Document:

Exhibit 10.8

 

 

 

Credit Agreement dated as of July 31,
2008 among the Company,

as lead borrower, certain of its
subsidiaries, as borrowers and

as guarantors, Wells Fargo Retail Finance,
LLC, as administrative agent,

collateral agent and swing line lender, and
Bank of America, N.A.,

JP Morgan Chase, N.A., and HSBC Business
Credit (USA) Inc., as lenders

 

CREDIT AGREEMENT

Dated as of July 31, 2008

 

Among

 

THE CHILDREN’S PLACE RETAIL STORES, INC.,

as the Lead Borrower

for

The Borrowers Party Hereto

 

The BORROWERS Party Hereto

 

The GUARANTORS Party Hereto

 

WELLS FARGO RETAIL FINANCE, LLC,

as Administrative Agent, Collateral Agent and Swing Line Lender

 

and

 

The LENDERS Party Hereto

 

 

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I.
  DEFINITIONS AND ACCOUNTING TERMS

  	
  1

  
	
   

  	
   

  
	
  1.01

  	
  Defined Terms

  	
  1

  
	
  1.02

  	
  Other Interpretive Provisions

  	
  45

  
	
  1.03

  	
  Accounting Terms

  	
  46

  
	
  1.04

  	
  Times of Day

  	
  46

  
	
  1.05

  	
  Letter of Credit Amounts

  	
  46

  
	
   

  	
   

  
	
  ARTICLE II.
  THE COMMITMENTS AND CREDIT EXTENSIONS

  	
  46

  
	
   

  	
   

  
	
  2.01

  	
  Committed Loans; Reserves

  	
  46

  
	
  2.02

  	
  Borrowings, Conversions and
  Continuations of Committed Loans

  	
  47

  
	
  2.03

  	
  Letters of Credit

  	
  50

  
	
  2.04

  	
  Swing Line Loans

  	
  59

  
	
  2.05

  	
  Prepayments

  	
  63

  
	
  2.06

  	
  Termination or Reduction of
  Commitments

  	
  64

  
	
  2.07

  	
  Repayment of Loans

  	
  65

  
	
  2.08

  	
  Interest

  	
  65

  
	
  2.09

  	
  Fees

  	
  66

  
	
  2.10

  	
  Computation of Interest and Fees

  	
  66

  
	
  2.11

  	
  Evidence of Debt.

  	
  67

  
	
  2.12

  	
  Payments Generally;
  Administrative Agent’s Clawback

  	
  67

  
	
  2.13

  	
  Sharing of Payments by Lenders

  	
  69

  
	
  2.14

  	
  Settlement Among Lenders

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.
  TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER

  	
  71

  
	
   

  	
   

  
	
  3.01

  	
  Taxes

  	
  71

  
	
  3.02

  	
  Illegality

  	
  73

  
	
  3.03

  	
  Inability to Determine Rates

  	
  73

  
	
  3.04

  	
  Increased Costs; Reserves on
  LIBO Rate Loans

  	
  74

  
	
  3.05

  	
  Compensation for Losses

  	
  75

  
	
  3.06

  	
  Mitigation Obligations;
  Replacement of Lenders

  	
  76

  
	
  3.07

  	
  Survival

  	
  76

  
	
  3.08

  	
  Designation of Lead Borrower as
  Borrowers’ Agent

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV.
  CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

  	
  77

  
	
   

  	
   

  
	
  4.01

  	
  Conditions of Initial Credit
  Extension

  	
  77

  
	
  4.02

  	
  Conditions to all Credit
  Extensions

  	
  80

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.
  REPRESENTATIONS AND WARRANTIES

  	
  81

  
	
   

  	
   

  
	
  5.01

  	
  Existence, Qualification and
  Power

  	
  81

  
	
  5.02

  	
  Authorization; No Contravention

  	
  82

  
	
  5.03

  	
  Governmental Authorization;
  Other Consents

  	
  82

  
	
  5.04

  	
  Binding Effect

  	
  82

  
						

 

i

 

	
  5.05

  	
  Financial Statements; No
  Material Adverse Effect

  	
  82

  
	
  5.06

  	
  Litigation

  	
  83

  
	
  5.07

  	
  No Default

  	
  83

  
	
  5.08

  	
  Ownership of Property; Liens

  	
  83

  
	
  5.09

  	
  Environmental Compliance

  	
  84

  
	
  5.10

  	
  Insurance

  	
  85

  
	
  5.11

  	
  Taxes

  	
  85

  
	
  5.12

  	
  ERISA Compliance

  	
  85

  
	
  5.13

  	
  Subsidiaries; Equity Interests

  	
  86

  
	
  5.14

  	
  Margin Regulations; Investment
  Company Act

  	
  87

  
	
  5.15

  	
  Disclosure

  	
  87

  
	
  5.16

  	
  Compliance with Laws

  	
  87

  
	
  5.17

  	
  Intellectual Property; Licenses,
  Etc.

  	
  88

  
	
  5.18

  	
  Labor Matters

  	
  88

  
	
  5.19

  	
  Security Documents

  	
  89

  
	
  5.20

  	
  Solvency

  	
  89

  
	
  5.21

  	
  Deposit Accounts; Credit Card
  Arrangements

  	
  89

  
	
  5.22

  	
  Brokers

  	
  89

  
	
  5.23

  	
  Customer and Trade Relations

  	
  90

  
	
  5.24

  	
  Material Contracts

  	
  90

  
	
  5.25

  	
  Casualty

  	
  90

  
	
  5.26

  	
  Anti-Terrorism Laws

  	
  90

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.
  AFFIRMATIVE COVENANTS

  	
  91

  
	
   

  	
   

  
	
  6.01

  	
  Financial Statements

  	
  91

  
	
  6.02

  	
  Certificates; Other Information

  	
  93

  
	
  6.03

  	
  Notices

  	
  95

  
	
  6.04

  	
  Payment of Obligations

  	
  96

  
	
  6.05

  	
  Preservation of Existence, Etc.

  	
  97

  
	
  6.06

  	
  Maintenance of Properties

  	
  97

  
	
  6.07

  	
  Maintenance of Insurance

  	
  97

  
	
  6.08

  	
  Compliance with Laws

  	
  99

  
	
  6.09

  	
  Books and Records; Accountants

  	
  99

  
	
  6.10

  	
  Inspection Rights

  	
  99

  
	
  6.11

  	
  Use of Proceeds

  	
  100

  
	
  6.12

  	
  Additional Loan Parties

  	
  100

  
	
  6.13

  	
  Cash Management

  	
  101

  
	
  6.14

  	
  Information Regarding the
  Collateral

  	
  103

  
	
  6.15

  	
  Physical Inventories

  	
  104

  
	
  6.16

  	
  Environmental Laws

  	
  104

  
	
  6.17

  	
  Further Assurances

  	
  104

  
	
  6.18

  	
  Compliance with Terms of Leaseholds

  	
  105

  
	
  6.19

  	
  Material Contracts

  	
  105

  
	
  6.20

  	
  ERISA

  	
  106

  
	
  6.21

  	
  Post-Closing Matters

  	
  107

  

 

ii

 

	
  ARTICLE VII.
  NEGATIVE COVENANTS

  	
  108

  
	
   

  	
   

  
	
  7.01

  	
  Liens

  	
  108

  
	
  7.02

  	
  Investments

  	
  108

  
	
  7.03

  	
  Indebtedness

  	
  108

  
	
  7.04

  	
  Fundamental Changes

  	
  108

  
	
  7.05

  	
  Dispositions

  	
  109

  
	
  7.06

  	
  Restricted Payments

  	
  109

  
	
  7.07

  	
  Payments and Prepayments of
  Indebtedness

  	
  109

  
	
  7.08

  	
  Change in Nature of Business

  	
  110

  
	
  7.09

  	
  Transactions with Affiliates

  	
  110

  
	
  7.10

  	
  Burdensome Agreements

  	
  110

  
	
  7.11

  	
  Use of Proceeds

  	
  111

  
	
  7.12

  	
  Amendment of Material Documents

  	
  111

  
	
  7.13

  	
  Corporate Name; Fiscal Year

  	
  111

  
	
  7.14

  	
  Blocked Accounts; Credit Card
  Processors

  	
  111

  
	
  7.15

  	
  Consignments

  	
  111

  
	
  7.16

  	
  Antilayering

  	
  111

  
	
  7.17

  	
  Capital Expenditures

  	
  112

  
	
  7.18

  	
  Foreign Transfers

  	
  112

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII.
  EVENTS OF DEFAULT AND REMEDIES

  	
  113

  
	
   

  	
   

  
	
  8.01

  	
  Events of Default

  	
  113

  
	
  8.02

  	
  Remedies Upon Event of Default

  	
  117

  
	
  8.03

  	
  Application of Funds

  	
  118

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX.
  ADMINISTRATIVE AND COLLATERAL AGENT

  	
  119

  
	
   

  	
   

  
	
  9.01

  	
  Appointment and Authority

  	
  119

  
	
  9.02

  	
  Rights as a Lender

  	
  120

  
	
  9.03

  	
  Exculpatory Provisions

  	
  120

  
	
  9.04

  	
  Reliance by Agents

  	
  121

  
	
  9.05

  	
  Delegation of Duties

  	
  121

  
	
  9.06

  	
  Resignation of Agents

  	
  121

  
	
  9.07

  	
  Non-Reliance on Administrative
  Agent and Other Lenders

  	
  122

  
	
  9.08

  	
  Administrative Agent
  May File Proofs of Claim

  	
  123

  
	
  9.09

  	
  Collateral and Guaranty Matters

  	
  123

  
	
  9.10

  	
  Notice of Transfer

  	
  124

  
	
  9.11

  	
  Reports and Financial Statements

  	
  124

  
	
  9.12

  	
  Agency for Perfection

  	
  125

  
	
  9.13

  	
  Indemnification of Agents

  	
  125

  
	
  9.14

  	
  Relation among Lenders

  	
  125

  
	
  9.15

  	
  Defaulting Lenders

  	
  125

  
	
   

  	
   

  	
   

  
	
  ARTICLE X.
  MISCELLANEOUS

  	
  126

  
	
   

  	
   

  
	
  10.01

  	
  Amendments, Etc.

  	
  126

  
	
  10.02

  	
  Notices; Effectiveness;
  Electronic Communications

  	
  128

  
	
  10.03

  	
  No Waiver; Cumulative Remedies

  	
  129

  

 

iii

 

	
  10.04

  	
  Expenses; Indemnity; Damage
  Waiver

  	
  129

  
	
  10.05

  	
  Payments Set Aside

  	
  131

  
	
  10.06

  	
  Successors and Assigns

  	
  131

  
	
  10.07

  	
  Treatment of Certain
  Information; Confidentiality

  	
  135

  
	
  10.08

  	
  Right of Setoff

  	
  136

  
	
  10.09

  	
  Interest Rate Limitation

  	
  137

  
	
  10.10

  	
  Counterparts; Integration;
  Effectiveness

  	
  137

  
	
  10.11

  	
  Survival

  	
  137

  
	
  10.12

  	
  Severability

  	
  138

  
	
  10.13

  	
  Replacement of Lenders

  	
  138

  
	
  10.14

  	
  Governing Law; Jurisdiction;
  Etc.

  	
  139

  
	
  10.15

  	
  Waiver of Jury Trial

  	
  140

  
	
  10.16

  	
  No Advisory or Fiduciary
  Responsibility

  	
  140

  
	
  10.17

  	
  USA PATRIOT Act Notice

  	
  141

  
	
  10.18

  	
  Time of the Essence

  	
  141

  
	
  10.19

  	
  Press Releases

  	
  141

  
	
  10.20

  	
  Additional Waivers

  	
  141

  
	
  10.21

  	
  No Strict Construction

  	
  143

  
	
  10.22

  	
  Foreign Asset Control
  Regulations

  	
  143

  
	
  10.23

  	
  Attachments

  	
  144

  
	
  10.24

  	
  Intercreditor Agreement

  	
  144

  
	
   

  	
   

  	
   

  
	
  SIGNATURE

  	
   

  	
  S-1

  

 

iv

 

SCHEDULES

 

	
  1.01

  	
   

  	
  Guarantors

  
	
  1.02

  	
   

  	
  Existing Shareholders

  
	
  1.03

  	
   

  	
  Guaranteed Lease Obligations

  
	
  2.01

  	
   

  	
  Commitments and Applicable Percentages

  
	
  2.03(k)

  	
   

  	
  Existing Letters of Credit

  
	
  5.01

  	
   

  	
  Loan Parties Organizational Information

  
	
  5.06

  	
   

  	
  Litigation

  
	
  5.08(b)(1)

  	
   

  	
  Owned Real Estate

  
	
  5.08(b)(2)

  	
   

  	
  Leased Real Estate

  
	
  5.09

  	
   

  	
  Environmental Matters

  
	
  5.10

  	
   

  	
  Insurance

  
	
  5.13

  	
   

  	
  Subsidiaries; Other Equity Investments

  
	
  5.17

  	
   

  	
  Intellectual Property; Licenses

  
	
  5.18

  	
   

  	
  Labor Matters

  
	
  5.21(a)

  	
   

  	
  DDAs

  
	
  5.21(b)

  	
   

  	
  Credit Card Arrangements

  
	
  5.24

  	
   

  	
  Material Contracts

  
	
  6.02

  	
   

  	
  Financial and Collateral Reporting

  
	
  6.11

  	
   

  	
  Hoop Obligations

  
	
  6.13

  	
   

  	
  Credit Card Notifications; Blocked Account Agreements

  
	
  7.01

  	
   

  	
  Existing Liens

  
	
  7.02

  	
   

  	
  Existing Investments

  
	
  7.03

  	
   

  	
  Existing Indebtedness

  
	
  10.02

  	
   

  	
  Administrative Agent’s Office; Certain Addresses for Notices

  

 

EXHIBITS

 

	
   

  	
   

  	
  Form of

  
	
   

  	
   

  	
   

  
	
  A

  	
   

  	
  Committed Loan Notice

  
	
  B

  	
   

  	
  Swing Line Loan Notice

  
	
  C

  	
   

  	
  Note

  
	
  D

  	
   

  	
  Compliance Certificate

  
	
  E

  	
   

  	
  Assignment and Assumption

  
	
  F

  	
   

  	
  Joinder Agreement

  
	
  G

  	
   

  	
  Borrowing Base Certificate

  
	
  H

  	
   

  	
  Credit Card Notification

  
	
  I

  	
   

  	
  Intercreditor Agreement

  

 

v

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of July 31,
2008, among

 

THE CHILDREN’S PLACE RETAIL STORES, INC., a Delaware corporation for
itself and as agent (in such capacity, the “Lead Borrower”) for the
other Borrowers now or hereafter party hereto;

 

the BORROWERS now or hereafter party hereto;

 

the GUARANTORS now or hereafter party hereto;

 

each lender from time to time party hereto (individually, a “Lender”
and, collectively, the “Lenders”), and

 

WELLS FARGO RETAIL FINANCE, LLC, as Administrative Agent, Collateral
Agent and Swing Line Lender.

 

The Borrowers have requested that the Lenders provide a revolving
credit facility, and the Lenders have indicated their willingness to lend, in
each case on the terms and conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:

 

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

 

1.01                           Defined
Terms.  As used in this Agreement,
the following terms shall have the meanings set forth below:

 

“ACH” means automated clearing house transfers.

 

“Accommodation Payment” as defined in Section 10.20(d).

 

“Account” means “accounts” as defined in the UCC, and also means
a right to payment of a monetary obligation, whether or not earned by
performance, (a) for property that has been or is to be sold, leased,
licensed, assigned, or otherwise disposed of, (b) for services rendered or
to be rendered, (c) for a policy of insurance issued or to be issued, (d) for
a secondary obligation incurred or to be incurred or (e) arising out of
the use of a credit or charge card or information contained on or for use with
the card.

 

“Acquisition” means, with respect to any Person (a) an
Investment in, or a purchase of a Controlling interest in, the Equity Interests
of any other Person, (b) a purchase or other acquisition of all or
substantially all of the assets or properties of, another Person or of any
business unit of another Person, (c) any merger or consolidation of such
Person with any other Person or other transaction or series of transactions
resulting in the acquisition of all or 

 

1

 

substantially all of the assets, or a Controlling interest in the
Equity Interests, of any Person, or (d) any acquisition by such Person of
any group of Store locations comprising more than five percent (5%) of the
number of Stores operated by the acquiring Person as of the date of such
acquisition, in each case acquired in any transaction or group of transactions
which are part of a common plan.

 

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

 

“Adjustment Date” means the first day of each Fiscal Quarter,
commencing with the first day of the fourth Fiscal Quarter of 2008.

 

“Administrative Agent” means Wells Fargo Retail Finance, LLC, in
its capacity as administrative agent under any of the Loan Documents, or any
successor administrative agent.

 

“Administrative Agent’s Office” means the Administrative Agent’s
address and, as appropriate, account as set forth on Schedule 10.02, or
such other address or account as the Administrative Agent may from time to time
notify the Lead Borrower and the Lenders.

 

“Administrative Questionnaire” means an Administrative
Questionnaire in a form supplied by the Administrative Agent.

 

“Affiliate” means, with respect to any Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.  Any references to the Affiliates of any Loan
Party herein or in any other Loan Document shall not include Hoop, unless
explicitly stated otherwise.

 

“Agent(s)” means, individually, the Administrative Agent or the
Collateral Agent and, collectively, means both of them.

 

“Aggregate Commitments” means the Commitments of all of the
Lenders.

 

“Agreement” means this Credit Agreement.

 

“Alabama Capital Lease” means a capital lease for the inventory handling system of the Borrowers and/or
any of their Affiliates located at the Alabama Property.

 

“Alabama Sale-Leaseback Transaction” means the sale-leaseback of the Alabama Property pursuant
to a lease on market terms.

 

“Alabama Property” means the land, together with the buildings,
structures, parking areas, and other improvements thereon, owned by Services
Company and located at 1377 Airport Road, Fort Payne, Alabama.

 

“Applicable Margin” means:

 

2

 

(a)                                  From
and after the Closing Date until the first Adjustment Date, the percentages set
forth in Level I of the pricing grid below; and

 

(b)                                 From
and after the first Adjustment Date, the Applicable Margin shall be determined
from the following pricing grid based upon the Average Excess Availability as
of the Fiscal Quarter ended immediately preceding such Adjustment Date; provided
that, if any of the financial statements delivered pursuant to Section 6.01
of this Agreement or any Borrowing Base Certificate is at any time restated or
otherwise revised (including as a result of an audit, but excluding revisions
resulting from (i) normal year-end audit adjustments and changes in GAAP
or its application to the financial statements delivered pursuant to Section 6.01
of this Agreement or (ii) any other cause other than the correction of an
error, omission or misrepresentation of the Loan Parties), or if the
information set forth in any such financial statements or any such Borrowing
Base Certificate, otherwise proves to be false or incorrect when delivered such
that the Applicable Margin would have been higher than was otherwise in effect
during any period, without constituting a waiver of any Default or Event of
Default arising as a result thereof, interest due under this Agreement shall be
immediately recalculated at such higher rate for any applicable periods and
shall be due and payable on demand.

 

 

	
  Level

  	
   

  	
  Average Excess

  Availability

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  Base Rate

  Margin

  	
   

  	
  Commercial

  Letter of

  Credit Fee

  	
   

  	
  Standby Letter

  of Credit Fee

  	
   

  
	
  I

  	
   

  	
  Greater than
  or equal to $50,000,000

  	
   

  	
  1.50

  	
  %

  	
  0.00

  	
  %

  	
  0.75

  	
  %

  	
  1.50

  	
  %

  
	
  II

  	
   

  	
  Less than
  $50,000,000 but greater than or equal to $25,000,000

  	
   

  	
  1.75

  	
  %

  	
  0.00

  	
  %

  	
  1.00

  	
  %

  	
  1.75

  	
  %

  
	
  III

  	
   

  	
  Less than
  $25,000,000

  	
   

  	
  2.00

  	
  %

  	
  0.00

  	
  %

  	
  1.25

  	
  %

  	
  2.00

  	
  %

  

 

“Applicable Percentage” means, with respect to any Lender at any
time, the percentage (carried out to the ninth decimal place) of the Aggregate
Commitments represented by such Lender’s Commitment at such time.  If the commitment of each Lender to make
Loans and the obligation of the L/C Issuer to make L/C Credit Extensions have
been terminated pursuant to Section 8.02, or if the Aggregate
Commitments have expired, then the Applicable Percentage of each Lender shall
be determined based on the Applicable Percentage of such Lender most recently
in effect, giving effect to any subsequent assignments.  The initial Applicable Percentage of each
Lender is set forth opposite the name of such Lender on Schedule 2.01 or
in

 

3

 

the Assignment and Assumption pursuant to which such Lender becomes a
party hereto, as applicable.

 

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

 

“Assignee Group” means two or more Eligible Assignees that are
Affiliates of one another or two or more Approved Funds managed by the same
investment advisor.

 

“Assignment and Assumption” means an assignment and assumption
entered into by a Lender and an Eligible Assignee (with the consent of any
party whose consent is required by Section 10.06(b)), and accepted
by the Administrative Agent, in substantially the form of Exhibit E
or any other form approved by the Administrative Agent.

 

“Attributable Indebtedness” means, on any date, in respect of
any Capital Lease Obligation of any Person, the capitalized amount thereof that
would appear on a balance sheet of such Person prepared as of such date in
accordance with GAAP.

 

“Audited Financial Statements” means the audited Consolidated
balance sheet of the Lead Borrower and its Subsidiaries for the Fiscal Year
ended February 2, 2008, and the related Consolidated statements of income
or operations and cash flows for such Fiscal Year of the Lead Borrower and its
Subsidiaries, including the notes thereto.

 

“Availability” means the lesser of (a) or (b), where:

 

(a)                                  is
the result of:

 

(i)            The Revolving Credit
Ceiling,

 

Minus

 

(ii)           The aggregate
Outstanding Amount of all Credit Extensions to, or for the account of, the
Borrowers; and

 

(b)                                 is
the result of:

 

(i)            The Borrowing Base,

 

Minus

 

(ii)           The
aggregate Outstanding Amount of all Credit Extensions to, or for the account
of, the Borrowers.

 

“Availability Period” means the period from and including the
Closing Date to the earliest of (a) the Maturity Date, (b) the date
of termination of the Aggregate Commitments pursuant to Section 2.06,
or (c) the date of termination of the commitment of each Lender to

 

4

 

make Loans and of the obligation of the L/C Issuer to make L/C Credit
Extensions pursuant to Section 8.02.

 

“Availability Reserves” means, without duplication of any other
Reserves or items that are otherwise addressed or excluded through eligibility
criteria, such reserves as the Administrative Agent from time to time
determines in its reasonable discretion as being appropriate: (a) to
reflect the impediments to the Agents’ ability to realize upon the Collateral, (b) to
reflect claims and liabilities that the Administrative Agent determines will
need to be satisfied in connection with the realization upon the Collateral, (c) to
reflect criteria, events, conditions, contingencies or risks which adversely
affect any component of the Borrowing Base, or the assets, business, financial
performance or financial condition of any Loan Party, or (d) to reflect
that a Default or an Event of Default has occurred and is continuing (provided
that, in the case of this clause (d) only, the reserve shall be
reasonably related to the event giving rise to such Default or Event of
Default). Without limiting the generality of the foregoing, Availability
Reserves may include (but are not limited to) such reserves as the
Administrative Agent from time to time determines in its reasonable discretion
as being appropriate based on: (i) rent; (ii) customs duties and
other costs to release Inventory which is being imported into the United
States; (iii) outstanding Taxes and other governmental charges, including,
without limitation, ad valorem, real estate, personal property, sales, and
other Taxes which may have priority over the interests of the Collateral Agent
in the Collateral; (iv) salaries, wages and benefits due to employees of
any Borrower which may have priority over the interests of the Collateral Agent
in the Collateral; (v) Customer Credit Liabilities (provided  that
the Administrative Agent shall only impose reserves in respect of Customer
Credit Liabilities if either (A) an Event of Default has occurred and is
continuing or (B)(i) Excess Availability is less than $50,000,000 and (ii) there
has been a material increase (as determined by the Administrative Agent in its
reasonable discretion) in the Borrowers’ liabilities in respect of outstanding
Customer Credit Liabilities, compared to historical levels, as reflected in the
Borrowers’ books and records); (vi) warehousemen’s or bailee’s charges and
other Permitted Encumbrances which may have priority over the interests of the
Collateral Agent in the Collateral; (vii) Cash Management Reserves; and (viii) Bank
Products Reserves.

 

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

 

“Bank Products” means any services or facilities provided to any
Loan Party by a Lender or any of its Affiliates (but excluding Cash Management
Services) on account of (a) Swap Contracts, (b) purchase cards, (c) merchant
services constituting a line of credit, and (d) leasing.

 

“Bank Products Reserves” means such reserves as the
Administrative Agent from time to time determines in its reasonable discretion
as being appropriate to reflect the liabilities and obligations of the Loan
Parties with respect to Bank Products then provided or outstanding.

 

“Base Rate”   means for any day a fluctuating rate per annum
equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the
rate of interest in effect for such day as publicly announced from time to time
by Wells Fargo Bank as its “prime rate.” 
The “prime rate” is a rate set by Wells Fargo Bank based upon various
factors including Wells Fargo Bank’s costs and desired return, general economic
conditions and other factors, and is used as a reference point for

 

5

 

pricing some loans, which may be priced at, above, or below such
announced rate.  Any change in such rate
announced by Wells Fargo Bank shall take effect at the opening of business on
the day specified in the public announcement of such change.

 

“Base Rate Loan” means a
Loan that bears interest based on the Base Rate.

 

“Blocked Account” has the meaning provided in Section 6.13(a)(i).

 

“Blocked Account Agreement” has the meaning provided in Section 6.13(a)(i).

 

“Blocked Account Bank” means Wachovia Bank, National Association
and each other bank with whom deposit accounts are maintained in which any
funds of any of the Loan Parties from one or more DDAs are concentrated and
with whom a Blocked Account Agreement has been, or is required to be, executed
in accordance with the terms hereof.

 

“Blocked Person” has the meaning provided in Section 5.26.

 

“Borrowers” means, collectively, the Lead Borrower, Services
Company, and each other Person who shall from time to time enter into a Joinder
Agreement as a Borrower.

 

“Borrowing” means a Committed Borrowing or a Swing Line
Borrowing, as the context may require.

 

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

 

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

 

plus

 

(b)                                 the
lesser of (i) the retail value of Eligible Inventory, net of Inventory
Reserves, multiplied by the NRLV Percentage of the NRLV of Eligible
Inventory or (ii) the retail value of Eligible Inventory, net of Inventory
Reserves, multiplied by the Inventory Advance Rate;

 

plus

 

(c)                                  the
lesser of (i) the retail value of Eligible In-Transit Inventory, net of
Inventory Reserves, multiplied by the NRLV Percentage of the NRLV of
Eligible In-Transit Inventory or (ii) the retail value of Eligible
In-Transit Inventory, net of Inventory Reserves, multiplied by the
Inventory Advance Rate; provided  that in no event shall the
amount available to be borrowed pursuant to this clause (c) exceed
$23,000,000;

 

plus

 

(d)                                 with
respect to any Eligible Letter of Credit, the lesser of (i) the Cost of
the Inventory supported by such Eligible Letter of Credit, net of Inventory
Reserves, multiplied by the NRLV Percentage of the NRLV of the Inventory
supported by such

 

6

 

Eligible Letter of Credit, or (ii) the Cost of the Inventory
supported by such Eligible Letter of Credit, net of Inventory Reserves, multiplied
by the Eligible Letter of Credit Advance Rate;

 

plus

 

(e)                                  the
lesser of (i) FMV of Eligible Real Estate, net of Realty Reserves, multiplied
by the Real Estate Advance Rate or (ii) $15,000,000.00;

 

minus

 

(f)                                    the
Excess Availability Reserve;

 

minus

 

(g)                                 the
then amount of all Availability Reserves.

 

“Borrowing Base Certificate” has the meaning provided in Section 6.02(c).

 

“Business Day” means any day other than a Saturday, Sunday or
other day on which commercial banks are authorized to close under the Laws of,
or are in fact closed in, the state where the Administrative Agent’s Office is
located and, if such day relates to any LIBO Rate Loan, means any such day on
which dealings in Dollar deposits are conducted by and between banks in the
London interbank market.

 

“Canadian Letter of Credit” means any Letter of Credit caused to
be issued pursuant to this Agreement by Services Company for the purchase of
Inventory for the benefit of Children’s Place Canada, which shall be issued in
Dollars.

 

“Canadian Letter of Credit Sublimit” means $10,000,00.00.

 

“Canadian Subsidiary” means any Subsidiary of any Borrower that
is organized under the laws of Canada or any province, state or political
subdivision thereof.

 

 “Capital Expenditures”
means, with respect to any Person for any period, (a) all expenditures
made (whether made in the form of cash or other property) or costs incurred for
the acquisition or improvement of fixed or capital assets of such Person
(excluding normal replacements and maintenance which are properly charged to
current operations), in each case that are (or should be) set forth as capital
expenditures in a Consolidated statement of cash flows of such Person for such
period, in each case prepared in accordance with GAAP, and (b) Capital
Lease Obligations incurred by a Person during such period.

 

“Capital Lease Obligations” means, with respect to any Person
for any period, 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.

 

7

 

“Cash Collateralize” has the meaning specified in Section 2.03(g).

 

“Cash Dominion Event” means either (i) the occurrence and
continuance of any Specified Event of Default, or (ii) the failure of the
Borrowers to maintain Excess Availability of at least $25,000,000.00, which
failure continues for five (5) consecutive Business Days.  For purposes of this Agreement, the
occurrence of a Cash Dominion Event shall be deemed continuing at the
Administrative Agent’s option (i) so long as such Specified Event of
Default has not been waived, and/or (ii) if the Cash Dominion Event arises
as a result of the Borrowers’ failure to achieve Excess Availability as
required hereunder, until Excess Availability has exceeded $25,000,000.00 for
forty-five (45) consecutive days, in which case a Cash Dominion Event shall no
longer be deemed to be continuing for purposes of this Agreement; provided  that
a Cash Dominion Event shall be deemed continuing (even if a Specified Event of
Default is no longer continuing and/or Excess Availability exceeds the required
amount for forty-five (45) consecutive days) at all times after a Cash Dominion
Event has occurred and been discontinued on three (3) occasions after the
Closing Date.

 

“Cash Management Reserves “ means such reserves as the
Administrative Agent, from time to time, determines in its reasonable
discretion as being appropriate to reflect the reasonably anticipated
liabilities and obligations of the Loan Parties with respect to Cash Management
Services then provided or outstanding.

 

“Cash Management Services” means any one or more of the
following types or services or facilities provided to any Loan Party by a
Lender or any of its Affiliates: (a) ACH transactions, (b) cash
management services, including, without limitation, controlled disbursement
services, treasury, depository, overdraft, and electronic funds transfer
services, (c) foreign exchange facilities, (d) credit or debit cards,
and (e) merchant services not constituting a Bank Product.

 

“Cash on Hand” means, as of any date of determination, the
amount of unrestricted cash of the Borrowers that is (a) deposited in an
account of the Borrowers maintained with Wells Fargo Bank, which account is
subject to a valid, enforceable and first priority perfected security interest
in favor of the Collateral Agent pursuant to a control agreement, in form and
substance satisfactory to the Collateral Agent, and (b) not subject to any
Lien, except in favor of the Collateral Agent and the Revolving Credit Agent.

 

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

 

“CERCLIS” means the Comprehensive Environmental Response,
Compensation, and Liability Information System maintained by the United States
Environmental Protection Agency.

 

“CFC” means a Person that is a controlled foreign corporation
under Section 957 of the Code.

 

“Change in Law” means the occurrence, after the date of this
Agreement, of any of the following: (a) the adoption or taking effect of
any Law, rule, regulation or treaty, (b) any change in any Law, rule,
regulation or treaty or in the administration, interpretation or application

 

8

 

thereof by any Governmental Authority or (c) the making or
issuance of any request, guideline or directive (whether or not having the
force of law) by any Governmental Authority.

 

“Change of Control” means an event or series of events by which:

 

(a)                                  any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, but excluding any employee benefit plan of
such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such
plan), other than the existing shareholders of the Lead Borrower set forth on Schedule
1.02 or a “person” or “group” Controlled by one of the existing
shareholders of the Lead Borrower set forth on Schedule 1.02, becomes
the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a person or group shall be deemed
to have “beneficial ownership” of all securities that such “person” or “group”
has the right to acquire, whether such right is exercisable immediately or only
after the passage of time (such right, an “option right”)), directly or
indirectly, of 25% or more of the Equity Interests of the Lead Borrower
entitled to vote for members of the board of directors or equivalent governing
body of the Lead Borrower on a fully-diluted basis (and taking into account all
such Equity Interests that such “person” or “group” has the right to acquire
pursuant to any option right); or

 

(b)                                 the
Lead Borrower fails at any time to own, directly or indirectly, 100% of the
Equity Interests of each other Loan Party free and clear of all Liens (other
than Liens in favor of the Collateral Agent and Liens securing the Note
Obligations having the priority set forth in the Intercreditor Agreement),
except where such failure is as a result of a transaction permitted by the Loan
Documents.

 

“Children’s Place Canada” means The Children’s Place (Canada),
LP, an Ontario limited partnership.

 

“Closing Date” means the first date all the conditions precedent
in Section 4.01 are satisfied or waived in accordance with Section 10.01,
which shall be July 31, 2008.

 

“Code” means the Internal Revenue Code of 1986, and the
regulations promulgated thereunder, as amended and in effect.

 

“Collateral” means any and all “Collateral” as defined in any
applicable Security Document and all other property that is or is intended
under the terms of the Security Documents to be subject to Liens in favor of
the Collateral Agent.

 

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

 

9

 

Agent as the Collateral Agent may reasonably require; provided  that
the Real Property Waiver and Consent for the Loan Parties’ distribution center
located at 3800 East Philadelphia Street, Ontario, California and the Landlord’s
Waiver for the Loan Parties’ corporate headquarters located at 915 Secaucus
Road, Secaucus, New Jersey, each executed and delivered pursuant to the
Existing Credit Agreement, shall be deemed to be Collateral Access Agreements
hereunder.

 

“Collateral Agent” means Wells Fargo Retail Finance, LLC, acting
in such capacity for its own benefit and the ratable benefit of the other
Credit Parties.

 

“Commercial Letter of Credit” means any Letter of Credit issued
for the purpose of providing the primary payment mechanism in connection with
the purchase of Inventory by a Borrower in the ordinary course of business of
such Borrower.

 

“Commitment” means, as to each Lender, its obligation to (a) make
Committed Loans to the Borrowers pursuant to Section 2.01, (b) purchase
participations in L/C Obligations, and (c) purchase participations in
Swing Line Loans, in an aggregate principal amount at any one time outstanding
not to exceed the amount set forth opposite such Lender’s name on Schedule
2.01 or in the Assignment and Assumption pursuant to which such Lender
becomes a party hereto, as applicable, as such amount may be adjusted from time
to time in accordance with this Agreement.

 

“Commitment Fee” has the meaning provided in Section 2.09(a).

 

“Committed Borrowing” means a borrowing consisting of
simultaneous Committed Loans of the same Type and, in the case of LIBO Rate
Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.

 

“Committed Loan” has the meaning specified in Section 2.01.

 

“Committed Loan Notice” means a notice of (a) a Committed
Borrowing, (b) a conversion of Loans from one Type to the other, or (c) a
continuation of LIBO Rate Loans, pursuant to Section 2.02, which,
if in writing, shall be substantially in the form of Exhibit A.

 

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

 

“Concentration Account” has the meaning provided in Section 6.13(c).

 

“Consent” means actual consent given by a Lender from whom such
consent is sought; or the passage of ten (10) Business Days from receipt
of written notice to a Lender from the Administrative Agent of a proposed
course of action to be followed by the Administrative Agent without such Lender’s
giving the Administrative Agent written notice of that Lender’s objection to
such course of action.

 

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

 

10

 

“Contractual Obligation” means, as to any Person, any provision
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.

 

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

 

“Cost” means the calculated cost of purchases, based upon the
Borrowers’ accounting practices in effect on the Closing Date (as such
accounting practices may change or be modified from time to time in accordance
with GAAP), as determined from invoices received by the Borrowers, the
Borrowers’ purchase journals or the Borrowers’ stock ledger.  “Cost” does not include inventory
capitalization costs or other non-purchase price charges (such as freight) used
in the Borrowers’ calculation of cost of goods sold.

 

“Credit Card Advance Rate” means 90%.

 

“Credit Card Notifications” has the meaning provided in Section 6.13(a)(i).

 

“Credit Extensions” mean each of the following: (a) a
Borrowing and (b) an L/C Credit Extension.

 

“Credit Party” or “Credit Parties” means (a) individually,
(i) each Lender and its Affiliates, (ii) each Agent, (iii) each
L/C Issuer, (iv) each beneficiary of each indemnification obligation
undertaken by any Loan Party under any Loan Document, (v) any other Person
to whom Obligations under this Agreement and other Loan Documents are owing,
and (vi) the successors and assigns of each of the foregoing, and (b) collectively,
all of the foregoing.

 

“Credit Party Expenses” means, without limitation, (a) all
reasonable out-of-pocket expenses incurred by the Agents and their respective
Affiliates, in connection with this Agreement and the other Loan Documents,
including without limitation (i) the reasonable fees, charges and
disbursements of (A) one primary counsel for the Agents and one local
counsel in each applicable jurisdiction, (B) outside consultants for the
Agents, (C) appraisers, (D) commercial finance examinations, and (E) all
such reasonable out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of the Obligations, (ii) in connection
with (A) the syndication of the credit facilities provided for herein, (B) the
preparation, negotiation, administration, management, execution and delivery of
this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (C) the enforcement or protection
of their rights in connection with this Agreement or the Loan Documents or
efforts to preserve, protect, collect, or enforce the Collateral, or (D) any
workout, restructuring or negotiations in respect of any Obligations, and (b) with
respect to the L/C Issuer, and its Affiliates, all reasonable out-of-pocket
expenses incurred in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder; and (c) all
reasonable out-of-pocket expenses incurred by the Credit Parties who are not
the Agents, the L/C Issuer or any Affiliate of any of them, after the occurrence
and during the

 

11

 

continuance of an Event of Default, provided  that such
Credit Parties shall be entitled to reimbursement for no more than one primary
counsel and one local counsel in each applicable jurisdiction (absent a
conflict of interest in which case the Credit Parties may engage and be
reimbursed for additional counsel), one outside consultant and one financial
advisor, in each case representing or advising all such Credit Parties.

 

“Customer Credit Liabilities” means, at any time, the aggregate
remaining value at such time of (a) outstanding gift certificates and gift
cards of the Borrowers entitling the holder thereof to use all or a portion of
the certificate or gift card to pay all or a portion of the purchase price for
any Inventory, and (b) outstanding merchandise credits and customer
deposits of the Borrowers.

 

“Customs Broker Agreement” means an agreement, in form and
substance reasonably satisfactory to the Collateral Agent, among a Borrower, a
customs broker, freight forwarder or other carrier, and the Collateral Agent,
in which the customs broker, freight forwarder or other carrier acknowledges
that it has control over and holds the documents evidencing ownership of the
subject Inventory for the benefit of the Collateral Agent and agrees, upon
notice from the Collateral Agent, to hold and dispose of the subject Inventory
solely as directed by the Collateral Agent; provided  that the
Customs Broker Agency Agreement executed and delivered pursuant to the Existing
Credit Agreement by C-Air Customhouse Broker/C-Air International shall be
deemed to be a Customs Broker Agreement hereunder.

 

“DDA” means each checking or other demand deposit account
maintained by any of the Loan Parties.

 

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

 

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

 

“Default Rate” means (a) when used with respect to
Obligations other than Letter of Credit Fees, an interest rate equal to (i) the
Base Rate plus (ii) the Applicable Margin, if any, applicable to
Base Rate Loans, plus (iii) 2% per annum; provided, however,
that with respect to a LIBO Rate Loan, the Default Rate shall be an interest
rate equal to the interest rate (including any Applicable Margin) otherwise
applicable to such LIBO Rate Loan plus 2% per annum, and (b) when
used with respect to Letter of Credit Fees, a rate equal to the Applicable
Margin for Standby Letters of Credit or Commercial Letters of Credit, as
applicable, plus 2% per annum.

 

“Defaulting Lender” means any Lender that (a) has failed to
fund any portion of the Committed Loans, participations in L/C Obligations or
participations in Swing Line Loans required to be funded by it hereunder within
one Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within one Business Day of
the date

 

12

 

when due, unless the subject of a good faith dispute, or (c) has
been deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.

 

“Disposition” or “Dispose” means the sale, transfer,
license, lease or other disposition (including any sale and leaseback
transaction and any sale, transfer, license or other disposition of (whether in
one transaction or in a series of transactions) all or substantially all of its
assets to or in favor of any Person) of any property (including, without
limitation, any Equity Interests) by any Person (or the granting of any option
or other right to do any of the foregoing), including any sale, assignment,
transfer or other disposal, with or without recourse, of any notes or accounts
receivable or any rights and claims associated therewith .

 

“Dollars” and “$” mean lawful money of the United States.

 

“Domestic Subsidiary” means any Subsidiary that is organized
under the laws of any political subdivision of the United States.

 

“Early Termination Fee” has the meaning set forth in Section 2.09(b).

 

“Eligible Assignee” means (a) a Credit Party or any of its
Affiliates; (b) a bank, insurance company, or company engaged in the
business of making commercial loans, which Person, together with its
Affiliates, has a combined capital and surplus in excess of $250,000,000; (c) an
Approved Fund; (d) any Person to whom a Credit Party assigns its rights
and obligations under this Agreement as part of an assignment and transfer of
such Credit Party’s rights in and to a material portion of such Credit Party’s
portfolio of asset based credit facilities, and (e) any other Person
(other than a natural person); provided, however, that each
Eligible Assignee described in clauses (a) through (e), above, shall be
reasonably acceptable to, and subject to the approval of, the Administrative Agent,
the L/C Issuer, the Swing Line Lender, and the Lead Borrower (each such
approval not to be unreasonably withheld or delayed) to the extent provided in Section 10.06(b) of
this Agreement; provided  further that, notwithstanding the
foregoing, “Eligible Assignee” shall not include a Loan Party or any of
the Loan Parties’ Affiliates or Subsidiaries.

 

“Eligible Credit Card Receivables” means Accounts due to a
Borrower on a non-recourse basis from Visa, Mastercard, American Express
Company, Discover, and other major credit card processors, in each case
acceptable to the Administrative Agent in its reasonable discretion, as they
arise in the ordinary course of business, which have been earned by
performance, and are deemed by the Administrative Agent in its reasonable
discretion to be eligible for inclusion in the calculation of the Borrowing
Base.  Without limiting the foregoing,
unless the Administrative Agent otherwise agrees, none of the following shall
be deemed to be Eligible Credit Card Receivables:

 

(a)           Accounts due from
major credit card processors that have been outstanding for more than five (5) Business
Days from the date of sale;

 

(b)           Accounts due from
major credit card processors with respect to which a Loan Party does not have
good, valid and marketable title, free and clear of any Lien (other than Liens
granted to the Collateral Agent and Liens to secure the Note Purchase
Facility);

 

13

 

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

 

(d)           Accounts due from
major credit card processors which are disputed, are with recourse, or with
respect to which a claim, counterclaim, offset or chargeback has been asserted
(to the extent of such claim, counterclaim, offset or chargeback);

 

(e)           Accounts due from
major credit card processors as to which the credit card processor has the
right under certain circumstances to require a Loan Party to repurchase the
Accounts from such credit card processor; or

 

(f)            Accounts due from
major credit card processors which the Administrative Agent determines in its
reasonable discretion to be uncertain of collection.

 

“Eligible In-Transit Inventory” means, as of any date of
determination thereof, without duplication, Inventory:

 

(a)           for which full
payment has been delivered to the seller of such Inventory and evidence of such
payment has been received by the Administrative Agent;

 

(b)           which has been
shipped from a location outside of the United States for receipt by a Borrower
within forty-five (45) days of the date of shipment, but which has not yet been
delivered to such Borrower;

 

(c)           for which the
purchase order is in the name of a Borrower and title to such Inventory has
passed to such Borrower;

 

(d)           for which the
document of title reflects a Borrower as consignee or, if requested by the
Collateral Agent, names the Collateral Agent as consignee, and in each case as
to which the Collateral Agent has control over the documents of title which
evidence ownership of the subject Inventory (such as, if requested by the
Collateral Agent, by the delivery of a Customs Broker Agreement);

 

(e)           which is insured
against types of loss, damage, hazards and risks, and in amounts, reasonably
satisfactory to the Collateral Agent;

 

(f)            for which the
common carrier is not an Affiliate of the applicable vendor or supplier; and

 

(g)           that does not
qualify as Eligible Inventory solely because it is not located in the United
States of America (excluding territories or possessions of the United States)
at a location that is owned or leased by a Borrower, but which otherwise would
constitute Eligible Inventory.

 

Each Committed Loan Notice or Swing Line Loan Notice, as the context
requires, shall be deemed a certification by the Borrowers that, to the best
knowledge of the Borrowers, all

 

14

 

Eligible In-Transit Inventory included in the most recent Borrowing
Base Certificate meets all of the Borrowers’ representations and warranties
contained in the Loan Documents concerning Eligible Inventory, that the
Borrowers know of no reason why such Eligible Inventory would not be accepted
by the Borrowers when it arrives and that the shipment, as evidenced by the
documents, conforms to the related order documents.

 

“Eligible Inventory” means, as of the date of determination
thereof, without duplication, items of Inventory (other than Eligible
In-Transit Inventory or Inventory supported by an Eligible Letter of Credit) of
a Borrower that are finished goods, merchantable and readily saleable to the
public in the ordinary course deemed by the Administrative Agent in its
reasonable discretion to be eligible for inclusion in the calculation of the
Borrowing Base, in each case that, except as otherwise agreed by the
Administrative Agent, complies with each of the representations and warranties
respecting Inventory made by the Borrowers in the Loan Documents, and that is
not excluded as ineligible by virtue of one or more of the criteria set forth
below.  Except as otherwise agreed by the
Administrative Agent, the following items of Inventory shall not be included in
Eligible Inventory:

 

(a)           Inventory that is
not solely owned by a Borrower or a Borrower does not have good and valid title
thereto;

 

(b)           Inventory that is
leased by, or is on consignment to, a Borrower;

 

(c)           Inventory (other
than Eligible In-Transit Inventory or Inventory supported by an Eligible Letter
of Credit) that is not located in the United States of America (excluding
territories or possessions of the United States) at a location that is owned or
leased by a Borrower, except to the extent that the Borrowers have furnished
the Administrative Agent with (i) any UCC financing statements or other
documents that the Administrative Agent may determine to be necessary to
perfect its security interest in such Inventory at such location, and (ii) a
Collateral Access Agreement executed by the Person owning any such location;

 

(d)           Inventory that is
comprised of goods which (i) are damaged, defective, “seconds,” or
otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are
obsolete or slow moving, or are special order or custom items, work-in-process,
raw materials, or that constitute spare parts, promotional, marketing,
packaging and shipping materials or supplies used or consumed in a Borrower’s
business, (iv) are not in compliance with all standards imposed by any
Governmental Authority having regulatory authority over such Inventory, its use
or sale, or (v) are bill and hold goods;

 

(e)           Inventory that is
not subject to a perfected first-priority security interest in favor of the Collateral
Agent;

 

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

 

(g)           Inventory that is
not insured in compliance with the provisions of Section 5.10
hereof; or

 

15

 

(h)           Inventory that has
been sold but not yet delivered or as to which a Borrower has accepted a
deposit.

 

“Eligible Letter of Credit” means, as of any date of
determination thereof, a Commercial Letter of Credit which supports the purchase
of Inventory, (a) which Inventory does not constitute Eligible In-Transit
Inventory and for which no documents of title have then been issued, (b) which
Inventory otherwise would constitute Eligible Inventory, (c) which
Commercial Letter of Credit has an expiry within one hundred twenty (120) days
of the date of initial issuance of such Commercial Letter of Credit, and (d) which
Commercial Letter of Credit provides that it may be drawn only after the
Inventory is completed and after documents of title have been issued for such
Inventory reflecting a Borrower or the Collateral Agent as consignee of such
Inventory.

 

“Eligible Letter of Credit Advance Rate” means 70%.

 

“Eligible Real Estate” means the Alabama Property and any other
Real Estate which satisfies all of the following conditions and is otherwise
deemed by the Required Lenders in their reasonable discretion to be eligible
for inclusion in the calculation of the Borrowing Base:

 

(a)           The applicable
Borrower owns fee title to such Real Estate;

 

(b)           The applicable
Borrower has executed and delivered to the Collateral Agent such mortgages and
other documents as the Collateral Agent may request;

 

(c)           The applicable
Borrower has delivered to the Collateral Agent a title insurance policy or
marked-up title commitment having the effect of a policy of title insurance and
environmental studies, and other real estate items, as required by, and
satisfactory to, the Collateral Agent, including, but not limited to, those
items required by FIRREA;

 

(d)           The Collateral Agent
has a perfected first-priority lien in such Real Estate, subject only to
Permitted Encumbrances;

 

(e)           Such parcel of Real
Estate has been appraised by a third party appraiser acceptable to the
Collateral Agent;

 

(f)            Such Real Estate is
used by a Borrower for offices or as a Store or distribution center; and

 

(g)           As to any particular
property, the applicable Borrower is in compliance with the representations,
warranties and covenants set forth in the mortgage relating to such Real
Estate.

 

“Environmental Compliance Reserve” means, with respect to
Eligible Real Estate, any reserve which the Agents, from time to time in their
reasonable discretion establish for estimable amounts that are reasonably
likely to be expended by any of the Loan Parties in order for such Loan Party
and its operations and property (a) to comply with any notice from a
Governmental

 

16

 

Authority asserting non-compliance with Environmental Laws, or (b) to
correct any such non-compliance with Environmental Laws.

 

“Environmental Laws” means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including
those related to hazardous substances or wastes, air emissions and discharges
to waste or public systems.

 

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

 

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

 

“Equity Interests” means, with respect to any Person, all of the
shares of capital stock of (or other ownership or profit interests in) such
Person, all of the warrants, options or other rights for the purchase or
acquisition from such Person of shares of capital stock of (or other ownership
or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase or
acquisition from such Person of such shares (or such other interests), and all
of the other ownership or profit interests in such Person (including
partnership, member or trust interests therein), whether voting or nonvoting,
and whether or not such shares, warrants, options, rights or other interests
are outstanding on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of
1974.

 

“ERISA Affiliate” means any trade or business (whether or not
incorporated) under common control with the Lead Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a Reportable Event with respect to
a Pension Plan; (b) a withdrawal by the Lead Borrower or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA during a
plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Lead Borrower or any
ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer
Plan is in reorganization; (d) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Sections
4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or condition
which

 

17

 

constitutes grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan
or Multiemployer Plan; or (f) the imposition of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007
of ERISA, upon the Lead Borrower or any ERISA Affiliate.

 

“Event of Default” has the meaning specified in Section 8.01.  An Event of Default shall be deemed to be
continuing unless and until that Event of Default has been duly waived as
provided in Section 10.01 hereof.

 

“Excess Availability” means, as of any date of determination
thereof by the Administrative Agent, the result, if a positive number, of:

 

(a)           The lesser of:

 

 (i)           the Borrowing Base; or

 

 (ii)          the Revolving Credit Ceiling;

 

minus

 

(b)           The aggregate
Outstanding Amount of all Credit Extensions.

 

“Excess Availability Reserve” means an amount equal to the
lesser of (a) the product of (i) the amount generated by clauses (a) through
(e) of the Borrowing Base multiplied by (ii) ten percent (10%)
or (b) the product of (i) the Revolving Credit Ceiling then in effect
multiplied by (ii) ten percent (10%); provided, however,
if the amount generated by clauses (a) through (e) of the Borrowing
Base minus the amount set forth in clause (a) above is greater than
the Revolving Credit Ceiling then in effect, the Excess Availability Reserve
shall be $0.

 

“Excluded Taxes” means, with respect to the Administrative
Agent, any Lender, the L/C Issuer or any other recipient of any payment to be
made by or on account of any obligation of the Borrowers hereunder, (a) taxes
imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the
jurisdiction (or any political subdivision thereof) under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable Lending Office is located, (b) any
branch profits taxes imposed by the United States or any similar tax imposed by
any other jurisdiction in which any Borrower is located and (c) in the
case of a Foreign Lender (other than an assignee pursuant to a request by the
Borrowers under Section 10.13), any withholding tax that is imposed
on amounts payable to such Foreign Lender at the time such Foreign Lender
becomes a party hereto (or designates a new Lending Office) or is attributable
to such Foreign Lender’s failure or inability (other than as a result of a
Change in Law) to comply with Section 3.01(d), except to the extent
that such Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new Lending Office (or assignment), to receive additional
amounts from the Borrowers with respect to such withholding tax pursuant to Section 3.01(a).

 

“Existing Credit Agreement” means that certain Fifth Amended and
Restated Loan and Security Agreement, dated as of June 28, 2007, by and
between, among others, the Borrowers,

 

18

 

the financial institutions party thereto from time to time as lenders,
and Wells Fargo Retail Finance, LLC, as Agent, as amended and in effect as of
the Closing Date.

 

“Existing Letters of Credit” means each of the letters of credit
issued under the Existing Credit Agreement and the L/C Demand Facility and
outstanding on the Closing Date, as listed on Schedule 2.03(k) hereto.

 

“Extraordinary
Receipt” means any cash received by or paid to or for the account of
any Person not in the ordinary course of business, including tax refunds,
pension plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute compensation for
lost earnings), condemnation awards (and payments in lieu thereof), indemnity
payments and any purchase price adjustments.

 

“Facility Guaranty” means the Guaranty dated as of the Closing
Date made by the Guarantors in favor of the Administrative Agent and the
Lenders and each other Guaranty hereafter made by a Guarantor in favor of the
Administrative Agent and the Lenders, in form reasonably satisfactory to the
Administrative Agent.

 

“Federal Funds Rate”  means, for any day, the rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; provided  that (a) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is
so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate (rounded upward, if necessary, to a whole
multiple of 1/100 of 1%) charged to Wells Fargo Bank on such day on such
transactions as determined by the Administrative Agent.

 

“Fee Letter” means the letter agreement, dated as of the Closing
Date, among the Borrowers and the Agents.

 

“FIRREA” means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time.

 

“Fiscal Month” means any fiscal month of any Fiscal Year, which
month shall generally end on the Saturday closest to the last day of each
calendar month in accordance with the fiscal accounting calendar of the Loan
Parties.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year,
which quarters shall generally end on the Saturday closest to the last day of
each April, July, October and January of such Fiscal Year in
accordance with the fiscal accounting calendar of the Loan Parties.

 

“Fiscal Year” means the fifty-two (52) or fifty-three (53) week
period that ends on the Saturday closest to January 31st of
each calendar year.

 

“FMV” means, as to any Eligible Real Estate, the fair market
value of such Eligible Real Estate as set forth in the most recent appraisal of
such Eligible Real Estate as determined from

 

19

 

time to time by an independent appraisal firm engaged by, and
acceptable to, the Administrative Agent.

 

“Foreign Lender” means any Lender that is organized under the
laws of a jurisdiction other than that in which the Lead Borrower is resident
for tax purposes.  For purposes of this
definition, the United States, each State thereof and the District of Columbia
shall be deemed to constitute a single jurisdiction.

 

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

 

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

 

“GAAP” means generally accepted accounting principles in the
United States set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the
circumstances as of the date of determination, consistently applied.

 

“Governmental Authority” means the government of the United
States or any other nation, or of any political subdivision thereof, whether
state or local, and any agency, authority, instrumentality, regulatory body,
court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government (including any supra-national bodies such as the
European Union or the European Central Bank).

 

“Guarantee” means, as to any Person, any (a) any
obligation, contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation payable or
performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation, (ii) to
purchase or lease property, securities or services for the purpose of assuring
the obligee in respect of such Indebtedness or other obligation of the payment
or performance of such Indebtedness or other obligation, (iii) to maintain
working capital, equity capital or any other financial statement condition or
liquidity or level of income or cash flow of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered
into for the purpose of assuring in any other manner the obligee in respect of
such Indebtedness or other obligation of the payment or performance thereof or
to protect such obligee against loss in respect thereof (in whole or in part),
or (b) any Lien on any assets of such Person securing any Indebtedness or
other obligation of any other Person, whether or not such Indebtedness or other
obligation is assumed by such Person (or any right, contingent or otherwise, of
any holder of such Indebtedness to obtain any such Lien).  The amount of any Guarantee shall be deemed
to be an amount equal to the stated or determinable amount of the related
primary obligation, or portion thereof, in respect of which such Guarantee is
made or, if

 

20

 

not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith.  The term “Guarantee” as a verb
has a corresponding meaning.

 

“Guarantor” means each Subsidiary of the Lead Borrower listed on
Schedule 1.01 annexed hereto and each other Subsidiary of the Lead
Borrower that shall be required to execute and deliver a Facility Guaranty or
Facility Guaranty supplement pursuant to Section 6.12.

 

“Hazardous Materials” means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

 

“Hoop” means, collectively, Hoop Holdings, LLC, a Delaware
limited liability company, and its Subsidiaries.

 

“Indebtedness” means, as to any Person at a particular time,
without duplication, all of the following, whether or not included as
indebtedness or liabilities in accordance with GAAP:

 

(a)           all obligations of
such Person for borrowed money and all obligations of such Person evidenced by
bonds, debentures, notes, loan agreements or other similar instruments;

 

(b)           the maximum amount
of all direct or contingent obligations of such Person arising under letters of
credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments;

 

(c)           net obligations of
such Person under any Swap Contract;

 

(d)           all obligations of
such Person to pay the deferred purchase price of property or services (other
than trade accounts payable in the ordinary course of business and, in each
case, payable in accordance with customary trade practices);

 

(e)           indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)            All Attributable
Indebtedness in respect of Capital Lease Obligations of such Person, but
excluding any obligations of such Person in respect of operating leases;

 

(g)           all obligations of
such Person to purchase, redeem, retire, defease or otherwise make any payment
in respect of any Equity Interest in such Person or any other Person, or any
warrant, right or option to acquire such Equity Interest, valued, in the case
of a redeemable preferred interest, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends;
and

 

21

 

(h)           all Guarantees of
such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture (other than a joint
venture that is itself a corporation or limited liability company) in which
such Person is a general partner or a joint venturer, unless such Indebtedness
is expressly made non-recourse to such Person. 
The amount of any net obligation under any Swap Contract on any date shall
be deemed to be the Swap Termination Value thereof as of such date.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(a).

 

“Information” has the meaning specified in Section 10.07.

 

“Intellectual Property” means all present and future: trade
secrets, know-how and other proprietary information; trademarks, trademark
applications, internet domain names, service marks, trade dress, trade names,
business names, designs, logos, slogans (and all translations, adaptations,
derivations and combinations of the foregoing) indicia and other source and/or
business identifiers, and all registrations or applications for registrations
which have heretofore been or may hereafter be issued thereon throughout the
world; copyrights and copyright applications; (including copyrights for
computer programs) and all tangible and intangible property embodying the
copyrights, unpatented inventions (whether or not patentable); patents and
patent applications; industrial design applications and registered industrial
designs; license agreements related to any of the foregoing and income
therefrom; books, records, writings, computer tapes or disks, flow diagrams,
specification sheets, computer software, source codes, object codes, executable
code, data, databases and other physical manifestations, embodiments or
incorporations of any of the foregoing; all other intellectual property; and
all common law and other rights throughout the world in and to all of the foregoing.

 

“Intellectual Property Security Agreement” means the
Intellectual Property Security Agreement dated as of the Closing Date among the
Loan Parties and the Collateral Agent, granting a Lien in the Intellectual
Property and certain other assets of the Loan Parties, as amended and in effect
from time to time.

 

“Intercreditor Agreement” means an agreement substantially in
the form of Exhibit I.

 

“Interest Payment Date” means (a) as to any Loan other than
a Base Rate Loan, the last day of each Interest Period applicable to such Loan
and the Maturity Date; provided, however, that if any Interest
Period for a LIBO Rate Loan exceeds three months, the respective dates that
fall every three months after the beginning of such Interest Period shall also
be Interest Payment Dates; and (b) as to any Base Rate Loan (including a
Swing Line Loan), the first day of each month (or if such day is not a Business
Day, on the next succeeding Business Day) and the Maturity Date.

 

“Interest Period” means, as to each LIBO Rate Loan, the period
commencing on the date such LIBO Rate Loan is disbursed or converted to or
continued as a LIBO Rate Loan and ending

 

22

 

on the date one, two, three or six months thereafter, as selected by
the Lead Borrower in its Committed Loan Notice; provided  that:

 

(i)            any Interest Period
that would otherwise end on a day that is not a Business Day shall be extended
to the next succeeding Business Day unless such Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Business Day;

 

(ii)           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 the calendar month
at the end of such Interest Period;

 

(iii)          no Interest Period
shall extend beyond the Maturity Date; and

 

(iv)          notwithstanding the
provisions of clause (iii), no Interest Period shall have a duration of less
than one (1) month, and if any Interest Period applicable to a LIBO
Borrowing would be for a shorter period, such Interest Period shall not be
available hereunder.

 

For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.

 

“Inventory” has the meaning given that term in the UCC, and
shall also
include, without limitation, all: (a) goods which (i) are
leased by a Person as lessor, (ii) are held by a Person for sale or lease
or to be furnished under a contract of service, (iii) are furnished by a
Person under a contract of service, or (iv) consist of raw materials, work
in process, or materials used or consumed in a business; (b) goods of said
description in transit; (c) goods of said description which are returned,
repossessed or rejected; and (d) packaging, advertising, and shipping
materials related to any of the foregoing.

 

“Inventory Advance Rate” means thirty percent (30%).

 

“Inventory Reserves” means such reserves as may be established
from time to time by the Administrative Agent in the Administrative Agent’s
reasonable discretion with respect to the determination of the saleability, at
retail, of the Eligible Inventory or which reflect such other factors as affect
the realizable value of the Eligible Inventory.

 

“Investment” means, as to any Person, any direct or indirect
acquisition or investment by such Person, whether by means of (a) the
purchase or other acquisition of Equity Interests of another Person, (b) a
loan, advance or capital contribution to, Guarantee or assumption of debt of,
or purchase or other acquisition of any other debt or interest in, another
Person, or (c) any Acquisition, or (d) any other investment of money
or capital in order to obtain a profitable return.  For purposes of covenant compliance, the
amount of any Investment shall be the amount actually invested, without
adjustment for subsequent increases or decreases in the value of such
Investment.

 

23

 

“IRS” means the United States Internal Revenue Service.

 

“Issuer Documents” means with respect to any Letter of Credit,
the Letter Credit Application, and any other document, agreement and instrument
entered into by, among or between the L/C Issuer, the Administrative Agent and
a Borrower (or any Subsidiary) or in favor of the Administrative Agent or L/C
Issuer and relating to any such Letter of Credit.

 

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

 

“Landlord Lien State” means Pennsylvania, Virginia and
Washington and such other state(s) in which a landlord’s claim for rent
may have priority over the lien of the Collateral Agent in any of the
Collateral.

 

“Laws” means each international, foreign, Federal, state and
local statute, treaty, rule, guideline, regulation, ordinance, code and
administrative or judicial precedent or authority, including the interpretation
or administration thereof by any Governmental Authority charged with the
enforcement, interpretation or administration thereof, and each applicable
administrative order, directed duty, request, license, authorization and permit
of, and agreement with, any Governmental Authority, in each case whether or not
having the force of law.

 

“L/C Advance” means, with respect to each Lender, such Lender’s
funding of its participation in any L/C Borrowing in accordance with its
Applicable Percentage.

 

“L/C Borrowing” means an extension of credit resulting from a
drawing under any Letter of Credit which has not been reimbursed on the date
when made or refinanced as a Committed Borrowing.

 

“L/C Credit Extension” means, with respect to any Letter of
Credit, the issuance thereof or extension of the expiry date thereof, or the
increase of the amount thereof.

 

“L/C Demand Facility” means that certain $60,000,000 letter of
credit facility established by Wells Fargo Retail Finance, LLC and certain
other financial institutions providing for the issuance of commercial letters
of credit for the account of the Borrowers pursuant to the terms of the L/C
Demand Facility Letter of Credit Agreement.

 

“L/C Demand Facility Letter of Credit Agreement” means that
certain Letter of Credit Agreement, dated as of June 28, 2007, by and
between, among others, the Borrowers, the financial institutions party thereto
from time to time as lenders, and Wells Fargo Retail Finance, LLC, as Agent, as
amended and in effect from time to time.

 

“L/C Issuer” means (a) Wells Fargo Bank in its capacity as
issuer of Letters of Credit hereunder, or any successor issuer of Letters of
Credit hereunder (which successor may only be a Lender selected by the
Administrative Agent in its discretion) and (b) any other Lender selected
by the Lead Borrower in its discretion with the consent of the Administrative
Agent (which consent shall not be unreasonably withheld).  The L/C Issuer may, in its discretion,
arrange for 

 

24

 

one or more Letters of Credit to be issued by Affiliates of the L/C
Issuer, in which case the term “L/C Issuer” shall include any such Affiliate
with respect to Letters of Credit issued by such Affiliate.

 

“L/C Obligations” means, as at any date of determination, the
aggregate undrawn amount available to be drawn under all outstanding Letters of
Credit plus the aggregate of all Unreimbursed Amounts, including all L/C
Borrowings.  For purposes of computing
the amounts available to be drawn under any Letter of Credit, the amount of
such Letter of Credit shall be determined in accordance with Section 1.05.  For all purposes of this Agreement, if on any
date of determination a Letter of Credit has expired by its terms but any
amount may still be drawn thereunder by reason of the operation of applicable
Law, such Letter of Credit shall be deemed to be “outstanding” in the amount so
remaining available to be drawn.

 

“L/C Responsible Person” means any employee or officer of a
Borrower.

 

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

 

“Lender” has the meaning specified in the introductory paragraph
hereto and, as the context requires, includes the Swing Line Lender.

 

“Lending Office” means, as to any Lender, the office or offices
of such Lender described as such in such Lender’s Administrative Questionnaire,
or such other office or offices as a Lender may from time to time notify the
Lead Borrower and the Administrative Agent.

 

“Letter of Credit” means each Standby Letter of Credit and each
Commercial Letter of Credit issued hereunder (including any Canadian Letter of
Credit).  Without limiting the foregoing,
all Existing Letters of Credit shall be deemed to have been issued hereunder
and shall for all purposes be deemed to be “Letters of Credit” hereunder.

 

“Letter of Credit Application” means an application and
agreement for the issuance or amendment of a Letter of Credit in the form from
time to time in use by the L/C Issuer.

 

“Letter of Credit Expiration Date” means the day that is seven
days prior to the Maturity Date then in effect (or, if such day is not a
Business Day, the next preceding Business Day).

 

“Letter of Credit Fee” has the meaning specified in Section 2.03(h).

 

“Letter of Credit Sublimit” means an amount equal to
$175,000,000.  The Letter of Credit
Sublimit is part of, and not in addition to, the Aggregate Commitments.  A permanent reduction of the Aggregate Commitments
shall not require a corresponding pro rata reduction in the Letter of Credit
Sublimit; provided, however, that if the Aggregate Commitments
are reduced to an amount less than the Letter of Credit Sublimit, then the
Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Lead
Borrower’s option, less than) the Aggregate Commitments.

 

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

 

25

 

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

 

“LIBO Rate Loan” means a Committed Loan that bears interest at a
rate based on the Adjusted LIBO Rate.

 

“Lien” means (a) any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge, or preference, priority or other security interest or
preferential arrangement in the nature of a security interest of any kind or
nature whatsoever (including any conditional sale, Capital Lease Obligation, or
other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having substantially
the same economic effect as any of the foregoing) and (b) in the case of
securities, any purchase option, call or similar right of a third party with
respect to such securities.

 

“Liquidation” means the exercise by the Administrative Agent or
Collateral Agent of those rights and remedies accorded to such Agents under the
Loan Documents and applicable Law as a creditor of the Loan Parties with
respect to the realization on the Collateral, including (after the occurrence
and continuation of an Event of Default) the conduct by the Loan Parties acting
with the consent of the Administrative Agent, of any public, private or GOB
sale or other disposition of the Collateral for the purpose of liquidating the
Collateral.  Derivations of the word “Liquidation”
(such as “Liquidate”) are used with like meaning in this Agreement.

 

“Loan” means an extension of credit by a Lender to the Borrowers
under Article II in the form of a Committed Loan or a Swing Line
Loan.

 

“Loan Account” has the meaning assigned to such term in Section 2.11(a).

 

“Loan Documents” means this Agreement, each Note, each Issuer
Document, the Fee Letter, all Borrowing Base Certificates, the Blocked Account
Agreements, the Credit Card Notifications, the Security Documents, each
Facility Guaranty, the Intercreditor Agreement and any other instrument or
agreement now or hereafter executed and delivered in connection herewith, or in
connection with any transaction arising out of any Cash Management Services and
Bank Products provided by a Lender or any of its Affiliates, each as amended
and in effect from time to time.

 

26

 

“Loan Parties” means, collectively, the Borrowers and each
Guarantor.

 

“Material Adverse Effect” means (a) a material adverse
change in, or a material adverse effect upon, the results of operations,
business, properties, liabilities (actual or contingent) or condition
(financial or otherwise) of the Loan Parties and their Subsidiaries taken as a
whole; (b) a material impairment of the ability of any Loan Party to
perform its obligations under any Loan Document to which it is a party; or (c) a
material impairment of the rights and remedies of the Agent or the Lenders
under any Loan Document or a material adverse effect upon the legality, validity,
binding effect or enforceability against any Loan Party of any Loan Document to
which it is a party.  In determining
whether any individual event would result in a Material Adverse Effect,
notwithstanding that such event in and of itself does not have such effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events would result in a
Material Adverse Effect.

 

“Material Contract” means, with respect to any Person, each contract
to which such Person is a party, the termination or breach of which would be
reasonably likely to result in a Material Adverse Effect.

 

“Material Indebtedness” means Indebtedness of the Loan Parties
under the Note Purchase Facility and other Indebtedness (other than the
Obligations) of the Loan Parties in an aggregate principal amount exceeding
$3,000,000.   For purposes of determining
the amount of Material Indebtedness at any time, the amount of the obligations
in respect of any Swap Contract at such time shall be calculated at the Swap
Termination Value thereof.

 

“Maturity Date” means July 31, 2013.

 

“Maximum Rate” has the meaning provided therefor in Section 10.09.

 

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

 

“Mortgage” means the Mortgage on the Alabama Property by
Services Company in favor of the Collateral Agent.

 

“Mortgage Policy” has the meaning given that term in Section 6.21(b).

 

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

 

“Net Proceeds” means:

 

(a)                                  with respect to any
Disposition by any Loan Party or
any of its Subsidiaries (including, without limitation, any Disposition of the Alabama Property in connection with the
Alabama Sale-Leaseback Transaction), or any Extraordinary Receipt
received or paid to the account of any
Loan Party or any of its Subsidiaries, the excess, if any, of (i) the
sum of cash and cash equivalents received in connection with such transaction
(including any cash or cash equivalents received by way of deferred payment 

 

27

 

pursuant to, or by monetization of, a note receivable or otherwise, but
only as and when so received) over (ii) the sum of (A) the principal
amount of any Indebtedness that is secured by the applicable asset by a Lien
permitted hereunder which is senior to the Collateral Agent’s Lien on such
asset and that is required to be repaid (or to establish an escrow for the
future repayment thereof) in connection with such transaction (other than
Indebtedness under the Loan Documents, but including the payment of the
proceeds from any Note Purchasers Priority Collateral in reduction of the
Indebtedness under the Note Purchase Facility), (B) the reasonable and
customary out-of-pocket expenses incurred by such Loan Party or such Subsidiary in connection with such
transaction (including, without limitation, appraisals, and brokerage, legal,
title and recording or transfer tax expenses and commissions) paid by any Loan
Party to third parties (other than Affiliates)); and

 

(b)                                 with
respect to the sale or issuance of any Equity Interest by any Loan Party or any of its
Subsidiaries, or the incurrence or issuance of any Indebtedness by any Loan
Party or any of its Subsidiaries, the excess of (i) the sum of the cash
and cash equivalents received in connection with such transaction over (ii) the
sum of (A) the underwriting discounts and commissions, and other
reasonable and customary out-of-pocket expenses, incurred by such Loan Party or
such Subsidiary in connection therewith and (B) the principal amount of
any Indebtedness (plus any premium or other required payment on account
thereof) under the Note Purchase Facility that is required to be repaid in
connection with such transaction.

 

“Non-Consenting Lender” has the meaning provided therefor in Section 10.01.

 

“Note” means a promissory note made by the Borrowers in favor of
a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit C.

 

“Note Documents” means the Note Purchase Agreement, the Senior
Secured Second Lien Notes due June 2013 issued under the Note Purchase
Agreement, and all “Loan Documents” (as such term is defined in the Note
Purchase Agreement), each as amended and in effect from time to time.

 

“Note Obligations” has the meaning given that term in the
Intercreditor Agreement.

 

“Note Purchase Agreement” means that certain Note Purchase
Agreement dated as of the Closing Date among the Lead Borrower, as issuer, the
initial note purchasers party thereto, Sankaty Advisors, LLC, as collateral
agent, and Crystal Capital Fund Management, L.P., as syndication agent.

 

“Note Purchasers” means the note purchasers from time to time
party to the Note Purchase Agreement.

 

“Note Purchasers Priority Collateral” has the meaning given that
term in the Intercreditor Agreement.

 

“Note Purchase Facility” means the $85,000,000 senior secured
second lien note purchase facility dated as of the Closing Date established by
the Note Purchasers for the benefit 

 

28

 

of the Lead Borrower pursuant to the Note Documents, as amended and in
effect from time to time.

 

“NPL” means the
National Priorities List under CERCLA.

 

“NRLV” means the net appraised retail liquidation value of the
Borrowers’ Inventory (expressed as a percentage of the Cost of such Inventory)
as determined from time to time by an independent appraiser engaged by the
Administrative Agent.

 

“NRLV Percentage” means ninety percent (90%).

 

“Obligations” means (a) all advances to, and debts
(including principal, interest, fees, costs, and expenses), liabilities,
obligations, covenants and indemnities of, any Loan Party arising under any
Loan Document or otherwise with respect to any Loan or Letter of Credit
(including payments in respect of reimbursement of disbursements, interest
thereon and obligations to provide cash collateral therefor), whether direct or
indirect (including those acquired by assumption), absolute or contingent, due
or to become due, now existing or hereafter arising and including interest and
fees that accrue after the commencement by or against any Loan Party or any
Affiliate thereof of any proceeding under any Debtor Relief Laws naming such
Person as the debtor in such proceeding, regardless of whether such interest
and fees are allowed claims in such proceeding, and (b) any Other
Liabilities.

 

“Organization Documents” means, (a) with respect to any
corporation, the certificate or articles of incorporation and the bylaws (or
equivalent or comparable constitutive documents with respect to any non-U.S.
jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement; (c) with
respect to any partnership, joint venture, trust or other form of business
entity, the partnership, joint venture or other applicable agreement of
formation or organization and any agreement, instrument, filing or notice with
respect thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or organization
and, if applicable, any certificate or articles of formation or organization of
such entity, and (d) in each case, all shareholder or other equity holder
agreements, voting trusts and similar arrangements to which such Person is a
party or which is applicable to its Equity Interests and all other arrangements
relating to the Control or management of such Person.

 

“Other Liabilities” means (a) any Cash Management Services
furnished to any of the Loan Parties or any of their Subsidiaries and/or (b) any
transaction with any Lender or any of their respective Affiliates, which arises
out of any Bank Product entered into with any Loan Party and any such Person,
as each may be amended from time to time.

 

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

 

“Outstanding Amount” means (i) with respect to Committed
Loans and Swing Line Loans on any date, the aggregate outstanding principal
amount thereof after giving effect to any borrowings and prepayments or
repayments of Committed Loans and Swing Line Loans 

 

29

 

occurring on such date; and (ii) with respect to any L/C
Obligations on any date, the amount of such L/C Obligations on such date after
giving effect to any L/C Credit Extension occurring on such date and any other
changes in the aggregate amount of the L/C Obligations as of such date,
including as a result of any reimbursements by the Borrowers of Unreimbursed
Amounts.

 

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

 

“Participant” has the meaning specified in Section 10.06(d).

 

“Payment Conditions” means, at the time of determination with
respect to any payment or prepayment of Indebtedness, that (a) no Default
or Event of Default has occurred and is continuing or would arise as a result
of making such payment or prepayment, and (b) at least five (5) days
prior to making such payment or prepayment, the Lead Borrower shall have
provided to the Administrative Agent a certificate signed by a Responsible
Officer of the Lead Borrower, in form and substance reasonably satisfactory to
the Administrative Agent, certifying that (i) in the case of any payment
or prepayment of Indebtedness in an aggregate amount not to exceed $20,000,000
in any Fiscal Year, Excess Availability immediately prior to, and projected pro
forma Excess Availability (measured as of the end of each Fiscal Month) for the
six Fiscal Months immediately following, and after giving effect to, such
payment or prepayment shall be equal to or greater than $50,000,000, (ii) in
the case of any payment or prepayment of Indebtedness in an aggregate amount in
excess of $20,000,000 in any Fiscal Year, the sum of Excess Availability plus
Cash on Hand immediately prior to, and the sum of projected pro forma Excess
Availability plus projected pro forma Cash on Hand (in each case,
measured as of the end of each Fiscal Month) for the twelve Fiscal Months
immediately following, and after giving effect to, such payment or prepayment
shall be equal to or greater than $75,000,000, and (iii) the Loan Parties,
on a Consolidated basis, are, and will continue to be, Solvent after giving
effect to such payment or prepayment.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“Pension Plan” means any “employee pension benefit plan” (as
such term is defined in Section 3(2) of ERISA), other than a
Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or
maintained by any Borrower or any ERISA Affiliate or to which any Borrower or
any ERISA Affiliate contributes or has an obligation to contribute, or in the
case of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the immediately preceding five
plan years.

 

“Permitted Acquisition” means an Acquisition in which all of the
following conditions are satisfied:

 

(a)                                  No
Default or Event of Default has occurred and is continuing or, immediately
following such Acquisition or after taking into account the pro forma
financials, would result from the consummation of such Acquisition;

 

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

 

30

 

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

 

(c)                                  The
Lead Borrower shall have furnished the Administrative Agent with thirty (30)
days’ prior written notice of such intended Acquisition and shall have
furnished the Administrative Agent with a current draft of the acquisition
documents (and final copies thereof as and when executed), a summary of any due
diligence undertaken by the Loan Parties in connection with such Acquisition,
appropriate financial statements of the Person which is the subject of such
Acquisition, pro forma projected financial statements for the twelve (12) month
period following such Acquisition after giving effect to such Acquisition
(including balance sheets, cash flows and income statements by month for the
acquired Person, individually, and on a Consolidated basis with all Loan
Parties), and such other information as the Administrative Agent may reasonably
require, all of which shall be reasonably satisfactory to the Administrative
Agent;

 

(d)                                 Either
(i) the legal structure of the Acquisition shall be acceptable to the
Administrative Agent in its discretion, or (ii) the Loan Parties shall
have provided the Administrative Agent with a solvency opinion from an
unaffiliated third party valuation firm reasonably satisfactory to the
Administrative Agent;

 

(e)                                  After
giving effect to the Acquisition, if the Acquisition is an Acquisition of the
Equity Interests, a Loan Party shall acquire and own, directly or indirectly, a
majority of the Equity Interests in the Person being acquired and shall Control
a majority of any voting interests or shall otherwise Control the governance of
the Person being acquired;

 

(f)                                    If
the assets acquired in such Acquisition are to be included in the Borrowing
Base, the Administrative Agent shall have received (i) the results of
appraisals of the assets (or the assets of the Person) to be acquired in such
Acquisition and of a commercial finance examination of the Person which is (or
whose assets are) being acquired, and (ii) such other due diligence as the
Administrative Agent may reasonably require, all of the results of the
foregoing to be reasonably satisfactory to the Administrative Agent;

 

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

 

(h)                                 If
the Person which is the subject of such Acquisition will be maintained as a
Subsidiary of a Loan Party, or if the assets acquired in an acquisition will be
transferred to a Subsidiary which is not then a Loan Party, such Subsidiary
(unless such Subsidiary is a CFC, in which case such Subsidiary will not be
required to be joined as a Borrower or Guarantor) shall have been joined as a “Borrower”
hereunder or as a Guarantor, as the Administrative Agent shall determine, and
the Collateral Agent shall have received a security interest and/or mortgage
interest in such Subsidiary’s Equity Interests, Inventory, Accounts and other
property of the same nature as constitutes 

 

31

 

collateral under the Security Documents (subject only to Permitted
Encumbrances having priority by operation of law and, in the case of the Note
Purchasers Priority Collateral, Liens securing the obligations of the Borrowers
with respect to the Note Purchase Facility);

 

(i)                                     The
total consideration paid for all such Acquisitions (whether in cash, tangible
property, notes or other property) after the Closing Date shall not exceed in
the aggregate the sum of $50,000,000.00; and

 

(j)                                     Prior
to, and on a pro forma basis for the six months immediately following, and
after giving effect to, such Acquisition, Excess Availability will be greater
than or equal to $50,000,000.00.

 

“Permitted Disposition” means any of the following:

 

(a)                                  Dispositions
of Inventory in the ordinary course of business, including liquidations or
other Dispositions of Inventory in connection with Store closings in the
ordinary course of business;

 

(b)                                 bulk
sales or other Dispositions of the Inventory of a Loan Party not in the
ordinary course of business in connection with Store closings, at arm’s length,
provided, that such Store closures and related Inventory Dispositions
shall not exceed (i) in any Fiscal Year of the Lead Borrower and its
Subsidiaries, five percent (5%) of the number of the Loan Parties’ Stores as of
the beginning of such Fiscal Year (net of new Store openings) and (ii) in
the aggregate from and after the Closing Date, ten percent (10%) of the number
of the Loan Parties’ Stores in existence as of the Closing Date (net of new
Store openings), provided  further that all sales of Inventory in
connection with Store closings shall be in accordance with liquidation
agreements and with professional liquidators reasonably acceptable to the
Agents; provided  further that all Net Proceeds received in
connection therewith are applied to the Obligations if then required in
accordance with Section 2.05 hereof;

 

(c)                                  non-exclusive
licenses of Intellectual Property of a Loan Party or any of its Subsidiaries in
the ordinary course of business;

 

(d)                                 licenses
for the conduct of licensed departments within the Loan Parties’ Stores in the
ordinary course of business; provided  that, if requested by the
Agents, the Agents shall have entered into an intercreditor agreement with the
Person operating such licensed department on terms and conditions reasonably
satisfactory to the Agents;

 

(e)                                  (i) Dispositions
of Equipment in the ordinary course of business that is substantially worn,
damaged, obsolete or, in the judgment of a Loan Party, no longer useful or
necessary in its business or that of any Subsidiary and is not replaced with
similar property having at least equivalent value and (ii) other
Dispositions of Equipment having a fair market value not to exceed $500,000 in
the aggregate in any Fiscal Year;

 

(f)                                    sales,
transfers and Dispositions among the Loan Parties or by any Subsidiary to a
Loan Party, including, without limitation, distributions or transfers of 

 

32

 

some or all of the assets of Twin Brook to the Lead Borrower, provided
that before, or within three (3) Business Days after, any such
distribution or transfer, the Lead Borrower shall have caused the former assets
of Twin Brook so distributed to be pledged to the Collateral Agent for the
benefit of the Credit Parties;

 

(g)                                 sales,
transfers and Dispositions of or by any Subsidiary which is not a Loan Party to
another Subsidiary that is not a Loan Party;

 

(h)                                 as
long as no Default or Event of Default shall have occurred and be continuing or
would arise therefrom, the Alabama Capital Lease; provided  that the Collateral Agent shall have received a
Collateral Access Agreement from the lessor under the Alabama Capital Lease;
and

 

(i)                                     as
long as no Default or Event of Default shall have occurred and be continuing or
would arise therefrom, the Alabama Sale-Leaseback Transaction; provided  that
(i) such sale is made for fair market value, (ii) the Net Proceeds
paid in cash are in an amount at least equal to the greater of the amounts
advanced, or available to be advanced, against the Alabama Property under the
Borrowing Base, (iii) all Net Proceeds received in connection with any
such transaction are applied to the Obligations, and (iv) the Collateral
Agent shall have received a Collateral Access Agreement from the purchaser of
the Alabama Property.

 

“Permitted Encumbrances” means:

 

(a)                                  Liens
imposed by law for Taxes that are not yet due or are being contested in
compliance with Section 6.04;

 

(b)                                 Carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by applicable Law, arising in the ordinary course of business and
securing obligations that are not overdue by more than thirty (30) days or are
being contested in compliance with Section 6.04;

 

(c)                                  Pledges
and deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations, other than any Lien imposed by ERISA;

 

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

 

(e)                                  Liens
in respect of judgments that would not constitute an Event of Default
hereunder;

 

(f)                                    Easements,
covenants, conditions, restrictions, building code laws, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property or materially interfere

 

33

 

with the ordinary conduct of business of a Loan Party and such other
minor title defects or survey matters that are disclosed by current surveys
that, in each case, do not materially interfere with the current use of the
real property;

 

(g)                                 Liens
existing on the date hereof and listed on Schedule 7.01 and any renewals
or extensions thereof, provided  that (i) the property
covered thereby is not changed, (ii) the amount secured or benefited
thereby is not increased, (iii) the direct or any contingent obligor with
respect thereto is not changed, and (iv) any renewal or extension of the
obligations secured or benefited thereby is otherwise permitted hereunder;

 

(h)                                 Liens
on fixed or capital assets acquired by any Loan Party which are permitted under
clause (c) of the definition of Permitted Indebtedness so long as (i) the
Indebtedness secured thereby does not exceed the cost of acquisition of such
fixed or capital assets and (ii) such Liens shall not extend to any other
property or assets of the Loan Parties;

 

(i)                                     Liens
in favor the Collateral Agent;

 

(j)                                     Landlords’
and lessors’ Liens in respect of rent not in default;

 

(k)                                  Possessory
Liens in favor of brokers and dealers arising in connection with the
acquisition or disposition of Investments owned as of the date hereof and
Permitted Investments, provided  that such liens (a) attach
only to such Investments and (b) secure only obligations incurred in the
ordinary course and arising in connection with the acquisition or disposition
of such Investments and not any obligation in connection with margin financing;

 

(l)                                     Liens
arising solely by virtue of any statutory or common law provisions relating to
banker’s liens, liens in favor of securities intermediaries, rights of setoff
or similar rights and remedies as to deposit accounts or securities accounts or
other funds maintained with depository institutions or securities
intermediaries;

 

(m)                               Liens
arising from precautionary UCC filings regarding “true” operating leases or, to
the extent permitted under the Loan Documents, the consignment of goods to a
Loan Party;

 

(n)                                 Liens
on the Collateral securing the Note Obligations having the priority set forth
in the Intercreditor Agreement;

 

(o)                                 Liens
referred to in Schedule B of the Mortgage Policy insuring the Mortgage; and

 

(o)                                 Liens
in favor of customs and revenues authorities imposed by applicable Law arising
in the ordinary course of business in connection with the importation of goods
and securing obligations (i) that are not overdue by more than thirty (30)
days, or (ii)(A) that are being contested in good faith by appropriate
proceedings, (B) the applicable Loan Party or Subsidiary has set aside on
its books adequate reserves with

 

34

 

respect thereto in accordance with GAAP and (C) such contest
effectively suspends collection of the contested obligation and enforcement of
any Lien securing such obligation;

 

provided, however,  that, except as provided in any one or more
of clauses (a) through (o) above, the term “Permitted Encumbrances”
shall not include any Lien securing obligations for borrowed money.

 

“Permitted Indebtedness” means:

 

(a)                                  Indebtedness
outstanding on the date hereof and listed on Schedule 7.03 and any
Permitted Refinancing Indebtedness in respect thereof;

 

(b)                                 Indebtedness
of any Loan Party to any other Loan Party; provided  that such
Indebtedness shall (i) be evidenced by such documentation as the
Administrative Agent may reasonably require, (ii) constitute “Collateral”
under this Agreement and the Security Documents, (iii) be on terms
(including subordination terms) reasonably acceptable to the Administrative
Agent, and (iv) be otherwise permitted pursuant to Section 7.03;

 

(c)                                  (i) transfers
permitted by Section 7.18 and (ii) intercompany Indebtedness
incurred in the ordinary course of business between the Loan Parties located
within the United States, on the one hand, and their Affiliates in Puerto,
Rico, Canada and Asia, on the other hand, to the extent otherwise permitted
pursuant to clause (h) of the definition of Permitted Investments;

 

(d)                                 Without
duplication of Indebtedness described in clause (f) of this definition,
purchase money Indebtedness of any Loan Party to finance the acquisition of any
fixed or capital assets, including the Alabama Capital Lease and other Capital
Lease Obligations, and any Indebtedness assumed in connection with the
acquisition of any such assets or secured by a Lien on any such assets prior to
the acquisition thereof, and any Permitted Refinancing Indebtedness in respect
thereof; provided, however, that the aggregate principal amount
of Indebtedness permitted by this clause (d) shall not exceed $5,000,000
at any time outstanding; provided  further that, if requested by
the Collateral Agent, the Loan Parties shall cause the holders of any such
Indebtedness incurred after the Closing Date to enter into a Collateral Access
Agreement;

 

(e)                                  any
liability or obligation of any Borrower to any other Borrower or to any
Affiliate of any Borrower, and any liability or obligation of any Affiliate of
any Borrower to any Borrower or to any other Affiliate of any Borrower, to
reimburse or share the costs of any services or third party expenses in
accordance with the terms of any intercompany cost-sharing agreement or
arrangement, provided  that no Default or Event of Default shall
have occurred and be continuing or would arise therefrom;

 

(f)                                    Subordinated
Indebtedness;

 

(g)                                 Indebtedness
incurred in connection with the Alabama Sale-Leaseback Transaction, provided
that (i) such sale is made for fair market value, (ii) the Net

 

35

 

Proceeds paid in cash are in an amount at least equal to the greater of
the amounts advanced or available to be advanced against the Alabama Property
under the Borrowing Base, (iii) all Net Proceeds received in connection
with any such Indebtedness are applied to the Obligations, and (iv) the
Collateral Agent shall have received a Collateral Access Agreement from the
purchaser of the Alabama Property;

 

(h)                                 the
Obligations;

 

(i)                                     Indebtedness
under the Note Purchase Facility (including Guarantees of the Borrowers or any
Guarantor in respect of such Indebtedness), and any Permitted Refinancing
Indebtedness in respect thereof;

 

(j)                                     Indebtedness
owed by any Canadian Subsidiary to any Borrower;

 

(k)                                  Guarantees
of any Borrower in respect of the obligations of Hoop under those certain
leases described on Schedule 1.03; and

 

(l)                                     other
unsecured Indebtedness in an aggregate principal amount not to exceed
$15,000,000 at any time outstanding.

 

“Permitted Investments” means:

 

(a)                                  readily
marketable obligations issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof having
maturities of not more than 360 days from the date of acquisition thereof; provided  that the full
faith and credit of the United States of America is pledged in support thereof;

 

(b)                                 commercial
paper issued by any Person organized under the laws of any state of the United
States of America and rated at least “Prime-1” (or the then equivalent
grade) by Moody’s or at least “A-1” (or the then equivalent grade) by
S&P, in each case with maturities of not more than 180 days from the date
of acquisition thereof;

 

(c)                                  time
deposits with, or insured certificates of deposit or bankers’ acceptances of,
any commercial bank that (i) (A) is a Lender or (B) is organized
under the laws of the United States of America, any state thereof or the
District of Columbia or is the principal banking subsidiary of a bank holding
company organized under the laws of the United States of America, any state
thereof or the District of Columbia, and is a member of the Federal Reserve
System, (ii) issues (or the parent of which issues) commercial paper rated
as described in clause (c) of this definition and (iii) has combined
capital and surplus of at least $1,000,000,000, in each case with maturities of
not more than 180 days from the date of acquisition thereof;

 

(d)                                 fully
collateralized repurchase agreements with a term of not more than thirty (30)
days for securities described in clause (a) above (without regard to the
limitation on maturity contained in such clause) and entered into with a
financial institution satisfying the criteria described in clause (c) above
or with any primary dealer and having a market value at the time that such
repurchase agreement is entered into of 

 

36

 

not less than 100% of the repurchase obligation of such counterparty
entity with whom such repurchase agreement has been entered into;

 

(e)                                  Investments,
classified in accordance with GAAP as current assets of the Loan Parties, in
any money market fund, mutual fund, or other investment companies that are
registered under the Investment Company Act of 1940, as amended, which are
administered by financial institutions that have the highest rating obtainable
from either Moody’s or S&P, and which invest solely in one or more of the
types of securities described in clauses (a) through (d) above;

 

(f)                                    Investments
existing on the Closing Date, and set forth on Schedule 7.02, but not
any increase in the amount thereof or any other modification of the terms
thereof;

 

(g)                                 (i) Investments
by any Loan Party and its Subsidiaries in their respective Subsidiaries outstanding
on the date hereof, (ii) additional Investments by any Loan Party and its
Subsidiaries in any other Loan Party (provided  that the Lead
Borrower shall be permitted to make additional Investments in Twin Brook in an
aggregate amount not to exceed $750,000 in any Fiscal Year), and (iii) additional
Investments by any Loan Party in Subsidiaries that are not Loan Parties not to
exceed $1,000,000 in the aggregate in any Fiscal Year;

 

(h)                                 so
long as no Event of Default shall have occurred and be continuing, or would
result therefrom, the Lead Borrower may make loans and advances to its
Subsidiaries in an aggregate amount not to exceed $5,000,000 at any time
outstanding;

 

(i)                                     intercompany
loans and advances or other intercompany Indebtedness permitted pursuant to
clauses (b), (c), (e) and (j) of the definition of Permitted
Indebtedness;

 

(j)                                     Investments
consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course
of business, and Investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors to the extent reasonably
necessary in order to prevent or limit loss;

 

(k)                                  Guarantees
constituting Permitted Indebtedness;

 

(l)                                     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;

 

(m)                               so
long as no Event of Default shall have occurred and be continuing, or would
result therefrom, (i) loans and advances to officers, directors and
employees of the Loan Parties and Subsidiaries in the ordinary course of
business for travel, entertainment, relocation and analogous business purposes,
and (ii) other loans and advances to officers, directors and employees of
the Loan Parties and Subsidiaries in an aggregate amount not to exceed
$6,000,000 at any time outstanding; and

 

37

 

(n)                                 Investments
constituting Permitted Acquisitions;

 

provided, however, that
notwithstanding the foregoing, after the occurrence and during the continuance
of a Cash Dominion Event, no such Investments specified in clauses (a) through
(e) shall be permitted unless such Investments are pledged to the
Collateral Agent as additional Collateral for the Obligations pursuant to such
agreements as may be reasonably required by the Collateral Agent.

 

“Permitted Overadvance” means an Overadvance made by the Administrative
Agent, in its discretion, which:

 

(a)                                  Is
made (i) to maintain, protect or preserve the Collateral and/or the Credit
Parties’ rights under the Loan Documents or which is otherwise for the benefit
of the Credit Parties; or (ii) to enhance the likelihood of, or to
maximize the amount of, repayment of any Obligation; or (iii) to pay any
other amount chargeable to any Loan Party hereunder; and

 

(b)                                 Together
with all other Permitted Overadvances then outstanding, shall not (i) exceed
ten percent (10%) of the Revolving Credit Ceiling at any time or (ii) unless
a Liquidation is occurring, remain outstanding for more than forty-five (45)
consecutive Business Days, unless in each case, the Required Lenders otherwise
agree;

 

provided  however, that the
foregoing shall not (i) modify or abrogate any of the provisions of Section 2.03
regarding the Lender’s obligations with respect to Letters of Credit, or (ii) result
in any claim or liability against the Administrative Agent (regardless of the
amount of any Overadvance) for “inadvertent Overadvances” (i.e. where an
Overadvance results from changed circumstances beyond the control of the
Administrative Agent (such as a reduction in the collateral value)), and such “inadvertent
Overadvances” shall not reduce the amount of Permitted Overadvances allowed
hereunder; provided  further that in no event shall the
Administrative Agent make an Overadvance, if after giving effect thereto, the
principal amount of the Credit Extensions would exceed the Aggregate
Commitments (as in effect prior to any termination of the Commitments pursuant
to Section 2.06 hereof).

 

“Permitted Refinancing Indebtedness” means, with respect to any
Person, any refinancing, refunding, renewal or extension of any Indebtedness of
such Person (or any successor of such Person); provided  that (i) the
amount of such Indebtedness is not increased at the time of such refinancing,
refunding, renewal or extension except by an amount equal to a reasonable
premium or other reasonable amount paid, and fees and expenses reasonably
incurred, in connection with such refinancing and by an amount equal to any
existing commitments unutilized thereunder, and the direct or contingent
obligor with respect thereto is not changed as a result of or in connection
with such refinancing, refunding, renewal or extension, (ii) the result of
such extension, renewal or replacement shall not be an earlier maturity date or
decreased weighted average life of such Indebtedness, (iii) the terms
relating to principal amount, amortization, maturity, and collateral (if any),
of any such refinancing, refunding, renewing or extending Indebtedness, and of
any agreement entered into and of any instrument issued in connection
therewith, are no less favorable in any material respect to the Loan Parties or
the Lenders than the terms of any agreement or instrument governing the 

 

38

 

Indebtedness being refinanced, refunded, renewed or extended and the
interest rate applicable to any such refinancing, refunding, renewing or
extending Indebtedness does not exceed the then applicable market interest
rate, and (iv) if the Indebtedness being refinanced, refunded, renewed or
extended is Subordinated Indebtedness, such refinancing, refunding, renewal or
extension (A) is subordinated in right of payment to the Obligations on
terms at least as favorable, taken as a whole, to the Lenders as those
contained in the documentation governing the Subordinated Indebtedness being
refinanced, refunded, renewed or extended, and (B) contains covenants and
events of default that are not more restrictive taken as a whole than the
covenants and events of default contained in the documentation governing the
Indebtedness being refinanced (as determined in good faith by the Lead Borrower).

 

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

 

“Plan” means any “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) established by a Borrower or, with
respect to any such plan that is subject to Section 412 of the Code or
Title IV of ERISA, any ERISA Affiliate.

 

“Pledge Agreement” means, collectively, (a) the Pledge
Agreement dated as of the Closing Date between the Lead Borrower and the
Collateral Agent and (b) the Pledge Agreement dated as of the Closing Date
between Twin Brook Insurance Company, Inc. and the Collateral Agent, in
each case as amended and in effect from time to time.

 

“Prepayment Event” means:

 

(a)                                  Any
sale, transfer or other Disposition (including, without limitation, any
Disposition of the Alabama Property in
connection with the Alabama Sale-Leaseback Transaction, but excluding any
Disposition permitted pursuant to clauses (a), (c), (d), (e), (f) and (g) of
the definition of Permitted Dispositions) of any property or asset of a
Loan Party; provided  that any individual Disposition for which
any Loan Party or any of its Subsidiaries receives Net Proceeds in an amount
not to exceed $2,500,000 prior to the occurrence of a Cash Dominion Event shall
not be deemed a Prepayment Event;

 

(b)                                 Any
casualty or other insured damage to, or any taking under power of eminent
domain or by condemnation or similar proceeding of, any property or asset of a
Loan Party, unless (i) the proceeds therefrom are required to be paid to
the holder of a Lien on such property or asset having priority over the Lien of
the Collateral Agent or (ii) prior to the occurrence of a Cash Dominion
Event, the proceeds therefrom are utilized for purposes of replacing or
repairing the assets in respect of which such proceeds, awards or payments were
received within 180 days of the occurrence of the damage to or loss of the
assets being repaired or replaced; provided  that any individual
casualty or other insured damage to, or taking under power of eminent domain or
by condemnation or similar proceeding of, any property or asset of a Loan Party
for which any Loan Party receives Net Proceeds in an amount not to exceed
$2,500,000 prior to the occurrence of a Cash Dominion Event shall not be deemed
a Prepayment Event;

 

39

 

(c)                                  The
issuance by a Loan Party of any Equity Interests, other than any such issuance
of Equity Interests (i) to a Loan Party, (ii) as consideration for a
Permitted Acquisition or (iii) as a compensatory issuance to any employee,
director, or consultant (including under any option plan);

 

(d)                                 The
incurrence by a Loan Party of any Indebtedness for borrowed money other than
Permitted Indebtedness; or

 

(e)                                  The
receipt by any Loan Party of any Extraordinary Receipts; provided  that
the receipt of any individual Extraordinary Receipt in an amount not to exceed
$2,500,000 prior to the occurrence of a Cash Dominion Event shall not be deemed
a Prepayment Event.

 

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

 

“Real Estate Advance Rate” means 50%.

 

“Realty Reserves” means such reserves as the Administrative
Agent from time to time determines in the Administrative Agent’s reasonable
discretion as being appropriate to reflect the impediments to the Agents’
ability to realize upon any Eligible Real Estate.  Without limiting the generality of the
foregoing, Realty Reserves may include (but are not limited to) (i) Environmental
Compliance Reserves, (ii) reserves for (A) municipal taxes and
assessments, (B) repairs and (C) remediation of title defects, and (iii) reserves
for Indebtedness secured by Liens having priority over the Lien of the
Collateral Agent.

 

“Register” has the meaning specified in Section 10.06(c).

 

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

 

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

 

“Reports” has the meaning provided in Section 9.11(a).

 

“Request for Credit Extension” means (a) with respect to a
Committed Borrowing, conversion or continuation of Committed Loans, a Committed
Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of
Credit Application, and (c) with respect to a Swing Line Loan, a Swing
Line Loan Notice.

 

“Required Lenders” means, as of any date of determination,
Lenders holding 50.1% or more of the Aggregate Commitments or, if the
Commitment of each Lender to make Loans and the obligation of the L/C Issuer to
make L/C Credit Extensions have been terminated pursuant to Section 8.02,
Lenders holding in the aggregate 50.1% or more of the Total Outstandings (with 

 

40

 

the aggregate amount of each Lender’s risk participation and funded
participation in L/C Obligations and Swing Line Loans being deemed “held” by
such Lender for purposes of this definition); provided  that the
Commitment of, and the portion of the Total Outstandings held or deemed held
by, any Defaulting Lender shall be excluded for purposes of making a
determination of Required Lenders.

 

“Reserves” means all Inventory Reserves, Availability Reserves
and Realty Reserves.

 

“Responsible Officer” means the chief executive officer,
president, chief financial officer or treasurer of a Loan Party or any of the
other individuals designated in writing to the Administrative Agent by an
existing Responsible Officer of a Loan Party as an authorized signatory of any
certificate or other document to be delivered hereunder.  Any document delivered hereunder that is
signed by a Responsible Officer of a Loan Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Loan Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted Payment” means any dividend or other distribution
(whether in cash, securities or other property) with respect to any capital
stock or other Equity Interest of any Person or any of its Subsidiaries, or any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
defeasance, acquisition, cancellation or termination of any such capital stock
or other Equity Interest, or on account of any return of capital to such Person’s
stockholders, partners or members (or the equivalent of any thereof), or any
option, warrant or other right to acquire any such dividend or other
distribution or payment.  Without
limiting the foregoing, “Restricted Payments” with respect to any Person shall
also include all payments made by such Person with any proceeds of a
dissolution or liquidation of such Person.

 

“Revolving Credit Ceiling” means $200,000,000, as such amount
may be modified in accordance with the terms of this Agreement.

 

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

 

“Security Agreement” means the Security Agreement dated as of
the Closing Date among the Loan Parties and the Collateral Agent.

 

“Security Documents” means the Security Agreement, the Pledge
Agreement, the Intellectual Property Security Agreement, the Mortgage, the
Blocked Account Agreements, the Credit Card Notifications, and each other
security agreement or other instrument or document executed and delivered to
the Collateral Agent pursuant to this Agreement or any other Loan Document
granting a Lien to secure any of the Obligations.

 

“Services Company” means The Children’s Place Services Company,
LLC, a Delaware limited liability company.

 

“Settlement Date” has the meaning provided in Section 2.14(a).

 

41

 

“Shareholders’ Equity” means, as of any date of determination,
Consolidated shareholders’ equity of the Lead Borrower and its Subsidiaries as
of that date determined in accordance with GAAP.

 

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

 

“Solvent” and “Solvency” means, with respect to any
Person on a particular date, that on such date (a) at fair valuation, all
of the properties and assets of such Person are greater than the sum of the
debts, including contingent liabilities, of such Person, (b) the present
fair saleable value of the properties and assets of such Person is not less
than the amount that would be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
is able to realize upon its properties and assets and pay its debts and other
liabilities, contingent obligations and other commitments as they mature in the
normal course of business, (d) such Person does not intend to, and does
not believe that it will, incur debts beyond such Person’s ability to pay as
such debts mature, and (e) such Person is not engaged in a business or a
transaction, and is not about to engage in a business or transaction, for which
such Person’s properties and assets would constitute unreasonably small capital
after giving due consideration to the prevailing practices in the industry in
which such Person is engaged.  The amount
of all guarantees at any time shall be computed as the amount that, in light of
all the facts and circumstances existing at the time, can reasonably be
expected to become an actual or matured liability.

 

“Specified Event of Default” means the occurrence of any Event
of Default described in any of Sections 8.01(a), 8.01(b)(i), 8.01(b)(ii), 8.01(d),
8.01(e), 8.01(f), 8.01(g), 8.01(h), 8.01(i),
8.01(j), 8.01(l), 8.01(m), 8.01(n), 8.01(q),
8.01(r) or 8.01(s).

 

“Standby Letter of Credit” means any Letter of Credit that is
not a Commercial Letter of Credit and that (a) is used in lieu or in
support of performance guaranties or performance, surety or similar bonds
(excluding appeal bonds) arising in the ordinary course of business, (b) is
used in lieu or in support of stay or appeal bonds, (c) supports the
payment of insurance premiums for reasonably necessary casualty insurance
carried by any of the Loan Parties, or (d) supports payment or performance
for identified purchases or exchanges of products or services in the ordinary
course of business.

 

“Standby Letter of Credit Sublimit” means $50,000,000.

 

“Stated Amount” means at any time the maximum amount for which a
Letter of Credit may be honored.

 

“Statutory Reserve Rate” means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the FRB to which any Lender is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as “Eurocurrency Liabilities” in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such
Regulation D.  LIBO Rate Loans shall
be deemed to constitute 

 

42

 

eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and
as of the effective date of any change in any reserve percentage.

 

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

 

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

 

“Subsidiary” of a Person means a corporation, partnership, joint
venture, limited liability company or other business entity of which a majority
of the shares Equity Interests having ordinary voting power for the election of
directors or other governing body are at the time beneficially owned, or the management
of which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person. 
Unless otherwise specified, all references herein to a “Subsidiary” or
to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of a Loan
Party.  Any reference to the Subsidiaries
of the Lead Borrower herein or in any other Loan Document shall not include
Hoop, unless explicitly stated otherwise.

 

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

 

“Swap Termination Value” means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or
after the date such Swap Contracts have been closed out and termination value(s) determined
in accordance therewith, such termination value(s), and (b) for any date
prior to the date referenced in clause (a), the amount(s) determined as
the mark-to-market value(s) for such Swap Contracts, as determined based
upon one or more mid-market or other readily available quotations provided by
any recognized dealer in such Swap Contracts (which may include a Lender or any
Affiliate of a Lender).

 

43

 

“Swing Line” means the revolving credit facility made available
by the Swing Line Lender pursuant to Section 2.04.

 

“Swing Line Borrowing” means a borrowing of a Swing Line Loan
pursuant to Section 2.04.

 

“Swing Line Lender” means Wells Fargo Retail Finance, LLC, in
its capacity as provider of Swing Line Loans, or any successor swing line
lender hereunder.

 

“Swing Line Loan” has the meaning specified in Section 2.04(a).

 

“Swing Line Loan Notice” means a notice of a Swing Line
Borrowing pursuant to Section 2.04(a), which, if in writing, shall
be substantially in the form of Exhibit B.

 

“Swing Line Sublimit” means an amount equal to the lesser of (a) $20,000,000
or (b) the Aggregate Commitments. 
The Swing Line Sublimit is part of, and not in addition to, the
Aggregate Commitments.

 

“Taxes” means all present or future taxes, levies, imposts,
duties, deductions, withholdings, assessments, fees or other charges imposed by
any Governmental Authority in connection with any and all payments to be made
by or on account of any obligation of the Borrowers hereunder or under any other
Loan Document, including any interest, additions to tax or penalties applicable
thereto.

 

“Termination Date” means the earliest to occur of (i) the
Maturity Date, (ii) the date on which the maturity of the Obligations is
accelerated (or deemed accelerated) and the Commitments are irrevocably
terminated (or deemed terminated) in accordance with Article VIII.

 

“Total Outstandings” means the aggregate Outstanding Amount of
all Loans and all L/C Obligations.

 

“Twin Brook” means Twin Brook Insurance Company, Inc., a
New York captive insurance company.

 

“Type” means, with respect to a Committed Loan, its character as
a Base Rate Loan or a LIBO Rate Loan.

 

“UCC” or “Uniform Commercial Code” means the Uniform
Commercial Code as in effect from time to time in the State of New York; provided,
however, that if a term is defined in Article 9 of the Uniform
Commercial Code differently than in another Article thereof, the term
shall have the meaning set forth in Article 9; provided  further
that, if by reason of mandatory provisions of law, perfection, or the effect of
perfection or non-perfection, of a security interest in any Collateral or the
availability of any remedy hereunder is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than New York, “Uniform Commercial Code”
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection or availability of such remedy, as the case may
be.

 

44

 

“Uncapped Excess Availability” means, as of any date of
determination thereof by the Administrative Agent, the result, if a positive
number, of:

 

(a)                                  the
Borrowing Base;

 

minus

 

(b)                                 the
aggregate Outstanding Amount of all Credit Extensions.

 

“Unfunded Pension Liability” means the excess of a Pension Plan’s
benefit liabilities under Section 4001(a)(16) of ERISA, over the current
value of that Pension Plan’s assets, determined in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code for
the applicable plan year.

 

“United States” and “U.S.” mean the United States of
America.

 

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

 

“Wells Fargo Bank” means Wells Fargo Bank, N.A., a national
banking association.

 

1.02                           Other
Interpretive Provisions.  With reference to this Agreement
and each other Loan Document, unless otherwise specified herein or in such
other Loan Document:

 

(a)                                  The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include,”
“includes” and “including” shall be deemed to be followed by the
phrase “without limitation.”  The word “will”
shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any
definition of or reference to any agreement, instrument or other document
(including any Organization Document) shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein or in any other Loan Document), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns, (iii) the words “herein,” “hereof”
and “hereunder,” and words of similar import when used in any Loan
Document, shall be construed to refer to such Loan Document in its entirety and
not to any particular provision thereof, (iv) all references in a Loan
Document to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles and Sections of, and Exhibits and Schedules to, the Loan
Document in which such references appear, (v) any reference to any law
shall include all statutory and regulatory provisions consolidating, amending
replacing or interpreting such law and any reference to any law or regulation
shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time, and (vi) the words “asset”
and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

45

 

(b)                                 In the computation of
periods of time from a specified date to a later specified date, the word “from”
means “from and including;” the words “to” and “until”
each mean “to but excluding;” and the word “through” means “to
and including.”

 

(c)                                  Section headings
herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Loan Document.

 

1.03                           Accounting
Terms.

 

(a)                                  Generally.  All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all
financial data (including financial ratios and other financial calculations)
required to be submitted pursuant to this Agreement shall be prepared in
conformity with, GAAP applied on a consistent basis, as in effect from time to
time, applied in a manner consistent with that used in preparing the Audited
Financial Statements, except as otherwise specifically prescribed
herein.

 

(b)                                 Changes in GAAP.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Loan Document, and either the Lead Borrower or the Required Lenders shall so
request, the Administrative Agent, the Lenders and the Borrowers shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the
approval of the Required Lenders); provided  that, until so
amended, (i) such ratio or requirement shall continue to be computed in
accordance with GAAP prior to such change therein and (ii) the Borrowers
shall provide to the Administrative Agent and the Lenders financial statements
and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.

 

1.04         Times of Day.  Unless otherwise specified, all references
herein to times of day shall be references to Eastern time (daylight or
standard, as applicable).

 

1.05         Letter of Credit Amounts.  Unless otherwise specified, all references
herein to the amount of a Letter of Credit at any time shall be deemed to be
the Stated Amount of such Letter of Credit in effect at such time; provided,
however, that, except as otherwise provided in Section 2.03(h),
with respect to any Letter of Credit that, by its terms or the terms of any
Issuer Documents related thereto, provides for one or more automatic increases
in the Stated Amount thereof, the amount of such Letter of Credit shall be
deemed to be the maximum Stated Amount of such Letter of Credit after giving
effect to all such increases, whether or not such maximum Stated Amount is in
effect at such time.

 

ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01                           Committed
Loans; Reserves.

 

(a)                                  Subject to the terms
and conditions set forth herein, each Lender severally agrees to make loans
(each such loan, a “Committed Loan”) to the Borrowers from time 

 

46

 

to time, on any Business Day during the Availability Period, in an
aggregate amount not to exceed at any time outstanding the lesser of (x) the
amount of such Lender’s Commitment, or (y) such Lender’s Applicable
Percentage of the Borrowing Base; subject in each case to the following
limitations:

 

(i)                                     after giving
effect to any Committed Borrowing, the Total Outstandings shall not exceed the
lesser of (A) the Aggregate Commitments, or (B) the Borrowing Base;

 

(ii)                                  after giving effect
to any Committed Borrowing, the aggregate Outstanding Amount of the Committed
Loans of any Lender, plus such Lender’s Applicable Percentage of the
Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed
such Lender’s Commitment;

 

(iii)                               The Outstanding Amount
of all L/C Obligations shall not at any time exceed the Letter of Credit
Sublimit; and

 

(iv)                              After giving effect to
all Credit Extensions, no Overadvance shall exist.

 

Within the limits of each Lender’s Commitment, and subject to the other
terms and conditions hereof, the Borrowers may borrow under this Section 2.01,
prepay under Section 2.05, and reborrow under this Section 2.01  Committed Loans may be Base Rate Loans or
LIBO Rate Loans, as further provided herein.

 

(b)                                 The following are the
Reserves as of the Closing Date:

 

(i)                                     Shrink (an
Inventory Reserve): An amount equal to 0.70% of the gross sales of the
Borrowers for the Fiscal Year to date; and

 

(ii)                                  Rent (an Availability
Reserve): An amount equal to (A) one (1) months’ rent for all of the
Borrowers’ leased locations in Pennsylvania, Virginia and Washington, other
than leased locations with respect to which the Collateral Agent has received a
Collateral Access Agreement, and (B) three (3) months’ rent for the
Borrowers’ distribution center located in Dayton, New Jersey.

 

(c)                                  The Administrative
Agent shall have the right, at any time and from time to time on or after the
Closing Date in its reasonable discretion to establish, modify or eliminate
Reserves.

 

2.02                           Borrowings,
Conversions and Continuations of Committed Loans.

 

(a)                                  Committed Loans
(other than Swing Line Loans) shall be either Base Rate Loans or LIBO Rate
Loans, as the Lead Borrower may request subject to and in accordance with this Section 2.02.  Subject to the other provisions of this Section 2.02,
Committed Borrowings of more than one Type may be incurred at the same time.

 

47

 

(b)                                 Each Committed
Borrowing, each conversion of Committed Loans from one Type to the other, and
each continuation of LIBO Rate Loans shall be made upon the Lead Borrower’s
irrevocable notice to the Administrative Agent, which may be given by
telephone.  Each such notice must be
received by the Administrative Agent not later than 1:00 p.m. (i) three
Business Days prior to the requested date of any Borrowing of, conversion to or
continuation of LIBO Rate Loans or of any conversion of LIBO Rate Loans to Base
Rate Loans, and (ii) one Business Day prior to the requested date of any
Borrowing of Base Rate Loans.  Each
telephonic notice by the Lead Borrower pursuant to this Section 2.02(b) must
be confirmed promptly by delivery to the Administrative Agent of a written
Committed Loan Notice, appropriately completed and signed by a Responsible
Officer of the Lead Borrower.  Each
Borrowing of, conversion to or continuation of LIBO Rate Loans shall be in a
principal amount of $1,000,000 or a whole multiple of $500,000 in excess
thereof.  Except as provided in Sections
2.03(c) and 2.04(c), each Borrowing of, or conversion to, Base
Rate Loans shall be in a principal amount of $500,000 or a whole multiple of
$100,000 in excess thereof.  Each
Committed Loan Notice (whether telephonic or written) shall specify (i) whether
the Lead Borrower is requesting a Borrowing, a conversion of Committed Loans
from one Type to the other, or a continuation of LIBO Rate Loans, (ii) the
requested date of the Borrowing, conversion or continuation, as the case may be
(which shall be a Business Day), (iii) the principal amount of Committed
Loans to be borrowed, converted or continued, (iv) the Type of Committed
Loans to be borrowed or to which existing Committed Loans are to be converted,
and (v) if applicable, the duration of the Interest Period with respect
thereto.  If the Lead Borrower fails to
specify a Type of Committed Loan in a Committed Loan Notice or if the Lead
Borrower fails to give a timely notice requesting a conversion or continuation,
then the applicable Committed Loans shall be made as, or converted to, Base
Rate Loans.  Any such automatic
conversion to Base Rate Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable LIBO Rate
Loans.  If the Lead Borrower requests a
Borrowing of, conversion to, or continuation of LIBO Rate Loans in any such
Committed Loan Notice, but fails to specify an Interest Period, it will be
deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary
herein, a Swing Line Loan may not be converted to a LIBO Rate Loan.

 

(c)                                  Following receipt of
a Committed Loan Notice, the Administrative Agent shall promptly notify each
Lender of the amount of its Applicable Percentage of the applicable Committed
Loans, and if no timely notice of a conversion or continuation is provided by
the Lead Borrower, the Administrative Agent shall notify each Lender of the
details of any automatic conversion to Base Rate Loans described in Section 2.02(b).  In the case of a Committed Borrowing, each
Lender shall make the amount of its Committed Loan available to the
Administrative Agent in immediately available funds at the Administrative Agent’s
Office not later than 1:00 p.m. on the Business Day specified in the
applicable Committed Loan Notice.  Upon
satisfaction of the applicable conditions set forth in Section 4.02
(and, if such Borrowing is the initial Credit Extension, Section 4.01),
the Administrative Agent shall use reasonable efforts to make all funds so
received available to the Borrowers in like funds by no later than 4:00 p.m.
on the day of receipt by the Administrative Agent either by (i) crediting
the account of the Lead Borrower on the books of the Administrative Agent with
the amount of such funds or (ii) wire transfer 

 

48

 

of such funds, in each case in accordance with instructions provided to
(and reasonably acceptable to) the Administrative Agent by the Lead Borrower; provided,
however, that if, on the date the Committed Loan Notice with respect to
such Borrowing is given by the Lead Borrower, there are L/C Borrowings
outstanding, then the proceeds of such Borrowing, first, shall be
applied to the payment in full of any such L/C Borrowings, and second,
shall be made available to the Borrowers as provided above.

 

(d)                                 The Administrative
Agent, without the request of the Lead Borrower, may advance any interest, fee,
service charge, Credit Party Expenses, or other payment to which any Credit
Party is entitled from the Loan Parties pursuant hereto or any other Loan
Document, as and when due and payable, and may charge the same to the Loan
Account notwithstanding that an Overadvance may result thereby.  The Administrative Agent shall advise the
Lead Borrower of any such advance or charge promptly after the making
thereof.  Such action on the part of the
Administrative Agent shall not constitute a waiver of the Administrative Agent’s
rights and the Borrowers’ obligations under Section 2.05(c).  Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2.02(d) shall
bear interest at the interest rate then and thereafter applicable to Base Rate
Loans.

 

(e)                                  Except as otherwise
provided herein, a LIBO Rate Loan may be continued or converted only on the
last day of an Interest Period for such LIBO Rate Loan.  Upon the occurrence and during the
continuance of a Default, the Administrative Agent may, and at the direction of
the Required Lenders shall, prohibit Loans from being requested as, converted
to or continued as, LIBO Rate Loans.

 

(f)                                    The Administrative
Agent shall promptly notify the Lead Borrower and the Lenders of the interest
rate applicable to any Interest Period for LIBO Rate Loans upon determination
of such interest rate.  At any time that
Base Rate Loans are outstanding, the Administrative Agent shall notify the Lead
Borrower and the Lenders of any change in Wells Fargo Bank’s prime rate used in
determining the Base Rate promptly following the public announcement of such
change.

 

(g)                                 After giving effect to
all Committed Borrowings, all conversions of Committed Loans from one Type to
the other, and all continuations of Committed Loans as the same Type, there
shall not be more than ten (10) Interest Periods in effect with respect to
Committed Loans.

 

(h)                                 The Administrative
Agent, the Lenders, the Swing Line Lender and the L/C Issuer shall have no
obligation to make any Loan or to provide any Letter of Credit if an
Overadvance would result.  The
Administrative Agent may, in its discretion, make Permitted Overadvances
without the consent of the Lenders, the Swing Line Lender and the L/C Issuer
and each Lender shall be bound thereby. 
Any Permitted Overadvance may constitute a Swing Line Loan.  A Permitted Overadvance is for the account of
the Borrowers and shall constitute a Loan and an Obligation and shall be repaid
by the Borrowers in accordance with the provisions of Section 2.05(c).  The making of any such Permitted Overadvance
on any one occasion shall not obligate the Administrative Agent or any Lender
to make or permit any Permitted Overadvance on any other occasion or to 

 

49

 

permit such Permitted Overadvances to remain outstanding. The making by
the Administrative Agent of a Permitted Overadvance shall not modify or
abrogate any of the provisions of Section 2.03 regarding the
Lenders’ obligations to purchase participations with respect to Letters of
Credit or of Section 2.04 regarding the Lenders’ obligations to purchase
participations with respect to Swing Line Loans.  Without limiting the foregoing, the
Administrative Agent shall have no liability for, and no Loan Party or Credit
Party shall have the right to, or shall, bring any claim of any kind whatsoever
against the Administrative Agent with respect to “inadvertent Overadvances”
(i.e. where an Overadvance results from changed circumstances beyond the
control of the Administrative Agent (such as a reduction in the collateral
value)) regardless of the amount of any such Overadvance(s).

 

2.03                           Letters
of Credit.

 

(a)                                  The
Letter of Credit Commitment.

 

(i)                                     Subject to the
terms and conditions set forth herein, (A) the Administrative Agent, in
reliance upon the agreements of the Lenders set forth in this Section 2.03,
shall endeavor to cause the L/C Issuer from time to time on any Business Day
during the period from the Closing Date until the Letter of Credit Expiration
Date, to issue Letters of Credit (including Canadian Letters of Credit) for the
account of the Borrowers, and to amend or extend Letters of Credit previously
issued by the L/C Issuer, in accordance with Section 2.03(b) below;
and (B) the Lenders severally agree to participate in Letters of Credit
(including Canadian Letters of Credit) issued for the account of the Borrowers
and any drawings thereunder; provided  that after giving effect to
any L/C Credit Extension with respect to any Letter of Credit, (v) the
Outstanding Amount of the L/C Obligations with respect to Standby Letters of Credit
shall not exceed the Standby Letter of Credit Sublimit, (w) the
Outstanding Amount of the L/C Obligations with respect to Canadian Letters of
Credit shall not exceed the Canadian Letter of Credit Sublimit, (x) the
Total Outstandings shall not exceed the lesser of the Aggregate Commitments or
the Borrowing Base, (y) the aggregate Outstanding Amount of the Committed
Loans of any Lender, plus such Lender’s Applicable Percentage of the
Outstanding Amount of all L/C Obligations, plus such Lender’s Applicable
Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed
such Lender’s Commitment, and (z) the Outstanding Amount of the L/C
Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Lead Borrower for the
issuance or amendment of a Letter of Credit shall be deemed to be a
representation by the Borrowers that the L/C Credit Extension so requested
complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to
the terms and conditions hereof, the Borrowers’ ability to obtain Letters of
Credit shall be fully revolving, and accordingly the Borrowers may, during the
foregoing period, obtain Letters of Credit to replace Letters of Credit that
have expired or that have been drawn upon and reimbursed.  Any L/C Issuer (other than Wells Fargo Bank
or any of its Affiliates) shall notify the Administrative Agent in writing on
each Business Day of all Letters of Credit issued on the prior Business Day by
such L/C Issuer.

 

50

 

(ii)                                  No Letter of Credit
shall be issued if:

 

(A)                              subject
to Section 2.03(b)(iii), the expiry date of such requested Standby
Letter of Credit would occur more than twelve months after the date of issuance
or last extension, unless the Required Lenders have approved such expiry date;
or

 

(B)                                subject
to Section 2.03(b)(iii), the expiry date of such requested
Commercial Letter of Credit would occur more than 120 days after the date of
issuance or last extension, unless the Required Lenders have approved such
expiry date; or

 

(C)                                the
expiry date of such requested Letter of Credit would occur after the Letter of
Credit Expiration Date, unless either such Letter of Credit is Cash
Collateralized on or prior to the Letter of Credit Expiration Date or all the
Lenders have approved such expiry date.

 

(iii)                               No Letter of Credit
shall be issued without the prior consent of the Administrative Agent if:

 

(A)                              any
order, judgment or decree of any Governmental Authority or arbitrator shall by
its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter
of Credit, or any Law applicable to the L/C Issuer or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the L/C Issuer with respect to such
Letter of Credit any restriction, reserve or capital requirement (for which the
L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing
Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or
expense which was not applicable on the Closing Date and which the L/C Issuer
in good faith deems material to it;

 

(B)                                the
issuance of such Letter of Credit would violate one or more policies of the L/C
Issuer applicable to letters of credit generally;

 

(C)                                such
Letter of Credit is to be denominated in a currency other than Dollars; provided
that if the L/C Issuer, in its discretion and with the consent of the
Administrative Agent, issues a Letter of Credit denominated in a currency other
than Dollars, all reimbursements by the Borrowers of the honoring of any
drawing under such Letter of Credit shall be paid in Dollars; or

 

(D)                               a
default of any Lender’s obligations to fund under Section 2.03(c) exists
or any Lender is at such time a Defaulting Lender hereunder, unless the
Administrative Agent or the L/C Issuer has entered into satisfactory
arrangements with the Borrowers or such Lender to eliminate the L/C Issuer’s
risk with respect to such Lender.

 

51

 

(iv)                              The L/C Issuer shall not
amend any Letter of Credit if (A) the L/C Issuer would not be permitted at
such time to issue such Letter of Credit in its amended form under the terms
hereof, (B) the beneficiary of such Letter of Credit does not accept the
proposed amendment to such Letter of Credit or (C) such Letter of Credit
has been amended on four (4) prior occasions.

 

(v)                                 The L/C Issuer shall
act on behalf of the Lenders with respect to any Letters of Credit issued by it
and the documents associated therewith, and the L/C Issuer shall have all of the
benefits and immunities (A) provided to the Administrative Agent in Article IX
with respect to any acts taken or omissions suffered by the L/C Issuer in
connection with Letters of Credit issued by it or proposed to be issued by it
and Issuer Documents pertaining to such Letters of Credit as fully as if the
term “Administrative Agent” as used in Article IX included the L/C
Issuer with respect to such acts or omissions, and (B) as additionally
provided herein with respect to the L/C Issuer.

 

(b)                                 Procedures
for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of
Credit.

 

(i)                                     Each Letter of
Credit shall be issued or amended, as the case may be, upon the request of the
Lead Borrower delivered to the Administrative Agent (with a copy to the L/C
Issuer) in the form of a Letter of Credit Application, appropriately completed
and signed by an L/C Responsible Person; provided, however, that
in no event shall any Letter of Credit be amended more than four (4) times
after the issuance thereof.  Any Letter
of Credit Application or other document delivered hereunder that is signed by
an L/C Responsible Person shall be conclusively presumed to have been
authorized by all necessary corporate, partnership and/or other action, and
such L/C Responsible Person shall be conclusively presumed to have acted on
behalf of the Lead Borrower.  Such Letter
of Credit Application must be received by the Administrative Agent not later
than 1:00 p.m. at least two Business Days (or such other date and time as
the Administrative Agent may agree in a particular instance in its sole
discretion) prior to the proposed issuance date or date of amendment, as the
case may be.  Promptly after receipt of
any Letter of Credit Application, the Administrative Agent will confirm with the
L/C Issuer (by telephone or in writing) that the L/C Issuer has received a copy
of such Letter of Credit Application from the Lead Borrower and, if not, the
Administrative Agent will provide the L/C Issuer with a copy thereof.  In the case of a request for an initial
issuance of a Letter of Credit, such Letter of Credit Application shall specify
in form and detail satisfactory to the Administrative Agent and the L/C Issuer:
(A) the proposed issuance date of the requested Letter of Credit (which
shall be a Business Day); (B) the amount thereof; (C) the expiry date
thereof; (D) the name and address of the beneficiary thereof; (E) the
documents to be presented by such beneficiary in case of any drawing
thereunder; (F) the full text of any certificate to be presented by such
beneficiary in case of any drawing thereunder; and (G) such other matters
as the Administrative Agent or the L/C Issuer may require.  In the case of a request for an amendment of
any outstanding Letter of Credit, such Letter of Credit 

 

52

 

Application shall specify in form and detail satisfactory to the
Administrative Agent and the L/C Issuer (A) the Letter of Credit to be
amended; (B) the proposed date of amendment thereof (which shall be a Business
Day); (C) the nature of the proposed amendment; and (D) such other
matters as the Administrative Agent and the L/C Issuer may require.  Additionally, the Lead Borrower shall furnish
to the L/C Issuer and the Administrative Agent such other documents and
information pertaining to such requested Letter of Credit issuance or
amendment, including any Issuer Documents, as the L/C Issuer or the
Administrative Agent may reasonably require.

 

(ii)                                  Immediately upon the
issuance or amendment of each Letter of Credit, each Lender shall be deemed to
(without any further action), and hereby irrevocably and unconditionally agrees
to, purchase from the L/C Issuer, without recourse or warranty, a risk
participation in such Letter of Credit in an amount equal to the product of
such Lender’s Applicable Percentage times the amount of such Letter of
Credit.  Upon any change in the
Commitments under this Agreement, it is hereby agreed that with respect to all
L/C Obligations, there shall be an automatic adjustment to the participations
hereby created to reflect the new Applicable Percentages of the assigning and
assignee Lenders.

 

(iii)                               If the Lead Borrower so
requests in any applicable Letter of Credit Application, the Administrative
Agent may, in its sole and absolute discretion, cause the L/C Issuer to issue a
Standby Letter of Credit that has automatic extension provisions (each, an “Auto-Extension
Letter of Credit”); provided  that any such Auto-Extension
Letter of Credit must permit the L/C Issuer to prevent any such extension at
least once in each twelve-month period (commencing with the date of issuance of
such Standby Letter of Credit) by giving prior notice to the beneficiary
thereof not later than a day (the “Non-Extension Notice Date”) in each
such twelve-month period to be agreed upon at the time such Standby Letter of
Credit is issued.  Unless otherwise
directed by the Administrative Agent or L/C Issuer, the Lead Borrower shall not
be required to make a specific request to the Administrative Agent or L/C
Issuer for any such extension.  Once an
Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to
have authorized (but may not require) the L/C Issuer to permit the extension of
such Standby Letter of Credit at any time to an expiry date not later than the
Letter of Credit Expiration Date; provided, however, that the
Administrative Agent shall instruct the L/C Issuer not to permit any such
extension if (A) the Administrative Agent has determined that it would not
be permitted, or would have no obligation, at such time to cause the issuance
of such Standby Letter of Credit in its revised form (as extended) under the
terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or
otherwise), or (B) the L/C Issuer has received notice (which may be by
telephone or in writing) on or before the day that is thirty days before the
Non-Extension Notice Date (1) from the Administrative Agent that the
Required Lenders have elected not to permit such extension or (2) from the
Administrative Agent or the Lead Borrower that one or more of the applicable
conditions specified in Section 4.02 is not then satisfied, and in
each such case directing the L/C Issuer not to permit such extension.

 

53

 

(iv)                              Promptly after its
delivery of any Letter of Credit or any amendment to a Letter of Credit to an
advising bank with respect thereto or to the beneficiary thereof, the L/C
Issuer will make available to the Lead Borrower and the Administrative Agent a
true and complete copy of such Letter of Credit or amendment.

 

(c)                                  Drawings
and Reimbursements; Funding of Participations.

 

(i)                                     Upon receipt from
the beneficiary of any Letter of Credit of any notice of a drawing under such
Letter of Credit, the L/C Issuer shall notify the Administrative Agent thereof
and the Administrative Agent shall notify the Lead Borrower; provided, however,
that any failure to give or delay in giving such notice shall not relieve the
Borrowers of their obligation to reimburse the L/C Issuer and the Lenders with
respect to any such payment.  If the
Administrative Agent notifies the Lead Borrower of any such notice of a drawing
not later than 1:30 p.m. on the date of any payment by the L/C Issuer
under a Letter of Credit (each such date, an “Honor Date”), the
Borrowers shall reimburse the L/C Issuer through the Administrative Agent on
the same day in an amount equal to the amount of such drawing.  If the Administrative Agent notifies the Lead
Borrower of any such notice of a drawing later than 1:30 p.m. on any Honor
Date, the Borrowers shall reimburse the L/C Issuer through the Administrative
Agent by 10:00 a.m. on the next day in an amount equal to the amount of
such drawing.  If the Borrowers fail to
so reimburse the L/C Issuer by such time, the Administrative Agent shall
promptly notify each Lender of the Honor Date, the amount of the unreimbursed
drawing (the “Unreimbursed Amount”), and the amount of such Lender’s
Applicable Percentage thereof.  In such
event, the Borrowers shall be deemed to have requested a Committed Borrowing of
Base Rate Loans to be disbursed on the Honor Date in an amount equal to the
Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02
for the principal amount of Base Rate Loans, but subject to the amount of the
unutilized portion of the Aggregate Commitments and the conditions set forth in
Section 4.02 (other than the delivery of a Committed Loan
Notice).  Any notice given by the L/C
Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may
be given by telephone or electronic means.

 

(ii)                                  Each Lender shall
upon any notice pursuant to Section 2.03(c)(i) make funds
available to the Administrative Agent for the account of the L/C Issuer at the
Administrative Agent’s Office in an amount equal to its Applicable Percentage
of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day
specified in such notice by the Administrative Agent, whereupon, subject to the
provisions of Section 2.03(c)(iii), each Lender that so makes funds
available shall be deemed to have made a Base Rate Loan to the Borrowers in
such amount.  The Administrative Agent
shall remit the funds so received to the L/C Issuer.

 

(iii)                               With respect to any
Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of
Base Rate Loans because the conditions set forth in Section 4.02
cannot be satisfied or for any other reason, the Borrowers 

 

54

 

shall be deemed to have incurred from the L/C Issuer an L/C Borrowing
in the amount of the Unreimbursed Amount that is not so refinanced, which L/C
Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at the Default Rate.  In
such event, each Lender’s payment to the Administrative Agent for the account
of the L/C Issuer pursuant to Section 2.03(c)(ii) shall be
deemed payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this Section 2.03.

 

(iv)                              Until each Lender funds
its Committed Loan or L/C Advance pursuant to this Section 2.03(c) to
reimburse the L/C Issuer for any amount drawn under any Letter of Credit,
interest in respect of such Lender’s Applicable Percentage of such amount shall
be solely for the account of the L/C Issuer.

 

(v)                                 Each Lender’s
obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuer
for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c),
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense
or other right which such Lender may have against the L/C Issuer, any Borrower
or any other Person for any reason whatsoever; (B) the occurrence or
continuance of a Default, or (C) any other occurrence, event or condition,
whether or not similar to any of the foregoing; provided, however,
that each Lender’s obligation to make Committed Loans pursuant to this Section 2.03(c) is
subject to the conditions set forth in Section 4.02 (other than
delivery by the Lead Borrower of a Committed Loan Notice).  No such making of an L/C Advance shall
relieve or otherwise impair the obligation of the Borrowers to reimburse the
L/C Issuer for the amount of any payment made by the L/C Issuer under any
Letter of Credit, together with interest as provided herein.

 

(vi)                              If any Lender fails to
make available to the Administrative Agent for the account of the L/C Issuer
any amount required to be paid by such Lender pursuant to the foregoing
provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii),
the L/C Issuer shall be entitled to recover from such Lender (acting through
the Administrative Agent), on demand, such amount with interest thereon for the
period from the date such payment is required to the date on which such payment
is immediately available to the L/C Issuer at a rate per annum equal to the
greater of the Federal Funds Rate and a rate determined by the L/C Issuer in accordance
with banking industry rules on interbank compensation plus any
administrative, processing or similar fees customarily charged by the L/C
Issuer in connection with the foregoing. 
If such Lender pays such amount (with interest and fees as aforesaid),
the amount so paid shall constitute such Lender’s Committed Loan included in
the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C
Borrowing, as the case may be.  A
certificate of the L/C Issuer submitted to any Lender (through the
Administrative Agent) with respect to any amounts owing under this clause (vi) shall
be conclusive absent manifest error.

 

55

 

(d)                                 Repayment
of Participations.

 

(i)                                     At any time after
the L/C Issuer has made a payment under any Letter of Credit and has received
from the Administrative Agent a Lender’s L/C Advance in respect of such payment
in accordance with Section 2.03(c), if the Administrative Agent
receives for the account of the L/C Issuer any payment in respect of the
related Unreimbursed Amount or interest thereon (whether directly from the
Borrowers or otherwise, including proceeds of Cash Collateral applied thereto
by the Administrative Agent), the Administrative Agent will distribute to such
Lender its Applicable Percentage thereof (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Lender’s
L/C Advance was outstanding) in the same funds as those received by the Administrative
Agent.

 

(ii)                                  If any payment
received by the Administrative Agent for the account of the L/C Issuer pursuant
to Section 2.03(c)(i) is required to be returned under any of
the circumstances described in Section 10.05 (including pursuant to
any settlement entered into by the L/C Issuer in its discretion), each Lender
shall pay to the Administrative Agent for the account of the L/C Issuer its
Applicable Percentage thereof on demand of the Administrative Agent, plus
interest thereon from the date of such demand to the date such amount is
returned by such Lender, at a rate per annum equal to the Federal Funds Rate
from time to time in effect.  The
obligations of the Lenders under this clause shall survive the payment in full
of the Obligations and the termination of this Agreement.

 

(e)                                  Obligations
Absolute.  The obligation of the
Borrowers to reimburse the L/C Issuer for each drawing under each Letter of
Credit and to repay each L/C Borrowing shall be absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including the following:

 

(i)                                     any lack of
validity or enforceability of such Letter of Credit, this Agreement, or any
other Loan Document;

 

(ii)                                  the existence of any
claim, counterclaim, setoff, defense or other right that the Borrowers or any
Subsidiary may have at any time against any beneficiary or any transferee of
such Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the L/C Issuer or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or by such
Letter of Credit or any agreement or instrument relating thereto, or any
unrelated transaction;

 

(iii)                               any draft, demand, certificate
or other document presented under such Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under such Letter of Credit;

 

56

 

(iv)                              any payment by the L/C
Issuer under such Letter of Credit against presentation of a draft or
certificate that does not strictly comply with the terms of such Letter of
Credit; or any payment made by the L/C Issuer under such Letter of Credit to
any Person purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of such
Letter of Credit, including any arising in connection with any proceeding under
any Debtor Relief Law;

 

(v)                                 any other circumstance
or happening whatsoever, whether or not similar to any of the foregoing,
including any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrowers or any of their Subsidiaries; or

 

(vi)                              the fact that any Event
of Default shall have occurred and be continuing.

 

The Lead Borrower shall promptly examine a copy of each Letter of
Credit and each amendment thereto that is delivered to it and, in the event of
any claim of noncompliance with the Lead Borrower’s instructions or other
irregularity, the Lead Borrower will promptly notify the Administrative Agent
and the L/C Issuer.  The Borrowers shall
be conclusively deemed to have waived any such claim against the L/C Issuer and
its correspondents unless such notice is given as aforesaid.

 

(f)                                    Role of L/C
Issuer.  Each Lender and the
Borrowers agree that, in paying any drawing under a Letter of Credit, the L/C
Issuer shall not have any responsibility to obtain any document (other than any
sight draft, certificates and documents expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such
document.  None of the L/C Issuer, the
Administrative Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the L/C Issuer shall be liable to any
Lender for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross
negligence or willful misconduct; (iii) any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit or any error in
interpretation of technical terms; or (iv) the due execution,
effectiveness, validity or enforceability of any document or instrument related
to any Letter of Credit or Issuer Document. 
The Borrowers hereby assume all risks of the acts or omissions of any
beneficiary or transferee with respect to its use of any Letter of Credit; provided,
however, that this assumption is not intended to, and shall not,
preclude the Borrowers’ pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Administrative
Agent, any of their respective Related Parties nor any correspondent,
participant or assignee of the L/C Issuer shall be liable or responsible for any
of the matters described in clauses (i) through (v) of Section 2.03(e);
provided, however, that anything in such clauses to the contrary
notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the
                

 

57

 

L/C Issuer may be liable to the Borrowers, to the extent, but only to
the extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrowers which the Borrowers prove were caused by the L/C
Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with
the terms and conditions of a Letter of Credit. 
In furtherance and not in limitation of the foregoing, the L/C Issuer
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or information
to the contrary (or the L/C Issuer may refuse to accept and make payment upon
such documents if such documents are not in strict compliance with the terms of
such Letter of Credit), and the L/C Issuer shall not be responsible for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.

 

(g)                                 Cash Collateral.  Upon the request of the Administrative Agent,
(i) if the L/C Issuer has honored any full or partial drawing request
under any Letter of Credit and such drawing has resulted in an L/C Borrowing,
or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation
for any reason remains outstanding, the Borrowers shall, in each case, promptly
Cash Collateralize the then Outstanding Amount of all L/C Obligations.  Sections 2.05 and 8.02(c) set
forth certain additional requirements to deliver Cash Collateral
hereunder.  For purposes of this Section 2.03,
Section 2.05 and Section 8.02(c), “Cash
Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances in an
amount equal to 105% (in the case of Letters of Credit denominated in a
currency other than Dollars, in an amount at least equal to 110%) of the
Outstanding Amount of all L/C Obligations, pursuant to documentation in form and
substance satisfactory to the Administrative Agent and the L/C Issuer (which
documents are hereby Consented to by the Lenders).  Derivatives of such term have corresponding
meanings.  The Borrowers hereby grant to
the Collateral Agent a security interest in all such cash, deposit accounts and
all balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in
blocked, non-interest bearing deposit accounts at Wells Fargo Bank or an
account maintained by the Administrative Agent.  If at any time the Administrative Agent
determines that any funds held as Cash Collateral are subject to any right or
claim of any Person other than the Administrative Agent or that the total
amount of such funds is less than the aggregate Outstanding Amount of all L/C
Obligations, the Borrowers will, forthwith upon demand by the Administrative
Agent, pay to the Administrative Agent, as additional funds to be deposited as
Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding
Amount over (y) the total amount of funds, if any, then held as Cash
Collateral that the Administrative Agent determines to be free and clear of any
such right and claim.  Upon the drawing
of any Letter of Credit for which funds are on deposit as Cash Collateral, such
funds shall be applied, to the extent permitted under applicable Laws, to
reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be
applied to satisfy other Obligations.

 

58

 

(h)           Letter
of Credit Fees.  The Borrowers shall
pay to the Administrative Agent, for the account of each Lender in accordance
with its Applicable Percentage, a Letter of Credit fee (the “Letter of
Credit Fee”) (i) for each Commercial Letter of Credit, equal to the
Applicable Margin multiplied by the daily Stated Amount under such
Letter of Credit, and (ii) for each Standby Letter of Credit, equal to the
Applicable Margin multiplied by the daily Stated Amount under such
Letter of Credit.  For purposes of computing
the daily Stated Amount available to be drawn under any Letter of Credit, the
Stated Amount of the Letter of Credit shall be determined in accordance with Section 1.05;
provided  that, for purposes only of calculating the Letter of
Credit Fee owing hereunder, the daily Stated Amount available to be drawn under
any Letter of Credit that provides for one or more automatic increases in the
Stated Amount thereof shall be deemed to be the maximum Stated Amount then in
effect under such Letter of Credit (at the time of each such calculation of the
Letter of Credit Fee), rather than the maximum Stated Amount for which such
Letter of Credit may be honored.  Letter
of Credit Fees shall be (i) due and payable on the first day of each month
(or if such day is not a Business Day, on the next succeeding Business Day),
commencing with the first such date to occur after the issuance of such Letter
of Credit, on the Letter of Credit Expiration Date and thereafter on demand,
and (ii) computed on a monthly basis in arrears.  If there is any change in the Applicable
Margin during any month, the daily amount available to be drawn under of each
Letter of Credit shall be computed and multiplied by the Applicable Margin
separately for each period during such month that such Applicable Margin was in
effect.  Notwithstanding anything to the
contrary contained herein, while any Event of Default has occurred and is
continuing, the Administrative Agent may, and upon the request of the Required
Lenders shall, notify the Lead Borrower that all Letter of Credit Fees shall
accrue at the Default Rate and thereafter such Letter of Credit Fees shall
accrue at the Default Rate to the fullest extent permitted by applicable Laws.

 

(i)            Consignment
of Bill of Lading.  The Borrowers
shall, upon the request of the Administrative Agent, consign to the Borrowers,
the Collateral Agent or the L/C Issuer any bill of lading for Inventory which
is supported by an Eligible Letter of Credit issued by the L/C Issuer.

 

(j)            Conflict
with Issuer Documents.  In the event
of any conflict between the terms hereof and the terms of any Issuer Document,
the terms hereof shall control.

 

(k)           Existing
Letters of Credit.  The Borrowers,
the Agents, the Lenders and the L/C Issuer agree that the Existing Letters of
Credit shall be deemed Letters of Credit hereunder as if issued by the L/C
Issuer hereunder and, from and after the Closing Date, shall be subject to and
governed by the terms and conditions hereof.

 

2.04         Swing Line Loans.

 

(a)           The
Swing Line.  Subject to the terms and
conditions set forth herein, the Swing Line Lender agrees, in reliance upon the
agreements of the other Lenders set forth in this Section 2.04, to
make loans (each such loan, a “Swing Line Loan”) to the Borrowers from
time to time on any Business Day during the Availability Period in an aggregate
amount not to exceed at any time outstanding the amount of the Swing Line

 

59

 

Sublimit,
notwithstanding the fact that such Swing Line Loans, when aggregated with the
Applicable Percentage of the Outstanding Amount of Committed Loans and L/C
Obligations of the Lender acting as Swing Line Lender, may exceed the amount of
such Lender’s Commitment; provided, however, that after giving
effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed
the lesser of (A) the Aggregate Commitments, or (B) the Borrowing
Base, and (ii) the aggregate Outstanding Amount of the Committed Loans of
any Lender at such time, plus such Lender’s Applicable Percentage of the
Outstanding Amount of all L/C Obligations at such time, plus such Lender’s
Applicable Percentage of the Outstanding Amount of all Swing Line Loans at such
time shall not exceed such Lender’s Commitment, and provided, further,
that the Borrowers shall not use the proceeds of any Swing Line Loan to
refinance any outstanding Swing Line Loan. 
Within the foregoing limits, and subject to the other terms and
conditions hereof, the Borrowers may borrow under this Section 2.04,
prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall bear interest only
at a rate based on the Base Rate. 
Immediately upon the making of a Swing Line Loan, each Lender shall be
deemed to, and hereby irrevocably and unconditionally agrees to, purchase from
the Swing Line Lender a risk participation in such Swing Line Loan in an amount
equal to the product of such Lender’s Applicable Percentage times the
amount of such Swing Line Loan.

 

(b)           Borrowing
Procedures.  Each Swing Line
Borrowing shall be made upon the Lead Borrower’s irrevocable notice to the
Swing Line Lender and the Administrative Agent, which may be given by
telephone. Each such notice must be received by the Swing Line Lender and the
Administrative Agent not later than 3:00 p.m. on the requested borrowing
date, and shall specify (i) the amount to be borrowed, and (ii) the
requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed
promptly by delivery to the Swing Line Lender and the Administrative Agent of a
written Swing Line Loan Notice, appropriately completed and signed by a
Responsible Officer of the Lead Borrower. 
Promptly after receipt by the Swing Line Lender of any telephonic Swing
Line Loan Notice, the Swing Line Lender will confirm with the Administrative
Agent (by telephone or in writing) that the Administrative Agent has also
received such Swing Line Loan Notice and, if not, the Swing Line Lender will
notify the Administrative Agent (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received
notice (by telephone or in writing) from the Administrative Agent at the
request of the Required Lenders prior to 3:00 p.m. on the date of the
proposed Swing Line Borrowing (A) directing the Swing Line Lender not to
make such Swing Line Loan as a result of the limitations set forth in the
proviso to the first sentence of Section 2.04(a), or (B) that
one or more of the applicable conditions specified in Article IV is
not then satisfied, then, subject to the terms and conditions hereof, the Swing
Line Lender shall, not later than 4:00 p.m. on the borrowing date
specified in such Swing Line Loan Notice, make the amount of its Swing Line
Loan available to the Borrowers at its office by crediting the account of the Lead
Borrower on the books of the Swing Line Lender in immediately available funds.

 

60

 

(c)           Refinancing of
Swing Line Loans.

 

(i)            The
Swing Line Lender, at any time in its sole and absolute discretion, may request,
on behalf of the Borrowers (which hereby irrevocably authorize the Swing Line
Lender to so request on their behalf), that each Lender make a Base Rate Loan
in an amount equal to such Lender’s Applicable Percentage of the amount of
Swing Line Loans then outstanding.  Such
request shall be made in writing (which written request shall be deemed to be a
Committed Loan Notice for purposes hereof) and in accordance with the
requirements of Section 2.02, without regard to the minimum and
multiples specified therein for the principal amount of Base Rate Loans, but
subject to the unutilized portion of the Aggregate Commitments and the
conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the Lead
Borrower with a copy of the applicable Committed Loan Notice promptly after
delivering such notice to the Administrative Agent.  Each Lender shall make an amount equal to its
Applicable Percentage of the amount specified in such Committed Loan Notice
available to the Administrative Agent in immediately available funds for the
account of the Swing Line Lender at the Administrative Agent’s Office not later
than 1:00 p.m. on the day specified in such Committed Loan Notice,
whereupon, subject to Section 2.03(c)(ii), each Lender that so
makes funds available shall be deemed to have made a Base Rate Loan to the
Borrowers in such amount.  The
Administrative Agent shall remit the funds so received to the Swing Line
Lender.

 

(ii)           If
for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing
in accordance with Section 2.04(c)(i), the request for Base Rate
Loans submitted by the Swing Line Lender as set forth herein shall be deemed to
be a request by the Swing Line Lender that each of the Lenders fund its risk
participation in the relevant Swing Line Loan and each Lender’s payment to the
Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall
be deemed payment in respect of such participation.

 

(iii)          If
any Lender fails to make available to the Administrative Agent for the account
of the Swing Line Lender any amount required to be paid by such Lender pursuant
to the foregoing provisions of this Section 2.04(c) by the
time specified in Section 2.04(c)(i), the Swing Line Lender shall
be entitled to recover from such Lender (acting through the Administrative
Agent), on demand, such amount with interest thereon for the period from the
date such payment is required to the date on which such payment is immediately
available to the Swing Line Lender at a rate per annum equal to the greater of
the Federal Funds Rate and a rate determined by the Swing Line Lender in
accordance with banking industry rules on interbank compensation plus any
administrative, processing or similar fees customarily charged by the Swing
Line Lender in connection with the foregoing. 
If such Lender pays such amount (with interest and fees as aforesaid),
the principal amount so paid shall constitute such Lender’s Committed Loan
included in the relevant Committed Borrowing or funded participation in the
relevant Swing Line Loan, as the case may be.  
A certificate of the Swing Line Lender submitted to any Lender (through
the Administrative Agent) with respect

 

61

 

to any amounts owing under this clause (iii) shall be conclusive
absent manifest error.

 

(iv)          Each
Lender’s obligation to make Committed Loans or to purchase and fund risk
participations in Swing Line Loans pursuant to this Section 2.04(c) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, the Borrowers or any
other Person for any reason whatsoever, (B) the occurrence or continuance
of a Default, or (C) any other occurrence, event or condition, whether or
not similar to any of the foregoing; provided, however, that each
Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c) is
subject to the conditions set forth in Section 4.02.  No such funding of risk participations shall
relieve or otherwise impair the obligation of the Borrowers to repay Swing Line
Loans, together with interest as provided herein.

 

(d)           Repayment
of Participations.

 

(i)            At
any time after any Lender has purchased and funded a risk participation in a
Swing Line Loan, if the Swing Line Lender receives any payment on account of
such Swing Line Loan, the Swing Line Lender will distribute to such Lender its
Applicable Percentage of such payment (appropriately adjusted, in the case of
interest payments, to reflect the period of time during which such Lender’s
risk participation was funded) in the same funds as those received by the Swing
Line Lender.

 

(ii)           If
any payment received by the Swing Line Lender in respect of principal or
interest on any Swing Line Loan is required to be returned by the Swing Line
Lender under any of the circumstances described in Section 10.05
(including pursuant to any settlement entered into by the Swing Line Lender in
its discretion), each Lender shall pay to the Swing Line Lender its Applicable
Percentage thereof on demand of the Administrative Agent, plus interest thereon
from the date of such demand to the date such amount is returned, at a rate per
annum equal to the Federal Funds Rate. 
The Administrative Agent will make such demand upon the request of the
Swing Line Lender.  The obligations of
the Lenders under this clause shall survive the payment in full of the
Obligations and the termination of this Agreement.

 

(e)           Interest
for Account of Swing Line Lender. 
The Swing Line Lender shall be responsible for invoicing the Borrowers
for interest on the Swing Line Loans. 
Until each Lender funds its Base Rate Loan or risk participation pursuant
to this Section 2.04 to refinance such Lender’s Applicable
Percentage of any Swing Line Loan, interest in respect of such Applicable
Percentage shall be solely for the account of the Swing Line Lender.

 

62

 

(f)            Payments
Directly to Swing Line Lender.  The
Borrowers shall make all payments of principal and interest in respect of the
Swing Line Loans directly to the Swing Line Lender.

 

2.05         Prepayments.

 

(a)           The
Borrowers may, upon irrevocable notice from the Lead Borrower to the
Administrative Agent, at any time or from time to time voluntarily prepay
Committed Loans in whole or in part without premium or penalty; provided
that (i) such notice must be received by the Administrative Agent
not later than 1:00 p.m. (A) three Business Days prior to any date of
prepayment of LIBO Rate Loans and (B) on the date of prepayment of Base
Rate Loans; (ii) any prepayment of LIBO Rate Loans shall be in a principal
amount of $1,000,000 or a whole multiple of $500,000 in excess thereof; and (iii) any
prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a
whole multiple of $100,000 in excess thereof or, in each case, if less, the
entire principal amount thereof then outstanding.  Each such notice shall specify the date and
amount of such prepayment and the Type(s) of Committed Loans to be prepaid
and, if LIBO Rate Loans, the Interest Period(s) of such Committed
Loans.  The Administrative Agent will
promptly notify each Lender of its receipt of each such notice, and of the
amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Lead Borrower,
the Borrowers shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein.  Any prepayment of a LIBO Rate Loan shall be
accompanied by all accrued interest on the amount prepaid, together with any
additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the
Committed Loans of the Lenders in accordance with their respective Applicable
Percentages.

 

(b)           The
Borrowers may, upon irrevocable notice from the Lead Borrower to the Swing Line
Lender (with a copy to the Administrative Agent), at any time or from time to
time, voluntarily prepay Swing Line Loans in whole or in part without premium
or penalty; provided  that (i) such notice must be received
by the Swing Line Lender and the Administrative Agent not later than 3:00 p.m.
on the date of the prepayment, and (ii) any such prepayment shall be in a
minimum principal amount of $100,000. 
Each such notice shall specify the date and amount of such
prepayment.  If such notice is given by
the Lead Borrower, the Borrowers shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein.

 

(c)           If
for any reason the Total Outstandings at any time exceed the lesser of the
Aggregate Commitments or the Borrowing Base, each as then in effect, the
Borrowers shall immediately prepay Committed Loans, Swing Line Loans and L/C
Borrowings and/or Cash Collateralize the L/C Obligations (other than L/C
Borrowings) in an aggregate amount equal to such excess; provided, however,
that the Borrowers shall not be required to Cash Collateralize the L/C Obligations
pursuant to this Section 2.05(c) unless after the prepayment
in full of the Loans the Total Outstandings exceed the lesser of the Aggregate
Commitments or the Borrowing Base, each as then in effect.

 

63

 

(d)           After
the occurrence and during the continuance of a Cash Dominion Event, the
Borrowers shall prepay the Loans and Cash Collateralize the L/C Obligations in
accordance with the provisions of Section 6.13 hereof.   In addition, the Borrowers shall prepay the
Loans and Cash Collateralize the L/C Obligations in an amount equal to the Net
Proceeds (other than, with respect only to the Note Purchasers Priority
Collateral, such portion of the Net Proceeds that are then required to be paid
to the Note Purchasers under the Note Purchase Facility) received by a Loan
Party on account of a Prepayment Event, irrespective of whether or not a Cash
Dominion Event then exists and is continuing. 
The Agents shall not be obligated to release their Liens on any
Collateral until such Net Proceeds have been so received (to the extent
required in this clause (d)).  The
application of such Net Proceeds to the Loans shall not reduce the
Commitments.  If all Obligations then due
are paid, any excess Net Proceeds shall be remitted to the operating account of
the Borrowers maintained with the Administrative Agent.

 

(e)           Prepayments
made pursuant to this Section 2.05, first, shall be applied
ratably to the L/C Borrowings and the Swing Line Loans, second, shall be
applied ratably to the outstanding Committed Loans, third, shall be used
to Cash Collateralize the remaining L/C Obligations; and, fourth, the
amount remaining, if any, after the prepayment in full of all L/C Borrowings,
Swing Line Loans and Committed Loans outstanding at such time and the Cash
Collateralization of the remaining L/C Obligations in full may be retained by
the Borrowers for use in the ordinary course of its business.  Upon the drawing of any Letter of Credit that
has been Cash Collateralized, the funds held as Cash Collateral shall be
applied (without any further action by or notice to or from the Borrowers or
any other Loan Party) to reimburse the L/C Issuer or the Lenders, as
applicable, and, to the extent not so applied, shall thereafter be returned to
the Borrowers.

 

2.06         Termination or Reduction of
Commitments.

 

(a)           The
Borrowers may, upon irrevocable notice from the Lead Borrower to the
Administrative Agent, terminate the Aggregate Commitments, the Letter of Credit
Sublimit or the Swing Line Sublimit or from time to time permanently reduce the
Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line
Sublimit; provided  that (i) any such notice shall be
received by the Administrative Agent not later than 1:00 p.m. (A) thirty
(30) days prior to the date of any termination of the Aggregate Commitments and
(B) five (5) Business Days prior to the date of any reduction of the
Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line
Sublimit, (ii) any such partial reduction shall be in an aggregate amount
of $5,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the
Borrowers shall not terminate or reduce (A) the Aggregate Commitments if,
after giving effect thereto and to any concurrent prepayments hereunder, the
Total Outstandings would exceed the Aggregate Commitments, (B) the Letter
of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of
L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter
of Credit Sublimit, and (C) the Swing Line Sublimit if, after giving
effect thereto, and to any concurrent payments hereunder, the Outstanding
Amount of Swing Line Loans hereunder would exceed the Swing Line Sublimit.

 

64

 

(b)           If,
after giving effect to any reduction of the Aggregate Commitments, the Letter
of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the
Aggregate Commitments, such Letter of Credit Sublimit or Swing Line Sublimit
shall be automatically reduced by the amount of such excess.

 

(c)           The
Administrative Agent will promptly notify the Lenders of any termination or
reduction of the Letter of Credit Sublimit, Swing Line Sublimit or the
Aggregate Commitments under this Section 2.06.  Upon any reduction of the Aggregate
Commitments, the Commitment of each Lender shall be reduced by such Lender’s
Applicable Percentage of such reduction amount. 
All fees (including, without limitation, Commitment Fees, Early
Termination Fees and Letter of Credit Fees) and interest in respect of the
Aggregate Commitments accrued until the effective date of any termination of
the Aggregate Commitments shall be paid on the effective date of such termination.

 

2.07         Repayment of Loans.

 

(a)           The
Borrowers shall repay to the Lenders on the Termination Date the aggregate
principal amount of Committed Loans outstanding on such date.

 

(b)           To
the extent not previously paid, the Borrowers shall repay the outstanding
balance of the Swing Line Loans on the Termination Date.

 

2.08         Interest.

 

(a)           Subject
to the provisions of Section 2.08(b) below, (i) each LIBO
Rate Loan shall bear interest on the outstanding principal amount thereof for
each Interest Period at a rate per annum equal to the Adjusted LIBO Rate for
such Interest Period plus the Applicable Margin; (ii) each Base
Rate Loan shall bear interest on the outstanding principal amount thereof from
the applicable borrowing date at a rate per annum equal to the Base Rate plus
the Applicable Margin; and (iii) each Swing Line Loan shall bear interest
on the outstanding principal amount thereof from the applicable borrowing date
at a rate per annum equal to the Base Rate plus the Applicable Margin.

 

(b)           (i)            If any amount payable under any Loan
Document is not paid when due (without regard to any applicable grace periods),
whether at stated maturity, by acceleration or otherwise, such amount shall
thereafter bear interest at a fluctuating interest rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(ii)           If any other Event
of Default has occurred and is continuing, then the Administrative Agent may,
and upon the request of the Required Lenders shall, notify the Lead Borrower
that all outstanding Obligations shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the Default Rate and
thereafter, until such Event of Default has been duly waived as provided in Section 10.01
hereof, such Obligations shall bear interest at the Default Rate to the fullest
extent permitted by applicable Laws.

 

65

 

(iii)          Accrued and unpaid
interest on past due amounts (including interest on past due interest) shall be
due and payable upon demand.

 

(c)           Interest
on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable
in accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.

 

2.09         Fees.  In addition to certain fees described in
subsection (h) of Section 2.03:

 

(a)           Commitment
Fee.  The Borrowers shall pay to the
Administrative Agent, for the account of each Lender, in accordance with its
Applicable Percentage, a commitment fee (the “Commitment Fee”) equal to
0.25% times the average daily amount by which the Aggregate Commitments
exceed the sum of (i) the Outstanding Amount of Loans and (ii) the
Outstanding Amount of L/C Obligations. 
The Commitment Fee shall accrue at all times during the Availability
Period, including at any time during which one or more of the conditions in Article IV
is not met, and shall be due and payable monthly in arrears on the first day of
each month  (or if such day is not a Business Day, on the next
succeeding Business Day), commencing with the first such date to occur after
the Closing Date, and on the last day of the Availability Period.  The Commitment Fee shall be calculated
monthly in arrears.

 

(b)           Early
Termination Fee.  In the event that
the Termination Date occurs, for any reason, prior to the Maturity Date, the
Borrowers shall pay to the Administrative Agent, for the ratable benefit of the
Lenders, a fee (the “Early Termination Fee”) in respect of amounts which
are or become payable by reason thereof equal to: (i) one-half of one
percent (0.50%) of the Revolving Credit Ceiling then in effect if the
Termination Date shall occur at any time on or before July 31, 2009; and (ii) one-quarter
of one percent (0.25%) of the Revolving Credit Ceiling then in effect if the
Termination Date shall occur at any time on or after July 31, 2009 but on
or before July 31, 2010.  No Early
Termination Fee shall be due if the Termination Date shall occur at any time
after July 31, 2010.  All parties to
this Agreement agree and acknowledge that the Lenders will have suffered
damages on account of the early termination of this Agreement and that, in view
of the difficulty in ascertaining the amount of such damages, the Early
Termination Fee constitutes reasonable compensation and liquidated damages to
compensate the Lenders on account thereof.

 

(c)           Other
Fees.  The Borrowers shall pay to the
Administrative Agent fees in the amounts and at the times specified in the Fee
Letter.  Such fees shall be fully earned
when paid and shall not be refundable for any reason whatsoever.

 

2.10         Computation of Interest and Fees.  All computations of interest and fees
shall be made on the basis of a 360-day year and actual days elapsed.  Interest shall accrue on each Loan for the
day on which the Loan is made, and shall not accrue on a Loan, or any portion
thereof, for the day on which the Loan or such portion is paid, provided
that any Loan that is repaid on the same day on which it is made shall,
subject to Section 2.12, bear interest for one day.  Each

 

66

 

determination by the
Administrative Agent of an interest rate or fee hereunder shall be conclusive
and binding for all purposes, absent manifest error.

 

2.11         Evidence of Debt.

 

(a)           The
Credit Extensions made by each Lender shall be evidenced by one or more
accounts or records maintained by the Administrative Agent (the “Loan
Account”) in the ordinary course of business.  In addition, each Lender may record in such
Lender’s internal records, an appropriate notation evidencing the date and
amount of each Loan from such Lender, each payment and prepayment of principal
of any such Loan, and each payment of interest, fees and other amounts due in
connection with the Obligations due to such Lender.  The accounts or records maintained by the
Administrative Agent and each Lender shall be conclusive absent manifest error
of the amount of the Credit Extensions made by the Lenders to the Borrowers and
the interest and payments thereon.  Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrowers hereunder to pay any amount
owing with respect to the Obligations. 
In the event of any conflict between the accounts and records maintained
by any Lender and the accounts and records of the Administrative Agent in
respect of such matters, the accounts and records of the Administrative Agent
shall control in the absence of manifest error. 
Upon the request of any Lender made through the Administrative Agent,
the Borrowers shall execute and deliver to such Lender (through the
Administrative Agent) a Note, which shall evidence such Lender’s Loans in
addition to such accounts or records. 
Each Lender may attach schedules to its Note and endorse thereon the
date, Type (if applicable), amount and maturity of its Loans and payments with
respect thereto.  Upon receipt of an
affidavit of a Lender as to the loss, theft, destruction or mutilation of such
Lender’s Note and upon cancellation of such Note, the Borrowers will issue, in
lieu thereof, a replacement Note in favor of such Lender, in the same principal
amount thereof and otherwise of like tenor.

 

(b)           In
addition to the accounts and records referred to in Section 2.11(a),
each Lender and the Administrative Agent shall maintain in accordance with its
usual practice accounts or records evidencing the purchases and sales by such
Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the
accounts and records maintained by the Administrative Agent and the accounts
and records of any Lender in respect of such matters, the accounts and records
of the Administrative Agent shall control in the absence of manifest error.

 

2.12         Payments Generally; Administrative
Agent’s Clawback.

 

(a)           General.  All payments to be made by the Borrowers
shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.  Except as
otherwise expressly provided herein, all payments by the Borrowers hereunder
shall be made to the Administrative Agent, for the account of the respective
Lenders to which such payment is owed, at the Administrative Agent’s Office in
Dollars and in immediately available funds not later than 2:00 p.m. on the
date specified herein.  The
Administrative Agent will promptly distribute to each Lender its Applicable
Percentage (or other applicable share as provided herein) of such payment in
like funds as received

 

67

 

by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative
Agent after 2:00 p.m. shall be deemed received on the next succeeding
Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrowers
shall come due on a day other than a Business Day, payment shall be made on the
next following Business Day, and such extension of time shall be reflected in
computing interest or fees, as the case may be.

 

(b)           (i)            Funding by Lenders; Presumption
by Administrative Agent.  Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing of LIBO Rate Loans (or in the case of any
Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such
Borrowing) that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with Section 2.02
(or in the case of a Borrowing of Base Rate Loans, that such Lender has made
such share available in accordance with and at the time required by Section 2.02)
and may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount.  In such event, if
a Lender has not in fact made its share of the applicable Committed Borrowing
available to the Administrative Agent, then the applicable Lender and the
Borrowers severally agree to pay to the Administrative Agent forthwith on
demand such corresponding amount in immediately available funds with interest
thereon, for each day from and including the date such amount is made available
to the Borrowers to but excluding the date of payment to the Administrative
Agent, at (A) in the case of a payment to be made by such Lender, the
greater of the Federal Funds Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation
plus any administrative processing or similar fees customarily charged by the
Administrative Agent in connection with the foregoing, and (B) in the case
of a payment to be made by the Borrowers, the interest rate applicable to Base
Rate Loans.  If the Borrowers and such
Lender shall pay such interest to the Administrative Agent for the same or an
overlapping period, the Administrative Agent shall promptly remit to the
Borrowers the amount of such interest paid by the Borrowers for such
period.  If such Lender pays its share of
the applicable Committed Borrowing to the Administrative Agent, then the
principal amount so paid shall constitute such Lender’s Committed Loan included
in such Committed Borrowing.  Any payment
by the Borrowers shall be without prejudice to any claim the Borrowers may have
against a Lender that shall have failed to make such payment to the
Administrative Agent.

 

(ii)           Payments by
Borrowers; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have
received notice from the Lead Borrower prior to the time at which any payment
is due to the Administrative Agent for the account of the Lenders or the L/C
Issuer hereunder that the Borrowers will not make such payment, the
Administrative Agent may assume that the Borrowers have made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the L/C Issuer, as the case may be, the amount
due.  In such event, if the Borrowers
have not in fact made such payment, then each of the Lenders or the L/C Issuer,
as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or the L/C Issuer,
in

 

68

 

immediately available funds with interest thereon, for each day from
and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, at the greater of the Federal
Funds Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.

 

A notice of the Administrative Agent to any Lender or the Lead Borrower
with respect to any amount owing under this subsection (b) shall be
conclusive, absent manifest error.

 

(c)           Failure
to Satisfy Conditions Precedent.  If
any Lender makes available to the Administrative Agent funds for any Loan to be
made by such Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to the Borrowers by the Administrative
Agent because the conditions to the applicable Credit Extension set forth in Article IV
are not satisfied or waived in accordance with the terms hereof (subject to the
provisions of the last paragraph of Section 4.02 hereof), the
Administrative Agent shall return such funds (in like funds as received from
such Lender) to such Lender, without interest, within seven (7) days after
it is determined by the Administrative Agent that the conditions to the
applicable Credit Extension set forth in Article IV have not been
satisfied.

 

(d)           Obligations
of Lenders Several.  The obligations
of the Lenders hereunder to make Committed Loans, to fund participations in
Letters of Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c) are
several and not joint.  The failure of
any Lender to make any Committed Loan, to fund any such participation or to
make any payment under Section 10.04(c) on any date required
hereunder shall not relieve any other Lender of its corresponding obligation to
do so on such date, and no Lender shall be responsible for the failure of any
other Lender to so make its Committed Loan, to purchase its participation or to
make its payment under Section 10.04(c).

 

(e)           Funding
Source.  Nothing herein shall be
deemed to obligate any Lender to obtain the funds for any Loan in any
particular place or manner or to constitute a representation by any Lender that
it has obtained or will obtain the funds for any Loan in any particular place
or manner.

 

2.13         Sharing of Payments by Lenders.  If any Credit Party shall, by exercising any
right of setoff or counterclaim or otherwise, obtain payment in respect of any
principal of, interest on, or other amounts with respect to, any of the
Obligations resulting in such Lender’s receiving payment of a proportion of the
aggregate amount of such Obligations greater than its pro  rata
share thereof as provided herein (including as in contravention of the
priorities of payment set forth in Section 8.03), then the Credit
Party receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) purchase (for cash at face
value) participations in the Obligations of the other Credit Parties, or make
such other adjustments as shall be equitable, so that the benefit of all such
payments shall be shared by the Credit Parties ratably and in the priorities
set forth in Section 8.03, provided that:

 

(a)           if
any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or

 

69

 

subparticipations shall be rescinded and the purchase price restored to
the extent of such recovery, without interest; and

 

(b)           the
provisions of this Section shall not be construed to apply to (x) any
payment made by the Loan Parties pursuant to and in accordance with the express
terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of or sale of a participation in any of its
Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to
any assignee or participant, other than to the Borrowers or any Subsidiary
thereof (as to which the provisions of this Section shall apply).

 

Each Loan Party consents to the foregoing and agrees, to the extent it
may effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against such
Loan Party rights of setoff and counterclaim with respect to such participation
as fully as if such Lender were a direct creditor of such Loan Party in the
amount of such participation.

 

2.14         Settlement Among Lenders.

 

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

 

(b)           The
Administrative Agent shall deliver to each of the Lenders promptly after a
Settlement Date a summary statement of the amount of outstanding Committed
Loans for the period and the amount of repayments received for the period.  As reflected on the summary statement, (i) the
Administrative Agent shall transfer to each Lender its Applicable Percentage of
repayments, and (ii) each Lender shall transfer to the Administrative
Agent (as provided below) or the Administrative Agent shall transfer to each
Lender, such amounts as are necessary to insure that, after giving effect to
all such transfers, the amount of Committed Loans made by each Lender shall be
equal to such Lender’s Applicable Percentage of all Committed Loans outstanding
as of such Settlement Date.  If the summary
statement requires transfers to be made to the Administrative Agent by the
Lenders and is received prior to 1:00 p.m. on a Business Day, such
transfers shall be made in immediately available funds no later than 3:00 p.m.
that day; and, if received after 1:00 p.m., then no later than 3:00 p.m.
on the next Business Day. The obligation of each Lender to transfer such funds
is irrevocable, unconditional and without recourse to or warranty by the
Administrative Agent.  If and to the extent
any Lender shall not have so made its transfer to the Administrative Agent,
such Lender agrees to pay to the Administrative Agent, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Administrative Agent, equal to the greater of
the Federal Funds Rate and a rate determined by the Administrative Agent in
accordance with banking

 

70

 

industry rules on interbank compensation plus any administrative,
processing, or similar fees customarily charged by the Administrative Agent in
connection with the foregoing.

 

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY;

APPOINTMENT OF LEAD BORROWER

 

3.01         Taxes.

 

(a)           Payments
Free of Taxes.  Any and all payments
by or on account of any obligation of the Borrowers hereunder or under any other
Loan Document shall be made free and clear of and without reduction or
withholding for any Indemnified Taxes or Other Taxes, provided  that
if the Borrowers shall be required by applicable Law to deduct any Indemnified
Taxes (including any Other Taxes) from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, Lender or L/C Issuer, as the case may
be, receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrowers shall make such deductions and (iii) the
Borrowers shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable Law.

 

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

 

(c)           Indemnification
by the Loan Parties.  The Loan
Parties shall indemnify the Administrative Agent, each Lender and the L/C
Issuer, within 10 days after demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes
imposed or asserted on or attributable to amounts payable under this Section)
paid by the Administrative Agent, such Lender or the L/C Issuer, as the case
may be, and any penalties, interest and reasonable expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate as to the
amount of such payment or liability delivered to the Lead Borrower by a Lender
or the L/C Issuer (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the L/C
Issuer, shall be conclusive absent manifest error.

 

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

 

71

 

(e)           Status
of Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which any Borrower is resident for tax purposes, or any
treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Lead Borrower
(with a copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Lead Borrower or the Administrative
Agent, 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 of withholding.  In
addition, any Lender, if requested by the Lead Borrower or the Administrative
Agent, shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Lead Borrower or the Administrative Agent as will
enable the Lead Borrower or the Administrative Agent to determine whether or
not such Lender is subject to backup withholding or information reporting
requirements.

 

Without limiting the generality of the foregoing, in the event that any
Borrower is resident for tax purposes in the United States, any Foreign Lender
shall deliver to the Lead Borrower and the Administrative Agent (in such number
of copies as shall be requested by the recipient) on or prior to the date on
which such Foreign Lender becomes a Lender under this Agreement (and from time
to time thereafter upon the request of the Lead Borrower or the Administrative
Agent, but only if such Foreign Lender is legally entitled to do so), whichever
of the following is applicable:

 

(i)            duly
completed copies of Internal Revenue Service Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States is
a party;

 

(ii)           duly
completed copies of Internal Revenue Service Form W-8ECI;

 

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

 

(iv)          any
other form prescribed by applicable law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together
with such supplementary documentation as may be prescribed by applicable law to
permit the Lead Borrower to determine the withholding or deduction required to
be made.

 

(f)            Treatment
of Certain Refunds.  If the
Administrative Agent, any Lender or the L/C Issuer determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrowers or with respect to which the
Borrowers have paid additional amounts pursuant to this Section, it shall pay
to

 

72

 

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

 

3.02         Illegality.  If any Lender determines that any Law has
made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable Lending Office to make, maintain or
fund LIBO Rate Loans, or to determine or charge interest rates based upon the
LIBO Rate, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of,
Dollars in the London interbank market, then, on notice thereof by such Lender
to the Lead Borrower through the Administrative Agent, any obligation of such
Lender to make or continue LIBO Rate Loans or to convert Base Rate Loans to
LIBO Rate Loans shall be suspended until such Lender notifies the Administrative
Agent and the Lead Borrower that the circumstances giving rise to such
determination no longer exist.  Upon
receipt of such notice, the Borrowers shall, upon demand from such Lender (with
a copy to the Administrative Agent), prepay or, if applicable, convert all LIBO
Rate Loans of such Lender to Base Rate Loans, either on the last day of the
Interest Period therefor, if such Lender may lawfully continue to maintain such
LIBO Rate Loans to such day, or immediately, if such Lender may not lawfully
continue to maintain such LIBO Rate Loans. 
Upon any such prepayment or conversion, the Borrowers shall also pay
accrued interest on the amount so prepaid or converted.

 

3.03         Inability to
Determine Rates.  If the Required
Lenders determine that for any reason in connection with any request for a LIBO
Rate Loan or a conversion to or continuation thereof that (a) Dollar
deposits are not being offered to banks in the London interbank market for the
applicable amount and Interest Period of such LIBO Rate Loan, (b) adequate
and reasonable means do not exist for determining the LIBO Rate for any
requested Interest Period with respect to a proposed LIBO Rate Loan, or (c) the
LIBO Rate for any requested Interest Period with respect to a proposed LIBO
Rate Loan does not adequately and fairly reflect the cost to such Lenders of
funding such Loan, the Administrative Agent will promptly so notify the Lead
Borrower and each Lender.  Thereafter,
the obligation of the Lenders to make or maintain LIBO Rate Loans shall be
suspended until the Administrative Agent (upon the instruction of the Required
Lenders) revokes such notice.  Upon
receipt of such notice, the Lead Borrower may revoke any pending request for a
Borrowing of, conversion to or continuation of LIBO Rate Loans or, failing
that, will be deemed to have converted such request into a request for a
Committed Borrowing of Base Rate Loans in the amount specified therein.

 

73

 

3.04         Increased Costs;
Reserves on LIBO Rate Loans.

 

(a)           Increased
Costs Generally.  If any Change in
Law shall:

 

(i)            impose,
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except
any reserve requirement reflected in the LIBO Rate) or the L/C Issuer;

 

(ii)           subject
any Lender or the L/C Issuer to any tax of any kind whatsoever with respect to
this Agreement, any Letter of Credit, any participation in a Letter of Credit
or any LIBO Rate Loan made by it, or change the basis of taxation of payments
to such Lender or the L/C Issuer in respect thereof (except for Indemnified
Taxes or Other Taxes covered by Section 3.01 and the imposition of,
or any change in the rate of, any Excluded Tax payable by such Lender or the
L/C Issuer); or

 

(iii)          impose
on any Lender or the L/C Issuer or the London interbank market any other
condition, cost or expense affecting this Agreement or LIBO Rate Loans made by
such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall
be to increase the cost to such Lender of making or maintaining any LIBO Rate
Loan (or of maintaining its obligation to make any such Loan), or to increase
the cost to such Lender or the L/C Issuer of participating in, issuing or
maintaining any Letter of Credit (or of maintaining its obligation to
participate in or to issue any Letter of Credit), or to reduce the amount of
any sum received or receivable by such Lender or the L/C Issuer hereunder
(whether of principal, interest or any other amount) then, upon request of such
Lender or the L/C Issuer, the Borrowers will pay to such Lender or the L/C
Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or the L/C Issuer, as the case may be, for such
additional costs incurred or reduction suffered.

 

(b)           Capital
Requirements.  If any Lender or the
L/C Issuer determines that any Change in Law affecting such Lender or the L/C
Issuer or any Lending Office of such Lender or such Lender’s or the L/C Issuer’s
holding company, if any, regarding capital requirements has or would have the
effect of reducing the rate of return on such Lender’s or the L/C Issuer’s
capital or on the capital of such Lender’s or the L/C Issuer’s holding company,
if any, as a consequence of this Agreement, the Commitments of such Lender or
the Loans made by, or participations in Letters of Credit held by, such Lender,
or the Letters of Credit issued by the L/C Issuer, to a level below that which
such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s holding
company could have achieved but for such Change in Law (taking into
consideration such Lender’s or the L/C Issuer’s policies and the policies of
such Lender’s or the L/C Issuer’s holding company with respect to capital
adequacy), then from time to time, the Borrowers will pay to such Lender or the
L/C Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or the L/C Issuer or such Lender’s or the L/C Issuer’s
holding company for any such reduction suffered.

 

74

 

(c)           Certificates
for Reimbursement.  A certificate of
a Lender or the L/C Issuer setting forth the amount or amounts necessary to
compensate such Lender or the L/C Issuer or its holding company, as the case
may be, as specified in subsection (a) or (b) of this Section and
delivered to the Lead Borrower shall be conclusive absent manifest error.  The Borrowers shall pay such Lender or the
L/C Issuer, as the case may be, the amount shown as due on any such certificate
within 10 days after receipt thereof.

 

(d)           Delay
in Requests.  Failure or delay on the
part of any Lender or the L/C Issuer to demand compensation pursuant to the
foregoing provisions of this Section shall not constitute a waiver of such
Lender’s or the L/C Issuer’s right to demand such compensation, provided
that the Borrowers shall not be required to compensate a Lender or the
L/C Issuer pursuant to the foregoing provisions of this Section for any
increased costs incurred or reductions suffered more than nine months prior to
the date that such Lender or the L/C Issuer, as the case may be, notifies the
Lead Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or the L/C Issuer’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the nine-month period referred
to above shall be extended to include the period of retroactive effect
thereof).

 

3.05         Compensation for
Losses.  Upon demand of any Lender
(with a copy to the Administrative Agent) from time to time, the Borrowers
shall promptly compensate such Lender for and hold such Lender harmless from
any loss, cost or expense incurred by it as a result of:

 

(a)           any
continuation, conversion, payment or prepayment of any Loan other than a Base
Rate Loan on a day other than the last day of the Interest Period for such Loan
(whether voluntary, mandatory, automatic, by reason of acceleration, or
otherwise);

 

(b)           any
failure by the Borrowers (for a reason other than the failure of such Lender to
make a Loan) to prepay, borrow, continue or convert any Loan other than a Base
Rate Loan on the date or in the amount notified by the Lead Borrower; or

 

(c)           any
assignment of a LIBO Rate Loan on a day other than the last day of the Interest
Period therefor as a result of a request by the Lead Borrower pursuant to Section 10.13;

 

including any loss of anticipated profits and
any loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained. 
The Borrowers shall also pay any customary administrative fees charged
by such Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrowers to the
Lenders under this Section 3.05, each Lender shall be deemed to
have funded each LIBO Rate Loan made by it at the LIBO Rate for such Loan by a
matching deposit or other borrowing in the London interbank market for a
comparable amount and for a comparable period, whether or not such LIBO Rate
Loan was in fact so funded.

 

75

 

3.06         Mitigation
Obligations; Replacement of Lenders.

 

(a)           Designation
of a Different Lending Office.  If
any Lender requests compensation under Section 3.04, or the
Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender gives a notice pursuant to Section 3.02, then such
Lender shall use commercially reasonable efforts to designate a different
Lending Office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04,
as the case may be, in the future, or eliminate the need for the notice
pursuant to Section 3.02, as applicable, and (ii) in each
case, would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  The Borrowers hereby agree to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

 

(b)           Replacement
of Lenders.  If any Lender requests
compensation under Section 3.04, or if the Borrowers are required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 3.01, the Borrowers
may replace such Lender in accordance with Section 10.13.

 

3.07         Survival.  All of the Borrowers’ obligations under this Article III
shall survive termination of the Aggregate Commitments and repayment of all
other Obligations hereunder.

 

3.08         Designation of
Lead Borrower as Borrowers’ Agent.

 

(a)           Each
Borrower hereby irrevocably designates and appoints the Lead  Borrower as such Borrower’s agent to obtain
Credit Extensions, the proceeds of which shall be available to each Borrower
for such uses as are permitted under this Agreement.  As the disclosed principal for its agent,
each Borrower shall be obligated to each Credit Party on account of Credit
Extensions so made as if made directly by the applicable Credit Party to such
Borrower, notwithstanding the manner by which such Credit Extensions are
recorded on the books and records of the Lead Borrower and of any other
Borrower.  In addition, each Loan Party
other than the Borrowers hereby irrevocably designates and appoints the
Lead  Borrower as such Loan Party’s agent
to represent such Loan Party in all respects under this Agreement and the other
Loan Documents.

 

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

 

(c)           The
Lead  Borrower shall act as a conduit for
each Borrower (including itself, as a “Borrower”) on whose behalf the Lead
Borrower has requested a Credit

 

76

 

Extension.  Neither the
Administrative Agent nor any other Credit Party shall have any obligation to
see to the application of such proceeds therefrom.

 

ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01         Conditions of
Initial Credit Extension.  The
obligation of the L/C Issuer and each Lender to make its initial Credit
Extension hereunder is subject to satisfaction of the following conditions
precedent:

 

(a)           The
Administrative Agent’s receipt of the following, each of which shall be
originals or telecopies (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing Loan
Party, each dated the Closing Date (or, in the case of certificates of
governmental officials, a recent date before the Closing Date) and each in form
and substance reasonably satisfactory to the Administrative Agent:

 

(i)            executed
counterparts of this Agreement sufficient in number for distribution to the
Administrative Agent, each Lender and the Lead Borrower;

 

(ii)           a
Note executed by the Borrowers in favor of each Lender requesting a Note;

 

(iii)          such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Loan Party as the
Administrative Agent may require evidencing (A) the authority of each Loan
Party to enter into this Agreement and the other Loan Documents to which such
Loan Party is a party or is to be a party and (B) the identity, authority
and capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party or is to be a party;

 

(iv)          copies
of each Loan Party’s Organization Documents and such other documents and
certifications as the Administrative Agent may reasonably require to evidence
that each Loan Party is duly organized or formed, and that each Loan Party is
validly existing and in good standing under the Laws of the jurisdiction of its
incorporation or organization;

 

(v)           favorable
opinions of (A) Gibson, Dunn & Crutcher LLP, counsel to the Loan
Parties, (B) Maynard, Cooper & Gale, P.C., LLC, local Alabama
real estate counsel, (C) Stroock & Stroock & Lavan LLP,
special counsel to Twin Brook, and (D) McGuireWoods LLP, special counsel
to The Children’s Place (Virginia), LLC, each addressed to the Administrative
Agent and each Lender, as to such matters concerning the Loan Parties and the
Loan Documents as the Administrative Agent may reasonably request;

 

(vi)          a
certificate signed by a Responsible Officer of the Lead Borrower certifying (A) that
the conditions specified in Sections 4.02(a) and (b) have
been

 

77

 

satisfied, (B) that, excluding the filing for bankruptcy and the
implementation of the bankruptcy proceeding of Hoop, there has been no event or
circumstance since the date of the Audited Financial Statements that has had or
could be reasonably expected to have, either individually or in the aggregate,
a Material Adverse Effect, (C) either that (1) no consents, licenses
or approvals (other than those referenced in Section 4.01(a)(iii) of
this Agreement) are required in connection with the execution, delivery and
performance by such Loan Party and the validity against such Loan Party of the
Loan Documents to which it is a party, or (2) that all such consents,
licenses and approvals have been obtained and are in full force and effect, and
(D) to the Solvency of the Loan Parties on a Consolidated basis as of the
Closing Date after giving effect to the transactions contemplated hereby;

 

(vii)         evidence
that all insurance required to be maintained pursuant to the Loan Documents and
all endorsements in favor of the Agents required under the Loan Documents have
been obtained and are in effect;

 

(viii)        a
payoff letter from the lenders under the Existing Credit Agreement satisfactory
in form and substance to the Administrative Agent evidencing that the Existing
Credit Agreement has been or concurrently with the Closing Date is being
terminated, all obligations thereunder are being paid in full, and all Liens
securing obligations under the Existing Credit Agreement have been or
concurrently with the Closing Date are being released;

 

(ix)           the
Security Documents (including, without limitation, the Mortgage) and, to the
extent not previously delivered to the Administrative Agent pursuant to the
Existing Credit Agreement, certificates evidencing any stock being pledged
thereunder, together with undated stock powers executed in blank, each duly
executed by the applicable Loan Parties;

 

(x)            the
Intercreditor Agreement, duly executed by each of the parties thereto;

 

(xi)           all
other Loan Documents, each duly executed by the applicable Loan Parties and the
other parties thereto;

 

(xii)          certified
copies of the Note Documents, duly executed by the parties thereto, together
with such other agreements, instruments and documents delivered in connection
therewith as the Administrative Agent shall reasonably request;

 

(xiii)         results
of searches or other evidence reasonably satisfactory to the Collateral Agent
(in each case dated as of a date reasonably satisfactory to the Collateral
Agent) indicating the absence of Liens on the assets of the Loan Parties,
except for Permitted Encumbrances and Liens for which termination statements
and releases, satisfactions and discharges of any mortgages, or subordination
agreements reasonably satisfactory to the Collateral Agent are

 

78

 

being tendered concurrently with such extension of credit or other
arrangements reasonably satisfactory to the Collateral Agent for the delivery
of such termination statements and releases have been made;

 

(xiv)        (A)          all documents and instruments,
including Uniform Commercial Code financing statements, required by law or
reasonably requested by the Collateral Agent to be filed, registered or
recorded to create or perfect the first priority Liens intended to be created
under the Loan Documents and all such documents and instruments shall have been
so filed, registered or recorded to the satisfaction of the Collateral Agent
and (B) the Credit Card Notifications and Blocked Account Agreements
required pursuant to Section 6.13 hereof;

 

(xv)         a
Phase I environmental site assessment report in accordance with ASTM Standard
E1527-05, in form and substance reasonably satisfactory to the Collateral
Agent, from an environmental consulting firm reasonably acceptable to the
Collateral Agent, which report shall identify recognized environmental
conditions with respect to the Alabama Property and shall, to the extent
possible, quantify any related costs and liabilities associated with such
conditions, and the Collateral Agent shall be satisfied with the nature and
amount of any such matters;

 

(xvi)        an
appraisal (based upon FMV) of the Alabama Property complying with the
requirements of FIRREA by a third party appraiser reasonably acceptable to the
Collateral Agent and otherwise in form and substance reasonably satisfactory to
the Collateral Agent; and

 

(xvii)       such
other assurances, certificates, documents, consents or opinions as the Agents
reasonably may require.

 

(b)           After
giving effect to (i) the first funding under the Loans and the funding
under the Note Purchase Facility, (ii) any charges to the Loan Account
made in connection with the establishment of the credit facility contemplated
hereby and (iii) all Letters of Credit to be issued at, or immediately
subsequent to, such establishment, Excess Availability shall be not less than
$80,000,000.

 

(c)           The
Administrative Agent shall have received a Borrowing Base Certificate dated the
Closing Date, relating to the week ended on July 26, 2008, and executed by
a Responsible Officer of the Lead Borrower.

 

(d)           The
Administrative Agent shall be reasonably satisfied that any financial
statements delivered to it fairly present the business and financial condition
of the Loan Parties and that there has been no Material Adverse Effect since
the date of the most recent financial information delivered to the
Administrative Agent.

 

(e)           The
Administrative Agent shall have received and be satisfied with (i) a
detailed forecast for the period commencing on the Closing Date and ending with
the end of the then Fiscal Year, which condition shall be deemed to have been
satisfied by the Administrative Agent’s receipt of the lender presentation
dated June 2, 2008.

 

79

 

(f)            There
shall not be pending any litigation or other proceeding, the result of which,
either individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

(g)           The
consummation of the transactions contemplated hereby shall not violate any
Applicable Law or any Organization Document.

 

(h)           The
Borrowers shall have entered into the Note Purchase Facility, and the terms of,
and the documentation evidencing, the Note Purchase Facility shall be
reasonably satisfactory to the Administrative Agent.

 

(i)            All
fees required to be paid to the Agents on or before the Closing Date shall have
been paid in full, and all fees required to be paid to the Lenders on or before
the Closing Date shall have been paid in full.

 

(j)            The
Borrowers shall have paid all fees, charges and disbursements of counsel to the
Administrative Agent to the extent invoiced prior to or on the Closing Date,
plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such fees, charges and disbursements
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude a final settling of accounts
between the Borrowers and the Administrative Agent).

 

(k)           The
Administrative Agent shall have received all documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including,
without limitation, the USA PATRIOT Act.

 

(l)            No
material changes in governmental regulations or policies affecting any Loan
Party or any Credit Party shall have occurred prior to the Closing Date.

 

4.02         Conditions to all
Credit Extensions.  The obligation of
each Lender to honor any Request for Credit Extension (other than a Committed
Loan Notice requesting only a conversion of Committed Loans to the other Type,
or a continuation of LIBO Rate Loans) is subject to the following conditions
precedent:

 

(a)           The
representations and warranties of each other Loan Party contained in Article V
or any other Loan Document, or which are contained in any document furnished at
any time under or in connection herewith or therewith, shall be true and
correct in all material respects on and as of the date of such Credit
Extension, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and
correct in all material respects as of such earlier date, and except that for purposes
of this Section 4.02, the representations and warranties contained
in subsections (a) and (b) of Section 5.05 shall be
deemed to refer to the most recent statements furnished pursuant to clauses (a) and
(b), respectively, of Section 6.01.

 

80

 

(b)           Except
for good faith disputes between a Borrower and its landlords, no Default or
Event of Default shall have occurred and be continuing, or would result from
such proposed Credit Extension or from the application of the proceeds thereof.

 

(c)           The
Administrative Agent and, if applicable, the L/C Issuer or the Swing Line
Lender shall have received a Request for Credit Extension in accordance with
the requirements hereof.

 

(d)           No
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the extending of such credit shall have been issued and
remain in force by any Governmental Authority against any Borrower, any Agent,
any Lender or any of their Affiliate.

 

(e)           The
amount of any requested Loan or Letter of Credit shall not exceed Availability
at such time.

 

Each Request for Credit Extension (other than
a Committed Loan Notice requesting only a conversion of Committed Loans to the
other Type or a continuation of LIBO Rate Loans) submitted by the Lead Borrower
shall be deemed to be a representation and warranty by the Borrowers that the
conditions specified in Sections 4.02(a) and (b) have
been satisfied on and as of the date of the applicable Credit Extension.  The conditions set forth in this Section 4.02
are for the sole benefit of the Credit Parties, but until the Required Lenders
otherwise direct the Administrative Agent to cease making Committed Loans, the
Lenders will fund their Applicable Percentage of all Committed Loans and L/C
Advances and participate in all Swing Line Loans and Letters of Credit whenever
made or issued, which are requested by the Lead Borrower and which,
notwithstanding the failure of the Loan Parties to comply with the provisions
of this Article IV, are agreed to by the Administrative Agent; provided,
however, the making of any such Loans or the issuance of any Letters of
Credit shall not be deemed a modification or waiver by any Credit Party of the
provisions of this Article IV on any future occasion or a waiver of
any rights or the Credit Parties as a result of any such failure to comply.

 

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make
Loans and to issue Letters of Credit hereunder, each Loan Party represents and
warrants to the Administrative Agent and the other Credit Parties that:

 

5.01         Existence,
Qualification and Power.  Each Loan
Party and each Subsidiary thereof: (a) is a corporation, limited liability
company, partnership or limited partnership, duly organized or formed, validly
existing and, where applicable, in good standing under the Laws of the
jurisdiction of its incorporation or organization; (b) has all requisite
power and authority and all requisite governmental licenses, permits,
authorizations, consents and approvals to (i) own or lease its assets and
carry on its business as currently conducted or as proposed to be conducted and
(ii) execute, deliver and perform its obligations under the Loan Documents
to which it is a party; and (c) is duly qualified and is licensed and,
where applicable, in good standing under the Laws of each jurisdiction where
its ownership, lease or operation of properties or the conduct of

 

81

 

its business requires such
qualification or license; except in each case referred to in clause (b)(i) or
(c), to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect.  Schedule
5.01 annexed hereto sets forth, as of the Closing Date, each Loan Party’s name
as it appears in official filings in its state of incorporation or organization
and the name under which each Loan Party conducts its business (if different),
its state of incorporation or organization, organization type, organization
number, if any, issued by its state of incorporation or organization, its
federal employer identification number and the address of its chief executive
office and principal place of business.

 

5.02         Authorization; No
Contravention.  The execution,
delivery and performance by each Loan Party of each Loan Document to which such
Person is, or is to be, a party has been duly authorized by all necessary
corporate or other organizational action and does not and will not: (a) contravene
the terms of any of such Person’s Organization Documents; (b) conflict in
any material respect with, or result in any breach, termination, or
contravention of, or constitute a default under, or require any payment to be
made under (i) any Material Contract or any Material Indebtedness to which
such Person is a party or affecting such Person or the properties of such
Person or any of its Subsidiaries, (ii) any order, injunction, writ or
decree of any Governmental Authority or any arbitral award to which such Person
or its property is subject, or (iii) any governmental licenses, permits,
authorizations, consents and approvals; except, in each case referred to in
this clause (b), to the extent that any such conflict, breach, termination,
contravention or default could not reasonably be expected to have a Material
Adverse Effect; (c) result in or require the creation of any Lien upon any
asset of any Loan Party (other than Liens in favor of the Collateral Agent
under the Security Documents); or (d) violate any Law.

 

5.03         Governmental
Authorization; Other Consents.  No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, any Loan Party of this Agreement or any other Loan
Document, except for (a) the perfection or maintenance of the Liens
created under the Security Documents (having the priority set forth in the
Intercreditor Agreement), or (b) such
as have been obtained or made and are in full force and effect.

 

5.04         Binding Effect.  This Agreement has been, and each other Loan
Document, when delivered, will have been, duly executed and delivered by each
Loan Party that is party thereto.  This
Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of such Loan Party,
enforceable against each Loan Party that is party thereto in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

 

5.05         Financial Statements;
No Material Adverse Effect.

 

(a)           The
Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; (ii) fairly present the financial condition of
the Lead Borrower and its Subsidiaries as of the date thereof and their results
of operations for the period covered thereby in accordance with GAAP
consistently applied throughout the period

 

82

 

covered thereby, except as otherwise expressly noted therein; and (iii) show
all Material Indebtedness and other liabilities, direct or contingent, of the
Lead Borrower and its Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Indebtedness.

 

(b)           The
unaudited Consolidated balance sheet of the Lead Borrower and its Subsidiaries
dated May, 2008, and the related Consolidated statements of income or
operations and cash flows for the Fiscal Month ended on that date (i) were
prepared in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein, and (ii) fairly
present the financial condition of the Lead Borrower and its Subsidiaries as of
the date thereof and their results of operations for the period covered
thereby, subject, in the case of clauses (i) and (ii), to the absence of
footnotes and to normal year-end audit adjustments.

 

(c)           Since
the date of the Audited Financial Statements, excluding the filing for
bankruptcy and the implementation of the bankruptcy proceeding of Hoop, there
has been no event or circumstance, either individually or in the aggregate,
that has had or could reasonably be expected to have a Material Adverse Effect.

 

5.06         Litigation.  Except as otherwise set forth in Schedule
5.06, there are no actions, suits, proceedings, claims or disputes pending or,
to the knowledge of the Loan Parties after due and diligent investigation,
threatened or contemplated, at law, in equity, in arbitration or before any
Governmental Authority, by or against any Loan Party or any of its Subsidiaries
or against any of its properties or revenues that (a) purport to affect or
pertain to this Agreement or any other Loan Document, or any of the transactions
contemplated hereby, or (b) either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

5.07         No Default.  No Loan Party or any Subsidiary is in default
under or with respect to, or party to, any Material Contract or any Material
Indebtedness.  No Default has occurred
and is continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

 

5.08         Ownership of
Property; Liens.

 

(a)           Each
of the Loan Parties and each Subsidiary thereof has good record and marketable
title in fee simple to, or valid leasehold interests in, all real property
necessary or used in the ordinary conduct of its business, free and clear of
all Liens, other than Permitted Encumbrances, except for such defects in title
and leasehold interests as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect  Each of the Loan Parties and each Subsidiary
has good and marketable title to, valid leasehold interests in, or valid
licenses to use, all personal property (including Intellectual Property) and
assets material to the ordinary conduct of its business as currently conducted
or as proposed to be conducted,  free and clear of all Liens, other
than Permitted Encumbrances, except for such defects in title, leasehold
interests and licenses as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

83

 

(b)           Schedule 5.08(b)(1) sets
forth the address (including street address, county and state) of all Real
Estate that is owned by the Loan Parties, together with a list of the holders
of any mortgage or other Lien thereon as of the Closing Date.  Each Loan Party and each of its Subsidiaries
has good, marketable and insurable fee simple title to the real property owned
by such Loan Party or such Subsidiary, free and clear of all Liens, other than
Permitted Encumbrances, except for such defects in title as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  Schedule
5.08(b)(2) sets forth the address (including street address, county
and state) of all Leases of the Loan Parties, together with a list of the lessor
and its contact information with respect to each such Lease as of the Closing
Date.  Each of such Leases is in full
force and effect as of the Closing Date and the Loan Parties are not in default
of the terms thereof, except for such defaults as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(c)           Schedule 7.01 sets forth a
complete and accurate list of all Liens on the property or assets of each Loan
Party and each of its Subsidiaries, showing as of the date hereof the
lienholder thereof and the property or assets of such Loan Party or such
Subsidiary subject thereto.  The property
of each Loan Party and each of its Subsidiaries is subject to no Liens, other
than Liens set forth on Schedule 7.01, and Permitted Encumbrances.

 

(d)           Schedule 7.02 sets forth a
complete and accurate list of all Investments held by any Loan Party or any
Subsidiary of a Loan Party on the date hereof, showing as of the date hereof
the amount, obligor or issuer and maturity, if any, thereof.

 

(e)           Schedule 7.03 sets forth a
complete and accurate list of all Indebtedness of each Loan Party or any
Subsidiary of a Loan Party as of the Closing Date, showing as of the Closing
Date the amount, obligor or issuer and maturity thereof.  As of the Closing Date, after giving effect
to the transactions contemplated hereby, the Loan Parties have no Indebtedness
except for the Note Obligations, the Indebtedness set forth on Schedule 7.03
and Permitted Indebtedness.

 

5.09         Environmental Compliance.

 

(a)           No Loan Party or any Subsidiary thereof
(i) has failed to comply with any Environmental Law or to obtain, maintain
or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability,
except, in each case, as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(b)           Except as otherwise set forth in Schedule
5.09, to the knowledge of the Loan Parties, none of the properties
currently or formerly owned or operated by any Loan Party or any Subsidiary
thereof is listed or proposed for listing on the NPL or on the CERCLIS or any
analogous foreign, state or local list or is adjacent to any such property;
there are no and never have been any underground or above-ground storage tanks
or any 

 

84

 

surface impoundments, septic tanks, pits, sumps or
lagoons in which Hazardous Materials are being or have been treated, stored or
disposed on any property currently owned or operated by any Loan Party or any
Subsidiary thereof or, to the best of the knowledge of the Loan Parties, on any
property formerly owned or operated by any Loan Party or Subsidiary thereof;
there is no asbestos or asbestos-containing material on any property currently
owned or operated by any Loan Party or Subsidiary thereof; and Hazardous
Materials have not been released, discharged or disposed of on any property
currently or formerly owned or operated by any Loan Party or any Subsidiary
thereof.

 

(c)           Except as otherwise set forth on Schedule
5,09, no Loan Party or any Subsidiary thereof is undertaking, and no Loan
Party or any Subsidiary thereof has completed, either individually or together
with other potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or
operation, either voluntarily or pursuant to the order of any Governmental
Authority or the requirements of any Environmental Law; and all Hazardous
Materials generated, used, treated, handled or stored at, or transported to or
from, any property currently or formerly owned or operated by any Loan Party or
any Subsidiary thereof have been disposed of in a manner not reasonably
expected to result in material liability to any Loan Party or any Subsidiary
thereof.

 

5.10         Insurance.  The
properties of the Loan Parties and their Subsidiaries are insured with
financially sound and reputable insurance companies which are not Affiliates of
the Loan Parties, in such amounts, with such deductibles and covering such
risks (including, without limitation, workmen’s compensation, public liability,
business interruption and property damage insurance) as are customarily carried
by companies engaged in similar businesses and owning similar properties in
localities where the Loan Parties or the applicable Subsidiary operates.  Schedule 5.10 sets forth a description of all
insurance maintained by or on behalf of the Loan Parties as of the Closing
Date. Each insurance policy listed on Schedule 5.10 is in full force and effect
and all premiums in respect thereof that are due and payable have been paid.

 

5.11         Taxes.  The Loan
Parties and their Subsidiaries have filed all Federal, state and other material
tax returns and reports required to be filed, and have paid all Federal, state
and other material taxes, assessments, fees and other governmental charges
levied or imposed upon them or their properties, income or assets otherwise due
and payable, except those which are being contested in good faith by appropriate
proceedings being diligently conducted, for which adequate reserves have been
provided in accordance with GAAP, as to which Taxes no Lien has been filed and
which contest effectively suspends the collection of the contested obligation
and the enforcement of any Lien securing such obligation.  There is no proposed tax assessment against
any Loan Party or any Subsidiary that would, if made, have a Material Adverse
Effect.  No Loan Party or any Subsidiary
thereof is a party to any tax sharing agreement.

 

5.12         ERISA
Compliance.

 

(a)           Each
Plan is in compliance in all material respects with the applicable provisions
of ERISA, the Code and other Federal or state Laws.  Each Plan that is intended to qualify under
Section 401(a) of the Code has received a favorable 

 

85

 

determination letter from the IRS or an application
for such a letter is currently being processed by the IRS with respect thereto
and, to the best knowledge of the Lead Borrower, nothing has occurred which
would prevent, or cause the loss of, such qualification.  The Loan Parties and each ERISA Affiliate
have made all required contributions to each Plan subject to Section 412
of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.  No Lien imposed
under the Code or ERISA exists or, to the knowledge of the Lead Borrower, is
likely to arise on account of any Plan.

 

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

 

(c)           Except as could not reasonably be
expected to have a Material Adverse Effect, individually or in the aggregate,
(i) no ERISA Event has occurred or is reasonably expected to occur;
(ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither any Loan Party nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) neither any Loan Party nor any ERISA Affiliate
has incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Sections 4201 or 4243 of ERISA with
respect to a Multiemployer Plan; and (v) neither any Loan Party nor any
ERISA Affiliate has engaged in a transaction that could be subject to Sections
4069 or 4212(c) of ERISA.

 

5.13         Subsidiaries; Equity Interests. 
The Loan Parties have no Subsidiaries other than those specifically
disclosed in Part (a) of Schedule 5.13, which Schedule sets
forth the legal name, jurisdiction of incorporation or formation and authorized
Equity Interests of each such Subsidiary, listed by class, and setting forth
the number and percentage of the outstanding Equity Interests of each such
class owned directly or indirectly by the applicable Loan Party.  All of the outstanding Equity Interests in
such Subsidiaries have been validly issued, are fully paid and non-assessable
and are owned by a Loan Party (or a Subsidiary of a Loan Party) in the amounts
specified on Part (a) of Schedule 5.13, free and clear of all
Liens except for those created under the Security Documents and the Note
Documents.  No Loan Party or any of its
respective Subsidiaries is subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of any Loan Party’s
Subsidiaries’ Equity Interests or any security convertible into or exchangeable
for any such Equity Interests.  The Loan
Parties have no equity investments in any other corporation or entity other
than those specifically disclosed in Part (b) of Schedule 5.13.  Part (c) of Schedule 5.13 is
a complete and accurate description of the authorized Equity Interests of each
Loan Party, by class, and a description of the number of shares of each such
class that are issued and outstanding. 
All of the outstanding Equity Interests in the Loan Parties have been
validly issued, and are fully paid and non-assessable and, other than with
respect to the Lead Borrower, are owned in the amounts specified on
Part (c) of 

 

86

 

Schedule 5.13, free and clear of all Liens except for those created
under the Security Documents and the Note Documents.  Except as set forth in Schedule 5.13,
there are no subscriptions, options, warrants, or calls relating to any shares
of any Loan Party’s Equity Interests, including any right of conversion or
exchange under any outstanding security or other instrument.  No Loan Party is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its Equity Interests or any security convertible into or exchangeable
for any of its Equity Interests.  The
copies of the Organization Documents of each Loan Party and each amendment
thereto provided pursuant to Section 4.01 are true and correct
copies of each such document, each of which is valid and in full force and
effect.

 

5.14         Margin Regulations; Investment Company
Act.

 

(a)           No Loan Party is engaged or will be
engaged, principally or as one of its important activities, in the business of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the FRB), or extending credit for the purpose of purchasing or carrying
margin stock.  None of the proceeds of
the Credit Extensions shall be used directly or indirectly for the purpose of
purchasing or carrying any margin stock, for the purpose of reducing or
retiring any Indebtedness that was originally incurred to purchase or carry any
margin stock or for any other purpose that might cause any of the Credit
Extensions to be considered a “purpose credit” within the meaning of
Regulations T, U, or X issued by the FRB.

 

(b)           None of the Loan Parties, any Person
Controlling any Loan Party, or any Subsidiary is or is required to be
registered as an “investment company” under the Investment Company Act of 1940.

 

5.15         Disclosure.  Each Loan
Party has disclosed to the Administrative Agent and the Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its
Subsidiaries is subject, and all other matters known to it, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect.  No report, financial
statement, certificate or other information furnished (whether in writing or
orally) by or on behalf of any Loan Party to the Administrative Agent or any
Lender in connection with the transactions contemplated hereby and the
negotiation of this Agreement or delivered hereunder or under any other Loan
Document (in each case, as modified or supplemented by other information so
furnished), contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to
projected financial information, the Loan Parties represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

 

5.16         Compliance with Laws. 
Each of the Loan Parties and each Subsidiary is in compliance in all
material respects with the requirements of all applicable Laws and all orders,
writs, injunctions and decrees applicable to it or to its properties, except in
such instances in which (a) such requirement of Law or order, writ,
injunction or decree is being contested in good faith by appropriate
proceedings diligently conducted or (b) the failure to comply therewith,
either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

 

87

 

5.17         Intellectual Property; Licenses, Etc. 
Each Loan Party owns, or holds licenses in, all Intellectual Property,
trade names, patent rights and other authorizations that are necessary to the
conduct of its business as currently conducted and as proposed to be conducted,
and attached hereto as Schedule 5.17 is a true, correct, and complete
listing of all material patents, patent applications, trademarks, trademark
applications, copyrights, and copyright registrations as to which a Loan Party
is the owner or is an exclusive licensee. 
To the best knowledge of the Lead Borrower after reasonable inquiry,
(i) there is no action, proceeding, claim or complaint pending or,
threatened in writing to be brought against any Loan Party which might
jeopardize any of such Person’s interest in any of the foregoing licenses,
patents, copyrights, trademarks, trade names, designs or applications, except
those which are not, in the aggregate, material to the Loan Parties’ financial
condition, results of operations or business and (ii) no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by any Loan Party or any
Subsidiary infringes upon any rights held by any other Person.

 

5.18         Labor Matters. 
There are no strikes, lockouts, slowdowns or other material labor
disputes against any Loan Party or any Subsidiary thereof pending or, to the
knowledge of any Loan Party, threatened which, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Except as set forth on Part (a) of Schedule 5.18, the hours
worked by and payments made to employees of the Loan Parties comply with the
Fair Labor Standards Act and any other applicable federal, state, local or
foreign Law dealing with such matters, except for any noncompliance which,
either individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.  Except as set
forth on Part (b) of Schedule 5.18, no Loan Party or any of
its Subsidiaries has incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act or similar state Law.  All material payments due from any Loan Party
and its Subsidiaries, or for which any claim may be made against any Loan
Party, on account of wages and employee health and welfare insurance and other
benefits, have been paid or properly accrued in accordance with GAAP as a
liability on the books of such Loan Party. Except as set forth on
Part (c) of Schedule 5.18, no Loan Party or any Subsidiary is
a party to or bound by (i) any collective bargaining agreement or
(ii) any management agreement, employment agreement, bonus, restricted
stock, stock option, or stock appreciation plan or agreement or any similar
plan, agreement or arrangement which, in each case in this clause (ii), imposes
commitments on such Loan Party or its Subsidiary in excess of $3,000,000 per
year. There are no representation proceedings pending or, to any Loan Party’s
knowledge, threatened to be filed with the National Labor Relations Board, and
no labor organization or group of employees of any Loan Party or any Subsidiary
has made a pending demand for recognition. There are no complaints, unfair
labor practice charges, grievances, arbitrations, unfair employment practices
charges or any other claims or complaints against any Loan Party or any
Subsidiary pending or, to the knowledge of any Loan Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment of any employee of any Loan Party or any of its Subsidiaries which,
either individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.  The
consummation of the transactions contemplated by the Loan Documents will not
give rise to any right of termination or right of renegotiation on the part of
any union under any collective bargaining agreement to which any Loan Party or
any of its Subsidiaries is bound.  Each
Loan Party and its Subsidiaries are in material compliance with all
requirements pursuant to employment standards, labor 

 

88

 

relations, health and safety, workers compensation and human rights
laws, immigration laws and other applicable employment legislation.  To the knowledge of the Loan Parties, no officer
or director of any Loan Party who is party to an employment agreement with such
Loan Party is in violation of any term of any employment contract or
proprietary information agreement with such Loan Party; and to the knowledge of
the Loan Parties, the execution of the employment agreements and the continued
employment by the Loan Parties of the such persons, will not result in any such
violation.

 

5.19         Security Documents. 
The Security Documents are effective to create in favor of the
Collateral Agent a legal, valid and enforceable security interest in the
Collateral, and the Security Documents constitute, or will upon the filing of
financing statements and/or the obtaining of “control”, in each case with
respect to the relevant Collateral as required under the applicable UCC, the
creation of a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties thereunder in such Collateral, in each
case prior and superior in right to any other Person, except for (a) with
respect to the Note Purchasers Priority Collateral only, Liens securing the
obligations of the Borrowers with respect to the Note Purchase Facility, and
(b) other Permitted Encumbrances having priority under applicable Law.

 

5.20         Solvency.  After giving
effect to the transactions contemplated by this Agreement, and before and after
giving effect to each Credit Extension, the Loan Parties, on a Consolidated
basis, are Solvent. No transfer of property has been or will be made by any
Loan Party and no obligation has been or will be incurred by any Loan Party in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of any Loan Party.

 

5.21         Deposit Accounts; Credit Card
Arrangements.

 

(a)           Annexed hereto as Schedule 5.21(a) is
a list of all DDAs maintained by the Loan Parties as of the Closing Date, which
Schedule includes, with respect to each DDA (i) the name and address of
the depository; (ii) the account number(s) maintained with such
depository; (iii) a contact person at such depository, and (iv) the
identification of each Blocked Account Bank.

 

(b)           Annexed hereto as Schedule 5.21(b)
is a list describing all arrangements as of the Closing Date to which any Loan
Party is a party with respect to the processing and/or payment to such Loan
Party of the proceeds of any credit card charges for sales made by such Loan
Party.

 

5.22         Brokers.  No broker or
finder brought about the obtaining, making or closing of the Loans or
transactions contemplated by the Loan Documents, and no Loan  Party or Affiliate thereof has any obligation
to any Person in respect of any finder’s or brokerage fees in connection
therewith.  Each Loan Party hereby
jointly and severally indemnifies each Credit Party against, and agrees that
such Person will hold each such Credit Party harmless from, any claim, demand
or liability, including reasonable attorneys’ fees, for any broker’s, finder’s
or placement fee or commission incurred by such indemnifying party or the Lead
Borrower or its Affiliates or a representative of such Person.

 

89

 

5.23         Customer and Trade Relations. 
Except for matters which, either individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, there exists
no actual or, to the knowledge of any Loan Party, threatened, termination or
cancellation of, or any material adverse modification or change in, the
business relationship of any Loan Party with any supplier material to its
operations.

 

5.24         Material Contracts. 
No Loan Party is in default under any Material Contract to which such
Person is a party or by which such Person is bound, the effect of which default
is to cause, or to permit the other party(ies) to such Material Contract to
cause, with the giving of notice if required, such Material Contract to be
terminated.  Set forth on Schedule
5.24 is a description of all Material Contracts of the Loan Parties,
showing the parties and principal subject matter thereof and amendments and
modifications thereto; provided, however, that the Lead Borrower may
amend Schedule 5.24 to add additional Material Contracts so long as such
amendment occurs by written notice to the Administrative Agent not less than 5
days after the date on which such Loan Party enters into such Material Contract
after the Closing Date.  Except for
matters which, either individually or in the aggregate, could not reasonably be
expected to either result in a Material Adverse Effect or expose the Loan
Parties to liabilities greater than $5,000,000, each Material Contract (other
than those that have expired at the end of their normal terms) (a) is in
full force and effect and is binding upon and enforceable against the
applicable Loan Party or its Subsidiaries and, to the best of the Lead
Borrower’s knowledge, each other Person that is a party thereto in accordance
with its terms, (b)  is not in default due to the action or inaction of
any Loan Party or its Subsidiaries and (c) the consummation of the
financing arrangements contemplated hereunder, will not constitute or create a
default or create a right of termination under any Material Contract.

 

5.25         Casualty.  Neither the
businesses nor the properties of any Loan Party or any of its Subsidiaries are
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance) that, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.

 

5.26         Anti-Terrorism
Laws.

 

(a)           General.  To the
knowledge of the Loan Parties, after reasonable inquiry, none of the Loan
Parties nor any direct or indirect investor in any Loan Party (other than the
Lenders or any direct or indirect investors in the Lenders), is in violation of
any Anti-Terrorism Law or engages in or conspires to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

(b)           Executive Order No. 13224. 
To the knowledge of the Loan Parties, after reasonable inquiry, none of
the Loan Parties nor any direct or indirect investor in any Loan Party (other
than the Lenders or any direct or indirect investors in the Lenders), or their
respective agents acting or benefiting in any capacity in connection with the
transactions hereunder, is any of the following (each a “Blocked Person”):

 

90

 

(i)                                     a Person that is listed in the annex to,
or is otherwise subject to the provisions of, the Executive Order
No. 13224;

 

(ii)                                  a Person owned or controlled  by, or acting for or on behalf of, any Person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order No. 13224;

 

(iii)                               a Person or entity with which any Lender
is prohibited from dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law;

 

(iv)                              a Person or entity that commits,
threatens or conspires to commit or supports “terrorism” as defined in the
Executive Order No. 13224;

 

(v)                                 a Person or entity that is named as a
“specially designated national” on the most current list published by the U.S.
Treasury Department Office of Foreign Asset Control at its official website or
any replacement website or other replacement official publication of such list;
or

 

(vi)                              a person or entity who is affiliated or
associated with a person or entity listed above.

 

(c)           To the best knowledge of the Loan
Parties, after reasonable inquiry, none of the Loan Parties nor, to the
knowledge of the Loan Parties, any of its or their agents acting in any
capacity in connection with the transactions hereunder (i) conducts any
business or engages in making or receiving any contribution of funds, goods or
services to or for the benefit of any Blocked Person, or (ii) deals in, or
otherwise engages in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order No. 13224.

 

ARTICLE VI.

AFFIRMATIVE COVENANTS

 

So long as any Lender
shall  have any Commitment hereunder, any
Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any
Letter of Credit shall remain outstanding, the Loan Parties shall, and shall
(except in the case of the covenants set forth in Sections 6.01, 6.02,
and 6.03) cause each Subsidiary to:

 

6.01         Financial
Statements.  Deliver to the
Administrative Agent, in form and detail satisfactory to the Administrative
Agent:

 

(a)           as soon as available, but in any event
within ninety (90) days after the end of each Fiscal Year of the Lead Borrower
(commencing with the Fiscal Year ending in January 2009), a Consolidated
and consolidating balance sheet of the Lead Borrower and its Subsidiaries as at
the end of such Fiscal Year, the related Consolidated and consolidating
statements of income or operations and Shareholders’ Equity and the related
Consolidated statement of cash flows (with consolidating reconciliation of cash
from the balance sheet to the statement of cash flows that is reasonably
acceptable to the Administrative Agent) for such Fiscal Year, setting forth in
each case, but only with

 

91

 

respect to the Consolidated statements, in comparative
form the figures for (i) the previous Fiscal Year and (ii) such
period set forth in the projections delivered pursuant to Section 6.02(c) hereof,
all in reasonable detail and prepared in accordance with GAAP, such
Consolidated and (where relevant) consolidating statements to be audited and
accompanied by (i) a report and unqualified opinion of BDO Seidman, LLP or
another public accounting firm of nationally recognized standing reasonably
acceptable to the Administrative Agent, which report and opinion shall be
prepared in accordance with generally accepted auditing standards and shall not
be subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit, (ii) an opinion
of such public accounting firm independently assessing the Loan Parties’
internal controls over financial reporting in accordance with Item 308 of SEC
Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of
Sarbanes-Oxley expressing a conclusion that contains no statement that there is
a material weakness in such internal controls, except for such material
weaknesses as to which the Required Lenders do not object and (iii) as to
statements not covered by an audit, certification by a Responsible Officer of
the Lead Borrower to the effect that such statements are fairly stated in all
material respects when considered in relation to the Consolidated and
consolidating financial statements of the Lead Borrower and its Subsidiaries;

 

(b)           as soon as available, but in any
event within thirty (30) days after the end of each Fiscal Month of each Fiscal
Year of the Lead Borrower (except with respect to the last Fiscal Month of each
Fiscal Quarter, with respect to which the applicable period for delivery shall
be forty-five (45) days rather than thirty (30) days), a Consolidated and
consolidating balance sheet of the Lead Borrower and its Subsidiaries as at the
end of such Fiscal Month, the related Consolidated and consolidating statements
of income or operations (and, with respect to the last Fiscal Month of each
Fiscal Quarter, Shareholders’ Equity) and the related Consolidated statement of
cash flows (with consolidating reconciliation of cash from the balance sheet to
the statement of cash flows that is reasonably acceptable to the Administrative
Agent) for such Fiscal Month, and for the portion of the Fiscal Year then
ended, setting forth in each case, but only with respect to the Consolidated
statements, in comparative form the figures for (i) such period set forth
in the projections delivered pursuant to Section 6.01(c) hereof,
(ii) the corresponding Fiscal Month of the previous Fiscal Year and
(iii) the corresponding portion of the previous Fiscal Year, all in
reasonable detail, such Consolidated and (where relevant) consolidating
statements to be certified by a Responsible Officer of the Lead Borrower as
fairly presenting the financial condition, results of operations and cash flows
of the Lead Borrower and its Subsidiaries as of the end of such Fiscal Month in
accordance with GAAP, subject only to normal year-end audit adjustments and the
absence of footnotes;

 

(c)           as soon as available, but in any
event (i) on or before January 31st of each Fiscal Year of
the Lead Borrower, a preliminary month-by-month business plan for the following
Fiscal Year prepared by management of the Lead Borrower and reviewed by the
board of directors of the Lead Borrower, and (ii) on or before
March 1st of each Fiscal Year of the Lead Borrower, a final month-by-month
business plan for such Fiscal Year prepared by management of the Lead Borrower
(which final business plan shall be approved by the board of directors of the
Lead Borrower by March 31st of such Fiscal 

 

92

 

Year), in each case the form of which shall be
substantially similar to the business plan for the Fiscal Year ended on or
about January 31, 2009 and the substance of which shall be reasonably
satisfactory to the Administrative Agent, for such Fiscal Year; provided
that, if the Lead Borrower delivers a business plan that is not
reasonably satisfactory to the Administrative Agent, but that otherwise
complies with this Section 6.01(c), this Section 6.01(c) shall
be deemed to be satisfied to the extent that the Lead Borrower delivers a
business plan reasonably satisfactory to the Administrative Agent on or before
March 31 of such Fiscal Year.

 

6.02         Certificates;
Other Information.  Deliver to the
Administrative Agent, in form and detail satisfactory to the Administrative
Agent:

 

(a)           concurrently with the delivery of the
financial statements referred to in Section 6.01(a), a certificate
of its public accounting firm certifying such financial statements;

 

(b)           concurrently with the delivery of the
financial statements referred to in Section 6.01(b), (i) a
duly completed Compliance Certificate signed by a Responsible Officer of the
Lead Borrower, which shall include (A) a certification as to the amount,
if any, of rent under any Leases, and any obligations and liabilities with
respect to Taxes, that have not been timely paid, (B) a certification as
to the receipt of notice, if any, as to any obligations or liabilities with
respect to utilities and/or insurance premiums that have not been timely paid,
and (C) a certification as to the acquisition, if any, of any additional
Intellectual Property acquired since the date of the last similar
certification, and (ii) a copy of management’s analysis with respect to
such financial statements, which analysis shall be consistent with the analysis
previously provided by the Lead Borrower under the Existing Credit
Agreement.  In the event of any change in
generally accepted accounting principles used in the preparation of such
financial statements, the Lead Borrower shall also provide a statement of
reconciliation conforming such financial statements to GAAP;

 

(c)           on the first Wednesday of each Fiscal
Month (or, if such day is not a Business Day, on the next succeeding Business
Day), a certificate in the form of Exhibit G (a “Borrowing Base
Certificate”) showing the Borrowing Base as of the close of business as of
the last day of the immediately preceding Fiscal Month, each Borrowing Base
Certificate to be certified as complete and correct by a Responsible Officer of
the Lead Borrower; provided  that (i) if Uncapped Excess
Availability at any time is less than $25,000,000 or (ii) an Event of
Default has occurred and is continuing, such Borrowing Base Certificate shall
be delivered on Wednesday of each week (or, if Wednesday is not a Business Day,
on the next succeeding Business Day), as of the close of business on the
immediately preceding Saturday;

 

(d)           concurrently with the filing thereof (or
upon the request of the Administrative Agent or its auditors, appraisers,
accountants, consultants or other representatives), copies of each of the Lead
Borrower’s federal income tax returns, and any amendments thereto;

 

93

 

(e)                                  promptly upon
receipt, copies of any detailed audit reports, management letters or
recommendations submitted to the board of directors (or the audit committee of
the board of directors) of any Loan Party by its public accounting firm in
connection with the accounts or books of the Loan Parties or any Subsidiary, or
any audit of any of them, in each case to the extent permitted by the policies
of its public accounting firm at such time;

 

(f)                                    promptly after the
same are available, copies of each annual report, proxy or financial statement,
or other document, report or communication sent to the stockholders of the Loan
Parties, and copies of all annual, regular, periodic and special reports and
registration statements which any Loan Party files with the SEC under Section 13
or 15(d) of the Securities Exchange Act of 1934 or with any national
securities exchange, and in any case not otherwise required to be delivered to
the Administrative Agent pursuant hereto;

 

(g)                                 the financial and
collateral reports described on Schedule 6.02 hereto, at the times set
forth in such Schedule;

 

(h)                                 promptly after the
furnishing thereof, (i) copies of any statement or report furnished to any
holder of debt securities of any Loan Party or any Subsidiary thereof pursuant
to the terms of any indenture, loan or credit or similar agreement and (ii) copies of all notices and other
communications received or delivered by a Loan Party with respect to the Note
Documents (i) which indicate a breach or default of any such document, or (ii) which
constitute a notice under Section 7.5 (Notices) of the Note Purchase
Agreement (to the extent not otherwise already provided to the Administrative
Agent), in each case not otherwise required to be furnished to the
Lenders pursuant to Section 6.01 or any other clause of this Section 6.02;

 

(i)                                     as soon as
available, but in any event within 30 days after the end of each Fiscal Year of
the Loan Parties (or upon the
request of the Administrative Agent or its auditors, appraisers, accountants,
consultants or other representatives), (i) a certificate executed by an
authorized officer of the Lead Borrower certifying the existence and adequacy
of the property and casualty insurance program carried by the Loan Parties and
their Subsidiaries, and (ii) a written summary of said program identifying
the name of each insurer, the number of each policy and expiration date of each
policy, the amounts and types of each coverage, and a list of exclusions and
deductibles for each policy.

 

(j)                                     promptly, and in
any event within five Business Days after receipt thereof by any Loan Party or
any Subsidiary thereof, copies of each notice or other correspondence received
from any Governmental Authority (including, without limitation, the SEC (or
comparable agency in any applicable non-U.S. jurisdiction)) concerning any
proceeding with, or investigation or possible investigation or other inquiry by
such Governmental Authority regarding financial or other operational results of
any Loan Party or any Subsidiary thereof or any other matter which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect; and

 

94

 

(k)                                  promptly, such
additional information regarding the business affairs, financial condition or
operations of any Loan Party or any Subsidiary, or compliance with the terms of
the Loan Documents, as the Administrative Agent or any Lender may from time to
time reasonably request.

 

Financial statements required to be
delivered pursuant to Sections 6.01(a), 6.01(b) or 6.02(f) (to
the extent any such documents are included in materials otherwise filed with
the SEC) may be delivered electronically and if so delivered, shall be deemed
to have been delivered on the date (i) on which the Lead Borrower posts
such documents, or provides a link thereto on the Lead Borrower’s website on
the Internet at the website address listed on Schedule 10.02; or (ii) on
which such documents are posted on the Lead Borrower’s behalf on EDGAR or
another Internet or intranet website, if any, to which each Lender and the
Administrative Agent have access (whether a commercial, third-party website or
whether sponsored by the Administrative Agent); provided  that: (i) the
Lead Borrower shall deliver paper copies of such documents to the
Administrative Agent or any Lender that requests the Lead Borrower to deliver
such paper copies until a written request to cease delivering paper copies is
given by the Administrative Agent or such Lender and (ii) the Lead
Borrower shall notify the Administrative Agent and each Lender (by telecopier
or electronic mail) of the posting of any such documents and provide to the
Administrative Agent by electronic mail electronic versions (i.e., soft
copies) of such documents. 
Notwithstanding anything contained herein, in every instance, the Lead
Borrower shall be required to provide paper copies of the Compliance
Certificates required by Section 6.02(b) to the Administrative
Agent.  The Administrative Agent shall
have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to
monitor compliance by the Loan Parties with any such request for delivery, and
each Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents.

 

6.03                           Notices.  Promptly notify the Administrative Agent:

 

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

 

(b)                                 of any matter that has
resulted or could reasonably be expected to result in a Material Adverse
Effect, including (i) breach or non-performance of, any default under, or
termination of, a Material Contract or with respect to Material Indebtedness of
any Loan Party or any Subsidiary thereof; (ii) any dispute, litigation,
investigation, proceeding or suspension between any Loan Party or any
Subsidiary thereof and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or any
administrative or arbitration proceeding affecting any Loan Party or any Subsidiary
thereof, including pursuant to any applicable Environmental Laws;

 

(c)                                  of any undischarged
or unpaid judgments or decrees in excess of $3,000,000, individually or in the
aggregate;

 

(d)                                 of the occurrence of
any ERISA Event;

 

(e)                                  of any material change
in accounting policies or financial reporting practices by any Loan Party or
any Subsidiary thereof;

 

95

 

(f)                                    of any change in
any Loan Party’s senior executive officers;

 

(g)                                 of the discharge by
any Loan Party of its present public accounting firm or any withdrawal or
resignation by such public accounting firm;

 

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

 

(i)                                     of the filing of
any Lien for unpaid Taxes against any Loan Party;

 

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

 

(k)                                  of any failure by any
Loan Party to pay rent at (i) ten percent (10%) or more of such Loan Party’s
locations or (ii) any of such Loan Party’s locations if such failure
continues for more than ten (10) days following the day on which such rent
first came due and such failure would be reasonably likely to result in a
Material Adverse Effect.

 

Each notice pursuant to this Section 6.03
shall be accompanied by a statement of a Responsible Officer of the Lead
Borrower setting forth details of the occurrence referred to therein and
stating what action the Lead Borrower has taken and proposes to take with
respect thereto.  Each notice pursuant to
Section 6.03(a) shall describe with particularity any and all
provisions of this Agreement and any other Loan Document that have been
breached.

 

6.04                           Payment
of Obligations.  Pay and discharge in
full as the same shall become due and payable, all its obligations and
liabilities, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, (b) all
lawful claims (including, without limitation, claims for labor, materials and
supplies and claims of landlords, warehousemen, customs brokers, and carriers)
which, if unpaid, would by law become a Lien upon its property (other than a Permitted
Encumbrance), and (c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness, except, in each case, where (a) the
validity or amount thereof (other than payroll taxes or taxes that are the
subject of a United States federal tax lien) is being contested in good faith
by appropriate proceedings diligently conducted, (b) such Loan Party has
set aside on its books adequate reserves with respect thereto in accordance
with GAAP, (c) such contest effectively suspends collection of the
contested obligation and enforcement of any Lien securing such obligation, and (d) the
failure to make payment pending such contest could not reasonably be expected
to result in a Material Adverse Effect. 
The Lead Borrower will, upon request, furnish the Collateral Agent with
proof satisfactory to the Collateral Agent indicating that the Loan Parties and
their Subsidiaries have made the payments or deposits described in clause (a) above.  Each Loan Party shall, and shall cause each
of its Subsidiaries to, pay in conformity with its customary practice all
accounts payable incident to the operations of 

 

96

 

such Person not referred to in
this Section 6.04, above.  Nothing
contained herein shall be deemed to limit the rights of the Agents with respect
to determining Reserves pursuant to this Agreement.

 

6.05                           Preservation
of Existence, Etc..  Preserve, renew
and maintain in full force and effect its legal existence and good standing
under the Laws of the jurisdiction of its organization or formation except in a
transaction permitted by Section 7.04 or 7.05.

 

6.06                           Maintenance
of Properties.

 

(a)                                  Keep its properties
in such repair, working order and condition, and shall from time to time make
such repairs, replacements, additions and improvements thereto, as are
reasonably necessary for the efficient operation of its business and shall
comply at all times in all material respects with all material franchises,
licenses and leases to which it is party so as to prevent any loss or
forfeiture thereof or thereunder, except where (i) compliance is at the
time being contested in good faith by appropriate proceedings and (ii) failure
to comply with the provisions being contested has not resulted, and which, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

 

(b)                                 Take all reasonable actions to possess and
maintain all Intellectual Property material to the conduct of their respective
businesses and own all right, title and interest in and to, or have a valid
license for, all such Intellectual Property. 
No Loan Party nor any of its Subsidiaries shall take any action, or fail
to take any action, that could reasonably be expected to (i) result in the
invalidity, abandonment, misuse, lapse, or unenforceability of Intellectual
Property which is material to the conduct of the business of the Loan Parties
or (ii) knowingly infringe upon or misappropriate any rights of other
Persons.

 

(c)                                  Do all things reasonably necessary in order
to comply with all Environmental Laws at any Real Property or otherwise in
connection with their operations noncompliance with which could reasonably be
expected to cause a Material Adverse Effect, and obtain all permits and other
governmental authorizations for their operations under applicable Environmental
Laws other than such permits and other authorizations the failure of which to
obtain could not, individually or in the aggregate, reasonably be expected to
cause a Material Adverse Effect.

 

6.07                           Maintenance
of Insurance.

 

(a)                                  Maintain with
financially sound and reputable insurance companies reasonably acceptable to
the Administrative Agent and not Affiliates of the Loan Parties, insurance with
respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business
and operating in the same or similar locations or as is required by applicable
Law, of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons and as are reasonably acceptable to the
Administrative Agent.

 

(b)                                 Fire and extended
coverage policies maintained with respect to any Collateral shall be endorsed
or otherwise amended to include (i) a non-contributing 

 

97

 

mortgage clause (regarding improvements to real property) and lenders’
loss payable clause (regarding personal property), in form and substance satisfactory
to the Collateral Agent, which endorsements or amendments shall provide that
the insurer shall pay all proceeds otherwise payable to the Loan Parties under
the policies directly to the Collateral Agent, (ii) a provision to the
effect that none of the Loan Parties, Credit Parties or any other Person shall
be a co-insurer and (iii) such other provisions as the Collateral Agent
may reasonably require from time to time to protect the interests of the Credit
Parties. Commercial general liability policies shall be endorsed to name the
Collateral Agent as an additional insured. Business interruption policies shall
name the Collateral Agent as a loss payee and shall be endorsed or amended to
include (i) a provision that, from and after the Closing Date, the insurer
shall pay all proceeds otherwise payable to the Loan Parties under the policies
directly to the Collateral Agent, (ii) a provision to the effect that none
of the Loan Parties, the Administrative Agent, the Collateral Agent or any
other party shall be a co-insurer and (iii) such other provisions as the
Collateral Agent may reasonably require from time to time to protect the
interests of the Credit Parties. Each such policy referred to in this Section 6.07(b) shall
also provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium, except upon not less than ten (10) days’
prior written notice thereof by the insurer to the Collateral Agent (giving the
Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for
any other reason, except upon not less than thirty (30) days’ prior written
notice thereof by the insurer to the Collateral Agent. The Lead Borrower shall
deliver to the Collateral Agent, prior to the cancellation, modification or
non-renewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the
Collateral Agent, including an insurance binder) together with evidence
satisfactory to the Collateral Agent of payment of the premium therefor.

 

(c)                                  None of the Credit
Parties, or their agents or employees shall be liable for any loss or damage
insured by the insurance policies required to be maintained under this Section 6.07.  Each Loan Party shall look solely to its
insurance companies or any other parties other than the Credit Parties for the
recovery of such loss or damage and such insurance companies shall have no
rights of subrogation against any Credit Party or its agents or employees.  If, however, the insurance policies do not
provide waiver of subrogation rights against such parties, as required above,
then the Loan Parties hereby agree, to the extent permitted by law, to waive
their right of recovery, if any, against the Credit Parties and their agents
and employees.  The designation of any
form, type or amount of insurance coverage by the any Credit Party under this Section 6.07
shall in no event be deemed a representation, warranty or advice by such Credit
Party that such insurance is adequate for the purposes of the business of the
Loan Parties or the protection of their properties.

 

(d)                                 Permit any
representatives that are designated by the Collateral Agent to inspect the
insurance policies maintained by or on behalf of the Loan Parties and to
inspect books and records related thereto and any properties covered
thereby.  The Loan Parties shall pay the
reasonable fees and expenses of any representatives retained by the Collateral
Agent to conduct any such inspection.

 

98

 

6.08                           Compliance
with Laws.  Comply in all material
respects with the requirements of all Laws and all orders, writs, injunctions
and decrees applicable to it or to its business or property, except in such
instances in which (a) such requirement of Law or order, writ, injunction
or decree is being contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves have been set
aside and maintained by the Loan Parties in accordance with GAAP; (b) such
contest effectively suspends enforcement of the contested Laws, and (c) the
failure to comply therewith could not reasonably be expected to have a Material
Adverse Effect.

 

6.09                           Books
and Records; Accountants.

 

(a)                                  (i) Maintain
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Loan Parties
or such Subsidiary, as the case may be; and (ii) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over the Loan Parties
or such Subsidiary, as the case may be.

 

(b)                                 At all times retain
BDO Seidman, LLP or another public accounting firm which is reasonably
satisfactory to the Administrative Agent and instruct such public accounting
firm in writing to cooperate with, and be available to, the Administrative
Agent or its representatives to discuss the Loan Parties’ financial
performance, financial condition, operating results, controls, and such other
matters, within the scope of the retention of such public accounting firm, as
may be raised by the Administrative Agent; provided  that the Lead
Borrower shall be entitled to participate in any such meetings or
discussions.  The Lead Borrower hereby
irrevocably authorizes and directs all auditors, accountants, or other third
parties to deliver to the Administrative Agent, at the Borrowers’ expense,
copies of the Borrowers’ financial statements, papers related thereto, and
other accounting records of any nature in their possession, and to disclose to
the Administrative Agent any information they may have regarding the Collateral
or the financial condition of the Borrowers, in each case to the extent
permitted by the policies of such auditors, accountants or other third parties
at such time; provided  that the Lead Borrower shall be entitled
to be provided with copies of any such financial statements, papers, accounting
records or disclosures contemporaneously therewith.

 

6.10                           Inspection
Rights.

 

(a)                                  Permit
representatives and independent contractors of the Administrative Agent to
visit and inspect any of its properties, to examine its corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers, and
public accounting firm, all at the expense of the Loan Parties and at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the Lead Borrower; provided, however,
that when an Event of Default has occurred and is continuing, the
Administrative Agent (or any of its representatives or independent 

 

99

 

contractors) may do any of the foregoing at the expense of the Loan
Parties at any time during normal business hours and without advance notice.

 

(b)                                 Upon the request of
the Administrative Agent after reasonable prior notice, permit the
Administrative Agent or professionals (including investment bankers,
consultants, accountants, lawyers and appraisers) retained by the
Administrative Agent to conduct appraisals, commercial finance examinations and
other evaluations, including, without limitation, of (i) the Lead Borrower’s
practices in the computation of the Borrowing Base and (ii) the assets
included in the Borrowing Base and related financial information such as, but
not limited to, sales, gross margins, payables, accruals and reserves.  Subject to the following sentences, the Loan
Parties shall pay the fees and expenses of the Administrative Agent or such
professionals with respect to such evaluations and appraisals as provided below.  Without limiting the foregoing, the Loan
Parties acknowledge that the Administrative Agent may, in its discretion,
undertake up to one (1) real estate appraisal and up to two (2) inventory
appraisals and two (2) commercial finance examinations each Fiscal Year at
the Loan Parties’ expense; provided  that, in the event that
Excess Availability is at any time less than $35,000,000, the Administrative
Agent may, in its discretion, undertake up to three (3) inventory
appraisals and three (3) commercial finance examinations each Fiscal Year
at the Loan Parties’ expense. 
Notwithstanding anything to the contrary contained herein, the
Administrative Agent may cause additional inventory appraisals and commercial
finance examinations to be undertaken (i) as it in its reasonable
discretion deems necessary or appropriate, at its own expense, or (ii) if
required by applicable Law or if a Default or Event of Default shall have
occurred and be continuing, at the expense of the Loan Parties.

 

6.11                           Use
of Proceeds.  Use the proceeds of the
Credit Extensions (a) to refinance the Indebtedness of the Lead Borrower
and its Subsidiaries under the Existing Credit Agreement and the L/C Demand
Facility, (b) to finance transaction fees and expenses related hereto, (c) to
finance the acquisition of working capital assets of the Borrowers, including
the purchase of Inventory and Equipment, in each case in the ordinary course of
business, (d) to finance Capital Expenditures of the Borrowers, (e) to
pay certain obligations owed by the Lead Borrower to third parties as a result
of the Hoop bankruptcy in an aggregate amount not to exceed $13,400,000 (net of
receipts from Disney), as more fully described on Schedule 6.11 attached
hereto, and (f) for general corporate purposes of the Loan Parties, in
each case to the extent expressly permitted under applicable Law and the Loan
Documents.

 

6.12                           Additional
Loan Parties.  Notify the
Administrative Agent at the time that any Person becomes a Subsidiary, and
promptly thereafter (and in any event within fifteen (15) days), cause any such
Person (a) which is not a CFC, to (i) become a Loan Party by
executing and delivering to the Administrative Agent a Joinder to this
Agreement or a counterpart of the Facility Guaranty or such other document as
the Administrative Agent shall deem appropriate for such purpose, (ii) grant
a Lien to the Collateral Agent on such Person’s assets to secure the
Obligations, and (iii) deliver to the Administrative Agent documents of
the types referred to in clauses (iii) and (iv) of Section 4.01(a) and
favorable opinions of counsel to such Person (which shall cover, among other
things, the legality, validity, binding effect and enforceability of the
documentation referred to in clause (a)), and (b) if any Equity Interests
or Indebtedness of such 

 

100

 

Person are owned by or on
behalf of any Loan Party, to pledge such Equity Interests and promissory notes
evidencing such Indebtedness, in each case in form, content and scope reasonably
satisfactory to the Administrative Agent. 
In no event shall compliance with this Section 6.12 waive or be
deemed a waiver or Consent to any transaction giving rise to the need to comply
with this Section 6.12 if such transaction was not otherwise expressly
permitted by this Agreement or constitute or be deemed to constitute, with
respect to any Subsidiary, an approval of such Person as a Borrower or permit
the inclusion of any acquired assets in the computation of the Borrowing Base.

 

6.13                           Cash
Management.

 

(a)                                  On or prior to the
Closing Date:

 

(i)                                     deliver to the
Administrative Agent copies of notifications (each, a “Credit Card
Notification”) substantially in the form attached hereto as Exhibit H
which have been executed on behalf of such Loan Party and delivered to such
Loan Party’s credit card clearinghouses and processors listed on Schedule
5.21(b); and

 

(ii)                                  enter into a blocked
account agreement (each, a “Blocked Account Agreement”) satisfactory in
form and substance to the Agents with each Blocked Account Bank (collectively,
the “Blocked Accounts”).

 

The Administrative Agent hereby acknowledges
and agrees that, upon delivery of the Credit Card Notifications and Blocked
Account Agreements described on Schedule 6.13, the requirements of this Section 6.13(a),
and the requirements set forth below in each of Sections 6.13(b) and
6.13(c), shall be deemed to have been satisfied.

 

(b)                                 (i) Each Credit
Card Notification shall require the ACH or wire transfer no less frequently
than daily (and whether or not there are then any outstanding Obligations) to a
Blocked Account of all payments due from credit card processors, and (ii) the
Borrowers shall cause each depository institution listed on Schedule 5.21(a) to
cause the ACH or wire transfer no less frequently than daily (and whether or
not there are then any outstanding Obligations) to a Blocked Account of all
amounts on deposit in each DDA.

 

(c)                                  Each Blocked Account
Agreement shall require, after the occurrence and during the continuance of a
Cash Dominion Event, the ACH or wire transfer no less frequently than daily
(and whether or not there are then any outstanding Obligations) to the
concentration account maintained by the Collateral Agent at Wells Fargo Bank
(the “Concentration Account”), of all cash receipts and collections,
including, without limitation, the following:

 

(i)                                     all available cash
receipts from the sale of Inventory and other assets;

 

(ii)                                  all proceeds of
collections of Accounts;

 

101

 

(iii)                               all Net Proceeds, and
all other cash payments received by a Loan Party from any Person or from any
source or on account of any sale or other transaction or event;

 

(iv)                              the then contents of each
DDA (net of any minimum balance, not to exceed $2,500.00, as may be required to
be kept in the subject DDA by the depository institution at which such DDA is
maintained);

 

(v)                                 the then entire ledger
balance of each Blocked Account (net of any minimum balance, not to exceed
$2,500.00, as may be required to be kept in the subject Blocked Account by the
Blocked Account Bank); and

 

(vi)                              the proceeds of all
credit card charges.

 

Prior to the exercise of remedies provided for in Section 8.02
(or before the Loans have automatically become immediately due and payable and
the L/C Obligations have automatically been required to be Cash Collateralized
as set forth in the proviso to Section 8.02), subject to the terms
of the Intercreditor Agreement, all amounts received in the Concentration
Account from any source, including the Blocked Account Banks, shall be applied
by the Administrative Agent in the order set forth in Section 2.05(e).

 

(d)                                 Concurrently with the
delivery of the financial statements referred to in Section 6.01(b),
the Loan Parties shall provide the Collateral Agent with an accounting of the
contents of the Blocked Accounts and the Concentration Account, which shall
identify, to the reasonable satisfaction of the Collateral Agent, the proceeds
from the Note Purchasers Priority Collateral which were deposited into a Blocked
Account and swept to the Concentration Account. 
In addition, the Loan Parties shall provide the Collateral Agent (i) with
written notice of any Restricted Payment or other intercompany transfer to be
made to any Loan Party by any Subsidiary located outside of the United States,
in each case as otherwise permitted pursuant to Sections 7.06 or 7.18,
respectively, of this Agreement, no less than five (5) days prior to the
receipt thereof and (ii) with written confirmation (which shall include a
fed reference number, if applicable) on the date of the receipt of any such
Restricted Payment or other intercompany transfer.  Upon the receipt of (x) the contents of
the Blocked Accounts, and (y) such accounting and/or written confirmation,
the Collateral Agent agrees to promptly remit to the agent under the Note
Purchase Facility the proceeds of the Note Purchasers Priority Collateral
received by the Collateral Agent.

 

(e)                                  The Concentration
Account shall at all times be under the sole dominion and control of the Collateral
Agent.  The Loan Parties hereby
acknowledge and agree that (i) the Loan Parties have no right of
withdrawal from the Concentration Account, (ii) the funds on deposit in
the Concentration Account shall at all times be collateral security for all of
the Obligations and (iii) the funds on deposit in the Concentration
Account shall be applied as provided in this Agreement.

 

(f)                                    In the event that,
after the occurrence and during the continuance of a Cash Dominion Event, any
Loan Party receives or otherwise has dominion and control of 

 

102

 

any proceeds or collections described in Section 6.13(c),
such proceeds and collections shall be held in trust by such Loan Party for the
Collateral Agent, shall not be commingled with any of such Loan Party’s other
funds or deposited in any account of such Loan Party and shall, not later than
the Business Day after receipt thereof, be deposited into the Concentration
Account or dealt with in such other fashion as such Loan Party may be
instructed by the Collateral Agent.

 

(g)                                 Upon the request of
the Administrative Agent, the Loan Parties shall cause bank statements and/or
other reports to be delivered to the Administrative Agent not less often than
monthly, accurately setting forth all amounts deposited in each Blocked Account
to ensure the proper transfer of funds as set forth above.

 

6.14                           Information
Regarding the Collateral.

 

(a)                                  Furnish to the
Administrative Agent at least thirty (30) days prior written notice of any
change in: (i) any Loan Party’s name or in any trade name used to identify
it in the conduct of its business or in the ownership of its properties; (ii) the
location of any Loan Party’s chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by
it is located (including the establishment of any such new office or facility);
(iii) any Loan Party’s organizational structure or jurisdiction of
incorporation or formation; or (iv) any Loan Party’s Federal Taxpayer
Identification Number or organizational identification number assigned to it by
its state of organization. The Loan Parties agree not to effect or permit any
change referred to in the preceding sentence unless all filings have been made
under the UCC or otherwise that are required in order for the Collateral Agent
to continue at all times following such change to have a valid, legal and
perfected security interest in all the Collateral (subject only to (i) with
respect to the Note Purchasers Priority Collateral only, Liens securing the
obligations of the Loan Parties with respect to the Note Purchase Facility, and
(ii) other Permitted Encumbrances having priority by operation of
applicable Law) for its own benefit and the benefit of the other Credit
Parties.

 

(b)                                 From time to time as
may be reasonably requested by the Administrative Agent, and not less than one
time per Fiscal Year, the Lead Borrower shall supplement each Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter arising after the Closing Date that, if existing or occurring on the
Closing Date, would have been required to be set forth or described in such
Schedule or as an exception to such representation or that is necessary to
correct any information in such Schedule or representation which has been
rendered inaccurate thereby (and, in the case of any supplements to any
Schedule, such Schedule shall be appropriately marked to show the changes made
therein).  Notwithstanding the foregoing,
no supplement or revision to any Schedule or representation shall be deemed the
Credit Parties’ consent to the matters reflected in such updated Schedules or
revised representations nor permit the Loan Parties to undertake any actions
otherwise prohibited hereunder or fail to undertake any action required
hereunder from the restrictions and requirements in existence prior to the
delivery of such updated Schedules or such revision of a representation; nor
shall any 

 

103

 

such supplement or revision to any Schedule or representation be deemed
the Credit Parties’ waiver of any Default resulting from the matters disclosed
therein.

 

6.15                           Physical
Inventories.

 

(a)                                  Cause not less than
one (1) physical inventory to be undertaken, at the expense of the Loan
Parties, in each twelve month period, conducted by such inventory takers as are
satisfactory to the Collateral Agent and following such methodology as is
consistent with the methodology used in the immediately preceding inventory or
as otherwise may be satisfactory to the Collateral Agent. The Collateral Agent,
at the expense of the Loan Parties, may participate in and/or observe each scheduled
physical count of Inventory which is undertaken on behalf of any Loan
Party.  Upon the request of the
Collateral Agent, the Lead Borrower shall provide the Collateral Agent with a
reconciliation of the results of such inventory (as well as of any other
physical inventory undertaken by a Loan Party) and shall post such results to
the Loan Parties’ stock ledgers and general ledgers, as applicable.

 

(b)                                 The Collateral Agent,
in its discretion, if any Default shall have occurred and be continuing, may cause
additional such inventories to be taken as the Collateral Agent determines
(each, at the expense of the Loan Parties).

 

6.16                           Environmental
Laws.  (a)  Conduct its
operations and keep and maintain its Real Estate in material compliance with
all Environmental Laws; (b) obtain and renew all environmental permits
appropriate or necessary for its operations and properties; and (c) implement
any and all investigation, remediation, removal and response actions that are
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws pertaining to the presence,
generation, treatment, storage, use, disposal, transportation or release of any
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate, provided, however, that neither a Loan Party nor any of its
Subsidiaries shall be required to undertake any such cleanup, removal, remedial
or other action to the extent that its obligation to do so is being contested
in good faith and by proper proceedings and adequate reserves have been set
aside and are being maintained by the Loan Parties with respect to such
circumstances in accordance with GAAP.

 

6.17                           Further
Assurances.

 

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

 

104

 

(b)                                If any material assets
are acquired by any Loan Party after the Closing Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), notify the Agents
thereof, and the Loan Parties will cause such assets to be subjected to a Lien
securing the Obligations and will take such actions as shall be necessary or
shall be requested by any Agent to grant and perfect such Liens, including
actions described in paragraph (a) of this Section 6.17, all
at the expense of the Loan Parties. In no event shall compliance with this Section 6.17(b) waive
or be deemed a waiver or Consent to any transaction giving rise to the need to
comply with this Section 6.17(b) if such transaction was not
otherwise expressly permitted by this Agreement or constitute or be deemed to
constitute Consent to the inclusion of any acquired assets in the computation
of the Borrowing Base.

 

(c)                                 Upon the request of
the Collateral Agent, cause each of its customs brokers, freight forwarders and
other carriers which, individually, have control over, and/or hold the
documents evidencing ownership of, Inventory or other Collateral of the Loan
Parties with an aggregate retail value in excess of ten percent (10%) of the
retail value of all Inventory or other Collateral of the Loan Parties at such
time to deliver a Customs Broker Agreement to the Collateral Agent.

 

(d)                                Upon the request of the
Collateral Agent, cause any of its landlords with respect to Real Estate
acquired or leased after the Closing Date to deliver a Collateral Access
Agreement to the Collateral Agent in such form as the Collateral Agent may
reasonably require if the aggregate retail value of the Inventory or other
Collateral of the Loan Parties at any such location exceeds five percent (5%)
of the retail value of all Inventory or other Collateral of the Loan Parties at
such time.

 

6.18                          Compliance
with Terms of Leaseholds.  Except as
otherwise expressly permitted hereunder (including, without limitation, in
connection with Store closings permitted pursuant to clause (b) of the
definition of Permitted Dispositions), make all payments and otherwise perform
all obligations in respect of all Leases of real property to which any Loan
Party or any of its Subsidiaries is a party, keep such Leases in full force and
effect and not allow such Leases to lapse or be terminated or any rights to
renew such leases to be forfeited or cancelled, notify the Administrative Agent
of any default by any party with respect to such Leases and cooperate with the
Administrative Agent in all respects to cure any such default, and cause each
of its Subsidiaries to do so, except, in any case, where the failure to do so,
either individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.  In the
event that the Borrowers become delinquent in their rent payments, the
Administrative Agent may establish Reserves against the Borrowing Base for the
amount of any landlord liens arising from such delinquency.

 

6.19                          Material
Contracts.  Perform and observe all
of the terms and provisions of each Material Contract to be performed or
observed by any Loan Party or any of its Subsidiaries, take all such action
required on the part of any Loan Party or any of its Subsidiaries to maintain
each such Material Contract in full force and effect, enforce each such
Material Contract in accordance with its terms, take all such action to such
end as may be from time to time requested by the Administrative Agent and, upon
request of the Administrative Agent, make to each other party to each such
Material Contract such demands and requests for information and reports or

 

105

 

for action as any Loan Party or
any of its Subsidiaries is entitled to make under such Material Contract, and
cause each of its Subsidiaries to do so,
except, in any case, where the failure to do so, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

6.20                          ERISA.

 

(a)                                 Comply in all material
respects with the applicable provisions of ERISA or any other applicable
federal, state, provincial, local or foreign law dealing with such matters,
except where the failure to comply could reasonably be expected to result in a
claim or liability against any Loan Party or its Affiliates of $3,000,000 or
more.

 

(b)                                Pay and discharge promptly any liability imposed upon it pursuant to
the provisions of Title IV of ERISA; provided, however, that
neither any Loan Party nor any ERISA Affiliate or any other Subsidiary of the
Loan Parties shall be required to pay any such liability if (i) the
amount, applicability or validity thereof shall be diligently contested in good
faith by appropriate proceedings, and (ii) such Person shall have set
aside on its books reserves, in the opinion of the independent certified public
accountants of such Person, adequate with respect thereto.

 

(c)                                 Deliver to the Collateral Agent, promptly,
and in any event within 20 days, after (i) the occurrence of any
Reportable Event in respect of a Plan, a copy of the materials that are filed
with the PBGC, (ii) any Loan Party or any ERISA Affiliate or an
administrator of any Plan files with
participants, beneficiaries or the PBGC a notice of intent to terminate any
such Plan, a copy of any such notice, (iii) the
receipt of notice by any Loan Party or any ERISA Affiliate or an administrator
of any Plan from the PBGC of the PBGC’s
intention to terminate any Plan or to
appoint a trustee to administer any such Plan,
a copy of such notice, (iv) the request by any Lender of copies of each
annual report that is filed on Treasury Form 5500 with respect to any Plan, together with certified financial
statements (if any) for the Plan and any
actuarial statements on Schedule B to such Form 5500, (v) any
Loan Party or any ERISA Affiliate knows or has reason to know of any event or
condition which could reasonably be expected to constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Plan,
an explanation of such event or condition, (vi) the receipt by any Loan
Party or any ERISA Affiliate of an assessment of withdrawal liability under Section 4201
of ERISA from a Multiemployer Plan, a copy of such assessment, (vii) any
Loan Party or any ERISA Affiliate knows or has reason to know of any event or
condition which would reasonably be expected to cause any one of them to incur
a liability under Section 4062, 4063, 4064 or 4069 of ERISA or Section 412(n) or
4971 of the Code, an explanation of such event or condition, or (viii) any
Loan Party or any ERISA Affiliate knows or has reason to know that an
application is to be, or has been, made to the Secretary of the Treasury for a
waiver of the minimum funding standard under the provisions of Section 412
of the Code, a copy of such application, and in each case described in clauses (i) through
(iii) and (v) through (vii) together with a statement signed by
an officer setting forth details as to such Reportable Event, notice, event or
condition and the action which such Loan Party and any ERISA Affiliate proposes
to take with respect thereto.

 

106

 

6.21                          Post-Closing
Matters.

 

(a)                                 Within 60 days of the
Closing Date (or such longer period as may be agreed to by the Administrative
Agent in its sole discretion), the Borrowers shall deliver to the Collateral
Agent: (i) an American Land Title Association/American Congress on
Surveying and Mapping form survey, for which all necessary fees (where
applicable) have been paid, certified to the Collateral Agent and the issuer of
the Mortgage Policy in a manner reasonably satisfactory to the Collateral Agent
by a land surveyor duly registered and licensed in the State of Alabama and
reasonably acceptable to the Collateral Agent, showing all buildings and other
improvements, the location of any easements, parking spaces, rights of way,
building set-back lines and other dimensional regulations and the absence of
encroachments, either by such improvements or on to such property, and other
defects, other than encroachments and other defects reasonably acceptable to
the Collateral Agent; (ii) an endorsement to the Mortgage Policy deleting
the survey exception; (iii) comprehensive, same as survey, access,
address/location and contiguity endorsements to the Mortgage Policy; and (iv) evidence
that all other actions that the Collateral Agent may deem necessary or
desirable in order to create a valid and subsisting Lien on the Alabama
Property described in the Mortgage, subject only to Permitted Encumbrances
having priority by operation of applicable Law, has been taken.  Until such time as the Borrowers deliver the
items described in this Section 6.21(a), the Administrative Agent
is under no obligation to include the Alabama Property in the Borrowing Base.

 

(b)                                Within 60 days of the
Closing Date, a fully paid (or, as to which, evidence of the payment of the
applicable premium has been provided to the Collateral Agent) American Land
Title Association Lender’s Extended Coverage title insurance policy or
marked-up title commitment having the effect of a policy of title insurance
(the “Mortgage
Policy”) in form and substance, with endorsements and in an amount
acceptable to the Collateral Agent, issued by Stewart Title Guaranty Company,
insuring the Mortgage to be a valid and subsisting Lien on the property
described therein, free and clear of all defects (including, but not limited
to, mechanics’ and materialmen’s Liens) and encumbrances, excepting only
Permitted Encumbrances and other Liens permitted under the Loan Documents, and
providing for such other affirmative insurance (including endorsements for
future advances under the Loan Documents and for zoning of the applicable
property) and such coinsurance and direct access reinsurance as the Collateral
Agent may deem necessary or desirable. 
Until such time as the Borrowers deliver the items described in this Section 6.21(b),
the Administrative Agent is under no obligation to include the Alabama Property
in the Borrowing Base.

 

(c)                                 Within 30 days of the
Closing Date (or such longer period as may be agreed to by the Administrative
Agent in its sole discretion), the Borrowers shall deliver to the
Administrative Agent a Blocked Account Agreement with Wachovia Bank, National
Association with respect to account #203024911266.  In the event that the Borrowers are unable to
deliver the foregoing Blocked Account Agreement within the timeframe set forth
herein or make other arrangements acceptable to the Administrative Agent, the
Administrative Agent may, in its sole discretion, require the Borrowers to move
the applicable Blocked Account to Wells Fargo Bank, N.A. or another depository

 

107

 

institution that is willing to execute and deliver a Blocked Account
Agreement in form and substance reasonably satisfactory to the Administrative
Agent.

 

(d)                                Within 30 days of the
Closing Date (or such longer period as may be agreed to by the Administrative
Agent in its sole discretion), the Borrowers shall deliver to the
Administrative Agent a Blocked Account Agreement with Wells Fargo Bank, N.A.
with respect to account #13038997.

 

ARTICLE VII.

NEGATIVE COVENANTS

 

So long as any Lender shall have any Commitment hereunder, any Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, no Loan Party shall, nor shall it permit any
Subsidiary to, directly or indirectly:

 

7.01                          Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired or sign or file or suffer to exist under the UCC or any
similar Law or statute of any jurisdiction a financing statement that names any
Loan Party or any Subsidiary thereof as debtor; sign or suffer to exist any
security agreement authorizing any Person thereunder to file such financing
statement; sell any of its property or assets subject to an understanding or
agreement (contingent or otherwise) to repurchase such property or assets with
recourse to it or any of its Subsidiaries; or assign or otherwise transfer any
accounts or other rights to receive income, other than, as to all of the above,
Permitted Encumbrances.

 

7.02                          Investments.  Have outstanding, make, acquire or hold any
Investment (or become contractually committed to do so), directly or
indirectly, or incur any liabilities (including contingent obligations) for or
in connection with any Investment, except Permitted Investments.

 

7.03                          Indebtedness.  Create, incur, assume, guarantee, suffer to
exist or otherwise become or remain liable with respect to, any Indebtedness,
except Permitted Indebtedness.

 

7.04                          Fundamental
Changes.  (a) Merge, amalgamate,
dissolve, liquidate, wind up, consolidate with or into another Person,
reorganize, enter into a plan of reorganization, recapitalization or reclassify
its Equity Interests (or agree to do any of the foregoing) or (b) suspend
or go out of a substantial portion of its or their business or any material
line of business, except that, so long as no Default shall have occurred and be
continuing prior to or immediately after giving effect to any action described
below or would result therefrom:

 

(a)                                 any Subsidiary may
merge, consolidate or amalgamate with (i) a Loan Party, provided  that
the Loan Party shall be the continuing or surviving Person, or (ii) any
one or more other Subsidiaries, provided  further that when any
wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned
Subsidiary shall be the continuing or surviving Person;

 

(b)                                any CFC that is not a
Loan Party may merge into any CFC that is not a Loan Party; and

 

108

 

(c)                                 the Borrowers shall be
permitted to liquidate or dissolve Twin Brook at any time upon prior written
notice to the Administrative Agent, provided  that before, or
within three (3) Business Days after, the liquidation or dissolution of
Twin Brook, Twin Brook shall have contributed all of its assets to the Lead
Borrower and the Lead Borrower shall have caused the former assets of Twin
Brook, including, without limitation, the equity interests in Services Company,
to be pledged to the Collateral Agent for the benefit of the Credit Parties.  In the event of any liquidation or
dissolution of Twin Brook in accordance with the preceding sentence, Twin Brook
will automatically cease to be a Guarantor hereunder.

 

7.05                          Dispositions.  Make any Disposition or enter into any
agreement to make any Disposition, except Permitted Dispositions.

 

7.06                          Restricted
Payments.  Declare or make, directly
or indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, except that, so long as no Default shall have occurred and
be continuing prior to or immediately after giving effect to any action
described below or would result therefrom:

 

(a)                                 each Subsidiary of a
Loan Party may make Restricted Payments to any Loan Party;

 

(b)                                the Loan Parties and
each Subsidiary may declare and make dividend payments or other distributions
payable solely in the common stock or other common Equity Interests of such
Person;

 

(c)                                 the Lead Borrower may
repurchase up to $10,000,000 of its capital stock in any Fiscal Year so long as
there has been at least $50,000,000 of Excess Availability as of the end of
each of the three months preceding such repurchase, and on such date, after
taking into account the repurchase of such stock; and

 

(d)                                the Loan Parties may
issue and sell Equity Interests provided that (i) (A) with respect to
any Equity Interests, all dividends in respect of which are to be paid (and all
other payments in respect of which are to be made) shall be in additional
shares of such Equity Interests, in lieu of cash, (B) such Equity
Interests shall not be subject to redemption other than redemption at the
option of the Loan Party issuing such Equity Interests, and (C) all
payments in respect of such Equity Interests are expressly subordinated to the
Obligations, and (ii) no Loan Party shall issue any additional Equity
Interests in a Subsidiary.

 

7.07                          Payments
and Prepayments of Indebtedness.

 

(a)                                 Prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled maturity thereof
in any manner any Indebtedness (other than the Note Obligations), or make any
payment in violation of any subordination terms of any Subordinated
Indebtedness, except (i) as long as no Event of Default shall have
occurred and be continuing or would arise therefrom, regularly scheduled or
mandatory repayments or redemptions of Permitted Indebtedness (other than the
Note Obligations), (ii) refinancings and refundings of such Indebtedness
permitted pursuant to Section 7.03,

 

109

 

and (iii) as long as the Payment Conditions are satisfied, other
repayments or prepayments of Permitted Indebtedness (other than the Note
Obligations) in an aggregate amount not to exceed $10,000,000.00 in any Fiscal
Year.

 

(b)                                Make any payment in
respect of the Note Obligations, except (i) regularly scheduled payments
of interest on the Note Obligations, Excess Cash Flow (as such term is defined
in the Note Purchase Agreement) payments as set forth in Section 3.2.4.4
of the Note Purchase Agreement and fees and expenses permitted under the Note
Purchase Agreement, in each case to the extent permitted to be paid pursuant to
the terms of Section 2.5 of the Intercreditor Agreement, (ii) refinancings
or refundings of the Note Obligations permitted pursuant to Section 7.03,
(iii) as long as the Payment Conditions are satisfied, other repayments or
prepayments of the Note Obligations in an aggregate amount not to exceed
$20,000,000.00 in any Fiscal Year, and (iv) as long as (A) the
Payment Conditions are satisfied and (B) no proceeds of any Credit
Extension are being used to finance all or any portion of such repayment or
prepayment, other repayments or prepayments of the Note Obligations in an
aggregate amount in excess of $20,000,000.00 in any Fiscal Year.

 

7.08                          Change
in Nature of Business.  Engage in any
line of business substantially different from the business (or any business
substantially related or incidental thereto) conducted by the Loan Parties and
their Subsidiaries on the date hereof.

 

7.09                          Transactions
with Affiliates.  Enter into, renew,
extend or be a party to any transaction of any kind with any Affiliate of any
Loan Party, except for: (a) transactions that are in the ordinary course
of business, upon fair and reasonable terms, that are fully disclosed to the
Administrative Agent, and that are no less favorable to the Loan Parties than
would be obtainable by the Loan Parties at the time in a comparable arm’s
length transaction with a Person other than an Affiliate; (b) payment of
insurance premiums to Twin Brook in an aggregate amount not to exceed $750,000
in any Fiscal Year; (c) transactions between the Lead Borrower and
Services Company in the ordinary course of business; (d) intercompany
loans and advances or other intercompany Indebtedness permitted pursuant to
clauses (b), (c), (e) and (j) of the definition of Permitted
Indebtedness; and (e) intercompany Investments permitted pursuant to
clauses (g), (h), (i) and (m) of the definition of Permitted
Investments.

 

7.10                          Burdensome
Agreements.  Enter into or permit to
exist any Contractual Obligation (other than the Note Documents, this Agreement
or any other Loan Document) that (a) limits the ability (i) of any
Subsidiary to make Restricted Payments or other distributions to any Loan Party
or to otherwise transfer property to or invest in a Loan Party, (ii) of
any Subsidiary to Guarantee the Obligations, (iii) of any Subsidiary to
make or repay loans to a Loan Party, or (iv) of the Loan Parties or any
Subsidiary to create, incur, assume or suffer to exist Liens on property of
such Person in favor of the Collateral Agent; provided, however,
that this clause (iv) shall not prohibit any negative pledge incurred or
provided in favor of any holder of Indebtedness permitted under Section 7.01
solely to the extent any such negative pledge relates to the property financed
by or the subject of such Indebtedness; or (b) requires the grant of a
Lien to secure an obligation of such Person if a Lien is granted to secure
another obligation of such Person.

 

110

 

7.11                          Use
of Proceeds.  Use the proceeds of any
Credit Extension, whether directly or indirectly, and whether immediately,
incidentally or ultimately, to purchase or carry margin stock (within the
meaning of Regulation U of the FRB) or to extend credit to others for the purpose
of purchasing or carrying margin stock or to refund Indebtedness originally
incurred for such purpose.

 

7.12                          Amendment
of Material Documents.  Amend, modify
or waive any of a Loan Party’s rights under (a) its Organization Documents
or (b) any Material Contract or Material Indebtedness (other than on
account of any refinancing thereof otherwise permitted hereunder), in each case
to the extent that such amendment, modification or waiver would be reasonably
likely to have a Material Adverse Effect.

 

7.13                          Corporate
Name; Fiscal Year.

 

(a)                                 Change the Fiscal Year
of any Loan Party, or the accounting policies or reporting practices of the
Loan Parties, except as required by GAAP.

 

(b)                                Change its name as it
appears in official filings in the state of its incorporation or other
organization (b) change its chief executive office, principal place of
business, corporate offices or warehouses or locations at which any material
portion of the Collateral is held or stored, or the location of its records
concerning the Collateral, (c) change the type of entity that it is, (d) change
its organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its state of
incorporation or organization, in each case without at least thirty (30) days
prior written notice to the Collateral Agent and after the Collateral Agent’s
written acknowledgment, which acknowledgment shall not be unreasonably withheld
or delayed, that any reasonable action requested by the Collateral Agent in
connection therewith, including to continue the perfection of any Liens in
favor of the Collateral Agent, in any Collateral, has been completed or taken,
and provided  that any such new location of any Loan Party or
Domestic Subsidiary shall be in the continental United States.

 

7.14                          Blocked
Accounts; Credit Card Processors.

 

(a)                                 Open new Blocked
Accounts unless the Loan Parties shall have delivered to the Collateral Agent
appropriate Blocked Account Agreements consistent with the provisions of Section 6.13
and otherwise satisfactory to the Collateral Agent.

 

(b)                                Enter into new
agreements with credit card processors other than the ones expressly
contemplated herein or in Section 6.13 hereof unless the Loan
Parties shall have delivered to the Collateral Agent appropriate Credit Card
Notifications consistent with the provisions of Section 6.13 and
otherwise satisfactory to the Collateral Agent.

 

7.15                          Consignments.  Consign any Inventory or sell any Inventory
on bill and hold, sale or return, sale on approval, or other conditional terms
of sale.

 

7.16                          Antilayering.  Other than the Note Obligations, the Loan
Parties will not, and will not permit any of their Subsidiaries to, incur or in
any fashion become or remain liable with respect to any Indebtedness of the Loan
Parties or any Subsidiary which, by its terms, is

 

111

 

subordinated
to any other Indebtedness of such Loan Party or such Subsidiary and which is
not expressly subordinated to the Obligations on terms satisfactory to the
Administrative Agent.

 

7.17                          Capital
Expenditures.  Make Capital
Expenditures in each of the following Fiscal Years in excess of the applicable
amount set forth below:

 

	
  Fiscal Year Ending

  On or About

  	
   

  	
  Maximum

  Capital Expenditures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31, 2009

  	
   

  	
  $

  	
   86,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31, 2010

  	
   

  	
  $

  	
  85,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31, 2011

  	
   

  	
  $

  	
  122,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31, 2012

  	
   

  	
  $

  	
  134,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31, 2013

  	
   

  	
  $

  	
  133,000,000

  	
   

  

 

provided, however, that the
Required Lenders may, in the exercise of their reasonable business judgment,
increase any of the amounts set forth in the foregoing grid.  When making any determination whether to
increase the foregoing amounts, the Required Lenders may consider, among other
things, the actual financial results of the Loan Parties.

 

Any unutilized Capital Expenditures in any
given Fiscal Year may be carried forward as an increase to the subsequent year’s
Capital Expenditure covenant (without giving effect to any prior
carryover).  By way of example, if in the
Fiscal Year ending on or about January 31, 2009 (the “2008 Fiscal Year”),
the Loan Parties only make Capital Expenditures of $81,000,000, $5,000,000 of
unutilized Capital Expenditures may be carried forward as an increase to the
Capital Expenditure covenant for the Fiscal Year ending on or about January 31,
2010 (the “2009 Fiscal Year”). 
Therefore, in the 2009 Fiscal Year ending, the Loan Parties may make
Capital Expenditures of up to $90,000,000. 
If the Loan Parties only make Capital Expenditures of $82,000,000 in the
2009 Fiscal Year, $3,000,000 of unutilized Capital Expenditures may be carried
forward to the Fiscal Year ending on or about January 31, 2011 (the “2010
Fiscal Year”) (as this is the amount of the unutilized Capital Expenditures
under the original Capital Expenditures covenant for the 2009 Fiscal
Year).  If, on the other hand, the Loan
Parties make Capital Expenditures of $87,000,000 in the 2009 Fiscal Year, they
may not carry forward $3,000,000 of unutilized Capital Expenditures to the 2010
Fiscal Year (as this amount exceeds the original Capital Expenditures covenant
for the 2009 Fiscal Year and represents a portion of the carryover from the
2008 Fiscal Year).  In other words, in
the above example, if the Loan Parties do not make Capital Expenditures of
$90,000,000 in the 2009 Fiscal Year, they may only carry forward to the 2010
Fiscal Year the difference (if a positive number) between the original Capital
Expenditures covenant for the 2009 Fiscal Year and the amount of Capital
Expenditures actually made by the Loan Parties during the 2009 Fiscal Year.

 

7.18                          Foreign Transfers.  Permit the Loan Parties located within the United States to
make or receive intercompany transfers outside the ordinary course of business
to or from their Affiliates in Canada, Asia and/or Puerto Rico, except that, so long
as (a) no Default shall have

 

112

 

occurred and be continuing prior to or
immediately after giving effect to any transfer described below or would result
therefrom and (b) prior to, and on a projected pro forma basis for the six
months immediately following, and after giving effect to, any transfer
described below, Excess Availability will be greater than or equal to
$50,000,000:

 

(a)                                 the Loan Parties located
within the United States may (i) make intercompany transfers outside the
ordinary course of business of not more than $5,000,000 per Fiscal Year in the
aggregate to their Affiliates in Canada, (ii) make intercompany transfers
outside the ordinary course of business of not more than $5,000,000 per Fiscal
Year to their Affiliates in Asia, and (iii) make intercompany transfers
outside the ordinary course of business of not more than $2,500,000 per Fiscal
Year to their Affiliates in Puerto Rico; and

 

(b)                                the Loan Parties
located within the United States may (i) receive as intercompany transfers
outside the ordinary course of business from their Affiliates in Canada not
more than $5,000,000 per Fiscal Year, (ii) receive as intercompany
transfers outside the ordinary course of business from their Affiliates in Asia
not more than $5,000,000 per Fiscal Year, and (iii) receive as
intercompany transfers outside the ordinary course of business from their
Affiliates in Puerto Rico not more than $5,000,000 per Fiscal Year.

 

An additional $5,000,000 may be transferred
under each of Sections 7.18(b)(i), 7.18(b)(ii) and 7.18(b)(iii),
and the amount so transferred may be used to prepay the Note Obligations, provided
that the Loan Parties have satisfied the requirements set forth in
clauses (iii) or (iv), as applicable, of Section 7.07(b).

 

ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

 

8.01                          Events
of Default.  Any of the following
shall constitute an Event of Default:

 

(a)                                 Non-Payment.  The Borrowers or any other Loan Party fails
to pay when and as required to be paid herein, (i) any amount of principal
of any Loan or any L/C Obligation, or deposit any funds as Cash Collateral in
respect of L/C Obligations, or (ii) any interest on any Loan or on any L/C
Obligation, or any fee due hereunder, or (iii) any other amount payable
hereunder or under any other Loan Document; or

 

(b)                                Specific Covenants.

 

(i)                                    Any Loan Party
fails to perform or observe any term, covenant or agreement contained in any of
Sections 6.03, 6.05, 6.07, 6.10, 6.11, 6.12,
6.13 or 6.14 or Article VII of this Agreement or in Section 5.01
of the Security Agreement; or

 

(ii)                                 Any Loan Party fails
to perform or observe any term, covenant or agreement contained in Section 6.02(c) of
this Agreement and such failure continues for five (5) days; or

 

113

 

(iii)                              Any Loan Party fails to
perform or observe any term, covenant or agreement contained in any of Sections
6.01, 6.02(a) or 6.02(b) of this Agreement and such
failure continues for fifteen (15) days; or

 

(c)                                 Other Defaults.  Any Loan Party fails to perform or observe
any other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for thirty (30) days; or

 

(d)                                Material Impairment.  Any material impairment of the prospect of
repayment of any portion of the Obligations owing to the Credit Parties or a
material impairment of the value or priority of the Credit Parties’ security
interests in the Collateral; or

 

(e)                                 Representations and
Warranties in the Credit Agreement. 
Any representation, warranty, certification or statement of fact made or
deemed made by or on behalf of any Borrower or any other Loan Party herein, in
any other Loan Document, or in any document delivered in connection herewith or
therewith (including, without limitation, any Borrowing Base Certificate) shall
be incorrect or misleading in any material respect when made or deemed made; or

 

(f)                                   Material Indebtedness;
Swap Contracts.  (i) Any Loan
Party or any Subsidiary thereof (A) fails to make any payment when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Material Indebtedness (other than Indebtedness
hereunder, Indebtedness under the Note Purchase Facility and Indebtedness under
Swap Contracts) or Guarantee having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to all
creditors under any combined or syndicated credit arrangement) of more than
$3,000,000, or (B) fails to observe or perform any other agreement or
condition relating to any Material Indebtedness (other than Indebtedness
hereunder, Indebtedness under the Note Purchase Facility and Indebtedness under
Swap Contracts) or Guarantee having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to all
creditors under any combined or syndicated credit arrangement) of more than
$3,000,000, or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or
other event is to cause, or to permit the holder or holders of such
Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to be demanded or to become due or to be repurchased, prepaid,
defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness to be made, prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; or (ii) there occurs under any Swap Contract an
Early Termination Date (as defined in such Swap Contract) resulting from (A) any
event of default under such Swap Contract as to which a Loan Party or any
Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract)
or (B) any Termination Event (as so defined) under such Swap Contract as
to which a Loan Party or any Subsidiary thereof

 

114

 

is an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by the Loan Party or such Subsidiary as a result thereof
is greater than $3,000,000; or

 

(g)                                Insolvency
Proceedings, Etc.  Any Loan Party or
any of its Subsidiaries institutes or consents to the institution of any
proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
for it or for all or any material part of its property; or a proceeding shall
be commenced or a petition filed, without the application or consent of such
Person, seeking or requesting the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed and the appointment continues undischarged, undismissed or unstayed
for 45 calendar days (provided, however, that, during the
pendency of such period, the Credit Parties shall be relieved of their
obligation to extend credit hereunder), or an order or decree approving or
ordering any of the foregoing shall be entered; or any proceeding under any
Debtor Relief Law relating to any such Person or to all or any material portion
of its property is instituted without the consent of such Person and continues
undismissed or unstayed for 45 calendar days (provided, however,
that, during the pendency of such period, the Credit Parties shall be relieved
of their obligation to extend credit hereunder), or an order for relief is
entered in any such proceeding; or

 

(h)                                Inability to Pay
Debts; Attachment.  (i) Any Loan
Party or any Subsidiary thereof becomes unable or admits in writing its
inability or fails generally to pay its debts as they become due in the
ordinary course of business, or (ii) any writ or warrant of attachment or
execution or similar process is issued or levied against all or any material
portion of the property of any such Person; or

 

(i)                                    Judgments.  (i) There is entered against any Loan
Party or any Subsidiary thereof one or more judgments or orders for the payment
of money in an aggregate amount (as to all such judgments and orders) exceeding
$3,000,000 (to the extent not covered by independent third-party insurance as
to which the insurer is rated at least “A” by A.M. Best Company, has been
notified of the potential claim and does not dispute coverage) which become
Liens or encumbrances upon any material portion of any Borrower’s properties or
assets, and all such judgments or orders shall not have been vacated,
discharged, stayed or bonded pending appeal within thirty (30) days from the
entry thereof, or (ii) an action or proceeding is brought against any
Borrower which is reasonably likely to be decided adversely to such Borrower,
and such adverse decision would materially impair the prospect of repayment of
the Obligations or materially impair the value or priority of the Credit
Parties’ security interests in the Collateral; or

 

(j)                                    Liens.  A notice of Lien, levy, or assessment is
filed of record with respect to any of any Borrower’s properties or assets by
the United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, or any
taxes or debts owing at any time hereafter to any one or more of such entities
becomes a Lien, whether choate or otherwise, upon any of any Borrower’s
properties or assets and the same is not paid on the payment date thereof; or

 

115

 

(k)                                 ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of any Loan Party under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate
amount in excess of $3,000,000, or (ii) a Loan Party or any ERISA
Affiliate fails to pay when due, after the expiration of any applicable grace
period, any installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$100,000; or

 

(l)                                    Invalidity of
Loan Documents.  (i)  Any
provision of any Loan Document, at any time after its execution and delivery
and for any reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all the Obligations, ceases to be in full force and
effect; or any Loan Party or any other Person contests in any manner the
validity or enforceability of any provision of any Loan Document; or any Loan
Party denies that it has any or further liability or obligation under any
provision of any Loan Document, or purports to revoke, terminate or rescind any
provision of any Loan Document or seeks to avoid, limit or otherwise adversely
affect any Lien purported to be created under any Security Document; or (ii) any
Lien purported to be created under any Security Document shall cease to be
(except as permitted pursuant to the terms hereof or thereof), or shall be
asserted by any Loan Party or any other Person not to be, a valid and perfected
Lien on any Collateral, with the priority required by the applicable Security
Document; or

 

(m)                              Change of Control.  There occurs any Change of Control; or

 

(n)                                Cessation of
Business.  Except as otherwise
expressly permitted hereunder, any Loan Party shall take any action to suspend
the operation of its business in the ordinary course, liquidate all or
substantially all of its assets or Store locations, or employ an agent or other
third party to conduct a program of closings, liquidations or “Going-Out-Of-Business”
sales of any material portion of its business; or

 

(o)                                Loss of Collateral.  There occurs any uninsured loss to any
material portion of the Collateral; or

 

(p)                                Indictment.  The indictment or institution of any legal
process or proceeding against, any Loan Party or any Subsidiary thereof, under
any federal, state, municipal, and other criminal statute, rule, regulation,
order, or other requirement having the force of law for a felony; or

 

(q)                                Guaranty.  The termination or attempted termination of
any Facility Guaranty (other than as expressly permitted hereunder); or

 

(r)                                   Subordination.  (i)  The subordination provisions of the
documents evidencing or governing any Subordinated Indebtedness (the “Subordinated
Provisions”) shall, in whole or in part, terminate, cease to be effective
or cease to be legally valid, binding and enforceable against any holder of the
applicable Subordinated Indebtedness; or (ii) any Borrower or any other
Loan Party shall, directly or indirectly, (A) make any

 

116

 

payment on account of any Subordinated Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the extent that such payment is permitted by the terms
of the subordination provisions applicable to such Subordinated Indebtedness or
(B) disavow or contest in any manner (x) the effectiveness, validity
or enforceability of any of the Subordination Provisions, (y) that the
Subordination Provisions exist for the benefit of the Credit Parties, or (z) that
all payments of principal of or premium and interest on the applicable
Subordinated Indebtedness, or realized from the liquidation of any property of
any Loan Party, shall be subject to any of the Subordination Provisions; or

 

(s)                                 Cross-Default.  Any “Event of Default” occurs and is
continuing under the Note Documents.

 

8.02                          Remedies
Upon Event of Default.  If any Event
of Default occurs and is continuing, the Administrative Agent may, or, at the
request of the Required Lenders shall, take any or all of the following
actions:

 

(a)                                 declare the commitment
of each Lender to make Loans and any obligation of the L/C Issuer to make L/C
Credit Extensions to be terminated, whereupon such commitments and obligation
shall be terminated;

 

(b)                                declare the unpaid
principal amount of all outstanding Loans, all interest accrued and unpaid
thereon, and all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived
by the Loan Parties;

 

(c)                                 require that the Loan
Parties Cash Collateralize the L/C Obligations; and

 

(d)                                whether or not the
maturity of the Obligations shall have been accelerated pursuant hereto, may
(and at the direction of the Required Lenders, shall) proceed to protect,
enforce and exercise all rights and remedies of the Credit Parties under this
Agreement, any of the other Loan Documents or applicable Law, including, but
not limited to, by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Agreement and the other Loan Documents or any instrument
pursuant to which the Obligations are evidenced, and, if such amount shall have
become due, by declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the
entry of an order for relief with respect to any Loan Party or any Subsidiary
thereof under the Bankruptcy Code of the United States, the obligation of each
Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit
Extensions shall automatically terminate, the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, and the obligation of the Loan Parties to
Cash Collateralize the L/C Obligations as aforesaid shall automatically become
effective, in each case without further act of the Administrative Agent or any
Lender.

 

117

 

No remedy herein is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or any other provision of Law.

 

8.03                          Application of Funds.  After the exercise of remedies provided for
in Section 8.02 (or after the Loans have automatically become
immediately due and payable and the L/C Obligations have automatically been
required to be Cash Collateralized as set forth in the proviso to Section 8.02),
subject to the terms of the Intercreditor Agreement, any amounts received on
account of the Obligations shall be applied by the Administrative Agent in the
following order:

 

First, to payment of
that portion of the Obligations (excluding the Other Liabilities) constituting
fees, indemnities, Credit Party Expenses and other amounts (including fees,
charges and disbursements of counsel to the Administrative Agent and the
Collateral Agent and amounts payable under Article III) payable to
the Administrative Agent and the Collateral Agent, each in its capacity as
such;

 

Second, to payment
of that portion of the Obligations (excluding the Other Liabilities)
constituting indemnities, Credit Party Expenses, and other amounts (other than
principal, interest and fees) payable to the Lenders and the L/C Issuer
(including fees, charges and disbursements of counsel to the respective Lenders
and the L/C Issuer and amounts payable under Article III), ratably
among them in proportion to the amounts described in this clause Second
payable to them;

 

Third, to the extent
not previously reimbursed by the Lenders, to payment to the Lenders of that
portion of the Obligations constituting principal and accrued and unpaid
interest on any Permitted Overadvances, ratably among the Lenders in proportion
to the amounts described in this clause Third payable to them;

 

Fourth, to the
extent that Swing Line Loans have not been refinanced by a Committed Loan,
payment to the Swing Line Lender of that portion of the Obligations
constituting accrued and unpaid interest on the Swing Line Loans;

 

Fifth, to payment of
that portion of the Obligations constituting accrued and unpaid interest on the
Committed Loans, L/C Borrowings and other Obligations, and fees (including
Letter of Credit Fees but excluding any Early Termination Fees), ratably among
the Lenders and the L/C Issuer in proportion to the respective amounts
described in this clause Fifth payable to them;

 

Sixth, to the extent
that Swing Line Loans have not been refinanced by a Committed Loan, to payment
to the Swing Line Lender of that portion of the Obligations constituting unpaid
principal of the Swing Line Loans;

 

Seventh, to payment
of that portion of the Obligations constituting unpaid principal of the
Committed Loans and L/C Borrowings, ratably among the Lenders and the L/C
Issuer in proportion to the respective amounts described in this clause Seventh
held by them;

 

118

 

Eighth, to the
Administrative Agent for the account of the L/C Issuer, to Cash Collateralize
that portion of L/C Obligations comprised of the aggregate undrawn amount of
Letters of Credit;

 

Ninth, to payment of
all other Obligations (including, without limitation, the cash
collateralization of unliquidated indemnification obligations as provided in Section 10.04,
but excluding any Other Liabilities), ratably among the Credit Parties in
proportion to the respective amounts described in this clause Ninth held
by them;

 

Tenth, to payment of
that portion of the Obligations arising from Cash Management Services to the
extent secured under the Security Documents, ratably among the Credit Parties
in proportion to the respective amounts described in this clause Tenth
held by them;

 

Eleventh, to payment
of all other Obligations arising from Bank Products to the extent secured under
the Security Documents, ratably among the Credit Parties in proportion to the
respective amounts described in this clause Eleventh held by them; and

 

Last, the balance,
if any, after all of the Obligations have been indefeasibly paid in full, to
the Loan Parties or as otherwise required by Law.

 

Subject to Section 2.03(c),
amounts used to Cash Collateralize the aggregate undrawn amount of Letters of
Credit pursuant to clause Eighth above shall be applied to satisfy
drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

ARTICLE IX.

ADMINISTRATIVE AND COLLATERAL AGENT

 

9.01                          Appointment and Authority.

 

(a)                                 Each
of the Lenders and the L/C Issuer hereby irrevocably appoints Wells Fargo
Retail Finance, LLC to act on its behalf as the Administrative Agent hereunder
and under the other Loan Documents and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof or thereof, together with such
actions and powers as are reasonably incidental thereto.  The provisions of this Article are
solely for the benefit of the Administrative Agent, the Lenders and the L/C
Issuer, and no Loan Party or any Subsidiary thereof shall have rights as a
third party beneficiary of any of such provisions.

 

(b)                                Each
of the Lenders (in its capacities as a Lender), Swing Line Lender and the L/C
Issuer hereby irrevocably appoints Wells Fargo Retail Finance, LLC as Collateral
Agent and authorizes the Collateral Agent to act as the agent of such Lender
and the L/C Issuer for purposes of acquiring, holding and enforcing any and all
Liens on Collateral granted by any of the Loan Parties to secure any of the
Obligations, together with such powers and discretion as are reasonably
incidental thereto.  In this connection,
the Collateral Agent, as “collateral agent” and any co-agents, sub-agents and
attorneys-in-fact

 

119

 

appointed by the Collateral Agent pursuant to
Section 9.05 for purposes of holding or enforcing any Lien on the
Collateral (or any portion thereof) granted under the Collateral Documents, or
for exercising any rights and remedies thereunder at the direction of the Collateral
Agent), shall be entitled to the benefits of all provisions of this Article IX
and Article X (including Section 10.04(b)), as though
such co-agents, sub-agents and attorneys-in-fact were the “collateral agent”
under the Loan Documents, as if set forth in full herein with respect thereto.

 

9.02                          Rights as a Lender.  The Persons serving
as the Agents hereunder shall have the same rights and powers in their capacity
as a Lender as any other Lender and may exercise the same as though they were
not the Administrative Agent or the Collateral Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise
requires, include the Person serving as the Administrative Agent or the
Collateral Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the
Loan Parties or any Subsidiary or other Affiliate thereof as if such Person
were not the Administrative Agent or the Collateral Agent hereunder and without
any duty to account therefor to the Lenders.

 

9.03                          Exculpatory Provisions.  The Agents shall not
have any duties or obligations except those expressly set forth herein and in
the other Loan Documents.  Without
limiting the generality of the foregoing, the Agents:

 

(a)                                 shall
not be subject to any fiduciary or other implied duties, regardless of whether
a Default has occurred and is continuing;

 

(b)                                shall
not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative
Agent or the Collateral Agent, as applicable, is required to exercise as
directed in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be expressly provided for herein or in the other Loan
Documents), provided  that no Agent shall be required to take any
action that, in its respective opinion or the opinion of its counsel, may
expose such Agent to liability or that is contrary to any Loan Document or
applicable law; and

 

(c)                                 shall
not, except as expressly set forth herein and in the other Loan Documents, have
any duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the Loan Parties or any of its Affiliates that is
communicated to or obtained by the Person serving as the Administrative Agent,
the Collateral Agent or any of its Affiliates in any capacity.

 

No Agent shall be
liable for any action taken or not taken by it (i) with the Consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as such Agent shall believe in good faith
shall be necessary, under the circumstances as provided in Sections 10.01
and 8.02) or (ii) in the absence of its own gross negligence or
willful misconduct as determined by a final and non-appealable judgment of a

 

120

 

court of competent
jurisdiction.  The Agents shall not be
deemed to have knowledge of any Default unless and until notice describing such
Default is given to such Agent by the Loan Parties, a Lender or the L/C Issuer.

 

The Agents shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or
in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth herein or therein or the occurrence of any Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document or the
creation, perfection or priority of any Lien purported to be created by the
Security Documents, (v) the value or the sufficiency of any Collateral, or
(vi) the satisfaction of any condition set forth in Article IV
or elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to the Agents.

 

9.04                          Reliance by Agents.  Each Agent shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including, but not limited to, any electronic message, Internet or intranet
website posting or other distribution) believed by it to be genuine and to have
been signed, sent or otherwise authenticated by the proper Person.  Each Agent also may rely upon any statement
made to it orally or by telephone and believed by it to have been made by the
proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition
hereunder to the making of a Loan, or the issuance of a Letter of Credit, that
by its terms must be fulfilled to the satisfaction of a Lender or the L/C
Issuer, the Administrative Agent may presume that such condition is
satisfactory to such Lender or the L/C Issuer unless the Administrative Agent
shall have received written notice to the contrary from such Lender or the L/C
Issuer prior to the making of such Loan or the issuance of such Letter of
Credit.  Each Agent may consult with
legal counsel (who may be counsel for any Loan Party), independent accountants
and other experts selected by it, and shall not be liable for any action taken
or not taken by it in accordance with the advice of any such counsel,
accountants or experts.

 

9.05                          Delegation of Duties.  Each Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Loan
Document by or through any one or more sub-agents appointed by such Agent.  Each Agent and any such sub-agent may perform
any and all of its duties and exercise its rights and powers by or through their
respective Related Parties.  The exculpatory
provisions of this Article shall apply to any such sub-agent and to the
Related Parties of the Agents and any such sub-agent, and shall apply to their
respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as such Agent.

 

9.06                          Resignation of Agents.  Either Agent may at any time give written
notice of its resignation to the Lenders, the L/C Issuer and the Lead
Borrower.  Upon receipt of any such
notice of resignation, the Required Lenders shall have the right, in
consultation with the Lead Borrower, to appoint a successor, which shall be a
bank with an office in the United States, or an Affiliate of any such bank with
an office in the United States.  If no
such successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 

 

121

 

30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may
on behalf of the Lenders and the L/C Issuer, appoint a successor Administrative
Agent or Collateral Agent, as applicable, meeting the qualifications set forth
above; provided  that if the Administrative Agent or the
Collateral Agent shall notify the Lead Borrower and the Lenders that no
qualifying Person has accepted such appointment, then such resignation shall
nonetheless become effective in accordance with such notice and (1) the
retiring Agent shall be discharged from its duties and obligations hereunder
and under the other Loan Documents (except that in the case of any Collateral
held by the Collateral Agent on behalf of the Lenders or the L/C Issuer under
any of the Loan Documents, the retiring Collateral Agent shall continue to hold
such collateral security until such time as a successor Collateral Agent is
appointed) and (2) all payments, communications and determinations
provided to be made by, to or through the Administrative Agent shall instead be
made by or to each Lender and the L/C Issuer directly, until such time as the
Required Lenders appoint a successor Administrative Agent as provided for above
in this Section.  Upon the acceptance of
a successor’s appointment as Administrative Agent or Collateral Agent, as
applicable, hereunder, such successor shall succeed to and become vested with
all of the rights, powers, privileges and duties of the retiring (or retired)
Agent, and the retiring Agent shall be discharged from all of its duties and
obligations hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section). 
The fees payable by the Borrowers to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Lead Borrower and such successor. 
After the retiring Agent’s resignation hereunder and under the other
Loan Documents, the provisions of this Article and Section 10.04
shall continue in effect for the benefit of such retiring Agent, its sub-agents
and their respective Related Parties in respect of any actions taken or omitted
to be taken by any of them while the retiring Agent was acting as
Administrative Agent or Collateral Agent hereunder.

 

Any resignation by Wells Fargo Retail Finance, LLC as Administrative
Agent pursuant to this Section shall also constitute the resignation of
Wells Fargo Retail Finance, LLC as Swing Line Lender and Wells Fargo Bank as
L/C Issuer.  Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, (a) such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring L/C Issuer and Swing Line Lender, (b) the
retiring L/C Issuer and Swing Line Lender shall be discharged from all of its
duties and obligations hereunder or under the other Loan Documents, and (c) the
successor L/C Issuer shall issue letters of credit in substitution for the
Letters of Credit, if any, outstanding at the time of such succession or make
other arrangements satisfactory to the retiring L/C Issuer to effectively
assume the obligations of the retiring L/C Issuer with respect to such Letters
of Credit.

 

9.07                          Non-Reliance on
Administrative Agent and Other Lenders. 
Each Lender and the L/C Issuer acknowledges that it has, independently
and without reliance upon the Agents or any other Lender or any of their
Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender and the L/C
Issuer also acknowledges that it will, independently and without reliance upon
the Agents or any other Lender or any of their Related Parties and based on
such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or
based upon this Agreement, any other Loan Document or any related agreement or
any document furnished hereunder or thereunder. 
Except

 

122

 

as provided in
Section 9.11, the Agents shall not have any duty or responsibility
to provide any Credit Party with any other credit or other information
concerning the affairs, financial condition or business of any Loan Party that
may come into the possession of the Agents.

 

9.08                          Administrative Agent May File
Proofs of Claim.  In case of the
pendency of any proceeding under any Debtor Relief Law or any other judicial
proceeding relative to any Loan Party, the Administrative Agent (irrespective
of whether the principal of any Loan or L/C Obligation shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Loan
Parties) shall be entitled and empowered, by intervention in such proceeding or
otherwise:

 

(a)                                 to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans, L/C Obligations and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders, the L/C Issuer, the
Administrative Agent and the other Credit Parties (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders,
the L/C Issuer, the Administrative Agent, such Credit Parties and their
respective agents and counsel and all other amounts due the Lenders, the L/C
Issuer the Administrative Agent and such Credit Parties under Sections
2.03(h), 2.09 and 10.04) allowed in such judicial proceeding;
and

 

(b)                                to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;

 

and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender and the L/C
Issuer to make such payments to the Administrative Agent and, if the
Administrative Agent shall consent to the making of such payments directly to
the Lenders and the L/C Issuer, to pay to the Administrative Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of
the Administrative Agent and its agents and counsel, and any other amounts due
the Administrative Agent under Sections 2.09 and 10.04.

 

Nothing contained herein shall be deemed to authorize the
Administrative Agent to authorize or consent to or accept or adopt on behalf of
any Lender or the L/C Issuer any plan of reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of any Lender
or the L/C Issuer or to authorize the Administrative Agent to vote in respect
of the claim of any Lender or the L/C Issuer in any such proceeding.

 

9.09                          Collateral and Guaranty
Matters.  The
Credit Parties irrevocably authorize the Agents, at their option and in their
discretion,

 

(a)                                 to
release any Lien on any property granted to or held by the Collateral Agent
under any Loan Document (i) upon termination of the Aggregate Commitments
and payment in full of all Obligations (other than contingent indemnification
obligations for which no claim has been asserted) and the expiration or
termination of all Letters of Credit, (ii) that is sold or to be sold as
part of or in connection with any sale permitted

 

123

 

hereunder or under any other Loan Document, or (iii) if approved,
authorized or ratified in writing by the Required Lenders in accordance with Section 10.01;

 

(b)                                to
subordinate any Lien on any property granted to or held by the Collateral Agent
under any Loan Document to the holder of any Lien on such property that is
permitted by clause (h) of the definition of Permitted Encumbrances; and

 

(c)                                 to
release any Guarantor from its obligations under the Facility Guaranty if such
Person ceases to be a Subsidiary as a result of a transaction permitted
hereunder.

 

Upon request by any
Agent at any time, the Required Lenders will confirm in writing such Agent’s
authority to release or subordinate its interest in particular types or items
of property, or to release any Guarantor from its obligations under the
Facility Guaranty pursuant to this Section 9.09.  In each case as specified in this Section 9.09,
the Agents will, at the Loan Parties’ expense, execute and deliver to the
applicable Loan Party such documents as such Loan Party may reasonably request
to evidence the release of such item of Collateral from the assignment and
security interest granted under the Security Documents or to subordinate its
interest in such item, or to release such Guarantor from its obligations under
the Facility Guaranty, in each case in accordance with the terms of the Loan
Documents and this Section 9.09.

 

9.10                          Notice of Transfer.  The Agents may deem and treat a Lender party
to this Agreement as the owner of such Lender’s portion of the Obligations for
all purposes, unless and until, and except to the extent, an Assignment and
Acceptance shall have become effective as set forth in Section 10.06.

 

9.11                          Reports and Financial
Statements.  By signing this
Agreement, each Lender:

 

(a)                                 agrees
to furnish the Administrative Agent on the first day of each month with a
summary of all Other Liabilities due or to become due to such Lender;

 

(b)                                is
deemed to have requested that the Administrative Agent furnish such Lender,
promptly after they become available, copies of all financial statements and
Borrowing Base Certificates required to be delivered by the Lead Borrower
hereunder and all commercial finance examinations and appraisals of the
Collateral received by the Agents (collectively, the “Reports”);

 

(c)                                 expressly
agrees and acknowledges that the Administrative Agent makes no representation
or warranty as to the accuracy of the Reports, and shall not be liable for any
information contained in any Report;

 

(d)                                expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that the Agents or any other party performing any audit or
examination will inspect only specific information regarding the Loan Parties
and will rely significantly upon the Loan Parties’ books and records, as well
as on representations of the Loan Parties’ personnel;

 

(e)                                 agrees
to keep all Reports confidential in accordance with the provisions of Section 10.07
hereof; and

 

124

 

(f)                                   without
limiting the generality of any other indemnification provision contained in
this Agreement, agrees: (i) to hold the Agents and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any Credit Extensions that the indemnifying Lender has made or
may make to the Borrowers, or the indemnifying Lender’s participation in, or
the indemnifying Lender’s purchase of, a Loan or Loans; and (ii) to pay
and protect, and indemnify, defend, and hold the Agents and any such other
Lender preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses, and other amounts (including attorney
costs) incurred by the Agents and any such other Lender preparing a Report as
the direct or indirect result of any third parties who might obtain all or part
of any Report through the indemnifying Lender.

 

9.12                          Agency for Perfection.  Each Lender hereby appoints each other Lender
as agent for the purpose of perfecting Liens for the benefit of the Agents and
the Lenders, in assets which, in accordance with Article 9 of the UCC or
any other Applicable Law of the United States can be perfected only by
possession.  Should any Lender (other
than the Agents) obtain possession of any such Collateral, such Lender shall
notify the Agents thereof, and, promptly upon the Collateral Agent’s request
therefor shall deliver such Collateral to the Collateral Agent or otherwise
deal with such Collateral in accordance with the Collateral Agent’s
instructions.

 

9.13                          Indemnification of Agents.  The Lenders agree to indemnify the Agents (to
the extent not reimbursed by the Loan Parties and without limiting the
obligations of Loan Parties hereunder), ratably according to their respective
pro rata shares, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by, or
asserted against any Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted to be taken
by any Agent in connection therewith; provided, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent’s gross negligence or willful misconduct as
determined by a final and nonappealable judgment of a court of competent
jurisdiction.

 

9.14                          Relation among Lenders.  The Lenders are not
partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Agents)
authorized to act for, any other Lender.

 

9.15                          Defaulting Lenders.  Notwithstanding
anything contained in Sections 2.05, 2.06, 8.03 or any
other provision hereof, any Defaulting Lender shall be deemed to have assigned
any and all payments due to it from the Loan Parties, whether on account of
outstanding Loans, interest, fees or otherwise, to the remaining non-defaulting
Lenders for application to, and reduction of, their proportionate shares of all
outstanding Obligations until, as a result of application of such assigned payments
the Lenders’ respective Applicable Percentages of all outstanding Obligations
shall have returned to those in effect immediately prior to such delinquency
and without giving effect to the nonpayment causing such delinquency.  The
Defaulting Lender’s rights to payments as set forth above shall be restored
only upon the payment by the Defaulting Lender of its Applicable Percentage of
any Obligations, any

 

125

 

participation
obligation, or expenses as to which it is delinquent, together with interest
thereon at the Default Rate from the date when originally due until the date
upon which any such amounts are actually paid.

 

ARTICLE X.

MISCELLANEOUS

 

10.01                    Amendments, Etc.  No amendment or
waiver of any provision of this Agreement or any other Loan Document, and no
Consent to any departure by any Loan Party therefrom, shall be effective unless
in writing signed by the Administrative Agent, with the Consent of the Required
Lenders, and the Lead Borrower or the applicable Loan Party, as the case may
be, and acknowledged by the Administrative Agent, and each such waiver or
Consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such
amendment, waiver or consent shall:

 

(a)                                 extend
or increase the Commitment of any Lender (or reinstate any Commitment
terminated pursuant to Section 8.02) without the written Consent of
such Lender;

 

(b)                                postpone
any date fixed by this Agreement or any other Loan Document for (i) any
payment or mandatory prepayment of principal, interest, fees or other amounts
due to the Lenders (or any of them) hereunder or under any of the other Loan
Documents without the written Consent of each Lender entitled to such payment,
or (ii) any scheduled or mandatory reduction of the Aggregate Commitments
hereunder or under any other Loan Document without the written Consent of each
Lender;

 

(c)                                 reduce
the principal of, or the rate of interest specified herein on, any Loan or L/C
Borrowing, or (subject to clause (iv) of the second proviso to this Section 10.01)
any fees or other amounts payable hereunder or under any other Loan Document,
without the written Consent of each Lender entitled to such amount; provided,
however, that only the Consent of the Required Lenders shall be
necessary (i) to amend the definition of “Default Rate” or to waive any
obligation of the Borrowers to pay interest or Letter of Credit Fees at the
Default Rate;

 

(d)                                change
Section 2.13 or Section 8.03 in a manner that would
alter the pro rata sharing of payments required thereby without the written
Consent of each Lender;

 

(e)                                 change
any provision of this Section or the definition of “Required Lenders”, or
any other provision hereof specifying the number or percentage of Lenders
required to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the written Consent of
each Lender;

 

(f)                                   except
as expressly permitted hereunder or under any other Loan Document, release, or
limit the liability of, any Loan Party without the written Consent of each
Lender;

 

126

 

(g)                                increase
the Aggregate Commitments without the written Consent of each Lender;

 

(h)                                except
for Permitted Dispositions, release all or substantially all of the Collateral
from the Liens of the Security Documents without the written Consent of each
Lender;

 

(i)                                    change
the definition of the term “Borrowing Base” or any component definition thereof
if as a result thereof the amounts available to be borrowed by the Borrowers
would be increased without the written Consent of each Lender, provided  that the foregoing shall not limit the discretion of the
Administrative Agent to change, establish or eliminate any Reserves;

 

(j)                                    modify
the definition of Permitted Overadvance so as to increase the amount thereof
or, except as provided in such definition, the time period for a Permitted
Overadvance without the written Consent of each Lender; and

 

(k)                                 except
as expressly permitted herein or in any other Loan Document, subordinate the
Obligations hereunder or the Liens granted hereunder or under the other Loan
Documents, to any other Indebtedness or Lien, as the case may be without the
written Consent of each Lender;

 

and, provided
further, that (i) no amendment, waiver or Consent shall, unless in
writing and signed by the L/C Issuer in addition to the Lenders required above,
affect the rights or duties of the L/C Issuer under this Agreement or any
Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or Consent shall, unless in writing and signed by the Swing
Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) no amendment,
waiver or Consent shall, unless in writing and signed by the Administrative
Agent in addition to the Lenders required above, affect the rights or duties of
the Administrative Agent under this Agreement or any other Loan Document; and (iv) no
amendment, waiver or Consent shall, unless in writing and signed by the
Collateral Agent in addition to the Lenders required above, affect the rights
or duties of the Collateral Agent under this Agreement or any other Loan
Document.  Notwithstanding anything to
the contrary herein, no Defaulting Lender shall have any right to approve or
disapprove any amendment, waiver or Consent hereunder, except that the
Commitment of such Lender may not be increased or extended without the consent
of such Lender.

 

If any Lender does not Consent (a “Non-Consenting
Lender”) to a proposed amendment, waiver, consent or release with respect
to any Loan Document that requires the Consent of each Lender and that has been
approved by the Required Lenders, the Lead Borrower may replace such
Non-Consenting Lender in accordance with Section 10.13; provided
that such amendment, waiver, consent or release can be effected as a result of
the assignment contemplated by such Section (together with all other such
assignments required by the Lead Borrower to be made pursuant to this
paragraph).

 

127

 

10.02                    Notices; Effectiveness;
Electronic Communications.

 

(a)                                 Notices
Generally.  Except in the case of
notices and other communications expressly permitted to be given by telephone
(and except as provided in subsection (b) below), all notices and other
communications provided for herein shall be in writing and shall be delivered
by hand or overnight courier service, mailed by certified or registered mail or
sent by telecopier as follows, and all notices and other communications
expressly permitted hereunder to be given by telephone shall be made to the
applicable telephone number, as follows:

 

(i)                                    if
to the Loan Parties, the Agents, the L/C Issuer or the Swing Line Lender, to
the address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 10.02; and

 

(ii)                                 if
to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire.

 

Notices sent by hand
or overnight courier service, or mailed by certified or registered mail, shall
be deemed to have been given when received; notices sent by telecopier shall be
deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next Business Day for the recipient).  Notices delivered through electronic
communications to the extent provided in subsection (b) below, shall be
effective as provided in such subsection (b).

 

(b)                                Electronic
Communications.  Notices and other
communications to the Lenders and the L/C Issuer hereunder may be delivered or
furnished by electronic communication (including e-mail and Internet or
intranet websites) pursuant to procedures approved by the Administrative Agent,
provided that the foregoing shall not apply to notices to any Lender or
the L/C Issuer pursuant to Article II if such Lender or the L/C
Issuer, as applicable, has notified the Administrative Agent that it is
incapable of receiving notices under such Article by electronic
communication.  The Administrative Agent
or the Lead 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.

 

Unless the Administrative Agent otherwise prescribes, (i) notices
and other communications sent to an e-mail address shall be deemed received
upon the sender’s receipt of an acknowledgement from the intended recipient
(such as by the “return receipt requested” function, as available, return
e-mail or other written acknowledgement), provided that if such notice
or other communication is not sent during the normal business hours of the
recipient, such notice or communication shall be deemed to have been sent at
the opening of business on the next Business Day for the recipient, and (ii) notices
or communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address
therefor.

 

128

 

(c)                                  Change of Address,
Etc.  Each of the Loan Parties, the
Agents, the L/C Issuer and the Swing Line Lender may change its address,
telecopier or telephone number for notices and other communications hereunder
by notice to the other parties hereto. 
Each other Lender may change its address, telecopier or telephone number
for noticesand other communications hereunder by notice to the Lead Borrower,
the Agents, the L/C Issuer and the Swing Line Lender.  In addition, each Lender agrees to notify the
Administrative Agent from time to time to ensure that the Administrative Agent
has on record (i) an effective address, contact name, telephone number,
telecopier number and electronic mail address to which notices and other communications
may be sent and (ii) accurate wire instructions for such Lender.

 

(d)                                 Reliance by Agents,
L/C Issuer and Lenders.  The Agents,
the L/C Issuer and the Lenders shall be entitled to rely and act upon any
notices (including telephonic Committed Loan Notices and Swing Line Loan
Notices) purportedly given by or on behalf of the Loan Parties even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof.  The Loan Parties shall
indemnify the Agents, the L/C Issuer, each Lender and the Related Parties of
each of them from all losses, costs, expenses and liabilities resulting from
the reliance by such Person on each notice purportedly given by or on behalf of
the Loan Parties.  All telephonic notices
to and other telephonic communications with the Agents may be recorded by the
Agents, and each of the parties hereto hereby consents to such recording.

 

10.03                     No Waiver;
Cumulative Remedies.  No failure by
any Credit Party to exercise, and no delay by any such Person in exercising,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder or under any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers
and privileges provided herein and in the other Loan Documents are cumulative
and not exclusive of any rights, remedies, powers and privileges provided by
law.  Without limiting the generality of
the foregoing, the making of a Loan or issuance of a Letter of Credit shall not
be construed as a waiver of any Default, regardless of whether any Credit Party
may have had notice or knowledge of such Default at the time.

 

10.04                     Expenses;
Indemnity; Damage Waiver.

 

(a)                               Costs and Expenses.  The Borrowers shall pay all Credit Party
Expenses.

 

(b)                              Indemnification by the
Loan Parties.  The Loan Parties shall
indemnify the Agents (and any sub-agent thereof), each other Credit Party, and
each Related Party of any of the foregoing Persons (each such Person being
called an “Indemnitee”) against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses
(including the reasonable fees, charges and disbursements of any counsel for
any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee
by any third party or by the Borrowers or any other Loan Party arising out of,
in connection with, or as a result of (i) the execution or delivery of
this Agreement, any

 

129

 

other Loan Document or any agreement or instrument contemplated hereby
or thereby, the performance by the parties hereto of their respective
obligations hereunder or thereunder or the consummation of the transactions
contemplated hereby or thereby, or, in the case of the Agents (and any
sub-agents thereof) and their Related Parties only, the administration of this
Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit
or the use or proposed use of the proceeds therefrom (including any refusal by
the L/C Issuer to honor a demand for payment under a Letter of Credit if the
documents presented in connection with such demand do not strictly comply with
the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
any Loan Party or any of its Subsidiaries, or any Environmental Liability
related in any way to any Loan Party or any of its Subsidiaries, (iv) any
claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or
other Person which has entered into a control agreement with any Credit Party
hereunder, or (v) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by any
Borrower or any other Loan Party or any of the Loan Parties’ directors,
shareholders or creditors, and regardless of whether any Indemnitee is a party
thereto, in all cases, whether or not caused by or arising, in whole or in
part, out of the comparative, contributory or sole negligence of the
Indemnitee; provided  that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee or any of its Related
Parties or (y) result from a claim brought by a Borrower or any other Loan
Party against an Indemnitee for breach in bad faith of such Indemnitee’s
obligations hereunder or under any other Loan Document, if the Borrowers or
such Loan Party has obtained a final and nonappealable judgment in its favor on
such claim as determined by a court of competent jurisdiction.

 

(c)                                  Reimbursement by
Lenders.  To the extent that the Loan
Parties for any reason fail to indefeasibly pay any amount required under
subsection (a) or (b) of this Section to be paid by
it, each Lender severally agrees to pay to the Agents (or any such sub-agent),
the L/C Issuer or such Related Party, as the case may be, such Lender’s
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided
that the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against the
Agents (or any such sub-agent) or the L/C Issuer in its capacity as such, or
against any Related Party of any of the foregoing acting for the Agents (or any
such sub-agent) or L/C Issuer in connection with such capacity.  The obligations of the Lenders under this
subsection (c) are subject to the provisions of Section 2.12(c).

 

(d)                                 Waiver of
Consequential Damages, Etc.  To the
fullest extent permitted by applicable Law, the Loan Parties shall not assert,
and hereby waive, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Loan Document or any agreement or instrument

 

130

 

contemplated hereby, the transactions contemplated hereby or thereby,
any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages
arising from the use by unintended recipients of any information or other
materials distributed to such unintended recipients by such Indemnitee through
telecommunications, electronic or other information transmission systems in
connection with this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby other than for direct or actual damages
resulting from the gross negligence or willful misconduct of such Indemnitee as
determined by a final and nonappealable judgment of a court of competent
jurisdiction.

 

(e)                                  Payments.  All amounts due under this Section shall
be payable not later than ten Business Days after demand therefor.

 

(f)                                    Survival.  The agreements in this Section shall
survive the resignation of any Agent and the L/C Issuer, the assignment of any
Commitment or Loan by any Lender, the replacement of any Lender, the
termination of the Aggregate Commitments and the repayment, satisfaction or
discharge of all the other Obligations.

 

10.05                     Payments
Set Aside.  To the extent that any
payment by or on behalf of the Loan Parties is made to any Credit Party, or any
Credit Party exercises its right of setoff, and such payment or the proceeds of
such setoff or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by such Credit Party in its discretion) to be repaid to
a trustee, receiver or any other party, in connection with any proceeding under
any Debtor Relief Law or otherwise, then (a) to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such setoff had not occurred, and (b) each Lender and the
L/C Issuer severally agrees to pay to the Agents upon demand its applicable share
(without duplication) of any amount so recovered from or repaid by the Agents,
plus interest thereon from the date of such demand to the date such payment is
made at a rate per annum equal to the Federal Funds Rate from time to time in
effect.  The obligations of the Lenders
and the L/C Issuer under clause (b) of the preceding sentence shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

10.06                     Successors
and Assigns.

 

(a)                               Successors and
Assigns Generally.  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 no Loan Party may assign or otherwise transfer any of its rights or
obligations hereunder or under any other Loan Document without the prior
written Consent of the Administrative Agent and each Lender and no Lender may
assign or otherwise transfer any of its rights or obligations hereunder except (i) to
an Eligible Assignee in accordance with the provisions of Section 10.06(b),
(ii) by way of participation in accordance with the provisions of
subsection Section 10.06(d), or (iii) by way of pledge or
assignment of a security interest subject to the restrictions of Section 10.06(f) (and
any other attempted assignment or transfer by any party hereto shall be null
and void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their

 

131

 

respective successors and assigns permitted hereby, Participants to the
extent provided in subsection (d) of this Section and, to the extent
expressly contemplated hereby, the Related Parties of each of the Credit
Parties) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(b)                                 Assignments by
Lenders.  Any Lender may at any time
assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment(s) and
the Loans (including for purposes of this Section 10.06(b),
participations in L/C Obligations and Swing Line Loans) at the time owing to
it); provided  that any such assignment shall be subject to the
following conditions:

 

(i)                                     Minimum
Amounts.

 

(A)                              in
the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Loans at the time owing to it or in the case of an
assignment to a Lender or an Affiliate of a Lender or an Approved Fund with
respect to a Lender, no minimum amount need be assigned; and

 

(B)                                in
any case not described in subsection (b)(i)(A) of this Section, the
aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, the
principal outstanding balance 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 or, if
“Trade Date” is specified in the Assignment and Assumption, as of the Trade
Date, shall not be less than $5,000,000 unless the Administrative Agent
consents (such consent not to be unreasonably withheld or delayed); provided,
however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single Eligible
Assignee (or to an Eligible Assignee and members of its Assignee Group) will be
treated as a single assignment for purposes of determining whether such minimum
amount has been met;

 

(ii)                                  Proportionate
Amounts.  Each partial assignment
shall be made as an assignment of a proportionate part of all the assigning
Lender’s rights and obligations under this Agreement with respect to the Loans
or the Commitment assigned, except that this clause (ii) shall not apply
to the Swing Line Lender’s rights and obligations in respect of Swing Line
Loans;

 

(iii)                               Required
Consents.  The following consents
shall be required for the assignments described below in this Section 10.06(b)(iii):

 

(A)           the consent of the Lead Borrower
(such consent not to be unreasonably withheld or delayed) shall be required
unless (1) an Event of Default has occurred and is continuing at the time
of such assignment, (2) such assignment is in connection with any merger,
consolidation, sale, transfer or other

 

132

 

disposition of all or any substantial portion
of the business or loan portfolio of the assigning Lender, or (3) such
assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; and

 

(B)                                the
consent of the Administrative Agent (such consent not to be unreasonably
withheld or delayed) shall be required unless (1) such assignment is in
connection with any merger, consolidation, sale, transfer or other disposition
of all or any substantial portion of the business or loan portfolio of the
assigning Lender, or (2) such assignment is to a Lender, an Affiliate of a
Lender or an Approved Fund;

 

(C)                                the
consent of the L/C Issuer (such consent not to be unreasonably withheld or
delayed) shall be required for any assignment that increases the obligation of
the assignee to participate in exposure under one or more Letters of Credit
(whether or not then outstanding); and

 

(D)                               the
consent of the Swing Line Lender (such consent not to be unreasonably withheld
or delayed) shall be required for any assignment in respect of the assignment
of any Commitment.

 

(iv)                              Assignment
and Assumption.  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 $5,000; provided,
however, that the Administrative Agent may, in its sole discretion,
elect to waive such processing and recordation fee in the case of any
assignment. The assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

 

Subject to acceptance and recording thereof
by the Administrative Agent pursuant to subsection (c) of this Section,
from and after the effective date specified in each Assignment and Assumption,
the Eligible Assignee thereunder shall be a party to this Agreement 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 3.01, 3.04, 3.05, and 10.04
with respect to facts and circumstances occurring prior to the effective date
of such assignment.  Upon request, the
Borrowers (at their expense) shall execute and deliver a Note to the assignee
Lender.  Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this subsection shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance
with Section 10.06(d).

 

(c)                                  Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Administrative
Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the

 

133

 

names and addresses of the Lenders, and the Commitments of, and
principal amounts of the Loans and L/C Obligations owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive,
absent manifest error, and the Loan Parties, the Administrative Agent 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 Lead Borrower and
any Lender at any reasonable time and from time to time upon reasonable prior
notice.

 

(d)                                 Participations.  Any Lender may at any time, with the written
consent of the Administrative Agent (such consent not to be unreasonably
withheld or delayed) and, unless an Event of Default has occurred and is
continuing, the Lead Borrower (such consent not to be unreasonably withheld or
delayed), sell participations to any Person (other than a natural person or the
Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans
(including such Lender’s participations in L/C Obligations and/or Swing Line
Loans) owing to it); provided  that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, and (iii) the Loan Parties, the Agents, the Lenders
and the L/C Issuer shall continue to deal solely and directly with such Lender
in connection with such Lender’s rights and obligations under this
Agreement.  Any Participant shall agree
in writing to comply with all confidentiality obligations set forth in Section 10.07
as if such Participant was a Lender hereunder.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any  provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 10.01 that
affects such Participant.  Subject to
subsection (e) of this Section, the Loan Parties agree that each
Participant shall be entitled to the benefits of Sections 3.01, 3.04
and 3.05  to the same extent as if it were
a Lender and had acquired its interest by assignment pursuant to Section 10.06(b).  To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.08  as though it were a Lender, provided  that
such Participant agrees to be subject to Section 2.13 as though it
were a Lender.

 

(e)                                  Limitations upon
Participant Rights.  A Participant
shall not be entitled to receive any greater payment under Section 3.01
or 3.04  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 Lead Borrower’s prior written consent. 
A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 3.01 unless the Lead
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Loan Parties, to comply with Section 3.01(e) as
though it were a Lender.

 

134

 

(f)                                    Certain Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided  that no such pledge or assignment shall release
such Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto.

 

(g)                                 Electronic
Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and
Assumption shall be deemed to include electronic signatures or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.

 

(h)                                 Resignation as L/C
Issuer or Swing Line Lender after Assignment.  Notwithstanding anything to the contrary
contained herein, if at any time any Lender acting as L/C Issuer and/or Swing
Line Lender assigns all of its Commitment and Loans pursuant to subsection (b) above,
(i) such Lender may, upon 30 days’ notice to the Lead Borrower and the
Lenders, resign as L/C Issuer, if applicable, and/or (ii) such Lender may,
upon 30 days’ notice to the Lead Borrower, resign as Swing Line Lender, if
applicable.  In the event of any such
resignation as L/C Issuer or Swing Line Lender, the Lead Borrower shall be
entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line
Lender hereunder; provided, however, that no failure by the Lead
Borrower to appoint any such successor shall affect the resignation of such
Lender as L/C Issuer and/or Swing Line Lender, as the case may be.  If any Lender resigns as L/C Issuer, it shall
retain all the rights, powers, privileges and duties of the L/C Issuer
hereunder with respect to all Letters of Credit outstanding as of the effective
date of its resignation as L/C Issuer and all L/C Obligations with respect
thereto (including the right to require the Lenders to make Base Rate Loans or
fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If any Lender resigns as Swing Line Lender,
it shall retain all the rights of the Swing Line Lender provided for hereunder
with respect to Swing Line Loans made by it and outstanding as of the effective
date of such resignation, including the right to require the Lenders to make
Base Rate Loans or fund risk participations in outstanding Swing Line Loans
pursuant to Section 2.04(c). 
Upon the appointment of a successor L/C Issuer and/or Swing Line Lender,
(a) such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line
Lender, as the case may be, and (b) the successor L/C Issuer shall issue
letters of credit in substitution for the Letters of Credit, if any,
outstanding at the time of such succession or make other arrangements
satisfactory to the resigning L/C Issuer to effectively assume the obligations
of the resigning L/C Issuer with respect to such Letters of Credit.

 

10.07                     Treatment
of Certain Information; Confidentiality. 
Each of the Credit Parties agrees to maintain the confidentiality of the
Information (as defined below), except that

 

135

 

Information may be disclosed (a) to
its Affiliates and to its and its Affiliates’ respective partners, directors,
officers, employees, agents, advisors and representatives in connection with,
or as a result of, the performance by such Credit Party or its Affiliates of
their respective obligations under this Agreement or any other Loan Document or
any agreement or instrument contemplated hereby or thereby or the consummation
of the transactions contemplated hereby or thereby, or, in the case of the
Agents (and any sub-agents thereof) and their Related Parties only, the
administration of this Agreement and the other Loan Documents (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable Laws or
regulations or by any subpoena or similar legal process, (d) to any other
party hereto, (e) in connection with the exercise of any remedies
hereunder or under any other Loan Document or any action or proceeding relating
to this Agreement or any other Loan Document or the enforcement of rights
hereunder or thereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative
transaction relating to any Loan Party and its obligations, (g) with the
consent of the Lead Borrower or (h) to the extent such Information (x) becomes
publicly available other than as a result of a breach of this Section or (y) becomes
available to any Credit Party or any of their respective Affiliates on a
nonconfidential basis from a source other than the Loan Parties.

 

For purposes of this Section, “Information” means all
information received from the Loan Parties or any Subsidiary thereof relating
to the Loan Parties or any Subsidiary thereof or their respective businesses,
other than any such information that is available to any Credit Party on a
nonconfidential basis prior to disclosure by the Loan Parties or any Subsidiary
thereof.  Any Person required to maintain
the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information
may include material non-public information concerning the Loan Parties or a
Subsidiary, as the case may be, (b) it has developed compliance procedures
regarding the use of material non-public information and (c) it will
handle such material non-public information in accordance with applicable Law,
including Federal and state securities Laws.

 

10.08                     Right of
Setoff.  If an Event of Default shall
have occurred and be continuing or if any Lender shall have been served with a
trustee process or similar attachment relating to property of a Loan Party,
each Lender, the L/C Issuer and each of their respective Affiliates is hereby
authorized at any time and from time to time, after obtaining the prior written
consent of the Administrative Agent or the Required Lenders, to the fullest
extent permitted by applicable law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final, in whatever
currency) at any time held and other obligations (in whatever currency) at any
time owing by such Lender, the L/C Issuer or any such Affiliate to or for the
credit or the account of the Borrowers or any other Loan Party against any and
all of the Obligations now or

 

136

 

hereafter existing under this
Agreement or any other Loan Document to such Lender or the L/C Issuer,
irrespective of whether or not such Lender or the L/C Issuer shall have made
any demand under this Agreement or any other Loan Document and although such
obligations of the Borrowers or such Loan Party may be contingent or unmatured
or are owed to a branch or office of such Lender or the L/C Issuer different
from the branch or office holding such deposit or obligated on such
indebtedness.  The rights of each Lender,
the L/C Issuer and their respective Affiliates under this Section are in
addition to other rights and remedies (including other rights of setoff) that
such Lender, the L/C Issuer or their respective Affiliates may have.  Each Lender and the L/C Issuer (through the
Administrative Agent) agrees to notify the Lead Borrower and the Administrative
Agent promptly after any such setoff and application, provided  that
the failure to give such notice shall not affect the validity of such setoff
and application.

 

10.09                     Interest
Rate Limitation.  Notwithstanding
anything to the contrary contained in any Loan Document, the interest paid or
agreed to be paid under the Loan Documents shall not exceed the maximum rate of
non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender
shall receive interest in an amount that exceeds the Maximum Rate, the excess
interest shall be applied to the principal of the Loans or, if it exceeds such
unpaid principal, refunded to the Borrowers. 
In determining whether the interest contracted for, charged, or received
by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the contemplated term of the Obligations hereunder.

 

10.10                     Counterparts;
Integration; Effectiveness.  This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy
shall be as effective as delivery of a manually executed counterpart of this
Agreement.

 

10.11                     Survival.  All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof. 
Such representations and warranties have been or will be relied upon by
the Credit Parties, regardless of any investigation made by any Credit Party or
on their behalf and notwithstanding that any Credit Party may have had notice
or knowledge of any Default at the time of any Credit Extension, and shall
continue in full force and effect as long as any Loan or any other Obligation
hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall
remain outstanding.  Further, the
provisions of Sections 3.01, 3.04, 3.05 and 10.05
and Article IX shall survive and remain in full force and effect
regardless of the repayment of the Obligations, the expiration or

 

137

 

termination of the Letters of
Credit and the Commitments or the termination of this Agreement or any
provision hereof.  In connection with the
termination of this Agreement and the release and termination of the security
interests in the Collateral, the Agents may require such indemnities and
collateral security as they shall reasonably deem necessary or appropriate to
protect the Credit Parties against (x) loss on account of credits
previously applied to the Obligations that may subsequently be reversed or
revoked, and (y) any obligations that may thereafter arise with respect to
the Other Liabilities.

 

10.12                     Severability.  If any provision of this Agreement or the
other Loan Documents is held to be illegal, invalid or unenforceable, (a) the
legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions.  The
invalidity of a provision in a particular jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

 

10.13                     Replacement
of Lenders.  If any Lender requests
compensation under Section 3.04, or if the Borrowers are required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 3.01, or if any
Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrowers
may, at their sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 10.06), all of its interests, rights
and obligations under this Agreement and the related Loan Documents to an
assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment), provided that:

 

(a)                                  the Borrowers shall
have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

 

(b)                                 such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans
and L/C Advances, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents (including any
amounts under Section 3.05) from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrowers (in
the case of all other amounts);

 

(c)                                  in the case of any
such assignment resulting from a claim for compensation under Section 3.04
or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments
thereafter; and

 

(d)                                 such assignment does
not conflict with applicable Laws.

 

138

 

A Lender shall not be required to make any
such assignment or delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrowers to require
such assignment and delegation cease to apply.

 

10.14       Governing
Law; Jurisdiction; Etc.

 

(a)           GOVERNING
LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.

 

(b)           SUBMISSION
TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES
DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT
FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT
SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY HERETO MAY OTHERWISE HAVE TO BRING
ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)           WAIVER
OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT
REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE LOAN PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

 

(d)           SERVICE
OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN
THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS
AGREEMENT WILL AFFECT 

 

139

 

THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW.

 

(e)           ACTIONS
COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY ACTION COMMENCED
BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT
SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY
FEDERAL COURT SITTING THEREIN AS THE ADMINISTRATIVE AGENT MAY ELECT IN ITS SOLE
DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH
RESPECT TO ANY SUCH ACTION.

 

10.15       Waiver of Jury Trial.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

10.16       No Advisory or Fiduciary
Responsibility. In connection with all aspects of each transaction
contemplated hereby, the Loan Parties each acknowledge and agree that: (i) the credit
facility provided for hereunder
and any related arranging or other services in connection therewith (including
in connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the
Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each of the Loan Parties is capable of
evaluating and understanding and understands and accepts the terms, risks and
conditions of the transactions contemplated hereby and by the other Loan
Documents (including any amendment, waiver or other modification hereof or
thereof); (ii) in connection with the process leading to such transaction, the
each Credit Party is and has been acting solely as a principal and is not the
financial advisor, agent or fiduciary, for the Loan Parties or any of their respective Affiliates,
stockholders, creditors or employees or any other Person; (iii) none of the
Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility
in favor of the Loan Parties with respect to any of the transactions
contemplated hereby or the process leading thereto, including with respect to
any amendment, waiver or other modification hereof or of any other Loan
Document (irrespective of whether any of the Credit Parties has advised or is
currently advising any Loan Party or any of its Affiliates on other matters) and none of the Credit Parties
has any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated
hereby except those obligations expressly set forth herein and in 

 

140

 

the other Loan Documents; (iv)
the Credit Parties and their respective Affiliates may be engaged in a broad
range of transactions that involve interests that differ from those of the Loan
Parties and their respective
Affiliates, and none of the Credit Parties has any obligation to disclose any
of such interests by virtue of any advisory, agency or fiduciary relationship;
and (v) the Credit Parties have not provided and will not provide any legal,
accounting, regulatory or tax advice with respect to any of the transactions
contemplated hereby (including any amendment, waiver or other modification
hereof or of any other Loan Document) and each of the Loan Parties has consulted its own legal, accounting,
regulatory and tax advisors to the extent it has deemed appropriate. Each of the Loan Parties hereby waives
and releases, to the fullest extent permitted by law, any claims that it may
have against each of the Credit Parties with respect to any breach or alleged
breach of agency or fiduciary duty.

 

10.17       USA PATRIOT Act Notice.
Each Lender that is subject to the Act (as hereinafter defined) and the
Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Loan Parties that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”),
it is required to obtain, verify and record information that identifies each
Loan Party, which information includes the name and address of each Loan Party
and other information that will allow such Lender or the Administrative Agent,
as applicable, to identify each Loan Party in accordance with the Act. Each
Loan Party is in compliance, in all material respects, with the Patriot Act. No
part of the proceeds of the Loans will be used by the Loan Parties, directly or
indirectly, for any payments to any governmental official or employee,
political party, official of a political party, candidate for political office,
or anyone else acting in an official capacity, in order to obtain, retain or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended.

 

10.18       Time of the Essence.
Time is of the essence of the Loan Documents.

 

10.19       Press Releases. Each
Credit Party executing this Agreement agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure using
the name of Administrative Agent or its Affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days’
prior notice to Administrative Agent and without the prior written consent of
Administrative Agent unless (and only to the extent that) such Credit Party or
Affiliate is required to do so under Applicable Law and then, in any event,
such Credit Party or Affiliate will consult with Administrative Agent before
issuing such press release or other public disclosure. Each Loan Party consents
to the publication by Administrative Agent or any Lender of advertising
material relating to the financing transactions contemplated by this Agreement
using any Loan Party’s name, product photographs, logo or trademark. Administrative
Agent or such Lender shall provide a draft reasonably in advance of any
advertising material to the Lead Borrower for review and comment prior to the
publication thereof. Administrative Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.

 

10.20       Additional Waivers.

 

(a)           The
Obligations are the joint and several obligation of each Loan Party. To the
fullest extent permitted by Applicable Law, the obligations of each Loan Party 

 

141

 

shall not be affected by (i) the failure of any Credit Party to
assert any claim or demand or to enforce or exercise any right or remedy
against any other Loan Party under the provisions of this Agreement, any other
Loan Document or otherwise, (ii) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions of, this
Agreement or any other Loan Document, or (iii) the failure to perfect any
security interest in, or the release of, any of the Collateral or other
security held by or on behalf of the Collateral Agent or any other Credit
Party.

 

(b)           The
obligations of each Loan Party shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment
in full in cash of the Obligations after the termination of the Commitments),
including any claim of waiver, release, surrender, alteration or compromise of
any of the Obligations, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of any of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each Loan Party
hereunder shall not be discharged or impaired or otherwise affected by the
failure of any Agent or any other Credit Party to assert any claim or demand or
to enforce any remedy under this Agreement, any other Loan Document or any
other agreement, by any waiver or modification of any provision of any thereof,
any default, failure or delay, willful or otherwise, in the performance of any
of the Obligations, or by any other act or omission that may or might in any
manner or to any extent vary the risk of any Loan Party or that would otherwise
operate as a discharge of any Loan Party as a matter of law or equity (other
than the indefeasible payment in full in cash of all the Obligations after the
termination of the Commitments).

 

(c)           To
the fullest extent permitted by Applicable Law, each Loan Party waives any
defense based on or arising out of any defense of any other Loan Party or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause of the liability of any other Loan Party, other than
the indefeasible payment in full in cash of all the Obligations and the
termination of the Commitments. After the occurrence and during the continuance
of an Event of Default, the Collateral Agent and the other Credit Parties may,
at their election, foreclose on any security held by one or more of them by one
or more judicial or nonjudicial sales, accept an assignment of any such
security in lieu of foreclosure, compromise or adjust any part of the
Obligations, make any other accommodation with any other Loan Party, or
exercise any other right or remedy available to them against any other Loan
Party, without affecting or impairing in any way the liability of any Loan
Party hereunder except to the extent that all the Obligations have been
indefeasibly paid in full in cash and the Commitments have been terminated. Each
Loan Party waives any defense arising out of any such election even though such
election operates, pursuant to Applicable Law, to impair or to extinguish any
right of reimbursement or subrogation or other right or remedy of such Loan
Party against any other Loan Party, as the case may be, or any security.

 

(d)           Each
Borrower is obligated to repay the Obligations as joint and several obligors
under this Agreement. Upon payment by any Loan Party of any Obligations, all
rights of such Loan Party against any other Loan Party arising as a result
thereof by way 

 

142

 

of right of subrogation, contribution, reimbursement, indemnity or
otherwise shall in all respects be subordinate and junior in right of payment
to the prior indefeasible payment in full in cash of all the Obligations and
the date that the Commitments have been terminated. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations and no Loan Party will demand, sue for or otherwise
attempt to collect any such indebtedness. If any amount shall erroneously be
paid to any Loan Party on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Credit
Parties and shall forthwith be paid to the Administrative Agent to be credited
against the payment of the Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement and the other Loan Documents. Subject
to the foregoing, to the extent that any Borrower shall, under this Agreement
as a joint and several obligor, repay any of the Obligations constituting
Revolving Loans made to another Borrower hereunder or other Obligations
incurred directly and primarily by any other Borrower (an “Accommodation
Payment”), then the Borrower making such Accommodation Payment shall be
entitled to contribution and indemnification from, and be reimbursed by, each
of the other Borrowers in an amount, for each of such other Borrowers, equal to
a fraction of such Accommodation Payment, the numerator of which fraction is
such other Borrower’s Allocable Amount and the denominator of which is the sum
of the Allocable Amounts of all of the Borrowers. As of any date of determination,
the “Allocable Amount” of each Borrower shall be equal to the maximum
amount of liability for Accommodation Payments which could be asserted against
such Borrower hereunder without (a) rendering such Borrower “insolvent”
within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the
Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform
Fraudulent Conveyance Act (“UFCA”), (b) leaving such Borrower with
unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or
(c) leaving such Borrower unable to pay its debts as they become due
within the meaning of Section 548 of the Bankruptcy Code or Section 4 of the
UFTA, or Section 5 of the UFCA.

 

10.21       No Strict Construction.
The parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.

 

10.22       Foreign Asset Control
Regulations. Neither of the
advance of the Loans nor the use of the proceeds of any thereof will violate
the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading
With  the  Enemy  Act”) or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) (the “Foreign  Assets  Control  Regulations”)
or any enabling legislation or executive order relating thereto (which for the
avoidance of doubt shall include, but shall not be limited to (a) Executive
Order 13224 of September 21, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)) (the “Executive  Order”) and (b) the
Uniting and Strengthening America by 

 

143

 

Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore,
none of the Borrowers or their Affiliates (a) is or will become a “blocked
person” as described in the Executive Order, the Trading With the Enemy Act or
the Foreign Assets Control Regulations or (b) engages or will engage in any
dealings or transactions, or be otherwise associated, with any such “blocked
person” or in any manner violative of any such order

 

10.23       Attachments. The
exhibits, schedules and annexes attached to this Agreement are incorporated
herein and shall be considered a part of this Agreement for the purposes stated
herein, except that in the event of any conflict between any of the provisions of
such exhibits and the provisions of this Agreement, the provisions of this
Agreement shall prevail.

 

10.24       Intercreditor Agreement.
Notwithstanding anything herein to the contrary, the exercise of any right or
remedy by the Collateral Agent pursuant to this Agreement is subject to the
provisions of the Intercreditor Agreement. In the event of any conflict between
the terms of the Intercreditor Agreement and this Agreement, the terms of the
Intercreditor Agreement shall govern and control.

 

[SIGNATURE PAGES FOLLOW]

 

144

 

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

 

	
   

  	
  THE
  CHILDREN’S PLACE RETAIL

  STORES, INC., as Lead Borrower and as a

  Borrower

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Susan J. Riley

  
	
   

  	
  Title:

  	
  Executive Vice President, Finance &

  
	
   

  	
   

  	
  Administration

  
	
   

  	
   

  
	
   

  	
  THE
  CHILDREN’S PLACE SERVICES

  
	
   

  	
  COMPANY LLC,
  as a Borrower

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Susan J. Riley

  
	
   

  	
  Title:

  	
  Executive
  Vice President, Finance &

  
	
   

  	
   

  	
  Administration

  
	
   

  	
   

  
	
   

  	
  THE
  CHILDRENSPLACE.COM, INC., as a

  
	
   

  	
  Guarantor

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Adrienne Urban

  
	
   

  	
  Title:

  	
  Assistant
  Treasurer

  
	
   

  	
   

  
	
   

  	
  THE
  CHILDREN’S PLACE (VIRGINIA),

  LLC, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Susan J. Riley

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Treasurer

  
							

 

Signature Page to Credit Agreement

 

 

	
   

  	
  THE
  CHILDREN’S PLACE CANADA

  
	
   

  	
   HOLDINGS, INC., as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Susan J. Riley

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Treasurer

  
	
   

  	
   

  
	
   

  	
  TWIN BROOK
  INSURANCE COMPANY,

  INC., as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Susan J. Riley

  
	
   

  	
  Title:

  	
  Senior Vice
  President and Treasurer

  
						

 

Signature Page to Credit Agreement

 

 

	
   

  	
  WELLS FARGO
  RETAIL FINANCE, LLC,

  as Administrative Agent, as Collateral

  Agent, as Swing Line Lender and as a

  Lender

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
  Name:

  	
  Michele L. Ayou

  
	
   

  	
  Title:

  	
  Vice
  President

  
				

 

Signature Page to Credit Agreement

 

 

	
   

  	
  BANK OF
  AMERICA, N.A., as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

Signature Page to Credit Agreement

 

 

	
   

  	
  HSBC
  BUSINESS CREDIT (USA) INC.,

  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

Signature Page to Credit Agreement

 

 

	
   

  	
  JPMORGAN
  CHASE BANK, N.A.,

  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

Signature Page to Credit AgreementExhibit 10.9

 

Note Purchase Agreement dated as of July 31,
2008

among the Company, as issuer, and certain of
its subsidiaries

as guarantors, The Note Purchasers, Sankaty
Advisors, LLC, as collateral agent

and Crystal Capital Fund Management, L.P. as
syndication agent

 

EXECUTION

 

NOTE
PURCHASE AGREEMENT

 

dated as of July 31,
2008

 

among

 

THE CHILDREN’S PLACE RETAIL
STORES, INC., as Issuer

 

and

 

THE GUARANTORS LISTED
HEREIN,

 

THE NOTE PURCHASERS LISTED
HEREIN,

 

SANKATY ADVISORS, LLC, as
Collateral Agent

 

and

 

CRYSTAL CAPITAL FUND
MANAGEMENT, L.P., as Syndication Agent

 

 

$85,000,000 IN AGGREGATE
PRINCIPAL AMOUNT

OF SENIOR SECURED SECOND
LIEN NOTES DUE JULY 31, 2013

 

 

 

TABLE OF CONTENTS

 

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1. DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.1

  	
   

  	
  Certain Defined Terms; Rules of
  Construction

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.2

  	
   

  	
  Accounting Terms

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2. PURCHASE AND
  SALE OF THE NOTES

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.1

  	
   

  	
  Purchase and Sale of the Notes

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.2

  	
   

  	
  The Closing

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.3

  	
   

  	
  Payment of Purchase Price

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.4

  	
   

  	
  Use of Proceeds

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3. TERMS OF THE
  NOTES

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.1

  	
   

  	
  Interest on the Notes

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.2

  	
   

  	
  Payment of Notes

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.3

  	
   

  	
  Prepayment Procedures

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.4

  	
   

  	
  Taxes

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.5

  	
   

  	
  Manner and Time of Payment

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4. REPRESENTATIONS
  AND WARRANTIES OF NOTE PURCHASERS

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.1

  	
   

  	
  Legal Capacity; Due Authorization

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.2

  	
   

  	
  Restrictions on Transfer

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.3

  	
   

  	
  Accredited Investor, etc.

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.4

  	
   

  	
  No Advertisement

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5. REPRESENTATIONS
  AND WARRANTIES OF THE NOTE PARTIES

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.1

  	
   

  	
  Existence, Qualification and Power

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.2

  	
   

  	
  Authorization; No Contravention

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.3

  	
   

  	
  Governmental Authorization; Other Consents

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.4

  	
   

  	
  Binding Effect

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.5

  	
   

  	
  Financial Statements; No Material Adverse
  Effect

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.6

  	
   

  	
  Litigation

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.7

  	
   

  	
  No Default

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.8

  	
   

  	
  Ownership of Property; Liens; Lease
  Agreements

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.9

  	
   

  	
  Environmental Compliance

  	
   

  	
  13

  

 

i

 

	
  5.10

  	
   

  	
  Insurance

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.11

  	
   

  	
  Taxes

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.12

  	
   

  	
  ERISA Compliance

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.13

  	
   

  	
  Subsidiaries; Equity Interests

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.14

  	
   

  	
  Margin Regulations; Investment Company Act

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.15

  	
   

  	
  Disclosure

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.16

  	
   

  	
  Compliance with Laws

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.17

  	
   

  	
  Intellectual Property; Licenses, Etc.

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.18

  	
   

  	
  Labor Matters

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.19

  	
   

  	
  Collateral Documents

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.20

  	
   

  	
  Solvency

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.21

  	
   

  	
  Deposit Accounts; Credit Card Arrangements

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.22

  	
   

  	
  Brokers

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.23

  	
   

  	
  Customer and Trade Relations

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.24

  	
   

  	
  Material Contracts

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.25

  	
   

  	
  Casualty

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.26

  	
   

  	
  Anti-Terrorism Laws

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.27

  	
   

  	
  Valid Issuance of the Notes

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.28

  	
   

  	
  Private Placement

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.29

  	
   

  	
  Transition Services Agreement

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.30

  	
   

  	
  New Headquarters

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.31

  	
   

  	
  Stock Options

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.32

  	
   

  	
  License Agreements

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.33

  	
   

  	
  Hoop Expenses

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.34

  	
   

  	
  Product Recall

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6. CLOSING
  CONDITIONS

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.1

  	
   

  	
  Representations and Warranties; No Default

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.2

  	
   

  	
  Use of Proceeds

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.3

  	
   

  	
  Delivery of Documents

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.4

  	
   

  	
  Corporate/Capital Structure

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.5

  	
   

  	
  Authorizations, Consents and Approvals

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.6

  	
   

  	
  No Material Adverse Effect

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.7

  	
   

  	
  Litigation

  	
   

  	
  23

  

 

ii

 

	
  6.8

  	
   

  	
  Disclosure

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.9

  	
   

  	
  Due Diligence

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.10

  	
   

  	
  Hoop Bankruptcy

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.11

  	
   

  	
  Transition Services Agreement and HOOP Sale

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.12

  	
   

  	
  New Headquarters

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.13

  	
   

  	
  Stock Options

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.14

  	
   

  	
  Other Fees and Expenses

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.15

  	
   

  	
  Ancillary Documents

  	
   

  	
  23

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.16

  	
   

  	
  Senior Credit

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.17

  	
   

  	
  Closing Date Total Leverage Ratio

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.18

  	
   

  	
  Existing Indebtedness

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.19

  	
   

  	
  Perfection of Security

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.20

  	
   

  	
  Monitoring Fee

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7. affirmative
  COVENANTS

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.1

  	
   

  	
  Payment of Note Obligations

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.2

  	
   

  	
  Financial Statements

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.3

  	
   

  	
  Certificates; Other Information

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.4

  	
   

  	
  Other Information; Audit

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.5

  	
   

  	
  Notices

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.6

  	
   

  	
  Payment of Liabilities

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.7

  	
   

  	
  Preservation of Existence, Etc.

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.8

  	
   

  	
  Maintenance of Properties

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.9

  	
   

  	
  Maintenance of Insurance

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.10

  	
   

  	
  Compliance with Laws

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.11

  	
   

  	
  Books and Records; Accountants

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.12

  	
   

  	
  Inspection Rights; Appraisal Rights

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.13

  	
   

  	
  Use of Proceeds

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.14

  	
   

  	
  Formation of Subsidiaries

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.15

  	
   

  	
  Information Regarding the Collateral

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.16

  	
   

  	
  Financial Covenants

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.17

  	
   

  	
  Physical Inventories

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.18

  	
   

  	
  Environmental Laws

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.19

  	
   

  	
  Further Assurances

  	
   

  	
  34

  

 

iii

 

	
  7.20

  	
   

  	
  Compliance with Terms of Leaseholds

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.21

  	
   

  	
  Material Contracts

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.22

  	
   

  	
  ERISA

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.23

  	
   

  	
  Monitoring Fee

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.24

  	
   

  	
  Senior Debt Document Terms

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.25

  	
   

  	
  Post-Closing Matters

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8. NEGATIVE
  COVENANTS

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.1

  	
   

  	
  Liens

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.2

  	
   

  	
  Investments

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.3

  	
   

  	
  Indebtedness

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.4

  	
   

  	
  Fundamental Changes

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.5

  	
   

  	
  Dispositions

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.6

  	
   

  	
  Restricted Payments

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.7

  	
   

  	
  Payments and Prepayments of Indebtedness

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.8

  	
   

  	
  Change in Nature of Business

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.9

  	
   

  	
  Transactions with Affiliates

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.10

  	
   

  	
  Burdensome Agreements

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.11

  	
   

  	
  Use of Proceeds

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.12

  	
   

  	
  Amendment of Material Documents

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.13

  	
   

  	
  Corporate Name; Fiscal Year

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.14

  	
   

  	
  Consignments

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.15

  	
   

  	
  Antilayering

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.16

  	
   

  	
  Capital Expenditures

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.17

  	
   

  	
  Change of Control

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.18

  	
   

  	
  No Amendment To Transition Services
  Agreement

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.19

  	
   

  	
  New Headquarters

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.20

  	
   

  	
  Stock Options

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.21

  	
   

  	
  Licensing

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.22

  	
   

  	
  Leases

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.23

  	
   

  	
  Hoop Expenses

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.24

  	
   

  	
  Foreign Transfers

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9. EVENTS OF
  DEFAULT

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.1

  	
   

  	
  Payment Default

  	
   

  	
  41

  

 

iv

 

	
  9.2

  	
   

  	
  Certain Covenants

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.3

  	
   

  	
  Reporting Default

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.4

  	
   

  	
  Other Defaults

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.5

  	
   

  	
  Attachments

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.6

  	
   

  	
  Insolvency Proceeding, etc.

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.7

  	
   

  	
  Judgments

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.8

  	
   

  	
  Payment Default on Other Indebtedness

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.9

  	
   

  	
  Breach of Representations or Warranties

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.10

  	
   

  	
  Guaranty

  	
   

  	
  42

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.11

  	
   

  	
  Enforceability of Note Documents

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.12

  	
   

  	
  Material Adverse Effect

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.13

  	
   

  	
  Governmental Action

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.14

  	
   

  	
  Employee Plans

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.15

  	
   

  	
  Business Interruption

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.16

  	
   

  	
  Restatements

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10. RESTRICTIONS
  ON TRANSFER; LEGENDS

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.1

  	
   

  	
  Assignments

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.2

  	
   

  	
  Restrictive Legend

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.3

  	
   

  	
  Termination of Restrictions

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11. GUARANTEE

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.1

  	
   

  	
  Guarantee of Note Obligations

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.2

  	
   

  	
  Continuing Obligation

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.3

  	
   

  	
  Waivers with Respect to Note Obligations

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.4

  	
   

  	
  Note Purchasers’ Power to Waive, etc.

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.5

  	
   

  	
  Information Regarding the Issuer, etc.

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.6

  	
   

  	
  Certain Guarantor Representations

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.7

  	
   

  	
  Subrogation

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.8

  	
   

  	
  Subordination

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.9

  	
   

  	
  Limitation on Guaranty

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12. COLLATERAL
  AGENT

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.1

  	
   

  	
  Collateral Agent’s Authority to Act, etc.

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.2

  	
   

  	
  Collateral Agent’s Resignation

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.3

  	
   

  	
  Concerning the Collateral Agent

  	
   

  	
  54

  

 

v

 

	
  12.4

  	
   

  	
  Indemnification

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.5

  	
   

  	
  Assumption of Collateral Agent’s Rights

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13. MISCELLANEOUS

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.1

  	
   

  	
  Expenses

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.2

  	
   

  	
  Indemnity

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.3

  	
   

  	
  [INTENTIONALLY OMITTED]

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.4

  	
   

  	
  Intercreditor Agreement

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.5

  	
   

  	
  Amendments and Waivers

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.6

  	
   

  	
  Independence of Covenants

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.7

  	
   

  	
  Notices

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.8

  	
   

  	
  Survival of Warranties and Certain
  Agreements

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.9

  	
   

  	
  Failure or Indulgence Not Waiver; Remedies
  Cumulative

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.10

  	
   

  	
  Severability

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.11

  	
   

  	
  Heading

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.12

  	
   

  	
  Applicable Law

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.13

  	
   

  	
  Successors and Assigns; Subsequent Holders

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.14

  	
   

  	
  CONSENT TO JURISDICTION AND
  SERVICE OF PROCESS

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.15

  	
   

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.16

  	
   

  	
  Counterparts; Effectiveness

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.17

  	
   

  	
  Confidentiality

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.18

  	
   

  	
  USA PATRIOT ACT

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.19

  	
   

  	
  Entirety

  	
   

  	
  62

  

 

vi

 

SCHEDULES AND EXHIBITS

 

	
  Schedule

  	
   

  	
   

  
	
  I

  	
   

  	
  Note
  Purchasers and Purchase Price of Notes

  
	
  II

  	
   

  	
  Wire
  Instructions of the Note Purchasers

  
	
  2.4

  	
   

  	
  Use
  of Proceeds – Hoop Cash Costs

  
	
  5.1

  	
   

  	
  Note
  Parties Organizational Information

  
	
  5.6

  	
   

  	
  Litigation

  
	
  5.8.2(1)

  	
   

  	
  Owned
  Real Estate

  
	
  5.8.2(2)

  	
   

  	
  Leased
  Real Estate

  
	
  5.8.3

  	
   

  	
  Existing
  Liens

  
	
  5.8.4

  	
   

  	
  Existing
  Investments

  
	
  5.8.5

  	
   

  	
  Existing
  Indebtedness

  
	
  5.9

  	
   

  	
  Environmental
  Matters

  
	
  5.10

  	
   

  	
  Insurance

  
	
  5.13

  	
   

  	
  Subsidiaries;
  Other Equity Investments

  
	
  5.17

  	
   

  	
  Intellectual
  Property

  
	
  5.18(1)

  	
   

  	
  Collective
  Bargaining Agreements

  
	
  5.18(2)

  	
   

  	
  Employees

  
	
  5.18(3)

  	
   

  	
  Collective
  Bargaining Agreement and Certain Employee Agreements

  
	
  5.18(4)

  	
   

  	
  Employees
  Party to Employment Agreements

  
	
  5.21.1

  	
   

  	
  DDAs

  
	
  5.21.2

  	
   

  	
  Credit
  Card Arrangements

  
	
  5.22

  	
   

  	
  Brokerage
  Fees

  
	
  5.24

  	
   

  	
  Material
  Contracts

  
	
  5.33

  	
   

  	
  Hoop
  Expenses

  
	
  7.3

  	
   

  	
  Financial
  and Collateral Reporting

  
	
  7.16

  	
   

  	
  Financial
  Covenants

  
	
  7.16(a)

  	
   

  	
  Closing
  Date EBITDA

  
	
  7.16(b)

  	
   

  	
  Closing
  Date Total Leverage Ratio

  
	
  7.16(g)

  	
   

  	
  EBITDA
  – New Headquarters Related Charges

  
	
  7.16(h)

  	
   

  	
  EBITDA
  – Stock Options Related Charges

  
	
  T-1

  	
   

  	
  Letters
  of Credit

  
	
   

  	
   

  	
   

  
	
  Exhibit

  	
   

  	
   

  
	
  A

  	
   

  	
  Form of
  Senior Secured Second Lien Note

  
	
  B

  	
   

  	
  Form of
  Intercreditor Agreement

  
	
  C

  	
   

  	
  Form of
  Security Agreement

  

 

vii

 

NOTE
PURCHASE AGREEMENT

 

This NOTE PURCHASE AGREEMENT (this “Agreement”)
is dated as of July     , 2008 and is entered into by
and among The Children’s Place Retail Stores, Inc.  (the “Issuer”), a corporation
incorporated under the laws of Delaware, as issuer, the parties listed as
Guarantors on the signature pages hereto (the Guarantors and the Issuer
being referred to collectively as the “Note Parties”, and each such
Person a “Note Party”), Sankaty Advisors, LLC as Collateral Agent for
the Note Purchasers, Crystal Capital Fund Management, L.P. as Syndication Agent
for the Note Purchasers, and each Note Purchaser listed on Schedule I
attached hereto (collectively, the “Note Purchasers”).

 

RECITALS

 

WHEREAS, the Issuer will issue to the
Note Purchasers Senior Secured Second Lien Notes (the “Notes”) in the
aggregate original principal amount of $85,000,000 in the form attached as Exhibit A
hereto in order to finance the working capital, capital expenditures, certain
obligations owed by the Issuer to third parties as a result of the Hoop
bankruptcy, the repayment of the outstanding balance under the Issuer’s
Existing Credit Agreement, and for general corporate purposes and fees and
expenses in relation to the Issuer’s business.

 

WHEREAS, on or around the date hereof, the Issuer
will enter into a revolving credit agreement with Wells Fargo Retail Finance,
LLC, the borrowings in respect of which are also to be used in order to
finance the working capital, capital expenditures, certain obligations owed by
the Issuer to third parties as a result of the Hoop bankruptcy, and for general
corporate purposes and fees and expenses in relation to the Issuer’s business.

 

WHEREAS, pursuant to certain collateral documents
dated on or around the date hereof, the Note Parties will grant in favor of the
Collateral Agent, for the benefit of each of the Note Purchasers, liens in
respect of the collateral described in the Collateral Documents, to secure the
Note Parties’ obligations in respect of the Notes .

 

WHEREAS, in order to, among other things, govern the
priority of the liens held by the Revolving Agent and the Collateral Agent, the
Revolving Agent and the Collateral Agent will enter into that certain
Intercreditor Agreement (as amended, modified or supplemented from time to time,
the “Intercreditor Agreement”), in substantially the form attached as Exhibit B.

 

NOW, THEREFORE, in consideration of the foregoing,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Note Parties and the Note Purchasers agree
as follows:

 

SECTION 1. 
DEFINITIONS.

 

1.1                                 Certain Defined
Terms; Rules of Construction.  Capitalized terms used in this Agreement have
the meanings set forth in Annex I hereto.  Except as otherwise explicitly specified to
the contrary or unless the context clearly requires otherwise, (a) the
capitalized term “Section” refers to sections of this Agreement, (b) the
capitalized term “Exhibit” refers to exhibits to this Agreement, (c) the
capitalized term “Schedules” refers to schedules to this Agreement, (d) references
to a particular Section include all subsections thereof, (e) the word
“including” shall be construed as “including without limitation”, (f) references
to a particular statute or regulation include all rules and regulations
thereunder and any successor statute, regulation or rules, in each

 

 

case as from time to time in
effect, (g) references to a particular Person or entity include such
Person’s or entity’s successors and assigns to the extent not prohibited by
this Agreement, (h) references to “$”, “cash”, “dollars” or similar
references means United States dollars, paid in cash or other immediately
available funds.  References to “the date
hereof” mean the date first set forth above and (i) any reference in this
Agreement to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein).

 

1.2                                 Accounting
Terms.  Unless otherwise
specifically provided herein, any accounting term used in the Agreement shall
have the meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed in accordance with GAAP
consistently applied using the Issuer’s historical accounting practices.  That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing.  If any
“Accounting Changes” (as defined below) occur and such changes result in a
change in the calculation of the financial covenants, standards or terms used
in the Agreement or any other Note Document, then the Issuer and the Note
Purchasers agree to enter into negotiations in order to amend such provisions
of the Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the financial condition of the
Issuer and its Subsidiaries shall be the same after such Accounting Changes as
if such Accounting Changes had not been made; provided, however, that the
agreement of the Required Purchasers to any required amendments of such
provisions shall be sufficient to bind all of the Note Purchasers.  “Accounting Changes” means (i) changes
in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successor thereto or any
agency with similar functions), (ii) changes in accounting principles
concurred in by the Issuer’s certified public accountants; and (iii) purchase
accounting adjustments under FASB 141 or 142 and EITF 88-16, and the
application of the accounting principles set forth in FASB 109, including the
establishment of reserves pursuant thereto and any subsequent reversal (in
whole or in part) of such reserves.  All
such adjustments resulting from expenditures made subsequent to the Closing
Date (including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period.  If the Issuer and the Required Purchasers
agree upon the required amendments, then after appropriate amendments have been
executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained in the Agreement or in any other
Note Document shall, only to the extent of such Accounting Change, refer to
GAAP, consistently applied after giving effect to the implementation of such
Accounting Change.  If the Issuer and the
Required Purchasers cannot agree upon the required amendments within 30 days
following the date of implementation of any Accounting Change, then all
financial statements delivered and all calculations of financial covenants and
other standards and terms in accordance with the Agreement and the other Note
Documents shall be prepared, delivered and made without regard to the
underlying Accounting Change.

 

SECTION 2. 
PURCHASE AND SALE OF THE NOTES.

 

2.1                                 Purchase and
Sale of the Notes.  Subject to
the terms and conditions of this Agreement and on the basis of the
representations and warranties set forth herein, the Issuer hereby agrees to
sell to each Note Purchaser, and each such Note Purchaser agrees to purchase
from the

 

2

 

Issuer, at the Closing, a
Note in the original principal amount and purchase price set forth on Schedule
I.

 

2.2                                 The Closing.  The purchase and sale of the Notes will occur
at a closing (the “Closing”) to be held on July     ,
2008, at 10:00 a.m. (New York time), at the offices of Gibson, Dunn &
Crutcher LLP, 200 Park Ave., New York, NY 10166, or at such other date, time
and/or location as may be agreed upon by the parties hereto.

 

2.3                                 Payment of
Purchase Price.  At the
Closing, against payment by the Note Purchasers by wire transfer of immediately
available funds in the purchase price set forth on Schedule I, the
Issuer will deliver Notes registered in the names of the Note Purchasers in the
principal amounts set forth on Schedule I.

 

2.4                                 Use of Proceeds.  The proceeds of the sale by the Issuer of the
Notes hereunder shall be used solely to provide financing for
working capital; Capital Expenditures; expenses related to the Disney Store
Termination Agreements; certain obligations owed by the Issuer to third parties
as a result of the Hoop bankruptcy in an aggregate amount not to exceed
$20,000,000 (net of receipts from Disney), as more fully described on Schedule
2.4 attached hereto; the repayment of the outstanding balance under the
Issuer’s Existing Credit Agreement; and general corporate purposes and fees and
expenses.

 

SECTION 3. 
TERMS OF THE NOTES

 

3.1                                 Interest on the
Notes.  The Notes shall bear interest
at a rate equal to the respective Applicable Rate for such Notes on the unpaid
principal amount thereof (and on any interest or other amount owing hereunder
that is not paid when due, to the extent permitted by applicable law) from and
including the Closing Date (or as applicable, a Supplemental Closing Date)
until the principal amount shall have been paid in full.  During the pendency of any Event of Default,
the interest rate on the Notes shall be increased by 2% per  annum
over the then Applicable Rate.

 

3.1.1.                                             Interest
Payment Dates.  All accrued
interest on the Notes shall be payable, in arrears, in cash, on the last
Business Day of each month (each an “Interest Payment Date”).

 

3.1.2.                                             Calculation of
Interest.  Interest on
the Notes shall be computed on the basis of the actual number of days elapsed
over a 360-day year.  In computing such
interest, the date or dates of the making of the Notes shall be included and
the date of payment shall be excluded.

 

3.2                            Payment of
Notes.

 

3.2.1.                                             Payment at
Maturity.  The entire
principal amount of the Notes then outstanding, any accrued and unpaid interest
on the Notes and all other Note Obligations (except for contingent obligations
for which no demand has been made) shall be due and payable on, and shall be
paid in full in cash on, the Maturity Date of the Notes.  The Issuer understands and acknowledges that
it is obligated for the entire principal amount of the Notes issued by it, any
accrued and unpaid interest on such Notes and all other Note Obligations.

 

3.2.2.                                             Voluntary Prepayments.  The 
Notes may be prepaid at the Issuer’s option, at any time, and from time
to time, in whole or in part (in a minimum amount and in

 

3

 

increments of $1,000,000, or
such lesser amount as is then outstanding), on 5 Business Days’ prior
notice to the respective Note Purchasers whose Notes are to be prepaid; provided,
that any such voluntary prepayment of Notes shall include the Applicable
Premium on the amount so prepaid.

 

3.2.3.                                             Offer to
Repurchase Upon a Change of Control.

 

3.2.3.1.                                     Condition to
Issuer Action.  Not later than 5 Business Days prior to a
Change of Control, the Issuer shall give to each holder of Notes written notice
containing and constituting an offer to prepay Notes as described in Section 3.2.3.2,
accompanied by the certificate described in Section 3.2.3.5.

 

3.2.3.2.                                     Offer to Prepay
Notes.  Any offer to
prepay Notes contemplated by Section 3.2.3.1 or Sections 3.2.4.1
through 3.2.4.3 shall be an offer by the Issuer to prepay, in accordance
with and subject to this Section 3.2.3 the Notes (and in the case
of Section 3.2.3.1, all, and not less than all, of the Notes) of
the Issuer held by each holder (in this case only, “holder”
in respect of any Note registered in the name of a nominee for a disclosed
beneficial owner shall mean such beneficial owner) on the date specified in
such offer (the “Proposed Prepayment Date”) that is not less than 30 days and not more than 60 days
after the date of such offer (if the Proposed Prepayment Date shall not be
specified in such offer, the Proposed Prepayment Date shall be the first
Business Day which is at least 45 days after the date of such offer).

 

3.2.3.3.                                     Acceptance;
Rejection.  A holder of
Notes may accept the offer to prepay made pursuant to this Section 3.2.3
by causing a notice of such acceptance to be delivered to the Issuer at least
10 days prior to the Proposed Prepayment Date.

 

3.2.3.4.                                     Prepayment.  Prepayment of the Notes to be prepaid
pursuant to this Section 3.2.3 shall be at 100% of the principal
amount of such Notes, together with interest on such Notes accrued to the date
of prepayment plus the Applicable Premium if
any.  All prepayments pursuant to this Section 3.2.3
are subject to the terms and conditions set forth in the Intercreditor
Agreement and Section 3.2.4.5 and shall only be required to be made
to the extent expressly permitted to be made pursuant to the terms and
conditions of the Intercreditor Agreement. 
The Issuer shall give the Collateral Agent prior written notice of
making a mandatory prepayment pursuant to Section 2.05(d) of the
Revolving Loan Agreement.

 

3.2.3.5.                                     Officer’s
Certificate.  Each offer
of the Issuer to prepay Notes pursuant to this Section 3.2.3 shall
be accompanied by a certificate, executed by a senior financial officer of the
Issuer and dated the date of such offer, specifying: (i) the Proposed
Prepayment Date; (ii) that such offer is made pursuant to this Section 3.2.3
(or 3.2.4.1 through 3.2.4.3 as applicable); (iii) the
principal amount of each Note offered to be prepaid (which shall be 100% of the
principal amount of such Note); (iv) the interest that would be due on
each Note offered to be prepaid, accrued to the Proposed Prepayment Date; (v) the
amount of the Applicable Premium, if any (vi) that the conditions of this Section 3.2.3
have been fulfilled; and (vii) in reasonable detail, the nature and date
of the Change of Control, if applicable.

 

3.2.4.                                             Other Mandatory
Prepayments.

 

3.2.4.1.                                     Promptly upon
the receipt by any Note Party of the proceeds of any voluntary or involuntary
Disposition by any Note Party of property or assets (including casualty losses
or condemnations but excluding Dispositions which qualify as Permitted
Dispositions;

 

4

 

provided, however,
that to the extent that Permitted Dispositions (other than under clause (a), (c) or
(d) of the definition of Permitted Dispositions), exceed $4,000,000 per
Fiscal Year, then any such amount in excess of $4,000,000 per Fiscal Year shall
not constitute Permitted Dispositions for the purposes of this Section 3.2.4),
the Issuer shall make an offer to prepay the outstanding principal amount of
the Note Obligations in accordance with Sections 3.2.3.2 through 3.2.3.5
(including, without limitation, to the payment of the Applicable Premium on the
amount so prepaid) in an amount equal to 100% of the Net Cash Proceeds
(including condemnation awards and payments in lieu thereof) received by such
Person in connection with such Dispositions; provided that, so long as (A) no
Default or Event of Default shall have occurred and is continuing, (B) the
Issuer shall have given the Collateral Agent prior written notice of the Issuer’s
intention to apply such monies to the costs of replacement of the properties or
assets that are the subject of such Disposition and (C) the Note Parties
complete such replacement, purchase, or construction within 180 days after the
initial receipt of such monies, the Note Parties shall have the option to apply
up to $5,000,000 per Fiscal Year (not to exceed $15,000,000 in the aggregate
for all Fiscal Years without consent of the Required Purchasers and in no event
shall such amount include Net Cash Proceeds from any sale and lease-back by any
Note Party) of such monies to the costs of replacement of the property or
assets that are the subject of such Disposition unless and to the extent that
such applicable period shall have expired without such replacement, purchase or
construction being made or completed, in which case, any such amounts shall be
paid to the Collateral Agent and applied in accordance with Section 3.2.3.4.  Nothing contained in this Section 3.2.4.1 shall
permit any Note Party to Dispose of any property or assets other than in
accordance with Section 8.5.

 

3.2.4.2.                                     Promptly upon
the receipt by any Note Party of any Extraordinary Receipts, the Issuer shall
offer to prepay the outstanding principal amount of the Note Obligations in
accordance with Sections 3.2.3.2 through 3.2.3.5 in an amount
equal to 100% of the Net Cash Proceeds of such Extraordinary Receipts.

 

3.2.4.3.                                    Promptly upon
the issuance or incurrence by any Note Party of any Indebtedness (other than
Indebtedness permitted under Section 8.3), or any equity issuance
by a Note Party, the Issuer shall offer to prepay the outstanding principal
amount of the Note Obligations in accordance with Sections 3.2.3.2
through 3.2.3.5 (including, without limitation, to the payment of the
Applicable Premium on the amount so prepaid) in an amount equal to 100% of the
Net Cash Proceeds received by such Person in connection with such issuance or
incurrence.  The provisions of this Section 3.2.4.3
shall not be deemed to be implied consent to any such issuance or incurrence
otherwise prohibited by the terms and conditions of this Agreement.

 

3.2.4.4.                                    Within 10 days
of the earlier of (A) delivery to the Note Purchasers of a certificate of
a Responsible Officer of the Issuer containing the calculations for Excess Cash
Flow for any measurement period ending on or after January 31, 2009, or (B) (i) delivery
to the Note Purchasers of audited annual financial statements pursuant to Section 7.2.1,
commencing with the delivery to the Note Purchasers of financial statements for
Fiscal Year ended January 31, 2009 or, (ii) if such financial
statements are not delivered to Note Purchasers on the date such reports are
required to be delivered pursuant to Section 7.2.1, the date such
reports are required to be delivered to the Note Purchasers pursuant to Section 7.2.1,
the Note Parties shall prepay the outstanding principal amount of the Note
Obligations in accordance with Section 3.3 in an amount equal to (X) with
respect to such payment due in respect of Fiscal Year ended January 31,
2009, 50% of the aggregate Excess Cash Flow of the Note Parties for the Fiscal
Year ending on January 31, 2009 and (Y) with respect to each payment
due in respect of each Fiscal Year thereafter, 50% of the Excess Cash Flow of
the Note Parties for such Fiscal Year; provided, that, the Note
Parties shall be

 

5

 

permitted to prepay an
additional amount equal to 25% of the Excess Cash Flow of the Note Parties for
each such Fiscal Year in clause (A) and (B), which prepayment, for the
avoidance of doubt, shall not require the payment of any Applicable Premium.

 

3.2.4.5.                                     All prepayments
pursuant to this Section 3.2.4 are subject to the terms and
conditions set forth in the Intercreditor Agreement and shall only be required
to be made to the extent expressly permitted to be made pursuant to the terms
and conditions of the Intercreditor Agreement. 
The Issuer shall give the Collateral Agent prior written notice of
making a mandatory prepayment pursuant to Section 2.05(d) of the
Revolving Loan Agreement.

 

3.2.4.6.                                     AHYDO.  Notwithstanding anything to the contrary
contained in Section 3 above, if (1) the Notes remain
outstanding after the fifth anniversary of the initial issuance thereof and (2) the
aggregate amount of the accrued but unpaid interest on the Notes (including
interest paid in kind and any amounts treated as interest for U.S. federal
income tax purposes, such as “original issue discount”) as of any Testing Date
occurring after such fifth anniversary exceeds an amount equal to the Maximum
Accrual, then all such accrued but unpaid interest on the Notes (including any
amounts treated as interest for federal income tax purposes, such as “original
issue discount”) as of such time in excess of an amount equal to the Maximum
Accrual shall be paid in cash by the Issuer (or its successors) to the holders
thereof before the end of such Testing Date, it being the intent of the parties
hereto that the deductibility of interest under the Notes shall not be limited
or deferred by reason of Section 163(i) of the Code.  For these purposes, the “Maximum Accrual” is
an amount equal to the product of such Notes’ issue price (as defined in Code
Sections 1273(b) and 1274(a)) and their yield to maturity, and a “Testing
Date” is any Interest Payment Date and the date on which any “accrual period”
(within the meaning of Section 1272(a)(5) of the Code) closes.

 

3.3                            Prepayment
Procedures.

 

3.3.1.                                             If fewer than
all of the Notes are to be paid or prepaid, the Issuer shall pay or prepay the
Notes on a pro  rata basis.

 

3.3.2.                                             Upon surrender
of a Note that is paid or prepaid in part, the Issuer shall, at the request of
the applicable Note Purchaser, promptly execute and deliver to the holder (at
the expense of the Issuer) a new Note equal in principal amount to the unpaid
portion of the Note surrendered.

 

3.3.3.                                             Each Note
Purchaser agrees that before disposing of the Note held by it, or any part
thereof (other than by granting participations therein), such Note Purchaser
will make a notation thereon of all principal payments previously made thereon
and of the date to which interest thereon has been paid and will notify the
Issuer of the name and address of the transferee of that Note; provided,
that the failure to make (or any error in the making of) a notation of the
payments made under such Note or to notify the Issuer of the name and address
of a transferee shall not limit or otherwise affect the obligation of the
Issuer hereunder or under such Note.

 

3.3.4.                                             All payments or
prepayments (whether voluntary or mandatory) shall include the payment of
accrued and unpaid interest to, but not including, the date of such prepayment
on the principal amount of the Notes so prepaid.

 

6

 

3.3.5.                                             All prepayments
pursuant to this Section 3.3 are subject to the terms and
conditions set forth in the Intercreditor Agreement and shall only be required
to be made to the extent expressly permitted to be made pursuant to the terms
and conditions of the Intercreditor Agreement. 
The Issuer shall give the Collateral Agent prior written notice of
making a mandatory prepayment pursuant to Section 2.05(d) of the
Revolving Loan Agreement.

 

3.4                            Taxes.

 

3.4.1.                                             Subject to Section 3.3.4,
any and all payments by the Issuer hereunder or with respect to any Note or
Note Guarantee shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings in any such case imposed by the United States or any political
subdivision thereof, excluding taxes imposed or based on the recipient Note
Purchaser’s overall net income, and franchise or capital taxes imposed on it in
lieu of net income taxes (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities in respect of payments
hereunder or under the Notes being hereinafter referred to as “Taxes”).  If the Issuer or any Guarantor shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Note Purchaser, (i) the sum payable
shall be increased as may be reasonably necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.4) such Note Purchaser receives an amount
equal to the sum it would have received had no such deductions been made, (ii) the
Issuer or Guarantor shall make such deductions and (iii) the Issuer or
Guarantor shall remit the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.  Within 30 days after the date of any payment
of Taxes, the Issuer or Guarantor shall furnish to such Note Purchaser the
original or certified copy of a receipt evidencing payment thereof.

 

3.4.2.                                             In addition,
the Issuer and the Guarantors agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, performance under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as “Other Taxes”).

 

3.4.3.                                             Each Note
Purchaser of Notes organized under the laws of a jurisdiction outside the
United States, prior to its receipt of any payment on the Notes, shall provide
the Issuer with (i) Internal Revenue Service Form W-8ECI, W-8BEN,
W-8EXP or W-8IMY, as appropriate, or any successor form prescribed by the
Internal Revenue Service, certifying that such Note Purchaser is entitled to
benefits under an income tax treaty to which the United States is a party, which
exempts the recipient from United States withholding tax on payments of
interest or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
and (iii) any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of
the Code), certifying that such Note Purchaser is entitled to an exemption from
United States withholding tax on interest payments made pursuant to this
Agreement.

 

3.4.4.                                             For any period
with respect to which a Note Purchaser has failed to provide the Issuer with
the appropriate form pursuant to Section 3.4.3, such Note Purchaser
shall not be entitled to any additional amounts or indemnification under this Section 3.4
with respect to Taxes imposed by the United States; provided, however, that
should a Note Purchaser which is otherwise

 

7

 

exempt from Taxes become
subject to Taxes because of its failure to deliver a form required hereunder,
the Issuer shall take such steps as such Note Purchaser shall reasonably request
to assist such Note Purchaser to recover such Taxes.

 

3.4.5.                                             The Issuer and
the Guarantors will indemnify each Note Purchaser for the full amount of Taxes
or Other Taxes as provided in Sections 3.4.1 and 3.4.2 (to the
extent not previously paid under Section 3.4.1 or 3.4.2
above) imposed on such Note Purchaser and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto.  Payment in respect of any such
indemnification shall be made within 30 days from the date such Note Purchaser
makes written demand therefor.

 

3.4.6.                                             In the event
that the Issuer or a Guarantor makes an additional payment under Section 3.4.1,
3.4.2 or 3.4.5 for the account of any Note Purchaser and such
Note Purchaser, in its sole opinion and absolute discretion, determines that it
has finally and irrevocably received or been granted a credit against, or
relief or remission from, or repayment of, any tax paid or payable by it in
respect of or calculated with reference to the deduction or withholding giving
rise to such additional payment, such Note Purchaser shall, to the extent that
it determines that it can do so without prejudice to the retention of the
amount of such credit, relief, remission or repayment, pay to the Issuer or
Guarantor, as applicable, such amount as such Note Purchaser shall, in its sole
opinion, have determined is attributable to such deduction or withholding and
will leave such Note Purchaser (after such payment) in no worse position than
it would have been had the Issuer or Guarantor not been required to make such
deduction or withholding.  Nothing
contained herein shall (i) interfere with the right of a Note Purchaser to
arrange its tax affairs in whatever manner it thinks fit or (ii) oblige
any Note Purchaser to claim any tax credit or to disclose any information
relating to its tax affairs or any computations in respect thereof or (iii) require
any Note Purchaser to take or refrain from taking any action that would
prejudice its ability to benefit from any other credits, reliefs, remissions or
repayments to which it may be entitled.

 

3.4.7.                                             Without
prejudice to the survival of any other agreement hereunder, the agreements and
obligations contained in this Section 3.4 shall survive the payment
in full of principal and interest under the Notes.

 

3.5                            Manner and Time
of Payment.

 

3.5.1.                                             All payments
with respect to any Notes shall be made pro  rata to the Note
Purchasers without defense, set off or counterclaim in same day funds and shall
be made by wire transfer to the Note Purchasers’ respective accounts designated
in Schedule II hereto (or such other account or address or to the
attention of such other Person as the applicable Note Purchaser shall have
specified by prior written notice to the Issuer) so as to be actually received
not later than 3:00 p.m. (Boston time) on the date such payment is due; provided
that funds received by such Note Purchasers after 3:00 p.m. (Boston time)
shall be deemed to have been paid on the next succeeding Business Day.

 

3.5.2.                                             Whenever any
payment to be made hereunder or under the Notes shall be stated to be due on a
day which is not a Business Day, the payment shall be made on the next
succeeding Business Day and such additional period shall be included in the
computation of the payment of interest hereunder or under the Notes.

 

8

 

SECTION 4. 
REPRESENTATIONS AND WARRANTIES OF NOTE PURCHASERS.

 

In order to induce the Issuer to enter into this
Agreement, each Note Purchaser individually (but not on behalf of any other
Note Purchaser) represents and warrants for the benefit of the other Note
Purchasers and the Issuer that, as of the Closing Date:

 

4.1                                 Legal Capacity;
Due Authorization.  Such Note
Purchaser has full legal capacity, power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and that this Agreement
has been duly executed and delivered by such Note Purchaser and is the legal,
valid and binding obligation of such Note Purchaser enforceable against it in
accordance with the terms hereof.

 

4.2                                 Restrictions on
Transfer.  Such Note
Purchaser has been advised that the Notes have not been registered under the
Securities Act or any state securities laws and, therefore, cannot be resold
unless they are registered under the Securities Act and applicable state
securities laws or unless an exemption from such registration requirements is
available, and that the Notes may have to be held by such Note Purchaser for an
indefinite period of time.  Such Note
Purchaser is aware that the Issuer is not under any obligation to effect any
such registration with respect to the Notes or to file for or comply with any
exemption from registration.  Such Note
Purchaser is purchasing the Notes to be acquired by such Note Purchaser
hereunder for its own account and not with a view to, or for resale in
connection with, the distribution thereof in violation of the Securities Act;
provided, however, that except as provided in Section 10 of this
Agreement, the disposition of such Note Purchaser’s property shall at all times
be and remain in its control and sole discretion.

 

4.3                                 Accredited
Investor, etc.  Such Note
Purchaser has such knowledge and experience in financial and business matters
so as to be capable of evaluating the merits and risks of such investment, is
able to incur a complete loss of such investment and to bear the economic risk
of such investment for an indefinite period of time.  Such Note Purchaser (i) is an “accredited
investor” as that term is defined in Regulation D under the Securities Act and (ii) has
been represented by counsel in the purchase of the Notes to be purchased by it
and is aware of the limitations of state and federal securities laws with
respect to the disposition of the Notes. 
Such Note Purchaser acknowledges that such Note Purchaser has had an
opportunity to examine the financial and business affairs of the Issuer and the
Note Parties and an opportunity to ask questions of and receive answers from
the Issuer’s and the Note Parties’ management.

 

4.4                                 No
Advertisement.  There has
been no advertisement by such Note Purchaser of the Notes in printed public
media, radio, television or telecommunications, including electronic display
(for the avoidance of doubt, after the Closing Date the Note Purchasers may
advertise entering into the transactions contemplated by this Agreement).

 

SECTION 5. 
REPRESENTATIONS AND WARRANTIES OF THE NOTE PARTIES.

 

In order to induce each Note Purchaser to enter into
this Agreement and to purchase the Notes to be purchased by such Note Purchaser
hereunder, each Note Party represents and warrants to the Collateral Agent and
each Note Purchaser that:

 

5.1                                 Existence,
Qualification and Power.  Each Note Party and each
Subsidiary thereof: (a) is a corporation, limited liability company,
partnership or limited partnership, duly organized or formed, validly existing
and, where applicable, in good standing under the Laws of the jurisdiction

 

9

 

of its incorporation or
organization; (b) has all requisite power and authority and all requisite
governmental licenses, permits, authorizations, consents and approvals to (i) own
or lease its assets and carry on its business as currently conducted or as
proposed to be conducted and (ii) execute, deliver and perform its
obligations under the Note Documents to which it is a party; and (c) is
duly qualified and is licensed and, where applicable, in good standing under
the Laws of each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification or
license; except in each case referred to in clause (b)(i) or (c), to the
extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.  Schedule 5.1
annexed hereto sets forth, as of the Closing Date, each Note Party’s name as it
appears in official filings in its state of incorporation or organization and
the name under which each Note Party conducts its business (if different), its
state of incorporation or organization, organization type, organization number,
if any, issued by its state of incorporation or organization, its federal
employer identification number and the address of its chief executive office
and principal place of business.

 

5.2                                 Authorization;
No Contravention.  The
execution, delivery and performance by each Note Party of each Note Document to
which such Person is, or is to be, a party has been duly authorized by all
necessary corporate or other organizational action and does not and will not: (a) contravene
the terms of any of such Person’s Governing Documents; (b) conflict in any
material respect with, or result in any breach, termination, or contravention
of, or constitute a default under, or require any payment to be made under (i) any
Material Contract or any Material Indebtedness to which such Person is a party
or affecting such Person or the properties of such Person or any of its
Subsidiaries, (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which such Person or its
property is subject, or (iii) any governmental licenses, permits,
authorizations, consents and approvals, except in each case referred to in this
clause (b), to the extent that any such conflict, breach, termination,
contravention or default could not reasonably be expected to have a Material
Adverse Effect; (c) result in or require the creation of any Lien upon any
asset of any Note Party (other than Liens in favor of the Collateral Agent
under the Collateral Documents); or (d) violate any Law.

 

5.3                                 Governmental
Authorization; Other Consents.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Note Party of this Agreement or any other Note Document, except
for (a) the perfection or maintenance of the Liens created under the
Collateral Documents (having the priority set forth in the Intercreditor
Agreement), or (b) such as
have been obtained or made and are in full force and effect.

 

5.4                                 Binding Effect.  This Agreement has been, and each other Note
Document, when delivered, will have been, duly executed and delivered by each
Note Party that is party thereto.  This
Agreement constitutes, and each other Note Document when so delivered will
constitute, a legal, valid and binding obligation of such Note Party,
enforceable against each Note Party that is party thereto in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in
equity or at law.

 

5.5                                 Financial
Statements; No Material Adverse Effect.

 

5.5.1.                                             The audited
consolidated, balance sheet of the Note Parties and their Subsidiaries as at February 2,
2008, and the audited statements of income and related cash flows of

 

10

 

each such Persons for the
Fiscal Year then ended (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; (ii) fairly present the financial condition of
the Issuer and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein; and (iii) show all Material Indebtedness and other
liabilities, direct or contingent, of the Issuer and its Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments and
Indebtedness.

 

5.5.2.                                             The unaudited
Consolidated balance sheet of the Issuer and its Subsidiaries dated May, 2008,
and the related Consolidated statements of income or operations, Shareholders’
Equity and cash flows for the Fiscal Month ended on that date (i) were
prepared in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein, and (ii) fairly
present the financial condition of the Issuer and its Subsidiaries as of the
date thereof and their results of operations for the period covered thereby,
subject, in the case of clauses (i) and (ii), to the absence of footnotes
and to normal year-end audit adjustments.

 

5.5.3.                                             Projections for
the Note Parties and their Subsidiaries for the five year period ended on or
around January 31, 2012 (the “Projections”).  The Projections are based upon estimates and
assumptions stated therein, all of which the Issuer believes to be reasonable
and fair in light of reasonably foreseeable business conditions and current
facts known to the Issuer and, as of the Closing Date, reflects the Issuer’s
good faith and reasonable estimate of the future financial performance of the
Note Parties and of the other information projected therein for the period set
forth therein, it being recognized by the Note Purchasers that such projections
as they relate to future events are not to be viewed as fact and that actual
results during the period or periods covered by such Projections may differ
from the projected results set forth therein.

 

5.5.4.                                             Since February 2,
2008, there has been no event or circumstance, either individually or in the
aggregate, that has had or could reasonably be expected to have a Material
Adverse Effect.

 

5.6                            Litigation.  Except as otherwise set forth in Schedule
5.6, there are no actions, suits, judgments, proceedings, claims or
disputes pending or, to the knowledge of the Note Parties after due and
diligent investigation, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, by or against any Note Party
or any of its Subsidiaries or against any of its properties or revenues that (a) purport
to affect or pertain to this Agreement or any other Note Document, or any of
the transactions contemplated hereby, or (b) either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.7                            No Default.  No Note Party or any Subsidiary is in default
under or with respect to, or party to, any Material Contract or any Material
Indebtedness.  No Default has occurred
and is continuing or would result from the consummation of the transactions
contemplated by this Agreement or any other Note Document.

 

5.8                            Ownership of
Property; Liens; Lease Agreements.

 

5.8.1.                                             Each of the
Note Parties and each Subsidiary thereof has good record and marketable title
in fee simple to all
real property owned by such Person necessary or used in the

 

11

 

ordinary conduct of its business, free and clear of all
Liens, other than Permitted Encumbrances. 
Each of the Note Parties and each Subsidiary thereof has valid leasehold
interests in at least 95% of all the real property leased by such Person necessary or used in the
ordinary conduct of its business, free and clear of all Liens, other than
Permitted Encumbrances and, as to the remaining 5% of such leased property,
there are no defaults under such leasehold interests, except for such defaults
that could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.  Each of
the Note Parties and each Subsidiary has good and marketable title to or a
valid leasehold interest in all personal property and assets necessary or used
in to the ordinary conduct of its business (excluding Intellectual Property) as
currently conducted or as proposed to be conducted,  free and clear of all Liens, other than
Permitted Encumbrances, except for such defects in title and leasehold
interests as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. 
Each of the Note Parties and each Subsidiary has good and marketable
title to, valid leasehold interests in, or valid licenses to use, all
Intellectual Property necessary or used in the ordinary conduct of its business
as currently conducted or as proposed to be conducted,  free and clear of all Liens,
other than Permitted Encumbrances

 

5.8.2.                                             Schedule 5.8.2(1) sets forth the
address (including street address, county and state) of all Real Estate that is
owned by the Note Parties, together with a list of the holders of any mortgage
or other Lien thereon as of the Closing Date. 
Each Note Party and each of its Subsidiaries has good, marketable and
insurable fee simple title to the real property owned by such Note Party or
such Subsidiary, free and clear of all Liens, other than Permitted
Encumbrances, except for such defects in title as could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.  Schedule 5.8.2(2) sets forth the
address (including street address, county and state) of all Leases of the Note
Parties, together with a list of the lessor and its contact information with
respect to each such Lease as of the Closing Date.  At least 95% of the aggregate number of
Leases are in full force and effect as of the Closing Date and the Note Parties
are not in default of the terms of such Leases. There is no current litigation,
threatened litigation or material disputes in respect of any of the Leases;
except, in each case, as could not reasonably be expected to have a Material
Adverse Effect.  None of the Leases are
part of a master lease agreement.

 

5.8.3.                                             Schedule 5.8.3 sets forth a
complete and accurate list of all Liens on the property or assets of each Note
Party and each of its Subsidiaries, showing as of the date hereof the
lienholder thereof, the property or assets of such Note Party or such
Subsidiary subject thereto and for each Lien that secures Indebtedness in
excess of $1,000,000, the principal amount of the obligations secured thereby.  The property of each Note Party and each of
its Subsidiaries is subject to no Liens, other than Liens set forth on Schedule
5.8.3, and Permitted Encumbrances; provided, that, the aggregate amount of
Indebtedness secured by the Liens set forth on Schedule 5.8.3 shall not
exceed $3,000,000.

 

5.8.4.                                             Schedule 5.8.4 sets forth a
complete and accurate list of all Investments held by any Note Party or any
Subsidiary of a Note Party on the date hereof, showing as of the date hereof
the amount, obligor or issuer and maturity, if any, thereof.

 

5.8.5.                                             Schedule 5.8.5 sets forth a
complete and accurate list of all Indebtedness of each Note Party or any
Subsidiary of a Note Party as of the Closing Date, showing as of the Closing
Date the amount, obligor or issuer and maturity thereof and Schedule T-1
sets forth a complete and accurate list of all letters of credit of the Note
Parties.  As of the Closing Date, after
giving effect to the transactions contemplated hereby, the Note Parties have no
Indebtedness except for the Note Obligations, the Indebtedness set forth on Schedule
5.8.5 and Permitted Indebtedness.

 

12

 

5.9                            Environmental
Compliance.

 

5.9.1.                                             No Note Party
or any Subsidiary thereof (i) has failed to comply with any Environmental
Law or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with
respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability, except in each case, as could not, individually or in
the aggregate be expected to have a Material Adverse Effect.

 

5.9.2.                                             Except as
otherwise set forth in Schedule 5.9, to the knowledge of the Note
Parties, none of the properties currently or formerly owned or operated by any
Note Party or any Subsidiary thereof is listed or proposed for listing on the
NPL or on the CERCLIS or any analogous foreign, state or local list or is
adjacent to any such property; there are no and never have been any underground
or above-ground storage tanks or any surface impoundments, septic tanks, pits,
sumps or lagoons in which Hazardous Materials are being or have been treated,
stored or disposed on any property currently owned or operated by any Note
Party or any Subsidiary thereof or, to the best of the knowledge of the Note
Parties, on any property formerly owned or operated by any Note Party or
Subsidiary thereof; there is no asbestos or asbestos-containing material on any
property currently owned or operated by any Note Party or Subsidiary thereof;
and Hazardous Materials have not been released, discharged or disposed of on
any property currently or formerly owned or operated by any Note Party or any
Subsidiary thereof.

 

5.9.3.                                             Except as
otherwise set forth on Schedule 5.9, no Note Party or any Subsidiary
thereof is undertaking, and no Note Party or any Subsidiary thereof has
completed, either individually or together with other potentially responsible
parties, any investigation or assessment or remedial or response action
relating to any actual or threatened release, discharge or disposal of
Hazardous Materials at any site, location or operation, either voluntarily or
pursuant to the order of any Governmental Authority or the requirements of any
Environmental Law; and all Hazardous Materials generated, used, treated,
handled or stored at, or transported to or from, any property currently or
formerly owned or operated by any Note Party or any Subsidiary thereof have
been disposed of in a manner not reasonably expected to result in material
liability to any Note Party or any Subsidiary thereof.

 

5.10                      Insurance.  The properties of the Note Parties and their
Subsidiaries are insured with financially sound and reputable insurance companies
which are not Affiliates of the Note Parties, in such amounts, with such
deductibles and covering such risks (including, without limitation, workmen’s
compensation, public liability, business interruption and property damage
insurance) as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Note Parties
or the applicable Subsidiary operates.  Schedule
5.10 sets forth a description of all insurance maintained by or on behalf
of the Note Parties as of the Closing Date. Each insurance policy listed on Schedule
5.10 is in full force and effect and all premiums in respect thereof that
are due and payable have been paid.

 

5.11                           Taxes.  The Note Parties and their Subsidiaries have
filed all Federal, state and other material tax returns and reports required to
be filed, and have paid all Federal, state and other material taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets otherwise due and payable, except those
which are being contested in good faith by appropriate proceedings being
diligently conducted, for which adequate reserves have been provided in
accordance with GAAP, as to which Taxes no Lien has been filed and which

 

13

 

contest effectively suspends
the collection of the contested obligation and the enforcement of any Lien
securing such obligation.  There is no
proposed tax assessment against any Note Party or any Subsidiary that would, if
made, have a Material Adverse Effect.  No
Note Party or any Subsidiary thereof is a party to any tax sharing agreement.

 

5.12                      ERISA
Compliance.

 

5.12.1.                                       Each Plan is in
compliance in all material respects with the applicable provisions of ERISA,
the Code and other Federal or state Laws. 
Each Plan that is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the Internal
Revenue Service or an application for such a letter is currently being
processed by the Internal Revenue Service with respect thereto and, to the best
knowledge of the Issuer, nothing has occurred which would prevent, or cause the
loss of, such qualification.  The Note
Parties and each ERISA Affiliate have made all required contributions to each
Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412
of the Code has been made with respect to any Plan.  No Lien imposed under the Code or ERISA
exists or, to the knowledge of the Issuer, is likely to arise on account of any
Plan.

 

5.12.2.                                       There are no
pending or, to the best knowledge of the Issuer, threatened claims, actions or
lawsuits, or action by any Governmental Authority, with respect to any
Plan.  To the best knowledge of the
Issuer, there has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan.

 

5.12.3.                                       Except as could
not reasonably be expected to have a Material Adverse Effect, individually or
in the aggregate: (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension
Liability; (iii) neither any Note Party nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA
with respect to any Pension Plan (other than premiums due and not delinquent
under Section 4007 of ERISA); (iv) neither any Note Party nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA
with respect to a Multiemployer Plan; and (v) neither any Note Party nor
any ERISA Affiliate has engaged in a transaction that could be subject to
Sections 4069 or 4212(c) of ERISA.

 

5.13                      Subsidiaries;
Equity Interests.  The Note
Parties have no Subsidiaries other than those specifically disclosed in Part (a) of
Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of
incorporation or formation and authorized Equity Interests of each such
Subsidiary, listed by class, and setting forth the number and percentage of the
outstanding Equity Interests of each such class owned directly or indirectly by
the applicable Note Party.  All of the
outstanding Equity Interests in such Subsidiaries have been validly issued, are
fully paid and non-assessable and are owned by a Note Party (or a Subsidiary of
a Note Party) in the amounts specified on Part (a) of Schedule
5.13, free and clear of all Liens except for those created under the
Security Documents and the Collateral Documents.  The Note Parties have no equity investments
in any other corporation or entity other than those specifically disclosed in Part (b) of
Schedule 5.13.  Part (c) of
Schedule 5.13 is a complete and accurate description of the authorized
Equity Interests of each Note Party, by class, and a description of the number
of shares of each such class that are issued and outstanding.  All of the outstanding Equity Interests in
the Note Parties have been validly issued, and are fully paid and
non-assessable and, other than with respect to the Issuer, are owned in the
amounts specified on Part (c) of Schedule 5.13, free and clear
of all Liens except for those created under the

 

14

 

Security Documents and the
Collateral Documents.  Except as set
forth in Schedule 5.13, there are no subscriptions, options, warrants,
or calls relating to any shares of any Note Party’s Equity Interests, including
any right of conversion or exchange under any outstanding security or other
instrument.  No Note Party is subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its Equity Interests or any security convertible into or
exchangeable for any of its Equity Interests. 
The copies of the Governing Documents of each Note Party and each
amendment thereto provided pursuant to Section 6.3 are true and
correct copies of each such document, each of which is valid and in full force
and effect.

 

5.14                      Margin
Regulations; Investment Company Act.

 

5.14.1.                                       No Note Party
is engaged or will be engaged, principally or as one of its important
activities, in the business of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the FRB), or extending credit for the purpose
of purchasing or carrying margin stock. 
None of the proceeds from the sale of the Notes shall be used directly
or indirectly for the purpose of purchasing or carrying any margin stock, for
the purpose of reducing or retiring any Indebtedness that was originally
incurred to purchase or carry any margin stock or for any other purpose that
might cause any of the sale of the Notes to be considered a “purpose credit”
within the meaning of Regulations T, U, or X issued by the FRB.

 

5.14.2.                                       None of the
Note Parties, any Person Controlling any Note Party, or any Subsidiary is or is
required to be registered as an “investment company” under the Investment
Company Act of 1940.

 

5.15                      Disclosure.  Each Note Party has disclosed to the
Collateral Agent and the Note Purchasers all agreements, instruments and
corporate or other restrictions to which it or any of its Subsidiaries is
subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
Effect.  No report, financial statement,
certificate or other information furnished (whether in writing or orally) by or
on behalf of any Note Party to the Collateral Agent or any Note Purchasers in
connection with the transactions contemplated hereby and the negotiation of
this Agreement or delivered hereunder or under any other Note Document (in each
case, as modified or supplemented by other information so furnished), contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided  that, with respect to
projected financial information, the Note Parties represent only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

 

5.16                      Compliance with
Laws.  Each of the Note Parties and
each Subsidiary is in compliance in all respects with the requirements of all
applicable Laws and all orders, writs, injunctions and decrees applicable to it
or to its properties, except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in
good faith by appropriate proceedings diligently conducted or (b) the
failure to comply therewith, either individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.

 

5.17                      Intellectual
Property; Licenses, Etc.  Each
Note Party owns, or holds licenses in, all Intellectual Property, trade names,
patent rights and other authorizations that are necessary to the conduct of its
business as currently conducted and as proposed to be conducted, and attached
hereto

 

15

 

as Schedule 5.17 is a
true, correct, and complete listing of all material patents, patent
applications, trademarks, trademark applications, copyrights, and copyright
registrations as to which a Note Party is the owner or is an exclusive
licensee.  To the best knowledge of the
Issuer after reasonable inquiry, (i) there is no action, proceeding, claim
or complaint pending or, threatened in writing to be brought against any Note
Party which might jeopardize any of such Person’s interest in any of the
foregoing licenses, patents, copyrights, trademarks, trade names, designs or
applications, except those which are not, in the aggregate, material to the
Note Parties’ financial condition, results of operations or business and (ii) no
slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by any Note
Party or any Subsidiary infringes upon any rights held by any other Person.

 

5.18                      Labor Matters.  There are no strikes, lockouts, slowdowns or
other material labor disputes against any Note Party or any Subsidiary thereof
pending or, to the knowledge of any Note Party, threatened which, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 5.18(1), the hours worked by and
payments made to employees of the Note Parties comply with the Fair Labor
Standards Act and any other applicable federal, state, local or foreign Law
dealing with such matters, except for any noncompliance which, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.   Except as set forth on Schedule 5.18(2),
no Note Party or any of its Subsidiaries has incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act or
similar state Law.  All payments due from
any Note Party and its Subsidiaries, or for which any claim may be made against
any Note Party, on account of wages and employee health and welfare insurance
and other benefits, have been paid or properly accrued in accordance with GAAP
as a liability on the books of such Note Party. Except as set forth on Schedule
5.18(3), no Note Party or any Subsidiary is a party to or bound by (i) any
collective bargaining agreement, or (ii) management agreement, employment
agreement, bonus, restricted stock, stock option, or stock appreciation plan or
agreement or any similar plan, agreement or arrangement, in each case in this
clause (ii), imposing commitments on such Note Party or Subsidiary under such
agreement in excess of $3,000,000 per year. There are no representation
proceedings pending or, to any Note Party’s knowledge, threatened to be filed
with the National Labor Relations Board, and no labor organization or group of
employees of any Note Party or any Subsidiary has made a pending demand for
recognition. There are no complaints, unfair labor practice charges, grievances,
arbitrations, unfair employment practices charges or any other claims or
complaints against any Note Party or any Subsidiary pending or, to the
knowledge of any Note Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment of any
employee of any Note Party or any of its Subsidiaries which, either
individually or in the aggregate, could reasonably be expected to have a Material
Adverse Effect.  The consummation of the
transactions contemplated by the Note Documents will not give rise to any right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which any Note Party or any of its
Subsidiaries is bound.  Each Note Party
and its Subsidiaries are in material compliance with all requirements pursuant
to employment standards, labor relations, health and safety, workers
compensation and human rights laws, immigration laws and other applicable
employment legislation.  To the knowledge
of the Note Parties, no officer or director of any Note Party who is party to
an employment agreement with such Note Party is in violation of any term of any
employment contract or proprietary information agreement with such Note Party;
and to the knowledge of the Note Parties, the execution of the employment
agreements and the continued employment by the Note Parties of the such
persons, will not result in any such violation.

 

16

 

Schedule 5.18(4) sets forth the names and titles of each
officer and director of each Note Party who is party to an employment
agreement.

 

5.19         Collateral Documents.  The Collateral Documents are effective to
create in favor of the Collateral Agent for the benefit of the Note Purchasers
a legal, valid and enforceable security interest in the Collateral, and the
Collateral Documents constitute, or will upon the filing of financing
statements and/or the obtaining of “control”, in each case with respect to the
relevant Collateral as required under the applicable Uniform Commercial Code,
the creation of a fully perfected Lien on, and security interest in, all right,
title and interest of the Note Parties thereunder in such Collateral, in each
case prior and superior in right to any other Person, except for (a) with
respect to the Revolving Lenders Priority Collateral (as defined in the
Intercreditor Agreement) only, Liens securing the obligations of the Issuer
with respect to the Revolving Loan Documents, and (b) other Permitted
Encumbrances having priority under applicable Law.

 

5.20         Solvency.  After giving effect to the transactions
contemplated by this Agreement, each Note Party on a Consolidated basis are
Solvent. No transfer of property has been or will be made by any Note Party and
no obligation has been or will be incurred by any Note Party in connection with
the transactions contemplated by this Agreement or the other Note Documents
with the intent to hinder, delay, or defraud either present or future creditors
of any Note Party.

 

5.21         Deposit Accounts;
Credit Card Arrangements.

 

5.21.1.             Annexed hereto as Schedule
5.21.1 is a list of all DDAs maintained by the Note Parties as of the
Closing Date, which Schedule includes, with respect to each DDA (i) the
name and address of the depository; (ii) the account number(s) maintained
with such depository; (iii) a contact person at such depository, and (iv) the
identification of each blocked account bank.

 

5.21.2.             Annexed hereto as Schedule
5.21.2 is a list describing all arrangements as of the Closing Date to
which any Note Party is a party with respect to the processing and/or payment
to such Note Party of the proceeds of any credit card charges for sales made by
such Note Party.

 

5.22         Brokers.  Other than those set forth on Schedule
5.22, no broker or finder brought about the obtaining, making or closing of
the Notes or transactions contemplated by the Note Documents, and no Note Party
or Affiliate thereof has any obligation to any Person in respect of any finder’s
or brokerage fees in connection therewith. 
Each Note Party hereby jointly and severally indemnifies each Credit
Party against, and agrees that such Person will hold each such Credit Party
harmless from, any claim, demand or liability, including reasonable attorneys’
fees, for any broker’s, finder’s or placement fee or commission incurred by
such indemnifying party or the Issuer or its Affiliates or a representative of
such Person.

 

5.23         Customer and Trade
Relations.  There exists no actual
or, to the knowledge of any Note Party, threatened, termination or cancellation
of, or any material adverse modification or change in the business relationship
of any Note Party with any customer or supplier which represents over 5% of
annual purchase or supply commitments of the Note Parties.

 

5.24         Material Contracts.  No Note Party is in default under any
contract, lease or commitment to which such Person is a party or by which such
Person is bound,  under contracts, leases
or commitments which are not, individually or in the aggregate, material to
such Person’s financial condition, results of operations or business.  Set forth on Schedule 5.24 is a
description of

 

17

 

all Material
Contracts of the Note Parties, showing the parties and principal subject matter
thereof and amendments and modifications thereto; provided, however,
that the Issuer may amend Schedule 5.24 to add additional Material
Contracts so long as such amendment occurs by written notice to the Collateral Agent
not less than 5 days after the date on which such Note Party enters into such
Material Contract after the Closing Date. 
Except for matters which, either individually or in the aggregate, could
not reasonably be expected to either result in a Material Adverse Effect or
expose the Note Parties to liabilities greater than $5,000,000, each Material
Contract (other than those that have expired at the end of their normal terms) (a) is
in full force and effect and is binding upon and enforceable against the
applicable Note Party or its Subsidiaries and, to the best of the Issuer’s
knowledge, each other Person that is a party thereto in accordance with its
terms, (b)  is not in default due to the action or inaction of any Note
Party or its Subsidiaries and (c) the consummation of the financing
arrangements contemplated hereunder, will not constitute or create a default or
create a right of termination under any Material Contract.

 

5.25         Casualty.  Neither the businesses nor the properties of
any Note Party or any of its Subsidiaries are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance) that, either individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.26         Anti-Terrorism Laws.

 

5.26.1.             General
Anti-Terrorism Laws.  To the
knowledge of the Note Parties, after reasonable inquiry, none of the Note
Parties nor any direct or indirect investor in any Note Party (other than the
Note Purchasers or any direct or indirect investors in the Note Purchasers), is
in violation of any Anti-Terrorism Law or engages in or conspires to engage in
any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.

 

5.26.2.             Blocked Persons.  To the knowledge of the Note Parties, after
reasonable inquiry, none of the Note Parties nor any direct or indirect
investor in any Note Party (other than the Note Purchasers or any direct or
indirect investors in the Note Purchasers), or their respective agents acting
or benefiting in any capacity in connection with the transactions hereunder, is
any of the following (each a “Blocked Person”):

 

5.26.2.1.          a Person that is listed
in the annex to, or is otherwise subject to the provisions of, the Executive
Order No. 13224;

 

5.26.2.2.          a Person owned or
controlled  by, or acting for or on
behalf of, any Person that is listed in the annex to, or is otherwise subject
to the provisions of, the Executive Order No. 13224;

 

5.26.2.3.          a Person or entity with
which any Note Purchaser is prohibited from dealing or otherwise engaging in
any transaction by any Anti-Terrorism Law;

 

5.26.2.4.          a Person or entity that
commits, threatens or conspires to commit or supports “terrorism” as defined in
the Executive Order No. 13224;

 

18

 

5.26.2.5.          a Person or entity that
is named as a “specially designated national” on the most current list
published by the U.S. Treasury Department Office of Foreign Asset Control at
its official website or any replacement website or other replacement official
publication of such list; or

 

5.26.2.6.          a person or entity who
is affiliated or associated with a person or entity listed above.

 

5.26.3.             Executive Order No. 13224.  To the best knowledge of the Note Parties,
after reasonable inquiry, none of the Note Parties nor, to the knowledge of the
Note Parties, any of its or their agents acting in any capacity in connection
with the transactions hereunder (i) conducts any business or engages in
making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person, or (ii) deals in, or otherwise engages in
any transaction relating to, any property or interests in property blocked
pursuant to the Executive Order No. 13224.

 

5.27         Valid Issuance of the Notes.  The
Notes, when issued, sold and delivered in accordance with the terms hereof for
the consideration expressed herein, will be duly and validly authorized and
issued and
free of restrictions on transfer, other than restrictions imposed under this
Agreement and applicable securities laws. 
Based in part upon the representations of the Note Purchasers in Section 4,
the Notes will be issued in compliance with all United States securities laws.

 

5.28         Private Placement. 
Assuming the truth and accuracy of the Note Purchasers’ representations
set forth in Section 4.3 of this Agreement, the initial offer, sale
and issuance of the Notes to the Note Purchasers as contemplated by this
Agreement is exempt from the prospectus and registration requirements of the
Securities Act.  Neither the Issuer nor
any authorized agent acting on its behalf of it will take any action hereafter
that would cause the loss of such exemption.

 

5.29         Transition Services
Agreement.  No changes have been made
to the Transition Services Agreement or the Asset Purchase Agreement.

 

5.30         New Headquarters.  All liabilities relating to the New
Headquarters have been fully disclosed to the Note Purchasers and it is
reasonably expected that future liability will not exceed $2,000,000.  For the avoidance of doubt, Capital
Expenditures incurred after the Closing Date shall not be considered
liabilities for purposes of this Section 5.30.

 

5.31         Stock Options. All
liabilities relating to the Stock Options have been fully disclosed to the Note
Purchasers.

 

5.32         License Agreements.  The Note Parties (as applicable) are in
compliance with the terms and conditions of the License Agreements and there is
no current litigation, threatened litigation or material disputes in respect of
any of the License Agreements.

 

5.33         Hoop Expenses.  Schedule 5.33 correctly sets forth the
cash costs actually incurred by the Note Parties and an estimate of reasonable
projected cash costs of the Note Parties relating to the Hoop bankruptcy proceedings and the Hoop
Sale.

 

5.34         Product Recall.  There has been no material product recall of
any of the products of the Note Parties.

 

19

 

SECTION 6. 
CLOSING CONDITIONS.

 

The obligation of each Note Purchaser to purchase
and pay for the Notes provided for hereunder is subject to the satisfaction or
waiver by the Note Purchasers of the following conditions, each as of the
Closing Date:

 

6.1           Representations and Warranties; No Default.  All
representations and warranties of the Note Parties contained in this Agreement
shall be true and correct in all material respects, and there shall exist no
Default or Event of Default under any of the Note Documents or any other
material agreement to which any Note Party is a party as of the Closing Date,
after giving effect to the transactions contemplated hereby.

 

6.2           Use of Proceeds.  The
proceeds from the issuance of the Notes shall be used for the purposes set
forth in Section 2.4.

 

6.3           Delivery of Documents.  The
Note Purchasers shall have received the following items, each of which shall be
in form and substance reasonably satisfactory to the Note Purchasers and,
unless otherwise noted, dated the Closing Date:

 

6.3.1.               Duly executed copies of this Agreement, the
other Note Documents to which any Note Party is a party, and the Notes issued
in the names of the respective Note Purchasers as set forth on Schedule I.

 

6.3.2.               Duly executed copies of the release
agreement, settlement agreement, settlement order and other documents related
to the termination of the Issuer’s agreements with the Disney Store, including
any modifications or amendments thereof (the “Disney Store Termination
Agreements”), which shall each be in a form acceptable to the Note
Purchasers in their sole discretion.

 

6.3.3.               Duly executed copies of the Revolving Loan
Documents.

 

6.3.4.               Resolutions of the board of directors or
other equivalent governing body of each Note Party, approving the transactions
contemplated by this Agreement and each other Note Document to which such Note
Party is a party, and approving and authorizing the execution, delivery and performance
of this Agreement and each of the other Note Documents to which it is a party
and approving and authorizing, as applicable, the issuance and sale of the
Notes, the execution, delivery and payment of the Notes, in each case,
certified as of the Closing Date by such party’s Secretary or an Assistant
Secretary or other equivalent officer as being in full force and effect without
modification or amendment.

 

6.3.5.               A certificate of the Secretary or an
Assistant Secretary or other equivalent officer of each Note Party, dated the
Closing Date, as to the incumbency and signature of the officers of each Note
Party executing this Agreement, any certificate or other documents to be
delivered by it pursuant hereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary or other equivalent officer;

 

6.3.6.               A copy of a certificate of the Secretary of
State, Registrar or similar Governmental Authority of the jurisdiction of
organization of each Note Party, dated as of a recent

 

20

 

date prior to the Closing
Date, and certifying that (i) if applicable, each Note Party has paid all
franchise taxes due as of the date of such certificate, and (ii) each Note
Party is duly organized and (to the extent applicable in its jurisdiction of
organization) in good standing under the laws of the jurisdiction of its
organization.

 

6.3.7.               A certificate of each Note Party signed on
its behalf by an officer or manager duly authorized, dated the Closing Date (the
statements made in which certificate shall be true on and as of such date)
listing all Governing Documents of such Persons, including any amendments
thereto, certifying that (i) such copies are true and correct copies of
the (A) Governing Documents and all amendments thereto, (B) its
bylaws as in effect on the Closing Date (which shall be reasonably satisfactory
to the Note Purchasers in all respects), (C) a good standing certificate
with respect to such Person issued by the Secretary of State of the jurisdiction
of its organization, (ii) there has not been any proceeding for the
dissolution or liquidation of such Person, (iii) the representations and
warranties of the Note Parties contained in this Agreement are true in all
respects as of the Closing Date (except to the extent that such representation
or warranty expressly relates to an earlier date and except for representations
and warranties that are not qualified by materiality, which are true in all
material respects), (iv) no event has occurred and is continuing or would
result from the transactions contemplated under this Agreements, that
constitutes a Default or an Event of Default, (v) the Note Parties on a
consolidated basis are Solvent, (vi) such Person is in compliance with all
terms of this Agreement as of the Closing Date (except for representations and
warranties in Section 5 that are not qualified by materiality,
which are true in all material respects), (vii) the conditions specified
in Section 6 have been fulfilled in all respects (except as expressly
waived in writing by the Collateral Agent) and (viii) such Person is duly
qualified and in good standing as a foreign corporation in each state or other
jurisdiction and has filed all annual reports required to be filed to the date
of such certificate, except to the extent such failure to be duly qualified and
in good standing as a foreign corporation could not reasonably, individually or
in the aggregate, be expected to have a Material Adverse Effect.

 

6.3.8.               [Reserved]

 

6.3.9.               A favorable opinion of Gibson, Dunn &
Crutcher LLP, special counsel to the Note Parties, addressed to the Note
Purchasers covering such matters as are typical to financings and such other
matters as the Note Purchasers shall reasonably request, and in form and
substance satisfactory to the Note Purchasers.

 

6.3.10.             A favorable opinion of Stroock &
Stroock & Lavan LLP, special counsel to the Note Parties, addressed to
the Note Purchasers covering such matters as are typical to financings and such
other matters as the Note Purchasers shall reasonably request, and in form and
substance satisfactory to the Note Purchasers.

 

6.3.11.             [Reserved]

 

6.3.12.             A favorable opinion of McGuireWoods LLP,
Virginia counsel to the Note Parties, addressed to the Note Purchasers covering
such matters as the Note Purchasers shall reasonably request, and in form and
substance satisfactory to the Note Purchasers.

 

6.3.13.             The Note Purchasers shall have received a
copy of the Projections, and such are in form and substance satisfactory to the
Note Purchasers.

 

21

 

6.3.14.             The Note Purchasers shall have received
written instructions from the Issuer directing the application of proceeds of
the Notes made pursuant to this Agreement.

 

6.3.15.             All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance to the Note
Purchasers and their counsel.

 

6.3.16.             A letter from the Note Parties to their
independent auditors authorizing the independent certified public accountants
of the Note Parties to communicate with the Collateral Agent.

 

6.3.17.             Certificate of insurance for each Note Party,
copies of the property, casualty, liability and business interruption insurance
policies for each Note Party (if any) and copies of  liability insurance policies for each Note
Party (if any) as required pursuant to Section 7.9.

 

6.3.18.             Each applicable Note Party shall have duly
authorized, executed and delivered such other certificates, instruments,
agreements and other documents and papers reasonably requested by the Note
Purchasers in connection with the transactions contemplated hereby in form and
substance satisfactory to such Note Purchasers.

 

6.3.19.         A duly executed
intellectual property security agreement dated the Closing Date and signed by
each Note Party which owns licenses, trademarks, or copyrights, in form and
substance reasonably satisfactory to the Purchasers, together with all
instruments, documents and agreements executed pursuant thereto.

 

6.3.20.         As soon as practicable
and not later than 30 days after the closing date, the Issuer shall make
commercially reasonable efforts to obtain a duly executed landlord consent from
each landlord that executed such a consent in favor of the Revolving Agent
permitting the Collateral Agent to remove the personal property of the Note
Parties from each relevant location owned by such landlord, reasonably
satisfactory in form and substance to the Collateral Agent, in its sole
discretion.

 

6.4           Corporate/Capital Structure.  The
Note Purchasers shall be satisfied with the ownership, corporate and legal
structure and capitalization of the Note Parties, including, without
limitation, the terms and conditions of any Capital Stock, options, warrants or
other securities issued by the Note Parties and any agreements related thereto.

 

6.5           Authorizations, Consents and Approvals.  Each
Note Party shall have received any and all necessary authorizations, consents
and approvals and shall have made any and all filings and shall have satisfied
all applicable waiting periods necessary in connection with the consummation of
the Transactions and the other transactions contemplated by this Agreement and
the other Note Documents.

 

6.6           No Material Adverse Effect. 
Nothing shall have occurred (and the Note Purchasers shall not be aware
of any facts or conditions not previously known) which the Note Purchasers
shall, in their sole discretion, determine has or could be reasonably expected
to have, a Material Adverse Effect. 
There shall not have occurred any fact, circumstance, change, effect or
occurrence or event of default that has a Material Adverse Effect.

 

22

 

6.7           Litigation.  There shall exist no action,
suit, investigation, litigation or proceeding affecting the Note Parties or any
of its properties pending or, to any Note Parties’ knowledge threatened, before
any court, governmental agency or arbitrator that, in the determination of the
Note Purchasers, (i) purports to affect the legality, validity or
enforceability of this Agreement, the Notes, or any other Note Document or the
transactions contemplated hereby and thereby or (ii) purports to restrain,
enjoin or otherwise prohibit or impose material adverse limitations on the
consummation of the Transactions.  No
order, judgment or decree of any court, arbitrator or governmental body shall
enjoin or restrain the Note Purchasers from acquiring the Notes or from making
the loans evidenced by the Notes.

 

6.8           Disclosure.  All factual information
furnished by or on behalf of the Note Parties and their parent companies in
writing to the Note Purchasers or the Collateral Agent (including this
Agreement and any exhibits, schedules or certificates made or delivered in
connection herewith (other than any proposed budgets and projections)), taken
as a whole, are true and correct in all material respects as of the date on
which they were dated or certified and do not omit to state a material fact
necessary to make the statements herein or therein, when taken as a whole, not
misleading in any material respect, in light of the circumstances under which
they were made, which has not been corrected or amended prior to the execution
of this Agreement.

 

6.9           Due Diligence.  The
Note Purchasers shall have completed their business, legal, and collateral due
diligence, including but not limited to (a) a review of any Material
Contracts, (b) a review of an appraisal of the Issuer’s intellectual
property reflecting a net orderly liquidation value of $40,000,000, in each
case, the results of which, shall be satisfactory to Note Purchasers in their
sole discretion;

 

6.10         Hoop Bankruptcy.  The
Note Purchasers shall be satisfied with the terms and implementation of the
bankruptcy proceeding of Hoop and, in particular, with any amounts to be funded
by the Issuer and with any retained liability of the Issuer;

 

6.11         Transition Services Agreement and HOOP Sale.  The
Note Purchasers shall, in their sole discretion, be satisfied with the terms of
the Transition Services Agreement and the Hoop Sale;

 

6.12         New Headquarters.  The Note Parties shall have fully disclosed
to the Note Purchasers all liabilities relating to the New Headquarters and the
Note Purchasers shall be satisfied, in their sole discretion, that no other
liabilities exist or are expected to arise in respect of same;

 

6.13         Stock Options.  The Note Parties shall have fully disclosed
to the Note Purchasers all liabilities relating to the Stock Options and all
such liabilities could not reasonably
be expected to have a Material Adverse Effect;

 

6.14         Other Fees and Expenses.  On
the Closing Date, all reasonable expenses of the Note Purchasers (including,
without limitation, reasonable legal fees and expenses) incurred in connection
with the negotiation and execution of this Agreement and the other Note
Documents shall have been paid by the Issuer.

 

6.15         Ancillary Documents.  Each
applicable Note Party shall have delivered to the Collateral Agent any side
letters or agreements relating to the Transactions not previously disclosed to
the Collateral Agent between the Note Parties or their Affiliates and any of
the Revolving

 

23

 

Lenders, any Affiliates of
the foregoing or any other third party (other than any fee letters relating to
the fees payable under the Revolving Loan Debt).

 

6.16         Senior Credit.  All
of the closing conditions set forth in the Revolving Loan Agreement shall have
been satisfied (other than the consummation of the purchase and sale of the
Notes) and the transactions contemplated thereby have been consummated
concurrently with the consummation of the purchase of the Notes.  The terms, commitment amount and availability
at closing of the Revolving Loan Debt shall be in form and substance
satisfactory to the Note Purchasers.

 

6.17         Closing Date Total Leverage Ratio.  The
Note Parties and their Subsidiaries shall have a Closing Date Total Leverage
Ratio (as defined in Schedule 7.16(b)) that is not greater than 2.5 to
1.00.

 

6.18         Existing Indebtedness. 
After giving effect to the transactions contemplated by this Agreement,
none of the Note Parties shall have outstanding any Indebtedness, other than
the Note Obligations, the Indebtedness set forth on Schedule 5.8.5
and Permitted Indebtedness.

 

6.19         Perfection of Security.  Each Note Party shall have duly authorized,
executed, acknowledged and delivered such security agreements, notices,
memoranda of intellectual property security interests and other instruments as
the Note Purchasers may have reasonably requested, and shall have authorized
the filing of financing statements, all in order to perfect the Liens purported
or required pursuant to this Agreement, the Security Agreement or any other
Note Document to be created in the Collateral and hereby agrees to pay or shall
have paid all filing or recording fees or taxes required to be paid in
connection with the filing, registration or recordation thereof, including any
recording, mortgage, documentary, transfer or intangible taxes.

 

6.20         Monitoring Fee.  The Collateral Agent shall have received the
Monitoring Fee payable on the Closing Date.

 

SECTION 7. 
AFFIRMATIVE COVENANTS

 

Until payment in full of the Note Obligations, the
Note Parties shall, and (except in the case of the covenants set forth in
Sections 7.2, 7.3, and 7.5) cause each Subsidiary to:

 

7.1           Payment of Note Obligations. 
Subject to the terms and conditions of the Intercreditor Agreement, duly
and punctually pay the principal, interest and any other amounts owing under
this Agreement and the Notes when due under the terms of this Agreement, and
each Note Party will observe and comply with all other requirements applicable
to it pursuant to this Agreement and the other Note Documents.

 

7.2           Financial Statements.  Deliver to the Collateral Agent, in form and
detail satisfactory to the Collateral Agent:

 

7.2.1.               as soon as
available, but in any event within ninety (90) days after the end of each
Fiscal Year of the Issuer (commencing with the Fiscal Year ending in January 2009),
a Consolidated and consolidating balance sheet of the Issuer and its
Subsidiaries as at the end of such Fiscal Year, the related Consolidated and
consolidating statements of income or operations and Shareholders’ Equity and
the related Consolidated statement of cash flows (with consolidating

 

24

 

reconciliation
of cash from the balance sheet to the statement of cash flows that is
reasonably acceptable to the Collateral Agent) for such Fiscal Year, setting
forth in each case in, but only with respect to the Consolidated statements,
comparative form the figures for (i) the previous Fiscal Year and (ii) such
period set forth in the projections delivered pursuant to Section 7.2.3,
all in reasonable detail and prepared in accordance with GAAP, such
Consolidated, and where relevant consolidating statements to be audited and
accompanied by (a) a report and unqualified opinion of BDO Seidman, LLP or
another public accounting firm of nationally recognized standing reasonably
acceptable to the Collateral Agent, which report and opinion shall be prepared
in accordance with generally accepted auditing standards and shall not be
subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit or any qualification which relates to the treatment
or classification of any item and which, as a condition to the removal of such
qualification, would require an adjustment to such item, the effect of which
would cause any noncompliance with the provisions of Section 7.16; (b) an
opinion of such public accounting firm independently assessing the Note Parties’
internal controls over financial reporting in accordance with Item 308 of SEC
Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of
Sarbanes-Oxley expressing a conclusion that contains no statement that there is
a material weakness in such internal controls, except for such material
weaknesses as to which the Collateral Agent does not object and (c) as to
statements not covered by an audit, certification by a Responsible Officer of
the Issuer to the effect that such statements are fairly stated in all material
respects when considered in relation to the Consolidated and consolidating
financial statements of the Issuer and its Subsidiaries;

 

7.2.2.               as soon as
available, but in any event within thirty (30) days after the end of each
Fiscal Month of each Fiscal Year of the Issuer (except with respect to the last
Fiscal Month of each Fiscal Quarter, with respect to which the applicable
period for delivery shall be forty-five (45) days rather than thirty (30)
days), a Consolidated and consolidating balance sheet of the Issuer and its
Subsidiaries as at the end of such Fiscal Month, the related Consolidated and
consolidating statements of income or operations (and with respect to the last
Fiscal Month of each Fiscal Quarter, Shareholders’ Equity) and the related
Consolidated statement of cash flows (with consolidating reconciliation of cash
from the balance sheet to the statement of cash flows that is reasonably
acceptable to the Collateral Agent) for such Fiscal Month, and for the portion
of the Fiscal Year then ended, setting forth in each case in, but only with
respect to the Consolidated statements, comparative form the figures for (i) such
period set forth in the projections delivered pursuant to Section 7.2.3
hereof, (ii) the corresponding Fiscal Month of the previous Fiscal Year,
and (iii) the corresponding portion of the previous Fiscal Year, all in
reasonable detail, such Consolidated, and where relevant consolidating
statements to be certified by a Responsible Officer of the Issuer as fairly
presenting the financial condition, results of operations and cash flows of the
Issuer and its Subsidiaries as of the end of such Fiscal Month in accordance
with GAAP, subject only to normal year-end audit adjustments and the absence of
footnotes;

 

7.2.3.               as soon as
available, but in any event (i) on or before January 31st
of each Fiscal Year of the Issuer, a preliminary month-by-month business plan for the following Fiscal Year prepared by management of the Issuer
and reviewed by the board of directors of the Issuer, and (ii) on or
before March 1st of each Fiscal Year of the Issuer, a final
month-by-month business plan for such Fiscal Year prepared by management
of the Issuer (which final business plan shall be approved
by the board of directors of the Issuer by March 31st of such
Fiscal Year), in each case the form of which shall be substantially
similar to the business plan for the Fiscal Year ended on or about January 31,
2009 and the substance of which shall be reasonably satisfactory to the
Collateral Agent, for such Fiscal Year; provided  that, if the
Issuer delivers a business plan that is not reasonably

 

25

 

satisfactory
to the Collateral Agent, but that otherwise complies with this Section 7.2.3,
this Section 7.2.3 shall be deemed to be satisfied to the extent
that the Issuer delivers a business plan reasonably satisfactory to the
Collateral Agent on or before March 31 of such Fiscal Year.

 

7.3           Certificates; Other
Information.  Deliver to the
Collateral Agent, in form and detail satisfactory to the Collateral Agent:

 

7.3.1.               concurrently with
the delivery of the financial statements referred to in Section 7.2.1,
a certificate of its public accounting firm, to the extent permitted by its
internal policies, certifying such financial statements and stating that, in
making the examination necessary for their certification of such financial
statements, such public accounting firm has not obtained any knowledge of the
existence of any Event of Default under Section 9 or, if any such
Event of Default shall exist, stating the nature and status of such event;

 

7.3.2.               concurrently with
the delivery of the financial statements referred to in Section 7.2.2,
(i) a duly completed Compliance Certificate signed by a Responsible
Officer of the Issuer, which shall include a certification as to the amount, if
any, of rent under any Leases and any Taxes that have not been timely paid, and (ii) a copy of management’s analysis
with respect to such financial statements, which analysis shall be consistent
with the analysis previously provided by the Issuer under the Existing Credit
Agreement.  In the event of any change in
generally accepted accounting principles used in the preparation of such
financial statements, the Issuer shall also provide a statement of
reconciliation conforming such financial statements to GAAP;

 

7.3.3.               concurrently with
the filing thereof (or upon the request of the Collateral Agent or its
auditors, appraisers, accountants, consultants or other representatives),
copies of each of the Issuer’s
federal income tax returns, and any amendments thereto;

 

7.3.4.               promptly upon receipt,
copies of any detailed audit reports, management letters or recommendations
submitted to the board of directors (or the audit committee of the board of
directors) of any Note Party by its public accounting firm in connection with
the accounts or books of the Note Parties or any Subsidiary, or any audit of
any of them, in each case to the extent permitted by the policies of its public
accounting firm at such time;

 

7.3.5.               promptly after the
same are available, copies of each annual report, proxy or financial statement,
or other document, report or communication sent to the stockholders of the Note
Parties, and copies of all annual, regular, periodic and special reports and
registration statements which any Note Party may file or be required to file with
the SEC under Section 13 or 15(d) of the Securities Exchange Act of
1934 or with any national securities exchange, and in any case not otherwise
required to be delivered to the Collateral Agent pursuant hereto;

 

7.3.6.               the financial and
collateral reports described on Schedule 7.3 hereto, at the times set
forth in such Schedule;

 

7.3.7.               promptly after the
furnishing thereof, (i) copies of any statement or report furnished to any
holder of debt securities of any Note Party or any Subsidiary thereof pursuant
to the terms of any indenture, loan or credit or similar agreement and (ii) copies of all notices and other
communications received or delivered by a Note Party with respect to the
Revolving Loan Documents (i) which indicate a breach or default of any such
document, or (ii) which constitute a notice under Section 6.03
(Notices) of the Revolving Loan Agreement (to the extent not otherwise

 

26

 

already provided to the
Collateral Agent), in each case not otherwise required to be furnished
to the Note Purchasers pursuant to Section 7.2 or any other clause
of this Section 7.3;

 

7.3.8.               as soon as
available, but in any event within 30 days after the end of each Fiscal Year of
the Note Parties (or upon the
request of the Collateral Agent or its auditors, appraisers, accountants,
consultants or other representatives), (i) a certificate executed by an
authorized officer of the Issuer certifying the existence and adequacy of the
property and casualty insurance program carried by the Note Parties and their
Subsidiaries, and (ii) a written summary of said program identifying the
name of each insurer, the number of each policy and expiration date of each
policy, the amounts and types of each coverage, and a list of exclusions and
deductibles for each policy;

 

7.3.9.               promptly, and in
any event within five Business Days after receipt thereof by any Note Party or
any Subsidiary thereof, copies of each notice or other correspondence received
from any Governmental Authority (including, without limitation, the SEC (or
comparable agency in any applicable non-U.S. jurisdiction)) concerning any
proceeding with, or investigation or possible investigation or other inquiry by
such Governmental Authority regarding financial or other operational results of
any Note Party or any Subsidiary thereof or any other matter which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect;

 

7.3.10.             as soon as available and in any event within
90 days after the end of each Fiscal Year, 
computations by the Note Parties demonstrating, as of the end of such
Fiscal Year, compliance with Sections 7.16, inclusive, and setting forth the
amount of the available basket under Section 3.2.4.1 and
computations supporting adjustments to or use of the same during such period;

 

7.3.11.             (i) as soon as available and in any
event within 45 days after the end of each Fiscal Quarter, computations by the
Issuer demonstrating, as of the end of such quarter, compliance with Section 7.16
(such computation including, during such time period, any asset sales under Section 8.5
or the application Net Cash Proceeds), and setting forth the amount of the
available basket under Section 3.2.4.1 and computations supporting
any adjustments to or use of the same during such period and (ii) as soon
as available and in any event with 30 days after the end of each of the Fiscal
Months ending November 30 and December 31, computations by the Issuer
demonstrating, as of the end of such Fiscal Month, compliance with Section 3.1
of Schedule 7.16;

 

7.3.12.             on the first
Wednesday of each Fiscal Month (or, if such day is not a Business Day, on the
next succeeding Business Day), a copy
of the most recently prepared borrowing base certificate in the form delivered
pursuant to Section 6.02(c) of the Revolving Loan Agreement;

 

7.3.13.             within 30 days after
the end of each Fiscal Month, a report setting forth the monthly sales figures
on a store-by-store basis for such Fiscal Month and, as to each store, a
year-over-year comparison percentage with respect to the relevant portion of
the previous Fiscal Year, and (y) within 45 days after the end of each
Fiscal Quarter, a report setting forth the quarterly contributions analysis
broken down on a store-by-store basis;

 

7.3.14.             upon request by any
Note Purchaser, a report of revenue derived from the Licensing Agreements;

 

7.3.15.             copies of any
physical inventories conducted under Section 6.15 of the Revolving Loan
Agreement;

 

27

 

7.3.16.             upon request by any
Note Purchaser, copies of any reports delivered to the Revolving Lenders
pursuant to the Revolving Loan Agreement; and

 

7.3.17.             promptly, such
additional information regarding the business affairs, financial condition or
operations of any Note Party or any Subsidiary, or compliance with the terms of
the Note Documents, as the Collateral Agent or any Note Purchaser may from time
to time reasonably request.

 

Financial statements required to be delivered
pursuant to Section 7.3.5 (to the extent any such documents are
included in materials otherwise filed with the SEC) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on
the date (i) on which the Issuer posts such documents, or provides a link
thereto on the Issuer’s website on the Internet at the website address listed
in Section 13.7; or (ii) on which such documents are posted on
the Issuer’s behalf on EDGAR or another Internet or intranet website, if any,
to which each Note Purchaser and the Collateral Agent have access (whether a
commercial, third-party website or whether sponsored by the Collateral Agent);
provided that: (i) the Issuer shall deliver paper copies of such documents
to the Collateral Agent or any Note Purchaser that requests the Issuer to
deliver such paper copies until a written request to cease delivering paper
copies is given by the Collateral Agent or such Note Purchaser and (ii) the
Issuer shall notify the Collateral Agent and each Note Purchaser (by facsimile
or electronic mail) of the posting of any such documents and provide to the
Collateral Agent by electronic mail electronic versions (i.e., soft copies) of
such documents.  Notwithstanding anything
contained herein, in every instance, the Issuer shall be required to provide paper
copies of the Compliance Certificates required by Section 7.3.2 to
the Collateral Agent.  The Collateral
Agent shall have no obligation to request the delivery or to maintain copies of
the documents referred to above, and in any event shall have no responsibility
to monitor compliance by the Note Parties with any such request for delivery,
and each Note Purchaser shall be solely responsible for requesting delivery to
it or maintaining its copies of such documents.

 

7.4           Other Information;
Audit.  From time to time at
reasonable intervals upon request of the Collateral Agent, furnish to the
Collateral Agent and such Note Purchaser such other information regarding the
business, assets, financial condition, or income of the Note Parties (i) as
the Collateral Agent may reasonably request, including copies of all tax
returns, licenses, agreements, leases and instruments to which any of the Note
Parties is party, and (ii) copies of any information delivered to the
Revolving Agent as furnished to under Section 6.14 (Information Regarding
the Collateral) of the Revolving Loan Agreement.

 

7.5           Notices.  Promptly notify the Collateral Agent:

 

7.5.1.               of the occurrence
of any Default or Event of Default;

 

7.5.2.               of (x) any
litigation or any administrative or arbitration proceeding which creates a
material risk of resulting, after giving effect to any applicable insurance, in
the payment by the Note Parties and their Subsidiaries of more than $1,000,000,
(y) any undischarged or unpaid judgments or decrees in excess of $2,500,000,
singly or in the aggregate, or (z) of any matter that has resulted or
could reasonably be expected to result in a Material Adverse Effect, including (i) breach
or non-performance of, any default under, or termination of, a Material
Contract or with respect to Material Indebtedness of any Note Party or any
Subsidiary thereof; (ii) any dispute, litigation, investigation,
proceeding or suspension between any Note Party or any Subsidiary thereof and
any Governmental Authority; or (iii) the commencement of, or any material
development in, any

 

28

 

litigation or
any administrative or arbitration proceeding affecting any Note Party or any
Subsidiary thereof, including pursuant to any applicable Environmental Laws;

 

7.5.3.               of any undischarged
or unpaid judgments or decrees in excess of $3,000,000, individually or in the
aggregate;

 

7.5.4.               of the occurrence
of any ERISA Event;

 

7.5.5.               of any material
change in accounting policies or financial reporting practices by any Note
Party or any Subsidiary thereof;

 

7.5.6.               of any change in
any Note Party’s senior executive officers;

 

7.5.7.               of the discharge by
any Note Party of its present public accounting firm or any withdrawal or
resignation by such public accounting firm;

 

7.5.8.               of any collective
bargaining agreement or other labor contract to which a Note Party becomes a
party, the application for the certification of a collective bargaining agent,
or any labor negotiations or strikes;

 

7.5.9.               of the filing of
any Lien for unpaid Taxes against any Note Party;

 

7.5.10.             of any casualty or
other insured damage to any material portion of the Collateral or the
commencement of any action or proceeding for the taking of any interest in a
material portion of the Collateral under power of eminent domain or by
condemnation or similar proceeding or if any material portion of the Collateral
is damaged or destroyed; and

 

7.5.11.             of any failure by any
Note Party to pay rent at (i) ten percent (10%) or more of such Note Party’s
locations or (ii) any of such Note Party’s locations if such failure
continues for more than ten (10) days following the day on which such rent
first came due and such failure would be reasonably likely to result in a
Material Adverse Effect.

 

Each notice pursuant to this Section 7.5
shall be accompanied by a statement of a Responsible Officer of the Issuer
setting forth details of the occurrence referred to therein and stating what
action the Issuer has taken and proposes to take with respect thereto.  Each notice pursuant to Section 7.5.1
shall describe with particularity any and all provisions of this Agreement and
any other Note Document that have been breached.

 

7.6           Payment of
Liabilities.  Pay and discharge in
full as the same shall become due and payable, all its obligations and
liabilities, including (i) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, (ii) all
lawful claims (including, without limitation, claims for labor, materials and
supplies and claims of landlords, warehousemen, customs brokers, and carriers)
which, if unpaid, would by law become a Lien upon its property (other than a
Permitted Encumbrance), and (iii) all Indebtedness, as and when due and
payable, but subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness, except, in each case,
where (a) the validity or amount thereof (other than payroll taxes or
taxes that are the subject of a United States federal tax lien) is being
contested in good faith by appropriate proceedings diligently conducted, (b) such
Note Party has set aside on its books adequate reserves with respect thereto in
accordance with GAAP, (c) such contest effectively suspends collection of
the contested obligation and enforcement of any Lien securing such

 

29

 

obligation,
and (d) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.  The Issuer will, upon request, furnish the
Collateral Agent with proof satisfactory to the Collateral Agent indicating
that the applicable Person has made the payments or deposits described in
clause (i), (ii) and (iii) above. 
Each Note Party shall, and shall cause each of its Subsidiaries to, pay
in conformity with its customary practice all accounts payable incident to the
operations of such Person not referred to in this Section 7.6,
above.

 

7.7           Preservation of
Existence, Etc.  Preserve, renew and
maintain in full force and effect its legal existence and good standing under
the Laws of the jurisdiction of its organization or formation except in a
transaction permitted by Section 8.4 or 8.5.

 

7.8           Maintenance of
Properties.

 

7.8.1.               Keep its properties
in such repair, working order and condition, and shall from time to time make
such repairs, replacements, additions and improvements thereto, as are
reasonably necessary for the efficient operation of its business and shall
comply at all times in all material respects with all material franchises,
licenses and leases to which it is party so as to prevent any loss or
forfeiture thereof or thereunder, except where (i) compliance is at the
time being contested in good faith by appropriate proceedings and (ii) failure
to comply with the provisions being contested has not resulted, and which, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

 

7.8.2.               Take all reasonable
actions to possess and maintain all Intellectual Property material to the
conduct of their respective businesses and own all right, title and interest in
and to, or have a valid license for, all such Intellectual Property.  No Note Party nor any of its Subsidiaries
shall take any action, or fail to take any action, that could reasonably be
expected to (i) result in the invalidity, abandonment, misuse, lapse, or
unenforceability of Intellectual Property which is material to the conduct of
the business of the Note Parties or (ii) knowingly infringe upon or
misappropriate any rights of other Persons.

 

7.8.3.               Do all things
reasonably necessary in order to comply with all Environmental Laws at any Real
Property or otherwise in connection with their operations noncompliance with
which could reasonably be expected to cause a Material Adverse Effect, and
obtain all permits and other governmental authorizations for their operations
under applicable Environmental Laws other than such permits and other
authorizations the failure of which to obtain could not, individually or in the
aggregate, reasonably be expected to cause a Material Adverse Effect.

 

7.9           Maintenance of
Insurance.

 

7.9.1.               Maintain with
financially sound and reputable insurance companies reasonably acceptable to
the Collateral Agent and not Affiliates of the Note Parties, insurance with respect
to its properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business and
operating in the same or similar locations or as is required by applicable Law,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons and as are reasonably acceptable to the
Collateral Agent.  None of the Note
Purchasers, or their agents or employees shall be liable for any loss or damage
insured by the insurance policies required to be maintained under this Section 7.9.  Each Note Party shall look solely to its
insurance companies or any other parties other than the Note Purchasers for

 

30

 

the recovery
of such loss or damage and such insurance companies shall have no rights of
subrogation against the Note Purchasers or its agents or employees.  If, however, the insurance policies do not
provide waiver of subrogation rights against such parties, as required above,
then the Note Parties hereby agree, to the extent permitted by law, to waive
their right of recovery, if any, against the Note Purchasers and their agents
and employees.  The designation of any
form, type or amount of insurance coverage by any Note Purchaser under this Section 7.9
shall in no event be deemed a representation, warranty or advice by such Note
Purchaser that such insurance is adequate for the purposes of the business of
the Note Parties or the protection of their properties.

 

7.9.2.               Fire and extended
coverage policies maintained with respect to any Collateral shall be endorsed
or otherwise amended to include (i) a non-contributing mortgage clause
(regarding improvements to real property) and lenders’ loss payable clause
(regarding personal property), in form and substance satisfactory to the
Collateral Agent, which endorsements or amendments shall provide that the
insurer shall pay all proceeds otherwise payable to the Note Parties under the
policies directly to the Collateral Agent, (ii) a provision to the effect
that none of the Note Parties, Credit Parties or any other Person shall be a
co-insurer and (iii) such other provisions as the Collateral Agent may
reasonably require from time to time to protect the interests of the Credit
Parties. Commercial general liability policies shall be endorsed to name the
Collateral Agent as an additional insured. Business interruption policies shall
name the Collateral Agent as a loss payee and shall be endorsed or amended to
include (i) a provision that, from and after the Closing Date, the insurer
shall pay all proceeds otherwise payable to the Note Parties under the policies
directly to the Collateral Agent, (ii) a provision to the effect that none
of the Note Parties, the Collateral Agent or any other party shall be a
co-insurer and (iii) such other provisions as the Collateral Agent may
reasonably require from time to time to protect the interests of the Credit
Parties. Each such policy referred to in this Section 7.9.2 shall
also provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium, except upon not less than ten (10) days’
prior written notice thereof by the insurer to the Collateral Agent (giving the
Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for
any other reason, except upon not less than thirty (30) days’ prior written
notice thereof by the insurer to the Collateral Agent. The Issuer shall deliver
to the Collateral Agent, prior to the cancellation, modification or non-renewal
of any such policy of insurance, a copy of a renewal or replacement policy (or
other evidence of renewal of a policy previously delivered to the Collateral
Agent, including an insurance binder) together with evidence satisfactory to the
Collateral Agent of payment of the premium therefor.

 

7.9.3.               Permit any
representatives that are designated by the Collateral Agent to inspect the
insurance policies maintained by or on behalf of the Note Parties and to
inspect books and records related thereto and any properties covered
thereby.  The Note Purchasers shall pay
the reasonable fees and expenses of any representatives retained by the
Collateral Agent to conduct any such inspection.

 

7.10         Compliance with Laws.  Comply in all material respects with the
requirements of all Laws and all orders, writs, injunctions and decrees
applicable to it or to its business or property, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is
being contested in good faith by appropriate proceedings diligently conducted
and with respect to which adequate reserves have been set aside and maintained
by the Note Parties in accordance with GAAP; (b) such contest effectively
suspends enforcement of the contested Laws, and (c) the failure to comply
therewith could not reasonably be expected to have a Material Adverse Effect.

 

31

 

7.11         Books and Records;
Accountants.

 

7.11.1.             (i) Maintain
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Note Parties
or such Subsidiary, as the case may be; and (ii) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over the Note Parties
or such Subsidiary, as the case may be.

 

7.11.2.             At all times retain
BDO Seidman, LLP or another public accounting firm which is reasonably
satisfactory to the Collateral Agent and instruct such public accounting firm
in writing to cooperate with, and be available to, the Collateral Agent or its
representatives to discuss the Note Parties’ financial performance, financial
condition, operating results, controls, and such other matters, within the
scope of the retention of such public accounting firm, as may be raised by the
Collateral Agent; provided  that the Issuer shall be entitled to
participate in any such meetings or discussions.  The Issuer hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to the
Collateral Agent, at the Issuer’s expense, copies of the Issuer’s financial
statements, papers related thereto, and other accounting records of any nature
in their possession, and to disclose to the Collateral Agent any information
they may have regarding the Collateral or the financial condition of the
Issuer, in each case to the extent permitted by the policies of its public
accounting firm or other third party at such time; provided  that
the Issuer shall be entitled to be provided with copies of any such financial
statements, papers, accounting records or disclosures contemporaneously
therewith.

 

7.12         Inspection Rights;
Appraisal Rights.

 

7.12.1.             Permit
representatives and independent contractors of the Collateral Agent to visit
and inspect any of its properties, to examine its corporate, financial and
operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers, and
public accounting firm, all at the expense of the Note Parties and at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the Issuer; provided, however,
that when an Event of Default has occurred and is continuing, the Collateral Agent
(or any of its representatives or independent contractors) may do any of the
foregoing at the expense of the Note Parties at any time during normal business
hours and without advance notice.

 

7.12.2.             Upon the request of
the Collateral Agent, provide copies of any appraisals, commercial finance
examinations and other evaluations conducted by the Revolving Agent to the
Collateral Agent.  The Collateral Agent
may, in its discretion, at the expense of the Note Parties undertake up to one
Intellectual Property appraisal per Fiscal Year and an additional two
Intellectual Property appraisals over the term of the Note Obligations.
Notwithstanding anything to the contrary contained herein, the Collateral Agent
may cause additional inventory appraisals, commercial finance examinations, and
Intellectual Property appraisals to be undertaken (i) as it in its
reasonable discretion deems necessary or appropriate, at its own expense, or (ii) if
required by applicable Law or if a Default or Event of Default shall have occurred
and be continuing, at the expense of the Note Parties.

 

7.13         Use of Proceeds.  Use
the proceeds of the Notes only for the purposes set forth in Section 2.4.

 

32

 

7.14         Formation of Subsidiaries.

 

7.14.1.             At the time that any
Note Party forms any direct or indirect Subsidiary or acquires any direct or
indirect Subsidiary after the Closing Date in accordance with Section 8.2,
(a) cause such new Subsidiary (other than a Subsidiary that is a CFC) to
provide to the Collateral Agent a joinder to this Agreement as a Guarantor and
to the Security Agreement, in form and substance satisfactory to the Collateral
Agent, (b) cause the direct parent of each such Subsidiary (if not the
Issuer, as applicable) to pledge all of its equity interests in such Subsidiary
pursuant to the Security Agreement and to cause each such Subsidiary to pledge
its assets pursuant to the Security Agreement; and (c) provide to the
Collateral Agent all other documentation, including one or more opinions of
counsel satisfactory to the Collateral Agent, which in its opinion is
appropriate with respect to the execution and delivery of the applicable
documentation referred to above; provided, that, with respect to
clauses (a), (b) and (c), any newly acquired or formed Subsidiary that is
a CFC shall only pledge up to 65% of its voting Equity Interests and 100% of
its non-voting Equity Interests.  Any
document, agreement, or instrument executed or issued pursuant to this Section 7.14
shall be a Note Document.

 

7.14.2.             From and after the
Closing, take such action as is reasonably required by the Collateral Agent to
grant or perfect a Security Interest in any assets of such Note Party.  Such Lien in favor of the Collateral Agent
shall be senior and prior in right to all other Persons, except as otherwise
provided in Section 8.3 or the Intercreditor Agreement.

 

7.15         Information Regarding
the Collateral.

 

7.15.1.             Furnish to the
Collateral Agent at least thirty (30) days prior written notice of any change
in: (i) any Note Party’s name or in any trade name used to identify it in
the conduct of its business or in the ownership of its properties; (ii) the
location of any Note Party’s chief executive office, its principal place of
business, any office in which it maintains books or records relating to
Collateral owned by it or any office or facility at which Collateral owned by
it is located (including the establishment of any such new office or facility);
(iii) any Note Party’s organizational structure or jurisdiction of
incorporation or formation; or (iv) any Note Party’s Federal Taxpayer
Identification Number or organizational identification number assigned to it by
its state of organization. The Note Parties agree not to effect or permit any
change referred to in the preceding sentence unless all filings have been made
under the UCC or otherwise that are required in order for the Collateral Agent
to continue at all times following such change to have a valid, legal and
perfected first priority security interest in all the Collateral for its own
benefit and the benefit of the other Credit Parties.

 

7.15.2.             From time to time as
may be reasonably requested by the Collateral Agent, and not less than one time
per Fiscal Year, the Issuer shall supplement each Schedule hereto, or any
representation herein or in any other Note Document, with respect to any matter
arising after the Closing Date that, if existing or occurring on the Closing
Date, would have been required to be set forth or described in such Schedule or
as an exception to such representation or that is necessary to correct any
information in such Schedule or representation which has been rendered
inaccurate thereby (and, in the case of any supplements to any Schedule, such
Schedule shall be appropriately marked to show the changes made therein).  Notwithstanding the foregoing, no supplement
or revision to any Schedule or representation shall be deemed the Credit
Parties’ consent to the matters reflected in such updated Schedules or revised
representations nor permit the Note Parties to undertake any actions otherwise
prohibited hereunder or fail to undertake any action required

 

33

 

hereunder from
the restrictions and requirements in existence prior to the delivery of such
updated Schedules or such revision of a representation; nor shall any such
supplement or revision to any Schedule or representation be deemed the Credit
Parties’ waiver of any Default resulting from the matters disclosed therein.

 

7.16         Financial Covenants.  The Note Parties will comply with the
covenants set forth on Schedule 7.16.

 

7.17         Physical Inventories.  Cause the Collateral Agent to receive copies
of the results of any physical inventory required or requested by the Revolving
Agent along with any related additional information provided to the Revolving
Agent in connection with the physical inventories.

 

7.18         Environmental Laws.  (a)  Conduct its operations and keep and
maintain its Real Estate in material compliance with all Environmental Laws; (b) obtain
and renew all environmental permits appropriate or necessary for its operations
and properties; and (c) implement any and all investigation, remediation,
removal and response actions that are necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
pertaining to the presence, generation, treatment, storage, use, disposal,
transportation or release of any Hazardous Materials on, at, in, under, above,
to, from or about any of its Real Estate, provided, however, that
neither a Note Party nor any of its Subsidiaries shall be required to undertake
any such cleanup, removal, remedial or other action to the extent that its
obligation to do so is being contested in good faith and by proper proceedings
and adequate reserves have been set aside and are being maintained by the Note
Parties with respect to such circumstances in accordance with GAAP.

 

7.19         Further Assurances.

 

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

 

7.19.2.             If any material assets
are acquired by any Note Party after the Closing Date (other than assets
constituting Collateral under the Security Agreement that become subject to the
Lien of the Security Agreement upon acquisition thereof), notify the Collateral
Agent, and the Note Parties will cause such assets to be subjected to a Lien
securing the Note Obligations and will take such actions as shall be necessary
or shall be requested by any Agent to grant and perfect such Liens, including
actions described in Section 7.19.1, all at the expense of the Note
Parties. In no event shall compliance with this Section 7.19 waive
or be deemed a waiver or Consent to any transaction giving rise to the need to
comply with this Section 7.19 if such transaction was not otherwise
expressly permitted by this Agreement.

 

7.20         Compliance with Terms
of Leaseholds.  Except as otherwise
expressly permitted hereunder (including, without limitation, in connection
with Store closings permitted pursuant to clause (b) of the definition of
Permitted Dispositions), make all payments and otherwise perform all

 

34

 

obligations in
respect of all Leases of real property to which any Note Party or any of its
Subsidiaries is a party, keep such Leases in full force and effect and not
allow such Leases to lapse or be terminated or any rights to renew such leases
to be forfeited or cancelled, notify the Collateral Agent of any default by any
party with respect to such Leases and cooperate with the Collateral Agent in all
respects to cure any such default, and cause each of its Subsidiaries to do so,
except, in any case, where the failure to do so, either individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

7.21         Material Contracts.  Perform and observe all the terms and
provisions of each Material Contract to be performed or observed by it,
maintain each such Material Contract in full force and effect, enforce each
such Material Contract in accordance with its terms, take all such action to
such end as may be from time to time requested by the Collateral Agent and,
upon request of the Collateral Agent, make to each other party to each such
Material Contract such demands and requests for information and reports or for
action as any Note Party or any of its Subsidiaries is entitled to make under
such Material Contract, and cause each of its Subsidiaries to do so, except, in any case, where the failure to
do so, either individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.

 

7.22         ERISA.

 

7.22.1.             Comply in all
material respects with the applicable provisions of ERISA or any other
applicable federal, state, provincial, local or foreign law dealing with such
matters, except where the failure to comply could reasonably be expected to
result in a claim or liability against any Note Party or its Affiliates of
$3,000,000 or more.

 

7.22.2.             Pay and discharge
promptly any liability imposed upon it pursuant to the provisions of Title IV
of ERISA; provided, however, that neither any Note Party nor any
ERISA Affiliate or any other Subsidiary of the Note Parties shall be required
to pay any such liability if (i) the amount, applicability or validity
thereof shall be diligently contested in good faith by appropriate proceedings,
and (ii) such Person shall have set aside on its books reserves, in the
opinion of the independent certified public accountants of such Person,
adequate with respect thereto.

 

7.22.3.             Deliver to the
Collateral Agent, promptly, and in any event within 20 days, after (i) the
occurrence of any Reportable Event in respect of a Plan, a copy of the
materials that are filed with the PBGC, (ii) any Note Party or any  ERISA Affiliate or an administrator of any Plan files with participants, beneficiaries or
the PBGC a notice of intent to terminate any such Plan, a copy of any such notice, (iii) the receipt of notice by
any Note Party or any ERISA Affiliate or an administrator of any Plan from the PBGC of the PBGC’s intention to
terminate any Plan or to appoint a
trustee to administer any such Plan, a
copy of such notice, (iv) the request by any Note Purchaser of copies of
each annual report that is filed on Treasury Form 5500 with respect to any
Plan, together with certified financial
statements (if any) for the Plan and any
actuarial statements on Schedule B to such Form 5500, (v) any
Note Party or any ERISA Affiliate knows or has reason to know of any event or
condition which could reasonably be expected to constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Plan,
an explanation of such event or condition, (vi) the receipt by any Note
Party or any ERISA Affiliate of an assessment of withdrawal liability under Section 4201
of ERISA from a Multiemployer Plan, a copy of such assessment, (vii) any
Note Party or any ERISA Affiliate knows or has reason to know of any event or
condition which would reasonably be expected to cause any one of them to incur
a liability under Section 4062, 4063, 4064 or 4069 of ERISA or Section 412(n)

 

35

 

or 4971 of the
Code, an explanation of such event or condition, or (viii) any Note Party
or any ERISA Affiliate knows or has reason to know that an application is to
be, or has been, made to the Secretary of the Treasury for a waiver of the
minimum funding standard under the provisions of Section 412 of the Code,
a copy of such application, and in each case described in clauses (i) through
(iii) and (v) through (vii) together with a statement signed by
an officer setting forth details as to such Reportable Event, notice, event or
condition and the action which such Note Party and any ERISA Affiliate proposes
to take with respect thereto.

 

7.23         Monitoring Fee.  Pay to the Collateral Agent the Monitoring
Fee when it is due and payable.

 

7.24         Senior Debt Document Terms.  To
the extent that the Revolving Loan Documents are amended, enter into an
amendment to amend this Agreement to the extent expressly permitted by the
Intercreditor Agreement.

 

7.25         Post-Closing Matters.

 

7.25.1.             Concurrently with
delivery to the Revolving Agent, the Issuer shall deliver to the Collateral
Agent: (i) a copy of the American Land Title Association/American Congress
on Surveying and Mapping form survey provided to the Revolving Agent; (ii) an
endorsement to the mortgage title policy deleting the survey exception; (iii) evidence
that all other actions that the Collateral Agent may deem necessary or
desirable in order to create valid and subsisting Liens on the Alabama Property
described in the mortgage prior in right to all other Liens except the Lien
in favor of the Revolving Agent and Permitted Encumbrances having priority by
operation of law has been taken and (iv) a fully paid (or, as to
which, evidence of the payment of the applicable premium has been provided to
the Collateral Agent) American Land Title Association Lender’s Extended
Coverage title insurance policy or marked-up title commitment having the effect
of a policy of title insurance in form and substance, with endorsements and in
an amount acceptable to the Collateral Agent, issued by Stewart Title Guaranty
Company, insuring the mortgage to be a valid and subsisting Lien on the
property described therein, free and clear of all defects (including, but not
limited to, mechanics’ and materialmen’s Liens) and encumbrances, excepting
only Permitted Encumbrances and other Liens permitted under the Note Documents,
and providing for such other affirmative insurance (including endorsements for
future advances under the Note Documents and for zoning of the applicable
property) and such coinsurance and direct access reinsurance as the Collateral
Agent may deem necessary or desirable.

 

SECTION 8.  NEGATIVE COVENANTS

 

Until payment in full of the Note Obligations, no
Note Party shall, nor shall it permit any Subsidiary to, directly or
indirectly:

 

8.1           Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired or sign or file or suffer to exist under the UCC or any
similar Law or statute of any jurisdiction a financing statement that names any
Note Party or any Subsidiary thereof as debtor; sign or suffer to exist any
security agreement authorizing any Person thereunder to file such financing
statement; sell any of its property or assets subject to an understanding or
agreement (contingent or otherwise) to repurchase such property or assets with
recourse to it or any of its Subsidiaries; or assign or otherwise transfer any
accounts or other rights to receive income, other than, as to all of the above,
Permitted Encumbrances.

 

36

 

8.2           Investments.  Have outstanding, acquire or hold any
Investment (or become contractually committed to do so), directly or
indirectly, or incur any liabilities (including contingent obligations) for or
in connection with any Investment, except Permitted Investments.

 

8.3           Indebtedness.  Create, incur, assume, guarantee, suffer to
exist or otherwise become or remain liable with respect to, any Indebtedness,
except Permitted Indebtedness.

 

8.4           Fundamental Changes.  (a) Merge, amalgamate, dissolve,
liquidate, wind up, consolidate with or into another Person, reorganize, enter
into a plan of reorganization, recapitalization or reclassify its Equity
Interests (or agree to do any of the foregoing) or (b) suspend or go out
of a substantial portion of its or their business or any material line of
business, except that, so long as no Default shall have occurred and be
continuing prior to or immediately after giving effect to any action described
below or would result therefrom:

 

8.4.1.               any Subsidiary may
merge, consolidate or amalgamate with (i) a Note Party, provided  that
the Note Party shall be the continuing or surviving Person, or (ii) any
one or more other Subsidiaries, provided  further that when any
wholly-owned Subsidiary is merging with another Subsidiary, the wholly-owned
Subsidiary shall be the continuing or surviving Person;

 

8.4.2.               the Issuer may
merge, consolidate or amalgamate with another Note Party, provided that
the Issuer shall be the surviving entity of any such merger, consolidation or
amalgamation;

 

8.4.3.               any CFC that is not
a Note Party may merge into any CFC that is not a Note Party; and

 

8.4.4.               the Issuer shall be
permitted to liquidate or dissolve Twin Brook at any time upon prior written
notice to the Collateral Agent, provided  that before, or within
three (3) Business Days after, the liquidation or dissolution of Twin
Brook, Twin Brook shall have contributed all of its assets to the Issuer and
the Issuer shall have caused the former assets of Twin Brook, including,
without limitation, the equity interests in Services Company, to be pledged to
the Collateral Agent for the benefit of the Note Purchasers.  In the event of any liquidation or
dissolution of Twin Brook in accordance with the preceding sentence, Twin Brook
will automatically cease to be a Guarantor hereunder.

 

8.5           Dispositions.  Make any Disposition or enter into any
agreement to make any Disposition, except Permitted Dispositions.

 

8.6           Restricted Payments.  Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
except that, so long as no Default shall have occurred and be continuing prior
to or immediately after giving effect to any action described below or would
result therefrom:

 

8.6.1.               each Subsidiary of
a Note Party may make Restricted Payments to any Note Party, provided, that,
during the occurrence and continuation of an Event of Default under this
Agreement or the Revolving Loan Agreement, any dividend payments made by any
Subsidiary of a Note Party whose Equity Interests are the Note Purchasers
Priority Collateral shall be paid directly to the Collateral Agent;

 

37

 

8.6.2.               the Note Parties
and each Subsidiary may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity
Interests of such Person;

 

8.6.3.               the Issuer may
repurchase up to $10,000,000 of its Capital Stock in any Fiscal Year and
$40,000,000 in the aggregate so long as (i) the Leverage Ratio, both
immediately before and after giving effect to such repurchase, is less than
1.75:1.00, (ii) no Event of Default or Default shall have occurred and be
continuing or would arise therefrom and (iii) there has been at least
$50,000,000 of Excess Availability as of the end of each of the three months
preceding such repurchase, and on such date, after taking into account the
repurchase of such stock; provided, that, the Issuer may not repurchase any of
its Capital Stock for six months following the Closing Date; and

 

8.6.4.               the Note Parties
may issue and sell Equity Interests provided that (i) (A) with
respect to any Equity Interests, all dividends in respect of which are to be
paid (and all other payments in respect of which are to be made) shall be in
additional shares of such Equity Interests, in lieu of cash, (B) such Equity
Interests shall not be subject to redemption other than redemption at the
option of the Note Party issuing such Equity Interests, and (C) all
payments in respect of such Equity Interests are expressly subordinated to the
Note Obligations, and (ii) no Note Party shall issue any additional Equity
Interests in a Subsidiary.

 

8.7           Payments and
Prepayments of Indebtedness.  Prepay,
redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity
thereof in any manner any Indebtedness (other than the Revolving Obligations
and the Note Obligations), or make any payment in violation of any
subordination terms of any Subordinated Indebtedness, except (i) as long
as no Event of Default shall have occurred and be continuing or would arise
therefrom, regularly scheduled or mandatory repayments or redemptions of
Permitted Indebtedness (other than the Revolving Obligations and the Note
Obligations), (ii) Permitted Refinancing Indebtedness and (iii) as
long as the Payment Conditions are satisfied, other repayments or prepayments
of Permitted Indebtedness in an aggregate amount not to exceed $10,000,000 in
any Fiscal Year.

 

8.8           Change in Nature of
Business.  Engage in (a) any
line of business substantially different from the business conducted by the
Note Parties and their Subsidiaries on the date hereof, or (b) any type of
activity reasonably likely to devalue the Issuer’s business or brand name,
except as could not reasonably be expected to have a Material Adverse Effect.

 

8.9           Transactions with
Affiliates.  Enter into, renew,
extend or be a party to any transaction of any kind with any Affiliate of any
Note Party, except for: (a) transactions that are in the ordinary course
of business, upon fair and reasonable terms, that are fully disclosed to the
Collateral Agent, and that are no less favorable to the Note Parties than would
be obtainable by the Note Parties at the time in a comparable arm’s length
transaction with a Person other than an Affiliate; (b) payment of
insurance premiums to Twin Brook in an aggregate amount not to exceed $750,000
in any Fiscal Year; (c) transactions between the Issuer and Services
Company in the ordinary course of business; (d) intercompany loans and
advances or other intercompany Indebtedness permitted pursuant to clauses (b),
(c), (e) and (j) of the definition of Permitted Indebtedness; and (e) intercompany
Investments permitted pursuant to clauses (g), (h), (i) and (m) of
the definition of Permitted Investments.

 

8.10         Burdensome Agreements.  Enter into or permit to exist any Contractual
Obligation (other than the Revolving Loan Documents, this Agreement or any
other Note Document) that

 

38

 

(a) limits
the ability (i) of any Subsidiary to make Restricted Payments or other
distributions to any Note Party or to otherwise transfer property to or invest
in a Note Party, (ii) of any Subsidiary to Guarantee the Note Obligations,
(iii) of any Subsidiary to make or repay loans to a Note Party, or (iv) of
the Note Parties or any Subsidiary to create, incur, assume or suffer to exist
Liens on property of such Person in favor of the Collateral Agent; provided,
however, that this clause (iv) shall not prohibit any negative
pledge incurred or provided in favor of any holder of Indebtedness permitted
under Section 8.3 solely to the extent any such negative pledge
relates to the property financed by or the subject of such Indebtedness; or (b) requires
the grant of a Lien to secure an obligation of such Person if a Lien is granted
to secure another obligation of such Person.

 

8.11         Use of Proceeds.  Use the proceeds from the sale of the Notes,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase or carry margin stock (within the meaning of Regulation
U of the FRB) or to extend credit to others for the purpose of purchasing or
carrying margin stock or to refund Indebtedness originally incurred for such
purpose.

 

8.12         Amendment of Material
Documents.  Amend, modify or waive
any of a Note Party’s rights under (a) its Governing Documents or (b) any
Material Contract or Material Indebtedness (other than on account of any
refinancing thereof otherwise permitted hereunder), in each case to the extent
that such amendment, modification or waiver would be reasonably likely to have
a Material Adverse Effect.

 

8.13         Corporate Name; Fiscal
Year.

 

8.13.1.             Change the Fiscal
Year of any Note Party, or the accounting policies or reporting practices of
the Note Parties, except as required by GAAP.

 

8.13.2.             Change its name as it
appears in official filings in the state of its incorporation or other
organization (b) change its chief executive office, principal place of
business, corporate offices or warehouses or locations at which any material
portion of the Collateral is held or stored, or the location of its records
concerning the Collateral, (c) change the type of entity that it is, (d) change
its organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its state of incorporation
or organization, in each case without at least thirty (30) days prior written
notice to the Collateral Agent and after the Collateral Agent’s written
acknowledgment, which acknowledgment shall not be unreasonably withheld or
delayed, that any reasonable action requested by the Collateral Agent in
connection therewith, including to continue the perfection of any Liens in
favor of the Collateral Agent, in any Collateral, has been completed or taken,
and provided  that any such new location of any Note Party or
Domestic Subsidiary shall be in the continental United States.

 

8.14         Consignments.  Consign any Inventory or sell any Inventory
on bill and hold, sale or return, sale on approval, or other conditional terms
of sale.

 

8.15         Antilayering.  Other than the Note Obligations, the Note
Parties will not, and will not permit any of their Subsidiaries to, incur or in
any fashion become or remain liable with respect to any Indebtedness of the
Note Parties or any Subsidiary which, by its terms, is subordinated to any
other Indebtedness of such Note Party or such Subsidiary and which is not
expressly subordinated to the Note Obligations on terms satisfactory to the
Required Purchasers.

 

39

 

8.16         Capital Expenditures.  Make Capital Expenditures in the Fiscal Year (i) ending
on or about January 31, 2009 in excess of $86,200,000.00, and (ii) in
excess of the Capital Expenditure grid, as follows:

 

	
  Fiscal Year ending 

  January 31

  	
   

  	
  EBITDA Target

  	
   

  	
  Maximum Capital

  Expenditures if 

  EBITDA is less than

  the EBITDA Target

  	
   

  	
  Maximum Capital

  Expenditures if 

  EBITDA exceeds the

  EBITDA Target

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2010

  	
   

  	
  $

  	
  172,800,000

  	
   

  	
  $

  	
  75,000,000

  	
   

  	
  $

  	
  85,000,000

  	
   

  
	
  2011

  	
   

  	
  $

  	
  194,400,000

  	
   

  	
  $

  	
  102,000,000

  	
   

  	
  $

  	
  122,000,000

  	
   

  
	
  2012

  	
   

  	
  $

  	
  239,490,000

  	
   

  	
  $

  	
  112,000,000

  	
   

  	
  $

  	
  134,000,000

  	
   

  
	
  2013

  	
   

  	
  $

  	
  239,200,000

  	
   

  	
  $

  	
  111,000,000

  	
   

  	
  $

  	
  133,000,000

  	
   

  

 

provided, however, that the Required
Purchasers may, in the exercise of their reasonable business judgment, increase
any of the amounts set forth in the foregoing grid.  When making any determination whether to
increase the foregoing amounts, the Required Purchasers may consider, among
other things, the actual financial results of the Note Parties.

 

8.17         Change of Control.  Cause, permit, or suffer any Change of
Control.

 

8.18         No Amendment To
Transition Services Agreement.  Make
any material amendments to the Transition Services Agreement (other than the
extension of such agreement) unless any such amendments are reasonably
satisfactory to the Required Purchasers.

 

8.19         New Headquarters.  Incur any liability in respect of the New
Headquarters is excess of $2,000,000, excluding liability disclosed to the Note
Purchasers prior to the Closing Date.

 

8.20         Stock Options.  Incur any liabilities in respect of the Stock
Options which would cause a Material Adverse Effect.

 

8.21         Licensing.   Without the consent of the Required
Purchasers, license more than $5,000,000 of the Intellectual Property of the
Note Parties at less than fair market value to other parties.

 

8.22         Leases.  Be in material default under more than 5% of
the Leases.

 

8.23         Hoop Expenses.
Permit the costs actually incurred by the Note Parties and the projected costs
of the Note Parties relating to the Hoop bankruptcy proceedings and the Hoop
Sale to exceed the amounts scheduled on Schedule 5.33.

 

8.24         Foreign Transfers.  Permit the Note Parties located within the
United States to (A) (i) make intercompany transfers outside the
ordinary course of more than $10,000,000 per Fiscal Year in the aggregate to
their affiliates in Canada, (ii) make intercompany transfers outside the
ordinary course of business of more than $10,000,000 per Fiscal Year to their
affiliates in Asia, or (iii) make

 

40

 

intercompany
transfers outside the ordinary course of business of more than $5,000,000 per
Fiscal Year to their affiliates in Puerto Rico or (B) (i) receive as
intercompany transfers outside the ordinary course from their affiliates in
Canada more than $5,000,000 per Fiscal Year, (ii) receive as intercompany
transfers from their affiliates in Asia more than $5,000,000 per Fiscal Year,
or (iii) receive as intercompany transfers from their affiliates in Puerto
Rico more than $5,000,000 per Fiscal Year. 
An additional $5,000,000 may be transferred under each of Sections
8.24(A)(i), 8.24 (A)(ii), 8.24 (A)(iii), 8.24 (B)(i), 8.24 (B)(ii) and
8.24 (B)(iii) so long as the amount transferred is used to prepay the
Note Obligations in accordance with Section 3.2.2.

 

SECTION 9.  EVENTS OF DEFAULT.

 

If one or more of the following events (herein
referred to as “Events of Default”) shall occur and be continuing:

 

9.1           Payment Default.  If
the Issuer fails to pay when due and payable, or when declared due and payable,
(a) all or any portion of its Note Obligations consisting of interest,
fees, or charges due the Note Purchasers or the Collateral Agent, reimbursement
of, or other amounts (other than any portion thereof constituting principal)
constituting Note Obligations, and such failure continues for a period of 3
Business Days, or (b) all or any portion of the principal of its Note
Obligations; or

 

9.2           Certain Covenants.

 

9.2.1.               Any Note Party
shall default in the performance or observance of any covenant contained in any
of Sections  3.2.3, 3.2.4, 7.5, 7.7, 7.9,
7.11 through 7.15 and 8 hereof; or

 

9.2.2.               Any Note Party
fails to perform or observe any covenant or other agreement contained in any of
Section 7 (other than Section 7.6 and those specified
in Section 9.2.1 above) of this Agreement and such failure
continues for a period of 10 days after the earlier of (i) the date on
which such failure shall first become known to any officer of any Note Party or
(ii) written notice thereof is given to the Issuer by the Collateral
Agent.

 

9.3           Reporting Default. 
Failure by any Note Party to (i) furnish financial information
within 15 days of when due or when requested, or (ii) permit the
inspection of its books or records, in each case, when required pursuant to the
terms of this Agreement; or

 

9.4           Other Defaults.  Any
Note Party shall default in the performance or observance of any covenant,
agreement or condition of this Agreement (other than those described or
referred to in any other paragraph of this Section) or any other Note Document
and such default shall continue unremedied for more than 20 days after the
first to occur of (i) a Note Party obtaining actual knowledge of such
default or (ii) receipt by a Note Party of written notice of such default
from the Required Purchasers.

 

9.5           Attachments.  If any material portion of any
Note Party’s or any of its Subsidiaries’ assets are attached, seized, subjected
to a writ or distress warrant, or are levied upon, or come into the possession
of any third Person and the same are not discharged before the earlier of 30
days after the date it first arises or 5 days prior to the date on which such
property or asset is subject to forfeiture by such Note Party or its
Subsidiary, as applicable; or

 

41

 

9.6           Insolvency Proceeding, etc.

 

9.6.1.               If an Insolvency Proceeding is commenced by
any Note Party or any of their Subsidiaries; or

 

9.6.2.               If an Insolvency Proceeding is commenced
against any Note Party or any of its Subsidiaries, and any of the following
events occur:  (a) such Note Party
or any of its Subsidiaries, as applicable, consents to the institution of such
Insolvency Proceeding against it, (b) the petition commencing the
Insolvency Proceeding is not timely controverted, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 60 calendar days
of the date of the filing thereof, (d) an interim trustee, receiver,
receiver-manager or other custodian or is appointed to take possession of all
or any substantial portion of the properties or assets of, or to operate all or
any substantial portion of the business of, any Note Party or any of its
Subsidiaries, as applicable, or (e) an order for relief shall have been
issued or entered therein; or

 

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

 

9.6.4.               Any Note Party or any of its Subsidiaries
shall admit in writing its inability, or be generally unable, to pay its debts
as they become due or cease operations of its present business; or

 

9.7           Judgments.  If one or more judgments,
orders, or awards involving an aggregate amount of $3,000,000 or more (except
to the extent fully covered by insurance pursuant to which the insurer has
accepted liability therefor in writing) shall be entered or filed against any
Note Party or any of its Subsidiaries with respect to any of their respective
assets, and the same is not released, discharged, bonded against, or stayed
pending appeal before the earlier of 30 days after the date it first arises or
5 days prior to the date on which such asset is subject to being forfeited by
the applicable Note Party or its Subsidiary; or

 

9.8           Payment Default on Other Indebtedness.  If
there is (i) any “Event of Default” (or any similar term) as defined in
the Revolving Loan Documents, or (ii) a default or event of default in one
or more agreements to which any Note Party or any of its Subsidiaries is a
party with one or more third Persons relative to Indebtedness of any such Note
Party or its Subsidiary (other than the Revolving Loan Debt) involving an
aggregate amount of $1,500,000 or more, and with respect to this clause (ii) such
default (x) occurs at or prior to the final maturity of the obligations
thereunder, or (y) results in a right by such third Person(s),
irrespective of whether exercised, to accelerate the maturity of the
obligations of the Note Party or its Subsidiary thereunder; or

 

9.9           Breach of Representations or Warranties.  If
any warranty, representation, statement, or Record made herein or in any other
Note Document or delivered to the Collateral Agent or any Note Purchaser in
connection with this Agreement or any other Note Document proves to be untrue
in any material respect (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) as of the date of issuance or
making or deemed making thereof; or

 

9.10         Guaranty.  If the obligation of any
Guarantor under the Note Guarantee is limited or terminated by operation of law
or by such Guarantor, or any such Guarantor becomes the subject of an
Insolvency Proceeding; or

 

42

 

9.11         Enforceability of Note Documents.  Any
provision of any Note Document shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by any Note Party, or a proceeding shall be commenced by any Note Party, or by any
Governmental Authority having jurisdiction over any Note Party, seeking to
establish the invalidity or unenforceability thereof, or any Note Party shall
deny that it has any liability or obligation purported to be created under any
Note Document; or

 

9.12         Material Adverse Effect.  A
Material Adverse Effect occurs and is continuing; or

 

9.13         Governmental Action.  (i) Any
Governmental Authority shall (A) revoke, terminate, suspend or adversely
modify any license, permit, patent, trademark, tradename or design of any Note
Parties or any of its Subsidiaries, the continuation of which is material to
the continuation the business of the Note Parties and their Subsidiaries taken
as a whole or (B) commence proceedings to suspend, revoke, terminate or
adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within 60 days, or (C) schedule
or conduct a hearing on the renewal of any license, permit, trademark,
tradename or patent necessary for the continuation of such Person’s business
and the staff of such Governmental Authority issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of the Issuer’s business shall be
revoked or terminated and not replaced by a substitute acceptable to the
Required Purchasers within 30 days after the date of such revocation or
termination, and, with respect to both clauses (i) and (ii), such
revocation, proceedings or termination and non-replacement would reasonably be
expected to have a Material Adverse Effect; or

 

9.14         Employee Plans.  An
event or condition specified in Sections 5.12 or 7.22 hereof
shall occur or exist with respect to any Plan and,
as a result of such event or condition, together with all other such events or
conditions, the Issuer or any member of the Controlled Group shall incur, or in
the reasonable opinion of the Collateral Agent be reasonably likely to incur, a
liability to a Plan, or the PBGC (or
both) which, in the reasonable judgment of the Collateral Agent, would have a
Material Adverse Effect; or

 

9.15         Business Interruption.  The
operations of the Note Parties at any material Real Property location are
interrupted at any time for a period of 10 consecutive days, unless either (i) such
business interruption is not reasonably likely to have a Material Adverse
Effect on any Note Party, or (ii) the Note Parties shall (x) be
entitled to receive for such period of interruption, proceeds of business
interruption insurance sufficient to assure that their per diem cash needs
during such period is at least equal to their average per diem cash needs for
the consecutive three month period immediately preceding the initial date of
interruption (or, at the Note Parties’ election, any other consecutive three
month period preceding the initial date of interruption and commencing
subsequent to the Closing Date as then designated by the Note Parties) and (y) receive
such proceeds in the amount described in clause (x) preceding not later
than 30 days (with an additional 30 days in the event the proof of loss takes
longer to obtain than the initial 30 days) following the initial date of any such
interruption; provided, however, that notwithstanding the
provisions of clauses (x) and (y) of this Section 9.15,
an Event of Default shall be deemed to have occurred if (A) any of the
Note Parties shall have ceased material operations for a period of 5
consecutive business days or (B) the Note Parties have received more than
$10,000,000 in proceeds of business interruption insurance in the aggregate; or

 

43

 

9.16         Restatements.  At any time after the Closing Date, the Notes
Parties materially and adversely restate any financial statement for any period
prior to the Closing Date other than as a result of a change in GAAP or its
application.

 

THEN, (i) upon the occurrence of any Bankruptcy
Default, the unpaid principal amount of all Notes, together with accrued
interest thereon, and, as liquidated damages and not as a penalty, an amount
equal to the Applicable Premium then in effect, shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Issuer and the other Note Parties, and (ii) upon the occurrence of any
other Event of Default, the Required Purchasers may, upon written notice to the
Issuer, declare the Notes to be due and payable, whereupon the principal amount
of all Notes, together with accrued interest thereon, and, as liquidated
damages and not as a penalty, an amount equal to the Applicable Premium then in
effect, shall automatically become immediately due and payable, such without
any other notice of any kind, and without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Issuer and the other Note Parties; provided, however, that if the
principal of, premium, if any, and interest on the Notes due otherwise than by
such declaration plus any expenses due and payable hereunder have been paid in
full, and any and all Defaults (other than the nonpayment of principal and
interest on the Notes that shall have become due by such declaration) shall
have been remedied or waived, the Required Purchasers may waive all Defaults
and rescind and annul any such declaration and consequences.

 

SECTION 10.  RESTRICTIONS ON TRANSFER; LEGENDS.

 

10.1         Assignments.

 

10.1.1.             Subject to Section 10.1.1.1,
each Note Purchaser may at any time sell, assign, transfer, pledge or negotiate
all or any part of its Notes without the consent of any Note Party; provided
that such transfer of the Notes is in compliance with applicable United States
federal and state securities laws.

 

10.1.1.1.          So long as no Event of
Default shall have occurred and be continuing, (a) assignments will be
limited to persons engaged in lending or purchasing and holding loans and
securities in the ordinary course of business, and (b) no Note Purchaser
may sell, assign, transfer or negotiate all or any part of its Notes without
the Issuer’s consent, such consent not to be unreasonably withheld, delayed or
conditioned.  Notwithstanding the foregoing,
no consent shall be required to effect a sale, assignment, transfer or pledge
of a Note to (i) any Affiliate of such Note Purchaser, (ii) with
respect to any Note Purchaser which is a fund that invests in loans and/or
investments, any other such fund managed by the same investment advisor as such
Note Purchaser or by an Affiliate of such Note Purchaser or such advisor (a “Related
Fund”), (iii) any other Note Purchaser hereunder, or (iv) or any
Person to whom a Note Purchaser assigns its rights and obligations under this
Agreement as part of an assignment and transfer of such Note Purchaser’s rights
in and to a material portion of such Note Purchaser ‘s portfolio of asset based
credit facilities.

 

10.1.2.             The Collateral Agent shall keep at its principal
office, or the principal office of its counsel, a register in which it shall
provide for the registration of the Notes and the transfer of the same shall be
provided.  Failure to make any
recordation, or any error in such recordation, shall not affect any of the Note
Obligations.  Upon surrender for
registration of transfer of any Notes in accordance with Section 10.1
at the principal office of the Issuer, the Issuer shall, at its expense,
promptly execute and deliver one or more new Notes, as applicable, of like
tenor and of

 

44

 

a like principal amount,
registered in the name of such transferee or transferees and, in the case of a
transfer in part, a new Note in the appropriate amount registered in the names
of such transferor.  While the Notes are “restricted
securities” within the meaning of Rule 144(a)(3) under the Securities
Act, the Issuer shall provide the Note Purchasers with the information
specified in, and meeting the requirements of Rule 144A(d)(4) under
the Securities Act in connection with any proposed transfer.

 

10.2         Restrictive Legend.

 

10.2.1.             Each Note shall bear a legend in
substantially the following form:

 

“THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT,
WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY OTHER
APPLICABLE SECURITIES LAWS (COLLECTIVELY, THE “SECURITIES LAWS”), AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED (I) IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES LAWS COVERING THE
TRANSFER OR PURSUANT TO AN EXEMPTION FROM REGISTRATION AND (II) EXCEPT IN
COMPLIANCE WITH SECTION 10.1 OF THAT CERTAIN NOTE PURCHASE
AGREEMENT DATED AS OF JULY 31, 2008 AMONG THE ISSUER, THE NOTE PURCHASERS (AS
DEFINED THEREIN) AND THE GUARANTORS PARTY THERETO.”

 

10.3         Termination of Restrictions.  The
restrictions imposed by Section 10.2 hereof upon the
transferability of the Notes shall cease and terminate as to any particular
Notes when, in the opinion of Ropes & Gray LLP, or other counsel reasonably
acceptable to the Issuer, such restrictions are no longer
required in order to assure compliance with applicable securities laws.  Whenever such restrictions shall cease and terminate as to any Notes, the
holder thereof shall be entitled to receive from the Issuer, without expense,
replacement Notes not bearing the applicable legend set forth in Section 10.2 hereof.

 

SECTION 11.  GUARANTEE.

 

11.1         Guarantee of Note Obligations.

 

11.1.1.             Each Guarantor, jointly and severally,
unconditionally and irrevocably guarantees that the Note Obligations of the
Issuer will be performed and paid in full in cash when due and payable, whether
at the stated or accelerated maturity thereof or otherwise, this Note Guarantee
being a guarantee of payment and not of collectibility and being absolute and
in no way conditional or contingent (the “Guaranteed Obligation”).  In the event any part of the Note Obligations
shall not have been so paid in full when due and payable, each Guarantor will,
promptly upon notice by the Collateral Agent or, without notice, promptly upon
the occurrence of a Bankruptcy Default with respect to any Note Party, pay or
cause to be paid to the Collateral Agent for the account of each Note Purchaser
in accordance with the Note Purchasers’ proportionate share of such Note
Obligations which are then due and payable and unpaid.  The obligations of each Guarantor hereunder
shall not be affected by the invalidity, unenforceability or irrecoverability
of any of the Note Obligations as against the Issuer, any other Note Party, any
other Guarantor thereof or any other Person. 
For purposes hereof, the Note Obligations shall be due and payable when
and as the same shall be due and payable under the terms of this Agreement or
any other Note Document 

 

45

 

notwithstanding the fact
that the collection or enforcement thereof against the Issuer may be stayed or
enjoined under the Bankruptcy Code or other applicable law.

 

11.1.2.             The liability of each
Guarantor hereunder shall be absolute and unconditional irrespective of:

 

11.1.2.1.          any lack of validity or enforceability of the Notes, this Agreement or
any other agreement between the Issuer and the Note Purchasers relating to the
advance of monies to the Issuer or any other agreement or instrument relating
thereto;

 

11.1.2.2.          any change in the time, manner or place of payment of, amount of credit
available to the Issuer under, or in any other term of, or any other amendment
or waiver of or any consent to departure from, any agreement between the Issuer
and the Note Purchasers relating to the advance of monies to the Issuer;

 

11.1.2.3.          any change in the name, objects, partnership interest, Capital Stock,
partnership agreement, or certificate or articles of incorporation or by-laws
or any other constituent documents of the Issuer and any of the Guarantors or
the Issuer or any of the Guarantors being amalgamated with another corporation
(in which case this Note Guarantee shall apply to the Guaranteed Obligations of
the resulting corporation and, where the Issuer has been amalgamated with
another corporation, the term “Issuer” shall include such resulting
corporation);

 

11.1.2.4.          any equities between the Note Purchasers, the Guarantor or the Issuer
or any defense, opposition of any nature whatsoever or right of set-off,
compensation, abatement, combination of accounts or cross-claim that the
Guarantor or the Issuer may have;

 

11.1.2.5.          any act or omission on the part of the Note Purchasers that would
prevent subrogation operating in favor of the Guarantor; and

 

11.1.2.6.          to the extent permitted
by applicable law, any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Issuer in respect of the Note
Obligations or of any Guarantor in respect of its guarantee, it being the intent of each Guarantor that
liability to the Note Purchasers, under this Note Guarantee shall be absolute
and unconditional under any and all circumstances and shall not be discharged
except by payment in full of the Note Obligations and the Guaranteed
Obligations.

 

11.1.3.             The Note Purchasers
shall not be concerned to see or enquire into the powers of the Issuer or any
of its respective directors, officers, managers or other agents, acting or
purporting to act on its behalf, and monies, advances, renewals or credits in
fact borrowed or obtained from the Note Purchasers in professed exercise of
such powers shall be deemed to form part of the debts and liabilities hereby
guaranteed, notwithstanding that such borrowing or obtaining of monies,
advances, renewals or credits shall be in excess of the powers of the Issuer or
of its directors, officers, managers or other agents aforesaid, or be in any
way irregular, defective or informal. 
This Note Guarantee shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Note Obligations or
Guaranteed Obligations is rescinded or must otherwise be returned by the Note
Purchasers upon the insolvency, bankruptcy or reorganization of the Issuer or
otherwise, all as though such payment had not been made.

 

46

 

11.1.4.                                       Without limiting the
generality of this Section 11.1.4, none of the Guaranteed
Obligations shall be limited, lessened or released, nor shall this Note
Guarantee be discharged, by the recovery of any judgment against the Issuer or
any other Person, by any voluntary or involuntary liquidation, dissolution,
winding-up, merger or amalgamation of the Issuer, a Guarantor or any other
person, by any sale or other disposition of all or substantially all of the
assets of the Issuer, or by any judicial or extra-judicial receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, moratorium, arrangement, composition with creditors or other
proceedings affecting the Issuer, a Guarantor or any other Person.  If at any time the Note Purchasers have the
right to accelerate the payment of monies owed under the Notes, and such
acceleration is prevented by reason of the pendency against the Issuer of a
case or proceeding under the Bankruptcy Code, the Guarantors agree that, for
purposes of this Note Guarantee such payment shall be deemed to have been
accelerated in accordance with the terms hereof, and the Guarantors shall
forthwith pay or cause to be paid the full amount of principal of and interest
so owing and any other amounts guaranteed hereunder without further notice or
demand.  This is a guarantee of payment,
not a deficiency guarantee. The guarantees provided for in this Section 11
are subject to the terms and conditions of the Intercreditor Agreement.

 

11.2                      Continuing Obligation.  Each Guarantor acknowledges that the Note
Purchasers have entered into this Agreement (and, to the extent that the Note
Purchasers or the Collateral Agent may enter into any future Note Document,
will have entered into such agreement) in reliance on this Note Guarantee, the
Note Guarantee being a continuing irrevocable agreement, and such Guarantor
agrees that its guarantee may not be revoked in whole or in part.  The obligations of the Guarantors hereunder
shall terminate when all of the Note Obligations have been paid in full in cash
and discharged; provided, however, that:

 

11.2.1.                                       if a claim is made upon the Note Purchasers
at any time for repayment or recovery of any amounts or any property received
by the Note Purchasers from any source on account of any of the Note
Obligations and the Note Purchasers repay or return any amounts or property so
received (including interest thereon to the extent required to be paid by the
Note Purchasers), or

 

11.2.2.                                       if the Note Purchasers become liable for any
part of such claim by reason of (i) any judgment or order of any court or
administrative authority having competent jurisdiction, or (ii) any
settlement or compromise of any such claim, then the Guarantors shall remain
liable under this Agreement for the amounts so repaid or property so returned
or the amounts for which the Note Purchasers become liable (such amounts being
deemed part of the Guaranteed Obligations) to the same extent as if such
amounts or property had never been received by the Note Purchasers,
notwithstanding any termination hereof or the cancellation of any instrument or
agreement evidencing any of the Note Obligations.  Not later than five (5) days after
receipt of notice from the Collateral Agent, the Guarantors shall pay to the
Collateral Agent, for the benefit of the Note Purchasers, an amount equal to
the amount of such repayment or return for which the Note Purchasers have so
become liable.  Payments hereunder by a
Guarantor may be required by the Collateral Agent on any number of occasions.

 

11.2.3.                                       The obligations and liabilities of the
Guarantors hereunder shall not be released, discharged, limited or in any way
affected by anything done, suffered or permitted by the Note Purchasers in
connection with any monies advanced by the Note Purchasers to the Issuer or any
security therefor, including any loss of or in respect of any security received
by the Note Purchasers 

 

47

 

from the Issuer or
others.  It is agreed that the Note
Purchasers, without releasing, discharging, limiting or otherwise affecting in
whole or in part the Guarantors’ obligations and liabilities hereunder, may,
without limiting the generality of the foregoing:

 

11.2.3.1.                               grant time, renewals, extensions,
indulgences, releases and discharges to the Issuer;

 

11.2.3.2.                               take or abstain from taking securities or
collateral from the Issuer or from perfecting securities or collateral of the
Issuer;

 

11.2.3.3.                               release, discharge, compromise or otherwise
deal with (with or without consideration) any and all collateral, mortgages or
other security given by the Issuer or any third party with respect to the
obligations or matters contemplated by this Agreement;

 

11.2.3.4.                               do, or omit to do, anything to enforce the
payment or performance of any of the Note Obligations or the Guaranteed
Obligations or take or abstain
from taking security from the Issuer or any other person or to perfect or
abstain from perfecting any security interest;

 

11.2.3.5.                               vary, compromise, exchange, renew, discharge,
release, discharge, subordinate, postpone, abandon or otherwise deal with any
of the Note Obligations or the Guaranteed Obligations or any security interest;

 

11.2.3.6.                               deal with or allow any creditor of the Issuer
or the Guarantors or any of them or any other Person to deal with goods or
property constituting collateral subject to any security interest;

 

11.2.3.7.                               accept compromises from the Issuer;

 

11.2.3.8.                               apply all monies at any time received from
the Issuer or from securities upon such part of the Note Obligations in
compliance with the Note Documents as the Note Purchasers may see fit or change
any such application in whole or in part from time to time as the Note
Purchasers may see fit; or

 

11.2.3.9.                               otherwise deal with the Issuer, each other Guarantor
and all other Persons and securities in compliance with the Note Documents as
the Note Purchasers may see fit.

 

11.2.4.                                       The Note Purchasers shall not be bound or
obliged to exhaust their recourse against the Issuer or any other Guarantor or
any other persons or any securities, mortgage or collateral they may hold or
take any other action (other than make demand) before being entitled to payment
from a Guarantor hereunder.

 

11.2.5.                                       Any account settled by or between the Note
Purchasers and the Issuer with respect to the Notes shall be accepted by the
Guarantors as conclusive evidence that the balance or amount thereby appearing
due to the Note Purchasers is so due.

 

11.3                      Waivers with Respect to Note Obligations. 
Except to the extent expressly required by this Agreement or any other
Note Document, each Guarantor waives, to the fullest extent permitted by the
provisions of applicable law, all of the following (including all defenses,
counterclaims and other rights of any nature based upon any of the following):

 

48

 

11.3.1.                                       presentment, demand for payment and protest
of nonpayment of any of the Note Obligations, and notice of protest, dishonor
or nonperformance;

 

11.3.2.                                       notice of acceptance of this Note Guarantee
and notice that the Notes have been sold by the Issuer hereunder in reliance on
such Guarantor’s guarantee of the Note Obligations;

 

11.3.3.                                       notice of any Default or of any inability to
enforce performance of the obligations of the Issuer or any other Person with
respect to any Note Document or notice of any acceleration of maturity of any
Note Obligations;

 

11.3.4.                                       demand for performance or observance of, and
any enforcement of any provision of this Agreement, the Note Obligations or any
other Note Document or any pursuit or exhaustion of rights or remedies with
respect to any collateral or against the Issuer or any other Person in respect
of the Note Obligations or any requirement of diligence or promptness on the
part of Collateral Agent or any Note Purchaser in connection with any of the
foregoing;

 

11.3.5.                                       any act or omission on the part of any Note
Purchaser which may impair or prejudice the rights of such Guarantor, including
rights to obtain subrogation, exoneration, contribution, indemnification or any
other reimbursement from the Issuer or any other Person, or otherwise operate
as a deemed release or discharge;

 

11.3.6.                                       failure
or delay to perfect or continue the perfection of any Security Interest in any
Collateral or any other action which harms or impairs the value of, or any
failure to preserve or protect the value of, any Collateral;

 

11.3.7.                                       any statute of limitations or any statute or rule of
law which provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than the obligation of the
principal;

 

11.3.8.                                       any “single action” or “antideficiency” law
which would otherwise prevent any Note Purchaser from bringing any action,
including any claim for a deficiency, against such Guarantor before or after
the Collateral Agent or the Note Purchasers’ commencement or completion of any
foreclosure action, whether judicially, by exercise of power of sale or
otherwise, or any other law which would otherwise require any election of
remedies by the Collateral Agent or any Note Purchaser;

 

11.3.9.                                       all demands and notices of every kind with
respect to the foregoing; and

 

11.3.10.                                 to the extent not referred to above, all
defenses (other than payment) which the Issuer may now or hereafter have to the
payment of the Note Obligations, together with all suretyship defenses, which
could otherwise be asserted by such Guarantor.

 

Each Guarantor represents that it has obtained the
advice of counsel as to the extent to which suretyship and other defenses may
be available to it with respect to its obligations hereunder in the absence of
the waivers contained in this Section 11.3.

 

No delay or omission on the part of any of the
Collateral Agent or any of the Note Purchasers in exercising any right under
any Note Document or under any other guarantee of the Note Obligations shall
operate as a waiver or relinquishment of such right.  No action which the Collateral Agent or 

 

49

 

the Note Purchasers or any Note Party or any of its
Subsidiaries may take or refrain from taking with respect to the Note
Obligations shall affect the provisions of this Agreement or the obligations of
each Guarantor hereunder.  None of the
Note Purchasers’ or the Collateral Agent’s rights shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of any of
the Note Parties or any of their Subsidiaries, or by any noncompliance by any
Note Party or of its Subsidiaries with any Note Document, regardless of any knowledge
thereof which the Collateral Agent or any Note Purchaser may have or otherwise
be charged with.

 

11.4                      Note Purchasers’ Power to Waive, etc.  Notwithstanding anything to
the contrary herein, with respect to this Section 11, each
Guarantor grants to the Collateral Agent and each of the Note Purchasers full
power in their discretion, without notice to or consent of such Guarantor, such
notice and consent being expressly waived to the fullest extent permitted by
applicable law, and without in any way affecting the liability of such
Guarantor under its guarantee hereunder:

 

11.4.1.                                       To waive compliance with, and any Default
under, and to consent to any amendment to or modification or termination of any
provision of, or to give any waiver in respect of, this Agreement, any other
Note Document, the Collateral, the Note Obligations or any guarantee thereof
(each as from time to time in effect);

 

11.4.2.                                       To grant any renewals extensions of the Note
Obligations (for any duration), and any other indulgence with respect thereto,
and to effect any total or partial release (by operation of law or otherwise),
discharge, compromise or settlement with respect of the Note Obligations,
whether or not rights against such Guarantor under this Agreement are reserved
in connection therewith;

 

11.4.3.                                       To take security in any form for the Note
Obligations, and to consent to the addition to or the substitution, exchange,
release or other disposition of, or to deal in any other manner with, any part
of any property contained in the Collateral whether or not the property, if
any, received upon the exercise of such power shall be of a character or value
the same as or different from the character or value of any property disposed
of, and to obtain, modify or release any present or future guarantees of the
Note Obligations and to proceed against any of the Collateral or such
guarantees in any order;

 

11.4.4.                                       To collect or liquidate or realize upon any
of the Note Obligations or the Collateral in any manner or to refrain from
collecting or liquidating or realizing upon any of the Note Obligations; and

 

11.4.5.                                       To extend additional credit, if any, under
this Agreement, any other Note Document or otherwise in such amount as the Note
Purchasers may determine, including increasing the amount of credit and the
interest rate and fees with respect thereto, even though the condition of the
Note Parties (financial or otherwise, on an individual or Consolidated basis)
may have deteriorated since the date hereof.

 

11.5                      Information Regarding the Issuer, 
etc.  Each Guarantor has made such investigation as
it deems desirable of the risks undertaken by it in entering into this
Agreement and is fully satisfied that it understands all such risks.  Each Guarantor waives any obligation which
may now or hereafter exist on the part of the Collateral Agent or any Note
Purchaser to inform it of the risks being undertaken by entering into this
Agreement or of any changes in such risks and, from and after the date hereof,
each Guarantor undertakes to keep itself informed of such risks and any 

 

50

 

changes therein.  Each Guarantor
expressly waives any duty which may now or hereafter exist on the part of the
Collateral Agent or any Note Purchaser to disclose to such Guarantor any matter
related to the business of the Note Parties and their Subsidiaries, operations,
character, collateral, credit, condition (financial or otherwise), income or
prospects of the Issuer and its Affiliates or its properties or management,
whether now or hereafter known by the Collateral Agent or any Note
Purchaser.  Each Guarantor represents,
warrants and agrees that it assumes sole responsibility for obtaining from the
Issuer all information concerning this Agreement and all other Note Documents
and all other information as to the Issuer and its Affiliates or its properties
or management as such Guarantor deems necessary or desirable.

 

11.6                      Certain Guarantor Representations.  Each Guarantor represents
that:

 

11.6.1.                                       giving this Note Guarantee is in its best
corporate interest and commercial benefit and does not exceed its financial
means and capabilities;

 

11.6.2.                                       it is in its best interest and in pursuit of
the purposes for which it was organized as an integral part of the business
conducted and proposed to be conducted by the Note Parties and their
Subsidiaries, and reasonably necessary and convenient in connection with the
conduct of the business conducted and proposed to be conducted by them, to
induce the Note Purchasers to enter into this Agreement and to purchase the
Notes from the Issuer by making the Note Guarantee contemplated by this Section 11;

 

11.6.3.                                       the proceeds from the sale of the Notes will
directly or indirectly inure to its benefit;

 

11.6.4.                                       by virtue of the foregoing it is receiving
directly or indirectly at least reasonably equivalent value from the Note
Purchasers for its Guaranteed Obligation;

 

11.6.5.                                       it will not be rendered insolvent or left
with unreasonably small assets with which to conduct its business as a result
of entering into this Agreement (considering, among other things, its rights of
contribution against other Note Parties);

 

11.6.6.                                       after giving effect to the transactions
contemplated by this Agreement and the other Note Documents and considering,
among other things, its rights of contribution against other Note Parties, it
will (directly or indirectly) have assets having a fair saleable value in the
ordinary course in excess of its total obligations to all Persons (taking into
account, as applicable, rights of contribution, subrogation and indemnity with
regard to obligations shared by others); and

 

11.6.7.                                       it has been advised by the Collateral Agent
that the Note Purchasers are unwilling to enter into this Agreement unless the
Note Guarantee provided for by this Section 11 is given by it.

 

11.7                      Subrogation.  Each Guarantor agrees that, until the Note
Obligations are paid in full, it will not exercise any right of reimbursement,
subrogation, contribution, offset or other claims against any Note Party or any
of its Subsidiaries arising by contract or operation of law in connection with
any payment made or required to be made by such Guarantor under this Agreement
or any other Note Document; provided, that the Note Parties hereby waive
any such right of reimbursement, subrogation, contribution, offset or other
claim.  After the payment in full of the
Note Obligations, each Guarantor shall be entitled to exercise against any Note
Party or any of their 

 

51

 

Subsidiaries all such rights of reimbursement, subrogation,
contribution and offset, and all such other claims, to the fullest extent
permitted by law.

 

11.8                      Subordination.

 

11.8.1.                                       Each Note Party covenants and agrees that the
payment of any Indebtedness and all obligations and liabilities owing by any
Note Party in favor of any other Note Party, whether now existing or hereafter
incurred (collectively, the “Intercompany Obligations”) is subordinated,
to the extent and in the manner provided in this Section 11.8, to
the prior payment in full of all Note Obligations owed or hereafter owing to
the Note Purchasers by the Note Parties and is so subordinated as a claim
against such Person or any of its assets, whether such claim be in the ordinary
course of business or in the event of voluntary or involuntary liquidation,
dissolution, insolvency or bankruptcy, so that no payment with respect to any
such Indebtedness, claim or liability will be made or received while any Event
of Default exists and that such subordination is for the benefit of the Note
Purchasers.

 

11.8.2.                                       Each Note Party hereby (i) authorizes
the Note Purchasers to demand specific performance of the terms of this Section 11.8
at any time when any Note Party shall have failed to comply with any provisions
of this Section 11.8 which are applicable to it and (ii) irrevocably
waives any defense based on the adequacy of a remedy at law, which might be
asserted as a bar to such remedy of specific performance.

 

11.8.3.                                       Upon any distribution of assets of any Note
Party in any dissolution, winding up, liquidation or reorganization (whether in
bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or otherwise):

 

11.8.3.1.                               The Note Purchasers shall first be entitled
to receive payment in full in cash of the Note Obligations before any Note
Party is entitled to receive any payment on account of the Intercompany
Obligations; provided that prior to the occurrence of an Event of Default, any
Note Party may make payments to any other Note Party on account of Intercompany
Indebtedness.

 

11.8.3.2.                               Any payment or distribution of assets of any
Note Party of any kind or character, whether in cash, property or securities,
to which any other Note Party would be entitled except for the provisions of
this Section 11.8, shall be paid by the liquidating trustee or
agent or other Person making such payment or distribution directly to the Note
Purchasers in the manner set forth herein, to the extent necessary to make
payment in full of all Note Obligations remaining unpaid after giving effect to
any concurrent payment or distribution or provisions therefor to the Note
Purchasers.

 

11.8.3.3.                               In the event that notwithstanding the
foregoing provisions of this Section 11.8 any payment or
distribution of assets of any Note Party of any kind or character, whether in
cash, property or securities, shall be received by any other Note Party on
account of any Intercompany Obligations before all Note Obligations are paid in
full, such payment or distribution shall be received and held in trust for and
shall be paid over to the Collateral Agent for itself and the Note Purchasers
for application to the payment of the Note Obligations until all of the Note
Obligations shall have been paid in full, after giving effect to any concurrent
payment or distribution or provision therefor to the Note Purchasers.

 

52

 

11.8.3.4.                              No right of any Note Purchaser or any other
present or future holders of the Note Obligations to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of any Note Party or by any act or failure to
act, in good faith, by any Note Party, or by any noncompliance by any Note Party
with the terms of the Intercompany Obligations, regardless of any knowledge
thereof which any Note Purchaser may have or be otherwise charged with.

 

11.9                      Limitation on Guaranty.

 

11.9.1.                                       In
any action or proceeding with respect to any Guarantor involving any state
corporate law, the Bankruptcy Code of the United States or any other Debtor
Relief Law, if the obligations of such Guarantor under this Note Guarantee
would otherwise be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under this Note Guarantee, then, notwithstanding any other
provision hereof to the contrary, the amount of such liability shall, without
any further action by such Guarantor, any Note Party, the Collateral Agent or
any other Person, be automatically limited and reduced to the highest amount
which is valid and enforceable and not subordinated to the claims of other
creditors as determined in such action or proceeding.  Any term or provision of this Note Guarantee
to the contrary notwithstanding, the maximum aggregate amount of the
obligations guaranteed or incurred hereunder by any Guarantor shall not exceed (i) the
maximum amount that can be hereby guaranteed and incurred without rendering
this Note Guarantee, as it relates to such Guarantor, voidable under applicable
law relating to fraudulent conveyance or fraudulent transfer or similar laws or
(ii) the maximum amount which can be guaranteed by such Guarantor under
applicable law, including applicable state and federal laws relating to
insolvency of debtors.

 

SECTION 12. 
COLLATERAL AGENT.

 

12.1                      Collateral Agent’s Authority to Act, etc.  Each
of the Note Purchasers appoints and authorizes Sankaty Advisors, LLC to act for
the Note Purchasers as the Collateral Agent in connection with and on the terms
set forth in the Note Documents.  If Note
Purchasers affiliated with the Collateral Agent hold less than 20% of the
outstanding Note Obligations, then the Required Purchasers may designate a
successor Collateral Agent and the term “Collateral Agent” shall for all
purposes of this Agreement and the Note Documents thereafter mean such
successor.  All action in connection with
the enforcement of, or the exercise of any remedies under the Note Documents
shall be taken in the manner set forth therein. 
Each of the Note Purchasers authorizes the Collateral Agent to (i) execute
and deliver the Note Documents on behalf of such Note Purchaser and accept
delivery thereof on its behalf from any Note Party, (ii) take such action
on its behalf and to exercise all rights, powers  and remedies and perform the duties as are
expressly delegated to the Agent under such Note Documents and (iii) exercise
such powers as are reasonably incidental thereto.

 

12.2                      Collateral Agent’s Resignation.  The Collateral Agent may
resign at any time by giving at least 60 days’ prior written notice of its
intention to do so to each of the Note Purchasers and the Issuer and upon the
appointment by the Required Purchasers of a successor Collateral Agent
reasonably satisfactory to the Issuer. 
If no successor Collateral Agent shall have been so appointed and shall
have accepted such appointment within 45 days after the retiring Collateral Agent’s
giving of such notice of resignation, then the retiring Collateral Agent may
appoint a successor Collateral Agent which shall be a bank or a trust company
organized under the laws of the United States of America or any state thereof
and having a combined capital, surplus and undivided profit of at least
$500,000,000 (so long as no Default exists) with the consent of the Issuer,
which shall not be 

 

53

 

unreasonably withheld; provided, however, that any
successor Collateral Agent appointed under this sentence may be removed upon
the written request of the Required Purchasers, which request shall also
appoint a successor Collateral Agent (so long as no Default exists) reasonably
satisfactory to the Issuer.  Upon the
appointment of a new Collateral Agent hereunder, the term “Collateral Agent”
shall for all purposes of this Agreement and the Note Documents thereafter mean
such successor.  After any retiring
Collateral Agent’s resignation hereunder as Collateral Agent, or the removal
hereunder of any successor Collateral Agent, the provisions of this Agreement
and the other Note Documents shall continue to inure to the benefit of such
retiring or removed Collateral Agent as to any actions taken or omitted to be
taken by it while it was Collateral Agent under this Agreement and the other
Note Documents.

 

12.3                      Concerning the Collateral Agent.

 

12.3.1.                                       Action in Good Faith, etc.  The
Collateral Agent and its officers, directors, employees and agents shall be
under no liability to any of the Note Purchasers or to any future holder of any
Notes for any action or failure to act taken or suffered in good faith, and any
action or failure to act in accordance with an opinion of its counsel shall
conclusively be deemed to be in good faith. 
The Collateral Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, on instructions given to the Collateral Agent by
the Required Purchasers.  The Collateral
Agent may execute releases and other collateral termination documents with
respect to assets disposed of by the Note Parties as permitted by this
Agreement.

 

12.3.2.                                       No Implied Duties, etc.  The
Collateral Agent shall have and may exercise such powers as are specifically
delegated to the Collateral Agent under this Agreement or any other Note
Document together with all other powers incidental thereto.  The Collateral Agent shall have no implied
duties to any Person or any obligation to take any action under this Agreement
or any other Note Document except for action specifically provided for in this
Agreement or any other Note Document to be taken by the Collateral Agent.

 

12.3.3.                                       Validity, etc.  The
Collateral Agent shall not be responsible to any Note Purchaser or any future
holder of any Notes (a) for the legality, validity, enforceability or
effectiveness of this Agreement or any other Note Document, or (b) for any
recitals, reports, representations, warranties or statements contained in or
made in connection with this Agreement or any other Note Document.

 

12.3.4.                                       Compliance.  The Collateral Agent shall not
be obligated to ascertain or inquire as to the performance or observance of any
of the terms of this Agreement or any other Note Document.

 

12.3.5.                                       Employment of Collateral Agent and Counsel.  The
Collateral Agent may execute any of its duties as Collateral Agent under this
Agreement or any other Note Document by or through employees, agents and
attorneys in fact and shall not be responsible to any of the Note Purchasers,
the Issuer or any other Note Party for the default or misconduct of any such
agents or attorneys in fact selected by the Collateral Agent acting in good
faith.  The Collateral Agent shall be
entitled to advice of counsel concerning all matters pertaining to the agency
hereby created and its duties hereunder or under any other Note Document.

 

12.3.6.                                       Reliance on Documents and Counsel.  The
Collateral Agent shall be entitled to rely, and shall be fully protected in
relying, upon any affidavit, certificate, cablegram, 

 

54

 

consent, instrument, letter,
notice, order, document, statement, facsimile, telegram, telex or teletype
message or writing reasonably believed in good faith by the Collateral Agent to
be genuine and correct and to have been signed, sent or made by the Person in
question, including any telephonic or oral statement made by such Person, and,
with respect to legal matters, upon an opinion or the advice of counsel
selected by the Collateral Agent.

 

12.3.7.                                       Collateral Agent’s Reimbursement.  Each
of the Note Purchasers severally agrees to reimburse the Collateral Agent, pro
rata in accordance with such Note Purchaser’s percentage interest
(determined based on the ratio of the aggregate principal amount of the Notes
held by such Note Purchaser to the aggregate amount of all outstanding Notes),
for any reasonable expenses not reimbursed by the Issuer (without limiting the
obligation of the Issuer to make such reimbursement):  (a) for which the Collateral Agent is
entitled to reimbursement by the Issuer under this Agreement or any other Note
Document, and (b) after the occurrence and during the continuance of a
Default, for any other reasonable expenses incurred by the Collateral Agent on
the Note Purchasers’ behalf in connection with the enforcement of the Note
Purchasers’ rights under this Agreement or any other Note Document; provided,
however, that the Collateral Agent shall not be reimbursed for any such
expenses arising as a result of its gross negligence or willful misconduct.

 

12.4                      Indemnification.  The Note Purchasers shall severally indemnify
the Collateral Agent and its officers, directors, employees, agents, attorneys,
accountants, consultants and controlling Persons (to the extent not reimbursed
by the Note Parties and without limiting the obligation of the Note Parties to
do so), pro rata in accordance with their respective percentage interests (as
determined in accordance with Section 12.3.7), from and against any
and all liabilities, obligations, damages, penalties, actions, judgments,
suits, losses (including accrued and unpaid Collateral Agent’s fees), costs,
expenses or disbursements of any kind whatsoever which may at any time be
imposed on, incurred by or asserted against the Collateral Agent or such
Persons relating to or arising out of this Agreement, any Note Document, the
transactions contemplated hereby or thereby, or any action taken or omitted by
the Collateral Agent in connection with any of the foregoing; provided, however,
that the foregoing shall not extend to actions or omissions which are determined
in a final, nonappealable judgment by a court of competent jurisdiction to have
been taken by the Collateral Agent with gross negligence or willful misconduct.

 

12.5                      Assumption of Collateral Agent’s Rights. 
Notwithstanding anything herein or in any Note Document to the contrary,
if at any time no Person constitutes the Collateral Agent hereunder or the
Collateral Agent fails to act upon written directions from the Required
Purchasers, the Required Purchasers shall be entitled to exercise any power,
right or privilege granted to the Collateral Agent under this Agreement or any
other Note Document and in so acting the Note Purchasers shall have the same
rights, privileges, indemnities and protections provided to the Collateral
Agent under this Agreement or any other Note Document.

 

SECTION 13. 
MISCELLANEOUS.

 

13.1                      Expenses.  Whether or not the transactions contemplated
hereby shall be consummated, the Issuer agrees to promptly pay (i) all the
actual and reasonable costs and expenses incurred by the Collateral Agent and
the Note Purchasers in the preparation of this Agreement and the other Note
Documents and (ii) all reasonable out-of-pocket costs and expenses of the
Collateral Agent and the Note Purchasers (including fees, expenses and
disbursements of their outside counsel, Ropes & Gray LLP) relating to
the negotiation, preparation and execution of the Note Documents, review of
other documents (including due diligence review) in connection with the
transactions 

 

55

 

contemplated hereby, and any amendments and waivers hereto or thereto,
and the Closing.  In addition, the Issuer
agrees to promptly pay in full after the occurrence of an Event of Default, all
costs and expenses (including, without limitation, reasonable fees and
disbursements of counsel) incurred by the Collateral Agent or the Note
Purchasers in enforcing any obligations of or in collecting any payments due
hereunder or under the Notes by reason of such Event of Default or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a workout, or any insolvency or
bankruptcy proceedings; provided that, in such event, the Note
Purchasers and the Collateral Agent shall be only entitled to payment of the
fees, expenses and disbursements of a single outside counsel and other
professionals, such to be designated by the Required Purchasers.

 

13.2                      Indemnity.  In addition to the payment of expenses
pursuant to Section 13.1, whether or not the transactions
contemplated hereby shall be consummated, each Note Party (as “Indemnitor”)
agrees to indemnify, pay and hold the Note Purchasers, the Collateral Agent and
the officers, directors, employees, agents, and Affiliates of the Note
Purchasers and the Collateral Agent (collectively called the “Indemnitees”)
harmless from and against any and all other liabilities, costs, expenses,
obligations, losses, damages, penalties, actions, judgments, suits, claims and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of one counsel for such Indemnitees) in
connection with any investigative, administrative or judicial proceeding
commenced or threatened (excluding claims among Indemnitees and, with the
exception of claims arising out of otherwise indemnifiable matters (e.g.,
actions to enforce the indemnification rights provided hereunder), and
excluding claims between the Issuer and an Indemnitee), whether or not such
Indemnitee shall be designated a party thereto, which may be imposed on,
incurred by, or asserted against that Indemnitee, in any manner relating to or
arising out of this Agreement, the Notes, the Note Documents or the other
documents related to the transactions contemplated hereby (including, without
limitation, the existence or exercise of any security rights with respect to
the Collateral in accordance with the Collateral Documents), the Note
Purchasers’ agreement to purchase the Notes or the use or intended use of the
proceeds of any of the proceeds thereof to the Issuer (the “Indemnified
Liabilities”); provided, that the Indemnitor shall not have any
obligation to an Indemnitee hereunder with respect to an Indemnified Liability
to the extent that such Indemnified Liability arises from the gross negligence
or willful misconduct of that Indemnitee or its Related Parties as mutually
agreed between the Indemnitee and the Indemnitors or as determined by a final,
non-appealable judgment of a court of competent jurisdiction.  Each Indemnitee shall give the Indemnitor
prompt written notice of any claim that might give rise to Indemnified
Liabilities setting forth a description of those elements of such claim of
which such Indemnitee has knowledge; provided, that any failure to give
such notice shall not affect the obligations of the Indemnitor unless (and then
solely to the extent) such Indemnitor is prejudiced thereby.  The Indemnitor shall have the right at any
time during which such claim is pending to select counsel to defend and control
the defense thereof and settle any claims for which it is responsible for
indemnification hereunder (provided that the Indemnitor will not settle
any such claim without (i) the appropriate Indemnitee’s prior written
consent, which consent shall not be unreasonably withheld or (ii) obtaining
an unconditional release of the appropriate Indemnitee from all claims arising
out of or in any way relating to the circumstances involving such claim) so
long as in any such event the Indemnitor shall have stated in writing delivered
to the Indemnitee that, as between the Indemnitor and the Indemnitee, the
Indemnitor is responsible to the Indemnitee with respect to such claim to the
extent and subject to the limitations set forth herein; provided, that
the Indemnitor shall not be entitled to control the defense of any claim in the
event that in the reasonable opinion of counsel for the Indemnitee, there are
one or more material defenses available to the Indemnitee which are not
available to the Indemnitor; provided further, that with respect to 

 

56

 

any claim as to which the Indemnitee is controlling the defense, the
Indemnitor will not be liable to any Indemnitee for any settlement of any claim
pursuant to this Section 13.2 that is effected without its prior
written consent, which consent shall not be unreasonably withheld.  To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section 13.2 may
be unenforceable because it is violative of any law or public policy, the
Issuer shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.

 

13.3                      [INTENTIONALLY OMITTED]

 

13.4                      Intercreditor
Agreement.  Each of the Note
Purchasers hereby agrees with the Collateral Agent to be bound by the terms and
provisions of the Intercreditor Agreement, 
as if such Note Purchaser were a signatory thereto and hereby instructs
the Collateral Agent to enter into the Intercreditor Agreement when such
agreement is executed and delivered by all parties thereto.  In the event of any conflict between this
Agreement and the Intercreditor Agreement, the parties hereto hereby agree that
the Intercreditor Agreement shall govern.

 

13.5                      Amendments and Waivers.  Subject to Section 7.24, no
amendment, modification, termination or waiver of any provision of the Note
Documents, shall in any event be effective without the written consent of the
Required Purchasers and the Issuer; provided, however, that no
amendment, modification, waiver or consent shall, unless in writing and signed
by each Note Purchaser affected thereby, do any of the following:  (a) extend the maturity or time of, or
right to receive, payment of principal of, or premium, if any, or interest on,
any Notes (other than as a result of waiving a prepayment required under Sections
3.2.2 or 3.2.3 or 3.2.4 or a Default or Event of Default
giving rise to a right of acceleration, which shall each be by written consent
of the Required Purchasers); or (b) reduce the rate of interest or the
principal amount of any of the Notes or increase the relative amount of
interest which the Issuer may pay through capitalizing the same; or (c) impair
or affect the right of any Note Purchaser to institute suit for enforcement of
any such payment to which such Note Purchaser is entitled pursuant to this
Agreement; or (d) alter the percentage of Note Purchasers necessary to
modify or take action under this Agreement; (e) release any Collateral
except as provided in the Collateral Documents; (f) amend the definition
of “Required Purchasers” hereunder or (g) amend this Section 13.5.  Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was
given.  No notice to or demand on the
Issuer in any case shall entitle such Person to any further notice or demand in
similar or other circumstances.  Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section 13.5 shall be binding upon each holder of the
Notes at the time outstanding and each future holder thereof.

 

13.6                      Independence of Covenants.  All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of an Event of Default or Default if such action is
taken or condition exists.

 

13.7                      Notices.  All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and delivered personally or sent via a nationally
recognized overnight courier.  Such
notices, demands and other communications will be delivered or sent to the
address indicated below:

 

57

 

If to the Issuer or any
other Note Party:

 

	
   

  	
  Issuer:

  
	
   

  	
   

  
	
   

  	
  The
  Children’s Place Retail Stores, Inc.

  
	
   

  	
  915
  Secaucus Road

  
	
   

  	
  Secaucus,
  New Jersey 07094

  
	
   

  	
  Attn:
  Chief Financial Officer

  
	
   

  	
  Fax
  No.: (201) 558-2837

  
	
   

  	
   

  
	
  With
  a copy to:

  
	
   

  
	
   

  	
  Gibson,
  Dunn & Crutcher LLP

  
	
   

  	
  200
  Park Avenue

  
	
   

  	
  New
  York, New York 10166

  
	
   

  	
  Attn:
  Aaron Adams

  
	
   

  	
  Fax
  No.: (212) 351-2494

  
	
   

  	
   

  
	
   

  	
  Guarantors:

  
	
   

  	
   

  
	
   

  	
  The
  Children’s Place Services Company, LLC

  
	
   

  	
  The
  Children’s Place (Virginia), LLC

  
	
   

  	
  The
  Children’s Place Canada Holdings, Inc.

  
	
   

  	
  thechildren’splace.com,
  inc.

  
	
   

  	
  Twin
  Brook Insurance Company, Inc.

  
	
   

  	
  915
  Secaucus Road

  
	
   

  	
  Secaucus,
  New Jersey 07094

  
	
   

  	
  Attn:
  General Counsel

  
	
   

  	
  Fax
  No.: (201) 558-2840

  
	
   

  	
   

  
	
  With
  a copy to:

  
	
   

  
	
   

  	
  Gibson,
  Dunn & Crutcher LLP

  
	
   

  	
  200
  Park Avenue

  
	
   

  	
  New
  York, New York 10166

  
	
   

  	
  Attn:
  Aaron Adams

  
	
   

  	
  Fax
  No.: (212) 351-2494

  
	
   

  	
   

  
	
  If to Note Purchasers or
  to the Collateral Agent:

  
	
   

  
	
   

  	
  c/o
  Sankaty Advisors, LLC

  
	
   

  	
  111
  Huntington Avenue

  
	
   

  	
  Boston,
  Massachusetts 02199

  
	
   

  	
  Telephone:
  (617) 516-2000

  
	
   

  	
  Facsimile:
  (617) 516-2710

  
	
   

  	
  Attention:
  James Athanasoulas

  
	
   

  	
   

  
	
   

  

 

58

 

with a copy to:

 

	
   

  	
  Ropes &
  Gray LLP

  
	
   

  	
  One
  International Place

  
	
   

  	
  Boston,
  Massachusetts 02110

  
	
   

  	
  Telephone:
  (617) 951-7483

  
	
   

  	
  Facsimile:
  (617) 951-7050

  
	
   

  	
  Attention:
  Alyson Allen, Esq.

  
	
   

  	
   

  
	
   

  	
  and

  
	
   

  	
   

  
	
   

  	
  Ropes &
  Gray LLP

  
	
   

  	
  1211
  Avenue of the Americas

  
	
   

  	
  New
  York, New York 10036

  
	
   

  	
  Telephone:
  (212) 841-0665

  
	
   

  	
  Facsimile:
  (646) 728-1598

  
	
   

  	
  Attention:
  Marc E. Hirschfield, Esq.

  

 

or such other address or to the attention of such
other Person as the recipient party shall have specified by prior written
notice to the sending party; provided that the failure to deliver copies
of notice as indicated above shall not affect the validity of such notice.  Any such communication shall be deemed to
have been received when actually delivered or refused.

 

13.8                      Survival of Warranties and Certain Agreements.

 

13.8.1.                                       Any liability of any Note Party for any
breach of, or inaccuracy in, the representations and warranties made by it
herein shall survive the execution and delivery of this Agreement, the sale and
delivery of the Notes hereunder and shall continue until the repayment of the
Notes and the Note Obligations in full; provided, that if all or any
part of such payment is set aside, such Note Party shall remain liable for any
breach of, or inaccuracy in, the representations and warranties made by it
herein as if no such payment had been made.

 

13.8.2.                                       Any liability of any Note Party for any
breach of or default in the performance of the agreements made by it herein
shall survive the execution and delivery of this Agreement, the sale and delivery
of the Notes hereunder and shall continue until the repayment of the Notes and
the Note Obligations; provided, that if all or part of such payment is
set aside, such Person shall remain liable for any breach of or default in the
performance of such agreements.

 

13.8.3.                                       Notwithstanding anything in this Agreement or
implied by law to the contrary, the agreements of the Note Parties set forth in
Sections 13.1 and 13.2 shall survive the payment of the Notes,
and the termination of this Agreement.

 

13.9                      Failure or Indulgence Not Waiver; Remedies Cumulative.  No
failure or delay on the part of any Note Purchaser in the exercise of any
power, right or privilege hereunder or under the Notes shall impair such power,
right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege.  All
rights and remedies existing under this Agreement or the Notes are cumulative
to and not exclusive of, any rights or remedies otherwise available.

 

59

 

13.10                Severability.  If and to the extent that any provision in
this Agreement or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions of this Agreement, the Notes or of the other obligations of any Note
Party under any of such provisions, or of such provision or obligation in any
other jurisdiction, or of such provision to the extent not invalid, illegal or
unenforceable shall not in any way be affected or impaired thereby.

 

13.11                Heading.  Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.

 

13.12                Applicable Law.  This Agreement shall be governed by, and
shall be construed and enforced in accordance with, the laws of the State of
New York.

 

13.13                Successors and Assigns; Subsequent Holders.  This
Agreement shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and assigns of the Note Purchasers.  The terms and provisions of this Agreement
and all certificates delivered pursuant hereto shall inure to the benefit of
any assignee or transferee of the Notes, to the extent the assignment is
permitted hereunder, and in the event of such transfer or assignment, the
rights and privileges herein conferred upon the Note Purchasers shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. 
The respective rights or any interest therein or hereunder of a Note
Party may not be assigned without the written consent of the Required
Purchasers.  Any assignee shall execute a
joinder to this Agreement.

 

13.14                CONSENT
TO JURISDICTION AND SERVICE OF PROCESS.  ALL JUDICIAL PROCEEDINGS
BROUGHT AGAINST ANY NOTE PARTY WITH RESPECT TO THIS AGREEMENT OR ANY OTHER NOTE
DOCUMENTS MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK IN NEW
YORK COUNTY, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH NOTE PARTY
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT SUBJECT, HOWEVER, TO RIGHTS OF APPEAL.  EACH NOTE PARTY HEREBY AGREES THAT SERVICE
UPON IT IN THE MANNER PROVIDED FOR THE GIVING OF NOTICES IN SECTION 13.7
SHALL CONSTITUTE SUFFICIENT NOTICE. 
NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF ANY NOTE PURCHASER TO BRING
PROCEEDINGS AGAINST THE ISSUER IN THE COURTS OF ANY OTHER JURISDICTION.

 

13.15                WAIVER
OF JURY TRIAL.  THE PARTIES HERETO HEREBY WAIVE, TO THE FULL EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT
OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT
THEREOF.  NOTWITHSTANDING ANYTHING
CONTAINED IN THIS AGREEMENT TO THE CONTRARY, NO CLAIM MAY BE MADE BY ANY
NOTE PARTY AGAINST 

 

60

 

ANY NOTE PURCHASER FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (OTHER THAN
WILLFUL MISCONDUCT CONSTITUTING ACTUAL FRAUD) IN CONNECTION WITH, ARISING OUT
OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED HEREUNDER OR UNDER
THE OTHER NOTE DOCUMENTS, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH.  EACH NOTE PARTY HEREBY
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH
DAMAGES.  EACH NOTE PARTY AGREES THAT
THIS SECTION 13.15 IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND ACKNOWLEDGES THAT THE NOTE PURCHASERS WOULD NOT EXTEND TO THE
ISSUER ANY MONIES HEREUNDER IF THIS SECTION 13.15 WERE NOT PART OF
THIS AGREEMENT.

 

13.16                Counterparts; Effectiveness.  This Agreement and any
amendments, waivers, consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.  This Agreement shall become effective upon
the execution of a counterpart hereof by each of the parties hereto, and when
written or telephonic notification of such execution and authorization of
delivery thereof has been received by the Note Parties and the Note Purchasers.

 

13.17                Confidentiality.  The Collateral Agent and each Note Purchaser
agrees to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents concerning the business of the Note Parties and their
Subsidiaries furnished to such Note Purchaser by the Note Parties or any of
their Subsidiaries or on its behalf pursuant to this Agreement (the “Information”).  Notwithstanding the foregoing, the Collateral
Agent and any Note Purchaser shall be permitted to disclose Information (i) to
its officers, managers, directors, employees, agents and representatives provided
that such Information shall remain confidential; (ii) to the extent
required by applicable laws and regulations or by any subpoena or similar legal
process, or to the extent requested by any governmental agency or authority; (iii) to
the extent such Information (A) becomes publicly available other than as a
result of a breach of this Agreement, (B) becomes available to such Note
Purchaser on a non-confidential basis from a source other than the Note Parties
or any of their Subsidiaries or (C) was available to the Note Purchaser on
a non-confidential basis prior to its disclosure to the Note Purchaser by the
Note Parties or any of their Subsidiaries; (iv) to the extent any Note
Party or any of its Subsidiaries shall have consented to such disclosure in writing;
(v) in connection with the assignment of any Notes, provided that
the recipient of Information agrees to maintain the confidentiality of the
Information; or (vi) to its respective investors or lenders in connection
with any regular or otherwise required reporting performed by such Note
Purchaser to any such Persons.  The
Collateral Agent and any Note Purchaser may (and each employee, representative
or agent or advisors of the Collateral Agent or any Note Purchaser), to the
extent necessary to prevent the transaction from being described as a “confidential
transaction” under Treasury Regulation section 1.6011-4(b)(3), disclose the tax
treatment and tax structure of the transaction and any related tax strategies.

 

13.18                USA PATRIOT ACT.  Each Note Purchaser subject to the USA
PATRIOT ACT (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”) hereby notifies the Note Parties that pursuant to the
requirements of the Act, it may be required to obtain, verify and record
information that identifies the Note Parties, which information includes the
name and address of the Note Parties and other information that will allow such
Note Purchaser to identify the Note Parties 

 

61

 

in accordance with the Act.  The
Note Parties hereby agree to provide any such information upon request, and to
the disclosure of such information pursuant to the requirements of the Act and
notwithstanding any other provision hereof.

 

13.19                Entirety.  This Agreement and the other Note Documents
embody the entire agreement among the parties and supersede all prior
agreements and understandings, if any, relating to the subject matter hereof
and thereof.

 

62

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by the respective duly authorized officers of the
undersigned and by the undersigned as of the date first written above.

 

	
  THE
  ISSUER:

  	
  THE CHILDREN’S
  PLACE RETAIL STORES, 

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: Susan
  J. Riley

  
	
   

  	
  Title:
  Executive Vice President, Finance &

  
	
   

  	
    Administration

  

 

 

[Signatures continue on following page]

 

Note Purchase Agreement

 

 

	
  GUARANTORS:

  	
  THE CHILDREN’S
  PLACE SERVICES 

  COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Susan J. Riley

  
	
   

  	
   

  	
  Title:  Executive Vice President, Finance &

  
	
   

  	
   

  	
     Administration

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TWIN BROOK
  INSURANCE COMPANY, 

  INC.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Susan J. Riley

  
	
   

  	
   

  	
  Title:  Senior Vice President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  THECHILDRENSPLACE.COM,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Adrienne Urban

  
	
   

  	
   

  	
  Title:  Assistant Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE CHILDREN’S
  PLACE CANADA 

  HOLDINGS, INC.

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Susan J. Riley

  
	
   

  	
   

  	
  Title:  Senior Vice President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE CHILDREN’S
  PLACE (VIRGINIA), LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Susan J. Riley

  
	
   

  	
   

  	
  Title:  Senior Vice President and Treasurer

  

 

 

[Signatures continue on following page]

 

Note Purchase Agreement

 

 

	
  NOTE PURCHASERS:

  	
  SANKATY
  CREDIT OPPORTUNITIES III, 

  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Stuart E. Davies

  
	
   

  	
   

  	
  Title:    Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SANKATY
  CREDIT OPPORTUNITIES IV, 

  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Stuart E. Davies

  
	
   

  	
   

  	
  Title:    Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  RGIP,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:    Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
  CRYSTAL
  CAPITAL FUND, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  Crystal Capital GP, LLC, its General

  
	
   

  	
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  CRYSTAL
  CAPITAL ONSHORE 

  WAREHOUSE LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  As
  duly authorized:  Crystal Capital Fund 

  Management, L.P., as designated manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Crystal
  Capital Fund Management GP,

  
	
   

  	
   

  	
   

  	
  LLC,
  its General Partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
								

 

Note Purchase Agreement

 

 

	
   

  	
  1903
  ONSHORE FUNDING, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:  GB Merchant Partners, LLC, its Investment 

  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BANK
  OF AMERICA, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Peter Sherman

  
	
   

  	
   

  	
  Title:    Managing Director

  
	
   

  	
   

  	
   

  
	
  COLLATERAL AGENT:

  	
  SANKATY
  ADVISORS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:  Stuart E. Davies

  
	
   

  	
   

  	
  Title:    Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SYNDICATION AGENT:

  	
  CRYSTAL
  CAPITAL FUND MANAGEMENT, 

  L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  Crystal Capital Fund Management GP, LLC, 

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

Note Purchase Agreement

 

 

SCHEDULE I

 

ALLOCATION OF THE NOTES AMONG THE NOTE PURCHASERS

 

	
  Note Purchaser

  	
   

  	
  Cash Fee

  	
   

  	
  OID

  	
   

  	
  Funded Amount of

  Total Issuance ($)

  	
   

  	
  Principal Amount of 

  Total Issuance ($)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sankaty Credit Opportunities III, L.P.

  	
   

  	
  None

  	
   

  	
  $

  	
  368,156.25

  	
   

  	
  $

  	
  16,956,843.75

  	
   

  	
  $

  	
  17,325,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sankaty Credit Opportunities IV, L.P.

  	
   

  	
  None

  	
   

  	
  $

  	
  368,156.25

  	
   

  	
  $

  	
  16,956,843.75

  	
   

  	
  $

  	
  17,325,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RGIP, LLC

  	
   

  	
  None

  	
   

  	
  $

  	
  7,437.50

  	
   

  	
  $

  	
  342,562.50

  	
   

  	
  $

  	
  350,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Crystal Capital Fund, L.P.

  	
   

  	
  $

  	
  212,500.00

  	
   

  	
  None

  	
   

  	
  $

  	
  9,787,500.00

  	
   

  	
  $

  	
  10,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Crystal Capital Onshore Warehouse LLC

  	
   

  	
  $

  	
  159,375.00

  	
   

  	
  None

  	
   

  	
  $

  	
  7,340,625.00

  	
   

  	
  $

  	
  7,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1903 Onshore Funding, LLC

  	
   

  	
  $

  	
  308,125.00

  	
   

  	
  None

  	
   

  	
  $

  	
  14,191,875.00

  	
   

  	
  $

  	
  14,500,00.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  382,500.00

  	
   

  	
  None

  	
   

  	
  $

  	
  17,617,500.00

  	
   

  	
  $

  	
  18,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  1,062,500.00

  	
   

  	
  $

  	
  743,750.00

  	
   

  	
  $

  	
  83,000,000.00

  	
   

  	
  $

  	
  85,000,000

  	
   

  

 

 

ADDRESSES OF THE NOTE PURCHASERS

 

Sankaty
Credit Opportunities III, L.P.

111
Huntington Avenue

Boston,
MA 02199

Attention:
James Athanasoulas

Fax
(617) 516-2710

 

Sankaty
Credit Opportunities IV, L.P.

111
Huntington Avenue

Boston,
MA 02199

Attention:
James Athanasoulas

Fax
(617) 516-2710

 

RGIP, LLC

Ropes & Gray LLP

One International Place

Boston, MA 02110

Attention: Erik Johnston

Fax: (617) 951-7050

Email: erik.johnston@ropesgray.com

 

Crystal
Capital Fund, L.P.

Two
International Place

Boston,
MA  02110

Attention:  Evren Ozargun

Telephone:
(617) 428-8700

Fax:
(617) 428-8701

E-mail:
eozargun@crystalcapital.com

 

Crystal
Capital Onshore Warehouse LLC

c/o
Crystal Capital Fund Management, L.P.

Two
International Place

Boston,
MA  02110

Attention:  Evren Ozargun

Telephone:  (617) 428-8700

Fax:  (617) 428-8701

E-mail:
eozargun@crystalcapital.com

 

1903
Onshore Funding, LLC

c/o
GB Merchant Partners, LLP

101
Huntington Avenue, 10th Floor

Boston,
MA 02199

Attention:
Wendy Landon

Tel:
(617) 422-6596

Email:
wlandon@gordonbrothers.com

 

 

Bank of
America, N.A.

Independence
Center

101
North Tryon Street, 15th Floor

NC1-001-15-01

Charlotte,
North Carolina 28255

Attention:
Servicing Team TLC004

Tel:
(704) 386-4550

Fax:
(704) 409-0154

E-mail
address: cs-dailywork@bankofamerica.com

 

with,
in each case, copies to:

 

Ropes &
Gray LLP

One
International Place

Boston,
Massachusetts  02110

Phone:  (617) 951-7483

Fax:  (617) 951-7050

Attention:  Alyson Allen

 

and

 

Ropes &
Gray LLP

1211
Avenue of the Americas

New
York, New York  10036

Telephone:  (212) 841-0665

Facsimile:  (646) 728-1598

Attention:  Marc E. Hirschfield, Esq.

 

 

SCHEDULE II

WIRE INSTRUCTIONS OF THE NOTE PURCHASERS

 

Sankaty
Credit Opportunities III, L.P.

Bank:
HSBC Bank USA, N.A.

ABA
Number: 021001088

Account
Name: Sankaty Credit Opportunities III LP Operating

Account
Number: 090330170

SWIFT
Code: MRMDUS33

 

Sankaty
Credit Opportunities IV, L.P.

Bank:
HSBC Bank USA, N.A.

ABA
Number: 021001088

Account
Name: Sankaty Credit Opportunities IV LP Operating

Account
Number: 090 340 116

SWIFT
Code: MRMDUS33

 

RGIP,
LLC

Bank:
Bank of America

ABA
Number: 0260 0959 3

Account
Name: RGIP, LLC

Account
Number: 000051280897

Reference:
Children’s Place

 

Crystal
Capital Fund, L.P.

Bank:
Citibank, N.A.

  666 Fifth Avenue

  New York, NY 10043

ABA
Number: 021 000 089

Account
Name:  Crystal Capital Fund, L.P.

Account
Number:  9936788449

Reference:  Children’s Place

 

Crystal
Capital Onshore Warehouse LLC

Bank: US Bank NA

  One Federal
Street, Third Floor

  Boston,
MA  02110

ABA Number: 091000022

Account Name: Crystal Capital Onshore Warehouse

Account Number: 
104790063903

Reference:  Children’s
Place

 

 

1903 Onshore Funding, LLC

Bank:
Bank of America

ABA
Number: 026-009-593

Account
Name: 1903 Onshore Funding, LLC

Account
Number: 4602287049

Reference:
The Children’s Place

 

Bank of America, N.A.

Bank:
Bank of America, N.A.

ABA Number: 026-009-593

Account Name: Credit Services

Account Number: 1366210627300

Attention: Servicing Team TLC004

Reference: The Children’s Place 

 

A-2

 

ANNEX
I

 

DEFINITIONS
TO NOTE PURCHASE AGREEMENT

 

“Account” means an account (as that term is
defined in the Uniform Commercial Code).

 

“Accounting Change” has the meaning set forth
in Section 1.2.

 

“Acquisition” means, with respect to
any Person (a) an Investment in, or a purchase of a Controlling interest
in, the Equity Interests of any other Person, (b) a purchase or other
acquisition of all or substantially all of the assets or properties of, another
Person or of any business unit of another Person, (c) any merger or
consolidation of such Person with any other Person or other transaction or
series of transactions resulting in the acquisition of all or substantially all
of the assets, or a Controlling interest in the Equity Interests, of any
Person, or (d) any acquisition by such Person of any group of Store
locations comprising more than five percent (5%) of the number of Stores
operated by the acquiring Person as of the date of such acquisition, in each
case acquired in any transaction or group of transactions which are part of a
common plan.

 

“Affiliate” of any Person means (a) any
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with such Person, or (b) any Person who is a director
or executive officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above.  For purposes of this definition, control of a
Person means the power, direct or indirect, (x) to vote 15% or more of the
securities having ordinary voting power for the election of directors of such
Person, or (y) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise. Any reference to the
Affiliates of any Note Party herein or in any Note Document shall not include
Hoop, unless explicitly stated otherwise.

 

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

 

“Alabama Property” means the land, together
with the buildings, structures, parking areas, and other improvements thereon,
owned by The Children’s Place Services Company, LLC, a Delaware limited
liability company and located at 1377 Airport Road, Fort Payne, Alabama.

 

“Anti-Terrorism Laws” means any laws relating
to terrorism or money laundering, including Executive Order No. 13224, the
USA Patriot Act, the laws comprising or implementing the Bank Secrecy Act, and
the laws administered by the United States Treasury Department’s Office of
Foreign Asset Control (as any of the foregoing laws may from time to time be
amended, renewed, extended, or replaced).

 

“Applicable Premium” means the premium to be
due and payable in connection with any acceleration or a prepayment of the
Notes pursuant to this Agreement (excluding any scheduled amortization payments
and payments of Excess Cash Flows under Section 3.2.4.4 and
payments of Extraordinary Receipts under Section 3.2.4.2).  With respect to the Notes, each such
prepayment premium shall be equal, with respect to any such acceleration or
prepayment made or first required to be made during any period set forth in the
table below, to the percentage set forth beside such period in such table of
the aggregate principal amount of the Notes then prepaid or required to be
prepaid:

 

A-1

 

	
  Period

  	
   

  	
  Applicable Premium

  	
   

  
	
  July 31, 2008 through July 30,
  2009

  	
   

  	
  2

  	
  %

  
	
  July 31, 2009 through July 30,
  2010

  	
   

  	
  1.5

  	
  %

  
	
  Subsequent to July 31, 2010

  	
   

  	
  0

  	
  %

  

 

“Applicable Rate” means the rate of
interest to be paid on the unpaid principal amount of the Notes from and after
the Closing Date.  For the period from
and after the Closing Date, the Applicable Rate shall be a rate equal to LIBOR
plus the applicable margin as set forth below (the “Applicable Margin”).  The Applicable Margin shall be (i) for
the period from the Closing Date until the date the first calculations are
required to be delivered pursuant to Section 7.3.11, calculated on
the following leverage based grid, where the Closing Date Total Leverage Ratio
equals “x”, and (ii) thereafter, calculated on a leverage based grid as
follows, where the Leverage Ratio as set forth in the computations delivered
pursuant to Section 7.3.11 for the most recent Trailing Twelve
Month Period equals “x” and is calculated as of the end of the most recent
Fiscal Month for which financial reports have been delivered pursuant to the
Agreement; provided, however, that in the event any financial reports
have not been timely delivered pursuant to the terms of the Agreement, the
Leverage Ratio for such Trailing Twelve Month Period shall be presumed to be >
2: 1.

 

	
  Leverage Ratio

  	
   

  	
  Applicable Margin

  	
   

  
	
  x > 2 : 1

  	
   

  	
  9.75

  	
  %

  
	
  2 : 1 > x > 1.5 : 1.0

  	
   

  	
  9.0

  	
  %

  
	
  x < 1.5 : 1.0

  	
   

  	
  8.5

  	
  %

  

 

“Asset Purchase Agreement” means the Asset
Purchase Agreement, dated as of April 3, 2008, among T2 Acquisition, LLC,
T1 WDC Inc., The Children’s Place Services Company, LLC, Hoop Retail Stores,
LLC and Hoop Canada, Inc.

 

“Bankruptcy Code” means Title 11 of the
United States Code, as now or hereafter in effect, or any successor thereto.

 

“Bankruptcy Default” means any Event of
Default referred to in Section 9.6.

 

“Blocked Person” has the meaning set forth in
Section 5.26.2.

 

“Borrowing Base” has the meaning ascribed to
it in the Revolving Loan Agreement.

 

“Business Day” means any day that is not a
Saturday, Sunday, or other day on which banks are authorized or required to
close in the state of New York.

 

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

 

A-2

 

“Capital Stock” means all shares, interests,
participations, rights to purchase, options, warrants, general or limited
partnership interests, or limited liability company interests or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity, whether voting or nonvoting,
including common stock, preferred stock or any other “equity security” (as such
term is defined in Rule 3a11-1 of the Rules and Regulations
promulgated by the Securities and Exchange Commission (17 C.F.R. § 240.3a11-1)
under the Securities and Exchange Act of 1934, as the same shall be from time
to time be amended, renewed, extended or replaced).

 

“Capitalized Lease” means any lease which is
required to be capitalized on the balance sheet of the lessee in accordance
with GAAP.

 

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

 

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

 

“CFC” means a Person that is a controlled
foreign corporation under Section 957 of the Code.

 

“Change of
Control”, in respect of the Issuer, means any “person” or “group” (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan), other than the existing
shareholders of the Issuer set forth on Schedule 1.02 or a “person” or “group”
Controlled by one of the existing shareholders of the Issuer set forth on
Schedule 1.02, becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, except that a person or
group shall be deemed to have “beneficial ownership” of all securities that
such “person” or “group” has the right to acquire, whether such right is
exercisable immediately or only after the passage of time (such right, an
“option right”)), directly or indirectly, of 25% or more of the Equity
Interests of the Issuer entitled to vote for members of the board of directors
or equivalent governing body of the Issuer on a fully-diluted basis (and taking
into 

 

A-3

 

account all
such Equity Interests that such “person” or “group” has the right to acquire
pursuant to any option right);

 

“Closing” has the meaning set forth in Section 2.2.

 

“Closing Date” means the date on which the
Notes are issued and sold pursuant to the Agreement.

 

“Closing Date EBITDA” has the meaning set
forth in Schedule 7.16.

 

“Closing Date Total Leverage Ratio” has the
meaning set forth in Schedule 7.16.

 

“Code” means the United States Internal
Revenue Code of 1986, together with all rules and regulations issued
thereunder, as now and hereafter in effect, as codified at 26 U.S.C. §1 et seq
or any successor provision thereto.

 

“Collateral” means all collateral on which a
lien is granted or purported to be granted pursuant to any Collateral Document.

 

“Collateral Documents” means, collectively,
the Security Agreement, the IP Security Agreement and any other document
pursuant to which any Note Party and any Guarantor grants security for the Note
Obligations.

 

“Collateral Agent” means Sankaty Advisors,
LLC, in its capacity as Collateral Agent under the Note Documents or any
successor thereto.

 

“Consolidated”, when used with reference to
any term, means that term as applied to the accounts of the Issuer (or other
specified Person) and all of its Subsidiaries (or other specified group of
Persons), or such of its Subsidiaries as may be specified, consolidated (or
combined), in accordance with GAAP and with appropriate deductions for minority
interests in Subsidiaries.

 

Contractual Obligation”
means, as to any Person, any provision 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.

 

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

 

“Controlled Group” means all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with any Note Party, are
treated as a single employer under Section 414 of the Code.

 

“DDA” means each checking or other
demand deposit account maintained by any of the Note Parties.  All funds in each DDA shall be conclusively
presumed to be Collateral and proceeds of Collateral and the Note Purchasers
and the Collateral Agent shall have no duty to inquire as to the source of the
amounts on deposit in any DDA.

 

A-4

 

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

 

“Default” means any event, act, condition or
default which with notice or lapse of time, or both, would constitute an Event
of Default.

 

“Disney Store Termination Agreements”
has the meaning set forth in Section 6.3.2.

 

“Disposition” or “Dispose”
means the sale, transfer, license, lease or other disposition (including any
sale and leaseback transaction and any sale, transfer, license or other
disposition of (whether in one transaction or in a series of transactions) all
or substantially all of its assets to or in favor of any Person) of any property
(including, without limitation, any Equity Interests) by any Person (or the
granting of any option or other right to do any of the foregoing), including
any sale, assignment, transfer or other disposal, with or without recourse, of
any notes or accounts receivable or any rights and claims associated therewith.

 

“Documents” means the Note Documents, the
Revolving Loan Documents, the Governing Documents, and all documents,
certificates and agreements delivered with respect thereto, in each case, together
with any schedules, exhibits, appendices or other attachments thereto.

 

“Domestic Subsidiary” means any Subsidiary
that is organized under the laws of any political subdivision of the United
States.

 

“EBITDA” has the meaning set forth in Schedule
7.16.

 

“Environmental Laws” means any and all
Federal, state, local, and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the
environment, including those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.

 

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

 

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

 

“Equipment” means and includes all of the
Issuer’s goods (other than Inventory) whether now owned or hereafter acquired
and wherever located including, without limitation, all 

 

A-5

 

equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts,
accessories and all replacements and substitutions therefor or accessions
thereto.

 

“Equity Interests” means, with respect to any
Person, all of the shares of capital stock of (or other ownership or profit
interests in) such Person, all of the warrants, options or other rights for the
purchase or acquisition from such Person of shares of capital stock of (or
other ownership or profit interests in) such Person, all of the securities
convertible into or exchangeable for shares of capital stock of (or other
ownership or profit interests in) such Person or warrants, rights or options
for the purchase or acquisition from such Person of such shares (or such other
interests), and all of the other ownership or profit interests in such Person
(including partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such shares, warrants, options, rights or other
interests are outstanding on any date of determination.

 

“ERISA”
means the Employee
Retirement Income Security Act of 1974 as the same may be amended from time to
time.

 

“ERISA Affiliate”
means any trade or business (whether or not incorporated) under common control
with the Issuer within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).

 

“ERISA Event” means (a) a
Reportable Event with respect to a Pension Plan; (b) a withdrawal by the
Issuer or any ERISA Affiliate from a Pension Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer (as defined
in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a
complete or partial withdrawal by the Issuer or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a
Pension Plan or Multiemployer Plan; (e) an event or condition which
constitutes grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan or Multiemployer
Plan; or (f) the imposition of any liability under Title IV of ERISA,
other than for PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Issuer or any ERISA Affiliate.

 

“Events of Default” has the meaning set forth
in Section 9.

 

“Excess Availability” has the meaning
ascribed to it in the Revolving Loan Agreement.

 

“Excess Cash Flow” means, with respect to a
specified fiscal period and determined with respect to the Note Parties on a
consolidated basis in accordance with GAAP and without duplication of any
amounts constituting Extraordinary Receipts used to prepay the Note
Obligations, (a) EBITDA for the fiscal year then ended, minus (b) the
sum of (i) voluntary and mandatory prepayments of the Notes in accordance
with Section 3.2, (ii) the cash portion of Interest Expense
paid during such fiscal period (including cash payments of future capitalized
interest), (iii) the cash portion of taxes paid during such period, (iv) the
cash portion of Capital Expenditures during such period, (v) cash payments
made under Capitalized Leases, (vi) plus or minus changes in working
capital for such Fiscal Period with adjustments for the accounting of
outstanding checks as accounts payable, (vii) changes in Canadian and
Asian cash balances due to 

 

A-6

 

operations in the ordinary
course, (viii) the cash portion of payments made relating to Hoop to the
extent excluded from EBITDA, (ix) the cash portion of one time charges
related to the Issuers restructuring announced on March 20, 2008 to the
extent excluded from EBITDA, (x) the cash portion of non-reoccuring
charges related to the severance of certain senior management to the extent
excluded from EBITDA, (xi) legal and other professional advisory closing fees
associates with the Note Documents and the Revolving Loan Documents to the
extent excluded from EBITDA, (xii) legal and other professional advisory fees
incurred in the Fiscal Year ending January 31, 2009 associated with the
development of strategic alternatives to the extent excluded from EBITDA, and
(xiii) the cash portion of all other non-reoccurring charges/gains to the extent
excluded from EBITDA.

 

“Exchange Act” means the Securities Exchange
Act of 1934, as amended (and any successor statute).

 

“Existing Credit Agreement” means that
certain Fifth Amended and Restated Loan and Security Agreement, dated as of June 28, 2007,
by and between, among others, the Issuer, Services Company, the financial
institutions party thereto from time to time as lenders, and Wells Fargo Retail
Finance, LLC, as Agent, as amended and in effect as of the Closing Date.

 

“Extraordinary Receipts” means any
cash received by the Note Parties with respect to (a) tax refunds, (b) pension
plan reversions, (c) proceeds of insurance (including key man life
insurance and, unless the Collateral Agent provides its prior written consent
otherwise, business interruption insurance, but excluding any casualty
insurance), (d) judgments, proceeds of settlements or other consideration
of any kind in connection with any cause of action, (e) indemnity
payments, (f) any purchase price adjustment received in connection with
any purchase agreement (other than relating to ordinary purchases of goods and
services in the ordinary course of business) and (g) at any time that an
Event of Default shall exist and be continuing and at the sole discretion of
the Collateral Agent, any other cash received by the Note Parties not in the
ordinary course of business; provided that with respect to the receipts
described in clauses (a) through (f) of this definition, only such
receipts in excess of $2,000,000 in the aggregate over the life of the Note
Obligations shall be deemed an “Extraordinary Receipt”; provided further that
any individual receipt described in clauses (a) through (f) of this
definition that does not exceed $100,000 shall not be deemed an “Extraordinary
Receipt” and for the avoidance of doubt, shall not be included in the aggregate
amount received under clauses (a) through (f) of this definition.

 

 “Fiscal
Quarter” has the meaning set forth in Schedule 7.16.

 

“Fiscal Month” means any fiscal month
of any Fiscal Year, which month shall generally end on the Saturday closest to
the last day of each calendar month in accordance with the fiscal accounting
calendar of the Note Parties.

 

“Fiscal Year” has the meaning set forth in Schedule
7.16.

 

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

 

“GAAP” means generally accepted accounting principles set forth from time to time in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting 

 

A-7

 

Standards Board (or agencies with similar functions of comparable
stature and authority within the accounting profession), which are applicable
to the circumstances as of the date of determination.

 

“Governing Documents” means, with respect to
any Person, such Person’s articles and by-laws of a corporation, operating
agreement, if a limited liability company or unlimited liability company, and
limited partnership agreement and certificate of limited partnership, of a
limited partnership, and other similar governing documents, with respect to any
other entity.

 

“Governmental Authority” means any
nation or government, any state or other political subdivision thereof, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.

 

“Guarantee” means as to any Person, any
obligation of such Person guaranteeing, providing comfort or otherwise
supporting any Indebtedness, lease, dividend, or other obligation (“primary
obligation”) of any other Person (the “primary obligor”) in any manner,
including any obligation or arrangement of such Person to (a) purchase or
repurchase any such primary obligation, (b) advance or supply funds (i) for
the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, (d) protect
the beneficiary of such arrangement from loss (other than product warranties
given in the ordinary course of business) or (e) indemnify the owner of
such primary obligation against loss in respect thereof.  The amount of any Guarantee at any time shall
be deemed to be an amount equal to the lesser at such time of (x) the
stated or determinable amount of the primary obligation in respect of which
such Guarantee is incurred and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guarantee, or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.

 

“Guaranteed Obligations” shall have the
meaning assigned to such term in Section 11.1.

 

“Guarantors” means each of the
parties listed as Guarantors on the signature pages to this Agreement and
each Person that subsequently becomes a party to this Agreement and is required
to act as a Guarantor under this Agreement.

 

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

 

A-8

 

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

 

“Hedge Termination Value” means, in respect
of any one or more Hedge Agreements, after taking into account the effect of
any legally enforceable netting agreement relating to such Hedge Agreements, (a) for
any date on or after the date such Hedge Agreements have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in clause (a),
the amount(s) determined as the mark-to-market value(s) for such
Hedge Agreements, as determined based upon one or more mid-market or other
readily available quotations provided by any recognized dealer in such Hedge
Agreements (which may include a Note Purchaser or any Affiliate of a Note Purchaser).

 

“Hoop” means each Subsidiary of the Issuer
which comprises the Disney store business previously conducted by the Issuer.

 

“Hoop Sale” means the sale of certain assets
of Hoop and certain other assets used in the Hoop business pursuant to the Asset
Purchase Agreement.

 

“Indebtedness” means, as to any Person at a
particular time, without duplication, all of the following, whether or not
included as indebtedness or liabilities in accordance with GAAP;

 

(a)           all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;

 

(b)           the maximum amount of all direct or contingent obligations
of such Person arising under letters of credit (including standby and
commercial), bankers’ acceptances, bank guaranties, surety bonds and similar
instruments;

 

(c)           net obligations of such Person under any Hedge Agreement;

 

(d)           all obligations of such Person to pay the deferred
purchase price of property or services (other than trade accounts payable in
the ordinary course of business and, in each case, payable in accordance with
customary trade practices);

 

(e)           indebtedness (excluding prepaid interest thereon) secured
by a Lien on property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title retention
agreements), whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse;

 

(f)            all obligations in respect of Capital Lease Obligations
of such Person, but excluding any obligations of such Person in respect of
operating leases;

 

(g)           all obligations of such Person to purchase, redeem,
retire, defease or otherwise make any payment in respect of any Equity Interest
in such Person or any 

 

A-9

 

other
Person, or any warrant, right or option to acquire such Equity Interest,
valued, in the case of a redeemable preferred interest, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends; and

 

(h)           all Guarantees of such Person in respect of any of the
foregoing.

 

For all purposes hereof, the Indebtedness of
any Person shall include the Indebtedness of any partnership or joint venture
(other than a joint venture that is itself a corporation or limited liability
company) in which such Person is a general partner or a joint venturer, unless
such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any Hedge
Agreement on any date shall be deemed to be the Hedge Termination Value thereof
as of such date.

 

“Indemnified Liabilities” has the meaning set
forth in Section 13.2.

 

“Indemnitees” has the meaning set forth in Section 13.2.

 

“Indemnitor” has the meaning set forth in Section 13.2.

 

“Information” has the meaning set forth in Section 13.17.

 

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

 

“Intellectual Property” means any and all
licenses, patents, copyrights, trademarks, designs and the goodwill associated
with such trademarks.

 

“Intercompany Obligations” has the meaning
set forth in Section 11.8.1.

 

“Intercreditor Agreement” has the meaning set
forth in the Recitals.

 

“Interest Expense” has the meaning set forth
in Schedule 7.16.

 

“Interest Payment Date” has the meaning set
forth in Section 3.1.1.

 

“Interest Period”  means the period from and including
the Closing Date and ending on the date
one, two, three or six months thereafter, as selected by a Issuer by written
notice to the Collateral Agent, no less than three days prior to the
commencement of the Interest Period, and each succeeding period elected
by the Issuer in this manner; provided
that:

 

(a)           if
the Issuer fails to elect an Interest Period by written notice to the
Collateral Agent by the date that is three days prior to the commencement of an
Interest Period, such Interest Period will automatically end one month after
its commencement;

 

(b)           any
Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall end
on the next preceding Business Day;

 

A-10

 

(c)           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 the
calendar month at the end of such Interest Period; and

 

(d)           no
Interest Period shall extend beyond the Maturity Date.

 

“Internal Revenue Service” means the Internal
Revenue Service of the United States government.

 

“Inventory” means and includes, as to any
Person, all of such Person’s now owned or hereafter acquired goods, merchandise
and other personal property, wherever located, to be furnished under any
consignment arrangement, contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in such
Person’s business or used in selling or furnishing such goods, merchandise and
other personal property, and all documents of title or other documents
representing them.

 

“Investment” means, as to any Person, any
direct or indirect acquisition or investment by such Person, whether by means
of (a) the purchase or other acquisition of Equity Interests of another
Person, (b) a loan, advance or capital contribution to, Guarantee or
assumption of debt of, or purchase or other acquisition of any other debt or
interest in, another Person, or (c) any Acquisition, or (d) any other
investment of money or capital in order to obtain a profitable return.  For purposes of covenant compliance, the
amount of any Investment shall be the amount actually invested, without
adjustment for subsequent increases or decreases in the value of such Investment..

 

“IP Security Agreement” means that certain
Intellectual Property Agreement, dated the date hereof, by and between the Note
Parties and the Collateral Agent for the benefit of the Note Purchasers, as
amended, modified or supplemented from time to time in accordance with the
terms thereof.

 

“Issuer” has the meaning set forth in the
preamble.

 

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

 

“Letters of Credit” means each of the Letters
of Credit set forth in Schedule T-1.

 

“LIBOR” means for any Interest Period
the greater of (x) 3.00% per annum or (y):

 

(a)  the rate per annum equal to
the rate determined by the Note Purchasers to be the offered rate that appears
on the page of the Telerate screen (or any successor thereto) that
displays an average British Bankers Association Interest Settlement Rate for
deposits in Dollars (for delivery on the first day of such Interest Period)
with a term equivalent to such Interest Period, determined as of approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, or

 

A-11

 

(b)  if the rate referenced in the
preceding clause (a) does not appear on such page or service or such page or
service shall not be available, the rate per annum equal to the rate determined
by the Note Purchasers to be the offered rate on such other page or other
service that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period.

 

“License Agreements” means any licensing agreements entered into
between any of the  Note Parties or their
Subsidiaries and any Person.

 

“Lien” means any mortgage, deed of trust,
pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance,
easement, lien (statutory or other), security interest, or other security
arrangement and any other preference, priority, or preferential arrangement of
any kind or nature whatsoever, including any conditional sale contract or other
title retention agreement, the interest of a lessor under a Capital Lease and
any synthetic or other financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code or any comparable law.

 

“Material Adverse Effect” means, excluding
the filing for bankruptcy and the implementation of the bankruptcy proceeding
of Hoop, since any specified date or from the circumstances existing
immediately prior to the happening of any specified event, a material adverse
change in (a) the business, assets, financial condition or properties of (i) the
Issuer and its Subsidiaries taken as a whole or (ii) all of the Note
Parties taken as a whole, (b) the ability of (i) the Issuer or (ii) all
of the Note Parties taken as a whole, to perform their obligations under this
Agreement or the other Note Documents, or (c) the ability of any Guarantor
to perform any of its material obligations under any guarantee of the Notes, or
(d) the rights and remedies of the Note Purchasers under the Agreement or
the other Note Documents; provided, that where no date is specified, the
measurement date shall be from and after February 2, 2008.

 

“Material Contract” means, with respect to
any Person, (i) each contract or agreement to which such Person or any of
its Subsidiaries is a party involving aggregate consideration payable to or by
such Person or such Subsidiary of $5,000,000 or more (other than (A) purchase
orders in the ordinary course of the business of such Person or such
Subsidiary, (B) contracts that by their terms may be terminated by such
Person or Subsidiary in the ordinary course of its business upon less than 60
days notice without penalty or premium and (C) employment contracts with
aggregate consideration less than $1,000,000), (ii) any material License
Agreements, and (iii) each other contract or agreement which if terminated
prior to the term set forth therein, such termination could reasonably be
expected to have a Material Adverse Effect.

 

“Material Indebtedness” means
Indebtedness of the Note Parties under the Revolving Loan Agreement and other
Indebtedness (other than the Note Obligations) of the Note Parties in an
aggregate principal amount exceeding $1,500,000.  For purposes of determining the amount of
Material Indebtedness at any time, the amount of the obligations in respect of
any Hedge Agreement at such time shall be calculated at the Hedge Termination
Value thereof.

 

“Maturity Date” means July 31, 2013.

 

A-12

 

“Monitoring Fee” means a $50,000 fee payable
to the Collateral Agent on the Closing Date and on each anniversary of the
Closing Date with such fee being fully earned when paid.

 

“Moody’s” has the meaning specified therefor
in the definition of Cash Equivalents.

 

“Multiemployer Plan” means a
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to
which Note Parties or any member of the Controlled Group may have any
liability.

 

“Net Cash Proceeds” means:

 

(a)           with
respect to any sale or disposition by a Note Party, the amount of cash proceeds
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on behalf
of a Note Party in connection therewith after deducting therefrom only (i) the
amount of any Indebtedness secured by any Permitted Encumbrance on any asset
(other than (A) the Revolving Loan Debt and (B) Indebtedness
assumed by the purchaser of such asset) which is required to be, and is, repaid
in connection with such sale or disposition, (ii) all fees, commissions,
and expenses related thereto and required to be paid by a Note Party in connection
with such sale or disposition and (iii) taxes paid or payable to any
taxing authorities by a Note Party in connection with such sale or disposition,
in each case to the extent, but only to the extent, that the amounts so
deducted are, at the time of receipt of such cash, actually paid or payable to
a Person that is not an Affiliate of a Note Party and are properly attributable
to such transaction;

 

(b)           with
respect to the issuance or incurrence of any Indebtedness by a Note Party or
any of its Subsidiaries, or the issuance by a Note Party or any of its
Subsidiaries of any shares of its Capital Stock, the aggregate amount of cash
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment or disposition of deferred consideration)
by or on behalf of a Note Party or any of its Subsidiaries in connection with
such issuance or incurrence, after deducting therefrom only (i) all fees,
commissions, and expenses related thereto and required to be paid by a Note Party
or any of its Subsidiaries in connection with such issuance or incurrence and (ii) taxes
paid or payable to any taxing authorities by a Note Party or any of its
Subsidiaries in connection with such issuance or incurrence, in each case to
the extent, but only to the extent, that the amounts so deducted are, at the
time of receipt of such cash, actually paid or payable to a Person that is not
an Affiliate of a Note Party or any of its Subsidiaries, and are properly
attributable to such transaction; and

 

(c)           with
respect to any Extraordinary Receipts received by a Note Party, the amount of
cash proceeds received (directly or indirectly) from time to time (whether as
initial consideration or through the payment of deferred consideration) by or
on behalf of a Note Party, in connection therewith after deducting therefrom
only (i)  all fees, commissions, and expenses related thereto and required
to be paid by a Note Party in connection with such Extraordinary Receipts and (ii) taxes
paid or payable to any taxing authorities by a Note Party in connection with
such Extraordinary Receipts, in each case to the extent, but only to the
extent, that the amounts so deducted are, at the time of receipt of such cash,
actually paid or payable to a Person that is not an Affiliate of a Note Party,
and are properly attributable to such Extraordinary Receipts.

 

“New Headquarters”
means the office located at Two Emerson Lane, Secaucus, NJ 07094.

 

A-13

 

“Note” and “Notes” has the meaning set
forth in the recitals to the Agreement and shall mean and include any Notes
issued pursuant to Section 10.1 of the Agreement, and shall further
mean any include any amendments, modifications or refinancings thereof,
including any such that increase the principal amount thereof.

 

“Note Documents” means the Agreement, the
Collateral Documents, the Intercreditor Agreement, the Notes and each of the
documents, instruments and other agreements evidencing, guaranteeing or
governing or otherwise relating to the incurrence by the Issuer of, the Note
Obligations, as in effect on the Closing Date and as the same may be entered
into, amended, restated, modified or supplemented from time to time in
accordance with the terms of the Intercreditor Agreement.

 

“Note Guarantee” means the Guarantee issued
pursuant to Section 11 by the Guarantors.

 

“Note Obligations” means any and all
obligations of the Issuer under this Agreement with respect to the Notes and
under the Notes, including, without limitation, the obligation to pay
principal, premium, if any, interest, expenses, reasonable attorneys’ fees and
disbursements, indemnities and other amounts payable thereunder or in
connection therewith or related thereto, in each case to the extent provided
for under this Agreement or the other Note Documents.

 

“Note Parties” has the meaning set forth in
the preamble.

 

“Note Purchasers” has the meaning set forth
in the preamble to the Agreement, and means and includes the Note Purchasers
and any assignees of the Notes pursuant to Section 10.1 of the
Agreement.  “Note Purchaser” means
any of the Note Purchasers, individually.

 

“Note Purchasers Priority Collateral” has the
meaning given that term in the Intercreditor Agreement.

 

“Other Taxes” has the meaning set forth in Section 3.4.2.

 

“Payment Conditions”
means, at the time of determination with respect to any specified transaction
or payment, that (a) no Default or Event of Default has occurred and is
continuing or would arise as a result of entering into such transaction or making
such payment, and (b) at least five (5) days prior to entering into
such transaction or making such payment, the Issuer shall have provided to the
Collateral Agent a certificate signed by a Responsible Officer of the Issuer,
in form and substance reasonably satisfactory to the Collateral Agent,
certifying that (i) prior to, and on a pro forma basis for the six months
immediately following, and after giving effect to (provided that if the
aggregate amount of such payment in any Fiscal Year is less than or equal to
$10,000,000, such pro forma test shall not be required), such transaction or
payment, Excess Availability will be greater than or equal to $50,000,000, (ii) the
Note Parties, on a Consolidated basis, are, and will continue to be, Solvent
after giving effect to such transaction or payment, and (iii) the Leverage
Ratio immediately before and after such transaction or payment is less than
1.75:1:00.

 

“PBGC” means the Pension Benefit Guaranty
Corporation or any successor entity.

 

“Pension Plan” means
any “employee pension benefit plan” (as such term is defined in Section 3(2) of
ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by the Issuer or any ERISA Affiliate or to which
the Issuer or 

 

A-14

 

any
ERISA Affiliate contributes or has an obligation to contribute, or in the case
of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the immediately preceding five
plan years.

 

“Permitted Acquisition”
means an Acquisition in which all of the following conditions are satisfied:

 

(a)           No Default or Event of Default has occurred and is
continuing or immediately following such Acquisition or after taking into
account the pro forma financials, would result from the consummation of such
Acquisition;

 

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

 

(c)           The Issuer shall have furnished the Note Purchasers with
thirty (30) days’ prior written notice of such intended Acquisition and shall
have furnished the Note Purchasers with a current draft of the acquisition
documents (and final copies thereof as and when executed), a summary of any due
diligence undertaken by the Note Parties in connection with such Acquisition,
appropriate financial statements of the Person which is the subject of such
Acquisition, pro forma projected financial statements for the twelve (12) month
period following such Acquisition after giving effect to such Acquisition
(including balance sheets, cash flows and income statements by month for the
acquired Person, individually, and on a Consolidated basis with all Note
Parties), and such other information as the Note Purchasers may reasonably
require, all of which shall be reasonably satisfactory to the Note Purchasers;

 

(d)           Either (i) the legal structure of the Acquisition
shall be acceptable to the Note Purchasers in their discretion, or (ii) the
Note Parties shall have provided the Note Purchasers with a solvency opinion
from an unaffiliated third party valuation firm reasonably satisfactory to the
Note Purchasers;

 

(e)           After giving effect to the Acquisition, if the Acquisition
is an Acquisition of the Equity Interests, a Note Party shall acquire and own,
directly or indirectly, a majority of the Equity Interests in the Person being
acquired and shall Control a majority of any voting interests or shall
otherwise Control the governance of the Person being acquired;

 

(g)           Any assets acquired shall be utilized in, and if the
Acquisition involves a merger, consolidation or stock acquisition, the Person
which is the subject of such Acquisition shall be engaged in, the same or
substantially the same line of business engaged in by the Issuer under this
Agreement;

 

(h)           If the Person which is the subject of such Acquisition
will be maintained as a Subsidiary of a Note Party, or if the assets acquired
in an acquisition will be transferred to a Subsidiary which is not then a Note
Party, such Subsidiary (unless a CFC, in which case such Subsidiary will not be
required to be a Guarantor) shall have been joined as a Guarantor, and the
Collateral Agent shall have received a security interest in such 

 

A-15

 

Subsidiary’s
Intellectual Property and/or mortgage interest in such Subsidiary’s Equity
Interests, Inventory, Accounts (subject only to Permitted Encumbrances having
priority by operation of law) and other property of the same nature as
constitutes collateral under the Collateral Documents; subject only to
Permitted Encumbrances having priority by operation of law and the Lien in
favor of the Revolving Lenders;

 

(i)            Prior to, and on a pro forma basis for the twelve
months immediately following, and after giving effect to, such Acquisition,
Excess Availability will be greater than or equal to $50,000,000;

 

(j)            The Leverage Ratio, both immediately before and after
giving effect to such Acquisition, is less than 2:00:1:00; otherwise the Required
Purchasers have provided their written consent to such merger, amalgamation,
consolidation, transfer, sale or acquisition; and

 

(k)           no Permitted Acquisitions shall exceed $100,000,000 in any
Fiscal Year.

 

“Permitted Disposition”
means any of the following:

 

(a)           Dispositions of Inventory in the ordinary course of
business, including liquidations or other Dispositions of Inventory in
connection with Store closings in the ordinary course of business; provided,
that, the aggregate total of any Dispositions of Inventory in connection with Store closings under this
clause (a) shall not exceed $10,000,000 in any Fiscal Year;

 

(b)           bulk sales or other Dispositions of the Inventory of a
Note Party not in the ordinary course of business in connection with Store
closings, at arm’s length, provided, that such Store closures and
related Inventory Dispositions shall not exceed (i) in any Fiscal Year of
the Issuer and its Subsidiaries, five percent (5%) of the number of the Note
Parties’ Stores as of the beginning of such Fiscal Year (net of new Store
openings) and (ii) in the aggregate from and after the Closing Date, ten
percent (10%) of the number of the Note Parties’ Stores in existence as of the
Closing Date (net of new Store openings), provided  further that
all sales of Inventory in connection with Store closings shall be in accordance
with liquidation agreements and with professional liquidators reasonably
acceptable to the Collateral Agent; provided  further that all Net
Cash Proceeds received in connection therewith are applied to the Obligations
if then required in accordance with Section 2.05 of the Revolving Loan
Agreement;

 

(c)           non-exclusive licenses of Intellectual Property of a Note
Party or any of its Subsidiaries in the ordinary course of business; provided,
that, the aggregate total over the life of the Note Obligations of any
Dispositions under this clause (c) shall not exceed $2,000,000;

 

(d)           licenses for the conduct of licensed departments within
the Note Parties’ Stores in the ordinary course of business; provided  that,
if requested by the Collateral Agent, the Collateral Agent shall have entered
into an intercreditor agreement with the Person operating such licensed
department on terms and conditions reasonably satisfactory to the Required
Purchasers;

 

A-16

 

(e)           (i) Dispositions of Equipment in the ordinary course
of business that is substantially worn, damaged, obsolete or, in the judgment
of a Note Party, no longer useful or necessary in its business or that of any
Subsidiary and is not replaced with similar property having at least equivalent
value and (ii) other Dispositions of Equipment having a fair market value
not to exceed $500,000 in the aggregate in any Fiscal Year;

 

(f)            sales, transfers and Dispositions among the Note Parties
or by any Subsidiary to a Note Party, including, without limitation,
distributions or transfers of some or all of the assets of Twin Brook to the
Issuer, provided  that before, or within three (3) Business
Days after, any such distribution or transfer, the Issuer shall have caused the
former assets of Twin Brook so distributed to be pledged to the Collateral
Agent for the benefit of the Note Purchasers;

 

(g)           sales, transfers and Dispositions of or by any Subsidiary
which is not a Note Party to another Subsidiary that is not a Note Party; and

 

(h)           as long as no Default or Event of Default shall have
occurred and be continuing or would arise therefrom, the Alabama Sale-Leaseback
Transaction; provided  that (i) such sale is made for fair
market value, (ii) the Net Cash Proceeds paid in cash are in an amount at
least equal to the greater of the amounts advanced, or available to be
advanced, against the Alabama Property under the Borrowing Base, (iii) subject
to the Intercreditor Agreement, all Net Cash Proceeds received in connection
with any such transaction are applied to the Obligations, and (iv) the
Collateral Agent shall have received a Collateral Access Agreement from the
purchaser of the Alabama Property;

 

provided,  however,
to the extent the Intercreditor Agreement restricts the ability of the Note
Parties to apply the Net Cash Proceeds from any foregoing asset dispositions to
the Note Obligations and the asset disposition is of property not included in
the Borrowing Base, other than to the extent the asset disposition is a
Replaced Asset Disposition, the amount of the Net Cash Proceeds from such asset
disposition shall at all times thereafter result in a permanent reduction of
the Borrowing Base in an amount equal to the amount of the Net Cash
Proceeds.  For purposes of this
paragraph, “Replaced Asset Disposition” shall mean a Disposition in which the
Net Cash Proceeds are used to replace the Disposed assets with similar assets
having a fair market value at least as great as the Disposed assets, provided
that to the extent such Net Cash Proceeds from such Dispositions exceed
$5,000,000 in the aggregate, such Dispositions above $5,000,000 may be approved
as a “Replaced Asset Disposition” by the Required Purchasers in their discretion.

 

“Permitted Encumbrances”
means:

 

(a)           Liens imposed by law for Taxes that are not yet due or are
being contested in compliance with Section 7.6;

 

(b)           Carriers’, warehousemen’s, mechanics’, materialmen’s,
repairmen’s and other like Liens imposed by applicable Law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than thirty (30) days or are being contested in compliance with Section 7.6;

 

A-17

 

(c)           Pledges and deposits made in the ordinary course of
business in compliance with workers’ compensation, unemployment insurance and
other social security laws or regulations, other than any Lien imposed by
ERISA;

 

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

 

(e)           Liens in respect of judgments that would not constitute an
Event of Default hereunder;

 

(f)            Easements, covenants, conditions, restrictions, building
code laws, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business that do
not secure any monetary obligations and do not materially detract from the
value of the affected property or materially interfere with the ordinary
conduct of business of a Note Party and such other minor title defects or survey
matters that are disclosed by current surveys that, in each case, do not
materially interfere with the current use of the real property;

 

(g)           Liens existing on the date hereof and listed on Schedule
5.8.3 and any renewals or extensions thereof, provided  that (i) the
property covered thereby is not changed, (ii) the amount secured or
benefited thereby is not increased, (iii) the direct or any contingent
obligor with respect thereto is not changed, and (iv) any renewal or
extension of the obligations secured or benefited thereby is otherwise
permitted hereunder;

 

(h)           Liens on fixed or capital assets acquired by any Note
Party which are permitted under clause (c) of the definition of Permitted
Indebtedness so long as (i) the Indebtedness secured thereby does not
exceed the cost of acquisition of such fixed or capital assets and (ii) such
Liens shall not extend to any other property or assets of the Note Parties;

 

(i)            Liens in favor the Collateral Agent;

 

(j)            Landlords’ and lessors’ Liens in respect of rent not in
default;

 

(k)           Possessory Liens in favor of brokers and dealers arising
in connection with the acquisition or disposition of Investments owned as of
the date hereof and Permitted Investments, provided  that such
liens (a) attach only to such Investments and (b) secure only
obligations incurred in the ordinary course and arising in connection with the
acquisition or disposition of such Investments and not any obligation in
connection with margin financing;

 

(l)            Liens arising solely by virtue of any statutory or common
law provisions relating to banker’s liens, liens in favor of securities
intermediaries, rights of setoff or similar rights and remedies as to deposit
accounts or securities accounts or other funds maintained with depository
institutions or securities intermediaries;

 

A-18

 

(m)          Liens arising from precautionary UCC filings regarding
“true” operating leases or, to the extent permitted under the Note Documents,
the consignment of goods to a Note Party;

 

(n)           Liens on the Collateral securing the Obligations having
the priority set forth in the Intercreditor Agreement; and

 

(o)           Liens in favor of customs and revenues authorities imposed
by applicable Law arising in the ordinary course of business in connection with
the importation of goods and securing obligations (i) that are not overdue
by more than thirty (30) days, or (ii)(A) that are being contested in good
faith by appropriate proceedings, (B) the applicable Note Party or
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (C) such contest effectively suspends collection
of the contested obligation and enforcement of any Lien securing such
obligation;

 

provided, however, 
that, except as provided in any one or more of clauses (a) through (o) above,
the term “Permitted Encumbrances” shall not include any Lien securing
obligations for borrowed money.

 

“Permitted Indebtedness”
means:

 

(a)           Indebtedness
outstanding on the date hereof and listed on Schedule 5.8.5 and any
Permitted Refinancing Indebtedness in respect thereof;

 

(b)           Indebtedness of any Note Party to any other Note Party; provided
that such Indebtedness shall (i) be evidenced by such documentation
as the Required Purchasers may reasonably require, (ii) constitute
“Collateral” under this Agreement and the Security Documents, (iii) be on
terms (including subordination terms) reasonably acceptable to the Required
Purchasers;

 

(c)           transfers permitted by Section 8.24 and
intercompany Indebtedness incurred in the ordinary course between the Note
Parties located within the United States on the one hand and their Affiliates
in Puerto, Rico, Canada and Asia on the other hand;

 

(d)           Without duplication of Indebtedness described in clause (f) of
this definition, Purchase Money Indebtedness of any Note Party to finance the
acquisition of any fixed or capital assets, including the Alabama Capital Lease
and other Capital Lease Obligations, and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and any Permitted Refinancing Indebtedness in
respect thereof; provided, however, that the aggregate principal amount of
Indebtedness permitted by this clause (d) and clause (g) shall not
exceed $5,000,000 at any time outstanding; provided  that, if
requested by the Required Purchasers, the Note Parties shall cause the holders
of such Indebtedness incurred after the Closing Date to enter into a Collateral
Access Agreement; for the purposes of this clause (d), “Alabama Capital Lease”
means a capital lease for the inventory handling system of the Note Parties
located at the Alabama Property.

 

A-19

 

(e)                                  any liability
or obligation of the Issuer to any Affiliate of the Issuer, and any liability
or obligation of any Affiliate of the Issuer to any other Affiliate of the
Issuer, to reimburse or share the costs of any services or third party expenses
in accordance with the terms of any intercompany cost-sharing agreement or
arrangement, provided  that no Default or Event of Default shall
have occurred and be continuing or would arise therefrom;

 

(f)                                    Subordinated
Indebtedness; provided, that, (i) the terms of such Subordinated
Indebtedness are satisfactory to the Required Purchasers in its sole
determination and (ii) an intercreditor agreement is executed in
connection with such Subordinated Indebtedness with the Required Purchasers;

 

(g)                                 Indebtedness
incurred in connection with the Alabama Sale-Leaseback Transaction up to
$2,500,000, provided  that (i) such sale is made for fair
market value, (ii) the Net Cash Proceeds paid in cash are in an amount at
least equal to the greater of the amounts advanced or available to be advanced
against the Alabama Property under the Borrowing Base, (iii) all Net Cash
Proceeds received in connection with any such Indebtedness are applied to the
Obligations, and (iv) the Collateral Agent shall have received a
Collateral Access Agreement from the purchaser of the Alabama Property;

 

(h)                                 the Note
Obligations;

 

(i)                                     Indebtedness
under the Revolving Loan Agreement (including Guarantees of the Issuer or any
Guarantor in respect of such Indebtedness), and any Permitted Refinancing
Indebtedness in respect thereof;

 

(j)                                     Indebtedness
owed by any Canadian Subsidiary to the Issuer;

 

(k)                                  Guarantees of
the Issuer in respect of the obligations of Hoop under those certain leases
described on Schedule 5.33; and

 

(l)                                     [Reserved]

 

(m)                               Indebtedness
permitted under the definition of “Permitted Investments” Clauses (g), (h),
(i), (k) and (m); and

 

(n)                                 other unsecured
Indebtedness at any time outstanding in an aggregate principal amount not to
exceed $12,500,000 in the aggregate and $3,000,000 to any one party.

 

“Permitted Investments”
means:

 

(a)                                  readily
marketable obligations issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof having
maturities of not more than 360 days from the date of acquisition thereof; provided  that the full
faith and credit of the United States of America is pledged in support thereof;

 

A-20

 

(b)                                 commercial
paper issued by any Person organized under the laws of any state of the United
States of America and rated at least “Prime-1” (or the then equivalent
grade) by Moody’s or at least “A-1” (or the then equivalent grade) by
S&P, in each case with maturities of not more than 180 days from the date
of acquisition thereof;

 

(c)                                  time deposits
with, or insured certificates of deposit or bankers’ acceptances of, any
commercial bank that (i) (A) is a lender under the Revolving Loan
Documents or (B) is organized under the laws of the United States of
America, any state thereof or the District of Columbia or is the principal
banking subsidiary of a bank holding company organized under the laws of the
United States of America, any state thereof or the District of Columbia, and is
a member of the Federal Reserve System, (ii) issues (or the parent of
which issues) commercial paper rated as described in clause (c) of this
definition and (iii) has combined capital and surplus of at least
$1,000,000,000, in each case with maturities of not more than 180 days from the
date of acquisition thereof;

 

(d)                                 fully
collateralized repurchase agreements with a term of not more than thirty (30)
days for securities described in clause (a) above (without regard to the
limitation on maturity contained in such clause) and entered into with a financial
institution satisfying the criteria described in clause (c) above or with
any primary dealer and having a market value at the time that such repurchase
agreement is entered into of not less than 100% of the repurchase obligation of
such counterparty entity with whom such repurchase agreement has been entered
into;

 

(e)                                  Investments,
classified in accordance with GAAP as current assets of the Note Parties, in
any money market fund, mutual fund, or other investment companies that are
registered under the Investment Company Act of 1940, as amended, which are
administered by financial institutions that have the highest rating obtainable
from either Moody’s or S&P, and which invest solely in one or more of the
types of securities described in clauses (a) through (d) above;

 

(f)                                    Investments
existing on the Closing Date, and set forth on Schedule 5.8.4, but not
any increase in the amount thereof or any other modification of the terms
thereof;

 

(g)                                 (i) Investments
by any Note Party and its Subsidiaries in their respective Subsidiaries
outstanding on the date hereof, (ii) additional Investments by any Note
Party and its Subsidiaries in any other Note Party (provided  that
the Issuer shall be permitted to make additional Investments in Twin Brook in
an aggregate amount not to exceed $750,000 in any Fiscal Year), and (iii) additional
Investments by any Note Party in Subsidiaries that are not Note Parties not to
exceed $1,000,000 in the aggregate in any Fiscal Year;

 

(h)                                 so long as no
Event of Default shall have occurred and be continuing, or would result
therefrom, the Issuer may make loans and advances to its Subsidiaries in an
aggregate amount not to exceed $5,000,000 at any time outstanding;

 

(i)                                     intercompany
loans and advances or other intercompany Indebtedness permitted pursuant to
clauses (b), (c) and (e) of the definition of Permitted Indebtedness;

 

A-21

 

(j)                                     Investments
consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course
of business, and Investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors to the extent reasonably
necessary in order to prevent or limit loss;

 

(k)                                  Guarantees
constituting Permitted Indebtedness;

 

(l)                                     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;

 

(m)                               so long as no
Event of Default shall have occurred and be continuing, or would result
therefrom, (i) loans and advances to officers, directors and employees of
the Note Parties and Subsidiaries in the ordinary course of business for
travel, entertainment, relocation and analogous business purposes, and (ii) other
loans and advances to officers, directors and employees of the Note Parties and
Subsidiaries in an aggregate amount not to exceed $6,000,000 at any time
outstanding; and

 

(n)                                 Investments
constituting Permitted Acquisitions;

 

“Permitted Protest” means the right of any
Note Party or its Subsidiaries to protest any Lien, taxes (other than payroll
taxes or taxes that are the subject of a deemed trust, lien or other charge in
favor of a Government Authority), or rental payment, provided that (a) a
reserve with respect to such obligation is established on such Person’s books
and records in such amount as is required under GAAP, (b) any such protest
is instituted promptly and prosecuted diligently by such Person in good faith
and (c) each Note Party shall, and shall cause each of its Subsidiaries
to, pay or bond, or cause to be paid or bonded, all such taxes, assessments,
charges or other governmental claims immediately upon the commencement of proceedings
to foreclose any Lien which may have attached as security therefor (except to
the extent such proceedings have been dismissed or stayed).

 

“Permitted Purchase Money Indebtedness”
means, as of any date of determination, Purchase Money Indebtedness in an
aggregate principal amount outstanding at any one time not in excess of
$5,000,000.

 

“Permitted Refinancing Indebtedness” means,
with respect to any Person, any refinancing, refunding, renewal or extension of
any Indebtedness of such Person (or any successor of such Person); provided
that with respect to the Revolving Loans or any other Indebtedness
having an individual principal amount over $1,000,000 (i) the amount of
such Indebtedness is not increased at the time of such refinancing, refunding,
renewal or extension except by an amount equal to a reasonable premium or other
reasonable amount paid, and fees and expenses reasonably incurred, in
connection with such refinancing and by an amount equal to any existing
commitments unutilized thereunder, and the direct or contingent obligor with
respect thereto is not changed as a result of or in connection with such
refinancing, refunding, renewal or extension, (ii) the result of such
extension, renewal or replacement shall not be an earlier maturity date or
decreased weighted average life of such Indebtedness, (iii) the terms
relating to principal amount, amortization, maturity, and collateral (if any),
and other material terms taken as a whole, of any such refinancing, refunding,
renewing or extending Indebtedness, and of any agreement entered into and of
any instrument issued in connection therewith, are no less favorable in any
material respect to the Note

 

A-22

 

Parties or the
Note Purchasers than the terms of any agreement or instrument governing the
Indebtedness being refinanced, refunded, renewed or extended and the interest
rate applicable to any such refinancing, refunding, renewing or extending
Indebtedness is not increased, and (iv) if the Indebtedness being
refinanced, refunded, renewed or extended is Subordinated Indebtedness, such
refinancing, refunding, renewal or extension is subordinated in right of
payment to the Note Obligations on terms at least as favorable, taken as a
whole, to the Note Purchasers as those contained in the documentation governing
the Subordinated Indebtedness being refinanced, refunded, renewed or extended,
and (B) contains covenants and events of default that are not more
restrictive taken as a whole than the covenants and events of default contained
in the documentation governing the Indebtedness being refinanced.

 

“Person” means any entity, whether of natural
or legal constitution, including any individual, corporation, partnership,
joint venture, limited liability company, unlimited liability company, trust,
estate, unincorporated organization, government or any agency or political
subdivision thereof.

 

“Plan” means any “employee benefit
plan” (as such term is defined in Section 3(3) of ERISA) established
by the Issuer or, with respect to any such plan that is subject to Section 412
of the Code or Title IV of ERISA, any ERISA Affiliate.

 

“Projections” has the meaning set forth in Section 5.5.3.

 

“Proposed Prepayment Date” has the meaning
set forth in Section 3.2.3.2.

 

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

 

“Real Property” means the right, title and
interest in and to all owned and leased premises of the Note Parties and each
of their Subsidiaries.

 

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

 

“Related Party” means any of the current
stockholders, directors, officers or beneficial owners of any of the Note
Parties or any of their Subsidiaries or Affiliates, and their spouses, siblings
and descendants and trusts for the benefit of any of the current stockholders,
directors, officers or beneficial owners, their spouses, siblings and
descendants.

 

“Reportable Event” has the meaning set forth
in ERISA § 4043, other than events for which the 30 day notice has been waived.

 

“Required Purchasers” means the Note
Purchasers holding at least 51% of the outstanding Note Obligations, which
group must include at least two Note Purchasers and which must include any Note
Purchaser holding at least 25% of the outstanding Note Obligations (it being
understood and agreed that Note Purchasers that are Affiliates or Related Fund
shall constitute one Note Purchaser for the purpose of this provision).

 

A-23

 

“Responsible Officer” means the chief
executive officer, president, chief financial officer or treasurer of a Note
Party or any of the other individuals designated in writing to the Collateral
Agent by an existing Responsible Officer of a Note Party as an authorized
signatory of any certificate or other document to be delivered hereunder.  Any document delivered hereunder that is
signed by a Responsible Officer of a Note Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Note Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Note Party.

 

“Restricted Payment” means, any dividend or
other distribution (whether in cash, securities or other property) with respect
to any capital stock or other Equity Interest of any Person or any of its
Subsidiaries, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, defeasance, acquisition, cancellation or termination of
any such capital stock or other Equity Interest, or on account of any return of
capital to such Person’s stockholders, partners or members (or the equivalent
of any thereof), or any option, warrant or other right to acquire any such
dividend or other distribution or payment. 
Without limiting the foregoing, “Restricted Payments” with respect to
any Person shall also include all payments made by such Person with any
proceeds of a dissolution or liquidation of such Person.

 

“Revolving Agent” has the meaning set forth
in the Intercreditor Agreement.

 

“Revolving Lender” has the meaning set forth
in the Intercreditor Agreement.

 

“Revolving Loan Agreement” has the meaning
set forth in the Intercreditor Agreement.

 

“Revolving Loan Debt” means the “Revolving
Loan Debt” as defined in the Intercreditor Agreement.

 

“Revolving Loan Documents” has the meaning
set forth in the Intercreditor Agreement.

 

“Revolving Obligations” has the meaning
ascribed to the defined term “Obligations” in the Revolving Loan Agreement.

 

“S&P” has the meaning specified therefor
in the definition of Cash Equivalents.

 

“Securities Act” means the United States
Securities Act of 1933, as amended and any successor statute.

 

“Security Agreement” means the Security
Agreement, substantially in the form of Exhibit C to the Agreement,
between the Note Parties and the Collateral Agent, for the benefit of the Note
Purchasers, as amended, modified or supplemented from time to time.

 

“Security Documents” has the meaning
specified therefor in the Revolving Loan Agreement.

 

“Security Interests” means the security
interests in the Collateral granted under the Collateral Documents to secure
the Note Obligations.

 

A-24

 

“Services Company” means The Children’s
Place Services Company, LLC, a Delaware limited liability company.

 

“Solvent” means, as to any Person at any
time, that (a) the fair value of the Property of such Person is greater
than the amount of such Person’s liabilities (including disputed, contingent
and unliquidated liabilities) as such value is established and liabilities
evaluated for purposes of Section 101(32)(A) of the Bankruptcy Code
and, in the alternative, for purposes of the Uniform Fraudulent Transfer Act; (b) the
present fair saleable value (on a going concern basis) of the Property of such
Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured; (c) such
Person is able to realize upon its Property and generally pay its debts and
other liabilities (including disputed, contingent and unliquidated liabilities)
as they mature in the normal course of business; (d) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person’s ability to generally pay as such debts and liabilities mature;
and (e) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person’s
Property would constitute unreasonably small capital.

 

 “Stock
Options” means (i) the stock option investigation, (ii) related
material weakness in internal controls over financial reporting related to
stock option grants, (iii) resolution of tax consequences and corrective
action related to discounted stock options, (iv) the related restatement
to Issuer’s prior period financial statements to reflect additional stock based
compensation expenses relating to stock option grants made in each year from
the  Fiscal Year ended January 31,
1998 through the first Fiscal Quarter of 
Fiscal Year 2006, all of which was disclosed in the Issuers’s Annual
Report on Form 10-K for the fifty-three weeks ended February 3, 2007.

 

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

 

“Subordinated
Indebtedness” means Indebtedness which is expressly subordinated in right
of payment to the prior payment in full of the Revolving Obligations and Note
Obligations and which is in form and on terms approved in writing by the
Required Purchasers.

 

“Subsidiary” means, with respect to any
Person, (a) any corporation of which an aggregate of more than 50% of the
outstanding Capital Stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether, at the
time, Stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned legally or beneficially by such Person
or one or more Subsidiaries of such Person, or with respect to which any such
Person has the right to vote or designate the vote of more than 50% or more of
such Capital Stock whether by proxy, agreement, operation of law or otherwise,
and (b) any partnership or limited liability company in which such Person
and/or one or more Subsidiaries of such Person shall have an interest (whether
in the form of voting or participation in profits or capital contribution) of
more than 50% or of which any such Person is a general partner or managing
member or may exercise the powers of a general partner whether directly or
indirectly, and (c) any other Person (other than a corporation, limited
liability company or partnership) in which such Person, a Subsidiary of such
Person or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof, has (a) at least a
majority ownership interest or (b) the power to elect or direct the
election of a majority of the directors or other

 

A-25

 

governing body of such
Person.  Any reference to the
Subsidiaries of the Issuer herein or in any Note Document shall not include
Hoop, unless explicitly stated otherwise.

 

“Syndication Agent” means Crystal Capital
Fund Management, L.P., in its capacity as Syndication Agent under the Note
Documents or any successor thereto.

 

“Taxes” has the meaning set forth in Section 3.4.1.

 

“Transactions” means the transactions
contemplated by the Revolving Loan Documents and the Note Documents.

 

“Transition Services Agreement” means the
agreement so entitled dated as of April 30, 2008 among The Children’s
Place Services Company, LLC, T2 Acquisition, LLC and the other parties named
therein.

 

“Twin Brook” means Twin Brook Insurance
Company, Inc., a New York captive insurance company.

 

“Unfunded Pension Liability” means the
excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16)
of ERISA, over the current value of that Pension Plan’s assets, determined in
accordance with the assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.

 

“Uniform Commercial Code” means the Uniform
Commercial Code of the State of New York, or any successor statutes.

 

“USA Patriot Act” means the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.

 

A-26

 

SCHEDULE 7.16

 

FINANCIAL COVENANTS

 

Section 1.                                          Closing Date Total Leverage Ratio.

 

1.1.                              For purposes of this Schedule 7.16 and
the Agreement:

 

“Closing Date EBITDA” means, trailing twelve
month EBITDA as of May 31, 2008, as set forth in Schedule 7.16(a).

 

“Closing
Date Total Leverage Ratio” means the Leverage Ratio as of May 31,
2008, as set forth in Schedule 7.16(b).

 

Section 2.

 

2.1.                              Minimum EBITDA.  The
Note Parties and their Subsidiaries shall maintain EBITDA, measured for each
Trailing Twelve Month Period, of not less than the following amount indicated
below as of the end of each Fiscal Quarter ending on:

 

	
  Fiscal Quarters Ended

  	
   

  	
  EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  August 2, 2008

  	
   

  	
  $

  	
  80,015,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2008

  	
   

  	
  $

  	
  103,329,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31, 2009

  	
   

  	
  $

  	
  111,521,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thereafter

  	
   

  	
  $

  	
  115,000,000

  	
   

  

 

2.2.                              “EBITDA” has the meaning set forth in Section 3.2
of this Schedule 7.16.

 

Section 3.                                          Maximum Total Leverage Ratio.

 

3.1                                 The Note Parties and their Subsidiaries shall
maintain a Leverage Ratio, measured for each Trailing Twelve Month Period, of
not greater than the following amount indicated below as of November 30
and December 31 of each Fiscal Year and as of the end of each Fiscal
Quarter ending on:

 

	
  Fiscal Quarters Ended

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  August 2, 2008

  	
   

  	
  2.50:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  November 1, 2008

  	
   

  	
  2.50:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 31, 2009

  	
   

  	
  2.50:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thereafter

  	
   

  	
  2.50:1.00

  	
   

  

 

1

 

3.2                                 For purposes of this Schedule 7.16 and
the Agreement:

 

(i)                                     “EBITDA”
means, for any period, for the Issuer and its Subsidiaries excluding Hoop, an
amount determined on a Consolidated basis, substantially in accordance with
GAAP and the Issuer’s past practices, equal to Issuer’s Consolidated net
income, excluding Hoop, plus the sum, without duplication and to the extent
included in the calculation of Consolidated net income, of the following
amounts with respect to the Issuer and its Subsidiaries excluding Hoop for such
period:

 

(a)                                  Consolidated
interest expense, net of consolidated interest income, and other fees and
charges associated with Permitted Indebtedness, including (i) accrued
interest on the Revolving Loan Debt and accrued interest, adjusted to reflect
the actual amount paid or received by such Persons under any interest rate
swaps in place with respect to the Notes at such time, on the Notes; monthly
re-occurring fees; fees and other expenses that are capitalized or
amortized;  fees associated with
amending, restating or terminating the Existing Credit Agreement (as defined in
the Revolving Loan Agreement) and the L/C Demand Facility;

 

(b)                                 income,
franchise or similar taxes;

 

(c)                                  total
depreciation expense;

 

(d)                                 total
amortization expense, including amortization of intangibles (including, but not
limited to, goodwill);

 

(e)                                  non
ordinary expenses, net of revenues related to the divestiture of Hoop or
otherwise received from Walt Disney Corporation and its Affiliates in
accordance with the Transition Services Agreement to the extent such revenues
are included in the Issuer’s Consolidated net income, including but not limited
to (i) legal, financial advisory, broker and other professional fees
associated with the divestiture of Hoop; (ii) any impairment or other non
reoccurring charges related specially to the valuation of Hoop; (iii) to
the extent not included in the Issuer’s Projections, non allocated expenses
associated with the operation of Hoop; (iv) other non re-occurring charges
associated with Hoop, including contributions made by the Issuer to Hoop and
payments owed but not paid to the Issuer by Hoop for services provided by the
Issuer; and (v) payments made by the Issuer on behalf of Hoop which were
not reimbursed by Hoop and would have normally been made by Hoop or made by the
Issuer and reimbursed by Hoop in the ordinary course; provided that the
cash charges added back to Consolidated net income under this clause (e) over
the term of this Agreement shall be limited to $35 million for the Fiscal Year
ending on or around January 31, 2009 and $5 million for the Fiscal Year
ending on or around January 31, 2010;

 

2

 

(f)                                    one
time charges such as severance and other related costs associated with the
Issuer’s downsizing and restructuring announced on March 20, 2008 up to
$3 million in the aggregate unless otherwise approved by the Required
Purchasers;

 

(g)                                 impairment
and other non re-occurring charges related to the exit of the Issuer’s New
Headquarters as set forth on Schedule 7.16(g) not to exceed
$20.7 million;

 

(h)                                 non
re-occurring charges related to the Issuer’s stock option investigation as set
forth on Schedule 7.16(h) not to exceed $11.6 million to the extent
such charges were included in the Issuer’s Projections;

 

(i)                                     non
re-occurring charges related to the severance of certain senior management
disclosed to the Note Purchasers to the extent such charges were included in
the Issuer’s Projections up to $3 million in any Fiscal Year unless otherwise
approved by the Required Purchasers (including, for the avoidance of doubt, the
$4.7 million for the Fiscal Year ending January 2008 set forth on the
Projections);

 

(j)                                     other
non re-occurring cash charges not to exceed $25 million over the term of this
Agreement and $5 million in any measurement period unless otherwise approved by
the Required Purchasers; provided, that, a corresponding decrease in cash gains
shall be reflected for any charge under this clause (j).

 

(k)                                  non
cash, non re-occurring charges or losses and extraordinary charges, as
determined in accordance with GAAP up to $5 million in the aggregate unless
otherwise approved by the Required Purchasers; provided, that, a corresponding
decrease in non-cash gains shall be reflected for any change under this clause
(k).

 

(l)                                     employee
compensation paid in Equity Interests issued by the Issuer or its Subsidiaries
excluding Hoop;

 

(m)                               legal
and other professional advisory and closing fees associated with the Note
Documents and the Revolving Loan Documents up to $[5] million in the aggregate
unless otherwise approved by the Required Purchasers; and

 

(n)                                 legal
and other professional advisory fees incurred in 2007 and 2008 associated with
the development of strategic alternatives up to $5 million in the aggregate
unless otherwise approved by the Required Purchasers.

 

(ii)                                  “Leverage Ratio” means for the Issuer
and its Subsidiaries excluding Hoop the ratio of (x) the sum of (A) the
outstanding balance with respect to the Notes as of the measurement date, (B) for
the Fiscal Year ending January 2009, the trailing twelve month average of
the (i) ending monthly balance of outstanding revolving loans under the
Existing Credit Agreement and the Revolving Loan Agreement as of the
measurement date, less (ii) the outstanding amount under the Notes on the
Closing Date for any months occurring prior to the Closing Date that are
included in any trailing twelve month period, provided that to the extent the
result of such calculation is less than zero the amount will be deemed to be
zero, (C) for the Fiscal Year ending January 2009, the average
monthly outstanding commercial letters of credit issued under the Existing
Credit Agreement, the L/C Demand Facility and the Revolving Loan Agreement

 

3

 

as
of the measurement date, and (D) for the Fiscal Year ending January 2009,
the average monthly outstanding standby letters of credit issued under the
Existing Credit Agreement, the L/C Demand Facility and the Revolving Loan
Agreement as of the measurement date to (y) the trailing twelve month
EBITDA as of the measurement date.  Such
year to date calculations will be trailing twelve month calculations beginning
with the end of February 2009.

 

(iii)                               “Fiscal Quarter” means the applicable
fiscal quarter of a Fiscal Year.

 

(iv)                              “Fiscal Year” means any Note Parties’
Fiscal Year for financial accounting purposes, beginning on or about February 1st
and ending on or about January 31st.

 

(v)                                 “Trailing Twelve Month” means the
twelve (12) calendar month period immediately preceding the date of
calculation.

 

Section 4.                                          Minimum Fixed Charge Coverage Ratio.

 

4.1                                 The Note Parties shall maintain a Fixed
Charge Coverage Ratio, measured for each Trailing Twelve Month Period, of not
less than 1.50:1.00 as of the end of the Fiscal Quarter ending on November 1,
2008 and 2.00:1.00 as of the end of each Fiscal Quarter thereafter.

 

4.2                                 For purposes of this Schedule 7.16 and
the Agreement:

 

(i)                                     “Fixed Charge Coverage Ratio” means
for the Issuer and its Subsidiaries excluding Hoop for the trailing twelve
month period most recently ended the ratio of (x) EBITDA less the sum of (A) Capital
Expenditures, plus (B) the cash portion of state and federal income,
franchise and similar taxes, to (y) Consolidated cash interest expense,
adjusted to reflect the actual amount paid or received by such Persons under
any interest rate swaps in place with respect to the Notes at such time.

 

(ii)                                  “Income Tax Expense” means the cash
portion of expenditures for federal and state income taxes determined in
accordance with GAAP.

 

(iii)                               “Interest Expense” means (A) for
the period before the twelve (12) month anniversary of the Closing Date,
expenditures for interest determined in accordance with GAAP calculated on an
annualized basis based upon the time period from the Closing Date to the date
of calculation, and thereafter, (B) expenditures for interest determined
in accordance with GAAP for the twelve (12) calendar month period immediately
preceding the date of calculation.

 

Section 5.                                          Calculation of Financial Covenants.

 

(i)                                     The Note Purchasers may calculate the Note
Parties’ EBITDA and the other specified amounts under this Schedule 7.16
(and under the other financial covenants contained in the Agreement) on the
basis of information then available to the Note Purchasers, which calculation(s) will
be binding on the Note Parties; however, the
Note Purchasers will give notice to the Note Parties of the Note Purchasers’
computations made pursuant to this Section 6 and an

 

4

 

opportunity
to provide the Note Purchasers with any additional or contrary
information.  The Note Parties must
provide any additional (or contrary) information within 15 Business Days after
the Note Purchasers gives notice to the Note Parties of the Note Purchasers’
computations.

 

(ii)                                  The Financial Covenants will be based on the
Consolidated financial performance of the Note Parties and all their
Subsidiaries in accordance with the Agreement.

 

Section 6.                                          Definitions.  Capitalized terms used, but
not defined, in this Schedule 7.16 have the meanings given to them
in the Agreement.

 

5

 

SCHEDULE 7.3

 

A monthly report of new Store openings (including an estimate of
associated costs) and closings.

 

1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]