exv10w1



 




Exhibit
10.1



EXECUTION VERSION




 





$225,000,000




AMENDED AND RESTATED TERM LOAN AGREEMENT




among




EDDIE BAUER HOLDINGS, INC.,




EDDIE BAUER, INC.,

as Borrower,




The Several Lenders from Time to Time Parties Hereto,




GOLDMAN SACHS CREDIT PARTNERS L.P.,

as Syndication Agent,




and




JPMORGAN CHASE BANK, N.A.,

as Administrative Agent




Dated as of June 21, 2005



 Amended and Restated as of April 4, 2007



 







J.P. MORGAN SECURITIES INC. AND GOLDMAN SACHS CREDIT PARTNERS L.P.,




as Joint Lead Arrangers and Joint Bookrunners










 



 


TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	SECTION 1. DEFINITIONS
	 	 	 	 
	 
	 	 	 	 
	1.1 Defined Terms
	 	 	1	 
	1.2 Other Definitional Provisions
	 	 	18	 
	 
	 	 	 	 
	SECTION 2. AMOUNT AND TERMS OF TERM COMMITMENTS
	 	 	 	 
	 
	 	 	 	 
	2.1 Refinance of Existing Loans and Term Commitments
	 	 	18	 
	2.2 Procedure for Loan Borrowing
	 	 	18	 
	2.3 Repayment of Loans
	 	 	19	 
	2.4 Fees, etc.
	 	 	19	 
	2.5 Optional Prepayments
	 	 	19	 
	2.6 Mandatory Prepayments
	 	 	20	 
	2.7 Conversion and Continuation Options
	 	 	21	 
	2.8 Limitations on Eurodollar Tranches
	 	 	21	 
	2.9 Interest Rates and Payment Dates
	 	 	22	 
	2.10 Computation of Interest and Fees
	 	 	22	 
	2.11 Inability to Determine Interest Rate
	 	 	22	 
	2.12 Pro Rata Treatment and Payments
	 	 	23	 
	2.13 Requirements of Law
	 	 	24	 
	2.14 Taxes
	 	 	25	 
	2.15 Indemnity
	 	 	26	 
	2.16 Change of Lending Office
	 	 	27	 
	2.17 Replacement of Lenders
	 	 	27	 
	 
	 	 	 	 
	SECTION 3. REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	 
	 	 	 	 
	3.1 Financial Condition
	 	 	27	 
	3.2 No Change
	 	 	28	 
	3.3 Existence; Compliance with Law
	 	 	28	 
	3.4 Power; Authorization; Enforceable Obligations
	 	 	28	 
	3.5 No Legal Bar
	 	 	29	 
	3.6 Litigation
	 	 	29	 
	3.7 No Default
	 	 	29	 
	3.8 Ownership of Property; Liens
	 	 	29	 
	3.9 Intellectual Property
	 	 	29	 
	3.10 Taxes
	 	 	29	 
	3.11 Federal Regulations
	 	 	30	 
	3.12 Labor Matters
	 	 	30	 
	3.13 ERISA
	 	 	30	 
	3.14 Investment Company Act; Other Regulations
	 	 	30	 
	3.15 Subsidiaries
	 	 	30	 
	3.16 Use of Proceeds
	 	 	31	 
	3.17 Environmental Matters
	 	 	31	 
	3.18 Accuracy of Information, etc
	 	 	31	 
	3.19 Security Documents
	 	 	32	 
	3.20 Solvency
	 	 	32	 




i









 



 


	 	 	 	 	 
	 	 	Page
	3.21 Regulation H
	 	 	32	 
	3.22 Certain Documents
	 	 	32	 
	 
	 	 	 	 
	SECTION 4. CONDITIONS PRECEDENT
	 	 	 	 
	 
	 	 	 	 
	4.1 Conditions to the Restatement Effective Date
	 	 	33	 
	 
	 	 	 	 
	SECTION 5. AFFIRMATIVE COVENANTS
	 	 	 	 
	 
	 	 	 	 
	5.1 Financial Statements
	 	 	35	 
	5.2 Certificates; Other Information
	 	 	36	 
	5.3 Payment of Obligations
	 	 	37	 
	5.4 Maintenance of Existence; Compliance
	 	 	37	 
	5.5 Maintenance of Property; Insurance
	 	 	37	 
	5.6 Inspection of Property; Books and Records; Discussions
	 	 	38	 
	5.7 Notices
	 	 	38	 
	5.8 Environmental Laws
	 	 	39	 
	5.9 [Intentionally Omitted]
	 	 	39	 
	5.10 Additional Collateral, etc
	 	 	39	 
	5.11 Passive Company Status
	 	 	41	 
	5.12 Post Closing Matters
	 	 	41	 
	 
	 	 	 	 
	SECTION 6. NEGATIVE COVENANTS
	 	 	 	 
	 
	 	 	 	 
	6.1 Financial Condition Covenants
	 	 	41	 
	6.2 Indebtedness
	 	 	43	 
	6.3 Liens
	 	 	44	 
	6.4 Fundamental Changes
	 	 	46	 
	6.5 Disposition of Property
	 	 	46	 
	6.6 Restricted Payments
	 	 	47	 
	6.7 Capital Expenditures
	 	 	47	 
	6.8 Investments
	 	 	48	 
	6.9 Optional Payments and Modifications of Certain Debt Instruments
	 	 	49	 
	6.10 Transactions with Affiliates
	 	 	50	 
	6.11 Sales and Leasebacks
	 	 	50	 
	6.12 Swap Agreements
	 	 	50	 
	6.13 Changes in Fiscal Periods
	 	 	50	 
	6.14 Negative Pledge Clauses
	 	 	50	 
	6.15 Clauses Restricting Subsidiary Distributions
	 	 	50	 
	6.16 Lines of Business
	 	 	51	 
	6.17 Environmental Matters
	 	 	51	 
	6.18 Transactions Relating to Spiegel Acceptance Corporation
	 	 	51	 
	 
	 	 	 	 
	SECTION 7. EVENTS OF DEFAULT
	 	 	 	 
	 
	 	 	 	 
	SECTION 8. THE AGENTS
	 	 	 	 
	 
	 	 	 	 
	8.1 Appointment
	 	 	54	 
	8.2 Delegation of Duties
	 	 	54	 
	8.3 Exculpatory Provisions
	 	 	54	 
	8.4 Reliance by Administrative Agent
	 	 	54	 




ii









 



 


	 	 	 	 	 
	 	 	Page
	8.5 Notice of Default
	 	 	55	 
	8.6 Non-Reliance on Agents, Arrangers and Other Lenders
	 	 	55	 
	8.7 Indemnification
	 	 	55	 
	8.8 Agent in Its Individual Capacity
	 	 	56	 
	8.9 Successor Administrative Agent
	 	 	56	 
	8.10 Syndication Agent and Arrangers
	 	 	56	 
	 
	 	 	 	 
	SECTION 9. MISCELLANEOUS
	 	 	 	 
	 
	 	 	 	 
	9.1 Amendments and Waivers
	 	 	56	 
	9.2 Notices
	 	 	57	 
	9.3 No Waiver; Cumulative Remedies
	 	 	58	 
	9.4 Survival of Representations and Warranties
	 	 	58	 
	9.5 Payment of Expenses and Taxes
	 	 	58	 
	9.6 Successors and Assigns; Participations and Assignments
	 	 	59	 
	9.7 Adjustments; Set-off
	 	 	62	 
	9.8 Counterparts
	 	 	62	 
	9.9 Severability
	 	 	62	 
	9.10 Integration
	 	 	63	 
	9.11 GOVERNING LAW
	 	 	63	 
	9.12 Submission To Jurisdiction; Waivers
	 	 	63	 
	9.13 Acknowledgements
	 	 	63	 
	9.14 Releases of Guarantees and Liens
	 	 	64	 
	9.15 Confidentiality
	 	 	64	 
	9.16 Patriot Act
	 	 	64	 
	9.17 WAIVERS OF JURY TRIAL
	 	 	65	 




iii










 



 




 SCHEDULES:




	 	 	 
	1.1A

	 	Commitments
	1.1B

	 	Mortgaged Property
	3.2

	 	Changes
	3.4

	 	Consents, Authorizations, Filings and Notices
	3.7

	 	Defaults
	3.9

	 	Intellectual Property Litigation
	3.15

	 	Subsidiaries
	3.19(a)

	 	UCC Filing Jurisdictions
	3.19(b)

	 	Mortgage Filing Jurisdictions
	6.2(d)

	 	Existing Indebtedness
	6.3(f)

	 	Existing Liens
	6.8(h)

	 	Existing Investments






EXHIBITS:




	 	 	 
	A

	 	Form of Assignment and Assumption
	B

	 	Form of Compliance Certificate
	C

	 	Form of Guarantee and Collateral Agreement
	D

	 	Form of Exemption Certificate
	E

	 	Form of Closing Certificate
	F

	 	Form of Mortgage





iv










 



 




          AMENDED AND RESTATED TERM LOAN AGREEMENT (this “Agreement”), dated as of June 21, 2005
and amended and restated as of April 4, 2007, among EDDIE BAUER HOLDINGS, INC., a Delaware
corporation (“Holdings”), EDDIE BAUER, INC., a Delaware corporation (the
“Borrower”), the several banks and other financial institutions or entities from time to
time parties to this Agreement (collectively, the “Lenders”), GOLDMAN SACHS CREDIT PARTNERS
L.P., as syndication agent (in such capacity, the “Syndication Agent”), and JPMORGAN CHASE
BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”).




W I T N E S S E T H:




          WHEREAS, Holdings, the Borrower, certain of the Lenders and the Administrative Agent are
parties to that certain Term Loan Agreement, dated as of June 21, 2005 (as heretofore modified and
supplemented and in effect immediately before giving effect to the amendment and restatement
contemplated hereby, the “Existing Loan Agreement”);



          WHEREAS, the Borrower has requested that the Existing Loan Agreement be amended and restated
to, among other things, authorize the issuance of not less than $75,000,000 of Convertible Notes
(as defined herein) and to extend the maturity date of, and refinance, the loans outstanding
thereunder (the “Existing Term Loans”), in each case to occur contemporaneously with the
Restatement Effective Date; and




          WHEREAS, the Borrower has also requested that the Existing Loan Agreement be restated in its
entirety to read as provided herein.




          Accordingly, effective on the Restatement Effective Date (as defined herein), the Existing
Loan Agreement shall be amended and restated in its entirety as follows:




SECTION 1. DEFINITIONS




          1.1 Defined Terms. As used in this Agreement, the terms listed in this Section 1.1
shall have the respective meanings set forth in this Section 1.1.




          “ABL Facility”: the revolving credit facility provided to the Borrower and certain of
its Subsidiaries pursuant to the ABL Facility Agreement and any refinancings, renewals or
extensions thereof in accordance with Section 6.2.




          “ABL Facility Agent”: Bank of America, N.A., in its capacity as agent under the ABL
Facility Agreement, and any successor agent thereto.




          “ABL Facility Agreement”: the Loan and Security Agreement, dated as of June 21, 2005,
among the Borrower, Holdings, the Subsidiaries of the Borrower party thereto, the financial
institutions named therein, and Bank of America, N.A., as agent, Banc of America Securities LLC, as
sole lead arranger and book manager, Fleet Retail Group, Inc. and The CIT Group/Business Credit,
Inc., as co-syndication agents, and General Electric Capital Corporation, as documentation agent,
together with all instruments and other agreements entered into by any Group Member in connection
therewith, in each case, as in effect on the date hereof and as hereafter amended, supplemented or
otherwise modified from time to time in accordance with Section 6.9 or refinanced, renewed or
extended in accordance with Section 6.2.




          “ABR”: for any day, a rate per annum (rounded upwards, if necessary, to the next
1/100 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective







 



2




Rate in effect on such day plus 1/2 of 1%. Any change in the ABR due to a change in
the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business
on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate,
respectively.




          “ABR Loans”: Loans the rate of interest applicable to which is based upon the ABR.




          “Administrative Agent”: JPMorgan Chase Bank, N.A., together with its affiliates, as
the arranger of the Term Commitments and as the administrative agent for the Lenders under this
Agreement and the other Loan Documents, together with any of its successors.




          “Affiliate”: as to any Person, any other Person that, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person. For purposes of this
definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10%
or more of the securities having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.




          “Agents”: the collective reference to the Syndication Agent and the Administrative
Agent.




          “Agreement”: as defined in the preamble hereto.




          “Applicable Margin”: for each Loan, the rate per annum equal to (a) 3.25%, in the
case of Eurodollar Loans, and (b) 2.25%, in the case of ABR Loans; provided that from and
after the delivery of certificates pursuant to Section 5.2 for the fiscal quarter ended June 30,
2007, the Applicable Margin with respect to the Loans will be determined pursuant to the Pricing
Grid.




          “Approved Fund”: as defined in Section 9.6(b).




          “Arrangers”: J.P. Morgan Securities Inc. and Goldman Sachs Credit Partners L.P., as
joint lead arrangers and joint bookrunners.




          “Asset Sale”: any Disposition of property or series of related Dispositions of
property (excluding any such Disposition permitted by clause (a), (b), (c) or (d) of Section 6.5)
that yields gross proceeds to any Group Member (valued at the initial principal amount thereof in
the case of non-cash proceeds consisting of notes or other debt securities and valued at fair
market value in the case of other non-cash proceeds) in excess of $1,000,000.




          “Assignee”: as defined in Section 9.6(b).




          “Assignment and Assumption”: an Assignment and Assumption, substantially in the form
of Exhibit A.




          “Benefitted Lender”: as defined in Section 9.7(a).




          “Board”: the Board of Governors of the Federal Reserve System of the United States
(or any successor).




          “Borrower”: as defined in the preamble hereto.










 



3




          “Business Day”: a day other than a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to close, provided, that with
respect to notices and determinations in connection with, and payments of principal and interest
on, Eurodollar Loans, such day is also a day for trading by and between banks in Dollar deposits in
the interbank eurodollar market.




          “Capital Expenditures”: for any period, with respect to any Person, the aggregate of
all expenditures by such Person and its Subsidiaries for the acquisition or leasing (pursuant to a
capital lease) of fixed or capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries; provided that the foregoing
shall exclude the effects of improvements on real property leased by the Borrower or any of its
Subsidiaries which are funded by the applicable landlords and which are accounted for as capital
improvements and deferred rent obligations.




          “Capital Lease Obligations”: as to any Person, the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes
of this Agreement, the amount of such obligations at any time shall be the capitalized amount
thereof at such time determined in accordance with GAAP.




          “Capital Stock”: any and all shares of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any and all warrants,
rights or options to purchase any of the foregoing.




          “Cash Equivalents”: (a) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof and backed by the full
faith and credit of the United States, in each case maturing within one year from the date of
acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank
deposits having maturities of twelve months or less from the date of acquisition issued by any
Lender or by any commercial bank organized under the laws of the United States or any state thereof
having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-1 by Standard & Poor’s Ratings Services (“S&P”) or P-1 by Moody’s
Investors Service, Inc. (“Moody’s”), or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally, and maturing within six months from the date of acquisition;
(d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of
clause (b) of this definition, having a term of not more than 30 days, with respect to securities
issued or fully guaranteed or insured by the United States government; (e) securities with
maturities of one year or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign government, the securities
of which state, commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by Moody’s; (f) securities with
maturities of six months or less from the date of acquisition backed by standby letters of credit
issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; (g) money market mutual or similar funds that invest exclusively in assets satisfying
the requirements of clauses (a) through (f) of this definition; or (h) money market funds that (i)
comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, as
amended, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least
$5,000,000,000.




          “Closing Date”: shall mean June 21, 2005.










 



4




          “Code”: the Internal Revenue Code of 1986, as amended from time to time.




          “Collateral”: all property of the Loan Parties, now owned or hereafter acquired, upon
which a Lien is purported to be created by any Security Document.




          “Commonly Controlled Entity”: an entity, whether or not incorporated, that is under
common control with the Borrower within the meaning of Section 4001(a)(14) of ERISA or is part of a
group that includes the Borrower and that is treated as a single employer under Section 414(b) or
(c) of the Code.




          “Compliance Certificate”: a certificate duly executed by a Responsible Officer
substantially in the form of Exhibit B.




          “Conduit Lender”: any special purpose corporation organized and administered by any
Lender for the purpose of making Loans otherwise required to be made by such Lender and designated
by such Lender in a written instrument; provided, that the designation by any Lender of a
Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan
under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the
designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to
deliver all consents and waivers required or requested under this Agreement with respect to its
Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled
to receive any greater amount pursuant to Sections 2.13, 2.14, 2.15 or 9.5 than the designating
Lender would have been entitled to receive in respect of the Loans made by such Conduit Lender or
(b) be deemed to have any Commitment.




          “Confidential Information Memorandum”: the Confidential Information Memorandum dated
March 2007 and furnished to certain Lenders on March 9, 2007.




          “Consolidated Current Assets”: at any date, all amounts (other than cash and Cash
Equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current
assets” (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries
at such date.




          “Consolidated Current Liabilities”: at any date, all amounts that would, in
conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like
caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date, but
excluding the current portion of any Funded Debt of the Borrower and its Subsidiaries.




          “Consolidated EBITDA”: for any period, Consolidated Net Income for such period plus,
without duplication and to the extent reflected as a charge in the statement of such Consolidated
Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization
or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation and amortization
expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization
costs, (e) non-cash writedowns of tangible or intangible assets, (f) non-cash expenses related to
stock options and restricted stock grants accounted for pursuant to SFAS 123 or similar accounting
standards, (g) non-cash expenses related to the amortization of lease obligations, (h) non-cash
expenses related to loss recorded on equity share of foreign joint ventures, (i) any extraordinary,
unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income for such period,
non-cash losses on sales of assets outside of the ordinary course of business), provided
that the amounts referred to in this clause (i) shall not, in the aggregate, exceed $10,000,000 for
any fiscal year of the Borrower, (j) any cash received during such period in respect of items
described in clause (A)(ii) below subsequent to the fiscal quarter in which the relevant







 



5




non-cash income or gain was reflected in the statement of Consolidated Net Income, and (k)
cash expenses arising during the first quarter of the 2007 fiscal year in an amount not to exceed
(x) $5,000,000 in connection with that certain merger agreement among the Borrower, Sun Capital
Partners and Golden Gate Partners and (y) $5,200,000 for severance payments arising in connection
with the departure of the chief executive officer in February 2007, and minus, (A) to the
extent included in the statement of such Consolidated Net Income for such period, the sum of (i)
interest income, (ii) any extraordinary, unusual or non-recurring income or gains (including,
whether or not otherwise includable as a separate item in the statement of such Consolidated Net
Income for such period, gains on the sales of assets outside of the ordinary course of business),
(iii) income tax credits (to the extent not netted from income tax expense) and (iv) any other
non-cash income, (B) any cash payments made during such period in respect of items described in
clause (i) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses
were reflected as a charge in the statement of Consolidated Net Income and (C) to the extent
included in the statement of such Consolidated Net Income for such period, any cash charges
associated with lease obligations which do not appear on the statement of profit and loss, all as
determined on a consolidated basis.




          “Consolidated EBITDAR”: for any period, Consolidated EBITDA for such period
plus Consolidated Rent Expense for such period.




          “Consolidated Fixed Charge Coverage Ratio”: for any period, the ratio of (a)
Consolidated EBITDAR for such period to (b) the sum (without duplication) of (i) Consolidated
Interest Expense for such period, (ii) Consolidated Rent Expense for such period, (iii) the
aggregate amount actually paid by the Borrower and its Subsidiaries during such period on account
of Capital Expenditures (excluding the principal amount of Indebtedness (other than any Loans)
incurred in connection with such expenditures) and (iv) scheduled payments made during such period
on account of principal of Indebtedness of the Borrower or any of its Subsidiaries (including
scheduled principal payments in respect of the Loans).




          “Consolidated Interest Expense”: for any period, total cash interest expense
(including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for
such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries
(including all commissions, discounts and other fees and charges owed with respect to letters of
credit and bankers’ acceptance financing and net costs under Swap Agreements in respect of interest
rates to the extent such net costs are allocable to such period in accordance with GAAP).




          “Consolidated Net Income”: for any period, the consolidated net income (or loss) of
the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP;
provided that there shall be excluded (a) the income (or deficit) of any Person accrued
prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a
Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by the Borrower or such
Subsidiary in the form of dividends or similar distributions, and (c) the undistributed earnings of
any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the terms of any
Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to
such Subsidiary.




          “Consolidated Rent Expense”: for any period, the aggregate amount of fixed and
contingent rentals payable by the Borrower and its Subsidiaries for such period with respect to
leases of real and personal property, determined on a consolidated basis in accordance with GAAP,
excluding non-cash expenses related to the amortization of lease obligations.










 



6




          “Consolidated Senior Secured Debt”: at any time, the aggregate amount of Consolidated
Total Debt, excluding (x) the Convertible Notes, (y) any Permitted Junior Lien Debt and (z)
Indebtedness that is not secured by a Lien.




          “Consolidated Senior Secured Leverage Ratio”: as at the last day of any period, the
ratio of (a) Consolidated Senior Secured Debt on such day to (b) Consolidated EBITDA for such
period.




          “Consolidated Total Debt”: at any date, the aggregate principal amount of all
Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis
in accordance with GAAP; provided that at any such date the amount of Indebtedness
outstanding under the ABL Facility shall be calculated as an average of the principal amount
outstanding at the end of each day for the prior 365 days.




          “Consolidated Working Capital”: at any date, the excess of Consolidated Current
Assets on such date over Consolidated Current Liabilities on such date.




          “Continuing Directors”: the directors of Holdings on the Restatement Effective Date,
and each other director, if, in each case, such other director’s nomination for election to the
board of directors of Holdings is recommended by at least
662/3% of the then Continuing Directors.




          “Contractual Obligation”: as to any Person, any provision of any security issued by
such Person or of any agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound.




          “Convertible Notes Documents”: the Indenture, dated as of April 4, 2007 among
Holdings, the subsidiary guarantors parties thereto and the trustee therefor, and any documentation
executed by Holdings in connection with Indebtedness permitted pursuant to Section 6.2(k), in each
case as such agreement may be amended, supplemented or otherwise modified from time to time in
accordance with Section 6.9.




          “Convertible Notes”: the convertible notes issued by Holdings pursuant to the
Convertible Notes Documents.




          “Default”: any of the events specified in Section 7, whether or not any requirement
for the giving of notice, the lapse of time, or both, has been satisfied.




          “Disposition”: with respect to any property, any sale, lease, sale and leaseback,
assignment, conveyance, transfer or other disposition thereof. The terms “Dispose” and
“Disposed of” shall have correlative meanings.




          “Dollars” and “$”: dollars in lawful currency of the United States.




          “Domestic Subsidiary”: any Subsidiary of the Borrower organized under the laws of any
jurisdiction within the United States.




          “ECF Percentage”: 50%; provided, that, with respect to each fiscal year of
the Borrower ending after December 31, 2007, the ECF Percentage shall be reduced to 25% if the
Consolidated Senior Secured Leverage Ratio as of the last day of such fiscal year is not greater
than 2.00 to 1.00.




          “Eddie Bauer Canada”: Eddie Bauer of Canada, Inc.










 



7




          “Environmental Laws”: any and all foreign, Federal, state, local or municipal laws,
rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental
Authority or other Requirements of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment, or of human health as
such relates to exposure to hazardous or deleterious materials, or employee health and safety as
such relates to exposure to hazardous or deleterious materials, as has been, is now or may at any
time hereafter be in effect.




          “Environmental Permits”: any and all permits, licenses, approvals, registrations,
notifications, exemptions and any other authorization required under any Environmental Law.




          “ERISA”: the Employee Retirement Income Security Act of 1974, as amended from time to
time.




          “Eurocurrency Reserve Requirements”: for any day as applied to a Eurodollar Loan, the
aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve
requirements in effect on such day (including basic, supplemental, marginal and emergency reserves)
under any regulations of the Board or other Governmental Authority having jurisdiction with respect
thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the
Federal Reserve System.




          “Eurodollar Base Rate”: with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum determined on the basis of the rate for
deposits in Dollars for a period equal to such Interest Period commencing on the first day of such
Interest Period appearing on Page 3750 of the Telerate screen as of 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period. In the event that such rate does not
appear on Page 3750 of the Telerate screen (or otherwise on such screen), the “Eurodollar Base
Rate” shall be determined by reference to such other comparable publicly available service for
displaying eurodollar rates as may be selected by the Administrative Agent or, in the absence of
such availability, by reference to the rate at which the Administrative Agent is offered Dollar
deposits at or about 11:00 A.M., New York City time, two Business Days prior to the beginning of
such Interest Period in the interbank eurodollar market where its eurodollar and foreign currency
and exchange operations are then being conducted for delivery on the first day of such Interest
Period for the number of days comprised therein.




          “Eurodollar Loans”: Loans the rate of interest applicable to which is based upon the
Eurodollar Rate.




          “Eurodollar Rate”: with respect to each day during each Interest Period pertaining to
a Eurodollar Loan, a rate per annum determined for such day in accordance with the following
formula (rounded upward to the nearest 1/100th of 1%):




                         Eurodollar Base Rate                         

1.00 — Eurocurrency Reserve Requirements




          “Eurodollar Tranche”: the collective reference to Eurodollar Loans the then current
Interest Periods with respect to all of which begin on the same date and end on the same later date
(whether or not such Loans shall originally have been made on the same day).




          “Event of Default”: any of the events specified in Section 7, provided that
any requirement for the giving of notice, the lapse of time, or both, has been satisfied.










 



8




          “Excess Cash Flow”: for any fiscal year of the Borrower, the excess, if any, of (a)
the sum, without duplication, of (i) Consolidated Net Income for such fiscal year or such period,
as applicable, (ii) the amount of all non-cash charges (including depreciation and amortization)
deducted in arriving at such Consolidated Net Income, (iii) decreases in Consolidated Working
Capital for such fiscal year or such period, as applicable, (iv) the aggregate net amount of
non-cash loss on the Disposition of property by the Borrower and its Subsidiaries during such
fiscal year or such period, as applicable (other than sales of inventory in the ordinary course of
business), to the extent deducted in arriving at such Consolidated Net Income and (v) income tax
expense of the Borrower and its Subsidiaries for such fiscal year or such period, as applicable,
over (b) the sum, without duplication, of (i) the amount of all non-cash credits included
in arriving at such Consolidated Net Income, (ii) the aggregate amount actually paid by the
Borrower and its Subsidiaries in cash during such fiscal year or such period, as applicable, on
account of Capital Expenditures (excluding the principal amount of Indebtedness incurred in
connection with such expenditures and any such expenditures financed with the proceeds of any
Reinvestment Deferred Amount), (iii) the aggregate amount of all regularly scheduled principal
payments of Funded Debt (including the Loans) of the Borrower and its Subsidiaries made during such
fiscal year or such period, as applicable (other than in respect of any revolving credit facility
to the extent there is not an equivalent permanent reduction in commitments thereunder), (iv)
increases in Consolidated Working Capital for such fiscal year or such period, as applicable, (v)
the aggregate net amount of gain on the Disposition of (or Recovery Event with respect to) property
by the Borrower and its Subsidiaries during such fiscal year or such period, as applicable (other
than sales of inventory in the ordinary course of business), to the extent included in arriving at
such Consolidated Net Income, (vi) income taxes actually paid by the Borrower and its Subsidiaries
during such fiscal year or such period, as applicable, and (vii) amounts paid to holders of
Convertible Notes to the extent permitted by the proviso to Section 6.9(f); provided that
with respect to the Securitization Subsidiaries, Excess Cash Flow shall include the excess, if any,
of (x) the aggregate amounts actually received in cash by the Securitization Subsidiaries or
Holdings, less any amounts Holdings has any reasonable cause to believe may be subject to an in rem
claim of a third party or a preferential or fraudulent transfer claim of a third party, during such
fiscal year or period, as applicable, over (y) the aggregate amounts actually paid in cash
by the Securitization Subsidiaries or Holdings on account of the Securitization Note during such
fiscal year or period, as applicable.




          “Excess Cash Flow Application Date”: as defined in Section 2.6(d).




          “Excluded Foreign Subsidiary”: any Foreign Subsidiary in respect of which either (a)
the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing by
such Subsidiary of the Obligations, would, in the good faith judgment of the Borrower, result in
adverse tax consequences to the Borrower or could reasonably be expected to violate any Requirement
of Law binding on such Foreign Subsidiary or its property or directors.




          “Facility”: the Term Commitments and the Loans made thereunder.




          “Federal Funds Effective Rate”: for any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by JPMorgan Chase Bank, N.A. from three
federal funds brokers of recognized standing selected by it.




          “Foreign Subsidiary”: any Subsidiary of the Borrower that is not a Domestic
Subsidiary.




          “Funded Debt”: as to any Person, all Indebtedness of such Person that matures more
than one year from the date of its creation or matures within one year from such date but is
renewable or







 



9




extendible, at the option of such Person, to a date more than one year from such date or
arises under a revolving credit or similar agreement that obligates the lender or lenders to extend
credit during a period of more than one year from such date, including all current maturities and
current sinking fund payments in respect of such Indebtedness whether or not required to be paid
within one year from the date of its creation and, in the case of the Borrower, Indebtedness in
respect of the Loans.




          “Funding Office”: the office of the Administrative Agent specified in Section 9.2 or
such other office as may be specified from time to time by the Administrative Agent as its funding
office by written notice to the Borrower and the Lenders.




          “GAAP”: generally accepted accounting principles in the United States as in effect
from time to time, except that for purposes of Section 6.1, GAAP shall be determined on the basis
of such principles in effect on the date hereof and consistent with those used in the preparation
of the most recent audited financial statements referred to in Section 3.1(b). In the event that
any “Accounting Change” (as defined below) shall occur and such change results in a change in the
method of calculation of financial covenants, standards or terms in this Agreement, then the
Borrower and the Administrative Agent agree to enter into negotiations in order to amend such
provisions of this Agreement so as to reflect equitably such Accounting Changes with the desired
result that the criteria for evaluating the Borrower’s financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made. Until such time as such
an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and
the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue
to be calculated or construed as if such Accounting Changes had not occurred. “Accounting Changes”
refers to changes in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants or, if applicable, the SEC.




          “Governmental Authority”: any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative
functions of or pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).




          “Group Members”: the collective reference to Holdings, the Borrower and their
respective Subsidiaries.




          “Guarantee and Collateral Agreement”: the Guarantee and Collateral Agreement, dated
as of June 21, 2005 and amended and restated as of April 4, 2007, substantially in the form of
Exhibit C, among Holdings, the Borrower and each Subsidiary Guarantor and any amendment, waiver,
supplement or any other modification to the foregoing.




          “Guarantee Obligation”: as to any Person (the “guaranteeing person”), any
obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing
Person that guarantees or in effect guarantees, or which is given to induce the creation of a
separate obligation by another Person (including any bank under any letter of credit) that
guarantees or in effect guarantees, any Indebtedness (the “primary obligations”) of any
other third Person (the “primary obligor”) in any manner, whether directly or indirectly,
including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any
such primary obligation or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation of the ability of
the







 



10




primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of
(a) an amount equal to the stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing
person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation,
unless such primary obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall
be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as
determined by the Borrower in good faith.




          “Guarantors”: the collective reference to Holdings and the Subsidiary Guarantors.




          “Holdings”: as defined in the preamble hereto.




          “Indebtedness”: of any Person at any date, without duplication, (a) all indebtedness
of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase
price of property or services (other than trade payables incurred in the ordinary course of such
Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person (even though the
rights and remedies of the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all Capital Lease Obligations of such
Person, (f) all obligations of such Person, contingent or otherwise, as an account party or
applicant under or in respect of acceptances, letters of credit, surety bonds or similar
arrangements, (g) the liquidation value of all mandatorily redeemable preferred Capital Stock of
such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind
referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in
clauses (a) through (h) above secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts
and contract rights) owned by such Person (other than Liens of the types described in Section
6.3(b), (c), (d) and (i)), whether or not such Person has assumed or become liable for the payment
of such obligation, and (j) for the purposes of Section 7(e) only, all obligations of such Person
in respect of Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of
any other entity (including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such Indebtedness expressly
provide that such Person is not liable therefor.




          “Insolvency”: with respect to any Multiemployer Plan, the condition that such
Multiemployer Plan is insolvent within the meaning of Section 4245 of ERISA.




          “Insolvent”: pertaining to a condition of Insolvency.




          “Intellectual Property”: the collective reference to all rights, priorities and
privileges relating to intellectual property, whether arising under United States, multinational or
foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or
in equity for any infringement or other impairment thereof, including the right to receive all
proceeds and damages therefrom.










 



11




          “Intercreditor Agreement”: an Intercreditor Agreement, dated as of June 21, 2005,
among the Borrower, each Guarantor, the ABL Facility Agent and the Administrative Agent and any
amendment, waiver, supplement or other modification to the foregoing.




          “Interest Payment Date”: (a) as to any ABR Loan, the last day of each March, June,
September and December to occur while such Loan is outstanding and the final maturity date of such
Loan, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day
of such Interest Period, (c) as to any Eurodollar Loan having an Interest Period longer than three
months, each day that is three months, or a whole multiple thereof, after the first day of such
Interest Period and the last day of such Interest Period and (d) as to any Loan, the date of any
repayment or prepayment made in respect thereof.




          “Interest Period”: as to any Eurodollar Loan, (a) initially, the period commencing on
the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and
ending one, two, three or six (or, if agreed to by all Lenders, nine or twelve) months thereafter,
as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be,
given with respect thereto; and (b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six (or,
if agreed to by all Lenders, nine or twelve) months thereafter, as selected by the Borrower by
irrevocable notice to the Administrative Agent not later than 1:00 P.M., New York City time, on the
date that is three Business Days prior to the last day of the then current Interest Period with
respect thereto; provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:





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




     (ii) the Borrower may not select an Interest Period that would extend beyond the date
final payment is due on the Loans; and




     (iii) any 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) shall end on the last Business Day of a calendar month.



          “Investments”: as defined in Section 6.8.




          “Joint Ventures”: the joint ventures pursuant to the joint venture agreements as in
effect on the Closing Date (other than any modifications from time to time after the Closing Date
with respect to the rate of royalties to be paid by such joint ventures to the Borrower in
connection with the use of trademarks and logos of the Borrower) with Eddie Bauer Japan, Inc. and
Eddie Bauer GmbH Germany.




          “Joint Venture Investments”: Investments in the Joint Ventures.




          “Lenders”: as defined in the preamble hereto; provided that unless the
context otherwise requires, each reference herein to the Lenders shall be deemed to include any
Conduit Lender.




          “Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security interest or any preference,
priority or other security agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any capital lease having
substantially the same







 



12




economic effect as any of the foregoing). For purposes hereof, any licenses granted by a Loan
Party to third parties to use Intellectual Property owned or developed by such Loan Party shall not
constitute a “Lien” on such Intellectual Property.




          “Loan”: any loan made by any Lender pursuant to this Agreement.




          “Loan Documents”: this Agreement, the Security Documents, the Notes, all other
agreements executed in connection with this Agreement in favor of the Administrative Agent and
other agents and arrangers party hereto or thereto, and any amendment, waiver, supplement or other
modification to any of the foregoing.




          “Loan Parties”: each Group Member that is a party to a Loan Document.




          “Material Adverse Effect”: a material adverse effect on (a) the business, property,
operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries,
taken as a whole or (b) the validity or enforceability of this Agreement or the other Loan
Documents taken as a whole or the rights or remedies of the Administrative Agent or the Lenders
hereunder or thereunder taken as a whole.




          “Materials of Environmental Concern”: any gasoline or petroleum (including crude oil
or any fraction thereof) or petroleum products, asbestos, molds, polychlorinated biphenyls,
urea-formaldehyde insulation, radioactivity or any other substances, materials or wastes that is
regulated pursuant to or could reasonably be expected to give rise to liability under any
applicable Environmental Law.




          “Maturity Date”: April 1, 2014.




          “Minority Banks”: as defined in Section 9.1(b).




          “Moody’s”: Moody’s Investor Service, Inc.




          “Mortgage”: each of the mortgages and deeds of trust made by any Loan Party in favor
of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, filed by the
Administrative Agent in connection with the Closing Date, as amended and restated in connection
with the Restatement Effective Date, and any amendment, waiver, supplement or other modification to
the foregoing and any subsequent mortgages and deeds of trust substantially in the form of Exhibit
F (with such changes thereto as shall be advisable under the law of the jurisdiction in which such
mortgage or deed of trust is to be recorded).




          “Mortgaged Property”: the real property listed on Schedule 1.1B, as to which the
Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to the
Mortgage.




          “Multiemployer Plan”: a multiemployer plan as defined in Section 4001(a)(3) of ERISA,
and which is subject to Title IV of ERISA, to which the Borrower or any Commonly Controlled Entity
is making or accruing an obligation to make contributions, or has within any of the preceding six
plan years made or accrued an obligation to make contributions.




          “Net Cash Proceeds”: (a) in connection with any Asset Sale or any Recovery Event, the
proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by
way of deferred payment of principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received), net of attorneys’ fees,
accountants’ fees,







 



13




investment banking fees, amounts required to be applied to the repayment of Indebtedness
secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale
or Recovery Event (other than any Lien pursuant to a Security Document), all distributions and
other payments required to be made pursuant to partnership agreements, limited liability company
organizational documents, joint venture agreements or similar agreements to minority interest
holders in Subsidiaries as a result of such Asset Sale or Recovery Event, any amounts reserved for
purchase price adjustments and post-closing liabilities in connection with any such transaction
(but such amounts shall be included if released or no longer reserved), and other arm’s-length
costs, and other customary fees and expenses actually incurred in connection therewith and net of
taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any
available tax credits or deductions and any tax sharing arrangements) and (b) in connection with
any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received
from such issuance or incurrence, net of attorneys’ fees, investment banking fees, accountants’
fees, underwriting discounts and commissions and other arm’s –length costs and expenses actually
incurred in connection therewith; provided that there shall be excluded any funds received in
connection with the exercise of any stock option or similar equity rights granted to employees or
directors of Holdings or any of its Subsidiaries.




          “Non-Excluded Taxes”: as defined in Section 2.14(a).




          “Non-U.S. Lender”: as defined in Section 2.14(d).




          “Notes”: the collective reference to any promissory note evidencing Loans.




          “Obligations”: the unpaid principal of and interest on (including interest accruing
after the maturity of the Loans and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans and all other obligations and liabilities of the Borrower to the
Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, any other Loan Document or any other document made, delivered or
given in connection herewith or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of
counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower
pursuant hereto) or otherwise.




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




          “Participant”: as defined in Section 9.6(c).




          “Patriot Act”: the USA Patriot Act, Title III of Pub. L. 107-56, signed into law on
October 26, 2001.




          “PBGC”: the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA (or any successor).




          “Pension Act”: the Pension Protection Act of 2006, as it presently exists or as it may
be amended from time to time.










 



14




          “Permitted Exceptions”: as defined in the Mortgages.




          “Permitted Junior Lien Debt”: Indebtedness of the Borrower that is secured by Liens
junior and subordinated to the Liens securing the Obligations and (i) is on terms that are not more
restrictive, taken as a whole, on the Borrower than the terms of this Agreement, as determined in
the reasonable judgment of the Administrative Agent, (ii) has a final maturity date not earlier
than October 1, 2014, and (iii) is subject to an intercreditor agreement to be agreed among the
Administrative Agent and the agent thereof.




          “Person”: an individual, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.




          “Plan”: at a particular time, any employee benefit plan that is covered by ERISA and
in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were
terminated at such time, would reasonably be expected to, under Section 4069 of ERISA, be deemed to
be) an “employer” as defined in Section 3(5) of ERISA.




          “Plan Effective Date”: June 21, 2005.




          “Plan of Reorganization”: the “Modified First Amended Joint Plan of Reorganization
under Chapter 11 of the Bankruptcy Code” for the Borrower and its affiliates, dated as of May 23,
2005, and subject to that certain order of the United States Bankruptcy Court for the Southern
District of New York, dated May 27, 2005.




          “Pricing Grid”: the table set forth below.




	 	 	 	 	 	 	 	 	 
	Consolidated Senior	 	Applicable Margin for	 	Applicable Margin for
	Secured Leverage Ratio	 	Eurodollar Loans	 	ABR Loans
	greater than or equal
to 3.25 to 1.00
	 	 	3.25	%	 	 	2.25	%
	less than 3.25 to 1.00
	 	 	3.00	%	 	 	2.00	%






          Any change in the calculation of the Applicable Margin that is caused by a change in the
Consolidated Senior Secured Leverage Ratio will become effective on the date that the Borrower
delivers a certificate pursuant to Section 5.2 setting forth the change in the Consolidated Senior
Secured Leverage Ratio. In addition, at all times while an Event of Default shall have occurred
and be continuing, the highest rate set forth in each column of the Pricing Grid shall apply.




          “Prime Rate”: the rate of interest per annum publicly announced from time to time by
JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City (the
Prime Rate not being intended to be the lowest rate of interest charged by JPMorgan Chase Bank,
N.A. in connection with extensions of credit to debtors).




          “Pro Forma Balance Sheet”: as defined in Section 3.1(a).










 



15




          “Pro Forma Statement of Operations”: as defined in Section 3.1(a).




          “Projections”: as defined in Section 5.2(c).




          “Recovery Event”: any settlement of or payment in excess of $1,000,000 in respect of
any property or casualty insurance claim or any condemnation proceeding relating to any asset of
any Group Member.




          “Register”: as defined in Section 9.6(b).




          “Regulation U”: Regulation U of the Board as in effect from time to time.




          “Reinvestment Deferred Amount”: with respect to any Reinvestment Event, the aggregate
Net Cash Proceeds received by any Group Member in connection therewith that are not applied to
prepay the Loans pursuant to Section 2.6(c) as a result of the delivery of a Reinvestment Notice.




          “Reinvestment Event”: any Asset Sale or Recovery Event in respect of which the
Borrower has delivered a Reinvestment Notice.




          “Reinvestment Notice”: a written notice executed by a Responsible Officer stating
that no Event of Default has occurred and is continuing and that the Borrower (directly or
indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net
Cash Proceeds of an Asset Sale or Recovery Event to acquire or repair assets useful in its
business.




          “Reinvestment Prepayment Amount”: with respect to any Reinvestment Event, the
Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant
Reinvestment Prepayment Date to acquire or repair assets useful in the Borrower’s (or a
Subsidiary’s) business.




          “Reinvestment Prepayment Date”: with respect to any Reinvestment Event, the earlier
of (a) the date occurring six months after such Reinvestment Event; provided that such
period may be extended, for a period of up to an additional three months, if at the time of
expiration of such six months the Borrower or the relevant Subsidiary has entered into an agreement
to acquire or repair assets useful in its business with the relevant Reinvestment Deferred Amount
and (b) the date on which the Borrower shall have determined not to acquire or repair assets useful
in the Borrower’s business with all or any portion of the relevant Reinvestment Deferred Amount.




          “Reorganization”: with respect to any Multiemployer Plan, the condition that such
plan is in reorganization within the meaning of Section 4241 of ERISA.




          “Reportable Event”: any of the events set forth in Section 4043(c) of ERISA, other
than those events as to which the thirty day notice period is waived
under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.




          “Required Lenders”: at any time, the holders of more than 50% of (a) until the
Restatement Effective Date, the Term Commitments then in effect and (b) thereafter, the aggregate
unpaid principal amount of the Loans then outstanding.




          “Requirement of Law”: as to any Person, the certificate of incorporation and by-laws
or other organizational or governing documents of such Person, and any law, treaty, rule or
regulation or







 



16




determination of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which such Person or any of
its property is subject.




          “Responsible Officer”: the chief executive officer, president, vice president and
controller, or chief financial officer of the Borrower, but in any event, with respect to financial
matters, the chief financial officer, treasurer, vice president and controller or chief accounting
officer of the Borrower.




          “Restatement Effective Date” April 4, 2007, the date on which the conditions
precedent set forth in Section 4.1 shall have been satisfied.




          “Restricted Payments”: as defined in Section 6.6.




          “S&P”: Standard & Poor’s Ratings Service.




          “SEC”: the Securities and Exchange Commission, any successor thereto and any
analogous Governmental Authority.




          “Securitization Note”: that certain promissory note, dated the Plan Effective Date,
issued by Holdings entitling the holder of the note to receive Net Securitization Interests
Payments (as defined therein) paid from funds received from the Securitization Subsidiaries in
respect of any securitization interests held by either Securitization Subsidiary as of the Plan
Effective Date.




          “Securitization Subsidiaries”: the collective reference to Spiegel Acceptance
Corporation and Financial Services Acceptance Corporation, each a Delaware corporation and a direct
Subsidiary of Holdings.




          “Security Documents”: the collective reference to the Guarantee and Collateral
Agreement, the Mortgage and all other security documents previously or hereafter delivered to the
Administrative Agent granting a Lien on any property of any Person to secure the obligations and
liabilities of any Loan Party under any Loan Document and any amendment, waiver, supplement or any
other modification to any of the foregoing.




          “Single Employer Plan”: any Plan that is covered by Title IV of ERISA, but that is
not a Multiemployer Plan.




          “Solvent”: when used with respect to any Person, means that, as of any date of
determination, (a) the amount of the “present fair saleable value” of the assets of such Person
will, as of such date, exceed the amount of all “liabilities of such Person, contingent or
otherwise”, as of such date, as such quoted terms are determined in accordance with applicable
federal and state laws governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater than the amount that
will be required to pay the liability of such Person on its debts as such debts become absolute and
matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital
with which to conduct its business, and (d) such Person will be able to pay its debts as they
mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim”
means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.










 



17




          “Specified Change of Control”: a “Change of Control” (or any other defined term having
a similar purpose) as defined in any ABL Facility, the Convertible Notes Documents or any
documentation governing any Permitted Junior Lien Debt.




          “Subsidiary”: as to any Person, a corporation, partnership, limited liability company
or other entity of which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.




          “Subsidiary Guarantor”: each Subsidiary of the Borrower other than any Excluded
Foreign Subsidiary.




          “Swap Agreement”: any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or any of its Subsidiaries
shall be a “Swap Agreement”.




          “Syndication Agent”: as defined in the preamble hereto.




          “Term Commitment”: as to any Lender, the obligation of such Lender to make a Loan to
the Borrower in a principal amount not to exceed the amount set forth under the heading “Term
Commitment” opposite such Lender’s name on Schedule 1.1A. The aggregate amount of the Term
Commitments as of the Restatement Effective Date is $225,000,000.




          “Term Percentage”: as to any Lender at any time, the percentage which such Lender’s
Term Commitment then constitutes of the Term Commitments (or, at any time after the Restatement
Effective Date, the percentage which the aggregate principal amount of such Lender’s Loans then
outstanding constitutes of the aggregate principal amount of the Loans then outstanding).




          “Transactions”: collectively, (i) the issuance of not less than $75,000,000 of
Convertible Notes, (ii) the repayment of Existing Term Loans from the proceeds of such Convertible
Notes, (iii) the amendment and restatement of the Existing Loan Agreement pursuant to this
Agreement, (iv) the Loans made hereunder and (v) the payment of fees, costs and expenses related to
the foregoing.




          “Transferee”: any Assignee or Participant.




          “Type”: as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.




          “United States”: the United States of America.




          “Wholly Owned Subsidiary”: as to any Person, any other Person all of the Capital
Stock of which (other than directors’ qualifying shares required by law) is owned by such Person
directly and/or through other Wholly Owned Subsidiaries.










 



18




          “Wholly Owned Subsidiary Guarantor”: any Subsidiary Guarantor that is a Wholly Owned
Subsidiary of the Borrower.




          1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms
defined in this Agreement shall have the defined meanings when used in the other Loan Documents or
any certificate or other document made or delivered pursuant hereto or thereto.




          (b)   As used herein and in the other Loan Documents, and any certificate or other document
made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Group Member not
defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not
defined, shall have the respective meanings given to them under GAAP, (ii) the words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii)
the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect
of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings),
(iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to
refer to any and all tangible and intangible assets and properties, including cash, Capital Stock,
securities, revenues, accounts, leasehold interests and contract rights, and (v) references to
agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer
to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise
modified from time to time.




          (c)   The words “hereof”, “herein” and “hereunder” and words of similar import, when used in
this Agreement, shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise
specified.




          (d)   The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.




          SECTION 2. AMOUNT AND TERMS OF TERM COMMITMENTS




          2.1 Refinance of Existing Loans and Term Commitments. Pursuant to the Existing Loan
Agreement, the Lenders thereunder made Existing Term Loans to the Borrower on the Closing Date in
the aggregate principal amount of $300,000,000, and $273,750,000 of the Existing Term Loans remain
outstanding immediately before giving effect to this Agreement. On the Restatement Effective Date,
the Borrower shall refinance $225,000,000 of the Existing Term Loans with Loans made under this
Agreement and shall repay any remaining obligations arising under the Existing Loan Agreement with
the proceeds of Convertible Notes issued immediately prior to, or contemporaneously with, the
Restatement Effective Date. To effectuate the refinance of the Existing Term Loans, subject to the
terms and conditions hereof, each Lender severally agrees to make a term loan to the Borrower on
the Restatement Effective Date in an amount equal to the amount of the Term Commitment of such
Lender. The Loans may from time to time be Eurodollar Loans or ABR Loans, as determined by the
Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 2.7.




          2.2 Procedure for Loan Borrowing. The Borrower shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent prior to 1:00 P.M.,
New York City time, one Business Day prior to the anticipated Restatement Effective Date) requesting that the Lenders make the
Loans on the Restatement Effective Date. The Loans made on the Restatement Effective Date shall
initially be ABR Loans and, unless otherwise agreed by the Administrative Agent in its sole
discretion, no Loan may be converted into or continued as a Eurodollar Loan at any time prior to
the third Business Day after the Restatement Effective Date (the “Eurodollar Date”) and no
Loan may be converted into or continued as a Eurodollar Loan having an Interest Period in excess of
one month








 



19




prior to the date that is 30 days after the Eurodollar Date. Upon receipt of such notice
the Administrative Agent shall promptly notify each Lender thereof. Not later than 1:00 P.M., New
York City time, on the Restatement Effective Date each Lender shall make available to the
Administrative Agent at the Funding Office an amount in immediately available funds equal to the
Loan to be made by such Lender. The Administrative Agent shall credit the account of the Borrower
on the books of such office of the Administrative Agent with the aggregate of the amounts made
available to the Administrative Agent by the Lenders in immediately available funds.




          2.3 Repayment of Loans. The Loans of each Lender shall mature in 24 consecutive
quarterly installments, each of which shall be in an amount equal to such Lender’s Term Percentage
multiplied by the amount set forth below opposite such installment:




	 	 	 	 	 
	Installment	 	Principal Amount
	June 30, 2007
	 	$	562,500	 
	September 30, 2007
	 	$	562,500	 
	December 31, 2007
	 	$	562,500	 
	March 31, 2008
	 	$	562,500	 
	June 30, 2008
	 	$	562,500	 
	September 30, 2008
	 	$	562,500	 
	December 31, 2008
	 	$	562,500	 
	March 31, 2009
	 	$	562,500	 
	June 30, 2009
	 	$	562,500	 
	September 30, 2009
	 	$	562,500	 
	December 31, 2009
	 	$	562,500	 
	March 31, 2010
	 	$	562,500	 
	June 30, 2010
	 	$	562,500	 
	September 30, 2010
	 	$	562,500	 
	December 31, 2010
	 	$	562,500	 
	March 31, 2011
	 	$	562,500	 
	June 30, 2011
	 	$	562,500	 
	September 30, 2011
	 	$	562,500	 
	December 31, 2011
	 	$	562,500	 
	March 31, 2012
	 	$	562,500	 
	June 30, 2012
	 	$	562,500	 
	September 30, 2012
	 	$	562,500	 
	December 31, 2012
	 	$	562,500	 
	March 31, 2013
	 	$	562,500	 
	June 30, 2013
	 	$	562,500	 
	September 30, 2013
	 	$	562,500	 
	December 31, 2013
	 	$	562,500	 
	Maturity Date
	 	$	209,812,500	 






          2.4 Fees, etc.
The Borrower agrees to pay the fees in the amounts and on the dates as set forth in any fee
agreements between the Borrower and the Administrative Agent or among the Borrower, the Agents and
the Arrangers, and to perform any other obligations contained therein.




          2.5 Optional Prepayments. The Borrower may at any time and from time to time prepay
the Loans, in whole or in part, without premium or penalty, upon irrevocable notice delivered to
the Administrative Agent no later than 1:00 P.M., New York City time, three Business Days prior
thereto, in the case of Eurodollar Loans, and no later than 1:00 P.M., New York City time, one
Business Day prior thereto, in the case of ABR Loans, which notice shall specify the date and
amount of prepayment and







 



20




whether the prepayment is of Eurodollar Loans or ABR Loans; provided that
if a Eurodollar Loan is prepaid on any day other than the last day of the Interest Period
applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.15. Upon
receipt of any such notice the Administrative Agent shall promptly notify each Lender. If any such
notice is given, the amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to such date on the amount prepaid. Partial prepayments of
Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof.




          2.6 Mandatory Prepayments. (a) If any Capital Stock shall be issued or sold by any
Loan Party (other than (i) Capital Stock issued to a Loan Party, (ii) Capital Stock issued pursuant
to or in connection with any employee or director stock plan, stock option plan or similar plan,
and (iii) Capital Stock issued pursuant to the Convertible Notes Documents), an amount equal to 50%
of the Net Cash Proceeds thereof shall be applied within two (2) Business Days of receipt by any
Loan Party of the Net Cash Proceeds from such issuance or sale toward the prepayment of the Loans
as set forth in Section 2.6(e); provided that no prepayments of Net Cash Proceeds from such sale or
issuance of any such Capital Stock shall be applied to prepay the Loans if, at the time of such
sale or issuance, the Consolidated Senior Secured Leverage Ratio is less than 2.00 to 1.00;
provided, however, that the Borrower shall not be required to apply to the
prepayment of the Loans such Net Cash Proceeds from the issuance of Capital Stock to the extent
such Net Cash Proceeds are applied to pay, prepay, repurchase or redeem the Convertible Notes to
the extent permitted under the proviso in Section 6.9(f).




          (b)   If any Indebtedness shall be incurred by any Loan Party (excluding any Indebtedness
incurred in accordance Section 6.2, other than Section 6.2(j)(i)), an amount equal to 100% of the
Net Cash Proceeds thereof shall be applied within two (2) Business Days of such incurrence toward
the prepayment of the Loans as set forth in Section 2.6(e); provided that, after Net Cash
Proceeds of at least $50,000,000 of Indebtedness incurred pursuant to Section 6.2(j)(i) shall have
been applied to prepay the Loans, Net Cash Proceeds of up to $50,000,000 of Indebtedness incurred
pursuant to Section 6.2(j)(i) may be excluded from the foregoing requirement during the term of
this Agreement.




          (c)   If on any date any Loan Party shall receive Net Cash Proceeds from any Asset Sale or
Recovery Event then, unless a Reinvestment Notice shall be delivered in respect thereof, an amount
equal to such Net Cash Proceeds shall be applied, within two (2) Business Days of receipt by any
Loan Party of the Net Cash Proceeds, toward the prepayment of the Loans as set forth in Section
2.6(e); provided, that, notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds
of Asset Sales (other than Asset Sales of the type described in clause (ii) of this proviso) that
may be excluded from the foregoing requirement pursuant to a Reinvestment Notice shall not exceed
$1,000,000 in any fiscal year of the Borrower, (ii) the aggregate Net Cash Proceeds of any Asset
Sale in respect of real property with a fair market value less than $3,000,000 may be excluded from
the foregoing requirement pursuant to a
Reinvestment Notice during the term of this Agreement so long as the applicable Loan Party
reinvests such Net Cash Proceeds in real property of like kind and value and (iii) on each
Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to
the relevant Reinvestment Event shall be applied toward the prepayment of the Loans as set forth in
Section 2.6(e); provided further that notwithstanding anything herein to the
contrary, Net Cash Proceeds from any Asset Sale or Recovery Event in respect of the Revolving
Lender Priority Collateral (as defined in the Intercreditor Agreement) shall be applied,
first, to the payment of the principal amount outstanding under the ABL Facility to the
extent required under the ABL Facility Agreement and, second, to the prepayment of the
Loans.




          (d)   If, for any fiscal year of the Borrower commencing with the fiscal year ending December
31, 2007, there shall be Excess Cash Flow, the Borrower shall, on the relevant Excess Cash Flow
Application Date, apply the ECF Percentage of such Excess Cash Flow toward the prepayment of the
Loans as set forth in Section 2.6(e), if and to the extent that such amount exceeds the amount of







 



21




voluntary prepayments of the Loans made during such fiscal year. Each such prepayment shall be
made on a date (an “Excess Cash Flow Application Date”) no later than five Business Days
after the earlier of (i) the date on which the financial statements of the Borrower referred to in
Section 5.1(a), for the fiscal year with respect to which such prepayment is made, are required to
be delivered to the Administrative Agent and (ii) the date such financial statements are actually
delivered.




          (e)   Amounts to be applied in connection with prepayments made pursuant to this Section 2.6
shall be applied to the prepayment of the Loans in accordance with Section 2.12(b). The
application of any prepayment pursuant to this Section 2.6 shall be made, first, to ABR
Loans and, second, to Eurodollar Loans. Each prepayment of the Loans under this Section
2.6 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid.
If, pursuant to this Section 2.6, Eurodollar Loans are required to be prepaid on a day no more than
three Business Days prior to the last day of an Interest Period with respect thereto, the Borrower
may deposit cash in a cash collateral account established with the Administrative Agent, for the
benefit of the Lenders, on terms and conditions satisfactory to the Administrative Agent to be held
for application to such Eurodollar Loans on the last day of the Interest Period with respect
thereto. Interest on any such Eurodollar Loans shall be payable at the then applicable rate during
the period that such cash remains in the cash collateral account.




          2.7 Conversion and Continuation Options. (a) The Borrower may elect from time to
time to convert Eurodollar Loans to ABR Loans by giving the Administrative Agent prior irrevocable
notice of such election no later than 1:00 P.M., New York City time, on the Business Day preceding
the proposed conversion date, provided that any such conversion of Eurodollar Loans other
than on the last day of an Interest Period with respect thereto shall be subject to Section 2.15.
The Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the
Administrative Agent prior irrevocable notice of such election no later than 1:00 P.M., New York
City time, on the third Business Day preceding the proposed conversion date (which notice shall
specify the length of the initial Interest Period therefor), provided that no ABR Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the
Administrative Agent or the Required Lenders have determined in its or their sole discretion not to
permit such conversions. Upon receipt of any such notice the Administrative Agent shall promptly
notify each Lender thereof.




          (b)   Any Eurodollar Loan may be continued as such upon the expiration of the then current
Interest Period with respect thereto by the Borrower giving irrevocable notice to the
Administrative Agent, in accordance with the applicable provisions of the term “Interest Period”
set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans,
provided that no
Eurodollar Loan may be continued as such when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have determined in its or their
sole discretion not to permit such continuations, and provided, further, that if
the Borrower shall fail to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans shall be automatically
converted to ABR Loans on the last day of such then expiring Interest Period. Upon receipt of any
such notice the Administrative Agent shall promptly notify each Lender thereof.




          2.8 Limitations on Eurodollar Tranches. Notwithstanding anything to the contrary in
this Agreement, all borrowings, conversions and continuations of Eurodollar Loans and all
selections of Interest Periods shall be in such amounts and be made pursuant to such elections so
that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans
comprising each Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of $1,000,000
in excess thereof and (b) no more than five Eurodollar Tranches shall be outstanding at any one
time.










 



22




          2.9 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest
for each day during each Interest Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such day plus the Applicable Margin.




          (b)   Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the
Applicable Margin.




          (c)   (i) If all or a portion of the principal amount of any Loan shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), all outstanding Loans (whether or
not overdue) shall bear interest at a rate per annum equal to the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section 2.9 plus 2% and
(ii) if all or a portion of any interest payable on any Loan, any fee or other amount payable
hereunder shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal to the rate then
applicable to ABR Loans plus 2%, in each case, with respect to clauses (i) and (ii) above,
from the date of such non-payment until such amount is paid in full (as well after as before
judgment).




          (d)   Interest shall be payable in arrears on each Interest Payment Date, provided
that interest accruing pursuant to paragraph (c) of this Section 2.9 shall be payable from time to
time on demand.




          2.10 Computation of Interest and Fees. (a) Interest and fees payable pursuant hereto
shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with
respect to ABR Loans the rate of interest on which is calculated on the basis of the Prime Rate,
the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of each determination of a Eurodollar Rate. Any change in the
interest rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of the effective date and the amount of each such change in interest rate.




          (b)   Each determination of an interest rate by the Administrative Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the
absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver
to the Borrower a statement showing the quotations used by the Administrative Agent in determining
any interest rate pursuant to Section 2.9(a).




          2.11 Inability to Determine Interest Rate. If prior to the first day of any Interest
Period:





     (a)   the Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar
Rate for such Interest Period, or




     (b)   the Administrative Agent shall have received notice from the Required Lenders
that the Eurodollar Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such Interest Period,









 



23

the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the
Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans
requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any
Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the
last day of the then-current Interest Period, to ABR Loans. Until such notice has been withdrawn
by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor
shall the Borrower have the right to convert ABR Loans to Eurodollar Loans.




          2.12 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the
Lenders hereunder and each payment by the Borrower on account of any fee payable to the Lenders
shall be made pro rata according to the respective Term Percentages of the Lenders.




          (b)   Each payment (including each prepayment) by the Borrower on account of principal of and
interest on the Loans shall be made pro rata according to the outstanding principal
amounts of the Loans then held by the Lenders. Prepayments of the Loans pursuant to Section 2.5
shall be applied, first, to the immediately succeeding twelve months’ scheduled
amortization payments in direct order of maturity and, second, to reduce all remaining
respective installments thereof ratably according to the amounts of such installments after giving
effect to all prior reductions thereto. The amount of each principal prepayment of the Loans being
made pursuant to Section 2.6 shall be applied to reduce the then remaining installments of the
Loans pro rata based upon the then remaining principal amounts thereof after giving
effect to all prior reductions thereto. Amounts prepaid on account of the Loans may not be
reborrowed.




          (c)   All payments (including prepayments) to be made by the Borrower hereunder, whether on
account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and
shall be made prior to 2:00 P.M., New York City time, on the due date thereof to the Administrative
Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the Lenders promptly
upon receipt in
like funds as received. If any payment hereunder (other than payments on the Eurodollar
Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day. If any payment on a Eurodollar Loan becomes due and payable
on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such payment into another
calendar month, in which event such payment shall be made on the immediately preceding Business
Day. In the case of any extension of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate during such extension.




          (d)   Unless the Administrative Agent shall have been notified in writing by any Lender prior
to a borrowing that such Lender will not make the amount that would constitute its share of such
borrowing available to the Administrative Agent, the Administrative Agent may assume that such
Lender is making such amount available to the Administrative Agent, and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If
such amount is not made available to the Administrative Agent by the required time on the
Restatement Effective Date therefor, such Lender shall pay to the Administrative Agent, on demand,
such amount with interest thereon, at a rate equal to the greater of (i) the Federal Funds
Effective Rate and (ii) a rate determined by the Administrative Agent in according with banking
industry rules on interbank compensation, for the period until the Lender makes such amount
immediately available to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this paragraph shall be conclusive
in the absence of manifest error. If such Lender’s share of such borrowing is not made available
to the Administrative Agent by such Lender within three Business Days







 



24




after the Restatement
Effective Date, the Administrative Agent shall also be entitled to recover such amounts with
interest thereon at the rate per annum applicable to ABR Loans, on demand, from the Borrower.




          (e)   Unless the Administrative Agent shall have been notified in writing by the Borrower
prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will
not make such payment to the Administrative Agent, the Administrative Agent may assume that the
Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in
reliance upon such assumption, make available to the Lenders their respective pro
rata shares of a corresponding amount. If such payment is not made to the Administrative
Agent by the Borrower within three Business Days after such due date, the Administrative Agent
shall be entitled to recover, on demand, from each Lender to which any amount which was made
available pursuant to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein shall be deemed to
limit the rights of the Administrative Agent or any Lender against the Borrower.




          2.13 Requirements of Law. (a) If the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:




          (i)   shall subject any Lender to any tax of any kind whatsoever with respect to this
Agreement or any Eurodollar Loan made by it, or change the basis of taxation of payments to
such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.14 and
changes in the rate of tax on the overall net income of such Lender);




          (ii)   shall impose, modify or hold applicable any reserve, special deposit, compulsory
loan or similar requirement against assets held by, deposits or other liabilities in or for
the account of, advances, loans or other extensions of credit by, or any other acquisition
of funds by, any office of such Lender that is not otherwise included in the determination
of the Eurodollar Rate; or




          (iii)   shall impose on such Lender any other condition;



and the result of any of the foregoing is to increase the cost to such Lender, by an amount that
such Lender deems to be material, of making, converting into, continuing or maintaining Eurodollar
Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the
Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes
entitled to claim any additional amounts pursuant to this paragraph, it shall promptly notify the
Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so
entitled.




          (b)   If any Lender shall have determined that the adoption of or any change in any
Requirement of Law regarding capital adequacy or in the interpretation or application thereof or
compliance by such Lender or any corporation controlling such Lender with any request or directive
regarding capital adequacy (whether or not having the force of law) from any Governmental Authority
made subsequent to the date hereof shall have the effect of reducing the rate of return on such
Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level
below that which such Lender or such corporation could have achieved but for such adoption, change
or compliance (taking into consideration such Lender’s or such corporation’s policies with respect
to capital adequacy) by an amount deemed by such Lender to be material, then from time to time,
after submission by such Lender to the















 




25

Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower
shall pay to such Lender such additional amount or amounts as will compensate such Lender or such
corporation for such reduction.




          (c) A certificate as to any additional amounts payable pursuant to this Section submitted by
any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the
absence of manifest error. Notwithstanding anything to the contrary in this Section, the Borrower
shall not be required to compensate a Lender pursuant to this Section for any amounts incurred more
than six months prior to the date that such Lender notifies the Borrower of such Lender’s intention
to claim compensation therefor; provided that, if the circumstances giving rise to such
claim have a retroactive effect, then such six-month period shall be extended to include the period
of such retroactive effect. The obligations of the Borrower pursuant to this Section shall survive
the termination of this Agreement and the payment of the Loans and all other amounts payable
hereunder.




          2.14 Taxes  (a) All payments made by the Borrower under this Agreement shall be made
free and clear of, and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise or margin taxes (imposed in lieu of net income taxes)
imposed on the Administrative Agent or any Lender as a result of a present or former connection
between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing authority thereof or therein (other than
any such connection arising solely from the Administrative Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced, this Agreement or
any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings (“Non-Excluded Taxes”) or Other Taxes are required to be
withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts
so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to
yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other
Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement, provided, however, that the Borrower shall not be required to increase
any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are
attributable to such Lender’s failure to comply with the requirements of paragraph (d) or (e) of
this Section or (ii) that are United States withholding taxes imposed on amounts payable to such
Lender at the time such Lender becomes a party to this Agreement, except to the extent that such
Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts
from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.




          (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.




          (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly
as possible thereafter the Borrower shall send to the Administrative Agent for its own account or
for the account of the relevant Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof to the extent such receipt is
reasonably available. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due
to the appropriate taxing authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify the Administrative
Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by
the Administrative Agent or any Lender as a result of any such failure.










 



26


          (d) Each Lender (or Transferee) that is not a “U.S. Person” as defined in Section 7701(a)(30)
of the Code (a “Non-U.S. Lender”) shall deliver to the Borrower and the Administrative
Agent (or, in the case of a Participant, to the Lender from which the related participation shall
have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a statement
substantially in the form of Exhibit D and a Form W-8BEN, or any subsequent versions thereof or
successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete
exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower
under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the case of any
Participant, on or before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall
promptly notify the Borrower at any time it determines that it is no longer in a position to
provide any previously delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of
this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this
paragraph that such Non-U.S. Lender is not legally able to deliver.




          (e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax
under the law of the jurisdiction in which the Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without withholding or at a
reduced rate, provided that such Lender is legally entitled to complete, execute and
deliver such documentation and in such Lender’s judgment such completion, execution or submission
would not materially prejudice the legal position of such Lender.




          (f) If the Administrative Agent or any Lender determines, in its sole discretion, that it has
received a refund of any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by
the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this
Section 2.14, it shall pay over such refund to the Borrower (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this Section 2.14 with respect to
the Non-Excluded Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Administrative Agent or such Lender and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund); provided, that
the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the
amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such Governmental
Authority. This paragraph shall not be construed to require the Administrative Agent or any Lender
to make available its tax returns (or any other information relating to its taxes which it deems
confidential) to the Borrower or any other Person.




          (g) The agreements in this Section shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.




          2.15 Indemnity The Borrower agrees to indemnify each Lender for, and to hold each
Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of
(a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar
Loans after the Borrower has given a notice requesting the same in accordance with the provisions
of this










 



27

Agreement, (b) default by the Borrower in making any prepayment of or conversion from
Eurodollar Loans after the Borrower has given a notice thereof in accordance with the provisions of
this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day that is not the last
day of an Interest Period with respect thereto. Such indemnification may include an amount equal
to the excess, if any, of (i) the amount of interest that would have accrued on the amount so
prepaid, or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of such Interest
Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would
have commenced on the date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued
to such Lender on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. A certificate as to any amounts payable pursuant
to this Section 2.15 submitted to the Borrower by any Lender shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.




          2.16 Change of Lending Office. Each Lender agrees that, upon the occurrence of any
event giving rise to the operation of Section 2.13 or 2.14(a) with respect to such Lender, it will,
if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of
such Lender) to designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such designation is made on terms
that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no
economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section
2.16 shall affect or postpone any of the obligations of the Borrower or the rights of any Lender
pursuant to Section 2.13 or 2.14(a).




          2.17 Replacement of Lenders. The Borrower shall be permitted to replace any Lender
that (a) requests reimbursement for amounts owing pursuant to Section 2.13 or 2.14(a) or (b)
defaults in its obligation to make Loans hereunder, with a replacement financial institution;
provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement, (iii) the
replacement financial institution shall purchase, at par, all Loans and other amounts owing to such
replaced Lender on or prior to the date of replacement, (iv) the Borrower shall be liable to such
replaced Lender under Section 2.15 if any Eurodollar Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto, (v) the replacement
financial institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 9.6 (provided that the Borrower shall be obligated to pay
the registration and processing fee referred to therein), (vii) until such time as such replacement
shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to
Section 2.13 or 2.14(a), as the case may be, and (viii) any such replacement shall not be deemed to
be a waiver of any rights that the Borrower, the Administrative Agent or any other Lender shall
have against the replaced Lender.




SECTION 3. REPRESENTATIONS AND WARRANTIES




          To induce the Administrative Agent and the Lenders to enter into this Agreement and to make
the Loans, Holdings and the Borrower hereby jointly and severally represent and warrant to the
Administrative Agent and each Lender that:




          3.1 Financial Condition. (a) The unaudited pro forma consolidated balance sheet of
Holdings and its consolidated Subsidiaries as at December 30, 2006 (including the notes thereto)
(the “Pro Forma Balance Sheet”), copies of which have heretofore been furnished to each
Lender, has been







 



28




prepared giving effect (as if such events had occurred on such date) to the Transactions. The
Pro Forma Balance Sheet has been prepared in good faith upon reasonable assumptions at the time
made and presents fairly on a pro forma basis the estimated financial position of Holdings and its
consolidated Subsidiaries as at December 30, 2006, assuming that the Transactions had actually
occurred at such date. The pro forma statement of operations for the twelve-month period ending on
December 30, 2006 (the “Pro Forma Statement of Operations”), copies of which have
heretofore been furnished to each Lender, has been prepared giving effect (as if such events had
occurred on December 30, 2006) to the Transactions. The Pro Forma Statement of Operations has been
prepared in good faith upon reasonable assumptions at the time made and presents fairly on a pro
forma basis the estimated financial position of Holdings and its consolidated Subsidiaries as at
December 30, 2006, assuming that the events specified in the preceding sentence had actually
occurred on December 30, 2006.




          (b) The audited consolidated balance sheets of Holdings and its consolidated Subsidiaries as
at January 1, 2005, December 31, 2005, and December 30, 2006, and the related combined statements
of operations, stockholders’ equity and comprehensive income and cash flows for the three fiscal
years ended on January 1, 2005, December 31, 2005, and December 30, 2006, reported on by BDO
Seidman, LLP, present fairly in all material respects the consolidated financial condition of
Holdings and its consolidated Subsidiaries as at such date, and the consolidated results of its
operations and its consolidated cash flows for the respective fiscal years then ended. All such
financial statements, including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved (except as approved by
the aforementioned firm of accountants and disclosed therein). No Loan Party has any material
Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or
unusual forward or long-term commitments, including any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, which are not reflected in the
most recent financial statements referred to in this paragraph.




          3.2 No Change. Other than as described on Schedule 3.2, since December 30, 2006, there
has been no development or event that has had or could reasonably be expected to have a Material
Adverse Effect.




          3.3 Existence; Compliance with Law. Each Loan Party (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, and the legal right, to own and operate its property, to lease the property it
operates as lessee and to conduct the business in which it is currently engaged, (c) is duly
qualified as a foreign corporation or other organization and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the conduct of its
business requires such qualification and (d) is in compliance with all Requirements of Law except
to the extent that the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.




          3.4 Power; Authorization; Enforceable Obligations. Each Loan Party has the power and
authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a
party and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party
has taken all necessary organizational action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the
extensions of credit on the terms and conditions of this Agreement. No consent or authorization
of, filing with, notice to or other act by or in respect of, any Governmental Authority or any
other Person (each, a “Filing”) is required in connection with the Transactions and the
extensions of credit hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations,
filings and notices described in Schedule 3.4, which consents, authorizations, filings and notices
have been obtained or made and are in full force and effect, (ii) the filings referred to in
Sections 3.19, 5.4 and 5.8 and any other Filings contemplated by this Agreement or any other Loan










 



29

Document, and (iii) any antitrust Filings required to be made to foreclose on the Collateral.
Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto.
This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal,
valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan
Party in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).




          3.5 No Legal Bar. The execution, delivery and performance of this Agreement and the
other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any Contractual Obligation of any Group Member and will not result in, or
require, the creation or imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created
by the Security Documents or the ABL Facility Agreement). No Requirement of Law or Contractual
Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to
have a Material Adverse Effect.




          3.6 Litigation. No litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of Holdings or the Borrower, threatened
by or against any Group Member or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or
(b) that could reasonably be expected to have a Material Adverse Effect.




          3.7 No Default. Other than as disclosed on Schedule 3.7, no Group Member is in default
under or with respect to any of its Contractual Obligations in any respect that could reasonably be
expected to have a Material Adverse Effect. Upon the consummation of the Transactions, no Default
or Event of Default will be continuing.




          3.8 Ownership of Property; Liens. Except as could not reasonably be expected to have a
Material Adverse Effect, each Group Member has title in fee simple to, or a valid leasehold
interest in, all its real property, and good title to, or a valid leasehold interest in, all its
other property, and such property is free and clear of any Liens except Liens permitted by Section
6.3.




          3.9 Intellectual Property Each Group Member owns, or is licensed to use, all
Intellectual Property included in the Collateral. Except as described in Schedule 3.9, no material
claim has been asserted and is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does
Holdings or the Borrower know of any valid basis for any such claim. To the knowledge of each
Group Member, the use of such Intellectual Property by such Group Member does not infringe on the
rights of any Person in any material respect.




          3.10 Taxes. Each Group Member has (i) filed or caused to be filed all Federal and
other material tax returns that are required to be filed and (ii) paid all taxes shown to be due
and payable on said returns or, except as could not be reasonably expected to have a Material
Adverse Effect, on any assessments made against it or any of its property and all other taxes, fees
or other charges imposed on it or any of its property by any Governmental Authority (in the case of
the foregoing clauses (i) and (ii), other than any the amount or validity of which are currently
being contested in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the relevant Group Member); no tax Lien has
been filed, and, to the knowledge of Holdings and the Borrower, no claim is being asserted, with
respect to any such tax, fee or other charge.










 



30




          3.11 Federal Regulations. No part of the proceeds of any Loans, and no other
extensions of credit hereunder, will be used (a) for “buying” or “carrying” any “margin stock”
within the respective meanings of each of the quoted terms under Regulation U as now and from time
to time hereafter in effect for any purpose that violates the provisions of the Regulations of the
Board or (b) for any purpose that violates the provisions of the Regulations of the Board. If
requested by any Lender or the Administrative Agent, the Borrower will furnish to the
Administrative Agent and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.




          3.12 Labor Matters. Except as, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Group
Member pending or, to the knowledge of Holdings or the Borrower, threatened; (b) hours worked by
and payments made to employees of each Group Member have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all
payments due from any Group Member on account of employee health and welfare insurance have been
paid or accrued as a liability on the books of the relevant Group Member.




          3.13 ERISA. Neither a Reportable Event nor an “accumulated funding deficiency” (within
the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred since the Closing Date
with respect to any Single Employer Plan, and none is reasonably expected to occur. No termination
of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen,
during such period. With respect to each Plan, Holdings, the Borrower, and each Commonly
Controlled Entity has complied in all material respects with the applicable provisions of ERISA and
the Code. On and after the effectiveness of the Pension Act, there has been no failure of any
Single Employer Plan to satisfy the minimum funding standards (within the meaning of Section 412 of
the Code or Section 302 of ERISA) applicable to such Single Employer Plan and no determination that
any Single Employer Plan is, or is expected to be, in “at risk” status within the meaning of Title
IV of ERISA. The present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Single Employer Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made, exceed the value of the
assets of such Single Employer Plan allocable to such accrued benefits by $15,000,000. Neither the
Borrower nor any Commonly Controlled Entity has received any written notification, or has
knowledge, that any Multiemployer Plan is, or is expected to be, in reorganization or in endangered
or critical status (within the meaning of Section 432 of the Code or Section 305 or Title IV of
ERISA) or has been, or is to be, terminated within the meaning of Title IV of ERISA. Neither the
Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result in a material
liability under ERISA, and no Multiemployer Plan exists.




          3.14 Investment Company Act; Other Regulations. No Loan Party is an “investment
company”, or a company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any
Requirement of Law (other than Regulation X of the Board) that limits its ability to incur
Indebtedness.




          3.15 Subsidiaries. Except as disclosed to the Administrative Agent by the Borrower in
writing from time to time after the Restatement Effective Date, (a) Schedule 3.15 sets forth the
name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the
percentage of each class of Capital Stock owned by any Loan Party and (b) there are no outstanding
subscriptions, options, warrants, calls, rights or other agreements or commitments (other than
stock options granted to employees or directors and directors’ qualifying shares) of any nature
relating to any Capital Stock of the Borrower or any Subsidiary, except as created by the Loan
Documents or the ABL Facility Agreement.










 



31




          3.16 Use of Proceeds. The proceeds of the Loans shall be used to fund the
Transactions.




          3.17 Environmental Matters. Except as, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect:




          (a) each Group Member: (i) is in compliance with all applicable Environmental Laws, and
within the period of all applicable statutes of limitation has been in compliance with all
applicable Environmental Laws, except for any past noncompliance that has been fully and finally
resolved without continued or future effect to any Group Member; (ii) holds all Environmental
Permits (each of which is in full force and effect) required for any of its current operations or
for any property owned, leased, or otherwise operated by it; and (iii) is in compliance with all of
its Environmental Permits, and within the period of all applicable statutes of limitation has been
in compliance with all of its Environmental Permits, except for any past noncompliance that has
been fully and finally resolved without continued or future effect to any Group Member;




          (b) Materials of Environmental Concern are not present at, on, under, in, or about any real
property now or formerly owned, leased or operated by any Group Member or at any other location
(including, without limitation, any location to which Materials of Environmental Concern have been
sent by or on behalf of any Group Member for re-use or recycling or for treatment, storage, or
disposal) which could reasonably be expected to (i) give rise to liability of the Borrower under
any applicable Environmental Law or otherwise result in costs to the Borrower, or (ii) interfere
with the Borrower’s continued operations or (iii) to the knowledge of Holdings and the Borrower,
impair the fair saleable value of any Mortgaged Property;




          (c) no judicial or arbitral proceeding or governmental or administrative action (including
any notice of violation or alleged violation) is pending or, to the knowledge of Holdings and the
Borrower, threatened, under or relating to any Environmental Law to which any Group Member is or,
to the knowledge of Holdings and the Borrower, will be named as a party, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law;




          (d) no Group Member has received any written request for information, or been notified that
it is a potentially responsible party under or relating to the federal Comprehensive Environmental
Response, Compensation, and Liability Act or any similar Environmental Law, or with respect to any
Materials of Environmental Concern; and




          (e) no Group Member has assumed or retained, by contract or, to the knowledge of Holdings and
the Borrower, operation of law, any liabilities of another Person of any kind, fixed or contingent,
known or unknown under any Environmental Law or with respect to any Material of Environmental
Concern.




          3.18 Accuracy of Information, etc. No statement or information contained in this
Agreement, any other Loan Document, the Confidential Information Memorandum or any other document,
certificate or statement furnished by or on behalf of any Loan Party to the Administrative Agent or
the Lenders, or any of them, for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement, information,
document or certificate was so furnished (or, in the case of the Confidential Information
Memorandum, as of the date of this Agreement), any untrue statement of a fact or omitted to state a
fact necessary to make the statements contained herein or therein not materially misleading in
light of the circumstances under which such statements are made, taken as a whole. The projections
and pro forma financial information










 



32

contained in the materials referenced above are based upon good faith estimates and
assumptions believed by management of the Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to future events is not to
be viewed as fact and that actual results during the period or periods covered by such financial
information may differ from the projected results set forth therein by a material amount. There is
no fact known to any Loan Party that would reasonably be expected to have a Material Adverse Effect
that has not been expressly disclosed herein, in Holdings’ SEC filings, in the other Loan
Documents, in the Confidential Information Memorandum or in any other documents, certificates and
statements furnished to the Administrative Agent and the Lenders for use in connection with the
transactions contemplated hereby and by the other Loan Documents.




          3.19 Security Documents. (a) The Guarantee and Collateral Agreement is effective to
create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and proceeds thereof. In the
case of the Pledged Stock described in the Guarantee and Collateral Agreement, when stock
certificates representing such Pledged Stock are delivered to the Administrative Agent, and in the
case of the other Collateral described in the Guarantee and Collateral Agreement, when financing
statements and other filings specified on Schedule 3.19(a) in appropriate form are filed in the
offices specified on Schedule 3.19(a), the Guarantee and Collateral Agreement shall constitute a
fully perfected Lien on, and security interest in, all right, title and interest of the Loan
Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in
the Guarantee and Collateral Agreement), in each case prior and superior in right to any other
Person (except, Liens permitted by Sections 6.3(a) and (l) and, in the case of Collateral other
than Pledged Stock, Liens permitted by Section 6.3, including the Liens securing the obligations
under the ABL Facility Agreement).




          (b) The Mortgage is effective to create in favor of the Administrative Agent, for the benefit
of the Lenders, a legal, valid and enforceable Lien on the Mortgaged Property described therein and
proceeds thereof, and when the Mortgage is filed in the offices specified on Schedule 3.19(b), such
Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and
interest of the Loan Parties in the Mortgaged Property and the proceeds thereof, as security for
the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to
any other Person, and is free and clear of any Liens except Liens permitted by Section 6.3.
Schedule 1.1B lists, as of the Restatement Effective Date, each parcel of owned real property
located in the United States and held by the Borrower or any of its Subsidiaries that has a fair
market value, in the reasonable opinion of the Borrower, in excess of $1,000,000, except the real
property located in Westmont, Illinois (as to which no Mortgage is required as of the Restatement
Effective Date).




          3.20 Solvency. After giving effect to the Transactions and the incurrence of all
Indebtedness and obligations being incurred in connection herewith and therewith, each Loan Party
will be Solvent.




          3.21 Regulation H. The Mortgage does not encumber improved real property that is
located in an area that has been identified by the Secretary of Housing and Urban Development as an
area having special flood hazards and in which flood insurance has been made available under the
National Flood Insurance Act of 1968.




          3.22 Certain Documents. The Borrower has delivered to the Administrative Agent a
complete and correct copy of the Convertible Notes Documents and all amendments to the ABL Facility
Agreement executed contemporaneously with the Restatement Effective Date.










 



33


SECTION 4. CONDITIONS PRECEDENT




          4.1 Conditions to the Restatement Effective Date. The agreement of each Lender to make
the extension of credit requested to be made by it is subject to the satisfaction, prior to or
concurrently with the making of such extension of credit on the Restatement Effective Date, of the
following conditions precedent:





          (a) Loan Documents. The Administrative Agent shall have received (i) this
Agreement, executed and delivered by the Administrative Agent, Holdings, the Borrower and
each Person listed on Schedule 1.1A, (ii) the Guarantee and Collateral Agreement, executed
and delivered by each Loan Party, and (iii) the Mortgage, executed and delivered by Eddie
Bauer Fulfillment Services, Inc.




          (b) Pro Forma Balance Sheet; Financial Statements. The Lenders shall have
received (i) a reasonably satisfactory Pro Forma Balance Sheet, (ii) reasonably satisfactory
audited consolidated financial statements of Holdings and its consolidated Subsidiaries for
the 2004, 2005 and 2006 fiscal years, and (iii) a reasonably satisfactory Pro Forma
Statement of Operations.




          (c) Projections. The Lenders shall have received reasonably satisfactory
projections through 2012.




          (d) Approvals. All governmental and third party approvals necessary in
connection with the Transactions, the financing contemplated thereby and hereby and the
continuing operations of the Loan Parties (including shareholder approvals, if any) shall
have been obtained on satisfactory terms and shall be in full force and effect, and all
applicable waiting periods shall have expired without any action being taken or threatened
by any competent authority that would restrain, prevent or otherwise impose adverse
conditions on any of the transactions contemplated hereby.




          (e) Lien Searches. The Administrative Agent shall have received the results
of a recent lien search in each relevant jurisdictions where the Loan Parties are
incorporated, and such search shall reveal no liens on any of the assets of the Loan Parties
except for liens permitted by Section 6.3.




          (f) Fees. The Agents and the Arrangers shall have received all fees required
to be paid, and all expenses for which invoices have been presented (including the
reasonable fees and expenses of legal counsel), three Business Days before the Restatement
Effective Date.




          (g) Closing Certificate; Certified Certificate of Incorporation; Good Standing
Certificates. The Administrative Agent shall have received (i) a certificate of each
Loan Party, dated the Restatement Effective Date, substantially in the form of Exhibit E,
with appropriate insertions and attachments, including the certificate of incorporation of
each Loan Party that is a corporation certified by the relevant authority of the
jurisdiction of organization of such Loan Party, and (ii) a long form good standing
certificate for each Loan Party from its jurisdiction of organization. The Administrative
Agent shall be reasonably satisfied with the form and substance of the certificates of
incorporation and by-laws or other applicable organizational documents of each Loan Party.




          (h) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions:









 



34



	 	i.	 	the legal opinion of Akin Gump Strauss Hauer & Feld
LLP, counsel to Holdings, the Borrower and its Subsidiaries; and
	 
	 	ii.	 	the legal opinion of local counsel in Ohio.




Each such legal opinion shall cover such matters incident to the transactions contemplated
by this Agreement as the Administrative Agent may reasonably require.





          (i) Pledged Stock; Stock Powers; Pledged Notes. The Administrative Agent
shall have received (i) the certificates representing the shares of Capital Stock pledged
pursuant to the Guarantee and Collateral Agreement together with an undated stock power for
each such certificate executed in blank by a duly authorized officer of the pledgor thereof
and (ii) each promissory note (if any) pledged to the Administrative Agent pursuant to the
Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by
an executed transfer form in blank) by the pledgor thereof.




          (j) Filings, Registrations and Recordings. Each document (including any
Uniform Commercial Code financing statement) required by the Security Documents or under law
or reasonably requested by the Administrative Agent to be filed, registered or recorded in
order to create in favor of the Administrative Agent, for the benefit of the Lenders, a
perfected Lien on the Collateral described therein, prior and superior in right to any other
Person (other than with respect to Liens expressly permitted by Section 6.3), shall be in
proper form for filing, registration or recordation.




          (k) Real Estate. The Administrative Agent shall have received in respect of
the Mortgaged Property an updated mortgagee’s title insurance policy (or policies) or marked
up unconditional binder for such insurance. Each such policy shall (A) be in an amount
reasonably satisfactory to the Administrative Agent; (B) be issued at ordinary rates; (C)
insure that the Mortgage insured thereby creates a valid first Lien on the Mortgaged
Property free and clear of all defects and encumbrances, except Permitted Exceptions and as
disclosed therein; (D) name the Administrative Agent for the benefit of the Lenders as the
insured thereunder; (E) be in the form of ALTA Loan Policy — 1970 (Amended 10/17/70 and
10/17/84) (or equivalent policies); (F) contain such endorsements and affirmative coverage
as the Administrative Agent may reasonably request and (G) be issued by title companies
reasonably satisfactory to the Administrative Agent (including any such title companies
acting as co-insurers or reinsurers, at the option of the Administrative Agent). The
Administrative Agent shall have received evidence reasonably satisfactory to it that all
premiums in respect of each such policy, all charges for mortgage recording tax, and all
related expenses, if any, have been paid.




          (l) Insurance. The Administrative Agent shall have received insurance
certificates satisfying the requirements of Section 5.2(b) of the Guarantee and Collateral
Agreement.




          (m) Credit Rating. The Facility shall have received a rating from Moody’s and
S&P.




          (n) Repayment of Existing Term Loans. Holdings shall have received gross
proceeds of not less than $75,000,000 from the issuance of Convertible Notes and the
Administrative Agent under, and as defined in, the Existing Loan Agreement shall have
received the proceeds thereof, which shall be applied to repay Existing Term Loans.




          (o) Other Documents. The Administrative Agent shall have received such
documents and other instruments as the Administrative Agent or its counsel may reasonably
request.









 



35



          (p) Representations and Warranties. Each of the representations made by any
Loan Party in or pursuant to the Loan Documents shall be true and correct in all material
respects as of the Restatement Effective Date.




          (q) No Default. No Default or Event of Default shall be continuing on the
Restatement Effective Date after giving effect to the Transactions.



SECTION 5. AFFIRMATIVE COVENANTS




          Holdings and the Borrower hereby jointly and severally agree that, so long as any Loan or
other amount is owing to any Lender or the Administrative Agent hereunder, each of Holdings and the
Borrower shall and shall cause each of its Subsidiaries to:




          5.1 Financial Statements. Furnish to the Administrative Agent on behalf of each
Lender:





          (a) as soon as available, but in any event within 90 days after the end of each fiscal
year of Holdings, a copy of the audited consolidated and unaudited consolidating balance
sheet of Holdings and its consolidated Subsidiaries as at the end of such year and the
related audited consolidated and unaudited consolidating statements of income and of cash
flows for such year, setting forth in each case in comparative form the figures for the
previous year, reported on by BDO Seidman, LLP or other independent certified public
accountants of nationally recognized standing;




          (b) as soon as available, but in any event not later than 45 days after the end of
each of the first three quarterly periods of each fiscal year of Holdings, the unaudited
consolidated and consolidating balance sheet of Holdings and its consolidated Subsidiaries
as at the end of such quarter and the related unaudited consolidated and consolidating
statements of income and of cash flows for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as fairly presenting, in all
material respects, the consolidated and consolidating financial condition of Holdings and
its consolidated Subsidiaries as at such date, and the consolidated and consolidating
results of its operations and its consolidated and consolidating cash flows for such period
(subject to normal year-end audit adjustments); and




          (c) as soon as available, but in any event not later than 30 days after the end of
each month occurring during each fiscal year of Holdings (other than the third, sixth, ninth
and twelfth such month), the unaudited consolidated and consolidating balance sheets of
Holdings and its consolidated Subsidiaries as at the end of such month and the related
unaudited consolidated and consolidating statements of income and of cash flows for such
month and the portion of the fiscal year through the end of such month, setting forth in
each case in comparative form the figures for the previous year, certified by a Responsible
Officer as fairly presenting, in all material respects, the consolidated and consolidating
financial condition of Holdings and its consolidated Subsidiaries as at such date, and the
consolidated and consolidating results of its operations and its consolidated and
consolidating cash flows for such period (subject to normal year-end audit adjustments).


All such financial statements shall be prepared in reasonable detail and in accordance with GAAP
applied (except as approved by such accountants or officer, as the case may be, and disclosed in
reasonable detail therein) consistently throughout the periods reflected therein and with prior
periods. The Administrative Agent will provide the financial statements and other materials
required to be furnished by the Borrower








 



36


pursuant to this Section 5.1 to the Lenders by posting such financial statements and materials on a
secure Intralinks site.




          5.2 Certificates; Other Information. Furnish to the Administrative Agent on behalf of
each Lender (or, in the case of clause (g), to the relevant Lender):





          (a) concurrently with the delivery of the financial statements referred to in Section
5.1(a), a certificate of the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default pursuant to Section 6.1, except as specified
in such certificate;




          (b) concurrently with the delivery of any financial statements pursuant to Section
5.1, (i) a certificate of a Responsible Officer stating that such Responsible Officer has
obtained no knowledge of any Default or Event of Default except as specified in such
certificate and (ii) in the case of quarterly or annual financial statements, a Compliance
Certificate containing (A) all information and calculations necessary for determining
compliance by each Group Member with the provisions of this Agreement referred to therein as
of the last day of the fiscal quarter or fiscal year of Holdings, as the case may be, (B) to
the extent not previously disclosed to the Administrative Agent, a description of any change
in the jurisdiction of organization, the name or corporate structure of any Loan Party and a
list of any Intellectual Property acquired by any Loan Party since the date of the most
recent report delivered pursuant to this clause (B) (or, in the case of the first such
report so delivered, since the Restatement Effective Date) and (C) to the extent not
previously disclosed to the Administrative Agent, statements that (w) no property of the
type described in Section 5.10 as to which the Administrative Agent is required to have a
perfected Lien pursuant to the Security Documents has been acquired, (x) no fee interest in
any real property having a value (together with improvements thereon) of at least $1,000,000
has been acquired, (y) no Subsidiary has been formed or acquired or, if any such Subsidiary
has been formed or acquired, the Borrower has complied with the requirements of Section 5.10
with respect thereto and (z) no Excluded Foreign Subsidiary has been formed or acquired;




          (c) as soon as available, and in any event no later than 60 days after the end of each
fiscal year of Holdings, a detailed consolidated budget for the following fiscal year
(including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of the following fiscal year, the related consolidated statements of projected cash
flow, projected changes in financial position and projected income and a description of the
underlying assumptions applicable thereto, all on a monthly basis), and, as soon as
available, significant revisions, if any, of such budget and projections with respect to
such fiscal year (collectively, the “Projections”), which Projections shall in each
case be accompanied by a certificate of a Responsible Officer stating that such Projections
are based on reasonable estimates, information and assumptions available at such time and
that such Responsible Officer has no reason to believe that such Projections are incorrect
or misleading in any material respect;




          (d) concurrently with the delivery of any financial statements pursuant to Section
5.1, (i) a narrative discussion and analysis of the financial condition and results of
operations of the Borrower and its Subsidiaries for the most recent month covered by such
financial statements and for the period from the beginning of the then current fiscal year
to the end of such month, (ii) a comparison of the financial condition and result of
operations of the Borrower and its Subsidiaries for such month and for the period from the
beginning of the then current fiscal year to the end of such month to the comparable periods
of the previous year, together with a detailed explanation of any variances, (iii) in the
case of financial statements delivered pursuant to Section 5.1(a) and (b), a comparison of
the financial condition and results of operations of the Borrower









 



37



and its Subsidiaries for the most recent fiscal quarter covered by such financial
statements and for the period from the beginning of the then current fiscal year to the end
of such quarter to the portion of the Projections covering such periods, together with a
detailed explanation of any variances, and (iv) information, in detail reasonably
satisfactory to the Administrative Agent, regarding sales by sales channels and comparable
store sales, for the most recent month covered by such financial statements (it being
understood that the Borrower’s report on a Form 10-Q or Form 10-K that includes a management
discussion and analysis shall be deemed to satisfy the requirement under clauses (i) and
(iii) of this Section 5.2(d));




          (e) no later than five Business Days prior to the expected effectiveness thereof,
copies of substantially final drafts of any proposed amendment, supplement, waiver or other
modification with respect to the ABL Facility, the Securitization Note, the Convertible
Notes Documents or documents in connection with Permitted Junior Lien Debt;




          (f) within five Business Days after the same are sent, copies of all financial
statements and reports that Holdings or the Borrower sends to the holders of any class of
its debt securities or public equity securities and, within five Business Days after the
same are filed, copies of all financial statements and reports that Holdings or the Borrower
may make to, or file with, the SEC;




          (g) promptly, such additional financial and other information as any Lender may from
time to time reasonably request; and




          (h) as soon as available, but in any event not later than 15 days after Holdings’, the
Borrower’s or any of its Subsidiaries’ receipt thereof, a copy of all management reports and
management letters prepared for Holdings, the Borrower or any of its Subsidiaries by any
independent certified public or chartered accountants of Holdings, the Borrower or any of
its Subsidiaries.


The Administrative Agent will provide the certificates and other information required to be
furnished by the Borrower pursuant to this Section 5.2 (other than any information obtained by a
Lender pursuant to clause (g)) to the Lenders by posting such certificates and other information on
a secure Intralinks site.




          5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity
or before they become delinquent, as the case may be, all its material obligations of whatever
nature, except where the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the relevant Group Member.




          5.4 Maintenance of Existence; Compliance. (a)(i) Preserve, renew and keep in full
force and effect its organizational existence and (ii) take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct of its business,
except, in each case, as otherwise permitted by Section 6.4 and except, in the case of clause (ii)
above, to the extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law except to
the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to
have a Material Adverse Effect.




          5.5 Maintenance of Property; Insurance. (a) Keep all property useful and necessary in
its business in good working order and condition, ordinary wear and tear excepted and (b) maintain
with financially sound and reputable insurance companies insurance on all its property in at least
such amounts and against at least such risks (but including in any event public liability, product
liability and










 



38

business interruption) as are usually insured against in the same general area by companies
engaged in the same or a similar business.




          5.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of
records and account in which full, true and correct entries of all dealings and transactions in
relation to its business and activities shall be made in conformity with GAAP and all Requirements
of Law and (b) no more frequently than once per fiscal year at any reasonable time during normal
business hours and upon reasonable notice permit representatives of any Lender to visit and inspect
any of its properties and examine and make abstracts from any of its books and records and to
discuss the business, operations, properties and financial and other condition of the Group Members
with officers of the Group Members and with their independent certified public accountants;
provided that at any time after the occurrence and during the continuance of an Event of Default,
there shall not be any limit to the number of visits and inspections; provided further that
any representative of a Lender visiting the property as provided herein shall use all reasonable
efforts to minimize disturbances.




          5.7 Notices. Promptly give notice to the Administrative Agent of:





          (a) the occurrence of any Default or Event of Default;




          (b) any (i) default or event of default under any Contractual Obligation of any Loan
Party or (ii) litigation, investigation or proceeding that may exist at any time between any
Group Member and any Governmental Authority, that in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected to have a Material
Adverse Effect;




          (c) any litigation or proceeding affecting any Group Member (i) in which the amount
involved is $5,000,000 or more and not covered by insurance, (ii) in which injunctive or
similar relief is sought or (iii) which relates to any Loan Document;




          (d) the following events, as soon as possible and in any event within 30 days after
the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable
Event with respect to any Single Employer Plan, (ii) a failure to make any material required
contribution to a Plan or, on and after the effectiveness of the Pension Act, any failure by
any Single Employer Plan to satisfy the minimum funding standards (within the meaning of
Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, (iii) the creation
of any Lien in favor of the PBGC or a Single Employer Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or the institution of
proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Single Employer Plan or Multiemployer
Plan; or (iv) on and after the effectiveness of the Pension Act, receipt of (x) a
determination that any Single Employer plan is, or is expected to be, in “at risk” status
(within the meaning of title IV of ERISA), (y) any determination that a Multiemployer Plan
is, or is expected to be, in endangered or critical status, within the meaning of Section
305 of ERISA, or (z) any (I) documents described in Section 101(k) of ERISA that Holdings,
the Borrower or any Commonly Controlled Entity may request with respect to any Multiemployer
Plan and (II) any notices described in Section 101(l) of ERISA that Holdings, the Borrower
or any Commonly Controlled Entity may request with respect to any Single Employer Plan;
provided, that if Holdings, the Borrower or any Commonly Controlled Entity has not requested
such documents or notices from the administrator or sponsor of the applicable Single
Employer Plan, Holdings, the Borrower or the Commonly Controlled Entity(ies) shall promptly
make a request for such documents or notices from such administrator or sponsor and shall
provide copies of such documents and notices promptly after receipt thereof; and









 



39



          (e) any development or event that has had or would reasonably be expected to have a
Material Adverse Effect.


Each notice pursuant to this Section 5.7 shall be accompanied by a statement of a Responsible
Officer setting forth details of the occurrence referred to therein and stating what action the
relevant Group Member proposes to take with respect thereto. The Administrative Agent shall
provide notices and other materials required to be furnished pursuant to this Section 5.7 to the
Lenders by posting such financial statements and materials on a secured Intralinks site.




          5.8 Environmental Laws. (a) Comply in all material respects with, and use
commercially reasonable efforts to ensure compliance in all material respects by all tenants and
subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material
respects with and maintain, and use commercially reasonable efforts to ensure that all tenants and
subtenants obtain and comply in all material respects with and maintain, any and all licenses,
approvals, notifications, registrations or permits required by applicable Environmental Laws.




          (b) Take reasonable efforts to prevent any other person from generating, using, treating,
storing, releasing, disposing of, or otherwise managing Materials of Environmental Concern in a
manner that could reasonably be expected to result in a material liability to, or materially affect
any real property owned or operated by, any Group Member.




          (c) Conduct and complete all investigations, studies, sampling and testing, and all remedial,
removal and other actions required under Environmental Laws and promptly comply in all material
respects with all orders and directives of all Governmental Authorities regarding Environmental
Laws, except for any such orders and directives that are being challenged or appealed in good faith
in the applicable administrative or judicial body, and with respect to which any appropriate
reserves are maintained and provided that the pendency of such challenges or appeals could not
reasonably be expected to give rise to a Material Adverse Effect.




          5.9 [Intentionally Omitted].




          5.10 Additional Collateral, etc. (a) With respect to any property acquired after the
Closing Date by any Group Member other than the Securitization Subsidiaries (other than (v)
interests in real property, (w) personal property of a type excluded from the definition of
“Collateral” in the Guarantee and Collateral Agreement, (x) any property described in paragraph (c)
or (d) below, (y) any property subject to a Lien expressly permitted by Section 6.3(g) or 6.3(i)
and (z) property acquired by any Excluded Foreign Subsidiary) as to which the Administrative Agent,
for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to
the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other
documents as the Administrative Agent reasonably deems necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a security interest in such property and (ii)
take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of
the Lenders, a perfected first or second priority security interest in such property (subject to
any Liens permitted by Section 6.3 solely to the extent that such Liens have priority under
applicable law), as applicable, in such property, including the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Guarantee and Collateral
Agreement or by law or as may be reasonably requested by the Administrative Agent.




          (b) With respect to any fee interest in any real property having a value (together with
improvements thereof) of at least $1,000,000 acquired after the Closing Date by any Group Member
other than the Securitization Subsidiaries (other than (x) any such real property subject to a
Lien expressly permitted by Section 6.3(g), (y) any real property of like kind and value which is
purchased with the Net











 



40



Cash Proceeds of an Asset Sale in respect of real property with a fair market value less than
$3,000,000 pursuant to Section 2.6(c)(ii) and (z) real property acquired by any Excluded Foreign
Subsidiary), promptly (i) execute and deliver a first priority Mortgage (subject only to Liens of
the types described in Sections 6.3(a), (e) and (m)), in favor of the Administrative Agent, for the
benefit of the Lenders, covering such real property, (ii) if requested by the Administrative Agent,
provide the Lenders with (x) title and extended coverage insurance covering such real property in
an amount at least equal to the purchase price of such real property (or such other amount as shall
be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof,
together with a surveyor’s certificate and (y) any consents or estoppels reasonably deemed
necessary or advisable by the Administrative Agent in connection with such Mortgage, each of the
foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating
to the matters described above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Administrative Agent.




          (c) With respect to any new Subsidiary (other than an Excluded Foreign Subsidiary) created or
acquired after the Closing Date by any Group Member (other than by any Group Member that is an
Excluded Foreign Subsidiary), promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent reasonably deems
necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a
perfected first priority security interest in the Capital Stock of such new Subsidiary that is
owned by any Group Member, (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly
authorized officer of the relevant Group Member, (iii) cause such new Subsidiary (A) to become a
party to the Guarantee and Collateral Agreement, (B) to take such actions necessary or advisable to
grant to the Administrative Agent for the benefit of the Lenders a perfected first or second
priority security interest in the Collateral (subject to any Liens permitted by Section 6.3 solely
to the extent that such Liens have priority under applicable law), as applicable, described in the
Guarantee and Collateral Agreement with respect to such new Subsidiary, including the filing of
Uniform Commercial Code financing statements in such jurisdictions as may be required by the
Guarantee and Collateral Agreement or by law or as may be reasonably requested by the
Administrative Agent and (C) to deliver to the Administrative Agent a certificate of such
Subsidiary, substantially in the form of Exhibit E, with appropriate insertions and attachments,
and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be in form and substance,
and from counsel, reasonably satisfactory to the Administrative Agent.




          (d) With respect to any new Excluded Foreign Subsidiary created or acquired after the Closing
Date by any Group Member (other than by any Group Member that is an Excluded Foreign Subsidiary),
promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and
Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest
in the Capital Stock of such new Subsidiary that is owned by any such Group Member (provided that
in no event shall more than 66% of the total outstanding voting Capital Stock of any such new
Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent the certificates
representing such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the relevant Group Member, and take such other action as
may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect
the Administrative Agent’s security interest therein, and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.










 



41




          5.11 Passive Company Status. In the case of Holdings, it shall not (i) conduct,
transact or otherwise engage in, or commit to conduct, transact or otherwise engage in, any
material business or operations other than (y) those incidental to its ownership of the Capital
Stock of the Borrower and the Securitization Subsidiaries and (z) those contemplated by Section
6.2(g) and (k) and 6.6, (ii) incur, create, assume or suffer to exist any material Indebtedness or
other liabilities or financial obligations, except (w) those contemplated by Sections 6.2(c), (g)
and (k) and Section 6.6, (x) nonconsensual obligations imposed by operation of law, (y) obligations
pursuant to the Loan Documents to which it is a party and (z) obligations with respect to its
Capital Stock, or (iii) own, lease, manage or otherwise operate any material properties or assets
(including cash (other than cash received in connection with dividends made by the Borrower in
accordance with Section 6.6 pending application in the manner contemplated by such Section 6.6) and
cash equivalents or distributions made by the Securitization Subsidiaries permitted hereunder)
other than the ownership of shares of Capital Stock of the Borrower and the Securitization
Subsidiaries.




          5.12 Post Closing Matters. On or prior to May 30, 2007, the Administrative Agent shall
have received a written environmental assessment with respect to the Borrower’s distribution center
in Groveport, Ohio prepared by an environmental consultant reasonably acceptable to the
Administrative Agent, which assessment shall be in form, scope and substance reasonably
satisfactory to the Administrative Agent.




SECTION 6. NEGATIVE COVENANTS




          Holdings and the Borrower hereby jointly and severally agree that, so long as any Loan or
other amount is owing to any Lender or the Administrative Agent hereunder, each of Holdings and the
Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:




          6.1 Financial Condition Covenants.




          (a) Consolidated Senior Secured Leverage Ratio. Permit the Consolidated Senior
Secured Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the
Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below
opposite such fiscal quarter:




	 	 	 
	 	 	Consolidated Senior Secured
	Fiscal Quarter	 	Leverage Ratio
	March 31, 2007

	 	5.75 to 1.00
	June 30, 2007

	 	5.75 to 1.00
	September 30, 2007

	 	5.75 to 1.00
	December 31, 2007

	 	5.75 to 1.00
	March 31, 2008

	 	5.50 to 1.00
	June 30, 2008

	 	5.50 to 1.00
	September 30, 2008

	 	5.25 to 1.00
	December 31, 2008

	 	5.00 to 1.00
	March 31, 2009

	 	4.00 to 1.00
	June 30, 2009

	 	4.00 to 1.00
	September 30, 2009

	 	3.75 to 1.00
	December 31, 2009

	 	3.50 to 1.00
	March 31, 2010

	 	3.25 to 1.00
	June 30, 2010

	 	3.25 to 1.00
	September 30, 2010

	 	3.25 to 1.00












 



42


	 	 	 
	 	 	Consolidated Senior Secured
	Fiscal Quarter	 	Leverage Ratio
	December 31, 2010

	 	3.25 to 1.00
	March 31, 2011

	 	3.00 to 1.00
	June 30, 2011

	 	3.00 to 1.00
	September 30, 2011

	 	3.00 to 1.00
	December 31, 2011

	 	3.00 to 1.00
	March 31, 2012

	 	2.50 to 1.00
	June 30, 2012

	 	2.50 to 1.00
	September 30, 2012

	 	2.50 to 1.00
	December 31, 2012

	 	2.50 to 1.00
	March 31, 2013

	 	2.50 to 1.00
	June 30, 2013

	 	2.50 to 1.00
	September 30, 2013

	 	2.50 to 1.00
	December 31, 2013

	 	2.50 to 1.00
	March 31, 2014

	 	2.50 to 1.00






          (b) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge
Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any
fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal
quarter:




	 	 	 
	 	 	Consolidated Fixed
	Fiscal Quarter	 	Charge Coverage Ratio
	March 31, 2007

	 	0.75 to 1.00
	June 30, 2007

	 	0.75 to 1.00
	September 30, 2007

	 	0.75 to 1.00
	December 31, 2007

	 	0.75 to 1.00
	March 31, 2008

	 	0.80 to 1.00
	June 30, 2008

	 	0.90 to 1.00
	September 30, 2008

	 	0.90 to 1.00
	December 31, 2008

	 	0.90 to 1.00
	March 31, 2009

	 	0.95 to 1.00
	June 30, 2009

	 	0.95 to 1.00
	September 30, 2009

	 	0.975 to 1.00
	December 31, 2009

	 	0.975 to 1.00
	March 31, 2010

	 	1.00 to 1.00
	June 30, 2010

	 	1.00 to 1.00
	September 30, 2010

	 	1.00 to 1.00
	December 31, 2010

	 	1.00 to 1.00
	March 31, 2011

	 	1.05 to 1.00
	June 30, 2011

	 	1.05 to 1.00
	September 30, 2011

	 	1.05 to 1.00
	December 31, 2011

	 	1.05 to 1.00
	March 31, 2012

	 	1.10 to 1.00
	June 30, 2012

	 	1.10 to 1.00
	September 30, 2012

	 	1.10 to 1.00
	December 31, 2012

	 	1.10 to 1.00
	March 31, 2013

	 	1.10 to 1.00
	June 30, 2013

	 	1.10 to 1.00
	September 30, 2013

	 	1.10 to 1.00
	December 31, 2013

	 	1.10 to 1.00












 



43


	 	 	 
	 	 	Consolidated Fixed
	Fiscal Quarter	 	Charge Coverage Ratio
	March 31, 2014

	 	1.10 to 1.00






          6.2 Indebtedness. Create, issue, incur, assume, become liable in respect of or suffer
to exist any Indebtedness, except:





          (a) Indebtedness of any Loan Party pursuant to any Loan Document;




          (b) Indebtedness of (i) the Borrower to any Subsidiary, (ii) any Wholly Owned
Subsidiary Guarantor to the Borrower or any other Subsidiary, (iii) any Loan Party to any
other Loan Party and (iv) any Subsidiary that is not a Loan Party to any other Subsidiary
that is not a Loan Party;




          (c) Guarantee Obligations incurred in the ordinary course of business by (i) the
Borrower or any of its Subsidiaries of obligations of any Wholly Owned Subsidiary Guarantor,
(ii) the Borrower of obligations of Eddie Bauer Canada and Eddie Bauer Customer Services
Inc. in an aggregate amount at any one time outstanding not to exceed $20,000,000 and (iii)
Holdings of obligations of its Subsidiaries in an aggregate amount at any one time
outstanding not to exceed $10,000,000;




          (d) Indebtedness outstanding on the Restatement Effective Date and listed on Schedule
6.2(d) and any refinancings, refundings, renewals or extensions thereof (without increasing
the principal amount, or shortening the maturity thereof, at the time of such refinancing,
renewal or extension thereof);




          (e) Indebtedness (including, without limitation, Capital Lease Obligations and
refinancings thereof) secured by Liens permitted by Section 6.3(g) in an aggregate principal
amount at any one time outstanding not to exceed $10,000,000;




          (f) (i) Indebtedness of the Borrower in respect of the ABL Facility in an aggregate
principal amount at any one time outstanding not to exceed $150,000,000, provided
that the Borrower may increase the aggregate principal amount of Indebtedness at any one
time outstanding in respect of the ABL Facility by $75,000,000, subject to the Intercreditor
Agreement, and any refinancings, renewals or extensions thereof (without increasing the
principal amount, or shortening the maturity, thereof) and (ii) Guarantee Obligations of any
Guarantor in respect of such Indebtedness;




          (g) Indebtedness of Holdings in respect of the Securitization Note;




          (h) Indebtedness of the Joint Ventures to the Borrower and Guarantee Obligations by
the Borrower of obligations of the Joint Ventures; provided that in any fiscal year
the aggregate principal amount of such Indebtedness and such Guarantee Obligations do not,
when added to Investments made in accordance with Section 6.8(g), exceed the aggregate
amount received by the Borrower and its Subsidiaries in such fiscal year from Eddie Bauer
Japan, Inc. and Eddie Bauer GmbH Germany by more than $2,500,000;









 



44



          (i) Indebtedness owed to any Loan Party by Eddie Bauer Canada and Eddie Bauer Customer
Services Inc. in an aggregate principal amount not to exceed $20,000,000 at any one time
outstanding;




          (j) additional unsecured Indebtedness of the Borrower and its Subsidiaries (i) in an
aggregate principal amount (as to the Borrower and all such Subsidiaries) not to exceed
$100,000,000 at any one time outstanding provided that amounts incurred hereunder
shall be applied in accordance with Section 2.6(b) and (ii) the proceeds of which are
applied to pay, prepay, repurchase or redeem Convertible Notes to the extent permitted under
the proviso to Section 6.9(f);




          (k) Indebtedness of Holdings on account of Convertible Notes (i) issued on or
immediately prior to the Restatement Effective Date, (ii) issued after the Restatement
Effective Date, in an aggregate principal amount not to exceed $100,000,000 at any one time
outstanding and (iii) the proceeds of which are applied to pay, prepay, repurchase or redeem
Convertible Notes to the extent permitted under the proviso to Section 6.9(f);




          (l) (i) Permitted Junior Lien Debt and any refinancings, refundings, renewals or
extensions thereof (without increasing the principal amount, or shortening the maturity,
thereof) in an aggregate principal amount not to exceed $75,000,000 at any one time
outstanding and (ii) Permitted Junior Lien Debt the proceeds of which are applied to pay,
prepay, repurchase or redeem Convertible Notes to the extent permitted under the proviso to
Section 6.9(f);




          (m) the financing of insurance premiums with the providers of such insurance or their
affiliates in the ordinary course of business;




          (n) secured Indebtedness of Excluded Foreign Subsidiaries in an aggregate principal
amount at any one time outstanding not to exceed $20,000,000 (or the equivalent thereof in
other currencies, measured in Dollars in each case at the time of incurrence thereof, or, in
the case of revolving loans, at the time of establishment of such commitment or facility);
and




          (o) Indebtedness representing deferred compensation to employees of any Group Member in
an aggregate principal amount at any one time outstanding not to exceed $2,500,000.




          6.3 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property,
whether now owned or hereafter acquired, except:




          (a) Liens for taxes not yet delinquent or that are being contested in good faith by
appropriate proceedings, provided that adequate reserves with respect thereto are
maintained on the books of the Borrower or its Subsidiaries, as the case may be, in
conformity with GAAP;




          (b) carriers’, warehousemen’s, mechanics’, materialmen’s, landlords’, repairmen’s or
other like Liens arising in the ordinary course of business that are not overdue for a
period of more than 45 days or that are being contested in good faith by appropriate
proceedings or, in the case of mechanics’, materialmen’s or repairmen’s Liens that arise as
a result of a failure of a general contractor to pay its subcontractors, that are otherwise
being expeditiously dealt with in an appropriate manner by the Borrower;




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









 



45



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




          (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in
the ordinary course of business that, in the aggregate, do not in any case materially
detract from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or any of its Subsidiaries;




          (f) Liens in existence on the Restatement Effective Date listed on Schedule 6.3(f),
securing Indebtedness permitted by Section 6.2(d); provided that no such Lien is
spread to cover any additional property after the Closing Date (other than additions and
accessions thereto) and that the principal amount of Indebtedness secured thereby is not
increased;




          (g) Liens securing Indebtedness of the Borrower or any other Subsidiary incurred
pursuant to Section 6.2(e) to finance the acquisition of fixed or capital assets, or to
refinance such Indebtedness; provided that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such
Liens do not at any time encumber any property other than the property financed by such
Indebtedness (other than additions and accessions thereto and the proceeds thereof) and
(iii) the amount of Indebtedness secured thereby is not increased;




          (h) Liens created pursuant to the Security Documents;




          (i) any interest or title of a lessor under any lease entered into by the Borrower or
any Subsidiary in the ordinary course of its business and covering only the assets so
leased, including the filing of UCC financing statements as a precautionary measure in
connection with operating leases or consignment of goods;




          (j) Liens securing (i) (x) the Indebtedness under the ABL Facility permitted pursuant
to Section 6.2(f) hereof and (y) Swap Agreements with lenders (or affiliates thereof) under
the ABL Facility, to the extent permitted pursuant to Section 6.12 hereof, in each case
subject to the Intercreditor Agreement and (ii) Indebtedness permitted under Section 6.2(l)
hereof;




          (k) Liens on assets of the Securitization Subsidiaries related to the Securitization
Interests, as defined in the Plan of Reorganization;




          (l) Liens arising from judgments and attachments in connection with court proceedings;
provided that (i) the attachment or enforcement of such Liens would not result in an
Event of Default hereunder, (ii) such Liens are being contested in good faith by appropriate
proceedings, (iii) adequate reserves have been set aside for such court proceeding, (iv) no
material assets or property of any Loan Party is subject to a material risk of loss or
forfeiture as a result of any such judgment or attachment, (v) the claims in respect of such
Liens are fully covered by insurance (subject to ordinary and customary deductibles) and
(vi) a stay of execution pending appeal or proceeding in respect of any such judgment or
attachment for review is in effect;




          (m) Permitted Exceptions;




          (n) Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;









 



46



          (o) Liens securing insurance premium financing arrangements entered into in the
ordinary course of business; and




          (p) bankers’ liens, rights of set-off and similar rights and remedies as to deposit
accounts or other funds maintained with a financial institution.



          6.4 Fundamental Changes. Enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all
or substantially all of its property or business, except that:





          (a) any Subsidiary of the Borrower may be merged or consolidated with or into the
Borrower (provided that the Borrower shall be the continuing or surviving
corporation) or with or into any Wholly Owned Subsidiary Guarantor (provided that
the Wholly Owned Subsidiary Guarantor shall be the continuing or surviving corporation);




          (b) any Subsidiary of the Borrower may Dispose of any or all of its assets (i) to the
Borrower or any Wholly Owned Subsidiary Guarantor (upon voluntary liquidation or otherwise)
or (ii) pursuant to a Disposition permitted by Section 6.5; and




          (c) any Investment expressly permitted by Section 6.8 may be structured as a merger,
consolidation or amalgamation.



          6.5 Disposition of Property. Dispose of any of its property, whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such
Subsidiary’s Capital Stock to any Person, except:





          (a) the Disposition of obsolete or worn out property in the ordinary course of
business;




          (b) the sale of inventory in the ordinary course of business;




          (c) Dispositions permitted by clause (i) of Section 6.4(b);




          (d) the sale or issuance of any Subsidiary’s Capital Stock to the Borrower or any
Wholly Owned Subsidiary Guarantor;




          (e) sales or closings by the Borrower and its Subsidiaries of their retail or outlet
stores;




          (f) the Disposition for cash of a registered trademark or application for registration
of a trademark (other than a material trademark) that the applicable Loan Party determines,
in the exercise of good business judgment, is no longer beneficial, appropriate or
consistent with such Loan Party’s merchandise assortment or brand image;




          (g) Dispositions of any interest of a Loan Party in any Joint Venture Investments;
provided that such sale is made at arm’s length and for fair market value;




          (h) the Disposition of other property (other than accounts or inventory) having a fair
market value not to exceed $5,000,000 in the aggregate during the term of this Agreement;
and




          (i) the Disposition of the Borrower’s distribution center in Groveport, Ohio;
provided that such Disposition is (x) pursuant to an arm’s length transaction, (y)
for fair market value as determined as of a date within 12 months of the proposed date of
such Disposition by the









 



47



appraisers and (z) for cash consideration paid upon consummation of such transaction,
which cash consideration shall not be less than 100% of the total consideration received;
provided further that the Net Cash Proceeds therefrom shall be applied to
prepay the Loans in accordance with Section 2.6(c) (without giving effect to any ability to
reinvest such proceeds pursuant to a Reinvestment Notice).



          6.6 Restricted Payments. Declare or pay any dividend (other than dividends payable
solely in common stock of the Person making such dividend) on, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any Capital Stock of any Group Member, whether now
or hereafter outstanding, or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of any Group Member (collectively,
“Restricted Payments”), except that:





          (a) any Subsidiary may make Restricted Payments to the Borrower or any Wholly Owned
Subsidiary Guarantor;




          (b) so long as no Default or Event of Default shall have occurred and be continuing,
the Borrower may pay dividends to Holdings to permit Holdings to purchase Holdings’ common
stock or common stock options from present or former officers or employees of any Group
Member (or their respective estates, heirs or legatees) upon the death, disability or
termination of employment of such officer or employee or cancel any Indebtedness owed by any
present or former officers or employees of any Group Member (or their respect estates, heirs
or legatees), provided that the aggregate amount of payments after the Restatement
Effective Date (net of any proceeds received by Holdings and contributed to the Borrower
after the Restatement Effective Date in connection with resales of any common stock or
common stock options so purchased) shall not exceed $5,000,000 during any fiscal year; and




          (c) the Borrower may pay dividends to Holdings to permit Holdings to (i) pay corporate
overhead expenses incurred in the ordinary course of business, (ii) pay any taxes that are
due and payable by Holdings and the Borrower as part of a consolidated group, (iii) pay
interest on Indebtedness permitted under Section 6.2(k), and (iv) pay, prepay, repurchase or
redeem Convertible Notes to the extent permitted under the proviso to Section 6.9(f); and




          (d) the Securitization Subsidiaries may make distributions to Holdings of any amounts
received in respect of any Securitization Interests, as defined in the Plan of
Reorganization.



          6.7 Capital Expenditures. Make or commit to make any Capital Expenditure, except
Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business not to
exceed the amount set forth in the column opposite each fiscal year of the Borrower set forth
below:




	 	 	 	 	 
	Fiscal Year	 	Maximum Capital Expenditures
	2007
	 	$	45,000,000	 
	2008
	 	$	50,000,000	 
	2009
	 	$	60,000,000	 
	2010
	 	$	70,000,000	 
	2011
	 	$	70,000,000	 
	2012
	 	$	70,000,000	 
	2013
	 	$	70,000,000	 
	2014
	 	$	70,000,000	 












 



48

; provided, that up to 50% of any such amount referred to above, if not so expended in the
fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding
fiscal year.




          6.8 Investments. Make any advance, loan, extension of credit (by way of guaranty or
otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or
other debt securities of, or any assets constituting a business unit of, or make any other
investment in, any Person (all of the foregoing, “Investments”), except:





          (a) extensions of trade credit in the ordinary course of business;




          (b) investments in Cash Equivalents;




          (c) Guarantee Obligations permitted by Section 6.2;




          (d) loans and advances to employees of any Group Member in the ordinary course of
business (including for travel, entertainment and relocation expenses) in an aggregate
amount for all Group Members not to exceed $250,000 at any one time outstanding;




          (e) Investments in assets useful in the business of the Borrower and its Subsidiaries
made by the Borrower or any of its Subsidiaries with the proceeds of any Reinvestment
Deferred Amount;




          (f) intercompany Investments by any Group Member in (i) any Loan Party and (ii) any
Subsidiary that is not, prior to such Investment, a Loan Party, in an aggregate amount for
all such Investments pursuant to this clause (f)(ii) (which, for avoidance of doubt,
excludes Investments constituting Guarantee Obligations permitted under clause (c) above)
not to exceed $10,000,000 at any one time outstanding (each such Investment to be valued at
cost at the time made);




          (g) Joint Venture Investments; provided that in any fiscal year the aggregate
amount of such Investments does not, when added to Indebtedness and Guarantee Obligations
incurred pursuant to Section 6.2(h), exceed the aggregate amount received by the Borrower
and its Subsidiaries in such fiscal year from Eddie Bauer Japan, Inc. and Eddie Bauer GmbH
Germany by more than $2,500,000;




          (h) Investments outstanding on the Restatement Effective Date and listed on Schedule
6.8(h);




          (i) Indebtedness permitted under Section 6.2(i);




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




          (k) Investments received by the Borrower or any Subsidiary as consideration in
connection with any Disposition permitted under Section 6.5 to the extent non-cash
consideration is permitted hereunder;




          (l) Investments pursuant to Swap Agreements permitted under Section 6.12; and




          (m) in addition to Investments otherwise expressly permitted by this Section 6.8,
Investments by the Borrower or any of its Subsidiaries in an aggregate amount (each such









 



49



Investment to be valued at cost at the time made) not to exceed $5,000,000 at any one
time outstanding during the term of this Agreement.



          6.9 Optional Payments and Modifications of Certain Debt Instruments. (a) Make or
offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or
otherwise optionally or voluntarily defease or segregate funds with respect to the Securitization
Note;




          (b) amend, modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the material terms of the Securitization Note
(other than any such amendment, modification, waiver or other change that (i) would extend the
maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any
date for payment of interest thereon and (ii) does not involve the payment of a consent fee); or




          (c) amend, modify, waive or otherwise change, or consent or agree to any amendment,
modification, waiver or other change to, any of the terms of the ABL Facility Agreement other than
as permitted under the Intercreditor Agreement;




          (d) make any cash (i) optional or voluntary payment, prepayment, repurchase or redemption of
any Convertible Notes or (ii) optional payments on account of or for a sinking or other analogous
fund for the repurchase, redemption, defeasance or other acquisition of any Convertible Notes, in
each case other than a refinancing or refunding thereof with the proceeds of Indebtedness permitted
under Section 6.2 (but if such Indebtedness is incurred in reliance upon Section 6.2(k), then (A)
the differences between the documentation governing such new Section 6.2(k) Indebtedness and the
Convertible Notes Documents shall be deemed to be modifications of the Convertible Notes Documents,
which modifications must comply with the requirements of Section 6.9(e), and (B) after the
consummation of such refinancing or refunding, such new documentation shall be deemed to be the
“Convertible Notes Documents” for purposes of Section 6.9(e), and all amendments, supplements,
modifications and waivers of such documentation shall be subject thereto);




          (e) make any amendment, supplement, modification or waiver of any of the terms of any
Convertible Notes or the Convertible Notes Documents not expressly required pursuant to the terms
of the Convertible Notes or the Convertible Notes Documents (i) which shortens the fixed maturity
of or increases the aggregate principal amount thereof to an amount in excess of the aggregate
amount of Convertible Notes permitted to be incurred pursuant to Section 6.2(k), or increases the
rate or shortens the time of payment of interest on, or increases the amount or shortens the time
of payment of any principal or premium payable, at a date fixed for prepayment or by acceleration
or otherwise prior to maturity thereof or increases the amount of, or accelerates the time of
payment of, any fees or other amounts payable in connection therewith to any holder thereof; (ii)
which relates to any material affirmative or negative covenants or any events of default or
remedies thereunder and the effect of which is to subject Holdings, or any of its Subsidiaries, to
any more onerous or more restrictive provisions; or (iii) which otherwise adversely affects the
interests of the Lenders hereunder in any material respect; or




          (f) except in connection with a refinancing or refunding thereof permitted under Section
6.9(d), repurchase any Convertible Notes at any time when the Borrower has Excess Cash Flow in an
amount less than the outstanding Obligations; provided however that notwithstanding Section
6.9(d) and so long as no Default or Event of Default has occurred and is continuing, and to the
extent required as a result of the application of NASDAQ Rule 4350(i), Holdings may pay, prepay,
repurchase or redeem Convertible Notes in an amount not to exceed (i) $15,000,000 plus (ii)
100% of the Net Cash Proceeds from the (x) incurrence by Borrower of any Permitted Junior Lien Debt
and unsecured Indebtedness and (y) the issuance by Holdings of Capital Stock and Convertible Notes
(in excess of the Convertible Notes outstanding as of the Restatement Effective Date), plus
(iii) 50% of Consolidated Net Income for the










 



50

period (treated as one accounting period) from the beginning of the last fiscal quarter of
2008 to end of the most recent fiscal quarter ending prior to the date of such payment for which
financial statements are in existence.




          6.10 Transactions with Affiliates. Enter into any transaction, including any purchase,
sale, lease or exchange of property, the rendering of any service or the payment of any management,
advisory or similar fees, with any Affiliate (other than Holdings, the Borrower or any Wholly Owned
Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b)
in the ordinary course of business of the relevant Group Member and (c) upon fair and reasonable
terms no less favorable to the relevant Group Member than it would obtain in a comparable arm’s
length transaction with a Person that is not an Affiliate. Notwithstanding the foregoing, Eddie
Bauer Canada and Eddie Bauer Customer Services Inc. may maintain cash management arrangements with
the Borrower in the ordinary course of business consistent with past practice and in accordance
with applicable law.




          6.11 Sales and Leasebacks. Enter into any arrangement with any Person providing for
the leasing by any Group Member of real or personal property that has been or is to be sold or
transferred by such Group Member to such Person or to any other Person to whom funds have been or
are to be advanced by such Person on the security of such property or rental obligations of such
Group Member, other than a transaction arising out of the continued use of the Groveport, Ohio
distribution center after a Disposition thereof.




          6.12 Swap Agreements. Enter into any Swap Agreement, except (a) Swap Agreements
entered into to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure
(other than those in respect of Capital Stock) and (b) Swap Agreements entered into in order to
effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating
rate to another floating rate or otherwise) with respect to any interest-bearing liability or
investment of the Borrower or any Subsidiary.




          6.13 Changes in Fiscal Periods. Permit the fiscal year of Holdings or the Borrower to
end on a day other than the last Saturday nearest to December 31 or change the Borrower’s method of
determining fiscal quarters.




          6.14 Negative Pledge Clauses. Enter into or suffer to exist or become effective any
agreement that prohibits or limits the ability of any Group Member other than the Securitization
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property or
revenues, whether now owned or hereafter acquired, to secure its obligations under the Loan
Documents to which it is a party other than (a) this Agreement and the other Loan Documents, (b)
the ABL Facility Agreement, (c) the Convertible Notes Documents, (d) documentation in connection
with Permitted Junior Lien Debt and (e) any agreements governing any purchase money Liens or
Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation
shall only be effective against the assets financed thereby) and leases and licenses arising in the
ordinary course of business.




          6.15 Clauses Restricting Subsidiary Distributions. Enter into or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the
Borrower (other than the Securitization Subsidiaries) to (a) make Restricted Payments in respect of
any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any
other Subsidiary of the Borrower, (b) make loans or advances to, or other Investments in, the
Borrower or any other Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower
or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing
under or by reason of (i) any restrictions existing under the Loan Documents, the ABL Facility
Agreement, the Convertible Notes Documents or documentation in connection with Permitted Junior
Lien Debt, (ii) any restrictions with










 



51

respect to a Subsidiary imposed pursuant to an agreement that has been entered into in
connection with the Disposition of all or substantially all of the Capital Stock or assets of such
Subsidiary and (iii) leases and licenses arising in the ordinary course of business.




          6.16 Lines of Business. Enter into any business, either directly or through any
Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on
the date of this Agreement or that are reasonably related thereto.




          6.17 Environmental Matters. Generate, use, treat, store, release, dispose of, or
otherwise manage Materials of Environmental Concern in a manner that would reasonably be expected
to result in a material liability to any Group Member or to materially affect any real property
owned or leased by any of them.




          6.18 Transactions Relating to Spiegel Acceptance Corporation. Notwithstanding anything
herein to the contrary, the following transactions shall be permitted: (a) distribution by Spiegel
Credit Card Master Note Trust (the “Note Trust”) to Spiegel Acceptance Corporation of all
of the assets of the Note Trust (the “Trust Assets”), (b) the sale, transfer or assignment
by the Note Trust or Spiegel Acceptance Corporation, as the case may be, of the Trust Assets or any
interest therein, or the sale of Spiegel Acceptance Corporation, to a third-party purchaser
pursuant to an arm’s length transaction, (c) the dissolution or liquidation of the Note Trust or
Spiegel Acceptance Corporation, as the case may be, following such sale of the Trust Assets, and
(d) the execution and delivery by the Note Trust and Spiegel Acceptance Corporation of any and all
consents, certificates, guaranties, indemnities or other agreements deemed reasonably necessary to
accomplish the transactions described in this Section.




SECTION 7. EVENTS OF DEFAULT





          If any of the following events shall occur and be continuing:




          (a) the Borrower shall fail to pay (i) any principal of any Loan when due in
accordance with the terms hereof; (ii) any interest on any Loan within three Business Days
after any such interest becomes due in accordance with the terms hereof; or (iii) any other
amount payable hereunder or under any other Loan Document within five Business Days after
any such other amount becomes due in accordance with the terms hereof; or




          (b) any representation or warranty made or deemed made by any Loan Party herein or in
any other Loan Document or that is contained in any certificate, document or financial or
other statement furnished by it at any time under or in connection with this Agreement or
any such other Loan Document shall prove to have been inaccurate in any material respect on
or as of the date made or deemed made; or




          (c) (i) any Loan Party shall default in the observance or performance of any
agreement contained in clause (i) or (ii) of Section 5.4(a) (with respect to Holdings and
the Borrower only), Section 5.7(a) or Section 6 of this Agreement or Sections 5.5 and 5.7(b)
of the Guarantee and Collateral Agreement, (ii) an “Event of Default” under and as defined
in any Mortgage shall have occurred and be continuing, or (iii) Holdings shall default in
the observance or performance of any agreement contained in Section 5.11 of this Agreement
and such default shall continue unremedied for a period of three days; or




          (d) any Loan Party shall default in the observance or performance of any other
agreement contained in this Agreement or any other Loan Document (other than as provided in









 



52



paragraphs (a) through (c) of this Section 7), and such default shall continue
unremedied for a period of 30 days; or




          (e) any Group Member shall (i) default in making any payment of any principal of any
Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled
or original due date with respect thereto; or (ii) default in making any payment of any
interest on any such Indebtedness beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created; or (iii) default in the
observance or performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with
the giving of notice if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to
become payable; provided, that a default, event or condition described in clause
(i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of
Default unless, at such time, one or more defaults, events or conditions of the type
described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be
continuing with respect to Indebtedness the outstanding principal amount of which exceeds in
the aggregate $5,000,000; or




          (f) (i) any Group Member shall commence any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or any Group Member shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against any Group Member any
case, proceeding or other action of a nature referred to in clause (i) above that (A)
results in the entry of an order for relief or any such adjudication or appointment or (B)
remains undismissed or undischarged for a period of 60 days; or (iii) there shall be
commenced against any Group Member any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar process against all or any
substantial part of its assets that results in the entry of an order for any such relief
that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) any Group Member shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall
be unable to, or shall admit in writing its inability to, pay its debts as they become due;
or




          (g) (i) any Person shall engage in any “prohibited transaction” (as defined in Section
406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any “accumulated funding
deficiency” (as defined in Section 302 of ERISA), or, on and after the effectiveness of the
Pension Act, any failure to satisfy the minimum funding standards (within the meaning of
Section 412 of the Code or Section 302 of ERISA), whether or not waived, shall exist with
respect to any Single Employer Plan or any Lien in favor of the PBGC or a Single Employer
Plan or Multiemployer Plan shall arise on the assets of any Group Member or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of









 



53



such Single Employer Plan for purposes of Title IV of ERISA, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA, (v) any Group Member or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to,
incur any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) on and after the effectiveness of the
Pension Act, there is a determination that any Single Employer Plan is, or is expected to
be, in “at risk” status (within the meaning of Title IV of ERISA) or that a Multiemployer
Plan is, or is expected to be, in endangered or critical status, within the meaning of
Section 305 of ERISA, or (vii) any other event or condition shall occur or exist with
respect to a Plan; and in each case in clauses (i) through (vii) above, such event or
condition, together with all other such events or conditions, if any, could, in the sole
reasonable judgment of the Required Lenders, reasonably be expected to have a Material
Adverse Effect; or




          (h) one or more judgments or decrees shall be entered against any Group Member
involving in the aggregate a liability (to the extent not paid or covered by insurance as to
which the relevant insurance company has not disclaimed coverage) of $5,000,000 or more, and
all such judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 30 days from the entry thereof; or




          (i) any of the Security Documents shall cease, for any reason (other than the express
release thereof), to be in full force and effect, or any Loan Party or any Affiliate of any
Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease
to be enforceable and of the same effect and priority purported to be created thereby; or




          (j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement
shall cease, for any reason (other than the express release thereof), to be in full force
and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or




          (k) (i)(A) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall
become, or obtain rights (whether by means of warrants, options or otherwise) to become the
“beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
directly or indirectly, of more than 35% of the outstanding common stock of Holdings, (B)
the board of directors of Holdings shall cease to consist of a majority of Continuing
Directors, or (C) Holdings shall cease to own and control, of record and beneficially, 100%
of each class of outstanding Capital Stock of the Borrower free and clear of all Liens
(except Liens created by the Guarantee and Collateral Agreement or Liens securing the
Indebtedness under the ABL Facility) or (ii) a Specified Change of Control shall occur; or




          (l) the Lien subordination provisions or any other provision of the Intercreditor
Agreement shall cease for any reason to be valid or any Loan Party or any of its
Subsidiaries shall so assert in writing;


then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or
(ii) of paragraph (f) above with respect to the Borrower, automatically the Loans (with accrued
interest thereon) and all other amounts owing under this Agreement and the other Loan Documents
shall immediately become due and payable, and (B) if such event is any other Event of Default, with
the consent of the Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans
(with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan
Documents to be due and payable forthwith, whereupon the same shall immediately become due and
payable. Except as expressly provided








 



54


above in this Section 7, presentment, demand, protest and all other notices of any kind are hereby
expressly waived by the Borrower.




SECTION 8. THE AGENTS




          8.1 Appointment. Each Lender hereby irrevocably designates and appoints the
Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents,
and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take
such action on its behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to the Administrative
Agent by the terms of this Agreement and the other Loan Documents, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Administrative Agent.




          8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.




          8.3 Exculpatory Provisions. None of any Agent or any Arranger or any of their
respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or any other Loan Document (except to the extent that any of the
foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from its or such Person’s own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements, representations or
warranties made by any Loan Party or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document referred to or provided
for in, or received by the Agents or the Arrangers under or in connection with, this Agreement or
any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a
party thereto to perform its obligations hereunder or thereunder. The Agents and the Arrangers
shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this Agreement or any other
Loan Document, or to inspect the properties, books or records of any Loan Party.




          8.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of legal counsel
(including counsel to Holdings or the Borrower), independent accountants and other experts selected
by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if
so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability







 



55




and expense that may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.




          8.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has
received notice from a Lender, Holdings or the Borrower referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a “notice of default”. In the
event that the Administrative Agent receives such a notice, the Administrative Agent shall give
notice thereof to the Lenders. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so
specified by this Agreement, all Lenders); provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.




          8.6 Non-Reliance on Agents, Arrangers and Other Lenders. Each Lender expressly
acknowledges that none of the Agents or the Arrangers or any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any representations or
warranties to it and that no act by any Agent or any Arranger hereafter taken, including any review
of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any
representation or warranty by any Agent or any Arranger to any Lender. Each Lender represents to
the Agents and the Arrangers that it has, independently and without reliance upon any Agent, any
Arranger or any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their affiliates and
made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon any Agent, any Arranger or any
other Lender, and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial and other condition
and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender
with any credit or other information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a
Loan Party that may come into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.




          8.7 Indemnification. The Lenders agree to indemnify each Agent and Arranger in its
capacity as such (to the extent not reimbursed by Holdings or the Borrower and without limiting the
obligation of Holdings or the Borrower to do so), ratably according to their respective Term
Percentages in effect on the date on which indemnification is sought under this Section 8.7 (or, if
indemnification is sought after the date upon which the Loans shall have been paid in full, ratably
in accordance with such Term Percentages immediately prior to such date), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever that may at any time (whether before or after the
payment of the Loans) be imposed on, incurred by or asserted against such Agent or Arranger in any
way relating to or arising out of this Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or







 



56




therein or the transactions contemplated hereby or thereby or any action taken or omitted by
such Agent or Arranger under or in connection with any of the foregoing; provided that no Lender
shall be liable for the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final
and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent’s
or Arranger’s gross negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Loans and all other amounts payable hereunder.




          8.8 Agent in Its Individual Capacity. Each Agent and Arranger and its affiliates may
make loans to, accept deposits from and generally engage in any kind of business with any Loan
Party as though such Agent or Arranger were not an Agent or an Arranger, respectively. With
respect to its Loans made or renewed by it, each Agent and Arranger shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as
though it were not an Agent or an Arranger, and the terms “Lender” and “Lenders” shall include each
Agent in its individual capacity.




          8.9 Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon 10 days’ notice to the Lenders and the Borrower. If the Administrative
Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then
the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall (unless an Event of Default under Section 7(a) or Section 7(f) with respect
to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower
(which approval shall not be unreasonably withheld or delayed), whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and the term
“Administrative Agent” shall mean such successor agent effective upon such appointment and
approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no
successor agent has accepted appointment as Administrative Agent by the date that is 10 days
following a retiring Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and
perform all of the duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above. After any retiring
Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 8 shall
inure to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.




          8.10 Syndication Agent and Arrangers. Neither the Syndication Agent nor any Arranger
shall have any duties or responsibilities hereunder in its capacity as such.




SECTION 9. MISCELLANEOUS




          9.1 Amendments and Waivers. (a) Neither this Agreement, any other Loan Document, nor
any terms hereof or thereof may be amended, supplemented or modified except in accordance with the
provisions of this Section 9.1. The Required Lenders and each Loan Party party to the relevant
Loan Document may, or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan Documents for the
purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be,
may specify in such instrument, any of the requirements of this Agreement or the other Loan
Documents or







 



57




any Default or Event of Default and its consequences; provided, however, that
no such waiver and no such amendment, supplement or modification shall (i) forgive the principal
amount of any Loan or extend the final scheduled date of maturity of any Loan, extend the scheduled
date of any amortization payment in respect of any Loan, reduce the stated rate of any interest or
fee payable hereunder (except (x) in connection with the waiver of applicability of any
post-default increase in interest rates and (y) that any amendment or modification of defined terms
used in the financial covenants in this Agreement shall not constitute a reduction in the rate of
interest or fees for purposes of this clause (i)) without the written consent of each Lender
directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this
Section 9.1 without the written consent of such Lender; (iii) reduce any percentage specified in
the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement and the other Loan Documents, release all or
substantially all of the Collateral or release all or substantially all of the Subsidiary
Guarantors from their obligations under the Guarantee and Collateral Agreement, in each case
without the written consent of all Lenders; or (iv) amend, modify or waive any provision of Section
8 without the written consent of the Agents. Any such waiver and any such amendment, supplement or
modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties,
the Lenders, the Agents and all future holders of the Loans. In the case of any waiver, the Loan
Parties, the Lenders and the Administrative Agent shall be restored to their former position and
rights hereunder and under the other Loan Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereon.




          (b) Notwithstanding anything to the contrary contained in Section 9.1(a), in the event that
the Borrower requests that any provision of this Agreement be amended, modified or waived in a
manner which would require the unanimous consent of all of the Lenders and such amendment,
modification or waiver is agreed to by the Required Lenders, then with the consent of the Borrower
and the Required Lenders, the Borrower and the Required Lenders shall be permitted to amend the
Agreement without the consent of the Lender or Lenders which did not agree to the amendment,
modification or waiver requested by the Borrower (such Lender or Lenders, the “Minority
Banks”) to provide for (x) the addition to this Agreement of one or more other financial
institutions (each of which shall be an Assignee), or an increase in the Loans of one or more of
the Required Lenders, so that the aggregate of the Loans after giving effect to such amendment
shall be in the same amount as the aggregate of the Loans immediately before giving effect to such
amendment, (y) the making of such additional Loans by such new financial institutions or Required
Lenders as may be necessary to repay in full the outstanding Loans of the Minority Banks
immediately before giving effect to such amendment and (z) such other modifications to this
Agreement as may be appropriate.




          9.2 Notices. All notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered, or three Business
Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of Holdings, the Borrower and the Administrative Agent,
and as set forth in an administrative questionnaire delivered to the Administrative Agent in the
case of the Lenders, or to such other address as may be hereafter notified by the respective
parties hereto:




	 	 	 
	     Holdings:

	 	Eddie Bauer Holdings, Inc.
	 

	 	15010 NE 36th Street
	 

	 	Redmond, Washington 98052
	 

	 	Attention: Chief Financial Officer, with a copy to the same
	 

	 	address, Attention: General Counsel
	 

	 	Telecopy: (425) 755-7671












 



58


	 	 	 
	 

	 	Telephone – Chief Financial Officer: (425) 755-4891
	 

	 	Telephone – General Counsel: (425) 755-6179
	 
	 	 
	     Borrower:

	 	Eddie Bauer, Inc.
	 

	 	15010 NE 36th Street
	 

	 	Redmond, Washington 98052
	 

	 	Attention: Chief Financial Officer, with a copy to the same
	 

	 	address, Attention: General Counsel
	 

	 	Telecopy: (425) 755-7671
	 

	 	Telephone – Chief Financial Officer: (425) 755-4891
	 

	 	Telephone – General Counsel: (425) 755-6179
	 
	 	 
	     Administrative Agent:

	 	JPMorgan Chase Bank, N.A.
	 

	 	277 Park Avenue
	 

	 	New York, New York 10172
	 

	 	Attention: James A. Knight
	 

	 	Telecopy: (646) 534-3081
	 

	 	Telephone: (212) 622-8486





provided that any notice, request or demand to or upon the Administrative Agent or the
Lenders shall not be effective until received.




          Notices and other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not apply to notices pursuant to Section 2 unless
otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent
or the Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or communications.




          9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising,
on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.




          9.4 Survival of Representations and Warranties. All representations and warranties
made hereunder, in the other Loan Documents and in any document, certificate or statement delivered
pursuant hereto or in connection herewith shall survive the execution and delivery of this
Agreement and the making of the Loans.




          9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse each
Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or modification to, this
Agreement and the other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions contemplated hereby and
thereby, including the reasonable fees and disbursements of counsel to such Agent and filing and
recording fees and expenses, with statements with respect to the foregoing to be submitted to the
Borrower prior to the Restatement Effective Date (in the case of amounts to be paid on the
Restatement Effective Date) and










 



59



from time to time thereafter on a quarterly basis or such other periodic basis as such Agent
shall deem appropriate, (b) to pay or reimburse each Lender and Agent for all its out-of-pocket
costs and expenses incurred in connection with the enforcement or preservation of any rights under
this Agreement, the other Loan Documents and any such other documents, or in connection with any
insolvency or bankruptcy of any Group Member or in connection with any work-out or restructuring of
the transactions contemplated hereby, including the fees and disbursements of financial advisors
and counsel to each Lender and Agent, (c) to pay, indemnify, and hold each Lender and Agent
harmless from, any and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable
or determined to be payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and Agent
and its respective officers, directors, employees, affiliates, agents and controlling persons
(each, an “Indemnitee”) harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other Loan Documents and any
such other documents, including any of the foregoing relating to the use of proceeds of the Loans
or the violation of, noncompliance with or liability under, any Environmental Law applicable to the
operations of any Group Member, or any actual or alleged presence or release of Materials of
Environmental Concern on or from any property currently or formerly owned or operated by any Group
Member, and the reasonable fees and expenses of legal counsel in connection with claims, actions or
proceedings by any Indemnitee against any Loan Party under any Loan Document (all the foregoing in
this clause (d), collectively, the “Indemnified Liabilities”), provided that the Borrower
shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the
extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from the gross negligence or willful misconduct of such
Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the
Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and
agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of
them might have by statute or otherwise against any Indemnitee, except with respect to any such
claims, demands, penalties, fines, liabilities, settlements, damages, costs or expenses to the
extent they are found by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of such Indemnitee. All amounts due
under this Section 9.5 shall be payable not later than 10 days after written demand therefor.
Statements payable by the Borrower pursuant to this Section 9.5 shall be submitted to the Borrower
as set forth in Section 9.2, or to such other Person or address as may be hereafter designated by
the Borrower in a written notice to the Administrative Agent. The agreements in this Section 9.5
shall su
rvive repayment of the Loans and all other amounts payable hereunder.




          9.6 Successors and Assigns; Participations and Assignments. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that (i) the Borrower may not assign or
otherwise transfer any of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be
null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section 9.6.




          (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may
assign to one or more assignees (each, an “Assignee”) all or a portion of its rights and
obligations under







 



60




this Agreement (including all or a portion of the Loans at the time owing to it) with the
prior written consent of:





          (A) the Borrower (such consent not to be unreasonably withheld), provided that
no consent of the Borrower shall be required for an assignment to a Lender, an affiliate of
a Lender, an Approved Fund (as defined below) or, if any Event of Default has occurred and
is continuing, any other Person; and




          (B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment of all or any portion of a Loan to a Lender, an
affiliate of a Lender or an Approved Fund.




          (ii) Assignments shall be subject to the following additional conditions:




          (A) except in the case of an assignment to a Lender, an affiliate of a Lender or an
Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s
Loans, the amount of the Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $1,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that (1) no such
consent of the Borrower shall be required if any Event of Default has occurred and is
continuing and (2) such amounts shall be aggregated in respect of each Lender and its
affiliates or Approved Funds, if any, so long as the amount of the Loans held by each such
Lender, affiliate or Approved Fund shall not be less than $500,000;




          (B) the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation fee of
$3,500; and




          (C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an administrative questionnaire.



               For the purposes of this Section 9.6, “Approved Fund” means any Person (other than a
natural person) that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an affiliate of a Lender or (c) an entity or an affiliate of an entity
that administers or manages a Lender.




               (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from
and after the effective date specified in each Assignment and Assumption the Assignee thereunder
shall be a party hereto and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption,
be released from its obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.13, 2.14, 2.15 and 9.5). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 9.6 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (c) of this Section.




               (iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall
maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a
register for










 



61



the recordation of the names and addresses of the Lenders, and the principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
“Register”). The entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for inspection by the
Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.




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




          (c) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent,
sell participations to one or more banks or other entities (a “Participant”) in all or a
portion of such Lender’s rights and obligations under this Agreement (including all or a portion of
the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement
shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations and (C) the Borrower, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement. Any agreement pursuant to which a Lender
sells such a participation shall provide that such Lender shall retain the sole right to enforce
this Agreement and to approve any amendment, modification or waiver of any provision of this
Agreement; provided that such agreement may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver that (1) requires the
consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of
Section 9.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this
Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections
2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 9.7(b) as though it were a Lender,
provided such Participant shall be subject to Section 9.7(a) as though it were a Lender.




          (ii) A Participant shall not be entitled to receive any greater payment under Section 2.13 or
2.14 than the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such Participant is
made with the Borrower’s prior written consent. Any Participant that is a Non-U.S. Lender shall
not be entitled to the benefits of Section 2.14 unless such Participant complies with Section
2.14(d).




          (d) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or Assignee for such Lender as a party hereto.




          (e) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue
Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph
(d) above.










 



62


          (f) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it
may have funded hereunder to its designating Lender without the consent of the Borrower or the
Administrative Agent and without regard to the limitations set forth in Section 9.6(b). Each of
Holdings, the Borrower, each Lender and the Administrative Agent hereby confirms that it will not
institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender
any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state
bankruptcy or similar law, for one year and one day after the payment in full of the latest
maturing commercial paper note issued by such Conduit Lender; provided, however, that each
Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other
party hereto for any loss, cost, damage or expense arising out of its inability to institute such a
proceeding against such Conduit Lender during such period of forbearance.




          9.7 Adjustments; Set-off. (a) Except to the extent that this Agreement expressly
provides for payments to be allocated to a particular Lender, if any Lender (a “Benefitted
Lender”) shall receive any payment of all or part of the Obligations owing to it, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in Section 7(f), or otherwise), in a greater
proportion than any such payment to or collateral received by any other Lender, if any, in respect
of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from
the other Lenders a participating interest in such portion of the Obligations owing to each such
other Lender, or shall provide such other Lenders with the benefits of any such collateral, as
shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such
collateral ratably with each of the Lenders; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall
be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but
without interest.




          (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall
have the right, without prior notice to Holdings or the Borrower, any such notice being expressly
waived by Holdings and the Borrower to the extent permitted by applicable law, upon any amount
becoming due and payable by Holdings or the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise), to set off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final, but excluding deposits held in
a fiduciary capacity), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at
any time held or owing by such Lender or any branch or agency thereof to or for the credit or the
account of Holdings or the Borrower, as the case may be. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made by such Lender;
provided that the failure to give such notice shall not affect the validity of such setoff
and application.




          9.8 Counterparts. This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts, and all of said counterparts taken together shall
be deemed to constitute one and the same instrument. Delivery of an executed signature page of
this Agreement by facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be
lodged with the Borrower and the Administrative Agent.




          9.9 Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.










 



63




          9.10 Integration. This Agreement and the other Loan Documents represent the entire
agreement of Holdings, the Borrower, the Administrative Agent and the Lenders with respect to the
subject matter hereof and thereof, and there are no promises, undertakings, representations or
warranties by the Administrative Agent or any Lender relative to the subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.




          9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.




          9.12 Submission To Jurisdiction; Waivers. Each of Holdings and the Borrower hereby
irrevocably and unconditionally:





          (a) submits for itself and its property in any legal action or proceeding relating to
this Agreement and the other Loan Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of
the courts of the State of New York, the courts of the United States for the Southern
District of New York, and appellate courts from any thereof;




          (b) consents that any such action or proceeding may be brought in such courts and
waives any objection that it may now or hereafter have to the venue of any such action or
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;




          (c) agrees that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially similar form of
mail), postage prepaid, to Holdings or the Borrower, as the case may be at its address set
forth in Section 9.2 or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;




          (d) agrees that nothing herein shall affect the right to effect service of process in
any other manner permitted by law or shall limit the right to sue in any other jurisdiction;
and




          (e) waives, to the maximum extent not prohibited by law, any right it may have to
claim or recover in any legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages.



          9.13 Acknowledgements. Each of Holdings and the Borrower hereby acknowledges that:





          (a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents;




          (b) neither the Administrative Agent nor any Lender has any fiduciary relationship
with or duty to Holdings or the Borrower arising out of or in connection with this Agreement
or any of the other Loan Documents, and the relationship between Administrative Agent and
Lenders, on one hand, and Holdings and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and









 



64



          (c) no joint venture is created hereby or by the other Loan Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Lenders or among
Holdings, the Borrower and the Lenders.



          9.14 Releases of Guarantees and Liens. (a) Notwithstanding anything to the contrary
contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably
authorized by each Lender (without requirement of notice to or consent of any Lender except as
expressly required by Section 9.1) to take any action requested by the Borrower having the effect
of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit
consummation of any transaction not prohibited by any Loan Document or that has been consented to
in accordance with Section 9.1 or (ii) under the circumstances described in paragraph (b) below.




          (b) At such time as the Loans and the other obligations under the Loan Documents (other than
obligations under or in respect of Swap Agreements) shall have been paid in full, (i) the
Collateral shall be released from the Liens created by the Security Documents, and the Security
Documents and all obligations (other than those expressly stated to survive such termination) of
the Administrative Agent and each Loan Party under the Security Documents shall terminate, all
without delivery of any instrument or performance of any act by any Person and (ii) at the expense
of the Borrower, with no representation or warranty by the Administrative Agent or any Lender, the
Administrative Agent shall deliver any collateral then in its possession and any termination
statements or documents as the Borrower may from time to time reasonably request to effectuate, or
reflect of public record, the release and discharge of the security interests and liens described
in clause (i) above.




          9.15 Confidentiality. Each of the Administrative Agent and each Lender agrees to keep
confidential all non-public information provided to it by any Loan Party, the Administrative Agent
or any Lender pursuant to or in connection with this Agreement that is designated by the provider
thereof as confidential; provided that nothing herein shall prevent the Administrative Agent or any
Lender from disclosing any such information (a) to the Administrative Agent, any other Lender or
any affiliate thereof, (b) subject to an agreement to comply with provisions no less restrictive
than this Section, to any actual or prospective Transferee or any direct or indirect counterparty
to any Swap Agreement (or any professional advisor to such counterparty), (c) to its employees,
directors, agents, attorneys, accountants and other professional advisors or those of any of its
affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any
order of any court or other Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any litigation or
similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of
Insurance Commissioners or any similar organization or any nationally recognized rating agency that
requires access to information about a Lender’s investment portfolio in connection with ratings
issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder
or under any other Loan Document.




          9.16 Patriot Act. Each Lender that is subject to the requirements of the Patriot Act
and the Administrative Agent (on behalf of itself and not on behalf of any Lender) hereby notifies
the Borrower and each other Loan Party that pursuant to the requirements of the Patriot Act, it is
required to obtain, verify and record information that identifies the Borrower and each other Loan
Party, which information includes the name and address of the Borrower and each other Loan Party
and other information that will allow such Lender or the Administrative Agent, as applicable, to
identify the Borrower and each other Loan Party in accordance with the Patriot Act. The Borrower
and each other Loan Party shall, and shall cause each of its Subsidiaries to, provide, to the
extent commercially reasonable, such information and take such actions as are reasonably requested
by each Lender and the Administrative Agent to maintain compliance with the Patriot Act.










 



65




          9.17 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE ADMINISTRATIVE AGENT AND THE
LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.










 



66




          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the day and year first above written.




	 	 	 	 	 
	 	EDDIE BAUER HOLDINGS, INC.

 	 
	 	By:  	/s/ David Taylor	 
	 	 	Name: David Taylor	 	 
	 	 	Title: Interim Chief Financial Officer	 	 
	 
	 	EDDIE BAUER, INC.

 	 
	 	By:  	/s/ David Taylor	 
	 	 	Name: David Taylor	 	 
	 	 	Title: Interim Chief Financial Officer	 	 
	 
	 	JPMORGAN CHASE BANK, N.A., as Administrative Agent
and as a Lender

 	 
	 	By:  	 	 
	 	 	Name: 	 	 
	 	 	Title: 	 	 
	 
	 	GOLDMAN SACHS CREDIT PARTNERS L.P., as Syndication
Agent

 	 
	 	By:  	 	 
	 	 	Name: 	 	 
	 	 	Title: