Exhibit 4.1 


AMENDED AND RESTATED CREDIT AGREEMENT


dated as of


April 15, 2010
among


TRANS WORLD ENTERTAINMENT CORPORATION, 

as Lead Borrower for:


Record Town, Inc. 

Record Town USA, LLC 

Trans World Entertainment Corporation 

Trans World New York, LLC 

Trans World Florida, LLC 

Movies Plus, Inc. 

Record Town Utah, LLC, 

as BORROWERS


Media Logic USA, LLC, 

as FACILITY GUARANTOR


The LENDERS Party Hereto


BANK OF AMERICA, N.A., 

as Issuing Bank


BANK OF AMERICA, N.A., 

as Administrative Agent and as Collateral Agent


BANK OF AMERICA, N.A. 

WELLS FARGO RETAIL FINANCE, LLC 

as Co-Borrowing Base Agents


BANC OF AMERICA SECURITIES LLC 

WELLS FARGO RETAIL FINANCE, LLC 

as Co-Documentation Agents


BANC OF AMERICA SECURITIES LLC 

WELLS FARGO RETAIL FINANCE, LLC 

as Joint Lead Arrangers





TABLE OF CONTENTS


	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE I
 Definitions

 	
  

 	
 2

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 1.01

 	
 Defined
 Terms.

 	
  

 	
 2

 
	
 Section 1.02

 	
 Terms
 Generally

 	
  

 	
 35

 
	
 Section 1.03

 	
 Accounting
 Terms; GAAP

 	
  

 	
 35

 
	
  

 	
  

 	
  

 
	
 ARTICLE II
 Amount and Terms of Credit

 	
  

 	
 36

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 2.01

 	
 Commitments
 of the Lenders

 	
  

 	
 36

 
	
 Section 2.02

 	
 Reserves;
 Changes to Reserves

 	
  

 	
 36

 
	
 Section 2.03

 	
 Making of
 Revolving Loans

 	
  

 	
 37

 
	
 Section 2.04

 	
 Overadvances

 	
  

 	
 38

 
	
 Section 2.05

 	
 Swingline
 Loans

 	
  

 	
 38

 
	
 Section 2.06

 	
 Letters of
 Credit

 	
  

 	
 39

 
	
 Section 2.07

 	
 Settlements
 Amongst Lenders

 	
  

 	
 43

 
	
 Section 2.08

 	
 Notes;

 	
  

 	
 44

 
	
 Section 2.09

 	
 Interest on
 Loans

 	
  

 	
 45

 
	
 Section 2.10

 	
 Default
 Interest

 	
  

 	
 45

 
	
 Section 2.11

 	
 Certain
 Fees

 	
  

 	
 46

 
	
 Section 2.12

 	
 Commitment
 Fee and Line Fee

 	
  

 	
 46

 
	
 Section 2.13

 	
 Letter of
 Credit Fees

 	
  

 	
 47

 
	
 Section 2.14

 	
 Nature of
 Fees

 	
  

 	
 47

 
	
 Section 2.15

 	
 Termination
 or Reduction of Commitments

 	
  

 	
 47

 
	
 Section 2.16

 	
 Alternate
 Rate of Interest

 	
  

 	
 47

 
	
 Section 2.17

 	
 Conversion
 and Continuation of Revolving Loans

 	
  

 	
 48

 
	
 Section 2.18

 	
 Mandatory
 Prepayment; Cash Collateral

 	
  

 	
 49

 
	
 Section 2.19

 	
 Optional
 Prepayment of Loans; Reimbursement of Lenders

 	
  

 	
 50

 
	
 Section 2.20

 	
 Maintenance
 of Loan Account; Statements of Account

 	
  

 	
 51

 
	
 Section 2.21

 	
 Cash
 Receipts

 	
  

 	
 52

 
	
 Section 2.22

 	
 Application
 of Payments

 	
  

 	
 54

 
	
 Section 2.23

 	
 Increased
 Costs

 	
  

 	
 57

 
	
 Section 2.24

 	
 Change in
 Legality

 	
  

 	
 58

 
	
 Section 2.25

 	
 Payments;
 Sharing of Setoff

 	
  

 	
 59

 
	
 Section 2.26

 	
 Taxes

 	
  

 	
 60

 
	
 Section 2.27

 	
 Security
 Interests in Collateral

 	
  

 	
 63

 
	
 Section 2.28

 	
 Mitigation
 Obligations; Replacement of Lenders

 	
  

 	
 63

 
	
  

 	
  

 	
  

 
	
 ARTICLE III
 Representations and Warranties

 	
  

 	
 64

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 3.01

 	
 Organization;
 Powers

 	
  

 	
 64

 
	
 Section 3.02

 	
 Authorization;
 Enforceability

 	
  

 	
 64

 
	
 Section 3.03

 	
 Governmental
 Approvals; No Conflicts

 	
  

 	
 65

 
	
 Section 3.04

 	
 Financial
 Condition

 	
  

 	
 65

 
	
 Section 3.05

 	
 Properties

 	
  

 	
 65

 
	
 Section 3.06

 	
 Litigation
 and Environmental Matters

 	
  

 	
 66

 


(i)









	
  

 	
  

 	
  

 	
  

 
	
 Section 3.07

 	
 Compliance
 with Laws and Agreements

 	
  

 	
 66

 
	
 Section 3.08

 	
 Investment
 and Holding Company Status

 	
  

 	
 66

 
	
 Section 3.09

 	
 Taxes

 	
  

 	
 67

 
	
 Section 3.10

 	
 ERISA

 	
  

 	
 67

 
	
 Section 3.11

 	
 Disclosure

 	
  

 	
 67

 
	
 Section 3.12

 	
 Subsidiaries

 	
  

 	
 68

 
	
 Section 3.13

 	
 Insurance

 	
  

 	
 68

 
	
 Section 3.14

 	
 Labor
 Matters

 	
  

 	
 68

 
	
 Section 3.15

 	
 Security
 Documents; Judgment Liens

 	
  

 	
 69

 
	
 Section 3.16

 	
 Federal
 Reserve Regulations

 	
  

 	
 69

 
	
 Section 3.17

 	
 Solvency

 	
  

 	
 69

 
	
 Section 3.18

 	
 Licenses;
 Permits

 	
  

 	
 69

 
	
  

 	
  

 	
  

 
	
 ARTICLE IV
 Conditions

 	
  

 	
 70

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 4.01

 	
 Effective Date

 	
  

 	
 70

 
	
 Section 4.02

 	
 Conditions
 Precedent to Each Loan and Each Letter of Credit

 	
  

 	
 73

 
	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE V
 Affirmative Covenants

 	
  

 	
 73

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 5.01

 	
 Financial
 Statements and Other Information

 	
  

 	
 74

 
	
 Section 5.02

 	
 Notices of
 Material Events

 	
  

 	
 76

 
	
 Section 5.03

 	
 Information
 Regarding Collateral

 	
  

 	
 77

 
	
 Section 5.04

 	
 Existence;
 Conduct of Business

 	
  

 	
 77

 
	
 Section 5.05

 	
 Payment of
 Obligations

 	
  

 	
 77

 
	
 Section 5.06

 	
 Maintenance
 of Properties

 	
  

 	
 78

 
	
 Section 5.07

 	
 Insurance

 	
  

 	
 78

 
	
 Section 5.08

 	
 Books and
 Records; Inspection and Audit Rights; Appraisals; Accountants

 	
  

 	
 79

 
	
 Section 5.09

 	
 Physical
 Inventories

 	
  

 	
 80

 
	
 Section 5.10

 	
 Compliance
 with Laws

 	
  

 	
 80

 
	
 Section 5.11

 	
 Use of
 Proceeds and Letters of Credit

 	
  

 	
 81

 
	
 Section 5.12

 	
 Additional
 Subsidiaries

 	
  

 	
 81

 
	
 Section 5.13

 	
 Further
 Assurances

 	
  

 	
 81

 
	
 Section 5.14

 	
 Corporate
 Separateness

 	
  

 	
 82

 
	
  

 	
  

 	
  

 
	
 ARTICLE VI
 Negative Covenants

 	
  

 	
 82

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 6.01

 	
 Indebtedness
 and Other Obligations

 	
  

 	
 82

 
	
 Section 6.02

 	
 Liens

 	
  

 	
 84

 
	
 Section 6.03

 	
 Fundamental
 Changes

 	
  

 	
 84

 
	
 Section 6.04

 	
 Investments,
 Loans, Advances, Guarantees and Acquisitions

 	
  

 	
 85

 
	
 Section 6.05

 	
 Asset Sales
 and Store Closings

 	
  

 	
 86

 
	
 Section 6.06

 	
 Restricted
 Payments; Certain Payments of Indebtedness

 	
  

 	
 87

 
	
 Section 6.07

 	
 Transactions
 with Affiliates

 	
  

 	
 88

 
	
 Section 6.08

 	
 Restrictive
 Agreements

 	
  

 	
 88

 
	
 Section 6.09

 	
 Amendment of
 Material Documents

 	
  

 	
 88

 
	
 Section 6.10

 	
 Additional
 Subsidiaries

 	
  

 	
 89

 
	
 Section 6.11

 	
 Fiscal Year

 	
  

 	
 89

 


(ii)









	
  

 	
  

 	
  

 	
  

 
	
 Section 6.12

 	
 ERISA

 	
  

 	
 89

 
	
 Section 6.13

 	
 Environmental
 Laws

 	
  

 	
 90

 
	
  

 	
  

 	
  

 
	
 ARTICLE VII
 Events of Default

 	
  

 	
 90

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 7.01

 	
 Events of
 Default

 	
  

 	
 90

 
	
 Section 7.02

 	
 Remedies on
 Default

 	
  

 	
 94

 
	
 Section 7.03

 	
 Application
 of Proceeds

 	
  

 	
 94

 
	
  

 	
  

 	
  

 
	
 ARTICLE VIII
 The Agents

 	
  

 	
 94

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 8.01

 	
 Administration
 by Administrative Agent

 	
  

 	
 94

 
	
 Section 8.02

 	
 The
 Collateral Agent

 	
  

 	
 95

 
	
 Section 8.03

 	
 Co-Borrowing
 Base Agents

 	
  

 	
 95

 
	
 Section 8.04

 	
 Sharing of
 Excess Payments

 	
  

 	
 96

 
	
 Section 8.05

 	
 Agreement of
 Required Lenders

 	
  

 	
 97

 
	
 Section 8.06

 	
 Liability of
 Agents

 	
  

 	
 97

 
	
 Section 8.07

 	
 Notice of
 Default; Actions on Default

 	
  

 	
 99

 
	
 Section 8.08

 	
 Lenders’
 Credit Decisions

 	
  

 	
 99

 
	
 Section 8.09

 	
 Reimbursement
 and Indemnification

 	
  

 	
 99

 
	
 Section 8.10

 	
 Rights of
 Agents

 	
  

 	
 100

 
	
 Section 8.11

 	
 Notice of
 Transfer

 	
  

 	
 100

 
	
 Section 8.12

 	
 Successor
 Agent

 	
  

 	
 100

 
	
 Section 8.13

 	
 Reports and
 Financial Statements

 	
  

 	
 101

 
	
 Section 8.14

 	
 Deteriorating
 and Delinquent Lenders

 	
  

 	
 101

 
	
 Section 8.15

 	
 Arrangers

 	
  

 	
 102

 
	
  

 	
  

 	
  

 
	
 ARTICLE IX
 Miscellaneous

 	
  

 	
 102

 
	
  

 	
  

 	
  

 	
  

 
	
 Section 9.01

 	
 Notices

 	
  

 	
 102

 
	
 Section 9.02

 	
 Waivers;
 Amendments

 	
  

 	
 103

 
	
 Section 9.03

 	
 Expenses;
 Indemnity; Damage Waiver

 	
  

 	
 105

 
	
 Section 9.04

 	
 Designation
 of Lead Borrower as Borrowers’ Agent

 	
  

 	
 107

 
	
 Section 9.05

 	
 Successors
 and Assigns

 	
  

 	
 108

 
	
 Section 9.06

 	
 Survival

 	
  

 	
 110

 
	
 Section 9.07

 	
 Counterparts;
 Integration; Effectiveness

 	
  

 	
 111

 
	
 Section 9.08

 	
 Severability

 	
  

 	
 111

 
	
 Section 9.09

 	
 Right of
 Setoff

 	
  

 	
 111

 
	
 Section 9.10

 	
 Governing
 Law; Jurisdiction; Consent to Service of Process

 	
  

 	
 112

 
	
 Section 9.11

 	
 WAIVER OF
 JURY TRIAL

 	
  

 	
 112

 
	
 Section 9.12

 	
 Headings

 	
  

 	
 113

 
	
 Section 9.13

 	
 Interest
 Rate Limitation

 	
  

 	
 113

 
	
 Section 9.14

 	
 Additional
 Waivers

 	
  

 	
 113

 
	
 Section 9.15

 	
 Confidentiality

 	
  

 	
 114

 
	
 Section 9.16

 	
 Publicity

 	
  

 	
 115

 
	
 Section 9.17

 	
 USA Patriot
 Act

 	
  

 	
 115

 
	
 Section 9.18

 	
 Foreign
 Asset Control Regulations

 	
  

 	
 115

 
	
 Section 9.19

 	
 Existing
 Credit Agreement Amended and Restated

 	
  

 	
 116

 


(iii)







 EXHIBITS


	
  

 	
  

 
	
 A

 	
 Assignment
 and Acceptance

 
	
 B-1

 	
 Revolving
 Note

 
	
 B-2

 	
 Swingline
 Note

 
	
 C

 	
 Compliance
 Certificate

 
	
 D

 	
 Borrowing Base
 Certificate

 
	
 E

 	
 Joinder
 Agreement

 


(iv)





SCHEDULES


	
  

 	
  

 
	
 1.1(a)

 	
 Lenders and
 Commitments

 
	
 1.1(b)

 	
 Existing
 Intercompany Agreements

 
	
 2.21(a)

 	
 DDAs

 
	
 2.21(b)

 	
 Credit Card
 Arrangements

 
	
 2.21(c)

 	
 Blocked
 Accounts

 
	
 2.21(f)

 	
 Disbursement
 Accounts

 
	
 2.21(i)

 	
 Investments
 held in Securities Accounts

 
	
 3.05(c)(i)

 	
 Title to
 Properties; Real Estate Owned

 
	
 3.05(c)(ii)

 	
 Leased
 Properties

 
	
 3.06(a)

 	
 Litigation

 
	
 3.06(b)

 	
 Disclosed
 Matters

 
	
 3.09

 	
 Taxes

 
	
 3.10

 	
 ERISA

 
	
 3.12

 	
 Subsidiaries

 
	
 3.13

 	
 Insurance

 
	
 5.01(i)

 	
 Financial
 and Collateral Reports

 
	
 6.01

 	
 Indebtedness

 
	
 6.02

 	
 Liens

 
	
 6.04

 	
 Investments

 


(v)









	
  

 	
  

 
	
  

 	
 AMENDED AND RESTATED CREDIT AGREEMENT dated
 as of April __, 2010 among: 

 
	
  

 	
  

 
	
  

 	
 TRANS WORLD ENTERTAINMENT CORPORATION, a New
 York corporation, having its principal place of business at 38 Corporate
 Circle, Albany, New York 12203, as Lead Borrower (in such capacity, the “Lead
 Borrower”) for the Borrowers now or hereafter a party hereto; 

 
	
  

 	
  

 
	
  

 	
 the BORROWERS now or hereafter party hereto; 

 
	
  

 	
  

 
	
  

 	
 the FACILITY GUARANTORS now or hereafter
 party hereto; 

 
	
  

 	
  

 
	
  

 	
 the LENDERS now or hereafter party hereto; 

 
	
  

 	
  

 
	
  

 	
 BANK OF AMERICA, N.A., as Issuing Bank; 

 
	
  

 	
  

 
	
  

 	
 BANK OF AMERICA, N.A., as Administrative
 Agent and as Collateral Agent for its own benefit and the benefit of the
 other Secured Parties; and 

 
	
  

 	
  

 
	
  

 	
 BANK OF AMERICA, N.A. and WELLS FARGO RETAIL FINANCE, LLC, as
 co-borrowing base agents (collectively, in such capacity, together with any
 replacement thereof pursuant to Section 8.12 hereof, the “Co-Borrowing
 Base Agents”) for their own benefit and the benefit of the other Secured
 Parties; 

 



in
consideration of the mutual covenants herein contained and benefits to be
derived herefrom, the parties hereto agree as follows: 


W I T N E S S E
T H:  


          WHEREAS,
the Borrowers and the Facility Guarantors have previously entered into a
certain Credit Agreement dated as of January 5, 2006 (as amended and in effect,
the “Existing Credit Agreement”) with the Administrative Agent, the
Collateral Agent and the “Lenders” party to, and as defined in, the Existing
Credit Agreement (the “Existing Lenders”); 


          WHEREAS,
immediately prior to the Effective Date (as defined herein), the Existing
Lenders have assigned all of their rights, obligations and Commitments under
the Existing Credit Agreement to Bank of America (as defined herein); 


          WHEREAS,
Bank of America has re-assigned all of the rights, obligations and Commitments
of the Existing Lenders to the Lenders hereunder in accordance with Schedule
1.1(a) hereto; 


          WHEREAS,
the Borrowers, the Facility Guarantors, the Agents and the Lenders desire to
extend the Maturity Date (as defined in the Existing Credit Agreement) and to
make certain other modifications to the Existing Credit Agreement, as provided
herein; and 


1





          WHEREAS,
in connection with the foregoing, the Borrowers, the Facility Guarantors, the
Agents and the Lenders desire to amend and restate the Existing Credit
Agreement as provided herein. 


          NOW,
THEREFORE, in consideration of the mutual conditions and agreements set forth
in this Agreement, and for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto hereby agree that the Existing
Credit Agreement shall be amended and restated in its entirety to read as
follows (it being agreed that this Agreement shall not be deemed to evidence or
result in a novation or repayment and reborrowing of the Obligations under the
Existing Credit Agreement): 


ARTICLE I


Definitions


                    Section
1.01 Defined Terms.


          As
used in this Agreement, the following terms have the meanings specified below: 


          “Account”
means “accounts” as defined in the UCC and also means a right to payment of a
monetary obligation, whether or not earned by performance, (a) for property
that has been or is to be sold, leased, licensed, assigned, or otherwise
disposed of, (b) for services rendered or to be rendered, (c) for a policy of
insurance issued or to be issued, (d) for a secondary obligation incurred or to
be incurred, (e) for energy provided or to be provided, (f) for the use or hire
of a vessel under a charter or other contract, (g) arising out of the use of a
credit or charge card or information contained on or for use with the card, or
(h) as winnings in a lottery or other game of chance operated or sponsored by a
state, governmental unit of a state, or person licensed or authorized to
operate the game by a state or governmental unit of a state. 


          “ACH”
means automated clearing house transfers. 


          “Acquisition”
means the purchase or acquisition by any Person of (a) more than fifty percent
(50%) of the Capital Stock (or Capital Stock representing more than fifty
percent (50%) of the ordinary voting power) of another Person (other than a
Foreign Subsidiary) or (b) all or substantially all of the assets (other than
the Capital Stock) of another Person, including pursuant to a merger or
consolidation with such Person. 


          “Adjusted
LIBO Rate” means, with respect to any LIBO Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied
by (b) the Statutory Reserve Rate. The Adjusted LIBO Rate will be adjusted
automatically as to all LIBO Rate Loans then outstanding as of the effective
date of any change in the Statutory Reserve Rate. 


          “Adjustment
Date” means the first day of each Fiscal Quarter; provided that
the first Adjustment Date after the Effective Date shall be the first day of
the Fiscal Quarter commencing October 31, 2010. 


2





          “Administrative
Agent” means Bank of America, N.A., in its capacity as administrative agent
under any of the Loan Documents, and its successors and assigns. 


          “Affiliate”
means, with respect to a specified Person, any other Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified or, with respect to any Loan
Party, is a director or officer of such Loan Party. 


          “Agents”
means, collectively, the Administrative Agent, the Collateral Agent and the
Co-Borrowing Base Agents. 


          “Agreement”
means this Amended and Restated Credit Agreement, as hereafter modified,
amended, supplemented or restated, and in effect from time to time. 


          “Agreement
Value” means, for each Hedging Agreement, on any date of determination, an
amount determined by the Administrative Agent equal to: 


	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 in the case
 of a Hedging Agreement documented pursuant to the Master Agreement
 (Multicurrency-Cross Border) published by the International Swap and
 Derivatives Association, Inc. (the “Master Agreement”), the amount, if
 any, that would be payable by any Loan Party or any of its Subsidiaries to
 its counterparty to such Hedging Agreement, as if (i) such Hedging Agreement
 was being terminated early on such date of determination, (ii) such Loan
 Party or Subsidiary was the sole “Affected Party”, and (iii) the counterparty
 was the sole party determining such payment amount (with the counterparty
 making such determination pursuant to the provisions of the form of Master
 Agreement); or 

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 in the case
 of a Hedging Agreement traded on an exchange, the mark-to-market value of
 such Hedging Agreement, which will be the unrealized loss on such Hedging
 Agreement to the Loan Party or Subsidiary of a Loan Party to such Hedging
 Agreement determined by the counterparty based on the settlement price of
 such Hedging Agreement on such date of determination; or 

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 in all other
 cases, the mark-to-market value of such Hedging Agreement, which will be the
 unrealized loss on such Hedging Agreement to the Loan Party or Subsidiary of
 a Loan Party to such Hedging Agreement determined by the counterparty as the
 amount, if any, by which (i) the present value of the future cash flows to be
 paid by such Loan Party or Subsidiary exceeds (ii) the present value of the
 future cash flows to be received by such Loan Party or Subsidiary pursuant to
 such Hedging Agreement; capitalized terms used and not otherwise defined in
 this definition shall have the respective meanings set forth in the above
 described Master Agreement.

 



          “Applicable
Law” means, as to any Person: (a) all laws, statutes, rules, regulations,
orders, treaty or other requirements having the force of law; and (b) all court
orders, injunctions, notices, binding agreements, decrees, judgments, and/or
similar rulings, in each instance ((a) and 


3





(b)) of or by
any Governmental Authority, or court, or tribunal which has jurisdiction over
such Person, or any property of such Person. 


          “Applicable
Margin” means: 


	
  

 	
  

 
	
  

 	
           (a)
 From and after the Effective Date until the first Adjustment Date, the
 percentages set forth in Level III of the pricing grid below. In no event
 shall the Applicable Margin be set at Levels I or II prior to the first
 Adjustment Date (even if the Average Excess Availability requirements for
 Levels I or II have been met); and 

 
	
  

 	
  

 
	
  

 	
           (b)
 From and after the first Adjustment Date and on each Adjustment Date
 thereafter, the Applicable Margin shall be determined from the following
 pricing grid based upon Average Excess Availability for the most recent
 Fiscal Quarter ended immediately preceding such Adjustment Date; provided,
 however, that notwithstanding anything to the contrary set forth
 herein, upon the occurrence and during the continuance of an Event of
 Default, the Administrative Agent may, and at the direction of the Required
 Lenders or any Voting Borrowing Base Agent shall, immediately increase the
 Applicable Margin to that set forth in Level III (even if the Average Excess
 Availability requirements for a different Level have been met) and interest
 shall accrue at the rate set forth in Section 2.10; provided further
 that, if any of the financial statements delivered pursuant to Section
 5.01 of this Agreement or any Borrowing Base Certificate is at any time
 restated or otherwise revised (including as a result of an audit), or if the
 information set forth in any such financial statements or any such Borrowing
 Base Certificate otherwise proves to be false or incorrect such that the
 Applicable Margin would have been higher than was otherwise in effect during
 any period, without constituting a waiver of any Default or Event of Default
 arising as a result thereof, interest due under this Agreement shall be
 immediately recalculated at such higher rate for any applicable periods and
 shall be due and payable on demand. 

 






	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Level

 	
  

 	
 Average Excess

 Availability

 	
  

 	
 Applicable Margin

 for LIBO Loans

 	
  

 	
 Applicable Margin for

 Prime Rate Loans

 
	

 


 	
  

 	

 


 	
  

 	

 


 	
  

 	

 


 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 I

 	
  

 	
 Greater
 than $75,000,000

 	
  

 	
 4.00%

 	
  

 	
 3.00%

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 II

 	
  

 	
 Less
 than or equal to

 $75,000,000 but greater

 than $35,000,000

 	
  

 	
 4.25%

 	
  

 	
 3.25%

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 III

 	
  

 	
 Less
 than or equal to

 $35,000,000

 	
  

 	
 4.50%

 	
  

 	
 3.50%

 


4





          “Appraisal
Percentage” means eighty percent (80%). 


          “Appraised
Value” means the appraised orderly liquidation value, net of costs and
expenses to be incurred in connection with any such liquidation, which value
shall be expressed as a percentage of Cost of the Borrowers’ Eligible Inventory
as set forth in the Borrowers’ inventory stock ledger, and which value shall be
determined from time to time by the most recent appraisal undertaken by an
independent appraiser engaged by the Administrative Agent (and reasonably
satisfactory to the Co-Borrowing Base Agents). 


          “Approved
Fund” means any Fund that is administered or managed by (a) a Lender, (b)
an Affiliate of a Lender, (c) an entity or an Affiliate of an entity that
administers or manages a Lender, or (d) the same investment advisor or an
advisor under common control with such Lender, Affiliate or advisor, as
applicable. 


          “Arrangers”
means Banc of America Securities LLC and Wells Fargo Retail
Finance, LLC, in their capacities as joint lead arrangers. 


          “Assignment
and Acceptance” means an assignment and acceptance entered into by a Lender
and an assignee (with the consent of any party whose consent is required by Section
9.05), and accepted by the Administrative Agent, in the form of Exhibit
A or any other form approved by the Administrative Agent. 


          “Availability”
means, at any time of determination thereof by the Co-Borrowing
Base Agents, the result, if a positive number, of the lesser of (a) or (b): 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 (i)

 	
 the Total
 Commitments, 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 minus

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (ii)

 	
 the
 Borrowing Base Reserve, 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 minus

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (iii)

 	
 the
 aggregate unpaid balance of the Credit Extensions; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 or

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 (i)

 	
 the
 Borrowing Base, 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 minus

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (ii)

 	
 the
 aggregate unpaid balance of the Credit Extensions. 

 


5





          “Availability
Reserves” means, subject to Section 2.02(b), such reserves as the
Administrative Agent or any Co-Borrowing Base Agent (after consultation with
the Administrative Agent) from time to time determines in such Agent’s
reasonable discretion as being appropriate (a) to reflect the impediments to
the Agents’ ability to realize upon the Collateral, (b) to reflect claims and
liabilities that the Administrative Agent or any Co-Borrowing Base Agent (after
consultation with the Administrative Agent) determines will need to be
satisfied in connection with the realization upon the Collateral, (c) to
reflect criteria, events, conditions, contingencies or risks which adversely
affect any component of the Borrowing Base, or the assets, business, financial
performance or financial condition of any Loan Party, or (d) to reflect that a
Default or an Event of Default then exists. Without limiting the generality of
the foregoing, Availability Reserves may include (but are not limited to)
reserves based on: (a) rent and other occupancy expenses payable to any
landlord for leased locations with respect to which the Collateral Agent has
not received a Collateral Access Agreement in form and substance reasonably
satisfactory to the Collateral Agent; (b) Gift Certificate and Merchandise
Credit Liability; (c) customs, duties, and other costs to release Inventory
which is being imported into the United States; (d) outstanding customer
deposits; (e) judgments and outstanding Taxes and other governmental charges,
including, ad valorem, real estate, personal property, sales, and other Taxes;
(f) amounts equal to any Borrower’s liability, if any, to any licensees
conducting business at and from such Borrower’s premises as reflected from time
to time on such Borrower’s books and records; (g) reserves for warehouseman’s
or bailee’s charges; (h) liabilities related or arising from frequent shoppers’
or reward programs; or (i) the maximum aggregate amount that the Borrowers
would be required to pay under Hedging Agreements which constitute Obligations
if such Hedging Agreements were terminated. Upon the determination by any
Co-Borrowing Base Agent (after consultation with the Administrative Agent) that
an Availability Reserve should be established or modified, such Co-Borrowing
Base Agent shall notify the Administrative Agent in writing, and the
Administrative Agent shall thereupon establish or modify such Availability
Reserve, subject to the provisions of Section 8.03(b) of this Agreement.



          “Average
Excess Availability” means the average daily Excess Availability for the
immediately preceding Fiscal Quarter. 


          “Bank
of America” means Bank of America, N.A., a national banking association,
and its Subsidiaries, Affiliates, branches, and their respective successors and
assigns. 


          “BAS”
means Banc of America Securities LLC and its successors. 


          “Blocked
Account Agreements” has the meaning set forth in Section 2.21(c). 


          “Blocked
Account Banks” means the banks with whom the Borrowers have entered into
Blocked Account Agreements. 


          “Blocked
Accounts” has the meaning set forth in Section 2.21(c). 


6





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


          “Borrowers”
means, collectively, the Lead Borrower, Movies Plus, Inc., Record Town, Inc.,
Record Town USA, LLC, Trans World New York, LLC, Trans World Florida, LLC,
Record Town Utah, LLC and each other Person who shall from time to time become
a Borrower pursuant to a Joinder Agreement. 


          “Borrowing”
means (a) the incurrence of Revolving Loans of a single Type, on a single date
and having, in the case of LIBO Loans, a single Interest Period, or (b) a
Swingline Loan. 


          “Borrowing
Base” means,
at any time of calculation, an amount equal to: 


	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (a)

 	
 the lesser
 of: 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 (A) the Cost of Eligible Inventory, net of Inventory Reserves (provided that such Inventory Reserves shall not be
 duplicative of any reserve specifically provided for in the calculation of
 Appraised Value), multiplied by (B) the Appraisal Percentage, multiplied
 by (C) the Appraised Value of Eligible Inventory; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 or 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 (A) the Cost of Eligible Inventory, net of Inventory Reserves, multiplied
 by (B) the Inventory Advance Rate; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 minus

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (b)

 	
 the
 Borrowing Base Reserve; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 minus

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (c)

 	
 the then
 amount of all Availability Reserves; 

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 provided
 that if, at any time, the Loan Parties are conducting going-out-of-business
 or other liquidation sales at five (5) or more Stores, then (i) all Inventory
 located in each Store in which a Loan Party is conducting the
 going-out-of-business or other liquidation sales and related Store closures
 and Inventory dispositions (without assistance from an independent
 professional liquidation company reasonably acceptable to the Co-Borrowing
 Base Agents pursuant to a formal consulting arrangement reasonably acceptable
 to the Co-Borrowing Base Agents) shall be excluded from Eligible Inventory
 for purposes of calculating the Borrowing Base, and (ii) the Appraisal
 Percentage or Inventory Advance Rate, as the case may be, applicable to
 Eligible Inventory located in each Store in which an independent professional
 liquidation company reasonably acceptable to the Co-Borrowing Base Agents is
 conducting (or assisting the Loan Parties pursuant to a formal consulting
 arrangement reasonably acceptable to the Co-Borrowing

 


7









	
  

 	
  

 
	
  

 	
 Base Agents)
 the going-out-of-business or other liquidation sales and related Store
 closures and Inventory dispositions (which Eligible Inventory shall not be
 excluded for purposes of calculating the Borrowing Base) shall be subject to
 adjustment by the Administrative Agent or any Co-Borrowing Base Agent (after
 consultation with the Administrative Agent) in such Agent’s reasonable
 discretion. Upon the determination by any Co-Borrowing Base Agent (after
 consultation with the Administrative Agent) that the Appraisal Percentage or
 Inventory Advance Rate, as the case may be, should be adjusted, such
 Co-Borrowing Base Agent shall notify the Administrative Agent in writing, and
 the Administrative Agent shall thereupon adjust the Appraisal Percentage or
 Inventory Advance Rate, as the case may be, subject to the provisions of Section
 8.03(b) of this Agreement. 

 



          “Borrowing
Base Certificate” means a certificate substantially in the form of Exhibit
D hereto (with such changes therein as may be reasonably required by the
Administrative Agent or any Co-Borrowing Base Agent to reflect the components
of, and reserves against, the Borrowing Base as provided for hereunder from
time to time), executed and certified as accurate and complete by a Responsible
Officer of the Lead Borrower, which shall include appropriate exhibits, schedules,
supporting documentation and additional reports as reasonably requested by the
Administrative Agent or any Co-Borrowing Base Agent. 


          “Borrowing
Base Issues” has the meaning set forth in Section 8.03. 


          “Borrowing
Base Reserve” means an amount equal to $10,000,000. 


          “Borrowing
Request” means a request by the Lead Borrower for a Borrowing in accordance
with Section 2.03. 


          “Breakage
Costs” has the meaning set forth in Section 2.19(b). 


          “Business
Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in Charlotte, North Carolina, Boston, Massachusetts or New
York, New York are authorized or required by law to remain closed; provided
that, when used in connection with a LIBO Loan, the term “Business Day”
shall also exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market. 


          “Capital
Expenditures” means, for any period, all expenditures made or costs
incurred (whether made in the form of cash, or other property), for the
acquisition, improvement or repair of fixed or capital assets of a Person, in
each case that are (or would be) set forth in a Consolidated statement of cash
flows of such Person and its Consolidated Subsidiaries for such period prepared
in accordance with GAAP as capital expenditures. 


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


8





of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP. 


          “Capital
Stock” means, as to any Person that is a corporation, the authorized shares
of such Person’s capital stock, including all classes of common, preferred,
voting and nonvoting capital stock, and, as to any Person that is not a
corporation or an individual, the membership or other ownership interests in
such Person, together with, in any such case, all warrants, options and other
rights to purchase or otherwise acquire, and all other instruments convertible
into or exchangeable (other than any debt security exchangeable for or
convertible into such capital stock) for, any of the foregoing. 


          “Cash
Collateral Account” means an interest-bearing account established by the
Lead Borrower with the Collateral Agent at Bank of America under the sole and
exclusive dominion and control of the Collateral Agent, designated as the
“Trans World Entertainment Cash Collateral Account”. 


          “Cash
Management Services” means any one or more of the following types of
services or facilities provided to any Loan Party by the Administrative Agent
or any Lender or any of their respective Affiliates: (a) ACH transactions; (b)
cash management services, including, without limitation, controlled disbursement
services, treasury, depository, overdraft and electronic funds transfer
services; (c) foreign exchange facilities; (d) credit card processing services;
(e) purchase cards; and (f) credit or debit cards. 


          “Cash
Receipts” has the meaning set forth in Section 2.21(c). 


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


          “Change
in Control” means, at any time: 


	
  

 	
  

 
	
  

 	
           (a)
 During any period of twelve (12) consecutive months, individuals who at the
 beginning of such period constituted the board of directors of the Lead
 Borrower (together with any new directors whose election or appointment by
 such board of directors, or whose nomination for election by shareholders of
 the Lead Borrower, as the case may be, was approved by a vote of a majority
 of the directors still in office who were either directors at the beginning
 of such period or whose election or nomination for election was previously so
 approved) cease for any reason to constitute a majority of the board of
 directors then in office; or 

 
	
  

 	
  

 
	
  

 	
           (b)
 Any person or group of persons (within the meaning of the Securities and
 Exchange Act of 1934, as amended) other than Robert J. Higgins and his Heirs is
 or becomes the beneficial owner (within the meaning of Rule 13d-3 and 13d-5
 of the Securities and Exchange Act of 1934, as amended, except that such
 person shall be deemed to have “beneficial ownership” of all shares that such
 person has the right to acquire, whether such right is exercisable
 immediately or only after the passage of time) directly or indirectly of
 thirty-five percent (35%) or more (on a fully diluted basis) of the 

 


9









	
  

 	
  

 
	
  

 	
 total then
 outstanding Voting Stock of the Lead Borrower, whether as a result of the
 issuance of securities of the Lead Borrower, a merger, consolidation,
 liquidation or dissolution of the Lead Borrower, a direct or indirect
 transfer of securities or otherwise, and at
 such time Robert J. Higgins (i) owns beneficially, directly or indirectly,
 less (on a fully diluted basis) of the total then outstanding Voting Stock of
 the Lead Borrower than such person or group of persons or (ii) does not
 Control the Lead Borrower; or 

 
	
  

 	
  

 
	
  

 	
           (c)
 Other than pursuant to transactions expressly permitted by Section 6.03,
 the Lead Borrower fails at any time to own, directly or indirectly, 100% of
 the Capital Stock of each other Loan Party free and clear of all Liens (other
 than the Liens in favor of the Collateral Agent for its own benefit and the
 ratable benefit of the other Secured Parties, and Liens specified in clauses
 (a), (e) and (i) of the definition of Permitted Encumbrances arising by
 operation of Applicable Law). 

 



          “Change
in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 2.23(b), by any lending office of such Lender or
by such Lender’s or the Issuing Bank’s holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement. 


          “Charges”
has the meaning set forth in Section 9.13. 


          “Closing
Date” means January 5, 2006. 


          “Co-Borrowing
Base Agents” has the meaning provided in the preamble to this Agreement. 


          “Code”
means the Internal Revenue Code of 1986 and the Treasury regulations
promulgated thereunder, as amended from time to time. 


          “Collateral”
means any and all “Collateral” as defined in any applicable Security Document. 


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


10





          “Collateral
Agent” means Bank of America, N.A., in its capacity as collateral agent
under the Security Documents, and its successors and assigns. 


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


          “Commitment”
means, with respect to each Lender, the aggregate commitment of such Lender
hereunder, if any, to make Loans or issue Letters of Credit, in the amount set
forth opposite its name on Schedule 1.1(a) hereto or as may subsequently
be set forth in the Register from time to time, as the same may be reduced from
time to time pursuant to Section 2.15 hereof. 


          “Commitment
Fee” has the meaning set forth in Section 2.12(a). 


          “Commitment
Percentage” means, with respect to each Lender, at any time, that
percentage of the Commitments of all Lenders hereunder to make Credit
Extensions to the Borrowers in the amount set forth opposite its name on Schedule
1.1(a) hereto or as may subsequently be set forth in the Register from time
to time. 


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



          “Concentration
Account” shall have the meaning set forth in Section 2.21(c). 


          “Confirmation
Agreement” means that certain Confirmation and Amendment of Ancillary Loan
Documents, dated as of the Effective Date, among the Loan Parties, the Administrative
Agent and the Collateral Agent. 


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


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


          “Cost”
means the cost of purchases with respect to all Eligible Inventory as reported
on the Borrowers’ inventory stock ledger and, in each case, based upon the
average cost method of accounting and the Borrowers’ accounting practices which
are in effect on the Effective Date. “Cost” shall not include (i) any fees,
commissions or purchase price mark-ups imposed, paid or incurred by any
Borrowers pursuant to any Existing Intercompany Agreements, including, but not
limited to, the “Estimated Purchase Price” (as defined therein); or (ii)
inventory capitalization costs or other non-purchase price charges (other than
freight-in) used in the Borrowers’ calculation of cost of goods sold. 


          “Credit
Card Notifications” has the meaning set forth in Section 2.21(c). 


11





          “Credit
Extensions” means, as of any day, the sum of (a) the principal balance of
all Loans then outstanding, and (b) the then amount of the Letter of Credit
Outstandings. 


          “DDAs”
means any checking or other demand deposit account maintained by the Borrowers,
other than the Blocked Accounts and the Disbursement Accounts. 


          “Default”
means any event or condition that constitutes an Event of Default or that upon
notice, lapse of time or both would, unless cured or waived, become an Event of
Default. 


          “Delinquent
Lender” has the meaning set forth in Section 8.14(a). 


          “Deteriorating
Lender” means any Delinquent Lender or any Lender as to which (a) the
Issuing Bank or the Swingline Lender has reasonably ascertained that such
Lender or its Subsidiary has, without cause, defaulted in fulfilling its
funding obligations under one or more other syndicated credit facilities, or
(b) a Person that controls such Lender has been deemed insolvent or become the
subject of a bankruptcy, insolvency or similar proceeding. 


          “Disbursement
Accounts” has the meaning set forth in Section 2.21(e). 


          “dollars”
or “$” refers to lawful money of the United States of America. 


          “Effective
Date” means April 15, 2010. 


          “Eligible
Assignee” means: (a) any Lender, any Affiliate of a Lender or any Approved
Fund; (b) a bank, insurance company, or company engaged in the business of
making commercial loans having a combined capital and surplus in excess of
$300,000,000; or (c) any other Person approved by the Administrative Agent; provided
that “Eligible Assignee” shall not include a Borrower or any of a
Borrower’s Affiliates or Subsidiaries. 


          “Eligible
Inventory” means, as of the date of determination thereof, items of
Inventory of the Borrowers that are finished goods, merchantable and readily
saleable to the public in the ordinary course and deemed by the Co-Borrowing
Base Agents in their reasonable credit judgment to be eligible for inclusion in
the Borrowing Base. Without limiting the foregoing, unless otherwise approved
in writing by the Co-Borrowing Base Agents, none of the following shall be
deemed to be Eligible Inventory: 


	
  

 	
  

 
	
  

 	
           (a)
 Inventory that is not owned solely by the Borrowers, or is leased, on memo,
 or on consignment, or the Borrowers do not have good and valid title thereto;
 

 
	
  

 	
  

 
	
  

 	
           (b)
 Inventory that is located at a distribution center leased by the Borrowers
 unless the Borrowers have furnished the Collateral Agent with a Collateral
 Access Agreement executed by the Person owning any such location on terms
 reasonably acceptable to the Collateral Agent; 

 
	
  

 	
  

 
	
  

 	
           (c)
 Inventory that is not located at a property that is owned or leased by the
 Borrowers, except (i) Inventory in transit between any such owned or leased
 location, or 

 


12









	
  

 	
  

 
	
  

 	
 (ii) to the
 extent that the Borrowers have furnished the Collateral Agent with (A) any
 UCC financing statements or other documents that the Collateral Agent may
 determine to be necessary to perfect its security interest in such Inventory,
 and (B) a Collateral Access Agreement executed by the Person owning any
 location at which such Inventory is located on terms reasonably acceptable to
 the Collateral Agent; 

 
	
  

 	
  

 
	
  

 	
           (d)
 Inventory that represents (i) goods damaged, defective or otherwise
 unmerchantable, (ii) goods that do not conform in all material respects to
 the representations and warranties contained in this Agreement or any of the
 Security Documents, or (iii) goods to be returned to the vendor; 

 
	
  

 	
  

 
	
  

 	
           (e)
 Inventory that is not located in the United States of America (including the
 territory of Puerto Rico); 

 
	
  

 	
  

 
	
  

 	
           (f)
 Inventory that is not subject to a perfected first priority security interest
 in favor of the Collateral Agent for the benefit of the Secured Parties
 (subject only to Liens specified in clauses (a), (e) and (i) of the
 definition of Permitted Encumbrances, but solely to the extent such Liens
 have priority by operation of Applicable Law over the Liens granted to the
 Collateral Agent); 

 
	
  

 	
  

 
	
  

 	
           (g)
 Inventory which consists of promotional or marketing materials, samples,
 labels, bags, packaging, and other similar non-merchandise categories; 

 
	
  

 	
  

 
	
  

 	
           (h)
 Inventory that is obsolete, unusable, or otherwise unavailable for sale; 

 
	
  

 	
  

 
	
  

 	
           (i)
 Inventory as to which insurance in compliance with the provisions of Section
 5.07 hereof is not in effect; 

 
	
  

 	
  

 
	
  

 	
           (j)
 Inventory which has been sold but not yet delivered; 

 
	
  

 	
  

 
	
  

 	
           (k)
 Inventory which consists of raw materials or work in progress; and 

 
	
  

 	
  

 
	
  

 	
           (l)
 Inventory which is acquired in a Permitted Acquisition unless and until (i)
 the Co-Borrowing Base Agents have received or conducted (A) an appraisal of
 such Inventory, and (B) such other due diligence as the Co-Borrowing Base
 Agents may require, all the results of the foregoing to be reasonably
 satisfactory to the Co-Borrowing Base Agents; and (ii) the Co-Borrowing Base Agents
 have established Inventory Reserves (if applicable) therefor and otherwise
 agreed that such Inventory shall be deemed Eligible Inventory. 

 



          “Environmental
Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices having the force of orders or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the pollution or protection of the
environment, handling, treatment, storage, disposal, Release or threatened
Release of any Hazardous Material or to health and safety matters with respect
to Hazardous Materials. 


13






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


          “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time and the regulations promulgated and rulings issued thereunder.


          “ERISA
Affiliate” means any trade or business (whether or not incorporated) that,
together with the Lead Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 of the Code.


          “ERISA
Event” means: (a) any “reportable event”, as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to
a Plan (other than an event for which the 30-day notice period is waived);
(b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of
ERISA), whether or not waived; (c) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Lead Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Lead Borrower or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by the Lead Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the
Lead Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from the Lead Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.


          “Event
of Default” has the meaning set forth in Section 7.01. 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 and the
Lenders in writing, as provided herein.


          “Excess
Availability” means, as of any date of determination, the
excess, if any, of (a) Availability over (b) the sum of (i) all checks
then held by the Loan Parties (other than held checks drawn to pay accounts
which are not more than thirty (30) days beyond stated credit terms), (ii)
accounts payable of the Loan Parties which are more than sixty (60) days beyond
credit terms then accorded the Loan Parties, and (iii) overdrafts by the Loan
Parties.


14





          “Excluded
Entity” means a single purpose entity formed by the Loan Parties that shall
not own or acquire any material assets other than (i) the South Beach Real
Estate and (ii) such incidental personal property as may be necessary for the
operation of the South Beach Real Estate.


          “Excluded
Taxes” means, with respect to the Agents, any Lender, any Issuing Bank or
any other recipient of any payment to be made by or on account of any
obligation of any Loan Party hereunder: (a) income or franchise Taxes
imposed on (or measured by) its gross or net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located; (b) any branch
profits Taxes imposed by the United States of America or any similar Tax
imposed by any other jurisdiction in which a Loan Party is located; and
(c) in the case of a Foreign Lender (other than an assignee pursuant to a
request by the Borrowers under Section 2.28(b)), any withholding Tax
(including pursuant to FATCA) that (i) is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement (or designates a new lending office), except, in the case of the
designation of a new lending office or an assignment, to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of such
designation or assignment, to receive additional amounts from the Borrowers
with respect to such withholding Tax pursuant to Section 2.26(a), or
(ii) is attributable to such Foreign Lender’s failure to comply with Section
2.26(e), Section 2.26(j) or FATCA.


          “Executive
Order” has the meaning provided in Section 9.18.


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


          “Existing
Intercompany Agreements” means each of those agreements specified on Schedule
1.1(b) hereto, as amended and in effect as of the Effective Date.


          “Existing
Lenders” has the meaning provided in the recitals to this Agreement.


          “Facility
Guarantee” means, collectively, (a) the Guarantees, dated as of
the Closing Date, executed by the Borrowers and the Facility Guarantors in
favor of the Administrative Agent, the Collateral Agent, the Lenders, the
Swingline Lender, and the Issuing Bank, and (b) each other Guarantee made by a
Borrower or a Guarantor from time to time in favor of the Agents and the
Lenders, in form reasonably satisfactory to the Agents, each as amended and in
effect from time to time.


          “Facility
Guarantors” means (a) Media Logic USA, LLC and (b) each other Subsidiary of
the Lead Borrower that shall from time to time be required to execute and
deliver a Facility Guarantee pursuant to Section 5.12 hereof. 


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


15





          “FATCA”
shall mean The Foreign Account Tax Compliance Act of 2009, as set forth in
Sections 1471 through 1474 of the Code, any amendments thereto, any other
United States federal legislation, if and to the extent enacted, that is
substantially similar to FATCA, and any regulations thereunder or official
governmental interpretations thereof.


          “Federal
Funds Effective Rate” means, for any day, a rate per annum equal to the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by the Administrative
Agent. 


          “Fee
Letter” means the letter agreement among the Borrowers, the Administrative
Agent and BAS of even date herewith, as such letter may from time to time be
amended.


          
“Financial Officer” means, with respect to a Loan Party, any of the
chief financial officer, vice president-finance, treasurer, or controller of
that Loan Party.


          “Fiscal
Month” means any fiscal month of any Fiscal Year, the end of which shall
be determined in accordance with the Lead Borrower’s fiscal calendar.


          
“Fiscal Quarter” means any fiscal quarter of any Fiscal Year,
the end of which shall be determined by reference to the National Retail Federation
Retail Sales Reporting Calendar.


          “Fiscal
Year” means any period of 52 or 53 consecutive weeks, the end of which
shall be determined by reference to the National Retail Federation Retail Sales
Reporting Calendar.


          “Foreign
Assets Control Regulations” has the meaning provided in Section 9.18.


          “Foreign
Lender” means any Lender that is organized under the laws of a jurisdiction
other than the United States of America or any State thereof or the District of
Columbia.


          “Foreign
Subsidiary” means any Subsidiary that is organized under the laws of a
jurisdiction other than the United States of America or any State thereof or
the District of Columbia.


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


          “GAAP”
means principles which are (a) consistent with those promulgated or adopted by
the Financial Accounting Standards Board and its predecessors (or successors)
in effect and applicable to that accounting period in respect of which
reference to GAAP is being made, and (b) consistently applied with past
financial statements of the Loan Parties adopting the same principles.


16





          “Gift
Certificate and Merchandise Credit Liability” means, at any time, the
aggregate face value at such time of (a) outstanding gift certificates and gift
cards of any Borrower entitling the holder thereof to use all or a portion of
the certificate to pay all or a portion of the purchase price for any
Inventory, and (b) outstanding merchandise credits of any Borrower.


          “Governmental
Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any
agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.


          “Guarantee”
of or by any Person (the “guarantor”) means any obligation, contingent
or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of the guarantor, direct or indirect, (a) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
or other obligation or to purchase (or to advance or supply funds for the
purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to
maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation, or (d) as an account
party in respect of any letter of credit or letter of guaranty issued to
support such Indebtedness or obligation; provided that the term
“Guarantee” shall not include endorsements for collection or deposit in the
ordinary course of business. 


          “Hazardous
Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum
or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes, mold, fungi
or similar bacteria, and all other substances or wastes of any nature regulated
pursuant to any Environmental Law, including any material listed as a hazardous
substance under Section 101(14) of CERCLA.


          “Hedging
Agreement” means any interest rate protection agreement, interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, foreign
currency exchange agreement, commodity price protection agreement, or other
interest or currency exchange rate or commodity price hedging arrangement
designed to hedge against fluctuations in interest rates or foreign exchange
rates.


          “Heirs”
means any Person who receives any beneficial ownership in the Voting Stock of
the Lead Borrower from Robert J. Higgins by will or intestate succession,
whether directly from Robert J. Higgins or through one or more Heirs.


          
“Indebtedness” of any Person means, without duplication:


17







          (a)
all obligations of such Person for borrowed money (including any obligations
which are without recourse to the credit of such Person) or with respect to
deposits or advances of any kind;


          (b)
all obligations of such Person evidenced by bonds, debentures, notes or similar
instruments;


          (c)
all obligations of such Person upon which interest charges are customarily
paid;


          (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person;


          (e)
all obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business);


          (f)
all Indebtedness for which such Person is not the obligor that is secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed;


          (g)
all Guarantees by such Person of Indebtedness of others;


          (h)
all Capital Lease Obligations of such Person;


          (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty;


          (j)
all obligations, contingent or otherwise, of such Person in respect of bankers’
acceptances;


          (k)
the Agreement Value of all Hedging Agreements;


          (l)
the principal and interest portions of all rental obligations of such Person
under any Synthetic Lease, Tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing where such transaction is
considered borrowed money indebtedness for Tax purposes but is classified as an
operating lease in accordance with GAAP; and


          (m)
all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of Capital Stock or other ownership or
profit interests in such Person or in any other Person (or warrants, rights or
options to acquire such Capital Stock or ownership interests). 




18





          For
all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefore as a
result of such Person’s ownership interest in or other relationship with such
entity, except to the extent the terms of such Indebtedness provide that such
Person is not liable therefor.


          “Indemnified
Taxes” means Taxes other than Excluded Taxes.


          “Indemnitee”
has the meaning set forth in Section 9.03(b).


          “Intellectual
Property Security Agreement” means the Intellectual Property Security Agreement,
dated as of the Effective Date, among the Loan Parties and the Collateral Agent
for the benefit of the Secured Parties, as amended and in effect from time to
time. 


          “Interest
Payment Date” means (a) with respect to any Prime Rate Loan (including
a Swingline Loan) the first day of each calendar month, and (b) with
respect to any LIBO Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part, and, in addition, if such LIBO Loan has
an Interest Period of greater than ninety (90) days, the last day of every
third month of such Interest Period.


          “Interest
Period” means, with respect to any LIBO Borrowing, the period commencing on
the date of such Borrowing and ending on the numerically corresponding day in
the calendar month that is one, two, three or six months thereafter, as the
Lead Borrower may elect by notice to the Administrative Agent in accordance
with the provisions of this Agreement; provided that (a) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day, (b) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month during which such Interest Period ends) shall end on the last Business
Day of the calendar month of such Interest Period, (c) any Interest Period
which would otherwise end after the Termination Date shall end on the
Termination Date, and (d) notwithstanding the provisions of clause (c), no
Interest Period shall, unless approved by the Administrative Agent and all of
the Lenders, have a duration of less than one month, and if any Interest Period
applicable to a LIBO Borrowing would be for a shorter period, such Interest
Period shall not be available hereunder. For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing. 


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


          “Inventory
Advance Rate” means sixty percent (60%).


          “Inventory
Reserves” means, subject to Section 2.02(b), such reserves as may be
established from time to time by the Administrative Agent or any Co-Borrowing
Base Agent (after consultation with the Administrative Agent) in such Agent’s
reasonable discretion with 


19





respect to the
determination of the salability, at retail, of the Eligible Inventory or which
reflect such other factors as affect the market value of the Eligible
Inventory. Inventory Reserves may include (but are not limited to) reserves
based on: (i) obsolescence; (ii) seasonality; (iii) Shrink; (iv) imbalance; (v)
change in Inventory character; (vi) change in Inventory composition; (vii)
change in Inventory mix; (viii) markdowns (both permanent and point of sale);
and/or (ix) retail markons and markups inconsistent with prior period practice
and performance, industry standards, current business plans, or advertising
calendar and planned advertising events. Upon the determination by any
Co-Borrowing Base Agent (after consultation with the Administrative Agent) that
an Inventory Reserve should be established or modified, such Co-Borrowing Base
Agent shall notify the Administrative Agent in writing, and the Administrative
Agent shall thereupon establish or modify such Inventory Reserve, subject to
the provisions of Section 8.03(b) of this Agreement.


          “Investment”
means, with respect to any Person, (a) any Capital Stock, evidence of
Indebtedness or other security of another Person, (b) any loan, advance,
contribution to capital or extension of credit (except for current trade and
accounts receivable for Inventory sold or services rendered in the ordinary
course of business and payable in accordance with customary trade terms) to
another Person, (c) any Guarantee of any obligation of another Person, (d) any
Acquisition, (e) any commitment or option to make any such Acquisition, or (f)
any other investment or interest in any Person, with respect to each clause
above whether now existing or hereafter made.


          “Issuing
Bank” means Bank of America, in its capacity as the issuer of Letters of
Credit hereunder, and any of its successors in such capacity. The Issuing Bank
may, in its discretion, arrange for one or more Letters of Credit to be issued
by an Affiliate of the Issuing Bank, in which case the term “Issuing Bank”
shall include any such Affiliate with respect to Letters of Credit issued by
such Affiliate.


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


          “Landlord
Lien State” means Washington, Virginia, Pennsylvania, and such other
state(s) in which a landlord’s claim for rent has or could reasonably be
expected to have priority over the Lien of the Collateral Agent in any of the
Collateral.


          “Lead
Borrower” means Trans World Entertainment Corporation.


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


          “Lenders”
means the Persons identified on Schedule
1.1(a) hereto as a “Lender” and each assignee that becomes a party
to this Agreement as provided in Section 9.05(b).




20






          “Letter
of Credit” means a letter of credit that is (i) issued pursuant to this
Agreement for the account of a Borrower, (ii) a Standby Letter of Credit or
Commercial Letter of Credit, (iii) issued in connection with the purchase of
Inventory by a Borrower and for other purposes for which a Borrower has
historically obtained letters of credit, or for any other purpose that is
reasonably acceptable to the Administrative Agent, and (iv) in form reasonably
satisfactory to the Issuing Bank. 


          “Letter
of Credit Disbursement” means a payment made by the Issuing Bank pursuant
to a Letter of Credit.


          “Letter
of Credit Fees” means the fees payable in respect of Letters of Credit
pursuant to Section 2.13.


          “Letter
of Credit Outstandings” means, at any time, the sum of (a) with respect to
Letters of Credit outstanding at such time, the aggregate maximum amount that
then is or at any time thereafter may become available for drawing or payment
thereunder, plus (b) all amounts theretofore drawn or paid under Letters
of Credit for which the Issuing Bank has not been reimbursed.


          “LIBO
Borrowing” means a Borrowing comprised of LIBO Loans.


          “LIBO
Loan” means any Loan bearing interest at a rate determined by reference to
the Adjusted LIBO Rate in accordance with the provisions of ARTICLE II.


          “LIBO
Rate” means, with respect to any LIBO Borrowing for any Interest Period,
the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as designated by the Administrative Agent
from time to time) at approximately 11:00 a.m., London time, two (2) Business
Days prior to the commencement of such Interest Period, for Dollar deposits
(for delivery on the first day of such Interest Period) with a term equivalent
to such Interest Period. If such rate is not available at such time for any
reason, then the “LIBO Rate” for such Interest Period shall be the rate per
annum determined by the Administrative Agent to be the rate at which deposits
in Dollars for delivery on the first day of such Interest Period in same day
funds in the approximate amount of the LIBO Loan being made, continued or
converted by Bank of America and with a term equivalent to such Interest Period
would be offered by Bank of America’s London Branch to major banks in the
London interbank eurodollar market at their request at approximately 11:00 a.m.
(London time) two (2) Business Days prior to the commencement of such Interest
Period.


          “Lien”
means, with respect to any asset, (a) any assignment, mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest
in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset, or (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.


21





          “Line
Fee” has the meaning set forth in Section 2.12(b).


          “Loan
Account” has the meaning set forth in Section 2.20.


          “Loan
Documents” means this Agreement, the Notes, the Letters of Credit, the
Fee Letter, all Borrowing Base Certificates, the Blocked Account Agreements,
the Credit Card Notifications, the Security Documents, the Facility Guarantee,
the Facility Guarantors Collateral Documents, the Confirmation Agreement and
any other document, instrument or agreement now or hereafter executed and delivered
in connection herewith, each as amended and in effect from time to time.


          “Loan
Party” or “Loan Parties” means each Borrower and each Facility
Guarantor.


          “Loans”
means all Revolving Loans, Swingline Loans and other advances at any time made
to or for account of any of the Borrowers pursuant to this Agreement.


          “Margin
Stock” has the meaning set forth in Regulation U.


          “Material
Adverse Effect” means a material adverse effect on (a) the business,
operations, property, assets or condition, financial or otherwise, of the
Borrowers, taken as a whole, (b) the ability of any Loan Party to perform any
obligation (other than a payment Obligation referenced in the following clause
(c)) under this Agreement or any of the other Loan Documents, (c) the ability
of the Loan Parties, taken as a whole, to pay any Obligations under this
Agreement or any of the other Loan Documents, (d) the validity or
enforceability of this Agreement or any of the other Loan Documents or any of
the rights or remedies of the Agents, the Lenders, the Swingline Lender, the
Issuing Bank or the other Secured Parties hereunder or thereunder, or (e) the
Collateral or the value thereof, taken as a whole. In determining whether any
individual event would result in a Material Adverse Effect, notwithstanding
that such event in and of itself does not have such effect, a Material Adverse
Effect shall be deemed to have occurred if the cumulative effect of such event
and all other then-existing events would result in a Material Adverse Effect.


          “Material
Indebtedness” means Indebtedness (other than Credit Extensions) of the
Borrowers in an aggregate principal amount exceeding $5,000,000. For purposes
of determining the amount of Material Indebtedness at any time, the amount of
the obligations in respect of any Hedging Agreement at such time shall be the
Agreement Value.


          “Maturity
Date” means April 15, 2013.


          “Maximum
Rate” has the meaning set forth in Section 9.13.


          “Minority
Lenders” has the meaning set forth in Section 9.02(c).


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


          “Multiemployer
Plan” means a multiemployer plan, sponsored by a Loan Party as defined in
Section 4001(a)(3) of ERISA to which the Lead Borrower, any other
Borrower, or any 


22





ERISA
Affiliate is making or accruing an obligation to make contributions, or has
within the preceding five plan years made or accrued an obligation to make
contributions.


          “Multiple
Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that is sponsored by the Lead Borrower or any other
Borrower, and (a) is maintained for employees of the Lead Borrower or any of
its Subsidiaries or any ERISA Affiliate and at least one Person other than the
Lead Borrower or any such Subsidiary or ERISA Affiliate or (b) was so
maintained and in respect of which the Lead Borrower or any such Subsidiary or
ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the
event such plan has been or were to be terminated.


          “New
Lending Office” has the meaning set forth in Section 2.26(e).


          “Notes”
shall mean (i) the promissory notes of the Borrowers substantially in the form
of Exhibit B-1, each payable to the order of a Lender, evidencing the
Revolving Loans, and (ii) the promissory note of the Borrowers substantially in
the form of Exhibit B-2, payable to the Swingline Lender, evidencing the
Swingline Loans.


          “Obligations”
means: (a) the due and punctual payment by the Loan Parties of (i) the
principal of, and interest (including all interest that accrues after the
commencement of any case or proceeding by or against any Loan Party under any
federal or state bankruptcy, insolvency, receivership or similar law, whether
or not allowed in such case or proceeding) on the Loans, as and when due,
whether at maturity, by acceleration, upon one or more dates set for prepayment
or otherwise, (ii) each payment required to be made by any Loan Party under
this Agreement or any other Loan Document in respect of any Letter of Credit
issued by an Issuing Bank, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations to provide
cash collateral and (iii) all other monetary obligations, including fees,
costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise, of any Loan Party to the Agents, the Lenders,
the Swingline Lender, the Issuing Bank or the other Secured Parties under this
Agreement or the other Loan Documents; and (b) the due and punctual
payment and performance of all the covenants, agreements, obligations and
liabilities of any Loan Party under or pursuant to this Agreement or the other
Loan Documents; and (c) all monetary obligations, including fees, costs,
expenses and indemnities (including fees, costs, expenses and indemnities that
accrue after the commencement of any case or proceeding by or against any Loan
Party under any federal or state bankruptcy, insolvency, receivership or
similar law, whether or not allowed in such case or proceeding), whether
primary, secondary, direct, contingent, fixed or otherwise, of any Loan Party
arising out of any Cash Management Services, Hedging Agreement or other banking
or financial services provided by any Lender or any of its Affiliates, in each
case in connection with the credit facilities provided by the Loan Documents,
and the due and punctual payment and performance of all of the covenants,
agreements, obligations and liabilities of any Loan Party relating thereto.
Obligations which arise out of any Cash Management Services, Hedging Agreement,
or other banking or financial services described in clause (c) of this
definition shall be secured Obligations solely to the extent that there is
sufficient Collateral following satisfaction of the Obligations described in
clauses (a) and (b) of this definition.


23





          “Organizational
Document” means, relative to any Loan Party, its certificate or articles of
incorporation or formation, operating agreements, by-laws, membership
agreements, partnership agreements and all shareholder or equity holder
agreements, voting trusts and similar arrangements applicable to its Capital
Stock, membership interests, or partnership interest, to which such Loan Party
is a party.


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


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


          “Participant”
has the meaning set forth in Section 9.05(e).


          “Participation
Register” has the meaning set forth in Section 9.05(e).


          “Patriot
Act” has the meaning set forth in Section 4.01(r).


          “Payment
Conditions” means, at the time of determination with respect to any
Permitted Acquisition or Permitted Minority Investment, that (a) no Default or
Event of Default then exists or would arise as a result of the consummation of
such Permitted Acquisition or such Permitted Minority Investment; (b) Excess
Availability is at least $20,000,000 immediately before and after consummation
of such Permitted Acquisition or such Permitted Minority Investment; and (c) at
least fifteen (15) Business Days prior to the consummation of such Permitted
Acquisition or such Permitted Minority Investment, the Lead Borrower shall
furnish to the Administrative Agent pro forma projections for the twelve (12)
Fiscal Months immediately following the proposed Permitted Acquisition or
Permitted Minority Investment, which projections give effect to the proposed
payment or transaction, and the Administrative Agent determines in its
reasonable discretion that the Borrowers shall maintain sufficient Availability
to maintain normal business operations for the period of such projections.


          “PBGC”
means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.


          “Permitted
Acquisition” means an Acquisition as to which each of the
following conditions is satisfied (as applicable):


	
  

 	
  

 
	
  

 	
           (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 

 


24









	
  

 	
  

 
	
  

 	
 such
 Acquisition or shall not have commenced any action which alleges that such
 Acquisition shall violate Applicable Law;

 
	
  

 	
  

 
	
  

 	
           (c)
 The Lead Borrower shall have furnished the Administrative Agent with at least
 fifteen (15) Business Days’ prior written notice of such intended Acquisition
 and, in the event the total consideration paid or payable by any Loan Party
 in connection with such Acquisition (whether in cash, tangible property,
 notes or other property) is equal to or greater than $2,500,000, the Lead
 Borrower shall have furnished the Administrative Agent with (i) a current
 draft of the acquisition documents as and when available, (ii) appropriate financial
 statements of the Person which is the subject of such Acquisition, (iii) pro
 forma projected financial statements for the twelve (12) Fiscal 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
 (iv) such other information as the Administrative Agent may reasonably
 request, all of which shall be reasonably satisfactory to the Administrative
 Agent;

 
	
  

 	
  

 
	
  

 	
           (d)
 After giving effect to the Acquisition, if the Acquisition is an Acquisition
 of Capital Stock or other equity interests, a 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 Stock and/or shall otherwise
 control the governance of the Person being acquired;

 
	
  

 	
  

 
	
  

 	
           (e)
 Any assets acquired shall be utilized in, and if the Acquisition involves a
 merger, consolidation or stock acquisition, the Person which is the subject
 of such Acquisition shall be engaged in, a business otherwise permitted to be
 engaged in by a Borrower pursuant to Section 6.03(b) of this
 Agreement;

 
	
  

 	
  

 
	
  

 	
           (f)
 If the Person which is the subject of such Acquisition will be maintained as
 a Subsidiary of a Loan Party, or if any assets acquired in such Acquisition
 will be transferred to a Subsidiary of a Loan Party which is not then a Loan
 Party, such Subsidiary shall have been joined as a Borrower hereunder or as a
 Facility Guarantor, as the Administrative Agent shall determine after
 consultation with the Lead Borrower, and the Collateral Agent, after
 consultation with the Lead Borrower, shall have received a first priority
 security interest in such Subsidiary’s property of the same nature as
 constitutes Collateral under the Security Documents;

 
	
  

 	
  

 
	
  

 	
           (g)
 (i) The total consideration paid or payable in connection with all such
 Acquisitions (whether in cash, tangible property, notes or other property) plus
 (i) the total consideration paid or payable in connection with all Permitted
 Minority Investments (whether in cash, tangible property, notes or other
 property) after the Effective Date shall not exceed in the aggregate the sum
 of $12,500,000; and

 
	
  

 	
  

 
	
  

 	
           (h)
 If the total consideration paid or payable in connection with any such
 Acquisition or series of related Acquisitions (whether in cash, tangible
 property, notes or 

 


25









	
  

 	
  

 
	
  

 	
 other
 property) exceeds in the aggregate the sum of $2,500,000, the Loan Parties
 shall have delivered to the Administrative Agent a certificate of a Financial
 Officer of the Lead Borrower stating that the Payment Conditions have been
 satisfied, together with supporting documentation demonstrating satisfaction
 of the Payment Conditions, which supporting documentation shall be reasonably
 satisfactory to the Administrative Agent.

 



          “Permitted
Dividends” means (a) dividends with respect to a Loan Party’s Capital Stock
payable solely in additional shares of or warrants to purchase its common
stock, (b) splits or reclassifications of the Lead Borrower’s stock into
additional or other shares of its common stock, and (c) cash dividends of any
Subsidiary (including any Loan Party) or the Excluded Entity to any Borrower.


          “Permitted
Encumbrances” means


	
  

 	
  

 
	
  

 	
           (a)
 Liens imposed by law for Taxes that are not yet due or are being contested in
 compliance with Section 5.05;

 
	
  

 	
  

 
	
  

 	
           (b)
 carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
 like Liens imposed by law (other than Liens arising from Environmental
 Liabilities), arising in the ordinary course of business and securing
 obligations that are not overdue by more than thirty (30) days or are being
 contested in compliance with Section 5.05;

 
	
  

 	
  

 
	
  

 	
           (c)
 pledges and deposits made in the ordinary course of business in compliance
 with workers’ compensation, unemployment insurance and other social security
 laws or regulations;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (e)
 judgment liens in respect of judgments that do not constitute an Event of
 Default under Section 7.01(l); 

 
	
  

 	
  

 
	
  

 	
           (f)
 Liens on fixed or capital assets acquired by any Loan Party; provided that
 (i) such Liens secure Indebtedness permitted by Section 6.01(a)(iv);
 (ii) such Liens and the Indebtedness secured thereby are incurred prior
 to or concurrently with such acquisition; (iii) the Indebtedness secured
 thereby does not exceed one hundred percent (100%) of the cost of acquiring
 such fixed or capital assets; and (iv) such Liens do not extend to any
 other property or assets of the Loan Parties;

 
	
  

 	
  

 
	
  

 	
           (g)
 easements, zoning restrictions, rights-of-way and similar encumbrances on
 real property imposed by law or arising in the ordinary course of business
 that do not secure any monetary obligations and do not materially detract
 from the value of the affected property or interfere with the ordinary
 conduct of business of the Loan Parties or any of their Subsidiaries;

 


26









	
  

 	
  

 
	
  

 	
           (h)
 (i) leases, licenses, subleases or sublicenses granted to any other Person in
 the ordinary course of business which do not interfere in any material
 respect with the business of the Loan Parties, or (ii) the rights reserved or
 vested in any Person by the terms of any lease, license, franchise, grant or
 permit held by any Loan Party or its Subsidiaries or by a statutory
 provision, to terminate any such lease, license, franchise, grant or permit,
 or require annual or periodic payments as a condition to the continuance
 thereof;

 
	
  

 	
  

 
	
  

 	
           (i)
 landlords’ and lessors’ Liens in respect of rent that is not overdue by more
 than thirty (30) days or which are being contested in compliance with Section
 5.05; provided that the aggregate outstanding amount of the
 obligations secured by such Liens shall not exceed $750,000 at any time;

 
	
  

 	
  

 
	
  

 	
           (j)
 possessory Liens in favor of brokers and dealers arising in connection with
 the acquisition or disposition of Investments owned as of the date hereof and
 Permitted Investments; provided that such Liens (i) attach only
 to such Investments; and (ii) secure only obligations incurred in the
 ordinary course and arising in connection with the acquisition or disposition
 of such Investments and not any obligation in connection with margin
 financing;

 
	
  

 	
  

 
	
  

 	
           (k)
 Liens in favor of a financial institution encumbering deposits (including the
 right of setoff) held by such financial institution in the ordinary course of
 such financial institutions business and which are within the general
 parameters customary in the banking industry; and

 
	
  

 	
  

 
	
  

 	
           (l)
 any Lien on any property or asset of any Loan Party set forth in Schedule
 6.02; provided that (i) such Lien shall not apply to any
 other property or asset of any Loan Party; and (ii) such Lien shall secure
 only those obligations that it secures as of the Effective Date, and
 extensions, renewals and replacements thereof that do not increase the
 outstanding principal amount thereof;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
 “Permitted
 Investments” means 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), maturing within one (1) year
 from the date of acquisition thereof;

 
	
  

 	
  

 
	
  

 	
           (b)
 Investments in commercial paper (i) issued by an entity (other than a Loan
 Party or an Affiliate of a Loan Party) organized under the laws of any state
 of the United States or the District of Columbia maturing within 90 days from
 the date of acquisition thereof and having, at such date of acquisition, a
 rating obtainable from a nationally 

 


27









	
  

 	
  

 
	
  

 	
 recognized
 rating organization of at least A-1 or P-1 or the equivalent thereof, or (ii)
 issued by a Lender maturing within 270 days from the date of acquisition
 thereof;

 
	
  

 	
  

 
	
  

 	
           (c)
 Investments in certificates of deposit, eurodollar deposits, banker’s
 acceptances and time deposits maturing within 180 days from the date of
 acquisition thereof issued or guaranteed by or placed with, and demand
 deposit and money market deposit accounts issued or offered by, (i) any
 domestic office of any commercial bank 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 $100,000,000 (or the
 equivalent amount in another currency), or (ii) any Lender or Affiliate
 thereof; 

 
	
  

 	
  

 
	
  

 	
           (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 or with any primary dealer and having a market value at the time that
 such repurchase agreement is entered into of not less than 100% of the
 repurchase obligation of such counterparty entity with whom such repurchase
 agreement has been entered into; and

 
	
  

 	
  

 
	
  

 	
           (e)
 Shares of investment companies that are registered under the Investment
 Company Act of 1940, as amended, and invest solely in one or more of the
 types of securities described in clauses (a) through (d) above;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (g)
 obligations the return with respect to which is excluded from gross income
 under Section 103 of the Tax Code, with a maturity of not more than six
 months or with the right of the holder to put such obligations for purchase
 at par upon not more than seven days’ notice and which are rated at least A-1
 or P-1 or the equivalent thereof by at least one nationally recognized rating
 organization;

 
	
  

 	
  

 
	
  

 	
           (h)
 (A) tax free money market funds that invest solely in the securities
 described in clause (f) above or (B) money market preferred municipal bond
 funds which have a term of not more than seven days and which are rated at
 least AAA or the equivalent thereof by S&P or at least AAA or the
 equivalent thereof by Moody’s;

 
	
  

 	
  

 
	
  

 	
           (i)
 any other securities reasonably acceptable to the Administrative Agent which
 are rated at least A-1 or P-1 or the equivalent thereof by at least one
 nationally recognized rating organization, or which are of an equivalent
 credit quality in the reasonable judgment of the Administrative Agent; and

 
	
  

 	
  

 
	
  

 	
           (j)
 Investments existing on the Effective Date, and set forth on Schedule 6.04;

 



provided that, notwithstanding the
foregoing, no such Investments described in clauses (a) through (i) above shall
be permitted unless (i) no Revolving Loans are then outstanding, and (ii) 


28





such
Investments are pledged to the Collateral Agent as additional collateral for
the Obligations pursuant to such agreements as may be reasonably required by
the Collateral Agent. 


          “Permitted
Minority Investment” means an Investment in a Person which is not a
Subsidiary and as to which each of the following conditions is satisfied (as
applicable):


	
  

 	
  

 
	
  

 	
           (a)
 No Default or Event of Default then exists or would arise as a result of the
 making of such Investment;

 
	
  

 	
  

 
	
  

 	
           (b)
 The Lead Borrower shall have furnished the Administrative Agent with at least
 fifteen (15) Business Days prior written notice of such intended Investment
 and, in the event the total consideration paid or payable by any Loan Party
 in connection with such Investment (whether in cash, tangible property, notes
 or other property) is equal to or greater than $2,500,000, the Lead Borrower
 shall have furnished the Administrative Agent with (i) a current draft of the
 joint venture or partnership agreement and other applicable documents, and
 (ii) such other information as the Administrative Agent may reasonably
 request, each of which shall be reasonably satisfactory to the Administrative
 Agent;

 
	
  

 	
  

 
	
  

 	
           (c)
 The Investment shall be in a Person engaged in a business otherwise permitted
 to be engaged in by a Borrower pursuant to Section 6.03(b) of this
 Agreement;

 
	
  

 	
  

 
	
  

 	
           (d)
 (i) The total consideration paid or payable in connection with all such
 Investments (whether in cash, tangible property, notes or other property) plus
 (ii) the total consideration paid or payable in connection with all Permitted
 Acquisitions (whether in cash, tangible property, notes or other property)
 after the Effective Date shall not exceed in the aggregate the sum of
 $12,500,000; and

 
	
  

 	
  

 
	
  

 	
           (e)
 If the total consideration paid or payable in connection with any such
 Investment or series of related Investments (whether in cash, tangible
 property, notes or other property) exceeds in the aggregate the sum of
 $2,500,000, the Loan Parties shall have delivered to the Administrative Agent
 a certificate of a Financial Officer of the Lead Borrower stating that the Payment
 Conditions have been satisfied, together with supporting documentation
 demonstrating satisfaction of the Payment Conditions, which supporting
 documentation shall be reasonably satisfactory to the Administrative Agent.

 



          “Permitted
Overadvance” means an Overadvance made by the Administrative
Agent, in its reasonable discretion, or at the direction of any Co-Borrowing
Base Agent, which (a) is made to maintain, protect or preserve the Collateral
and/or the Lenders’ rights under the Loan Documents, or (b) is otherwise in the
Lenders’ interests; provided, however, that Permitted
Overadvances shall not (i) exceed ten percent (10%) of the then Borrowing Base
in the aggregate outstanding at any time or (ii) remain outstanding for more
than ninety (90) consecutive calendar days, unless in case of this clause (ii),
the Required Lenders otherwise agree; provided further that the
foregoing shall not modify or abrogate any of the provisions of Section
2.06(e) regarding the Lender’s obligations with respect to Letter of Credit
Disbursements, or result in any claim or 


29





liability
against the Administrative Agent or any Co-Borrowing Base Agent (regardless of
the amount of any Overadvance) for “inadvertent Overadvances” (i.e., where an
Overadvance results from changed circumstances beyond the control of the
Administrative Agent or the Co-Borrowing Base Agents (such as a reduction in
the collateral value)); and provided further that in no event
shall the Administrative Agent make an Overadvance (nor shall such an
Overadvance constitute a Permitted Overadvance) if, after giving effect
thereto, the then outstanding Credit Extensions (including any Overadvance or
proposed Overadvance) would exceed the Total Commitments. 


          “Permitted
Store Closings” means Store closures and related Inventory dispositions
which, in the aggregate from and after the Effective Date, do not exceed one
hundred fifty (150) Stores (net of new Store openings); provided that
Store closures and related Inventory dispositions that exceed the foregoing
limits shall (i) require the consent of the Agents and the Required Lenders
(which consent shall not be unreasonably withheld), and (ii) be in accordance
with liquidation agreements or formal consulting arrangements with professional
liquidators or liquidation consultants, in each case reasonably acceptable to
the Co-Borrowing Base Agents.


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


          “Plan”
means a Single Employer Plan or a Multiple Employer Plan.


          “Pledge
Agreement” means the Pledge Agreement, dated as of the Closing Date, among
the Loan Parties and the Collateral Agent for the benefit of the Secured
Parties, as amended and in effect from time to time.


          “Prime
Rate” means, for any day, the highest of: (a) the variable annual rate of
interest then most recently announced by Bank of America as its “Prime Rate”;
(b) the Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1% (0.50%)
per annum; or (c) the Adjusted LIBO Rate (calculated utilizing the LIBO Rate
for a one-month Interest Period) plus one percent (1.00%) per annum. The
“Prime Rate” is a rate set by Bank of America based upon various factors
including Bank of America’s cost and desired return, general economic
conditions, and other factors, and is used as a reference point for pricing
some loans, which may be priced at, above, or below such announced rate. If for
any reason the Administrative Agent shall have determined (which determination
shall be conclusive absent manifest error) that it is unable to ascertain the
Federal Funds Effective Rate or the LIBO Rate for any reason, including the
inability or failure of the Administrative Agent to obtain sufficient
quotations thereof in accordance with the terms hereof, the Prime Rate shall be
determined without regard to clause (b) of the first sentence of this
definition or clause (a)(i) of the definition of Adjusted LIBO Rate, as
applicable, until the circumstances giving rise to such inability no longer
exist. Any change in the Prime Rate due to a change in Bank of America’s Prime
Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be
effective on the effective date of such change in Bank of America’s Prime Rate,
the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively.


30





          “Prime
Rate Loan” means any Loan bearing interest at a rate determined by
reference to the Prime Rate in accordance with the provisions of ARTICLE II.


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


          “Register”
has the meaning set forth in Section 9.05(c).


          “Regulation
T” means Regulation T of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof. 


          “Regulation U”
means Regulation U of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof.


          “Regulation X”
means Regulation X of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof.


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


          “Release”
has the meaning set forth in Section 101(22) of CERCLA.


          “Required
Lenders” means: (a) at any time there are two or fewer Lenders who are not
Deteriorating Lenders or Delinquent Lenders, all Lenders who are not
Deteriorating Lenders or Delinquent Lenders; and (b) at any time there are
three or more Lenders who are not Deteriorating Lenders or Delinquent Lenders,
Lenders (other than Deteriorating Lenders or Delinquent Lenders) the sum of
whose Commitments exceeds fifty percent (50%) of the Total Commitments at such
time, or if the Commitments have been terminated, Lenders whose percentage of
the outstanding Credit Extensions (after settlement and repayment of all
Swingline Loans by the Lenders) exceeds fifty percent (50%) of the Credit
Extensions.


          “Reserves”
means all Inventory Reserves and Availability Reserves.


          “Responsible
Officer” means, with respect to a Person, the chief executive officer,
chief financial officer, vice president-finance, treasurer, controller or
secretary of such Person.


          “Restricted
Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any shares of any class of
Capital Stock of any Person, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such shares of Capital Stock of any Person or any option, warrant or
other right to acquire any such shares of Capital Stock of any Person, in each
case other than Permitted Dividends. Without limiting the foregoing,
“Restricted Payments” with respect to any Person shall also include all
payments made by such Person (whether in cash, 


31





securities or
other property) made by such Person in respect of stock appreciation rights
plans, equity incentive, achievement or similar plans and all proceeds of a
dissolution or liquidation of such Person.


          “Revolving
Loans” means all Loans at any time made by a Lender pursuant to Section
2.03.


          “RTV
Inventory” means Inventory that is being held for return to the respective
vendors thereof within the applicable time periods and in all other respects in
conformity with the return privileges granted by the respective vendors
thereof.


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


          “SEC”
means the Securities and Exchange Commission.


          “Secured
Parties” shall have the meaning set forth in the Security Agreement.


          “Security
Agreement” means the Amended and Restated Security Agreement, dated as of
the Effective Date, among the Loan Parties and the Collateral Agent for the
benefit of the Secured Parties, as amended and in effect from time to time. 


          “Security
Documents” means the Security Agreement, the Intellectual Property Security
Agreement, the Pledge Agreement, the Facility Guarantors Collateral Documents,
and each other security agreement or other instrument or document executed and
delivered by any Loan Party to secure any of the Obligations.


          “Securities
Accounts” has the meaning set forth in Section 2.21(i).


          “Settlement
Date” has the meaning set forth in Section 2.07(b).


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


          “Single
Employer Plan” means a single employer plan, as defined in Section
4001(a)(15) of ERISA, that is sponsored by a Loan Party and (a) is maintained
for employees of the Lead Borrower or any of its Subsidiaries or any ERISA
Affiliate and no Person other than the Lead Borrower or any of its Subsidiaries
or any ERISA Affiliate or (b) was so maintained and in respect of which the
Lead Borrower or any of its Subsidiaries or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been or were
to be terminated.


          “Solvent”
means, with respect to any Person on a particular date, that on such date (a)
at fair valuations, the value of all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair saleable value of the properties and
assets of such Person is not less than the amount that would be required to pay
the probable liability of such Person on its debts as they become absolute and 


32





matured, (c)
such Person is able to realize upon its properties and assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (d) such Person does not intend to,
and does not believe that it will, incur debts beyond such Person’s ability to
pay as such debts mature, and (e) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or transaction, for which
such Person’s properties and assets would constitute unreasonably small capital
after giving due consideration to the prevailing practices in the industry in
which such Person is engaged.


          “South
Beach Guarantee” means a limited “carve out” Guarantee by one or more of
the Loan Parties of any Indebtedness incurred by the Excluded Entity to finance
the South Beach Real Estate in an aggregate principal amount not to exceed
$20,000,000, the conditions upon which such Guarantee may be drawn to be
limited in accordance with terms no broader than the terms set forth in that certain letter agreement,
dated as of March 16, 2010, by and between the Lead Borrower and CTL Capital,
LLC, and the other terms of such Guarantee to be reasonably acceptable to the
Administrative Agent; provided, however, that it is understood and agreed
that the Indebtedness of the Excluded Entity guaranteed by the South
Beach Guarantee may be provided by a Person other than CTL Capital, LLC.


          “South
Beach Real Estate” means the Real Estate located at 501 Collins Avenue,
Miami Beach, Florida.


          “Standby
Letter of Credit” means any Letter of Credit other than a Commercial Letter
of Credit.


          “Statutory
Reserve Rate” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus
the aggregate of the maximum reserve percentages (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal established
by the Board to which the Administrative Agent is subject with respect to
the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
LIBO Loans shall be deemed to constitute eurocurrency funding and to be subject
to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory
Reserve Rate shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.


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


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


          “Subsidiary”
means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s Consolidated financial 


33





statements if
such financial statements were prepared in accordance with GAAP as of such
date, as well as any other corporation, limited liability company, partnership,
association or other entity (a) of which Capital Stock representing more than
fifty percent (50%) of the equity or more than fifty percent (50%) of the
ordinary voting power or, in the case of a partnership, more than fifty percent
(50%) of the general partnership interests are, directly or indirectly as of
such date, owned, Controlled, or held, or (b) that is, as of such date,
otherwise Controlled by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent; provided that,
as used herein or in any other Loan Document, for all purposes, the term
“Subsidiary” shall not include the Excluded Entity.


          “Swingline
Lender” means Bank of America, in its capacity as lender of Swingline Loans
hereunder.


          “Swingline
Loan” shall mean a Loan made by the Swingline Lender to the Borrowers
pursuant to Section 2.05 hereof.


          “Synthetic
Lease” means any lease or other agreement for the use or possession of
property creating obligations which do not appear as Indebtedness on the
balance sheet of the lessee thereunder but which, upon the insolvency or
bankruptcy of such Person, may be characterized as Indebtedness of such lessee
without regard to the accounting treatment. 


          “Taxes”
means any and all current or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority.


          “Termination
Date” means the earliest to occur of (a) the Maturity Date, (b) the date on
which the maturity of the Loans is accelerated and the Commitments are
terminated, or (c) the date of the occurrence of any Event of Default pursuant
to Section 7.01(i) or Section 7.01(j).


          “Total
Commitments” means, at any time, the sum of the Commitments at such time.
As of the Effective Date, the Total Commitments shall be $100,000,000.


          “Trading
with the Enemy Act” has the meaning provided in Section 9.18.


          “Type”,
when used in reference to any Revolving Loan or Borrowing, refers to whether
the rate of interest on such Revolving Loan, or on the Revolving Loans
comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate
or the Prime Rate.


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


          “Unused
Commitment” means, on any day, (a) the then Total Commitments minus
(b) the then outstanding Credit Extensions.


          “Voting
Borrowing Base Agent” means a Co-Borrowing Base Agent (but not its assigns)
holding not less than fifty percent (50%) of the Total Commitments, or if the
Commitments have been terminated, a Co-Borrowing Base Agent (but not its
assigns) holding in the aggregate not 


34





less than
fifty percent (50%) of the outstanding Credit Extensions (after settlement and
repayment of all Swingline Loans by the Lenders); provided that
in no event shall a Co-Borrowing Base Agent that is a Deteriorating Lender or
Delinquent Lender be a Voting Borrowing Base Agent.


          “Voting
Stock” means, with respect to any corporation, the outstanding stock of all
classes (or equivalent interests) which ordinarily, in the absence of
contingencies, entitles holders thereof to vote for the election of directors
(or Persons performing similar functions) of such corporation, even though the
right so to vote has been suspended by the happening of such contingency.


          “Wells
Fargo” means Wells Fargo Retail Finance, LLC, a Delaware limited liability
company, and its Subsidiaries, Affiliates, branches, and their respective successors
and assigns.


          “Withdrawal
Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.


                    Section
1.02 Terms Generally.


          The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”. The word “will” shall be construed to have the
same meaning and effect as the word “shall”. Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns,
(c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not
to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights. 


                    Section
1.03 Accounting Terms; GAAP.


          Except
as otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect on the
Effective Date; provided that, if the Lead Borrower notifies the
Administrative Agent that the Lead Borrower requests an amendment to any
provision hereof to reflect the effect of any change occurring after the
Effective Date in GAAP or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies the Lead Borrower that the
Required Lenders request an 


35





amendment to
any provision hereof for such purpose), regardless of whether any such notice
is given before or after such change in GAAP or in the application thereof,
then such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
provision shall have been amended in accordance herewith.


ARTICLE II


Amount and Terms of Credit


                    Section
2.01 Commitments of the Lenders.


                    (a)
Each Lender, severally and not jointly with any other Lender, agrees, upon the
terms and subject to the conditions herein set forth, to extend credit to the
Borrowers on a revolving basis, in the form of Revolving Loans and Letters of
Credit, in an amount not to exceed the lesser of such Lender’s Commitment or
such Lender’s Commitment Percentage of the Borrowing Base, subject to the following
limitations:


	
  

 	
  

 
	
  

 	
                     (i)
 After giving effect to any Credit Extension, the aggregate outstanding amount
 of the Credit Extensions shall not at any time exceed the lesser of (A) the
 Total Commitments minus the Borrowing Base Reserve or (B) the
 Borrowing Base.

 
	
  

 	
  

 
	
  

 	
                     (ii)
 No Lender, other than the Issuing Bank subject to the terms and conditions
 set forth herein, shall be obligated to issue any Letter of Credit, and
 Letters of Credit shall be available solely from the Issuing Bank, subject to
 the ratable participation of all Lenders, as set forth in Section 2.06.
 The Borrowers will not at any time permit the aggregate Letter of Credit
 Outstandings to exceed $15,000,000.

 
	
  

 	
  

 
	
  

 	
                     (iii)
 Subject to all of the other provisions of this Agreement, Revolving Loans
 that are repaid may be reborrowed prior to the Termination Date, and no new
 Credit Extensions shall be made to the Borrowers after the Termination Date.

 



                    (b)
Each Borrowing of Revolving Loans to the Borrowers (other than Swingline Loans)
shall be made by the Lenders pro rata in accordance with their
respective Commitments. The failure of any Lender to make any Revolving Loan to
the Borrowers shall neither relieve any other Lender of its obligation to fund
its Revolving Loan in accordance with the provisions of this Agreement nor
increase the obligation of any other Lender.


                    Section
2.02 Reserves; Changes to Reserves.


                    (a)
The initial Reserves as of the Effective Date of this Agreement are those
reflected in the Borrowing Base Certificate delivered by the Lead Borrower to
the Co-Borrowing Base Agents pursuant to Section 4.01(e).


                    (b)
Subject to the provisions of Section 8.03(b), the Administrative Agent
may, and promptly upon the direction of any Co-Borrowing Base Agent (after
consultation with 


36





the
Administrative Agent) shall, hereafter establish additional Reserves or change
any of the foregoing Reserves in the exercise of its reasonable credit
judgment. Neither the Administrative Agent nor any Co-Borrowing Base Agent
shall establish any Reserve which is duplicative of any other Reserve whether
or not such Reserve falls under more than one Reserve category.


                    Section
2.03 Making of Revolving Loans.


                    (a)
Revolving Loans (other than Swingline Loans) by the Lenders shall be either
Prime Rate Loans or LIBO Loans as the Lead Borrower may request subject to and
in accordance with this Section 2.03; provided that all
Swingline Loans shall be only Prime Rate Loans. All Revolving Loans made
pursuant to the same Borrowing shall, unless otherwise specifically provided
herein, be Revolving Loans of the same Type. Each Lender may fulfill its
Commitment with respect to any Revolving Loan by causing any lending office of
such Lender to make such Revolving Loan, but any such use of a lending office
shall not affect the obligation of the Borrowers to repay such Revolving Loan
in accordance with the terms of the applicable Note. Subject to the other
provisions of this Section 2.03 and the provisions of Section 2.17,
Borrowings of Revolving Loans of more than one Type may be incurred at the same
time, but no more than eight (8) Borrowings of LIBO Loans may be outstanding at
any time.


                    (b)
The Lead Borrower shall give the Administrative Agent (x) three (3) Business
Days’ prior telephonic notice (thereafter confirmed in writing) of each
Borrowing of LIBO Loans and (y) prior telephonic notice (thereafter confirmed
in writing) of each Borrowing of Prime Rate Loans on the date of the proposed
Borrowing. Any such notice, to be effective, must be received by the
Administrative Agent not later than 1:00 p.m., Boston time, on the applicable
date. Such notice shall be irrevocable and shall specify the Borrowers, the
amount of the proposed Borrowing (which with respect to (i) Prime Rate Loans
shall be not less than $10,000, and (ii) LIBO Loans shall be not less than
$1,000,000 and integral multiples of $500,000) and the date thereof (which
shall be a Business Day) and shall contain disbursement instructions. Such
notice shall specify whether the Borrowing then being requested is to be a
Borrowing of Prime Rate Loans or LIBO Loans and, if LIBO Loans, the Interest Period
with respect thereto. If no election of Interest Period is specified in any
such notice for a Borrowing of LIBO Loans, such notice shall be deemed a
request for an Interest Period of one (1) month. If no election is made as to
the Type of Revolving Loan, such notice shall be deemed a request for Borrowing
of Prime Rate Loans. The Administrative Agent shall promptly notify each Lender
of its proportionate share of such Borrowing, the date of such Borrowing, the
Type of Borrowing being requested and the Interest Period or Interest Periods
applicable thereto, as appropriate. On the borrowing date specified in such
notice, each Lender shall make its share of the Borrowing available at the
office of the Administrative Agent at 100 Federal Street, Boston, Massachusetts
02110, no later than 2:00 p.m., Boston time, in immediately available funds.
Unless the Administrative Agent shall have received notice from a Lender prior
to the proposed date of any Borrowing that such Lender will not make available
to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with this Section 2.03 and may, in reliance
upon such assumption, make available to the Borrowers a corresponding amount.
In such event, if a Lender has not in fact made its share of the applicable
Borrowing available to the Administrative Agent, 


37





then the
applicable Lender and the Borrowers severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Borrowers to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation or
(ii) in the case of the Borrowers, the interest rate applicable to Prime Rate
Loans. If such Lender pays such amount to the Administrative Agent, then such
amount shall constitute such Lender’s Revolving Loan included in such
Borrowing. Upon receipt of the funds made available by the Lenders to fund any
Borrowing hereunder, the Administrative Agent shall disburse such funds into a
Disbursement Account or otherwise in the manner specified in the notice of
borrowing delivered by the Lead Borrower and shall use reasonable efforts to
make the funds so received from the Lenders available to the Borrowers no later
than 4:00 p.m., Boston time, on the same day.


                    (c)
Subject to the terms of Section 2.22, the Administrative Agent, without
the request of the Lead Borrower, may pay any interest, fee, service charge, or
other payment to which any Secured Party is entitled from the Borrowers
pursuant hereto or any other Loan Document and may charge the same to the Loan
Account notwithstanding that an Overadvance may result thereby. The
Administrative Agent shall advise the Lead Borrower of any such advance or
charge promptly after the making thereof. Such action on the part of the
Administrative Agent shall not constitute a waiver of the Administrative
Agent’s rights and the Borrowers’ obligations under Section 2.18(a). Any
amount which is added to the principal balance of the Loan Account as provided
in this Section 2.03(c) shall bear interest at the interest rate then
and thereafter applicable to Prime Rate Loans.


                    Section
2.04 Overadvances.


          The
Agents and the Lenders have no obligation to make any Loan or to provide any
Letter of Credit if an Overadvance would result. The Administrative Agent may,
in its discretion, and shall, at the direction of any Co-Borrowing Base Agent,
make Permitted Overadvances without the consent of the Lenders and each Lender
shall be bound thereby. Any Permitted Overadvances may constitute Swingline
Loans. The Permitted Overadvances shall constitute Revolving Loans and
Obligations. For the avoidance of doubt, the making of a Permitted Overadvance
shall be an Event of Default. The making of any such Permitted Overadvance on
any one occasion shall not obligate the Administrative Agent, the Co-Borrowing
Base Agents or any Lender to make or permit any Permitted Overadvance on any other
occasion or to permit such Permitted Overadvances to remain outstanding. 


                    Section
2.05 Swingline Loans.


                    (a)
The Swingline Lender is authorized by the Lenders, but is not obligated, to
make Swingline Loans at any time (subject to Section 2.05(b)) up to the
amount of (i) $10,000,000 plus (ii) the principal amount of any
Permitted Overadvance in the aggregate outstanding at such time, upon a notice
of Borrowing from the Lead Borrower received by the Administrative Agent and
the Swingline Lender (which notice, at the Swingline Lender’s 


38





discretion,
may be submitted prior to 1:00 p.m., Boston time, on the Business Day on which
such Swingline Loan is requested); provided that the Swingline
Lender shall not be obligated to make any Swingline Loan in its reasonable
discretion if any Lender at such time is a Deteriorating Lender, unless the
Swingline Lender has entered into satisfactory arrangements with the Borrowers
or such Lender to eliminate the Swingline Lender’s risk of full reimbursement
with respect to such Swingline Loan. Swingline Loans shall be Prime Rate Loans
and shall be subject to periodic settlement with the Lenders under Section
2.07.


                    (b)
Swingline Loans may be made only in the following circumstances: (i) for
administrative convenience, the Swingline Lender may, but is not obligated to,
make Swingline Loans in reliance upon the Borrowers’ actual or deemed
representations under Section 4.02, that the applicable conditions for
borrowing are satisfied; or (ii) for Permitted Overadvances. If the conditions
for borrowing under Section 4.02 cannot be fulfilled, the Required
Lenders or any Voting Borrowing Base Agent may direct the Swingline Lender to,
and the Swingline Lender thereupon shall, cease making Swingline Loans (other
than Permitted Overadvances) until such conditions can be satisfied or are
waived in accordance with Section 9.02 hereof. Unless the Required
Lenders or a Voting Borrowing Base Agent so direct the Swingline Lender, the
Swingline Lender may, but is not obligated to, continue to make Swingline Loans
notwithstanding that the conditions for borrowing under Section 4.02
cannot be fulfilled. No Swingline Loans shall be made pursuant to this Section
2.05(b) if the limitation set forth in Section 2.01(a)(i) would be
exceeded as a result thereof.


                    Section
2.06 Letters of Credit.


                    (a)
Upon the terms and subject to the conditions herein set forth, the Lead
Borrower may request the Issuing Bank, at any time and from time to time after
the date hereof and prior to the Termination Date, to issue, and subject to the
terms and conditions contained herein, the Issuing Bank shall issue, for the
account of any of the Borrowers one or more Letters of Credit; provided,
however, that no Letter of Credit shall be issued if after giving effect
to such issuance (i) the aggregate Letter of Credit Outstandings shall exceed
$15,000,000, or (ii) the aggregate Credit Extensions would exceed the
limitation set forth in Section 2.01(a)(i); provided further
that no Letter of Credit shall be issued if the Issuing Bank shall have
received notice from the Administrative Agent, the Required Lenders or any
Voting Borrowing Base Agent that the conditions to such issuance have not been
met; and provided further that the Issuing Bank shall not be
required to issue any such Letter of Credit in its reasonable discretion if:
(A) any order, judgment or decree of any Governmental Authority or arbitrator
shall by its terms purport to enjoin or restrain the Issuing Bank from issuing
such Letter of Credit, or any Applicable Law relating to the Issuing Bank or
any request or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall prohibit,
or request that the Issuing Bank refrain from, the issuance of letters of
credit generally or such Letter of Credit in particular or shall impose upon
the Issuing Bank with respect to such Letter of Credit any restriction, reserve
or capital requirement (for which the Issuing Bank is not otherwise compensated
hereunder) not in effect on the Effective Date, or shall impose upon the
Issuing Bank any unreimbursed loss, cost or expense which was not applicable on
the Effective Date and which the Issuing Bank in good faith deems material to
it; (B) the issuance of such Letter of 


39





Credit would
violate one or more policies of the Issuing Bank applicable to letters of
credit generally; or (C) any Lender is at such time a Deteriorating Lender
hereunder, unless the Issuing Bank has entered into satisfactory arrangements
with the Borrowers or such Lender to eliminate the Issuing Bank’s risk of full
reimbursement with respect to such Letter of Credit.


                    (b)
Each Standby Letter of Credit shall expire at or prior to the close of business
on the earlier of (i) the date one year after the date of the issuance of
such Letter of Credit (or, in the case of any renewal or extension thereof, one
year after such renewal or extension) and (ii) the date that is ten
Business Days prior to the Maturity Date; provided that each
Standby Letter of Credit may, upon the request of the Lead Borrower, include a
provision whereby such Letter of Credit shall be renewed automatically for
additional consecutive periods of twelve (12) months or less (but not
beyond the date that is ten Business Days prior to the Maturity Date) unless
the Issuing Bank notifies the beneficiary thereof at least thirty
(30) days prior to the then-applicable expiration date that such Letter of
Credit will not be renewed.


                    (c)
Each Commercial Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date 180 days after the date of the issuance
of such Commercial Letter of Credit and (ii) the date that is five (5) Business
Days prior to the Maturity Date.


                    (d)
Drafts drawn under each Letter of Credit shall be reimbursed by the Borrowers
in dollars on the same Business Day of any such drawing by paying to the
Administrative Agent an amount equal to such drawing not later than
12:00 noon, Boston time, on (i) the date that the Lead Borrower shall have
received notice of such drawing, if such notice is received prior to
10:00 a.m., Boston time, on such date, or (ii) the Business Day
immediately following the day that the Lead Borrower receives such notice, if
such notice is received after 10:00 a.m., Boston time on the day of
drawing; provided that the Lead Borrower may, subject to the
conditions to borrowing set forth herein, request in accordance with Section
2.03 that such payment be financed with a Revolving Loan consisting of a
Prime Rate Loan or Swingline Loan in an equivalent amount and, to the extent so
financed, the Borrowers’ obligation to make such payment shall be discharged
and replaced by the resulting Prime Rate Loan or Swingline Loan. The Issuing
Bank shall, promptly following its receipt thereof, examine all documents
purporting to represent a demand for payment under a Letter of Credit. The Issuing
Bank shall promptly notify the Administrative Agent and the Lead Borrower by
telephone of such demand for payment and whether the Issuing Bank has made or
will make payment thereunder; provided that any failure to give
or delay in giving such notice shall not relieve the Borrowers of their
obligation to reimburse the Issuing Bank and the Lenders with respect to any
such payment.


                    (e)
If the Issuing Bank shall make any Letter of Credit Disbursement, then, unless
the Borrowers shall reimburse the Issuing Bank in full on the date such payment
is made, the unpaid amount thereof shall bear interest, for each day from and
including the date such payment is made to but excluding the date that the
Borrowers reimburse the Issuing Bank therefore, at the rate per annum then
applicable to Prime Rate Loans; provided that, if the Borrowers
fail to reimburse such Issuing Bank when due pursuant to Section 2.06(d),
then Section 2.10 shall apply. Interest accrued pursuant to this
paragraph shall be for the account of the Issuing Bank, except that interest
accrued on and after the date of payment by any Lender 


40





pursuant to Section
2.06(g) to reimburse the Issuing Bank shall be for the account of such
Lender to the extent of such payment.


                    (f)
Immediately upon the issuance of any Letter of Credit by the Issuing Bank (or
the amendment of a Letter of Credit increasing the amount thereof), and without
any further action on the part of the Issuing Bank, the Issuing Bank shall be
deemed to have sold to each Lender, and each such Lender shall be deemed
unconditionally and irrevocably to have purchased from the Issuing Bank,
without recourse or warranty, an undivided interest and participation, to the
extent of such Lender’s Commitment Percentage, in such Letter of Credit, each
drawing thereunder and the obligations of the Borrowers under this Agreement
and the other Loan Documents with respect thereto. Upon any change in the
Commitments pursuant to Section 9.05, it is hereby agreed that with respect
to all Letter of Credit Outstandings, there shall be an automatic adjustment to
the participations hereby created to reflect the new Commitment Percentages of
the assigning and assignee Lenders. Any action taken or omitted by the Issuing
Bank under or in connection with a Letter of Credit, if taken or omitted in the
absence of gross negligence, bad faith or willful misconduct, shall not create
for the Issuing Bank any resulting liability to any Lender.


                    (g)
In the event that the Issuing Bank makes any Letter of Credit Disbursement and
the Borrowers shall not have reimbursed such amount in full to the Issuing Bank
pursuant to this Section 2.06, the Issuing Bank shall promptly notify
the Administrative Agent, which shall promptly notify each Lender of such
failure, and each Lender shall promptly and unconditionally pay to the
Administrative Agent for the account of the Issuing Bank the amount of such
Lender’s Commitment Percentage of such unreimbursed payment in dollars and in
same day funds. If the Issuing Bank so notifies the Administrative Agent, and
the Administrative Agent so notifies the Lenders prior to 11:00 a.m., Boston
time, on any Business Day, each such Lender shall make available to the Issuing
Bank such Lender’s Commitment Percentage of the amount of such unreimbursed
payment on such Business Day in same day funds (or if such notice is received
by the Lenders after 11:00 a.m., Boston time on the day of receipt, payment
shall be made on the immediately following Business Day). If and to the extent
such Lender shall not have so made its Commitment Percentage of the amount of
such unreimbursed payment available to the Issuing Bank, such Lender agrees to
pay to the Issuing Bank, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to the
Administrative Agent for the account of the Issuing Bank at the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation. Each
Lender agrees to fund its Commitment Percentage of such unreimbursed payment
notwithstanding a failure to satisfy any applicable lending conditions or the
provisions of, Section 2.01, Section 2.06, or ARTICLE IV,
or the occurrence of the Termination Date. The failure of any Lender to make
available to the Issuing Bank its Commitment Percentage of any payment under
any Letter of Credit shall neither relieve any Lender of its obligation
hereunder to make available to the Issuing Bank its Commitment Percentage of
any payment under any Letter of Credit on the date required, as specified
above, nor increase the obligation of such other Lender. Whenever any Lender
has made payments to the Issuing Bank in respect of any reimbursement
obligation for any Letter of Credit, such Lender shall be entitled to share
ratably, 


41





based on its
Commitment Percentage, in all payments and collections thereafter received on
account of such reimbursement obligation.


                    (h)
Whenever the Borrowers desire that the Issuing Bank issue a Letter of Credit
(or the amendment, renewal or extension of an outstanding Letter of Credit),
the Lead Borrower shall give to the Issuing Bank and the Administrative Agent
at least two Business Days’ prior written notice (or such shorter period as may
be agreed upon in writing by the Issuing Bank and the Lead Borrower) specifying
the date on which the proposed Letter of Credit is to be issued, amended,
renewed or extended (which shall be a Business Day), the stated amount of the
Letter of Credit so requested, the expiration date of such Letter of Credit,
the name and address of the beneficiary thereof, and the provisions thereof. If
requested by the Issuing Bank, the Borrowers shall also submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for the issuance, amendment, renewal or extension of a Letter of
Credit.


                    (i)
The obligations of the Borrowers to reimburse the Issuing Bank for any Letter
of Credit Disbursement shall be unconditional and irrevocable and shall be paid
strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation: (i) any lack of validity or enforceability
of any Letter of Credit; (ii) the existence of any claim, setoff, defense or
other right which the Borrowers may have at any time against a beneficiary of
any Letter of Credit or against the Issuing Bank or any of the Lenders, whether
in connection with this Agreement, the transactions contemplated herein or any
unrelated transaction; (iii) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (iv) payment by the Issuing Bank of any Letter of
Credit against presentation of a demand, draft or certificate or other document
which does not strictly comply with the terms of such Letter of Credit; (v) any
other circumstance or happening whatsoever, whether or not similar to any of
the foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the
Borrowers’ obligations hereunder; or (vi) the fact that any Event of Default
shall have occurred and be continuing. No Secured Party shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank, provided
that the foregoing provisions of this Section 2.06(i) shall not
be construed to excuse the Issuing Bank from liability to the Borrowers to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are hereby waived by the Borrowers to the extent permitted by
Applicable Law) suffered by the Borrowers that are caused by the gross
negligence, bad faith or willful misconduct on the part of the Issuing Bank (as
finally determined by a court of competent jurisdiction), the Issuing Bank
shall be deemed to have exercised care in each such determination. In
furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented that appear on their
face to be 


42





in compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.


                    (j)
If any Event of Default shall occur and be continuing, on the Business Day that
the Lead Borrower receives notice from the Administrative Agent, the Required
Lenders or any Voting Borrowing Base Agent demanding the deposit of cash
collateral pursuant to this paragraph, the Borrowers shall deposit in the Cash
Collateral Account an amount in cash equal to 103% of the Letter of Credit
Outstandings as of such date, plus any accrued and unpaid interest thereon.
Each such deposit shall be held by the Collateral Agent as collateral for the
payment and performance of the Obligations. The Collateral Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such Cash Collateral Account. Other than any interest earned on the
investment of such deposits, which investments shall be made at the option and
sole discretion of the Collateral Agent at the request of the Lead Borrower and
at the Borrowers’ risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such Cash Collateral Account shall be applied by the
Collateral Agent to reimburse the Issuing Bank for payments on account of
drawings under Letters of Credit for which it has not been reimbursed and, to
the extent not so applied, shall be held first for the satisfaction of the
reimbursement obligations of the Borrowers for the Letter of Credit
Outstandings at such time and thereafter be applied to satisfy other
Obligations of the Borrowers under this Agreement. If the Borrowers are
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned promptly to the Lead Borrower for the account of
the Borrowers but in no event later than three (3) Business Days after all
Events of Default have been waived in accordance with this Agreement.


                    Section
2.07 Settlements Amongst Lenders. 


                    (a)
The Swingline Lender may, at any time (but, in any event, not less frequently
than weekly, as provided in Section 2.07(b)), on behalf of the Borrowers
(which hereby authorize the Swingline Lender to act on its behalf in that
regard), request the Administrative Agent to cause the Lenders to make a
Revolving Loan (which shall be a Prime Rate Loan) in an amount equal to such
Lender’s Commitment Percentage of the outstanding amount of Swingline Loans
made in accordance with Section 2.05, which request may be made
regardless of whether the conditions set forth in ARTICLE IV have been
satisfied. Upon such request, each Lender shall make available to the
Administrative Agent the proceeds of such Revolving Loan for the account of the
Swingline Lender. If the Swingline Lender requires a Revolving Loan to be made
by the Lenders and the request therefor is received prior to 12:00 Noon, Boston
time, on a Business Day, such transfers shall be made in immediately available
funds no later than 3:00 p.m., Boston time, that day; and, if the request
therefor is received after 12:00 Noon, Boston time, then no later than 3:00
p.m., Boston time, on the next Business Day. The obligation of each Lender to
transfer such funds is irrevocable, unconditional and without recourse to or
warranty by the Administrative Agent or the Swingline Lender. If and to the 


43





extent any Lender
shall not have so made its transfer to the Administrative Agent, such Lender
agrees to pay to the Administrative Agent, forthwith on demand such amount,
together with interest thereon, for each day from such date until the date such
amount is paid to the Administrative Agent at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation. 


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


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


                    Section
2.08 Notes;


                    (a)
Upon the request of any Lender made through the Administrative Agent, the
Revolving Loans made by such Lender shall be evidenced by a revolving note duly
executed on behalf of the Borrowers, dated the Effective Date, in substantially
the form attached hereto as Exhibit B-1, payable to the order of such
Lender in an aggregate principal amount equal to such Lender’s Commitment.


                    (b)
The Swingline Loans made by the Swingline Lender shall be evidenced by a
swingline note duly executed on behalf of the Borrowers, dated the Effective
Date, in 


44





substantially
the form attached hereto as Exhibit B-2 payable to the order of the
Swingline Lender in an aggregate principal amount equal to $10,000,000.


                    (c)
Each Note shall bear interest from the date thereof on the outstanding
principal balance thereof as set forth in this ARTICLE II. Each Lender
is hereby authorized by the Borrowers to endorse on a schedule attached to each
Note delivered to such Lender (or on a continuation of such schedule attached
to such Note and made a part thereof), or otherwise to record in such Lender’s
internal records, an appropriate notation evidencing the date and amount of
each Loan from such Lender, each payment and prepayment of principal of any
such Loan, each payment of interest on any such Loan and the other information
provided for on such schedule; provided, however, that the
failure of any Lender to make such a notation or any error therein shall not
affect the obligation of the Borrowers to repay the Loans made by such Lender
in accordance with the terms of this Agreement and the applicable Notes.


                    (d)
Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or
mutilation of such Lender’s Note and upon cancellation of such Note, the
Borrowers will issue, in lieu thereof, a replacement Note in favor of such
Lender, in the same principal amount thereof and otherwise of like tenor.


                    Section
2.09 Interest on Loans.


                    (a)
Revolving Loans.


	
  

 	
  

 
	
  

 	
                     (i)
 Subject to Section 2.10, each Prime Rate Loan shall bear interest
 (computed on the basis of the actual number of days elapsed over a year of
 360 days, as applicable) at a rate per annum that shall be equal to the then
 Prime Rate, plus the Applicable Margin for Prime Rate Loans.

 
	
  

 	
  

 
	
  

 	
                     (ii)
 Subject to Section 2.10, each LIBO Loan shall bear interest (computed
 on the basis of the actual number of days elapsed over a year of 360 days) at
 a rate per annum equal, during each Interest Period applicable thereto, to
 the Adjusted LIBO Rate for such Interest Period, plus the Applicable
 Margin for LIBO Loans.

 
	
  

 	
  

 
	
  

 	
                     (iii)
 Accrued interest on all Revolving Loans shall be payable in arrears on each
 Interest Payment Date applicable thereto, at maturity (whether by
 acceleration or otherwise), after such maturity on demand and (with respect
 to LIBO Loans) upon any repayment or prepayment thereof (on the amount
 prepaid).

 



                    Section
2.10 Default Interest.


          Effective
upon the occurrence of an Event of Default and at all times thereafter while
such Event of Default is continuing, at the option of the Administrative Agent
or upon the direction of the Required Lenders or any Voting Borrowing Base
Agent, interest shall accrue on all outstanding Revolving Loans (including
Swingline Loans) (after as well as before judgment, as and to the extent
permitted by law) at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the rate (including
the Applicable 


45





Margin) in
effect from time to time plus two percent (2.00%) per annum, and such
interest shall be payable on demand.


                    Section
2.11 Certain Fees.


          The
Borrowers shall pay to the Administrative Agent and BAS, for their own
respective accounts and for the account of the Lenders, as applicable, the fees
set forth in the Fee Letter as and when payment of such fees is due as therein
set forth. 


                    Section
2.12 Commitment Fee and Line Fee. 


          The
Commitment Fee and Line Fee shall be payable at the times and in the manner set
forth below:


                    (a)
The Borrowers shall pay to the Administrative Agent, for the account of the
Lenders, a commitment fee (the “Commitment Fee”) equal to 0.75% per
annum (on the basis of actual days elapsed in a year of 360 days) of the average
daily balance of the Unused Commitment for each day commencing on and including
the Effective Date and ending on but excluding the Termination Date. The
Commitment Fee so accrued in any calendar quarter shall be payable in arrears
on the first Business Day of the immediately succeeding calendar quarter,
except that all Commitment Fees so accrued as of the Termination Date shall be
payable on the Termination Date. 


                    (b)
The Administrative Agent shall remit to each Lender a portion (referred to
herein as the “Line Fee”) of the Commitment Fee actually received by
Administrative Agent under Section 2.12(a) equal to 0.75% per annum (on
the basis of actual days elapsed in a year of 360 days) of the average daily
balance for each day, commencing on and including the Effective Date and ending
on but excluding the Termination Date, of the excess of (i) such Lender’s
Commitment over (ii) an amount equal to the sum of (x) such Lender’s Commitment
Percentage multiplied by the principal amount of Revolving Loans then
outstanding plus (y) such Lender’s Commitment Percentage multiplied
by the then Letter of Credit Outstandings; provided, however,
that for purposes of calculating the share of the Line Fee due to any Lender
which is both the Swingline Lender and a Lender of other Revolving Loans, such
Lender’s share shall be equal to the difference between (i) such Lender’s
Commitment, and (ii) the sum of (x) such Lender’s Commitment Percentage of the
principal amount of all Revolving Loans then outstanding (including the
principal amount of Swingline Loans then outstanding), and (y) such Lender’s
Commitment Percentage of the then Letter of Credit Outstandings. The Line Fee
so accrued in any calendar quarter shall be payable in arrears on the first Business
Day of the immediately succeeding calendar quarter, except that all Line Fees
so accrued as of the Termination Date shall be payable on the Termination Date.
If the Commitment Fee actually paid by the Borrowers to the Administrative
Agent is insufficient to pay the Line Fee due the Lenders, the deficiency shall
be paid to the Lenders by the Swingline Lender from its own funds (and the
Borrowers shall have no liability with respect thereto).


46






                    Section
2.13 Letter of Credit Fees.


                    (a)
The Borrowers shall pay the Administrative Agent, for the account of the
Lenders, on the first day of each calendar quarter, in arrears, a fee (a “Letter
of Credit Fee”) equal to the then Applicable Margin for LIBO Loans multiplied
by the average face amount of each Letter of Credit outstanding during the
subject quarter. Effective upon the occurrence of an Event of Default and at
all times thereafter while such Event of Default is continuing, at the option
of the Administrative Agent or upon the direction of the Required Lenders or
any Voting Borrowing Base Agent, the Letter of Credit Fee shall be increased by
an amount equal to two percent (2%) per annum.


                    (b)
The Borrowers shall pay to the Administrative Agent, for the account of the
Issuing Bank, and in addition to all Letter of Credit Fees otherwise provided
for hereunder, a fronting fee in the amount of one-quarter of one percent
(0.25%) on the face amount of each Letter of Credit and all other reasonable
fees and charges in connection with the issuance, negotiation, settlement,
amendment and processing of each Letter of Credit issued by the Issuing Bank as
are customarily imposed by the Issuing Bank from time to time in connection
with letter of credit transactions.


	
  

 	
  

 
	
  

 	
           (b)
 All Letter of Credit Fees shall be calculated on the basis of a 360-day year
 and actual days elapsed.

 



                    Section
2.14 Nature of Fees.


          All
fees shall be paid on the dates due, in immediately available funds, to the
Administrative Agent for the respective accounts of the Administrative Agent,
the Issuing Bank and the Lenders, as provided herein. All fees shall be fully
earned on the date when due and shall not be refundable under any
circumstances.


                    Section
2.15 Termination or Reduction of Commitments.


          Upon
at least three (3) Business Days’ prior written notice to the Administrative
Agent, the Borrowers may, at any time, in whole permanently terminate, or from
time to time in part permanently reduce, the Commitments. Each such partial
reduction shall be in the principal amount of $1,000,000 or any integral
multiple of $500,000 in excess thereof. Each such reduction or termination
shall (i) be applied ratably to the Commitments of each Lender and (ii) be
irrevocable when given. At the effective time of each such reduction or
termination, the Borrowers shall pay to the Administrative Agent for
application as provided herein (i) the Commitment Fee accrued on the amount of
the Commitments so terminated or reduced through the date thereof; and (ii) any
amount by which the sum of the Credit Extensions on such date exceed the amount
to which the Commitments are to be reduced effective on such date, in each case
pro rata based on the amount prepaid.


                    Section
2.16 Alternate Rate of Interest.


          If,
prior to the commencement of any Interest Period for a LIBO Borrowing:


47





                    (a)
the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate for such Interest Period; or


                    (b)
the Administrative Agent is advised by the Required Lenders that, as a result
of a Change in Law after the Effective Date, the making or maintaining of their
Loans included in such Borrowing for such Interest Period has become unlawful
or impracticable;


then the
Administrative Agent shall give notice thereof to the Lead Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Lead Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, (i) any
Borrowing Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a LIBO Borrowing shall be ineffective and
(ii) if any Borrowing Request requests a LIBO Borrowing, such Borrowing
shall be made as a Borrowing of Prime Rate Loans.


                    Section
2.17 Conversion and Continuation of Revolving Loans.


          The
Lead Borrower, on behalf of the Borrowers, shall have the right at any time, on
three (3) Business Days’ prior irrevocable notice to the Administrative Agent
(which notice, to be effective, must be received by the Administrative Agent
not later than 10:00 a.m., Boston time, on the third Business Day preceding the
date of any conversion), (x) to convert any outstanding Borrowings of Revolving
Loans (but in no event Swingline Loans) of one Type (or a portion thereof) to a
Borrowing of Revolving Loans of the other Type or (y) to continue an
outstanding Borrowing of LIBO Loans for an additional Interest Period, subject
to the following:


                    (a)
no Borrowing of Revolving Loans may be converted into, or continued as, LIBO
Loans at any time when an Event of Default has occurred and is continuing;


                    (b)
if less than a full Borrowing of Revolving Loans is converted, such conversion
shall be made pro rata among the Lenders based upon their
Commitment Percentages in accordance with the respective principal amounts of
the Revolving Loans comprising such Borrowing held by such Lenders immediately
prior to such conversion;


                    (c)
the aggregate principal amount of Revolving Loans being converted into or
continued as LIBO Loans shall be in an integral of $100,000 and at least
$500,000;


                    (d)
each Lender shall effect each conversion by applying the proceeds of its new
LIBO Loan or Prime Rate Loan, as the case may be, to its Revolving Loan being
so converted;


                    (e)
the Interest Period with respect to a Borrowing of LIBO Loans effected by a
conversion or in respect to the Borrowing of LIBO Loans being continued as LIBO
Loans shall commence on the date of conversion or the expiration of the current
Interest Period applicable to such continuing Borrowing, as the case may be;


48





                    (f)
a Borrowing of LIBO Loans may be converted only on the last day of an Interest
Period applicable thereto;


                    (g)
each request for a conversion or continuation of a Borrowing of LIBO Loans
which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one (1) month; and


                    (h)
no more than eight (8) Borrowings of LIBO Loans may be outstanding at any time.


If the Lead
Borrower does not give notice to convert any Borrowing of LIBO Loans, or does
not give notice to continue, or does not have the right to continue, any
Borrowing as LIBO Loans, in each case as provided above, such Borrowing shall
automatically be converted to a Borrowing of Prime Rate Loans at the expiration
of the then-current Interest Period. The Administrative Agent shall, after it
receives notice from the Lead Borrower, promptly give each Lender notice of any
conversion, in whole or part, of any Revolving Loan made by such Lender.


                    Section
2.18 Mandatory Prepayment; Cash Collateral.


          The
outstanding Obligations shall be subject to mandatory prepayment as follows:


                    (a)
If, at any time, the amount of the Credit Extensions exceeds the lesser of (i)
the Total Commitments minus the Borrowing Base Reserve or (ii) the
Borrowing Base, the Borrowers will immediately (A) prepay the Revolving Loans
in an amount necessary to eliminate such excess, and (B) if, after giving
effect to the prepayment in full of all outstanding Revolving Loans such excess
has not been eliminated, deposit cash into the Cash Collateral Account in an
amount equal to 103% of the Letters of Credit Outstanding.


                    (b)
The Revolving Loans shall be repaid in accordance with the provisions of Section
2.22 hereof.


                    (c)
Subject to the provisions of Section 2.18(a) and Section 2.18(b),
outstanding Prime Rate Loans shall be prepaid before outstanding LIBO Loans are
prepaid. Each partial prepayment of LIBO Loans shall be in an integral multiple
of $100,000. No prepayment of LIBO Loans shall be permitted pursuant to this Section
2.18 other than on the last day of an Interest Period applicable thereto,
unless the Borrowers simultaneously reimburse the Lenders for all Breakage Costs
associated therewith. In order to avoid such Breakage Costs, as long as no
Event of Default has occurred and is continuing, at the request of the Lead
Borrower, the Administrative Agent shall hold all amounts required to be
applied to LIBO Loans in the Cash Collateral Account and will apply such funds
to the applicable LIBO Loans at the end of the then pending Interest Period
therefore and such LIBO Loans shall continue to bear interest at the rate set
forth in Section 2.10 until the amounts in the Cash Collateral Account
have been so applied (provided that the foregoing shall in no way
limit or restrict the Agents’ rights upon the subsequent occurrence of an Event
of Default). No partial prepayment of a Borrowing of LIBO Loans shall result in
the aggregate principal amount of the LIBO Loans remaining outstanding 


49





pursuant to
such Borrowing being less than $1,000,000. Except as provided in Section
2.15, no prepayment of the Revolving Loans shall permanently reduce the
Commitments.


                    (d)
All amounts required to be applied to all Revolving Loans hereunder (other than
Swingline Loans) shall be applied ratably in accordance with each Lender’s
Commitment Percentage.


                    (e)
Upon the Termination Date, the Commitments and the credit facility provided
hereunder shall be terminated in full and the Borrowers shall pay, in full and
in cash, all outstanding Loans and all other outstanding Obligations.


                    Section
2.19 Optional Prepayment of Loans; Reimbursement of Lenders.


                    (a)
The Borrowers shall have the right at any time and from time to time to prepay
outstanding Revolving Loans in whole or in part, (x) with respect to LIBO
Loans, upon at least two (2) Business Days’ prior written, telex or facsimile
notice to the Administrative Agent prior to 11:00 a.m., Boston time, and (y)
with respect to Prime Rate Loans, on any Business Day if written, telex or
facsimile notice is received by the Administrative Agent prior to 1:00 p.m.,
Boston time, subject to the following limitations:


	
  

 	
  

 
	
  

 	
                     (i)
 Subject to Section 2.22, all prepayments shall be paid to the
 Administrative Agent for application, first, to the prepayment of
 outstanding Swingline Loans, second, to the prepayment of other
 outstanding Revolving Loans ratably in accordance with each Lender’s
 Commitment Percentage, and third, to the funding of a cash collateral
 deposit in the Cash Collateral Account in an amount equal to 103% of all
 Letter of Credit Outstandings.

 
	
  

 	
  

 
	
  

 	
                     (ii)
 Subject to the foregoing, outstanding Prime Rate Loans shall be prepaid
 before outstanding LIBO Loans are prepaid. Each partial prepayment of LIBO
 Loans shall be in an integral multiple of $100,000. No prepayment of LIBO
 Loans shall be permitted pursuant to this Section 2.19 other than on
 the last day of an Interest Period applicable thereto, unless the Borrowers
 simultaneously reimburse the Lenders for all Breakage Costs associated
 therewith. No partial prepayment of a Borrowing of LIBO Loans shall result in
 the aggregate principal amount of the LIBO Loans remaining outstanding
 pursuant to such Borrowing being less than $1,000,000.

 
	
  

 	
  

 
	
  

 	
                     (iii)
 Each notice of prepayment shall specify the prepayment date, the principal
 amount and Type of the Revolving Loans to be prepaid and, in the case of LIBO
 Loans, the Borrowing or Borrowings pursuant to which such Revolving Loans
 were made. Each notice of prepayment shall be irrevocable and shall commit
 the Borrowers to prepay such Revolving Loan by the amount and on the date
 stated therein. The Administrative Agent shall, promptly after receiving
 notice from the Lead Borrower hereunder, notify each Lender of the principal
 amount and Type of the Revolving Loans held by such Lender which are to be
 prepaid, the prepayment date and the manner of application of the prepayment.

 



50





                    (b)
The Borrowers shall reimburse each Lender on demand for any loss incurred or to
be incurred by it in the reemployment of the funds released (i) resulting from
any prepayment (for any reason whatsoever, including, without limitation,
conversion to Prime Rate Loans or acceleration by virtue of, and after, the
occurrence and continuance of an Event of Default) of any LIBO Loan required or
permitted under this Agreement, if such LIBO Loan is prepaid other than on the
last day of the Interest Period for such LIBO Loan or (ii) in the event that
after the Lead Borrower delivers a notice of borrowing under Section 2.03
in respect of LIBO Loans, such LIBO Loans are not made on the first day of the
Interest Period specified in such notice of borrowing for any reason other than
a breach by such Lender of its obligations hereunder or the delivery of any
notice pursuant to Section 2.16. Such loss shall be the amount as
reasonably determined by such Lender as the excess, if any, of (A) the amount
of interest which would have accrued to such Lender on the amount so paid or
not borrowed at a rate of interest equal to the Adjusted LIBO Rate for such
Revolving Loan, for the period from the date of such payment or failure to
borrow to the last day (x) in the case of a payment or refinancing with Prime
Rate Loans other than on the last day of the Interest Period for such LIBO
Loan, of the then current Interest Period for such LIBO Loan or (y) in the case
of such failure to borrow, of the Interest Period for such Revolving Loan which
would have commenced on the date of such failure to borrow, over (B) the amount
of interest which would have accrued to such Lender on such amount by investing
such amount in United States Treasury securities (bills on a discounted basis
shall be converted to a bond equivalent) with a maturity date closest to the
last day of the applicable Interest Period (collectively, “Breakage Costs”).
Any Lender demanding reimbursement for such loss shall deliver to the Lead
Borrower from time to time one or more certificates setting forth the amount of
such loss as determined by such Lender and setting forth in reasonable detail
the manner in which such amount was determined.


                    (c)
In the event the Borrowers fail to prepay any Revolving Loan on the date
specified in any prepayment notice delivered pursuant to Section 2.19(a),
the Borrowers on demand by any Lender shall pay to the Administrative Agent for
the account of such Lender any amounts required to compensate such Lender for
any loss incurred by such Lender as a result of such failure to prepay,
including, without limitation, any loss, cost or expenses incurred by reason of
the acquisition of deposits or other funds by such Lender to fulfill deposit
obligations incurred in anticipation of such prepayment. Any Lender demanding
such payment shall deliver to the Lead Borrower from time to time one or more
certificates setting forth the amount of such loss as determined by such Lender
and setting forth in reasonable detail the manner in which such amount was
determined.


                    (d)
Whenever any partial prepayment of Revolving Loans are to be applied to LIBO
Loans, such LIBO Loans shall be prepaid in the chronological order of their
Interest Payment Dates.


                    Section
2.20 Maintenance of Loan Account; Statements of Account.


                    (a)
The Administrative Agent shall maintain an account on its books in the name of
the Borrowers (the “Loan Account”) which will reflect (i) all Swingline
Loans, all Revolving Loans and other advances made by the Lenders to the
Borrowers or for the 


51





Borrowers’
account pursuant to the Loan Documents, (ii) all Letter of Credit
Disbursements, fees and interest that have become payable as herein set forth,
and (iii) any and all other Obligations that have become payable. 


                    (b)
The Loan Account will be credited with all amounts received by the
Administrative Agent from the Borrowers or otherwise for the Borrowers’
account, including all amounts received in the Concentration Account, and the
amounts so credited shall be applied as set forth in Section 2.22 of
this Agreement or Section 6.02 of the Security Agreement, as applicable. After
the end of each month, the Administrative Agent shall send to the Lead Borrower
a statement accounting for the charges, loans, advances and other transactions
occurring among and between the Administrative Agent, the Lenders and the
Borrowers during that month. The monthly statements shall, absent manifest
error, be final, conclusive and binding on the Loan Parties, unless otherwise
objected to in writing by the Lead Borrower within thirty (30) days after
receipt of the monthly statement.


                    Section
2.21 Cash Receipts.


                    (a)
Annexed hereto as Schedule 2.21(a) is a list of all present DDAs, which
Schedule includes, with respect to each depository, (i) the name and address of
that depository, and (ii) the account number(s) maintained with such
depository. The Lead Borrower shall provide the Administrative Agent an updated
Schedule 2.21(a) within fifteen (15) days after the end of each Fiscal
Quarter.


                    (b)
Annexed hereto as Schedule 2.21(b) is a list describing all arrangements
to which the Borrowers are a party with respect to the payment to the Borrowers
of the proceeds of all credit card charges for sales by the Borrowers. 


                    (c)
On or prior to the Effective Date, the Borrowers shall have (i) delivered to
the Administrative Agent notifications to each of the Borrowers’ credit card
clearinghouses and processors of notice in form and substance satisfactory to
the Administrative Agent (each, a “Credit Card Notification”) and (ii)
entered into agency agreements with the banks maintaining the deposit accounts
identified on Schedule 2.21(c) (collectively, the “Blocked Accounts”),
which agreements (the “Blocked Account Agreements”) shall be in form and
substance reasonably satisfactory to the Administrative Agent. The Credit Card
Notifications shall direct the recipients of such notifications to comply with
the written directions of the Collateral Agent received from time to time with
respect to the collections of Accounts processed by such credit card clearinghouses
and processors, respectively. The Blocked Account Agreements shall permit,
subject to the terms and conditions of this Section 2.21(c), the
Collateral Agent to direct the third parties to such agreements to sweep from
the Blocked Accounts on each Business Day all available cash receipts from the
sale of Inventory and other assets, all collections of Accounts, all proceeds
of Collateral, and all other cash payments received by the Borrowers from any
Person or from any source or on account of any sale or other transaction or
event (all such cash receipts and collections, “Cash Receipts”), to a
concentration account maintained by the Administrative Agent at Bank of America
(the “Concentration Account”) or such other account as otherwise
directed by the Administrative Agent. In that regard, the Borrowers shall cause
the 


52





ACH or wire
transfer to a Blocked Account or to the Concentration Account, no less
frequently than daily (and whether or not there is then an outstanding balance
in the Loan Account) of (A) the then contents of each DDA, each such transfer
to be net of an amount not to exceed $10,000 which may remain on deposit in
each DDA (unless the Collateral Agent is exercising its rights and remedies
under the Security Documents with respect to a substantial portion of the
Collateral, in which case the entire contents of each DDA shall be swept
daily); and (B) the proceeds of all credit card charges (to be paid directly by
any credit card clearinghouse or processor or, if received by any Loan Party,
by such Loan Party) not otherwise provided for pursuant hereto. Further,
whether or not any Obligations are then outstanding, the Borrowers shall cause
the ACH or wire transfer to the Concentration Account, no less frequently than
daily, of the then entire ledger balance of each Blocked Account, net of an
amount, not to exceed $75,000 in the aggregate, which may remain on deposit in
the Blocked Accounts (unless the Collateral Agent is exercising its rights and
remedies under the Security Documents with respect to a substantial portion of
the Collateral, in which case the entire contents of each Blocked Account shall
be swept daily). In the event that, notwithstanding the provisions of this Section
2.21, the Borrowers receive or otherwise have dominion and control of any
Cash Receipts, proceeds or collections, such Cash Receipts, proceeds, and
collections shall be held in trust by the Borrowers for the Administrative
Agent and shall not be commingled with any of the Borrowers’ other funds or
deposited in any account of the Borrowers and shall, within one Business Day
after receipt, either be deposited into a Blocked Account or the Concentration
Account, or dealt with in such other fashion as the Borrowers may be instructed
by the Administrative Agent.


                    (d)
At the request of the Administrative Agent, the Borrowers shall deliver or
shall cause to be delivered to the Administrative Agent accurate reports of all
amounts deposited in the Blocked Accounts to ensure the proper transfer of funds
as set forth above. If, at any time, any cash or cash equivalents owned by the
Borrowers are held or invested in any manner other than in a Blocked Account
that is subject to a Blocked Account Agreement or the Concentration Account,
the Administrative Agent shall require the Borrowers to have all funds
transferred to the Concentration Account, a Blocked Account or such other
account as the Administrative Agent may direct.


                    (e)
Provided no Event of Default has occurred and is continuing, the Borrowers may
close DDAs, Blocked Accounts and Securities Accounts and/or open new DDAs,
Blocked Accounts and Securities Accounts, subject to, in the case of Blocked
Accounts, the execution and delivery to the Administrative Agent of appropriate
Blocked Account Agreements (unless expressly waived by the Administrative
Agent) consistent with the provisions of this Section 2.21 and otherwise
satisfactory to the Administrative Agent. Provided no Event of Default has
occurred and is continuing, the Borrowers may terminate or enter into new
arrangements with respect to the payment to the Borrowers of the proceeds of
all credit card charges for sales by the Borrowers; provided, however,
that the Borrowers shall deliver to the Administrative Agent a Credit Card
Notification for any new arrangement promptly after entering into such new
agreement.


53





                    (f)
The Borrowers may also maintain one or more disbursement accounts (the “Disbursement
Accounts”) to be used by the Borrowers for disbursements and payments
(including payroll, sales taxes, or withholding taxes) in the ordinary course
of business or as otherwise permitted hereunder; provided that
such Disbursement Accounts are subject to a security interest in favor of the
Collateral Agent for the benefit of itself and the Secured Parties. The only
Disbursement Accounts as of the Effective Date are those described in Schedule
2.21(f).


                    (g)
The Concentration Account is, and shall remain, under the sole dominion and
control of the Collateral Agent. The Borrowers acknowledge and agree that (i)
the Borrowers have no right of withdrawal from the Concentration Account,
(ii) the funds on deposit in the Concentration Account shall continue to
be collateral security for all of the Obligations and (iii) the funds on
deposit in the Concentration Account shall be applied as provided in Section
2.22(a). 


                    (h)
Any directives to any of the Borrowers’ credit card clearinghouses or
processors or any institution at which a Blocked Account or Securities Account
is maintained shall be consistent with the provisions of Section 2.21(c)
above and Section 2.21(i) below. 


                    (i)
Annexed hereto as Schedule 2.21(i) is a list of all securities accounts at
any institution in which any Loan Party holds any Investments (other than
securities accounts located at the Administrative Agent, the Collateral Agent
or an Affiliate of the Administrative Agent or the Collateral Agent)
(collectively, with any such accounts hereafter established, the “Securities
Accounts”). Within sixty (60) days after the Effective Date, the Loan
Parties shall have caused each of the Investments in each of the Securities
Accounts to be either (i) transferred to a Securities Account located at the
Administrative Agent, the Collateral Agent or an Affiliate of the
Administrative Agent or the Collateral Agent or (ii) liquidated, with the
proceeds of such Investments delivered to the Administrative Agent for
application in accordance with this Agreement.


                    Section
2.22 Application of Payments.


                    (a)
So long as no Event of Default shall have occurred and be continuing, all
amounts received in the Concentration Account from any source, including the
Blocked Account Banks, and all other amounts received by the Administrative
Agent and the Collateral Agent shall be applied in the following order: 


	
  

 	
  

 
	
  

 	
                     (i)
 First, to pay fees and expense reimbursements and indemnification then
 due and payable to the Agents, the Issuing Bank and the Lenders, and then

 
	
  

 	
  

 
	
  

 	
                     (ii)
 Second, to pay interest due and payable on Credit Extensions, and then

 
	
  

 	
  

 
	
  

 	
                     (iii)
 Third, at the option of the Administrative Agent, to repay outstanding
 Swingline Loans, and
 then

 


54









	
  

 	
  

 
	
  

 	
                     (iv)
 Fourth, to repay other outstanding Revolving Loans that are Prime Rate
 Loans and all outstanding reimbursement obligations under Letters of Credit,
 and then 

 
	
  

 	
  

 
	
  

 	
                     (v)
 Fifth, to repay any outstanding Revolving Loans that are LIBO Loans
 and all Breakage Costs due in respect of such repayment pursuant to Section
 2.19(b) or, at the Lead Borrower’s option (if no Event of Default has
 occurred and is then continuing), to fund a cash collateral deposit to the
 Cash Collateral Account sufficient to pay, and with direction to pay, all
 such outstanding LIBO Loans on the last day of the then-pending Interest
 Period therefor, and then

 
	
  

 	
  

 
	
  

 	
                     (vi)
 Sixth, to pay all other Obligations owing to the Agents, the Issuing
 Bank and the Lenders that are then outstanding and due and payable, and then

 
	
  

 	
  

 
	
  

 	
                     (vii)
 Seventh, to pay all other Obligations that are then outstanding and
 due and payable.

 



                    (b)
If at any time all Obligations then due and payable are paid in full and all
Letters of Credit Outstandings shall be fully cash collateralized, then so long
as no Default or Event of Default shall have occurred and be continuing, any
excess amounts shall be deposited in a separate cash collateral account and
shall be released to the Borrowers upon the request of the Lead Borrower and
utilized by the Borrowers prior to any further Revolving Loans being made. Any
other amounts received by any Secured Party as contemplated by Section 2.15,
Section 2.18, Section 2.19, or Section 2.21 shall also be
applied in the order set forth above in this Section 2.22.


                    (c)
After the occurrence and during the continuance of an Event of Default, the
Administrative Agent shall apply all payments in respect of any Obligations and
all proceeds of the Collateral, subject to the provisions of this Agreement, in
the following order:


	
  

 	
  

 
	
  

 	
                     (i)
 First, to pay fees and expense reimbursements then due and payable to
 the Agents until paid in full, and then

 
	
  

 	
  

 
	
  

 	
                     (ii)
 Second, to pay fees and expense reimbursements then due and payable to
 the Issuing Bank and the Lenders until paid in full, and then

 
	
  

 	
  

 
	
  

 	
                     (iii)
 Third, ratably to pay interest accrued in respect of the Permitted
 Overadvances until paid in full, and then

 
	
  

 	
  

 
	
  

 	
                     (iv)
 Fourth, to pay interest accrued in respect of the Swingline Loans
 until paid in full, and then 

 
	
  

 	
  

 
	
  

 	
                     (v)
 Fifth, ratably to pay interest accrued in respect of the Revolving
 Loans until paid in full, and then

 


55









	
  

 	
  

 
	
  

 	
                     (vi)
 Sixth, ratably to pay principal in respect of the Permitted
 Overadvances until paid in full, and then

 
	
  

 	
  

 
	
  

 	
                     (vii)
 Seventh, ratably to pay principal due in respect of the Swingline
 Loans until paid in full, and then

 
	
  

 	
  

 
	
  

 	
                     (viii)
 Eighth, to the Administrative Agent, to be held by the Administrative
 Agent, for the ratable benefit of the Issuing Bank and the Lenders, as cash
 collateral in an amount up to 103% of the then extant Letters of Credit
 Outstandings, and then

 
	
  

 	
  

 
	
  

 	
                     (ix)
 Ninth, ratably to pay principal due in respect of the Revolving Loans
 until paid in full, and then

 
	
  

 	
  

 
	
  

 	
                     (x)
 Tenth, ratably to pay any other Obligations then owing to the
 Swingline Lender, and then

 
	
  

 	
  

 
	
  

 	
                     (xi)
 Eleventh, ratably to pay any other Obligations then owing to the
 Lenders, and then

 
	
  

 	
  

 
	
  

 	
                     (xii)
 Twelfth, to the ratable payment of all other Obligations then due and
 payable, and then

 
	
  

 	
  

 
	
  

 	
                     (xiii)
 Thirteenth, to the Lead Borrower or such other Person entitled thereto
 under Applicable Law.

 



          For
purposes of the foregoing (other than Section 2.22(c)(xii), “paid in
full” means payment of all amounts owing under the Loan Documents according to
the terms thereof, including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the commencement of
any insolvency or other similar proceedings under the Bankruptcy Code or
otherwise), default interest, interest on interest, and expense reimbursements,
except to the extent that default or overdue interest (but not any other
interest) and loan fees, each arising from or related to a default, are
disallowed in any insolvency or other similar proceedings under the Bankruptcy
Code or otherwise; provided, however, that for the purposes of Section
2.22(c)(xii), “paid in full” means payment of all amounts owing under the
Loan Documents according to the terms thereof, including loan fees, service
fees, professional fees, interest (and specifically including interest accrued
after the commencement of any Insolvency Proceeding), default interest, interest
on interest, and expense reimbursements, whether or not the same would be or is
allowed or disallowed in whole or in part in any insolvency or other similar
proceedings under the Bankruptcy Code or otherwise.


                    (d)
In the event of a direct conflict between the priority provisions of this Section
2.22 and other provisions contained in any other Loan Document, it is the
intention of the parties hereto that such priority provisions in such documents
shall be read together and construed, to the fullest extent possible, to be in
concert with each other. In the event of any 


56





actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section 2.22 shall control and govern.


                    (e)
All credits against the Obligations shall be conditioned upon final payment to
the Administrative Agent of the items giving rise to such credits and shall be
subject to one Business Day’s clearance and collection. If any item deposited
to the Concentration Account and credited to the Loan Account is dishonored or
returned unpaid for any reason, whether or not such return is rightful or
timely, the Administrative Agent shall have the right to reverse such credit
and charge the amount of such item to the Loan Account and the Borrowers shall
indemnify the Administrative Agent, the Collateral Agent, the Issuing Bank and
the Lenders against all claims and losses resulting from such dishonor or
return.


                    Section
2.23 Increased Costs.


                    (a)
If any Change in Law shall:


	
  

 	
  

 
	
  

 	
                     (i)
 impose, modify or deem applicable any reserve, special deposit or similar
 requirement against assets of, deposits with or for the account of, or credit
 extended by, any Lender or any holding company of any Lender (except any such
 reserve requirement reflected in the Adjusted LIBO Rate) or the Issuing Bank;
 or

 
	
  

 	
  

 
	
  

 	
                     (ii)
 impose on any Lender or the Issuing Bank or the London interbank market any
 other condition (not including, for the avoidance of doubt, any condition
 with respect to Taxes, which shall only give rise to additional payments to
 the extent provided by Section 2.26) affecting this Agreement or LIBO
 Loans made by such Lender or any Letter of Credit or participation therein;

 
	
  

 	
  

 
	
  

 	
 and the
 result of any of the foregoing shall be to increase the cost to such Lender
 of making or maintaining any LIBO Loan (or of maintaining its obligation to
 make any such Loan) or to increase the cost to such Lender or the Issuing Bank
 of participating in, issuing or maintaining any Letter of Credit or to reduce
 the amount of any sum received or receivable by such Lender or the Issuing
 Bank hereunder (whether of principal, interest or otherwise), then the
 Borrowers will pay to such Lender or the Issuing Bank, as the case may be,
 such additional amount or amounts as will compensate such Lender or the
 Issuing Bank, as the case may be, for such additional costs incurred or
 reduction suffered. For the avoidance of doubt, each such Lender and the
 Issuing Bank shall be entitled to payment under this Section 2.23 with
 respect to a Change in Law, unless the increased cost (including, without
 limitation, any Tax) to such Lender or the Issuing Bank is a result of a
 failure by such Lender or the Issuing Bank to (i) comply with such Change in
 Law (including FATCA), or (ii) to furnish any documentation required for the
 Borrowers, such Lender or the Issuing Bank to comply with their respective
 obligations under such Change in Law.

 



                    (b)
If any Lender or the Issuing Bank determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of
return on such 


57





Lender’s or
the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing
Bank’s holding company, if any, as a consequence of this Agreement or the Loans
made by, or participations in Letters of Credit held by, such Lender, or the
Letters of Credit issued by the Issuing Bank, to a level below that which such
Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding
company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the Issuing Bank’s policies and the policies of
such Lender’s or the Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company for any such reduction suffered.


                    (c)
A certificate of a Lender or the Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section and setting forth in reasonable detail the manner in which such amount
or amounts were determined shall be delivered to the Lead Borrower and shall be
conclusive absent manifest error. The Borrowers shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) Business Days after receipt thereof.


                    (d)
Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section within ninety (90) days of the effective
date of the relevant Change in Law shall constitute a waiver of such Lender’s
or the Issuing Bank’s right to demand such compensation.


                    Section
2.24 Change in Legality.


                    (a)
Notwithstanding anything to the contrary contained elsewhere in this Agreement,
if (x) any Change in Law shall make it unlawful for a Lender to make or
maintain a LIBO Loan or to give effect to its obligations as contemplated
hereby with respect to a LIBO Loan or (y) at any time any Lender reasonably
determines that the making or continuance of any of its LIBO Loans has become
impracticable as a result of a contingency occurring after the date hereof
which adversely affects the London interbank market or the position of such
Lender in the London interbank market, then, by written notice to the Lead
Borrower, such Lender may (i) declare that LIBO Loans will not thereafter be
made by such Lender hereunder, whereupon any request by the Lead Borrower for a
LIBO Borrowing shall, as to such Lender only, be deemed a request for a Prime
Rate Loan unless such declaration shall be subsequently withdrawn; and (ii)
require that all outstanding LIBO Loans made by it be converted to Prime Rate
Loans, in which event all such LIBO Loans shall be automatically converted to
Prime Rate Loans as of the effective date of such notice as provided in
paragraph (b) below. In the event any Lender shall exercise its rights under
clause (i) or (ii) of this paragraph (a), all payments and prepayments of
principal which would otherwise have been applied to repay the LIBO Loans that
would have been made by such Lender or the converted LIBO Loans of such Lender
shall instead be applied to repay the Prime Rate Loans made by such Lender in
lieu of, or resulting from the conversion of, such LIBO Loans.


58





                    (b)
For purposes of this Section 2.24, a notice to the Lead Borrower by any
Lender pursuant to paragraph (a) above shall be effective, if any LIBO Loans
shall then be outstanding, on the last day of the then-current Interest Period;
and otherwise such notice shall be effective on the date of receipt by the Lead
Borrower.


                    Section
2.25 Payments; Sharing of Setoff.


                    (a)
The Borrowers 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 Letters of Credit, or of amounts payable under Section
2.19(b), Section 2.23, Section 2.26, or otherwise) prior to
11:00 a.m., Boston time, 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 discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. Except as otherwise provided herein, if any day on which
payment is due is not a Business Day, then the payment shall be due on the next
day following which is a Business Day and such extension of time shall be
included in computing interest and fees in connection with such payment. All
such payments shall be made to the Administrative Agent at its offices at 100
Federal Street, 9th Floor, Boston, Massachusetts 02110 (or as the
Administrative Agent may otherwise direct in writing), except payments to be
made directly to the Issuing Bank or Swingline Lender as expressly provided
herein and except that payments pursuant to Section 2.19(b), Section
2.23, Section 2.26, and Section 9.03 shall be made directly
to the Persons entitled thereto and payments pursuant to other Loan Documents
shall be made to the Persons specified therein. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment
under any Loan Document shall be due on a day that is not a Business Day,
except with respect to LIBO Borrowings, the date for payment shall be extended
to the next succeeding Business Day, and such extension of time shall be
included in computing interest and fees in connection with such payment. All
payments under each Loan Document shall be made in dollars.


                    (b)
All funds received by and available to the Administrative Agent to pay
principal, unreimbursed drawings under Letters of Credit, interest and fees
then due hereunder, shall be applied in accordance with the provisions of Section
2.22(e) hereof or Section 6.02 of the Security Agreement, as applicable,
ratably among the parties entitled thereto in accordance with the amounts of
principal, unreimbursed drawings under Letters of Credit, interest, and fees
then due to such respective parties.


                    (c)
If any Lender shall, by exercising any right of setoff or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Loans or participations in drawings under Letters of Credit or Swingline
Loans resulting in such Lender’s receiving payment of a greater proportion of
the aggregate amount of its Loans and participations in drawings under Letters
of Credit and Swingline Loans and accrued interest thereon than the proportion
received by any other Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Loans and
participations in drawings under


59





Letters of Credit and Swingline Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Loans and participations
in drawings under Letters of
Credit and Swingline Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment
made by the Borrowers pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in drawings under Letters of Credit to any assignee or participant, other than
to the Borrowers or any Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrowers consent to the foregoing and agree, to
the extent they may effectively do so under Applicable Law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrowers rights of setoff and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the
Borrowers in the amount of such participation.


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


                    Section
2.26 Taxes.


                    (a)
Any and all payments by or on account of any obligation of the Borrowers
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any Indemnified Taxes; provided that, if
the Borrowers shall be required to deduct any Indemnified Taxes from such
payments, then (i) the sum payable shall be increased as necessary so
that, after making all required deductions for Indemnified Taxes (including
deductions for Indemnified Taxes applicable to additional sums payable under
this Section 2.26), the Agents, the Lenders (and any assignor of a
Lender, but only if such Lender’s assignor would have been entitled to an
increase pursuant to this Section 2.26(a)) or the Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrowers shall make such deductions,
and (iii) the Borrowers shall pay the full amount deducted to the relevant
Governmental Authority in accordance with Applicable Law. 


60





                    (b)
In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with Applicable Law.


                    (c)
The Borrowers shall indemnify the Agents, each Lender (and any assignor of such
Lender, but only if such Lender’s assignor would have been entitled to
indemnification pursuant to this Section 2.26(c)) and the Issuing Bank,
within ten (10) Business Days after written demand therefore, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Agents, such Lender
or the Issuing Bank, as the case may be, on or with respect to any payment by
or on account of any obligation of the Borrowers hereunder or under any other
Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted
on or attributable to amounts payable under this Section 2.26) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto. A certificate as to the amount of such payment or liability delivered
to the Lead Borrower by a Lender or the Issuing Bank, or by the Administrative
Agent on its own behalf or on behalf of an Agent, a Lender or the Issuing Bank
setting forth in reasonable detail the manner in which such amount was determined,
shall be conclusive absent manifest error. 


                    (d)
As soon as practicable after any payment of Indemnified Taxes or Other Taxes by
the Borrowers to a Governmental Authority, the Borrowers shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.


                    (e)
Any Foreign Lender shall deliver to the Lead Borrower and the Administrative
Agent two copies of either United States Internal Revenue Service Form W-8BEN
or Form W-8ECI, or any subsequent versions thereof or successors thereto to
establish its exemption from U.S. Federal withholding tax, or, in the case of a
Foreign Lender claiming exemption from in U.S. Federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of “portfolio
interest”, a (i) Form W-8BEN, or any subsequent versions thereof or successors
thereto and (ii) a certificate representing that such Foreign Lender is not (A)
a bank for purposes of Section 881(c) of the Code, (B) is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrowers and (C) is not a controlled foreign corporation related to the
Borrowers (within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Foreign Lender claiming, as applicable,
complete exemption from or reduced rate of, U.S. Federal withholding Tax on
payments by the Borrowers under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Foreign Lender on or before the date it
becomes a party to this Agreement (or, in the case of a transferee that is a
participation holder, on or before the date such participation holder becomes a
transferee hereunder) and on or before the date, if any, such Foreign Lender
changes its applicable lending office by designating a different lending office
(a “New Lending Office”). In addition, each Foreign Lender shall deliver
such forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Foreign Lender. Notwithstanding any other provision of this Section
2.26(e), a Foreign Lender shall not be required to deliver any form
pursuant to this Section 2.26(e) that such Foreign Lender is not legally
able to deliver.


61





                    (f)
Upon the request of the Lead Borrower, any Lender that is not a Foreign Lender
shall deliver to the Lead Borrower two copies of United States Internal Revenue
Service Form W-9 or any subsequent versions thereof or successors thereto,
properly completed and duly executed. If any Lender fails to deliver Form W-9
or any subsequent versions thereof or successors thereto as required herein,
then the Borrowers may withhold from any payment to such party an amount
equivalent to the applicable backup withholding Tax imposed by the Code,
without reduction.


                    (g)
The Borrowers shall not be required to indemnify any Lender or to pay any
additional amounts to any Lender in respect of U.S. Federal withholding tax
pursuant to Section 2.26(a) or Section 2.26(c) above to the
extent that the obligation to pay such additional amounts would not have arisen
but for a failure by such Lender to comply with the provisions of Section
2.26(e), Section 2.26(f) or Section 2.26(j). Should a Lender
become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrowers shall, at such Lender’s expense, take such steps as
such Lender shall reasonably request to assist such Lender to recover such
Taxes.


                    (h)
Each of the Lenders agrees that upon the occurrence of any circumstances
entitling such party to indemnification or additional amounts pursuant to Section
2.26(a) or Section 2.26(c), such party shall use reasonable efforts
to take any action (including designating a new lending office and signing any
prescribed forms or other documentation appropriate in the circumstances) if
such action would reduce or eliminate any Tax (including penalties or interest,
as applicable) with respect to which such indemnification or additional amounts
may thereafter accrue.


                    (i)
If any Lender reasonably determines that it has actually and finally realized,
by reason of a refund, deduction or credit of any Taxes paid or reimbursed by
the Borrowers pursuant to subsection (a) or (c) above in respect of payments
under the Loan Documents, a current monetary benefit that it would otherwise
not have obtained and that would result in the total payments under this Section
2.26 exceeding the amount needed to make such Lender whole, such Lender
shall pay to the Borrowers, with reasonable promptness following the date upon
which it actually realizes such benefit, an amount equal to the lesser of the
amount of such benefit or the amount of such excess, in each case net of all
out-of-pocket expenses incurred in securing such refund, deduction or credit.


                    (j)
If a payment made to a Lender under any Loan Document would be subject to U.S.
Federal withholding Tax imposed by FATCA as a result of the failure of such
Lender to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Lender shall deliver to the Lead Borrower and the Administrative Agent such
documentation as is required to be furnished pursuant to U.S. Treasury
Regulations in order for the Borrowers, such Lender and the Administrative
Agent to comply with their respective obligations (including any applicable
reporting requirements) under FATCA.


62





                    Section
2.27 Security Interests in Collateral.


          To
secure their Obligations, the Loan Parties shall grant to the Collateral Agent,
for its benefit and the benefit of the Secured Parties, a first priority
security interest in all of the Collateral pursuant to, and to the extent
required by, the Security Documents.


                    Section
2.28 Mitigation Obligations; Replacement of Lenders.


                    (a)
If any Lender requests compensation under Section 2.23, or if the
Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section
2.26, then such Lender shall use reasonable efforts to designate a
different lending office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or affiliates, if, in the reasonable judgment of such Lender, such designation
or assignment (i) would eliminate or reduce amounts payable pursuant to Section
2.23 or Section 2.26, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender. The Borrowers hereby
agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment; provided, however,
that the Borrowers shall not be liable for such costs and expenses of a Lender
requesting compensation if (i) such Lender becomes a party to this
Agreement on a date after the Effective Date and (ii) the relevant Change
in Law occurs on a date prior to the date such Lender becomes a party hereto.


                    (b)
If any Lender requests compensation under Section 2.23, or if the
Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section
2.26, or if any Lender is a Deteriorating Lender or a Delinquent Lender,
then the Borrowers may, at their sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 9.05), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that
(i) the Borrowers shall have received the prior written consent of the
Administrative Agent, the Issuing Bank and Swingline Lender, which consent
shall not unreasonably be withheld, (ii) such Lender shall have received
payment of an amount equal to the outstanding principal of its Loans and
participations in unreimbursed drawings under Letters of Credit 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 fees) or the Borrowers (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.23 or payments required to be made pursuant
to Section 2.26, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such Lender
or otherwise, the circumstances entitling the Borrowers to require such assignment
and delegation cease to apply.


63





ARTICLE III


Representations and Warranties


          To
induce the Lenders to make the Loans and to issue Letters of Credit, each Loan
Party, jointly and severally, makes, on the Effective Date and the date of the
making of each Revolving Loan and the date of issuance of each Letter of
Credit, the following representations and warranties to the Agents and each
Lender with respect to each Loan Party, which representations shall survive the
making of the Loans and issuance of such Letters of Credit until (i) the
Commitments have expired or been terminated, (ii) the principal of and interest
on each Loan and all fees and other Obligations shall have been irrevocably
paid in full, (iii) all Letters of Credit shall have expired or terminated or
been cash collateralized, to the extent of 103% of the then Letter of Credit
Outstandings, by cash or a letter of credit issued by a financial institution
and on terms reasonably satisfactory to the Administrative Agent, and (iv) all
Letter of Credit Disbursements shall have been reimbursed.


                    Section
3.01 Organization; Powers.


          Each
Loan Party is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to own its own property and assets and to carry on its business as
now conducted and to execute and deliver and perform all of its obligations
under all Loan Documents to which such Loan Party is a party. Each Loan Party
is qualified to do business in, and is in good standing (where such concept
exists) in every jurisdiction in which the nature of its business and/or
properties makes such qualifications necessary, except where the failure to be
so qualified and in good standing, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.


                    Section
3.02 Authorization; Enforceability.


          The
transactions contemplated hereby and by the other Loan Documents to be entered
into by each Loan Party are within such Loan Party’s corporate, limited
partnership, limited liability company, and other powers, as applicable, and
have been duly authorized by all necessary corporate, limited liability company
and, if required, stockholder or member action, as applicable. This Agreement
has been duly executed and delivered by each Loan Party that is a party hereto
and constitutes, and each other Loan Document to which any Loan Party is a
party, when executed and delivered by such Loan Party will constitute, a legal,
valid and binding obligation of such Loan Party (as the case may be),
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.


64





                    Section
3.03 Governmental Approvals; No Conflicts.


          The
transactions to be entered into and contemplated by the Loan Documents:
(a) do not require any material consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except for
such as have been obtained or made and are in full force and effect and except
filings and recordings necessary to perfect Liens created under the Loan
Documents; (b) will not violate in any material respect any Applicable Law
or the Organizational Documents of any Loan Party or any order of any
Governmental Authority; (c) will not violate or result in a default under any
material indenture, agreement or other instrument binding upon any Loan Party
or its assets, or give rise to a right thereunder to require any material
payment to be made by any Loan Party; and (d) will not result in the
creation or imposition of any Lien on any asset of any Loan Party, except Liens
in favor of the Secured Parties created under any of the Loan Documents or
otherwise permitted hereby or thereby. 


                    Section
3.04 Financial Condition.


          The
Lenders have previously received the Consolidated balance sheet, and statements
of income, stockholders’ equity, and cash flows for the Lead Borrower and its
Subsidiaries as of and for the Fiscal Year ended January 31, 2009 and as of and
for the Fiscal Quarter ended October 31, 2009, certified by the Lead Borrower’s
Chief Financial Officer. Such financial statements present fairly, in all material
respects, the financial position, results of the operations and cash flows for
the Lead Borrower and its Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the absence of
footnotes. Since October 31, 2009, there has been no event, fact or
circumstance which has had or could reasonably be expected to have a Material
Adverse Effect.


                    Section
3.05 Properties.


                    (a)
Except as disclosed in Schedules 3.05(c)(i) and 3.05(c)(ii),
each Loan Party has good title to, or valid leasehold interests in, all its
real and personal property material to its business, except for defects which
could not reasonably be expected to result in a Material Adverse Effect.


                    (b)
Each Loan Party owns or possesses the right to use, all patents, trademarks,
trade names, trade styles, brand names, service marks, logos, copyrights, and
other intellectual property used in its business, except to the extent that the
failure to own or have the right to use could not reasonably be expected to
have a Material Adverse Effect, and the use thereof by the Loan Parties does
not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.


                    (c)
Schedule 3.05(c)(i) sets forth as of the Effective Date the address
(including county) of all Real Estate that is owned by the Loan Parties, together
with a list of the holders of any mortgage or other Lien thereon. Schedule
3.05(c)(ii) sets forth as of the Effective Date the address of all real
estate that is leased by the Loan Parties. Within ninety (90) days of 


65





the Effective
Date, the Lead Borrower will deliver to the Administrative Agent a revised Schedule
3.05(c)(ii) that includes the name, address, and telephone number of each
lessor of such Lease. Each of such Leases is in full force and effect and the
Loan Parties are not in default in any material respect of the terms thereof
(other than defaults arising from the failure to pay (i) rent escalation
payments that have not been invoiced or (ii) amounts that are being contested
by a Loan Party in good faith consistent with the Loan Party’s practices as of
the Effective Date).


                    Section
3.06 Litigation and Environmental Matters.


                    (a)
Except for the matters set forth on Schedule 3.06(a), there are no
actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrowers, threatened
against or affecting any Loan Party (i) as to which there is a reasonable
possibility of an adverse determination and which, if adversely determined,
could reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect, or (ii) that involve any of the Loan Documents.


                    (b)
Except for the matters set forth on Schedule 3.06(b) and except with
respect to any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, no Loan Party
(i) has failed to comply with any Environmental Law or to obtain, maintain
or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.


                    (c)
Since the Closing Date, there has been no change in the status of the matters
set forth on Schedules 3.06(a) and 3.06(b) that, individually or
in the aggregate, has resulted in, or could reasonably be expected to result
in, a Material Adverse Effect.


                    Section
3.07 Compliance with Laws and Agreements.


                    (a)
Each Loan Party is in compliance in all material respects with the Patriot Act
and all other Applicable Law and all indentures, material agreements and other
instruments binding upon it or its property, and no default has occurred and is
continuing thereunder except in each case where the failure to do so or the
existence of a default, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect. This Section 3.07
shall not apply to environmental matters, which are the subject of Section
3.06 hereof.


                    (b)
No Loan Party or any principal or officer of the foregoing is under indictment
or active investigation by the U.S. Attorney for a felony crime or any other
crime punishable by imprisonment.


                    Section
3.08 Investment and Holding Company Status.


          No
Loan Party is (a) an “investment company” as defined in, or subject to regulation
under, the Investment Company Act of 1940 or (b) a “holding company” as
defined in, or subject to regulation under, the Public Utility Holding Company
Act of 1935.


66





                    Section
3.09 Taxes.


          Each
Loan Party has timely filed or caused to be filed all federal and state Tax
returns and reports required to have been filed and has paid or caused to be
paid all Taxes required to have been paid by it, except Taxes that are being
contested in good faith by appropriate proceedings, for which such Loan Party
has set aside on its books adequate reserves, and as to which no Lien has been
filed with respect to any Taxes which individually or in the aggregate exceed
$500,000. Except as set forth on Schedule 3.09, as of the Effective Date,
no Loan Party has executed or filed with any Governmental Authority any
agreement or other document extending, or having the effect of extending, the
period for assessment or collection of any Taxes. Proper and accurate amounts
have been withheld by each Loan Party from its respective employees for all
periods, such withholdings have been timely paid to the respective Governmental
Authorities, and each Loan Party is in material compliance with the applicable
federal, state, local and foreign tax withholding laws. Schedule 3.09
sets forth as of the Effective Date those taxable years for which any Loan
Parties’ tax returns are currently being audited by any Governmental Authority
and any assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described in Schedule 3.09,
as of the Effective Date, no Loan Party is liable for any Taxes under any
agreement (including any tax sharing agreements) as a transferee. The Loan
Parties do not intend to treat any of the transactions contemplated by the Loan
Documents as being a “reportable transaction” within the meaning of 26 CFR
1.6011-4. 


                    Section
3.10 ERISA.


          No
ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse
Effect. Except as disclosed on Schedule 3.10, the present value of all
accumulated benefit obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) did not, as
of the date of the most recent financial statements reflecting such amounts,
exceed the fair market value of the assets of such Plan, and the present value
of all accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed the fair market value of the assets of all such
underfunded Plans, except in each case in an amount that could not reasonably
be expected to have a Material Adverse Effect.


                    Section
3.11 Disclosure.


          The
Loan Parties have disclosed to the Lenders all agreements, instruments and
corporate or other restrictions to which any Loan Party is subject, and all
other matters known to any of them, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. The
reports, financial statements, certificates or other information (other than
any projections, pro formas, budgets and general market information) concerning
the Loan Parties furnished by, on behalf of, or at the direction of, any Loan
Party to the Administrative 


67





Agent or any
Lender in connection with the negotiation of this Agreement or any other Loan
Document or delivered hereunder or thereunder (as modified or supplemented by
other information so furnished), taken as a whole, do not contain any material
misstatement of fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. All projections, pro formas and budgets that have been or
will be prepared by the Borrowers and made available to the Administrative
Agent, any Lender or any other party hereto, have been or will be prepared in
good faith based upon reasonable assumptions, it being understood by the
Administrative Agent, the Lenders and all the other parties hereto that such
projections are subject to significant uncertainties and contingencies, many of
which are beyond the Borrowers’ control, and that no assurances can be given
that the projections will be realized. 


                    Section
3.12 Subsidiaries.


          Schedule 3.12
sets forth the name of, and the ownership interest of, each Loan Party in each
of the Loan Parties’ Subsidiaries as of the Effective Date; there is no other Capital
Stock or ownership interest of any class outstanding as of the Effective Date.
All such shares of Capital Stock are validly issued, fully paid, and
non-assessable. Except as set forth on Schedule 3.12, no Loan Party is
party to any joint venture, general or limited partnership, or limited
liability company, agreements or any other business ventures or entities as of
the Effective Date.


                    Section
3.13 Insurance.


          Schedule
3.13 sets forth, as of the
Effective Date, a description of all insurance maintained by or on behalf of
the Loan Parties and their Subsidiaries. As of the Effective Date, each of such
policies is in full force and effect. As of the Effective Date, all premiums in
respect of such insurance that are due and payable have been paid.


                    Section
3.14 Labor Matters.


          There
are no strikes, lockouts or slowdowns against any Loan Party pending or, to the
knowledge of the Loan Parties, threatened. The hours worked by and payments
made to employees of the Loan Parties have not been in violation of the Fair
Labor Standards Act or any other applicable federal, state, local or foreign
law dealing with such matters to the extent that any such violation could
reasonably be expected to result in a Material Adverse Effect. All payments due
from any Loan Party, or for which any claim may be made against any Loan Party,
on account of wages and employee health and welfare insurance and other
benefits, have been paid or accrued as a liability on the books of such member,
except to the extent that the failure to pay or accrue such payment could not
reasonably be expected to result in a Material Adverse Effect. The consummation
of the transactions contemplated by the Loan Documents will not give rise to
any right of termination or right of renegotiation on the part of any union
under any collective bargaining agreement to which any Loan Party is bound.


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                    Section
3.15 Security Documents; Judgment Liens.


          The
Security Documents create in favor of the Collateral Agent, for the benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law), and the Security Documents constitute, or will upon the
filing of financing statements or other requisite registrations and/or the
obtaining of “control”, in each case with respect to the relevant Collateral as
required under the applicable Uniform Commercial Code, to the extent security
interests in such Collateral can be perfected by such filings or control, the
creation of a fully perfected first priority Lien on, and security interest in,
and hypothecation of, all right, title and interest of the Loan Parties
thereunder in such Collateral (to the extent required by the Security
Documents), in each case prior and superior in right to any other Person
(except for Permitted Encumbrances arising under Applicable Law and having
priority over the Lien of the Collateral Agent). On the Effective Date, none of
the Loan Parties or any of their respective properties (including the
Collateral) is subject to any judgment Lien. 


                    Section
3.16 Federal Reserve Regulations.


                    (a)
No Loan Party is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of buying or carrying Margin
Stock.


                    (b)
No part of the proceeds of any Loan or any Letter of Credit will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to buy or carry Margin Stock or to extend credit to
others for the purpose of buying or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose in violation of Regulation T,
U or X or (ii) for any purpose that entails a violation of, or that is
inconsistent with, the provisions of the Regulations of the Board, including
Regulation T, U, or X.


                    Section
3.17 Solvency.


          Each
Borrower and each other Loan Party is Solvent. No transfer of property is being
made by any Loan Party and no obligation is being incurred by any Loan Party in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of any Loan Party.


                    Section
3.18 Licenses; Permits.


                    (a)
Each Loan Party has obtained all permits, licenses and other authorizations
which are required with respect to the ownership and operations of its business
except where the failure to obtain such permits, licenses or other
authorizations could not reasonably be expected to have a Material Adverse
Effect. Each Loan Party is in compliance with all terms and conditions of all
such permits, licenses, orders and authorizations, except where the failure to
comply with such terms and conditions could not reasonably be expected to have
a Material Adverse Effect.


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                    (b)
None of the Loan Parties has any liabilities, any claims against it or
presently outstanding notices imposed upon it or based upon any provision of
any Applicable Law, except for such liabilities, claims, citations or notices
which could not reasonably be expected to have a Material Adverse Effect.


ARTICLE IV


Conditions


                    Section
4.01 Effective Date.


          The
effectiveness of this Agreement, and the obligation of the Lenders to make the
initial Loan(s), if any, and the Issuing Bank to issue the initial Letters of
Credit, if any, on the Effective Date, is subject to the following conditions
precedent:


                    (a)
The Administrative Agent (or its counsel) shall have received from each party
hereto either (i) a counterpart of this Agreement and all other Loan
Documents (including, without limitation, the Security Documents) signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy or other electronic
transmission of a signed signature page of this Agreement) that such party has
signed a counterpart of this Agreement and all other Loan Documents.


                    (b)
The Administrative Agent shall have received a written opinion (addressed to
each Agent and the Lenders and dated the Effective Date) of Boies, Schiller
& Flexner LLP, counsel for the Loan Parties, in each case as to such
matters concerning the Loan Parties and the Loan Documents as the
Administrative Agent may reasonably request. The Loan Parties hereby request such
counsel to deliver such opinion.


                    (c)
The Administrative Agent shall have received a duly executed certificate of a
Responsible Officer of each Loan Party, in form and substance satisfactory to
the Administrative Agent, attaching each of the following documents and
certifying that each is true, correct and complete and in full force and effect
as of the Effective Date: (i) copies of its Organizational Documents, certified
to be true, correct and complete as of a recent date by the appropriate
Governmental Authority of the jurisdiction of its organization or formation;
(ii) copies of its resolutions approving and adopting the Loan Documents to
which it is a party, the transactions contemplated thereby, and authorizing the
execution and delivery thereof; (iii) incumbency certificates identifying the
Financial Officers of such Loan Party that are authorized to execute Loan
Documents and to act on such Loan Party’s behalf in connection with the Loan
Documents; and (iv) certificates of good standing from its jurisdiction of
incorporation or formation, in each case certified as of a recent date by the
appropriate Governmental Authority.


                    (d)
On the Effective Date, after giving effect to (i) the first funding under the
Loans, if any, (ii) charges to the Loan Account made in connection with the
establishment of the credit facility contemplated hereby, if any, and (iii) all
Letters of Credit to be issued at, or 


70





immediately
subsequent to, such establishment of the credit facilities, if any, Excess
Availability shall be not less than $50,000,000.


                    (e)
The Co-Borrowing Base Agents shall have received a Borrowing Base Certificate
dated the Effective Date, relating to the week ended on April 10, 2010, and
executed by a Financial Officer of the Lead Borrower.


                    (f)
The Administrative Agent shall have received a certificate from a Financial
Officer of each Loan Party, reasonably satisfactory in form and substance to
the Administrative Agent, certifying that, as of the Effective Date after giving effect to the
transactions contemplated hereby, (i) the representations and warranties made
by the Loan Parties in the Loan Documents are true and complete in all material
respects (other than representations and warranties which are qualified by
“materiality” or “Material Adverse Effect”, each of which shall be true and
correct in all respects), (ii) no Default or Event of Default exists, and (iii)
each of the Loan Parties are Solvent.


                    (g)
All necessary consents and approvals to the transactions contemplated hereby
shall have been obtained and shall be reasonably satisfactory to the
Administrative Agent, other than those the failure to obtain which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.


                    (h)
The Administrative Agent shall be reasonably satisfied that any financial
statements delivered to it fairly present the business and financial condition
of the Lead Borrower and its Subsidiaries and that, since October 31, 2009,
there has been no event, fact or circumstance which has had or could reasonably
be expected to have a Material Adverse Effect.


                    (i)
The Administrative Agent shall not have become aware of any information which,
in the Administrative Agent’s reasonable judgment, is inconsistent in a
material and adverse manner with any information disclosed to the Agents prior
to the date hereof with respect to any Loan Party or the transactions
contemplated in connection with this Agreement.


                    (j)
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
recent date reasonably satisfactory to the Collateral Agent) indicating the
absence of Liens (including tax or judgment Liens) on the assets of the Loan
Parties, except for Permitted Encumbrances and Liens for which termination
statements and releases reasonably satisfactory to the Collateral Agent are
being tendered concurrently with the execution of this Agreement.


                    (k)
The Collateral Agent shall have received (i) all documents and instruments,
including Uniform Commercial Code financing statements, required by Applicable
Law or reasonably requested by the Collateral Agent to be filed, registered or
recorded to create or perfect the first priority Liens intended to be created
under the Loan Documents and all such documents and instruments shall have been
so filed, registered or recorded to the satisfaction of 


71





the Collateral
Agent, and (ii) the Credit Card Notifications and Blocked Account Agreements
required pursuant to Section 2.21(c) hereof.


                    (l)
The Collateral Agent shall have received, and be reasonably satisfied with,
evidence of the Loan Parties’ insurance, together with such endorsements as are
required by the Loan Documents.


                    (m)
All fees due to the Administrative Agent, the Arrangers and the Lenders at or
immediately after the Effective Date, and all reasonable costs and expenses
incurred by the Agents and the Lenders in connection with the establishment of
the credit facility contemplated hereby (including the reasonable fees and
expenses of counsel to the Agents and the Lenders), shall have been paid in
full.


                    (n)
The consummation of the transactions contemplated hereby shall not (i) violate
any Applicable Law or (ii) conflict with, or result in a default or event of
default under, any material agreement, of any Loan Party. No event shall exist
which is, or solely with the passage of time, the giving of notice or both,
would be a default under any material agreement of any Loan Party.


                    (o)
No material changes in governmental regulations or policies affecting any Loan
Party, the Agents or any Lender involved in this transaction shall have
occurred prior to the Effective Date, the effect of which would prohibit the
Lenders from making Loans to the Borrowers. 


                    (p)
There shall have been delivered to the Administrative Agent executed
ratifications of the existing subordination agreements relating to the Existing
Intercompany Agreements, in form and substance satisfactory to the
Administrative Agent.


                    (q)
The Administrative Agent shall have received such additional instruments and
documents and such other information (financial or otherwise) as the
Administrative Agent or counsel to the Administrative Agent reasonably may
require or request.


                    (r)
The Administrative Agent shall have received all documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including, without
limitation, the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law
October 26, 2001)) (the “Patriot Act”).


Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless
each of the foregoing conditions is satisfied (or waived by the Agents in
writing) at or prior to 5:00 p.m., Boston time, on April 16, 2010 (and,
in the event such conditions are not so satisfied or waived, the Termination
Date shall be deemed to have occurred, and this Agreement and all Commitments
hereunder shall terminate at such time).


72





                    Section
4.02 Conditions Precedent to Each Loan and Each Letter of Credit.


          The
obligation of the Lenders to make each Revolving Loan and of the Issuing Bank
to issue each Letter of Credit, is subject to the following conditions
precedent:


                    (a)
Notice. The Administrative Agent shall have received a notice with
respect to such Borrowing or issuance, as the case may be, as required by ARTICLE
II.


                    (b)
Representations and Warranties. All representations and warranties
contained in this Agreement and the other Loan Documents shall be true and
correct in all material respects on and as of the date of each Borrowing or the
issuance of each Letter of Credit hereunder with the same effect as if made on
and as of such date, other than (i) representations and warranties that relate
solely to an earlier date, in which case they shall be true and correct as of such earlier
date, and (ii) representations and warranties qualified by materiality, each of
which shall be true and correct in all respects.


                    (c)
No Default. On the date of each Borrowing hereunder and the issuance of
each Letter of Credit, no Default or Event of Default shall have occurred and
be continuing or arise therefrom.


                    (d)
Borrowing Base Certificate. The Co-Borrowing Base Agents shall have
received the most recently required Borrowing Base Certificate, with each such
Borrowing Base Certificate including schedules as required by the
Administrative Agent or any Co-Borrowing Base Agent.


The request by
the Borrowers for, and the acceptance by the Borrowers of, each extension of
credit hereunder shall be deemed to be a representation and warranty by the
Borrowers that the conditions specified in this Section 4.02 have been
satisfied at that time and that after giving effect to such extension of credit
the Borrowers shall continue to be in compliance with the Borrowing Base. The
conditions set forth in this Section 4.02 are for the sole benefit of
the Agents and each other Secured Party. Until the Required Lenders or any
Voting Borrowing Base Agent otherwise directs the Administrative Agent to cease
making Loans, the Lenders will fund their Commitment Percentage of all Loans
and participate in all Swingline Loans and Letters of Credit, whenever made or
issued, which are requested by the Borrowers and which, notwithstanding the
failure of the Loan Parties to comply with the provisions of this ARTICLE IV,
are agreed to by the Administrative Agent; provided, however, the
making of any such Loans or the issuance of any such Letters of Credit shall
not be deemed a modification or waiver by any Secured Party of the provisions
of this ARTICLE IV on any future occasion or a waiver of any rights of
the Secured Parties as a result of any such failure to comply.


ARTICLE V


Affirmative Covenants


          Until
(i) the Commitments have expired or been terminated, and (ii) the principal of
and interest on each Loan and all fees payable hereunder shall have been
irrevocably been paid in 


73





full, and
(iii) all Letters of Credit shall have expired, been replaced, or terminated or
been cash collateralized, to the extent of 103% of the then Letter of Credit
Outstandings, by cash or a letter of credit issued by a financial institution
and on terms reasonably satisfactory to the Administrative Agent, and (iv) all
Letter of Credit Disbursements shall have been reimbursed, each Loan Party
covenants and agrees with the Agents and the Lenders that:


                    Section
5.01 Financial Statements and Other Information.


          The
Lead Borrower will furnish to the Administrative Agent (and, in the case of the
Borrowing Base Certificates required to be delivered pursuant to Section
5.01(f) and the other financial and collateral reports required to be
delivered pursuant Section 5.01(i), to each Co-Borrowing Base Agent):


                    (a)
within ninety (90) days after the end of each Fiscal Year of the Lead Borrower,
its Consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous Fiscal
Year, all audited and reported on by independent public accountants of
recognized national standing (without a “going concern” or like qualification
or exception and without a qualification or exception as to the scope of such
audit) to the effect that such Consolidated financial statements were prepared
in accordance with GAAP consistently applied throughout the period covered
thereby and present fairly in all material respects the financial condition and
results of operations of the Lead Borrower and its Subsidiaries on a
Consolidated basis;


                    (b)
Within forty-five (45) days (or such earlier date that is five (5) days after
the then current filing deadline for the Lead Borrower’s Quarterly Report on
Form 10-Q) after the end of each Fiscal Quarter of the Lead Borrower, its
Consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows, as of the end of and for such Fiscal Quarter and the
elapsed portion of the Fiscal Year, setting forth in each case in comparative
form the figures for the previous Fiscal Year and the figures as set forth in
the projections delivered pursuant to Section 5.01(e), all certified by
one of the Lead Borrower’s Financial Officers as presenting in all material
respects the financial condition and results of operations of the Loan Parties
on a Consolidated basis in accordance with GAAP consistently applied, subject
to normal year-end audit adjustments and the absence of footnotes;


                    (c)
Within thirty (30) days after the end of each Fiscal Month of the Lead
Borrower, the Lead Borrower’s unaudited Consolidated balance sheets and related
statements of operations, stockholders’ equity and cash flows, each as of the
end of and for such Fiscal Month and the elapsed portion of the Fiscal Year,
setting forth in each case in comparative form the figures for the
corresponding Fiscal Month end and year to date periods of the previous Fiscal
Year and the figures as set forth in the projections delivered pursuant to Section
5.01(e) hereof, all certified by one of its Financial Officers as
presenting in all material respects the financial condition and results of
operations of the Lead Borrower and its Subsidiaries on a Consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;


74





                    (d)
concurrently with any delivery of financial statements under clauses (a),
(b) and (c) above, a Compliance Certificate signed by a Financial Officer of
the Lead Borrower (i) certifying as to whether a Default or Event of Default
has occurred and, if a Default or Event of Default has occurred, specifying the
details thereof and any action taken or proposed to be taken with respect thereto,
and (ii) stating whether any material change in GAAP relevant to such financial
statements or in the application thereof has occurred since the date of the
Lead Borrower’s audited financial statements referred to in Section 3.04
and, if any such change has occurred, specifying the effect of such change on
the financial statements accompanying such certificate;


                    (e)
within thirty (30) days after the commencement of each Fiscal Year of the Lead
Borrower, a detailed Consolidated budget by Fiscal Month and Fiscal Quarter for
such Fiscal Year (including a projected Consolidated balance sheet, related
statements of projected operations and cash flow as of the end of and for such
Fiscal Year and a detailed report of the store openings and closures projected
to occur during such Fiscal Year);


                    (f)
weekly, on Wednesday of each week (or, if Wednesday is not a Business Day, on
the next succeeding Business Day), a Borrowing Base Certificate showing the
Borrowing Base as of the close of business on the immediately preceding
Saturday, each Borrowing Base Certificate to be certified as complete and
correct on behalf of the Borrowers by a Financial Officer of the Lead Borrower;


                    (g)
promptly after the same become publicly available, copies of all periodic and
other reports, proxy statements and other materials, if any, filed in final
form by any Loan Party with the Securities and Exchange Commission (including,
without limitation, Forms 10K and 10Q but excluding any registration statement
on Form S-8 or its equivalent), or any Governmental Authority succeeding to
any or all of the functions of said Commission, or with any national securities
exchange, as the case may be; 


                    (h)
promptly upon receipt thereof, copies of any “Significant Deficiency Report” or
“Material Weakness Report” (as such terms are defined in Auditing Standard No.
2 issued by the Public Company Accounting Oversight Board) submitted to any
Loan Party by independent certified public accountants in connection with each
annual or interim audit of the books of the Loan Parties or any of their
Subsidiaries made by such accountants;


                    (i)
the financial and collateral reports described on Schedule 5.01(i)
hereto, at the times set forth in such Schedule; 


                    (j)
notice of any intended (i) sale or other disposition of assets of any Loan
Party permitted hereunder in an amount equal to or greater than $1,000,000
other than sales or dispositions permitted pursuant to Section 6.05(a), Section
6.05(c), Section 6.05(d), Section 6.05(e) (except to the
extent notice thereof is required by Section 5.02(k) hereof), Section
6.05(g) or Section 6.05(i), or (ii) incurrence of any Indebtedness
permitted hereunder in an amount equal to or greater than $1,000,000, in each
case at least five (5) Business Days prior to the date of consummation such
sale or disposition or incurrence of such Indebtedness; and


75





                    (k)
promptly following any request therefor, such other information regarding the
operations, business affairs and financial condition of any Loan Party, or
compliance with the terms of any Loan Document, as the Agents or any Lender may
reasonably request.


                    Section
5.02 Notices of Material Events.


          The
Lead Borrower will furnish to the Administrative Agent prompt written notice of
the following:


                    (a)
the occurrence of any Default or Event of Default specifying the nature and
extent thereof, and the action (if any) which is proposed to be taken with
respect thereto;


                    (b)
the filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting any Loan Party or any
Affiliate thereof that could reasonably be expected to result in a Material
Adverse Effect; 


                    (c)
the occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in a Material
Adverse Effect; 


                    (d)
the occurrence of any default or any other event or condition under any
Indebtedness incurred by the Excluded Entity to finance the South Beach Real
Estate that enables or permits (with or without the giving of notice, the lapse
of time or both) the beneficiary or beneficiaries of the South Beach Guarantee
(or any trustee or agent on its or their behalf) to cause the South Beach
Guarantee to become payable or cash collateral in respect thereof to be
demanded;


                    (e)
any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect;


                    (f)
any change in any Borrower’s chief executive officer or chief financial
officer;


                    (g)
any failure by the Borrowers to pay rent or other occupancy charges at
twenty-five (25) or more of their locations (other than rent escalation
payments that have not been invoiced and payments that are being contested by
the Borrowers in good faith consistent with the Borrowers’ practices as of the
Effective Date), which failure continues for more than ten (10) days (or such
shorter cure period as provided in the lease for such location) following the
day on which such rent first came due; 


                    (h)
the discharge by any Loan Party of its present independent accountants or any
withdrawal or resignation by such independent accountants;


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


76





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


                    (k)
the filing of any Liens for unpaid Taxes against any Loan Party in an amount,
individually or in the aggregate, in excess of $500,000.


Each notice
delivered under this Section 5.02 shall be accompanied by a statement of
a Financial Officer or other executive officer of the Lead Borrower setting
forth the details of the event or development requiring such notice and, if
applicable, any action taken or proposed to be taken with respect thereto.


                    Section
5.03 Information Regarding Collateral.


          The
Borrowers will furnish to the Administrative Agent at least fifteen (15) days
prior written notice of any change: (a) in any Loan Party’s corporate name or
in any trade name used to identify it in the conduct of its business or in the
ownership of its properties; (b) in the location of any Loan Party’s chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it is located (including the
establishment of any such new office or facility); (c) in any Loan Party’s
corporate structure or jurisdiction of incorporation or formation; or
(d) in any Loan Party’s Federal Taxpayer Identification Number or
organizational identification number assigned to it by its state of
organization. The Borrowers will promptly notify the Administrative Agent if
any material portion of the Collateral is damaged or destroyed.


                    Section
5.04 Existence; Conduct of Business.


          Each
Loan Party will, and will cause each of its Subsidiaries to, do or cause to be
done all things necessary to comply with its respective Organizational
Documents, as applicable, and to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits, privileges,
franchises, patents, copyrights, trademarks and trade names material to the
conduct of its business, other than the failure to renew and keep in full force
and effect the rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names which, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect,
provided that the foregoing shall not prohibit any merger, consolidation,
liquidation or dissolution permitted under Section 6.03. 


                    Section
5.05 Payment of Obligations.


          Each
Loan Party will, and will cause each of its Subsidiaries to, pay its Material
Indebtedness and other obligations, including Tax liabilities, and claims for
labor, materials, or supplies, before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) such Loan Party or
such Subsidiary has set aside on its books adequate reserves with respect thereto
in accordance with GAAP, (c) such contest effectively suspends collection
of the contested 


77





obligation and
enforcement of any Lien securing such obligation, (d) no Lien has been filed
with respect thereto (other than Permitted Encumbrances arising by operation of
Applicable Law), and (e) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
Nothing contained herein shall be deemed to limit the rights of the
Administrative Agent or any Co-Borrowing Base Agent under Section 2.02(b)
hereof.


                    Section
5.06 Maintenance of Properties.


          Each
Loan Party will, and will cause each of its Subsidiaries to, keep and maintain
all property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted and except as provided in Section
6.05.


                    Section
5.07 Insurance.


                    (a)
Each Loan Party shall: (i) maintain insurance with financially sound and
reputable insurers (or a program of self-insurance reasonably acceptable to the
Administrative Agent) on such of its property and in at least such amounts and
against at least such risks as is consistent with business practices in effect
on the Effective Date or otherwise reasonably acceptable to the Administrative
Agent, including public liability insurance against claims for personal injury
or death occurring upon, in or about or in connection with the use of any
properties owned, occupied or controlled by it (including the insurance
required pursuant to the Security Documents); (ii) maintain such other
insurance as may be required by law; and (iii) furnish to the
Administrative Agent, upon written request, full information as to the
insurance carried.


                    (b)
Fire and extended coverage policies maintained with respect to any Collateral
shall be endorsed or otherwise amended to include (i) a lenders’ loss
payable clause (regarding personal property), in form and substance reasonably
satisfactory to the Collateral Agent, which endorsements or amendments shall
provide that the insurer shall pay all proceeds of any loss or claim to the
applicable Loan Party and the Collateral Agent, (ii) a provision to the
effect that none of the Loan Parties, Secured Parties, or any other Person
shall be a coinsurer and (iii) such other provisions as the Collateral
Agent may reasonably require from time to time to protect the interests of the
Lenders. Commercial general liability policies shall be endorsed to name the Collateral
Agent as an additional insured. Each such policy referred to in this paragraph
also shall provide that it shall not be canceled, modified or not renewed
(i) by reason of nonpayment of premium except upon not less than thirty
(30) days’ prior written notice thereof by the insurer to the Collateral Agent
(giving the Collateral Agent the right to cure defaults in the payment of
premiums) or (ii) for any other reason except upon not less than thirty
(30) days’ prior written notice thereof by the insurer to the Collateral Agent.
The Borrowers shall deliver to the Collateral Agent, prior to the cancellation,
modification or nonrenewal of any such policy of insurance, a copy of a renewal
or replacement policy (or other evidence of renewal of a policy previously
delivered to the Collateral Agent, including an insurance binder) together with
evidence satisfactory to the Collateral Agent of payment of the premium
therefore. Each Loan Party agrees to remit to the Agent (or otherwise cause to
be paid to the Agent) all 


78





proceeds of
any loss or claim under any policy referred to in this paragraph in excess of
$250,000 for application by the Administrative Agent in accordance with the
Loan Documents.


                    Section
5.08 Books and Records; Inspection and Audit Rights; Appraisals;
Accountants.


                    (a)
Each Loan Party will, and will cause each of its Subsidiaries to, keep proper
books of record and account in accordance with GAAP and in which full, true and
correct entries are made of all dealings and transactions in relation to its
business and activities. Each Loan Party will, and will cause each of its
Subsidiaries to, permit any representatives designated by any Agent, upon
reasonable prior notice during normal business hours, to visit and inspect its
properties, to examine and make extracts from its books and records, and,
during normal business hours, to discuss its affairs, finances and condition
with its officers and, in the presence of a Financial Officer, its independent
accountants, all at such reasonable times and as often as reasonably requested.



                    (b)
Each Loan Party will, and will cause each of its Subsidiaries to, from time to
time upon the request of the Administrative Agent or any Co-Borrowing Base Agent
(after consultation with the Administrative Agent) and after reasonable prior
notice during normal business hours, permit the Administrative Agent or
professionals (including investment bankers, consultants, accountants, lawyers
and appraisers) retained by the Administrative Agent (and reasonably
satisfactory to the Co-Borrowing Base Agents) to conduct appraisals, commercial
finance examinations and other evaluations, including, without limitation, of
(i) the Borrowers’ practices in the computation of the Borrowing Base and
(ii) the assets included in the Borrowing Base and related financial
information such as, but not limited to, sales, gross margins, payables,
accruals and reserves. Subject to the limitations set forth in the following
sentences, the Loan Parties shall pay the reasonable fees and expenses of the
Administrative Agent or such professionals with respect to such evaluations and
appraisals. The Loan Parties acknowledge and agree that the Administrative
Agent may, and upon the direction of any Co-Borrowing Base Agent (after
consultation with the Administrative Agent) shall, undertake up to three (3)
Inventory appraisals and up to three (3) commercial finance examinations during
any Fiscal Year, and the Loan Parties shall reimburse the Administrative Agent
for the reasonable cost thereof; provided, however, during any
Fiscal Year in which Excess Availability is less than twenty percent (20%) of
the lesser of (x) the Borrowing Base (as reflected on the most recent Borrowing
Base Certificate) or (y) the Total Commitments at any time during such Fiscal
Year, the Loan Parties acknowledge and agree that the Administrative Agent may,
and upon the direction of any Co-Borrowing Base Agent (after consultation with
the Administrative Agent) shall, undertake up to a total of four (4) Inventory
appraisals and up to a total of four (4) commercial finance examinations during
such Fiscal Year, and the Loan Parties shall reimburse the Co-Borrowing Base
Agents for the reasonable cost thereof; provided further that the
Administrative Agent shall be entitled to, and upon the direction of any
Co-Borrowing Base Agent (after consultation with the Administrative Agent)
shall, undertake additional commercial finance examinations and Inventory
appraisals each Fiscal Year at the Administrative Agent’s own expense.
Notwithstanding the foregoing, upon the occurrence and during the continuance
of a Default or Event of Default, the Administrative Agent shall be entitled
to, and upon the 


79






direction of
any Co-Borrowing Base Agent (after consultation with the Administrative Agent)
shall, undertake such Inventory appraisals and commercial finance examinations
during any Fiscal Year as the Administrative Agent or any Co-Borrowing Base
Agent in its discretion deems necessary or appropriate or as may be required by
Applicable Law, in each case at the expense of the Loan Parties.


                    (c)
The Loan Parties shall, at all times, retain independent nationally recognized
certified public accountants and shall request that such accountants reasonably
cooperate with, and be available at reasonable times to, the Administrative
Agent and the Co-Borrowing Base Agents or their representatives to discuss the
Loan Parties’ financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Administrative Agent or any Co-Borrowing
Base Agent. 


                    Section
5.09 Physical Inventories.


                    (a)
The Administrative Agent and the Co-Borrowing Base Agents, at the expense of
the Loan Parties, may participate in and/or observe each physical count and/or
inventory of so much of the Collateral as consists of Inventory which is
undertaken on behalf of the Borrowers so long as such participation does not
disrupt the normal inventory schedule or process. 


                    (b)
The Borrowers, at their own expense, shall cause not less than one (1) physical
inventory of the Borrowers’ Inventory to be undertaken in each twelve (12)
month period during which this Agreement is in effect, conducted by nationally
recognized inventory takers (or by the Borrowers provided independent auditors
review the inventory process and sample the results of the inventory) and using
practices consistent with practices in effect on the date hereof.


                    (c)
The Borrowers, within forty-five (45) days following the end of each Fiscal
Quarter, shall provide the Administrative Agent and the Co-Borrowing Base
Agents with a report summarizing the results of all physical inventories of the
Inventory of the Loan Parties conducted during such Fiscal Quarter, which
report shall be in form and substance reasonably acceptable to the
Administrative Agent and the Co-Borrowing Base Agents.


                    (d)
If an Event of Default has occurred and is continuing, the Administrative Agent
may, in its discretion, and upon the direction of any Co-Borrowing Base Agent
(after consultation with the Administrative Agent) shall, cause such additional
inventories to be taken as the Administrative Agent or any Co-Borrowing Base
Agent determines (each, at the expense of the Borrowers); provided, however,
that in no event shall more than three (3) such additional inventories be
conducted during any Fiscal Year at the expense of the Borrowers.


                    Section
5.10 Compliance with Laws.


          Each
Loan Party will, and will cause each of its Subsidiaries to, comply with all
Applicable Laws and the orders of any Governmental Authority, except where the
failure to do 


80





so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. 


                    Section
5.11 Use of Proceeds and Letters of Credit. 


                    (a)
The proceeds of all Loans made hereunder and Letters of Credit issued hereunder
will be used only (i) to finance the acquisition of working capital assets of
the Borrowers, including the purchase of inventory, in the ordinary course of
business, (ii) to finance Capital Expenditures of the Borrowers, (iii) for
general corporate purposes, and (iv) for any other corporate purpose permitted
by the terms of this Agreement.


                    (b)
No part of the proceeds of any Loan or Letter of Credit will be used, whether
directly or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations T, U, and X.


                    Section
5.12 Additional Subsidiaries.


          If
any additional Subsidiary of any Loan Party is formed or acquired after the
Effective Date, the Lead Borrower will promptly notify the Administrative Agent
and the Lenders thereof and (a) if such Subsidiary is not a Foreign
Subsidiary, the Borrowers will cause such Subsidiary to become (i) a Loan Party
hereunder by the execution and delivery to the Administrative Agent of a
Joinder Agreement and, in the case of a Facility Guarantor, a Facility
Guarantee; and (ii) a party to each applicable Security Document in the manner
provided therein within thirty (30) days after such Subsidiary is formed or
acquired and promptly take such actions to create and perfect Liens on such
Subsidiary’s assets (to the extent constituting Collateral under the Security
Documents) to secure the Obligations as the Administrative Agent shall
reasonably request and (b) if any shares of Capital Stock of such
Subsidiary are owned by or on behalf of any Loan Party, the Borrowers will
cause such shares to be pledged within thirty (30) Days after such Subsidiary
is formed or acquired (except that, if such Subsidiary is a Foreign Subsidiary,
shares of stock of such Subsidiary to be pledged may be limited to 65% of the
outstanding shares of Capital Stock of such Subsidiary).


                    Section
5.13 Further Assurances.


                    (a)
Each Loan Party will execute any and all further documents, financing
statements, agreements and instruments, and take all such further actions
(including the filing and recording of financing statements and other
documents), that may be required under any Applicable Law, or which any Agent
may reasonably request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Security Documents or the validity or priority of
any such Lien, all at the expense of the Loan Parties. The Loan Parties also
agree to provide to the Collateral Agent, from time to time upon request,
evidence reasonably satisfactory to the Collateral Agent as to the perfection
and priority of the Liens created or intended to be created by the Security
Documents.


81





                    (b)
If any assets which constitute Collateral under the Security Documents are
acquired by any Loan Party after the Effective Date, and such Collateral does
not automatically become subject to a Lien in favor of the Collateral Agent for
the benefit of the Secured Parties and perfected pursuant to the Security
Agreement to the extent required by the Security Agreement, the Borrowers will
notify the Collateral Agent and the Lenders thereof, and the Loan Parties will
cause such assets to be subjected to a Lien in favor of the Collateral Agent
for the benefit of the Secured Parties to the extent required by the Security
Agreement and will take such actions as shall be necessary or reasonably
requested by any Agent to grant and perfect such Liens, including actions
described in paragraph (a) of this Section, all at the expense of the Loan
Parties.


                    Section
5.14 Corporate Separateness.


                    (a)
Each Loan Party shall satisfy, and shall cause each of its Subsidiaries and the
Excluded Entity to satisfy, customary corporate and other formalities,
including, as applicable, the holding of regular board of directors’ and shareholders’
meetings or action by directors or shareholders without a meeting and the
maintenance of corporate offices and records.


                    (b)
Each Loan Party shall ensure, and shall cause each of its Subsidiaries to
ensure, that (i) no payment is made by it or any of its Subsidiaries to a
creditor of the Excluded Entity in respect of any liability of the Excluded
Entity, except as may be required in connection with the South Beach Guarantee,
and (ii) no bank account of the Excluded Entity shall be commingled with any
bank account of the Loan Parties or any of their Subsidiaries.


ARTICLE VI


Negative Covenants


          Until
(i) the Commitments have expired or been terminated, (ii) the principal of and
interest on each Loan and all fees and other Obligations shall have been
irrevocably paid in full, (iii) all Letters of Credit shall have expired,
replaced, or terminated or been cash collateralized, to the extent of 103% of
the then Letter of Credit Outstandings, by cash or a letter of credit issued by
a financial institution and on terms reasonably satisfactory to the
Administrative Agent, and (iv) all Letter of Credit Disbursements shall have
been reimbursed, each Loan Party covenants and agrees with the Agents and the
Lenders that:


                    Section
6.01 Indebtedness and Other Obligations.


                    (a)
The Loan Parties will not, and will not permit any of their Subsidiaries to,
create, incur, assume or permit to exist any Indebtedness, except:


                              (i)
Indebtedness created under the Loan Documents;


                              (ii)
Indebtedness set forth in Schedule 6.01 and extensions, renewals
replacements and refinancings of any such Indebtedness; provided that,
after giving effect 


82





to any of the
foregoing, (i) the principal amount of the outstanding Indebtedness is not
increased (except as otherwise permitted by this Section 6.01), (ii)
neither the tenor nor the average life is reduced, and (iii) the holders of
such Indebtedness are not afforded covenants, defaults, rights or remedies more
burdensome in any material respect to the obligor or obligors than those
contained in the Indebtedness being extended, renewed, replaced or refinanced
as determined by the Administrative Agent in its reasonable credit judgment;


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


                              (iv)
Indebtedness of any Loan Party to finance the acquisition of any fixed or
capital assets, including Capital Lease Obligations (excluding therein any
Indebtedness incurred in connection with any sale or sale-leaseback transaction
permitted by Section 6.01(a)(v)) and any Indebtedness assumed in
connection with the acquisition of any such assets or secured by a Lien on any
such assets prior to the acquisition thereof, and extensions, renewals and
replacements of any such Indebtedness that do not increase the outstanding
principal amount thereof or result in an earlier maturity date or decreased
weighted average life thereof; provided that the aggregate
principal amount of Indebtedness permitted by this clause (iv) shall not exceed
$15,000,000 at any time outstanding;


                              (v)
Indebtedness incurred to finance any Real Estate owned by the Loan Parties
pursuant to a sale-leaseback transaction;


                              (vi)
Indebtedness incurred for the construction or acquisition of, or to finance or
to refinance, any Real Estate owned by any Loan Party;


                              (vii)
Indebtedness under Hedging Agreements entered into in the ordinary course of
business, other than for speculative purposes;


                              (viii)
trade accounts payable (other than for borrowed money) incurred in the ordinary
course of business; provided that such trade accounts payable are
not more than sixty (60) days past due or, if overdue, are being diligently
contested in good faith and by appropriate proceedings;


                              (ix)
Guarantees of any Indebtedness permitted by this Section 6.01(a);


                              (x)
the South Beach Guarantee;


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


                              (xii)
other Indebtedness in an aggregate principal amount not exceeding $10,000,000
at any time outstanding.


83





                    (b)
None of the Loan Parties will, nor will they permit any of their Subsidiaries
to, (i) issue any preferred stock (except for preferred stock (A) all
dividends in respect of which are to be paid (and all other payments in respect
of which are to be made) in additional shares of such preferred stock, in lieu
of cash, (B) that is not subject to redemption, other than redemption at the
option of the Loan Party issuing such preferred stock, and (C) all payments in
respect of which are expressly subordinated to the Obligations) or (ii) other
than as permitted under Section 6.06, be or become liable in respect of
any obligation (contingent or otherwise) to purchase, redeem, retire, acquire
or make any other payment in respect of (A) any shares of Capital Stock of any
Loan Party prior to the Maturity Date or (B) any option, warrant or other right
to acquire any such shares of Capital Stock.


                    Section
6.02 Liens.


          The
Loan Parties will not, and will not permit any of their Subsidiaries to,
create, incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:


                    (a)
Liens created under the Loan Documents;


                    (b)
Permitted Encumbrances; and


                    (c)
Liens existing on any property or assets prior to the acquisition thereof by
any Loan Party or existing on any property or assets of any Person that becomes
a Subsidiary of any Loan Party after the Effective Date prior to the time such
Person becomes a Subsidiary of any Loan Party; provided that (i)
such Liens secure Indebtedness permitted by Section 6.01(a)(iv), (ii)
such Liens are not created in contemplation of, or in connection with, such acquisition
or such Person becoming a Subsidiary of any Loan Party, as applicable, (iii)
such Liens shall not apply to any other property or assets of any Loan Party or
any of its Subsidiaries, (iv) such Liens shall secure only the Indebtedness
that such Liens secure on the date of such acquisition or the date such Person
becomes a Subsidiary of any Loan Party, as applicable, and any extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof, and (v) such Liens shall not attach to any
Collateral.


                    Section
6.03 Fundamental Changes.


                    (a)
No Loan Party will, or will permit any of its Subsidiaries to, liquidate,
dissolve, merge into or consolidate with any other Person, or permit any other
Person to liquidate, dissolve, merge into or consolidate with it, or liquidate
or dissolve, except that, if at the time thereof and immediately after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing or would arise therefrom: (i) any Subsidiary of a Loan Party (other
than a Borrower) may merge, liquidate, dissolve, or consolidate into a Loan
Party, provided that in any such transaction the Loan Party shall be the
surviving entity; (ii) a Borrower may merge into any other Borrower; (iii) in
connection with a Permitted Acquisition, any Loan Party or any Subsidiary of a
Loan Party may merge with any other Person or permit any other


84





Person to merge with or into or consolidate with it, provided
that (A) the Person surviving such merger shall be a wholly-owned
Subsidiary of a Loan Party and (B) in the case of any such merger to which any
Loan Party is a party, such Loan Party is the surviving Person; (iv) any
Facility Guarantor may merge into any Borrower, provided that the Borrower
shall be the surviving entity; (v) any Facility Guarantor may liquidate or
dissolve voluntarily into any other Loan Party; (vi) any Subsidiary of a Loan
Party (other than a Loan Party) may liquidate or dissolve if the Lead Borrower
determines in good faith that such liquidation is in the best interests of the
Borrowers and provided that such liquidation or dissolution could not
reasonably be expected to have a Material Adverse Effect; and (vii) any
Subsidiary of any Loan Party that is not a Loan Party may liquidate, dissolve,
merge into or consolidate with any other Person.


                    (b)
The Loan Parties will not engage to any material extent in any business other
than businesses of the type conducted by the Loan Parties on the Effective Date
and businesses reasonably related or complementary thereto, except that a Loan
Party other than a Borrower may withdraw from any business activity which such
Person’s board of directors reasonably deems unprofitable or unsound; provided
that, promptly after such withdrawal, the Lead Borrower shall provide
the Administrative Agent with written notice thereof.


                    Section
6.04 Investments, Loans, Advances, Guarantees and Acquisitions.


          The
Loan Parties will not, and will not permit any of their Subsidiaries to,
purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary of a Loan Party prior to such merger)
any Capital Stock of, evidences of Indebtedness or other securities (including
any option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, guarantee any Indebtedness of, or
make or permit to exist any Investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person constituting a business unit,
except:


                    (a)
Permitted Investments;


                    (b)
Loans or advances made by a Loan Party to another Loan Party pursuant to the
Existing Intercompany Agreements;


                    (c)
Guarantees (including the South Beach Guarantee) constituting Indebtedness
permitted by Section 6.01;


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


                    (e)
Permitted Acquisitions;


                    (f)
Permitted Minority Investments


85






                    (g)
Investments consisting of Capital Stock or other ownership interests in the
Excluded Entity; provided that the Loan Parties and their
Subsidiaries shall not be permitted to make any other Investments in, loans or
advances to, or Guarantees (other than the South Beach Guarantee) of any
Indebtedness of, the Excluded Entity that would otherwise be permitted under
this Section 6.04; and


                    (h)
Loans or advances to employees in the ordinary course of business, not to exceed
$1,000,000 in the aggregate at any time outstanding.


                    Section 6.05 Asset Sales and Store Closings.


          The
Loan Parties will not, and will not permit any of their Subsidiaries to, sell,
transfer, lease or otherwise dispose of any asset, including any Capital Stock
or ownership interest, nor will the Loan Parties permit any of their
Subsidiaries to issue any additional shares of its Capital Stock or other
ownership interest in such Subsidiary, except:


                    (a)
sales of Inventory in the ordinary course of business; 


                    (b)
sales of used, obsolete, worn-out or surplus equipment;


                    (c)
sales of Permitted Investments in the ordinary course of business;


                    (d)
sales, transfers and dispositions among the Loan Parties and their
Subsidiaries; provided that any such sales, transfers or
dispositions involving a Subsidiary of a Loan Party that is not a Loan Party
shall be made in compliance with Section 6.07;


                    (e) the
sale and disposition of assets pursuant to Permitted Store Closings;


                    (f)
sales, transfers and dispositions by the Lead Borrower of any of its
Subsidiaries which is not a Loan Party;


                    (g)
returns of RTV Inventory in the ordinary course of business;


                    (h)
sales, transfers and dispositions by any Loan Party of any minority interest in
a joint venture or other Person;


                    (i)
sales, transfers and dispositions of leases, subleases, licenses or sublicenses
on property in the ordinary course of business; provided that (x)
no Default or Event of Default then exists or would arise therefrom, and (y)
such sale, transfer or disposition could not reasonably be expected to have a
Material Adverse Effect;


                    (j)
sale or issuances by the Lead Borrower of any of its Capital Stock that does
not result in a Change in Control;


                    (k)
the sale, transfer or other disposition of the South Beach Real Estate to the
Excluded Entity, as long as all of the proceeds of any Indebtedness incurred by
the Excluded


86





Entity to
finance the South Beach Real Estate, less the amount of any Indebtedness that
is secured by a Lien on the South Beach Real Estate that is required to be
repaid in connection with the financing of the South Beach Real Estate, are
paid to the Lead Borrower or another Loan Party substantially contemporaneously
with the sale, transfer or other disposition of the South Beach Real Estate to
the Excluded Entity; and


                    (l)
other sales, transfers or dispositions not in the ordinary course of business; provided
that (x) no Default or Event of Default then exists or would arise
therefrom, and (y) the aggregate amount of such sales, transfers, or dispositions
shall not exceed $5,000,000 during the term of this Agreement;


provided that all sales, transfers,
leases and other dispositions permitted hereby shall be made at arm’s length
(other than as permitted in clause (d) above) and for fair value and solely for
cash consideration; and provided further that the Administrative
Agent may, and upon the direction of the Required Lenders or any Voting
Borrowing Base Agent shall, terminate the authority granted hereunder in whole
or in part upon the occurrence and during the continuance of any Default or
Event of Default.


                    Section
6.06 Restricted Payments; Certain Payments of Indebtedness.


                    (a)
The Loan Parties will not, and will not permit any of their Subsidiaries to, declare
or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except as long as no Default or Event of Default exists or would arise
therefrom: (i) the Loan Parties may declare and pay Permitted Dividends; and
(ii) the Lead Borrower may make Restricted Payments pursuant to the Trans World
Entertainment Corporation 2005 Long Term and Incentive Share Award Plan and any
other plans of the Loan Parties existing on the Effective Date and described in
the Lead Borrower’s Form 10-K for Fiscal Year ended January 31, 2010, each as
in effect as of the Effective Date.


                    (b)
The Loan Parties will not, and will not permit any of their Subsidiaries to,
make or agree to pay or make, directly or indirectly, any payment or other distribution
(whether in cash securities or other property) of or in respect of principal of
or interest on any Indebtedness, or any payment or other distribution (whether
in cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any Indebtedness, except as long as no Default
or Event of Default has occurred and is continuing or would result from such
payments:


	
  

 	
  

 
	
  

 	
                     (i)
 payment of regularly scheduled interest and principal payments as and when
 due in respect of any other Indebtedness permitted hereunder; and

 
	
  

 	
  

 
	
  

 	
                     (ii)
 refinancings of Indebtedness to the extent permitted by Section 6.01.

 


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                    Section
6.07 Transactions with Affiliates.


          The
Loan Parties will not, and will not permit any of their Subsidiaries to, sell,
lease or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates (or the Excluded Entity, whether or
not an Affiliate of any Loan Party), except: (a) transactions among the Loan
Parties; (b) transactions that are in the ordinary course of business and that
are at prices and on terms and conditions not less favorable to the Loan
Parties or such Subsidiary than could be obtained on an arm’s-length basis from
unrelated third parties; (c) transactions in accordance with the terms and
conditions of the Existing Intercompany Agreements; (d) compensation
arrangements with officers and directors of the Loan Parties that are in
accordance with Applicable Law and consistent with any fiduciary duty any Loan
Party may have to any Person (including the owners of any Capital Stock of such
Loan Party) in respect thereto; (e) the sale, transfer or other disposition of
the South Beach Real Estate to the Excluded Entity in accordance with the terms
of Section 6.05(k); (f) the South Beach Guarantee; and (g) the leases
with Robert J. Higgins for the Lead Borrower’s offices at 38 Corporate Circle,
Albany, New York 12203 and the equipment therein, as such leases are in effect
as of the Effective Date.


                    Section
6.08 Restrictive Agreements.


          The
Loan Parties will not, and will not permit any of their Subsidiaries to,
directly or indirectly, enter into, incur or permit to exist any agreement or
other arrangement that prohibits, restricts or imposes any condition upon
(a) the ability of the Loan Parties or any of their Subsidiaries to
create, incur or permit to exist any Lien upon any of its property or assets or
(b) the ability of any Subsidiary of a Loan Party to pay dividends or
other distributions with respect to any shares of its Capital Stock or to make
or repay loans or advances to the Loan Parties or any other Subsidiary of the
Loan Parties or to guarantee Indebtedness of the Loan Parties or any other
Subsidiary of the Loan Parties; provided, however, that (i) the
foregoing shall not apply to restrictions and conditions imposed by Applicable
Law, or by any Loan Document, (ii) clause (a) of the foregoing shall
not apply to restrictions or conditions imposed by any agreement relating to
secured Indebtedness permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Indebtedness, and
(iii) clause (a) of the foregoing shall not apply to customary
provisions in leases restricting the assignment or subleasing thereof.


                    Section
6.09 Amendment of Material Documents.


          The
Loan Parties will not, and will not permit any of their Subsidiaries to, amend,
modify or waive any of its rights under: (a) its Organizational Documents, to
the extent that such amendment, modification or waiver could reasonably be
expected to result in a Material Adverse Effect; (b) any Subordinated
Indebtedness; or (c) any other instruments, documents or agreements, in each
case with respect to this clause (c), to the extent that such amendment,
modification or waiver could reasonably be expected to result in a Material
Adverse Effect.


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                    Section
6.10 Additional Subsidiaries.


          The
Loan Parties will not, and will not permit any of their Subsidiaries to, create
any additional Subsidiary unless no Default or Event of Default would arise
therefrom and the requirements of Section 5.12 are satisfied. For the
avoidance of doubt, nothing in this Section 6.10 shall restrict the
creation of the Excluded Entity.


                    Section
6.11 Fiscal Year


          The
Loan Parties shall not, and shall not permit any of their Subsidiaries to,
change their Fiscal Year without the prior written consent of the
Administrative Agent, which consent shall not be unreasonably withheld.


                    Section
6.12 ERISA.


          No
Loan Party shall, or shall cause or permit any of its Subsidiaries or its ERISA
Affiliates to:


                    (a)
cause or permit to occur an event that could reasonably be expected to result
in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068
of ERISA; or


                    (b)
cause or permit to occur an ERISA Event to the extent such ERISA Event could
reasonably be expected to result in taxes, penalties and other liability and
could reasonably be expected to result in a Material Adverse Effect; or


                    (c)
engage in any transaction in connection with which a Loan Party or any ERISA
Affiliate could reasonably be expected to be subject to either a civil penalty
assessed pursuant to the provisions of Section 502(i) of ERISA or a tax imposed
under the provisions of Section 4975 of the IRC, which, in each case, could
reasonably be expected to result in a Material Adverse Effect; or


                    (d)
adopt an amendment to any Pension Plan requiring the provision of security
under Section 307 of ERISA or Section 401(a)(29) of the IRC which could
reasonably be expected to result in a Material Adverse Effect; or


                    (e)
terminate any Pension Plan under Section 4041(c) of ERISA without the prior
consent of the Administrative Agent which could reasonably be expected to
result in a Material Adverse Effect; or


                    (f)
fail in any material respect to make payment when due (including permissible
extensions) of all amounts which, under the provisions of any Plan or
Multiemployer Plan, it is required to pay as contributions thereto or as
premiums to the PBGC, or, with respect to any Pension Plan, permit to exist any
material “accumulated funding deficiency” (within the meaning of Section 302 of
ERISA and Section 412 of the IRC) which could reasonably be expected to result
in a Material Adverse Effect; or


89





                    (g)
enter into a new agreement or agreements that would (i) obligate a Loan Party
or any ERISA Affiliate to make contributions to a Multiemployer Plan subject to
subtitle (e) of Title IV of ERISA which could reasonably be expected to result
in a Material Adverse Effect, (ii) create, extend or increase an obligation to
provide health or medical benefits for retirees of a Loan Party or an ERISA
Affiliate that would increase the accumulated post retirement benefit
obligation and could reasonably be expected to result in a Material Adverse
Effect.


                    Section
6.13 Environmental Laws.


          The
Loan Parties shall not, and shall not permit any of their Subsidiaries to, (a)
fail to comply with any Environmental Law or to obtain, maintain or comply with
any permit, license or other approval required under any Environmental Law, or
(b) undertake actions that are reasonably likely to result in an Environmental
Liability, except in either case where such failure or actions could not
reasonably be expected to result in a Material Adverse Effect.


ARTICLE VII


Events of Default


                    Section
7.01 Events of Default.


          If
any of the following events (“Events of Default”) shall occur:


                    (a)
Any Loan Party shall fail to pay any principal of any Loan or any reimbursement
obligation in respect of any Letter of Credit Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date
fixed for prepayment thereof or otherwise; or


                    (b)
Any Loan Party shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in Section 7.01(a)
payable under this Agreement or any other Loan Document), when and as the same
shall become due and payable and such failure continues for three (3) Business
Days; or


                    (c)
Any representation or warranty made or deemed made by or on behalf of any Loan
Party in or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with any Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect in any material respect when
made or deemed made; or


                    (d)
Any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in Section 2.21, Section 5.01, Section
5.02(a), Section 5.03, Section 5.07 (with respect to
insurance covering the Collateral), Section 5.08, Section 5.11,
or in ARTICLE VI; or


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                    (e)
Any Loan Party shall fail to observe or perform any covenant, condition or
agreement contained in any Loan Document (other than those specified in
clauses (a), (b), (c), or (d) of this Section 7.01), and such
failure shall continue unremedied for a period of ten (10) days after the
earlier of: (i) the Borrowers’ knowledge thereof; or (ii) notice thereof from
the Administrative Agent to the Lead Borrower; or


                    (f)
Any Loan Party shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness
when and as the same shall become due and payable (after giving effect to the
expiration of any grace or cure period set forth therein); or


                    (g)
Any event or condition occurs (i) that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with
or without the giving of notice, the lapse of time or both) the holder or
holders of any such Material Indebtedness (or any trustee or agent on its or
their behalf) to cause any such Material Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity, or (ii) that enables or permits (with or without the
giving of notice, the lapse of time or both) the beneficiary or beneficiaries
of the South Beach Guarantee (or any trustee or agent on its or their behalf)
to cause the South Beach Guarantee to become payable or cash collateral in
respect thereof to be demanded; or


                    (h)
The subordination provisions contained in, or otherwise pertaining to, any
agreement or instrument governing any Subordinated Indebtedness that is
Material Indebtedness for any reason shall be revoked or invalidated by any
Governmental Authority, or otherwise cease to be in full force and effect, or
any Person (who is a party to such Indebtedness) shall contest in any manner
the validity or enforceability thereof, or the Obligations for any reason shall
not have the priority contemplated by this Agreement or any agreement or
subordination provisions thereof evidencing any Subordinated Indebtedness or
any Loan Party shall acquiesce in the breach by a subordinated creditor of any
Subordination Indebtedness; or


                    (i)
An involuntary proceeding shall be commenced or an involuntary petition shall
be filed seeking (i) liquidation, reorganization or other relief in
respect of any Loan Party or its debts, or of a substantial part of its assets,
under any federal or state bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for any Loan Party or
for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for thirty (30) days or an order or decree
approving or ordering any of the foregoing shall be entered; or


                    (j)
Any Loan Party shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any federal
or state bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in clause (i)
of this Section 7.01, (iii) apply for or consent to the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for any Loan Party or for a substantial part


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of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting
any of the foregoing; or


                    (k)
Any Loan Party shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due; or 


                    (l)
(i) One or more judgments for the payment of money in an aggregate amount (to
the extent not covered by insurance) in excess of $5,000,000 shall be rendered
against any Loan Party or any combination thereof and the same shall remain undischarged
for a period of forty-five (45) consecutive days during which execution shall
not be effectively stayed, by reason of a pending appeal or otherwise, or any
action shall be legally taken by a judgment creditor to attach or levy upon any
material assets of any Loan Party to enforce any such judgment; or


                        (ii)
Any non-monetary judgment or order shall have been rendered against any Loan
Party or any of its Subsidiaries that could reasonably be expected to have a
Material Adverse Effect and there shall be any period of thirty (30)
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or


                    (m)
An ERISA Event shall have occurred that, when taken together with all other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Loan Parties in an aggregate amount exceeding $5,000,000 and
the same shall remain undischarged for a period of forty-five (45) consecutive
days during which execution shall not be effectively stayed, by reason of a
pending appeal or otherwise; or


                    (n)
Any challenge in writing shall be made 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; or


                    (o)
Any challenge shall be made by or on behalf of any other Person 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, which challenge the Administrative Agent determines is a bona fide
claim which if adversely determined could materially and adversely effect any
security interest created by or in any Loan Document, any payment payable or
made pursuant to any Loan Document or the value of any Collateral; or


                    (p)
Any Lien purported to be created under any Security Document shall cease to be,
or shall be asserted by any Loan Party not to be, a valid and perfected Lien on
any Collateral, with the priority required by the applicable Security Document,
except as a result of 


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the sale or
other disposition of the applicable Collateral in a transaction permitted under
the Loan Documents; or


                    (q)
The occurrence of any uninsured loss to any material portion of the Collateral;
or


                    (r)
The indictment of, or institution of any legal process or proceeding against,
any Loan Party, under any federal, state, municipal, and other civil or
criminal statute, rule, regulation, order, or other requirement having the
force of law which process or proceeding could reasonably be expected to not be
withdrawn or dismissed and where the relief, penalties, or remedies sought or
available include the forfeiture of any material property of any Loan Party
and/or the imposition of any stay or other order, the effect of which could
reasonably be expected to restrain in any material way the conduct by the
Borrowers, taken as a whole, of their business in the ordinary course; or


                    (s)
The determination by any Borrower, whether by vote of such Borrower’s partners,
board of directors or otherwise to: suspend the operation of such Borrower’s
business in the ordinary course, liquidate all or a material portion of such
Borrower’s assets or Store locations other than as permitted pursuant to Section
6.05(e) or employ an agent or other third party to conduct, or assist such
Borrower in conducting, a program of closings, liquidations or
“going-out-of-business” sales of any material portion of the business; or


                    (t)
Any Change in Control; or


                    (u)
The occurrence of any default under any Facility Guarantee and/or the
termination or attempted termination of any Facility Guarantee without the
prior written consent of the Administrative Agent;


then, and in
every such event (other than an event with respect to any Loan Party described
in clause (i) or (j) of this Section 7.01), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders or any Voting Borrowing Base Agent
shall, by notice to the Lead Borrower, take any of the following actions, at
the same or different times: (i) terminate the Commitments, and thereupon
the Commitments shall terminate immediately; (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to
be due and payable), and thereupon the principal of the Loans so declared to be
due and payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Loan Parties; (iii) instruct the
Collateral Agent to exercise (and promptly thereupon the Collateral Agent shall
exercise) its remedies under the Security Documents (including, without
limitation, foreclosure upon and taking possession of the Collateral); and (iv)
exercise any and all other remedies under the Loan Documents and Applicable Law
available to the Agents, the Issuing Bank and the Lenders. In case of any event
with respect to any Loan Party described in clauses (i) or (j) of this Section
7.01, the Commitments shall automatically terminate and the 


93





principal of
the Loans then outstanding, together with accrued interest thereon and all fees
and other obligations of the Borrowers accrued hereunder, shall automatically
become due and payable, without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Loan Parties.


                    Section
7.02 Remedies on Default.


          In
case any one or more of the Events of Default shall have occurred and be
continuing, and whether or not the maturity of the Loans shall have been
accelerated pursuant hereto, the Administrative Agent may proceed to protect
and enforce its rights and remedies under this Agreement, and the other Loan
Documents by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Agreement and the other Loan Documents or any instrument pursuant to which
the Obligations are evidenced, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Agents, the Lenders, the Swingline Lender or
the Issuing Bank. No remedy herein is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or any other provision of law.


                    Section
7.03 Application of Proceeds.


          After
the occurrence of an Event of Default and acceleration of the Obligations, all
proceeds realized from any Loan Party or on account of any Collateral shall be
applied in the manner set forth in Section 2.22(c)


ARTICLE VIII


The Agents


                    Section
8.01 Administration by Administrative Agent.


          Each
Lender, the Collateral Agent, the Co-Borrowing Base Agents and the Issuing Bank
hereby irrevocably designate Bank of America as Administrative Agent under this
Agreement and the other Loan Documents. The general administration of the Loan
Documents shall be by the Administrative Agent to the extent provided in the
Loan Documents. The Lenders, the Collateral Agent, the Co-Borrowing Base Agents
and the Issuing Bank each hereby (a) irrevocably authorizes the Administrative
Agent (i) to enter into the Loan Documents to which it is a party, and (ii) at
its discretion, to take or refrain from taking such actions as agent on its
behalf and to exercise or refrain from exercising such powers under the Loan
Documents as are delegated by the terms hereof or thereof, as appropriate,
together with all powers reasonably incidental thereto, and (b) agrees and
consents to all of the provisions of the Security Documents. The Administrative
Agent shall have no duties or responsibilities except as set forth in this
Agreement and the remaining Loan Documents, nor shall it have any fiduciary
relationship with


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any Secured
Party, and no implied covenants, responsibilities, duties, obligations, or liabilities
shall be read into the Loan Documents or otherwise exist against the
Administrative Agent.


                    Section
8.02 The Collateral Agent.


          The
Lenders, the Administrative Agent, the Co-Borrowing Base Agents and the Issuing
Bank each hereby irrevocably (i) designate Bank of America as Collateral Agent
under this Agreement and the other Loan Documents, (ii) authorize the
Collateral Agent to enter into the Security Documents and the other Loan
Documents to which it is a party and to perform its duties and obligations
thereunder, together with all powers reasonably incidental thereto, and (iii)
agrees and consents to all of the provisions of the Security Documents. All
Collateral shall be held or administered by the Collateral Agent (or its
duly-appointed agent) for its benefit and for the benefit of the other Secured
Parties. Any proceeds received by the Collateral Agent from the foreclosure,
sale, lease or other disposition of any of the Collateral and any other
proceeds received pursuant to the terms of the Security Documents or the other
Loan Documents shall be paid over to the Administrative Agent for application
as provided in Section 2.21, Section 2.22 and Section 7.03,
as applicable. The Collateral Agent shall have no duties or responsibilities
except as set forth in this Agreement and the remaining Loan Documents, nor
shall it have any fiduciary relationship with any Secured Party, and no implied
covenants, responsibilities, duties, obligations, or liabilities shall be read
into the Loan Documents or otherwise exist against the Collateral Agent.


                    Section
8.03 Co-Borrowing Base Agents.


                    (a)
Each Lender, the Administrative Agent, the Collateral Agent and the Issuing
Bank hereby irrevocably designates each of Bank of America and Wells Fargo as
Co-Borrowing Base Agents under this Agreement and the other Loan Documents and
hereby irrevocably authorizes each of the Co-Borrowing Base Agents (i) to enter
into the Loan Documents to which it is a party, and (ii) at its discretion, to
take or refrain from taking such actions as agent on its behalf and to exercise
or refrain from exercising such powers under the Loan Documents as are
delegated by the terms hereof or thereof, as appropriate, together with all
powers reasonably incidental thereto. No Co-Borrowing Base Agent shall have any
duties or responsibilities except as set forth in this Agreement, nor shall it
have any fiduciary relationship with any Secured Party, and no implied
covenants, responsibilities, duties, obligations, or liabilities shall be read
into the Loan Documents or otherwise exist against any Co-Borrowing Base Agent.


                    (b)
Notwithstanding any other provisions of this Agreement or any of the other Loan
Documents to the contrary, each Co-Borrowing Base Agent as of the Effective
Date shall have rights at least as expansive as the rights afforded to the
Administrative Agent relating to (i) (x) the definitions herein of the term
“Excess Availability” and any component definition thereof, and (y) the
definitions herein of the term “Borrowing Base” and any component thereof
(including, without limitation, Reserves, advance rates, appraised values and
eligibility criteria), (ii) reporting requirements and appraisals, examinations
and collateral audits, and (iii) the establishment, determination, modification
or release of the Borrowing Base Reserve or any


95





other Reserves
(collectively, the “Borrowing Base Issues”). Any provision in this
Agreement or any other Loan Document relating to a Borrowing Base Issue which
would otherwise only need the consent of, or to be satisfactory or acceptable
to, the Administrative Agent or the Collateral Agent shall be deemed to require
the consent of, or be satisfactory or acceptable (as the case may be) to, the
Co-Borrowing Base Agents. In addition, in the event that the Administrative
Agent and/or the Co-Borrowing Base Agents cannot agree on issues relating to
any or all of the Borrowing Base, Excess Availability, Borrowing Base
eligibility standards, Reserves, advance rates, borrowing base reporting,
appraisals or examinations or any other action or determination relating to a
Borrowing Base Issue, or any other matter with respect to which any
Co-Borrowing Base Agent has rights hereunder, the resolution of such issue
shall be to either: (x) require that the more conservative credit judgment be
implemented (that is, such credit judgment that would result in the least
amount of credit being available to the Borrowers under this Agreement), provided
that such credit judgment is commercially reasonable and is exercised in
good faith in accordance with customary business practices of the
Administrative Agent for comparable asset-based lending transactions in the
retail industry; or (y) decline to permit the requested action.


                    (c)
Notwithstanding anything in this Agreement or the other Loan Documents and the
foregoing to the contrary, (i) the Administrative Agent shall have sole and
exclusive authority and responsibility under this Agreement and the other Loan
Documents (without the consent or further approval of any Co-Borrowing Base
Agent) to select, employ and retain all attorneys, advisors, appraisers or
other professionals retained or to be retained by the Administrative Agent on
its own behalf or on behalf of the Co-Borrowing Base Agents (provided that
(i) upon the determination by any Co-Borrowing Base Agent (after consultation
with the Administrative Agent) that an advisor should be engaged, such
Co-Borrowing Base Agent shall notify the Administrative Agent in writing, and
the Administrative Agent shall thereupon promptly engage an advisor, and (ii)
all such advisors and any other professionals retained or to be retained by the
Administrative Agent on behalf of the Co-Borrowing Base Agents shall be
reasonably satisfactory to the Co-Borrowing Base Agents), and (ii) Wells Fargo
shall not assign any of its rights, powers, duties or obligations as a
Co-Borrowing Base Agent under this Agreement to any Person (other than an
Affiliate of such Person designated by such Person from time to time in writing
to the Administrative Agent as a Co-Borrowing Base Agent) without the prior
written consent of the Administrative Agent.


                    (d)
For the avoidance of doubt, the parties hereto each acknowledge and agree that
this Agreement does not grant either Co-Borrowing Base Agent the authority to
implement any Reserves or undertake to order any appraisals, audits or exams,
but rather grants such Persons the authority to direct the Administrative Agent
to do so (and, upon such direction, the Administrative Agent shall promptly do
so) in accordance with the terms and conditions of this Agreement.


                    Section
8.04 Sharing of Excess Payments.


          If,
at any time or times, any Secured Party shall receive (a) by payment,
foreclosure, setoff, banker’s lien, counterclaim, or otherwise, any payments
with respect to the Obligations owing to such Secured Party arising under, or
relating to, this Agreement or the other Loan 


96





Documents,
except for any such proceeds or payments received by such Secured Party from
the Administrative Agent pursuant to the terms of this Agreement, or (b)
payments from the Administrative Agent in excess of such Secured Party’s
ratable portion of all such distributions by the Administrative Agent, such
Secured Party shall promptly (i) turn the same over to the Administrative
Agent, in kind, and with such endorsements as may be required to negotiate the
same to the Administrative Agent, or in same day funds, as applicable, for the
account of all of the Secured Parties and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (ii) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Secured Parties so that such excess payment
received shall be applied ratably as among the Secured Parties in accordance
with their Commitment Percentages; provided, however, that if all
or part of such excess payment received by the purchasing party is thereafter
recovered from it, those purchases of participations shall be rescinded in
whole or in part, as applicable, and the applicable portion of the purchase
price paid therefor shall be returned to such purchasing party, but without
interest except to the extent that such purchasing party is required to pay
interest in connection with the recovery of the excess payment.


                    Section
8.05 Agreement of Required Lenders.


                    (a)
Upon any occasion requiring or permitting an approval, consent, waiver,
election or other action on the part of only the Required Lenders, action shall
be taken by the Administrative Agent, the Collateral Agent or the Co-Borrowing
Base Agents, as applicable, for and on behalf or for the benefit of all Lenders
upon the direction of the Required Lenders, and any such action shall be
binding on all Secured Parties;


                    (b)
Upon any occasion requiring or permitting an approval, consent, waiver, election
or other action on the part of all of the Lenders, action shall be taken by the
Administrative Agent, the Collateral Agent or the Co-Borrowing Base Agents, as
applicable, for and on behalf or for the benefit of all Lenders upon the
direction of all such Lenders, and any such action shall be binding on all
Secured Parties; and


                    (c)
No amendment, modification, consent, or waiver shall be effective except in
accordance with the provisions of Section 9.02.


                    Section
8.06 Liability of Agents.


                    (a)
Each of the Agents, when acting on behalf of the other Agents, the Lenders, the
Swingline Lender, the Issuing Bank, or the other Secured Parties, may execute
any of its respective duties under this Agreement by or through any of its
respective officers, agents and employees, and none of the Agents nor their
respective directors, officers, agents or employees shall be liable to any
other Secured Party or any of them for any action taken or omitted to be taken in
good faith, or be responsible to any Secured Party or to any of them for the
consequences of any oversight or error of judgment, or for any loss, except to
the extent of any liability imposed by law by reason of such Agent’s own gross
negligence or willful misconduct. None of the Agents nor their respective
directors, officers, agents and employees shall in any


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event be
liable to any other Secured Party or to any of them for any action taken or
omitted to be taken by them pursuant to instructions received by them from the
Required Lenders, or all Lenders, as applicable, or in reliance upon the advice
of counsel selected by it. Without limiting the foregoing, none of the Agents,
nor any of their respective directors, officers, employees, or agents: (i) shall
be responsible to any other Secured Party for the due execution, validity,
genuineness, effectiveness, sufficiency, or enforceability of, or for any
recital, statement, warranty or representation in, this Agreement, any other
Loan Document or any related agreement, document or order; or (ii) shall be
required to ascertain or to make any inquiry concerning the performance or
observance by any Loan Party of any of the terms, conditions, covenants, or
agreements of the Loan Parties under this Agreement or any of the Loan
Documents; or (iii) shall be responsible to any other Secured Party for the
state or condition of any properties of the Loan Parties or any other obligor
hereunder constituting Collateral for the Obligations of the Loan Parties
hereunder, or any information contained in the books or records of the Loan
Parties; or (iv) shall be responsible to any other Secured Party for the
validity, enforceability, collectibility, effectiveness or genuineness of this
Agreement or any other Loan Document or any other certificate, document or
instrument furnished in connection therewith; or (v) shall be responsible to
any other Secured Party for the validity, priority or perfection of any lien
securing or purporting to secure the Obligations or the value or sufficiency of
any of the Collateral.


                    (b)
The Agents may execute any of their duties under this Agreement or any other
Loan Document by or through their agents or attorneys-in-fact, and shall be
entitled to the advice of counsel concerning all matters pertaining to their
rights and duties hereunder or under the other Loan Documents. The Agents shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by them with reasonable care.


                    (c)
None of the Agents, nor any of their respective directors, officers, employees,
or agents, shall have any responsibility to the Loan Parties on account of the
failure or delay in performance or breach by any Secured Party (other than by
any Agent in its capacity as a Lender) or the Issuing Bank of any of their
respective obligations under this Agreement or the other Loan Documents or in
connection herewith or therewith.


                    (d)
Each of the Agents shall be entitled to rely, and shall be fully protected in
relying, upon any notice, consent, certificate, affidavit, or other document or
writing believed by it to be genuine and correct and to have been signed, sent
or made by the proper person or persons, and upon the advice and statements of
legal counsel (including, without, limitation, counsel to the Loan Parties),
independent accountants and other experts selected by the Agents. The Agents
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless they shall first receive such
advice or concurrence of the applicable Lenders as they deem appropriate or
they shall first be indemnified to their satisfaction by the Lenders against
any and all liability and expense which may be incurred by them by reason of
the taking or failing to take any such action. 


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                    Section
8.07 Notice of Default; Actions on Default.


                    (a)
No Agent shall be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default unless such Agent has actual knowledge of the same
or has received notice from a Secured Party or a Loan Party referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a “notice of default”. In the event that any Agent obtains such
actual knowledge or receives such a notice, such Agent shall give prompt notice
thereof to the Administrative Agent, and the Administrative Agent shall give
prompt notice thereof to each of the other Secured Parties. 


                    (b)
The Agents shall (subject to the provisions of Section 9.02) take such
action with respect to any Default or Event of Default as shall be reasonably
directed by the Required Lenders. Unless and until the Agents shall have
received such direction, the Agents may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to any such
Default or Event of Default as they shall deem advisable in the best interest
of the Lenders. In no event shall the Agents be required to comply with any
such directions to the extent that the Agents believe that the Agents’
compliance with such directions would be unlawful.


                    Section
8.08 Lenders’ Credit Decisions.


          Each
Secured Party acknowledges that it has, independently and without reliance upon
the Agents or any other Secured Party, and based on the financial statements
prepared by the Loan Parties and such other documents and information as it has
deemed appropriate, made its own credit analysis and investigation into the
business, assets, operations, property, and financial and other condition of
the Loan Parties and has made its own decision to enter into this Agreement and
the other Loan Documents and agrees that the Agents shall bear no
responsibility therefor. Each Secured Party also acknowledges that it will,
independently and without reliance upon the Agents or any other Secured Party,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in determining whether or not
conditions precedent to closing any Loan hereunder have been satisfied and in
taking or not taking any action under this Agreement and the other Loan
Documents.


                    Section
8.09 Reimbursement and Indemnification.


          Each
Lender agrees (a) to reimburse (i) each Agent for such Lender’s Commitment
Percentage of any expenses and fees incurred by such Agent for the benefit of
the Lenders or the Issuing Bank under this Agreement and any of the other Loan
Documents, including, without limitation, counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders or the
Issuing Bank, and any other expense incurred in connection with the
administration or enforcement thereof not reimbursed by the Loan Parties and
(ii) each Agent for such Lender’s Commitment Percentage of any expenses of such
Agent incurred for the benefit of the Lenders or the Issuing Bank that the Loan
Parties have agreed to reimburse pursuant to Section 9.03 and has failed
to so reimburse and (b) to indemnify and hold harmless each Agent and its
directors, officers, employees, or agents, on demand, in the amount of such
Lender’s 


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Commitment
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against it or any of them in any way relating to or
arising out of this Agreement or the other Loan Documents or any action taken
or omitted by it or any of them under this Agreement or the other Loan
Documents to the extent not reimbursed by the Loan Parties (except such as
shall result from their respective gross negligence or willful misconduct). The
provisions of this Section 8.09 shall survive the repayment of the
Obligations and the termination of the Commitments.


                    Section
8.10 Rights of Agents.


          It
is understood and agreed that each of the Agents shall have the same rights and
powers hereunder (including the right to give such instructions) as the other
Lenders and may exercise such rights and powers, as well as its rights and
powers under other agreements and instruments to which it is or may be party,
and engage in other transactions with the Loan Parties, as though it were not
the Administrative Agent, the Collateral Agent or a Co-Borrowing Base Agent
under this Agreement and the other Loan Documents. Each of the Agents and its
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of commercial or investment banking, trust, advisory or other business
with the Loan Parties and their Subsidiaries and Affiliates as if it were not
an Agent hereunder.


                    Section
8.11 Notice of Transfer. 


          The
Agents may deem and treat a Lender party to this Agreement as the owner of such
Lender’s portion of the Loans for all purposes, unless and until, and except to
the extent, an Assignment and Acceptance shall have become effective as set
forth in Section 9.05(b).


                    Section
8.12 Successor Agent. 


          Any
Agent may resign at any time by giving five (5) Business Days written notice
thereof to the other Agents, the Lenders and the Lead Borrower. Upon any such
resignation of any Agent, the Required Lenders shall have the right to appoint
a successor Agent, which so long as no Default or Event of Default has occurred
and is continuing, shall be reasonably satisfactory to the Lead Borrower (whose
consent shall not be unreasonably withheld or delayed). If no successor Agent
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within thirty (30) days after the retiring Agent’s giving of
notice of resignation, the retiring Agent may, on behalf of the other Agents,
the Lenders, the Swingline Lender, and the Issuing Bank, appoint a successor
Agent which shall be a Person capable of complying with all of the duties of
such Agent (and, if applicable, the Issuing Bank) hereunder (in the opinion of
the retiring Agent and as certified to the Lenders in writing by such successor
Agent) which, so long as no Default or Event of Default has occurred and is
continuing, shall be reasonably satisfactory to the Lead Borrower (whose
consent shall not be unreasonably withheld or delayed). Upon the acceptance of
any appointment as Agent by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent and the retiring Agent shall be discharged
from its


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duties and
obligations under this Agreement. After any retiring Agent’s resignation
hereunder as such Agent, the provisions of this ARTICLE VIII shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was such Agent under this Agreement.


                    Section 8.13 Reports
and Financial Statements.


          Promptly
after receipt thereof from the Borrowers, the Administrative Agent shall remit
to each Lender, each Co-Borrowing Base Agent and the Collateral Agent copies of
all financial statements required to be delivered by the Borrowers hereunder.
Promptly after receipt thereof, the Administrative Agent shall remit to each
Lender, each Co-Borrowing Base Agent and the Collateral Agent all commercial
finance examinations and appraisals of the Collateral received by the
Administrative Agent.


                    Section
8.14 Deteriorating and Delinquent Lenders.


                    (a)
If for any reason any Lender shall become a Deteriorating Lender or such Lender
(i) shall fail or refuse to abide by its obligations under this Agreement,
including, without limitation, its obligation to make available to the
Administrative Agent its Commitment Percentage of any Revolving Loans, expenses
or setoff or purchase its Commitment Percentage of a participation interest in
the Swingline Loans or Letter of Credit Outstandings, and such failure is not
cured within ten (10) days after receipt from the Administrative Agent of
written notice thereof, or (ii) has been deemed insolvent or become the subject
of a bankruptcy or insolvency proceeding (in the case of each of clauses (i)
and (ii), a “Delinquent Lender”), then, in addition to the rights and remedies
that may be available to Agents, other Lenders, the Loan Parties or any other
party at law or in equity, and not in limitation thereof, (A) such
Deteriorating Lender’s or Delinquent Lender’s right to participate in the
administration of, or decision-making rights related to, the Loans, this
Agreement or the other Loan Documents shall be suspended during the pendency of
such failure or refusal, (B) such Deteriorating Lender or Delinquent Lender
shall be deemed to have assigned any and all payments due to it from the Loan
Parties, whether on account of outstanding Loans, interest, fees or otherwise,
to the remaining Non-Deteriorating Lenders and non-Delinquent Lenders for
application to, and reduction of, their proportionate shares of all outstanding
Loans until, as a result of application of such assigned payments the Lenders’
respective Commitment Percentage of all outstanding Loans shall have returned
to those in effect immediately prior to such delinquency and without giving
effect to the nonpayment causing such delinquency, and (C) at the option of the
Administrative Agent, any amounts payable to such Deteriorating Lender or
Delinquent Lender hereunder (whether on account of principal, interest, fees or
otherwise) shall, in lieu of being distributed to such Deteriorating Lender or
Delinquent Lender, be retained by the Administrative Agent as cash collateral
for future funding obligations of such Deteriorating Lender or Delinquent
Lender in respect of any Revolving Loan or existing or future participating
interest in any Swingline Loan or Letter of Credit. The Deteriorating Lender’s
or Delinquent Lender’s decision-making and participation rights and rights to
payments as set forth in clauses (A), (B) and (C) hereinabove shall be restored
only upon the payment by such Deteriorating Lender or Delinquent Lender of its
Commitment Percentage of any Obligations, any participation obligation, or
expenses as to


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which it is
delinquent, together with interest thereon at the rate set forth in Section
2.10 hereof from the date when originally due until the date upon which any
such amounts are actually paid.


                    (b)
The non-Deteriorating Lenders and non-Delinquent Lenders shall also have the
right, but not the obligation, in their respective, sole and absolute
discretion, to cause the termination and assignment without any further action
by a Deteriorating Lender or Delinquent Lender for no cash consideration (pro rata,
based on the respective Commitments of those Lenders electing to exercise such
right) of such Deteriorating Lender’s or Delinquent Lender’s Commitment to fund
future Loans. Upon any such purchase of the Commitment Percentage of any
Deteriorating Lender or Delinquent Lender, the Deteriorating Lender’s or
Delinquent Lender’s share in future Loans and its rights under the Loan
Documents with respect thereto shall terminate on the date of purchase, and the
Deteriorating Lender or Delinquent Lender shall promptly execute all documents
reasonably requested to surrender and transfer such interest, including, if so
requested, an Assignment and Acceptance.


                    (c)
Each Deteriorating Lender and Delinquent Lender shall indemnify the
Administrative Agent, each non-Deteriorating Lender and each non-Delinquent
Lender from and against any and all loss, damage or expenses, including, but
not limited to, reasonable attorneys’ fees and funds advanced by any Agent or
by any non-Deteriorating Lender or non-Delinquent Lender, on account of a
Deteriorating Lender’s or Delinquent Lender’s failure to timely fund its
Commitment Percentage of a Loan or to otherwise perform its obligations under
the Loan Documents.


                    Section
8.15 Arrangers.


          Notwithstanding
the provisions of this Agreement or any of the other Loan Documents, the
Arrangers shall have no powers, rights, duties, responsibilities or liabilities
with respect to this Agreement and the other Loan Documents.


ARTICLE IX


Miscellaneous


                    Section
9.01 Notices.


          Except
in the case of notices and other communications expressly permitted to be given
by telephone, all notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service, mailed
by certified or registered mail or sent by telecopy, as follows:


                    (a)
if to any Loan Party, to it at 38 Corporate Circle, Albany, New York 12203,
Attention: Chief Financial Officer (Telecopy No. (518) 452-7833), with a copy
to Boies, Schiller & Flexner LLP, 10 North Pearl Street, 4th
Floor, Albany, New York 12207, Attention: Kathleen M. Franklin, Esquire
(Telecopy No. (518) 434-0665);


102






                    (b)
if to the Administrative Agent, the Collateral Agent, the Swingline Lender or
the Issuing Bank, to Bank of America, N.A., 100 Federal Street, 9th
Floor, Boston, Massachusetts 02110, Attention: Rick Hill (Telecopy No. (617)
434-4131), with a copy to Riemer & Braunstein, LLP, Three Center Plaza,
Boston, Massachusetts 02108, Attention: Kevin J. Simard, Esquire (Telecopy No.
(617) 880-3456); 


                    (c)
if to the Co-Borrowing Base Agents, to (i) Bank of America, N.A., 100 Federal
Street, 9th Floor, Boston, Massachusetts 02110, Attention: Rick Hill
(Telecopy No. (617) 434-4131), with a copy to Riemer & Braunstein, LLP,
Three Center Plaza, Boston, Massachusetts 02108, Attention: Kevin J. Simard,
Esquire (Telecopy No. (617) 880-3456), and to (ii) Wells Fargo Retail Finance,
LLC, One Boston Place, 18th Floor, Boston, Massachusetts 02108,
Attention: Patrick Norton (Telecopy No. (617) 523-4029), with a copy to
Otterbourg, Steindler, Houston & Rosen, P.C., 230 Park Avenue, New York, New
York, 10169, Attention: Michael Barocas, Esquire (Telecopy No. (212) 682-6104);



                    (d)
if to any other Lender, to it at its address (or telecopy number) set forth on
the signature pages hereto or on any Assignment and Acceptance for such Lender.



Any party
hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the
provisions of this Agreement shall be deemed to have been given on the date of
receipt. 


                    Section
9.02 Waivers; Amendments.  


                    (a)
No failure or delay by any Secured Party in exercising any right or power
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Agents, the Lenders, the
Swingline Lender, the Issuing Bank and the other Secured Parties hereunder and
under the other Loan Documents are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision
of any Loan Document or consent to any departure by any Loan Party therefrom
shall in any event be effective unless the same shall be permitted by Section
9.02(b), and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default or Event of Default,
regardless of whether the Agents, the Lenders, the Swingline Lender, or the
Issuing Bank may have had notice or knowledge of such Default or Event of
Default at the time. 


                    (b)
Neither this Agreement nor any other Loan Document nor any provision hereof or
thereof may be waived, amended or modified except, in the case of this
Agreement, pursuant to an agreement or agreements in writing entered into by
the Loan Parties and the Required Lenders or, in the case of any other Loan
Document, pursuant to an agreement or 


103





agreements in
writing entered into by the Agents and the Loan Parties that are parties
thereto, in each case with the consent of the Required Lenders; provided that no such waiver, amendment, modification or other agreement shall: (i) increase
the Commitment of any Lender without the consent of such Lender or increase the
Commitments to an amount greater than $100,000,000 without the consent of each
Lender; (ii) reduce the principal amount of any Loan or Letter of Credit
Disbursement or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the consent of each Lender affected thereby; (iii) postpone
the scheduled date of payment of the principal amount of any Loan or Letter of
Credit Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of the Commitments or the Maturity Date, without
the consent of each Lender affected thereby; (iv) change Section 2.19, Section
2.21, Section 2.22 or Section 2.25 of this Agreement or
Section 6.02 of the Security Agreement, without the consent of each Lender; (v)
change any of the provisions of this Section 9.02 or the definition of
the term “Required Lenders”, or any other provision of any Loan Document
specifying the number or percentage of Lenders required to waive, amend or
modify any rights thereunder or make any determination or grant any consent
thereunder, without the consent of each Lender; (vi) release any Borrower from
its obligations under any Loan Document, or limit its liability in respect of
such Loan Document, without the consent of each Lender; (vii) except in
connection with asset sales and other dispositions permitted pursuant to Section
6.05 of this Agreement, release any material portion of the Collateral from
the Liens of the Security Documents, without the consent of each Lender; (viii)
change the definition of the terms “Availability”, “Borrowing Base” or “Excess
Availability” or any component definition thereof if, as a result thereof, the
amounts available to be borrowed by the Borrowers would be increased, without
the consent of each Lender, provided that the foregoing shall not
limit the discretion of the Administrative Agent or any Co-Borrowing Base Agent
pursuant to clause (j) of the definition of Eligible Inventory, or to change,
establish or eliminate any Reserves; (ix) increase the Permitted Overadvance,
without the consent of each Lender; (x) except as expressly permitted herein,
subordinate the Obligations hereunder, or the Liens granted hereunder or under
the other Loan Documents, to any other Indebtedness or Lien, as the case may
be, without the prior consent of each Lender; and provided further
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Agents or the Issuing Bank without the prior written consent of
the Agents or the Issuing Bank, as the case may be.  


                    (c)
Notwithstanding anything to the contrary contained in this Section 9.02,
in the event that the Lead Borrower shall request that this Agreement or any
other Loan Document be modified, amended or waived in a manner which would
require the consent of the Lenders pursuant to Section 9.02(b) and such
amendment is approved by the Required Lenders, but not by the percentage of the
Lenders set forth in said Section 9.02(b), the Lead Borrower and the
Required Lenders shall be permitted to amend this Agreement without the consent
of the Lender or Lenders which did not agree to the modification or amendment
requested by the Lead Borrower (such Lender or Lenders, collectively the “Minority
Lenders”) to provide for (w) the termination of the Commitment of each of
the Minority Lenders, (x) the addition to this Agreement of one or more other
financial institutions that would qualify as an Eligible Assignee or an
increase in the Commitment of one or more of the Required Lenders, so that the
Total Commitments after giving effect to such amendment shall be in the same
amount as the Total 


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Commitments
immediately before giving effect to such amendment, (y) if any Loans are
outstanding at the time of such amendment, the making of such additional Loans
by such new or increasing Lender or Lenders, as the case may be, as may be
necessary to repay in full the outstanding Loans (including principal,
interest, and fees) of the Minority Lenders immediately before giving effect to
such amendment and (z) such other modifications to this Agreement or the Loan
Documents as may be appropriate and incidental to the foregoing; provided that
each such Minority Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in unreimbursed drawings
under Letters of Credit and Swingline Loans, accrued interest thereon, accrued
fees and all other amounts payable to it hereunder from the assignee or
Required Lender(s) increasing its Commitment (to the extent of such outstanding
principal and accrued interest and fees) or the Borrowers (in the case of all
other amounts).  


                    (d)
No notice to or demand on any Loan Party shall entitle any Loan Party to any
other or further notice or demand in the same, similar or other circumstances.
Each holder of a Note shall be bound by any amendment, modification, waiver or
consent authorized as provided herein, whether or not a Note shall have been
marked to indicate such amendment, modification, waiver or consent and any
consent by a Lender, or any holder of a Note, shall bind any Person
subsequently acquiring a Note, whether or not a Note is so marked. No amendment
to this Agreement or any other Loan Document shall be effective against the
Borrowers unless signed by the Borrowers or other applicable Loan Party. 


                    Section
9.03 Expenses; Indemnity; Damage Waiver.


                    (a)
The Loan Parties shall jointly and severally pay: (i) all reasonable
out-of-pocket expenses incurred by the Agents, the Arrangers and their
Affiliates in connection with the syndication of the credit facilities provided
for herein and the preparation, negotiation, administration, management,
execution and delivery of the Loan Documents, or any amendments, modifications
or waivers of the provisions thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), including, without
limitation, the reasonable fees, charges and disbursements of (A) counsel for
the Agents and the Arrangers, (B) outside consultants for the Agents, and (C)
appraisers and commercial finance examiners permitted under this Agreement;
(ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder; and (iii) all reasonable
out-of-pocket expenses (including the reasonable fees, charges and
disbursements of any counsel and any outside consultants for the Agents, the
Issuing Bank or the Lenders) incurred by the Agents, the Issuing Bank or the
Lenders in connection with the Loans made or Letters of Credit issued
hereunder, or in connection with the enforcement or protection of the rights of
the Agents, the Issuing Bank or the Lenders in connection with the Loan
Documents (including their rights under this Section 9.03), including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans; provided that the Lenders
who are not the Administrative Agent, the Collateral Agent, Co-Borrowing Base
Agents, the Arrangers or the Issuing Bank shall be entitled to reimbursement
for no more than one counsel or outside consultant representing all 


105





such Lenders
(absent a conflict of interest, in which case the Lenders may engage and be
reimbursed for additional counsel or outside consultants). 


                    (b)
The Loan Parties shall, jointly and severally, indemnify the Agents, the
Arrangers, the Issuing Bank and each Lender, and each Related Party of any of
the foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the reasonable fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or asserted
against any Indemnitee arising out of, in connection with, or as a result of:
(i) the execution or delivery of any Loan Document or any other agreement or
instrument contemplated hereby, the performance by the parties to the Loan
Documents of their respective obligations thereunder or the consummation of the
transactions contemplated by the Loan Documents or any other transactions
contemplated hereby; (ii) any Loan or Letter of Credit or the use of the
proceeds therefrom (including any refusal by the Issuing Bank to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit); (iii) any actual or alleged presence or release of Hazardous Materials
on or from any property currently or formerly owned or operated by any Loan
Party or any of their Subsidiaries, or any Environmental Liability related in
any way to any Loan Party or any of their Subsidiaries; or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that
such indemnity shall not, as to any Indemnitee, be available to the extent that
such losses, claims, damages, liabilities or related expenses resulted from the
gross negligence, bad faith or willful misconduct of such Indemnitee or any
Affiliate of such Indemnitee (or of any officer, director, employee, advisor or
agent of such Indemnitee or any such Indemnitee’s Affiliates). In connection
with any indemnified claim hereunder, the Indemnitee shall be entitled to
select its own counsel the Loan Parties shall promptly pay the reasonable fees
and expenses of such counsel. 


                    (c)
To the extent that any Loan Party fails to pay any amount required to be paid
by it to the Agents or the Issuing Bank under paragraphs (a) or (b) of this Section
9.03, each Lender severally agrees to pay to the Agents or the Issuing
Bank, as the case may be, such Lender’s Commitment Percentage (determined as of
the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount. 


                    (d)
To the extent permitted by Applicable Law, no Loan Party shall assert, and each
hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the transactions
contemplated by the Loan Documents, any Loan or Letter of Credit or the use of
the proceeds thereof. The Loan Parties further agree that no Indemnitee shall
have any liability to the Loan Parties, any Person asserting claims by or on
behalf of any Loan Party or any other Person in connection with this Agreement
or the other Loan Documents except as a result of the Indemnitee’s gross
negligence, bad faith or willful misconduct. 


106





                    (e)
All amounts due under this Section 9.03 shall be payable promptly after written
demand therefor.  


                    Section
9.04 Designation of Lead Borrower as Borrowers’ Agent.


                    (a)
Each Borrower hereby irrevocably designates and appoints the Lead Borrower as
that Borrower’s agent to obtain Loans and Letters of Credit hereunder, the
proceeds of which shall be available to each Borrower for those uses as set
forth herein. As the disclosed principal for its agent, each Borrower shall be
obligated to the Agents and each Lender on account of Loans so made and Letters
of Credit so issued hereunder as if made directly by the Lenders to that
Borrower, notwithstanding the manner by which such Loans and Letters of Credit
are recorded on the books and records of the Lead Borrower and of any Borrower.



                    (b)
Each Borrower recognizes that credit available to it hereunder is in excess of
and on better terms than it otherwise could obtain on and for its own account
and that one of the reasons therefore is its joining in the credit facility
contemplated herein with all other Borrowers. Consequently, each Borrower
hereby assumes and agrees to discharge all Obligations of all other Borrowers
as if the Borrower so assuming were each other Borrower. 


                    (c)
The Lead Borrower shall act as a conduit for each Borrower (including itself,
as a “Borrower”) on whose behalf the Lead Borrower has requested a Loan. The
Lead Borrower shall cause the transfer of the proceeds of each Loan to the
(those) Borrower(s) on whose behalf such Loan was obtained. Neither the Agents
nor any Lender shall have any obligation to see to the application of such
proceeds. 


                    (d)
Each of the Borrowers shall remain liable to the Agents and the Lenders for the
payment and performance of all Obligations (which payment and performance shall
continue to be secured by all Collateral granted by each of the Borrowers)
notwithstanding any determination by the Administrative Agent to cease making
Loans or causing Letters of Credit to be issued to or for the benefit of any
Borrower. 


                    (e)
The authority of the Lead Borrower to request Loans on behalf of, and to bind,
the Borrowers, shall continue unless and until the Administrative Agent
actually receives: 


                    (i)
written notice of: (i) the termination of such authority, and (ii) the
subsequent appointment of a successor Lead Borrower, which notice is signed by
a Financial Officer of each Borrower (other than the chief executive officer of
the Lead Borrower being replaced) then eligible for borrowing under this
Agreement; and 


                    (ii)
written notice from such successive Lead Borrower (A) accepting such
appointment, (B) acknowledging that such removal and appointment has been
effected by a Financial Officer of each Borrower, and (C) acknowledging that,
from and after the date of such appointment, the newly appointed Lead Borrower
shall be bound by the terms hereof, and that as used herein, the term “Lead
Borrower” shall mean and include the newly appointed Lead Borrower. 


107





                    Section
9.05 Successors and Assigns.


                    (a)
The provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns permitted
hereby (including any Affiliate of the Issuing Bank that issues any Letter of
Credit), except that no Loan Party may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the
Administrative Agent (and any such attempted assignment or transfer without
such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby (including any
Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Secured Parties) any legal or equitable right, remedy or claim under or by
reason of this Agreement. 


                    (b)
Any Lender may assign all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it); provided that (i) except in the case of an
assignment by a Lender to a Lender, an Affiliate of a Lender or an Approved
Fund, the Lead Borrower (but only if no Default or Event of Default exists and
is continuing), the Administrative Agent and the Issuing Bank must give their
prior written consent to such assignment by a Lender (which consent shall not
be unreasonably withheld or delayed), (ii) any assignment made by a Lender may
be made only to one or more Eligible Assignees, (iii) except in the case of an
assignment to a Lender, an Affiliate of a Lender or an Approved Fund, or an
assignment of the entire remaining amount of the assigning Lender’s Commitment
or Revolving Loans, the amount of the Commitment or Revolving Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000, unless the
Administrative Agent and the Lead Borrower otherwise consent, (iv) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations, (v) the parties to each assignment
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance, together with a processing and recordation fee of $3,500. Subject
to acceptance and recording thereof pursuant to Section 9.05(d), from
and after the effective date specified in each Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of
a Lender under this Agreement, and the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the assigning Lender’s rights and
obligations under this Agreement, such Lender shall cease to be a party hereto
but shall continue to be entitled to the benefits of Section 9.03). Any
assignment or transfer by a Lender of rights or obligations under this
Agreement that does not comply with this paragraph shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with Section 9.05(e). 


                    (c)
The Administrative Agent, acting for this purpose as an agent of the Loan
Parties, shall maintain at one of its offices in Boston, Massachusetts a copy
of each Assignment 


108





and Acceptance
delivered to it and a register for the recordation of the names and addresses
of the Lenders, and the Commitment of, and principal amount of the Loans and
Letter of Credit Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register
shall be conclusive absent manifest error and the Loan Parties, the
Administrative Agent, the Issuing Bank and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrowers, the
Issuing Bank and any Lender, at any reasonable time and from time to time upon
reasonable prior notice. 


                    (d)
Upon its receipt of a duly completed Assignment and Acceptance executed by an
assigning Lender and an assignee, the processing and recordation fee referred
to in Section 9.05(b) and any written consent to such assignment
required by Section 9.05(b), the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph. 


                    (e)
Any Lender may, without the consent of the Loan Parties, the Agents, and the
Issuing Bank, sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Loan Parties, the Agents, the Issuing Bank and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender’s rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation in the
Commitments, the Loans and the Letters of Credit Outstandings shall provide
that such Lender shall retain the sole right to enforce the Loan Documents and,
except as provided in the following sentence, to approve any amendment,
modification or waiver of any provision of the Loan Documents. Subject to Section
9.05(f), the Loan Parties agree that each Participant shall be entitled to
the benefits of Section 2.23, Section 2.24, and Section 2.25
to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 9.05(b). To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 9.09
as though it were a Lender; provided that such Participant agrees
to be subject to Section 2.25(b) as though it were a Lender. Each
Lender, acting for this purpose as an agent of the Loan Parties, shall maintain
at its offices a record of each agreement or instrument effecting any
participation and a register for the recordation of the names and addresses of
its Participants and their rights with respect to principal amounts and other
Obligations from time to time (each a “Participation Register”). The
entries in each Participation Register shall be conclusive absent manifest
error and the Loan Parties, the Administrative Agent, the Issuing Bank and the
Lenders may treat each Person whose name is recorded in a Participant Register
as a Participant for all purposes of this Agreement (including, for the
avoidance of doubt, for purposes of entitlement to benefits under Section
2.23, Section 2.24, and Section 2.25 or Section 9.09).
The Participation Register shall be available for inspection by the Borrowers,
the Issuing Bank and any Lender, at any reasonable time and from time to time
upon reasonable prior notice. 


109





                    (f)
A Participant shall not be entitled to receive any greater payment under Section
2.23 or Section 2.26 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant.
A Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 2.26 unless (i) the Lead Borrower is
notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrowers, to comply with Section 2.26(e)
as though it were a Lender and (ii) such Participant is eligible for exemption
from the withholding Tax referred to therein, following compliance with Section
2.26(e). 


                    (g)
Any Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such
Lender, including any pledge or assignment to secure obligations to any of the
twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve
Act, 12 U.S.C. Section 341, and this Section shall not apply to any such pledge
or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto. 


                    Section
9.06 Survival.


          All
covenants, agreements, indemnities, representations and warranties made by the
Loan Parties in the Loan Documents and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of the Loan Documents and
the making of any Loans and issuance of any Letters of Credit, regardless of
any investigation made by any such other party or on its behalf and
notwithstanding that any Secured Party may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid or any Letter of Credit
is outstanding and so long as the Commitments have not expired or terminated.
The provisions of Section 2.21, Section 2.24 and Section 9.03
and ARTICLE VIII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the expiration or termination of the Letters of Credit
and the Commitments or the termination of this Agreement or any provision
hereof. In connection with the termination of this Agreement and the release
and termination of the security interest in the Collateral, the Administrative
Agent, on behalf of itself and the other Agents, the Lenders, the Swingline
Lender, and the Issuing Bank, may require such assurances and indemnities as it
shall reasonably deem necessary or appropriate to protect the Agents, the
Lenders, the Swingline Lender, and the Issuing Bank against loss on account of
such release and termination, including without limitation, with respect to
credit previously applied to the Obligations that may reasonably be expected to
be subsequently reversed or revoked, or to secure such assurances and
indemnities, including but not limited to, requiring cash collateral for same. 


110





                    Section
9.07 Counterparts; Integration; Effectiveness.


          This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement
and the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all contemporaneous
or previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the
Agents, the Loan Parties and the Lenders and when the Administrative Agent
shall have received counterparts hereof that, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy or other electronic transmission shall be
effective as delivery of a manually executed counterpart of this Agreement. 


                    Section
9.08 Severability.


          Any
provision of this Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction. 


                    Section
9.09 Right of Setoff.


          If
an Event of Default shall have occurred and be continuing, each Secured Party,
each Participant, and each of their respective Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Secured Party, Participant or Affiliate to or for the credit or the account
of the Loan Parties against any of and all the Obligations of the Loan Parties
now or hereafter existing under this Agreement held by such Secured Party,
Participant or Affiliate irrespective of whether or not such Secured Party,
Participant or Affiliate shall have made any demand under this Agreement and
although such obligations may be unmatured; provided that such
Secured Party, Participant or Affiliate shall provide the Lead Borrower with
notice promptly after exercise of such right of setoff. The rights of each
Secured Party, Participant and Affiliate under this Section 9.09 are in
addition to other rights and remedies (including other rights of setoff) that
such Secured Party, Participant or Affiliate may have. No Secured Party will,
or will permit its Participant or Affiliate, to exercise its rights under this Section
9.09 without the prior written consent of the Administrative Agent or the
Required Lenders. ANY AND ALL RIGHTS TO REQUIRE THE ADMINISTRATIVE AGENT OR THE
COLLATERAL AGENT TO EXERCISE THEIR RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES ANY OF THE OBLIGATIONS, AS APPLICABLE, PRIOR TO THE
EXERCISE BY ANY SECURED PARTY, PARTICIPANT, OR AFFILIATE 


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OF THEIR RIGHT
OF SETOFF UNDER THIS SECTION ARE HEREBY KNOWINGLY, VOLUNTARILY, AND IRREVOCABLY
WAIVED. 


                    Section
9.10 Governing Law; Jurisdiction; Consent to Service of Process.


                    (a)
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF. 


                    (b)
The Loan Parties agree that any suit for the enforcement of this Agreement or
any other Loan Document may be brought in any New York state or federal court sitting
in New York County as the Administrative Agent may elect in its sole discretion
and consent to the non-exclusive jurisdiction of such courts. The Loan Parties
hereby waive any objection which they may now or hereafter have to the venue of
any such suit or any such court or that such suit is brought in an inconvenient
forum. The Loan Parties agree that any action commenced by any Loan Party
asserting any claim or counterclaim arising under or in connection with this
Agreement or any other Loan Document shall be brought solely in any New York
state or federal court sitting in New York County as the Administrative Agent
may elect in its sole discretion and consent to the exclusive jurisdiction of
such courts with respect to any such action. 


                    (c)
Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 9.01. Nothing in this Agreement
or any other Loan Document will affect the right of any party to this Agreement
to serve process in any other manner permitted by law. 


                    Section
9.11 WAIVER OF JURY TRIAL.


          EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH ANY LOAN
PARTY, ANY AGENT, THE ISSUING BANK, ANY LENDER OR ANY PARTICIPANT IS OR BECOMES
A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY LOAN
PARTY, ANY AGENT, THE ISSUING BANK, AND/OR SUCH LENDER OR PARTICIPANT OR IN
WHICH ANY LOAN PARTY, ANY AGENT, THE ISSUING BANK, OR SUCH LENDER OR
PARTICIPANT, IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES
DIRECTLY OR INDIRECTLY OUT OF OR RELATES TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE
THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 


112





                    Section
9.12 Headings.


          Article
and Section headings and the Table of Contents used herein are for convenience
of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this Agreement.



                    Section
9.13 Interest Rate Limitation. 


          Notwithstanding
anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts that are treated as
interest on such Loan under Applicable Law (collectively the “Charges”),
shall exceed the maximum lawful rate (the “Maximum Rate”) that may be
contracted for, charged, taken, received or reserved by the Lender holding such
Loan in accordance with Applicable Law, the rate of interest payable in respect
of such Loan hereunder, together with all Charges payable in respect thereof,
shall be limited to the Maximum Rate and, to the extent lawful, the interest
and Charges that would have been payable in respect of such Loan but were not
payable as a result of the operation of this Section shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefore) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender. 


                    Section
9.14 Additional Waivers.


                    (a)
The Obligations 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 any Agent or any
other Secured Party to assert any claim or demand or to enforce or exercise any
right or remedy against any other Loan Party under the provisions of this
Agreement, any other Loan Document or otherwise, (ii) any rescission, waiver,
amendment or modification of, or any release from any of the terms or provisions
of, this Agreement, any other Loan Document, or any other agreement, including
with respect to any other Loan Party, 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 other Secured Party. 


                    (b)
To the fullest extent permitted by Applicable Law, 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 Obligations), including any claim of waiver, release, surrender,
alteration or compromise of any of the Obligations, 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 Obligations or
otherwise. Without limiting the generality of the foregoing, the obligations of
each Loan Party hereunder shall not be discharged or impaired or otherwise
affected by any default, failure or delay, willful or otherwise, in the
performance of the Obligations, or by any other act or omission that may or
might in any manner or to any extent vary the risk of any Loan Party or that
would otherwise operate as a discharge of any Loan Party as a matter of law or
equity (other than the indefeasible payment in full in cash of all the
Obligations). 


113





                    (c)
To the fullest extent permitted by Applicable Law, each Loan Party waives any
defense based on or arising out of any defense of any other Loan Party or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any other Loan Party, other than
the indefeasible payment in full in cash of all the Obligations. The Collateral
Agent and the other Secured Parties may, at their election, foreclose on any
security held by one or more of them by one or more judicial or nonjudicial
sales, accept an assignment of any such security in lieu of foreclosure,
compromise or adjust any part of the Obligations, make any other accommodation
with any other Loan Party, or exercise any other right or remedy available to
them against any other Loan Party, without affecting or impairing in any way the
liability of any Loan Party hereunder except to the extent that all the
Obligations have been indefeasibly paid in full in cash. 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. 


                    (d)
Upon payment by any Loan Party of any Obligations, all rights of such Loan
Party against any other Loan Party arising as a result thereof by way of right
of subrogation, contribution, reimbursement, indemnity or otherwise shall in
all respects be subordinate and junior in right of payment to the prior
indefeasible payment in full in cash of all the Obligations. 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
Obligations. Notwithstanding the foregoing, prior to the occurrence of an Event
of Default, Loan Party may make payments to any other Loan Party on account of
any such indebtedness. After the occurrence and during the continuance of an
Event of Default, none of the Loan Parties will demand, sue for, or otherwise
attempt to collect any such indebtedness. 


                    Section
9.15 Confidentiality.


          Each
of the Lenders agrees that it will not disclose without the prior consent of
the Lead Borrower (other than to its employees, employees of Affiliates,
auditors, counsel or other professional advisors, in each case who have a need
to know such Confidential Information in accordance with customary banking
practices or to another Lender if the Lender or such Lender’s holding or parent
company in its sole discretion reasonably determines that any such party should
have access to such information) any information with respect to the Borrowers
or any other Loan Party which is furnished pursuant to this Agreement (all such
information, “Confidential Information”); provided that
any Lender may disclose any Confidential Information: (a) as has become
generally available to the public other than as a result of a disclosure in
violation of any duty of confidentiality hereunder by such Lender or the
Administrative Agent or a disclosure in violation of any duty of
confidentiality hereunder known to such Lender or the Administrative Agent to
have been made by any person or entity to which such Lender or the
Administrative Agent has delivered such Confidential Information; (b) as may be
required in any report, statement or testimony submitted to any municipal,
state or federal regulatory body having or claiming to have jurisdiction over
such Lender or to the Federal Reserve Board or the Federal Deposit Insurance
Corporation or similar organizations 


114





(whether in
the United States or elsewhere) or their successors; (c) as may be required in
response to any summons or subpoena or in connection with any litigation;
provided, however, that if the Lender is able to do so prior to complying with
the summons or subpoena, such Lender shall provide the Lead Borrower with
prompt notice of such required disclosure so that the Loan Party may seek a
protective order or other appropriate remedy; (d) in order to comply with any
law, order, regulation or ruling applicable to such Lender; (e) in connection
with the enforcement of remedies under this Agreement and the other Loan
Documents, and (f) to any prospective transferee in connection with any
contemplated transfer of any of the Loans or Notes or any interest therein by
such Lender provided that such prospective transferee receives such
Confidential Information having been made aware of the confidential nature thereof
and agrees to be bound by the terms of this Section 9.15. The Loan
Parties hereby agree that the failure of a Lender to comply with the provisions
of this Section 9.15 shall not relieve the Loan Parties of any of its
obligations to such Lender under this Agreement and the other Loan Documents. 


                    Section
9.16 Publicity.


          The
Agents may issue a “tombstone” notice of the establishment of the credit
facility contemplated by this Agreement and may make reference to the Lead
Borrower (and may utilize any logo or other distinctive symbol associated with
each Loan Party; provided that the Lead Borrower is provided with
a sample for its reasonable approval and any such usage is in accordance with
any trademark usage standards provided by the Lead Borrower) in connection with
any advertising, promotion, or marketing undertaken by the Agents. The Loan
Parties shall give the Agents one (1) business days notice of any press release
prior to it being issued, which press release shall be acceptable to the Agents
in its reasonable discretion. 


                    Section
9.17 USA Patriot Act.


          Each
Lender that is subject to the Patriot Act and the Administrative Agent (for
itself and not on behalf of any Lender) hereby notifies the Loan Parties that,
pursuant to the requirements of the Patriot Act, it is required to obtain,
verify and record information that identifies each Loan Party, which
information includes the name and address of each Loan Party and other
information that will allow such Lender or the Administrative Agent, as
applicable, to identify each Loan Party in accordance with the Patriot Act. No
part of the proceeds of the Credit Extensions will be used by the Loan Parties,
directly or indirectly, for any payment 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. 


                    Section
9.18 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


115 





Regulations”) or any enabling legislation or
executive order relating thereto (which for the avoidance of doubt shall
include, but shall not be limited to (a) Executive Order 13224 of September 21,
2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive
Order”) and (b) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56)). Furthermore, none of the Borrowers or their 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)
knowingly 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. 


                    Section
9.19 Existing Credit Agreement Amended and Restated. 


          Upon
satisfaction of the conditions precedent to the effectiveness of this
Agreement, (a) this Agreement shall amend and restate the Existing Credit
Agreement in its entirety (except to the extent that definitions from the
Existing Credit Agreement are incorporated herein by reference) and (b) the
rights and obligations of the parties under the Existing Credit Agreement shall
be subsumed within, and be governed by, this Agreement; provided, however,
that the Loan Parties hereby agree that (i) the Letter of Credit Outstandings
under, and as defined in, the Existing Credit Agreement on the Effective Date
shall be Letter of Credit Outstandings hereunder, and (ii) all Obligations and
Other Liabilities of the Loan Parties under, and as defined in, the Existing
Credit Agreement shall remain outstanding, shall constitute continuing
Obligations and Other Liabilities secured by the Collateral, and this Agreement
shall not be deemed to evidence or result in a novation or repayment and
reborrowing of such obligations and other liabilities. 


 [SIGNATURE PAGES FOLLOW]


116






          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.


	
  
 	
  
 	
  
 	
  
 
	
  
 	
 TRANS WORLD ENTERTAINMENT CORPORATION, 
as
 Lead Borrower and as a Borrower
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 By:
 	
 /s/ John J. Sullivan
 	
  
 
	
  
 	
  
 	

 
 	
  
 
	
  
 	
 Name: 
 	
 John J. Sullivan
 	
  
 
	
  
 	
 Title:
 	
 EVP & Chief Financial Officer
 	
  
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 RECORD TOWN, INC.,
 as a Borrower
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	By:
	/s/ John J. Sullivan
	
  
 
	
  
 	 
	
 	
  
 
	
  
 	Name: 
	John J. Sullivan
	
  
 
	
  
 	Title:
	EVP & Chief Financial Officer
	
  
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 RECORD TOWN USA, LLC,
 as a Borrower
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	By:
	/s/ John J. Sullivan
	
  
 
	
  
 	 
	
 	
  
 
	
  
 	Name: 
	John J. Sullivan
	
  
 
	
  
 	Title:
	EVP & Chief Financial Officer
	
  
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 TRANS WORLD NEW YORK, LLC,
 as a Borrower
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	By:
	/s/ John J. Sullivan
	
  
 
	
  
 	 
	
 	
  
 
	
  
 	Name: 
	John J. Sullivan
	
  
 
	
  
 	Title:
	EVP & Chief Financial Officer
	
  
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 TRANS WORLD FLORIDA, LLC,
 as a Borrower
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	By:
	/s/ John J. Sullivan
	
  
 
	
  
 	 
	

 	
  
 
	
  
 	Name: 
	John J. Sullivan
	
  
 
	
  
 	Title:
	EVP & Chief Financial Officer
	
  
 


S-1









	
  
 	
  
 	
  
 	
  
 
	
  
 	
 MOVIES PLUS, INC.,
 as a Borrower
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	By:
	/s/ John J. Sullivan
	
  
 
	
  
 	 
	
 	
  
 
	
  
 	Name: 
	John J. Sullivan
	
  
 
	
  
 	Title:
	EVP & Chief Financial Officer
	
  
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 RECORD TOWN UTAH, LLC,
 as a Borrower
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	By:
	/s/ John J. Sullivan
	
  
 
	
  
 	 
	
 	
  
 
	
  
 	Name: 
	John J. Sullivan
	
  
 
	
  
 	Title:
	EVP & Chief Financial Officer
	
  
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 MEDIA LOGIC USA, LLC,
 as a Facility Guarantor
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	
 By:
 	
 Record Town,
 Inc., its sole member
 	
  
 
	
  
 	
  
 	
  
 	
  
 
	
  
 	By:
	/s/ John J. Sullivan
	
  
 
	
  
 	 
	

 	
  
 
	
  
 	Name: 
	John J. Sullivan
	
  
 
	
  
 	Title:
	EVP & Chief Financial Officer
	
  
 


S-2









	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 BANK OF AMERICA, N.A.,
 as Administrative Agent, as Collateral Agent, as Co-Borrowing Base Agent, as
 Swingline Lender, as Issuing Bank, and as a Lender
 
	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 By: 
 	

 
	/s/ Rick Hill	
  
 
	
  
 	
  
 	

 
 	
  
 
	
  
 	
 Name: 
 	
 Rick Hill
 	
  
 
	
  
 	
  
 	

 
 	
  
 
	
  
 	
 Title:
 	
 Managing Director
 	
  
 
	
  
 	
  
 	

 
 	
  
 
	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 Address:
 	
  
 
	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 100 Federal
 Street, 9th Floor
 
	
  
 	
 Boston,
 Massachusetts 02110
 
	
  
 	
 Attn: Rick
 Hill 
 
	
  
 	
 Telephone:
 (617) 434-4080
 
	
  
 	
 Telecopy:
 (617) 434-4080
 


S-3









	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 WELLS FARGO RETAIL FINANCE, LLC,
 as Co-Borrowing Base Agent and as a Lender
 
	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 By: 
 	
  
 	/s/ Cory Loftus	
  
 
	
  
 	
  
 	

 
 	
  
 
	
  
 	
 Name:
 	
 Cory Loftus
 	
  
 
	
  
 	
 Title:
 	
 Vice President
 	
  
 
	
  
 	
  
 	

 
 	
  
 
	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 Address:
 	
  
 
	
  
 	
  
 	
  
 	
  
 	
  
 
	
  
 	
 One Boston Place,
 18th Floor
 
	
  
 	
 Boston,
 Massachusetts 02108
 
	
  
 	
 Attn: Cory
 Loftus
 
	
  
 	
 Telephone:
 (617) 854-7259
 
	
  
 	
 Telecopy:
 (877) 302-1418
 


S-4