exv10w1






Exhibit 10.1




EXECUTION VERSION




THIRD AMENDED AND RESTATED

REVOLVING CREDIT AGREEMENT




Dated as of March 31, 2010




among




BORDERS GROUP, INC.

BORDERS, INC.

as Borrowers




THE GUARANTORS PARTY HERETO




THE LENDERS PARTY HERETO




and




BANK OF AMERICA, N.A.

as Administrative Agent




BANK OF AMERICA, N.A. and GENERAL ELECTRIC CAPITAL CORPORATION

as Co-Collateral Agents




WELLS FARGO RETAIL FINANCE, LLC and

GENERAL ELECTRIC CAPITAL CORPORATION

as Co-Syndication Agents




JPMORGAN CHASE BANK, N.A.

as Documentation Agent




with




BANC OF AMERICA SECURITIES LLC

WELLS FARGO RETAIL FINANCE, LLC

J.P. MORGAN SECURITIES INC. and

GE CAPITAL MARKETS, INC.

as Joint Lead Arrangers and Joint Bookrunners









 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	1.	 	DEFINITIONS, RULES OF INTERPRETATION, ETC	 	 	2	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.1.	 	 	Definitions
	 	 	2	 
	 

	 	 	1.2.	 	 	Rules of Interpretation
	 	 	37	 
	 

	 	 	1.3.	 	 	Accounting Principles
	 	 	38	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.	 	THE CREDIT FACILITIES	 	 	39	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	2.1.	 	 	Revolving Credit Loans
	 	 	39	 
	 

	 	 	 	 	 	2.1.1. Commitment to Lend under Revolving Credit Facility
	 	 	39	 
	 

	 	 	 	 	 	2.1.2. [Reserved]
	 	 	39	 
	 

	 	 	 	 	 	2.1.3. Requests for Loans
	 	 	39	 
	 

	 	 	2.2.	 	 	Fees
	 	 	40	 
	 

	 	 	 	 	 	2.2.1. Existing Commitment Fee
	 	 	40	 
	 

	 	 	 	 	 	2.2.2. Extended Commitment Fee
	 	 	40	 
	 

	 	 	2.3.	 	 	Changes in Total Commitment	 	 	40	 
	 

	 	 	 	 	 	2.3.1. Reduction of Total Commitment
	 	 	40	 
	 

	 	 	 	 	 	2.3.2. Termination of Existing Tranche
	 	 	41	 
	 

	 	 	 	 	 	2.3.3. Increase in Commitment Applicable to Extended Tranche
	 	 	41	 
	 

	 	 	2.4.	 	 	Hedging Agreements and Cash Management Services
	 	 	42	 
	 

	 	 	2.5.	 	 	The Swingline
	 	 	42	 
	 

	 	 	 	 	 	2.5.1. The Swingline Loans
	 	 	42	 
	 

	 	 	 	 	 	2.5.2. Request for Swingline Loans
	 	 	43	 
	 

	 	 	 	 	 	2.5.3. Borrowings to Repay Swingline Loans
	 	 	44	 
	 

	 	 	 	 	 	2.5.4. Repayment of Participations
	 	 	45	 
	 

	 	 	 	 	 	2.5.5. Voluntary Reduction of Swingline Sublimit
	 	 	45	 
	 

	 	 	2.6.	 	 	Evidence of Loan Obligations
	 	 	45	 
	 

	 	 	 	 	 	2.6.1. Loan Accounts
	 	 	45	 
	 

	 	 	 	 	 	2.6.2. The Revolving Notes
	 	 	46	 
	 

	 	 	 	 	 	2.6.3. [Reserved]
	 	 	46	 
	 

	 	 	 	 	 	2.6.4. [Reserved]
	 	 	46	 
	 

	 	 	 	 	 	2.6.5. [Reserved]
	 	 	46	 
	 

	 	 	 	 	 	2.6.6. The Swingline Note
	 	 	46	 
	 

	 	 	 	 	 	2.6.7. Participating Interests of Lenders
	 	 	47	 
	 

	 	 	2.7.	 	 	Interest on Loans
	 	 	47	 
	 

	 	 	2.8.	 	 	Conversion Options
	 	 	47	 
	 

	 	 	 	 	 	2.8.1. Conversion to Different Type of Loan
	 	 	47	 
	 

	 	 	 	 	 	2.8.2. Continuation of Type of Loan
	 	 	48	 
	 

	 	 	 	 	 	2.8.3. Eurocurrency Rate Loans
	 	 	48	 
	 

	 	 	2.9.	 	 	Funds for Loans
	 	 	48	 
	 

	 	 	 	 	 	2.9.1. Funding Procedures
	 	 	48	 
	 

	 	 	 	 	 	2.9.2. Advances by Administrative Agent
	 	 	49	 
	 

	 	 	2.10.	 	 	[Reserved]
	 	 	49	 
	 

	 	 	2.11.	 	 	[Reserved]
	 	 	49	 
	 

	 	 	2.12.	 	 	Change in Aggregate Borrowing Base
	 	 	49	 
	 

	 	 	2.13.	 	 	Overadvances
	 	 	50	 
	 

	 	 	2.14.	 	 	Cash Collateral
	 	 	50	 
	 

	 	 	2.15.	 	 	Treatment of Delinquent Lenders
	 	 	51	 






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(continued)




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	3.	 	REPAYMENT OF THE LOANS	 	 	53	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	3.1.	 	 	Maturity
	 	 	53	 
	 

	 	 	3.2.	 	 	Mandatory Repayments of the Loans
	 	 	53	 
	 

	 	 	3.3.	 	 	Optional Repayments of Loans
	 	 	53	 
	 
	 	 	 	 	 	 	 	 	 	 
	4.	 	LETTERS OF CREDIT	 	 	54	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	4.1.	 	 	Letter of Credit Commitments
	 	 	54	 
	 

	 	 	 	 	 	4.1.1. Commitment to Issue Letters of Credit
	 	 	54	 
	 

	 	 	 	 	 	4.1.2. Letter of Credit Applications; Issuance of Letters of Credit
	 	 	55	 
	 

	 	 	 	 	 	4.1.3. Terms of Letters of Credit
	 	 	56	 
	 

	 	 	 	 	 	4.1.4. Reimbursement Obligations of Lenders
	 	 	57	 
	 

	 	 	 	 	 	4.1.5. Participations of Lenders
	 	 	57	 
	 

	 	 	 	 	 	4.1.6. Auto-Extension Letters of Credit
	 	 	57	 
	 

	 	 	4.2.	 	 	Reimbursement Obligation of the Borrowers
	 	 	57	 
	 

	 	 	4.3.	 	 	Letter of Credit Payments
	 	 	58	 
	 

	 	 	4.4.	 	 	Obligations Absolute
	 	 	60	 
	 

	 	 	4.5.	 	 	Role of Issuing Bank
	 	 	61	 
	 

	 	 	4.6.	 	 	Letter of Credit Fee
	 	 	62	 
	 

	 	 	4.7.	 	 	Transitional Letters of Credit
	 	 	62	 
	 

	 	 	4.8.	 	 	Letter of Credit Amounts
	 	 	62	 
	 
	 	 	 	 	 	 	 	 	 	 
	5.	 	CERTAIN GENERAL PROVISIONS	 	 	63	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	5.1.	 	 	Closing and Administrative Agent’s Fees
	 	 	63	 
	 

	 	 	5.2.	 	 	BGI as Agent for other Borrowers
	 	 	63	 
	 

	 	 	5.3.	 	 	Funds for Payments
	 	 	63	 
	 

	 	 	 	 	 	5.3.1. Payments to Administrative Agent
	 	 	63	 
	 

	 	 	 	 	 	5.3.2. No Offset, etc.
	 	 	63	 
	 

	 	 	5.4.	 	 	Computations
	 	 	64	 
	 

	 	 	5.5.	 	 	Inability to Determine Eurocurrency Rate
	 	 	64	 
	 

	 	 	5.6.	 	 	Illegality
	 	 	64	 
	 

	 	 	5.7.	 	 	Additional Costs, etc.
	 	 	65	 
	 

	 	 	5.8.	 	 	Capital Adequacy
	 	 	66	 
	 

	 	 	5.9.	 	 	Certificate
	 	 	66	 
	 

	 	 	5.10.	 	 	Indemnity
	 	 	66	 
	 

	 	 	5.11.	 	 	Interest After Default
	 	 	67	 
	 

	 	 	5.12.	 	 	Replacement of Lenders
	 	 	67	 
	 

	 	 	5.13.	 	 	[Reserved]
	 	 	67	 
	 

	 	 	5.14.	 	 	[Reserved]
	 	 	67	 
	 

	 	 	5.15.	 	 	Concerning Joint and Several Liability of the Borrowers
	 	 	67	 
	 

	 	 	5.16.	 	 	Additional Borrowers
	 	 	70	 
	 

	 	 	5.17.	 	 	Taxes
	 	 	70	 
	 
	 	 	 	 	 	 	 	 	 	 
	6.	 	GUARANTY AND COLLATERAL SECURITY	 	 	74	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	6.1.	 	 	Guaranty of Payment and Performance
	 	 	74	 






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	 	 	 	 	 	 	 	 	Page
	 

	 	 	6.2.	 	 	Guaranty Absolute
	 	 	74	 
	 

	 	 	6.3.	 	 	Effectiveness, Enforcement
	 	 	76	 
	 

	 	 	6.4.	 	 	Waiver
	 	 	76	 
	 

	 	 	6.5.	 	 	Subordination; Subrogation
	 	 	76	 
	 

	 	 	6.6.	 	 	Payments
	 	 	77	 
	 

	 	 	6.7.	 	 	Setoff
	 	 	77	 
	 

	 	 	6.8.	 	 	Further Assurances
	 	 	77	 
	 

	 	 	6.9.	 	 	Successors and Assigns
	 	 	77	 
	 

	 	 	6.10.	 	 	Contribution
	 	 	78	 
	 

	 	 	6.11.	 	 	[Reserved]
	 	 	78	 
	 

	 	 	6.12.	 	 	Security of Borrowers
	 	 	78	 
	 

	 	 	6.13.	 	 	Limitation on Guaranty Obligations
	 	 	78	 
	 
	 	 	 	 	 	 	 	 	 	 
	7.	 	REPRESENTATIONS AND WARRANTIES	 	 	78	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	7.1.	 	 	Corporate Authority
	 	 	78	 
	 

	 	 	 	 	 	7.1.1. Incorporation; Good Standing
	 	 	78	 
	 

	 	 	 	 	 	7.1.2. Authorization
	 	 	79	 
	 

	 	 	 	 	 	7.1.3. Enforceability
	 	 	79	 
	 

	 	 	7.2.	 	 	Governmental Approvals
	 	 	79	 
	 

	 	 	7.3.	 	 	Title to Properties; Leases
	 	 	79	 
	 

	 	 	7.4.	 	 	Fiscal Year; Financial Statements and Projections
	 	 	79	 
	 

	 	 	 	 	 	7.4.1. Fiscal Year
	 	 	79	 
	 

	 	 	 	 	 	7.4.2. Financial Statements
	 	 	79	 
	 

	 	 	 	 	 	7.4.3. Projections
	 	 	80	 
	 

	 	 	7.5.	 	 	No Material Adverse Effect, etc
	 	 	80	 
	 

	 	 	7.6.	 	 	Franchises, Patents, Copyrights, etc
	 	 	80	 
	 

	 	 	7.7.	 	 	Litigation
	 	 	80	 
	 

	 	 	7.8.	 	 	[Reserved.]
	 	 	80	 
	 

	 	 	7.9.	 	 	Compliance with Other Instruments, Laws, etc
	 	 	80	 
	 

	 	 	7.10.	 	 	Tax Status
	 	 	80	 
	 

	 	 	7.11.	 	 	No Event of Default
	 	 	81	 
	 

	 	 	7.12.	 	 	Holding Company and Investment Company Acts
	 	 	81	 
	 

	 	 	7.13.	 	 	[Reserved.]
	 	 	81	 
	 

	 	 	7.14.	 	 	Certain Transactions
	 	 	81	 
	 

	 	 	7.15.	 	 	ERISA Compliance
	 	 	81	 
	 

	 	 	7.16.	 	 	Use of Proceeds
	 	 	82	 
	 

	 	 	 	 	 	7.16.1. General
	 	 	82	 
	 

	 	 	 	 	 	7.16.2. Regulations U and X
	 	 	82	 
	 

	 	 	7.17.	 	 	Environmental Compliance
	 	 	82	 
	 

	 	 	7.18.	 	 	Subsidiaries
	 	 	83	 
	 

	 	 	7.19.	 	 	Disclosure
	 	 	84	 
	 

	 	 	7.20.	 	 	Senior Debt Status
	 	 	84	 
	 

	 	 	7.21.	 	 	Solvency
	 	 	84	 
	 

	 	 	7.22.	 	 	Updates to Schedules
	 	 	84	 
	 

	 	 	7.23.	 	 	Insurance
	 	 	85	 
	 

	 	 	7.24.	 	 	Bank Accounts
	 	 	85	 






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	 	 	 	 	 	 	 	 	Page
	 

	 	 	7.25.	 	 	Perfection of Security Interest
	 	 	85	 
	 

	 	 	7.26.	 	 	[Reserved.]
	 	 	85	 
	 

	 	 	7.27.	 	 	Foreign Assets Control Regulations, Etc
	 	 	85	 
	 

	 	 	7.28.	 	 	Taxpayer Identification Number
	 	 	85	 
	 

	 	 	7.29.	 	 	Excluded Subsidiaries
	 	 	85	 
	 

	 	 	7.30.	 	 	Kobo
	 	 	85	 
	 
	 	 	 	 	 	 	 	 	 	 
	8.	 	AFFIRMATIVE COVENANTS	 	 	85	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	8.1.	 	 	Punctual Payment
	 	 	86	 
	 

	 	 	8.2.	 	 	Maintenance of Office
	 	 	86	 
	 

	 	 	8.3.	 	 	Records and Accounts
	 	 	86	 
	 

	 	 	8.4.	 	 	Financial Statements, Certificates and Information
	 	 	86	 
	 

	 	 	8.5.	 	 	Notices
	 	 	89	 
	 

	 	 	 	 	 	8.5.1.  Defaults
	 	 	89	 
	 

	 	 	 	 	 	8.5.2.  Environmental Events
	 	 	89	 
	 

	 	 	 	 	 	8.5.3.  Notice of Litigation, Judgments and Claims Against Assets
	 	 	89	 
	 

	 	 	 	 	 	8.5.4.  Notice Regarding Certain Events
	 	 	89	 
	 

	 	 	 	 	 	8.5.5.  Notices Concerning Inventory Collateral
	 	 	89	 
	 

	 	 	 	 	 	8.5.6.  [Reserved]
	 	 	90	 
	 

	 	 	 	 	 	8.5.7.  Notice of Default under the Second Lien Loan Documents
	 	 	90	 
	 

	 	 	 	 	 	8.5.8.  [Reserved]
	 	 	90	 
	 

	 	 	 	 	 	8.5.9.  Notices under the Pershing Square Warrant Transaction
	 	 	90	 
	 

	 	 	8.6.	 	 	Legal Existence; Maintenance of Properties
	 	 	90	 
	 

	 	 	8.7.	 	 	Insurance
	 	 	91	 
	 

	 	 	8.8.	 	 	Taxes
	 	 	91	 
	 

	 	 	8.9.	 	 	Inspection of Properties
	 	 	91	 
	 

	 	 	 	 	 	8.9.1.  Generally
	 	 	91	 
	 

	 	 	 	 	 	8.9.2.  Collateral Reports
	 	 	92	 
	 

	 	 	 	 	 	8.9.3.  Appraisals
	 	 	92	 
	 

	 	 	8.10.	 	 	Compliance with Laws, Contracts, Licenses, and Permits
	 	 	93	 
	 

	 	 	8.11.	 	 	Employee Benefit Plans
	 	 	93	 
	 

	 	 	8.12.	 	 	Use of Proceeds
	 	 	93	 
	 

	 	 	8.13.	 	 	Stock Collateral
	 	 	93	 
	 

	 	 	8.14.	 	 	Future Subsidiaries
	 	 	94	 
	 

	 	 	8.15.	 	 	Bank Accounts, Credit Cards and Purchase Cards
	 	 	94	 
	 

	 	 	 	 	 	8.15.1.  General
	 	 	94	 
	 

	 	 	 	 	 	8.15.2.  Acknowledgment of Application
	 	 	96	 
	 

	 	 	 	 	 	8.15.3.  Purchase Cards
	 	 	96	 
	 

	 	 	8.16.	 	 	Landlord and Mortgagee Agreements
	 	 	96	 
	 

	 	 	8.17.	 	 	Further Assurances
	 	 	96	 
	 

	 	 	8.18.	 	 	Permitted Restructuring Transactions
	 	 	96	 
	 

	 	 	8.19.	 	 	Intellectual Property
	 	 	96	 
	 
	 	 	 	 	 	 	 	 	 	 
	9.	 	CERTAIN NEGATIVE COVENANTS	 	 	96	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	9.1.	 	 	Restrictions on Indebtedness
	 	 	96	 
	 

	 	 	9.2.	 	 	Restrictions on Liens
	 	 	98	 






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	 	 	 	 	 	 	 	 	Page
	 

	 	 	9.3.	 	 	Restrictions on Investments
	 	 	100	 
	 

	 	 	9.4.	 	 	Restricted Payments
	 	 	101	 
	 

	 	 	9.5.	 	 	Merger, Consolidation, Disposition of Assets and Sale Leaseback Transactions
	 	 	102	 
	 

	 	 	 	 	 	9.5.1.  Mergers and Consolidations
	 	 	102	 
	 

	 	 	 	 	 	9.5.2.  Disposition of Assets
	 	 	102	 
	 

	 	 	9.6.	 	 	Acquisitions
	 	 	103	 
	 

	 	 	9.7.	 	 	Compliance with Environmental Laws
	 	 	104	 
	 

	 	 	9.8.	 	 	[Reserved.]
	 	 	104	 
	 

	 	 	9.9.	 	 	Employee Benefit Plans
	 	 	104	 
	 

	 	 	9.10.	 	 	Business Activities
	 	 	105	 
	 

	 	 	9.11.	 	 	Fiscal Year
	 	 	105	 
	 

	 	 	9.12.	 	 	Transactions with Affiliates
	 	 	105	 
	 

	 	 	9.13.	 	 	Changes in Governing Documents
	 	 	105	 
	 

	 	 	9.14.	 	 	Inconsistent Agreements
	 	 	105	 
	 

	 	 	9.15.	 	 	Payments of Other Indebtedness
	 	 	105	 
	 

	 	 	9.16.	 	 	Amendments to Second Lien Loan Documents
	 	 	106	 
	 

	 	 	9.17.	 	 	Permitted Restructuring Transactions
	 	 	106	 
	 

	 	 	9.18.	 	 	Certain Terms of the Pershing Square Transactions
	 	 	106	 
	 

	 	 	9.19.	 	 	Inactive Subsidiaries
	 	 	106	 
	 

	 	 	9.20.	 	 	Maximum Cash and Cash Equivalents
	 	 	106	 
	 
	 	 	 	 	 	 	 	 	 	 
	10.	 	FINANCIAL COVENANTS	 	 	107	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	10.1.	 	 	Minimum Excess Availability
	 	 	107	 
	 
	 	 	 	 	 	 	 	 	 	 
	11.	 	CLOSING CONDITIONS	 	 	107	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	11.1.	 	 	Loan Documents
	 	 	107	 
	 

	 	 	11.2.	 	 	Certified Copies of Governing Documents
	 	 	107	 
	 

	 	 	11.3.	 	 	Corporate or Other Action
	 	 	107	 
	 

	 	 	11.4.	 	 	Incumbency Certificate
	 	 	107	 
	 

	 	 	11.5.	 	 	UCC and Intellectual Property Search Results
	 	 	107	 
	 

	 	 	11.6.	 	 	Certificates of Insurance
	 	 	108	 
	 

	 	 	11.7.	 	 	Solvency Certificate
	 	 	108	 
	 

	 	 	11.8.	 	 	Opinion of Counsel
	 	 	108	 
	 

	 	 	11.9.	 	 	Payment of Fees
	 	 	108	 
	 

	 	 	11.10.	 	 	 Additional Indebtedness
	 	 	108	 
	 

	 	 	11.11.	 	 	 Existing Credit Agreement
	 	 	108	 
	 

	 	 	11.12.	 	 	 Disbursement Instructions
	 	 	108	 
	 

	 	 	11.13.	 	 	 Excess Availability
	 	 	108	 
	 

	 	 	11.14.	 	 	 Validity of Liens
	 	 	109	 
	 

	 	 	11.15.	 	 	 Consents and Approvals
	 	 	109	 
	 

	 	 	11.16.	 	 	 Financial Condition, etc
	 	 	109	 
	 

	 	 	11.17.	 	 	 Minimum Commitments Under Extended Tranche
	 	 	109	 
	 

	 	 	11.18.	 	 	 Borrowing Base Report
	 	 	109	 
	 

	 	 	11.19.	 	 	 Inventory Summary
	 	 	109	 
	 

	 	 	11.20.	 	 	 Agency Account Agreements; Accounts
	 	 	109	 
	 

	 	 	11.21.	 	 	 Landlord and Mortgagee Agreements
	 	 	109	 






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	 	 	11.22.	 	 	Credit Card Notifications
	 	 	109	 
	 

	 	 	11.23.	 	 	Payoff of Pershing Square Term Loan Facility
	 	 	110	 
	 

	 	 	11.24.	 	 	Second Lien Loan Documents
	 	 	110	 
	 

	 	 	11.25.	 	 	Financial Statements
	 	 	110	 
	 
	 	 	 	 	 	 	 	 	 	 
	12.	 	CONDITIONS TO ALL BORROWINGS	 	 	110	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	12.1.	 	 	Representations True; No Event of Default
	 	 	110	 
	 

	 	 	12.2.	 	 	No Legal Impediment
	 	 	110	 
	 

	 	 	12.3.	 	 	Proceedings and Documents
	 	 	111	 
	 

	 	 	12.4.	 	 	Governmental Regulation
	 	 	111	 
	 

	 	 	12.5.	 	 	Revolving Credit Facility Borrowings
	 	 	111	 
	 

	 	 	12.6.	 	 	Excess Availability
	 	 	111	 
	 

	 	 	12.7.	 	 	Seasonal Availability Requirement
	 	 	111	 
	 
	 	 	 	 	 	 	 	 	 	 
	13.	 	EVENTS OF DEFAULT; ACCELERATION; ETC	 	 	111	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	13.1.	 	 	Events of Default and Acceleration
	 	 	111	 
	 

	 	 	13.2.	 	 	Termination of Commitments
	 	 	114	 
	 

	 	 	13.3.	 	 	Remedies
	 	 	114	 
	 

	 	 	13.4.	 	 	Judgment Currency
	 	 	115	 
	 

	 	 	13.5.	 	 	Distribution of Proceeds
	 	 	115	 
	 

	 	 	13.6.	 	 	Cash Management Services and Hedge Agreements Subordinate
	 	 	116	 
	 
	 	 	 	 	 	 	 	 	 	 
	14.	 	THE AGENTS	 	 	117	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	14.1.	 	 	Appointment and Authority
	 	 	117	 
	 

	 	 	14.2.	 	 	Rights as a Lender
	 	 	118	 
	 

	 	 	14.3.	 	 	Exculpatory Provisions
	 	 	118	 
	 

	 	 	14.4.	 	 	Reliance by Administrative Agent and the Co-Collateral Agents
	 	 	119	 
	 

	 	 	14.5.	 	 	Delegation of Duties
	 	 	119	 
	 

	 	 	14.6.	 	 	Resignation of Administrative Agent, Co-Collateral Agent
	 	 	119	 
	 

	 	 	14.7.	 	 	Non-Reliance on Administrative Agent, Co-Collateral Agents and Other Lenders
	 	 	120	 
	 

	 	 	14.8.	 	 	No Other Duties, Etc
	 	 	121	 
	 

	 	 	14.9.	 	 	Administrative Agent May File Proofs of Claim
	 	 	121	 
	 

	 	 	14.10.	 	 	Duties in the Case of Enforcement
	 	 	122	 
	 

	 	 	14.11.	 	 	Release of Collateral and Guarantors
	 	 	122	 
	 

	 	 	14.12.	 	 	Intercreditor Agreement
	 	 	123	 
	 

	 	 	14.13.	 	 	Indemnity
	 	 	123	 
	 
	 	 	 	 	 	 	 	 	 	 
	15.	 	SUCCESSORS AND ASSIGNS	 	 	123	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	15.1.	 	 	General Conditions
	 	 	123	 
	 

	 	 	15.2.	 	 	Assignments
	 	 	124	 
	 

	 	 	15.3.	 	 	Register
	 	 	126	 
	 

	 	 	15.4.	 	 	Participations
	 	 	126	 
	 

	 	 	15.5.	 	 	Payments to Participants
	 	 	126	 
	 

	 	 	15.6.	 	 	Miscellaneous Assignment Provisions
	 	 	127	 






vi









 






TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 

	 	 	15.7.	 	 	[Reserved.]
	 	 	127	 
	 

	 	 	15.8.	 	 	New Notes
	 	 	127	 
	 

	 	 	15.9.	 	 	Assignment to Special Purpose Funding Vehicle
	 	 	127	 
	 

	 	 	15.10.	 	 	Resignation as Issuing Bank or Swingline Lender
	 	 	128	 
	 
	 	 	 	 	 	 	 	 	 	 
	16.	 	PROVISIONS OF GENERAL APPLICATION	 	 	128	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	16.1.	 	 	Setoff
	 	 	128	 
	 

	 	 	16.2.	 	 	Costs and Expenses
	 	 	130	 
	 

	 	 	16.3.	 	 	Indemnification; Damage Waiver
	 	 	131	 
	 

	 	 	16.3A.	 	 	Payments Set Aside
	 	 	132	 
	 

	 	 	16.4.	 	 	Treatment of Certain Confidential Information
	 	 	133	 
	 

	 	 	 	 	 	16.4.1.  Confidentiality
	 	 	133	 
	 

	 	 	 	 	 	16.4.2.  Prior Notification
	 	 	133	 
	 

	 	 	 	 	 	16.4.3.  Other
	 	 	134	 
	 

	 	 	16.5.	 	 	Survival of Covenants, Etc
	 	 	134	 
	 

	 	 	16.6.	 	 	Notices
	 	 	134	 
	 

	 	 	16.7.	 	 	Governing Law
	 	 	135	 
	 

	 	 	16.8.	 	 	Headings
	 	 	135	 
	 

	 	 	16.9.	 	 	Counterparts
	 	 	135	 
	 

	 	 	16.10.	 	 	Entire Agreement, Etc
	 	 	136	 
	 

	 	 	16.11.	 	 	Waiver of Jury Trial
	 	 	136	 
	 

	 	 	16.12.	 	 	Consents, Amendments, Waivers, Etc
	 	 	136	 
	 

	 	 	16.13.	 	 	Severability
	 	 	138	 
	 
	 	 	 	 	 	 	 	 	 	 
	17.	 	USA PATRIOT ACT NOTICE	 	 	138	 
	 
	 	 	 	 	 	 	 	 	 	 
	18.	 	TRANSITIONAL ARRANGEMENTS	 	 	138	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	18.1.	 	 	Prior Credit Agreement Superseded
	 	 	138	 
	 

	 	 	18.2.	 	 	Interest and Fees under Superseded Agreement
	 	 	138	 
	 
	 	 	 	 	 	 	 	 	 	 
	19.	 	INTERCREDITOR AGREEMENT	 	 	138	 






vii









 






Exhibits




	 	 	 
	Exhibit A-1

	 	Form of Revolving Note
	Exhibit A-2

	 	Form of Swingline Note
	Exhibit B

	 	Form of Revolving Loan Request
	Exhibit C

	 	Form of Swingline Loan Request
	Exhibit D

	 	Form of Compliance Certificate
	Exhibit E

	 	Assignment and Acceptance
	Exhibit F

	 	Form of Joinder Agreement (Borrower/Guarantor)
	Exhibit G

	 	Form of Borrowing Base Report
	Exhibit H

	 	Co-Collateral Agent Rights Agreement






Schedules




	 	 	 
	Schedule 1

	 	Lenders and Commitments
	Schedule 1.01A

	 	Permitted Restructuring Transactions
	Schedule 4.7

	 	Transitional Letters of Credit
	Schedule 7.3

	 	Title to Properties; Leases
	Schedule 7.5

	 	Restricted Payments
	Schedule 7.7

	 	Litigation
	Schedule 7.10

	 	Taxes
	Schedule 7.14

	 	Transactions with Affiliates
	Schedule 7.15(d)

	 	Pension Plans
	Schedule 7.17

	 	Environmental Compliance
	Schedule 7.18

	 	Subsidiaries, Etc.
	Schedule 7.23

	 	Insurance
	Schedule 7.24

	 	Bank Accounts
	Schedule 7.28

	 	Tax Identification Number
	Schedule 9.1

	 	Existing Indebtedness
	Schedule 9.2

	 	Existing Liens
	Schedule 9.3

	 	Existing Investments
	Schedule 9.14

	 	Inconsistent Agreements
	Schedule 11.21

	 	Distribution Centers







-i-











 





THIRD AMENDED AND RESTATED REVOLVING

CREDIT AGREEMENT




     This THIRD AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of March 31, 2010, by
and among (a) BORDERS GROUP, INC. (“BGI”), a Michigan corporation, and BORDERS, INC., a
Colorado corporation (“Borders”), (b) any other Subsidiary of BGI which becomes a Borrower
hereunder pursuant to §5.16 (together with BGI and Borders, the “Borrowers”), (c) the
Guarantors from time to time party hereto (the “Guarantors”), (d) the financial
institutions from time to time party hereto (the “Lenders”), (e) BANK OF AMERICA, N.A., as
administrative agent for itself and the Lenders (in such capacity, the “Administrative
Agent”), (f) BANK OF AMERICA, N.A. and GENERAL ELECTRIC CAPITAL CORPORATION, each as a
collateral agent for itself and the Lenders (collectively, the “Co-Collateral Agents”), (g)
WELLS FARGO RETAIL FINANCE, LLC and GENERAL ELECTRIC CAPITAL CORPORATION, each as a syndication
agent for itself and the Lenders (collectively, the “Co-Syndication Agents”), (h) JPMORGAN
CHASE BANK, N.A., as a documentation agent for itself and the Lenders (the “Documentation
Agent”), and (i) BANK OF AMERICA, N.A., as an Issuing Bank hereunder.



     WHEREAS, BGI, Borders and BGP (UK) Limited, as borrowers (the “Existing Borrowers”),
the lenders party thereto (the “Existing Lenders”), Bank of America in its capacity as
administrative agent for such lenders from time to time parties thereto, JPMorgan Chase Bank, N.A.
and Wells Fargo Retail Finance, LLC in their respective capacity as co-syndication agents
thereunder, and LaSalle Retail Finance, a division of LaSalle Business Credit, LLC and General
Electric Capital Corporation, in their respective capacity as co-documentation agents thereunder
are parties to that certain Second Amended and Restated Multicurrency Revolving Credit Agreement
dated as of July 31, 2006 (as amended prior to the date hereof, the “Existing Credit
Agreement”), pursuant to which the Existing Lenders have made loans and other extensions of
credit to the Existing Borrowers;



     WHEREAS, the Lenders are willing to amend and restate the Existing Credit Agreement, and the
Lenders are willing to make loans and other extensions of credit to the Borrowers, and the
Borrowers are willing to continue, and grant, liens on the Collateral (as hereinafter defined) in
favor of the Administrative Agent (as hereinafter defined), all on the terms and conditions set
forth herein;



     WHEREAS, pursuant to such amendment and restatement of the Existing Credit Agreement, among
other things, (a) each Existing Lender has been invited to extend the tenor of its Commitment (as
defined in the Existing Credit Agreement) to lend Revolving Credit Loans through the fourth
anniversary of the Effective Date (as defined below) in exchange for an increase in pricing and,
unless otherwise agreed by such Existing Lender, a reduction in the principal amount of its
Commitment to extend Revolving Credit Loans; (b) each Existing Lender shall either terminate its
Last Out Revolving Commitment (as defined in the Existing Credit Agreement) or incorporate such
commitments into its Commitment under the Extended Tranche (as defined below); (c) each Existing
Lender which has declined to extend the tenor of its Commitment (as defined in the Existing Credit
Agreement) to lend Revolving Credit Loans shall retain such Commitment at its existing principal
amount, tenor and pricing and such loans will be included in the Existing Tranche (as defined
below); and (d) the Borrowers will be the initial borrowers under the amended and restated credit
agreement and there shall be no foreign borrowers as of the Effective Date and the Loans (as
defined below) under this Credit Agreement (as defined below) shall be denominated in Dollars;



     NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged (these recitals being an
integral part of this Credit Agreement), the Borrowers, the Administrative Agent, the Co-Collateral



 









 




Agents, and the Lenders hereby agree that, as of the Effective Date (as defined below), the
Existing Credit Agreement shall be amended and restated in its entirety and shall remain in full
force and effect as set forth herein:




1. DEFINITIONS, RULES OF INTERPRETATION, ETC.




     1.1. Definitions. The following terms shall have the meanings set forth in this §1 or
elsewhere in the provisions of this Credit Agreement referred to below:



     ABL Priority Collateral. Has the meaning given to such term in the Intercreditor
Agreement.



     Accounts Receivable. All rights of BGI or any of its Subsidiaries to payment for
goods sold, leased or otherwise marketed in the ordinary course of business and all rights of BGI
or any of its Subsidiaries to payment for services rendered in the ordinary course of business and
all sums of money or other proceeds due thereon pursuant to transactions with account debtors,
except for that portion of the sum of money or other proceeds due thereon that relate to sales, use
or property taxes in conjunction with such transactions, recorded on books of account in accordance
with GAAP.



     Acquisition. Any transaction, or any series of related transactions, consummated on
or after the Closing Date, by which BGI or any of its Subsidiaries (a) acquires any ongoing
business or all or substantially all of the assets of any Person or division thereof, whether
through a purchase of assets, merger or otherwise, or (b) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions) a majority of the
securities of a corporation, which securities have ordinary voting power for the election of
directors (other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage and voting power) of the outstanding partnership
interests of a partnership or membership interests of a limited liability company.



     Adjusted Excess Availability. At any time of determination, the then Excess
Availability, minus, if applicable, the Incremental Seasonal Amount if the Seasonal
Availability Period is in effect at such time; provided, however, that Adjusted
Excess Availability shall not apply at any time after the payment in full of the Indebtedness under
the Second Lien Loan Facility.



     Adjustment Date. The first Business Day of the month immediately following the end of
each Fiscal Quarter; provided that, with respect to the Existing Tranche, no Adjustment
Date shall occur on the Effective Date and the first Adjustment Date following the Effective Date
shall mean the first Business Day of May, 2010.



     Administrative Agent. Bank of America, acting as administrative agent for the
Lenders, and each other Person appointed as the successor Administrative Agent in accordance with
§14.6.



     Administrative Agent’s Office. The Administrative Agent’s office located at 100
Federal Street, Boston, Massachusetts 02110 or at such other location as the Administrative Agent
may designate from time to time.



     Administrative Agent’s Special Counsel. Bingham McCutchen LLP or such other counsel
as may be approved by the Administrative Agent.



     Administrative Questionnaire. An Administrative Questionnaire in a form supplied by
the Administrative Agent.



- 2 -









 





     Affiliate. Any Person which, directly or indirectly, controls, is controlled by or is
under common control with any Person. “Control” of a Person means the power, directly or
indirectly, (a) to vote five percent (5%) or more of the Capital Stock (on a fully diluted basis)
of such Person having ordinary voting power for the election of directors, managing members or
general partners (as applicable); or (b) to direct or cause the direction of the management and
policies of such Person (whether by contract or otherwise).



     Agency Account Agreements. See §8.15.1.



     Agents. Collectively, the Administrative Agent, the Co-Collateral Agents, the
Co-Syndication Agents and the Documentation Agent.



     Aggregate Borrowing Base. At the relevant time of reference thereto, an amount
determined by the Administrative Agent by reference to the most recent Borrowing Base Report, as
adjusted pursuant to the provisions below, which is equal to the sum of:




     (a) 90% of Eligible Credit Card Receivables of the Borrowers and the
Guarantors; plus




     (b) 90% of the most recently appraised net orderly liquidation value (stated as
a percentage of cost and as performed by an appraiser, and in a manner, acceptable
to the Administrative Agent) of the Eligible Inventory owned by the Borrowers and
the Guarantors net of Inventory Reserves and the Shrink Reserve; provided,
however, that if the Increased Advance Rate Conditions have not occurred on
or prior to December 31, 2010, such percentage shall be reduced to 87.5% effective
as of such date; provided, further, however, that, if the
Increased Advance Rate Conditions have occurred and been satisfied on or prior to
June 30, 2011, such percentage shall be increased to 90% commencing on the date on
which such conditions have been satisfied (but in no event shall such increase occur
after June 30, 2011 if the Increased Advance Rate Conditions have not been satisfied
by that date); plus




     (c) at the request of the Borrowers and in the sole discretion of the
Administrative Agent and the Second Lien Agent after the completion of due diligence
with respect to Eligible Corporate Sales Receivables, an advance rate agreed to by
the Administrative Agent and the Second Lien Agent, but not exceeding 85% of
Eligible Corporate Sales Receivables; minus




     (d) Landlord Lien Reserve; minus




     (e) Hedge Reserve; provided, however, that such reserve shall
not apply at any time after the payment in full of the Indebtedness under the Second
Lien Loan Facility; minus




     (f) Net Debt Reserve; provided, however, that such reserve
shall not apply at any time after the payment in full of the Indebtedness under the
Second Lien Loan Facility; minus




     (g) Purchase Card Reserve; provided, however, that such reserve
shall not apply at any time after the payment in full of the Indebtedness under the
Second Lien Loan Facility; minus



- 3 -









 






     (h) Term Borrowing Base Reserve; provided, however, that such
reserve shall not apply at any time after the payment in full of the Indebtedness
under the Second Lien Loan Facility; minus




     (i) Equity Reserve (if then applicable); provided, however,
that such reserve shall not apply at any time after the payment in full of the
Indebtedness under the Second Lien Loan Facility; minus




     (j) Other Reserves including, without limitation, a Customer Deposit Reserve, a
Customer Credit Liability Reserve and a reserve for ad valorem and other taxes which
may have priority over the security interest of the Administrative Agent or the
Second Lien Agent.



     Anything to the contrary in this Credit Agreement notwithstanding but subject to the
Intercreditor Agreement, the Administrative Agent reserves the right, in consultation with the
Borrowers (but without their consent) and immediately upon notice (which shall contain a brief
explanation for such changes) to the Borrowers, without declaring an Event of Default, to change
eligibility criteria contained in the definitions of Eligible Credit Card Receivables, Eligible
Corporate Sales Receivables and Eligible Inventory, to change and/or establish reserves taken in
respect of Eligible Inventory, Eligible Credit Card Receivables and Eligible Corporate Sales
Receivables from time to time and/or to reduce the advance rates against the Aggregate Borrowing
Base or any components thereof in such amounts, and with respect to such matters, as the
Administrative Agent in its reasonable discretion shall deem necessary or appropriate, from time to
time; provided that any such change in eligibility criteria, or any such change and/or
establishment of reserves taken in respect of Eligible Inventory, Eligible Credit Card Receivables
and Eligible Corporate Sales Receivables and/or any such reduction in the advance rates made
pursuant to this paragraph shall not result in more credit being available, and shall not be more
favorable to the Borrowers than as set forth in this Credit Agreement on the Effective Date without
the written consent of the Required Lenders and in accordance with the Intercreditor Agreement.



     Annual Net Debt Amount. The greatest amount of Net Debt of Paperchase on any Business
Day during the first five Business Days of each calendar year. Once determined, the Annual Net Debt
Amount shall remain unchanged until the calculation thereof in the subsequent calendar year.



     Applicable Margin. For each period commencing on an Adjustment Date through the date
immediately preceding the next Adjustment Date (each a “Rate Adjustment Period”), the
Applicable Margin with regard to each of the Existing Tranche and the Extended Tranche shall be the
applicable margin set forth below with respect to the arithmetic mean of the daily Excess
Availability as determined for the Fiscal Quarter of BGI and its Subsidiaries ended immediately
prior to the applicable Rate Adjustment Period.



Applicable Margin — Existing Tranche




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Standby	 	Documentary
	 	 	 	 	 	 	 	 	Eurocurrency	 	Letter of	 	Letter of
	 	 	 	 	 	 	 	 	Rate	 	Credit	 	Credit
	Level	 	Excess Availability	 	Base Rate Loans	 	Loans	 	Fees	 	Fees
	I
	 	Greater than or
equal to
$350,000,000

	 	 	0.25	%	 	 	2.00	%	 	 	2.00	%	 	 	1.00	%






- 4 -









 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Standby	 	Documentary
	 	 	 	 	 	 	 	 	Eurocurrency	 	Letter of	 	Letter of
	 	 	 	 	 	 	 	 	Rate	 	Credit	 	Credit
	Level	 	Excess Availability	 	Base Rate Loans	 	Loans	 	Fees	 	Fees
	II
	 	Greater than or
equal to
$150,000,000 but
less than
$350,000,000

	 	 	0.50	%	 	 	2.25	%	 	 	2.25	%	 	 	1.125	%
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	III
	 	Less than
$150,000,000

	 	 	0.75	%	 	 	2.50	%	 	 	2.50	%	 	 	1.25	%





Applicable Margin — Extended Tranche




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Standby	 	Documentary
	 	 	 	 	 	 	 	 	Eurocurrency	 	Letter of	 	Letter of
	 	 	 	 	 	 	 	 	Rate	 	Credit	 	Credit
	Level	 	Excess Availability	 	Base Rate Loans	 	Loans	 	Fees	 	Fees
	I
	 	Greater than or
equal to
$250,000,000

	 	 	2.75	%	 	 	3.75	%	 	 	3.75	%	 	 	1.875	%
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	II
	 	Greater than or
equal to
$100,000,000 but
less than
$250,000,000

	 	 	3.00	%	 	 	4.00	%	 	 	4.00	%	 	 	2.00	%
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	III
	 	Less than
$100,000,000

	 	 	3.25	%	 	 	4.25	%	 	 	4.25	%	 	 	2.125	%






     Notwithstanding the foregoing, if the Borrowers fail to deliver any Compliance Certificate
pursuant to §8.4(c) hereof then, for the period commencing on the next Adjustment Date to occur
subsequent to such failure through the date immediately following the date on which such Compliance
Certificate is delivered, the Applicable Margin shall be the Applicable Margin set forth in Level
III above for the Existing Tranche or the Extended Tranche, as applicable. For the avoidance of
doubt, for the period from the Effective Date to the date immediately preceding the next Adjustment
Date that occurs at least three months after the Effective Date, the Applicable Margin shall be set
at no less than Level II above.



     Notwithstanding anything to the contrary in the foregoing, in the event either the Borrowers
or the Administrative Agent determines, in good faith, that the calculation of Excess Availability
on which the Applicable Margin for any particular period was determined is inaccurate and, as a
consequence thereof, the Applicable Margin with respect to any Tranche was lower or higher than it
would have been, (i) the Borrowers shall promptly (but in any event within ten (10) Business Days)
deliver (after the Borrowers discover such inaccuracy or the Borrowers are notified by the
Administrative Agent of such inaccuracy, as the case may be) to the Administrative Agent correct
financial and borrowing base information for such period, (ii) the Administrative Agent shall
determine and notify the Borrowers of the amount of interest that would have been due in respect of
any of the outstanding Obligations, if any, during such period had the Applicable Margin been
calculated based on the correct Excess Availability and (iii) if the Applicable Margin was lower
than it would have been, the Borrowers shall promptly pay to the Administrative Agent the
difference, between that amount and the amount actually paid in respect of such period. The
foregoing shall in no way limit the rights of the Administrative Agent or the Lenders to exercise
their rights to impose the rate of interest applicable during an Event of Default as provided
herein.



- 5 -









 





     Applicable Pension Legislation. At any time, any pension or retirement benefits
legislation (be it national, federal, provincial, territorial or otherwise) then applicable to any
Borrower or any of its Subsidiaries.



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



     Assignment and Acceptance. An assignment and acceptance entered into by a Lender and
an Eligible Assignee (with the consent of any party whose consent is required by §15.2), and
accepted by the Administrative Agent, in substantially the form of Exhibit E or any other form
approved by the Administrative Agent.



     Authorized Officers. The President, Vice President and Chief Financial Officer, Vice
President and Controller, Associate Director, Treasury or Treasurer of any Borrower and with
respect to any Foreign Subsidiary, a director of such Foreign Subsidiary or, in any case, any
Person designated in writing to the Administrative Agent by any of the foregoing.



     Auto-Extension Letter of Credit. See §4.1.6.



     Balance Sheet Date. January 31, 2009.



     Bank of America. Bank of America, N.A., a national banking association, in its
individual capacity.



     Base Rate. The highest of (a) the variable annual rate of interest so designated from
time to time by Bank of America as its “prime rate”, such rate being a reference rate and not
necessarily representing the lowest or best rate being charged to any customer, (b) one-half of one
percent (0.50%) above the Federal Funds Effective Rate and (c) the Eurocurrency Rate for a
one-month Interest Period in effect for such day plus one percent (1.0%). “Federal
Funds Effective Rate” shall mean for any day, the rate per annum equal to the weighted average
of the rates on overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers on such day, as published for the Business Day next succeeding
such day (or, if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any next succeeding
Business Day, Federal Funds Effective Rate for any such day shall be the average rate per annum
(rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on
such day on such transactions as reasonably determined by the Administrative Agent. Changes in the
Base Rate resulting from any changes in Bank of America’s “prime rate” shall take place
immediately without notice or demand of any kind.



     Base Rate Loans. Revolving Credit Loans bearing interest calculated by reference to
the Base Rate.



     BGI. As defined in the preamble hereto.



     BGP (UK). BGP (UK) Limited, a company with limited liability incorporated under the
laws of England and Wales.



     Borders. As defined in the preamble hereto.



     Borders Direct. Borders Direct, LLC, a Virginia limited liability company.



- 6 -









 





     Borders Superstores. Borders Superstores (UK) Limited, a company with limited
liability incorporated under the laws of England and Wales.



     Borrower(s). As defined in the preamble hereto and such term shall include any new
Borrower that becomes party hereto by executing a Joinder Agreement and satisfying the requirements
of §5.16.



     Borrower Note Record. A Record with respect to a Revolving Note.



     Borrower Obligations. All indebtedness, obligations and liabilities of the Borrowers
and their Subsidiaries to any of the Lenders, any Affiliate of any Lender, any of the Agents, any
Issuing Bank and the Swingline Lender individually or collectively, existing on the Effective Date
or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law
or otherwise, arising or incurred under this Credit Agreement, any of the Notes, or any of the
other Loan Documents or any Hedging Agreement or any Cash Management Services or in respect of any
of the Revolving Credit Loans made or Reimbursement Obligations incurred in respect of Letters of
Credit issued for the account of any of the Borrowers or any of the Revolving Notes, Letter of
Credit Applications, Letters of Credit or other instruments at any time evidencing any thereof and
including interest, fees, costs, expenses and indemnities that accrue after the commencement by or
against any Borrower or any of its Subsidiaries of any Insolvency Proceeding, regardless of whether
such interest, fees costs, expenses and indemnities are allowed claims in such Insolvency
Proceeding.



     Borrowing Base Report. A Borrowing Base Report signed by an Authorized Officer of the
Borrowers and in substantially the form of Exhibit G hereto and in such detail as shall be
reasonably satisfactory to the Administrative Agent. All calculations of the Aggregate Borrowing
Base in connection with the preparation of any Borrowing Base Report shall originally be made by
the Borrowers and certified to the Administrative Agent; provided that the Administrative
Agent shall have the right to review and adjust, in the exercise of its reasonable credit judgment,
any such calculation to the extent that such calculation is not in accordance with this Credit
Agreement.



     Business Day. Any day on which banking institutions in Boston, Massachusetts and New
York, New York are open for the transaction of banking business and, in addition, with respect to
any Eurocurrency Rate Loan, (a) a London Banking Day and (b) a day on which Dollar settlements of
such dealings may be effected in New York, New York and London, England.



     Capital Assets. Fixed assets, both tangible (such as land, buildings, fixtures,
machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and
good will); provided that Capital Assets shall not include any item customarily charged
directly to expense or depreciated over a useful life of twelve (12) months or less in accordance
with GAAP.



     Capital Expenditures. Amounts paid or Indebtedness incurred by BGI or any of its
Subsidiaries in connection with the purchase or lease by BGI or any of its Subsidiaries of Capital
Assets that would be required to be capitalized and shown on the balance sheet of such Person in
accordance with GAAP, provided that Capital Expenditures shall not include any expenditures
made to effect any Acquisition.



     Capital Stock. Any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and all equivalent ownership interests
in a Person (other than a corporation) and any and all warrants, rights or options to purchase any
of the foregoing.



- 7 -









 





     Capitalized Leases. Leases under which BGI or any of its Subsidiaries is the lessee
or obligor, the discounted future rental payment obligations under which are required to be
capitalized on the balance sheet of the lessee or obligor in accordance with GAAP.



     Cash Collateralize. To pledge and deposit with or deliver to the Administrative
Agent, for the benefit of the Administrative Agent, the Issuing Bank or Swingline Lender (as
applicable) and the Lenders, as collateral for the LC Exposure, Obligations in respect of Swingline
Loans, or obligations of Lenders to fund participations in respect of either thereof (as the
context my require), cash or deposit account balances or, if the Issuing Bank or Swingline Lender
benefitting from such collateral shall agree in its sole discretion, other credit support, in each
case pursuant to documentation in form and substance satisfactory to (a) the Administrative Agent
and (b) the Issuing Bank or the Swingline Lender (as applicable). “Cash Collateral” shall have a
meaning correlative to the foregoing and shall include the proceeds of such cash collateral and
other credit support.



     Cash Dominion Cure Event. With respect to any Cash Dominion Event arising from an
Event of Default, (a) such Event of Default is waived by the Lenders or otherwise remedied by the
Borrowers in accordance with this Credit Agreement and (b) no Event of Default occurs at any time
during a period of sixty (60) consecutive days following the date on which such Event of Default is
so waived or otherwise remedied. With respect to any other Cash Dominion Event, the Excess
Availability (or, if in effect, Adjusted Excess Availability) is greater than the greater of (i)
fifteen percent (15%) of the lesser of (A) the Aggregate Borrowing Base and (B) the Total
Commitment and (ii) $65,000,000 for a period of sixty (60) consecutive days. Notwithstanding the
foregoing, if a Cash Dominion Event occurs more than two times during any twelve (12) month period,
no Cash Dominion Cure Event shall occur until twelve (12) months have elapsed from the date the
first such Cash Dominion Event commenced.



     Cash Dominion Event. Any time either (a) an Event of Default shall have occurred or
(b) the Excess Availability (or, if in effect, Adjusted Excess Availability) is less than the
greater of (i) fifteen percent (15%) of the lesser of (A) the Aggregate Borrowing Base and (B) the
Total Commitment and (ii) $65,000,000.



     Cash Management Services. Any cash management services (including, without
limitation, ACH and similar transactions, credit card processing services, the maintenance of
operating or deposit accounts and the provision of checking or overdraft facilities or purchase
card products) from time to time made available to the Borrowers or any of their Subsidiaries by
any of the Lenders, the Administrative Agent, or any Issuing Bank, individually or collectively, or
any of their Affiliates.



     CERCLA. See §7.17(a).



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



     Change of Control. (a) An event or series of events by which any “person” or “group”
of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934) (other
than (i) Pershing Square and (ii) and any other “person” or “group” that the Administrative Agent
and the Co-Syndication Agents shall have approved in writing in their sole discretion) shall have
acquired “beneficial ownership” (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act, except that a person or group shall be deemed to have
“beneficial ownership” of all securities that such person or group has the right to acquire,
whether such right is exercisable immediately or only after



- 8 -









 




the passage of time or the satisfaction of other conditions and irrespective of the financial
and other terms upon which such right may be exercised (such right, an “option right”)), directly
or indirectly, of thirty-seven and a half percent (37.5%) or more of the Capital Stock of BGI that
is entitled (or would be entitled upon exercise) to vote for members of the board of directors or
equivalent governing body of BGI (and taking into account all such securities that such “person” or
“group” and all other “persons” or “groups” have the right to acquire pursuant to any option
right); or (b) during any period of twelve consecutive calendar months, individuals who were
directors of BGI on the first day of such period (together with any new directors whose election by
the Board of Directors of BGI was approved by a vote of sixty-six and two-thirds percent (66 2/3%)
of the directors then still in office who were either directors at the beginning of such period or
whose election was previously so approved) shall cease to constitute a majority of the board of
directors of BGI; (c) BGI fails to own 100% of the Capital Stock of all other Borrowers and all
Guarantors, except as a result of a transaction permitted hereunder; or (d) any “change of control”
or similar event as defined in any Second Lien Loan Document.




     Closing Date. July 31, 2006.



     Closing Fee. See §5.1.



     Co-Collateral Agents. As defined in the preamble hereto.



     Co-Collateral Agent Rights Agreement. That certain letter agreement dated as of the
date hereof by and among the Administrative Agent, the Co-Collateral Agents, the Borrowers and the
Guarantors, a copy of which is attached hereto as Exhibit H.



     Code. The Internal Revenue Code of 1986, as amended.



     Collateral. All of the property, rights and interests of the Borrowers and the
Guarantors that are or are intended to be subject to the Liens created by the Security Documents.
Collateral shall include the Intellectual Property of the Borrowers and Guarantors; it being
understood that, subject to §8.19, the Second Lien Agent, for the benefit of itself and the Second
Lien Secured Parties, shall have a first priority security interest in the Intellectual Property,
certain of the Capital Stock of Paperchase and Borders Superstores, the Capital Stock of Borders
Direct and the Capital Stock of Kobo owned by any Borrower or any Guarantor, and all furniture,
fixtures and equipment and the Administrative Agent, for the benefit of the Secured Parties, shall
have a second priority security interest in the Intellectual Property, certain of the Capital Stock
of Paperchase and Borders Superstores, the Capital Stock of Borders Direct and the Capital Stock of
Kobo owned by any Borrower or any Guarantor, and all furniture, fixtures and equipment. For the
avoidance of doubt, the term “Collateral” includes both the ABL Priority Collateral and the Second
Lien Priority Collateral.



     Commitment. With respect to each Lender, the amount set forth on Schedule 1
hereto as the amount of such Lender’s commitment to make Revolving Credit Loans under the Extended
Tranche or the Existing Tranche, as the case may be, to, and to participate in Swingline Loans and
the issuance, extension and renewal of Letters of Credit for the account of, the Borrowers, as the
same may be reduced from time to time in accordance with this Credit Agreement; or if such
commitment is terminated pursuant to this Credit Agreement, zero.



     Commitment Fee. The Existing Commitment Fee and/or the Extended Commitment Fee, as
the context requires.



     Commitment Percentage. Subject to adjustment as provided in §2.15, the percentage set
forth on Schedule 1 hereto as such Lender’s percentage of the Total Commitment, as in
effect from time to time.



- 9 -









 





     Commitment Termination Date. The Existing Tranche Termination Date or the Extended
Tranche Termination Date, as the context requires.



     Compliance Certificate. See §8.4(c).



     Concentration Account. See §8.15.1.



     Consolidated or consolidated. With reference to any term defined herein, shall mean
that term as applied to the accounts of BGI and its Subsidiaries, consolidated in accordance with
GAAP.



     Consolidated EBITDA. With respect to any period, an amount equal to the sum of (a)
Consolidated Net Income of BGI and its Subsidiaries for such period (excluding (i) all
extraordinary nonrecurring items of income, but not losses (except to the extent (x) such
extraordinary cash losses are offset by extraordinary cash income or (y) such extraordinary
non-cash losses are offset by extraordinary non-cash income) and (ii) income or loss of any Joint
Venture to which BGI or any of its Subsidiaries is a party to the extent such income or loss would
otherwise have been included in Consolidated Net Income), plus (b) in each case to the
extent deducted in the calculation of such Person’s Consolidated Net Income and without
duplication, (i) depreciation and amortization for such period, plus (ii) income tax
expense for such period, plus (iii) Consolidated Total Interest Expense paid or accrued
during such period, all as determined in accordance with GAAP, provided, however,
that there shall be excluded in calculating Consolidated Net Income for purposes of this definition
any losses attributable to the use of a fair value methodology for recognition and measurement of
impairment of goodwill not identified with impaired assets in accordance with Accounting Principles
Board Opinion No. 142.



     Consolidated Fixed Charges. With respect to BGI and its Subsidiaries and for any
period, the sum, without duplication, of (a) Consolidated Total Interest Expense for such period,
plus (b) any and all scheduled repayments of principal during such period in respect of
Indebtedness that becomes due and payable or that are to become due and payable during such period
pursuant to any agreement or instrument to which any Borrower or any of its Subsidiaries is a party
relating to (i) the borrowing of money or the obtaining of credit, including the issuance of notes
or bonds, (ii) the deferred purchase price of assets (other than trade payables incurred in the
ordinary course of business), (iii) in respect of any Capitalized Leases, and (iv) Indebtedness of
the type referred to above of another Person guaranteed by BGI or any of its Subsidiaries,
plus (c) dividends paid by BGI on or in respect of any shares of any class of Capital Stock
of BGI during such period, plus (d) the purchase, redemption, defeasance, retirement or
other acquisition of any shares of any class of Capital Stock of BGI or any of its Subsidiaries,
directly or indirectly through a Subsidiary or otherwise (including the setting apart of assets for
a sinking or other analogous fund to be used for such purpose), plus (e) payment in cash or
other property (other than common shares or additional warrants or rights to acquire common shares
or other equity securities or stock appreciation rights of BGI) arising or resulting from the
settlement, exercise, purchase, redemption, defeasance, retirement, payment, acquisition or
otherwise of the Pershing Square Warrants or any debt or equity instruments (including interest and
fees thereon) issued as a result of or in connection with the deferral of any payment in respect of
the Pershing Square Warrants or any settlement, exercise, purchase, redemption, defeasance,
retirement, payment, acquisition or otherwise thereof; provided, however, that
payments made to Pershing Square pursuant to the Pershing Square Term Loan Documents and payments
made with respect to the FIFO Loans in accordance with Section 3.2(d) of the Second Lien Loan
Agreement shall not be taken into account in making the foregoing calculation. Demand obligations
shall be deemed to be due and payable during any fiscal period during which such obligations are
outstanding.



     Consolidated Net Income (or Deficit). The consolidated net income (or deficit) of BGI
and its Subsidiaries, after deduction of all expenses, taxes, and other proper charges, determined
in accordance with GAAP.



- 10 -









 





     Consolidated Operating Cash Flow. For any period, an amount equal to the sum of (a)
Consolidated EBITDA minus (b) Capital Expenditures minus (c) cash taxes paid, in
each case of BGI and its Subsidiaries for such period determined in accordance with GAAP.



     Consolidated Total Interest Expense. For any period, the aggregate amount of interest
required to be paid or accrued by BGI and its Subsidiaries during such period on all Indebtedness
of BGI and its Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or capitalized (including,
without limitation, paid-in-kind interest), including payments consisting of interest in respect of
any Capitalized Lease or any Synthetic Lease, and including commitment fees, agency fees, facility
fees, balance deficiency fees and similar fees or expenses in connection with the borrowing of
money.



     Conversion Request. A notice given by the Borrowers to the Administrative Agent of
the Borrowers’ election to convert or continue a Revolving Credit Loan in accordance with §2.8.



     Copyright Security Agreement. Each Memorandum of Grant of Security Interest in
Copyrights that may be entered into after the Effective Date by any Borrower, any Guarantor, any of
such Borrower’s or such Guarantor’s Subsidiaries and the Administrative Agent, in form and
substance satisfactory to the Administrative Agent, each as amended, supplemented or otherwise
modified from time to time.



     Co-Syndication Agents. As defined in the preamble hereto.



     Credit Agreement or Agreement. This Third Amended and Restated Revolving
Credit Agreement, including the Schedules and Exhibits hereto.



     Credit Card Notifications. See §11.22.



     Customer Credit Liability Reserve. At any time, an amount equal to 50% of the
aggregate remaining value at such time of (a) outstanding gift certificates and gift cards of the
Borrowers entitling the holder thereof to use all or a portion of the certificate or gift card to
pay all or a portion of the purchase price for any Inventory, and (b) outstanding merchandise
credits of the Borrowers.



     Customer Deposit Reserves. A reserve in an amount equal to 100% of the customer
deposits made to any Borrower or any Guarantor.



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



     Deed. That certain Composite Security Deed executed and delivered on the Effective
Date, among BGI, BGP (UK) and the Administrative Agent, in form and substance satisfactory to the
Administrative Agent, as amended, supplemented or otherwise modified from time to time.



     Default. See §13.1.



     Delinquent Lender. See §2.15(a).



     Deteriorating Lender. Any Delinquent Lender or any other Lender as to which (a) the
Administrative Agent and either of the Issuing Bank or the Swingline Lender has reasonably
determined that such Lender has defaulted in fulfilling its obligations under one or more other
syndicated credit



- 11 -









 




facilities, or (b) such Lender or a direct or indirect parent company of such Lender has been
deemed insolvent in the reasonable judgment of the Administrative Agent or become the subject of
any Debtor Relief Law.




     Distribution. The declaration or payment of any dividend on or in respect of any
shares of any class of Capital Stock of a Person, other than dividends payable solely in shares of
common stock of such Person; the purchase, redemption, defeasance, retirement or other acquisition
of any shares of any class of Capital Stock of a Person, directly or indirectly through a
Subsidiary of such Person or otherwise (including the setting apart of assets for a sinking or
other analogous fund to be used for such purpose); the return of capital by a Person to its
shareholders as such; or any other distribution on or in respect of any shares of any class of
Capital Stock of such Person.



     Documentation Agent. As defined in the preamble hereto.



     Dollars or $. Dollars in lawful currency of the United States of America.



     Domestic Borrowing Base. As defined in the Existing Credit Agreement.



     Domestic Lending Office. Initially, the office of each Lender designated as such in
Schedule 1 hereto; thereafter, such other office of such Lender, if any, located within the
United States that will be making or maintaining Base Rate Loans.



     Domestic Subsidiary. Any Subsidiary of BGI organized under the laws of the United
States of America, any state or territory thereof or the District of Columbia.



     Drawdown Date. The date on which any Loan is made or is to be made, and the date on
which any Loan is converted or continued in accordance with §2.8.



     Effective Date. The first date on which the conditions set forth in §11 have been
satisfied and any Loans are to be made or converted or any Letter of Credit is to be issued
hereunder.



     Eligible Assignee. Any Person that meets the requirements to be an assignee under
§§15.2(c) and (f) (subject to such consents, if any, as may be required under §15.2(c)).



     Eligible Corporate Sales Receivables. As of the date of determination thereof,
Accounts Receivable due to a Borrower or a Guarantor arising from corporate sales of such Borrower
or such Guarantor, the value of which shall be determined by taking into consideration, among other
factors, their book value determined in accordance with GAAP; provided, however, that none
of the following classes of Accounts Receivable shall be deemed to be Eligible Corporate Sales
Receivables:




     (a) Accounts Receivable that do not arise out of sales of goods or rendering of
services in the ordinary course of such Borrower’s or such Guarantor’s business;




     (b) Accounts Receivable payable other than in Dollars or that are otherwise on
terms other than those normal or customary in such Borrower’s or such Guarantor’s
business;




     (c) Accounts Receivable owing from any Person that is an Affiliate of a
Borrower or a Guarantor;



- 12 -









 






     (d) Accounts Receivable more than 60 days past original invoice date or more
than 30 days past the date due;




     (e) Accounts Receivable owing from any Person from which an aggregate amount of
more than 20% of the Accounts Receivable owing therefrom is more than 30 days past
the date due;




     (f) Accounts Receivable owing from any Person that (i) has disputed liability
for any Account Receivable owing from such Person or (ii) has otherwise asserted any
claim, demand or liability against any Borrower or any of its Subsidiaries, whether
by action, suit, counterclaim or otherwise;




     (g) Accounts Receivable owing from any Person that shall take or be the subject
of any action or proceeding of a type described in §13.1(g);




     (h) Accounts Receivable (i) owing from any Person that is also a supplier to or
creditor of any Borrower or any of its Subsidiaries or (ii) representing any
manufacturer’s or supplier’s credits, discounts, incentive plans or similar
arrangements entitling any Borrower or any of its Subsidiaries to discounts on
future purchase therefrom;




     (i) Accounts Receivable arising out of sales to account debtors outside the
United States;




     (j) Accounts Receivable arising out of sales on a bill-and-hold, guaranteed
sale, sale-or-return, sale on approval or consignment basis or subject to any right
of return, setoff or charge back;




     (k) Accounts Receivable owing from an account debtor that is an agency,
department or instrumentality of the United States or any state thereof;




     (l) Accounts Receivable in respect of which the Security Agreement, after
giving effect to the related filings of financing statements that have then been
made, if any, does not or has ceased to create a valid and perfected first priority
lien or security interest in favor of the Administrative Agent, on behalf of the
Secured Parties, securing the Obligations; and




     (m) Accounts Receivable which do not conform to the eligibility requirements
set forth in the proviso of the definition of Eligible Credit Card Receivables.



     Eligible Credit Card Receivables. As of the date of determination thereof, Accounts
Receivable due to a Borrower or a Guarantor on a non-recourse basis (net of standard chargebacks
and standard fees due to the credit card issuer or processor and without reference to any rights of
customers to return goods) from (i) Visa, MasterCard, American Express Co., or Discover to the
extent processed by a major credit card processor, and (ii) other major credit card issuers and/or
processors reasonably acceptable to the Administrative Agent as arise in the ordinary course of
business for the purchase of merchandise or services which have been earned by performance;
provided that none of the following shall be deemed to be Eligible Credit Card Receivables:




     (a) Accounts Receivable that are past due or Accounts Receivable that have been
outstanding for more than five days from the date of sale;



- 13 -









 






     (b) Accounts Receivable with respect to which a Borrower or a Guarantor does
not have good, valid and marketable title thereto, free and clear of any Lien (other
than Liens granted to the Administrative Agent, for the benefit of the Agents and
the Secured Parties, pursuant to the Security Documents);




     (c) Accounts Receivable that are not subject to a first priority security
interest in favor of the Administrative Agent (or are subject to other Liens other
than Permitted Liens), for the benefit of the Agents and the Secured Parties (it
being the intent that standard fees due by a Borrower and standard chargebacks in
the ordinary course by such credit card issuers and/or processors shall not be
deemed violative of this clause);




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




     (e) Accounts Receivable which the Administrative Agent determines in its
reasonable commercial judgment to be unlikely to be collected (including, without
limitation, Accounts Receivable with respect to which the account debtor is deemed
not creditworthy or the value of such Account Receivable is otherwise impaired, in
each case in the Administrative Agent’s reasonable discretion exercised in a
commercially reasonable manner);




     (f) Accounts Receivable which (i) are not genuine and in all respects what it
purports to be, or (ii) are evidenced by a judgment;




     (g) Accounts Receivable which do not arise out of a completed, bona fide sale
and delivery of goods or rendition of services by a Borrower or a Guarantor in the
ordinary course of its business and in accordance with the terms and conditions of
all purchase orders, contracts or other documents relating thereto and forming a
part of the contract between such Borrower or such Guarantor and the account debtor,
and, in the case of goods, title to the goods have not passed from such Borrower or
such Guarantor to the account debtor; and




     (h) Accounts Receivable which are not for a specified amount maturing as stated
in the duplicate invoice covering such sale or rendition of services, or for which a
copy of which has not been furnished or made available to the Administrative Agent.



     Eligible Inventory. As of the date of determination thereof, items of inventory of
the Borrowers and/or the Guarantors that are finished goods, merchantable and readily saleable to
the public in the ordinary course deemed by the Administrative Agent in accordance with its
customary credit and collateral considerations and policies to be eligible for inclusion in the
calculation of the Aggregate Borrowing Base. Without limiting the foregoing, unless otherwise
approved in writing by the Administrative Agent, none of the following shall be deemed to be
Eligible Inventory:




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




     (b) inventory that is not located at a warehouse facility or store that is
owned or leased by a Borrower or a Guarantor and subject to a landlord waiver unless
it is in-



- 14 -









 







transit between warehouse facilities and/or stores leased or owned by a
Borrower or a Guarantor and such inventory is subject to a Freight Forwarder
Agreement;




     (c) inventory that represents (i) goods damaged, defective or otherwise
unmerchantable, except in the case of each of the foregoing to the extent that the
Administrative Agent has determined a recoverable value based on an appraisal of
such inventory and (ii) goods that do not conform in all material respects to the
representations and warranties contained in this Credit Agreement or any of the
Security Documents;




     (d) inventory that is not located in the United States of America or Puerto
Rico (but excluding any other territories or possessions of the United States), or
any other jurisdiction acceptable to the Administrative Agent in its reasonable
discretion (and subject to such inventory otherwise being “Eligible Inventory”
hereunder), in each case unless such inventory is in-transit between warehouse
facilities and/or stores leased or owned by a Borrower or a Guarantor in any such
locations and such inventory is subject to a Freight Forwarder Agreement;




     (e) inventory that is not subject to a perfected first-priority security
interest in favor of the Administrative Agent (or are subject to other Liens other
than Permitted Liens) for the benefit of the Secured Parties and the Agents;




     (f) inventory which consists of samples, labels, bags, packaging, and other
similar non-merchandise categories;




     (g) inventory as to which insurance in compliance with the provisions of §8.7
hereof is not in effect;




     (h) inventory which has been sold but not yet delivered or as to which any
Borrower has accepted a deposit;




     (i) inventory acquired in permitted acquisitions in compliance with the
provisions of §9.6, unless and until the Administrative Agent shall have received
(i) the results of appraisals of the inventory acquired in such acquisition and (ii)
such other due diligence related to such inventory by the Administrative Agent that
the Administrative Agent may require; provided that to the extent such
inventory is of the same type as that owned by the Borrowers as of the Effective
Date, such reasonable due diligence shall be of the type conducted by the
Administrative Agent and the Lenders in connection with this Credit Agreement, all
of the results of the foregoing to be reasonably satisfactory to the Administrative
Agent; and




     (j) inventory of a Subsidiary that becomes a Borrower or Guarantor hereunder in
compliance with the provisions of §5.16 unless and until the Administrative Agent
shall have received (i) the results of appraisals of the inventory of such
Subsidiary and (ii) such other reasonable due diligence related to such inventory by
the Administrative Agent that the Administrative Agent may require, all of the
result of the foregoing to be reasonably satisfactory to the Administrative Agent;


provided that “Eligible Inventory” shall include any inventory (a) not yet delivered to a
Borrower, (b) the purchase of which is supported by a documentary Letter of Credit issued under
this Credit Agreement having an expiry of sixty (60) days or less, (c) for which the document of
title reflects a Borrower as consignee (along with delivery to such Borrower of the documents of
title with respect thereto), (d) as to






- 15 -









 







which, if so required by the Administrative Agent in its discretion, the Administrative Agent has
control over the documents of title which evidence ownership of the subject inventory (such as by
the delivery of a customs broker agency agreement, satisfactory to the Administrative Agent), (e)
which is insured to the reasonable satisfaction of the Administrative Agent, and (f) which
otherwise would constitute Eligible Inventory. General criteria for Eligible Inventory may be
established and revised from time to time by the Administrative Agent in its reasonable discretion.




     Environmental Laws. See §7.17(a).



     EPA. See §7.17(b).



     Equity Reserve. A reserve in an amount equal to the difference between $10,000,000
and the amount of all principal payments made on account of the FIFO Loans at the time of
calculation; provided that the Equity Reserve shall be imposed only if, on or before May
15, 2010, BGI fails to receive Net Cash Proceeds in the sum of at least $25,000,000 (such sum being
referred to herein as the “New Equity Amount”) (and the receipt of the New Equity Amount
being referred to herein as the “New Equity Raise”); provided, further,
that (i) the Equity Reserve shall be removed at such time as the New Equity Raise occurs; or (ii)
if BGI receives Net Cash Proceeds from the sale of its Capital Stock on or before May 15, 2010, but
such amount is less than the New Equity Amount, the Equity Reserve shall be reduced to an amount
equal to the New Equity Amount less the amount of the Net Cash Proceeds actually received, so long
as such amount is a positive number; or (iii) if BGI receives Net Cash Proceeds from the sale of
its Capital Stock on or before May 15, 2010 but such amount, less the amount of any Distributions
necessary to effectuate the New Equity Raise (to the extent such Distributions are permitted to be
made pursuant to §9.4(c)(ii) of the Second Lien Loan Agreement), is less than the New Equity
Amount, the Equity Reserve shall be reduced to an amount equal to the New Equity Amount less the
amount of the Net Cash Proceeds actually received, less the amount of such Distributions.



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



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



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



     Eurocurrency Base Rate. See the definition of “Eurocurrency Rate”.



- 16 -









 





     Eurocurrency Lending Office. Initially, the office of each Lender designated as such
in Schedule 1 hereto; thereafter, such other office of such Lender, if any, that shall be
making or maintaining Eurocurrency Rate Loans.



     Eurocurrency Rate. For any Interest Period with respect to a Eurocurrency Rate Loan,
a rate per annum determined by the Administrative Agent pursuant to the following formula:



	 	 	 	 	 
	Eurocurrency Rate

	 	=
	 	Eurocurrency Base Rate
	 

	 	 	 	1.00 – Eurocurrency Reserve Percentage







     Where,



     Eurocurrency Base Rate means, for such 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 London Banking Days prior to
the commencement of such Interest Period, for deposits in Dollars (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 “Eurocurrency Base Rate” for such Interest Period
shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits
in U.S. Dollars for delivery on the first day of such Interest Period in immediately available
funds in the approximate amount of the Eurocurrency Rate 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 (or other Bank of America branch or Affiliate) to major banks in the London
or other offshore interbank market for U.S. Dollars at their request at approximately 11:00 a.m.
(London time) two London Banking Days prior to the commencement of such Interest Period.



     Eurocurrency Reserve Percentage means, for any day during any Interest Period, the
reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such
day, whether or not applicable to any Lender, under regulations issued from time to time by the FRB
for determining the maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as
“Eurocurrency liabilities”). The Eurocurrency Rate for each outstanding Eurocurrency Rate Loan
shall be adjusted automatically as of the effective date of any change in the Eurocurrency Reserve
Percentage.



     Eurocurrency Rate Loans. Loans bearing interest calculated by reference to the
Eurocurrency Rate.



     Event of Default. See §13.1.



     Excess Availability. At any time of determination, (a) the lesser of (i) the
Aggregate Borrowing Base at such time, and (ii) the Total Commitment at such time, minus
(b) the Total Facility Usage at such time.



     Exchange Rate. With respect to any currency other than Dollars, at any date of
determination thereof, the Spot Rate of exchange for the conversion of such currency into Dollars
and with respect to Dollars, at any date of determination thereof, the Spot Rate of exchange for
the conversion of Dollars into the applicable currency.



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     Excluded Subsidiaries. Each of (a) BB Holdings, Inc., a Michigan corporation, (b) WB
Holdings, Inc., a Michigan corporation, (c) BINC Acquisition Company, a Michigan corporation, (d)
Walden Acquisition Company, a Michigan corporation, (e) Borders/JGE Joint Venture LLC, a Michigan
limited liability company, (f) Borders Online, Inc., a Colorado corporation, (g) Walden Online,
Inc., a Colorado corporation, (h) Borders Fulfillment, Inc., a Delaware corporation, (i) Borders
Online, LLC, a Delaware limited liability company, (j) BGI Franchise PTY Ltd., a limited company
organized under the laws of Australia, (k) Borders Bookstore (M) SDN BHD, a limited liability
company organized under the laws of Malaysia, (l) BGI (UK), Ltd., a company with limited liability
incorporated under the laws of England and Wales, (m) Books Etc. Properties, Ltd., a company with
limited liability incorporated under the laws of England and Wales, (n) Charing Cross Properties,
Ltd., a company with limited liability incorporated under the laws of England and Wales, and (o)
Evermatch, Ltd., a company with limited liability incorporated under the laws of England and Wales.



     Excluded Taxes. With respect to the Administrative Agent, any Lender, the Issuing
Bank or any other recipient of any payment to be made by or on account of any obligation of the
Borrowers hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the Laws of which such recipient is organized or
considered to be present or, in the case of any Lender, in which its applicable Lending Office is
located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by
any other jurisdiction in which any Borrower is considered to be located, (c) any backup
withholding tax that is required by the Code to be withheld from amounts payable to a Lender that
has failed to comply with clause (A) of §5.17(e)(ii), and (d) in the case of a Foreign Lender
(other than an assignee pursuant to a request by any Borrower under §5.12), any United States
withholding tax that (i) is required to be imposed on amounts payable to such Foreign Lender
pursuant to the Laws in force at the time such Foreign Lender becomes a party hereto (or designates
a new Lending Office) or (ii) is attributable to such Foreign Lender’s failure or inability (other
than as a result of a Change in Law) to deliver documentation in accordance with clause (B) of
§5.17(e)(ii), except to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new Lending Office (or assignment), to receive additional amounts
from the Borrowers with respect to such withholding tax pursuant to §5.17(a)(ii) or (c).



     Existing Borrowers. As defined in the recitals hereto.



     Existing Commitment Fee. See §2.2.1.



     Existing Credit Agreement. As defined in the recitals hereto.



     Existing Lenders. As defined in the recitals hereto.



     Existing Letters of Credit. See §4.7.



     Existing Tranche. That portion of the Revolving Credit Facility not constituting the
Extended Tranche. On the Effective Date, the Commitments under the Existing Tranche aggregate
$270,500,000.



     Existing Tranche Termination Date. With respect to the Existing Tranche, the earlier
of (a) the Maturity Date and (b) the date on which the Existing Tranche is terminated and all
Revolving Credit Loans under such Tranche are paid in full in cash, as permitted or required under
the terms and provisions of this Credit Agreement.



     Extended Commitment Fee. See §2.2.2.



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     Extended Tranche. That portion of the Revolving Credit Facility as to which the
Lenders have agreed to extend their Commitments and the maturity of the Loans thereunder to the
fourth anniversary of the Effective Date. On the Effective Date, the Commitments under the
Extended Tranche aggregate $700,000,000.



     Extending Revolving Lender. Each Lender with a Commitment under the Extended Tranche.



     Extended Tranche Termination Date. With respect to the Extended Tranche, the earlier
of (a) the Maturity Date and (b) the date on which the Extended Tranche is terminated and all
Revolving Credit Loans under such Tranche are paid in full in cash, as permitted or required under
the terms and provisions of this Credit Agreement.



     FASB ASC. The Accounting Standards Codification of the Financial Accounting Standards
Board.



     Federal Funds Effective Rate. See the definition of “Base Rate”.



     Fee Letter. That certain fee letter among BGI, Bank of America and Banc of America
Securities LLC, as co-arranger dated as of February 3, 2010.



     Fees. Collectively, all fees in favor of any Lender, any Agent or any other Secured
Party, referred to herein or in any other Loan Document.



     FIFO Loans. Loans made by Bank of America in accordance with the provisions of
Section 2.1.1 of the Second Lien Loan Agreement. As of the effective date of the Second Lien Loan
Facility, the FIFO Loans aggregate $10,000,000.



     FILO Loans. Loans made by the Second Lien Lenders (other than Bank of America) in
accordance with the provisions of Section 2.1.1 of the Second Lien Loan Agreement. As of the
effective date of the Second Lien Loan Facility, the FILO Loans aggregate $80,000,000.



     Financial Affiliate. A Subsidiary of the bank holding company controlling any Lender,
which Subsidiary is engaging in any of the activities permitted by §4(e) of the Bank Holding
Company Act of 1956 (12 U.S.C. §1843).



     Fiscal Quarter. Subject to §7.4.1, for the first three Fiscal Quarters of each year,
the 13 week period commencing on the day after the last day of the preceding Fiscal Quarter and for
the fourth Fiscal Quarter of each year, the period commencing on the day after the last day of the
third Fiscal Quarter and ending on the Saturday closest to January 31 of each year. As used
herein, “FQ1 2xxx” refers to the first Fiscal Quarter of the 2xxx Fiscal Year, “FQ2 2xxx” refers to
the second Fiscal Quarter of the 2xxx Fiscal Year and so on.



     Fiscal Year. Subject to §7.4.1, the 52/53 week period commencing on the day after the
last day of the preceding Fiscal Year and ending on the Saturday closest to January 31 of each
year. By way of illustration, BGI’s 2009 Fiscal Year ended January 30, 2010.



     Fixed Charge Coverage Ratio. As of any date of determination, the ratio of (a)
Consolidated Operating Cash Flow for the Reference Period most recently ended to (b) Consolidated
Fixed Charges for such Reference Period.



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     Foreign Lender. Any Lender that is organized under the laws of a jurisdiction other
than that in which a Borrower is resident for tax purposes (including such a Lender when acting in
the capacity of Issuing Bank). For purposes of this definition, the United States, each State
thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.



     Foreign Subsidiary. Any Subsidiary of BGI (other than BGP (UK)) organized under the
laws of any jurisdiction other than the United States of America, any state or territory thereof or
the District of Columbia.



     FRB. The Board of Governors of the Federal Reserve System of the United States.



     Freight Forwarder Agreement. Each freight forwarder agreement required by the
Administrative Agent, in all cases such agreement to be in form, scope and substance satisfactory
to the Administrative Agent.



     Fronting Exposure. At any time there is a Delinquent Lender, (a) with respect to the
Issuing Bank, such Delinquent Lender’s Commitment Percentage of the outstanding LC Obligations
other than LC Obligations as to which such Delinquent Lender’s participation obligation has been
Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swingline
Lender, such Delinquent Lender’s Commitment Percentage of Swingline Loans other than Swingline
Loans as to which such Delinquent Lender’s participation obligation has been Cash Collateralized in
accordance with the terms hereof.



     Fund. 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 or generally accepted accounting principles. (a) When used in §10 whether
directly or indirectly through reference to a capitalized term used therein, means (i) principles
that are consistent with the principles promulgated or adopted by the Financial Accounting
Standards Board and its predecessors, in effect for the Fiscal Year ended on the Balance Sheet
Date, and (ii) to the extent consistent with such principles, the accounting practice of BGI
reflected in its financial statements for the year ended on the Balance Sheet Date (unless
otherwise agreed to by the parties hereto as contemplated by §1.3), and (b) when used in general,
other than as provided above, means principles that are (i) consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in
effect from time to time, and (ii) consistently applied with past financial statements of BGI
adopting the same principles, provided that in each case referred to in this definition of “GAAP” a certified public accountant would, insofar as the use of such accounting
principles is pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in GAAP) as to financial statements in which such principles have
been properly applied.



     Governing Documents. With respect to any Person, its certificate or articles of
incorporation or organization, its by-laws, or, as the case may be, its certificate of formation,
limited partnership certificate, operating agreement, limited partnership agreement or other
constitutive documents and all shareholder agreements, voting trusts and similar arrangements
applicable to any of its Capital Stock.



     Governmental Authority. Any foreign, federal, state, regional, local, municipal or
other government, or any department, commission, board, bureau, agency, public authority or
instrumentality thereof, or any court or arbitrator.



     Guaranteed Obligations. See §6.1.



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



     Guarantors. Each Borrower, each Subsidiary party hereto for purposes of §6 hereof,
any Person that becomes party to the Second Lien Credit Agreement as a guarantor thereunder, and
any Subsidiary of BGI which executes a Joinder Agreement as a Borrower or a Guarantor of all of the
Obligations pursuant to the provisions of this Credit Agreement after the Effective Date.



     Guaranty. The Guaranty set forth in §6 of this Credit Agreement, made by each
Guarantor in favor of the Secured Parties pursuant to which each Guarantor guarantees to the
Secured Parties the payment and performance of the Obligations.



     Hazardous Substances. See §7.17(b).



     Hedge Reserves. At any time of calculation, reserves equal to 100% of the Swap
Termination Value with respect to any services of facilities provided to any Borrower or any
Guarantor by the Administrative Agent, any Secured Party or any of their respective Affiliates on
account of Hedging Agreements then provided or outstanding.



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



     Hedging Obligations. All indebtedness, obligations and liabilities of the Borrowers
to any of the Secured Parties individually or collectively, existing on the date of this Credit
Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract,
operation of law or otherwise, arising or incurred under any Hedging Agreement.



     Increased Advance Rate Conditions. At any time of determination, the satisfaction of
each of the following: (a) no Default or Event of Default shall then exist and be continuing or
result from any increase in the advance rate against Eligible Inventory, (b) the principal balance
of the loans under the Second Lien Loan Facility shall not exceed $50,000,000, and (c) the
Administrative Agent shall have a first priority security interest in the Intellectual Property
subject only to Permitted Liens having priority by operation of applicable Law.



     Incremental Seasonal Amount. So long as it is a positive number, the sum of
$35,000,000 minus any prepayments made with respect to the FILO Loans.



- 21 -









 





     Indebtedness. As to any Person and whether recourse is secured by or is otherwise
available against all or only a portion of the assets of such Person and whether or not contingent,
but without duplication:




     (a) every obligation of such Person for money borrowed,




     (b) every obligation of such Person evidenced by bonds, debentures, notes or
other similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses,




     (c) every reimbursement obligation of such Person with respect to letters of
credit, bankers’ acceptances or similar facilities issued for the account of such
Person,




     (d) every obligation of such Person issued or assumed as the deferred purchase
price of property or services (including securities repurchase agreements but
excluding trade accounts payable or accrued liabilities arising in the ordinary
course of business which are not overdue or which are being contested in good
faith),




     (e) every obligation of such Person under any Capitalized Lease,




     (f) every obligation of such Person under any Synthetic Lease,




     (g) all sales by such Person of (i) accounts or general intangibles for money
due or to become due, (ii) chattel paper, instruments or documents creating or
evidencing a right to payment of money or (iii) other receivables (collectively
“receivables”), whether pursuant to a purchase facility or otherwise, other
than in connection with the disposition of the business operations of such Person
relating thereto or a disposition of defaulted receivables for collection and not as
a financing arrangement, and together with any obligation of such Person to pay any
discount, interest, fees, indemnities, penalties, recourse, expenses or other
amounts in connection therewith,




     (h) every obligation of such Person (an “equity related purchase
obligation”) to purchase, redeem, retire or otherwise acquire for value any
shares of Capital Stock issued by such Person or any rights measured by the value of
such Capital Stock, but only to the extent such equity related purchase obligations
provide that the purchase, redemption, retirement or other acquisition is required
to occur prior to the Maturity Date with respect to the Extended Tranche,




     (i) every obligation of such Person under any forward contract, futures
contract, swap, option or other financing agreement or arrangement (including,
without limitation, caps, floors, collars and similar agreements), the value of
which is dependent upon interest rates, currency exchange rates, commodities or
other indices (a “derivative contract”),




     (j) every obligation in respect of Indebtedness of any other entity (including
any partnership in which such Person is a general partner) to the extent that such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such entity, except to the extent that the terms of such
Indebtedness provide that such Person is not liable therefor and such terms are
enforceable under applicable Law,



- 22 -









 






     (k) every obligation, contingent or otherwise, of such Person guaranteeing, or
having the economic effect of guaranteeing or otherwise acting as surety for, any
obligation of a type described in any of clauses (a) through (j) (the “primary
obligation”) of another Person (the “primary obligor”), in any manner,
whether directly or indirectly, and including, without limitation, any obligation of
such Person (i) to purchase or pay (or advance or supply funds for the purchase of)
any security for the payment of such primary obligation, (ii) to purchase property,
securities or services for the purpose of assuring the payment of such primary
obligation, or (iii) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such primary obligation.



     The “amount” or “principal amount” of any Indebtedness at any time of
determination represented by (t) any Indebtedness, issued at a price that is less than the
principal amount at maturity thereof, shall be the amount of the liability in respect thereof
determined in accordance with GAAP, (u) any Capitalized Lease shall be the principal component of
the aggregate of the rentals obligation under such Capitalized Lease payable over the term thereof
that is not subject to termination by the lessee, (v) any sale of receivables shall be the amount
of unrecovered capital or principal investment of the purchaser (other than BGI or any of its
Wholly-owned Subsidiaries) thereof, excluding amounts representative of yield or Interest earned on
such investment, (w) any Synthetic Lease shall be the stipulated loss value, termination value or
other equivalent amount, (x) any derivative contract shall be the maximum amount of any termination
or loss payment required to be paid by such Person if such derivative contract were, at the time of
determination, to be terminated by reason of any event of default or early termination event
thereunder, whether or not such event of default or early termination event has in fact occurred,
(y) any equity related purchase obligation shall be the maximum fixed redemption or purchase price
thereof inclusive of any accrued and unpaid dividends to be comprised in such redemption or
purchase price and (z) any guaranty or other contingent liability referred to in clause (k) shall
be an amount equal to the stated or determinable amount of the primary obligation in respect of
which such guaranty or other contingent obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith.



     Notwithstanding anything to the contrary in this definition of Indebtedness, the obligations
(whether for cash, common shares of BGI or otherwise) of BGI and its Subsidiaries to settle the
Pershing Square Warrants, any stock appreciation rights issued in lieu thereof or any debt or
equity instruments (including interest and fees thereon) issued as a result of or in connection
with the deferral of any payment in respect of the Pershing Square Warrants or any settlement,
exercise, purchase, redemption, defeasance, retirement, payment, acquisition or otherwise thereof
shall not constitute Indebtedness hereunder.



     Indemnified Taxes. Taxes other than Excluded Taxes.



     Insolvency Proceeding. As to any Person, any of the following: (i) any case or
proceeding, whether voluntary or involuntary, with respect to such Person under any Debtor Relief
Law or any other or similar proceedings seeking any stay, reorganization, arrangement, composition
or readjustment of the obligations and indebtedness of such Person, (ii) any proceeding seeking the
appointment of any trustee, receiver, liquidator, custodian, administrator or other insolvency
official with similar powers with respect to such Person or any of its assets, (iii) any proceeding
for liquidation, dissolution or other winding up of the business of such Person, or (iv) any
assignment for the benefit of creditors or any marshalling of assets of such Person.



     Intellectual Property. As defined in the Security Agreement.



- 23 -









 





     Intellectual Property Security Agreement. Collectively, (i) the Trademark Security
Agreement, (ii) the Patent Security Agreement, (iii) the Copyright Security Agreement, and (iv) any
other intellectual property security agreements or joinder or supplement thereto in respect of any
Intellectual Property that may be entered into after the Effective Date with respect to any
Subsidiary of a Borrower or a Guarantor formed or acquired after the Effective Date, in each case,
in form and substance satisfactory to the Administrative Agent and as amended and in effect from
time to time.



     Intercreditor Agreement. That certain Intercreditor Agreement, dated as of March 31,
2010, among the Administrative Agent, the Second Lien Agent, the Borrowers, the Guarantors and the
other parties thereto (if any), in form and substance satisfactory to the Administrative Agent.



     Interest Payment Date. (a) As to any Base Rate Loan, the first day of each April,
July, October, and January for the immediately preceding three-month period with respect to
interest accrued during such three-month period, including, without limitation, the three-month
period which includes the Drawdown Date of such Base Rate Loan; (b) as to any Eurocurrency Rate
Loan in respect of which the Interest Period is (i) 3 months or less, the last day of such Interest
Period and (ii) more than 3 months, the date that is 3 months from the first day of such Interest
Period and, in addition, the last day of such Interest Period, and (c) as to any Swingline Loan,
the first day of the calendar quarter for the immediately preceding calendar quarter with respect
to interest accrued during such calendar quarter and on the Swingline Expiry Date.



     Interest Period. With respect to each Loan, (a) initially, the period commencing on
the Drawdown Date of such Loan and ending on the last day of one of the periods set forth below, as
selected by the Borrowers in a Loan Request or as otherwise required by the terms of this Credit
Agreement (i) for any Base Rate Loan, the last day of the calendar quarter; and (ii) for any
Eurocurrency Rate Loan, 7 days, 14 days, 1, 2, 3 or 6 months; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to such Loan and ending
on the last day of one of the periods set forth above, as selected by the Borrowers in a Conversion
Request; provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:



     (A) if any Interest Period with respect to a Eurocurrency Rate Loan would otherwise end on a
day that is not a Business Day, that Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the immediately preceding
Business Day;



     (B) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a
Business Day, that Interest Period shall end on the next succeeding Business Day;



     (C) if the Borrowers shall fail to give notice as provided in §2.8 with respect to the Loans,
the Borrowers shall be deemed to have requested a conversion of the affected Eurocurrency Rate Loan
to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day
of the then current Interest Period with respect thereto;



     (D) any Interest Period relating to any Eurocurrency Rate Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last Business Day of a
calendar month; and



     (E) any Interest Period that would otherwise extend beyond the applicable Maturity Date for
any Revolving Credit Loan shall end on the applicable Maturity Date.



- 24 -









 





     Interim Concentration Accounts. See §8.15.1.



     Inventory Reserves. Such reserves as may be established from time to time by the
Administrative Agent in its sole discretion with respect to the determination of the saleability,
at retail, of the Eligible Inventory or which reflect such other factors that affect the market
value of the Eligible Inventory. Inventory Reserves shall at all times include a reserve equal to
100% of the cost of news stand (unless such news stand Inventory is otherwise captured in the most
recently completed appraisal) and café Inventory. Inventory Reserves shall also include, without
duplication of the other reserves contained in this definition, a mark down reserve as agreed by
the Administrative Agent and the Second Lien Agent until such time as such mark downs are included
in the appraised net orderly liquidation value of Eligible Inventory.



     Investments. All expenditures made and all liabilities incurred (contingently or
otherwise) by a Person (i) for the acquisition of Capital Stock of any other Person, (ii) for the
acquisition of any Indebtedness of any other Person, (iii) for the making of any loan, advance,
capital contribution or transfer of property to another Person, or (iv) in respect of any
guaranties (or other commitments as described under Indebtedness), or obligations of, any Person.
In determining the aggregate amount of Investments outstanding at any particular time: (a) the
amount of any Investment represented by a guaranty shall be taken at not less than the principal
amount of the obligations guaranteed and still outstanding; (b) there shall be deducted in respect
of each such Investment any amount received as a return of capital (but only by repurchase,
redemption, retirement, repayment, liquidating dividend or liquidating distribution); (c) there
shall not be deducted in respect of any Investment any amounts received as earnings on such
Investment, whether as dividends, interest or otherwise; (d) there shall not be deducted from the
aggregate amount of Investments any decrease in the value thereof; and (e) the amount of any
Investment made by a transfer of property shall be valued at the fair market value of such
transferred property at the time of such transfer.



     IP Subordination Conditions. (a) No Default or Event of Default shall exist at the
time of and after giving effect to the subordination of the Lien and security interest of the
Second Lien Agent in the Intellectual Property to the Lien and security interest of the
Administrative Agent in the Intellectual Property, (b) the Second Lien Agent shall be reasonably
satisfied that it continues to hold a valid perfected Lien and security interest in the
Intellectual Property, subject only to the Lien of the Administrative Agent and to Permitted Liens
having priority over the Lien of the Second Lien Agent by operation of applicable Law, and
(c) the principal balance of the loans in respect of the Second Lien Loan Facility shall have been
reduced to $50,000,000 or less.



     Issuer Documents. With respect to any Letter of Credit, the Letter of Credit
Application, and any other document, agreement and instrument entered into by the Issuing Bank and
any Borrower or in favor of the Issuing Bank and relating to such Letter of Credit.



     Issuing Bank. Bank of America, in its capacity as issuer of Letters of Credit
pursuant to §4, or, in the event that Bank of America is unable to issue a Letter of Credit, any
other Lender selected by the Administrative Agent and the Borrowers to issue such Letter of Credit
with the consent of such Lender.



     Joinder Agreements. Joinder agreements in substantially the form of Exhibit F
hereto pursuant to which Subsidiaries of BGI become parties to and agree to be bound by the
provisions of this Credit Agreement as a Borrower or a Guarantor.



     Joint Venture. Any corporation, partnership, limited liability company, joint venture
or other entity in which BGI and its Subsidiaries own not more than 50% of the capital stock,
partnership interests,



- 25 -









 




membership interests or other ownership interests and which does not meet the definition of
“Subsidiary” herein.




     Kobo. Kobo Inc., a corporation incorporated under the laws of Ontario, Canada.



     Landlord Lien Reserve. Two month’s base rent for each of the Borrowers’ facilities
located in the States of Washington, Pennsylvania and Virginia at which inventory is stored,
calculated monthly on a two month rolling basis and such other amounts as the Administrative Agent
may from time to time establish and revise, in the Administrative Agent’s reasonable discretion, in
respect of any landlord lien rights in any other jurisdiction in which inventory is stored.



     Last Out Borrowing Base. As defined in the Existing Credit Agreement.



     Last Out Commitment Fee. As defined in the Existing Credit Agreement. For the
avoidance of doubt, the Last Out Commitment Fee has been paid in full on or prior to the Effective
Date.



     Last Out Revolving Commitment. As defined in the Existing Credit Agreement. For the
avoidance of doubt, the Last Out Revolving Commitment has been terminated and all obligations with
respect thereto have been paid in full prior to the Effective Date.



     Last Out Revolving Lender. Each Existing Lender with a Last Out Revolving Commitment.



     Laws. Means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.



     LC Borrowing. An extension of credit resulting from a drawing under any Letter of
Credit which has not been reimbursed on the date when made or refinanced as a Revolving Credit
Loan.



     LC Credit Extension. With respect to any Letter of Credit, the issuance thereof or
extension of the expiry date thereof, or the increase of the stated amount thereof.



     LC Exposure. At any time, the sum of (a) the Maximum Drawing Amount of all
outstanding Letters of Credit at such time plus (b) the aggregate amount of all Unpaid
Reimbursement Obligations at such time. The LC Exposure of any Lender at any time shall be its
Commitment Percentage of the total LC Exposure at such time.



     LC Obligations. As at any date of determination, the aggregate amount available to be
drawn under all outstanding Letters of Credit plus the aggregate of all Unpaid Reimbursement
Obligations, including all LC Borrowings. For purposes of computing the amount available to be
drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in
accordance with §4.8. For all purposes of this Agreement, if on any date of determination a Letter
of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the
operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.



     Lender Affiliate. With respect to any Lender, (a) an Affiliate of such Lender or (b)
any Approved Fund.



- 26 -









 





     Lenders. Bank of America and the other lending institutions listed on Schedule
1 hereto and any other Person who becomes an assignee of any rights and obligations of a Lender
pursuant to §15. Unless the context otherwise requires, the term “Lenders” includes the Swingline
Lender and any Issuing Bank. For the avoidance of doubt, the term “Lenders” includes the Revolving
Lenders and the Extending Revolving Lenders.



     Letter of Credit. See §4.1.1.



     Letter of Credit Application. See §4.1.1.



     Letter of Credit Expiration Date. See §4.1.3.



     Letter of Credit Fee. See §4.6.



     Letter of Credit Participation. See §4.1.4.



     Letter of Credit Sublimit. See §4.1.1.



     Lien. Any mortgage, deed of trust, security interest, charge, pledge, hypothecation,
assignment, attachment, deposit arrangement, encumbrance, lien (statutory, judgment or otherwise,
but excluding any right of set off arising by operation of law or pursuant to agreements entered
into in the ordinary course of business), or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any conditional sale or other title retention
agreement, any Capitalized Lease, any Synthetic Lease, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of the foregoing).



     Loan Documents or Finance Documents. This Credit Agreement, the Notes, the
Fee Letter, the Letter of Credit Applications, the Letters of Credit, the Security Documents, the
Joinder Agreements, the Co-Collateral Agent Rights Agreement, the Intercreditor Agreement, any
agreement creating or perfecting rights in Cash Collateral pursuant to the provisions of §2.14 of
this Agreement, and any other instruments, certificates or documents (including, without
limitation, all Borrowing Base Reports and all Compliance Certificates) delivered or contemplated
to be delivered hereunder or thereunder or in connection herewith or therewith (excluding Hedging
Agreements).



     Loan Request. A Revolving Loan Request or a Swingline Loan Request, as applicable.



     Loans. The Revolving Credit Loans and the Swingline Loans.



     Local Accounts. See §8.15.1.



     London Banking Day. Any day on which dealings in Dollar deposits are conducted by and
between banks in the London interbank eurodollar market.



     Material Adverse Effect. With respect to any event or occurrence of whatever nature
(including any adverse determination in any litigation, arbitration or governmental investigation
or proceeding):




          (a) a material adverse effect on the business, properties, prospects, condition
(financial or otherwise), assets, operations or income of any of the Borrowers,
individually, or the Borrowers and their Subsidiaries, taken as a whole;



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     (b) a material adverse effect on the ability of any of the Borrowers,
individually, or the Borrowers and their Subsidiaries, taken as a whole, to perform
any of their respective Obligations under any of the Loan Documents to which it is a
party; or




     (c) any impairment of the validity, binding effect or enforceability of this
Credit Agreement or any of the other Loan Documents or any impairment of the rights
or remedies available to any Agent, any Issuing Bank, any other Secured Party under
any Loan Document.



     Maturity Date. With respect to (a) the Existing Tranche, July 31, 2011 and (b) the
Extended Tranche, March 31, 2014.



     Maximum Drawing Amount. The maximum aggregate amount in Dollars that the
beneficiaries under outstanding Letters of Credit may at any time draw under such Letters of
Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of such
Letters of Credit.



     Multiemployer Plan. Any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which any Borrower or any ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been obligated to make
contributions.



     Multiple Employer Plan. A Plan which has two or more contributing sponsors (including
any Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a
plan is described in Section 4064 of ERISA.



     Net Book Value. At any relevant time of reference thereto, the then net book value of
Eligible Inventory determined on the retail method at lower of cost or market.



     Net Cash Proceeds. With respect to any sale, transfer or other disposition by any
Borrower or any Guarantor or any proceeds of a casualty, condemnation or eminent domain, the
excess, if any, of (i) the sum of cash and cash equivalents received in connection with such
transaction (including any cash or cash equivalents received by way of deferred payment pursuant
to, or by monetization of, a note receivable or otherwise, but only as and when so received) over
(ii) the sum of (A) reasonable and customary out-of-pocket expenses incurred by such Person in
connection with such transaction (including, without limitation, appraisals, and brokerage, legal,
title and recording or transfer tax expenses and commissions) paid by any Borrower or Guarantor to
third parties (other than Affiliates)), plus (B) taxes actually paid in connection with any such
sale or disposition and reserves for non-delinquent taxes in connection with the business sold for
periods prior to such sale.



     With respect to the issuance of any Capital Stock by any Borrower or any Guarantor, the excess
of (i) the sum of the cash and cash equivalents received in connection with such transaction
(including any cash or cash equivalents received by way of deferred payment pursuant to, or by
monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the
sum of (A) underwriting discounts and commissions, and other reasonable out-of-pocket expenses,
incurred by the Borrowers and Guarantors in connection therewith, plus (B) the amount of any
Indebtedness of any of the Borrowers and Guarantors that is repaid in connection with such
transaction.



     Net Debt. Prior to the Paperchase Sale and solely with respect to Paperchase, at any
time of calculation, the difference between the total Indebtedness of Paperchase then outstanding
and the cash and cash equivalents of Paperchase at such time (but in no event less than zero).



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     Net Debt Reserve. Prior to the Paperchase Sale, a reserve in an amount equal to the
sum of (a) 75% of Net Debt as of the last day of each fiscal month of Paperchase, provided
that if that portion of Consolidated EBITDA attributable to Paperchase is equal to or greater than
the Dollar equivalent of 4,000,000 pounds sterling in any Fiscal Year, the Net Debt Reserve shall
be in an amount equal to 50% of Net Debt as of the last day of each fiscal month of Paperchase for
the immediately subsequent Fiscal Year, plus (b) the Annual Net Debt Amount.



     Non-Extension Notice Date. See §4.1.6.



     Note Record. The Borrower Note Records and the Swingline Note Record.



     Notes. The Revolving Notes and the Swingline Note.



     Obligations. Singly, any of, and collectively, all of, the Borrower Obligations and
all of the Guaranteed Obligations.



     Online. Borders Online, LLC, a Delaware limited liability company.



     Other Reserves. As determined by the Administrative Agent in its reasonable
discretion, such amounts as the Administrative Agent may from time to time, immediately upon notice
(which shall contain a brief explanation for such changes) to the Borrowers, establish and revise
(a) to reflect events, conditions, contingencies, risks or any other circumstances which do, or
which the Administrative Agent believes may, (i) adversely affect either (A) any Collateral, the
rights of the Administrative Agent or any of the Secured Parties in any Collateral, or its value,
(B) the security interest and other rights of the Administrative Agent or any of the Secured
Parties in the Collateral (including the enforceability, perfection and priority thereof) or (C)
any other rights of the Administrative Agent or any of the Secured Parties, or (ii) adversely
affect the business or financial condition of any of the Borrowers or any of their Subsidiaries
individually or the Borrowers and their Subsidiaries taken as a whole, (b) to reflect the belief of
the Administrative Agent that any Borrowing Base Report or other collateral report or financial
information furnished (or not furnished) by or on behalf of the Borrowers to the Administrative
Agent or any of the Secured Parties is or may have been incomplete, inaccurate or misleading, (c)
to reflect any obligations (other than the Loans and Letters of Credit) secured by the Collateral
(including, without limitation, Hedging Obligations and/or obligations in respect of Cash
Management Services) or (d) with respect to such other matters (including, without limitation,
reserves which Administrative Agent may establish from time to time, in its reasonable discretion,
as being appropriate to reflect impediments to Administrative Agent’s ability to realize the full
value of the Collateral in a liquidation or Insolvency Proceeding of any of the Borrowers or their
Subsidiaries) as Administrative Agent in its reasonable discretion may elect to impose from time to
time.



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



     outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of
any date of determination.



     Outstanding Amount. (i) With respect to Revolving Credit Loans and Swingline Loans on
any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings
and prepayments or repayments of Revolving Credit Loans and Swingline Loans, as the case may be,
occurring on such date; and (ii) with respect to any LC Obligations on any date, the amount of such
LC



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Obligations on such date after giving effect to any LC Credit Extension occurring on such date
and any other changes in the aggregate amount of the LC Obligations as of such date, including as a
result of any reimbursements by the Borrowers of Unpaid Reimbursement Obligations.




     Overadvance. At any time of calculation, the amount, if any, by which the Total
Facility Usage exceeds the Aggregate Borrowing Base.



     Overnight Rate. For any day, the greater of (i) the Federal Funds Effective Rate and
(ii) an overnight rate determined by the Administrative Agent, the applicable Issuing Bank, or the
Swingline Lender, as the case may be, in accordance with banking industry rules on interbank
compensation.



     Paperchase. Paperchase Products Limited, a company with limited liability
incorporated under the laws of England and Wales, and its Subsidiaries.



     Paperchase Sale. The proposed sale of Paperchase by BGI (or its relevant Subsidiary)
to a third party purchaser to the extent expressly permitted by, and subject to the terms of,
§9.5.2(d)(ii).



     Participant. See §15.4.



     Patent Security Agreement. That certain Patent Collateral Assignment and Security
Agreement, executed and delivered on the Effective Date, among the Borrowers, the Guarantors, each
of their respective Subsidiaries and the Administrative Agent, in form and substance satisfactory
to the Administrative Agent and any other patent security agreement or joinder or supplement
thereto that may be entered into after the Effective Date with respect to a Subsidiary of a
Borrower or a Guarantor formed or acquired after the Effective Date, each as amended, supplemented
or otherwise modified from time to time.



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



     Pension Act. The Pension Protection Act of 2006, as amended.



     Pension Funding Rules. The rules of the Code and ERISA regarding minimum required
contributions (including any installment payment thereof) to Pension Plans or Multiemployer Plans
and set forth in, with respect to plan years ending prior to the effective date of the Pension Act,
Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and,
thereafter, Section 412 and 430 through 436 of the Code and Sections 302 through 305 of ERISA.



     Pension Plan. Any employee pension benefit plan (including a Multiple Employer Plan
or a Multiemployer Plan) maintained or contributed to by any Borrower and any ERISA Affiliate and
is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section
412 of the Code.



     Permitted Liens. Liens permitted by §9.2.



     Permitted Restructuring Transactions and Permitted Restructuring Transaction.
Any one or more of the transactions described on Schedule 1.01A hereto so long as any such
transaction is consummated in accordance with such Schedule 1.01A.



     Permitted Second Lien Loan Payments. Collectively, (a) interest and fees payable on
the Second Lien Loan Facility in accordance with the Second Lien Loan Documents and (b) scheduled
payments and



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mandatory prepayments of principal as required by, and in accordance with, the Second Lien
Loan Agreement, in each case, subject to the terms, provisions and conditions of the Intercreditor
Agreement.




     Pershing Square. Pershing Square Capital Management, L.P. and/or its Affiliates
(including their respective managed funds but excluding BGI and its Subsidiaries).



     Pershing Square Term Loan Documents. The term loan agreement dated as of April 9,
2008, and with a maturity date of April 1, 2010, among BGI, Pershing Square as the term loan agent,
the lenders party thereto and the other parties thereto, together with all agreements, documents,
instruments and certificates relating to the transactions contemplated thereby.



     Pershing Square Term Loan Facility. That certain term loan facility in an aggregate
principal amount up to $42,500,000 provided to BGI by Pershing Square and the other lenders under
such facility, pursuant to the Pershing Square Term Loan Documents.



     Pershing Square Warrants. The warrants to purchase common stock issued by BGI to
Pershing Square on April 9, 2008 under the Pershing Square Warrant Transaction, and including any
stock appreciation rights and/or derivatives issued in lieu of all or a portion thereof under the
Pershing Square Warrant Transaction.



     Pershing Square Warrant Transaction. The issuance by BGI to Pershing Square on April
9, 2008 of warrants to purchase BGI common stock pursuant to the Warrant and Registration Rights
Agreement, dated as of April 9, 2008, between BGI and Computershare Trust Company N.A., as Warrant
Agent.



     Person. Any individual, corporation, limited liability company, partnership, limited
liability partnership, trust, other unincorporated association, business, or other legal entity,
and any Governmental Authority.



     Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA
(including a Pension Plan but excluding a Multiemployer Plan), maintained for employees of any
Borrower or any ERISA Affiliate or any such Plan to which any Borrower or any ERISA Affiliate is
required to contribute on behalf of any of its employees.



     Property. Any and all property, whether real, personal, tangible, intangible or
mixed, both owned and leased pursuant to Capitalized Leases, of any Person.



     Purchase Card Reserve. An amount equal to the then liabilities and obligations of the
Borrowers and/or Guarantors as reported to the Administrative Agent in accordance with the
provisions of §8.4(j) hereof with respect to purchase cards then provided or outstanding
(including, without limitation, the purchase card presently provided by JPMorgan Chase Bank, N.A.
or any of its Affiliates); provided that a Purchase Card Reserve shall not be required to
be established until the earliest of (a) such time as Adjusted Excess Availability is less than or
equal to $105,000,000; (b) the commencement of an Insolvency Proceeding involving any Borrower or
any Guarantor; or (c) a sale of all or substantially all of the retail operations or inventory by
any Borrower or any Guarantor through store closing, going-out of business or similar sales;
provided, further that a Purchase Card Reserve shall not be required to be
maintained if (x) Adjusted Excess Availability is greater than $105,000,000 and (y) no Insolvency
Proceeding has been commenced against any Borrower or any Guarantor.



     RCRA. See §7.17(a).



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     Real Estate. All real property at any time owned or leased (as lessee or sublessee)
by BGI or any of its Subsidiaries.



     Record. The grid attached to a Note, or the continuation of such grid, or any other
similar record, including computer records, maintained by any Lender with respect to any Loan
referred to in such Note.



     Reference Period. As of any date of determination, the period of twelve (12)
consecutive fiscal months of BGI and its Subsidiaries ending on such date, or if such date is not a
fiscal month end date, the period of twelve (12) consecutive fiscal months most recently ended (in
each case treated as a single accounting period).



     Register. See §15.3.



     Reimbursement Obligation. The Borrowers’ obligation to reimburse the Administrative
Agent, any Issuing Bank and the Lenders on account of any drawing under any Letter of Credit as
provided in §4.2.



     Related Parties. 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.



     Replacement Lender. See §5.12.



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



     Required Revolving Lenders. As of any date, the Revolving Lenders having Revolving
Credit Exposures and unused Commitments representing at least fifty-one (51%) of the sum of the
total Revolving Credit Exposures and unused Commitments at such time.



     Required Lenders. As of any date, the Lenders having Revolving Credit Exposures
and/or unused Commitments representing at least fifty-one percent (51%) of the sum of the total
Revolving Credit Exposures and unused Commitments at such time; provided that if, at the
time Required Lenders is being determined, the Commitments shall have terminated in full, then the
outstanding Loans of the Lenders shall be included in their respective Revolving Credit Exposures
in determining the Required Lenders. After the Existing Tranche Termination Date, Required Lenders
shall be the Lenders under the Extended Tranche having Revolving Credit Exposures and unused
Commitments representing at least fifty-one (51%) percent of the sum of the total Revolving Credit
Exposures and unused Commitments at such time.



     Restricted Payments. In relation to BGI and its Subsidiaries, any (a) Distribution,
(b) payment in cash or other property (other than common shares or additional warrants or rights to
acquire common shares or other equity securities or stock appreciation rights of BGI) arising or
resulting from the settlement, exercise, purchase, redemption, defeasance, retirement, payment,
acquisition or otherwise of the Pershing Square Warrants or any debt or equity instruments
(including interest and fees thereon) issued as a result of or in connection with the deferral of
any payment in respect of the Pershing Square Warrants or any settlement, exercise, purchase,
redemption, defeasance, retirement, payment, acquisition or otherwise thereof or (c) derivatives or
other transactions with any financial institution, fund, commodities or stock exchange,
clearinghouse or other Person (a “Derivatives Counterparty”) obligating BGI or any of its
Subsidiaries to make payments to such Derivatives Counterparty as a result of any change in market
value of any Capital Stock of BGI or such Subsidiary.



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     Revolving Credit Exposure. With respect to any Lender at any time, the sum of the
outstanding principal amount of such Lender’s Revolving Credit Loans and its LC Exposure and
Swingline Exposure at such time.



     Revolving Credit Facility. The revolving credit facility provided to the Borrowers
under the Credit Agreement.



     Revolving Credit Loans. Revolving credit loans made or to be made by the Lenders to
the Borrowers pursuant to §2.1.1.



     Revolving Lender. Each Lender with a Commitment.



     Revolving Loan Request. See §2.1.3.



     Revolving Notes. See §2.6.2.



     SARA. See §7.17(a).



     Seasonal Availability Period. See §12.7.



     Second Lien Agent. GA Capital, LLC, or any other financial institution or fund (and,
if a fund, acceptable to the Administrative Agent in its reasonable discretion) in its capacity as
second lien administrative agent and collateral agent under the Second Lien Loan Documents.



     Second Lien Lenders. Collectively, the lenders under the Second Lien Loan Documents.



     Second Lien Loan Agreement. The Term Loan Agreement dated on or about the Effective
Date, among BGI, the Second Lien Loan Agent, the Second Lien Lenders and the other parties thereto,
in form and substance satisfactory to the Administrative Agent, and as amended from time to time in
accordance with the terms of the Intercreditor Agreement.



     Second Lien Loan Closing Date. The first date on which the conditions to
effectiveness set forth in the Second Lien Loan Agreement and the other Second Lien Loan Documents
have been satisfied and the Second Lien Loan Facility is made available to BGI and Borders.



     Second Lien Loan Documents. Collectively, the Second Lien Loan Agreement and each of
the other “Loan Documents” referred to therein, in each case, in form and substance satisfactory to
the Administrative Agent, and each as amended from time to time in accordance with the terms of the
Intercreditor Agreement.



     Second Lien Loan Facility. That certain term loan facility not to exceed $90,000,000
plus paid-in-kind interest to be provided to BGI by the Second Lien Agent and the Second Lien
Lenders pursuant to the Second Lien Loan Documents and having a maturity date not earlier than the
fourth anniversary of the Second Lien Loan Closing Date.



     Second Lien Priority Account. A non-interest bearing account in the name of the
Second Lien Agent established with a financial institution as the Second Lien Agent may request,
into which solely proceeds of the Second Lien Priority Collateral shall be deposited.



     Second Lien Priority Collateral. Has the meaning given to the term “Term Priority
Collateral” in the Intercreditor Agreement. For the avoidance of doubt, upon the incurrence of
Indebtedness by the



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Borrowers and the Guarantors under the Second Lien Loan Facility, the Borrowers and the
Guarantors shall grant a second priority security interest to the Administrative Agent in such
Second Lien Priority Collateral.




     Second Lien Secured Parties. Collectively, the “Secured Parties” under and as defined
in the Second Lien Loan Agreement.



     Secured Parties. Collectively, the Agents, the Lenders, the Issuing Banks, each
co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to terms
hereof, and the other Persons (including, without limitation, any Affiliate of any Lender) the
Obligations owing to which are or are purported to be secured by the Collateral under the terms of
the Security Documents.



     Securities Pledge Agreement. Collectively, (a) that certain Securities Pledge
Agreement, executed and delivered on the Effective Date, among the Borrowers, the Guarantors and
the Administrative Agent, (b) any other securities pledge agreement or joinder or supplement
thereto that may be entered into after the Effective Date with respect to a Subsidiary of any
Borrower or any Guarantor formed or acquired after the Effective Date and required to join such
securities pledge agreement hereunder, in each case, in form and substance reasonably acceptable to
the Administrative Agent and as amended and in effect from time to time, and (c) all other
instruments, agreements and documents executed or delivered pursuant to or in connection with such
securities pledge agreement (including, without limitation, any certificates representing pledged
Capital Stock or transfer powers delivered in connection therewith).



     Security Agreement. Collectively, (a) the Second Amended and Restated Security
Agreement, dated as of the Effective Date, among BGI, the other Borrowers, the Guarantors, any
other parties thereto and the Administrative Agent and in form and substance satisfactory to the
Lenders and the Administrative Agent (as the same may be further amended from time to time), (b)
and any other security agreement or joinder or supplement thereto that may be entered into after
the Effective Date with respect to a Subsidiary of a Borrower or a Guarantor formed or acquired
after the Effective Date and required to join such security agreement hereunder, in each case, in
form and substance reasonably acceptable to the Administrative Agent and as amended and in effect
from time to time, and (c) all other instruments, agreements and documents executed or delivered
pursuant to or in connection with such security agreement (including, without limitation, any
perfection certificates or collateral certificates delivered in connection therewith).



     Security Documents. Collectively, the Security Agreement, the Deed, the Intellectual
Property Security Agreement, the Securities Pledge Agreement, the Agency Account Agreements, the
Credit Card Notifications, the Freight Forwarder Agreements and all other instruments and
documents, including without limitation Uniform Commercial Code financing statements (or the
foreign equivalent, if applicable), required to be executed or delivered pursuant to any Security
Document, and each of the other agreements, instruments or documents that creates or purports to
create a Lien in favor of the Administrative Agent for the benefit of the Secured Parties.



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



     Shrink Reserve. From time to time and to the extent that Shrink was not deducted in
determining Net Book Value, the Borrowers’ then current general ledger reserve for Shrink;
provided that the determination of such current general ledger reserve is consistent with
the methodologies used in the Borrowers’ most recent physical inventory summary results delivered
to the Co-Collateral Agents on or about September 2009.



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     Small Format Stores. The stores owned by any Borrower or any of its Subsidiaries that
consist of Waldenbooks stores, Borders airport stores, “Borders Express” stores and “Borders
Outlet” stores.



     Solvent. With respect to any Person on a particular date, that on such date (a) the
fair value of the Property of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, (b) the present fair
saleable value of the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute and matured, (c)
such Person is able to realize upon its 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 or liabilities beyond such
Person’s ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in
business or a transaction, and is not about to engage in business or a transaction, for which such
Person’s property would constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which such Person is engaged. In computing the amount of
contingent liabilities at any time, it is intended that such liabilities will be computed at the
amount which, in light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.



     Spot Rate. For a currency, the rate determined by the Administrative Agent to be the
rate quoted by the Person acting in such capacity as the spot rate for the purchase by such Person
of such currency with another currency through its principal foreign exchange trading office at
approximately 11:00 a.m. on the date two Business Days prior to the date as of which the foreign
exchange computation is made; provided that the Administrative Agent may obtain such spot
rate from another financial institution designated by the Administrative Agent if the Person acting
in such capacity does not have as of the date of determination a spot buying rate for any such
currency.



     Subordinated Debt. Indebtedness of a Borrower or Guarantor that is subordinate in
right of payment to any or all of the Obligations on terms and conditions reasonably satisfactory
to the Administrative Agent and which provides, without limitation, (a) for a maturity after the
Maturity Date with respect to the Extended Tranche, (b) that such Indebtedness is unsecured, (c)
that no principal payments shall be required to be made until after the Maturity Date with respect
to the Extended Tranche, and (d) interest shall accrue and be payable in kind and/or in cash
(subject to the right of the Administrative Agent to impose a payment blockage period upon the
occurrence and during the continuance of any Default or Event of Default) at a rate of interest
reasonably acceptable to the Administrative Agent.



     Subsidiary. 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 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
securities or other ownership interests representing more than 50% of the equity or more than 50%
of the ordinary voting power or, in the case of a partnership, more than 50% of the general
partnership interests are, 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.



     Swap Termination Value. In respect of any one or more Hedging Agreements, after
taking into account the effect of any legally enforceable netting agreement relating to such
Hedging Agreements, (a) for any date on or after the date such Hedging Agreements have been closed
out and termination value(s) determined in accordance therewith, such termination value(s), and (b)
for any date prior to the date referenced in clause (a), the amount(s) determined as the
mark-to-market value(s) for such Hedging



- 35 -









 




Agreements, as determined based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Hedging Agreements (which may include a Lender
or any Affiliate of a Lender).




     Swingline Lender. Bank of America in its capacity as lender of Swingline Loans
hereunder.



     Swingline Expiry Date. The date which is five (5) Business Days prior to the Maturity
Date.



     Swingline Exposure. At any time, the aggregate principal amount of all Swingline
Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be its
Commitment Percentage of the total Swingline Exposure at such time.



     Swingline Loan. Any loan made by the Swingline Lender to the Borrowers pursuant to
§2.5.1 hereof.



     Swingline Loan Request. See §2.5.2.



     Swingline Note. See §2.6.6.



     Swingline Note Record. A record attached to the Swingline Note.



     Swingline Sublimit. $50,000,000.



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



     Taxes. All present or future taxes, including all levies, imposts, duties,
deductions, withholdings (including backup withholding), assessments, fees or other similar charges
relating to such amounts imposed by any Governmental Authority, including any interest, additions
to tax or penalties applicable thereto.



     Term Borrowing Base Reserve. A reserve against the Aggregate Borrowing Base to be
included in the calculation of the Aggregate Borrowing Base at any time the outstanding principal
amount of the loans under the Second Lien Loan Facility exceed the Term Loan Facility Borrowing
Base (as defined in the Second Lien Loan Agreement), the amount of which shall equal the difference
between such outstanding principal amount of such loans and the Term Loan Facility Borrowing Base
at such time, until the delivery of a subsequent Borrowing Base Report reflecting that such excess
is eliminated.



     Total Commitment. The sum of the Commitments of the Lenders, as in effect from time
to time. On the Effective Date, the Total Commitment shall be $970,500,000.



     Total Facility Usage. At any time, the sum of the Revolving Credit Loans outstanding,
the LC Exposure and the Swingline Loans outstanding.



     Total Facility Usage Ratio. The ratio, expressed as a percentage, of (i) the Total
Facility Usage at such time to (ii) the lesser of (A) the Total Commitment at such time or (B) the
Aggregate Borrowing Base at such time.



     Trademarks. As defined in the Security Agreement.



     Trademark Security Agreement. That certain Trademark Collateral and Security Pledge
Agreement, executed and delivered on the Effective Date, among the Borrowers, the Guarantors, each
of



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their respective Subsidiaries and the Administrative Agent, in form and substance satisfactory
to the Administrative Agent and any other trademark security agreement or joinder or supplement
thereto that may be entered into after the Effective Date with respect to a Subsidiary of a
Borrower or a Guarantor formed or acquired after the Effective Date and required to join such
trademark security agreement hereunder, each as amended, supplemented or otherwise modified from
time to time.




     Tranche. Collectively, the Extended Tranche and the Existing Tranche, and
individually either the Extended Tranche or the Existing Tranche, in each case, of the Revolving
Credit Facility.



     Type. As to any Revolving Credit Loan, its nature as a Base Rate Loan or a
Eurocurrency Rate Loan.



     Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the Borrowers
do not reimburse the Administrative Agent, any Issuing Bank and the Lenders on the date specified
in, and in accordance with, §4.2.



     Wholly-owned Subsidiary. Any Subsidiary of BGI of which all of the outstanding shares
of capital stock or other equity interests are owned by BGI (whether directly or through one or
more Wholly-owned Subsidiaries of BGI) except for (a) directors’ qualifying shares in jurisdictions
where such qualifying shares are required, and (b) non-voting stock issued pursuant to employee
stock or stock option plans; provided that (i) in respect of Paperchase, such stock shall
be in lieu of cash compensation that the applicable employees would otherwise have received in the
ordinary course of business, as reasonably determined by the board of directors or other governing
body of Paperchase, and (ii) in respect of any other Subsidiary, the aggregate amount of such stock
shall not exceed 1% of such Subsidiary’s outstanding stock.



     1.2. Rules of Interpretation.




     (a) A reference to any document or agreement shall include such document or
agreement as amended, modified or supplemented from time to time in accordance with
its terms and the terms of this Credit Agreement; provided that any terms
used herein which are defined by reference to the Second Lien Loan Agreement shall
mean such terms as defined in the Second Lien Loan Agreement as of the Effective
Date, without giving effect to any modifications or amendments thereto except as in
accordance with the Intercreditor Agreement.




     (b) The singular includes the plural and the plural includes the singular.




     (c) A reference to any law includes any amendment or modification to such law.




     (d) A reference to any Person includes its permitted successors and permitted
assigns.




     (e) Accounting terms not otherwise defined herein have the meanings assigned to
them by GAAP applied on a consistent basis by the accounting entity to which they
refer.




     (f) The words “include”, “includes” and “including” are not limiting.



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     (g) All terms not specifically defined herein or by GAAP, which terms are
defined in the Uniform Commercial Code as in effect in the State of New York, have
the meanings assigned to them therein, with the term “instrument” being that defined
under Article 9 of the Uniform Commercial Code.




     (h) Reference to a particular “§” refers to that section of this Credit
Agreement unless otherwise indicated.




     (i) The words “herein”, “hereof”, “hereunder” and words of like import shall
refer to this Credit Agreement as a whole and not to any particular section or
subdivision of this Credit Agreement.




     (j) Unless otherwise expressly indicated, in the computation of periods of time
from a specified date to a later specified date, the word “from” means “from and
including,” the words “to” and “until” each mean “to but excluding,” and the word
“through” means “to and including.”




     (k) This Credit Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are, however, cumulative and
are to be performed in accordance with the terms thereof.




     (l) This Credit Agreement and the other Loan Documents are the result of
negotiation among, and have been reviewed by counsel to, among others, the
Administrative Agent and the Borrowers and are the product of discussions and
negotiations among all parties. Accordingly, this Credit Agreement and the other
Loan Documents are not intended to be construed against any Agent or any of the
Lenders merely on account of any Agent’s or any Lender’s involvement in the
preparation of such documents.



     1.3. Accounting Principles. Except as otherwise provided in this Credit Agreement,
all computations and determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Credit Agreement shall be made and prepared in
accordance with GAAP (including principles of consolidation where appropriate); provided, however,
that if any change in GAAP or the application thereof occurs hereafter, or if BGI adopts a change
to its accounting principles or methods with the agreement of its independent certified public
accountants, and such change results in a change in the calculation of any financial covenant or
restriction set forth herein, then the parties hereto agree to enter into and diligently pursue
negotiations in order to amend such financial covenant or restriction so as to equitably reflect
such change, with the desired result that the criteria for evaluating the financial condition and
results of operations of BGI and its Subsidiaries shall be the same after such change as if such
change had not been made. Pending the resolution of any such negotiations, the Borrowers agree to
provide to each of the Lenders such unaudited financial information and pro forma statements using
the accounting methods and principles used in the preparation of the audited financial statements
for the Fiscal Year ended as of the Balance Sheet Date, as are necessary to enable the Lenders to
test the financial covenants contained herein. Notwithstanding the foregoing, for purposes of
determining compliance with any covenant contained herein, Indebtedness of the Borrowers and their
Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and
the effects of FASB ASC 825 on financial liabilities shall be disregarded.



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2. THE CREDIT FACILITIES.




     2.1. Revolving Credit Loans.




     2.1.1. Commitment to Lend under Revolving Credit Facility. Subject to
the terms and conditions set forth in this Credit Agreement, each of the Revolving
Lenders severally agrees to lend to the Borrowers and the Borrowers may borrow,
repay (subject to §3.3), and reborrow from time to time from the Effective Date up
to but not including the relevant Commitment Termination Date upon notice by the
Borrowers to the Administrative Agent given in accordance with §2.1.3, such sums in
Dollars as are requested by the Borrowers up to a maximum aggregate amount
outstanding (after giving effect to all amounts requested) at any one time equal to
such Lender’s Commitment in effect at such time, as such Commitment has been deemed
to be reduced by such Lender’s Commitment Percentage of the outstanding Swingline
Loans and such Lender’s LC Exposure, provided that (in each case, after
giving effect to all amounts requested) (a) the Total Facility Usage shall not
exceed the lesser of (i) the Total Commitment or (ii) the Aggregate Borrowing Base
as then in effect and (b) no Lender shall be required to advance Revolving Credit
Loans, which, when added to such Lender’s Commitment Percentage of outstanding
Swingline Loans and LC Exposure, would be in excess of its Commitment Percentage as
then in effect.



     Notwithstanding the foregoing, the Borrowers shall not request, and the Lenders shall not
advance, any Loans (other than (x) Revolving Credit Loans used to reimburse Swingline Loans as
provided in §2.5.3 and (y) Revolving Credit Loans used to reimburse a draw on a Letter of Credit as
provided in §4.3) at any time when, after giving effect to all amounts requested, Excess
Availability is less than the greater of (a) ten percent (10%) of the lesser of (i) the Aggregate
Borrowing Base and (ii) the Total Commitment and (b) $50,000,000.



     The Revolving Credit Loans shall be made pro rata between the respective Tranches, to the
extent applicable, of the Revolving Credit Facility in accordance with each Revolving Lender’s
Commitment Percentage applicable at such time. Each request for a Revolving Credit Loan hereunder
shall constitute a representation and warranty by the applicable Borrower or, as the case may be,
Borrowers that the conditions set forth above and in (A) §11 and §12, in the case of the initial
Revolving Credit Loans to be made on the Effective Date, and (B) §12, in the case of all other
Revolving Credit Loans, have been satisfied on the date of such request, and shall be deemed to
constitute a request for Loans under the Existing Tranche and Extended Tranche, to the extent
applicable, of the Revolving Credit Facility, pro rata.




     2.1.2. [Reserved].




     2.1.3. Requests for Loans. The applicable Borrower or, as the case may
be, Borrowers shall give to the Administrative Agent written notice in the form of
Exhibit B hereto (or telephonic notice confirmed in a writing in the form of
Exhibit B hereto) of each Revolving Credit Loan requested hereunder (in any
case, a “RevolvingLoanRequest”) no later than (a) 1:00 p.m.
(Eastern time) one (1) Business Day prior to the proposed Drawdown Date of any Base
Rate Loan and (b) 10:00 a.m. (Eastern time) three (3) Business Days prior to the
proposed Drawdown Date of any Eurocurrency Rate Loan. Each such notice shall
specify (i) the principal amount of the Revolving Credit Loan requested, (ii) the
proposed Drawdown Date of such Loan(s), (iii) the Interest Period for such Loan(s)
and (iv) the Type of such Loan(s). Promptly upon receipt of any such notice, the
Administrative Agent shall notify each of the Lenders thereof. Each



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Revolving Loan Request shall be irrevocable and binding on the applicable
Borrower or, as the case may be, Borrowers and shall obligate the applicable
Borrower or, as the case may be, Borrowers to accept the Loan requested from the
applicable Lenders on the proposed Drawdown Date. Each Revolving Loan Request shall
be in a minimum aggregate amount of $2,000,000 or a multiple of $1,000,000 in excess
thereof.



     2.2. Fees.




     2.2.1. Existing Commitment Fee. The Borrowers agree to pay to the
Administrative Agent for the accounts of the Lenders having Commitments under the
Existing Tranche, in accordance with their Commitment Percentages, a commitment fee
(the “Existing Commitment Fee”) in Dollars equal to 0.25% per annum
times the average daily amount by which the Total Commitment exceeds the
result of (x) the Total Facility Usage minus (y) the Swingline Loans
outstanding. The Existing Commitment Fee shall accrue at all times from the
Effective Date up to but not including the Maturity Date, including at any time
during which one or more of the conditions in §12 is not met, and shall be due and
payable quarterly in arrears on the first Business Day of each April, July, October
and January, commencing with the first such date to occur after the Effective Date,
and on the Maturity Date. The Existing Commitment Fee shall be calculated quarterly
in arrears.




     2.2.2. Extended Commitment Fee. The Borrowers agree to pay to the
Administrative Agent for the accounts of the Lenders having Commitments under the
Extended Tranche, in accordance with their respective Commitment Percentages, a
commitment fee (the “Extended Commitment Fee”) in Dollars equal to
(i) in the event that the arithmetic mean of the Total Facility Usage Ratio for a
quarterly computation period is less than fifty percent (50%) of the lesser of (A)
the Total Commitment or (B) the Aggregate Borrowing Base, 0.75% per annum
times the average daily amount by which the Total Commitment exceeds the
result of (x) the Total Facility Usage minus (y) the Swingline Loans
outstanding and (ii) in the event that the arithmetic mean of the Total Facility
Usage Ratio for a quarterly computation period is equal to or greater than fifty
percent (50%) of the lesser of (1) the Total Commitment or (2) the Aggregate
Borrowing Base, 0.50% per annum times the average daily amount by which the
Total Commitment exceeds the result of (x) the Total Facility Usage minus
(y) the Swingline Loans outstanding. The Extended Commitment Fee shall accrue at
all times from the Effective Date up to but not including the Maturity Date,
including at any time during which one or more of the conditions in §12 is not met,
and shall be due and payable quarterly in arrears on the first Business Day of each
April, July, October and January, based on the arithmetic mean of the Total Facility
Usage Ratio for the immediately preceding three-month period, commencing with the
first such date to occur after the Effective Date, and on the Maturity Date. The
Extended Commitment Fee shall be calculated quarterly in arrears.



     2.3. Changes in Total Commitment.




     2.3.1. Reduction of Total Commitment. The Borrowers shall have the
right at any time and from time to time upon five (5) Business Days prior written
notice to the Administrative Agent to reduce by $10,000,000 or increments of
$5,000,000 in excess thereof or to terminate entirely the Total Commitment,
whereupon the Commitments of the Lenders shall be reduced pro rata between the
Extended Tranche and the Existing Tranche of the Revolving Credit Facility in
accordance with their respective



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Commitment Percentages of the amount specified in such notice or, as the case
may be, terminated. Promptly after receiving any notice of the Borrowers delivered
pursuant to this §2.3.1, the Administrative Agent will notify the Lenders of the
substance thereof. Upon the effective date of any such reduction or termination,
the Borrowers shall pay to the Administrative Agent for the respective accounts of
the Lenders the full amount of any Commitment Fee, if any, then accrued on the
amount of the reduction. No reduction or termination of the Commitments may be
reinstated.




     2.3.2. Termination of Existing Tranche. Subject to the conditions in
this §2.3.2, upon thirty (30) days prior notice, on the ninetieth (90th) day
following the Effective Date, the Borrowers shall have the right to terminate
entirely the Commitments of the Lenders under the Existing Tranche, whereupon all of
the Commitments of the Lenders under the Existing Tranche shall be terminated;
provided that (a) no Default or Event of Default has occurred and is
continuing or would result therefrom, (b) the Borrowers may not terminate the
Commitments under the Existing Tranche under this §2.3.2 unless there exists a
minimum Excess Availability of $80,000,000 under the Extended Tranche (i) at all
times during the period of thirty (30) consecutive days immediately prior to the
termination of the Commitments under the Existing Tranche and the repayment of all
Loans under the Existing Tranche, and (ii) on a pro forma basis (x) immediately
after giving effect to any such termination of the Commitments under the Existing
Tranche and repayment of all Loans thereunder and (y) at all times during each of
the successive six (6) months after giving effect to any such termination and
repayment of the Existing Tranche, in each case based upon projections provided by
the Borrowers within thirty (30) days before the date of the proposed termination
and repayment of the Existing Tranche. Promptly after receiving any notice of the
Borrowers delivered pursuant to this §2.3.2, the Administrative Agent will notify
the Revolving Lenders of the substance thereof. Upon the effective date of any such
termination, the Borrowers shall pay to the Administrative Agent for the respective
accounts of the Lenders under the Existing Tranche the full amount of any Existing
Commitment Fee, if any, then accrued. No termination of the Commitments under the
Existing Tranche may be reinstated.




     2.3.3. Increase in Commitment Applicable to Extended Tranche.
Following the Effective Date, so long as no Default or Event of Default has occurred
and is then continuing or would result therefrom, the Borrowers may from time to
time request that the Total Commitment applicable to the Extended Tranche be
increased and, upon such request, the Administrative Agent shall have the right to
solicit additional financial institutions to become Extending Revolving Lenders for
purposes of this Credit Agreement, or to encourage any Lender to increase its
Commitment under the Extended Tranche, provided that (a) any such request
for an increase shall be in a minimum amount of $50,000,000; (b) the Borrowers may
make a maximum of three such requests over the term of this Credit Agreement; (c)
each Extending Revolving Lender which is a party to this Credit Agreement prior to
such increase shall have the first option, and may elect, to fund its pro
rata share of the amount of the increase in the Total Commitment (or any
such greater amount in the event that one or more Extending Revolving Lenders does
not elect to fund its respective pro rata share of the amount of the
increase in the Total Commitment), thereby increasing its Commitment under the
Extended Tranche hereunder, but no Lender shall have any obligation to do so; (d) in
the event that it becomes necessary to include a new financial institution to fund
the amount of the increase in the Total Commitment, each such financial institution
shall be reasonably acceptable to the Administrative Agent and each such financial
institution shall become



- 41 -









 







an Extending Revolving Lender hereunder and agree to become party to, and shall
assume and agree to be bound by, this Credit Agreement, subject to all terms and
conditions hereof; (e) none of the Administrative Agent or the other Agents shall
have any obligation to the Borrowers or to any Lender to solicit additional
financial institutions or any increase in the Commitment of any Extending Revolving
Lender pursuant to this §2.3.3; (f) no Extending Revolving Lender shall have an
obligation to the Borrowers, the Agents or any other Lender to increase its
Commitment or its Commitment Percentage; and (g) in no event shall the addition of
any Extending Revolving Lender or the increase in the Commitment of any Extending
Revolving Lender under this §2.3.3 increase the Total Commitment by an amount
greater than $175,000,000 in the aggregate. Upon the addition of any Extending
Revolving Lender, or the increase in the Commitment of any Extending Revolving
Lender, Schedule 1 shall be amended by the Administrative Agent and the
Borrowers to reflect such addition or such increase, and the Administrative Agent
shall deliver to the Lenders, the Agents, the Issuing Bank(s) and BGI copies of such
Schedule 1. If, at any time that the Commitments are increased pursuant to
this §2.3.3, there are Revolving Credit Loans then outstanding or any LC Exposure
then existing, each new Extending Revolving Lender, and each existing Extending
Revolving Lender that has increased its Commitment, shall purchase Loans under the
Extended Tranche and LC Exposure from each other Extending Revolving Lender in an
amount such that, after such purchase or purchases, the amount of outstanding Loans
and LC Exposure from each Extending Revolving Lender shall equal such Extending
Revolving Lender’s respective Commitment Percentage, as modified to give effect to
such increase, multiplied by the aggregate amount of Loans outstanding and LC
Exposure from all Lenders. To the extent that any outstanding Loans under the
Extended Tranche bear interest at the Eurocurrency Rate, the Borrowers shall pay any
additional costs described in §5.10 incurred by any Extending Revolving Lender.



     2.4. Hedging Agreements and Cash Management Services. Each Person providing Cash
Management Services for, or having Hedging Agreements with, any Borrower or any Guarantor shall
deliver to the Administrative Agent promptly on or before the Effective Date notice setting forth
the aggregate amount of all obligations of any Borrower or any Guarantor on account of such Cash
Management Services and/or Hedging Agreements (whether matured or unmatured, absolute or
contingent) as of the Effective Date. Following the end of each calendar month, each Person
providing Cash Management Services for, or having Hedging Agreements with, any Borrower or any
Guarantor shall deliver to the Administrative Agent promptly notice setting forth any new Cash
Management Services or Hedging Agreement, if applicable, or any change, if applicable, in the
aggregate amount of all obligations of any Borrower or any Guarantor on account of such Cash
Management Services and/or Hedging Agreements (whether matured or unmatured, absolute or
contingent) as of the end of such month. The obligations due with respect to Cash Management
Services and/or Hedging Agreements provided by any Person who fails to timely furnish the
Administrative Agent with such notice shall be subordinated to the Liens securing Indebtedness
pursuant to the Loan Documents and Liens securing Indebtedness with respect to the Second Lien Loan
Facility.



     2.5. The Swingline.




     2.5.1. The Swingline Loans. From the date hereof through but not
including the Swingline Expiry Date, and subject to the terms and conditions
hereinafter set forth, upon notice by the Borrowers made to the Swingline Lender in
accordance with §2.5.2 hereof, and in reliance upon the agreements of the other
Lenders set forth in this §2.5, the Swingline Lender may in its sole discretion make
Swingline Loans to the Borrowers from



- 42 -









 







time to time in Dollars on any Business Day in an aggregate principal amount
not to exceed the Swingline Sublimit. Each Swingline Loan shall be in a minimum
amount equal to $250,000 or a multiple of $100,000 in excess thereof.
Notwithstanding any other provisions of this Credit Agreement and in addition to the
limit set forth above, at no time shall the Total Facility Usage (after giving
effect to all amounts requested) exceed the lesser of (i) the Total Commitment or
(ii) the Aggregate Borrowing Base as then in effect. The Swingline Loans are being
made available for the administrative convenience of the Borrowers, the Swingline
Lender and the Lenders. Notwithstanding any other provisions of this Credit
Agreement, the Swingline Lender shall not advance any Swingline Loans if a Default
or Event of Default has occurred until such Default or Event of Default has been
cured or waived in accordance with the provisions of this Credit Agreement. The
Swingline Lender shall not be obligated to make any Swingline Loans at any time when
any Lender is a Delinquent Lender unless the Swingline Lender has entered into
arrangements satisfactory to it to eliminate the Swingline Lender’s risk of full
reimbursement with respect to such Delinquent Lender, including by Cash
Collateralizing such Delinquent Lender’s Commitment Percentage of the outstanding
Swingline Loans and any such additional Swingline Loans to be made as set forth in
this Agreement. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrowers may borrow, prepay and reborrow Swingline Loans.
Each request for a Swingline Loan hereunder shall constitute a representation and
warranty by the Borrowers that the conditions set forth above and in §11 and §12, in
the case of any Swingline Loans to be made on the Effective Date, and §12, in the
case of all other Swingline Loans, have been satisfied on the date of such request.




     2.5.2. Request for Swingline Loans. To request a Swingline Loan, the
Borrowers shall send to the Swingline Lender and the Administrative Agent written
notice in the form of Exhibit C hereto of each Swingline Loan requested
hereunder (a “Swingline Loan Request”) not later than 12:00 Noon (Eastern
time) on the proposed Drawdown Date of any Swingline Loan, which shall be a Business
Day. Each such Swingline Loan Request shall set forth the principal amount of the
proposed Swingline Loan and the Drawdown Date of such Swingline Loan.
Notwithstanding the foregoing, each of the Swingline Lender and the Administrative
Agent may, in its sole discretion, accept an oral or written request made on behalf
of the Borrowers by an Authorized Officer by telephone, telex, facsimile or some
other form of written electronic communication, in which case the Swingline Lender
and the Administrative Agent shall be entitled to rely on any such oral or written
request received by the Swingline Lender and the Administrative Agent in good faith
from anyone reasonably believed by the Swingline Lender or the Administrative Agent
to be an Authorized Officer. The Borrowers shall promptly confirm any such
communication by delivery of a Swingline Loan Request upon request of the Swingline
Lender or the Administrative Agent. Each Swingline Loan Request shall be
irrevocable and binding on the Borrowers and shall obligate the Borrowers to borrow
the Swingline Loan from the Swingline Lender on the proposed Drawdown Date thereof.
Unless the Swingline Lender has received notice (by telephone or in writing) from
the Administrative Agent (including at the request of any Lender) prior to 2:00 p.m.
(Eastern time) on the date of the proposed Swingline Loan (A) directing the
Swingline Lender not to make such Swingline Loan as a result of the limitations set
forth in the third sentence of §2.5.1, or (B) that one or more of the applicable
conditions specified in §12 is not then satisfied, then, upon satisfaction of the
applicable conditions set forth in this Credit Agreement, on the proposed Drawdown
Date the Swingline Lender shall make the Swingline Loan available to the Borrowers
no later than 3:00 p.m. (Eastern time) on the proposed Drawdown Date by crediting
the amount



- 43 -









 







of the Swingline Loan to the general deposit account of the Borrowers
maintained with the Swingline Lender.




     2.5.3. Borrowings to Repay Swingline Loans. The Borrowers jointly and
severally, absolutely, irrevocably and unconditionally promise to pay on the
Swingline Expiry Date the outstanding principal balance of all Swingline Loans. The
Borrowers may prepay the Swingline Loans at any time without penalty or premium. In
addition, the Swingline Lender may, on any Business Day, in its sole discretion,
demand repayment of the Swingline Loans and the Administrative Agent shall give
notice to the Lenders that the outstanding Swingline Loans shall be funded with a
borrowing of Loans prior to the Commitment Termination Date (provided that each such
notice shall be deemed to have been automatically given upon the occurrence of a
Default or Event of Default under §13.1(g) or (h) or upon the exercise of remedies
provided in the last paragraph of §13.1), in which case each of the Lenders shall
make Loans constituting Base Rate Loans to the Borrowers, on the next succeeding
Business Day following such notice, in an amount equal to such Revolving Lender’s
Commitment Percentage of the aggregate amount of all Swingline Loans outstanding to
the Borrowers. The proceeds thereof shall be applied directly to the Swingline
Lender to repay the Swingline Lender for such outstanding Swingline Loans. Each
Lender hereby absolutely, unconditionally and irrevocably agrees to make such Loans
upon one Business Day’s notice as set forth above, notwithstanding (a) that the
amount of such Loan may not comply with the applicable minimums otherwise required
hereunder, (b) the failure of the Borrowers to meet the conditions set forth in §§11
or 12 hereof, (c) the occurrence or continuance of a Default or an Event of Default
hereunder, (d) the date of such Loan, (e) the amount of, or termination of, the
Total Commitment at such time, (f) any setoff, counterclaim, recoupment, defense or
other right which such Lender may have against the Administrative Agent, the
Borrowers or any other Person for any reason whatsoever or (g) any other occurrence,
event or condition, whether or not similar to any of the foregoing. In the event
that it is impracticable for such Loan to be made for any reason on the date
otherwise required above (including as a result of the commencement of a proceeding
under the federal Bankruptcy Code in respect of any of the Borrowers), then each
Lender hereby agrees that it shall forthwith purchase (as of the date such Loan
would have been made, but adjusted for any payments received from the Borrowers on
or after such date and prior to such purchase) from the Swingline Lender, and the
Swingline Lender shall sell to each Lender, such participations in the Swingline
Loans (including all accrued and unpaid interest thereon) outstanding as shall be
necessary to cause the Lenders to share in such Swingline Loans pro rata based on
their respective Commitment Percentages (without regard to any termination of the
Total Commitment hereunder) by making available to the Swingline Lender an amount
equal to such Lender’s participation in the Swingline Loans. No such funding of
risk participations shall relieve or otherwise impair the obligation of the
Borrowers to repay Swingline Loans, together with interest as provided herein.
Notwithstanding anything in the foregoing to the contrary, following the termination
of the Commitments under the Existing Tranche (so long as no Default or Event of
Default has occurred and is continuing at the time of such termination), the
Extending Revolving Lenders shall be responsible for funding any Loans or
participations hereunder in accordance with their respective Commitment Percentages
after giving effect to such termination.




     Until each Lender funds its applicable Loan or risk participation pursuant to
this §2.5.3 to refinance such Lender’s Commitment Percentage of any Swingline Loan,
interest in respect of such pro rata share shall be solely for the
account of the Swingline



- 44 -









 







Lender. The Swingline Lender shall be responsible for invoicing the Borrowers
for interest on the Swingline Loans. The Borrowers shall make all payments of
principal and interest in respect of the Swingline Loans directly to the Swingline
Lender.




     If any Lender fails to make available to the Swingline Lender for the account
of the Swingline Lender any amount required to be paid by such Lender pursuant to
the foregoing provisions of this §2.5.3, the Swingline Lender shall be entitled to
recover from such Lender, on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment is
immediately available to the Swingline Lender at a rate per annum equal to the
Overnight Rate from time to time in effect, plus any administrative, processing or
similar fees customarily charged by the Swingline Lender in connection with the
foregoing. If such Lender pays such amount (with interest and fees as aforesaid),
the amount so paid shall constitute such Lender’s Base Rate Loan included in the
relevant Base Rate borrowing or funded participation in the relevant Swingline Loan,
as the case may be. A certificate of the Swingline Lender submitted to any Lender
with respect to any amounts owing under this §2.5.3 shall be conclusive absent
manifest error.




     2.5.4. Repayment of Participations.




     (a) At any time after any Lender has purchased and funded a risk participation
in a Swingline Loan, if the Swingline Lender receives any payment on account of such
Swingline Loan, the Swingline Lender will distribute to such Lender its pro
rata share thereof based on such Lender’s Commitment Percentage, in the same
funds as those received by the Swingline Lender.




     (b) If any payment received by the Swingline Lender in respect of principal or
interest on any Swingline Loan is required to be returned by the Swingline Lender
under any of the circumstances described in §16.3A (including pursuant to any
settlement entered into by the Swingline Lender in its discretion), each Lender
shall pay to the Swingline Lender its pro rata share thereof based
on such Lender’s Commitment Percentage, on demand of the Swingline Lender, plus
interest thereon from the date of such demand to the date such amount is returned,
at a rate per annum equal to the applicable Overnight Rate. The obligations of the
Lenders under this clause shall survive the payment in full of the Obligations and
the termination of this Credit Agreement.




     2.5.5. Voluntary Reduction of Swingline Sublimit. The Borrowers shall
have the right, at any time and from time to time, to terminate in whole or
permanently reduce in part, without premium or penalty, the Swingline Sublimit. The
Borrowers shall give not less than five (5) Business Days’ prior written notice to
the Swingline Lender designating the date (which shall be a Business Day) of such
termination or reduction and the amount of any partial reduction of the Swingline
Sublimit. Such termination or partial reduction of the Swingline Sublimit shall be
effective on the date specified in the Borrowers’ notice and shall be permanent.
Any such partial reduction of the Swingline Sublimit shall be in a minimum amount of
$1,000,000.



     2.6. Evidence of Loan Obligations.




     2.6.1. Loan Accounts. The Loans made by each Lender and each Lender’s
obligations in respect of any Letters of Credit shall be evidenced by one or more
accounts or records maintained by such Lender and by the Administrative Agent in the
ordinary



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course of business. The accounts or records maintained by the Administrative
Agent and each Lender shall be conclusive absent manifest error of the amount of the
Loans made by the Lenders and such Lender’s obligations in respect of Letters of
Credit and the interest and payments thereon. Any failure to so record or any error
in doing so shall not, however, limit or otherwise affect the obligation of the
Borrowers hereunder to pay any amount owing with respect to the Obligations. In the
event of any conflict between the accounts and records maintained by any Lender and
the accounts and records of the Administrative Agent in respect of such matters, the
accounts and records of the Administrative Agent shall control in the absence of
manifest error. Upon the request of any Lender to a Borrower made through the
Administrative Agent, such Borrower shall execute and deliver to such Lender
(through the Administrative Agent) a Note as set forth in §§2.6.2 through 2.6.6, as
applicable, which shall evidence such Lender’s Loans to such Borrower in addition to
such accounts or records. Each Lender may attach schedules to a Note and endorse
thereon the date, type, amount, currency, and maturity of its Loans and payments
with respect thereto.




     2.6.2. The Revolving Notes. Upon the request of any Lender to the
Borrowers, such Lender’s Revolving Credit Loans shall be evidenced by separate
promissory notes of the Borrowers in substantially the form of Exhibit A-1
hereto (each a “Revolving Note”) in each case dated as of the Effective Date
(or such other date on which a Lender may become a party hereto in accordance with
§15 hereof) and completed with appropriate insertions. One Revolving Note shall be
payable to the order of each such requesting Lender in a principal amount equal to
such Lender’s Commitment or, if less, the outstanding amount of all Revolving Credit
Loans made by such Lender, plus interest accrued thereon, as set forth below. Each
of the Borrowers irrevocably authorizes each Lender to make or cause to be made, at
or about the time of the Drawdown Date of any Loan or at the time of receipt of any
payment of principal on such Lender’s applicable Revolving Note, an appropriate
notation on such Lender’s Borrower Note Record reflecting the making of such Loan or
(as the case may be) the receipt of such payment.




     2.6.3. [Reserved].




     2.6.4. [Reserved].




     2.6.5. [Reserved].




     2.6.6. The Swingline Note. Upon the request of the Swingline Lender to
the Borrowers, the Swingline Loans shall be evidenced by a promissory note of the
Borrowers in substantially the form of Exhibit A-2 hereto (the
“Swingline Note”), dated as of the Effective Date with appropriate
insertions. The Swingline Note shall be payable to the order of the Swingline
Lender in a principal amount equal to the Swingline Sublimit and representing the
obligation of the Borrowers to pay to the Swingline Lender the aggregate unpaid
principal amount of all Swingline Loans made by the Swingline Lender hereunder plus
interest accrued thereon as set forth below. The Borrowers hereby irrevocably
authorize the Swingline Lender to make or cause to be made, at or about the time of
each Swingline Loan to the Borrowers made by the Swingline Lender and at the time of
receipt of any payment of principal on the Swingline Note of the Swingline Lender,
an appropriate notation on the Swingline Lender’s Swingline Note Record or the
Swingline Lender’s electronic data processing equipment reflecting the making of
such Swingline Loan or (as the case may be) the receipt of such payment.



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     2.6.7. Participating Interests of Lenders. In addition to the accounts
and records referred to in §2.6.1, each Lender and the Administrative Agent shall
maintain in accordance with its usual practice accounts or records evidencing the
purchases and sales by such Lender of participations in Letters of Credit and
Swingline Loans. In the event of any conflict between the accounts and records
maintained by the Administrative Agent and the accounts and records of any Lender in
respect of such matters, the accounts and records of the Administrative Agent shall
control in the absence of manifest error.



     2.7. Interest on Loans. Except as otherwise provided in §5.11:




     (a) each Revolving Credit Loan which is a Base Rate Loan shall bear interest
for the period commencing with the Drawdown Date thereof and ending on the last day
of the Interest Period with respect thereto at the rate per annum equal to the Base
Rate plus the Applicable Margin with respect to Base Rate Loans as in effect
from time to time.




     (b) each Revolving Credit Loan which is a Eurocurrency Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and ending on the
last day of the Interest Period with respect thereto at the rate per annum equal to
the Eurocurrency Rate determined for such Interest Period plus the
Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to
time.




     (c) each Swingline Loan shall bear interest from the Drawdown Date thereof
until repaid in full at the rate per annum equal to the Base Rate plus the
Applicable Margin with respect to Base Rate Loans as in effect from time to time.
Swingline Loans may not be converted into Eurocurrency Rate Loans.




     (d) each Borrower promises to pay interest on each Loan made to it (and the
Borrowers jointly and severally promise to pay interest on all the Loans) in arrears
on each Interest Payment Date with respect thereto and at such other times as may be
specified herein. Interest on the Loans shall be payable in Dollars. Interest
hereunder shall be due and payable in accordance with the terms hereof before and
after judgment, and before and after the commencement of any proceeding under any
Debtor Relief Laws.



     2.8. Conversion Options.




     2.8.1. Conversion to Different Type of Loan. The applicable Borrower
or, as the case may be, Borrowers may elect from time to time to convert any
outstanding Loan (other than a Swingline Loan) to a Loan of another Type,
provided that (a) with respect to any such conversion of a Eurocurrency Rate
Loan to a Base Rate Loan, the applicable Borrower or, as the case may be, Borrowers
shall give the Administrative Agent at least three (3) Business Days prior written
notice of such election; (b) with respect to any such conversion of a Base Rate Loan
to a Eurocurrency Rate Loan, the applicable Borrower or, as the case may be,
Borrowers shall give the Administrative Agent at least four (4) Business Days prior
written notice of such election; (c) with respect to any such conversion of a
Eurocurrency Rate Loan into a Base Rate Loan, such conversion shall only be made on
the last day of the Interest Period with respect thereto and (d) no such Loan may be
converted into a Eurocurrency Rate Loan when any Default or Event of Default has
occurred and is continuing. On the date on which such conversion is being made each
Lender shall take such action as is necessary to transfer its Commitment



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Percentage of such Loans to its Domestic Lending Office or its Eurocurrency
Lending Office, as the case may be. All or any part of outstanding Loans (other
than Swingline Loans) of any Type may be converted into a Loan of another Type as
provided herein, provided that any partial conversion shall be in an
aggregate principal amount of $5,000,000 or a multiple of $1,000,000 in excess
thereof. Each Conversion Request relating to the conversion of a Loan (other than a
Swingline Loan) to a Eurocurrency Rate Loan shall be irrevocable by the Borrowers.




     2.8.2. Continuation of Type of Loan. Any Loan (other than a Swingline
Loan) of any Type may be continued as a Loan of the same Type upon the expiration of
an Interest Period with respect thereto by compliance by the applicable Borrower or,
as the case may be, Borrowers with the notice provisions contained in §2.8.1;
provided that no Eurocurrency Rate Loan may be continued as such when any
Default or Event of Default has occurred and is continuing, but shall be
automatically converted to a Base Rate Loan on the last day of the first Interest
Period relating thereto ending during the continuance of any Default or Event of
Default of which officers of the Administrative Agent active upon the Borrowers’
account have actual knowledge. In the event that the applicable Borrower or, as the
case may be, Borrowers fail to provide any such notice with respect to the
continuation of any Eurocurrency Rate Loan as such, then as to Eurocurrency Rate
Loans such Eurocurrency Rate Loan shall be automatically converted to a Base Rate
Loan on the last day of the first Interest Period relating thereto. The
Administrative Agent shall notify the Lenders promptly when any such automatic
conversion contemplated by this §2.8 is scheduled to occur.




     2.8.3. Eurocurrency Rate Loans. Any conversion to or from Eurocurrency
Rate Loans shall be in such amounts and be made pursuant to such elections so that,
after giving effect thereto, the aggregate principal amount of all Eurocurrency Rate
Loans having the same Interest Period shall not be less than the equivalent of
$2,000,000 or a whole multiple of $1,000,000 in excess thereof. No more than eight
(8) Eurocurrency Rate Loans having different Interest Periods may be outstanding at
any time and no more than three of such Eurocurrency Rate Loans outstanding at any
time may have an Interest Period of 7 days or 14 days. Any Eurocurrency Rate Loan
having an Interest Period of 7 or 14 days may be continued as such on no more than
one occasion.



     2.9. Funds for Loans.




     2.9.1. Funding Procedures. Not later than 2:00 p.m. (Eastern time) on
the proposed Drawdown Date of any Revolving Credit Loans, each of the applicable
Lenders will make available to the Administrative Agent, at the Administrative
Agent’s Office, in immediately available funds, the amount of such Lender’s
Commitment Percentage of the amount of the requested Loans. Upon receipt from each
Lender of such amount, and upon receipt of the documents required by §§11 and 12 and
the satisfaction of the other conditions set forth therein, to the extent
applicable, the Administrative Agent will make available to the applicable Borrower
or, as the case may be, Borrowers the aggregate amount of such Loans made available
to the Administrative Agent by the applicable Lenders. The failure or refusal of
any Lender to make available to the Administrative Agent at the aforesaid time and
place on any Drawdown Date the amount of its Commitment Percentage of the requested
Loans shall not relieve any other Lender from its several obligation hereunder to
make available to the Administrative Agent the amount of such other Lender’s
Commitment Percentage of any requested Loans.



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     2.9.2. Advances by Administrative Agent. (a) The Administrative Agent
may, unless notified to the contrary by any Lender prior to a Drawdown Date, assume
that such Lender has made available to the Administrative Agent on such Drawdown
Date the amount of such Lender’s Commitment Percentage of the Loans to be made on
such Drawdown Date, and the Administrative Agent may (but it shall not be required
to), in reliance upon such assumption, make available to the applicable Borrower or,
as the case may be, Borrowers a corresponding amount. If any Lender makes available
to the Administrative Agent such amount on a date after such Drawdown Date, such
Lender shall pay to the Administrative Agent on demand an amount equal to the
product of (a) the average computed for the period referred to in clause (c) below,
of the Overnight Rate for each day included in such period times (b) the
amount of such Lender’s Commitment Percentage of such Loans, times (c) a
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Lender’s
Commitment Percentage of such Loans shall become immediately available to the
Administrative Agent, and the denominator of which is 360. A statement of the
Administrative Agent submitted to such Lender with respect to any amounts owing
under this paragraph shall be prima facie evidence of the amount due
and owing to the Administrative Agent by such Lender. If the amount of such
Lender’s Commitment Percentage of such Loans is not made available to the
Administrative Agent by such Lender within three (3) Business Days following such
Drawdown Date, the Administrative Agent shall be entitled to recover such amount
from the applicable Borrower or, as the case may be, Borrowers on demand, with
interest thereon at the rate per annum applicable to such Loans made on such
Drawdown Date.




     (b) Unless the applicable Borrower(s) has or have notified the Administrative
Agent prior to the date any payment is required to be made by it to the
Administrative Agent hereunder, that such Borrower(s) will not make such payment,
the Administrative Agent may assume that such Borrower has timely made such payment
and may (but shall not be so required to), in reliance thereon, make available a
corresponding amount to such Lender. If and to the extent that such payment was not
in fact made to the Administrative Agent by the applicable Borrower in immediately
available funds, then each Lender shall forthwith on demand repay to the
Administrative Agent the portion of such assumed payment that was made available to
such Lender in immediately available funds, together with interest thereon in
respect of each day from and including the date such amount was made available by
the Administrative Agent to such Lender to the date such amount is repaid to the
Administrative Agent in immediately available funds at the Overnight Rate from time
to time in effect.




     (c) A notice of the Administrative Agent to any Lender or any Borrower with
respect to any amount owing under §§2.9.2(a) and (b) shall be conclusive, absent
manifest error.



     2.10. [Reserved].



     2.11. [Reserved].



     2.12. Change in Aggregate Borrowing Base. The Aggregate Borrowing Base shall be
determined monthly (or at such other interval as may be specified pursuant to §8.4(e)) by the
Administrative Agent by reference to the Borrowing Base Report, commercial finance examinations and
collateral audit reports, and the appraisals of Eligible Inventory delivered to the Lenders and the
Administrative Agent pursuant to §§8.9.2 and 8.9.3 and other information obtained by or provided to
the



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Administrative Agent. The Administrative Agent shall give to the Borrowers notice of any
change in the Aggregate Borrowing Base determined by the Administrative Agent. Notwithstanding
anything to the contrary contained herein, in the event that the Administrative Agent receives or
obtains updates or additional information with respect to the Eligible Inventory, Eligible Credit
Card Receivables, Eligible Corporate Sales Receivables (if then included in the Aggregate Borrowing
Base), Borrowing Base Report, Other Reserves, Inventory Reserves, Shrink Reserve, Landlord Lien
Reserve, Hedge Reserve, Net Debt Reserve, Purchase Card Reserve, Term Borrowing Base Reserve,
Equity Reserve, Customer Deposit Reserve, Customer Credit Liability Reserve, commercial finance
examinations and collateral audit reports, and the appraisals of Eligible Inventory and other
information obtained by or provided to the Administrative Agent, the Administrative Agent may
revise the Aggregate Borrowing Base pursuant to such update or additional information and the
Administrative Agent shall give to the Borrowers written notice of any changes in the Aggregate
Borrowing Base determined by the Administrative Agent as a result thereof; provided that
any revisions to the Aggregate Borrowing Base pursuant to such update or additional information
shall not result in more credit being available, and shall not be more favorable to the Borrowers,
than as set forth in this Credit Agreement on the Effective Date without the written consent of the
Required Lenders and in accordance with the Intercreditor Agreement.



     2.13. Overadvances. Notwithstanding anything to the contrary contained elsewhere in
this Credit Agreement, if an Event of Default exists at the time (unless otherwise objected to by
the Required Lenders in writing), the Administrative Agent may in its discretion in order to
preserve and protect the Collateral or to preserve and protect the business of the Borrowers,
require all Revolving Lenders to honor requests or deemed requests by the Borrowers for Revolving
Credit Loans at a time when an Overadvance exists or which would result in an Overadvance and each
Lender shall be obligated to continue to fund its Commitment Percentage of such Revolving Credit
Loans not to exceed a maximum amount outstanding equal to its Commitment so long as (i) such
Overadvance is not known by the Administrative Agent to exceed five percent (5%) of the then
Aggregate Borrowing Base, in the aggregate outstanding at any time, and (ii) such Overadvance is
not outstanding for more than forty-five (45) consecutive days (unless the Required Lenders
otherwise agree); provided that the foregoing shall not (1) modify or abrogate any of the
provisions of §4.3 regarding the Lenders’ obligations with respect to any Unpaid Reimbursement
Obligations, or (2) result in any claim or liability against the Administrative Agent (regardless
of the amount of any Overadvance) for “inadvertent Overadvances” (i.e., where an
Overadvance results from changed circumstances beyond the control of the Administrative Agent (such
as a reduction in the collateral value)). Any Overadvance that remains outstanding for more than
forty-five (45) consecutive days shall constitute an Event of Default hereunder (unless the
Required Lenders otherwise agree). The making of any Overadvance is for the benefit of the
Borrowers; such Overadvances constitute Loans and Obligations hereunder. The making of any
Overadvance on any one occasion shall not obligate the Administrative Agent or the Lenders to make
other Overadvances on any other occasion or to permit any such Overadvance to remain outstanding.
In no event shall the Total Facility Usage (including any Overadvance and after giving effect to
all amounts requested) exceed the Total Commitment.



     2.14. Cash Collateral.




     (a) Certain Credit Support Events. Upon the request of the
Administrative Agent or the Issuing Bank (i) if the Issuing Bank has honored any
full or partial drawing request under any Letter of Credit and such drawing has
resulted in an LC Borrowing, or (ii) if, as of the Letter of Credit Expiration Date,
any LC Obligation for any reason remains outstanding, the Borrowers shall, in each
case, immediately Cash Collateralize the then Outstanding Amount of all LC
Obligations in an amount equal to 103% of such Outstanding Amount. At any time that
there shall exist a Delinquent Lender, immediately upon the request of the
Administrative Agent, the Issuing Bank or



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the Swingline Lender, the Borrowers shall deliver to the Administrative Agent
Cash Collateral in an amount sufficient to cover all Fronting Exposure (after giving
effect to §2.15(a) and any Cash Collateral provided by the Delinquent Lender).




     (b) Grant of Security Interest. All Cash Collateral (other than credit
support not constituting funds subject to deposit) shall be maintained in blocked,
non-interest bearing deposit accounts with the Administrative Agent. The Borrowers
hereby grant to (and subject to the control of) the Administrative Agent, for the
benefit of the Administrative Agent, the Issuing Bank and the Lenders (including the
Swingline Lender), and agrees to maintain, a first priority security interest in all
such cash, deposit accounts and all balances therein, and all other property so
provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as
security for the obligations to which such Cash Collateral may be applied pursuant
to §2.14(c). If at any time the Administrative Agent determines that Cash
Collateral is subject to any right or claim of any Person other than the
Administrative Agent as herein provided, or that the total amount of such Cash
Collateral is less than the amount required hereunder, the Borrowers or the relevant
Delinquent Lender will, promptly upon demand by the Administrative Agent, pay or
provide to the Administrative Agent additional Cash Collateral in an amount
sufficient to eliminate such deficiency.




     (c) Application. Notwithstanding anything to the contrary contained in
this Agreement, Cash Collateral provided under any of this §2.14 or §§2.5, 2.18, 3,
4, or 13.3 in respect of Letters of Credit or Swingline Loans shall be held and
applied to the satisfaction of the specific LC Obligations, Swingline Loans,
obligations to fund participations therein (including, as to Cash Collateral
provided by a Delinquent Lender, any interest accrued on such obligation) and other
obligations for which the Cash Collateral was so provided, prior to any other
application of such property as may be provided for herein.




     (d) Release. Cash Collateral (or the appropriate portion thereof)
provided to reduce Fronting Exposure or other obligations shall be released promptly
following (i) the elimination of the applicable Fronting Exposure or other
obligations giving rise thereto (including by the termination of Delinquent Lender
status of the applicable Lender (or, as appropriate, its assignee following
compliance with §15.2(g))) or (ii) the Administrative Agent’s good faith
determination that there exists excess Cash Collateral; provided,
however, (x) that Cash Collateral furnished by or on behalf of a Borrower or
Guarantor shall not be released during the continuance of a Default or Event of
Default (and following application as provided in this §2.14, may be otherwise
applied in accordance with §13.5), and (y) the Person providing Cash Collateral and
the Issuing Bank or Swingline Lender, as applicable, may agree that Cash Collateral
shall not be released but instead held to support future anticipated Fronting
Exposure or other obligations.



     2.15. Treatment of Delinquent Lenders.




     (a) Delinquent Lenders. If for any reason any Lender (i) shall fail or
refuse to abide by its obligations under this Agreement, including without
limitation its obligation to make available to Administrative Agent its Commitment
Percentage of any Revolving Credit Loans, expenses or setoff or purchase its
Commitment Percentage of a participation interest in the Swingline Loans or Letters
of Credit and such failure is not cured within one (1) Business Day of receipt from
the Administrative Agent of written



- 51 -









 







notice thereof, (ii) shall fail, within three (3) Business Days after request
by the Administrative Agent, to confirm that it will comply with the terms of this
Agreement relating to its Commitments or (iii) has been deemed insolvent in the
reasonable judgment of the Administrative Agent or become the subject of a
bankruptcy or insolvency proceeding (each, a “Delinquent Lender”), then, in
addition to the rights and remedies that may be available to the other Lenders, the
Agents, the Swingline Lender, the Issuing Bank, the Borrowers or any other Person at
law or in equity, and not in limitation thereof, (A) such Delinquent Lender’s right
to participate in the administration of, or decision-making rights related to, the
Revolving Credit Loans, this Agreement or the other Loan Documents shall be
suspended during the pendency of such failure or refusal; provided,
however, that the Commitment of a Delinquent Lender may not be increased or
extended without the consent of such Delinquent Lender, (B) such Delinquent Lender
shall be deemed to have assigned any and all payments due to it from the Borrowers
and/or the Guarantors, whether on account of outstanding Revolving Credit Loans,
interest, fees or otherwise, to the remaining non-Delinquent Lenders for application
to, and reduction of, their proportionate shares of all outstanding Obligations
until, as a result of application of such assigned payments the Lenders’ respective
Commitment Percentages of all outstanding Obligations 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 Delinquent Lender hereunder (whether on account
of principal, interest, fees or otherwise) shall, in lieu of being distributed to
such Delinquent Lender, be retained by the Administrative Agent as Cash Collateral
and may be utilized for future funding obligations of the Delinquent Lender in
respect of any Revolving Credit Loan or existing or future participating interest in
any Swingline Loan or Letter of Credit. The Delinquent Lender’s decision-making and
participation rights and rights to payments as set forth in clauses (A) and (B)
hereinabove shall be restored only upon the payment by the Delinquent Lender of its
Commitment Percentage of any Obligations, any participation obligation, or expenses
as to which it is delinquent, together with interest thereon at a rate per annum
equal to the rate of interest applicable to overdue principal pursuant to §5.11.1
from the date when originally due until the date upon which any such amounts are
actually paid.




     (b) Rights of Non-Delinquent Lenders. The 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 (at par) without any further
action by the Delinquent Lender for no cash consideration (pro rata,
based on the respective Commitments of those Lenders electing to exercise such
right), the Delinquent Lender’s Commitment to fund future Loans or purchase its
Commitment Percentage of participation interests in the Swingline Loans and Letters
of Credit. Upon any such purchase of the Commitment Percentage of any Delinquent
Lender, the 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
Delinquent Lender shall promptly execute all documents reasonably requested to
surrender and transfer such interest, including, if so requested, an Assignment and
Acceptance. The Borrowers may, on ten (10) days’ prior written notice to the
Administrative Agent and such Delinquent Lender, replace such Delinquent Lender (in
its capacity as a Lender) by causing such Delinquent Lender to (and such Delinquent
Lender shall be obligated to) assign (with the assignment fee to be paid by the
Borrowers in such instance) all of its rights and obligations under this Agreement
to one or more Eligible Assignees.



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     (c) Indemnification by Delinquent Lenders. Each Delinquent Lender
shall indemnify the Administrative Agent 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 the Administrative Agent or by any
non-Delinquent Lender, on account of a Delinquent Lender’s failure to timely fund
its Commitment Percentage of a Revolving Credit Loan, or its participation in
Swingline Loans and Letters of Credit or to otherwise perform its obligations
hereunder and under the other Loan Documents.



3. REPAYMENT OF THE LOANS.




     3.1. Maturity. The Borrowers jointly and severally promise to pay on the Maturity
Date with regard to the Existing Tranche, and there shall become absolutely due and payable on the
Maturity Date with regard to the Existing Tranche, all of the Revolving Credit Loans outstanding
under the Existing Tranche on such date, together with any and all accrued and unpaid interest
thereon. The Borrowers jointly and severally promise to pay on the Maturity Date with regard to
the Extended Tranche, and there shall become absolutely due and payable on the Maturity Date with
regard to the Extended Tranche, all of the Revolving Credit Loans outstanding under the Extended
Tranche on such date, together with any and all accrued and unpaid interest thereon.



     3.2. Mandatory Repayments of the Loans. If at any time the Total Facility Usage
exceeds the lesser of (i) the Total Commitment or (ii) the Aggregate Borrowing Base as then in
effect, then the Borrowers shall immediately pay the amount of such excess to the Administrative
Agent for the respective accounts of the Revolving Lenders for application: first, to any
Unpaid Reimbursement Obligations owing to such Revolving Lenders; second, to the Swingline
Loans owing to such Revolving Lenders; third, to the Revolving Credit Loans and
fourth, to provide to the Administrative Agent Cash Collateral for Reimbursement
Obligations owing to such Revolving Lenders as contemplated by §4.2(ii) and (iii).



     Each payment of any Unpaid Reimbursement Obligations or prepayment of Revolving Credit Loans
shall be allocated among the applicable Lenders, in proportion, as nearly as practicable, to each
Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each
applicable Lender’s relevant Loans, with adjustments to the extent practicable to equalize any
prior payments or repayments not exactly in proportion.



     3.3. Optional Repayments of Loans. The Borrowers shall have the right, at their
election, to repay the outstanding amount of the Revolving Credit Loans, as a whole or in part, at
any time without penalty or premium, provided that any full or partial prepayment of the
outstanding amount of any Eurocurrency Rate Loans pursuant to this §3.3 made other than on the last
day of the Interest Period relating thereto shall be subject to the payment of any additional costs
described in §5.10 incurred by any applicable Lender. The Borrowers shall give the Administrative
Agent, no later than 10:00 a.m. (Eastern time), at least one (1) Business Day prior written notice
of any proposed prepayment pursuant to this §3.3 of Base Rate Loans or Eurocurrency Rate Loans, in
each case specifying the proposed date of prepayment of applicable Loans and the principal amount
to be prepaid. Each such partial prepayment of the applicable Loans shall be in the amount of
$2,000,000 or a multiple of $1,000,000 in excess thereof, shall be accompanied by the payment of
accrued interest on the principal prepaid to the date of prepayment and shall be applied, in the
absence of instruction by the Borrowers, first to the principal of the Loans to be repaid
which are Base Rate Loans and then to the principal of the Loans to be repaid which are
Eurocurrency Rate Loans. Each partial prepayment shall be allocated among the applicable Lenders,
in proportion, as nearly as practicable, to the respective unpaid principal amount of each Lender’s
applicable



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Note(s), with adjustments to the extent practicable to equalize any prior repayments not
exactly in proportion.



4. LETTERS OF CREDIT.




     4.1. Letter of Credit Commitments.




     4.1.1. Commitment to Issue Letters of Credit. (a) Subject to the terms
and conditions hereof and the execution and delivery by the Borrowers of a letter of
credit application on the applicable Issuing Bank’s customary form (a “Letter of
Credit Application”), such Issuing Bank on behalf of the Lenders and in reliance
upon the agreement of the Lenders set forth in §4.1.4 and upon the representations
and warranties of the Borrowers contained herein, agrees, in its individual
capacity, to issue, extend and renew for the account of the Borrowers one or more
standby or documentary letters of credit, including without limitation, any bankers’
acceptance issued on account of any such standby or documentary letter of credit
(individually, a “Letter of Credit”), in such form as may be requested from
time to time by the applicable Borrower or, as the case may be, Borrowers and agreed
to by the applicable Issuing Bank; provided, however, that, after
giving effect to such request, (a) the sum of the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations shall not exceed $75,000,000 (the “Letter of
Credit Sublimit”) at any one time, and (b) the Total Facility Usage shall not
exceed the lesser of (i) the Total Commitment at such time or (ii) the Aggregate
Borrowing Base as then in effect. Each request by any Borrower for an LC Credit
Extension shall be deemed to be a representation by such Borrower that the LC Credit
Extension so requested complies with the conditions set forth in the proviso to the
preceding sentence. Within the foregoing limits, and subject to the terms and
conditions hereof, the Borrowers’ ability to obtain Letters of Credit shall be fully
revolving, and accordingly the Borrowers may, during the foregoing period, obtain
Letters of Credit to replace Letters of Credit that have expired or that have been
drawn upon and reimbursed. Each Issuing Bank shall provide the Administrative
Agent, on a monthly basis, a report on the Maximum Drawing Amount of outstanding
Letters of Credit. The Administrative Agent shall provide the Lenders, on a
quarterly basis, a report on the Maximum Drawing Amount of outstanding Letters of
Credit.




     (b) The Issuing Bank shall not issue any Letter of Credit, if:




     (i) subject to §4.16, the expiry date of such requested Letter of
Credit would occur more than twelve months after the date of issuance or
last extension, unless the Required Lenders have approved such expiry date;
or




     (ii) the expiry date of such requested Letter of Credit would occur
after the Maturity Date of the Extended Tranche.




     (c) The Issuing Bank shall not be under any obligation to issue any Letter of
Credit if:




     (i) any order, judgment or decree of any Governmental Authority or
arbitrator shall by its terms purport to enjoin or restrain such Issuing
Bank from issuing such Letter of Credit, or any laws applicable to such
Issuing Bank or any request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over such Issuing
Bank shall prohibit,



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or request that such Issuing Bank refrain from, the issuance of letters
of credit generally or such Letter of Credit in particular or shall impose
upon such Issuing Bank with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which such Issuing Bank is
not otherwise compensated hereunder) not in effect on the Effective Date, or
shall impose upon such Issuing Bank any unreimbursed loss, cost or expense
which was not applicable on the Effective Date and which such Issuing Bank
in good faith deems material to it;




     (ii) the issuance of such Letter of Credit would violate one or more
policies of the Issuing Bank applicable to letters of credit generally;




     (iii) such Letter of Credit is to be denominated in a currency other
than Dollars;




     (iv) any Lender is at that time a Delinquent Lender, unless the Issuing
Bank has entered into arrangements, including the delivery of Cash
Collateral in an amount equal to the actual or potential Fronting Exposure,
satisfactory to the Issuing Bank (in its sole discretion) with the Borrowers
or such Lender to eliminate the Issuing Bank’s actual or potential Fronting
Exposure with respect to the Delinquent Lender arising from either the
Letter of Credit then proposed to be issued or that Letter of Credit and all
other LC Obligations as to which the Issuing Bank has actual or potential
Fronting Exposure, as it may elect in its sole discretion.




     (d) The Issuing Bank shall not amend any Letter of Credit if the Issuing Bank
would not be permitted at such time to issue such Letter of Credit in its amended
form under the terms hereof.




     (e) The Issuing Bank shall be under no obligation to amend any Letter of Credit
if (i) the Issuing Bank would have no obligation at such time to issue such Letter
of Credit in its amended form under the terms hereof, or (ii) the beneficiary of
such Letter of Credit does not accept the proposed amendment to such Letter of
Credit.




     (f) The Issuing Bank shall act on behalf of the Lenders with respect to any
Letters of Credit issued by it and the documents associated therewith, and the
Issuing Bank shall have all of the benefits and immunities (i) provided to the
Administrative Agent in §14 with respect to any acts taken or omissions suffered by
the Issuing Bank in connection with Letters of Credit issued by it or proposed to be
issued by it and Issuer Documents pertaining to such Letters of Credit as fully as
if the term “Administrative Agent” as used in §14 included the Issuing Bank with
respect to such acts or omissions, and (ii) as additionally provided herein with
respect to the Issuing Bank.




     4.1.2. Letter of Credit Applications; Issuance of Letters of Credit.
(a) Each Letter of Credit Application shall be completed to the satisfaction of the
applicable Issuing Bank and signed by an Authorized Officer of the applicable
Borrower(s). In the event that any provision of any Letter of Credit Application
shall be inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such inconsistency,
govern. Such Letter of Credit Application must be received by the applicable
Issuing Bank and the Administrative Agent not later than 11:00 a.m. at least two
Business Days prior to the proposed issuance date or date of amendment, as the case
may be, of any Letter of Credit; or in each case such later date



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and time as the Administrative Agent and the applicable Issuing Bank may agree
in a particular instance in their sole discretion. In the case of a request for an
initial issuance of a Letter of Credit, such Letter of Credit Application shall
specify in form and detail satisfactory to the applicable Issuing Bank: (i) the
proposed issuance date of the requested Letter of Credit (which shall be a Business
Day); (ii) the amount thereof; (iii) the expiry date thereof; (iv) the name and
address of the beneficiary thereof; (v) the documents to be presented by such
beneficiary in case of any drawing thereunder; (vi) the full text of any certificate
to be presented by such beneficiary in case of any drawing thereunder; and (vii)
such other matters as the applicable Issuing Bank may require. In the case of a
request for an amendment of any outstanding Letter of Credit, such Letter of Credit
Application shall specify in form and detail satisfactory to the applicable Issuing
Bank (A) the Letter of Credit to be amended; (B) the proposed date of amendment
thereof (which shall be a Business Day); (C) the nature of the proposed amendment;
and (D) such other matters as the applicable Issuing Bank may require.
Additionally, the applicable Borrower(s) shall furnish to the applicable Issuing
Bank and the Administrative Agent such other documents and information pertaining to
such requested Letter of Credit issuance or amendment, including any documents
related thereto, as the applicable Issuing Bank or the Administrative Agent may
require.




     (b) Promptly after receipt of any Letter of Credit Application, the applicable
Issuing Bank will confirm with the Administrative Agent (by telephone or in writing)
that the Administrative Agent has received a copy of such Letter of Credit
Application from the applicable Borrower(s) and, if not, such Issuing Bank will
provide the Administrative Agent with a copy thereof. Unless the applicable Issuing
Bank has received written notice from any Lender, the Administrative Agent or any
Borrower or any Guarantor, at least one Business Day prior to the requested date of
issuance or amendment of the applicable Letter of Credit, that one or more
applicable conditions contained in §12 shall not then be satisfied, then, subject to
the terms and conditions hereof, the applicable Issuing Bank shall, on the requested
date, issue a Letter of Credit for the account of the applicable Borrower or enter
into the applicable amendment, as the case may be, in each case in accordance with
such Issuing Bank’s usual and customary business practices. Immediately upon the
issuance of each Letter of Credit, each Lender shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing Bank a risk
participation in such Letter of Credit in an amount equal to the product of such
Lender’s Commitment Percentage times the amount of such Letter of Credit. Such risk
participations shall be purchased by all Lenders on a pro rata
basis. For the avoidance of doubt, following the termination of the Existing
Tranche (so long as no Default or Event of Default has occurred and is continuing or
would result therefrom), the Extending Revolving Lenders shall purchase such risk
participations on a pro rata basis in accordance with their
Commitment Percentage after giving effect to such termination.




     4.1.3. Terms of Letters of Credit. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (a) have an expiry date no
later than the date which is five (5) days (or, if the Letter of Credit is confirmed
by a confirmer or otherwise provides for one or more nominated persons, forty-five
(45) days) prior to the Maturity Date of the Extended Tranche (in each case, the
“Letter of Credit Expiration Date”) and (b) subject to §4.1.6, have an
expiry date no later than twelve months after the date of issuance or last extension
or renewal. Each Letter of Credit so issued, extended or renewed shall be subject
to the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 or any successor version
thereto adopted by the applicable Issuing Bank in the ordinary course



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of its business as a letter of credit issuer and in effect at the time of
issuance of such Letter of Credit (the “Uniform Customs”) or, in the case of
a standby Letter of Credit, either the Uniform Customs or the International Standby
Practices (ISP98), International Chamber of Commerce Publication No. 590, or any
successor code of standby letter of credit practices among banks adopted by the
applicable Issuing Bank in the ordinary course of its business as a standby letter
of credit issuer and in effect at the time of issuance of such Letter of Credit.




     4.1.4. Reimbursement Obligations of Lenders. Each Lender severally
agrees that it shall be absolutely and unconditionally liable, without regard to the
occurrence of any Default or Event of Default or any other condition precedent or
circumstance whatsoever, to the extent of such Lender’s Commitment Percentage to
reimburse any Issuing Bank on demand for the amount of each draft paid by such
Issuing Bank under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrowers pursuant to §4.2 (such agreement for a Lender being
called herein the “Letter of Credit Participation” of such Lender).




     4.1.5. Participations of Lenders. Each such payment made by a Lender
shall be treated as the purchase by such Lender of a participating interest in the
Borrowers’ Reimbursement Obligation under §4.2 in an amount equal to such payment.
Each Lender shall share in accordance with its participating interest in any
interest which accrues pursuant to §4.2.




     4.1.6. Auto-Extension Letters of Credit. If the applicable Borrower
or, as the case may be, Borrowers so requests in any applicable Letter of Credit
Application, the applicable Issuing Bank may, in its sole and absolute discretion,
agree to issue a Letter of Credit that has automatic extension provisions (each, an
“Auto-Extension Letter of Credit”); provided that any such
Auto-Extension Letter of Credit must permit the Issuing Bank to prevent any such
extension at least once in each twelve-month period (commencing with the date of
issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof
not later than a day (the “Non-Extension Notice Date”) in each such
twelve-month period to be agreed upon at the time such Letter of Credit is issued.
Unless otherwise directed by the Issuing Bank, the applicable Borrower or, as the
case may be, Borrowers shall not be required to make a specific request to the
Issuing Bank for any such extension. Once an Auto-Extension Letter of Credit has
been issued, the Lenders shall be deemed to have authorized (but may not require)
the Issuing Bank to permit the extension of such Letter of Credit at any time to an
expiry date not later than the Letter of Credit Expiration Date; provided,
however, that the Issuing Bank shall not permit any such extension if (i)
the Issuing Bank has determined that it would not be permitted, or would have no
obligation, at such time to issue such Letter of Credit in its revised form (as
extended) under the terms hereof, or (ii) it has received notice (which may be by
telephone or in writing) on or before the day that is five Business Days before the
Non-Extension Notice Date (A) from the Administrative Agent that the Required
Lenders have elected not to permit such extension or (B) from the Administrative
Agent, any Lender or any Borrower that one or more of the applicable conditions
specified in §12 is not then satisfied, and in each such case directing the Issuing
Bank not to permit such extension.



     4.2. Reimbursement Obligation of the Borrowers. In order to induce each Issuing Bank
to issue, extend and renew each Letter of Credit and the Lenders to participate therein, the
Borrowers hereby jointly and severally agree to reimburse or pay to the Administrative Agent, for
the account of the



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applicable Issuing Bank or (as the case may be) the Lenders, with respect to each Letter of
Credit issued, extended or renewed by the Issuing Bank hereunder at the request of any Borrower:




     (i) except as otherwise expressly provided in §4.2(ii) and (iii) or
§4.3, on the Business Day next following the date that any draft presented
under such Letter of Credit is honored by the applicable Issuing Bank, or
the applicable Issuing Bank otherwise makes a payment with respect thereto,
(A) the amount paid by such Issuing Bank under or with respect to such
Letter of Credit, (B) interest thereon at a rate per annum equal to the Base
Rate plus the Applicable Margin with respect to Base Rate Loans as
in effect from time to time, and (C) the amount of any taxes, fees, charges
or other costs and expenses whatsoever incurred by the applicable Issuing
Bank or any Lender in connection with any payment made by the Issuing Bank
or any Lender under, or with respect to, such Letter of Credit,




     (ii) upon the reduction (but not termination) of the lesser of (x) the
Total Commitment or (y) the Aggregate Borrowing Base to an amount less than
the Maximum Drawing Amount, the amount equal to 103% of such difference,
which amount shall be held by the Administrative Agent for the benefit of
the Lenders and Issuing Banks as Cash Collateral for all Reimbursement
Obligations, and




     (iii) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with §13, an amount equal to 103% of the then Maximum Drawing
Amount on all Letters of Credit, which amount shall be held by the
Administrative Agent for the benefit of the Lenders and Issuing Banks
entitled to such amounts as Cash Collateral for all Reimbursement
Obligations.



     Each such payment shall be made by the applicable Borrower(s) to the Administrative Agent at
the Administrative Agent’s Office in immediately available funds. Except as otherwise provided in
§4.3 with respect to Unpaid Reimbursement Obligations which are converted to Revolving Credit
Loans, interest on any and all amounts remaining unpaid by the Borrowers under this §4.2 at any
time from the date such amounts become due and payable (whether as stated in this §4.2, by
acceleration or otherwise) until payment in full (whether before or after judgment) shall be
payable to the Administrative Agent on demand at the rate specified in §5.11 for overdue principal
on the Loans.



     4.3. Letter of Credit Payments. (a) If any draft shall be presented or other demand
for payment shall be made under any Letter of Credit, the applicable Issuing Bank shall notify the
Borrowers of the date and amount of the draft presented or demand for payment and of the date and
time when it expects to pay such draft or honor such demand for payment. If the applicable
Borrower or, as the case may be, Borrowers fail to reimburse the applicable Issuing Bank as
provided in §4.2 on or before the date that such draft is paid or other payment is made by such
Issuing Bank, such Issuing Bank may at any time thereafter notify the Administrative Agent who will
promptly notify the Lenders of the amount of any such Unpaid Reimbursement Obligation. If no
Default or Event of Default is then continuing, the applicable Borrower or, as the case may be,
Borrowers shall be deemed to have requested a Revolving Credit Loan, in the case of a Borrower, in
all respects bearing interest at the Base Rate with a Drawdown Date as of the date on which the
applicable Issuing Bank paid the draft presented for honor or otherwise made such payment, in an
amount equal to the amount of such draft or other payment and the notice from the applicable
Issuing Bank to the Lenders shall be deemed to be a notice of a Revolving Loan Request made by the
Administrative Agent. No later than 1:00 p.m. (Eastern time) on the Business Day next



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following the receipt of such notice, each Lender shall make available to the Administrative
Agent, at the Administrative Agent’s Office, in immediately available funds, such Lender’s
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an amount equal to the
product of (a) the average, computed for the period referred to in clause (c) below, of the
Overnight Rate for each day included in such period, times (b) the amount equal to such
Lender’s Commitment Percentage of such Unpaid Reimbursement Obligation, times (c) a
fraction, the numerator of which is the number of days that elapse from and including the date the
Issuing Bank paid the draft presented for honor or otherwise made payment to the date on which such
Lender’s Commitment Percentage of such Unpaid Reimbursement Obligation shall become immediately
available to the Administrative Agent, and the denominator of which is 360. If no Default or Event
of Default is continuing at the time the Administrative Agent notified the Lenders of the amount of
such Unpaid Reimbursement Obligation, the amounts made available to the Administrative Agent by the
Lenders hereunder shall be treated as a Revolving Credit Loan, in the case of a Borrower, in all
respects bearing interest at the Base Rate with a Drawdown Date as of the date on which the
applicable Issuing Bank paid the draft presented for honor or otherwise made such payment.




     (b) With respect to any Unpaid Reimbursement Obligation that is not fully
refinanced by a Revolving Credit Loan, in all respects bearing interest at the Base
Rate as set forth above because a Default or Event of Default is then continuing,
the conditions set forth in §12 cannot be satisfied or for any other reason, the
applicable Borrower(s) shall be deemed to have incurred from the applicable Issuing
Bank an extension of credit resulting from and in the amount of the Unpaid
Reimbursement Obligation that is not so refinanced, which extension of credit shall
be due and payable on demand (together with interest) and shall bear interest at the
default rate set forth in §5.11 and shall constitute an Obligation as defined herein
and for the purposes of the Loan Documents. In such event, each Lender’s payment to
the Administrative Agent for the account of the applicable Issuing Bank pursuant to
this §4.3 shall be deemed payment in respect of its participation in such extension
of credit and shall constitute a funding of such Lender’s participation in such
extension of credit in satisfaction of its participation obligation under this §4.
No such funding of such Lender’s participation in such extension of credit shall
relieve or otherwise impair the obligation of the applicable Borrower(s) to
reimburse the applicable Issuing Bank for the amount of any payment made by the
applicable Issuing Bank under any Letter of Credit, together with interest as
provided herein.




     (c) Until each Lender funds its Commitment Percentage of the Loans or
participations as set forth in this §4.3 to reimburse the applicable Issuing Bank
for any amount drawn under any Letter of Credit, interest in respect of such
Lender’s Commitment Percentage of such amount shall be solely for the account of the
applicable Issuing Bank.




     (d) Each Lender’s obligation to make Loans or advances to reimburse the Issuing
Bank for amounts drawn under Letters of Credit, as contemplated by this §4.3, shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right which
such Lender may have against the Issuing Bank, the Borrowers, any Subsidiary or any
other Person for any reason whatsoever; (B) the occurrence or continuance of a
Default or an Event of Default, or (C) any other occurrence, event or condition,
whether or not similar to any of the foregoing; provided, however,
that each Lender’s obligation to make Loans pursuant to this §4.3 is subject to the
conditions set forth in §12 (other than delivery by the Borrowers of a Revolving
Loan Request). No such making of an advance shall relieve or otherwise impair the
obligation of the Borrowers to reimburse the Issuing Bank



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for the amount of any payment made by the Issuing Bank under any Letter of
Credit, together with interest as provided herein.




     (e) If any Lender fails to make available to the Administrative Agent for the
account of the applicable Issuing Bank any amount required to be paid by such Lender
pursuant to the foregoing provisions of this §4.3 by the time specified in §4.3, the
applicable Issuing Bank shall be entitled to recover from such Lender (acting
through the Administrative Agent), on demand, such amount with interest thereon for
the period from the date such payment is required to the date on which such payment
is immediately available to the applicable Issuing Bank at a rate per annum equal to
the applicable Overnight Rate from time to time in effect, plus any administrative,
processing or similar fees customarily charged by the Issuing Bank in connection
with the foregoing. If such Lender pays such amount (with interest and fees as
aforesaid), the amount so paid shall constitute such Lender’s Loan included in the
relevant credit extension or advance under this §4.3, as the case may be. A
certificate of the applicable Issuing Bank submitted to any Lender (through the
Administrative Agent) with respect to any amounts owing under this clause (e) shall
be conclusive absent manifest error.




     (f) At any time after the applicable Issuing Bank has made a payment under any
Letter of Credit and has received from any Lender such Lender’s participation in
respect of such payment in accordance with this §4.3, if the Administrative Agent
receives for the account of the applicable Issuing Bank any payment in respect of
the related Unpaid Reimbursement Obligation or interest thereon (whether directly
from the applicable Borrower(s) or otherwise, including proceeds of Cash Collateral
applied thereto by the Administrative Agent), the Administrative Agent will
distribute to such Lender its Commitment Percentage thereof (appropriately adjusted,
in the case of interest payments, to reflect the period of time during which such
Lender’s participation was outstanding). If any payment received by the
Administrative Agent for the account of the applicable Issuing Bank pursuant to §4.3
is required to be returned in connection with any bankruptcy or insolvency
proceeding or otherwise (including pursuant to any settlement entered into by the
applicable Issuing Bank in its discretion), each Lender shall pay to the
Administrative Agent for the account of the applicable Issuing Bank its Commitment
Percentage thereof on demand of the Administrative Agent, plus interest thereon from
the date of such demand to the date such amount is returned by such Lender, at a
rate per annum equal to the applicable Overnight Rate from time to time in effect.
The obligations of the Lenders under the immediately preceding sentence shall
survive the payment in full of the Obligations and the termination of this Credit
Agreement.



     4.4. Obligations Absolute. The Borrowers’ obligations under this §4 shall be
absolute, unconditional and irrevocable under any and all circumstances and irrespective of the
occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff,
counterclaim or defense to payment which the Borrowers may have or have had against any Agent, any
Issuing Bank, any Lender or any beneficiary or transferee of a Letter of Credit, whether in
connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or
any agreement or instrument relating thereto, or any unrelated transaction. Each of the Borrowers
further agrees with the Administrative Agent, each Issuing Bank and the Lenders that, except for
liability resulting from the Administrative Agent’s, such Issuing Bank’s or such Lender’s gross
negligence or willful misconduct as determined by a final and nonappealable judgment of a court of
competent jurisdiction, the Administrative Agent, each Issuing Bank and the Lenders shall not be
responsible for, and the Borrowers’ Reimbursement Obligations under §4.2 shall not be affected by,
among other things, (a) any lack of validity or



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enforceability of such Letter of Credit, this Agreement, or any other Loan Document; or (b)
the existence of any claim, counterclaim, setoff, defense or other right that any Borrower or any
Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit
(or any Person for whom any such beneficiary or any such transferee may be acting), the Issuing
Bank or any other Person, whether in connection with this Agreement, the transactions contemplated
hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any
unrelated transaction; or (c) any draft, demand, certificate or other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing under such Letter of
Credit; or (d) any payment by the Issuing Bank under such Letter of Credit against presentation of
a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or
any payment made by the Issuing Bank under such Letter of Credit to any Person purporting to be a
trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any transferee of such
Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief
Law; or (e) any dispute between or among any Borrower, the beneficiary of any Letter of Credit or
any financing institution or other party to which any Letter of Credit may be transferred or any
claims or defenses whatsoever of any Borrower against the beneficiary of any Letter of Credit or
any such transferee; or (f) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, including any other circumstance that might otherwise constitute a defense
available to, or a discharge of, any Borrower or any Subsidiary. None of the Administrative Agent,
any Issuing Bank nor any Lenders shall be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however transmitted, in connection
with any Letter of Credit unless resulting from its gross negligence or willful misconduct as
determined by a final and nonappealable judgment of a court of competent jurisdiction. Each of the
Borrowers agrees that any action taken or omitted by the Administrative Agent, any Issuing Bank or
any Lender under or in connection with each Letter of Credit and the related drafts and documents,
if done in good faith, shall be binding upon each Borrower and shall not result in any liability on
the part of any Issuing Bank, the Administrative Agent or any Lender to any Borrower.



     Each applicable Borrower shall promptly examine a copy of each Letter of Credit and each
amendment thereto that is delivered to it and, in the event of any claim of noncompliance with such
Borrower’s instructions or other irregularity, such Borrower will immediately notify the Issuing
Bank. Such Borrower shall be conclusively deemed to have waived any such claim against the Issuing
Bank and its correspondents unless such notice is given as aforesaid.



     4.5. Role of Issuing Bank. Each Lender and each Borrower agrees that, in paying any
drawing under a Letter of Credit, the Issuing Bank shall not have any responsibility to obtain any
document (other than any sight draft, certificates and documents expressly required by the Letter
of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document. None of the Issuing Bank, the
Administrative Agent, any of their respective Related Parties nor any correspondent, participant or
assignee of the Issuing Bank shall be liable to any Lender for (i) any action taken or omitted in
connection herewith at the request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document
or instrument related to any Letter of Credit or Issuer Document. Each Borrower hereby assumes all
risks of the acts or omissions of any beneficiary or transferee with respect to its use of any
Letter of Credit; provided, however, that this assumption is not intended to, and
shall not, preclude any Borrower’s pursuing such rights and remedies as it may have against the
beneficiary or transferee at law or under any other agreement. None of the Issuing Bank, the
Administrative Agent, any of their respective Related Parties nor any correspondent, participant or
assignee of the Issuing Bank shall be liable or responsible for any of the matters described in
clauses (a)



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through (f) of §4.4; provided, however, that anything in such clauses to the
contrary notwithstanding, the Borrowers may have a claim against the Issuing Bank, and the Issuing
Bank may be liable to the Borrowers, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by the Borrowers which the Borrowers prove
were caused by the Issuing Bank’s willful misconduct or gross negligence as determined by a final
and nonappealable judgment of a court of competent jurisdiction or the Issuing Bank’s willful
failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a
sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept
documents that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary, and the Issuing Bank shall
not be responsible for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.



     4.6. Letter of Credit Fee. The Borrowers shall, on the first Business Day of each
April, July, October and January, commencing with the first such Date to occur after the Effective
Date, and on the Maturity Date, pay a fee (in each case, a “Letter of Credit Fee”) to the
Administrative Agent (a) in respect of each standby Letter of Credit issued, extended or renewed
during such Fiscal Quarter, an amount equal to the Applicable Margin applicable to each Lender
purchasing a participation therein per annum with respect to standby Letter of Credit Fees of the
face amount of such standby Letter of Credit, which Letter of Credit Fee shall, subject to §2.15,
be for the accounts of the Lenders in accordance with their respective Commitment Percentage and
(b) in respect of each documentary Letter of Credit an amount equal to the Applicable Margin
applicable to each Lender purchasing a participation therein per annum with respect to documentary
Letter of Credit Fees on the face amount of such documentary Letter of Credit, which Letter of
Credit Fee shall, subject to §2.15, be for the accounts of the Lenders in accordance with their
respective Commitment Percentage. Such Letter of Credit Fees shall be payable quarterly in
arrears. In respect of each Letter of Credit, the Borrowers shall also pay to each Issuing Bank
for such Issuing Bank’s own account, at the times and in the amounts set forth in the Fee Letter, a
fronting fee agreed by such Issuing Bank and the Borrowers and, at such other time or times as such
charges are customarily made by such Issuing Bank, such Issuing Bank’s customary issuance,
amendment, negotiation or document examination and other administrative fees as in effect from time
to time.



     4.7. Transitional Letters of Credit. Schedule 4.7 contains a list of certain
letters of credit issued prior to the Effective Date for the account of the Borrowers by Bank of
America in its capacity as the issuing bank under the Existing Credit Agreement (the “Existing
Letters of Credit”). On the Effective Date, (a) the Existing Letters of Credit shall be deemed
to be Letters of Credit issued pursuant to this §4 and shall be subject to all of the provisions
applicable to Letters of Credit under this Credit Agreement, including, without limitation, such
provisions as relate to the Letter of Credit Participations of the Lenders, and (b) all liabilities
of any Borrower with respect to the Existing Letters of Credit shall constitute Obligations of such
Borrower with respect to Letters of Credit in accordance with this Credit Agreement and the Loan
Documents as though such Borrower had executed a Letter of Credit Application with respect thereto
under this Credit Agreement. On the Effective Date, the letter of credit fees owing with respect
to the Existing Letters of Credit under §4.6 of the Existing Credit Agreement shall be calculated
and paid in full to Bank of America as administrative agent under the Existing Credit Agreement.
From and after the Effective Date, the Borrowers shall pay Letter of Credit Fees and such other
fees as provided in §4.6, in each case when due pursuant to §4.6, with respect to each of the
Existing Letters of Credit.



     4.8. Letter of Credit Amounts. Unless otherwise specified, all references herein to
the amount of a Letter of Credit at any time shall be deemed to mean the maximum face amount of
such



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Letter of Credit after giving effect to all increases thereof contemplated by such Letter of
Credit or the documents related thereto, whether or not such maximum face amount is in effect at
such time.



5. CERTAIN GENERAL PROVISIONS.




     5.1. Closing and Administrative Agent’s Fees. The Borrowers jointly and severally
agree to pay (a) to the Administrative Agent for the accounts of the Extending Revolving Lenders on
the Effective Date an upfront fee (the “Closing Fee”) as set forth in the Fee Letter and
(b) to the Administrative Agent and its Affiliates, at the times and in the manner set forth in the
Fee Letter, the fees described in the Fee Letter for the accounts of the Persons named therein.



     5.2. BGI as Agent for other Borrowers. Each of the Borrowers, by its execution of
this Credit Agreement, irrevocably authorizes BGI to give and receive all notices and instructions,
to take all actions and make such agreements expressed to be capable of being given, received or
taken by BGI or any other Borrower under this Credit Agreement and the other Loan Documents,
including, without limitation, the making of any Loan Request on behalf of such other Borrower, and
notwithstanding that such notice, instruction, action or agreement may affect such other Borrower,
and each Borrower shall, as regards the Agents, the Issuing Banks and the other Lenders, be bound
thereby as though each Borrower, as applicable, itself had given or received such notice or
instruction, taken such action or made such agreement.



     5.3. Funds for Payments.




     5.3.1. Payments to Administrative Agent. All payments of principal and
interest on Loans, Reimbursement Obligations, Fees and any other amounts due
hereunder or under any of the other Loan Documents shall be made on the due date
thereof to the Administrative Agent in Dollars, for the respective accounts of the
applicable Lenders, the Swingline Lender, any Agent or any Issuing Bank, as the case
may be, at the Administrative Agent’s Office or at such other place that the
Administrative Agent may from time to time designate, in each case at or about 11:00
a.m. (Eastern time or other local time at the place of payment) and in immediately
available funds.




     5.3.2. No Offset, etc. All payments by the Borrowers hereunder and
under any of the other Loan Documents shall be made without recoupment, setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other authority
therein unless the Borrowers are compelled by law to make such deduction or
withholding. If any such obligation is imposed upon the Borrowers with respect to
any amount payable by them hereunder or under any of the other Loan Documents, the
Borrowers will pay to the Administrative Agent, for the account of the applicable
Lenders, the Swingline Lender, the applicable Agent or (as the case may be) the
applicable Issuing Bank, on the date on which such amount is due and payable
hereunder or under such other Loan Document, such additional amount in Dollars as
shall be necessary to enable such Lenders, the Swingline Lender, such Agent or such
Issuing Bank to receive the same net amount which such Lenders, the Swingline
Lender, such Agent or such Issuing Bank would have received on such due date had no
such obligation been imposed upon the Borrowers. The Borrowers will deliver
promptly to the Administrative Agent certificates or other valid vouchers for all
taxes or other



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charges deducted from or paid with respect to payments made by the Borrowers
hereunder or under such other Loan Document.



     5.4. Computations. All computations of interest on the Loans (other than Base Rate
Loans) and of Fees shall, unless otherwise expressly provided herein, be based on a 360-day year
and paid for the actual number of days elapsed. All computations of interest on the Base Rate
Loans shall be based on a 365/366-day year and paid for the actual number of days elapsed. Except
as otherwise provided in the definition of the term “Interest Period” with respect to
Eurocurrency Rate Loans, whenever a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment shall be extended to
the next succeeding Business Day, and interest shall accrue during such extension. The outstanding
amount of the Loans as reflected on the Note Records and accounts relating to such Loans from time
to time shall be considered correct and binding on the Borrowers absent manifest error or unless
within five (5) Business Days after receipt of any notice by the Administrative Agent or any of the
Lenders of such outstanding amount, the Administrative Agent or such Lender shall notify the
Borrowers to the contrary.



     5.5. Inability to Determine Eurocurrency Rate. In the event, prior to the
commencement of any Interest Period relating to any Eurocurrency Rate Loan, the Administrative
Agent shall determine or be notified by the Required Lenders that (a) adequate and reasonable
methods do not exist for ascertaining the Eurocurrency Rate that would otherwise determine the rate
of interest to be applicable to any Eurocurrency Rate Loan during any Interest Period with respect
to a proposed Eurocurrency Rate Loan or in connection with an existing or proposed Base Rate Loan
utilizing the Eurocurrency Rate component in determining the Base Rate, or (b) the Eurocurrency
Rate determined or to be determined for such Interest Period will not adequately and fairly reflect
the cost to the Lenders of making or maintaining their Eurocurrency Rate Loans during such period,
the Administrative Agent shall forthwith give notice of such determination (which shall be
conclusive and binding on the Borrowers and the Lenders) to the Borrowers and the applicable
Lenders. In such event (i) any Loan Request or Conversion Request with respect to Eurocurrency
Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans
(without reference to the Eurocurrency Rate component of the Base Rate), (ii) each Eurocurrency
Rate Loan will automatically, on the last day of the then current Interest Period relating thereto,
become a Base Rate Loan and (iii) the obligations of the Lenders to make Eurocurrency Rate Loans or
the obligation of the Lenders to make a Base Rate Loan utilizing the Eurocurrency Rate component in
determining the Base Rate shall be suspended, in each case, until the Administrative Agent or the
Required Lenders determine that the circumstances giving rise to such suspension no longer exist,
whereupon the Administrative Agent or, as the case may be, the Administrative Agent upon the
instruction of the Required Lenders shall so notify the Borrowers and the Lenders.



     5.6. Illegality. If any Lender determines that any Law has made it unlawful, or that
any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to make, maintain or fund Loans whose interest is determined by reference to the
Eurocurrency Rate, or to determine or charge interest rates based upon the Eurocurrency Rate, or
any Governmental Authority has imposed material restrictions on the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice
thereof by such Lender to the Borrowers through the Administrative Agent, (i) any obligation of
such Lender to make or continue Eurocurrency Rate Loans or to convert Base Rate Loans to
Eurocurrency Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such
Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference
to the Eurocurrency Rate component of the Base Rate, the interest rate on which Base Rate Loans of
such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent
without reference to the Eurocurrency Rate component of the Base Rate, in each case until such
Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to
such determination no longer exist. Upon receipt of such notice, (x) the Borrowers shall,



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upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if
applicable, convert all Eurocurrency Rate Loans of such Lender to Base Rate Loans (the interest
rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be
determined by the Administrative Agent without reference to the Eurocurrency Rate component of the
Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully
continue to maintain such Eurocurrency Rate Loans to such day, or immediately, if such Lender may
not lawfully continue to maintain such Eurocurrency Rate Loans and (y) if such notice asserts the
illegality of such Lender determining or charging interest rates based upon the Eurocurrency Rate,
the Administrative Agent shall during the period of such suspension compute the Base Rate
applicable to such Lender without reference to the Eurocurrency Rate component thereof until the
Administrative Agent is advised in writing by such Lender that it is no longer illegal for such
Lender to determine or charge interest rates based upon the Eurocurrency Rate. Upon any such
prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or
converted.



     5.7. Additional Costs, etc. If any Change in Law shall:




     (a) subject any Lender, Agent or Issuing Bank to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this Credit
Agreement, the other Loan Documents, any Letters of Credit, such Lender’s Commitment
or the Loans (other than taxes based upon or measured by the income or profits of
such Lender, Agent or Issuing Bank), or




     (b) materially change the basis of taxation (except for changes in taxes on
income or profits) of payments to any Lender of the principal of or the interest on
any Loans or any other amounts payable to any Lender, Agent or Issuing Bank under
this Credit Agreement or any of the other Loan Documents, or




     (c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held by, or deposits in or
for the account of, or loans by, or letters of credit issued by, or commitments of
an office of any Lender or Issuing Bank, or




     (d) impose on any Lender, Agent or Issuing Bank any other conditions or
requirements with respect to this Credit Agreement, the other Loan Documents, any
Letters of Credit, the Loans, such Lender’s Commitment or any class of loans,
letters of credit or commitments of which any of the Loans or such Lender’s
Commitment forms a part, and the result of any of the foregoing clauses (a) through
(d) is:




     (i) to increase the cost to any Lender or Issuing Bank of making,
funding, issuing, renewing, extending or maintaining any of the Loans or
such Lender’s Commitment or any Letter of Credit, or




     (ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Lender, Agent or Issuing Bank
hereunder on account of such Lender’s Commitment, any Letter of Credit or
any of the Loans, or




     (iii) to require such Lender, Agent or Issuing Bank to make any payment
or to forego any interest or Reimbursement Obligation or other sum



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payable hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to the
gross amount of any sum receivable or deemed received by such Lender, Agent
or Issuing Bank from the Borrowers hereunder,




then, and in each such case, the Borrowers will, upon demand made by such Lender or (as the
case may be) any Agent or Issuing Bank at any time and from time to time and as often as the
occasion therefor may arise, and receipt by the Borrowers of a certificate meeting the
requirements of §5.9, pay to such Lender, Agent or Issuing Bank such additional amounts as
will be sufficient to compensate such Lender, Agent or Issuing Bank for such additional
cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum.



     5.8. Capital Adequacy. If after the date hereof any Lender, Agent or Issuing Bank
determines that (a) the adoption of or change in any law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) regarding capital requirements for
banks or bank holding companies or any change in the interpretation or application thereof by a
Governmental Authority with appropriate jurisdiction, or (b) compliance by such Lender, Agent or
Issuing Bank or any corporation controlling such Lender, Agent or Issuing Bank with any law,
governmental rule, regulation, policy, guideline or directive (whether or not having the force of
law) of any such entity regarding capital adequacy, has the effect of reducing the return on such
Lender’s, Agent’s or Issuing Bank’s commitment with respect to any Loans to a level below that
which such Lender, Agent or Issuing Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Lender’s, Agent’s or Issuing Bank’s then existing
policies with respect to capital adequacy and assuming full utilization of such entity’s capital)
by any amount deemed by such Lender or (as the case may be) Agent or Issuing Bank to be material,
then such Lender, Agent or Issuing Bank may notify the Borrowers of such fact. To the extent that
the amount of such reduction in the return on capital is not reflected in the Base Rate, the
Borrowers jointly and severally agree to pay such Lender or (as the case may be) Agent or Issuing
Bank for the amount of such reduction in the return on capital as and when such reduction is
determined upon presentation by such Lender or (as the case may be) such Agent or Issuing Bank of a
certificate in accordance with §5.9 hereof. Each Lender shall allocate such cost increases among
its customers in good faith and on an equitable basis.



     5.9. Certificate. A certificate setting forth any additional amounts payable pursuant
to §§5.7 or 5.8 and a brief explanation of such amounts which are due, submitted and signed by any
Lender, Agent or Issuing Bank to the Borrowers, shall be conclusive, absent manifest error, that
such amounts are due and owing.



     5.10. Indemnity. The Borrowers jointly and severally agree to indemnify each Lender
and to hold each Lender harmless from and against any loss, cost or expense (including loss of
anticipated profits, any foreign exchange losses and any loss or expense arising from the
liquidation or redeployment of funds obtained by it to maintain any Loans, from fees payable to
terminate the deposits from which such funds were obtained or from the performance of any foreign
exchange contract) that such Lender may sustain or incur as a consequence of (a) default by a
Borrower in payment of the principal amount of or any interest on any Eurocurrency Rate Loans as
and when due and payable, including any such loss or expense arising from interest or fees payable
by such Lender to banks of funds obtained by it in order to maintain its Eurocurrency Rate Loans,
(b) default by a Borrower in making a borrowing or conversion after such Borrower has given (or is
deemed to have given) a Loan Request or a Conversion Request relating thereto in accordance with
§§2.1.3, 2.5.2, 2.8 or 2.9 or (c) the making of any payment of a Eurocurrency Rate Loan or the
making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of
the applicable Interest Period with respect thereto, including interest or fees payable by such
Lender to lenders of funds obtained by it in order to maintain any such Loans.



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     5.11. Interest After Default. Upon the occurrence and during the continuance of a
Default or an Event of Default, all amounts payable hereunder or under any of the other Loan
Documents (including, without limitation, overdue principal and (to the extent permitted by
applicable Law) interest on the Loans, all other overdue amounts payable hereunder or under any of
the other Loan Documents, and the principal of the Loans not overdue) shall bear interest
compounded monthly and payable, without notice, demand or presentment, at a rate per annum equal to
two percent (2%) above the rate of interest then applicable thereto (or, if no rate of interest is
then applicable thereto, the Base Rate) until such Default or Event of Default has been cured or
remedied or such Default or Event of Default has been waived in accordance with the terms hereof
(after as well as before judgment and after as well as before the commencement of any proceeding
under any Debtor Relief Law).



     5.12. Replacement of Lenders. If any Lender (an “Affected Lender”) (a) makes
demand upon the Borrowers for (or if the Borrowers are otherwise required to pay) amounts pursuant
to §§5.7 or 5.8, (b) is unable to make or maintain Eurocurrency Rate Loans as a result of a
condition described in §5.6 or (c) defaults in its obligation to make Loans in accordance with the
terms of this Credit Agreement or purchase any Letter of Credit Participation or participate in any
Swingline Loan, the Borrowers may, so long as no Default or Event of Default has occurred and is
then continuing, within ninety (90) days of receipt of such demand, notice (or the occurrence of
such other event causing the Borrowers to be required to pay such compensation or causing §5.6 to
be applicable), or default referred to in clauses (a), (b) or (c), as the case may be, by notice (a
“Replacement Notice”) in writing to the Administrative Agent and such Affected Lender (i)
request the Affected Lender to cooperate with the Borrowers in obtaining a replacement Lender
satisfactory to the Administrative Agent and the Borrowers (the “Replacement Lender”); (ii)
request the non-Affected Lenders to acquire and assume all of the Affected Lender’s Loans and
Commitment as provided herein, but none of such Lenders shall be under an obligation to do so; or
(iii) designate a Replacement Lender approved by the Administrative Agent, such approval not to be
unreasonably withheld or delayed. If any satisfactory Replacement Lender shall be obtained, and/or
if any one or more of the non-Affected Lenders shall agree to acquire and assume all of the
Affected Lender’s Loans and Commitment, then such Affected Lender shall assign, in accordance with
§15, all of its Commitment, Loans, Letter of Credit Participations, Notes and other rights and
obligations under this Credit Agreement and all other Loan Documents to such Replacement Lender or
non-Affected Lenders, as the case may be, in exchange for payment of the principal amount so
assigned and all interest and fees accrued on the amount so assigned, plus all other Obligations
then due and payable to the Affected Lender; provided, however, that (A) such assignment shall be
without recourse, representation or warranty and shall be on terms and conditions reasonably
satisfactory to such Affected Lender and such Replacement Lender and/or non-Affected Lenders, as
the case may be, and (B) prior to any such assignment, the Borrowers shall have paid to such
Affected Lender all amounts properly demanded and unreimbursed under §§5.7 and 5.8. Upon the
effective date of such assignment, the Borrowers shall issue replacement Notes to such Replacement
Lender and/or non-Affected Lenders, as the case may be, and such institution shall become a
“Lender” for all purposes under this Credit Agreement and the other Loan Documents.



     5.13. [Reserved].



     5.14. [Reserved].



     5.15. Concerning Joint and Several Liability of the Borrowers.




     (a) Each of the Borrowers is accepting joint and several liability hereunder
and under the other Loan Documents in consideration of the financial accommodations
to be provided by the Lenders, any Issuing Bank and the Agents under this Credit
Agreement, for the mutual benefit, directly and indirectly, of each of the Borrowers
and



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in consideration of the undertakings of each other Borrower to accept joint and
several liability for the Obligations.




     (b) Each of the Borrowers, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint and
several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this §5.15), it being the intention of the parties hereto
that all the Obligations shall be the joint and several obligations of each of the
Borrowers without preferences or distinction among them.




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




     (d) The Obligations of each of the Borrowers under the provisions of this §5.15
constitute the full recourse Obligations of each of the Borrowers enforceable
against each such Person to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Credit Agreement
or the other Loan Documents or any other circumstance whatsoever as to any other
Borrower.




     (e) Except as otherwise expressly provided herein, each Borrower hereby waives
promptness, diligence, presentment, demand, protest, notice of acceptance of its
joint and several liability, notice of any and all advances of the Loans made under
this Credit Agreement and the Notes, notice of occurrence of any Default or Event of
Default (except to the extent notice is expressly required to be given pursuant to
the terms of this Credit Agreement or any of the other Loan Documents), or of any
demand for any payment under this Credit Agreement, notice of any action at any time
taken or omitted by any Agent, any Issuing Bank or the Lenders under or in respect
of any of the Obligations hereunder, any requirement of diligence and, generally,
all demands, notices and other formalities of every kind in connection with this
Credit Agreement and the other Loan Documents. Each Borrower hereby waives all
defenses which may be available by virtue of any valuation, stay, moratorium law or
other similar law now or hereafter in effect, any right to require the marshaling of
assets of the Borrowers and any other entity or Person primarily or secondarily
liable with respect to any of the Obligations, and all suretyship defenses
generally. Each Borrower hereby assents to, and waives notice of, any extension or
postponement of the time for the payment, or place or manner for payment,
compromise, refinancing, consolidation or renewals of any of the Obligations
hereunder, the acceptance of any partial payment thereon, any waiver, consent or
other action or acquiescence by the Agents, any Issuing Bank and the Lenders at any
time or times in respect of any default by any Borrower in the performance or
satisfaction of any term, covenant, condition or provision of this Credit Agreement
and the other Loan Documents, any and all other indulgences whatsoever by the
Agents, any Issuing Bank and the Lenders in respect of any of the Obligations
hereunder, and the taking, addition, substitution or release, in whole or in part,
at any time or times, of any security for any of such Obligations or the addition,
substitution or release, in whole or in part, of any Borrowers or any other entity
or Person primarily or secondarily liable for any Obligation. Such Borrower further
agrees that its Obligations shall not be released or discharged, in whole or in
part, or otherwise affected by the adequacy of any rights which any Agent, any
Issuing Bank or any Lender may have against any collateral security or



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other means of obtaining repayment of any of the Obligations, the impairment of
any collateral security securing the Obligations, including, without limitation, the
failure to protect or preserve any rights which any Agent, any Issuing Bank or any
Lender may have in such collateral security or the substitution, exchange,
surrender, release, loss or destruction of any such collateral security, any other
act or omission which might in any manner or to any extent vary the risk of such
Borrower, or otherwise operate as a release or discharge of such Borrower, all of
which may be done without notice to such Borrower. If for any reason any of the
other Borrowers has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become irrecoverable from
any of the other Borrowers by reason of such other Borrower’s insolvency, bankruptcy
or reorganization or by other operation of law or for any reason, this Credit
Agreement and the other Loan Documents to which it is a party shall nevertheless be
binding on such Borrower to the same extent as if such Borrower at all times had
been the sole obligor on such Obligations. Without limiting the generality of the
foregoing, each Borrower assents to any other action or delay in acting or failure
to act on the part of the Agents, any Issuing Bank and the Lenders, including,
without limitation, any failure strictly or diligently to assert any right or to
pursue any remedy or to comply fully with applicable Laws or regulations thereunder
which might, but for the provisions of this §5.15, afford grounds for terminating,
discharging or relieving such Borrower, in whole or in part, from any of its
obligations under this §5.15, it being the intention of each Borrower that, so long
as any of the Obligations hereunder remain unsatisfied, the obligations of such
Borrower under this §5.15 shall not be discharged except by performance and then
only to the extent of such performance. The Obligations of each Borrower under this
§5.15 shall not be diminished or rendered unenforceable by any winding up,
reorganization, arrangement, liquidation, reconstruction or similar proceeding with
respect to any reconstruction or similar proceeding with respect to any other
Borrower, or any of the Lenders. The joint and several liability of the Borrowers
hereunder shall continue in full force and effect notwithstanding any absorption,
merger, amalgamation or any other change whatsoever in the name, ownership,
membership, constitution or place of formation of any Borrower or the Lenders. Each
of the Borrowers acknowledges and confirms that it has itself established its own
adequate means of obtaining from each of the other Borrowers on a continuing basis
all information desired by such Borrower concerning the financial condition of each
of the other Borrowers and that each such Borrower will look to each of the other
Borrowers and not to any Agent, any Issuing Bank or any Lender in order for such
Borrower to keep adequately informed of changes in each of the other Borrowers’
respective financial conditions.




     (f) The provisions of this §5.15 are made for the benefit of the Lenders, the
Agents and each Issuing Bank and their respective permitted successors and assigns,
and may be enforced by it or them from time to time against any or all of the
Borrowers as often as occasion therefor may arise and without requirement on the
part of the Lenders, the Agents or any Issuing Bank or such successor or assign
first to marshal any of its or their claims or to exercise any of its or their
rights against any of the other Borrowers or to exhaust any remedies available to it
or them against any of the other Borrowers or to resort to any other source or means
of obtaining payment of any of the Obligations hereunder or to elect any other
remedy. The provisions of this §5.15 shall remain in effect until all of the
Obligations shall have been paid in full or otherwise fully satisfied. If at any
time, any payment, or any part thereof, made in respect of any of the Obligations,
is rescinded or must otherwise be restored or returned by any Lender, any Agent or
any Issuing Bank upon the insolvency, bankruptcy or reorganization of any of



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the Borrowers, or otherwise, the provisions of this §5.15 will forthwith be
reinstated in effect, as though such payment had not been made.




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




     (h) Each of the Borrowers hereby agrees that the payment of any amounts due
with respect to the indebtedness owing by any Borrower to any other Borrower is
hereby subordinated to the prior payment in full in cash of the Obligations. Each
Borrower hereby agrees that after the occurrence and during the continuance of any
Default or Event of Default, such Borrower will not demand, sue for or otherwise
attempt to collect any indebtedness of any other Borrower owing to such Borrower
until the Obligations shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, such Borrower shall collect, enforce or receive any amounts in
respect of such indebtedness, such amounts shall be collected, enforced and received
by such Borrower as trustee for the Administrative Agent and be paid over to the
Administrative Agent for the pro rata accounts of the Lenders to be
applied to repay the Obligations.



     5.16. Additional Borrowers. BGI may, upon not less than ten (10) Business Days’
notice to the Administrative Agent, cause additional Subsidiaries of BGI to become Borrowers
hereunder by causing such Subsidiary or Subsidiaries to agree to be bound by the provisions of this
Credit Agreement and the Notes, to execute and deliver a Joinder Agreement to the Administrative
Agent and to deliver such legal opinions and other documents and instruments as the Administrative
Agent may request, including allonges to the Notes. Upon the Administrative Agent’s receipt of
such notice, the Administrative Agent shall notify the Lenders at least five (5) days prior to such
joinder of a new Borrower. BGI shall not cause any Foreign Subsidiary of BGI to become a Borrower
hereunder.



     5.17. Taxes.




     (a) Payments Free of Taxes; Obligation to Withhold; Payments on Account of
Taxes. (i) Any and all payments by or on account of any obligation of the
Borrowers hereunder or under any other Loan Document shall to the extent permitted
by applicable Laws be made free and clear of and without reduction or withholding
for any Taxes. If, however, applicable Laws require the Borrowers or the
Administrative Agent to withhold or deduct any Tax, such Tax shall be withheld or
deducted in accordance with such Laws as determined by the Borrowers or the
Administrative Agent, as the case



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may be, upon the basis of the information and documentation to be delivered
pursuant to subsection (e) below.




     (ii) If the Borrowers or the Administrative Agent, as the case may be,
shall be required by the Code to withhold or deduct any Taxes, including
both United States Federal backup withholding and withholding taxes, from
any payment, then (A) the Borrowers or the Administrative Agent, as the case
may be, shall withhold or make such deductions as are determined by the
Borrowers or the Administrative Agent, as the case may be, to be required
based upon the information and documentation it has received pursuant to
subsection (e) below, (B) the Borrowers or the Administrative Agent, as the
case may be, shall timely pay the full amount withheld or deducted to the
relevant Governmental Authority in accordance with the Code, and (C) to the
extent that the withholding or deduction is made on account of Indemnified
Taxes or Other Taxes, the sum payable by the Borrowers shall be increased as
necessary so that after any required withholding or the making of all
required deductions (including deductions applicable to additional sums
payable under this Section) the Administrative Agent, Lender or Issuing
Bank, as the case may be, receives an amount equal to the sum it would have
received had no such withholding or deduction been made.




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




     (c) Tax Indemnifications. (i) Without limiting the provisions of
subsection (a) or (b) above, the Borrowers shall, and do hereby, indemnify the
Administrative Agent, each Lender and the Issuing Bank, and shall make payment in
respect thereof within ten (10) days after demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
withheld or deducted by the Borrowers or the Administrative Agent or paid by the
Administrative Agent, such Lender or the Issuing Bank, as the case may be, and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. The Borrowers
shall also, and do hereby, indemnify the Administrative Agent, and shall make
payment in respect thereof within ten (10) days after demand therefor, for any
amount which a Lender or the Issuing Bank for any reason fails to pay indefeasibly
to the Administrative Agent as required by clause (ii) of this subsection. A
certificate as to the amount of any such payment or liability delivered to the
Borrowers by a Lender or the Issuing Bank (with a copy to the Administrative Agent),
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.




     (ii) Without limiting the provisions of subsection (a) or (b) above,
each Lender and the Issuing Bank shall, and does hereby, indemnify the
Borrowers and the Administrative Agent, and shall make payment in respect
thereof within ten (10) days after demand therefor, against any and all
Taxes and any and all related losses, claims, liabilities, penalties,
interest and expenses (including the fees, charges and disbursements of any
counsel for the Borrowers or the Administrative Agent) incurred by or
asserted against the Borrowers or the



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Administrative Agent by any Governmental Authority as a result of the
failure by such Lender or the Issuing Bank, as the case may be, to deliver,
or as a result of the inaccuracy, inadequacy or deficiency of, any
documentation required to be delivered by such Lender or the Issuing Bank,
as the case may be, to the Borrower or the Administrative Agent pursuant to
subsection (e). Each Lender and the Issuing Bank hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time
owing to such Lender or the Issuing Bank, as the case may be, under this
Agreement or any other Loan Document against any amount due to the
Administrative Agent under this clause (ii). The agreements in this clause
(ii) shall survive the resignation and/or replacement of the Administrative
Agent, any assignment of rights by, or the replacement of, a Lender or the
Issuing Bank, the termination of the Total Commitment and the repayment,
satisfaction or discharge of all other Obligations.




     (d) Evidence of Payments. Upon request by the Borrowers or the
Administrative Agent, as the case may be, after any payment of Taxes by the
Borrowers or by the Administrative Agent to a Governmental Authority as provided in
this §5.17, the Borrowers shall deliver to the Administrative Agent, or the
Administrative Agent shall deliver to the Borrowers, as the case may be, the
original or a certified copy of a receipt issued by such Governmental Authority
evidencing such payment, a copy of any return required by Laws to report such
payment or other evidence of such payment reasonably satisfactory to the Borrowers
or the Administrative Agent, as the case may be.




     (e) Status of Lenders; Tax Documentation. (i) Each Lender shall
deliver to the Borrowers and to the Administrative Agent, at the time or times
prescribed by applicable Laws or when reasonably requested by the Borrowers or the
Administrative Agent, such properly completed and executed documentation prescribed
by applicable Laws or by the taxing authorities of any jurisdiction and such other
reasonably requested information as will permit the Borrowers or the Administrative
Agent, as the case may be, to determine (A) whether or not payments made hereunder
or under any other Loan Document are subject to Taxes, (B) if applicable, the
required rate of withholding or deduction, and (C) such Lender’s entitlement to any
available exemption from, or reduction of, applicable Taxes in respect of all
payments to be made to such Lender by the Borrowers pursuant to this Agreement or
otherwise to establish such Lender’s status for withholding tax purposes in the
applicable jurisdiction.




     (ii) Without limiting the generality of the foregoing, if a Borrower is
resident for tax purposes in the United States,




     (A) any Lender that is a “United States person” within the
meaning of Section 7701(a)(30) of the Code shall deliver to such
Borrower and the Administrative Agent executed originals of Internal
Revenue Service Form W-9 or such other documentation or information
prescribed by applicable Laws or reasonably requested by such
Borrower or the Administrative Agent as will enable such Borrower or
the Administrative Agent, as the case may be, to determine whether or
not such Lender is subject to backup withholding or information
reporting requirements; and




     (B) each Foreign Lender that is entitled under the Code or any
applicable treaty to an exemption from or reduction of withholding



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tax with respect to payments hereunder or under any other Loan
Document shall deliver to such Borrower and the Administrative Agent
(in such number of copies as shall be requested by the recipient) on
or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the
request of such Borrower or the Administrative Agent, but only if
such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:




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




     (b) executed originals of Internal Revenue Service Form W-8ECI,




     (c) executed originals of Internal Revenue Service Form W-8IMY
and all required supporting documentation,




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




     (e) executed originals of any other form prescribed by
applicable Laws as a basis for claiming exemption from or a reduction
in United States Federal withholding tax together with such
supplementary documentation as may be prescribed by applicable Laws
to permit such Borrower or the Administrative Agent to determine the
withholding or deduction required to be made.




     (iii) Each Lender shall promptly (A) notify the Borrowers and the
Administrative Agent of any change in circumstances which would modify or
render invalid any claimed exemption or reduction, and (B) take such steps
as shall not be materially disadvantageous to it, in the reasonable judgment
of such Lender, and as may be reasonably necessary (including the
re-designation of its Domestic Lending Office or its Eurocurrency Lending
Office) to avoid any requirement of applicable Laws of any jurisdiction that
any Borrower or the Administrative Agent make any withholding or deduction
for taxes from amounts payable to such Lender.




     (f) Treatment of Certain Refunds. If the Administrative Agent, any
Lender or the Issuing Bank determines, in its reasonable discretion, that it is
entitled to receive a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrowers or with respect to which the Borrowers have paid
additional amounts pursuant to this Section, it shall submit a claim for such refund
at the Borrowers’ expense; provided that no claim of refund will be
submitted if such refund will have an adverse



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effect on the Administrative Agent, such Lender or the Issuing Bank. If the
Administrative Agent, any Lender or the Issuing Bank receives a refund, it shall pay
to the applicable Borrower(s) an amount equal to such refund (but only to the extent
of indemnity payments made, or additional amounts paid, by such Borrower under this
Section with respect to the Taxes or Other Taxes giving rise to such refund), net of
all out-of-pocket expenses incurred by the Administrative Agent, such Lender or the
Issuing Bank, as the case may be, and without interest (other than any interest paid
by the relevant Governmental Authority with respect to such refund),
provided that the Borrowers, upon the request of the Administrative Agent,
such Lender or the Issuing Bank, agree to repay the amount paid over to the
Borrowers (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent, such Lender or the Issuing Bank
in the event the Administrative Agent, such Lender or the Issuing Bank is required
to repay such refund to such Governmental Authority. This subsection shall not be
construed to require the Administrative Agent, any Lender or the Issuing Bank to
make available its tax returns (or any other information relating to its taxes that
it deems confidential) to the Borrowers or any other Person.



6. GUARANTY AND COLLATERAL SECURITY.




     6.1. Guaranty of Payment and Performance. For value received and hereby acknowledged
and as an inducement to the Lenders to make Loans to the Borrowers and the Issuing Banks to issue
Letters of Credit for the account of the Borrowers, each Guarantor hereby absolutely,
unconditionally and irrevocably guarantees to the Agents, the Issuing Banks and the Lenders, the
full and punctual payment when due (whether at stated maturity, by required pre-payment, by
acceleration or otherwise), as well as the performance, of all of the Obligations including all
such which would become due but for the operation of the automatic stay pursuant to §362(a) of the
Federal Bankruptcy Code and the operation of §§502(b) and 506(b) of the Federal Bankruptcy Code
(such obligations collectively being the “Guaranteed Obligations”). This §6 is in no way
conditioned upon any requirement that any Agent, any Issuing Bank or any Lender first attempt to
collect any of the Obligations from the applicable Borrower or, as the case may be, Borrowers or
resort to any collateral security or other means of obtaining payment. Should any Borrower default
in the payment or performance of any of its Obligations, the obligations of each Guarantor
hereunder with respect to the Guaranteed Obligations shall become immediately due and payable to
the Administrative Agent, for the benefit of the Lenders, the Issuing Banks and the Agents, without
demand or notice of any nature, all of which are expressly waived by each Guarantor.



     Notwithstanding anything to the contrary contained in this §6, the parties hereto agree that
Paperchase shall not be required to be a guarantor of any of the Obligations hereunder.



     The guarantee by each of the Borrowers pursuant to this §6.1 is without prejudice to its
liability as a principal debtor under this Agreement.



     6.2. Guaranty Absolute. Each of the Guarantors guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms hereof, regardless of any law,
regulation, order, decree or directive (whether or not having the force of law) or any
interpretation thereof, now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Agent, any Issuing Bank or any Lender with respect thereto, including, without
limitation, any law, regulation, order, decree or directive or interpretation thereof that purports
to require or permit the satisfaction of any Guaranteed Obligation, other than strictly in
accordance with the terms of this Credit Agreement. The liability of each Guarantor under this
Guaranty with regard to the Guaranteed Obligations of each Borrower shall be absolute and
unconditional irrespective of:



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     (a) any lack of authorization, execution, validity or enforceability or any
illegality of such Borrower to become a Borrower hereunder, this Credit Agreement
and any amendment hereof (with regard to such Guaranteed Obligations), or any other
obligation, agreement or instrument relating thereto (it being agreed by each
Guarantor that the Guaranteed Obligations shall not be discharged prior to the final
and complete satisfaction of all of the Obligations of the Borrowers) or any failure
to obtain any necessary governmental consent or approvals or necessary third party
consents or approvals;




     (b) any Agent’s, any Issuing Bank’s or any Lender’s exercise or enforcement of,
or failure or delay in exercising or enforcing, legal proceedings to collect the
Obligations or the Guaranteed Obligations, as the case may be, or any power, right
or remedy with respect to any of the Obligations or the Guaranteed Obligations, as
the case may be, including (i) any suspension of any Agent’s, any Issuing Bank’s or
any Lender’s right to enforce against any other Borrower of the Guaranteed
Obligations, or (ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations of such Borrower or any
other amendment or waiver of or any consent to departure from this Credit Agreement
or the other Loan Documents (with regard to such Guaranteed Obligations) or any
other agreement or instrument governing or evidencing any of the Guaranteed
Obligations;




     (c) any exchange, release or non-perfection of any collateral, or any release
or amendment or waiver of or consent to departure from any other guaranty, for all
or any of the Guaranteed Obligations of such Borrower;




     (d) any change in ownership of such Borrower;




     (e) any acceptance of any partial payment(s) from such Borrower;




     (f) any insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition, assignment for the benefit of creditors, appointment of a receiver,
examiner or trustee for all or any part of any Borrower’s assets;




     (g) any assignment, participation or other transfer, in whole or in part, of
any Agent’s, any Issuing Bank’s or any Lender’s interest in and rights under this
Credit Agreement or any other Loan Document, or of any Agent’s, any Issuing Bank’s
or any Lender’s interest in the Obligations or the Guaranteed Obligations, as the
case may be;




     (h) any cancellation, renunciation or surrender of any pledge, guaranty or any
debt instrument evidencing the Obligations or the Guaranteed Obligations, as the
case may be;




     (i) any Agent’s, any Issuing Bank’s or any Lender’s vote, claim, distribution,
election, acceptance, action or inaction in any bankruptcy or reorganization case
related to the Obligations or the Guaranteed Obligations, as the case may be; or




     (j) any other action or circumstance, other than payment, which might otherwise
constitute a defense available to, or a discharge of, such Borrower in respect of
its Obligations or the Guaranteed Obligations, as the case may be.



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     This Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise
be returned by any Agent, any Issuing Bank or any Lender upon the insolvency, bankruptcy or
reorganization, examination of any Borrower or otherwise, all as though such payment had not
been made.



     6.3. Effectiveness, Enforcement. The Guaranty herein of each Guarantor shall be
effective and shall be deemed to be made with respect to each Loan made or Letter of Credit issued
to a Borrower as of the time it is made. No invalidity, irregularity or unenforceability by reason
of any bankruptcy or similar law, or any law or order of any government or agency thereof
purporting to reduce, amend or otherwise affect any liability of a Borrower, and no defect in or
insufficiency or want of powers of any Borrower or irregular or improperly recorded exercise
thereof, shall impair, affect, be a defense to or claim against such Guaranty. This Guaranty is a
continuing guaranty and shall (a) survive any termination of this Credit Agreement and (b) remain
in full force and effect until payment in full in cash and performance of all Guaranteed
Obligations and all other amounts payable under this Guaranty. This Guaranty is made for the
benefit of each Agent, each Issuing Bank and each of the Lenders and their respective successors
and assigns, and may be enforced from time to time as often as occasion therefor may arise and
without requirement on the part of any Agent, any Issuing Bank or any Lender first to exercise any
rights against any Borrower or to exhaust any remedies available to it against any Borrower or to
resort to any other source or means of obtaining payment of any of the Guaranteed Obligations or to
elect any other remedy. In the event that acceleration of the time for payment (or the giving of
notice of such acceleration) of the Guaranteed Obligations of any Borrower is stayed upon the
insolvency, bankruptcy, examination or reorganization, of such Borrower or for any other reason,
all such amounts otherwise subject to acceleration under the terms of this Credit Agreement shall
be immediately due and payable by each Guarantor under the Guaranty herein provided.



     6.4. Waiver. Each of the Guarantors hereby waives promptness, diligence, protest,
notice of protest, all suretyship defenses, notice of acceptance and any other notice with respect
to any of the Guaranteed Obligations, and this Guaranty and any requirement that any Agent, any
Issuing Bank or any Lender secure, perfect or protect any security interest or lien or any property
subject thereto or exhaust any right or take any action against any Borrower or any other Person or
any collateral. Each of the Guarantors also irrevocably waives, to the fullest extent permitted by
law, all defenses which at any time may be available to it in respect of the Guaranteed Obligations
by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now
or hereafter in effect.



     6.5. Subordination; Subrogation. Until the termination of the Commitments and final
payment and performance in full in cash of all of the Obligations, none of the Guarantors shall
exercise and each hereby waives any rights against any Borrower as a result of payment by any
Guarantor hereunder, by way of subrogation, reimbursement, restitution, contribution or otherwise,
and no Guarantor will prove any claim in competition with any Agent, any Issuing Bank or any Lender
in respect of any payment hereunder in bankruptcy, insolvency or reorganization proceedings of any
nature; no Guarantor will claim any set-off, recoupment or counterclaim against any Borrower in
respect of any liability of such Guarantor to such Borrower; and each Guarantor waives any benefit
of and any right to participate in any collateral which may be held by any Agent, any Issuing Bank
and any Lender. The payment of any amounts due with respect to any Indebtedness of any Borrower
now or hereafter held by any Guarantor is hereby subordinated to the prior payment in full of the
Guaranteed Obligations. Each Guarantor agrees that after the occurrence of any default in the
payment or performance of the Guaranteed Obligations, such Guarantor will not demand, sue for, or
otherwise attempt to collect any such Indebtedness of any of the Borrowers to such Guarantor until
the Guaranteed Obligations then due shall have been paid in full in cash. If, notwithstanding the
foregoing sentence, any Guarantor shall collect or receive any amounts in respect of such
indebtedness, such amounts shall be collected and



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received by such Guarantor as trustee for the Agents, any Issuing Bank and the Lenders and be
paid over to the Administrative Agent for the respective accounts of the Agents, the Issuing Banks
and the Lenders on account of the Guaranteed Obligations without affecting in any manner the
liability of any Guarantor under the other provisions of this §6. The provisions of this section
shall survive the expiration or termination of the Credit Agreement and the other Loan Documents
and the provisions of this section shall be supplemental to and not in derogation of any rights and
remedies of any Agent, any Issuing Bank or any Lender under any separate subordination agreement
which any Agent, any Issuing Bank or any Lender may at any time and from time to time entered into
with any Guarantor for the benefit of any Agent, any Issuing Bank or any Lender.




     6.6. Payments. Payments by each Guarantor hereunder may be required by the
Administrative Agent on any number of occasions. All payments made by each Guarantor under this §6
shall be made to the Administrative Agent, in the manner and at the place of payment specified
therefor in §5.3.1 hereof, for the account of the Lenders, the Issuing Banks and the Agents and in
the same currency in which such Obligation was made, unless otherwise agreed to in writing by the
Agents, the Issuing Banks or the Lenders.



     6.7. Setoff. Each Guarantor grants to the Agents, the Issuing Banks and the Lenders,
as security for the full and punctual payment and performance of all of such Guarantor’s
obligations under this §6, a continuing lien on, security interest and right of setoff in all
securities or other property belonging to such Guarantor now or hereafter held by any Agent, any
Issuing Bank or such Lender and in all deposits (general or special, time or demand, provisional or
final) and other sums credited by or due from any Agent, any Issuing Bank or such Lender to such
Guarantor or subject to withdrawal by such Guarantor. Regardless of the adequacy of any collateral
security or other means of obtaining payment of any of the Guaranteed Obligations, each of the
Agents, each Issuing Bank and the Lenders is hereby authorized at any time and from time to time
during the continuance of any Event of Default, without notice to any Guarantor (any such notice
being expressly waived by the Guarantors) and to the fullest extent permitted by law, to set off
and apply such deposits and other sums against the obligations of such Guarantor under this §6,
whether or not such Agent, such Issuing Bank or such Lender shall have made any demand under this
§6 and although such obligations may be contingent or unmatured.



     6.8. Further Assurances. Each Guarantor agrees that it will from time to time, at the
request of the Administrative Agent, do all such things and execute all such documents as the
Administrative Agent may reasonably consider necessary or desirable to give full effect to this §6
and to perfect and preserve the rights and powers of the Lenders, the Issuing Banks and the Agents
hereunder. Each Guarantor acknowledges and confirms that it has established its own adequate means
of obtaining from the Borrowers on a continuing basis all information desired by it concerning the
financial condition of the Borrowers and that it will look to the Borrowers and not to any Agent,
any Issuing Bank or any Lender in order for it to keep adequately informed of changes of the
financial condition of any Borrower.



     6.9. Successors and Assigns. This §6 shall be binding upon each Guarantor, its
successors and assigns, and shall inure to the benefit of the Agents, the Issuing Banks and the
Lenders and their respective successors, and permitted transferees and assigns. Without limiting
the generality of the foregoing sentence, each Lender may, in accordance with the provisions of §15
and subject to the limitations set forth therein, assign or otherwise transfer this Credit
Agreement, the other Loan Documents or any other agreement or note held by it evidencing, securing
or otherwise executed in connection with the Obligations, or sell participations in any interest
therein, to another Person, and such other Person shall thereupon become vested, to the extent set
forth in the agreement evidencing such assignment, transfer or participation, with all the rights
in respect thereof granted to such Lender herein. None of the Guarantors may assign any of its
obligations hereunder. BGI may cause additional Subsidiaries of BGI to become Guarantors hereunder
by causing such Subsidiary or Subsidiaries to agree



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to be bound by the provisions of this §6, to execute and deliver a Joinder Agreement to the
Administrative Agent and to deliver such legal opinions and other documents and instruments as the
Administrative Agent may request.




     6.10. Contribution. To the extent any of the Guarantors makes a payment hereunder in
excess of the aggregate amount of the benefit received by such Person in respect of the extensions
of credit under the Credit Agreement (the “Benefit Amount”), then such Person, after the
payment in full in cash of all of the Guaranteed Obligations shall be entitled to recover from each
such Person such excess payment, pro rata in accordance with the ratio of the Benefit Amount
received by such other Person to the total Benefit Amounts received by each of the Guarantors, and
the right to such recovery shall be deemed to be in asset and property of such Person so funding;
provided that all such rights to recovery shall be subordinate and junior in right of payment to
the final and indefeasible repayment in full in cash of all of the Obligations.



     6.11. [Reserved].



     6.12. Security of Borrowers. The Borrower Obligations shall be secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to priority under
applicable Law) in all of the ABL Priority Collateral, pursuant to the terms of the Security
Documents to which any Borrower or any Guarantor is a party and otherwise on terms and conditions
and pursuant to documentation satisfactory to the Administrative Agent. The Borrower Obligations
shall be secured by a perfected second priority security interest in the Second Lien Priority
Collateral pursuant to the terms of the Security Documents to which any Borrower or any Guarantor
is a party and otherwise on terms and conditions and pursuant to documentation satisfactory to the
Administrative Agent.



     6.13. Limitation on Guaranty Obligations. In any action or proceeding with respect to
any Guarantor involving any state corporate law, or any state or federal bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the obligations of such
Guarantor under §6.1 hereof would otherwise be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account of the amount of
its liability under said §6.1, then, notwithstanding any other provision hereof to the contrary,
the amount of such liability shall, without any further action by such Guarantor, Administrative
Agent, Lenders, or any other Person, be automatically limited and reduced to the highest amount
which is valid and enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.



7. REPRESENTATIONS AND WARRANTIES.




     Each of the Borrowers jointly and severally represents and warrants to the Lenders, the Agents
and the Issuing Banks as follows:



     7.1. Corporate Authority.




     7.1.1. Incorporation; Good Standing. Each of BGI and its Subsidiaries
(a) is a corporation (or similar business entity) duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
formation, (b) has all requisite corporate (or the equivalent company) power to own
its property and conduct its business as now conducted and as presently
contemplated, and (c) is in good standing as a foreign corporation (or similar
business entity) and is duly authorized to do business in each jurisdiction where
such qualification is necessary except where a failure to be so qualified would not
have a Material Adverse Effect.



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     7.1.2. Authorization. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which any of the Borrowers or any
of their Subsidiaries is or is to become a party and the transactions contemplated
hereby and thereby (a) are within the corporate (or the equivalent company)
authority of such Person, (b) have been duly authorized by all necessary corporate
(or the equivalent company) proceedings, (c) do not and will not conflict with or
result in any breach or contravention of any provision of law, statute, rule or
regulation to which any of the Borrowers or any of their Subsidiaries is subject or
any judgment, order, writ, injunction, license or permit applicable to any of the
Borrowers or any of their Subsidiaries and (d) do not conflict with any provision of
the Governing Documents of, or any agreement or other instrument binding upon, any
of the Borrowers or any of their Subsidiaries.




     7.1.3. Enforceability. The execution and delivery of this Credit
Agreement and the other Loan Documents to which any of the Borrowers or any of their
Subsidiaries is or is to become a party will result in valid and legally binding
obligations of such Person enforceable against it in accordance with the respective
terms and provisions hereof and thereof, except as enforceability is limited by
Debtor Relief Laws and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.



     7.2. Governmental Approvals. The execution, delivery and performance by any of the
Borrowers and any of their Subsidiaries of this Credit Agreement and the other Loan Documents to
which any of the Borrowers or any of their Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby do not require the approval or consent of, or filing
with, any Governmental Authority other than those already obtained.



     7.3. Title to Properties; Leases. Except as indicated on Schedule 7.3 hereto,
the Borrowers and their Subsidiaries own all of the assets reflected in the consolidated balance
sheet of the Borrowers and their Subsidiaries as at the Balance Sheet Date or acquired since that
date (except property and assets sold or otherwise disposed of in the ordinary course of business
since that date), subject to no Liens except Permitted Liens.



     7.4. Fiscal Year; Financial Statements and Projections.




     7.4.1. Fiscal Year. Each of the Borrowers and each of their
Subsidiaries has a Fiscal Year which is the 52/53 week period ending on the Saturday
closest to the last day in January; provided that the Borrowers and their
Subsidiaries may change any Fiscal Year end date to a date not more than seven (7)
days before or after the then scheduled end date of such Fiscal Year with written
notice to the Administrative Agent not less than thirty (30) days prior to the
commencement of such Fiscal Year. The Fiscal Quarters and Fiscal Year of the
Borrowers and their Subsidiaries are accurately described in §1.1 hereof (except as
otherwise noticed to the Administrative Agent pursuant to the proviso of the
preceding sentence).




     7.4.2. Financial Statements. There has been furnished to each of the
Lenders (a) a consolidated balance sheet of BGI and its Subsidiaries as at the
Balance Sheet Date and consolidated statements of income and cash flow of the
Borrowers and their Subsidiaries as at the Balance Sheet Date, certified by Ernst &
Young LLP, and (b) a consolidated balance sheet and consolidated statements of
income and cash flow of the Borrowers and their Subsidiaries for the FQ3 2009. Such
balance sheet and statements of



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income and cash flow have been prepared in accordance with GAAP and fairly
present the financial condition of BGI and its Subsidiaries as at the close of
business on the date thereof and the results of operations for the fiscal year then
ended. There are no contingent liabilities of any Borrower or any of its
Subsidiaries as of such date involving material amounts, known to the officers of
BGI, which were not disclosed in such balance sheet and the notes related thereto.




     7.4.3. Projections. The projections of the annual operating budgets of
BGI and its Subsidiaries on a consolidated basis, balance sheets, income statements,
cash flow statements and availability reports for the monthly periods from February
2010 through April 2011 and for the annual periods from Fiscal Year 2011 through
Fiscal Year 2014, copies of which have been delivered to each Lender, disclose all
assumptions made with respect to general economic, financial and market conditions
used in formulating such projections. To the knowledge of each of the Borrowers and
each of their Subsidiaries, no facts exist that (individually or in the aggregate)
would result in any material change in any of such projections. The projections are
based upon reasonable estimates and assumptions, have been prepared on the basis of
the assumptions stated therein and reflect the reasonable estimates of BGI and its
Subsidiaries of the results of operations and other information projected therein.



     7.5. No Material Adverse Effect, etc. Since the Balance Sheet Date there has been no
event or occurrence which has had a Material Adverse Effect. Since the Balance Sheet Date, the
Borrowers have not made any Restricted Payment except as set forth in Schedule 7.5 hereto.



     7.6. Franchises, Patents, Copyrights, etc. BGI and each of its Subsidiaries possesses
all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in
respect of the foregoing, adequate for the conduct of its business substantially as now conducted
without known conflict with any rights of others.



     7.7. Litigation. Except as set forth in Schedule 7.7 or Schedule 7.10
hereto, there are no actions, suits, proceedings or investigations of any kind pending or
threatened against BGI or any of its Subsidiaries before any Governmental Authority, that, (a)
might reasonably be expected to, either in any case or in the aggregate, (i) have a Material
Adverse Effect or (ii) materially impair the right of BGI and its Subsidiaries, considered as a
whole, to carry on business substantially as now conducted by them, or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves are not maintained on
the consolidated balance sheet of BGI and its Subsidiaries, or (b) which question the validity of
this Credit Agreement or any of the other Loan Documents, or any action taken or to be taken
pursuant hereto or thereto.



     7.8. [Reserved.]



     7.9. Compliance with Other Instruments, Laws, etc. Neither BGI nor any of its
Subsidiaries is in violation of any provision of its Governing Documents, or any agreement or
instrument to which it may be subject or by which it or any of its properties may be bound or any
decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a
manner that could result in the imposition of substantial penalties or have a Material Adverse
Effect.



     7.10. Tax Status. Except as set forth in Schedule 7.10 hereto, each of BGI
and its Subsidiaries (a) has made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which it is subject where, in the
cases of state or foreign tax returns, failure to make such filing could have a Material Adverse
Effect, (b) has paid all taxes and other



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governmental assessments and charges shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and by appropriate proceedings and (c)
has set aside on its books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply. Except as set
forth in Schedule 7.10, there are no unpaid taxes in any material amount claimed to be due
by the taxing authority of any jurisdiction, and none of the officers of any Borrower know of any
basis for any such claim.




     7.11. No Event of Default. No Default or Event of Default has occurred and is
continuing.



     7.12. Holding Company and Investment Company Acts. None of the Borrowers nor any of
their Subsidiaries is a “holding company”, or a “subsidiary company” of a “holding company”, or an
“affiliate” of a “holding company”, as such terms are defined in the Public Utility Holding Company
Act of 2005; nor is it is subject to regulation as a “public utility” under the Federal Power Act,
as amended; nor is it an “investment company”, or an “affiliated company” or a
“principal underwriter” of an “investment company”, as such terms are defined in
the Investment Company Act of 1940.



     7.13. [Reserved.]



     7.14. Certain Transactions. Except as set forth on Schedule 7.14, none of the
officers, directors, or employees of BGI or any of its Subsidiaries is presently a party to any
transaction involving payments in excess of $500,000 with BGI or any of its Subsidiaries (other
than for services as employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Borrowers, any corporation, partnership, trust or other
entity in which any officer or any such employee has a substantial interest or is an officer,
trustee or partner.



     7.15. ERISA Compliance.




     (a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or state laws. Each Pension Plan
that is intended to be a qualified plan under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service to the
effect that the form of such Plan is qualified under Section 401(a) of the Code, or
an application for such a letter is currently being processed by the Internal
Revenue Service. To the best knowledge of the Borrowers, nothing has occurred that
would prevent or cause the loss of such tax-qualified status.




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




     (c) (i) No ERISA Event has occurred, and neither the Borrowers nor any ERISA
Affiliate is aware of any fact, event or circumstance that could reasonably be
expected to constitute or result in an ERISA Event; (ii) the Borrowers and each
ERISA Affiliate has met all applicable requirements under the Pension Funding Rules
in respect of each Pension Plan, and no waiver of the minimum funding standards
under the Pension Funding Rules has been applied for or obtained; (iii) as of the
most recent



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valuation date for any Pension Plan, the funding target attainment percentage
(as defined in Section 430(d)(2) of the Code) is 60% or higher and neither the
Borrowers nor any ERISA Affiliate knows of any facts or circumstances that could
reasonably be expected to cause the funding target attainment percentage for any
such plan to drop below 60% as of the most recent valuation date; (iv) neither the
Borrowers nor any ERISA Affiliate has incurred any liability to the PBGC other than
for the payment of premiums, and there are no premium payments which have become due
that are unpaid; (v) neither the Borrowers nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and
(vi) no Pension Plan has been terminated by the plan administrator thereof nor by
the PBGC, and no event or circumstance has occurred or exists that could reasonably
be expected to cause the PBGC to institute proceedings under Title IV of ERISA to
terminate any Pension Plan.




     (d) Neither the Borrowers nor any ERISA Affiliate maintains or contributes to,
or has any unsatisfied obligation to contribute to, or liability under, any active
or terminated Pension Plan other than (A) on the Effective Date, those listed on
Schedule 7.15(d) hereto and (B) thereafter, Pension Plans not otherwise
prohibited by this Agreement.



     7.16. Use of Proceeds.




     7.16.1. General. The proceeds of the Loans shall be used for
refinancing certain existing Indebtedness (including Indebtedness under the Pershing
Square Term Loan Facility), working capital and general corporate purposes and
Acquisitions and Investments as permitted by this Credit Agreement. The Borrowers
will obtain Letters of Credit solely for working capital and general corporate
purposes.




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



     7.17. Environmental Compliance. The Borrowers have taken all appropriate inquiry into
the previous ownership of the Real Estate consistent with good commercial or customary practice
and, based upon such diligent investigation, has determined that, to the best of the Borrowers’
knowledge:




     (a) none of the Borrowers, their Subsidiaries or any operator of the Real
Estate or any operations thereon is in violation, or alleged violation, of any
judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including, without limitation, those arising under the
Resource Conservation and Recovery Act (“RCRA”), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986
(“SARA”), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state, local or foreign law, statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter “Environmental Laws”), which violation would have a material
adverse effect on the environment or a Material Adverse Effect;




     (b) none of the Borrowers nor any of their Subsidiaries has received notice
from any third party including, without limitation, any Governmental Authority, (i)
that any one of them has been identified by the United States Environmental
Protection



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Agency (“EPA”) as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C. §6903(5), any
hazardous substances as defined by 42 U.S.C. §9601(14), any pollutant or contaminant
as defined by 42 U.S.C. §9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any Environmental Laws
(“Hazardous Substances”) which any one of them has generated, transported or
disposed of has been found at any site at which a Governmental Authority has
conducted or has ordered that any Borrower or any of its Subsidiaries conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law; or (iii) that it is or shall be a named party to any claim,
action, cause of action, complaint, or legal or administrative proceeding (in each
case, contingent or otherwise) arising out of any third party’s incurrence of costs,
expenses, losses or damages of any kind whatsoever in connection with the release of
Hazardous Substances;




     (c) except as set forth on Schedule 7.17 attached hereto: (i) no
portion of the Real Estate has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance with applicable Environmental
Laws; and no underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate except in accordance with
applicable Environmental Laws; (ii) in the course of any activities conducted by the
Borrowers, their Subsidiaries or operators of its properties, no Hazardous
Substances have been generated or are being used on the Real Estate except in
accordance with applicable Environmental Laws; (iii) there have been no releases
(i.e., any past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, disposing or dumping) or
threatened releases of Hazardous Substances on, upon, into or from the properties of
the Borrowers or their Subsidiaries, which releases would have a material adverse
effect on the value of any of the Real Estate or adjacent properties or the
environment; (iv) to the best of the Borrowers’ knowledge, there have been no
releases on, upon, from or into any real property in the vicinity of any of the Real
Estate which, through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the Real Estate;
and (v) in addition, any Hazardous Substances that have been generated on any of the
Real Estate have been transported offsite only by carriers having an identification
number issued by the EPA (or the equivalent thereof in any foreign jurisdiction),
treated or disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which transporters and
facilities have been and are, to the best of the Borrowers’ knowledge, operating in
compliance with such permits and applicable Environmental Laws; and




     (d) none of the Borrowers nor any of their Subsidiaries, or any of the Real
Estate is subject to any applicable Environmental Law requiring the performance of
Hazardous Substances site assessments, or the removal or remediation of Hazardous
Substances, or the giving of notice to any Governmental Authority or the recording
or delivery to other Persons of an environmental disclosure document or statement by
virtue of the transactions set forth herein and contemplated hereby, or to the
effectiveness of any other transactions contemplated hereby.



     7.18. Subsidiaries. Schedule 7.18, as the same may be updated pursuant to
§7.22 hereof, states the name of each of BGI’s Subsidiaries and Joint Ventures and, in each case,
such entity’s jurisdiction of organization, the outstanding shares (referred to herein as the
“Subsidiary Shares”) and the owners thereof if it is a corporation, such entity’s
outstanding partnership interests (the “Partnership



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Interests”) if it is a partnership and such entity’s outstanding membership interests
(the “Membership Interests”) if it is a limited liability company. BGI and each of its
Subsidiaries has good and marketable title to all of the Subsidiary Shares, Partnership Interests,
and Membership Interests it purports to own, free and clear in each case of any Lien. All
Subsidiary Shares, Partnership Interests and Membership Interests have been validly issued and all
Subsidiary Shares are fully paid and nonassessable. All capital contributions and other
consideration required to be made or paid in connection with the issuance of the Partnership
Interests have been made or paid, as the case may be. There are no options, warrants or other
rights outstanding to purchase any such Subsidiary Shares, Partnership Interests or Membership
Interests except as indicated on Schedule 7.18. Neither Paperchase nor Borders Superstores
presently has, or in the future will have, any non-voting Capital Stock other than non-voting
Capital Stock issued by Paperchase pursuant to an employee stock or stock option plan;
provided that such stock shall only be issued in lieu of cash compensation that the
applicable employees would otherwise have received in the ordinary course of business as reasonably
determined by the board of directors or other governing body of Paperchase.




     7.19. Disclosure. None of this Credit Agreement or any of the other Loan Documents
contains any untrue statement of a material fact or omits to state a material fact (known to any of
the Borrowers or any of their Subsidiaries in the case of any document or information not furnished
by it or any of their Subsidiaries) necessary in order to make the statements herein or therein not
misleading. There is no fact known to any of the Borrowers or any of their Subsidiaries which has
a Material Adverse Effect, or which is reasonably likely in the future to have a Material Adverse
Effect, exclusive of effects resulting from changes in general economic conditions, legal standards
or regulatory conditions.



     7.20. Senior Debt Status. The Obligations of each Borrower and each Guarantor under
this Agreement and each of the other Loan Documents to which it is a party do rank and will rank at
least pari passu in priority of payment with all other Indebtedness of such
Borrower and Guarantor, as applicable. The Obligations of each Borrower and each Guarantor under
this Credit Agreement and each of the other Loan Documents to which it is a party and the Liens in
favor of the Administrative Agent securing such Obligations do rank and will rank senior in lien
status, with all other Indebtedness and Liens of such Borrower or such Guarantor, as applicable,
except (a) Indebtedness of such Borrower or such Guarantor to the extent secured by Permitted Liens
having priority over the Liens of the Administrative Agent by operation of applicable Law and (b)
Liens on the Second Lien Priority Collateral securing Indebtedness with respect to the Second Lien
Loan Facility. There is no Lien upon or with respect to any of the properties or income of any
Borrower, any Guarantor or any of their respective Subsidiaries which secures Indebtedness or other
obligations of any Person except for Permitted Liens. Prior to the effectiveness of this
Agreement, the Borrowers shall have repaid the Pershing Square Term Loan Facility in full in cash
and the Pershing Square Term Loan Documents will have been terminated therewith.



     7.21. Solvency. After giving effect to each incurrence of Indebtedness hereunder, and
the payment of all Fees, costs and expenses payable by each of the Borrowers hereunder, each of the
Borrowers is Solvent.



     7.22. Updates to Schedules. Should any of the information or disclosures provided on
any of the Schedules attached hereto become outdated or incorrect in any material respect, BGI
shall promptly provide the Administrative Agent in writing with such revisions or updates to such
Schedule as may be necessary or appropriate to update or correct same; provided that,
except for the amendment of Schedule 1, as contemplated by §§2.3.3 and 15 and the amendment
of Schedule 7.18 in connection with any new Subsidiary of BGI as permitted herein, no
Schedule shall be deemed to have been amended, modified or superseded by any such correction or
update, nor shall any breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule be deemed to have been cured thereby, unless and until the
Administrative Agent (which may require the consent of the Required Lenders) shall have accepted in
writing such revisions or updates to such Schedule.




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     7.23. Insurance. The Borrowers and each of their Subsidiaries maintain with
financially sound and reputable insurers insurance with respect to its properties and businesses
against such casualties and contingencies as are set forth on Schedule 7.23 hereto, and
such insurance is in accordance with sound business practices in accordance with industry standards
and the terms of the Security Documents.



     7.24. Bank Accounts. Schedule 7.24 (as updated by the most recent Borrowing
Base Report delivered pursuant to §8.4(e)) sets forth the account numbers and location of all Local
Accounts, Interim Concentration Accounts and other bank accounts of the Borrowers or any of their
Subsidiaries.



     7.25. Perfection of Security Interest. All filings, assignments, pledges and deposits
of documents or instruments have been made and all other actions have been taken that are necessary
or advisable, under applicable Law, to establish and perfect the Administrative Agent’s security
interest in the Collateral. The Administrative Agent’s rights with respect to the Collateral are
subject to the Intercreditor Agreement but are not subject to any other setoff, claims,
withholdings or other defenses. The Borrowers and all Subsidiaries of the Borrowers party to one
of the Security Documents are the owners of the Collateral free from any Lien, except for Permitted
Liens.



     7.26. [Reserved.]



     7.27. Foreign Assets Control Regulations, Etc. None of the requesting or borrowing of
the Loans, the requesting or issuance, extension or renewal of any Letters of Credit or the use of
the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. §1 et seq., as
amended) (the “Trading With the Enemy Act”) or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
(the “Foreign Assets Control Regulations”) or any enabling legislation or executive order
relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a)
Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the
“Executive Order”) and (b) the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore,
neither the Borrowers nor any of their Subsidiaries or other Affiliates (a) is or will become a
“blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign
Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be
otherwise associated, with any such “blocked person”.



     7.28. Taxpayer Identification Number. Each Borrower’s and Guarantor’s true and
correct U.S. taxpayer identification number is set forth on Schedule 7.28.



     7.29. Excluded Subsidiaries. None of the Excluded Subsidiaries engage in any trade or
business or own any assets or have incurred any Indebtedness except, after the Effective Date, to
the extent the Required Lenders have specifically consented in writing to such activities.



     7.30. Kobo. Except as set forth in the first sentence of §7.18, neither the Borrowers
nor the Guarantors make any representation or warranty whatsoever regarding Kobo, its assets, any
Collateral comprised of ownership interests in Kobo or otherwise.



8. AFFIRMATIVE COVENANTS.




     Each of the Borrowers, jointly and severally, covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any



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obligation to make any Loans or any Issuing Bank has any obligation to issue, extend or renew any
Letters of Credit:




     8.1. Punctual Payment. The Borrowers will duly and punctually pay or cause to be paid
the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees,
the Fees and all other amounts provided for in this Credit Agreement and the other Loan Documents
to which BGI or any of its Subsidiaries is a party, all in accordance with the terms of this Credit
Agreement and such other Loan Documents.



     8.2. Maintenance of Office. Each of the Borrowers will maintain its chief executive
office at 100 Phoenix Drive, Ann Arbor, Michigan or at such other place in the United States of
America as such Borrower shall designate upon written notice to the Administrative Agent, where
notices, presentations and demands to or upon such Borrower in respect of the Loan Documents to
which such Borrower is a party may be given or made.



     8.3. Records and Accounts. Each of the Borrowers will (a) keep, and cause each of its
Subsidiaries to keep, true and accurate records and books of account in which full, true and
correct entries will be made in accordance with GAAP, (b) maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of
its properties and the properties of its Subsidiaries, contingencies, and other reserves, and (c)
at all times engage Ernst & Young LLP or other independent certified public accountants
satisfactory to the Administrative Agent as the independent certified public accountants of the
Borrowers and their Subsidiaries and will not permit more than thirty (30) days to elapse between
the cessation of such firm’s (or any successor firm’s) engagement as the independent certified
public accountants of the Borrowers and their Subsidiaries and the appointment in such capacity of
a successor firm as shall be satisfactory to the Administrative Agent.



     8.4. Financial Statements, Certificates and Information. The Borrowers will deliver
to each of the Lenders:




          (a) as soon as practicable, but in any event not later than ninety (90) days
after the end of each Fiscal Year of the Borrowers, the consolidated balance sheet
of BGI and its Subsidiaries as at the end of such year, and the related consolidated
statement of income and consolidated statement of cash flow for such year, each
setting forth in comparative form the figures for the previous fiscal year and all
such consolidated statements to be in reasonable detail, prepared in accordance with
GAAP, and certified, without qualification and without an expression of uncertainty
as to the ability of BGI or any of its Subsidiaries to continue as going concerns,
by Ernst & Young LLP or by other independent certified public accountants
satisfactory to the Administrative Agent;




          (b) as soon as practicable, but in any event not later than forty-five (45)
days after the end of each of the first three fiscal quarters of the Borrowers,
copies of the unaudited consolidated balance sheet of BGI and its Subsidiaries as at
the end of such quarter, and the related consolidated statement of income and
consolidated statement of cash flow for the portion of the Borrowers’ fiscal year
then elapsed, all in reasonable detail and prepared in accordance with GAAP,
together with a certification by the principal financial or accounting officer of
BGI that the information contained in such financial statements fairly presents the
financial position of BGI and its Subsidiaries on the date thereof (subject to
year-end adjustments);




          (c) simultaneously with the delivery of the financial statements referred to in
subsections (a) and (b) above and (i) below, and promptly on or before the
occurrence of



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a Cash Dominion Event, a statement certified by the principal
financial or accounting officer of BGI, on behalf of the Borrowers, in substantially
the form of Exhibit D hereto (a “Compliance Certificate”) and
setting forth in reasonable detail computations evidencing compliance with the
covenant contained in §10, the calculation of the Fixed Charge Coverage Ratio, the
calculation of Consolidated EBITDA for the most recently ended period of four (4)
consecutive Fiscal Quarters of BGI and its Subsidiaries (if applicable),
reconciliations to reflect changes in GAAP since the Balance Sheet Date and setting
forth the projections and other information required pursuant to §8.4(g);




          (d) contemporaneously with the filing or mailing thereof, copies of all
material of a financial nature filed with the Securities and Exchange Commission or
sent to the stockholders of any of the Borrowers;




          (e) within fifteen (15) calendar days after the end of each fiscal month or at
such earlier time as the Administrative Agent may reasonably request, a Borrowing
Base Report setting forth the Aggregate Borrowing Base, the Excess Availability
(and, if different, Adjusted Excess
Availability), the computation of the Excess Availability covenant in §10.1,
and, to the extent applicable, an updated Schedule 7.24 as at the end of
such fiscal month or other date so requested by the Administrative Agent or any
Co-Collateral Agent; provided that if at any time (i) a Cash Dominion Event
has occurred and is continuing (unless and until a Cash Dominion Cure Event shall
have occurred), then within five (5) days after the end of each calendar week, a
Borrowing Base Report setting forth the Aggregate Borrowing Base, the Excess
Availability (and, if different, Adjusted Excess Availability) and the computation
of the Excess Availability covenant in §10.1, as at the end of such calendar week
and, with respect to such Borrowing Base Report delivered at the end of each fiscal
month, an updated Schedule 7.24 (if applicable) and (ii) a Default or an
Event of Default has occurred and is continuing and until such Default or Event of
Default is cured or waived pursuant to the terms and conditions of this Agreement as
determined by the Administrative Agent, then within five (5) days after the end of
each calendar week or more frequently as the Administrative Agent or any
Co-Collateral Agent may request, a Borrowing Base Report setting forth the Aggregate
Borrowing Base, the Excess Availability (and, if different, Adjusted Excess
Availability) and the computation of the Excess Availability covenant in §10.1, as
at the end of such calendar week and, with respect to such Borrowing Base Report
delivered at the end of each fiscal month, an updated Schedule 7.24 (if
applicable), in all cases, together with such other information relating to the
Collateral as the Administrative Agent or any Co-Collateral Agent shall reasonably
request, and accompanied by all supporting detail, reports and documentation as the
Administrative Agent or such Co-Collateral Agent shall reasonably request;




          (f) contemporaneously with any delivery made in connection with clause (e) of
this §8.4, (i) an Accounts Receivable report broken down by each credit card
processor (or other account debtor if Eligible Corporate Sales Receivables are then
included in the Aggregate Borrowing Base) and (ii) an inventory stock ledger report
with respect to any Accounts Receivable and inventory included in the Aggregate
Borrowing Base;




          (g) within thirty (30) days after the end of each Fiscal Year, and from time to
time upon request of the Administrative Agent, monthly projections consisting of
balance sheets, income statements, cash flow statements and availability reports for
the upcoming Fiscal Year of BGI and its Subsidiaries in substantially the same form
as, and updating, those projections delivered to the Lenders and referred to in
§7.4.3 or, if applicable,



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updating any later such projections delivered in response
to a request pursuant to this §8.4(g);




          (h) on or before each anniversary of the Effective Date, each Borrower or
Guarantor shall deliver to the Co-Collateral Agents a certificate, in substantially
the form attached to the Security Agreement as Exhibit A, executed by an
Authorized Officer of such Person (A) certifying that there has been no change in
any information provided in the perfection certificate delivered in connection with
the Security Agreement since the date on which such perfection certificate was
signed by such Person (or most recent updated pursuant to this §8.4(h)) or (B)
attaching an updated perfection certificate for such Person certified to be true and
correct as of the date thereof;




          (i) as soon as practicable, but in any event not later than thirty (30) days
after the end of each fiscal month of the Borrowers, copies of the unaudited
consolidated balance sheet of BGI and its Subsidiaries as at the end of such month,
and the related consolidated statement of income and consolidated statement of cash
flow for the portion of the Borrowers’ fiscal year then elapsed, all in reasonable
detail and prepared in accordance with GAAP, together with a certification by the
principal financial or accounting officer of BGI that the information contained in
such financial statements fairly presents the financial position of BGI and its
Subsidiaries on the date thereof (subject to year-end adjustments);




          (j) from time to time such other financial data and information (including
accountants, management letters) as the Administrative Agent or any Lender may
reasonably request; and




          (k) as and when required, all information set forth in §5.1 of each applicable
Intellectual Property Security Agreement.


Documents required to be delivered pursuant to this §8.4 (to the extent any such documents are
included in materials otherwise filed with the United States Securities and Exchange Commission)
may be delivered electronically and if so delivered, shall be deemed to have been delivered on the
date (i) on which the Borrowers post such documents or delivers such documents to the
Administrative Agent for posting to the Lenders, or provides a link thereto on the Borrowers’
website on the Internet at the website address listed in §16.6; or (ii) on which such documents are
posted on the Borrowers’ behalf on an Internet or intranet website, if any, to which each Lender,
each Issuing Bank and each Agent has access (whether a commercial, third-party website or whether
sponsored by the Administrative Agent); provided that: (i) the Borrowers shall deliver
paper copies of such documents to the Administrative Agent, any Issuing Bank or any Lender that
requests the Borrowers to deliver such paper copies until a written request to cease delivering
paper copies is given by the Administrative Agent, such Issuing Bank or such Lender and (ii) the
Borrowers shall notify the Administrative Agent, the Issuing Banks and each Lender (by telecopier
or electronic mail) of the posting of any such documents and provide to the Administrative Agent by
electronic mail electronic versions (i.e., soft copies) of such documents. Notwithstanding
anything contained herein, in every instance the Borrowers shall be required to provide paper
copies of the Compliance Certificates required by §8.4(c) to the Administrative Agent. Except for
such Compliance Certificates, the Administrative Agent shall have no obligation to request the
delivery or to maintain copies of the documents referred to above, and in any event shall have no
responsibility to monitor compliance by the Borrowers with any such request for delivery, and each
Lender and Issuing Bank shall be solely responsible for requesting delivery to it or maintaining
its copies of such documents.



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     8.5. Notices.




          8.5.1. Defaults. The Borrowers will promptly notify the Administrative
Agent in writing of the occurrence of any Default or Event of Default, together with
a reasonably detailed description thereof, and the actions the Borrowers propose to
take with respect thereto. If any Person shall give any notice or take any other
action in respect of a claimed default (whether or not constituting an Event of
Default) under this Credit Agreement or any other note, evidence of indebtedness,
indenture or other obligation to which or with respect to which BGI or any of its
Subsidiaries is a party or obligor, whether as principal, guarantor, surety or
otherwise, the Borrowers shall forthwith give written notice thereof to the
Administrative Agent describing the notice or action and the nature of the claimed
default.




          8.5.2. Environmental Events. The Borrowers will promptly give notice
to the Administrative Agent and each of the Lenders (a) of any violation of any
Environmental Law that any of the Borrowers or any of their Subsidiaries reports in
writing or is reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any Governmental Authority and (b) upon
becoming aware thereof, of any inquiry, proceeding, investigation, or other action,
including a notice from any agency of potential environmental liability, of any
Governmental Authority that could have a Material Adverse Effect.




          8.5.3. Notice of Litigation, Judgments and Claims Against Assets. Each
of the Borrowers will, and will cause each of its Subsidiaries to, promptly give
notice to the Administrative Agent and each of the Lenders in writing, and in any
event within fifteen (15) days, of becoming aware of any litigation or proceedings
threatened in writing or any pending litigation and proceedings affecting any of the
Borrowers or any of their Subsidiaries or to which any of the Borrowers or any of
their Subsidiaries is or becomes a party involving an uninsured claim against any of
the Borrower or any of their Subsidiaries that could reasonably be expected to have
a Material Adverse Effect on any of the Borrowers or any of their Subsidiaries and
stating the nature and status of such litigation or proceedings. The Borrowers
will, and will cause each of its Subsidiaries to, give notice to the Administrative
Agent and each of the Lenders, in writing, in form and detail satisfactory to the
Administrative Agent, within five (5) days of any judgment not covered by insurance,
final or otherwise, against the Borrowers or any of their Subsidiaries in an amount
in excess of $5,000,000. The Borrowers will, and will cause each of their
Subsidiaries to, promptly upon becoming aware thereof, notify the Administrative
Agent in writing of any setoff, claims, or other defenses to which any Collateral or the Administrative Agent’s
rights with respect to any Collateral are subject if any such setoff, claim, or
other defense would reasonably be expected to have a Material Adverse Effect or
result in a material impact on the on the Aggregate Borrowing Base.




          8.5.4. Notice Regarding Certain Events. The Borrowers will furnish or
cause to be furnished to the Administrative Agent and the Lenders written notice of
(a) promptly after the adoption thereof, any amendment to the organizational
documents of any Borrower; and (b) promptly, the enactment or adoption of any law
which could reasonably be expected to have a Material Adverse Effect.




          8.5.5. Notices Concerning Inventory Collateral. The Borrowers shall
provide to the Administrative Agent prompt notice of (a) any physical count of any



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Borrower’s or any of its Subsidiaries’ inventory, together with a copy of the
summary results thereof (and such other supporting information relating thereto as
the Administrative Agent may reasonably request) certified by such Borrower or such
Subsidiary, (b) any determination by any Borrower or any of its Subsidiaries that
the inventory levels of such Borrower or such Subsidiary are not adequate to meet
the sales projections of such Borrower or such Subsidiary, (c) details of all credit
card arrangements to which any Borrower or any of it Subsidiaries is from time to
time a party, including details relating to such Borrower’s or such Subsidiary’s
compliance with the terms of payment to the Concentration Account (as required
pursuant to §8.15) of the proceeds of all credit card charges for sales by such
Borrower or such Subsidiary, and (d) any failure of any Borrower or any of its
Subsidiaries to pay rent at any location, which failure continues for more than
three days following the day on which such rent is due and payable by such Borrower
or such Subsidiary (other than any rental payment being contested in good faith and
by appropriate proceedings or any rental payment which otherwise, by itself or in
the aggregate with all other such rental payments, would not have a Material Adverse
Effect).




          8.5.6. [Reserved].




          8.5.7. Notice of Default under the Second Lien Loan Documents. The
Borrowers shall, and shall cause each of their Subsidiaries to, deliver to the
Lenders notice of the occurrence of any “Default” or “Event of Default” under and as
defined in the Second Lien Loan Documents, such delivery to be made promptly after
becoming aware of such “Default” or “Event of Default” or after such notice or other
communication is received by any such Borrower or any such Subsidiary.




          8.5.8. [Reserved].




          8.5.9. Notices under the Pershing Square Warrant Transaction. The
Borrowers shall, and shall cause each of their Subsidiaries to, deliver to the
Lenders any notice of election to exercise or otherwise settle any of the Pershing
Square Warrants, such delivery to be made promptly after becoming aware of any such
notice.



     8.6. Legal Existence; Maintenance of Properties. Each of the Borrowers will do or
cause to be done all things necessary to preserve and keep in full force and effect its legal
existence, rights and franchises and those of its Subsidiaries (other than Excluded Subsidiaries).
It (a) will cause all of its properties and those of its Subsidiaries used or useful in the conduct
of its business or the business of its Subsidiaries to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment, (b) will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the
judgment of such Borrower may be necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times, (c) will maintain in full force and
effect all patents, trademarks, trade names, copyrights, licenses, permits and other Intellectual
Property and authorizations necessary for the ownership and operation of its properties and
business, and (d) will, and will cause each of its Subsidiaries to, continue to engage primarily in
the businesses now conducted by them and in related businesses; provided that nothing in
this §8.6 shall prevent any of the Borrowers from discontinuing the operation and maintenance of
any of its properties or any of those of its Subsidiaries, including any Intellectual Property, or the existence of any
Subsidiary of BGI or the conversions of any Subsidiary of BGI to a limited liability company or
limited liability partnership, if such discontinuance or conversion is, in the judgment of such
Borrower, desirable in the conduct of its or their business and that do not in the aggregate have a
Material Adverse Effect and, with respect to the conversions of a Borrower or a Guarantor to a
limited liability company or limited liability



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partnership, simultaneously with such conversion, such Borrower or Guarantor shall have executed and delivered to the Administrative Agent all
documentation which the Administrative Agent reasonably determines is necessary to continue such
Borrower’s or such Guarantor’s obligations in respect of this Credit Agreement and the
Administrative Agent’s Liens in respect of the Collateral.




     8.7. Insurance. Each of the Borrowers will, and will cause each of its Subsidiaries
to, maintain with financially sound and reputable insurers insurance with respect to its properties
and business against such casualties and contingencies as shall be in accordance with the general
practices of businesses engaged in similar activities in similar geographic areas and in amounts,
containing such terms, in such forms and for such periods as may be reasonable and prudent,
including self-insurance to the extent customary, all as reasonably determined by the
Administrative Agent. At the request of the Administrative Agent, BGI shall deliver from time to
time a summary schedule indicating all insurance then in force with respect to each of the
Borrowers and the Guarantors. The Borrowers shall deliver to the Administrative Agent endorsements
(x) to all “All Risk” physical damage insurance policies on all of the Borrowers’ and Guarantors’
tangible personal property and assets and business interruption insurance policies naming the
Administrative Agent lender loss payee, as its interest may appear and (y) to all general liability
and other liability policies naming the Administrative Agent an additional insured. In the event
the Borrowers or any of their Subsidiaries at any time or times hereafter shall fail to obtain or
maintain any of the policies or insurance required herein or to pay any premium in whole or in part
relating thereto, then the Administrative Agent, without waiving or releasing any obligations or
resulting Default or Event of Default hereunder, may at any time or times thereafter (but shall be
under no obligation to do so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which the Administrative Agent deems advisable. All
sums so disbursed by the Administrative Agent shall constitute part of the Obligations, payable as
provided in this Agreement.



     8.8. Taxes. Each of the Borrowers will, and will cause each of its Subsidiaries to,
duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue,
all taxes, assessments and other governmental charges imposed upon it and its owned Real Estate,
sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all
claims for labor, materials, or supplies that if unpaid might by law become a Lien or charge upon
any of its property; provided that any such tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good faith by appropriate
proceedings and if such Borrower or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and provided further that each of the Borrowers and
each of their Subsidiaries will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any Lien that may have attached as
security therefor.



     8.9. Inspection of Properties.




          8.9.1. Generally. Each of the Borrowers shall permit the Lenders,
through the Administrative Agent or any of the Lender’s or the Administrative
Agent’s other designated representatives, to visit and inspect any of the properties
of such Borrower or any of its Subsidiaries, to examine the books of account of such
Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom),
and to discuss the affairs, finances and accounts of such Borrower and its
Subsidiaries with, and to be advised as to the same by, its and their officers, and
to conduct examinations and verifications (whether by internal commercial finance
examiners, independent auditors, financial advisors or consultants) of all
components included in the Aggregate Borrowing Base, and to provide advice and
reporting for the benefit of the Administrative Agent and the Lenders, all at such
reasonable times and intervals as the Administrative Agent or any



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Lender may reasonably request. At least one time in each Fiscal Year, and more frequently upon
the request of the Administrative Agent if an Event of Default has occurred and is
continuing, the Borrowers will obtain and deliver to the Administrative Agent a
physical count of the inventory included in the Collateral (it being understood that
the Borrowers may not perform a physical count of the inventory included in the
Collateral at any store that has been opened for less than one (1) year), in form and substance satisfactory to
the Administrative Agent. Such physical counts of the inventory included in the
Collateral shall be conducted at the Borrowers’ expense. The Administrative Agent
may, at the Borrowers’ expense, participate in or observe any physical count of
inventory included in the Collateral. The Borrowers shall provide the
Administrative Agent with copies of any summary reports or other documents produced
by the Borrowers or their agents in connection with any physical counts of the
inventory included in the Collateral.




          8.9.2. Collateral Reports. The Borrowers will cooperate with the
Administrative Agent in the Administrative Agent’s obtaining, a report of an
independent collateral auditor satisfactory to the Administrative Agent (which may
be affiliated with one of the Lenders) with respect to the Accounts Receivable and
inventory components included in the Aggregate Borrowing Base, which report shall
indicate whether or not the information set forth in the Borrowing Base Report most
recently delivered is accurate and complete in all material respects based upon a
review by such auditors of such Accounts Receivable (including verification with
respect to the amount, aging, identity and credit of the respective account debtors
and the billing practices of the Borrowers or its applicable Subsidiary) and
inventory (including verification as to the value, location and respective types).
Such collateral value reports shall be conducted at the Borrowers’ expense no more
frequently than two (2) times during each Fiscal Year (or up to three (3) times in
each Fiscal Year in the event that at any time during such Fiscal Year Excess
Availability (or, if in effect, Adjusted Excess Availability) is less than the
greater of (i) twenty-five percent (25%) of the lesser of (A) the Aggregate
Borrowing Base and (B) the Total Commitment and (ii) $90,000,000), unless an Event
of Default has occurred and is continuing, in which event additional collateral
value reports requested by the Administrative Agent shall also be conducted and made
at the expense of the Borrowers. In addition to the collateral value reports
required to be obtained at the Borrowers’ expense under this §8.9.2, at times when
no Event of Default has occurred and is continuing, if the Administrative Agent so
elects to obtain one or more such additional reports, the Borrowers will cooperate
with the Administrative Agent in the Administrative Agent’s obtaining such reports
of an independent collateral auditor under this §8.9.2 and such additional reports
shall be conducted at the Administrative Agent’s expense.




          8.9.3. Appraisals. The Borrowers will obtain and deliver to the
Administrative Agent and the Co-Collateral Agents appraisal reports in form and
substance and from appraisers satisfactory to the Administrative Agent, stating the
then current fair market, orderly liquidation and forced liquidation values of all
or any portion of the inventory owned by the Borrowers and their Subsidiaries. Such
appraisals shall be conducted at the Borrowers’ expense no less frequently than
three (3) times during each Fiscal Year; provided that at any time after the
payment in full of the Indebtedness under the Second Lien Loan Facility, such
appraisals shall be conducted at the Borrowers’ expense no more frequently than two
(2) times during each Fiscal Year (or up to three (3) times in each Fiscal Year in
the event that Excess Availability is less than the greater of (i) twenty-five
percent (25%) of the lesser of (A) the Aggregate Borrowing Base and (B) the Total



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Commitment and (ii) $90,000,000), unless, in either case, an Event of Default has
occurred and is continuing, in which event additional appraisals requested by the
Administrative Agent and/or any Co-Collateral Agent shall also be conducted and made
at the expense of the Borrowers. In addition to the appraisal reports required to
be obtained at the Borrowers’ expense under this §8.9.3, at times when no Event of
Default has occurred and is continuing, if the Administrative Agent so elects to
obtain one or more such additional reports, the Borrowers will cooperate with the
Administrative Agent in the Administrative Agent’s obtaining such reports of an
appraiser under this §8.9.3 and such additional reports shall be conducted at the
Administrative Agent’s expense.



     8.10. Compliance with Laws, Contracts, Licenses, and Permits. Each of the Borrowers
will, and will cause each of its Subsidiaries to, comply with (a) the applicable Laws and
regulations wherever its business is conducted, including all Environmental Laws, (b) the
provisions of its Governing Documents, (c) all agreements and instruments by which it or any of its
properties may be bound and (d) all applicable decrees, orders, and judgments, where, with respect
to clauses (a), (c) and (d) only, failure to so comply could have a Material Adverse Effect. If
any authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order that any of the
Borrowers or any of their Subsidiaries may fulfill any of its obligations hereunder or any of the
other Loan Documents to which such Borrower or such Subsidiary is a party, such Borrower will, or
(as the case may be) will cause such Subsidiary to, immediately take or cause to be taken all
reasonable steps within the power of such Borrower or such Subsidiary to obtain such authorization,
consent, approval, permit or license and furnish the Administrative Agent and the Lenders with
evidence thereof.



     8.11. Employee Benefit Plans. The Borrowers will (a) promptly upon filing the same
with the Department of Labor or Internal Revenue Service upon request of the Administrative Agent,
furnish to the Administrative Agent a copy of the most recent actuarial statement required to be
submitted under §103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in
respect of each Guaranteed Pension Plan, (b) promptly upon receipt or dispatch, furnish to the
Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed
Pension Plan under §§302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under §§4041A, 4202, 4219, 4242, or 4245 of ERISA and (c) promptly furnish to
the Administrative Agent a copy of all actuarial statements required to be submitted under all
Applicable Pension Legislation.



     8.12. Use of Proceeds. The Borrowers will use the proceeds of the Loans and obtain
Letters of Credit solely for the purposes set forth in §7.16.1.



     8.13. Stock Collateral.




          (a) BGP (UK) will cause (i) 14,742 shares of the Capital Stock which it holds
in Paperchase (which constitutes 14.742% of the issued and outstanding voting
Capital Stock of Paperchase) and (ii) 44,980,000 shares of the Capital Stock which
it holds in Borders Superstores (which constitutes 65% of the issued and outstanding
voting Capital Stock of Borders Superstores) (or, in each case, such greater
percentage that, due to a Change in Law, (1) could not reasonably be expected to
cause the undistributed earnings of such Foreign Subsidiary as determined for U.S.
federal income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary’s U.S. parent and (2) could not reasonably be expected to cause any
materially adverse tax consequences), and BGI will cause all shares of Capital Stock
it or its Subsidiaries own in Borders Direct and Kobo to be subject at all times to
(x) a first priority, perfected Lien in favor of the Second Lien Agent for the
benefit of the Second Lien Secured Parties, and (y) a second priority,



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perfected Lien in favor of the Administrative Agent for the benefit of the Secured Parties, in
each case pursuant to the terms and conditions of the Loan Documents and the Second
Lien Loan Documents, as applicable, or other security documents, subject to the
Intercreditor Agreement, as the Administrative Agent shall reasonably request.




          (b) Each Borrower and Guarantor will cause (i) 100% of the issued and
outstanding Capital Stock of each of its Domestic Subsidiaries (other than any
Excluded Subsidiaries), (ii) all Capital Stock owned by any Borrower or any
Guarantor in Kobo and (iii) 65% (or such greater percentage that, due to a Change in
Law, (1) could not reasonably be expected to cause the undistributed earnings of
such Foreign Subsidiary as determined for U.S. federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary’s U.S. parent and (2) could
not reasonably be expected to cause any materially adverse tax consequences) in the
aggregate of the issued and outstanding voting Capital Stock of its Foreign
Subsidiaries (other than any Excluded Subsidiaries), to be subject at all times to
(A) a first priority (except as provided in §8.13(a) above), perfected Lien in favor
of the Administrative Agent for the benefit of the Secured Parties, and (B) a second
priority (except as provided in §8.13(a) above), perfected Lien in favor of the
Second Lien Agent for the benefit of the Second Lien Secured Parties, in each case
pursuant to the terms and conditions of the Loan Documents and the Second Lien Loan
Documents, as applicable, or other security documents, subject to the Intercreditor
Agreement, as the Administrative Agent shall reasonably request.



     8.14. Future Subsidiaries. At the time that any Borrower or any Guarantor forms any
direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Effective
Date, such Borrower or such Guarantor shall promptly, but in any event within 30 days after the
formation or acquisition of such Subsidiary: (a) notify the Administrative Agent of such formation
or acquisition, (b) cause any such new Subsidiary (other than a Foreign Subsidiary if the joinder
of such Foreign Subsidiary could reasonably be expected to cause the undistributed earnings of such
Foreign Subsidiary as determined for U.S. federal income tax purposes to be treated as a deemed
dividend to such Foreign Subsidiary’s U.S. parent and (2) could reasonably be expected to cause any
materially adverse tax consequences) to provide to the Administrative Agent a Joinder Agreement,
joinder agreements to the Security Documents (provided that the Capital Stock of such
Subsidiary shall be pledged to the extent required by the terms of §8.13 as if such Subsidiary had
existed on the Effective Date) and a joinder agreement to the Intercreditor Agreement, together
with such other documents, certificates, and instruments as the Administrative Agent may request,
including appropriate financing statements, all in form and substance satisfactory to the
Administrative Agent (including being sufficient to grant the Administrative Agent a first priority
Lien, or second priority Lien, as the case may be (in each case subject to Permitted Liens) in and
to the assets of such newly formed or acquired Subsidiary), and (c) provide to the Administrative
Agent all other documentation, including one or more opinions of counsel satisfactory to the
Administrative Agent, which in its opinion is appropriate with respect to the execution and
delivery of the applicable documentation referred to above. Any document, agreement, or instrument
executed or issued pursuant to this §8.14 shall constitute a Loan Document.



     8.15. Bank Accounts, Credit Cards and Purchase Cards.




          8.15.1. General. (a) On or prior to the Effective Date, each of the
Borrowers will, and will cause each of the Guarantors to, establish a depository
account (the “Concentration Account”) under the control of the
Administrative Agent for the benefit of the Secured Parties and the Agents, in the
name of the applicable Borrower or Guarantor, as the case may be, (b) at all times
after the Effective Date, cause all cash proceeds of the Collateral (except for
Second Lien Priority Collateral (which shall be



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deposited directly into the Second Lien Priority Account to the extent it has been established)) to be deposited only
into local depository accounts (“Local Accounts”), or concentration
depository accounts with financial institutions which have entered into agency
account agreements and, if applicable, lock box agreements (collectively, as the
same may be amended from time to time, the “Agency Account Agreements”), in
form and substance satisfactory to the Administrative Agent (such concentration
depository accounts being referred to collectively as “Interim Concentration
Accounts”) or the Concentration Account, (c) on or prior to the Effective Date,
each of the Borrowers will, and will cause each of the Guarantors to, provide the
Administrative Agent with executed and undated notices to all depository
institutions with Local Accounts directing such depository institutions to cause all
funds (other than those amounts paid to the Borrowers’ operating account or Local
Accounts referred to in this §8.15.1, clause (b)) held in each such Local Account to
be transferred no less frequently than once each day to, and only to, an Interim
Concentration Account or the Concentration Account, it being understood that the
Administrative Agent will not deliver any such notices to such depository
institutions until a Cash Dominion Event has occurred and is continuing (unless and
until a Cash Dominion Cure Event shall have occurred) and only then to the extent
permitted by the Intercreditor Agreement, (d) on or prior to the Effective Date,
each of the Borrowers will, and will cause each of the Guarantors to, provide the
Administrative Agent with executed and undated notices to all depository
institutions with Interim Concentration Accounts directing such depository
institutions to cause all funds of the Borrowers and the Guarantors held in such
Interim Concentration Accounts to be transferred daily to, and only to, the
Concentration Account, it being understood that the Administrative Agent will not
deliver any such notices to such depository institutions until a Cash Dominion Event
has occurred and is continuing (unless and until a Cash Dominion Cure Event shall
have occurred) and only then to the extent permitted by the Intercreditor Agreement,
and (e) at all times after the Effective Date ensure that immediately upon any
Borrower’s or any of its Subsidiaries’ receipt of any funds constituting cash
proceeds of any Collateral (other than Second Lien Priority Collateral (which shall
be deposited directly into the Second Lien Priority Account to the extent it has
been established)), all such amounts shall have been deposited in a Local Account,
an Interim Concentration Account or the Concentration Account. The Borrowers shall
not enter into any agreement with any credit card processors unless
contemporaneously therewith, a Credit Card Notification, in form and substance satisfactory to
the Administrative Agent, is executed and delivered to the Administrative Agent.
The Borrowers shall each cause each of their credit card processors to remit all
proceeds of all credit card charges to a Concentration Account. The Administrative
Agent agrees to deliver such documents and to take such steps, at the Borrowers’
sole cost and expense, as are reasonably requested by the Borrowers to evidence the
occurrence of any Cash Dominion Cure Event. The Borrowers shall not, and shall not
permit any of their Subsidiaries to, enter into any Agency Account Agreement
(including any deposit or securities account control agreements) in favor of the
Second Lien Agent and/or the Second Lien Secured Parties without such Agency Account
Agreement also being granted jointly in favor the Administrative Agent and/or the
Secured Parties; provided, however, in the event that a financial
institution will not permit both the Administrative Agent and the Second Lien Agent
to obtain control of the Second Lien Priority Account, the Second Lien Priority
Account shall be established under the sole control of the Second Lien Agent acting
for the benefit of (x) the Second Lien Secured Parties and (y) the Administrative
Agent, for the benefit of the Secured Parties, for purposes of perfecting the
Administrative Agent’s and the Secured Parties’ security interests in the Second
Lien Priority Account.



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          8.15.2. Acknowledgment of Application. If at any time a Cash Dominion
Event has occurred and is continuing (unless and until a Cash Dominion Cure Event
shall have occurred), each Borrower hereby agrees that all amounts received in the
Concentration Account will be the sole and exclusive property of the Administrative
Agent and the Second Lien Agent, to be applied in accordance with the Intercreditor
Agreement, this Credit Agreement and the Second Lien Loan Agreement, as applicable.




          8.15.3. Purchase Cards. The Borrowers and the Guarantors shall not
permit their outstanding liabilities and obligations on account of any purchase
cards to exceed $12,000,000 at any time.



     8.16. Landlord and Mortgagee Agreements. If, after the Effective Date, the Borrowers
or any of the Guarantors acquires or leases any distribution centers used as a warehouse facility
containing any Collateral, the Borrowers shall, or shall cause such Guarantor to, use commercially
reasonably efforts to deliver to the Administrative Agent a landlord or mortgagee waiver and access
agreement executed by the landlord or mortgagee, as applicable, of any such distribution center, in
each case in form and substance satisfactory to the Administrative Agent. Each Borrower shall
continue to use its commercially reasonable efforts to provide to the Administrative Agent a
landlord or mortgagee waiver and access agreement executed by the landlord or mortgagee of any
distribution center listed on Schedule 11.21, in each case in form and substance
satisfactory to the Administrative Agent, which have not been provided to the Administrative Agent
pursuant to §11.21; provided that, with respect to any distribution center for which such a
landlord or mortgagee waiver and access agreement has not been so delivered, the Administrative
Agent may, in its reasonable commercial judgment, implement a reserve against the Aggregate
Borrowing Base.



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



     8.18. Permitted Restructuring Transactions. Notwithstanding the foregoing Article
VIII, the provisions of this Article VIII shall not restrict the ability of the Borrowers and their
Subsidiaries from consummating any Permitted Restructuring Transaction made in accordance with
Schedule 1.01A and permitted under §9.5.2(d)(ii).



     8.19. Intellectual Property. Upon the satisfaction of the IP Subordination
Conditions, the Borrowers and the Guarantors shall promptly cause (a) the Second Lien Agent and the
Second Lien Secured Parties to subordinate their first priority security interest in the
Intellectual Property to the Administrative Agent and (b) the Administrative Agent to have a first
priority security interest in the Intellectual Property subject to Permitted Liens having priority
by operation of applicable Law.



9. CERTAIN NEGATIVE COVENANTS.




     Each of the Borrowers jointly and severally covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any
obligation to make any Loans or any Issuing Bank has any obligations to issue, extend or renew any
Letters of Credit:



     9.1. Restrictions on Indebtedness. None of the Borrowers will, nor will permit any of
its Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or
otherwise, with respect to any Indebtedness other than:



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          (a) Indebtedness to the Lenders, the Agents and the Issuing Banks arising under
any of the Loan Documents;




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




          (c) Indebtedness incurred in connection with the acquisition after the Closing
Date of any Property, other than Intellectual Property (and in any event not more
than ninety (90) days from the date of such acquisition), by such Borrower or such
Subsidiary as contemplated by §9.2(x);




          (d) obligations under or guaranties of Capitalized Leases;




          (e) Indebtedness in respect of Hedging Agreements entered into for hedging
purposes only and not for speculation; provided that nothing in this §9.1(e)
shall be deemed to prohibit equity hedging arrangements that constitute Restricted
Payments permitted pursuant to §9.4;




          (f) Indebtedness existing on the Effective Date and listed and described on
Schedule 9.1 hereto including any extensions or refinancings thereof on
substantially similar terms as the Indebtedness being refinanced and
provided there is no increase in the amount thereof;




          (g) unsecured Indebtedness of any of BGI’s Subsidiaries to, or in respect of
Obligations of, BGI or another Subsidiary of BGI consisting of intercompany loans
and, if no Default or Event of Default shall have occurred and be continuing at the
time such Indebtedness is incurred, any other Investments;




          (h) unsecured Indebtedness of BGI to, or in respect of obligations of, a
Subsidiary of BGI consisting of intercompany loans and, if no Default or Event of
Default shall have occurred and be continuing at the time such Indebtedness is
incurred, any other Investments;




          (i) Indebtedness in an aggregate principal amount not to exceed $5,000,000 at
any time extended by insurance or financing companies (or their agents or brokers)
solely for the purpose of financing insurance premiums owing to such parties;




          (j) Indebtedness which may be deemed to exist pursuant to any performance,
surety, statutory, appeal or similar obligations incurred in the ordinary course of
business;




          (k) Indebtedness of BGI and Borders pursuant to the Second Lien Loan Facility,
in an aggregate principal amount not to exceed $90,000,000 at any time (excluding
any interest that has been capitalized and added to such principal amount),
including any extensions or refinancings thereof on substantially similar terms as
the Indebtedness being refinanced (and as otherwise permitted hereunder, including,
without limitation, pursuant to §9.16) as long as there is no increase in the amount
thereof (other than any interest that has been capitalized and added to such
amount); provided that such Indebtedness is, at all times and in all
respects, subject to the Intercreditor Agreement; and



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          (l) other Indebtedness of BGI in an aggregate principal amount not to exceed
$160,000,000; provided that (i) at the time of incurrence of such
Indebtedness, no Default or Event of Default has occurred and is continuing or would
result therefrom, (ii) to the extent such Indebtedness is secured, the
Administrative Agent shall have a first priority (or, in the case of the Second Lien
Priority Collateral, second priority, subject only to the Second Lien Agent’s and
Second Lien Secured Parties’ first priority security interest in the Second Lien
Priority Collateral) security interest on the assets securing such Indebtedness and
(iii) such Indebtedness is, at all times and in all respects, subject to an
intercreditor agreement (A) in form and substance substantially similar to, and on
terms no less favorable to the Lenders than as set forth in, the Intercreditor
Agreement, and otherwise satisfactory to the Administrative Agent or (B) in form and
substance satisfactory to the Administrative Agent and the Required Lenders;
provided, however, that any such Indebtedness incurred by Paperchase
shall not exceed an amount equal to the dollar equivalent of 9,000,000 pounds
sterling in the aggregate at any time.



     9.2. Restrictions on Liens. None of the Borrowers will, nor will permit any of its
Subsidiaries to, (a) create or incur or suffer to be created or incurred or to exist any Lien upon
any of its property or assets of any character whether now owned or hereafter acquired, or upon the
income or profits therefrom; (b) transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of
any other obligation in priority to payment of its general creditors; (c) acquire, or agree to
acquire, any property or assets upon conditional sale or other title retention or purchase money
security agreement, device or arrangement; (d) suffer to exist for a period of more than thirty
(30) days after the same shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority
whatsoever over its general creditors; or (e) sell, assign, pledge or otherwise transfer any
“receivables” as defined in clause (g) of the definition of the term
“Indebtedness,” with or without recourse; provided that any Borrower or any of its
Subsidiaries may create or incur or suffer to be created or incurred or to exist:




               (i) Liens on the Collateral in favor of the Administrative Agent
securing the Obligations;




               (ii) Liens in favor of such Borrower on all or part of the assets of
Subsidiaries of such Borrower securing Indebtedness owing by Subsidiaries of
such Borrower to such Borrower;




               (iii) Liens to secure taxes, assessments and other government charges
in respect of obligations and Liens to secure claims for labor, material or
supplies, in each cash in respect of obligations not overdue or which are
being contested in good faith and by appropriate proceedings and for which
such Borrower or such Subsidiary has set aside on its books adequate
reserves with respect thereto;




               (iv) deposits or pledges made in connection with, or to secure payment
of, workmen’s compensation, general liability, unemployment or other
insurance, old age pensions or other social security obligations;




               (v) Liens on properties in respect of judgments or awards that have
been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which such
Borrower or such Subsidiary shall at the time in good faith be prosecuting
an appeal or proceedings



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for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review;




               (vi) Liens of carriers, warehousemen, mechanics and materialmen, and
other like Liens, securing obligations incurred in the ordinary course of
business, in respect of obligations not overdue or which in the aggregate do not
have a Material Adverse Effect;




               (vii) encumbrances on Real Estate consisting of easements, rights of
way, zoning restrictions, restrictions on the use of real property and
defects and irregularities in the title thereto, landlord’s or lessor’s
liens and other minor Liens, provided that none of such Liens (A)
interferes materially with the use of the property affected in the ordinary
conduct of the business of the Borrowers and their Subsidiaries, and (B)
individually or in the aggregate have a Material Adverse Effect;




               (viii) pledges or deposits made in the ordinary course of business to
secure performance of bids, tenders, contracts (other than for the repayment
of Indebtedness) or leases, not in excess of the aggregate amount due
thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary
course of business;




               (ix) Liens existing on the Effective Date and listed on Schedule
9.2 hereto, provided that the principal amount secured thereby is not
thereafter increased and no additional assets become subject to such Lien;




               (x) purchase money security interests in or purchase money mortgages on
Property (other than Inventory and Intellectual Property) acquired after the
Closing Date to secure purchase money Indebtedness of the type and amount
permitted by §9.1(c), incurred in connection with the acquisition of such
Property and in any event not more than ninety (90) days from the date of
such acquisition, which security interests or mortgages cover only the
Property so acquired;




               (xi) Liens in respect of the interests of lessors under Capitalized
Leases permitted under this Credit Agreement securing obligations of BGI or
its Subsidiaries to the lessor under such Capitalized Leases;




               (xii) Liens granted to the Agents, the Lenders and the Issuing Banks
pursuant to §16.1 hereof;




               (xiii) Liens (x) in favor of credit card issuers and/or processors
securing standard fees due by a Borrower or its Subsidiaries in the ordinary
course, which fees are within the general parameters customary in the credit
card processing industry and (y) in favor of banking institutions securing
standard fees due by a Borrower or its Subsidiaries in the ordinary course
in connection with deposit and other bank accounts held at such banking
institution, which fees are within the general parameters customary in the
banking industry;




               (xiv) Liens on assets of BGI and its Subsidiaries (other than
Collateral) not otherwise permitted by clauses (i) through (xiii) above, so
long as



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any Indebtedness secured thereby is permitted under the terms of
§9.1 and the aggregate fair market value of all property secured by such
Liens does not at any time exceed $5,000,000;




               (xv) Liens securing Indebtedness permitted under, and subject to,
§9.1(k); and




               (xvi) Liens securing Indebtedness permitted under §9.1(l) and granted
in accordance with, and subject to, §9.1(l).



     9.3. Restrictions on Investments. None of the Borrowers will, nor will permit any of
its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except
Investments in or by:




          (a) cash equivalents or short-term marketable securities;




          (b) intercompany Indebtedness permitted by §9.1(g);




          (c) Investments existing on the Effective Date and listed on Schedule
9.3 hereto;




          (d) Investments consisting of (1) loans and advances to employees (i) for
moving, entertainment, travel and other similar expenses in the ordinary course of
business, (ii) for any other purpose, with such Investments under this clause (ii)
not to exceed (x) $3,000,000 in the aggregate principal amount at any time
outstanding and (y) $1,000,000 in the aggregate principal amount at any time
outstanding to any single employee and (2) amounts held in accounts under deferred
compensation plans of the Borrowers where investments are directed by employees;




          (e) trade credit extended on usual and customary terms in the ordinary course
of business;




          (f) (i) Investments by any Borrower or any other Guarantor in any other
Borrower or other Guarantor or any Subsidiary of BGI in BGI and (ii) to the extent
not otherwise permitted by clause (i) hereof, Investments by BGI or any Borrower or
any Guarantor in any Subsidiary of BGI which is not a Borrower or a Guarantor or by
any Subsidiary of BGI which is not a Borrower or Guarantor in another Subsidiary of
BGI which is not a Borrower or Guarantor; provided that (A) no Default or
Event of Default has occurred and is continuing or would result therefrom, and (B)
such Investments or series of related Investments shall not exceed $3,000,000 in the
aggregate;




          (g) Acquisitions; provided that (i) no Default or Event of Default has
occurred and is continuing or would result therefrom, and (ii) such Acquisition is
permitted under §9.6;




          (h) guarantees of any obligations of landlords of a Borrower to the extent that
the obligations relate to funds arranged by a Borrower and used to finance or
refinance any stores of a Borrower and such funds are intended to be repaid through
lease payments of a Borrower;



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          (i) Investments in respect of Hedging Agreements entered into for hedging
purposes only and not for speculation; provided that nothing in this §9.3(i)
shall be deemed to prohibit equity hedging arrangements that constitute Restricted
Payments permitted pursuant to §9.4;




          (j) Investments constituting guarantees by BGI and its Subsidiaries under the
Second Lien Loan Facility;




          (k) other Investments not exceeding $2,000,000 in the aggregate during the term
of this Agreement; provided that no Default or Event of Default has occurred
and is continuing or would result therefrom;




          (l) guaranties permitted by §9.1; and




          (m) Investments (other than those Investments set forth in clauses (a) through
(l) above); provided that (i) no Default or Event of Default has occurred
and is continuing or would result therefrom, (ii) BGI delivers to the Lenders at
least three (3) Business Days before the date on which it or any of its Subsidiaries
agrees to or consummates such Investment a certificate of the principal financial or
accounting officer of the Borrowers certifying as accurate and complete the monthly
pro forma financial projections attached thereto and demonstrating
(x) immediately before and after giving effect to such Investment and on a projected
basis for the twelve (12) months after giving effect to such Investment, Excess
Availability would be greater than twenty-five percent (25%) of the lesser of (A)
the Aggregate Borrowing Base and (B) the Total Commitment and (y) the pro forma
Fixed Charge Coverage Ratio for the twelve (12) month period
then ended is greater than 1.20:1.00, in form and substance satisfactory to the
Administrative Agent, based on reasonable projections of the financial performance
of the Borrowers and (iii) BGI shall deliver a certificate of an Authorized Officer
of the Borrowers dated as of the date of such Investment as to the solvency of BGI
and its Subsidiaries on a consolidated basis following the consummation of such
Investment and in form and substance satisfactory to the Administrative Agent.



     9.4. Restricted Payments. None of the Borrowers will, nor will permit any of its
Subsidiaries to, make any Restricted Payments except that:




          (a) BGI may engage in stock splits (including reverse stock splits);




          (b) Subsidiaries may make Distributions to (i) BGI, (ii) a Wholly-owned
Subsidiary of BGI or (iii) employees of a Wholly-owned Subsidiary in respect of such
Wholly-owned Subsidiary’s non-voting stock owned by such employees; and




          (c) BGI or any of its Subsidiaries may make other Restricted Payments; provided
that (i) no Default or Event of Default has occurred and is continuing or would
result therefrom, (ii) BGI shall deliver to the Lenders on or before the date such
Restricted Payment is to be made a certificate of the principal financial or
accounting officer of BGI, on behalf of the Borrowers, certifying as accurate and
complete the monthly pro forma financial projections attached thereto and
demonstrating after giving effect to such Restricted Payment (x) immediately before
and after giving effect to such Restricted Payment and on a projected basis for the
twelve (12) months after giving effect to such Restricted Payment, Excess
Availability (or, if in effect, Adjusted Excess Availability) would be greater than
twenty-five percent (25%) of the lesser of (i) the



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Aggregate Borrowing Base and (ii) the Total Commitment and (y) the pro forma Fixed Charge Coverage Ratio for the
twelve (12) month period then ended is greater than 1.20:1.00, in form and substance
satisfactory to the Administrative Agent, based on reasonable projections of the
financial performance of the Borrowers; and (iii) BGI shall deliver a certificate of
an Authorized Officer of the Borrowers dated as of the date of such certificate as
to the solvency of the Borrowers and their Subsidiaries following the payment of all
such Restricted Payments for such Fiscal Quarter and in form and substance
satisfactory to the Administrative Agent.



     9.5. Merger, Consolidation, Disposition of Assets and Sale Leaseback Transactions.




          9.5.1. Mergers and Consolidations. Subject to §9.13, none of the
Borrowers will, nor will permit any of its Subsidiaries to, become a party to any
merger, demerger, amalgamation, consolidation or other corporate reconstruction,
except, so long as no Default or Event of Default shall have occurred and be
continuing or would result therefrom,




          (a) any Borrower (other than BGI) may merge or consolidate into another
Borrower;




          (b) any Subsidiary of BGI may consolidate or merge into any Borrower, a
Guarantor or any Wholly-owned Subsidiary of a Borrower, provided a Borrower,
a Guarantor or the Wholly-owned Subsidiary is the surviving corporation of such
consolidation or merger;




          (c) any Subsidiary of BGI (other than a Borrower or Guarantor) may consolidate
or merge into any other Subsidiary of BGI (other than a Borrower or Guarantor); and




          (d) any Borrower (other than BGI) or Subsidiary of BGI may merge or consolidate
into another Person in connection with any Acquisition permitted under, and subject
to the requirements of (both before and after giving pro forma effect to such
Acquisition), §9.6; provided that (i) no Default or Event of Default has
occurred and is continuing or would result therefrom and (ii) such Borrower or
Subsidiary shall be the surviving entity of such merger or consolidation.




          9.5.2. Disposition of Assets. None of the Borrowers will, nor will
permit any of its Subsidiaries to, become a party to or agree to or effect any
disposition of assets, other than:




          (a) the sale of inventory, the licensing of Intellectual Property in accordance
with the terms of the Intellectual Property Security Agreements and the disposition
of obsolete or excess assets, in each case in the ordinary course of business
consistent with past practices;




          (b) any sale, transfer, assignment or lease of Property (excluding any portion
of Second Lien Priority Collateral not constituting furniture, fixtures and
equipment), including without limitation any store closures, in the ordinary course
of business which are no longer necessary or required in the conduct of such
Borrower’s or Subsidiary’s business; provided that, except as provided in
§9.5.2(g) and other than store closures as a result of a lease termination in the
ordinary course with respect to such store, the



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Borrowers and their Subsidiaries shall not close more than (i) ten percent (10%) of the number of stores existing as
of the Effective Date in any Fiscal Year and (ii) twenty-five percent (25%) of the
number of stores existing as of the Effective Date during the term of this
Agreement; provided further that the Borrowers and their
Subsidiaries shall engage a national liquidator reasonably acceptable to the
Administrative Agent to conduct such store closures (x) upon the Administrative
Agent’s reasonable request and (y) at all other times in the event that the Required
Lenders have consented to store closures in excess of the thresholds set forth in
clauses (i) and (ii) above;




          (c) any sale or transfer of any Property (excluding Second Lien Priority
Collateral) owned by any Borrower or any Subsidiary of a Borrower in order then or
thereafter to lease such Property or lease other Property that any Borrower or any
Subsidiary of a Borrower intends to use for substantially the same purpose as the
property being sold or transferred (a “sale-leaseback transaction”) in the ordinary
course of business and provided that no Default or Event of Default shall
have occurred and is continuing or would result therefrom;




          (d) (i) any sale, transfer or lease of Property by any Borrower or any
Guarantor to any other Borrower or other Guarantor (other than Borders Direct) and
(ii) to the extent not otherwise permitted by clause (i) hereof, any Permitted
Restructuring Transaction so long as no Default or Event of Default has occurred and
is continuing or would result therefrom;




          (e) any sale, transfer or lease of Property in the ordinary course of business
which is replaced by substitute Property;




          (f) any disposition of Borders Direct pursuant to §14.11(b);




          (g) any disposition of the Small Format Stores; provided that to the
extent the Borrowers and their Subsidiaries close all the Waldenbook stores and
“Borders Express” stores, they shall engage a national liquidator reasonably
acceptable to the First Lien Agent to conduct such closures; and




          (h) other dispositions of assets that do not constitute ABL Priority Collateral
or Intellectual Property; provided that (A) the aggregate proceeds received
in respect of such dispositions during the term of this Agreement shall not exceed
$5,000,000, (B) such assets are sold or otherwise disposed of in an arm’s length
transaction for fair market value (after giving effect to all tax benefits, if any,
associated with such sale or other disposition), (C) no Default or Event of Default
exists or would result from such disposition and (D) the proceeds of such
dispositions shall be used to repay the Loans or otherwise applied in accordance
with the Intercreditor Agreement.



     9.6. Acquisitions. None of the Borrowers will, nor will permit any of its
Subsidiaries to, enter into any stock or asset acquisitions (other than the acquisition of assets
in the ordinary course of such Person’s business), or become or agree to become a general or
limited partner, joint venturer or member in any partnership, joint venture or limited liability company, as the case may be, other than Acquisitions which satisfy the
following criteria: (i) no Default or Event of Default has occurred and is continuing or would
result therefrom, (ii) such Acquisition shall be in substantially the same or a similar type of
business as BGI and its Subsidiaries, (iii) the Board of Directors and (if required by applicable
law) the shareholders of any Person to be acquired has approved the terms of the Acquisition, (iv)
BGI delivers to the Lenders on or before the date on which it or any of its Subsidiaries agrees to
or



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consummates such Acquisition a certificate of the principal financial or accounting officer of
the Borrowers certifying as accurate and complete the monthly pro forma financial projections
attached thereto and demonstrating (x) immediately before and after giving effect to such
Acquisition and on a projected basis for the twelve (12) months after giving effect to such
Acquisition, Excess Availability (or, if in effect, Adjusted Excess Availability) would be greater
than twenty percent (20%) of the lesser of (i) the Aggregate Borrowing Base and (ii) the Total
Commitment and (y) the pro forma Fixed Charge Coverage Ratio for the twelve (12) month period then
ended is greater than 1.00:1.00, in form and substance satisfactory to the Administrative Agent,
based on reasonable projections of the financial performance of the Borrowers, (v) the Borrowers
are in compliance, both before and after giving effect thereto, with §8.14, and (vi) BGI shall
deliver a certificate of an Authorized Officer of the Borrowers dated as of the date of such
Acquisition as to the solvency of the Borrowers and their Subsidiaries following the consummation
of such Acquisition and in form and substance satisfactory to the Administrative Agent.




     9.7. Compliance with Environmental Laws. None of the Borrowers will, nor will permit
any of its Subsidiaries to, (a) use any of the Real Estate or any portion thereof for the handling,
processing, storage or disposal of Hazardous Substances, (b) cause or permit to be located on any
of the Real Estate any underground tank or other underground storage receptacle for Hazardous
Substances, (c) generate any Hazardous Substances on any of the Real Estate, (d) conduct any
activity at any Real Estate or use any Real Estate in any manner so as to cause a release
(i.e., releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) or threatened release of Hazardous Substances
on, upon or into the Real Estate or (e) otherwise conduct any activity at any Real Estate or use
any Real Estate in any manner that would violate any Environmental Law or bring such Real Estate in
violation of any Environmental Law.



     9.8. [Reserved.]



     9.9. Employee Benefit Plans. None of the Borrowers nor any ERISA Affiliate will:




          (a) engage in any “prohibited transaction” within the meaning of §406
of ERISA or §4975 of the Code which could result in a material liability for any of
the Borrowers or any of its Subsidiaries; or




          (b) fail to make the minimum required contributions to any Guaranteed Pension
Plan under the Pension Funding Rules, whether or not such contributions are or may
be waived; or




          (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or
terminate any Guaranteed Pension Plan in a manner which, could result in the
imposition of a lien or encumbrance on the assets of any of the Borrowers or any of
its Subsidiaries pursuant to the Pension Funding Rules or §4068 of ERISA; or




          (d) amend any Guaranteed Pension Plan in circumstances requiring the posting of
security pursuant to the Pension Funding Rules; or




          (e) permit or take any action which would result in the aggregate benefit
liabilities (with the meaning of §4001 of ERISA) of all Guaranteed Pension Plans
exceeding the value of the aggregate assets of such Plans, disregarding for this
purpose the benefit liabilities and assets of any such Plan with assets in excess of
benefit liabilities; or



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          (f) permit or take any action which would contravene any Applicable Pension
Legislation.



     9.10. Business Activities. None of the Borrowers will, nor will permit any of its
Subsidiaries to, engage directly or indirectly (whether through Subsidiaries or otherwise) in any
type of business other than (a) with respect to the Borrowers, the businesses conducted by them on
the Effective Date, substantially as conducted and operated by such Person as of such date and (b)
with respect to any Subsidiary of a Borrower, substantially as conducted and operated by a Borrower
on the Effective Date or in businesses reasonably incidental and complementary thereto;
provided that the BGI and its Subsidiaries shall be permitted to engage in any businesses
permitted to be acquired in accordance with §9.6.



     9.11. Fiscal Year. Except as provided in §7.4.1, none of the Borrowers will, nor will
permit any of it Subsidiaries to, change its Fiscal Quarter or change its Fiscal Year.



     9.12. Transactions with Affiliates. None of the Borrowers will, nor will permit any
of its Subsidiaries to, enter into any transaction of any kind with any Affiliate of such Borrower
or such Subsidiary, whether or not in the ordinary course of business, other than on fair and
reasonable terms no less favorable to such Borrower or such Subsidiary as would be obtainable by
such Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person
other than an Affiliate; provided that (a) transactions between or among any Borrower and
any Guarantor not otherwise prohibited hereunder shall be permitted, (b) transactions with
Affiliates for such Affiliates’ services as employees, officers and directors shall be permitted,
and (c) transactions with respect to which the consideration to be paid or received by the
Borrowers or any of their Subsidiaries would be less than $3,000,000 shall be permitted with the
prior written consent of the Administrative Agent.



     9.13. Changes in Governing Documents. None of the Borrowers will, nor will permit any
of its Subsidiaries to, amend in any respect its Governing Documents in the event such change would
be adverse to the Lenders; provided that any Borrower or any Guarantor shall be permitted
to change its respective jurisdiction of organization or formation so long as such Borrower or such
Guarantor provides the Administrative Agent with written notice not less than thirty (30) days
prior to such change; provided further that BGI may amend or modify its Governing
Documents from time to time to the extent necessary to permit the Pershing Square Warrant
Transaction and the performance of its obligations thereunder as long as no Default or Event of
Default then exists or would arise therefrom.



     9.14. Inconsistent Agreements. None of the Borrowers will, nor will permit any of its
Subsidiaries to, enter into or permit to exist any contractual obligation (other than this
Agreement, any other Loan Document or any of the Second Lien Loan Documents) that limits the
ability (i) of any Subsidiary to make Restricted Payments to any Borrower or any Guarantor or to
otherwise transfer property to or invest in any Borrower or any Guarantor, except for any agreement
in effect (A) on the date hereof and set forth on Schedule 9.14 or (B) at the time any
Subsidiary becomes a Subsidiary of a Borrower, so long as such agreement was not entered into
solely in contemplation of such Person becoming a Subsidiary of such Borrower, (ii) of any
Subsidiary to guarantee the Obligations of the Borrowers under the Loan Documents or (iii) of any
Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such
Person securing the Obligations under the Loan Documents; provided, however, that
this clause (iii) shall not prohibit any negative pledge incurred or provided in favor of any
holder of Indebtedness permitted under §9.1(c) solely to the extent any such negative pledge
relates to the property financed by or the subject of such Indebtedness.



     9.15. Payments of Other Indebtedness. The Borrowers may not, and may not permit any
of their Subsidiaries to, make (a) any payment (including prepayment), redemption or repurchase of
principal (whether mandatory, voluntary, upon conversion or otherwise) in respect of the Second
Lien



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Loan Facility other than, (i) Permitted Second Lien Loan Payments, or (ii) unless (A) no
Default or Event of Default has occurred and is continuing or would result therefrom and (B) BGI
delivers to the Lenders on or before the date on which any Borrower makes such prepayment a
certificate of the principal financial or accounting officer of the Borrowers certifying as
accurate and complete the monthly pro forma financial projections attached thereto
and demonstrating (x) immediately before and after giving effect to such prepayment and on a
projected basis for the twelve (12) months after giving effect to such prepayment, Excess
Availability (or, if in effect, Adjusted Excess Availability) would be greater than twenty-five
percent (25%) of the lesser of (1) the Aggregate Borrowing Base and (2) the Total Commitment and
(y) the pro forma Fixed Charge Coverage Ratio for the twelve (12) month period then ended is
greater than 1.10:1.00, in form and substance satisfactory to the Administrative Agent, based on
reasonable projections of the financial performance of the Borrowers; provided that BGI
shall not be required to satisfy the conditions set forth in this clause (B) in the event that (I) the aggregate amount of such
prepayments does not exceed $20,000,000 and such prepayments are made with the proceeds of any
Borrower’s or any Subsidiary’s incurrence of additional Indebtedness permitted pursuant to §9.1(l)
in an aggregate amount in excess of $20,000,000, or (II) such prepayment is made with the proceeds
from the Paperchase Sale; (b) any optional or voluntary prepayment, redemption or repurchase of any
Indebtedness ranking pari passu in right of payment with the Obligations; or (c)
any prepayment, redemption, purchase, defeasance or other satisfaction prior to the scheduled
maturity thereof in any manner, or make any payment in violation of any subordination terms of, any
Indebtedness permitted pursuant to §9.1(l) that is contractually subordinated to the Loans.




     9.16. Amendments to Second Lien Loan Documents. The Borrowers will not, and will not
permit any of their Subsidiaries to, permit or otherwise allow any of the terms and conditions of
the Second Lien Loan Documents to be amended, revised or waived except to the extent expressly
permitted under the terms of the Intercreditor Agreement.



     9.17. Permitted Restructuring Transactions. Notwithstanding the foregoing Article IX,
the provisions of this Article IX (other than §9.5.2(d)(ii)) shall not restrict the ability of the
Borrowers and their Subsidiaries from consummating any Permitted Restructuring Transaction made in
accordance with Schedule 1.01A and permitted under §9.5.2(d)(ii).



     9.18. Certain Terms of the Pershing Square Transactions. Without the written consent
of the Required Lenders, the Borrowers will not, and will not permit any of their Subsidiaries to,
amend, supplement or otherwise modify any of the Pershing Square Warrants or any documents relating
thereto (as contemplated under the Pershing Square Warrant Transaction) in any manner that would
result in a Change of Control (whether upon the exercise of the Pershing Square Warrants or
otherwise).



     9.19. Inactive Subsidiaries. BGI will not permit any of the Excluded Subsidiaries to
engage in any trade or business or own any assets or incur any Indebtedness (other than, to the
extent in existence on the Effective Date, Indebtedness of the type described in §9.1(g)) except
with the prior written consent of the Required Lenders and on such terms as the Required Lenders
shall specify, including, but not limited to, compliance by such Persons with the requirements set
forth in §8.14.



     9.20. Maximum Cash and Cash Equivalents. So long as any Loans are outstanding, prior
to the occurrence of a Cash Dominion Event, the Borrowers shall not permit cash or cash equivalents
of the Borrowers and the Guarantors in an aggregate amount in excess of $100,000,000 (other than
(a) “store” cash, cash held in local, non-concentration deposit accounts, cash in transit between
stores and deposit accounts and cash receipts from sales in the process of inter-account transfers,
in each case as a result of the ordinary course operations of the Borrowers and the Guarantors, and
(b) to the extent necessary for the Borrowers and the Guarantors to satisfy in the ordinary course
of their business, the current liabilities incurred by them in the ordinary course of their
business and without acceleration of the satisfaction of



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such current liabilities) to accumulate and be maintained in deposit accounts or investment accounts of the Borrowers and the Guarantors.
After the occurrence and during the continuance of a Cash Dominion Event, the Borrowers shall
comply with the provisions of §8.15 hereof and maintain only such amounts, if any, in deposit
accounts or investment accounts as may be expressly permitted under said §8.15.




10. FINANCIAL COVENANTS.




     Each of the Borrowers, jointly and severally, covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any
obligation to make any Loans or any Issuing Bank has any obligation to issue, extend or renew any
Letters of Credit:



     10.1. Minimum Excess Availability. At all times, the Borrowers will maintain Excess
Availability of not less than the greater of (a) ten percent (10%) of the lesser of (i) the
Aggregate Borrowing Base and (ii) the Total Commitment and (b) $50,000,000.



11. CLOSING CONDITIONS.




     The obligations of the Lenders to make the initial Loans and of the Issuing Banks to issue any
initial Letters of Credit shall be subject to the satisfaction of the following conditions
precedent:



     11.1. Loan Documents. Each of the Loan Documents shall have been duly executed and
delivered by the respective parties thereto, shall be in full force and effect and shall be in form
and substance satisfactory to each of the Lenders. Each Lender and the Administrative Agent shall
have received a fully executed copy of each such document.



     11.2. Certified Copies of Governing Documents. Each of the Lenders shall have
received from each of the Borrowers and the Guarantors a copy certified by the appropriate
authority of the state of formation or organization of such Person, certified by a duly authorized
officer of such Person to be true, correct and complete on the Effective Date, of each of its
Governing Documents as in effect on such date of certification.



     11.3. Corporate or Other Action. All corporate (or other) action (including certified
copies of the board minutes and/or resolutions authorizing the execution of the Loan Documents to
which such Person is a party) necessary for the valid execution, delivery and performance by each
of the Borrowers and the Guarantors of this Credit Agreement and the other Loan Documents to which
it is or is to become a party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Lenders shall have been provided to each of the Lenders.



     11.4. Incumbency Certificate. Each of the Lenders and the Administrative Agent shall
have received from each of the Borrowers and the Guarantors an incumbency certificate, dated as of
the Effective Date, signed by a duly authorized officer of such Borrower or such Guarantor, and
giving the name and bearing a specimen signature of each individual who shall be authorized: (a)
to sign, in the name and on behalf of such Borrower and such Guarantor, each of the Loan Documents
to which such Borrower or such Guarantor is or is to become a party; (b) in the case of the
Borrowers, to make Loan Requests and Conversion Requests and to apply for Letters of Credit; and
(c) to give notices and to take other action on its behalf under the Loan Documents.



     11.5. UCC and Intellectual Property Search Results. The Administrative Agent shall
have received the results of Uniform Commercial Code and Intellectual Property searches (and the
equivalent



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thereof in all applicable foreign jurisdictions), indicating no Liens other than
Permitted Liens and otherwise in form and substance satisfactory to the Administrative Agent.




     11.6. Certificates of Insurance. The Administrative Agent shall have received (a) a
certificate of insurance and corresponding endorsements from an independent insurance broker dated
as of the Effective Date, identifying insurers, types of insurance, insurance limits, and policy
terms, and otherwise describing the insurance and naming the Administrative Agent as an additional
insured and a loss payee and (b) certified copies of all policies evidencing such insurance (or
certificates therefore signed by the insurer or an agent authorized to bind the insurer).



     11.7. Solvency Certificate. Each of the Lenders and the Administrative Agent shall
have received an officer’s certificate of the Borrowers dated as of the Effective Date as to the
solvency of BGI and its Subsidiaries, on a consolidated basis, following the consummation of the
transactions contemplated herein and in form and substance satisfactory to the Lenders.



     11.8. Opinion of Counsel. Each of the Lenders, the Agents and the Issuing Banks shall
have received a favorable legal opinion addressed to the Lenders, the Agents, and the Issuing Banks
dated as of the Effective Date, in form and substance satisfactory to the Lenders, Agents and the
Issuing Banks, from:




          (a) Baker & McKenzie, counsel to the Borrowers and their Subsidiaries;




          (b) Baker & McKenzie, counsel to BGP (UK);




          (c) Thomas Carney, Esq., General Counsel to the Borrowers and their
Subsidiaries; and




          (d) local counsel to the Borrowers and their Subsidiaries, as applicable.



     11.9. Payment of Fees. The Borrowers shall have paid to the Lenders or the
Administrative Agent, as appropriate, the Fees pursuant to §§4.6 and 5.1 and the fees and expenses
of the Administrative Agent’s Special Counsel.



     11.10. Additional Indebtedness. The Borrowers shall have received a minimum aggregate
principal amount of $75,000,000 in Indebtedness that is subject to and permitted by §9.1(k) of this
Agreement.



     11.11. Existing Credit Agreement. All amounts outstanding under the Existing Credit
Agreement shall have been reallocated, to the extent applicable, in accordance with Schedule
1, all commitments thereunder of the Last Out Revolving Lenders who are not parties to this
Agreement shall have been terminated and all commitments thereunder of the Existing Lenders party
to this Agreement as Revolving Lenders shall continue and be evidenced only by, and as set forth
in, this Agreement.



     11.12. Disbursement Instructions. The Administrative Agent shall have received an
initial Revolving Loan Request and disbursement instructions from the Borrowers, indicating how the
proceeds of the Loans are to be disbursed.



     11.13. Excess Availability. Each of the Lenders and the Administrative Agent shall
have received evidence that on the Effective Date, after giving effect to the transactions
contemplated hereby (including, without limitation, after giving effect to all borrowings under the
Credit Agreement and all credit exposure), the Excess Availability shall be equal to or greater
than $125,000,000.



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     11.14. Validity of Liens. The Security Documents shall be effective to create in
favor of the Administrative Agent a legal, valid and enforceable first priority security interest
in and Lien upon the ABL Priority Collateral (except for Permitted Liens entitled to priority under
applicable Law) and a second priority security interest in and Lien upon the Second Lien Priority
Collateral. All filings, recordings, deliveries of instruments and other actions necessary or
desirable in the opinion of the Administrative Agent to protect and preserve such security
interests shall have been duly effected or provided for. The Administrative Agent shall have
received evidence thereof in form and substance satisfactory to the Administrative Agent.



     11.15. Consents and Approvals. Each of the Lenders and the Administrative Agent shall
have received evidence that all consents and approvals necessary to complete all transactions
contemplated hereby have been obtained.



     11.16. Financial Condition, etc. No Material Adverse Effect, in the judgment of the
Required Lenders, shall have occurred since October 31, 2009.



     11.17. Minimum Commitments Under Extended Tranche. Lenders with a minimum of
$700,000,000 in Commitments (as defined in the Existing Credit Agreement) have converted such
Commitments into Commitments under the Extended Tranche which mature on the Maturity Date of the
Extended Tranche.



     11.18. Borrowing Base Report. Each of the Lenders shall have received from the
Borrowers the initial Borrowing Base Report (based on information relating to the most recently
ended fiscal month of the Borrowers for which such information is available) dated as of the
Effective Date.



     11.19. Inventory Summary. Each of the Lenders, the Administrative Agent and the
Co-Collateral Agents shall have received from the Borrowers the most recent inventory summary with
respect to any inventory included in the Aggregate Borrowing Base (based on information relating to
the most recently ended fiscal month of the Borrowers for which such information is available), and
the Borrowers shall have notified the Administrative Agent in writing on the Effective Date of any
material deviation from such inventory values reflected in such inventory summary and shall have
provided the Administrative Agent with such supplementary documentation as the Administrative Agent
may reasonably request.



     11.20. Agency Account Agreements; Accounts. The Borrowers shall have established the
Concentration Account with Bank of America, and the Administrative Agent shall have received (a) an
Agency Account Agreement executed or agreed to in form by Bank of America, each depository
institution with an Interim Concentration Account and (b) the notices referred to in clauses (c)
and (d) of §8.15.1.



     11.21. Landlord and Mortgagee Agreements. The Borrowers shall have used their best
efforts to provide to the Administrative Agent a landlord or mortgagee waiver and access agreement
executed by the landlord or mortgagee of any distribution center listed on Schedule 11.21,
in each case in form and substance satisfactory to the Administrative Agent.



     11.22. Credit Card Notifications. The Borrowers shall deliver to the Administrative
Agent notifications (the “Credit Card Notifications”) executed on behalf of the Borrowers
and the Guarantors to each of their credit card processors instructing such credit card processors
to remit all proceeds of all credit card charges to a Concentration Account, which Credit Card
Notifications shall be in form and substance satisfactory to the Administrative Agent.




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     11.23. Payoff of Pershing Square Term Loan Facility. The Administrative Agent shall
have received (a) evidence, in form and substance reasonably satisfactory to the Administrative
Agent, that the Pershing Square Term Loan Facility has been (or concurrently with the Effective
Date is being) repaid in full in cash and the Pershing Square Term Loan Documents have been (or
concurrently with the Effective Date are being) terminated and (b) all Liens upon any property of
the Borrowers and their Subsidiaries in favor of the lenders under the Pershing Square Term
Facility shall be terminated by such lenders immediately upon such repayment.



     11.24. Second Lien Loan Documents. The Administrative Agent shall have received a
certificate from an Authorized Officer of BGI, in form and substance satisfactory to the
Administrative Agent, attaching true, correct and complete copies of each of the Second Lien Loan
Documents.



     11.25. Financial Statements. The Administrative Agent shall have received forecasts
prepared by management of BGI of consolidated balance sheets and statements of income or
operations, cash flow statements and availability reports of BGI and its Subsidiaries on a monthly
basis for the first year following the Effective Date, and such forecasts shall be in form and
substance satisfactory to the Administrative Agent.



     Without limiting the generality of the provisions of the last paragraph of §14.3, for purposes
of determining compliance with the conditions specified in this §11, each Lender that has signed
this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with,
each document or other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Lender unless the Administrative Agent shall have received notice from such
Lender prior to the proposed Effective Date specifying its objection thereto.



12. CONDITIONS TO ALL BORROWINGS.




     The obligations of the Lenders to make any Loan and of any Issuing Bank to issue, extend or
renew any Letter of Credit, in each case whether on or after the Effective Date, shall also be
subject to the satisfaction of the following conditions precedent:



     12.1. Representations True; No Event of Default. Each of the representations and
warranties of each of the Borrowers and each of their Subsidiaries contained in this Credit
Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in
connection with this Credit Agreement shall be true as of the date as of which they were made and
shall also be true at and as of the time of the making of such Loan or the issuance, extension or
renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to
the extent of changes resulting from transactions contemplated or permitted by this Credit
Agreement and the other Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date) and no Default or Event of
Default shall have occurred and be continuing. The Administrative Agent shall have received a
certificate of the Borrowers signed by an authorized officer of the Borrowers to such effect.



     12.2. No Legal Impediment. No change shall have occurred in any law or regulations
thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it
illegal for such Lender to make such Loan or to participate in the issuance, extension or renewal
of such Letter of Credit or in the reasonable opinion of each Issuing Bank would make it illegal
for such Issuing Bank to issue, extend or renew such Letter of Credit.



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     12.3. Proceedings and Documents. All proceedings in connection with the transactions
contemplated by this Credit Agreement, the other Loan Documents and all other documents incident
thereto shall be satisfactory in substance and in form to the Lenders, the Issuing Banks and to the
Administrative Agent and their counsel, and the Lenders, the Issuing Banks, the Administrative
Agent and such counsel shall have received all information and such counterpart originals or
certified or other copies of such documents as the Administrative Agent may reasonably request.



     12.4. Governmental Regulation. Each Lender shall have received such statements in
substance and form reasonably satisfactory to such Lender as such Lender shall require for the
purpose of compliance with any applicable regulations of the Comptroller of the Currency or the
Board of Governors of the Federal Reserve System.



     12.5. Revolving Credit Facility Borrowings. The following shall be true and correct
(after giving effect to all amounts requested): the Total Facility Usage does not exceed the
lesser of (i) the Total Commitment at such time or (ii) the Aggregate Borrowing Base as then in
effect.



     12.6. Excess Availability. After giving effect to all amounts requested, Excess
Availability shall not be less than the greater of (a) ten percent (10%) of the lesser of (i) the
Aggregate Borrowing Base and (ii) the Total Commitment and (b) $50,000,000.



     12.7. Seasonal Availability Requirement. If such Loan or issuance, extension or
renewal of a Letter of Credit is to be made during the period commencing on December 1 of each year
and ending on the later of (i) January 31 of the following year and (ii) the date on which the
Borrowers deliver the financial statements calculating Consolidated EBITDA for the period ending
December 31 of such year (such period being referred to herein as the “Seasonal Availability
Period”), the Administrative Agent shall have received evidence in form and substance
satisfactory to the Administrative Agent that Excess Availability, after giving effect to such Loan
or issuance, extension or renewal of such Letter of Credit, is not less than the sum of (x) the
Incremental Seasonal Amount plus (y) the greater of (A) ten percent (10%) of the lesser of (A) the
Aggregate Borrowing Base and (2) the Total Commitment and (B) $50,000,000. Notwithstanding the
foregoing, this §12.7 shall not apply at any time after the payment in full of the Indebtedness
under the Second Lien Loan Facility.



13. EVENTS OF DEFAULT; ACCELERATION; ETC.




     13.1. Events of Default and Acceleration. If any of the following events (“Events
of Default” or, if the giving of notice or the lapse of time or both is required, then, prior
to such notice or lapse of time, “Defaults”) shall occur:




     (a) the Borrowers shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable, whether at the
stated date of maturity or any accelerated date of maturity or at any other date
fixed for payment;




     (b) the Borrowers or any of their Subsidiaries shall fail to pay any interest
on the Loans, any Fees, or other sums due hereunder or under any of the other Loan
Documents, within three (3) days following the date upon which the same shall become
due and payable, whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;




     (c) any of the Borrowers shall fail to comply with any of its covenants
contained in §§8.1, 8.4, 8.5.1, the first sentence of 8.6, 8.7, 8.12, 8.13, 8.14,
8.15, 8.17, 9



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(other than 9.7 and 9.9) or 10 or any of the Borrowers shall fail to comply
with any of its covenants contained in §8.9 within three (3) days following notice
from either the Administrative Agent or the Second Lien Agent of its request that a
Borrower so comply;




     (d) any of the Borrowers or any of their Subsidiaries shall fail to perform any
term, covenant or agreement contained herein or in any of the other Loan Documents
(other than those specified elsewhere in this §13.1) for thirty (30) days after
written notice of such failure has been given to the Borrowers by the Administrative
Agent (such grace period to be applicable only in the event such Default can be
remedied by corrective action of the Borrowers as determined by the Administrative
Agent in its sole discretion);




     (e) any representation or warranty of any Borrower or any of its Subsidiaries
in this Credit Agreement or any of the other Loan Documents or in any other document
or instrument delivered pursuant to or in connection with this Credit Agreement
(including, without limitation, any Borrowing Base Report) shall prove to have been
false in any material respect upon the date when made or deemed to have been made or
repeated;




     (f) any Borrower or any of its Subsidiaries shall fail to pay at maturity, or
within any applicable period of grace, any obligation in respect of the Second Lien
Loan Facility or any other obligation for Indebtedness with an aggregate outstanding
principal amount in excess of $10,000,000, or fail to observe or perform any
material term, covenant or agreement contained in any agreement by which it is bound
evidencing or securing the Second Lien Loan Facility or other Indebtedness with an
aggregate outstanding principal amount in excess of $10,000,000 for such period of
time as would permit (assuming the giving of appropriate notice if required) the
holder or holders thereof or of any obligations issued thereunder to accelerate the
maturity thereof, or any such holder or holders shall rescind or shall have a right
to rescind the purchase of any such obligations;




     (g) any Borrower or any of its Subsidiaries shall make an assignment for the
benefit of creditors, or admit in writing its inability to pay or generally fail to
pay its debts as they mature or become due, or shall petition or apply for the
appointment of a trustee or other custodian, liquidator, receiver or administrator
of such Borrower or any of its Subsidiaries or of any substantial part of the assets
of such Borrower or any of its Subsidiaries or shall commence any case, application
or other proceeding relating to such Borrower or any of its Subsidiaries under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of the
foregoing, or if any such petition or application shall be filed or any such case or
other proceeding shall be commenced against such Borrower or any of its Subsidiaries
and such Borrower or any of its Subsidiaries shall indicate its approval thereof,
consent thereto or acquiescence therein or such petition or application shall not
have been dismissed within forty-five (45) days following the filing thereof;




     (h) a decree or order is entered appointing any such trustee, custodian,
liquidator, receiver or administrator or adjudicating any Borrower or any of its
Subsidiaries bankrupt or insolvent, or approving a petition in any such case or
other proceeding, or a decree or order for relief is entered in respect of any
Borrower or any



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Subsidiary of any Borrower in an involuntary case under federal bankruptcy laws
as now or hereafter constituted;




     (i) there shall remain in force, undischarged, unsatisfied and unstayed, for
more than sixty days, whether or not consecutive, any final judgment against any
Borrower or any of its Subsidiaries that, with other outstanding final judgments,
undischarged, against any Borrower or any of its Subsidiaries exceeds in the
aggregate $10,000,000;




     (j) if any of the Loan Documents shall be cancelled, terminated, revoked or
rescinded, in each case otherwise than in accordance with the terms thereof or with
the express prior written agreement, consent or approval of the Lenders, or any
action at law, suit or in equity or other legal proceeding to cancel, revoke or
rescind any of the Loan Documents or contest the Administrative Agent’s security
interests and liens in any portion of the Collateral or the priority of the
Administrative Agent’s security interests and liens in any portion of the Collateral
contemplated by the Security Documents, shall be commenced by or on behalf of any
Borrower or any of its Subsidiaries party thereto or any of their respective
stockholders, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of the Loan
Documents is illegal, invalid or unenforceable in accordance with the terms thereof;




     (k) any Borrower or any ERISA Affiliate incurs any liability to the PBGC or a
Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount
exceeding $10,000,000, or any Borrower or any ERISA Affiliate is assessed withdrawal
liability pursuant to Title IV of ERISA by a Multiemployer Plan requiring aggregate
annual payments exceeding $10,000,000, or any of the following occurs with respect
to a Guaranteed Pension Plan: (i) an ERISA Event, or a failure to make a required
installment or other payment (under the Pension Funding Rules), provided
that the Administrative Agent determines in its reasonable discretion that such
event (A) could be expected to result in liability of any Borrower or any of its
Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount
exceeding $10,000,000 and (B) could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate United
States District Court of a trustee to administer such Guaranteed Pension Plan or for
the imposition of a lien in favor of such Guaranteed Pension Plan; or (ii) the
appointment by a United States District Court of a trustee to administer such
Guaranteed Pension Plan; or (iii) the institution by the PBGC of proceedings to
terminate such Guaranteed Pension Plan;




     (l) any Borrower or any of its Subsidiaries shall be enjoined, restrained or in
any way prevented by the order of any Governmental Authority from conducting any
material part of its business and such order shall continue in effect for more than
thirty (30) days and such restraint or enjoinment or similar restriction by any
Governmental Authority would have a Material Adverse Effect;




     (m) there shall occur the loss, suspension or revocation of, or failure to
renew, any license or permit now held or hereafter acquired by any Borrower or any
of its Subsidiaries if such loss, suspension, revocation or failure to renew would
have a Material Adverse Effect;




     (n) a Change of Control shall occur;



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     (o) if, Excess Availability shall fail to be greater than or equal to
$80,000,000 (i) at all times for a period of 30 consecutive days prior to the
termination and repayment of the Existing Tranche on the Maturity Date applicable to
the Existing Tranche, (ii) on a pro forma basis immediately after giving effect to
such termination and repayment of the Existing Tranche, or (iii) on a projected pro
forma basis based on projections provided by the Borrowers for each of the following
six months after giving effect to the termination and repayment of the Existing
Tranche; or




     (p) any Borrower or any Guarantor shall, directly or indirectly, disavow or
contest in any manner (i) the effectiveness, validity or enforceability of the
Intercreditor Agreement, (ii) that the Intercreditor Agreement exists for the
benefit of the Administrative Agent, the Lenders, the Agents, the Swingline Lender
and the Issuing Bank or (iii) that all payments of principal of or premium and
interest on the Indebtedness in respect of the Second Lien Loan Facility, or
realized from the liquidation of any property of any Borrower or any Guarantor,
shall be subject to the Intercreditor Agreement;




then, and in any such event, so long as the same may be continuing, the Administrative Agent
may, and upon the request of the Required Lenders shall, by notice in writing to the
Borrowers declare all amounts owing with respect to this Credit Agreement, the Notes and the
other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon
forthwith become, immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by each of the Borrowers;
provided that in the event of any Event of Default specified in §§13.1(g) or (h),
all such amounts shall become immediately due and payable automatically and without any
requirement of notice from the Administrative Agent or any Lender. Upon written demand by
the Required Lenders after the occurrence of any Event of Default, and automatically without
the necessity of demand in the event of any Event of Default specified in §13.1(g) or
§13.1(h), the applicable Borrower(s) shall immediately provide to the Administrative Agent
cash in an amount equal to 103% of the aggregate LC Exposure to be held by the
Administrative Agent as Cash Collateral in respect of such LC Exposure.



     13.2. Termination of Commitments. If any one or more of the Events of Default
specified in §13.1(g) or §13.1(h) shall occur, any unused portion of the credit hereunder shall
forthwith terminate and each of the Lenders shall be relieved of all further obligations to make
Loans to the Borrowers and the Issuing Banks shall be relieved of all further obligations to issue,
extend or renew Letters of Credit. If any other Event of Default shall have occurred and be
continuing, or if on any Drawdown Date or other date for issuing, extending or renewing any Letter
of Credit the conditions precedent to the making of the Loans to be made on such Drawdown Date or
(as the case may be) to issuing, extending or renewing such Letter of Credit on such other date are
not satisfied, the Administrative Agent may and, upon the request of the Required Lenders, shall,
by notice to the Borrowers, terminate the unused portion of the credit hereunder, and upon such
notice being given such unused portion of the credit hereunder shall terminate immediately and each
of the Lenders shall be relieved of all further obligations to make Loans and the Issuing Banks
shall be relieved of all further obligations to issue, extend or renew Letters of Credit. No
termination of the credit hereunder shall relieve any of the Borrowers or any of its Subsidiaries
of any of the Obligations.



     13.3. Remedies. In case any one or more of the Events of Default shall have occurred
and be continuing, and whether or not the Administrative Agent or the Lenders shall have
accelerated the maturity of the Loans pursuant to §13.1, (a) the Administrative Agent may, and
shall, upon the request of the Required Lenders, proceed to protect and enforce, on behalf of
itself and the Lenders, the Agents, the Swingline Lender, each Issuing Bank and the other Secured
Parties, all rights and remedies available to it,



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the Lenders, the Agents, the Swingline Lender, each Issuing Bank and the other Secured
Parties, by suit in equity, action at law or other appropriate proceeding, and (b) each Lender and
each Issuing Bank, if owed any amount with respect to the Loans or the Reimbursement Obligations,
may, with the consent of the Administrative Agent and the Required Lenders but not otherwise,
proceed to protect and enforce its rights by suit in equity, action at law or other appropriate
proceeding, in each case whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which
the Obligations to such Lender are evidenced, including as permitted by applicable Law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall have
become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal
or equitable right of such Lender. No remedy herein conferred upon any Lender or any Agent or the
holder of any Note or purchaser of any Letter of Credit Participation 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.




     13.4. Judgment Currency. If, for the purpose of obtaining judgment in any court or
obtaining an order enforcing a judgment, it becomes necessary to convert any amount due under this
Credit Agreement in Dollars (hereinafter in this §13.4 called the “first currency”) into
any other currency (hereinafter in this §13.4 called the “second currency”), then the
conversion shall be made at the Exchange Rate at the Administrative Agent’s close of business on
the Business Day next preceding the day on which the judgment is given or (as the case may be) the
order is made. Any payment made to any Agent, any Issuing Bank or any Lender pursuant to this
Credit Agreement in the second currency shall constitute a discharge of the obligations of the
Borrowers to pay to the Agents, the Issuing Banks and the Lenders any amount originally due to the
Agents, the Issuing Banks and the Lenders in the first currency under this Credit Agreement only to
the extent of the amount of the first currency which the Agents, the Issuing Banks and each of the
Lenders is able, on the date of the receipt by it of such payment in any second currency, to
purchase, in accordance with such Agent’s, such Issuing Bank’s and such Lender’s normal banking
procedures, with the amount of such second currency so received. If the amount of the first
currency falls short of the amount originally due to the Agents, the Issuing Banks and the Lenders
in the first currency under this Credit Agreement, the Borrowers hereby jointly and severally agree
that they will indemnify each of the Agents, the Issuing Banks and each of the Lenders against and
save each of the Agents, the Issuing Banks and each of the Lenders harmless from any shortfall so
arising. This indemnity shall constitute a joint and several obligation of the Borrowers separate
and independent from the other obligations contained in this Credit Agreement, shall give rise to a
separate and independent cause of action and shall continue in full force and effect
notwithstanding any judgment or order for a liquidated sum or sums in respect of amounts due to any
Agent, any Issuing Bank or any Lender under this Credit Agreement or under any such judgment or
order. Any such shortfall shall be deemed to constitute a loss suffered by each such Agent, such
Issuing Bank and each such Lender, as the case may be, and the Borrowers shall not be entitled to
require any proof or evidence of any actual loss. The covenant contained in this §13.4 shall
survive the payment in full of all of the other obligations of the Borrowers under this Credit
Agreement.



     13.5. Distribution of Proceeds. In the event that, following the occurrence or during
the continuance of any Default or Event of Default, the Administrative Agent or any Lender, as the
case may be, receives any monies in connection with the enforcement of its rights hereunder or
under any of the other Loan Documents, such monies shall, subject to the provisions of §§2.14 and
2.15 hereof and the Intercreditor Agreement, be distributed for application as follows:




     (a) First, to the payment of, or (as the case may be) the reimbursement of the
Administrative Agent for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Administrative Agent in



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connection with the collection of such monies by the Administrative Agent, for
the exercise, protection or enforcement by the Administrative Agent of all or any of
the rights, remedies, powers and privileges of the Administrative Agent under this
Credit Agreement or any of the other Loan Documents in support of any provision of
adequate indemnity to the Administrative Agent against any taxes or liens which by
law shall have, or may have, priority over the rights of the Administrative Agent to
such monies;




     (b)
Second, to pay any fees, indemnities or expense reimbursements then due to
the Administrative Agent from the Borrowers or any Guarantor pursuant to the terms
of any Loan Document (other than fees or expenses relating to Cash Management
Services or in respect of Hedging Agreements);




     (c)
Third, to pay interest due in respect of all Loans, including Swingline
Loans;




     (d)
Fourth, to pay or prepay principal of Swingline Loans;




     (e)
Fifth, to pay or prepay principal of the Loans (other than Swingline Loans)
and Unpaid Reimbursement Obligations;




     (f)
Sixth, to pay an amount to the Administrative Agent, for the ratable
benefit of the Issuing Banks, equal to 103% of all outstanding undrawn Letter of
Credit obligations to be held as Cash Collateral for such Obligations (and to the
extent not otherwise Cash Collateralized by the Borrowers pursuant to §§2.14 and 4);




     (g)
Seventh, to the payment of any other Obligation due to the Administrative
Agent or any Lender by the Borrower or any Guarantor (other than amounts relating to
Cash Management Services or Hedging Agreements);




     (h)
Eighth, to pay any amounts relating to (i) Cash Management Services then
due to the Lenders or their Affiliates and (ii) Hedging Agreements then due to the
Lenders or their Affiliates in respect of Hedging Agreements; provided that
such amounts relating to Hedging Agreements shall be calculated based on the Swap
Termination Value with respect to such Hedging Agreements at such time;




     (i)
Ninth, upon payment and satisfaction in full or other provisions for
payment in full satisfactory to the Lenders and the Administrative Agent of all of
the Obligations, to the payment of any obligations required to be paid pursuant to
§9-608(a)(1)(C) or 9-615(a)(3) of the Uniform Commercial Code of the State of New
York; and




     (j) Tenth, the excess, if any, shall be returned to the Borrowers or to
such other Persons as are entitled thereto pursuant to the terms and provisions of
the Intercreditor Agreement.



     13.6. Cash Management Services and Hedge Agreements Subordinate. Each of the
Borrowers, each Guarantor, the Administrative Agent and each Lender hereby acknowledges and agrees
that (i) the Administrative Agent’s and Lenders’ claims relating to any obligations in respect of
Cash Management Services or Hedging Obligations against any Borrower or any Guarantor in respect of
the Collateral constitute junior claims separate and apart (and of a different class) from the
senior claims of the Administrative Agent and the Lenders against such Borrower or such Guarantor
with respect to any



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other Obligations (other than Cash Management Services and Hedging Obligations) in respect of
the Collateral and (ii) the Obligations (other than Cash Management Services and Hedging
Obligations) include (a) all interest that accrues after the commencement of any Insolvency
Proceeding involving any Borrower or any Guarantor at the rate provided for in this Agreement
governing the same, whether or not a claim for post-petition interest is allowed in any such
Insolvency Proceeding and (b) all indemnities, fees and expenses that accrue after the commencement
of any Insolvency Proceeding involving any Borrower or any Guarantor as provided for in this Credit
Agreement, whether or not a claim for post-petition indemnities, fees or expenses is allowed in any
such Insolvency Proceeding. To further effectuate the intent of the parties as provided in the
immediately preceding sentence, if it is held that the claims against the Borrowers in respect of
the Collateral constitute only one secured claim (rather than separate classes of senior and junior
claims), then each of the Administrative Agent and each Lender hereby acknowledges and agrees that
all distributions shall be made as if there were separate classes of senior and junior secured
claims against any Borrower or any Guarantor in respect of the Collateral (with the effect being
that, to the extent that the aggregate value of the Collateral is sufficient (for this purpose
ignoring all claims held by the Administrative Agent and Lenders in respect of Cash Management
Services and Hedging Agreements)), the Administrative Agent and the Lenders shall be entitled to
receive, in addition to amounts distributed to them in respect of principal, pre-petition interest
and other claims, all amounts owing in respect of post-petition interest at the relevant contract
rate together with all post-petition indemnities, fees and expenses (even though such claims may or
may not be allowed in whole or in part in the respective Insolvency Proceeding) before any
distribution is made in respect of the claims held by the Administrative Agent and Lenders in
respect of Cash Management Services and Hedging Obligations, with each of the Administrative Agent
and each Lender hereby acknowledging and agreeing to turn over to the holders of the Obligations
(other than Cash Management Services and Hedging Obligations) all amounts otherwise received or
receivable by them to the extent needed to effectuate the intent of this sentence even if such
turnover of amounts has the effect of reducing the amount of the claim of the Administrative Agent
and Lenders in respect of Cash Management Services or Hedging Obligations. Regardless of whether
any such claim is allowed, and without limiting the generality of the other provisions of this
Credit Agreement, this Credit Agreement expressly is intended to include and does include the “rule
of explicitness” in that this Credit Agreement expressly entitles the Administrative Agent and
Lenders to receive payment from the Collateral of any post-petition interest, indemnities, fees or
expenses through distributions made pursuant to the provisions of this Credit Agreement even though
such interest, indemnities, fees or expenses are not allowed or allowable against the bankruptcy
estate of any Borrower or any Guarantor under any applicable Debtor Relief Laws.




14. THE AGENTS.




     14.1. Appointment and Authority. Each of the Lenders, the Co-Collateral Agents and
each Issuing Bank hereby irrevocably appoints Bank of America to act on its behalf as the
Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative
Agent to take such actions on its behalf and to exercise such powers as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such actions and powers as are
reasonably incidental thereto. Each of the Lenders, the Administrative Agent and each Issuing Bank
hereby irrevocably appoints Bank of America and General Electric Capital Corporation to act on its
behalf, individually, as a Co-Collateral Agent, and collectively, as the Co-Collateral Agents
hereunder and under the other Loan Documents, and authorizes the Co-Collateral Agents to take such
actions on its behalf and to exercise such powers as are delegated to the Co-Collateral Agents by
the terms hereof or thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this §14 are solely for the benefit of the Administrative Agent, the
Co-Collateral Agents, the other Agents, the Lenders and the Issuing Bank, and neither any Borrower
nor any Subsidiary shall have rights as a third party beneficiary of any of such provisions. The
Co-Collateral Agents’ rights and obligations are further set forth in the Co-Collateral Agent Side
Letter Agreement.



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     14.2. Rights as a Lender. Any Person serving as the Administrative Agent or a
Co-Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the Administrative Agent or a
Co-Collateral Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated
or unless the context otherwise requires, include each Person serving as the Administrative Agent
or Co-Collateral Agent hereunder in its individual capacity. Such Persons and their Affiliates may
accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity
for and generally engage in any kind of business with the Borrowers or any Subsidiary or other
Affiliate thereof as if such Persons were not the Administrative Agent or Co-Collateral Agent
hereunder and without any duty to account therefor to the Lenders.



     14.3. Exculpatory Provisions. Each of the Administrative Agent and the Co-Collateral
Agents shall not have any duties or obligations except those expressly set forth herein and in the
other Loan Documents. Without limiting the generality of the foregoing, neither the Administrative
Agent nor any Co-Collateral Agent:




     (a) shall be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing;




     (b) shall have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly contemplated
hereby or by the other Loan Documents that the Administrative Agent or such
Co-Collateral Agent is required to exercise as directed in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be expressly
provided for herein or in the other Loan Documents), provided that neither
the Administrative Agent nor any Co-Collateral Agent shall be required to take any
action that, in its opinion or the opinion of its counsel, may expose the
Administrative Agent or such Co-Collateral Agent to liability or that is contrary to
any Loan Document or applicable Law; and




     (c) shall, except as expressly set forth herein and in the other Loan
Documents, have any duty to disclose, and shall be liable for the failure to
disclose, any information relating to any of the Borrowers or any of their
respective Affiliates that is communicated to or obtained by any Person serving as
the Administrative Agent or a Co-Collateral Agent or any of its Affiliates in any
capacity.


Neither the Administrative Agent nor any Co-Collateral Agent shall be liable for any action taken
or not taken by it (i) with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary, or as the Administrative Agent or any
Co-Collateral Agent shall believe in good faith shall be necessary, under the circumstances as
provided in §§16.12 and 13.3) or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Administrative Agent nor any Co-Collateral Agent shall be deemed to have
knowledge of any Default unless and until notice describing such Default is given to the
Administrative Agent or such Co-Collateral Agent by the Borrowers, a Lender or the Issuing Bank.
Upon the Administrative Agent’s receipt of a notice describing a Default, the Administrative Agent
shall notify the Lenders of the substance thereof.



Neither the Administrative Agent nor any Co-Collateral Agent shall be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement or any other Loan Document, (ii) the contents of any certificate,
report or other document delivered hereunder or thereunder or in connection herewith or therewith,
(iii) the performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this






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Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in §§11 and 12 or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent or such
Co-Collateral Agent.




     14.4. Reliance by Administrative Agent and the Co-Collateral Agents. Each of the
Administrative Agent and each Co-Collateral Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent, statement,
instrument, document or other writing (including any electronic message, Internet or intranet
website posting or other distribution) believed by it to be genuine and to have been signed, sent
or otherwise authenticated by the proper Person. Each of the Administrative Agent and each
Co-Collateral Agent also may rely upon any statement made to it orally or by telephone and believed
by it to have been made by the proper Person, and shall not incur any liability for relying
thereon. In determining compliance with any condition hereunder to the making of a Loan, or the
issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender
or the Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to
such Lender or the Issuing Bank unless the Administrative Agent shall have received notice to the
contrary from such Lender or the Issuing Bank prior to the making of such Loan or the issuance of
such Letter of Credit. Each of the Administrative Agent and each Co-Collateral Agent may consult
with legal counsel (who may be counsel for the Borrowers), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.



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



     14.6. Resignation of Administrative Agent, Co-Collateral Agent. The Administrative
Agent may at any time give notice of its resignation to the Lenders, the Issuing Bank, the
Co-Collateral Agents and the Borrowers. Upon receipt of any such notice of resignation, the
Required Lenders shall have the right to appoint a successor, which shall be a Lender, a bank or
other financial institution with an office in the United States, or an Affiliate of any such
Lender, bank or other financial institution with an office in the United States. If no such
successor shall have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice of its resignation,
then the retiring Administrative Agent may on behalf of the Lenders and the Issuing Bank, appoint a
successor Administrative Agent meeting the qualifications set forth above; provided that if
the Administrative Agent shall notify the Borrowers and the Lenders that no qualifying Person has
accepted such appointment, then such resignation shall nonetheless become effective in accordance
with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents (except that in the case of any collateral
security held by the Administrative Agent on behalf of the Lenders or the Issuing Bank under any of
the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral
security until such time as a successor Administrative Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the Administrative Agent
shall instead be made by or to each Lender and the Issuing Bank directly, until such time as the
Required Lenders appoint a successor Administrative Agent as provided for above in this Section.
Upon the acceptance of a



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successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and
become vested with all of the rights, powers, privileges and duties of the retiring (or retired)
Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section). The fees payable by the Borrowers to a successor
Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrowers and such successor. After the retiring Administrative Agent’s resignation
hereunder and under the other Loan Documents, the provisions of this Section and §§16.1, 16.2, 16.3
and 16.3A shall continue in effect for the benefit of such retiring Administrative Agent, its sub
agents and their respective Related Parties in respect of any actions taken or omitted to be taken
by any of them while the retiring Administrative Agent was acting as Administrative Agent.




     Any resignation by Bank of America as Administrative Agent pursuant to this Section shall also
constitute its resignation as Issuing Bank, Swingline Lender and Co-Collateral Agent to the extent
that Bank of America is acting in such capacities at such time. Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, (a) such successor shall succeed to and
become vested with all of the rights, powers, privileges and duties of the retiring Issuing Bank
and the Swingline Lender, (b) the retiring Issuing Bank and Swingline Lender shall be discharged
from all of their respective duties and obligations hereunder or under the other Loan Documents,
and (c) the successor Issuing Bank shall issue letters of credit in substitution for the Letters of
Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory
to the retiring Issuing Bank to effectively assume the obligations of the retiring Issuing Bank
with respect to such Letters of Credit.



     Any Co-Collateral Agent may at any time give notice of its resignation to the Administrative
Agent, the other Co-Collateral Agent, the Lenders, the Issuing Bank and the Borrowers. Upon
receipt of any such notice of resignation, the Required Lenders shall have the right to appoint a
successor, which shall be a bank or other financial institution with an office in the United
States, or an Affiliate of any such bank or other financial institution with an office in the
United States. If no such successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Co-Collateral Agent gives notice
of its resignation, then the retiring Co-Collateral Agent may on behalf of the Lenders and the
Issuing Bank, appoint a successor Co-Collateral Agent meeting the qualifications set forth above;
provided that if the retiring Co-Collateral Agent shall notify the Borrowers and the
Lenders that no qualifying Person has accepted such appointment, then such resignation shall
nonetheless become effective in accordance with such notice and the retiring Co-Collateral Agent
shall be discharged from its duties and obligations hereunder and under the other Loan Documents.
Upon the acceptance of a successor’s appointment as Co-Collateral Agent hereunder, such successor
shall succeed to and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Co-Collateral Agent, and the retiring Co-Collateral Agent shall be discharged
from all of its duties and obligations hereunder or under the other Loan Documents (if not already
discharged therefrom as provided above in this Section). After the retiring Co-Collateral Agent’s
resignation hereunder and under the other Loan Documents, the provisions of this Section and
§§16.1, 16.2, 16.3 and 16.3A shall continue in effect for the benefit of such retiring
Co-Collateral Agent, its sub agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while the retiring Co-Collateral Agent was acting as a
Co-Collateral Agent.



     14.7. Non-Reliance on Administrative Agent, Co-Collateral Agents and Other Lenders.
Each Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon
the Administrative Agent, any Co-Collateral Agent or any other Lender or any of their Related
Parties and based on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender and the Issuing Bank also
acknowledges that it will, independently and without reliance upon the Administrative Agent, the
Co-Collateral Agents or any other



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Lender or any of their Related Parties and based on such documents and information as it shall
from time to time deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any other Loan Document or any related agreement or any
document furnished hereunder or thereunder.




     14.8. No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of
the Co-Syndication Agents, Documentation Agent and Joint Lead Arrangers listed on the cover page
hereof shall have any powers, duties or responsibilities under this Agreement or any of the other
Loan Documents, except in its capacity, as applicable, as the Administrative Agent, a Co-Collateral
Agent, a Lender or the Issuing Bank hereunder (or, with respect to the Co-Collateral Agents, under
the Co-Collateral Agent Rights Agreement).



     14.9. Administrative Agent May File Proofs of Claim.




     (a) In case of the pendency of any proceeding under any Debtor Relief Law or
any other judicial, administrative or like proceeding or any assignment for the
benefit of creditors relative to any Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan,
Reimbursement Obligation or Unpaid Reimbursement Obligation shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on such Borrower) shall
be entitled and empowered, by intervention in such proceeding, under any such
assignment or otherwise:




     (i) to file and prove a claim for the whole amount of the principal,
interest, fees and all other amounts owing (or which may become owing) and
unpaid in respect of the Loans, Reimbursement Obligations or Unpaid
Reimbursement Obligations and all other Obligations that are owing (or which
may become owing) and unpaid and to file such other documents as may be
necessary or advisable in order to have the claims of the Lenders and the
Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders and the Administrative
Agent and their respective agents and counsel and all other amounts due the
Lenders and the Administrative Agent under the terms of this Credit
Agreement) allowed in such proceeding or under any such assignment; and




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


Any custodian, receiver, assignee, trustee, liquidator, administrator, sequestrator or other
similar official in any such proceeding or under any such assignment is hereby authorized by each
Lender and the Issuing Bank to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments directly to the Lenders
and the Issuing Bank, nevertheless to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent under the terms of this
Credit Agreement.



Nothing contained herein shall authorize the Administrative Agent to consent to or accept or adopt
on behalf of any Lender or the Issuing Bank any plan of reorganization, arrangement, adjustment or
composition affecting the Obligations owed to such Lender or the rights of any Lender or to
authorize the Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding or under any such assignment.







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     14.10. Duties in the Case of Enforcement. In case one of more Events of Default have
occurred and shall be continuing, and whether or not acceleration of the Obligations shall have
occurred, the Administrative Agent may, and shall, if (a) so requested by the Required Lenders and
(b) the Lenders have provided to the Administrative Agent such additional indemnities and
assurances against expenses and liabilities as the Administrative Agent may reasonably request,
proceed to enforce the provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such other legal and
equitable and other rights or remedies as it may have in respect of such Collateral. The Required
Lenders may direct the Administrative Agent in writing as to the method and the extent of any such
sale or other disposition, the Lenders hereby agreeing to indemnify and hold the Administrative
Agent harmless from all liabilities incurred in respect of all actions taken or omitted in
accordance with such directions, provided that the Administrative Agent need not comply
with any such direction to the extent that the Administrative Agent reasonably believe the
Administrative Agent’s compliance with such direction to be unlawful or commercially unreasonable
in any applicable jurisdiction.



     14.11. Release of Collateral and Guarantors. (a) Release of Collateral. The Lenders
hereby authorize the Administrative Agent to enter into any agreement or execute any document
evidencing the release of any liens and security interests in connection with any sale or other
disposition of Collateral permitted hereunder or to subordinate any Lien on any property granted to
or held by the Administrative Agent under any Loan Document to the holder of any Lien on such
Property that is permitted by §9.2. The Lenders hereby authorize the Administrative Agent to enter
into any agreement or execute any document evidencing the release of any Guarantor from its
obligations under this Credit Agreement and the other Loan Documents if such Person ceases to be a
Subsidiary as a result of a transaction permitted hereunder. Upon request by the Administrative
Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s
authority to release or subordinate its interest in particular types or items of property, or to
release any Guarantor from its obligations under the Guaranty pursuant to this §14.13.




     (b) Release of Borders Direct or Capital Stock of Kobo. Upon notice to the
Administrative Agent and satisfaction of the following conditions, each of the
Lenders and the Administrative Agent hereby consent to (1) the release of Borders
Direct as a Guarantor under the Credit Agreement and the other Loan Documents, and
the Administrative Agent shall release its security interests in all assets of
Borders Direct and (2) the release of its security interest in the Capital Stock of
Kobo:




     (i) Borders Direct or BGI, as applicable, shall engage an independent
appraiser, reasonably acceptable to the Administrative Agent, the
Administrative Agent and the Co-Collateral Agents, to determine the fair
market value of Borders Direct, the Capital Stock of Kobo and/or their
assets (the “Appraised Value”);




     (ii) Borders Direct or BGI, as applicable, shall pay to the Borrowers
(a) from proceeds of equity or debt financing provided to Borders Direct
from one or more third parties or an amount in cash equal to the Appraised
Value of Borders Direct and (b) from the proceeds of the sale of the Capital
Stock of Kobo or any equity or debt financing provided to Kobo from one or
more third parties or an amount in cash equal to the Appraised Value of Kobo
and, in each case, the Borrowers shall use such proceeds to prepay the loans
under the Second Lien Loan Facility; and



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     (iii) No Default or Event of Default shall have occurred and be
continuing or would result therefrom.


In connection with any release of Borders Direct, the Borrowers and Borders Direct may enter into
agreements to accomplish such release and to accommodate the ongoing operations of Borders Direct,
including entering into a non-exclusive license agreement of a scope and term agreed by the
Administrative Agent, pursuant to which Borders Direct may continue to use the Borders name and
customer lists, so long as such agreements are on terms no less favorable to the Borrowers than if
such agreements were at arms’ length. Each of such agreements, including the non-exclusive license
agreement, shall be in form and substance reasonably satisfactory to the Administrative Agent.




     14.12. Intercreditor Agreement. Each party hereto irrevocably agrees to be bound by
the provisions of the Intercreditor Agreement (including, without limitation, provisions requiring
the rescission of remedies taken in accordance with §13.3 hereof). Each of the Lenders hereby
appoints, designates and authorizes the Administrative Agent to enter into the Intercreditor
Agreement and agrees that the Administrative Agent may bind such Lenders to the provisions thereof,
and of any other agreements, documents, filings and instruments to be delivered in connection with
this Agreement and the transactions contemplated hereby, on its behalf. Each of the Lenders hereby
agrees that the Administrative Agent may exercise the Administrative Agent’s rights and comply with
all of the Administrative Agent’s obligations under the Intercreditor Agreement. Each of the
Lenders hereby agrees that the Required Lenders shall instruct the Administrative Agent with
respect to any notices, instructions or otherwise to be provided by the Lenders or any of them to
the Administrative Agent pursuant to the terms of the Intercreditor Agreement. Each Lender further
agrees that it shall not provide any notice, instruction or otherwise to the Administrative Agent
other than through the Administrative Agent, acting on the instruction of the Required Lenders
hereunder.



     14.13. Indemnity. The Lenders ratably, in accordance with their Commitment
Percentages, agree hereby to indemnify and hold harmless each of the Administrative Agent, the
Co-Collateral Agents and their affiliates (including any of the officers, directors, employees,
agents and attorneys-in-fact of any thereof) from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for
which the Administrative Agent, the Co-Collateral Agents or such affiliate has not been reimbursed
by the Borrowers or the Guarantors as required by the terms hereof), and liabilities of every
nature and character arising out of or related to this Agreement, the Notes, or any of the other
Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the
Administrative Agent’s or any Co-Collateral Agent’s actions taken hereunder or thereunder, except
to the extent that any of the same shall be directly caused by the Administrative Agent’s or such
Co-Collateral Agent’s willful misconduct or gross negligence.



15. SUCCESSORS AND ASSIGNS.




     15.1. General Conditions. The provisions of this Credit 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 any Issuing Bank that issues any Letter of Credit),
except that the neither the Borrowers nor the Guarantors may assign or otherwise transfer any of
their rights or obligations hereunder without the prior written consent of each Lender and no
Lender may assign or otherwise transfer any of its rights or obligations hereunder except (a) to an
assignee in accordance with the provisions of §15.2, (b) by way of participation in accordance with
the provisions of §15.4 or (c) by way of pledge or assignment of a security interest subject to the
restrictions of §15.6 (and any other attempted assignment or transfer by any party hereto shall be
null and void). Nothing in this Credit 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 any Issuing Bank that



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issues any Letter of Credit), Participants to the extent provided in §15.4 and, to the extent
expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Banks and the
Lenders) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement
or any of the other Loan Documents.




     15.2. Assignments. Any Lender may at any time assign to one or more assignees all or
a portion of its rights and obligations under this Credit Agreement (including all or a portion of
its Commitment and the Loans (including for the purposes of this §15.2, participations in LC
Obligations and in Swingline Loans) at the time owing to it); provided that any such
assignment shall be subject to the following conditions:




     (a) Minimum Amounts.




     (i) in the case of an assignment of the entire remaining amount of the
assigning Lender’s Commitment and the applicable Loans at the time owing to
it or, in the case of an assignment to a Lender or a Lender Affiliate, no
minimum amount need be assigned;




     (ii) in any case not described in subsection (a)(i) of this Section,
the aggregate amount of the Commitment (which for this purpose includes the
applicable Loans outstanding thereunder) or, if the applicable Commitment is
not then in effect, the principal outstanding balance of the applicable
Loans of the assigning Lender subject to each such assignment (determined as
of the date on which 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, so long as no Default or
Event of Default has occurred and is continuing, BGI otherwise consent (each
such consent not to be unreasonably withheld or delayed).




     (b) Proportionate Amounts. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Credit Agreement with respect to the Loans or the Commitment
assigned;




     (c) Required Consents. No consent shall be required for any assignment
except to the extent required by subsection (a)(ii) of this Section and, in
addition:




     (i) the consent of BGI (such consent not to be unreasonably withheld)
shall be required unless (1) an Event of Default has occurred and is
continuing at the time of such assignment or (2) such assignment is to a
Lender, an Affiliate of a Lender or an Approved Fund; provided that
BGI shall be deemed to have consented to any such assignment unless it shall
object thereto by written notice to the Administrative Agent within five (5)
Business Days after having received notice thereof;




     (ii) the consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed) shall be required for assignments in
respect of any Commitment if such assignment is to a Person that is not a
Lender;




     (iii) the consent of the Issuing Bank (such consent not to be
unreasonably withheld or delayed) shall be required for (A) assignments in
respect of any Commitment if such assignment is to a Person that is not a
Lender



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and (B) any assignment that increases the obligation of the assignee
(other than an existing Lender) to participate in exposure under one or more
Letters of Credit (whether or not then outstanding); and




     (iv) the consent of the Swingline Lender (such consent not to be
unreasonably withheld or delayed) shall be required for assignments in
respect of any Commitment if such assignment is to a Person that is not a
Lender.




     (d) Retention of Characteristics. Any Loans and any Commitment
assigned under this §15.2 shall retain its respective characteristics (including its
characteristic as a Loan or Commitment under the Existing Tranche or the Extended
Tranche) immediately prior to such assignment upon the effectiveness of such
assignment; and




     (e) Assignment and Assumption. 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; provided,
however, that the Administrative Agent may, in its sole discretion, elect to
waive such processing and recordation fee in the case of any assignment. The
assignee, if it is not a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire.




     (f) No Assignment to Certain Persons. No such assignment shall be made
(i) to the Borrowers or any of their Affiliates or Subsidiaries, or (ii) to any
Deteriorating Lender or any of its Subsidiaries, or any Person who, upon becoming a
Lender hereunder, would constitute any of the foregoing Persons described in this
clause (ii), or (iii) to a natural person.




     (g) Certain Additional Payments. In connection with any assignment of
rights and obligations of any Delinquent Lender hereunder, no such assignment shall
be effective unless and until, in addition to the other conditions thereto set forth
herein, the parties to the assignment shall make such additional payments to the
Administrative Agent in an aggregate amount sufficient, upon distribution thereof as
appropriate (which may be outright payment, purchases by the assignee of
participations or subparticipations, or other compensating actions, including
funding, with the consent of the Borrowers and the Administrative Agent, the
applicable pro rata share of Loans previously requested but not funded by
the Delinquent Lender, to each of which the applicable assignee and assignor hereby
irrevocably consent), to (x) pay and satisfy in full all payment liabilities then
owed by such Delinquent Lender to the Administrative Agent or any Lender hereunder
(and interest accrued thereon) and (y) acquire (and fund as appropriate) its full
pro rata share of all Loans and participations in Letters of Credit and
Swingline Loans in accordance with its Commitment Percentage. Notwithstanding the
foregoing, in the event that any assignment of rights and obligations of any
Delinquent Lender hereunder shall become effective under applicable Law without
compliance with the provisions of this paragraph, then the assignee of such interest
shall be deemed to be a Delinquent Lender for all purposes of this Agreement until
such compliance occurs.


Subject to acceptance and recording thereof by the Administrative Agent pursuant to §15.3, from and
after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall
be a party to this Credit Agreement and, to the extent of the interest assigned by such Assignment
and Acceptance have the rights and obligations of a Lender under this Credit Agreement, and the
assigning






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Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance,
be released from its obligations under this Credit Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under this Credit
Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the
benefits of (i) §§5.3.2, 5.7, 5.8 and 5.10 and (ii) §16.3 notwithstanding such assignment, with
respect to facts and circumstances occurring prior to the effective date of such assignment. Upon
request, the Borrowers (at their expense) shall execute and deliver a Note to the assignee Lender.
Any assignment or transfer by a Lender of rights or obligations under this Credit Agreement that
does not comply with this paragraph shall be treated for purposes of this Credit Agreement as a
sale by such Lender of a participation in such rights and obligations in accordance with §15.4.




     15.3. Register. The Administrative Agent, acting solely for this purpose as an agent
of the Borrowers (and such agency being solely for tax purposes), shall maintain at the
Administrative Agent’s Office a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the Commitments of, and
principal amounts of the Loans and Reimbursement Obligations owing to, each Lender pursuant to the
terms hereof from time to time (the “Register”). The entries in the Register shall be
conclusive, and the Borrowers, the Agents, the Issuing Banks 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 Credit Agreement, notwithstanding notice to the contrary. In addition, the
Administrative Agent shall maintain on the Register information regarding the designation, and
revocation of designation, of any Lender as a Delinquent Lender. The Register shall be available
for inspection by the Borrowers, the Issuing Banks and any Lender, at any reasonable time and from
time to time upon reasonable prior notice.



     15.4. Participations. Any Lender may at any time, without the consent of, or notice
to, the Borrowers, the Agents, the Issuing Banks or the Swingline Lender sell participations to any
Person (other than a natural person, a Deteriorating Lender, or the Borrowers or any of the
Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Credit Agreement (including all or a portion of its
Commitment and/or the Loans owing to it); provided that (a) such Lender’s obligations under
this Credit Agreement shall remain unchanged, (b) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations and (c) the Borrowers, the Agents,
the Issuing Banks 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 Credit Agreement. Any agreement
or instrument pursuant to which a Lender sells such a participation shall provide that such Lender
shall retain the sole right to enforce this Credit Agreement and to approve any amendment,
modification or waiver of any provision of this Credit Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver that would reduce the principal of or
the interest rate on any Loans, extend the term or increase the amount of the Commitment of such
Lender as it relates to such Participant, reduce the amount of any Fees to which such Participant
is entitled or extend any regularly scheduled payment date for principal or interest. Subject to
§15.5, the Borrowers agree that each Participant shall be entitled to the benefits of §§5.3.2, 5.7,
5.8 and 5.10 to the same extent as if it were a Lender and had acquired its interest by assignment
pursuant to §15.2. To the extent permitted by law, each Participant also shall be entitled to the
benefits of §16.1 as though it were a Lender, provided such Participant agrees to be
subject to §16.1 as though it were a Lender.



     15.5. Payments to Participants. A Participant shall not be entitled to receive any
greater payment under §§5.7, 5.8 and 5.17 than the applicable Lender would have been entitled to
receive with respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrowers’ prior written consent. A Participant
that would not be a U.S. Person as defined in section 7701(a)(30) of the Code for federal income
tax purposes if it were a Lender shall not be



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entitled to the benefits of §5.17 unless the Borrowers are notified of the participation sold
to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with
§5.17 as though it were a Lender.




     15.6. Miscellaneous Assignment Provisions. Any Lender may at any time grant a
security interest in all or any portion of its rights under this Credit Agreement to secure
obligations of such Lender, including without limitation (a) any pledge or assignment to secure
obligations to any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve
Act, 12 U.S.C. §341 and (b) with respect to any Lender that is a Fund, to any lender or any trustee
for, or any other representative of, holders of obligations owed or securities issued by such Fund
as security for such obligations or securities or any institutional custodian for such Fund or for
such lender; provided that no such grant shall release such Lender from any of its
obligations hereunder, provide any voting rights hereunder to the secured party thereof, substitute
any such secured party for such Lender as a party hereto or affect any rights or obligations of the
Borrowers or Administrative Agent hereunder. The words “execution,” “signed,” “signature,” and
words of like import in any Assignment and Assumption shall be deemed to include electronic
signatures or the keeping of records in electronic form, each of which shall be of the same legal
effect, validity or enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law,
including the Federal Electronic Signatures in Global and National Commerce Act, or any other state
laws based on the Uniform Electronic Transactions Act.



     15.7. [Reserved.]



     15.8. New Notes. Upon its receipt of an Assignment and Acceptance executed by the
parties to such assignment, together with each Note subject to such assignment, the Administrative
Agent shall (a) record the information contained therein in the Register, and (b) give prompt
notice thereof to the Borrowers and the Lenders (other than the assigning Lender). Within five (5)
Business Days after receipt of such notice and upon the request of the Assignee, the Borrowers, at
their own expense, shall execute and deliver to the Administrative Agent, in exchange for each
surrendered Note, a new Note to the order of such Assignee in an amount equal to the amount assumed
by such Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained some portion of its obligations hereunder, a new Note to the order of the assigning Lender
in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they
are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the
aggregate principal amount of the surrendered Notes, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the form of the assigned Notes.
The surrendered Notes shall be cancelled and returned to the Borrowers.



     15.9. Assignment to Special Purpose Funding Vehicle. Notwithstanding anything to the
contrary contained in this §15, any Lender (a “Granting Lender”) may grant to a special
purpose funding vehicle (an “SPC”) of such Granting Lender, identified as such in writing from time
to time delivered by the Granting Lender to the Administrative Agent and the Borrowers, the option
to provide to the Borrowers all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Borrowers pursuant to this Credit
Agreement, provided that (a) nothing
herein shall constitute a commitment to make any Loan by any SPC, (b) the Granting Bank’s
obligations under this Credit Agreement shall remain unchanged, (c) the Granting Lender shall
retain the sole right to enforce this Credit Agreement and to approve any amendment, modification
or waiver of any provision of this Credit Agreement and (d) if an SPC elects not to exercise such
option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were
made by the Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any
expense reimbursement, indemnity or similar payment obligation



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under this Credit Agreement (all liability for which shall remain with the Granting Lender).
In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Credit Agreement) that, prior to the date that is one year and one day after
the later of (i) the payment in full of all outstanding senior indebtedness of any SPC and (ii) the
Maturity Date, it will not institute against, or join any other person in instituting against, such
SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or similar
proceedings under the laws of the United States of America or any State thereof. In addition,
notwithstanding anything to the contrary contained in this §15.9, any SPC may (A) with notice to,
but (except as specified below) without the prior written consent of, the Borrowers or the
Administrative Agent and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to its Granting Lender or to any financial institutions (consented to by the
Administrative Agent and, so long as no Default or Event of Default has occurred and is continuing,
BGI, which consents shall not be unreasonably withheld or delayed) providing liquidity and/or
credit facilities to or for the account of such SPC to fund the Loans made by such SPC or to
support the securities (if any) issued by such SPC to fund such Loans and (B) disclose on a
confidential basis any non-public information relating to its Loans (other than financial
statements referred to in §§7.4 or 8.4) to any rating agency, commercial paper dealer or provider
of a surety, guarantee or credit or liquidity enhancement to such SPC. In no event shall the
Borrowers be obligated to pay to an SPC that has made a Loan any greater amount than the Borrowers
would have been obligated to pay under this Credit Agreement if the Granting Lender had made such
Loan. An amendment to this §15.9 without the written consent of an SPC shall be ineffective
insofar as it alters the rights and obligations of such SPC.




     15.10. Resignation as Issuing Bank or Swingline Lender. Notwithstanding anything to
the contrary contained herein, if at any time any Issuing Bank or the Swingline Lender assigns all
of its Commitments and Revolving Credit Loans pursuant to this §15, such Issuing Bank or the
Swingline Lender may, upon 45 days’ notice to the Borrowers and the Lenders, resign in its capacity
as a Issuing Bank or the Swingline Lender, as applicable. In the event of any such resignation as
an Issuing Bank, BGI, with the consent of the Administrative Agent, shall be entitled to appoint
from among the Lenders a successor Issuing Bank hereunder; provided, however, that
no failure by BGI to appoint any such successor shall affect the resignation of such Issuing Bank.
If the Issuing Bank resigns in such capacity, it shall retain all the rights and obligations of the
Issuing Bank hereunder with respect to all Letters of Credit outstanding as of the effective date
of its resignation as Issuing Bank and all Reimbursement Obligations with respect thereto
(including the right to require the Lenders to make Loans or fund risk participations in Unpaid
Reimbursement Obligations pursuant to §4). If any Person resigns as Swingline Lender, it shall
retain all the rights of the Swingline Lender provided for hereunder with respect to Swingline
Loans made by it and outstanding as of the effective date of such resignation, including the right
to require the Lenders to make Loans or fund risk participations in outstanding Swingline Loans
pursuant to §2.5.



16. PROVISIONS OF GENERAL APPLICATION.




     16.1. Setoff. The Borrowers and the Guarantors hereby grant to each Agent, Issuing
Bank and each of the Lenders a continuing lien, security interest and right of setoff as security
for all liabilities and obligations to each Agent, Issuing Bank and each Lender, whether now
existing or hereafter arising, upon and against all deposits, credits, collateral and property, now
or hereafter in the possession, custody, safekeeping or control of such Agent, such Issuing Bank or
such Lender or any Lender Affiliate and their successors and assigns or in transit to any of them.
Regardless of the adequacy of any collateral, if any of the Obligations are due and payable and
have not been paid or any Event of Default shall have occurred, any deposits or other sums credited
by or due from any of the Lenders to any Borrower or any Guarantor and any securities or other
property of any Borrower or any Guarantor in the possession of such Lender may be applied to or set
off by such Lender against the payment of Obligations and any and all other



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liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, of any Borrower or any Guarantor to such Lender. Each Borrower and each
Guarantor hereby grants to the Issuing Banks a security interest in all goods, documents,
instruments and accounts which shall come into the possession or control of the Issuing Banks, any
of the Issuing Banks’ correspondents, or any Borrower or any Guarantor, or in which any Borrower or
any Guarantor may acquire an interest and the proceeds thereof as the result of opening or in
connection with any transaction under any Letter of Credit, as security for (a) all payments made
or to be made by such Issuing Bank or its correspondents under such Letter of Credit, (b) any
interest, commission or other customary charges in relation to such Letter of Credit and (c) any
other obligations of any Borrower or any Guarantor to the Issuing Banks under this Credit
Agreement. Upon any default by the Borrowers or the Guarantors in any of the undertakings set
forth in this Credit Agreement in respect of the Letters of Credit, each Issuing Bank is authorized
to sell any or all such goods or documents at public or private sale and exercise any and all other
rights as a secured creditor under the provisions of the Uniform Commercial Code of the State of
New York or any similar statute. Any legal requirement that any Issuing Bank must give the
Borrowers and the Guarantors, as applicable, reasonable notice of any proposed sale or disposition
of the goods or documents shall be met if such notice is given to the Borrowers and the Guarantors,
as applicable, at least five (5) days before the time of such sale or disposition. ANY AND ALL
RIGHTS TO REQUIRE ANY LENDER TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO
SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF ANY BORROWER OR ANY GUARANTOR ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED. Each of the Lenders agrees with each other Lender that (i) if
an amount to be set off is to be applied to Indebtedness of any Borrower or Guarantor to such
Lender, other than Indebtedness evidenced by the Notes held by such Lender or constituting
Reimbursement Obligations owed to such Lender, such amount shall be applied ratably to such other
Indebtedness and to the Indebtedness evidenced by all such Notes held by such Lender or
constituting Reimbursement Obligations owed to such Lender, and (ii) if such Lender shall receive
from any Borrower or any Guarantor, whether by voluntary payment, exercise of the right of setoff,
counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, or
constituting Reimbursement Obligations owed to, such Lender by proceedings against any Borrower or
any Guarantor at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation,
receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the
Note or Notes held by, or Reimbursement Obligations owed to, such Lender any amount in excess of
its ratable portion of the payments received by all of the Lenders with respect to the Notes held
by, and Reimbursement Obligations owed to, all of the Lenders, such Lender will make such
disposition and arrangements with the other Lenders with respect to such excess, either by way of
distribution, pro tanto assignment of claims, subrogation or otherwise as shall
result in each Lender receiving in respect of the Notes held by it or Reimbursement Obligations
owed it, its proportionate payment as contemplated by this Credit Agreement; provided that
if all or any part of such excess payment is thereafter recovered from such Lender, such
disposition and arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest; provided further that the provisions of this Section shall
not be construed to apply to (w) any payment made by or on behalf of any Borrower pursuant to and
in accordance with the express terms of this Agreement (including the application of funds arising
from the existence of a Delinquent Lender), (x) the application of Cash Collateral provided for in
§2.14, (y) any payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans or subparticipations in LC Obligations or Swingline Loans to any
assignee or participant, other than an assignment to any Borrower or any Subsidiary thereof (as to
which the provisions of this Section shall apply), or (z) any payment made by or on behalf of any
Borrower to Lenders having Commitments under the Existing Tranche on the Existing Tranche
Termination Date. Notwithstanding anything to the contrary contained herein, in the event that any
Delinquent Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid
over immediately to the Administrative Agent for further application in accordance with the
provisions of






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§2.15 and, pending such payment, shall be segregated by such Delinquent Lender from its other
funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y)
the Delinquent Lender shall provide promptly to the Administrative Agent a statement describing in
reasonable detail the Obligations owing to such Delinquent Lender as to which it exercised such
right of setoff.




     16.2. Costs and Expenses. (a) The Borrowers jointly and severally agree to pay (i)
the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents
and the other agreements and instruments mentioned herein, (ii) any taxes (including any interest
and penalties in respect thereto) payable by any Agent, any Issuing Bank or any of the Lenders
(other than taxes based upon any Agent’s, any Issuing Bank’s or any Lender’s net income) on or with
respect to the transactions contemplated by this Credit Agreement (the Borrowers hereby jointly and
severally agreeing to indemnify the Agents, the Issuing Banks and each Lender with respect
thereto), (iii) the reasonable fees, expenses and disbursements of the Administrative Agent’s
Special Counsel, the Administrative Agent’s counsel or any local counsel to the Administrative
Agent incurred in connection with the preparation, syndication, administration or interpretation of
the Loan Documents and other instruments mentioned herein, each closing hereunder, any amendments,
modifications, approvals, consents or waivers hereto or hereunder, or the cancellation of any Loan
Document upon payment in full in cash of all of the Obligations or pursuant to any terms of such
Loan Document for providing for such cancellation, (iv) the fees, expenses and disbursements of the
Administrative Agent or any of its affiliates, agents or representatives incurred by the
Administrative Agent or such affiliate, agent or representative in connection with the preparation,
syndication, administration or interpretation of the Loan Documents and other instruments mentioned
herein, including all title insurance premiums and surveyor, engineering, appraisal, examination
and reporting charges or expenses, including, without limitation, fees and expenses incurred
pursuant to §8.9, (v) all reasonable out-of-pocket expenses incurred by any Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder, (vi) all reasonable out-of-pocket expenses (including without limitation
reasonable attorneys’ fees and costs, which attorneys may be employees of any Lender, the Issuing
Bank or any Agent, and reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Lender, the Issuing Bank or any Agent in connection
with (x) the enforcement of or preservation of rights under any of the Loan Documents against any
of the Borrowers or any of their Subsidiaries or the administration thereof after the occurrence of
a Default or Event of Default (including all such out-of-pocket expenses incurred during any
workout, restructuring or negotiation) and (y) any litigation, proceeding or dispute whether
arising hereunder or otherwise, in any way related to any Lender’s, the Issuing Bank’s or any
Agent’s relationship with any Borrower or any of their Subsidiaries; provided that, for
purposes of the clauses (x) and (y) of this subsection (vi), to the extent such expenses consist of
legal fees and disbursements, such expenses shall be limited to the fees and disbursements of (A)
one external counsel for the Administrative Agent, (B) such local counsel as the Administrative
Agent deems appropriate and (C) one external counsel representing the Lenders, and (vii) all
reasonable fees, expenses and disbursements of any Lender, any Issuing Bank or any Agent incurred
in connection with Uniform Commercial Code searches. The covenants contained in this §16.2 shall
survive payment or satisfaction in full of all other obligations.




     (b) Reimbursement by Lenders. To the extent that any Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) of this
Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the
Issuing Bank or any Related Party of any of the foregoing, each Lender severally
agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Bank
or such Related Party, 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, provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the
case may be, was incurred by or asserted against the




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Administrative Agent (or any such sub-agent) or the Issuing Bank in its
capacity as such, or against any Related Party of any of the foregoing acting for
the Administrative Agent (or any such sub-agent) or Issuing Bank in connection with
such capacity. The obligations of the Lenders under this subsection (b) are several
and not joint.




     (c) Payments. All amounts due under this Section shall be payable not
later than ten (10) Business days after demand therefor.




     (d) Survival. The agreements in this Section shall survive the
resignation of the Administrative Agent, the Issuing Bank and the Swingline Lender,
the replacement of any Lender, the termination of the Total Commitment and the
repayment, satisfaction or discharge of all the other Obligations.



     16.3. Indemnification; Damage Waiver.




     (a) Indemnification. The Borrowers jointly and severally agree to
indemnify and hold harmless each Agent, each Issuing Bank and each Lender and any of
their Affiliates (including any affiliates and/or the officers, directors,
employees, agents and attorneys-in-fact of any of the same) (each such Person being
called an “Indemnitee”) from and against any and all claims, actions and
suits whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of this
Credit Agreement or any of the other Loan Documents or the transactions contemplated
hereby including, without limitation, (a) any actual or proposed use by any of the
Borrowers or any of their Subsidiaries of the proceeds of any of the Loans or
Letters of Credit, (b) the reversal or withdrawal of any provisional credits granted
by the Administrative Agent upon the transfer of funds from lock box, bank agency,
concentration accounts or otherwise under any cash management arrangements with any
of the Borrowers or any of their Subsidiaries or in connection with the provisional
honoring of funds transfers, checks or other items, (c) any of the Borrowers or any
of their Subsidiaries entering into or performing this Credit Agreement or any of
the other Loan Documents or (d) with respect to any of the Borrowers and any of
their Subsidiaries and their respective properties and assets, the violation of any
Environmental Law, the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threatened release of any Hazardous Substances or
any action, suit, proceeding or investigation brought or threatened with respect to
any Hazardous Substances (including, but not limited to, claims with respect to
wrongful death, personal injury or damage to property), in each case including,
without limitation, the reasonable fees and disbursements of counsel and allocated
costs of internal counsel incurred in connection with any such investigation,
litigation or other proceeding. In litigation, or the preparation therefor, each
Lender, each Issuing Bank, and each Agent and any of their affiliates shall be
entitled to select their own counsel and, in addition to the foregoing indemnity,
the Borrowers jointly and severally agree to pay promptly the reasonable fees and
expenses of such counsel. No Indemnitee shall be liable for any damages arising
from the use by others of any information or other materials obtained through
IntraLinks or other similar information transmission systems in connection with this
Credit Agreement. No Indemnitee shall be liable for any damages arising from the
use by unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby. If, and to the extent that the obligations of any
Borrower under this §16.3 are unenforceable for any reason, the Borrowers hereby
jointly and severally agree



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to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable Law. The covenants contained in
this §16.3 shall survive payment or satisfaction in full of all other Obligations.




     (b) Reimbursement by Lenders. To the extent that any Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) of this
Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the
Issuing Bank or any Related Party of any of the foregoing, each Lender severally
agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Bank
or such Related Party, 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, provided that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as the
case may be, was incurred by or asserted against the Administrative Agent (or any
such sub-agent) or the Issuing Bank in its capacity as such, or against any Related
Party of any of the foregoing acting for the Administrative Agent (or any such
sub-agent) or Issuing Bank in connection with such capacity. The obligations of the
Lenders under this subsection (b) are several and not joint.




     (c) Waiver of Consequential Damages, Etc. To the fullest extent
permitted by applicable Law, no Borrower shall assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
exemplary, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement, any
other Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use
of the proceeds thereof. No Indemnitee referred to in subsection (a) above shall be
liable for any damages arising from the use by unintended recipients of any
information or other materials distributed to such unintended recipients by such
Indemnitee through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby other than for direct or actual damages
resulting from the gross negligence or willful misconduct of such Indemnitee as
determined by a final and nonappealable judgment of a court of competent
jurisdiction.




     (d) Payments. All amounts due under this Section shall be payable not
later than ten Business Days after demand therefor.




     (e) Survival. The agreements in this Section shall survive the
resignation of the Administrative Agent, the Issuing Bank and the Swingline Lender,
the replacement of any Lender, the termination of the Total Commitment and the
repayment, satisfaction or discharge of all the other Obligations.



     16.3A. Payments Set Aside. To the extent that any payment by or on behalf of a
Borrower is made to the Administrative Agent, the Issuing Bank, the Swingline Lender or any Lender,
or the Administrative Agent, the Issuing Bank, the Swingline Lender or any Lender exercises its
right of setoff, and such payment or the proceeds of such setoff or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Administrative Agent, the Issuing Bank,
the Swingline Lender or such Lender in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a)
to the extent of such recovery, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such
payment had not been



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\





made or such setoff had not occurred, and (b) each Lender, the Swingline
Lender and the Issuing Bank, as applicable, severally agrees to pay to the Administrative Agent,
the Swingline Lender and the Issuing Bank, as applicable, upon demand its applicable share (without
duplication) of any amount so recovered from or repaid by the Administrative Agent, the Swingline
Lender or the Issuing Bank plus interest thereon from the date of such demand to the date such
payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in
effect. The obligations of the Lenders, the Swingline Lender and the Issuing Bank under clause (b)
of the preceding sentence shall survive the payment in full of the Obligations and the termination
of this Credit Agreement.



     16.4. Treatment of Certain Confidential Information.




     16.4.1. Confidentiality. Each of the Lenders, the Agents, and the
Issuing Banks agrees, on behalf of itself and each of its affiliates, directors,
officers, employees and representatives, to use reasonable precautions to keep
confidential, in accordance with their respective customary procedures for handling
confidential information of the same nature and in accordance with safe and sound
banking practices, any non-public information supplied to it by any Borrower or any
of their Subsidiaries pursuant to this Credit Agreement that is identified by such
Person as being confidential at the time the same is delivered to the Lenders, the
Issuing Banks or the Agents, provided that nothing herein shall limit the
disclosure of any such information (a) after such information shall have become
public other than through a violation of this §16.4, or becomes available to any of
the Lenders, the Issuing Banks or the Agents on a nonconfidential basis from a
source other than the Borrowers, (b) to the extent required by statute, rule,
regulation or judicial process, (c) to counsel for any of the Lenders, the Issuing
Banks or the Agents, (d) to bank examiners or any other regulatory authority having
jurisdiction over any Lender or any Agent, or to auditors or accountants, (e) to any
Agent, any Lender, the Issuing Banks or any Financial Affiliate, (f) in connection
with any litigation to which any one or more of the Lenders, the Issuing Banks, the
Agents or any Financial Affiliate is a party, or in connection with the enforcement
of rights or remedies hereunder or under any other Loan Document, (g) to a Lender
Affiliate or a Subsidiary or affiliate of any Agent or Issuing Banks, (h) to any
actual or prospective assignee or participant or any actual or prospective
counterparty (or its advisors) to any swap or derivative transactions referenced to
credit or other risks or events arising under this Credit Agreement or any other
Loan Document so long as such assignee, participant or counterparty, as the case may
be, agrees to be bound by the provisions of §16.4 or (i) with the consent of the
Borrowers. Moreover, each of the Agents, the Issuing Banks, the Lenders and any
Financial Affiliate is hereby expressly permitted by the Borrowers to refer to any
of the Borrowers and their Subsidiaries in connection with any advertising,
promotion or marketing undertaken by such Agent, such Lender, the Issuing Banks or
such Financial Affiliate and, for such purpose, such Agent, the Issuing Banks, such
Lender or such Financial Affiliate may utilize any trade name, trademark, logo or
other distinctive symbol associated with the Borrowers or any of their Subsidiaries
or any of their businesses.




     16.4.2. Prior Notification. Unless specifically prohibited by
applicable Law or court order, each of the Lenders, the Issuing Banks and the Agents
shall, prior to disclosure thereof, notify the Borrowers of any request for
disclosure of any such non-public information by any governmental agency or
representative thereof (other than any such request in connection with an
examination of the financial condition of such Lender by such governmental agency)
or pursuant to legal process.



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     16.4.3. Other. In no event shall any Lender, any Issuing Bank or any
Agent be obligated or required to return any materials furnished to it or any
Financial Affiliate by any Borrower or any of their Subsidiaries. The obligations
of each Lender under this §16.4 shall supersede and replace the obligations of such
Lender under any confidentiality letter in respect of this financing signed and
delivered by such Lender to the Borrowers prior to the date hereof and shall be
binding upon any assignee of, or purchaser of any participation in, any interest in
any of the Loans or Reimbursement Obligations from any Lender.



     16.5. Survival of Covenants, Etc. All covenants, agreements, representations and
warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or
other papers delivered by or on behalf of any Borrower or any of their Subsidiaries pursuant hereto
shall be deemed to have been relied upon by the Lenders, the Agents, the Issuing Banks,
notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive
the making by the Lenders of any of the Loans and the issuance, extension or renewal of any Letters
of Credit, as herein contemplated, and shall continue in full force and effect so long as any
Letter of Credit or any amount due under this Credit Agreement or the Notes or any of the other
Loan Documents remains outstanding or any Lender has any obligation to make any Loans or any
Issuing Bank has any obligation to issue, extend or renew any Letter of Credit, and for such
further time as may be otherwise expressly specified in this Credit Agreement. All statements
contained in any certificate or other paper delivered to any Lender, any Agent or any Issuing Bank
at any time by or on behalf of any of the Borrowers or any of their Subsidiaries pursuant hereto or
in connection with the transactions contemplated hereby shall constitute representations and
warranties by such Borrower or such Subsidiary hereunder.



     16.6. Notices. Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this Credit Agreement or
the Notes or any Letter of Credit Applications shall be in writing (which includes by setting forth
such notice or other communication on a site on the World Wide Web (a “Website Posting”) if
notice of such Website Posting (including the information necessary to access such site) has
previously been delivered to the applicable parties hereto by another means set forth in this
§16.6) and shall be delivered in hand, mailed by United States registered or certified first class
mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or
telex and confirmed by delivery via courier or postal service, addressed as follows:




     (a) if to the Borrowers or the Guarantors, at 100 Phoenix Drive, Ann Arbor,
Michigan USA 48108, Attention: Mark Bierley, Senior Vice President and Chief
Financial Officer, or at such other address for notice as the Borrowers shall last
have furnished in writing to the Person giving the notice;




     (b) if to the Administrative Agent, the Issuing Bank or the Swingline Lender,
at 100 Federal Street, Boston, Massachusetts 02110, USA, Attention: Kathleen
Dimock, Managing Director, or such other address for notice as the Administrative
Agent shall last have furnished in writing to the Person giving the notice;




     (c) if to any other Agent or any Lender, at such Agent’s or such Lender’s
address set forth on Schedule 1 hereto, or such other address for notice as
such Agent or such Lender shall have last furnished in writing to the Person giving
the notice; and




     (d) the Borrowers’ website on the Internet is available at the website address
www.bordersgroupinc.com.



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     Any such notice or demand shall be deemed to have been duly given or made and to have
become effective (i) if delivered by hand, overnight courier or facsimile to a responsible
officer of the party to which it is directed, at the time of the receipt thereof by such
officer or the sending of such facsimile, (ii) if sent by registered or certified
first-class mail, postage prepaid, on the third Business Day following the mailing thereof,
(iii) if delivered by a Website Posting, upon delivery of a notice or other communication of
such posting (including the information necessary to access such site) by another means set
forth in this §16.6 and (iv) notices and other communications sent to an e-mail address
shall be deemed received on the next Business Day following the sending thereof (unless the
sender receives a return email or otherwise indicating that such notice or other
communication has not been received by the recipient at such email address, in which case
the sender shall deliver such notice or communication by an alternate means),
provided that if such notice or other communication is not sent during the normal
business hours of the recipient, such notice or communication shall be deemed to have been
sent at the opening of business on the next Business Day for the recipient. Any notice or
other communication to be made hereunder or under the Notes or any Letter of Credit
Applications, even if otherwise required to be in writing under other provisions of this
Credit Agreement, the Notes or any Letter of Credit Applications, may alternatively be made
in an electronic record transmitted electronically under such authentication and other
procedures as the parties hereto may from time to time agree in writing (but not an
electronic record), and such electronic transmission shall be effective at the time set
forth in such procedures. Unless otherwise expressly provided in such procedures, such an
electronic record shall be equivalent to a writing under the other provisions of this Credit
Agreement, the Notes or any Letter of Credit Applications, and such authentication, if made
in compliance with the procedures so agreed by the parties hereto in writing (but not an
electronic record), shall be equivalent to a signature under the other provisions of this
Credit Agreement, the Notes or any Letter of Credit Applications.



     16.7. Governing Law. THIS AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW (OTHER THAN
THE NEW YORK GENERAL OBLIGATIONS LAW §5-1401)). EACH OF THE BORROWERS AND THE GUARANTORS AGREES
THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS
TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE
UPON THE BORROWERS BY MAIL AT THE ADDRESS SPECIFIED IN §16.6. EACH OF THE BORROWERS HEREBY WAIVES
ANY OBJECTION THAT IT 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 COURT.



     16.8. Headings. The captions in this Credit Agreement are for convenience of
reference only and shall not define or limit the provisions hereof.



     16.9. Counterparts. This Credit Agreement and any amendment hereof may be executed in
several counterparts and by each party on a separate counterpart, each of which when executed and
delivered shall be an original, and all of which together shall constitute one instrument. In
proving this Credit Agreement it shall not be necessary to produce or account for more than one
such counterpart signed by the party against whom enforcement is sought. Delivery by facsimile or
other electronic transmission by any of the parties hereto of an executed counterpart hereof or of
any amendment or waiver hereto shall be as effective as an original executed counterpart hereof or
of such amendment or



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waiver and shall be considered a representation that an original executed counterpart hereof
or such amendment or waiver, as the case may be, will be delivered.




     16.10. Entire Agreement, Etc. The Loan Documents and any other documents executed in
connection herewith or therewith express the entire understanding of the parties with respect to
the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be
changed, waived, discharged or terminated, except as provided in §16.12.



     16.11. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS CREDIT
AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING ANY COURSE OF
CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER
RELATING TO THE ADMINISTRATION OF THE LOANS OR ENFORCEMENT OF THE LOAN DOCUMENTS AND AGREES THAT IT
WILL NOT SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE
OR HAS NOT BEEN WAIVED. Each of the Borrowers and the Guarantors (a) certifies that no
representative, agent or attorney of any Lender, any Issuing Bank or any Agent has represented,
expressly or otherwise, that such Lender, such Issuing Bank or such Agent would not, in the event
of litigation, seek to enforce the foregoing waivers or other waivers contained in this Credit
Agreement or the other Loan Documents or other waivers contained in this Credit Agreement or the
other Loan Documents and (b) acknowledges that each Agent, each Issuing Bank and the Lenders have
been induced to enter into this Credit Agreement, the other Loan Documents to which it is a party
by, among other things, the waivers and certifications contained herein.



     16.12. Consents, Amendments, Waivers, Etc. Any consent or approval required or
permitted by this Credit Agreement to be given by the Lenders may be given, and any term of this
Credit Agreement, the other Loan Documents or any other instrument related hereto or mentioned
herein may be amended, and the performance or observance by any of the Borrowers or any of their
Subsidiaries of any terms of this Credit Agreement, the other Loan Documents or such other
instrument or the continuance of any Default or Event of Default may be waived (either generally or
in a particular instance and either retroactively or prospectively) with, but only with, the
written consent of the Borrowers and the written consent of the Required Lenders. Notwithstanding
the foregoing, no amendment, modification or waiver shall:




     (a) without the written consent of the Borrowers and each Lender directly
affected thereby:




     (i) reduce or forgive the principal amount of any Loans or
Reimbursement Obligations, or reduce the rate of interest on the Notes or
the amount of the Commitment Fee, the Last Out Commitment Fee or Letter of
Credit Fees (other than interest accruing pursuant to §5.11.2 following the
effective date of any waiver by the Required Lenders of the Default or Event
of Default relating thereto);




     (ii) increase the amount of such Lender’s Commitment or Last Out
Revolving Commitment or extend the expiration date of such Lender’s
Commitment or Last Out Revolving Commitment;



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     (iii) postpone or extend the Maturity Date or any other regularly
scheduled dates for payments of principal of, or interest on, the Loans or
Reimbursement Obligations or any Fees or other amounts payable to such
Lender (it being understood that (A) a waiver of the application of the
default rate of interest pursuant to §5.11.2, and (B) any vote to rescind
any acceleration made pursuant to §13.1 of amounts owing with respect to the
Loans and other Obligations shall require only the approval of the Required
Lenders);




     (iv) other than pursuant to a transaction permitted by the terms of
this Credit Agreement, release all or substantially all of the Collateral or
release all or substantially all of the Guarantors from their guaranty
obligations; and




     (v) increase the percentage of Eligible Credit Card Receivables or
Eligible Inventory (as applicable) in the calculation of the Domestic
Borrowing Base, Aggregate Borrowing Base or Last Out Borrowing Base, it
being understood, however, that: the foregoing shall not (A) limit the
adjustment by the Administrative Agent of any reserve in the Administrative
Agent’s administration of the Loans as otherwise permitted by this Agreement
or (B) prevent the Administrative Agent from restoring any component of the
Domestic Borrowing Base, the Aggregate Borrowing Base or the Last Out
Borrowing Base, which had been lowered by the Administrative Agent back to
the value of such component, as stated in this Credit Agreement or to an
intermediate value;




     (b) without the written consent of all of the Lenders, amend or waive this
§16.12 or the definition of Required Lenders or Required Revolving Lenders (it being
understood that the addition of one or more additional credit facilities, the
allowance of the credit extensions, interest and fees thereunder to share ratably or
on a subordinated basis with the Loans, Letters of Credit, interest and Fees in the
benefits of the Loan Documents and the inclusion of the holders of such facilities
in the determination of Required Lenders shall require only the approval of the
Required Lenders);




     (c) without the written consent of the Administrative Agent, amend or waive
§14, the amount or time of payment of the Administrative Agent’s fee payable for the
Administrative Agent’s account or any other provision applicable to the
Administrative Agent;




     (d) without the written consent of the applicable Issuing Bank, amend or waive,
the amount or time of payment of any Letter of Credit Fees or other fees payable for
such Issuing Bank’s account or any other provision applicable to such Issuing Bank;
or




     (e) without the written consent of the Swingline Lender amend or waive any
provision applicable to the Swingline Lender.



     No waiver shall extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of any Agent, any
Issuing Bank or any Lender in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrowers shall entitle the Borrowers to
other or further notice or demand in similar or other circumstances.



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     16.13. Severability. The provisions of this Credit Agreement are severable and if any
one clause or provision hereof shall be held illegal, invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in
any jurisdiction and the parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of which comes as
close as possible to that of the illegal, invalid or unenforceable provisions. Without limiting
the foregoing provisions of this §16.13, if and to the extent that the enforceability of any
provisions in this Agreement relating to Deteriorating Lenders shall be limited by Debtor Relief
Laws, as determined in good faith by the Administrative Agent, the Issuing Bank or the Swingline
Lender, as applicable, then such provisions shall be deemed to be in effect only to the extent not
so limited.



17. USA PATRIOT ACT NOTICE.




     Each Lender, each Issuing Bank and each Agent (for itself and not on behalf of any Lender or
any Issuing Bank) hereby notifies each of the Borrowers that pursuant to the requirements of the
USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
 “Act”), it is required to obtain, verify and record information that identifies the
Borrowers, which information includes the name and address of the Borrowers and other information
that will allow such Lender, such Issuing Bank or such Agent, as applicable, to identify the
Borrowers in accordance with the Act.



18. TRANSITIONAL ARRANGEMENTS.




     18.1. Prior Credit Agreement Superseded. On the Effective Date, this Credit Agreement
shall supersede the Existing Credit Agreement in its entirety, except as provided in this §18. On
the Effective Date, (a) the rights and obligations of the parties evidenced by the Existing Credit
Agreement shall be evidenced by this Credit Agreement and the other Loan Documents, (b) the “Loans”
as defined in the Existing Credit Agreement shall be converted to Loans as defined herein, (c) the
commitment percentages of the Lenders with respect to the “Loans” as defined in the Existing Credit
Agreement shall be reallocated in accordance with Schedule 1 attached hereto, and (d) the
Existing Letters of Credit issued by any Issuing Bank for the account of the Borrowers prior to the
Effective Date shall be converted into Letters of Credit under this Credit Agreement. Without
limiting the generality of the foregoing and to the extent necessary, the Lenders and the
Administrative Agent reserve all of their rights under the Existing Credit Agreement and each of
the Guarantors hereby obligates itself again in respect of all present and future Obligations
under, inter alia, the Existing Credit Agreement, as amended and restated by this Credit Agreement.



     18.2. Interest and Fees under Superseded Agreement. All interest and fees and
expenses, if any, owing or accruing under or in respect of the Existing Credit Agreement through
the Effective Date shall be calculated as of the Effective Date (pro rated in the case of any
fractional periods), and shall be paid on the Effective Date. Commencing on the Effective Date,
the Commitment Fees hereunder shall be payable by the Borrowers to the Administrative Agent for the
account of the Lenders in accordance with §2.2.



19. INTERCREDITOR AGREEMENT.




     Notwithstanding anything herein to the contrary, the security interest granted to the
Administrative Agent, for the benefit of the Secured Parties, pursuant to the Security Documents
and the exercise of any right or remedy by the Administrative Agent hereunder and thereunder are
subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the
terms of the



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Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall
govern and control.




[Remainder of Page Intentionally Left Blank]





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SCHEDULE 1.01A




PERMITTED RESTRUCTURING TRANSACTIONS



UNITED STATES





	1.	 	Refinancing relating to the Torrance, California store, where Borders is both the tenant and
the lender to the landlord.
	 
	2.	 	Refinancing relating to the Harrisburg, Pennsylvania warehouse, where Borders is both the
tenant and the lender to the landlord.
	 
	3.	 	Each of the preceding transactions may be conducted independently of the other at any time
and in any sequence and shall be deemed to include all acts and steps necessary for the
described action.
	 
	4.	 	Each of the foregoing shall be in form and substance satisfactory to the Administrative Agent
in all material respects and shall not affect the security interests of the Agents under the
Loan Documents. The Borrowers shall provide the Administrative Agent with all relevant
documentation related to the foregoing (in a reasonable time in advance of the consummation of
foregoing transactions) together with a certificate of a responsible officer of BGI confirming
the same.
	 
	5.	 	Each of the foregoing shall be accomplished in compliance with the requirements of the Credit
Agreement and the other Loan Documents and, for the avoidance of doubt, each Domestic
Subsidiary formed or otherwise created in connection with any of the foregoing shall be a
Guarantor under the Loan Documents and become a party to the relevant Security Documents prior
to any such inclusion to the extent required by §8.13 of the Credit Agreement.





PAPERCHASE





	1.	 	Establish an employee stock plan, and issue Paperchase non-voting shares and/or options in
connection with such plan.
	 
	2.	 	BGI (or its relevant Subsidiary) may consolidate the ownership of Paperchase into one
wholly-owned Subsidiary (other than Paperchase employee stock plan).
	 
	3.	 	BGI (or its relevant Subsidiary) sells Paperchase to a third party purchaser.
	 
	4.	 	BGP (UK) and Borders Superstores may loan the proceeds of the sales of Paperchase to BGI.
	 
	5.	 	Borders Superstores and BGP (UK) may be restructured or liquidated to allow them to
distribute their assets to BGI; provided that any Capital Stock of Paperchase shall
continue to be subject to a first-priority perfected lien in favor of the Administrative
Agent.
	 
	6.	 	To the extent Paperchase receives a payment from Borders, Inc. of its annual service fee
(comprised of commission, royalty and design fees), Paperchase may declare a dividend to its




 









 






	 	 	shareholders (BGP (UK) 14.742% and Borders Superstores 86.268%) in an amount equal to the
commission received. In turn, BGP (UK) and Borders Superstores will loan or distribute the
amount received from Paperchase to BGI. For the year-ended January 30, 2010, the total
service fee was approximately $6.4 million. It is anticipated that this annual service fee
will be significantly reduced in this current fiscal year when the parties renegotiate the
terms of the service agreement.
	 
	7.	 	BGI may grant a perpetual license to certain trademarks for use by Paperchase and a third
party purchaser on terms to be determined, but in any event on terms reasonably acceptable to
the Administrative Agent.
	 
	8.	 	Each of the preceding transactions may be conducted independently of the other at any time
and in any sequence and shall be deemed to include all acts and steps necessary for the
described action.
	 
	9.	 	To the extent that it is lawful and would not cause materially adverse tax consequences to
the Borrowers, the proceeds of the foregoing transactions shall be applied to repay the
Obligations.
	 
	10.	 	The transactions described in paragraph 1 above shall (i) be on arm’s length terms, (ii) be
on terms and conditions (including indemnity and expense reimbursement provisions) that are
customary for transactions of this type, (iii) be approved by the Board of Directors of BGI,
(iv) not result in any Borrower or Guarantor incurring any material liability or retaining any
material liability of Paperchase (or any other entity related to the transaction), other than
those retained liabilities relating to guarantees of certain store leases as in effect prior
to such disposition and so long as such retained liabilities are treated under the Credit
Agreement in a manner acceptable to the Administrative Agent, and (v) be for cash
consideration and may include a retained minority equity component in the business so disposed
(or, in each case, in form and substance otherwise satisfactory to the Administrative Agent).
	 
	11.	 	The Borrowers shall provide the Administrative Agent with all relevant documentation related
to the foregoing (in a reasonable time in advance of the consummation of foregoing
transactions) so that the Administrative Agent can confirm that the foregoing conditions have
been satisfied together with a certificate of a responsible officer of BGI confirming the
same.