Exhibit 10.1




 





 


AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT


 


by and between


 


OVERSTOCK.COM, INC.


 


as Borrower,


 


and


 


WELLS FARGO RETAIL FINANCE, LLC


 


as Lender


 


Dated as of January 6, 2009




 





 

















 


AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT


 


THIS AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”), is entered into as
of January 6, 2009, by and between WELLS
FARGO RETAIL FINANCE, LLC, a
Delaware limited liability company with offices at One Boston Place - 19th
Floor, Boston, Massachusetts 02109 (“Lender”) and OVERSTOCK.COM, INC., a Delaware corporation (“Borrower”).


 


WITNESSETH:


 


WHEREAS, the Borrower has
entered into a Loan and Security Agreement dated as of December 12, 2005
with Lender (as amended and in effect, the “Existing Loan Agreement”);
and


 


WHEREAS, the Borrower and
Lender desire to amend and restate the Existing Loan Agreement as set forth
herein.


 


NOW, THEREFORE, the parties
hereto agree that the Existing Loan Agreement shall be amended and restated in
its entirety to read as follows:


 


1.                                      DEFINITIONS AND
CONSTRUCTION.


 


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


 


“Account” means an “account”
(as such term is defined in Article 9 of the Code).


 


“Account Debtor”
means any Person who is obligated on an Account, chattel paper, or a General
Intangible.


 


“ACH Transactions”
means any cash management or related services (including the Automated Clearing
House processing of electronic fund transfers through the direct Federal Reserve
Fedline system) provided by a Bank Product Provider for the account of Borrower
or its Subsidiaries.


 


“Additional Documents”
has the meaning set forth in Section 4.4(c).


 


“Advances” has the
meaning set forth in Section 2.1(a).


 


“Affiliate” means, as
applied to any Person, any other Person who, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, such Person.  For purposes of this
definition, “control” means the possession, directly or indirectly through one
or more intermediaries, of the power to direct the management and policies of a
Person, whether through the ownership of Stock, by contract, or otherwise; provided,
however, that, for purposes of the definition of Eligible Accounts and Section 7.13
hereof:  (a) any Person which owns
directly or indirectly 10% or more of the Stock having ordinary voting power
for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed an
Affiliate of such Person, (b) each director (or comparable manager) of a
Person shall be deemed to be an Affiliate of such Person, and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed an Affiliate of such Person.


 





















 


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


 


“Applicable Prepayment
Premium” has the meaning set forth in the Fee Letter.


 


“Assignee” has the
meaning set forth in Section 14.1(a).


 


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


 


“Availability” means,
as of any date of determination, the amount that Borrower is entitled to borrow
as Advances hereunder (after giving effect to all then outstanding Obligations
(other than Bank Product Obligations) and all sublimits and reserves then
applicable hereunder).


 


“Average Excess
Availability”: means, for the applicable quarter, the aggregate of the
amount of Excess Availability on each day in such quarter, divided by the
number of days in such quarter.


 


“Bank Product” means
any financial accommodation extended to Borrower or its Subsidiaries by a Bank
Product Provider (other than pursuant to this Agreement) including:  (a) credit cards, (b) credit card
processing services, (c) debit cards, (d) purchase cards, (e) ACH
Transactions, (f) cash management, including controlled disbursement,
accounts or services, or (g) transactions under Hedge Agreements.


 


“Bank Product Agreements”
means those agreements entered into from time to time by Borrower or its
Subsidiaries with a Bank Product Provider in connection with the obtaining of
any of the Bank Products.


 


“Bank Product Obligations”
means all obligations, liabilities, contingent reimbursement obligations, fees,
and expenses owing by Borrower or its Subsidiaries to any Bank Product Provider
pursuant to or evidenced by the Bank Product Agreements and irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all such amounts that Borrower or its Subsidiaries are obligated to
reimburse to Lender as a result of Lender purchasing participations from, or
executing indemnities or reimbursement obligations to, a Bank Product Provider
with respect to the Bank Products provided by such Bank Product Provider to
Borrower or its Subsidiaries.


 


“Bank Product Provider”
means Wells Fargo or any of its Affiliates.


 


“Bank Product Reserve”
means, as of any date of determination, the lesser of (a) $250,000.00, and
(b) the amount of reserves that Lender has established (based upon the
Bank Product Providers’ reasonable determination of the credit exposure of
Borrower and its Subsidiaries in respect of Bank Products) in respect of Bank
Products then provided or outstanding.


 


“Bankruptcy Code”
means title 11 of the United States Code, as in effect from time to time.


 


“Base LIBOR Rate”
means the rate per annum, determined by Lender in accordance with its customary
procedures, and utilizing such electronic or other quotation sources as it
considers appropriate (rounded upwards, if necessary, to the next 1/100%), to
be the rate at which Dollar deposits (for delivery on the first day of the
requested Interest Period) are offered to major banks in the London interbank
market two (2) Business Days prior to the commencement of the requested
Interest Period, for a term and in an amount comparable to the Interest Period
and the amount of the LIBOR Rate Loan 


 


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requested
(whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR Rate
Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Borrower
in accordance with this Agreement, which determination shall be conclusive in
the absence of manifest error.


 


“Base Rate” means for
any day a fluctuating rate per annum equal to the highest of (a) the
Federal Funds Rate plus 1/2 of 1% (b) the rate of interest in effect for
such day as publicly announced from time to time by Wells Fargo as its “prime
rate” and (c) the LIBOR Rate for an Interest Period of one month, plus
1%.  The “prime rate” is a rate set by
Wells Fargo based upon various factors including Wells Fargo’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.  Any change in such
rate announced by Wells Fargo shall take effect at the opening of business on
the day specified in the public announcement of such change.


 


“Base Rate Loan”
means the portion of the Advances that bears interest at a rate determined by
reference to the Base Rate.


 


“Base Rate Margin”
shall have the meaning as set forth in the following table.


 


	
  If Average Excess Availability is:

  	
   

  	
  Base Rate Margin means:

  	
   

  
	
  Greater than or equal to $10,000,000

  	
   

  	
  0.25

  	
  %

  
	
  Greater than or equal to $5,000,000 but less than $10,000,000

  	
   

  	
  0.50

  	
  %

  
	
  Less than $5,000,000

  	
   

  	
  0.75

  	
  %

  



 


 “Benefit Plan” means a “defined benefit
plan” (as defined in Section 3(35) of ERISA) for which Borrower or any
Subsidiary or ERISA Affiliate of Borrower has been an “employer” (as defined in
Section 3(5) of ERISA) within the past six (6) years.


 


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


 


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


 


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


 


“Borrower Collateral”
means “all assets” of the Borrower, as provided in the Code, including without
limitation, all of Borrower’s now owned or hereafter acquired right, title, and
interest in and to each of the following:


 


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(a)                                  all of its Accounts,


 


(b)                                 all of its Books,


 


(c)                                  all of its commercial tort claims described on
Schedule 5.7(d),


 


(d)                                 all of its Deposit Accounts,


 


(e)                                  all of its Equipment,


 


(f)                                    all of its General Intangibles,


 


(g)                                 all of its Inventory,


 


(h)                                 all of its Investment Property (including all
of its securities and Securities Accounts),


 


(i)                                     all of its Negotiable Collateral,


 


(j)                                     all of its Supporting Obligations,


 


(k)                                  all money or other assets of Borrower that
now or hereafter come into the possession, custody, or control of the Lender,
and


 


(l)                                     the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the foregoing, and any and all Accounts, Books, Deposit
Accounts, Equipment, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, Real Property, Supporting Obligations, money, or other
tangible or intangible property resulting from the sale, exchange, collection,
or other disposition of any of the foregoing, or any portion thereof or
interest therein, and the proceeds thereof;


 


Notwithstanding
anything to the contrary contained in clauses (a) through (l) above,
the security interest created by this Agreement shall not extend to, and the
term “Borrower Collateral” shall not include, any assets of the Borrower
constituting Specified Litigation; provided  that, all proceeds,
substitutions or replacements of any assets of the Borrower constituting
Specified Litigation shall constitute Borrower Collateral hereunder.


 


“Borrower Intellectual
Property Right” means all of Borrower’s or any Subsidiary of Borrower’s right,
title and interest in any Intellectual Property Right owned, used or held for
use by Borrower or any Subsidiary of Borrower, and any license agreement
granting Borrower or any Subsidiary of Borrower the right to use any
Intellectual Property Right.


 


“Borrowing” means a
borrowing hereunder consisting of Advances.


 


“Borrowing Base”
means, as of any date of determination, the result of:


 


(a)                                  Eighty-five percent (85%) of Eligible Credit
Card Receivables; plus


 


(b)                                 As applicable, either: (i) at all times
other than the Seasonal Period, Sixty-five percent (65%) of the Cost of
Eligible Inventory, but in no event greater than Eighty-five percent (85%) of 


 


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the
Net Liquidation Value of Eligible Inventory, or (ii) during the Seasonal
Period, Seventy percent (70%) of the Cost of Eligible Inventory, but in no
event greater than Eighty-five percent (85%) of the Net Liquidation Value of
Eligible Inventory; minus


 


(c)                                  the sum of (i) the Bank Product Reserve,
(ii) the Permanent Reserve, and (iii) the aggregate amount of
reserves, if any, established by Lender under Section 2.1(b).


 


“Business Day” means
any day that is not a Saturday, Sunday, or other day on which banks are
authorized or required to close in the Commonwealth of Massachusetts, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term “Business Day” also shall exclude any day on which banks are closed
for dealings in Dollar deposits in the London interbank market.


 


“Capital Expenditures”
means, with respect to any Person for any period, the aggregate of all
expenditures by such Person and its Subsidiaries during such period that are
capital expenditures as determined in accordance with GAAP, whether such
expenditures are paid in cash or financed.


 


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


 


“Capitalized Lease
Obligation” means that portion of the obligations under a Capital Lease
that is required to be capitalized in accordance with GAAP.


 


“Cash Equivalents”
means, as of any date of determination, (a) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one (1) year from the date of acquisition
thereof, (b) marketable direct obligations issued by any state of the
United States or any political subdivision of any such state or any public instrumentality
thereof maturing within one (1) year from the date of acquisition thereof
and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor’s Rating Group (“S&P”)
or Moody’s Investor Service, Inc. (“Moody’s”), (c) commercial
paper maturing no more than 270 days from the date of creation thereof and, at
the time of acquisition, having a rating of at least A-1 from S&P or at
least P-1 from Moody’s, (d) certificates of deposit or bankers’
acceptances maturing within one (1) year from the date of acquisition
thereof issued by any bank organized under the laws of the United States or any
state thereof having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000, (e)  Deposit Accounts maintained
with (i) any bank that satisfies the criteria described in clause (d) above,
or (ii) any other bank organized under the laws of the United States or
any state thereof so long as the amount maintained with any such other bank is
less than or equal to $100,000 and is insured by the Federal Deposit Insurance
Corporation, (f) Investments in money market funds substantially all of
whose assets are invested in the types of assets described in clauses (a) through
(e) above.


 


“Cash Management Account”
has the meaning set forth in Section 2.7(a).


 


“Cash Management
Agreements” means those certain cash management agreements, in form and
substance satisfactory to Lender, each of which is among Borrower or one of its
Subsidiaries, Lender, and one of the Cash Management Banks.


 


“Cash Management Bank”
has the meaning set forth in Section 2.7(a).


 


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“Cash Sweep Instruction”
has the meaning set forth in Section 2.7(b).


 


“Change of Control”
means that (a) Permitted Holders fail to own and control, directly or
indirectly, 25% or more, of the Stock of Borrower having the right to vote for
the election of members of the Board of Directors, (b) any “person” or “group”
(within the meaning of Sections 13(d) and 14(d) of the Exchange Act),
other than Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of 40%, or more, of the Stock
of Borrower having the right to vote for the election of members of the Board
of Directors, or (c) a majority of the members of the Board of Directors
do not constitute Continuing Directors.


 


“Closing Date” means
the date of the making of the Initial Credit Extension hereunder or the date on
which Lender sends Borrower a written notice that each of the conditions
precedent set forth in Section 3.1 either have been satisfied or
have been waived.


 


“Closing Date Business
Plan” means the set of Projections of Borrower from the Closing Date
through the end of the following fiscal year, on a month-by-month basis, in
form and substance (including as to scope and underlying assumptions)
satisfactory to Lender.


 


“Code” means the
Massachusetts Uniform Commercial Code, as in effect from time to time; provided,
however, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, priority, or remedies with
respect to Lender’s Lien on any Collateral is governed by the Uniform
Commercial Code as enacted and in effect in a jurisdiction other than the
Commonwealth of Massachusetts, the term “Code” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for
purposes of the provisions thereof relating to such attachment, perfection,
priority, or remedies.


 


“Collateral” means
all assets and interests in assets and proceeds thereof now owned or hereafter
acquired by Borrower or its Subsidiaries in or upon which a Lien is granted
under any of the Loan Documents.


 


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


 


“Collections” means all cash, checks, notes, instruments, and
other items of payment (including insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).


 


“Commercial Tort Claim
Assignment” has the meaning set forth in Section 4.4(b).


 


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


 


“Continuing Director”
means (a) any member of the Board of Directors who was a director (or
comparable manager) of Borrower on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing
Date if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable 


 


6





















 


managers)
of Borrower and whose initial assumption of office resulted from such contest
or the settlement thereof.


 


“Control Agreement”
means a control agreement, in form and substance satisfactory to Lender,
executed and delivered by Borrower or one of its Subsidiaries, Lender, and the
applicable securities intermediary (with respect to a Securities Account) or
bank (with respect to a Deposit Account).


 


“Cost”:  The lower of (a) or (b), where:


 


(a)                                  is the calculated cost of purchases, based
upon the Borrower’s accounting practices as in effect on the date on which this
Agreement was executed and as thereafter modified with the consent of the
Lender, which consent shall not be unreasonably withheld, as such calculated
cost is determined from: invoices received by the Borrower; the Borrower’s
purchase journal; or the Borrower’s stock ledger.


 


(b)                                 is the cost equivalent of the lowest ticketed
or promoted price at which the subject Inventory is offered to the public,
after all mark-downs (whether or not such price is then reflected on the
Borrower’s accounting system), which cost equivalent is determined in
accordance with the FIFO method of accounting, reflecting the Borrower’s
historic business practices.


 


(“Cost” does not include
inventory capitalization costs or other non-purchase price charges (such as
freight) used in the Borrowers’ calculation of cost of goods sold).


 


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


 


“Daily Balance”
means, as of any date of determination and with respect to any Obligation, the
amount of such Obligation owed at the end of such day.


 


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


 


“Deposit Account” means
any “deposit account” (as such term is defined in Article 9 of the Code).


 


“Designated Account”
means the Deposit Account of Borrower identified on Schedule D-1.


 


“Designated Account Bank”
has the meaning ascribed thereto on Schedule D-1.


 


“Disbursement Letter”
means an instructional letter executed and delivered by Borrower to Lender
regarding the extensions of credit to be made on the Closing Date, the form and
substance of which is satisfactory to Lender.


 


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


 


“Eligible Credit Card
Receivables”: means Accounts due to Borrower on a non recourse basis from (i) Visa,
MasterCard, American Express Company, Discover, and other major credit card 


 


7





















 


processors,
in each case acceptable to the Lender in its discretion, as arise in the
ordinary course of business, which have been earned by performance, and are
deemed by the Lender in its discretion to be eligible for inclusion in the
calculation of the Borrowing Base.  Without limiting the foregoing, unless
the Lender otherwise agrees, none of the following shall be deemed to be
Eligible Credit Card Receivables:


 


(a)                                  those which have been outstanding for more
than five (5) Business Days from the date of sale;


 


(b)                                 those with respect to which a Loan Party does
not have good, valid and marketable title, free and clear of any Lien (other
than Liens granted to the Lender);


 


(c)                                  those that are not subject to a first
priority security interest in favor of the Lender (it being the intent that
chargebacks in the ordinary course by the credit card processors shall not be
deemed violative of this clause);


 


(d)                                 those 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)                                  those which the credit card processor has the
right under certain circumstances to require Borrower to repurchase such
Accounts from such credit card processor; or


 


(f)                                    those which the Lender determines in its
discretion to be uncertain of collection.


 


“Eligible Inventory”
means Inventory consisting of finished goods held for sale in the ordinary
course of Borrower’s business, that complies with each of the representations
and warranties respecting Eligible Inventory made in the Loan Documents, and
that is not excluded as ineligible by virtue of one or more of the excluding
criteria set forth below; provided, however, that such criteria
may be revised from time to time by Lender in Lender’s Permitted Discretion to
address the results of any audit or appraisal performed by Lender from time to
time after the date of this Agreement. 
In determining the amount to be so included, Inventory shall be valued at
the lower of cost or market on a basis consistent with Borrower’s historical
accounting practices.  An item of
Inventory shall not be included in Eligible Inventory if:


 


(a)                                  Borrower does not have good, valid, and
marketable title thereto,


 


(b)                                 it is not located at one of the locations in
the continental United States set forth on Schedule E-1 (or in-transit
from one such location to another such location),


 


(c)                                  it is located on real property leased by
Borrower or in a contract warehouse, in each case, unless it is subject to a
Collateral Access Agreement executed by the lessor or warehouseman, as the case
may be, and unless it is segregated or otherwise separately identifiable from
goods of others, if any, stored on the premises,


 


(d)                                 it is not subject to a valid and perfected
first priority Lender’s Lien,


 


(e)                                  it consists of goods returned or rejected by
Borrower’s customers as to which Borrower has not made a determination of
whether such goods are either saleable and to be returned to its inventory or
defective, or


 


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(f)            it consists of goods that are obsolete, restrictive or
custom items, work-in-process, raw materials, or goods that constitute spare
parts, packaging and shipping materials, supplies used or consumed in Borrower’s
business, bill and hold goods, defective goods, or Inventory acquired on
consignment;


 


provided, however, that no Inventory shall be
excluded from Eligible Inventory solely on the basis that it consists of
refurbished goods.


 


“Eligible Transferee”
means (a) a commercial bank organized under the laws of the United States,
or any state thereof, and having total assets in excess of $250,000,000, (b) a
commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development or a political
subdivision of any such country and which has total assets in excess of
$250,000,000, provided that such bank is acting through a branch or agency
located in the United States, (c) a finance company, insurance company, or
other financial institution or fund that is engaged in making, purchasing, or
otherwise investing in commercial loans in the ordinary course of its business
and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of Lender, (e) so
long as no Event of Default has occurred and is continuing, any other Person
approved by Borrower (which approval of Borrower shall not be unreasonably
withheld, delayed, or conditioned), and (f) during the continuation of an
Event of Default, any other Person approved by Lender; provided that, in
the case of a transfer to any Person pursuant to clauses (a) through (e),
such transfer shall be subject to the restrictions set forth in the Transferee
Letter.


 


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


 


“Environmental Law”
means any applicable federal, state, provincial, foreign or local statute, law,
rule, regulation, ordinance, code, binding and enforceable guideline, binding
and enforceable written policy, or rule of common law now or hereafter in
effect and in each case as amended, or any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, in each case, to the extent binding on Borrower or its
Subsidiaries, relating to the environment, the effect of the environment on
employee health, or Hazardous Materials, including the Comprehensive
Environmental Response Compensation and Liability Act, 42 USC § 9601 et seq.; the Resource Conservation and
Recovery Act, 42 USC § 6901 et seq.;
the Federal Water Pollution Control Act, 33 USC § 1251 et seq.; the Toxic Substances Control Act,
15 USC § 2601 et seq.; the
Clean Air Act, 42 USC § 7401 et seq.;
the Safe Drinking Water Act, 42 USC § 3803 et
seq.; the Oil Pollution Act of 1990, 33 USC § 2701 et seq.; the Emergency Planning and the
Community Right-to-Know Act of 1986, 42 USC § 11001 et seq.; the Hazardous Material Transportation Act, 49 USC §
1801 et seq.; and the
Occupational Safety and Health Act, 29 USC §651 et seq. (to the extent it regulates occupational exposure to
Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.


 


“Environmental
Liabilities and Costs” means all liabilities, monetary obligations, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all reasonable fees, disbursements and expenses of counsel,
experts, or consultants, and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim or 


 


9

















 


demand,
or Remedial Action required, by any Governmental Authority or any third party,
and which relate to any Environmental Action.


 


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


 


“Equipment” means “equipment”
(as such term is defined in Article 9 of the Code) and includes machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), computer hardware, tools, parts, and goods (other than
consumer goods, farm products, or Inventory), wherever located, including all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.


 


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


 


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


 


“Event of Default”
has the meaning set forth in Section 8.


 


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


 


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


 


“Existing Loan Agreement”
as the meaning as set forth in the recitals.


 


“Family Member”
means, with respect to any individual, any other individual having a
relationship by blood (to the second degree of consanguinity), marriage, or
adoption to such individual.


 


“Family Trusts”
means, with respect to any individual, trusts or other estate planning vehicles
established for the benefit of such individual or Family Members of such
individual and in respect of which such individual serves as trustee or in a
similar capacity.


 


“Federal Funds Rate”
means, 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 by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business 


 


10

















 


Day
as so published on the next succeeding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Federal Funds
Rate for such day shall be the average rate (rounded upward, if necessary, to a
whole multiple of 1/100 of 1%) charged to Wells Fargo on such day on such transactions
as determined by the Lender.


 


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


 


“FEIN” means Federal
Employer Identification Number.


 


“Filing Authorization
Letter” means a letter duly executed by Borrower authorizing Lender to file
appropriate financing statements in such office or offices as may be necessary
or, in the opinion of Lender, desirable to perfect the security interests to be
created by the Loan Documents.


 


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


 


“Funding Losses” has
the meaning set forth in Section 2.13(b)(ii).


 


“GAAP” means
generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.


 


“General Intangibles”
means “general intangibles” (as such term is defined in Article 9 of the
Code), including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trade secrets, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer
lists, monies due or recoverable from pension funds, route lists, rights to payment
and other rights under any royalty or licensing agreements, infringement
claims, computer programs, information contained on computer disks or tapes,
software, literature, reports, catalogs, insurance premium rebates, tax
refunds, and tax refund claims, and any other personal property other than
Accounts, Deposit Accounts, goods, Investment Property, and Negotiable
Collateral.


 


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


 


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


 


“Guarantors” means
each Subsidiary of Borrower (other than Overstock Mexico, S. de R.L de C.V.),
and “Guarantor” means any one of them.


 


“Guarantor Security
Agreement” means one or more security agreements executed and delivered by
each Guarantor in favor of Lender and the Bank Product Providers, in each case,
in form and substance satisfactory to Lender.


 


“Guaranty” means a
general continuing guaranty executed and delivered by each Guarantor in favor
of Lender and the Bank Product Providers, in form and substance satisfactory to
Lender.


 


11

















 


“Hazardous Materials”
means (a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as “hazardous
substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or
any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil,
petroleum, or petroleum derived substances, natural gas, natural gas liquids,
synthetic gas, drilling fluids, produced waters, and other wastes associated with
the exploration, development, or production of crude oil, natural gas, or
geothermal resources, (c) any flammable substances or explosives or any
radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.


 


“Hedge Agreement”
means any and all agreements or documents now existing or hereafter entered
into by Borrower or any of its Subsidiaries with Wells Fargo or any of its
Affiliates that provide for an interest rate, credit, commodity or equity swap,
cap, floor, collar, forward foreign exchange transaction, currency swap, cross
currency rate swap, currency option, or any combination of, or option with
respect to, these or similar transactions, for the purpose of hedging Borrower’s
or any of its Subsidiaries’ exposure to fluctuations in interest or exchange
rates, loan, credit exchange, security, or currency valuations or commodity
prices.


 


“Indebtedness” means,
as applied to any Person, (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, hedges, derivatives, or other
financial products, (c) all obligations as a lessee under Capital Leases, (d) all
obligations or liabilities of others secured by a Lien on any asset of such
Person or its Subsidiaries, irrespective of whether such obligation or
liability is assumed, (e) all obligations of such Person to pay the
deferred purchase price of assets (other than trade payables incurred in the
ordinary course of business and repayable in accordance with customary trade
practices), (f) all obligations of such Person owing under Hedge
Agreements, and (g) any obligation guaranteeing or intended to guarantee
(whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
sold with recourse) any obligation of any other Person that constitutes
Indebtedness under any of clauses (a) through (f) above.


 


“Indemnified Liabilities”
has the meaning set forth in Section 11.3.


 


“Indemnified Person”
has the meaning set forth in Section 11.3.


 


“Initial Credit Extension”
means the first Borrowing, issuance of an L/C or other extension of credit by
Lender under this Agreement.


 


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


 


“Intangible Assets”
means, with respect to any Person, that portion of the book value of all of
such Person’s assets that would be treated as intangibles under GAAP.


 


“Intellectual Property
Right” means any copyright, patent, or trademark (including any
registrations or applications for registration of any of the foregoing), or
trade secret including, but not limited to, any such legal rights included in
any schematics, technology, know-how, computer software 


 


12

















 


programs
or applications (in both source code and object code form) or in other tangible
or intangible information or material, and any license to use the foregoing.


 


“Intellectual Property
Security Agreement” means an intellectual property security agreement
executed and delivered by Borrower to Lender, the form of which is satisfactory
to Lender.


 


“Intercompany
Subordination Agreement” means a subordination agreement executed and
delivered by Borrower and each of its Subsidiaries and Lender, the form and
substance of which is satisfactory to Lender.


 


“Interest Expense”
means, for any period, the aggregate of the interest expense of Borrower and
its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.


 


“Interest Period”
means, with respect to each LIBOR Rate Loan, a period commencing on the date of
the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or
the conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2, 3, or
6 months thereafter; provided, however, that (a) if any
Interest Period would end on a day that is not a Business Day, such Interest
Period shall be extended (subject to clauses (c)-(e) below) to the next
succeeding Business Day, (b) interest shall accrue at the applicable rate
based upon the LIBOR Rate from and including the first day of each Interest
Period to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Business Day, (d) with respect to an Interest Period that
begins on the last Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period), the Interest Period shall end on the last Business Day of the
calendar month that is 1, 2, 3 or 6 months after the date on which the Interest
Period began, as applicable, and (e) Borrower may not elect an Interest
Period which will end after the Maturity Date.


 


“Inventory” means “inventory”
(as such term is defined in Article 9 of the Code).


 


“Investment” means,
with respect to any Person, any investment by such Person in any other Person
(including Affiliates) in the form of loans, guarantees, advances, or capital
contributions (excluding (a) commission, travel, and similar advances to
officers and employees of such Person made in the ordinary course of business,
and (b) bona fide Accounts
arising in the ordinary course of business consistent with past practice),
purchases or other acquisitions of Indebtedness, Stock, or all or substantially
all of the assets of such other Person (or of any division or business line of
such other Person), and any other items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.


 


“Investment Property”
means “investment property” (as such term is defined in Article 9 of the
Code).


 


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


 


 “L/C” has the meaning set forth in Section 2.12(a).


 


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


 


13

















 


“L/C Undertaking” has
the meaning set forth in Section 2.12(a).


 


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


 


“Lender Expenses”
means all reasonable (a) costs or expenses (including taxes, and insurance
premiums) required to be paid by Borrower or its Subsidiaries under any of the
Loan Documents that are paid, advanced, or incurred by Lender, (b) fees or
charges paid or incurred by Lender in connection with Lender’s transactions
with Borrower or its Subsidiaries, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record
searches (including tax lien, litigation, and Uniform Commercial Code searches
and including searches with the patent and trademark office, the copyright
office, or the department of motor vehicles), filing, recording, publication,
appraisals (including periodic collateral appraisals or business valuations to
the extent of the fees and charges (and up to the amount of any limitation)
contained in this Agreement), real estate surveys, real estate title policies
and endorsements, and environmental audits, (c) costs and expenses
incurred by Lender in the disbursement of funds to Borrower (by wire transfer
or otherwise), (d) charges paid or incurred by Lender resulting from the
dishonor of checks, (e) costs and expenses paid or incurred by Lender to
correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit
fees and expenses of Lender related to audit examinations of the Books to the
extent of the fees and charges (and up to the amount of any limitation)
contained in this Agreement, (g) costs and expenses of third party claims
or any other suit paid or incurred by Lender in enforcing or defending the Loan
Documents or in connection with the transactions contemplated by the Loan
Documents or Lender’s relationship with Borrower or any of its Subsidiaries, (h) Lender’s
costs and expenses (including attorneys fees) incurred in advising,
structuring, drafting, reviewing, administering, syndicating, or amending the
Loan Documents, and (i) Lender’s costs and expenses (including attorneys,
accountants, consultants, and other advisors fees and expenses) incurred in
terminating, enforcing (including attorneys, accountants, consultants, and
other advisors fees and expenses incurred in connection with a “workout,” a “restructuring,”
or an Insolvency Proceeding concerning Borrower or its Subsidiaries or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.


 


“Lender-Related Person”
means Lender, together with its Affiliates, officers, directors, employees,
attorneys, and agents.


 


“Lender’s Account”
means the account identified in Schedule L-1.


 


“Lender’s Liens”
means the Liens granted by Borrower and its Subsidiaries to Lender under this
Agreement or the other Loan Documents.


 


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


 


“Letter of Credit Usage”
means, as of any date of determination, the aggregate undrawn amount of all
outstanding Letters of Credit.


 


“LIBOR Deadline” has
the meaning set forth in Section 2.13(b)(i).


 


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


 


“LIBOR Option” has
the meaning set forth in Section 2.13(a).


 


14

















 


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


 


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


 


“LIBOR Rate Margin”
has the meaning as set forth in the following table:


 


	
  If Average Excess Availability is:

  	
   

  	
  LIBOR Rate Margin means:

  	
   

  
	
  Greater than or equal to $10,000,000

  	
   

  	
  2.25

  	
  %

  
	
  Greater than or equal to $5,000,000 but less than $10,000,000

  	
   

  	
  2.50

  	
  %

  
	
  Less than $5,000,000

  	
   

  	
  2.75

  	
  %

  



 


 “Lien” means any interest in an asset
securing an obligation owed to, or a claim by, any Person other than the owner
of the asset, irrespective of whether (a) such interest is based on the
common law, statute, or contract, (b) such interest is recorded or
perfected, and (c) such interest is contingent upon the occurrence of some
future event or events or the existence of some future circumstance or
circumstances.  Without limiting the
generality of the foregoing, the term “Lien” includes the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also includes reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.


 


“Loan Account” has
the meaning set forth in Section 2.10.


 


“Loan Documents”
means this Agreement, the Bank Product Agreements, the Cash Management
Agreements, the Control Agreements, the Intellectual Property Security
Agreement, the Disbursement Letter, the Fee Letter, the Guarantor Security
Agreement, the Guaranty, the Letters of Credit, the Officers’ Certificate, the
Securities Pledge Agreements, any note or notes executed by Borrower in
connection with this Agreement and payable to Lender, and any other agreement
entered into, now or in the future, by Borrower and Lender in connection with
this Agreement (including any agreements entered into pursuant to Section 6.15).


 


“Material Adverse Change”
means (a) a material adverse change in the business, prospects,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) of Borrower and its Subsidiaries, taken as a whole, (b) a
material impairment of Borrower’s and its Subsidiaries’ ability to perform their
respective obligations under the Loan Documents to which they are parties or of
Lender’s ability to enforce the Obligations or realize upon the Collateral, or (c) a
material impairment of the enforceability or priority of the Lender’s Liens
with respect to the Collateral as a result of an action or failure to act on
the part of Borrower or its Subsidiaries.


 


15

















 


“Maturity Date” has
the meaning set forth in Section 3.4.


 


“Maximum Revolver Amount”
means $25,000,000, unless increased in accordance with the provisions of Section 2.2.


 


“Minimum Cash Requirement”
means Borrower has cash on deposit in a Cash Management Account which is
subject to a Cash Management Agreement, in an amount not less than $40,000,000,
after deduction of an amount equal to 105% of all letters of credit issued
under the Wells Fargo Bank Amended Credit Agreement.


 


“Moody’s” has the
meaning set forth in the definition of Cash Equivalents.


 


“Negotiable Collateral”
means letters of credit, letter of credit rights, instruments, promissory
notes, drafts, documents, and chattel paper (including electronic chattel paper
and tangible chattel paper).


 


“Net Liquidation Value”
means the net recovery value (liquidation value) of Inventory expressed as a
percentage of the cost of such Inventory, as determined by the Lender in its
reasonable discretion based upon the most recent Inventory appraisal available
to the Lender conducted by an appraiser reasonably acceptable to the Lender.


 


“Obligations” means (a) all
loans, Advances, debts, principal, interest (including any interest that, but
for the commencement of an Insolvency Proceeding, would have accrued),
contingent reimbursement obligations with respect to outstanding Letters of
Credit, premiums, liabilities (including all amounts charged to Borrower’s Loan
Account pursuant hereto), obligations (including indemnification obligations),
fees (including the fees provided for in the Fee Letter), charges, costs,
Lender Expenses (including any fees or expenses that, but for the commencement
of an Insolvency Proceeding, would have accrued), lease payments, guaranties,
covenants, and duties of any kind and description owing by Borrower to Lender
pursuant to or evidenced by the Loan Documents, or owing to Wells Fargo or to
any Affiliate of the Lender or of Wells Fargo, (including any amounts owed
pursuant to the Wells Fargo Bank Amended Credit Agreement) and irrespective of
whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
including all interest not paid when due and all Lender Expenses that Borrower
is required to pay or reimburse by the Loan Documents, by law, or otherwise,
and (b) all Bank Product Obligations. 
Any reference in this Agreement or in the Loan Documents to the
Obligations shall include all extensions, modifications, renewals or
alterations thereof, both prior and subsequent to any Insolvency Proceeding.


 


“Officers’ Certificate”
means the representations and warranties of officers form submitted by Lender
to Borrower, together with Borrower’s completed responses to the inquiries set
forth therein, the form and substance of such responses to be satisfactory to
Lender.


 


“Overadvance”
has the meaning set forth in Section 2.5.


 


“Overstock
Real Estate Joinder Documents” means each of the documents, instruments and
agreements required pursuant to Section 6.15 to join Borrower’s
Subsidiary, Overstock.com Real Estate LLC to the Loan Documents.


 


“Participant” has the
meaning set forth in Section 14.1(d).


 


16

















 


“Permanent Reserve”
means a permanent block against Availability in the amount of $5,000,000.00.


 


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


 


“Permitted Dispositions”
means (a) sales or other dispositions of Equipment that is substantially
worn, damaged, or obsolete in the ordinary course of business, (b) sales
of Inventory to buyers in the ordinary course of business, including sales of
Inventory to businesses and other liquidators in bulk or otherwise in the
ordinary course of Borrower’s Business-to-Business operations consistent with
Borrower’s practices as disclosed to Lender as of the Closing Date, (c) the
use or transfer of money or Cash Equivalents in a manner that is not prohibited
by the terms of this Agreement or the other Loan Documents, and (d) the
licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and
other intellectual property rights in the ordinary course of business.


 


“Permitted Holders”
means Patrick Byrne, his Family Members, their respective heirs, legatees, and
Family Trusts, and any Persons owned or controlled by any of the foregoing who
own or control Stock of Borrower.


 


“Permitted Inventory
Acquisition” means Borrower’s purchase or acquisition of (i) all or
substantially all of the Inventory of any Person and (ii) any additional
assets of any such Person reasonably necessary, desirable or convenient in
connection with or in order to facilitate Borrower’s purchase or other
acquisition of such Inventory; provided, that the aggregate amount of
consideration paid by Borrower in connection with any such purchase or acquisition
shall not exceed $50,000,000.


 


“Permitted Investments”
means (a) Investments in cash and Cash Equivalents, (b) investments
in shorter-term, highly liquid instruments such as government (including
treasury), corporate, asset-backed and auction-rate securities and other
similar shorter -term instruments with maturities generally less than three
years or Investments otherwise permitted by Borrower’s Investment Policy set
forth as Schedule P-1, (c) Investments in negotiable instruments
for collection, (d) advances made in connection with purchases of goods or
services in the ordinary course of business, (e) Investments received in
settlement of amounts due to Borrower or any of its Subsidiaries effected in
the ordinary course of business or owing to Borrower or any of its Subsidiaries
as a result of Insolvency Proceedings involving an Account Debtor or upon the
foreclosure or enforcement of any Lien in favor of Borrower or its
Subsidiaries, (f) Investments in the securities held by Borrower and
pledged to secure Borrower’s obligations under the Wells Fargo Bank Amended
Credit Agreement and Investments made with the proceeds of such securities and (g) other
Investments not to exceed an aggregate of $20,000,000 in any calendar year so
long as (x) immediately prior to and after giving effect thereto no
Default or Event of Default shall have occurred and be continuing or will
result therefrom and (y) no Triggering Event Date shall have occurred or
will result therefrom.


 


“Permitted Liens”
means (a) Liens held by Lender, (b) Liens for unpaid taxes that
either (i) are not yet delinquent, or (ii) do not constitute an Event
of Default hereunder and are the subject of Permitted Protests, (c) Liens
set forth on Schedule P-1A, (d) the interests of lessors under
operating leases, (e) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure
Permitted Purchase Money Indebtedness and so long as such Lien attaches only to
the asset purchased or acquired and the proceeds thereof, (f) Liens
arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject
of Permitted Protests, (g) Liens on amounts 


 


17

















 


deposited
in connection with obtaining worker’s compensation or other unemployment insurance,
(h) Liens on amounts deposited in connection with the making or entering
into of bids, tenders, or leases in the ordinary course of business and not in
connection with the borrowing of money, (i) Liens on amounts deposited as
security for surety or appeal bonds in connection with obtaining such bonds in
the ordinary course of business, (j) Liens resulting from any judgment or
award that is not an Event of Default hereunder, and (k) with respect to
any Real Property, easements, rights of way, and zoning restrictions that (i) do
not materially interfere with or impair the use or operation thereof and (ii) are
not Environmental Liens.


 


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


 


“Permitted Purchase Money
Indebtedness” means, as of any date of determination, Purchase Money
Indebtedness incurred after the date of the Existing Loan Agreement in an
aggregate amount outstanding at any one time not in excess of $20,000,000.


 


“Person” means
natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.


 


“Projections” means
Borrower’s forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a basis
consistent with Borrower’s historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.


 


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


 


“Real Property” means
any estates or interests in real property now owned or hereafter acquired by
Borrower or any of its Subsidiaries and the improvements thereto.


 


“Real Property Collateral”
means the Real Property identified on Schedule R-1 and any Real Property
hereafter acquired by Borrower or any of its Subsidiaries.


 


“Receivables Reserves”
means such reserves as may be established from time to time by the Lender in
its Permitted Discretion with respect to the determination of the
collectability in the ordinary course of Eligible Credit Card Receivables,
including, without limitation, dilution reserves.


 


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


 


“Remedial Action” means
all actions taken to (a) clean up, remove, remediate, contain, treat,
monitor, assess, evaluate, or in any way address Hazardous Materials in the
indoor or outdoor 


 


18

















 


environment,
(b) prevent or minimize a release or threatened release of Hazardous
Materials so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment, (c) restore or
reclaim natural resources or the environment, (d) perform any pre-remedial
studies, investigations, or post-remedial operation and maintenance activities,
or (e) conduct any other actions with respect to Hazardous Materials
authorized by Environmental Laws.


 


“Required Availability”
means $5,000,000.00.


 


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


 


“Revolver Increase”
has the meaning set forth in Section 2.2.


 


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


 


“Seasonal Period”
means August 31 through November 28  each
year  or such other 90 consecutive day
period between August 1 and December 31 determined  by Borrower  and
communicated to Lender in writing.


 


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


 


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


 


“Securities Pledge
Agreement” means a securities pledge agreement, in form and substance
satisfactory to Lender, executed and delivered by Borrower or one of its
Subsidiaries to Lender.


 


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


 


“S&P” has the
meaning set forth in the definition of Cash Equivalents.


 


“Specified Litigation”
has the meaning provided in the Transferee Letter.


 


“Stock” means all
shares, options, warrants, interests, participations, or other equivalents
(regardless of how designated) of or in a Person, whether voting or nonvoting,
including common stock, preferred stock, or any other “equity security” (as
such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act), but shall not
include the 3.75% Senior Convertible Notes due 2011 issued by Borrower, as they
may be amended from time to time, or any security issued by Borrower in
exchange for any of such Notes or in connection with any financing of any of
the indebtedness evidenced by any such Notes.


 


 “Subsidiary” of a Person means a
corporation, partnership, limited liability company, or other entity in which
that Person directly or indirectly owns or controls the shares of Stock having


 


19
















 


ordinary
voting power to elect a majority of the board of directors (or appoint other
comparable managers) of such corporation, partnership, limited liability
company, or other entity.


 


“Supporting Obligation”
means a letter-of-credit right or secondary obligation that supports the
payment or performance of an Account, chattel paper, document, General
Intangible, instrument, or Investment Property.


 


“Taxes” has the
meaning set forth in Section 16.5.


 


“Transferee Letter”
means that certain transferee letter, dated as of even date herewith, between
Borrower and Lender.


 


“Triggering Event Date”
means any date upon which Excess Availability shall be less than 50% of the
Borrowing Base.


 


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


 


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


 


“United States” means
the United States of America.


 


“Voidable Transfer”
has the meaning set forth in Section 16.8.


 


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


 


“Wells Fargo Bank Amended
Credit Agreement” means that certain Credit Agreement dated February 13,
2004 entered into by and between the Borrower and Wells Fargo, as the same has
been, and hereafter may be amended and/or restated and in effect from time to
time.


 


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


 


1.3                               Code.  Any terms used in
this Agreement that are defined in the Code shall be construed and defined as
set forth in the Code unless otherwise defined herein; provided, however,
that to the extent that the Code is used to define any term herein and such
term is defined differently in different Articles of the Code, the definition
of such term contained in Article 9 shall govern.


 


1.4                               Construction.  Unless
the context of this Agreement or any other Loan Document clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms “includes” and “including” are not
limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,”
and similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document, as the case may be, as a whole and not
to any particular provision of this Agreement or such other Loan Document, as
the case may be.  Section, subsection,


 


20

















 


clause, schedule, and
exhibit references herein are to this Agreement unless otherwise
specified.  Any reference in this
Agreement or in the other Loan Documents to any agreement, instrument, or
document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein to the satisfaction or
repayment in full of the Obligations shall mean the repayment in full in cash
(or cash collateralization in accordance with the terms hereof) of all
Obligations other than contingent indemnification Obligations and other than
any Bank Product Obligations that, at such time, are allowed by the applicable
Bank Product Provider to remain outstanding and are not required to be repaid
or cash collateralized pursuant to the provisions of this Agreement.  Any reference herein to any Person shall be
construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein
or in the other Loan Documents shall be satisfied by the transmission of a
Record and any Record transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein.


 


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


 


2.                                      LOAN AND TERMS OF PAYMENT.


 


2.1                               Revolver Advances.


 


(a)                                  Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, Lender agrees to make
advances (“Advances”) to Borrower in an amount at any one time
outstanding not to exceed an amount equal to the lesser of (i) the Maximum Revolver Amount less the Letter of Credit Usage, or (ii) the
Borrowing Base less the Letter of
Credit Usage.


 


(b)                                 Anything to the contrary in this Section 2.1
notwithstanding, Lender shall have the right to establish reserves in such
amounts, and with respect to such matters, as Lender in its Permitted
Discretion shall deem necessary or appropriate, against the Borrowing Base,
including but not limited to, reserves with respect to:


 


(i)                                     sums that Borrower is required to pay (such
as taxes, assessments, insurance premiums, or, in the case of leased assets,
rents or other amounts payable under such leases) and has failed to pay under
any Section of this Agreement or any other Loan Document,


 


(ii)                                  amounts owing by Borrower or its Subsidiaries
to any Person to the extent secured by a Lien on, or trust over, any of the
Collateral (other than any existing Permitted Lien set forth on Schedule P-1
which is specifically identified thereon as entitled to have priority over the
Lender’s Liens), which Lien or trust, in the Permitted Discretion of Lender
likely would have a priority superior to the Lender’s Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under
applicable law) in and to such item of the Collateral,


 


(iii)                               Customer Credit Liabilities, and


 


(iv)                              Receivables Reserves.


 


21

















 


Further, the Lender may
establish reserves from time to time in the Lender’s Permitted Discretion with
respect to the determination of the saleability, at retail, of the Eligible
Inventory or which reflect such other factors as affect the market value of the
Eligible Inventory.


 


In addition to the
foregoing, the Lender shall have the right, from and after a request from the
Borrower for the Initial Credit Extension and as provided in Section 2.11(c),
to have the Borrower’s Inventory reappraised by a qualified appraisal company
selected by Lender from time to time for the purpose of re-determining the Net
Liquidation Value of Borrower’s Inventory and, as a result, re-determining the
Borrowing Base.


 


(c)                                  Lender shall have no obligation to make
additional Advances hereunder to the extent such additional Advances would
cause the Revolver Usage to exceed the Maximum Revolver Amount.


 


(d)                                 Amounts borrowed pursuant to this Section 2.1
may be repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.


 


2.2                               Revolver Increase.


 


(a)                                  Provided that no Event of Default has
occurred and is continuing, the Borrower shall have the right at any time
through that date that is the first anniversary of the date of this Agreement,
on not more than three (3) occasions, and upon not less than Five (5) Business
Days prior written notice to the Lender, to elect to increase the Maximum
Revolver Amount by up to $10,000,000.00 in the aggregate, in minimum increments
of $2,500,000.00 (each a “Revolver Increase”) from the amount in effect on the
date of this Agreement ($25,000,000.00) to an amount of up to
$35,000,000.00.  Upon any Revolver
Increase, the Maximum Revolver Amount shall be increased to the elected amount
and shall thereafter be deemed the then existing Maximum Revolver Amount for
all purposes under this Agreement.


 


(b)                                 Increase Conditions.   No Revolver Increase shall become effective
unless and until each of the following conditions have been satisfied:


 


(i)                                     The Borrower shall have paid the Lender the
Revolver Increase Fee as provided in the Fee Letter;


 


(ii)                                  A note will be issued at the Borrower’s
expense to the Lender to reflect the new Maximum Revolver Amount; and


 


(iii)                               The Borrower shall have delivered such other
instruments, documents, and agreements with respect to the Revolver Increase as
the Lender may reasonably have requested.


 


2.3                               Borrowing Procedures and
Settlements.


 


(a)                                  Procedure for
Borrowing.  Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Lender.   Such notice must be received by Lender no
later than 1:00 p.m. (Massachusetts time) on a Business Day specifying (i) the
amount of such Borrowing, and (ii) the requested Funding Date, which shall
be a Business Day.  At Lender’s election,
in lieu of delivering the above-described written request, any Authorized
Person may give Lender telephonic notice of such request by the required
time.  In such circumstances, Borrower agrees
that any such telephonic


 


22

















 


notice
will be confirmed in writing within 24 hours of the giving of such telephonic
notice, but the failure to provide such written confirmation shall not affect
the validity of the request.


 


(b)                                 Making of Advances.  If Lender has received a timely request for a Borrowing in accordance
with the provisions hereof, and subject to the satisfaction of the applicable
terms and conditions set forth herein, Lender shall make the proceeds of such
Advance available to Borrower on the applicable Funding Date by transferring
available funds equal to such proceeds to Borrower’s Designated Account.


 


2.4                               Payments.


 


(a)                                  Payments by Borrower.


 


(i)                                     Except as otherwise expressly provided
herein, all payments by Borrower shall be made to Lender’s Account for the
account of the Lender and shall be made in immediately available funds, no
later than 2:00 p.m. (Massachusetts time) on the date specified
herein.  Any payment received by Lender
later than 2:00 p.m. (Massachusetts time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue until such following Business Day.


 


(b)                                 Apportionment and
Application.


 


(i)                                     Subject to Section 2.4(b)(ii), all
payments shall be remitted to Lender and all such payments, and all proceeds of
Collateral received by Lender, shall be applied as follows:


 


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


 


(B)                                second, to pay any fees then due to Lender under the Loan Documents until
paid in full,


 


(C)                                third, to pay interest due in respect of Advances until paid in full,


 


(D)                               fourth, so long as no Event of Default has occurred and is continuing, and at
Lender’s election (which election Lender agrees will not be made if an
Overadvance would be created thereby), to pay amounts then due and owing by
Borrower or its Subsidiaries in respect of Bank Products, until paid in full,


 


(E)                                 fifth, so long as no Event of Default has occurred and is continuing, to pay
the principal of all Advances until paid in full,


 


(F)                                 sixth, if an Event of Default has occurred and is continuing, ratably (i) to
pay the principal of all Advances until paid in full, (ii) to Lender, to
be held by Lender as cash collateral in an amount up to 105% of the Letter of
Credit Usage until paid in full, and (iii) to Lender, to be held by
Lender, for the benefit of the Bank Product Providers, as cash collateral in an
amount up to the


 


23

















 


amount of the Bank Product Reserve
established prior to the occurrence of, and not in contemplation of, the
subject Event of Default until Borrower’s and its Subsidiaries’ obligations in
respect of Bank Products have been paid in full or the cash collateral amount
has been exhausted,


 


(G)                                seventh, to pay any other Obligations (including the provision of amounts to
Lender, to be held by Lender, for the benefit of the Bank Product Providers, as
cash collateral in an amount up to the amount determined by Lender in its
Permitted Discretion as the amount necessary to secure Borrower’s and its
Subsidiaries’ obligations in respect of Bank Products), and


 


(H)                               eighth, to Borrower (to be wired to the Designated Account) or such other
Person entitled thereto under applicable law.


 


(ii)                                  In each instance, so long as no Event of
Default has occurred and is continuing, this Section 2.4(b) shall
not apply to any payment made by Borrower to Lender and specified by Borrower
to be for the payment of specific Obligations then due and payable (or
prepayable) under any provision of this Agreement.


 


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


 


(iv)                              In the event of a direct conflict between the
priority provisions of this Section 2.4 and other provisions
contained in any other Loan Document, it is the intention of the parties hereto
that such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other.  In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section 2.4 shall control and govern.


 


2.5                               Overadvances.  If,
at any time or for any reason, the amount of Obligations (other than Bank
Product Obligations) owed by Borrower to Lender pursuant to Section 2.1
or Section 2.12 is greater than any of the limitations set forth in
Section 2.1 or Section 2.12, as applicable (an “Overadvance”),
Borrower immediately shall pay to Lender, in cash, the amount of such excess,
which amount shall be used by Lender to reduce the Obligations in accordance
with the priorities set forth in Section 2.4(b).  In addition, Borrower hereby promises to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full as and when due and payable under the terms of this Agreement
and the other Loan Documents.


 


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


 


(a)                                  Interest Rates. 
Except as provided in clause (c) below, all Obligations (except for
undrawn Letters of Credit and except for Bank Product Obligations) that have
been charged to the Loan Account pursuant to the terms hereof shall bear
interest on the Daily Balance thereof as follows (i) if the relevant
Obligation is an Advance that is a LIBOR Rate Loan, at a per annum rate equal
to the


 


24

















 


LIBOR
Rate plus the LIBOR Rate Margin, and (ii) otherwise, at a per annum rate
equal to the Base Rate plus the Base Rate Margin.


 


The foregoing
notwithstanding, at no time shall any portion of the Obligations (other than
Bank Product Obligations) bear interest on the Daily Balance thereof at a per
annum rate less than 3.50%.  To the
extent that interest accrued hereunder at the rate set forth herein would be
less than the foregoing minimum daily rate, the interest rate chargeable
hereunder for such day automatically shall be deemed increased to the minimum
rate.


 


(b)                                 Letter of Credit Fee.  Borrower shall pay Lender a Letter of Credit fee (in addition to the
charges, commissions, fees, and costs set forth in Section 2.12(e))
which shall accrue at a rate equal to (i) the LIBOR Rate Margin times the Daily Balance of the undrawn
amount of all outstanding stand-by Letters of Credit, and (ii) the LIBOR Rate
Margin minus One-half percent (.50%) times the Daily Balance of the undrawn
amount of all outstanding documentary Letters of Credit.


 


(c)                                  Default Rate.  Upon the occurrence and during the continuation of an Event of Default,
at the election of Lender,


 


(i)                                     all Obligations (except for undrawn Letters
of Credit and except for Bank Product Obligations) that have been charged to
the Loan Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to Two percent (2.0%) above the per
annum rate otherwise applicable hereunder, and


 


(ii)                                  the Letter of Credit fee provided for above
shall be increased to Two percent (2.00%) above the per annum rate otherwise
applicable hereunder.


 


(d)                                 Payment.  Except as provided to the contrary in Section 2.11 or Section 2.13(a),
interest, Letter of Credit fees, and all other fees payable hereunder shall be
due and payable, in arrears, on the first day of each month at any time that
Obligations are outstanding or at any time that Lender has an obligation to
extend credit hereunder.  Borrower hereby
authorizes Lender, from time to time without prior notice to Borrower, to
charge all interest and fees (when due and payable), all Lender Expenses (as
and when incurred), all charges, commissions, fees, and costs provided for in Section 2.12(e) (as
and when accrued or incurred), all fees and costs provided for in Section 2.11
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including any amounts due and payable to the
Bank Product Providers in respect of Bank Products up to the amount of the Bank
Product Reserve) to Borrower’s Loan Account, which amounts thereafter shall
constitute Advances hereunder and shall accrue interest at the rate then applicable
to Advances hereunder.  Any interest not
paid when due shall be compounded by being charged to Borrower’s Loan Account
and shall thereafter constitute Advances hereunder and shall accrue interest at
the rate then applicable to Advances that are Base Rate Loans hereunder.


 


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


 


(f)                                    Intent to Limit Charges to
Maximum Lawful Rate.  In no event shall the interest rate or rates
payable under this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final


 


25

















 


determination,
deem applicable.  Borrower and Lender, in
executing and delivering this Agreement, intend legally to agree upon the rate
or rates of interest and manner of payment stated within it; provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate
or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto,
as of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower
in excess of such legal maximum, whenever received, shall be applied to reduce
the principal balance of the Obligations to the extent of such excess.


 


2.7                               Cash Management.


 


(a)                                  Borrower shall and shall cause each of its
Subsidiaries to (i) establish and maintain cash management services of a
type and on terms satisfactory to Lender at one or more of the banks set forth
on Schedule 2.7(a) (each, a “Cash Management Bank”), and
shall request in writing and otherwise take such reasonable steps to ensure
that all of its and its Subsidiaries’ Account Debtors forward payment of the
amounts owed by them directly to such Cash Management Bank, and (ii) deposit
or cause to be deposited promptly, and in any event no later than the first
Business Day after the date of receipt thereof, all of their Collections
(including those sent directly by their Account Debtors to Borrower or one of
its Subsidiaries) into a bank account in Lender’s name (a “Cash Management
Account”) at one of the Cash Management Banks.


 


(b)                                 Each Cash Management Bank shall establish and
maintain Cash Management Agreements with Lender and Borrower, in form and
substance acceptable to Lender.  Each
such Cash Management Agreement shall provide, among other things, that (i) the
Cash Management Bank will comply with any instructions originated by Lender
directing the disposition of the funds in such Cash Management Account without
further consent by Borrower or its Subsidiaries, as applicable, (ii) the
Cash Management Bank has no rights of setoff or recoupment or any other claim
against the applicable Cash Management Account other than for payment of its
service fees and other charges directly related to the administration of such
Cash Management Account and for returned checks or other items of payment, and (iii) at
any time after which Lender so instructs such Cash Management Bank (a “Cash
Sweep Instruction”), it immediately will forward by daily sweep all amounts
in the applicable Cash Management Account to the Lender’s Account until such
time (if any) as Lender, in its sole discretion, notifies it that the Cash
Sweep Instruction is terminated; and (iv) if clause (iii) is not
applicable, then Borrower may direct the Cash Management Bank to immediately
transfer all such amounts to any Deposit Account designated by Borrower for use
by Borrower in accordance with this Agreement. 
Lender may issue a Cash Sweep Instruction immediately upon Borrower’s
request for the Initial Credit Extension.


 


(c)                                  So long as no Default or Event of Default has
occurred and is continuing, Borrower may amend Schedule 2.7(a) to
add or replace a Cash Management Bank or Cash Management Account; provided,
however, that (i) such prospective Cash Management Bank shall be
reasonably satisfactory to Lender, and (ii) prior to the time of the
opening of such Cash Management Account, Borrower (or its Subsidiary, as
applicable) and such prospective Cash Management Bank shall have executed and
delivered to Lender a Cash Management Agreement.  Borrower (or its Subsidiaries, as applicable)
shall close any of its Cash Management Accounts (and establish replacement cash
management accounts in accordance with the foregoing sentence) promptly and in
any event within 30 days of notice from Lender that the creditworthiness of any
Cash Management Bank is no longer acceptable in Lender’s reasonable judgment,
or as promptly as practicable and in any event within 60 days of notice
from Lender that the operating performance, funds transfer, or availability
procedures or performance of the Cash Management Bank with respect to Cash
Management Accounts or Lender’s liability under any Cash Management Agreement
with such Cash Management Bank is no longer acceptable in Lender’s reasonable
judgment.


 


26

















 


(d)                                 The Cash Management Accounts shall be cash
collateral accounts subject to Control Agreements.


 


2.8                               Crediting Payments.  The
receipt of any payment item by Lender (whether from transfers to Lender by the
Cash Management Banks pursuant to the Cash Management Agreements or otherwise)
shall not be considered a payment on account unless such payment item is a wire
transfer of immediately available federal funds made to the Lender’s Account or
unless and until such payment item is honored when presented for payment.  Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly.  Anything to the contrary contained herein notwithstanding,
any payment item shall be deemed received by Lender only if it is received into
the Lender’s Account on a Business Day on or before 2:00 p.m.
(Massachusetts time).  If any payment
item is received into the Lender’s Account on a non-Business Day or after 2:00 p.m.
(Massachusetts time) on a Business Day, it shall be deemed to have been
received by Lender as of the opening of business on the immediately following
Business Day.


 


2.9                               Designated Account.  Lender
is authorized to make the Advances, and Lender is authorized to issue the
Letters of Credit, under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person or,
without instructions, if pursuant to Section 2.6(d).  Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of
receiving the proceeds of the Advances requested by Borrower and made by Lender
hereunder.  Unless otherwise agreed by
Lender and Borrower, any Advance requested by Borrower and made by Lender
hereunder shall be made to the Designated Account.


 


2.10                        Maintenance of Loan Account; Statements of
Obligations.  Lender shall maintain an account
on its books in the name of Borrower (the “Loan Account”) on which Borrower
will be charged with all Advances made by Lender to Borrower or for Borrower’s
account, the Letters of Credit issued by Lender for Borrower’s account, and
with all other payment Obligations hereunder or under the other Loan Documents
(except for Bank Product Obligations), including, accrued interest, fees and
expenses, and Lender Expenses.  In
accordance with Section 2.8, the Loan Account will be credited with
all payments received by Lender from Borrower or for Borrower’s account,
including all amounts received in the Lender’s Account from any Cash Management
Bank.  Lender shall render statements
regarding the Loan Account to Borrower, including principal, interest, fees,
and including an itemization of all charges and expenses constituting Lender
Expenses owing, and such statements, absent manifest error, shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and Lender unless, within 30 days after receipt thereof
by Borrower, Borrower shall deliver to Lender written objection thereto
describing the error or errors contained in any such statements.


 


2.11                        Fees.  Borrower shall pay to
Lender the following fees and charges, which fees and charges shall be
non-refundable when paid (irrespective of whether this Agreement is terminated
thereafter):


 


(a)                                  Unused Line Fee.  On the first day of each month during the
term of this Agreement, commencing from and after the date of the Initial
Credit Extension, an unused line fee in an amount equal to 0.50% per annum times
the result of (i) the Maximum Revolver Amount, less (ii) the sum of (A) the
average Daily Balance of Advances that were outstanding during the immediately
preceding month, plus (B) the average Daily Balance of the Letter of
Credit Usage during the immediately preceding month,


 


(b)                                 Fee Letter Fees.  As and when due and payable under the terms of the Fee Letter, the fees
set forth in the Fee Letter.


 


27

















 


(c)                                  Audit, Appraisal, and
Valuation Charges.  At all times following the date of the Initial Credit Extension, audit,
appraisal, and valuation fees and charges as follows (i) a fee of $850 per
day, per auditor, plus out-of-pocket expenses for each financial audit of
Borrower performed by personnel employed by Lender, (ii) if implemented, a
fee of $850 per day, per applicable individual, plus out-of-pocket expenses for
the establishment of electronic collateral reporting systems, (iii) the
actual charges incurred by Lender for each appraisal of the Collateral, or any
portion thereof, performed by personnel employed by Lender, and (iv) the
actual charges paid or incurred by Lender if it elects to employ the services
of one or more third Persons to perform financial audits of Borrower or its
Subsidiaries, to establish electronic collateral reporting systems, to appraise
the Collateral, or any portion thereof, or to assess Borrower’s or its
Subsidiaries’ business valuation; provided, however, that,
notwithstanding the foregoing, so long as no Event of Default shall have
occurred and be continuing, Borrower shall not be responsible for the charges
incurred in connection with appraisals of the Collateral to the extent that
such appraisals are done more frequently than (x) prior to the occurrence
of a Triggering Event Date, during any fiscal year, (A) with respect to
audits, three (3) times and (B) with respect to appraisals, three (3) times,
and (y) after the occurrence of a Triggering Event Date, during any fiscal
year, (A) with respect to audits, four (4) times and (B) with
respect to appraisals, four (4) times (it being understood and agreed that
the foregoing shall not prohibit in any way Lender from performing, or causing
the performance of, such audits and appraisals more frequently).


 


2.12                        Letters of Credit.


 


(a)                                  Subject to the terms and conditions of this
Agreement, Lender agrees to issue letters of credit for the account of Borrower
(each, an “L/C”) or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an “L/C Undertaking”)
with respect to letters of credit issued by an Underlying Issuer (as of the
date of this Agreement, the prospective Underlying Issuer is to be Wells Fargo)
for the account of Borrower.  Each
request for the issuance of a Letter of Credit, or the amendment, renewal, or
extension of any outstanding Letter of Credit, shall be made in writing by an
Authorized Person and delivered to Lender via hand delivery, telefacsimile, or
other electronic method of transmission reasonably in advance of the requested
date of issuance, amendment, renewal, or extension.   Each such request shall be in form and
substance satisfactory to Lender in its Permitted Discretion and shall specify (i) the
amount of such Letter of Credit, (ii) the date of issuance, amendment,
renewal, or extension of such Letter of Credit, (iii) the expiration of
such Letter of Credit, (iv) the name and address of the beneficiary
thereof (or the beneficiary of the Underlying Letter of Credit, as applicable),
and (v) such other information (including, in the case of an amendment,
renewal, or extension, identification of the outstanding Letter of Credit to be
so amended, renewed, or extended) as shall be necessary to prepare, amend,
renew, or extend such Letter of Credit.  
If requested by Lender, Borrower also shall be an applicant under the
application with respect to any Underlying Letter of Credit that is to be the
subject of an L/C Undertaking.  Lender
shall have no obligation to issue a Letter of Credit if any of the following
would result after giving effect to the issuance of such requested Letter of
Credit:


 


(i)                                     the Letter of Credit Usage would exceed the
Borrowing Base less the
outstanding amount of Advances, or


 


(ii)                                  the Letter of Credit Usage would exceed
$25,000,000, or


 


(iii)                               the Letter of Credit Usage would exceed the
Maximum Revolver Amount less the  outstanding amount of Advances.


 


Borrower and Lender
acknowledge and agree that certain Underlying Letters of Credit may be issued
to support letters of credit that already are outstanding as of the date of the
Existing


 


28

















 


Agreement.  Each Letter of Credit (and corresponding
Underlying Letter of Credit) shall be in form and substance acceptable to
Lender (in the exercise of its Permitted Discretion), including the requirement
that the amounts payable thereunder must be payable in Dollars.  If Lender is obligated to advance funds under
a Letter of Credit, Borrower immediately shall reimburse such L/C Disbursement
to Lender by paying to Lender an amount equal to such L/C Disbursement not
later than 2:00 p.m., Massachusetts time, on the date that such L/C
Disbursement is made, if Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 1:00 p.m., Massachusetts time, on
such date, or, if such notice has not been received by Borrower prior to such
time on such date, then not later than 2:00 p.m., Massachusetts time, on
the Business Day that Borrower receives such notice, if such notice is received
prior to 1:00 p.m., Massachusetts time, on the date of receipt, and, in
the absence of such reimbursement, the L/C Disbursement immediately and
automatically shall be deemed to be an Advance hereunder and, thereafter, shall
bear interest at the rate then applicable to Advances that are Base Rate Loans
under Section 2.6.  To the
extent an L/C Disbursement is deemed to be an Advance hereunder, Borrower’s
obligation to reimburse such L/C Disbursement shall be discharged and replaced
by the resulting Advance.


 


(b)                                 Borrower hereby agrees to indemnify, save,
defend, and hold Lender harmless from any loss, cost, expense, or liability,
and reasonable attorneys fees incurred by Lender arising out of or in
connection with any Letter of Credit; provided, however, that
Borrower shall not be obligated hereunder to indemnify for any loss, cost,
expense, or liability to the extent that it is caused by the gross negligence
or willful misconduct of Lender. 
Borrower agrees to be bound by the Underlying Issuer’s regulations and
interpretations of any Underlying Letter of Credit or by Lender’s
interpretations of any L/C issued by Lender to or for Borrower’s account, even
though this interpretation may be different from Borrower’s own, and Borrower
understands and agrees that Lender shall not be liable for any error,
negligence, or mistake, whether of omission or commission, in following
Borrower’s instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto.  Borrower understands that the L/C
Undertakings may require Lender to indemnify the Underlying Issuer for certain
costs or liabilities arising out of claims by Borrower against such Underlying
Issuer.  Borrower hereby agrees to
indemnify, save, defend, and hold Lender harmless with respect to any loss,
cost, expense (including reasonable attorneys fees), or liability incurred by
Lender under any L/C Undertaking as a result of Lender’s indemnification of any
Underlying Issuer; provided, however, that Borrower shall not be
obligated hereunder to indemnify for any loss, cost, expense, or liability to
the extent that it is caused by the gross negligence or willful misconduct of
Lender.  Borrower hereby acknowledges and
agrees that Lender shall not be responsible for delays, errors, or omissions resulting
from the malfunction of equipment in connection with any Letter of Credit.


 


(c)                                  Borrower hereby authorizes and directs any
Underlying Issuer to deliver to Lender all instruments, documents, and other
writings and property received by such Underlying Issuer pursuant to such
Underlying Letter of Credit and to accept and rely upon Lender’s instructions
with respect to all matters arising in connection with such Underlying Letter
of Credit and the related application.


 


(d)                                 Any and all charges, commissions, fees, and
costs incurred by Lender relating to Underlying Letters of Credit shall be
Lender Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrower to Lender for the account of Lender; it being
acknowledged and agreed by Borrower that the Underlying Issuer also imposes a
schedule of charges for amendments, extensions, drawings, and renewals.


 


(e)                                  If by reason of (i) any change after the
date of this Agreement in any applicable law, treaty, rule, or regulation or
any change in the interpretation or application thereof by any


 


29
















 


Governmental
Authority, or (ii) compliance by the Underlying Issuer or Lender with any
direction, request, or requirement (irrespective of whether having the force of
law) of any Governmental Authority or monetary authority including, Regulation
D of the Federal Reserve Board as from time to time in effect (and any
successor thereto):


 


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


 


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


 


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


 


(f)            In the interest of clarity and for the
avoidance of doubt, it is acknowledged and agreed that in connection with the
determination of Availability, L/C’s and L/C Undertakings under this Agreement
are independent from any letters of credit or similar letter of credit
undertakings that the Borrower may procure through Wells Fargo in accordance
with, and subject to the Wells Fargo Bank Amended Credit Agreement.  Any such letters of credit and/or letter of
credit undertakings procured through the Wells Fargo Bank Amended Credit
Agreement do constitute Obligations secured hereby, but shall not be included
in Letter of Credit Usage hereunder.


 


2.13        LIBOR Option.


 


(a)           Interest and Interest
Payment Dates.  In lieu of having interest charged at the
rate based upon the Base Rate, Borrower shall have the option (the “LIBOR
Option”) to have interest on all or a portion of the Advances be charged at
a rate of interest based upon the LIBOR Rate. 
Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the
last day of the Interest Period applicable thereto (provided that  in the case of any Interest Period for any LIBOR Rate
Loan which is greater than three months, interest on such LIBOR Rate Loan also
shall be payable on the date that is three months after the beginning of such
Interest Period), (ii) the occurrence of an Event of Default in
consequence of which Lender has elected to accelerate the maturity of all or
any portion of the Obligations, or (iii) termination of this Agreement
pursuant to the terms hereof.  On the
last day of each applicable Interest Period, unless Borrower properly has
exercised the LIBOR Option with respect thereto, the interest rate applicable
to such LIBOR Rate Loan automatically shall convert to the rate of interest
then applicable to Base Rate Loans of the same type hereunder.  At any time that an Event of Default has
occurred and is continuing, Borrower no longer shall have the option to request
that Advances bear interest at a rate based upon the LIBOR Rate and Lender
shall have the right to convert the interest rate on all outstanding LIBOR Rate
Loans to the rate then applicable to Base Rate Loans hereunder.


 


30

















 


(b)           LIBOR Election.


 


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


 


(ii)           Each LIBOR Notice shall be irrevocable and binding on Borrower.  In connection with each LIBOR Rate Loan,
Borrower shall indemnify, defend, and hold Lender harmless against any loss,
cost, or expense incurred by Lender as a result of (a) the payment of any
principal of any LIBOR Rate Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b) the
conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, or (c) the failure to borrow, convert, continue
or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice
delivered pursuant hereto (such losses, costs, and expenses, collectively, “Funding
Losses”).  Funding Losses shall be
deemed to equal the amount determined by Lender to be the excess, if any, of (i) the
amount of interest that would have accrued on the principal amount of such
LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have
been applicable thereto, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert, or continue, for the period that would have been the
Interest Period therefor), minus (ii) the amount of interest that would
accrue on such principal amount for such period at the interest rate which
Lender would be offered were it to be offered, at the commencement of such
period, Dollar deposits of a comparable amount and period in the London
interbank market.  A certificate of
Lender delivered to Borrower setting forth any amount or amounts that Lender is
entitled to receive pursuant to this Section 2.13 shall be
conclusive absent manifest error.


 


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


 


(c)           Prepayments.  Borrower may prepay LIBOR Rate Loans at any time; provided, however,
that in the event that LIBOR Rate Loans are prepaid on any date that is not the
last day of the Interest Period applicable thereto, including as a result of
any automatic prepayment through the required application by Lender of proceeds
of Borrower’s and its Subsidiaries’ Collections in accordance with Section 2.4(b) or
for any other reason, including early termination of the term of this Agreement
or acceleration of all or any portion of the Obligations pursuant to the terms
hereof, Borrower shall indemnify, defend, and hold Lender and its Participants
harmless against any and all Funding Losses in accordance with clause (b)(ii) above.


 


31

















 


(d)           Special Provisions Applicable to
LIBOR Rate.


 


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


 


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


 


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


 


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


 


32

















 


was based (which
statement shall be deemed true and correct absent manifest error).  In determining such amount, Lender may use
any reasonable averaging and attribution methods.


 


3.             CONDITIONS; TERM OF AGREEMENT.


 


3.1          Conditions Precedent to the Initial Credit
Extension.  The obligation of Lender to make the Initial
Credit Extension hereunder is subject to the fulfillment, to the satisfaction
of Lender (the making of such Initial Credit Extension by Lender being
conclusively deemed to be its satisfaction or waiver of the following), of each
of the following conditions precedent:


 


(a)           Borrower shall have provided Lender with not
less than forty-five (45) Business Days’ prior written notice of the Borrower’s
intention to request the Initial Credit Extension;


 


(b)           Lender shall have received a Filing
Authorization Letter, duly executed by Borrower, together with appropriate
financing statements duly filed in such office or offices as may be necessary
or, in the opinion of Lender, desirable to perfect the Lender’s Liens in and to
the Collateral, and Lender shall have received searches reflecting the filing
of all such financing statements;


 


(c)           Lender shall have received each of the
following documents (or, in the sole discretion of Lender, ratifications of
such documents delivered in connection with the Existing Loan Agreement), in
form and substance satisfactory to Lender, duly executed, and each such
document shall be in full force and effect:


 


(i)            this Agreement, together with all schedules
hereto,


 


(ii)           the Cash Management Agreements,


 


(iii)          the Control Agreements,


 


(iv)          the Intellectual Property Security Agreement,


 


(v)           the Disbursement Letter,


 


(vi)          the Fee Letter,


 


(vii)         the Officers’ Certificate,


 


(viii)        the Securities Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, as well as Stock powers
with respect thereto endorsed in blank (or equivalent, in the case of any
non-U.S. Subsidiary whose Stock is pledged); and


 


(ix)           the Overstock Real Estate Joinder Documents,


 


(x)            all Loan Documents not expressly referenced
in (i) through (ix) above;


 


(d)           Lender shall have received a certificate from
the Secretary of Borrower (i) attesting to the resolutions of Borrower’s
Board of Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which Borrower is a party, (ii)


 


33

















 


authorizing
specific officers of Borrower to execute the same, and (iii) attesting to
the incumbency and signatures of such specific officers of Borrower;


 


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


 


(f)            Lender shall have received a certificate of
status with respect to Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is in
good standing in such jurisdiction;


 


(g)           Lender shall have received certificates of
status with respect to Borrower, each dated within 30 days of the Closing Date,
such certificates to be issued by the appropriate officer of the jurisdictions
(other than the jurisdiction of organization of Borrower) in which its failure
to be duly qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that Borrower is in good standing in such
jurisdictions;


 


(h)           Lender shall have received a current
certificate of insurance, together with the endorsements thereto, as are
required by Section 6.8, the form and substance of which shall be
satisfactory to Lender;


 


(i)            Lender shall have received a ratification of
the Intercreditor Agreement with Wells Fargo Bank, National Association;


 


(j)            Lender shall have received Collateral Access
Agreements (or, in the sole discretion of Lender, ratifications of such
Collateral Access Agreements delivered in connection with the Existing Loan
Agreement) covering all locations required by Lender where any Inventory of
Borrower is located including, but not limited to, with respect to the
following locations: (i) 6350 South 3000 East, Salt Lake City, UT 84121 (Suite 100,
Suites 200, 300 and 400), (ii) 6344 South 3000 East, Salt Lake City, Utah
84121, (iii) 955 South 3800 West, Salt Lake City, UT 84104, (iv) 1545
South 4800 West, Salt Lake City, Utah 84104, (v) 3949 South 200 East, Suite B1,
Salt Lake City, Utah 84104 and (vi) 1862 South 4800 West, Salt Lake City,
Utah 84104;


 


(k)           Lender shall have received an opinion of
Borrower’s counsel in form and substance satisfactory to Lender;


 


(l)            Lender shall have received satisfactory
evidence (including a certificate of the chief financial officer of Borrower)
that all tax returns required to be filed by Borrower and its Subsidiaries have
been timely filed and all taxes upon Borrower and its Subsidiaries or their
properties, assets, income, and franchises (including Real Property taxes,
sales taxes, and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;


 


(m)          Borrower shall have the Required Availability
after giving effect to the Initial Credit Extension hereunder and the payment
of all fees, costs and expenses required to be paid by Borrower on the Closing
Date under this Agreement or the other Loan Documents;


 


(n)           Lender shall have completed its business,
legal, and collateral due diligence, including, but not limited to (i) a
collateral audit and review of Borrower’s and its Subsidiaries’ books and
records and verification of Borrower’s representations and warranties to Lender,
the results of which shall be satisfactory to Lender, (ii) an inspection
of each of the locations where Borrower’s and its


 


34

















 


Subsidiaries’
Inventory is located, the results of which shall be satisfactory to Lender and (iii) a
legal review of all fulfillment partner contracts or similar agreements and
other contracts material to Borrower’s operation, the results of which shall be
satisfactory to Lender (all such due diligence to be current as of the Closing
Date);


 


(o)           Lender shall have received Borrower’s
projections of liquidity for the 12 month period immediately following the
Closing Date, which projections are satisfactory to Lender in its sole
discretion;


 


(p)           Lender shall have received completed reference
checks with respect to Borrower’s senior management, the results of which are
satisfactory to Lender in its sole discretion;


 


(q)           Lender shall have received a current
appraisal of the Net Liquidation Value applicable to Borrower’s and its
Subsidiaries’ Inventory, the results of which shall be satisfactory to Lender;


 


(r)            Lender shall have received Uniform Commercial
Code, tax lien, and litigation searches, the results of which shall be
satisfactory to Lender;


 


(s)           Lender shall have reviewed and shall be
satisfied with all material agreements and customer contracts of Borrower,
including fulfillment partner agreements;


 


(t)            Lender shall have received Borrower’s Closing
Date Business Plan, the results of which shall be satisfactory to Lender;


 


(u)           Borrower shall have paid (i) all Lender
Expenses incurred in connection with the transactions evidenced by this
Agreement and (ii) all fees then due under the Fee Letter;


 


(v)           Borrower and each of its Subsidiaries shall
have received all licenses, approvals or evidence of other actions required by
any Governmental Authority in connection with the execution and delivery by
Borrower or its Subsidiaries of the Loan Documents or with the consummation of
the transactions contemplated thereby; and


 


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


 


It
is expressly acknowledged and agreed by Borrower that Borrower has not, as of
the date of this Agreement, requested the Initial Credit Extension hereunder.


 


3.2          Conditions Subsequent to the Initial Credit
Extension.  The obligation of Lender to
continue to make Advances (or otherwise extend credit hereunder) is subject to
the fulfillment, on or before the date applicable thereto, of each of the
conditions subsequent set forth in a certain post-closing letter agreement
executed in connection herewith dated as of the date hereof (the failure by
Borrower to so perform or cause to be performed constituting an Event of
Default).


 


3.3          Conditions Precedent to all Extensions of
Credit.  The obligation of Lender to make
any Advances hereunder at any time (or to extend any other credit hereunder)
shall be subject to the following conditions precedent:


 


35

















 


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


 


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


 


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


 


(d)           no Material Adverse Change shall have
occurred.


 


3.4            Term.  This Agreement shall
continue in full force and effect for a term ending on January 6, 2011
(the “Maturity Date”).  The
foregoing notwithstanding, Lender shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence of an Event of Default, and Borrower shall have the right to
terminate this Agreement in accordance with the provisions of Section 3.6.


 


3.5            Effect of Termination.  On
the date of termination of this Agreement, all Obligations (including
contingent reimbursement obligations of Borrower with respect to outstanding
Letters of Credit and including all Bank Product Obligations) immediately shall
become due and payable without notice or demand (including (a) either (i) providing
cash collateral to be held by Lender in an amount equal to 105% of the Letter
of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to Lender, and (b) providing cash collateral (in an amount
determined by Lender as sufficient to satisfy the reasonably estimated credit
exposure) to be held by Lender for the benefit of the Bank Product Providers
with respect to the Bank Product Obligations). 
No termination of this Agreement, however, shall relieve or discharge
Borrower or its Subsidiaries of their duties, Obligations, or covenants
hereunder or under any other Loan Documents and the Lender’s Liens in the
Collateral shall remain in effect until all Obligations have been paid in full
and Lender’s obligations to provide additional credit hereunder have been
terminated.  When this Agreement has been
terminated and all of the Obligations have been paid in full and Lender’s
obligations to provide additional credit under the Loan Documents have been
terminated irrevocably, Lender will, at Borrower’s sole expense, execute and
deliver any termination statements, lien releases, mortgage releases,
re-assignments of trademarks, discharges of security interests, and other
similar discharge or release documents (and, if applicable, in recordable form)
as are reasonably necessary to release, as of record, the Lender’s Liens and
all notices of security interests and liens previously filed by Lender with
respect to the Obligations. 
Notwithstanding the foregoing, Borrower’s termination of this Agreement
shall not require Borrower to terminate the Wells Fargo Bank Amended Credit
Agreement or any agreement related thereto or otherwise affect any letter of
credit issued thereunder.


 


3.6            Early
Termination by Borrower. 
Borrower has the option, at any time upon prior written notice to Lender
(the number of prior days to be agreed to separately between Borrower and
Lender), to terminate this Agreement by paying to Lender, in cash, the
Obligations (including (a) either (i) providing cash collateral to be
held by Lender in an amount equal to 105% of the Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to Lender, and (b) providing
cash collateral (in an amount determined by Lender as sufficient to satisfy the
reasonably estimated credit exposure) to be held by Lender for the benefit of
the Bank Product Providers with respect to the Bank Product Obligations), in
full, together with the Applicable Prepayment Premium.  If Borrower has sent a


 


36

















 


notice of termination
pursuant to the provisions of this Section, then Lender’s obligations to extend
credit hereunder shall terminate and Borrower shall be obligated to repay the
Obligations (including (a) either (i) providing cash collateral to be
held by Lender in an amount equal to 105% of the Letter of Credit Usage, or (ii) causing
the original Letters of Credit to be returned to Lender, and (b) providing cash
collateral (in an amount determined by Lender as sufficient to satisfy the
reasonably estimated credit exposure) to be held by Lender for the benefit of
the Bank Product Providers with respect to the Bank Product Obligations), in
full, together with the Applicable Prepayment Premium, on the date set forth as
the date of termination of this Agreement in such notice.  In the event of the termination of this
Agreement and repayment of the Obligations at any time prior to the Maturity
Date, for any of the following reasons: (a) termination upon the election
of Lender to terminate after the occurrence and during the continuation of an
Event of Default, (b) foreclosure and sale of Collateral, (c) sale of
the Collateral in any Insolvency Proceeding, or (d) restructure,
reorganization, or compromise of the Obligations by the confirmation of a plan
of reorganization or any other plan of compromise, restructure, or arrangement
in any Insolvency Proceeding; then, in view of the impracticability and extreme
difficulty of ascertaining the actual amount of damages to Lender or profits
lost by Lender as a result of such early termination, and by mutual agreement
of the parties as to a reasonable estimation and calculation of the lost
profits or damages of Lender, Borrower shall pay the Applicable Prepayment
Premium to Lender, measured as of the date of such termination.


 


4.             CREATION OF SECURITY INTEREST.


 


4.1          Grant of Security Interest.  Borrower
hereby grants to Lender, for the benefit of Lender and the Bank Product
Providers, a continuing security interest in all of its right, title, and
interest in all currently existing and hereafter acquired or arising Borrower
Collateral in order to secure prompt repayment of any and all of the
Obligations in accordance with the terms and conditions of the Loan Documents
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents.  The
Lender’s Liens in and to the Borrower Collateral shall attach to all Borrower
Collateral without further act on the part of Lender or Borrower.  Anything contained in this Agreement or any
other Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrower and its Subsidiaries have no authority, express or
implied, to dispose of any item or portion of the Collateral.


 


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


 


4.3          Collection of Accounts, General Intangibles,
and Negotiable Collateral.  At any time after the occurrence
and during the continuation of an Event of Default, Lender or Lender’s designee
may (a) notify Account Debtors of Borrower that Borrower’s Accounts,
chattel paper, or General Intangibles have been assigned to Lender or that
Lender has a security interest therein, or (b) collect Borrower’s Accounts,
chattel paper, or General Intangibles directly and charge the collection costs
and expenses to the Loan Account. 
Borrower agrees that it will hold in trust for Lender, as Lender’s
trustee, any of its or its Subsidiaries’ Collections that it receives and
immediately will deliver such Collections to Lender or a Cash Management Bank
in their original form as received by Borrower or its Subsidiaries.


 


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4.4           Filing of Financing
Statements; Commercial Tort Claims; Delivery of Additional Documentation
Required.


 


(a)           Borrower authorizes Lender to file any
financing statement necessary or desirable to effectuate the transactions
contemplated by the Loan Documents, and any continuation statement or amendment
with respect thereto, in any appropriate filing office without the signature of
Borrower where permitted by applicable law. Borrower hereby ratifies the filing
of any financing statement filed without the signature of Borrower prior to the
date hereof.  Such financing statements
may describe the Borrower Collateral in the same manner as described herein or
may contain an indication or description of collateral that describes such
property in any other manner as Lender may determine is necessary, advisable or
prudent to ensure the perfection of the security interest in the Borrower Collateral
granted to Lender herein, including describing such property as “all assets,
whether now owned or hereafter acquired” or “all personal property, whether now
owned or hereafter acquired.”


 


(b)           If Borrower or its Subsidiaries acquire any
commercial tort claims after the date hereof, Borrower shall promptly (but in
any event within three (3) Business Days after such acquisition) deliver
to Lender a written description of such commercial tort claim and shall deliver
a written agreement, in form and substance satisfactory to Lender, pursuant to
which Borrower or its Subsidiary, as applicable, shall grant a perfected
security interest in all of its right, title and interest in and to such
commercial tort claim to Lender, as security for the Obligations (a “Commercial
Tort Claim Assignment”) and, if Lender reasonably determines that
perfection or priority of Lender’s security interest is dependent on or
enhanced by filing Commercial Tort Claim Assignments, Borrower, promptly after
the request of Lender, shall file all such Commercial Tort Claim Assignments
with the court as appropriate.


 


(c)           At any time upon the request of Lender,
Borrower shall execute and deliver to Lender, and shall cause its Subsidiaries
to execute and deliver to Lender, any and all financing statements, original
financing statements in lieu of continuation statements, amendments to
financing statements, fixture filings, security agreements, pledges, mortgages,
surveys, assignments, Commercial Tort Claim Assignments, endorsements of certificates
of title, and all other documents (collectively, the “Additional Documents”)
that Lender may request in its Permitted Discretion, in form and substance
satisfactory to Lender, to create, perfect, and continue perfected or to better
perfect the Lender’s Liens in the assets of Borrower and its Subsidiaries
(whether now owned or hereafter arising or acquired, tangible or intangible,
real or personal), to create and perfect Liens in favor of Lender in any owned
Real Property acquired after the Closing Date, and in order to fully consummate
all of the transactions contemplated hereby and under the other Loan
Documents.  To the maximum extent
permitted by applicable law, Borrower authorizes Lender to execute any such Additional
Documents in Borrower’s name and authorizes Lender to file such executed
Additional Documents in any appropriate filing office.  In addition, on such periodic basis as Lender
shall require, Borrower shall (i) provide Lender with a report of all new
material patentable, copyrightable, or trademarkable materials acquired or
generated by Borrower or its Subsidiaries during the prior period, (ii) cause
all material patents, copyrights, and trademarks acquired or generated by
Borrower or its Subsidiaries that are not already the subject of a registration
with the appropriate filing office (or an application therefor diligently
prosecuted) to be registered with such appropriate filing office in a manner
sufficient to impart constructive notice of Borrower’s or the applicable
Subsidiary’s ownership thereof, and (iii) cause to be prepared, executed,
and delivered to Lender supplemental schedules to the applicable Loan Documents
to identify such patents, copyrights, and trademarks as being subject to the
security interests created thereunder; provided, however, that
neither Borrower nor any of its Subsidiaries shall register with the U.S.
Copyright Office any unregistered copyrights (whether in existence on the
Closing Date or thereafter acquired, arising, or developed) unless (i) the
Borrower provides Lender with written notice of its intent to register such
copyrights not less than five (5) Business Days prior to the date of the
proposed registration, and (ii) prior to such registration, the applicable
Person


 


38

















 


executes
and delivers to Lender an intellectual property security agreement in form and
substance satisfactory to Lender, supplemental schedules to any existing
intellectual property security agreement, or such other documentation as Lender
reasonably deems necessary in order to perfect and continue perfected Lender’s
Liens on such copyrights following such registration.


 


4.5          Power of Attorney.  Borrower
hereby irrevocably makes, constitutes, and appoints Lender (and any of Lender’s
officers, employees, or agents designated by Lender) as Borrower’s true and
lawful attorney, with power to (a) at any time that a Default or Event of
Default shall have occurred and be continuing or a Triggering Event Date shall
have occurred, if Borrower refuses to, or fails timely to execute and deliver
any of the documents described in Section 4.4, sign the name of
Borrower on any of the documents described in Section 4.4, (b) at
any time that an Event of Default has occurred and is continuing, sign Borrower’s
name on any invoice or bill of lading relating to the Borrower Collateral,
drafts against Account Debtors, or notices to Account Debtors, (c) send
requests for verification of Borrower’s or its Subsidiaries’ Accounts, (d) at
any time that a Cash Sweep Instruction is in effect, endorse Borrower’s name on
any of its payment items (including all of its Collections) that may come into
Lender’s possession, (e) at any time that an Event of Default has occurred
and is continuing, make, settle, and adjust all claims under Borrower’s
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (f) at any time that an Event of Default
has occurred and is continuing, settle and adjust disputes and claims
respecting Borrower’s or its Subsidiaries’ Accounts, chattel paper, or General
Intangibles directly with Account Debtors, for amounts and upon terms that
Lender determines to be reasonable, and Lender may cause to be executed and
delivered any documents and releases that Lender determines to be
necessary.  The appointment of Lender as
Borrower’s attorney, and each and every one of its rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully and finally repaid and performed and Lender’s obligations to extend
credit hereunder are terminated.


 


4.6          Right to Inspect.  Lender
(through any of its officers, employees, or agents) shall have the right, from
time to time hereafter to inspect the Books and make copies or abstracts thereof
and to check, test, and appraise the Collateral, or any portion thereof, in
order to verify Borrower’s and its Subsidiaries’ financial condition or the
amount, quality, value, condition of, or any other matter relating to, the
Collateral.


 


4.7          Control Agreements.  Borrower
agrees that it will and will cause its Subsidiaries to take any or all
reasonable steps in order for Lender to obtain control in accordance with
Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the Code with respect to
(subject to the proviso contained in Section 7.12) all of its or
their Securities Accounts, Deposit Accounts, electronic chattel paper,
Investment Property, and letter-of-credit rights.  Upon the occurrence and during the
continuance of a Default or Event of Default, Lender may notify any bank or
securities intermediary to liquidate the applicable Deposit Account or
Securities Account or any related Investment Property maintained or held
thereby and remit the proceeds thereof to the Lender’s Account.


 


5.             REPRESENTATIONS AND
WARRANTIES.


 


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


 


39
















 


avoidance
of doubt, nothing herein shall constitute a representation or warranty by
Borrower to any of the following prior to the Closing Date):


 


5.1          No Encumbrances.  Borrower
and its Subsidiaries have good and indefeasible title to, or a valid leasehold
interest in, their personal property assets and good and marketable title to,
or a valid leasehold interest in, their Real Property, in each case, free and
clear of Liens except for Permitted Liens.


 


5.2          Eligible Inventory.  As
to each item of Inventory that is identified by Borrower as Eligible Inventory
in a borrowing base report submitted to Lender, such Inventory is, to the
knowledge of Borrower, and subject to the provisions of the following sentence,
(a) of good and merchantable quality, free from known defects, and (b) not
excluded as ineligible by virtue of one or more of the excluding criteria set
forth in the definition of Eligible Inventory. 
Lender acknowledges that in view of the magnitude of Borrower’s
operations and the nature of Borrower’s business, a portion of the Inventory
identified by Borrower as Eligible Inventory in a borrowing base report
submitted to Lender may be damaged or may otherwise not be of good and
merchantable quality, and that Borrower has no practicable way to identify such
items of Inventory, and that Borrower shall not be deemed to have breached this
representation solely because of the foregoing.


 


5.3          Equipment.  All of the
Equipment of Borrower and its Subsidiaries is used or held for use in their
business and is fit for such purposes, subject to wear and tear and downtime
and subject to replacement or upgrades in connection with the expansion of
Borrower’s business from time to time.


 


5.4          Location of Inventory and Equipment.  The
Inventory and Equipment of Borrower and its Subsidiaries are not stored with a
bailee, warehouseman, or similar party (other than third party logistics
providers such as Ozburn-Hessey Logistics, LLC) and are located only at, or
in-transit between, the locations identified on Schedule 5.4 (as such
Schedule may be updated pursuant to Section 6.9).


 


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


 


5.6          State of Incorporation; Location of Chief Executive
Office; FEIN; Organizational Identification Number; Commercial Tort Claims.


 


(a)           The jurisdiction of
organization of Borrower and each of its Subsidiaries is set forth on Schedule
5.6(a).


 


(b)           The chief executive
office of Borrower and each of its Subsidiaries is located at the address
indicated on Schedule 5.6 (b) (as such Schedule may be updated
pursuant to Section 6.9).


 


(c)           Borrower’s and each
of its Subsidiaries’ FEIN and organizational identification numbers, if any,
are identified on Schedule 5.6(c).


 


(d)           As of the Closing
Date, Borrower and its Subsidiaries do not hold any commercial tort claims,
except as set forth on Schedule 5.6(d).


 


5.7          Due Organization and
Qualification; Subsidiaries.


 


(a)           Borrower is duly
organized and existing and in good standing under the laws of the jurisdiction
of its organization and qualified to do business in any state where the failure
to be so qualified reasonably could be expected to result in a Material Adverse
Change.


 


40

















 


(b)           Set forth on Schedule
5.7(b), is a complete and accurate description of the authorized capital
Stock of Borrower, by class, and, as of the date or dates set forth in such
Schedule, a description of the number of shares of each such class that are
issued and outstanding.  Other than as
described on Schedule 5.7(b), there are no subscriptions, options,
warrants, or calls relating to any shares of Borrower’s capital Stock,
including any right of conversion or exchange under any outstanding security or
other instrument.  Other than as
described on Schedule 5.7(b), Borrower is not subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable
for any of its capital Stock.


 


(c)           Set forth on Schedule
5.7(c), is a complete and accurate list of Borrower’s direct and indirect
Subsidiaries, showing:  (i) the
jurisdiction of their organization, (ii) the number of shares of each
class of common and preferred Stock authorized for each of such Subsidiaries,
and (iii) the number and the percentage of the outstanding shares of each
such class owned directly or indirectly by Borrower.  All of the outstanding capital Stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.


 


(d)           Except as set forth
on Schedule 5.7(c), there are no subscriptions, options, warrants, or
calls relating to any shares of Borrower’s Subsidiaries’ capital Stock,
including any right of conversion or exchange under any outstanding security or
other instrument.  Neither Borrower nor
any of its Subsidiaries is subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of Borrower’s
Subsidiaries’ capital Stock or any security convertible into or exchangeable
for any such capital Stock.


 


5.8          Due Authorization; No Conflict.


 


(a)           The execution,
delivery, and performance by Borrower of this Agreement and the other Loan
Documents to which it is a party have been duly authorized by all necessary
action on the part of Borrower.


 


(b)           The execution,
delivery, and performance by Borrower of this Agreement and the other Loan
Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation of Borrower, (iii) result
in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of Borrower, other than Permitted Liens, or (iv) require
any approval of Borrower’s interest holders or any approval or consent of any
Person under any material contractual obligation of Borrower, other than
consents or approvals that have been obtained and that are still in force and
effect.


 


(c)           Other than (i) the
filing of financing statements, and (ii) any recording of the Intellectual
Property Security Agreement in the United States Copyright Office or the
recording of the Intellectual Property Security Agreement in the United States
Patent and Trademark Office, the execution, delivery, and performance by
Borrower of this Agreement and the other Loan Documents to which Borrower is a
party do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any Governmental Authority, other
than consents or approvals that have been obtained and that are still in force
and effect.


 


(d)           This Agreement and
the other Loan Documents to which Borrower is a party, and all other documents
contemplated hereby and thereby, when executed and delivered by Borrower will
be


 


41

















 


the
legally valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as enforcement may be limited
by equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws relating to or limiting creditors’ rights
generally.


 


(e)           The Lender’s Liens
are validly created, perfected, and first priority Liens, subject only to
Permitted Liens.


 


(f)            The execution,
delivery, and performance by each Guarantor of the Loan Documents to which it
is a party have been duly authorized by all necessary action on the part of
such Guarantor.


 


(g)           The execution,
delivery, and performance by each Guarantor of the Loan Documents to which it
is a party do not and will not (i) violate any provision of federal,
state, or local law or regulation applicable to such Guarantor, the Governing
Documents of such Guarantor, or any order, judgment, or decree of any court or
other Governmental Authority binding on such Guarantor, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation of such Guarantor, (iii) result
in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of such Guarantor, other than Permitted Liens, or
(iv) require any approval of such Guarantor’s interest holders or any
approval or consent of any Person under any material contractual obligation of
such Guarantor, other than consents or approvals that have been obtained and
that are still in force and effect.


 


(h)           Other than (i) the
filing of financing statements, and (ii) any recording of the Intellectual
Property Security Agreement in the United States Copyright Office or the
recording of the Intellectual Property Security Agreement in the United States
Patent and Trademark Office, the execution, delivery, and performance by each
Guarantor of the Loan Documents to which such Guarantor is a party do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any Governmental Authority other than consents or
approvals that have been obtained and that are still in force and effect.


 


(i)            The Loan Documents
to which each Guarantor is a party, and all other documents contemplated hereby
and thereby, when executed and delivered by such Guarantor will be the legally
valid and binding obligations of such Guarantor, enforceable against such
Guarantor in accordance with their respective terms, except as enforcement may
be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors’
rights generally.


 


5.9          Litigation.  Other than
those matters disclosed on Schedule 5.9 and other than matters existing
on the Closing Date or arising hereafter that reasonably could not be expected
to result in a Material Adverse Change, there are no actions, suits, or
proceedings pending or, to the best knowledge of Borrower, threatened against
Borrower or any of its Subsidiaries.


 


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


 


42

















 


5.11        Fraudulent Transfer.


 


(a)           Borrower is Solvent.


 


(b)           No transfer of property
is being made by Borrower or its Subsidiaries and no obligation is being
incurred by Borrower or its Subsidiaries in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrower or its
Subsidiaries.


 


5.12        Employee Benefits.  None
of Borrower, any of its Subsidiaries, or any of their ERISA Affiliates
maintains or contributes to any Benefit Plan.


 


5.13        Environmental Condition.  Except
as set forth on Schedule 5.13, (a) to Borrower’s knowledge, none of
Borrower’s or its Subsidiaries’ properties or assets has ever been used by
Borrower, its Subsidiaries, or by previous owners or operators in the disposal
of, or to produce, store, handle, treat, release, or transport, any Hazardous
Materials, where such use, production, storage, handling, treatment, release or
transport was in violation, in any material respect, of any applicable
Environmental Law, (b) to Borrower’s knowledge, none of Borrower’s or its
Subsidiaries’ properties or assets has ever been designated or identified in
any manner pursuant to any environmental protection statute as a Hazardous
Materials disposal site, (c) neither Borrower nor any of its Subsidiaries
has received notice that a Lien arising under any Environmental Law has
attached to any revenues or to any Real Property owned or operated by Borrower
or its Subsidiaries, and (d) neither Borrower nor its Subsidiaries has
received a summons, citation, notice, or directive from the United States
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by Borrower or its Subsidiaries
resulting in the releasing or disposing of Hazardous Materials into the environment.


 


5.14        Brokerage Fees.  Neither Borrower nor any of its Subsidiaries
has utilized the services of any broker or finder in connection with Borrower’s
obtaining financing from Lender under this Agreement and no brokerage
commission or finders fee is payable by Borrower or its Subsidiaries in
connection herewith.


 


5.15        Intellectual
Property.


 


(a)           Each of Borrower and
its Subsidiaries owns, or holds licenses in, all material Intellectual Property
Rights.  Attached hereto as Schedule
5.15(a) (which Borrower may amend from time to time provided that
notice and copies thereof are promptly provided to Lender) is a true, correct,
and complete listing of all patents, patent applications, trademarks, trademark
applications and copyrights (including copyright registrations and
applications) as to which Borrower is the owner or is an exclusive licensee.


 


(b)           Borrower represents
and warrants that it and its Subsidiaries have taken all actions reasonably
necessary to protect material Borrower Intellectual Property Rights, including (i) protecting
the secrecy and confidentiality of Borrower’s and its Subsidiaries’
confidential information and trade secrets by having and enforcing a policy
requiring all current and former employees, consultants, licensees, vendors and
contractors to execute appropriate confidentiality and invention assignment
agreements; (ii) taking all actions reasonably necessary to ensure that no
trade secret of Borrower or its Subsidiaries falls or has fallen into the
public domain; and (iii) protecting the secrecy and confidentiality of the
source code of all computer software programs and applications of which
Borrower and its Subsidiaries is the owner or licensee by  having
and enforcing a policy requiring any licensees of such source code to enter into
license agreements with appropriate use and non-disclosure restrictions.


 


43

















 


Borrower
and its Subsidiaries have only entered into such source code licenses as set
forth in Schedule 5.15(b).


 


(c)           Except as set forth
on Schedule 5.15(c), no past or present employee or contractor of
Borrower or its Subsidiaries has any ownership interest, license, permission or
other right in or to any material Borrower Intellectual Property Rights.


 


(d)           Borrower and its
Subsidiaries have made all necessary payments, filings and recordations to
protect and maintain their interest in material Borrower Intellectual Property
Rights in the United States or any other jurisdiction, including (i) making
all necessary registration, maintenance, and renewal fee payments; and (ii) filing
all necessary documents, including all applications for registration of
copyrights, trademarks, and patents.


 


(e)           No claim has been
made and is continuing or threatened that the use by Borrower or its Subsidiaries
of any item of General Intangibles is invalid or unenforceable or that the use
by Borrower or its Subsidiaries of any General Intangibles does or may violate
the rights of any Person, other than any such claim which would not cause a
Material Adverse Change. To the best of Borrower’s knowledge, there is
currently no infringement or unauthorized use of any item of Intellectual
Property Rights contained on Schedule 5.15(a).


 


(f)            Borrower and its
Subsidiaries have filed applications and taken any and all other actions
reasonably necessary to register all material copyrights, in good faith in
accordance with the procedures and regulations of the U.S. Copyright Office in
a manner sufficient to impart constructive notice of Borrower’s and its
Subsidiaries’ ownership thereof.


 


5.16        Leases.  Borrower and
its Subsidiaries enjoy peaceful and undisturbed possession under all leases
material to their business and to which they are parties or under which they
are operating, and all of such leases are valid and subsisting and no material
default by Borrower or its Subsidiaries (or, to the knowledge of Borrower or
its Subsidiaries, by the lessors thereunder) exists under any of them.


 


5.17        Deposit Accounts and Securities Accounts.  Set
forth on Schedule 5.17 is a listing of all of Borrower’s and its
Subsidiaries’ Deposit Accounts and Securities Accounts, including, with respect
to each bank or securities intermediary (a) the name and address of such
Person, and (b) the account numbers of the Deposit Accounts or Securities
Accounts maintained with such Person.


 


5.18        Complete Disclosure.  All
representations and warranties (taken as a whole) of Borrower set forth in this
Agreement (including all information contained in the Schedules hereto or in
the other Loan Documents) are true and accurate in all material respects on or
as of the date or dates as of which such representations and warranties are
made and do not omit to state any fact necessary to make such information
(taken as a whole) not misleading in any material respect in light of the
circumstances under which such representations and warranties were made.  On the Closing Date, the Closing Date
Business Plan represents, and as of the date on which any other Projections are
delivered to Lender, such additional Projections represent Borrower’s good
faith estimate of its and its Subsidiaries’ future performance for the periods
covered thereby, it being understood and agreed that Projections and plans are
estimates, and that actual results are likely to vary from those projected,
planned or estimated.


 


5.19        Indebtedness.  Set forth on Schedule 5.19 is a true
and complete list of all Indebtedness of Borrower and its Subsidiaries
outstanding immediately prior to the Closing Date that is to remain outstanding
after the Closing Date and such Schedule accurately reflects the aggregate
principal amount of such Indebtedness and describes the principal terms
thereof.


 


44

















 


5.20        [Intentionally
Omitted].


 


5.21        Taxes and
Payments.  Borrower and
its Subsidiaries have filed all federal and state income tax returns and all
other material tax returns, domestic and foreign, required to be filed by them
and have paid all taxes and assessments payable by them which have become due,
except for those contested in good faith and adequately disclosed and fully
provided for on the financial statements of Borrower and its Subsidiaries, in
accordance with GAAP and for which Borrower and its Subsidiaries, as
applicable, have provided adequate reserves (in the good faith judgment of the
management of Borrower and its Subsidiaries). 
Borrower and its Subsidiaries have provided adequate reserves (in the
good faith judgment of the management of Borrower and its Subsidiaries) for the
payment of all federal, state, local and foreign income taxes applicable for
the current fiscal year to date.  Except
as set forth on Schedule 5.21, there is no action, suit, proceeding,
investigation, audit, or claim now pending or, to the knowledge of Borrower
threatened, by any authority regarding any taxes relating to Borrower or its
Subsidiaries that could reasonably be expected to result in a material
liability to Borrower or its Subsidiaries. 
Except as set forth on Schedule 5.21, as of the Closing Date,
none of the Borrower or its Subsidiaries have entered into an agreement or
waiver or been requested to enter into an agreement or waiver extending any
statute of limitations relating to the payment or collection of taxes of
Borrower or its Subsidiaries, or is aware of any circumstances that would cause
the taxable years or other taxable periods of Borrower or its Subsidiaries not
to be subject to the normally applicable statute of limitations.


 


6.             AFFIRMATIVE
COVENANTS.


 


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


 


6.1          Accounting System.  Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Lender. 
Borrower also shall keep a reporting system that shows all additions,
sales, claims, returns, and allowances with respect to its and its Subsidiaries’
sales.


 


6.2          Collateral Reporting.  Provide Lender with the following
documents at the following times in form satisfactory to Lender:


 


	
  Monthly (not later than
  the 10th day of each month), except as provided below, a report:

  	
   

  	
  (a)           a borrowing base certificate (in a
  form approved by Lender) and including, without limitation, the balance of
  Borrower’s cash deposits as of the end of the immediately preceding month.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)           Itemizing all Inventory specifying
  the cost and the retail value, as of the end of the prior month, of the
  Borrower’s and its Subsidiaries’ Inventory, by category, with additional
  detail showing additions to and deletions therefrom, together with a
  reconciliation to the respective month-end general ledgers and financial
  statements.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)           Setting forth net sales for the
  prior month.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)           Setting forth the cost of goods
  sold for the prior month,

  



 


45

















 


	
   

  	
   

  	
  receipts or purchases.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)           Setting forth a comprehensive
  accounting of all of the Borrower’s and its Subsidiaries receipts and/or
  purchases for the prior month.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)            Setting forth the Borrower’s gross
  margin for all sales for the prior month.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (g)           Listing all held checks.

   

  (h)           Summarizing and aging all accounts
  payable by vendor (including, without limitation, an itemization of all
  amounts owing to any landlord, warehouseman or distributor (including,
  without limitation, Ozburn-Hessey Logistics, LLC)), of the Borrower’s and its
  Subsidiaries’ accounts payable and any book overdraft, together with a
  reconciliation to the respective month-end general ledgers and financial
  statements.

   

  (i)            Setting forth the Borrower’s stock
  ledger by department, along with a general ledger-to-stock ledger
  reconciliation.

   

  Provided that, if a Triggering Event Date occurs, all
  such reports and documents in clauses (a) through (i) above shall
  be delivered weekly, until such time (if any) as Lender, in its sole
  discretion, notifies Borrower that such reporting may revert back to a
  monthly basis; provided further, that in all events, the reports and
  documents in clauses (b) through (i) above shall only be required
  to be delivered from and after the
  date of the Initial Credit Extension.

  
	
   

  	
   

  	
   

  
	
  Prior
  to the date of the Initial Credit Extension, quarterly, and, from and after
  such date, monthly

  	
   

  	
  (j)            Setting forth a detailed Inventory aging for the
  Borrower and its Subsidiaries.

  
	
   

  	
   

  	
   

  
	
  Upon request by Lender

  	
   

  	
  (k)           As to the Collateral or the
  financial condition of the Borrower and its Subsidiaries, warehouse receipts
  and such other items and statements as Lender may request.

  



 


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


 


6.3          Financial
Statements, Reports, Certificates.  Deliver to Lender:


 


(a)           as soon as
available, but in any event within 30 days (45 days in the case of a month that
is the end of one of Borrower’s fiscal quarters) after the end of (i) prior
to the date of the Initial Credit Extension, each quarter during each of
Borrower’s fiscal years and (ii) from and after the date of the Initial
Credit Extension, each month during each of Borrower’s fiscal years,


 


46

















 


(i)            an unaudited consolidated and consolidating balance
sheet, income statement, and statement of cash flow covering Borrower’s and its
Subsidiaries’ operations during such period, and


 


(ii)           a Compliance Certificate,


 


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


 


(i)            consolidated and consolidating financial statements of
Borrower and its Subsidiaries for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Lender and certified,
without any qualifications (including any (A) “going concern” or like
qualification or exception, (B) qualification or exception as to the scope
of such audit, or (C) qualification which relates to the treatment or
classification of any item and which, as a condition to the removal of such
qualification, would require an adjustment to such item, the effect of which
would be to cause any noncompliance with the provisions of Section 7.18),
by such accountants to have been prepared in accordance with GAAP (such audited
financial statements to include a balance sheet, income statement, and
statement of cash flow and, if prepared, such accountants’ letter to
management),


 


(ii)           a certificate of such accountants addressed to Lender
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default under Section 7.18, and


 


(iii)          a Compliance Certificate,


 


(c)           as soon as
available, but in any event within 30 days prior to the start of each of
Borrower’s fiscal years, copies of Borrower’s Projections, in form and
substance (including as to scope and underlying assumptions) satisfactory to
Lender, in its Permitted Discretion, for the forthcoming two (2) years,
year by year, and for the forthcoming fiscal year, month by month, certified by
the chief financial officer of Borrower as being such officer’s good faith
estimate of the financial performance of Borrower during the period covered
thereby,


 


(d)           if and when filed by
Borrower,


 


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


 


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


 


(iii)          copies of Borrower’s federal income tax returns, and any
amendments thereto, filed with the Internal Revenue Service; provided, however,
that the public filing of any document with the SEC shall be deemed to be
delivery to Lender for purposes of this subsection (d),


 


(e)           if and when provided,
any other information that is provided by Borrower to its shareholders
generally; provided, however, that the public filing of any document with the
SEC shall be deemed to be delivery to Lender for purposes of this subsection
(e),


 


47

















 


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


 


(g)           promptly, but in any
event within 5 days after Borrower has knowledge of any event or condition that
constitutes a Default or an Event of Default, notice thereof and a statement of
the curative action that Borrower proposes to take with respect thereto,


 


(h)           promptly after the
commencement thereof, but in any event within 5 days after the service of
process with respect thereto on Borrower or any of its Subsidiaries, notice of
all actions, suits, or proceedings brought by or against Borrower or any of its
Subsidiaries before any Governmental Authority which reasonably could be
expected to result in a Material Adverse Change,


 


(i)            promptly, notice of
any material changes to Borrower’s return practices and policies, and


 


(j)            upon the request of
Lender, any other information reasonably requested relating to the financial
condition of Borrower or its Subsidiaries.


 


In addition, Borrower agrees
that no Subsidiary of Borrower will have a fiscal year different from that of
Borrower.  Borrower also agrees to
cooperate with Lender to allow Lender to consult with its independent certified
public accountants if Lender reasonably requests the right to do so and that,
in such connection, its independent certified public accountants are authorized
to communicate with Lender and to release to whatever financial information
concerning Borrower or its Subsidiaries that Lender reasonably may request.


 


6.4          Guarantor
Reports.  Cause each
Guarantor to deliver its annual financial statements at the time when Borrower
provides its audited financial statements to Lender, but only to the extent
such Guarantor’s financial statements are audited and are not consolidated with
Borrower’s financial statements, and copies of all federal income tax returns
as soon as the same are available and in any event no later than 30 days after
the same are required to be filed by law.


 


6.5          [Intentionally
Omitted].


 


6.6          Maintenance of Properties.  Maintain
and preserve all of its properties which are necessary or useful in the proper
conduct to its business in good working order and condition, ordinary wear and
tear excepted, and comply at all times with the provisions of all material
leases to which it is a party as lessee, so as to prevent any loss or
forfeiture thereof or thereunder.


 


6.7          Taxes.  Cause all
assessments and taxes, whether real, personal, or otherwise, due or payable by,
or imposed, levied, or assessed against Borrower, its Subsidiaries, or any of
their respective assets to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest.  Borrower will and will cause its Subsidiaries
to make timely payment or deposit of all tax payments and withholding taxes
required of it and them by applicable laws, including those laws concerning
F.I.C.A., F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon request, furnish


 


48

















 


Lender with proof
satisfactory to Lender indicating that Borrower and its Subsidiaries have made
such payments or deposits.


 


6.8          Insurance.


 


(a)           At Borrower’s
expense, maintain insurance respecting its and its Subsidiaries’ properties and
assets wherever located, covering loss or damage by fire, theft, explosion, and
all other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. Borrower also shall maintain
business interruption, public liability, and product liability insurance, as
well as insurance against larceny, embezzlement, and criminal misappropriation.  All such policies of insurance shall be in
such amounts and with such insurance companies as are reasonably satisfactory
to Lender. Borrower shall deliver copies of all such policies to Lender with an
endorsement naming Lender as the sole loss payee (under a satisfactory lender’s
loss payable endorsement) or additional insured, as appropriate.  Each policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than 30 days prior
written notice to Lender in the event of cancellation of the policy for any
reason whatsoever.


 


(b)           Borrower shall give
Lender prompt notice of any loss covered by such insurance.  Lender shall have the exclusive right to
adjust any losses claimed under any such insurance policies after the
occurrence and during the continuation of an Event of Default, without any
liability to Borrower whatsoever in respect of such adjustments.  Any monies received as payment for any loss
under any insurance policy mentioned above (other than liability insurance
policies) or as payment of any award or compensation for condemnation or taking
by eminent domain, shall be paid over to Lender to be applied at the option of
Lender either to the prepayment of the Obligations or shall be disbursed to
Borrower under staged payment terms reasonably satisfactory to Lender for
application to the cost of repairs, replacements, or restorations. Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items of
property destroyed prior to such damage or destruction.


 


(c)           Borrower will not
and will not suffer or permit its Subsidiaries to take out separate insurance
concurrent in form or contributing in the event of loss with that required to
be maintained under this Section 6.8, unless Lender is included
thereon as an additional insured or loss payee under a lender’s loss payable
endorsement.  Borrower promptly shall
notify Lender whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and copies of such policies promptly shall be provided to Lender.


 


6.9          Location of Inventory and Equipment.  Keep
Borrower’s and its Subsidiaries’ Inventory and Equipment only at the locations
identified on Schedule 5.4 and their chief executive offices only at the
locations identified on Schedule 5.6(b); provided, however, that
Borrower may amend Schedule 5.4 and Schedule 5.6 so long as such
amendment occurs by written notice to Lender not less than 5 Business Days
prior to the date on which such Inventory or Equipment is moved to such new
location or such chief executive office is relocated, so long as such new
location is within the continental United States, and so long as, at the time
of such written notification, Borrower provides to Lender a Collateral Access
Agreement with respect thereto.


 


6.10        Compliance with Laws.  Comply
with the requirements of all applicable laws, rules, regulations, and orders of
any Governmental Authority, other than laws, rules, regulations, and orders the
non-compliance with which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Change.


 


49
















 


6.11                        Leases.  Pay when due all
rents and other amounts payable under any material leases to which Borrower or
any of its Subsidiaries is a party or by which Borrower’s or any such
Subsidiaries’ properties and assets are bound, unless such payments are the
subject of a Permitted Protest.


 


6.12                        Existence.  At all times preserve
and keep in full force and effect Borrower’s and its Subsidiaries’ valid
existence and good standing and any rights and franchises material to their
businesses.


 


6.13                        Environmental.


 


(a)                                  Keep any property either owned or operated by
Borrower or its Subsidiaries free of any Environmental Liens or post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material
respects, with Environmental Laws and provide to Lender documentation of such
compliance which Lender reasonably requests, (c) promptly notify Lender of
any release of a Hazardous Material in any reportable quantity from or onto
property owned or operated by Borrower or its Subsidiaries and take any
Remedial Actions required to abate said release or otherwise to come into
compliance with applicable Environmental Law, and (d) promptly, but in any
event within 5 days of its receipt thereof, provide Lender with written notice
of any of the following:  (i) notice
that an Environmental Lien has been filed against any of the real or personal
property of Borrower or its Subsidiaries, (ii)  commencement of any
Environmental Action or notice that an Environmental Action will be filed
against Borrower or its Subsidiaries, and (iii) notice of a violation,
citation, or other administrative order which reasonably could be expected to
result in a Material Adverse Change.


 


6.14                        Disclosure
Updates.  Promptly and in no
event later than 5 Business Days after obtaining knowledge thereof, notify
Lender if any written information, exhibit, or report furnished to Lender
contained, at the time it was furnished, any untrue statement of a material
fact or omitted to state any material fact necessary to make the statements
contained therein not misleading in light of the circumstances in which
made.  The foregoing to the contrary
notwithstanding, any notification pursuant to the foregoing provision will not
cure or remedy the effect of the prior untrue statement of a material fact or
omission of any material fact nor shall any such notification have the effect
of amending or, modifying this Agreement or any of the Schedules hereto.


 


6.15                        Formation or Acquisition of Subsidiaries.  If Borrower or any Guarantor intends to
form any direct or indirect Subsidiary or acquire any direct or indirect
Subsidiary after the Closing Date, Borrower or such Guarantor shall provide at
least five (5) days prior written notice to Lender.  At the time that Borrower or such Guarantor
forms any direct or indirect Subsidiary or acquires any direct or indirect
Subsidiary after the Closing Date, Borrower or such Guarantor shall (a) cause
such new Subsidiary to provide to Lender a joinder to this Agreement or the
Guaranty and Guarantor Security Agreement, or cause such new Subsidiary to
enter into the Guaranty and Guarantor Security Agreement (if such agreements
were not previously entered into), together with such other security documents
(including mortgages with respect to any Real Property of such new Subsidiary
and joinders to the Intellectual Property Security Agreement), as well as
appropriate financing statements (and with respect to all property subject to a
mortgage, fixture filings), all in form and substance satisfactory to Lender
(including being sufficient to grant Lender a first priority Lien (subject to
Permitted Liens) in and to the assets of such newly formed or acquired
Subsidiary), (b) enter into, and cause such new Subsidiary to enter into,
an Intercompany Subordination Agreement, in form and substance satisfactory to
Lender, (c) provide to Lender a pledge agreement and appropriate
certificates and powers or financing statements, hypothecating all of the
direct or beneficial ownership interest in such new Subsidiary, in form and
substance satisfactory to Lender, and (d) provide to Lender all other
documentation, including one or more opinions of counsel satisfactory to
Lender, which in its opinion is appropriate with respect to the


 


50

















 


execution and delivery of
the applicable documentation referred to above (including policies of title
insurance or other documentation with respect to all property subject to a
mortgage).  Any document, agreement, or
instrument executed or issued pursuant to this Section 6.15 shall
be a Loan Document.


 


6.16                        Intellectual Property.


 


(a)                                  Borrower agrees that, should it or any of its
Subsidiaries obtain an ownership interest in any Intellectual Property Right
which is not now a part of the Collateral, (i) any such Intellectual
Property Right shall automatically become Collateral and (ii) with respect
to any ownership interest in any Intellectual Property Right that Borrower or
such Subsidiary should obtain, it shall give prompt written notice thereof to
Lender in accordance with Section 12 hereof.  Borrower authorizes Lender to modify this
Agreement by amending Schedule 5.15(a) (and will cooperate
reasonably with Lender in effecting any such amendment) to include any
Intellectual Property Right which becomes part of the Collateral under this
Section.


 


(b)                                 With respect to material Borrower
Intellectual Property Rights, Borrower agrees, subject to the last sentence of
this subsection, to take all necessary steps, including making all necessary
payments and filings in connection with registration, maintenance, and renewal
of copyrights, trademarks, and patents in the U.S. Copyright Office, the U.S.
Patent and Trademark Office, any other appropriate government agencies in
foreign jurisdictions or in any court, to maintain each such Borrower
Intellectual Property Right.  Borrower
agrees to take corresponding steps with respect to each new or acquired
material Intellectual Property Right to which it or any of its Subsidiaries is
now or later becomes entitled. Any expenses incurred in connection with such
activities shall be borne solely by Borrower. None of Borrower or any of its
Subsidiaries shall discontinue use of or otherwise abandon any Intellectual
Property Right without the written consent of Lender, unless Borrower or such
Subsidiary shall have previously determined that such use or the pursuit or
maintenance of such registration is no longer desirable in the conduct of
Borrower’s or such Subsidiary’s business and that the loss thereof will not
cause a Material Adverse Change, in which case, Borrower will give notice of
any such abandonment to Lender pursuant to the terms of Section 12
hereof.


 


(c)                                  Borrower will continue to take all actions
reasonably necessary to protect the material Borrower Intellectual Property
Rights, including such steps as are set forth in Sections 5.15(a) and
(b) above.  Borrower further
agrees to give Lender prompt written notice in accordance with Section 12
hereof if Borrower or any of its Subsidiaries enters into any agreements after
the Closing Date pursuant to which it grants any right to a third party to use
or access the source code of any computer software programs or applications of
which Borrower or such Subsidiary is the owner or licensee.  Borrower authorizes Lender to modify this
Agreement by amending Schedule 5.15(b) (and will cooperate
reasonably with Lender in effecting any such amendment) to include any such
additional license grant(s).


 


(d)                                 Borrower agrees to notify Lender promptly and
in writing if it learns (i) that any item of the Borrower Intellectual
Property Rights contained on Schedule 5.16(a) may be determined to
have become abandoned or dedicated or (ii) of any adverse determination or
the institution of any proceeding (including the institution of any proceeding
in the U.S. Copyright Office, U.S. Patent and Trademark Office and any other
appropriate government agencies in foreign jurisdictions, or any court)
regarding any item of the Borrower Intellectual Property Rights that would
cause a Material Adverse Change.


 


(e)                                  In the event that Borrower becomes aware that
any item of the General Intangibles is infringed or misappropriated by a third
party, Borrower shall promptly notify Lender and shall take such actions as
Borrower or Lender deems appropriate under the circumstances to protect such


 


51

















 


General
Intangibles, including suing for infringement or misappropriation and for an
injunction against such infringement or misappropriation, unless any such
infringement or misappropriation would not cause a Material Adverse Change. Any
expense incurred in connection with such activities shall be borne solely by
Borrower.


 


(f)                                    Borrower agrees that, should it or any of its
Subsidiaries create or otherwise obtain an ownership interest in, or license
of, material copyrights after the Closing Date, it shall, promptly after such
creation or acquisition (but in no event to exceed 60 days after such creation
or acquisition), (i) provide the Lender with five (5) Business Days’
prior written notice of its intent to effect any registration thereof with the
United States Copyright Office, (ii) file applications and take any and
all other actions reasonably necessary to register all such copyrights in good
faith in accordance with the procedures and regulations of the United States
Copyright Office in a manner sufficient to impart constructive notice of
Borrower’s or such Subsidiary’s ownership thereof, and (iii) cause to be
prepared, executed, and delivered to Lender, with sufficient time to permit
Lender to record no later than the last Business Day within ten (10) days
following the date that such copyrights have been registered or an application
for registration has been filed, an Intellectual Property Security Agreement or
supplemental schedules to the Intellectual Property Security Agreement
reflecting the security interest of Lender in such new copyrights, which
supplemental schedules shall be in form and content suitable for registration
with the United States Copyright Office so as to give constructive notice, when
so registered, of the transfer by Borrower to Lender of a security interest in
such copyrights.


 


(g)                                 Borrower shall maintain copies of all source
and object code for all software utilized in its business operations at safe
and secure offsite locations reasonably acceptable to Lender, and shall, at the
request of Lender, advise the operators of such locations of Lender’s security
interest in such software, shall keep Lender fully informed of each such
location, and shall maintain the currency of all such software stored offsite.


 


7.                                      NEGATIVE COVENANTS.


 


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


 


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


 


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


 


(b)                                 Indebtedness set forth on Schedule 5.19,


 


(c)                                  Permitted Purchase Money Indebtedness,


 


(d)                                 refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1
(and continuance or renewal of any Permitted Liens associated therewith) so
long as:  (i) the terms and
conditions of such refinancings, renewals, or extensions do not, in Lender’s
reasonable judgment, materially impair the prospects of repayment of the
Obligations by Borrower or materially impair Borrower’s creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so


 


52

















 


refinanced,
renewed, or extended, (iii) such refinancings, renewals, or extensions do not
result in a shortening of the average weighted maturity of the Indebtedness so
refinanced, renewed, or extended, nor are they on terms or conditions that,
taken as a whole, are materially more burdensome or restrictive to Borrower, (iv) if
the Indebtedness that is refinanced, renewed, or extended was subordinated in
right of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must include subordination
terms and conditions that are at least as favorable to Lender as those that
were applicable to the refinanced, renewed, or extended Indebtedness, and (v) the
Indebtedness that is refinanced, renewed, or extended is not recourse to any
Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended,


 


(e)                                  endorsement of instruments or other payment
items for deposit,


 


(f)                                    Indebtedness composing Permitted Investments,


 


(g)                                 additional unsecured Indebtedness of the
Borrower and any of its Subsidiaries in an aggregate principal amount not to
exceed $250,000,000 at any time outstanding so long as (a) immediately
prior to and after giving effect thereto no Default or Event of Default shall
have occurred and be continuing or will result therefrom and (b) no
Triggering Event Date shall have occurred or will result therefrom,


 


(h)                                 indebtedness described on Schedule 7.1,
and


 


(i)                                     Indebtedness consisting of letters of credit
issued for the account of Borrower under the Wells Fargo Bank Amended Credit
Agreement, not to exceed the maximum amount permitted thereunder as of the date
of this Agreement.


 


7.2                               Liens.  Create, incur,
assume, or suffer to exist, directly or indirectly, any Lien on or with respect
to any of its assets, of any kind, whether now owned or hereafter acquired, or
any income or profits therefrom, except for Permitted Liens (including Liens
that are replacements of Permitted Liens to the extent that the original
Indebtedness is refinanced, renewed, or extended under Section 7.1(d) and
so long as the replacement Liens only encumber those assets (or the proceeds of
such assets in connection with Permitted Liens securing the original
Indebtedness (as of the date of this Agreement) under the Wells Fargo Bank
Amended Credit Agreement) that secured the refinanced, renewed, or extended
Indebtedness).


 


7.3                               Restrictions on Fundamental
Changes.


 


(a)                                  Enter
into any merger, consolidation, reorganization, or recapitalization, or
reclassify its Stock, or purchase all or substantially all of the assets or
Stock of any other Person, in any case, in one transaction or a series of
transactions, or enter into any agreement in respect of or to undertake any of
the foregoing; provided, however, that, at all times prior to the
making of the Initial Credit Extension (but not thereafter) this Section 7.3(a) shall
not prohibit or restrict in any way Borrower’s ability to (i) make
Permitted Inventory Acquisitions from time to time so long as (x) after
giving effect to any Permitted Inventory Acquisition, the Minimum Cash
Requirement will be satisfied and (y) immediately
prior to and after giving effect to any Permitted Inventory Acquisition, no
Default or Event of Default shall have occurred and be continuing or will result
therefrom, and (ii) make acquisitions of inventory in the ordinary course
of business so long as (x) the consideration paid in any such acquisition
or series of related acquisitions does not exceed the aggregate amount of
$1,000,000 and (y)


 


53

















 


immediately
prior to and after giving effect to any such acquisition, no Default or Event
of Default shall have occurred and be continuing or will result therefrom.


 


(b)                                 Liquidate, wind up, or dissolve itself (or suffer
any liquidation or dissolution).


 


7.4                               Disposal of Assets.  Other
than Permitted Dispositions, convey, sell, lease, license, assign, transfer, or
otherwise dispose of any of Borrower’s or its Subsidiaries’ assets.


 


7.5                               Change Name.  Change Borrower’s or
any of its Subsidiaries’ names, FEINs, organizational identification number,
state of organization or organizational identity; provided, however,
that Borrower or any of its Subsidiaries may change their names upon at least
30 days prior written notice to Lender of such change and so long as, (a) at
the time of such written notification, Borrower or its Subsidiary provides any
financing statements necessary to perfect and continue perfected the Lender’s
Liens and (b) immediately after such name change Borrower provides Lender
with evidence of such name change (including copies of any related public
filings).


 


7.6                               Nature of Business.  Make
any change in the principal nature of Borrower’s business as an online
liquidator or retailer (it being agreed that changes in the categories or types
of goods and services offered by Borrower as of the Closing Date and changes in
the manner in which Borrower offers such goods and services as of the Closing
Date and/or the addition or termination of services offered by Borrower or its
Subsidiaries shall not be considered a fundamental change in the nature of
Borrower’s business as an online liquidator or retailer).


 


7.7                               Prepayments and Amendments.  Except
in connection with a refinancing permitted by Section 7.1(d), or
upon Lender’s consent, a refinancing of indebtedness under Section 7.1(h):


 


(a)                                  optionally prepay, redeem, defease, purchase,
or otherwise acquire any Indebtedness of Borrower or its Subsidiaries, other
than the Obligations in accordance with this Agreement; provided however that,
notwithstanding the foregoing, or anything else in this Agreement or in any of
the Loan Documents, at all times prior to the making of the Initial Credit
Extension (but not thereafter), the Borrower may repurchase or refinance any or
all of its outstanding 3.75% Senior Convertible Notes due 2011 in the original
principal amount of $120,000,00 on terms approved by Borrower, so long as (i) after
giving effect thereto, the Minimum Cash Requirement will be satisfied and (ii) immediately
prior to and after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing or will result upon the consummation of any
such repurchase or refinancing; or


 


(b)                                 directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing  or concerning Indebtedness permitted under Sections
7.1(b) or (c).


 


7.8                               [Intentionally Omitted].


 


7.9                               Consignments.  Consign
any of its or their Inventory or sell any of its or their Inventory on bill and
hold, sale or return, sale on approval, or other conditional terms of sale; provided,
however, that this Section 7.9 shall not prohibit or
restrict in any way Borrower’s ability to offer or sell any of its Inventory in
accordance with Borrower’s customary returns policies and other customary terms
of sale, as in effect from time to time so long as Lender has received prior
written notice of any changes to such policies or terms.


 


54

















 


7.10                        Distributions.  Make
any distribution or declare or pay any dividends (in cash or other property,
other than common Stock) on, or purchase, acquire, redeem, or retire any of
Borrower’s Stock, of any class, whether now or hereafter outstanding; provided,
however, that, at all times prior to the making of the Initial Credit
Extension (but not thereafter) this Section 7.10 shall not prohibit
or restrict in any way Borrower’s ability to repurchase or otherwise acquire shares
of Borrower’s Stock if (i) after giving effect thereto, the Minimum Cash
Requirement will be satisfied and (ii) immediately prior to and after
giving effect thereto, no Default or Event of Default shall have occurred and
be continuing or will result therefrom.


 


7.11                        Accounting Methods.  Modify
or change its fiscal year or its method of accounting (other than in accordance
with GAAP) or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party accounting
firm or service bureau for the preparation or storage of Borrower’s or its
Subsidiaries’ accounting records without said accounting firm or service bureau
agreeing to provide Lender information regarding Borrower’s and its
Subsidiaries’ financial condition; provided that, nothing herein shall restrict
Borrower from selecting (or changing) its independent accounting firm provided
that such firm is reasonably acceptable to the Lender.


 


7.12                        Investments.  Except for Permitted
Investments, directly or indirectly, make or acquire any Investment or incur
any liabilities (including contingent obligations) for or in connection with
any Investment; provided, however, that Borrower and its
Subsidiaries shall not have Permitted Investments (other than in the Cash
Management Accounts) in Deposit Accounts or Securities Accounts in an aggregate
amount in excess of $250,000.00  at any one
time unless Borrower or its Subsidiary, as applicable, and the applicable
securities intermediary or bank have entered into Control Agreements governing
such Permitted Investments in order to perfect (and further establish) the
Lender’s Liens in such Permitted Investments. 
Subject to the foregoing proviso, Borrower shall not and shall not
permit its Subsidiaries to establish or maintain any Deposit Account or
Securities Account unless Lender shall have received a Control Agreement in
respect of such Deposit Account or Securities Account.


 


7.13                        Transactions with Affiliates.  Directly
or indirectly enter into or permit to exist any transaction with any Affiliate
of Borrower except for transactions that (a) are upon fair and reasonable
terms, (b) if they involve one or more payments by Borrower or its
Subsidiaries in excess of $60,000.00, are fully disclosed to Lender, and (c) are
no less favorable to Borrower or its Subsidiaries, as applicable, than would be
obtained in an arm’s length transaction with a non-Affiliate.


 


7.14                        Suspension.  Suspend or go out of
a substantial portion of the business conducted by Borrower and its Subsidiaries,
considered as a whole.


 


7.15                        [Intentionally Omitted].


 


7.16                        Use of Proceeds.  Use
the proceeds of the Advances for any purpose other than (a) to pay
transactional fees, costs, and expenses incurred in connection with this
Agreement, the other Loan Documents, and the transactions contemplated hereby
and thereby, and (b) thereafter, consistent with the terms and conditions
hereof, for its lawful and permitted purposes.


 


7.17                        Inventory and Equipment with Bailees.  Store
the Inventory or Equipment of Borrower or its Subsidiaries at any time now or
hereafter with a bailee, warehouseman, or similar party; provided, however,
that this provision shall not be deemed to restrict Borrower’s engagement or
use of third party logistics providers such as Ozburn-Hessey Logistics, LLC.


 


7.18                        [Intentionally Omitted].


 


55

















 


8.                                      EVENTS OF DEFAULT.


 


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


 


8.1                               If Borrower fails to pay when due and
payable, or when declared due and payable, all or any portion of the
Obligations (whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on such amounts),
fees and charges due Lender, reimbursement of Lender Expenses, or other amounts
constituting Obligations); provided, however, that in the case of
Overadvances that are caused by the charging of interest, fees, or Lender
Expenses to the Loan Account, such event shall not constitute an Event of
Default if, within 3 Business Days of its receipt of telephonic notice of such
Overadvance, Borrower eliminates such Overadvance;


 


8.2                               If Borrower or any of its Subsidiaries fails
in any material respect to perform, keep, or observe any term, provision,
condition, covenant, or agreement contained in this Agreement or in any of the
other Loan Documents;


 


8.3                               If any material portion of the consolidated
assets of the Borrower and its Subsidiaries is attached, seized, subjected to a
writ or distress warrant, levied upon, or comes into the possession of any
third Person; provided, however, that this provision shall not be deemed to
apply to Borrower’s use of third party logistics providers such as Ozburn-Hessey
Logistics, LLC;


 


8.4                               If an Insolvency Proceeding is commenced by
Borrower or any of its Subsidiaries;


 


8.5                               If an Insolvency Proceeding is commenced
against Borrower, or any of its Subsidiaries, and any of the following events
occur:  (a) Borrower or such
Subsidiary consents to the institution of such Insolvency Proceeding against
it, (b) the petition commencing the Insolvency Proceeding is not timely
controverted; provided, however, that, during the pendency of
such period, Lender shall be relieved of its obligations to extend credit
hereunder, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 45 calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, Lender shall be relieved
of its obligation to extend credit hereunder, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, Borrower or any of its Subsidiaries, or (e) an order for
relief shall have been entered therein;


 


8.6                               If Borrower or any of its Subsidiaries is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs;


 


8.7                               If a notice of Lien, levy, or assessment is
filed of record with respect to any of Borrower’s or any of its Subsidiaries’
assets by the United States, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, or if any
taxes or debts owing at any time hereafter to any one or more of such entities
becomes a Lien, whether choate or otherwise, upon any of Borrower’s or any of
its Subsidiaries’ assets and the same is not paid before such payment is
delinquent;


 


8.8                               If a judgment or other claim becomes a Lien
or encumbrance upon any material portion of Borrower’s or any of its
Subsidiaries’ assets;


 


8.9                               If there is a default in any material
agreement to which Borrower or any of its Subsidiaries is a party and such
default (a) occurs at the final maturity of the obligations thereunder, or
(b)


 


56

















 


results
in the acceleration by the other party thereto of the maturity of Borrower’s or
its Subsidiaries’ obligations thereunder or in the termination of such
agreement; but in each such case only if the same has a material adverse effect
on Borrower and its Subsidiaries considered as a whole;


 


8.10                        If Borrower or any of its Subsidiaries makes
any payment on account of Indebtedness that has been contractually subordinated
in right of payment to the payment of the Obligations, except to the extent
such payment is permitted by the terms of the subordination provisions
applicable to such Indebtedness;


 


8.11                        If any misstatement or misrepresentation of a
material fact exists as of the date when made or deemed made, in any warranty,
representation, statement, or Record made to Lender by or on behalf of Borrower
or its Subsidiaries;


 


8.12                        If the Obligation of any Guarantor under its
Guaranty is limited or terminated by such Guarantor thereunder;


 


8.13                        If this Agreement or any other Loan Document
that purports to create a Lien, shall, for any reason, fail or cease to create
a valid and perfected and, except to the extent permitted by the terms hereof
or thereof, first priority Lien on or security interest in the Collateral
covered hereby or thereby, except as a result of a disposition of the
applicable Collateral in a transaction permitted under this Agreement;


 


8.14                        Any provision of any Loan Document shall at
any time for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by Borrower or its Subsidiaries, or a
proceeding shall be commenced by Borrower or its Subsidiaries, or by any
Governmental Authority having jurisdiction over Borrower or its Subsidiaries
seeking to establish the invalidity or unenforceability thereof, or Borrower or
its Subsidiaries, shall deny that Borrower or its Subsidiaries has any
liability or obligation purported to be created under any Loan Document; or


 


8.15                        If any Change of Control shall occur.


 


9.                                      LENDER’S RIGHTS AND
REMEDIES.


 


9.1                               Rights and Remedies.  Upon
the occurrence, and during the continuation, of an Event of Default, Lender (at
its election but without notice of its election and without demand) may do any
one or more of the following, all of which are authorized by Borrower:


 


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


 


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


 


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


 


(d)                                 Settle or adjust disputes and claims directly
with Borrower’s Account Debtors for amounts and upon terms which Lender
considers advisable, and in such cases, Lender will credit


 


57

















 


Borrower’s
Loan Account with only the net amounts received by Lender in payment of such
disputed Accounts after deducting all Lender Expenses incurred or expended in
connection therewith;


 


(e)                                  Cause Borrower to hold all of its returned
Inventory in trust for Lender and segregate all such Inventory from all other
assets of Borrower or in Borrower’s possession;


 


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


 


(g)                                 Without notice to Borrower (such notice being
expressly waived), and without constituting an acceptance of any collateral in
full or partial satisfaction of an obligation (within the meaning of the Code),
set off and apply to the Obligations any and all (i) balances and deposits
of Borrower held by Lender (including any amounts received in the Cash
Management Accounts), or (ii) Indebtedness at any time owing to or for the
credit or the account of Borrower held by Lender;


 


(h)                                 Hold, as cash collateral, any and all
balances and deposits of Borrower held by Lender, and any amounts received in
the Cash Management Accounts, to secure the full and final repayment of all of
the Obligations;


 


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


 


(j)                                     Sell the Borrower Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrower’s premises) as Lender determines is commercially
reasonable.  It is not necessary that the
Borrower Collateral be present at any such sale;


 


(k)                                  Lender shall give notice of the disposition
of the Borrower Collateral as follows:


 


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


 


(ii)                                  The notice shall be personally delivered to
Borrower as provided in Section 12, at least 10 days before the
earliest time of disposition set forth in the


 


58

















 


notice; no notice needs to be given prior to
the disposition of any portion of the Borrower Collateral that is perishable or
threatens to decline speedily in value or that is of a type customarily sold on
a recognized market;


 


(l)                                     Lender may credit bid and purchase at any
public sale;


 


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


 


(n)                                 Lender shall have all other rights and
remedies available at law or in equity or pursuant to any other Loan Document.


 


The foregoing to the contrary notwithstanding, upon
the occurrence of any Event of Default described in Section 8.4 or Section 8.5,
in addition to the remedies set forth above, without any notice to Borrower or
any other Person or any act by the Lender, Lender’s obligation to extent credit
hereunder shall terminated and the Obligations then outstanding, together with
all accrued and unpaid interest thereon and all fees and all other amounts due
under this Agreement and the other Loan Documents, shall automatically and
immediately become due and payable, without presentment, demand, protest, or
notice of any kind, all of which are expressly waived by Borrower.


 


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


 


10.                               TAXES AND EXPENSES.


 


If
Borrower fails to pay any monies (whether taxes, assessments, insurance
premiums, or, in the case of leased properties or assets, rents or other
amounts payable under such leases) due to third Persons, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, then, Lender, in its sole discretion and
without prior notice to Borrower, may do any or all of the following:  (a) make payment of the same or any part
thereof, (b) set up such reserves against the Borrowing Base or the
Maximum Revolver Amount as Lender deems necessary to protect Lender from the
exposure created by such failure, or (c) in the case of the failure to
comply with Section 6.8 hereof, obtain and maintain insurance
policies of the type described in Section 6.8 and take any action
with respect to such policies as Lender deems prudent.  Any such amounts paid by Lender shall
constitute Lender Expenses and any such payments shall not constitute an
agreement by Lender to make similar payments in the future or a waiver by
Lender of any Event of Default under this Agreement.  Lender need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual official
notice for the payment thereof shall be conclusive evidence that the same was
validly due and owing.


 


11.                               WAIVERS; INDEMNIFICATION.


 


11.1                        Demand; Protest.  Borrower
waives demand, protest, notice of protest, notice of default or dishonor,
notice of payment and nonpayment, nonpayment at maturity, release, compromise,


 


59
















 


settlement, extension, or
renewal of documents, instruments, chattel paper, and guarantees at any time
held by Lender on which Borrower may in any way be liable.


 


11.2        Lender’s Liability for Borrower Collateral.  Borrower
hereby agrees that:  (a) so long as
Lender complies with its obligations, if any, under the Code, Lender shall not
in any way or manner be liable or responsible for:  (i) the safekeeping of the Borrower
Collateral, (ii) any loss or damage thereto occurring or arising in any
manner or fashion from any cause, (iii) any diminution in the value
thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Borrower Collateral shall be borne by Borrower.


 


11.3        Indemnification.  Borrower
shall pay, indemnify, defend, and hold the Lender-Related Persons, and each
Participant (each, an “Indemnified Person”) harmless (to the fullest
extent permitted by law) from and against any and all claims, demands, suits,
actions, investigations, proceedings, liabilities, costs, fines, penalties, and
damages, and all reasonable attorneys, experts and consultants fees and
disbursements and other costs and expenses actually incurred in connection
therewith or in connection with the enforcement of this indemnification (as and
when they are incurred and irrespective of whether suit is brought), at any
time asserted against, imposed upon, or incurred by any of them (a) in
connection with or as a result of or related to the execution, delivery,
enforcement, performance, or administration (including any restructuring or
workout with respect hereto) of this Agreement, any of the other Loan
Documents, or the transactions contemplated hereby or thereby or the monitoring
of Borrower’s and its Subsidiaries’ compliance with the terms of the Loan
Documents, and (b) with respect to any investigation, litigation, or
proceeding related to this Agreement, any other Loan Document, or the use of
the proceeds of the credit provided hereunder (irrespective of whether any
Indemnified Person is a party thereto), or any act, omission, event, or
circumstance in any manner related thereto (all the foregoing, collectively,
the “Indemnified Liabilities”). 
The foregoing to the contrary notwithstanding, Borrower shall have no
obligation to any Indemnified Person under this Section 11.3 with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. 
This provision shall survive the termination of this Agreement and the
repayment of the Obligations.  If any
Indemnified Person makes any payment to any other Indemnified Person with
respect to an Indemnified Liability as to which Borrower was required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrower
with respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH
IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR
OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.


 


12.          NOTICES.


 


Unless otherwise provided in
this Agreement, all notices or demands by Borrower or Lender to the other
relating to this Agreement or any other Loan Document shall be in writing and
(except for financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be personally delivered or
sent by registered or certified mail (postage prepaid, return receipt
requested), overnight courier, electronic mail (at such email addresses as
Borrower or Lender, as applicable, may designate to each other in accordance
herewith), or telefacsimile to Borrower or Lender, as the case may be, at its
address set forth below:


 


60

















 


	
  If
  to Borrower:

  	
  OVERSTOCK.COM,
  INC.

  
	
   

  	
  6350
  South 3000 East

  
	
   

  	
  Salt
  Lake City, Utah 84121

  
	
   

  	
  Attn:
  Senior Vice President, Finance

  
	
   

  	
  Fax
  No.  (801) 947-3144

  
	
   

  	
   

  
	
  and
  to:

  	
  OVERSTOCK.COM,
  INC.

  
	
   

  	
  6350
  South 3000 East

  
	
   

  	
  Salt
  Lake City, Utah 84121

  
	
   

  	
  Attn:
  General Counsel

  
	
   

  	
  Fax
  No.  (801) 947-3144

  
	
   

  	
   

  
	
  with
  copies to:

  	
  BRACEWELL &
  GIULIANI, LLP

  
	
   

  	
  111
  Congress Ave., Suite 2300

  
	
   

  	
  Austin,
  Texas 78701

  
	
   

  	
  Attn:
  Tom Adkins, Esq.

  
	
   

  	
  Fax
  No.  (512) 479-3940

  
	
   

  	
   

  
	
  If
  to Lender:

  	
  WELLS FARGO RETAIL FINANCE, LLC

  
	
   

  	
  One
  Boston Place, 19th Floor

  
	
   

  	
  Boston,
  Massachusetts 02108

  
	
   

  	
  Attn:
  Joseph Burt

  
	
   

  	
  Fax
  No.: 866-617-3988

  
	
   

  	
   

  
	
  with
  copies to:

  	
  RIEMER &
  BRAUNSTEIN LLP

  
	
   

  	
  3
  Center Plaza

  
	
   

  	
  Boston.,
  Massachusetts 02108

  
	
   

  	
  Attn:
  Jason S. DelMonico, Esquire

  
	
   

  	
  Fax
  No.  617-880-3456

  



 


Lender and Borrower may
change the address at which they are to receive notices hereunder, by notice in
writing in the foregoing manner given to the other party.  All notices or demands sent in accordance
with this Section 12, other than notices by Lender in connection
with enforcement rights against the Borrower Collateral under the provisions of
the Code, shall be deemed received on the earlier of the date of actual receipt
or three (3) Business Days after the deposit thereof in the mail.  Borrower acknowledges and agrees that notices
sent by Lender in connection with the exercise of enforcement rights against
Borrower Collateral under the provisions of the Code shall be deemed sent when
deposited in the mail or personally delivered, or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.


 


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


 


(a)           THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT
IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND
THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.


 


61

















 


(b)           THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS
ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF SUFFOLK, COMMONWEALTH
OF MASSACHUSETTS, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT
LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING
SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWER AND LENDER WAIVE, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM  NON  CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).


 


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


 


14.          ASSIGNMENTS
AND PARTICIPATIONS; SUCCESSORS.


 


14.1        Assignments
and Participations.


 


(a)           Lender may assign
and delegate to one or more assignees (each an “Assignee”) that are
Eligible Transferees all, or any ratable part of all, of the Obligations and
the other rights and obligations of Lender hereunder and under the other Loan
Documents, in a minimum amount of $5,000,000; provided, however,
that Borrower may continue to deal solely and directly with Lender in
connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to Borrower
by Lender and the Assignee, and (ii) Lender and its Assignee have
delivered to Borrower an assignment and acceptance.  Anything contained herein to the contrary
notwithstanding, the Assignee need not be an Eligible Transferee if such
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of the assigning Lender.


 


(b)           From and after the
date that Lender provides Borrower with such written notice and executed
assignment and acceptance, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment and acceptance, shall have the
rights and obligations of a Lender under the Loan Documents, and (ii) the
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such assignment and
acceptance, relinquish its rights (except with respect to Section 11.3
hereof) and be released from any future obligations under this Agreement (and
in the case of an assignment and acceptance covering all or the remaining
portion of an assigning Lender’s rights and obligations under this Agreement
and the other Loan Documents, such Lender shall cease to be


 


62

















 


a
party hereto and thereto), and such assignment shall effect a novation between
Borrower and the Assignee; provided, however, that nothing
contained herein shall release any assigning Lender from obligations that
survive the termination of this Agreement, including such assigning Lender’s
obligations under Section 16.9 of this Agreement.


 


(c)           Immediately upon
Borrower’s receipt of such fully executed assignment and acceptance agreement,
this Agreement shall be deemed to be amended to the extent, but only to the
extent, necessary to reflect the addition of the Assignee and the resulting
adjustment of the rights and duties of Lender arising therefrom.


 


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


 


(e)           In connection with
any such assignment or participation or proposed assignment or participation,
Lender may, subject to the provisions of Section 16.9, disclose all
documents and information which it now or hereafter may have relating to Borrower
and its Subsidiaries and their respective businesses.


 


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


 


63

















 


14.2        Successors.  This Agreement
shall bind and inure to the benefit of the respective successors and assigns of
each of the parties; provided, however, that Borrower may not
assign this Agreement or any rights or duties hereunder without Lender’s prior
written consent and any prohibited assignment shall be absolutely void ab initio. 
No consent to assignment by Lender shall release Borrower from its
Obligations.  Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to Section 14.1 hereof and, except as expressly
required pursuant to Section 14.1 hereof, no consent or approval by
Borrower is required in connection with any such assignment.


 


15.          AMENDMENTS; WAIVERS.


 


15.1        Amendments and Waivers.  No
amendment or waiver of any provision of this Agreement or any other Loan
Document (other than Bank Product Agreements), and no consent with respect to
any departure by Borrower therefrom, shall be effective unless the same shall
be in writing and signed by Lender and Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.


 


15.2        No Waivers; Cumulative Remedies.  No
failure by Lender to exercise any right, remedy, or option under this Agreement
or any other Loan Document, or delay by Lender in exercising the same, will
operate as a waiver thereof.  No waiver
by Lender will be effective unless it is in writing, and then only to the
extent specifically stated.  No waiver by
Lender on any occasion shall affect or diminish Lender’s rights thereafter to
require strict performance by Borrower of any provision of this Agreement.  Lender’s rights under this Agreement and the
other Loan Documents will be cumulative and not exclusive of any other right or
remedy that Lender may have.


 


16.          GENERAL PROVISIONS.


 


16.1        Effectiveness.  This
Agreement shall be binding and deemed effective when executed by Borrower and
Lender.


 


16.2        Section Headings.  Headings
and numbers have been set forth herein for convenience only.  Unless the contrary is compelled by the
context, everything contained in each Section applies equally to this
entire Agreement.


 


16.3        Interpretation.  Neither
this Agreement nor any uncertainty or ambiguity herein shall be construed
against Lender or Borrower, whether under any rule of construction or
otherwise.  On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.


 


16.4        Severability of Provisions.  Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.


 


16.5        Withholding Taxes.  All
payments made by Borrower hereunder or under any note or other Loan Document
will be made without setoff, counterclaim, or other defense.  In addition, all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future Taxes, and in the event any deduction or withholding of Taxes is
required, Borrower shall comply with the penultimate sentence of this Section 16.5,
“Taxes” shall mean, any taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any jurisdiction
or by any


 


64

















 


political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, any tax imposed by any jurisdiction or by any political subdivision
or taxing authority thereof or therein measured by or based on the net income
or net profits of Lender) and all interest, penalties or similar liabilities
with respect thereto.  If any Taxes are
so levied or imposed, Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every payment of all amounts
due under this Agreement, any note, or Loan Document, including any amount paid
pursuant to this Section 16.5 after withholding or deduction for or
on account of any Taxes, will not be less than the amount provided for herein; provided,
however, that Borrower shall not be required to increase any such
amounts if the increase in such amount payable results from Lender’s own
willful misconduct or gross negligence (as finally determined by a court of
competent jurisdiction).  Borrower will
furnish to Lender as promptly as possible after the date the payment of any Tax
is due pursuant to applicable law certified copies of tax receipts evidencing
such payment by Borrower.


 


16.6        Counterparts; Electronic Execution.  This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one
and the same Agreement.  Delivery of an
executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission shall be equally as effective as delivery of an original
executed counterpart of this Agreement. 
Any party delivering an executed counterpart of this Agreement by
telefacsimile or other electronic method of transmission also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. 
The foregoing shall apply to each other Loan Document mutatis mutandis.


 


16.7        Revival and Reinstatement of Obligations.  If
the incurrence or payment of the Obligations by Borrower or any Guarantor or
the transfer to Lender of any property should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors’ rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, or other voidable or recoverable payments
of money or transfers of property (collectively, a “Voidable Transfer”),
and if Lender is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that
Lender is required or elects to repay or restore, and as to all reasonable
costs, expenses, and attorneys fees of Lender related thereto, the liability of
Borrower or any such Guarantor(s) automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.


 


16.8        Confidentiality.


 


Lender agrees that material,
non-public information regarding Borrower and its Subsidiaries, their
operations, assets, and existing and contemplated business plans shall be
treated by Lender in a confidential manner, and shall not be disclosed by
Lender to Persons who are not parties to this Agreement, except:  (a) to attorneys for and other advisors,
accountants, auditors, and consultants to Lender, (b) to Subsidiaries and
Affiliates of Lender (including the Bank Product Providers), provided that any
such Subsidiary or Affiliate shall have agreed to receive such information
hereunder subject to the terms of this Section 16.8, (c) as
may be required by statute, decision, or judicial or administrative order,
rule, or regulation, (d) as may be agreed to in advance by Borrower or its
Subsidiaries or as requested or required by any Governmental Authority pursuant
to any subpoena or other legal process, (e) as to any such information
that is or becomes generally available to the public (other than as a result of
prohibited disclosure by Lender), (f) in connection with any assignment,
prospective assignment, sale, prospective sale, participation or prospective
participations, or pledge or prospective pledge of Lender’s interest under


 


65

















 


this
Agreement, provided that any such assignee, prospective assignee, purchaser,
prospective purchaser, participant, prospective participant, pledgee, or
prospective pledgee shall have agreed in writing to receive such information
hereunder subject to the terms of this Section, and (g) in connection with
any litigation or other adversary proceeding involving parties hereto which
such litigation or adversary proceeding involves claims related to the rights
or duties of such parties under this Agreement or the other Loan
Documents.  The provisions of this Section 16.8
shall survive for 2 years after the payment in full of the Obligations.


 


16.9        Integration.  This
Agreement, together with the other Loan Documents, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof.


 


16.10      Amendment and Restatement.  This
Agreement shall amend and restate the Existing Loan Agreement in its
entirety.  On the date of this Agreement,
the rights and obligations of the parties under the Existing Loan Agreement
shall be subsumed within and be governed by this Agreement; provided,
however, that Borrower and Lender each agrees that (i) all Obligations of
the Borrower under the Existing Loan Agreement shall remain outstanding, shall
constitute continuing Obligations secured by the Collateral and this Agreement
shall not be deemed to evidence or result in a novation or repayment and
reborrowing of such Obligations and (ii) all references to the Existing
Loan Agreement in any Loan Document or other document or instrument delivered
in connection therewith shall be deemed to refer to this Agreement and the
provisions hereof.  Lender agrees that
any existing Default or Event of Default under the Existing Loan Agreement
shall be waived upon the effectiveness of this Agreement, provided that,
such waiver shall not serve as a continuing waiver of any such event which
would constitute a Default or an Event of Default under this Agreement.


 


[Signature
page to follow]


 


66
















 


IN WITNESS
WHEREOF, the parties
hereto have caused this Agreement to be executed and delivered as of the date
first above written.


 


 


	
   

  	
  OVERSTOCK.COM,
  INC.,

  a Delaware corporation, as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Jonathan E. Johnson III

  
	
   

  	
  Name:

  	
  Jonathan
  E. Johnson III

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO RETAIL FINANCE, LLC,

  a Delaware limited liability company, as Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Joseph Burt

  
	
   

  	
  Name:

  	
  Joseph
  Burt

  
	
   

  	
  Title:

  	
  Vice
  President

  



 


Signature Page to Amended
and Restated Loan and Security Agreement


 

















 


TABLE OF
CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS AND
  CONSTRUCTION

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
  20

  
	
   

  	
  1.3

  	
  Code

  	
  20

  
	
   

  	
  1.4

  	
  Construction

  	
  20

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND TERMS OF
  PAYMENT

  	
  21

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Revolver Advances

  	
  21

  
	
   

  	
  2.2

  	
  Revolver Increase

  	
  22

  
	
   

  	
  2.3

  	
  Borrowing
  Procedures and Settlements

  	
  22

  
	
   

  	
  2.4

  	
  Payments

  	
  23

  
	
   

  	
  2.5

  	
  Overadvances

  	
  24

  
	
   

  	
  2.6 

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

  	
  24

  
	
   

  	
  2.7

  	
  Cash Management

  	
  26

  
	
   

  	
  2.8

  	
  Crediting Payments

  	
  27

  
	
   

  	
  2.9

  	
  Designated Account

  	
  27

  
	
   

  	
  2.10

  	
  Maintenance of
  Loan Account; Statements of Obligations

  	
  27

  
	
   

  	
  2.11

  	
  Fees

  	
  27

  
	
   

  	
  2.12

  	
  Letters of Credit

  	
  28

  
	
   

  	
  2.13

  	
  LIBOR Option

  	
  30

  
	
   

  	
  2.14

  	
  Capital
  Requirements

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM
  OF AGREEMENT

  	
  33

  
	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conditions
  Precedent to the Initial Credit Extension

  	
  33

  
	
   

  	
  3.2

  	
  Conditions
  Subsequent to the Initial Credit Extension

  	
  35

  
	
   

  	
  3.3

  	
  Conditions
  Precedent to all Extensions of Credit

  	
  35

  
	
   

  	
  3.4

  	
  Term

  	
  36

  
	
   

  	
  3.5

  	
  Effect of
  Termination

  	
  36

  
	
   

  	
  3.6

  	
  Early Termination
  by Borrower

  	
  36

  



 


i

















 


TABLE OF
CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  CREATION OF
  SECURITY INTEREST

  	
  37

  
	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Grant of Security
  Interest

  	
  37

  
	
   

  	
  4.2

  	
  Negotiable
  Collateral

  	
  37

  
	
   

  	
  4.3

  	
  Collection of
  Accounts, General Intangibles, and Negotiable Collateral

  	
  38

  
	
   

  	
  4.4

  	
  Filing of
  Financing Statements; Commercial Tort Claims; Delivery of Additional
  Documentation Required

  	
  38

  
	
   

  	
  4.5

  	
  Power of Attorney

  	
  39

  
	
   

  	
  4.6

  	
  Right to Inspect

  	
  39

  
	
   

  	
  4.7

  	
  Control Agreements

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  39

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  No Encumbrances

  	
  40

  
	
   

  	
  5.2

  	
  Eligible Inventory

  	
  40

  
	
   

  	
  5.3

  	
  Equipment

  	
  40

  
	
   

  	
  5.4

  	
  Location of
  Inventory and Equipment

  	
  40

  
	
   

  	
  5.5

  	
  Inventory Records

  	
  40

  
	
   

  	
  5.6

  	
  State of
  Incorporation; Location of Chief Executive Office; FEIN; Organizational
  Identification Number; Commercial Tort Claims

  	
  40

  
	
   

  	
  5.7

  	
  Due Organization
  and Qualification; Subsidiaries

  	
  41

  
	
   

  	
  5.8

  	
  Due Authorization;
  No Conflict

  	
  41

  
	
   

  	
  5.9

  	
  Litigation

  	
  42

  
	
   

  	
  5.10

  	
  No Material
  Adverse Change

  	
  42

  
	
   

  	
  5.11

  	
  Fraudulent
  Transfer

  	
  43

  
	
   

  	
  5.12

  	
  Employee Benefits

  	
  43

  
	
   

  	
  5.13

  	
  Environmental
  Condition

  	
  43

  
	
   

  	
  5.14

  	
  Brokerage Fees

  	
  43

  
	
   

  	
  5.15

  	
  Intellectual Property

  	
  43

  
	
   

  	
  5.16

  	
  Leases

  	
  44

  
	
   

  	
  5.17

  	
  Deposit Accounts
  and Securities Accounts

  	
  44

  
	
   

  	
  5.18

  	
  Complete
  Disclosure

  	
  44

  



 


ii

















 


TABLE OF
CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.19

  	
  Indebtedness

  	
  44

  
	
   

  	
  5.20

  	
  [Intentionally Omitted]

  	
  45

  
	
   

  	
  5.21

  	
  Taxes and Payments

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE
  COVENANTS

  	
  45

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Accounting System

  	
  45

  
	
   

  	
  6.2

  	
  Collateral
  Reporting

  	
  45

  
	
   

  	
  6.3

  	
  Financial
  Statements, Reports, Certificates

  	
  46

  
	
   

  	
  6.4

  	
  Guarantor Reports

  	
  48

  
	
   

  	
  6.5

  	
  [Intentionally
  Omitted]

  	
  48

  
	
   

  	
  6.6

  	
  Maintenance of
  Properties

  	
  48

  
	
   

  	
  6.7

  	
  Taxes

  	
  48

  
	
   

  	
  6.8

  	
  Insurance

  	
  49

  
	
   

  	
  6.9

  	
  Location of
  Inventory and Equipment

  	
  49

  
	
   

  	
  6.10

  	
  Compliance with
  Laws

  	
  49

  
	
   

  	
  6.11

  	
  Leases

  	
  50

  
	
   

  	
  6.12

  	
  Existence

  	
  50

  
	
   

  	
  6.13

  	
  Environmental

  	
  50

  
	
   

  	
  6.14

  	
  Disclosure Updates

  	
  50

  
	
   

  	
  6.15

  	
  Formation or
  Acquisition of Subsidiaries

  	
  50

  
	
   

  	
  6.16

  	
  Intellectual Property

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  NEGATIVE COVENANTS

  	
  52

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Indebtedness

  	
  52

  
	
   

  	
  7.2

  	
  Liens

  	
  53

  
	
   

  	
  7.3

  	
  Restrictions on
  Fundamental Changes

  	
  53

  
	
   

  	
  7.4

  	
  Disposal of Assets

  	
  54

  
	
   

  	
  7.5

  	
  Change Name

  	
  54

  
	
   

  	
  7.6

  	
  Nature of Business

  	
  54

  
	
   

  	
  7.7

  	
  Prepayments and
  Amendments

  	
  54

  
	
   

  	
  7.8

  	
  [Intentionally
  Omitted]

  	
  54

  



 


iii

















 


TABLE OF
CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.9

  	
  Consignments

  	
  54

  
	
   

  	
  7.10

  	
  Distributions

  	
  55

  
	
   

  	
  7.11

  	
  Accounting Methods

  	
  55

  
	
   

  	
  7.12

  	
  Investments

  	
  55

  
	
   

  	
  7.13

  	
  Transactions with
  Affiliates

  	
  55

  
	
   

  	
  7.14

  	
  Suspension

  	
  55

  
	
   

  	
  7.15

  	
  [Intentionally
  Omitted]

  	
  55

  
	
   

  	
  7.16

  	
  Use of Proceeds

  	
  55

  
	
   

  	
  7.17

  	
  Inventory and
  Equipment with Bailees

  	
  55

  
	
   

  	
  7.18

  	
  [Intentionally Omitted]

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF DEFAULT

  	
  56

  
	
   

  	
   

  	
   

  
	
  9.

  	
  LENDER’S RIGHTS
  AND REMEDIES

  	
  57

  
	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Rights and
  Remedies

  	
  57

  
	
   

  	
  9.2

  	
  Remedies
  Cumulative

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  TAXES AND EXPENSES

  	
  59

  
	
   

  	
   

  	
   

  
	
  11.

  	
  WAIVERS;
  INDEMNIFICATION

  	
  59

  
	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Demand; Protest

  	
  59

  
	
   

  	
  11.2

  	
  Lender’s Liability
  for Borrower Collateral

  	
  60

  
	
   

  	
  11.3

  	
  Indemnification

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  NOTICES

  	
  60

  
	
   

  	
   

  	
   

  
	
  13.

  	
  CHOICE OF LAW AND
  VENUE; JURY TRIAL WAIVER

  	
  61

  
	
   

  	
   

  	
   

  
	
  14.

  	
  ASSIGNMENTS AND
  PARTICIPATIONS; SUCCESSORS

  	
  62

  
	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Assignments and
  Participations

  	
  62

  
	
   

  	
  14.2

  	
  Successors

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  AMENDMENTS;
  WAIVERS

  	
  64

  
	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Amendments and
  Waivers

  	
  64

  
	
   

  	
  15.2

  	
  No Waivers;
  Cumulative Remedies

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  GENERAL PROVISIONS

  	
  64

  
	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Effectiveness

  	
  64

  



 


iv

















 


TABLE OF
CONTENTS


(continued)


 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.2

  	
  Section Headings

  	
  64

  
	
   

  	
  16.3

  	
  Interpretation

  	
  64

  
	
   

  	
  16.4

  	
  Severability of
  Provisions

  	
  64

  
	
   

  	
  16.5

  	
  Withholding Taxes

  	
  64

  
	
   

  	
  16.6

  	
  Counterparts;
  Electronic Execution

  	
  65

  
	
   

  	
  16.7

  	
  Revival and
  Reinstatement of Obligations

  	
  65

  
	
   

  	
  16.8

  	
  Confidentiality

  	
  65

  
	
   

  	
  16.9

  	
  Integration

  	
  66

  
	
   

  	
  16.10

  	
  Amendment and
  Restatement

  	
  66

  



 


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TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  EXHIBITS
  AND SCHEDULES

  
	
  Exhibit C-1

  	
  Form of Compliance
  Certificate

  	
   

  
	
  Exhibit L-1

  	
  Form of LIBOR Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule D-1

  	
  Designated Account

  	
   

  
	
  Schedule E-1

  	
  Eligible Inventory
  Locations

  	
   

  
	
  Schedule L-1

  	
  Lender’s Account

  	
   

  
	
  Schedule P-1

  	
  Permitted Investments

  	
   

  
	
  Schedule
  P-1A  Permitted Liens

  	
   

  
	
  Schedule R-1

  	
  Real Property Collateral

  	
   

  
	
  Schedule 2.7(a)

  	
  Cash Management Banks

  	
   

  
	
  Schedule 5.4

  	
  Locations of Inventory and
  Equipment

  	
   

  
	
  Schedule 5.6(a)

  	
  States of Organization

  	
   

  
	
  Schedule 5.6(b)

  	
  Chief Executive Offices

  	
   

  
	
  Schedule 5.6(c)

  	
  FEIN and Organizational
  Identification Numbers

  	
   

  
	
  Schedule 5.6(d)

  	
  Commercial Tort Claims

  	
   

  
	
  Schedule 5.7(b)

  	
  Capitalization of Borrower

  	
   

  
	
  Schedule 5.7(c)

  	
  Capitalization of
  Borrower’s Subsidiaries

  	
   

  
	
  Schedule 5.9

  	
  Litigation

  	
   

  
	
  Schedule 5.13

  	
  Environmental Matters

  	
   

  
	
  Schedule 5.15(a)

  	
  Intellectual Property

  	
   

  
	
  Schedule
  5.15(b)

  	
  Source
  Code Licenses

  	
   

  
	
  Schedule
  5.15(c)

  	
  Interests
  in Intellectual Property Rights

  	
   

  
	
  Schedule 5.17

  	
  Deposit Accounts and
  Securities Accounts

  	
   

  
	
  Schedule 5.19

  	
  Permitted Indebtedness

  	
   

  
	
  Schedule
  5.21

  	
  Taxes
  and Payments

  	
   

  
	
  Schedule
  7.1

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  
	
  1117277.8