Document:

Exhibit 10.12

 

FINANCING AGREEMENT

 

Dated as of October 1, 2006

 

by and among

 

BODY CENTRAL ACQUISITION CORP.,

as Initial Borrower and as Administrative Borrower,

 

THE FINANCIAL INSTITUTIONS FROM

TIME TO TIME PARTY HERETO,

 

DYMAS FUNDING COMPANY, LLC,

as Administrative Agent,

 

CHURCHILL FINANCIAL CAYMAN LTD.,

as Syndication Agent,

 

and

 

NEWSTAR FINANCIAL, INC.,

as Documentation Agent

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1.

  	
  DEFINITIONS; CERTAIN TERMS

  	
  2

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Definitions

  	
  2

  
	
  Section 1.02.

  	
  Terms Generally

  	
  28

  
	
  Section 1.03.

  	
  Accounting and Other
  Terms

  	
  29

  
	
  Section 1.04.

  	
  Time References

  	
  29

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2.

  	
  THE LOANS

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Commitments

  	
  29

  
	
  Section 2.02.

  	
  Making the Loans

  	
  30

  
	
  Section 2.03.

  	
  Repayment of Loans;
  Evidence of Debt

  	
  32

  
	
  Section 2.04.

  	
  Interest

  	
  33

  
	
  Section 2.05.

  	
  Reduction of
  Commitment; Prepayment of Loans

  	
  35

  
	
  Section 2.06.

  	
  Fees

  	
  38

  
	
  Section 2.07.

  	
  Securitization

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3.

  	
  LETTERS OF CREDIT

  	
  39

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Letters of Credit

  	
  39

  
	
  Section 3.02.

  	
  Participations

  	
  41

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4.

  	
  PAYMENTS AND OTHER COMPENSATION

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
  Payments; Computations;
  and Statements

  	
  43

  
	
  Section 4.02.

  	
  Sharing of Payments,
  Etc

  	
  44

  
	
  Section 4.03.

  	
  Apportionment of
  Payments

  	
  45

  
	
  Section 4.04.

  	
  Increased Costs and
  Reduced Return

  	
  45

  
	
  Section 4.05.

  	
  Taxes

  	
  47

  
	
  Section 4.06.

  	
  Inability to Determine
  Interest Rate

  	
  49

  
	
  Section 4.07.

  	
  Illegality

  	
  49

  
	
  Section 4.08.

  	
  Replacement of Lenders

  	
  50

  
	
  Section 4.09.

  	
  Joint and Several
  Liability of the Borrowers

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5.

  	
  CONDITIONS TO LOANS

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Conditions Precedent to
  Effectiveness

  	
  51

  
	
  Section 5.02.

  	
  Conditions Precedent to the Making of any
  Loan after the Consummation of the Body Shop Acquisition

  	
  53

  
	
  Section 5.03.

  	
  Conditions Precedent to
  All Loans and Letters of Credit

  	
  53

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  54

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Representations and
  Warranties

  	
  54

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7.

  	
  COVENANTS OF THE LOAN PARTIES

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Affirmative Covenants

  	
  62

  
	
  Section 7.02.

  	
  Negative Covenants

  	
  70

  
	
  Section 7.03.

  	
  Financial Covenants

  	
  76

  

 

i

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8.

  	
  EVENTS OF DEFAULT

  	
  77

  
	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
  Events of Default

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9.

  	
  AGENT

  	
  81

  
	
   

  	
   

  	
   

  
	
  Section 9.01.

  	
  Appointment

  	
  81

  
	
  Section 9.02.

  	
  Nature of Duties

  	
  81

  
	
  Section 9.03.

  	
  Rights, Exculpation,
  Etc

  	
  82

  
	
  Section 9.04.

  	
  Reliance

  	
  83

  
	
  Section 9.05.

  	
  Indemnification

  	
  83

  
	
  Section 9.06.

  	
  Administrative Agent
  Individually

  	
  83

  
	
  Section 9.07.

  	
  Successor Agent

  	
  84

  
	
  Section 9.08.

  	
  Collateral Matters

  	
  84

  
	
  Section 9.09.

  	
  Agency for Perfection

  	
  86

  
	
  Section 9.10.

  	
  Settlement

  	
  86

  
	
  Section 9.11.

  	
  Syndication Agent and
  Documentation Agent

  	
  87

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10.

  	
  GUARANTY

  	
  87

  
	
   

  	
   

  	
   

  
	
  Section 10.01.

  	
  Guaranty

  	
  87

  
	
  Section 10.02.

  	
  Guaranty Absolute

  	
  88

  
	
  Section 10.03.

  	
  Waiver

  	
  89

  
	
  Section 10.04.

  	
  Continuing Guaranty;
  Assignments

  	
  89

  
	
  Section 10.05.

  	
  Subrogation

  	
  89

  
	
  Section 10.06.

  	
  Maximum Obligations

  	
  90

  
	
  Section 10.07.

  	
  Contribution

  	
  90

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11.

  	
  MISCELLANEOUS

  	
  91

  
	
   

  	
   

  	
   

  
	
  Section 11.01.

  	
  Notices, Etc

  	
  91

  
	
  Section 11.02.

  	
  Amendments, Etc

  	
  92

  
	
  Section 11.03.

  	
  Expenses; Taxes;
  Attorneys’ Fees

  	
  93

  
	
  Section 11.04.

  	
  Right of Set-off

  	
  94

  
	
  Section 11.05.

  	
  Severability

  	
  94

  
	
  Section 11.06.

  	
  Assignments and
  Participations

  	
  94

  
	
  Section 11.07.

  	
  Counterparts

  	
  98

  
	
  Section 11.08.

  	
  GOVERNING LAW

  	
  98

  
	
  Section 11.09.

  	
  CONSENT TO
  JURISDICTION; SERVICE OF PROCESS AND VENUE

  	
  98

  
	
  Section 11.10.

  	
  WAIVER OF JURY TRIAL,
  ETC

  	
  99

  
	
  Section 11.11.

  	
  Consent by ‘the
  Administrative Agent and Lenders

  	
  99

  
	
  Section 11.12.

  	
  No Party Deemed Drafter

  	
  99

  
	
  Section 11.13.

  	
  Reinstatement; Certain
  Payments

  	
  99

  
	
  Section 11.14.

  	
  Indemnification

  	
  100

  
	
  Section 11.15.

  	
  Records

  	
  101

  

 

ii

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 11.16.

  	
  Binding Effect

  	
  101

  
	
  Section 11.17.

  	
  Interest

  	
  101

  
	
  Section 11.18.

  	
  Confidentiality

  	
  102

  
	
  Section 11.19.

  	
  Integration

  	
  103

  
	
  Section 11.20.

  	
  Administrative Borrower

  	
  103

  

 

iii

 

SCHEDULE AND EXHIBITS

 

	
  Schedule 1.01(A)

  	
  Lenders and Lenders’ Commitments

  
	
  Schedule 6.01(e)

  	
  Capitalization; Subsidiaries

  
	
  Schedule 6.01(f)

  	
  Litigation; Commercial Tort Claims

  
	
  Schedule 6.01(j)

  	
  Taxes

  
	
  Schedule 6.01(1)

  	
  Business

  
	
  Schedule 6.01(o)

  	
  Real Property

  
	
  Schedule 6.01(q)

  	
  Environmental Matters

  
	
  Schedule 6.01(u)

  	
  Intellectual Property

  
	
  Schedule 7.02(a)

  	
  Existing Liens

  
	
  Schedule 7.02(b)

  	
  Existing Indebtedness

  
	
  Schedule 7.02(e)

  	
  Existing Investments

  
	
  Schedule 7.02(h)

  	
  Transactions with Affiliates

  
	
  Schedule 7.02(i)

  	
  Limitations on Dividends and Other Payment
  Restrictions

  
	
  Schedule 7.02(n)

  	
  Contingent Obligations

  
	
   

  
	
  Exhibit A

  	
  Form of Assignment and Acceptance

  
	
  Exhibit B

  	
  Form of Borrowing Base Certificate

  
	
  Exhibit C

  	
  Form of Compliance Certificate

  
	
  Exhibit D

  	
  Form of Excess Cash Flow Certificate

  
	
  Exhibit E

  	
  Form of Guarantor Joinder

  
	
  Exhibit F

  	
  Form of Notice of Borrowing

  
	
  Exhibit G

  	
  Form of Notice of Conversion/Continuation

  
	
  Exhibit H

  	
  List of Closing Documents

  
			

 

iv

 

FINANCING AGREEMENT

 

Financing Agreement, dated as of October 1,
2006, by and among BODY CENTRAL ACQUISITION CORP., a Delaware corporation (the “Parent”),
as the initial “Borrower” hereunder; each Person that becomes a
guarantor hereunder by execution of a joinder agreement substantially in the
form of Exhibit E hereto (each such Person and, upon consummation
of the Body Shop Acquisition and effectiveness of the Closing Date Joinder
Agreement, the Parent, hereinafter is sometimes referred to individually as a “Guarantor”
and collectively as the “Guarantors”, in each case further defined
herein below); the financial institutions from time to time party hereto as
lenders hereunder (each a “Lender” and collectively, the “Lenders”);
DYMAS FUNDING COMPANY, LLC, a Delaware limited liability company (“Dymas”),
as administrative agent for the Lenders (Dymas, in such capacity, together with
its successors and assigns in such capacity in accordance with Section 9.07,
the “Administrative Agent”); CHURCHILL FINANCIAL CAYMAN LTD., as
syndication agent for the Lenders (in such capacity, the “Syndication Agent”);
and NEWSTAR FINANCIAL, INC., as documentation agent for the Lenders (in
such capacity, the “Documentation Agent”).

 

RECITALS

 

WHEREAS, the Parent was organized for the purpose
of acquiring all of the issued and outstanding Capital Stock of Body Shop and
CV pursuant to the Body Shop Acquisition Agreement and the other Body Shop
Acquisition Documents (the “Body Shop Acquisition”); and

 

WHEREAS, the Parent has asked the Lenders to extend
credit to the Parent as the initial Borrower hereunder and, upon consummation
of the Body Shop Acquisition and effectiveness of the Closing Date Joinder
Agreement, Body Shop and CV, consisting of (a) two (2) term loans in
the aggregate principal amounts of $27,500,000 and $24,000,000, respectively
and (b) a revolving credit facility in an aggregate principal amount not
to exceed $15,000,000 at any time outstanding, the proceeds of which term loans
and loans made under the revolving credit facility shall be used (i) to
finance, in part, the Body Shop Acquisition, (ii) to refinance existing
indebtedness of Body Shop and CV, (iii) for general working capital
purposes (including Permitted Acquisitions), of Body Shop, CV and, to the
extent permitted hereunder, their respective Subsidiaries and (iv) to pay
fees and expenses in connection with the Related Transactions; and

 

WHEREAS, the Body Shop Acquisition shall be
consummated on the date hereof and pursuant to the Closing Date Joinder
Agreement, immediately upon such consummation (a) Body Shop and CV shall
be joined as Borrowers, and shall assume on a joint and several basis all of
the obligations of the Parent as the initial Borrower, in each case hereunder
and under each of the other Loan Documents, and (b) the Parent shall
become a Guarantor hereunder and under of each of the other Loan Documents;

 

NOW THEREFORE, in consideration of the premises and
the covenants and agreements contained herein, the parties hereto agree as
follows:

 

 

ARTICLE 1.

DEFINITIONS; CERTAIN TERMS

 

Section 1.01.  Definitions.  As used in this Agreement (including, without
limitation, the preamble and Recitals hereto), the following terms shall have
the respective meanings indicated below, such meanings to be applicable equally
to both the singular and plural forms of such terms:

 

“Account Receivable” means, with respect to
any Person, any and all rights of such Person to payment for goods sold and/or
services rendered, including accounts, general intangibles and any and all such
rights evidenced by chattel paper, instruments or documents, whether due or to
become due and whether or not earned by performance, and whether now or hereafter
acquired or arising in the future, and any proceeds arising therefrom or
relating thereto.

 

“Acquired Assets” has the meaning specified
therefor in the definition of the term “Permitted Acquisition.”

 

“Acquisition” means the acquisition of all
or substantially all of the assets of any Person, or of any business unit or
division of any Person, or all or substantially all of the Capital Stock of any
Person.

 

“Action” has the meaning specified therefor
in Section 11.11.

 

“Administrative Agent” has the meaning
specified therefor in the preamble hereto.

 

“Administrative Agent Advances” has the
meaning specified therefor in Section 9.08(a).

 

“Administrative Agent’s Account” means the
following account or such other account designated by the Administrative Agent
from time to time as the account into which the Loan Parties shall make all
payments to the Administrative Agent for the benefit of the Administrative
Agent and the Lenders under this Agreement and the other Loan Documents:

 

	
  Bank:

  	
   

  	
  Citibank, N.A.

  
	
  City/State:

  	
   

  	
  New York, New York

  
	
  ABA#

  	
   

  	
  021 000 089

  
	
  Account Name:

  	
   

  	
  Dymas Funding Company, LLC

  
	
  Account Number:

  	
   

  	
  14126333

  
	
  Ref:

  	
   

  	
  Body Shop

  

 

“Administrative Borrower” has the meaning
specified therefor in Section 11.20.

 

“Affiliate” means, with respect to any
Person, any other Person that directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person.  For purposes of this
definition, “control” of a Person means the power, directly or indirectly,
either to (i) vote 10% or more of the Capital Stock having ordinary voting
power for the election of directors (or similar Persons) of such Person or (ii) direct
or cause the direction of the management and policies of such Person whether by
contract or otherwise.

 

2

 

 

Notwithstanding anything herein to the contrary, in
no event shall Administrative Agent or any Lender be considered an “Affiliate”
of any Loan Party.

 

“Agreement” means this Financing Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the
same may be in effect at the time such reference becomes operative.

 

“Applicable Margin” means, for any day, the
rate per annum set forth below opposite the applicable Level then in effect, it
being understood and agreed that the Applicable Margin for (i) Revolving
Loans that are Base Rate Loans shall be the percentage set forth under the
column “Base Rate Margin for Revolving Loans”, (ii) Revolving Loans that
are LIBOR Loans shall be the percentage set forth under column “LIBOR Margin
for Revolving Loans and Letter of Credit Fee”, (iii) portions of Term Loan
A that are Base Rate Loans shall be the percentage set forth under the column “Base
Rate Margin for Term Loan A”, (iv) portions of Term Loan A that are LIBOR
Loans shall be the percentage set forth under the column “LIBOR Margin for Term
Loan A”, (v) portions of Term Loan B that are Base Rate Loans shall be the
percentage set forth under the column “Base Rate Margin for Term Loan B”, (vi) portions
of Term Loan B that are LIBOR Loans shall be the percentage set forth under the
column “LIBOR Margin for Term Loan B”, and (vii) the Letter of Credit Fee
shall be the percentage set forth under the column “LIBOR Margin for Revolving
Loans and Letter of Credit Fee”:

 

	
  Level

  	
   

  	
  Senior 

  Leverage 

  Ratio

  	
   

  	
  Base Rate

  Margin for

  Revolving

  Loans

  	
   

  	
  LIBOR

  Margin for

  Revolving

  Loans and

  Letter of

  Credit Fee

  	
   

  	
  Base Rate

  Margin for

  Term Loan A

  	
   

  	
  LIBOR

  Margin for

  Term Loan A

  	
   

  
	
  I

  	
   

  	
  >3.75

  	
   

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  
	
  II

  	
   

  	
  >2.50 but <3.75

  	
   

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  
	
  III

  	
   

  	
  >2.00 but <2.50

  	
   

  	
  1.75

  	
  %

  	
  3.25

  	
  %

  	
  1.75

  	
  %

  	
  3.25

  	
  %

  
	
  IV

  	
   

  	
  <2.0

  	
   

  	
  1.50

  	
  %

  	
  3.00

  	
  %

  	
  1.50

  	
  %

  	
  3.00

  	
  %

  

 

	
  Level

  	
   

  	
  Senior Leverage Ratio

  	
   

  	
  Base Rate Margin for

  Term Loan B

  	
   

  	
  LIBOR Margin for

  Term Loan B

  	
   

  
	
  I

  	
   

  	
  >3.75

  	
   

  	
  2.75

  	
  %

  	
  4.25

  	
  %

  
	
  II

  	
   

  	
  >2.50 but <3.75

  	
   

  	
  2.50

  	
  %

  	
  4.00

  	
  %

  
	
  III

  	
   

  	
  >2.00 but <2.50

  	
   

  	
  2.25

  	
  %

  	
  3.75

  	
  %

  
	
  IV

  	
   

  	
  <2.0

  	
   

  	
  2.00

  	
  %

  	
  3.50

  	
  %

  

 

The Applicable Margin shall, in each case, be
determined and adjusted quarterly on the first day of the month following the
month during which the Administrative Agent has received from the Borrowers the
Compliance Certificate for the fiscal quarters ending March, June, September and
December of each Fiscal Year required to be delivered to the
Administrative Agent and the Lenders in accordance with the provisions of Section 7.01(a)(iii) (each
an 

 

3

 

“Interest Determination Date”), and shall be
based upon the Senior Leverage Ratio set forth in such Compliance
Certificate.  Such Applicable Margin
shall be effective from such Interest Determination Date until the next such
Interest Determination Date.  The initial
Applicable Margin shall be based on Level II until the first Interest
Determination Date occurring after the delivery of the Compliance Certificate
for the quarter ending December 31, 2006.

 

“Assignment and Acceptance” means an
assignment and acceptance entered into by an assigning Lender and an assignee,
and accepted by the Administrative Agent and, if required pursuant to Section 11.06,
the Borrowers, in accordance with Section 11.06 hereof and substantially
in the form of Exhibit A hereto or such other form acceptable to the
Administrative Agent.

 

“Authorized Officer” means, with respect to
any Person, the chief executive officer, chief financial officer, treasurer,
controller, president or executive vice president of such Person.

 

“Availability” means, at any time, the
amount at such time by which (i) the lesser of (A) the Borrowing Base
and (B) the Total Revolving Loan Commitment, exceeds (ii) the sum of (A) the
aggregate outstanding principal amount of all Revolving Loans and (B) all
Letter of Credit Obligations.

 

“Bankruptcy Code” means the United States
Bankruptcy Code (11 U.S.C. § 101, et seq.),
as amended, and any successor statute.

 

“Base Rate” means a variable per annum rate
of interest equal to the greater of (i) the rate of interest publicly
announced by JPMorgan Chase Bank in New York, New York from time to time as its
Base Rate or prime rate or (ii) the Federal Funds Rate plus one-half of
one percent (0.50%).  The Base Rate or
prime rate is determined from time to time by JPMorgan Chase Bank as a means of
pricing some loans to its borrowers and neither is tied to any external rate of
interest or index nor necessarily reflects the lowest rate of interest actually
charged by JPMorgan Chase Bank to any particular class or category of
customers.  Each change in the Base Rate
shall be effective from and including the date such change is publicly
announced as being effective.

 

“Base Rate Loans” means Loans, the rate of
interest applicable to which is based on the Base Rate.

 

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

 

“Body Shop” means Body Shop of America, Inc.,
a Florida corporation.

 

“Body Shop Acquisition” has the meaning
specified therefor in the Recitals hereto.

 

“Body Shop Acquisition Agreement” means that
certain Stock Purchase Agreement, dated as of October 1, 2006, by and
among the Parent, Body Shop, CV, the Sellers and the Seller Representative,
without giving effect to any amendments, restatements or modifications thereof
or supplements thereto except for any of the foregoing previously consented to
in writing in accordance with the terms of this Agreement.

 

4

 

“Body Shop Acquisition Documents” means the
collective reference to the Body Shop Acquisition Agreement and all other
material agreements, documents and instruments executed and/or delivered
pursuant thereto or in connection therewith, in each case without giving effect
to any amendments, restatements or modifications thereof or supplements thereto
except for any of the foregoing previously consented to in writing in
accordance with the terms of this Agreement.

 

“Borrower” means (i) prior to
consummation of the Body Shop Acquisition and effectiveness of the Closing Date
Joinder Agreement, and solely with respect to the initial Loans made on the
Closing Date, the Parent, and (ii) upon consummation of the Body Shop
Acquisition and the effectiveness of the Closing Date Joinder Agreement, each
of Body Shop and CV.

 

“Borrowing Base” means, at any time, 70% of
Eligible Inventory (as defined in the Borrowing Base Certificate) at such time.

 

“Borrowing Base Certificate” means a
certificate signed by an Authorized Officer of the Administrative Borrower and
setting forth the calculation of the Borrowing Base, substantially in the faint
of Exhibit B.

 

“Business Day” means (i) for all
purposes other than as covered by clause (ii) of this definition, any day
other than a Saturday, Sunday or other day on which commercial banks in New
York City are authorized or required to close and (ii) with respect to all
notices, determinations, fundings and payments in connection with Loans bearing
interest at the LIBOR, any day that is a Business Day described in clause (i) above
and that is also a day for trading by and between banks in Dollar deposits in
the applicable interbank LIBOR market.

 

“Capital Expenditures” are defined in the
Compliance Certificate.

 

“Capital Guideline” means any law, rule,
regulation, policy, guideline or directive (whether or not having the force of
law and whether or not the failure to comply therewith would be unlawful) of
any central bank or Governmental Authority (i) regarding capital adequacy,
capital ratios, capital requirements, the calculation of a bank’s capital or
similar matters, or (ii) affecting the amount of capital required to be
obtained or maintained by any Lender, any Person controlling any Lender, or the
L/C Issuer or the manner in which any Lender, any Person controlling any
Lender, or the L/C Issuer allocates capital to any of its contingent
liabilities (including letters of credit), advances, acceptances, commitments,
assets or liabilities.

 

“Capital Stock” means (i) with respect
to any Person that is a corporation, any and all shares, interests,
participations or other equivalents (however designated and whether or not
voting) of corporate stock, and (ii) with respect to any Person that is
not a corporation, any and all partnership, membership or other equity
interests of such Person including, in each instance in clauses (i) and (ii) above,
options, warrants, convertible securities and other equity securities.

 

“Capitalized Lease” means, with respect to
any Person, any lease of real or personal property by such Person as lessee
which is required under GAAP to be capitalized on the balance sheet of such
Person.

 

5

 

“Capitalized Lease Obligations” means, with
respect to any Person, obligations of such Person and its Subsidiaries under
Capitalized Leases, and, for purposes hereof, the amount of any such obligation
shall be the capitalized amount thereof determined in accordance with GAAP.

 

“Cash and Cash Equivalents” means all cash
and any presently existing or hereafter arising deposit account balances,
certificates of deposit or other financial instruments properly classified as
cash equivalents under GAAP.

 

“Change of Control” means the occurrence of
any one or more of the following:

 

(i)            Sponsor and Co-Sponsor collectively
cease to be entitled (without regard to the occurrence of any contingency) by
contract or by means of the direct or beneficial ownership of Capital Stock of
the Parent to cause the nomination and election of a majority of the members of
the boards of directors or similar governing body of the Parent; or

 

(ii)           the consent of Sponsor ceases to be a
prerequisite for the Parent to take any of the actions described in Section C(3)(b) of
the Parent Certificate of Incorporation, as in effect on the Closing Date;

 

(iii)          Sponsor ceases to beneficially and of
record own and control, directly or indirectly, free and clear of all Liens, at
least seventy percent (70%) of the aggregate number of issued and outstanding
shares of Capital Stock (as the same may be adjusted for any combination,
recapitalization or reclassification into a greater or similar number of
shares) of the Parent owned by Sponsor on the Closing Date; or

 

(iv)          following consummation of the Body
Shop Acquisition, the Parent ceases to beneficially and of record own and
control all of the issued and outstanding Capital Stock of Borrowers, free and
clear of all Liens other than Liens in favor of Administrative Agent; or

 

(v)           subject to the provisions of Section 7.02(c),
Borrowers cease to beneficially own and control, directly or indirectly, free
and clear of all Liens other than Liens in favor of Administrative Agent, 100%
of the issued and outstanding Capital Stock of any other Loan Party other than
the Parent.

 

“Closing Date” means the date on which all
of the conditions precedent set forth in Section 5.01 are satisfied
or waived and the initial Loans are made.

 

“Closing Date Joinder Agreement” means that
certain Master Reaffirmation and Joinder to Loan Documents dated as of the date
hereof among the Parent, Body Shop, CV and Administrative Agent.

 

“Co-Sponsor” means the collective reference
to AIG Global Investment Corp., AIG Private Equity (Bermuda) Ltd., AIG PEP III
Direct, L.P., AIG PEP IV Co-Investment, L.P., AIG Co-Investment Fund, L.P. and
American International Group, Inc. Retirement Plan, and any of their
Affiliates respectively.

 

6

 

“Collateral” means all of the property and
assets and all interests therein and proceeds thereof now owned or hereafter
acquired by any Person upon which a Lien is granted or purported to be granted
by such Person as security for all or any part of the Obligations.

 

“Commitments” means, with respect to each
Lender, such Lender’s Revolving Loan Commitment, Term Loan A Commitment and
Term Loan B Commitment.

 

“Compliance Certificate” means a certificate
signed by an Authorized Officer of Administrative Borrower, in the form of Exhibit C.

 

“Consolidated EBITDA” is defined in the
Compliance Certificate.

 

“Contingent Obligation” means, with respect
to any Person, any obligation of such Person guaranteeing or intended to
guarantee any Indebtedness, leases, dividends or other obligations (“primary
obligations”) of any other Person (the “primary obligor”) in any manner,
whether directly or indirectly, including, without limitation, (i) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of a primary obligor, (ii) the
obligation to make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement, (iii) any
obligation of such Person, whether or not contingent, (A) to purchase any
such primary obligation or any property constituting direct or indirect
security therefor, (B) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (C) to purchase
property, assets, 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 or (D) otherwise to assure or
hold harmless the holder of such primary obligation against loss in respect
thereof; provided, however, that the term “Contingent Obligation” shall not
include any product warranties extended in the ordinary course of
business.  The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation .with respect to which such Contingent
Obligation is made (or, if less, the maximum amount of such primary obligation
for which such Person may be liable pursuant to the terms of the instrument
evidencing such Contingent Obligation) or, if not stated or determinable, the
maximum reasonably anticipated liability with respect thereto (assuming such
Person is required to perform thereunder), as determined by such Person in good
faith.

 

“CV” means Catalogue Ventures, Inc., a
Florida corporation.

 

“Default” means an event which, with the
giving of notice or the lapse of time or both, would constitute an Event of
Default.

 

“Default Rate” means, with respect to any
Obligation, a rate of interest per annum equal to the rate of interest
otherwise in effect from time to time pursuant to the terms of this Agreement
with respect to such Obligation plus two percent (2%), or, if a rate of
interest is not otherwise in effect with respect to such Obligation, a rate of
interest per annum equal to the sum 

 

7

 

of (i) the Base Rate plus (ii) the
Applicable Margin for Revolving Loans which are Base Rate Loans plus (iii) two
percent (2%).

 

“Defaulting Lender” shall mean, at any time,
any Lender that, at such time (a) has failed to make a Loan required
pursuant to the terms of this Agreement, including the funding of a
participation in a Letter of Credit in accordance with the terms hereof, (b) has
failed to pay to the Administrative Agent or any Lender an amount owed by such
Lender pursuant to the terms hereof, or (c) has been deemed insolvent or
has become subject to a bankruptcy or insolvency proceeding or to a receiver,
trustee or similar official.

 

“Disposition” means any transaction, or
series of related transactions, pursuant to which any Person or any of its
Subsidiaries sells, assigns, transfers or otherwise disposes of any property or
assets (whether now owned or hereafter acquired) to any other Person, in each
case, whether or not the consideration therefor consists of cash, securities or
other assets owned by the acquiring Person, excluding any sales of Inventory in
the ordinary course of business.

 

“Documentation Agent” has the meaning
specified therefor in the preamble hereto.

 

“Dollar,” “Dollars” and the symbol “$”
each means lawful money of the United States of America.

 

“Eligible Inventory” is defined in the
Borrowing Base Certificate.

 

“Employee Benefit Plan” means an employee
benefit plan subject to ERISA sponsored by or with respect to which any Loan
Party or any of its ERISA Affiliates has or may have liability, including
contingent liability.

 

“Employee Plan” means an employee benefit
plan (other than a Multiemployer Plan) covered by Title IV of ERISA sponsored
by or with respect to which any Loan Party or any of its ERISA Affiliates has
or may have liability, including contingent liability.

 

“Environmental Actions” means any action,
complaint, summons, citation, notice, directive, order, claim, litigation,
investigation, judicial or administrative proceeding, judgment, letter or other
communication from any Person or Governmental Authority relating to (a) violations
of or non-compliance with Environmental Laws by any Loan Party or any of its
Subsidiaries or any predecessor in interest or by any other Person in connection
with the ownership or operation of the assets, the facilities, the properties
or the business of any Loan Party or any of its Subsidiaries or any predecessor
in interest; (b) any actual or alleged liabilities, responsibilities or
obligations of any Loan Party or any of its Subsidiaries or any predecessor in
interest (i) relating to adverse environmental conditions at, on, under or
from any assets, facilities or properties owned or operated by any Loan Party
or any of its Subsidiaries or any predecessor in interest or (ii) resulting
from or in connection with operation of the assets, the facilities, the
properties or the business of any Loan Party or any of its Subsidiaries or any
predecessor in interest; or (c) any Releases of Hazardous Materials (i) at,
on, under or from any assets, properties or businesses owned or operated by any
Loan Party or any of its Subsidiaries or any predecessor in interest, (ii) at,
on, under or from adjoining properties or businesses, or (iii) at, on,
under or from any facilities which received Hazardous Materials generated or
otherwise handled by any Loan Party or any of its Subsidiaries or any
predecessor in interest.

 

8

 

“Environmental Laws” means the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. § 1801, et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. § 6901, et seq.), the Federal Clean Water Act (33 U.S.C.
§ 1251 et seq.), the Clean Air Act (42
U.S.C. § 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. § 2601 et seq.)
and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as such laws may be amended or
otherwise modified from time to time, and any other present or future federal,
state, local or foreign statute, ordinance, rule, regulation, order, judgment,
decree, permit, license or other requirement or determination of any
Governmental Authority imposing liabilities or establishing standards of
conduct for the protection of human health or the environment, including
without limitation any requirements or determinations relating to the Release,
presence, use, generation, storage, transportation, treatment, management,
handling or disposal of Hazardous Materials.

 

“Environmental Liabilities and Costs” means
all liabilities, monetary obligations, Remedial Actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants and costs of investigations and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of or in response to any
adverse environmental condition or a Release of Hazardous Materials at, on,
under or from (i) any property or facility presently or formerly owned or
operated by any Loan Party or any of its Subsidiaries or predecessor in
interest or (ii) any property or facility which received Hazardous
Materials generated, transported or otherwise handled by any Loan Party or any
of its Subsidiaries or predecessor in interest.

 

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

 

“Equity Documents” means (i) that
certain Stockholder Agreement dated as of the date hereof by and among the
Parent, Sponsor, Co-Sponsor and each of the other Persons from time to time
party thereto as a Stockholder (as such term is defined therein), (ii) that
certain Securities Purchase Agreement dated as of the date hereof by and among
the Parent and each of the Initial Stockholders (as such term is defined
therein), (iii) those certain Subscription Agreements dated as of the date
hereof between the Parent and certain Stockholders, (iv) that certain
Registration Rights Agreement dated as of the date hereof among the Parent and
each of the other Persons from time to time party thereto as a Stockholder (as
such term is defined therein) and (v) and all agreements, instruments and
other documents related thereto.

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended, and any successor statute of similar import,
and regulations thereunder, in each case, as in effect from time to time.

 

“ERISA Affiliate” means, with respect to any
Person, any trade or business (whether or not incorporated) whose employees are
treated as being employed by a single employer, which includes such Person,
pursuant to Sections 414(b), (c), (m) and (o) of the Internal Revenue
Code or Section 4001(b) of ERISA.

 

“Event of Default” means any of the events
set forth in Section 8.01.

 

9

 

“Excess Cash Flow” is defined in the Excess
Cash Flow Certificate.

 

“Excess Cash Flow Certificate” means a certificate
signed by an Authorized Officer of Administrative Borrower, in the form of Exhibit D.

 

“Existing Credit Facility” means that
certain Promissory Note dated December 22, 1998 by Body Shop to Wachovia
Bank, National Association in the original principal amount of $2,500,000, as
amended by letter Agreement dated May 12, 1999 and April, 2001, as
extended and modified by Loan Document Extension and Modification Agreement
dated July 1, 2001 and Promissory Note and Loan Agreement dated February 10,
2004.

 

“Extraordinary Receipts” means (i) proceeds
of casualty insurance to the extent not reinvested as permitted pursuant to Section 2.05(c)(v),
(ii) condemnation awards (and payments in lieu thereof) to the extent not
reinvested as permitted pursuant to Section 2.05(c)(v), and (iii) fifty
percent (50%) of any purchase price adjustment received pursuant to the Body
Shop Acquisition Agreement.

 

“Fee Letter” means that certain letter
agreement of even date herewith among Borrowers and Administrative Agent, as
the same may be amended, modified, supplemented and/or restated from time to
time.

 

“Federal Funds Rate” means, for any period,
a fluctuating interest rate per annum equal to, for each day during such
period, the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

 

“Financial Statements” means (i) the
audited consolidated balance sheet of Body Shop and its Subsidiaries for the
2005 Fiscal Year, and CV and its Subsidiaries for the Fiscal Year ended December 31,
2005, and, in each case, the related consolidated income statement,
shareholders’ equity and cash flows for the Fiscal Year then ended, and (ii) the
unaudited consolidated balance sheet of Body Shop and its Subsidiaries as of July 1,
2006, and the unaudited consolidated balance sheet of CV and its Subsidiaries
as of July 1, 2006, and, in each case, the related consolidated income
statement, shareholders’ equity and cash flows for the six months then ended.

 

“Fiscal Year” means the fiscal year of the
Parent and its Subsidiaries ending on the Saturday closest to December 31
of each year.

 

“Fixed Charge Coverage Ratio” is defined in
the Compliance Certificate.

 

“GAAP” means generally accepted accounting
principles in effect from time to time in the United States, applied on a
consistent basis, provided that for the purpose of Section 7.03 hereof and
the definitions used therein, “GAAP” shall mean generally accepted accounting
principles in effect on the date hereof and consistent with those used in the
preparation of the Financial Statements, provided,
further, that if there occurs after the
date of this Agreement any 

 

10

 

change in GAAP that affects in any respect the
calculation of any covenant contained in Section 7.03 hereof, the
Administrative Agent and the Administrative Borrower shall negotiate in good
faith amendments to the provisions of this Agreement that relate to the
calculation of such covenant with the intent of having the respective positions
of the Lenders and the Borrowers after such change in GAAP conform as nearly as
possible to their respective positions as of the date of this Agreement and,
until any such amendments have been agreed upon, the covenants in Section 7.03
hereof shall be calculated as if no such change in GAAP has occurred.

 

“Governmental Authority” means any nation or
government, any Federal, state, city, town, municipality, county, local or
other political subdivision thereof or thereto and any department, commission,
board, bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.

 

“Guaranteed Obligations” has the meaning
specified therefor in Section 10.01.

 

“Guarantor” means each Person which
guarantees, pursuant to Section 7.01(j) or otherwise, all or any part
of the Obligations, including, without limitation, upon consummation of the
Body Shop Acquisition and effectiveness of the Closing Date Joinder Agreement,
the Parent.

 

“Guaranty” means each guaranty made by each
Guarantor in favor of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders (i) in the case of the Parent, upon consummation of
the Body Shop Acquisition and effectiveness of the Closing Date Joinder
Agreement, and (ii) in the case of all other Guarantors, by execution of a
joinder in the form of Exhibit E pursuant to Section 7.01(j) or
otherwise.

 

“Hazardous Material” means (a) any
element, compound or chemical that is defined, listed or otherwise classified
as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance,
extremely hazardous substance or chemical, hazardous waste, special waste, or
solid waste under Environmental Laws; (b) petroleum and its refined
products; (c) polychlorinated biphenyls; and (d) any substance
exhibiting a hazardous waste characteristic, including, without limitation,
corrosivity, ignitability, toxicity or reactivity as well as any radioactive or
explosive materials.

 

“Hedging Agreement” means any interest rate,
foreign currency, commodity or equity swap, collar, cap, floor or forward rate
agreement, or other agreement or arrangement designed to protect against
fluctuations in interest rates or currency, commodity or equity values
(including, without limitation, any option with respect to any of the foregoing
and any combination of the foregoing agreements or arrangements), and any
confirmation executed in connection with any such agreement or arrangement.

 

“Highest Lawful Rate” means, with respect to
Administrative Agent or any Lender, the maximum non-usurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Obligations under laws applicable to
Administrative Agent or such Lender which are currently in effect or, to the
extent allowed by 

 

11

 

law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than
applicable laws now allow.

 

“Indebtedness” means, with respect to any
Person, without duplication, (i) all indebtedness of such Person for
borrowed money; (ii) all obligations of such Person for the deferred
purchase price of property or services (other than accrued liabilities, trade
payables or other accounts payable incurred in the ordinary course of such
Person’s business and not outstanding for more than 120 days after the date
such payable was created), including, without limitation, earnouts and other
similar obligations; (iii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments or upon which interest
payments are customarily made; (iv) all reimbursement, payment or other
obligations and liabilities of such Person created or arising under any
conditional sales or other title retention agreement with respect to property
used and/or acquired by such Person, even though the rights and remedies of the
lessor, seller and/or lender thereunder may be limited to repossession or sale
of such property; (v) all Capitalized Lease Obligations of such Person; (vi) all
obligations and liabilities, contingent or otherwise, of such Person, in
respect of letters of credit, acceptances and similar facilities; (vii) all
obligations and liabilities, calculated on a basis satisfactory to the
Administrative Agent and in accordance with accepted practice, of such Person
under Hedging Agreements; (viii) all obligations referred to in clauses (i) through
(vii) of this definition of another Person secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) a Lien upon property owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness.  The Indebtedness of any
Person shall include the Indebtedness of any partnership of or joint venture in
which such Person is a general partner or a joint venturer, in each case except
to the extent that the terms of such Indebtedness expressly provide that such
Person has no liability with respect thereto and the Administrative Agent shall
have received evidence reasonably satisfactory to the Administrative Agent that
such limitation of liability is enforceable against the holders of such
Indebtedness under applicable law.

 

“Indemnified Matters” has the meaning
specified therefor in Section 11.14(a).

 

“Indemnitees” has the meaning specified
therefor in Section 11.14(a).

 

“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, assignments for the benefit of
creditors, formal or informal moratoria, compositions, or extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.

 

“Interest Payment Date” shall mean (a) as
to any Base Rate Loan, the last day of each calendar quarter during the term of
this Agreement, (b) as to any LIBOR Loan having an Interest Period of
three months or less, the last day of such Interest Period, (c) as to any
LIBOR Loan having an Interest Period longer than three months, each day which
is three months after the first day of such Interest Period and the last day of
such Interest Period and (d) as to any Loan which is the subject of a
mandatory prepayment required pursuant to this Agreement, the date of such prepayment.

 

12

 

 

“Interest Period” shall mean, with respect
to any LIBOR Loan,

 

(i)            initially, the period commencing on
the borrowing date or conversion date, as the case may be, with respect to such
LIBOR Loan and ending one, two, three or six months thereafter, as selected by
the Borrowers in the Notice of Borrowing or Notice of Conversion/Continuation
given with respect thereto; and

 

(ii)           thereafter, each period commencing on
the last day of the immediately preceding Interest Period applicable to such
LIBOR Loan and ending one, two, three or six months as selected by the
Borrowers by irrevocable notice to the Administrative Agent not less than three
(3) Business Days prior to the last day of the then current Interest
Period with respect thereto;

 

provided that the foregoing provisions are subject
to the following:

 

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

 

(B)           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 relevant calendar month;

 

(C)           any Interest Period in respect of any
Loan that would otherwise extend beyond the final payment date for such Loan
shall end on such payment date;

 

(D)          with regard to a Term Loan, no
Interest Period shall extend beyond any principal amortization payment date
unless the portion of such Term Loan consisting of Base Rate Loans together
with the portion of such Term Loan consisting of LIBOR Loans with Interest
Periods expiring prior to or concurrently with the date such principal
amortization payment date is due, is at least equal to the amount of such
principal amortization payment due on such date;

 

(E)           pursuant to Section 2.04(f)(ii),
if the Administrative Borrower shall fail to give timely notice of an election
to continue a LIBOR Loan such LIBOR Loan shall be converted automatically into
a LIBOR Loan with an Interest Period of thirty (30) days at the end of the
applicable Interest Period with respect thereto; and

 

(F)           no more than eight (8) LIBOR
Loans may be in effect at any time.

 

“Internal Revenue Code” means the Internal
Revenue Code of 1986, as amended (or any successor statute thereto) and the regulations
promulgated thereunder.

 

“Inventory” means, with respect to any
Person, all goods and merchandise of such Person, including, without
limitation, all raw materials, work-in-process, packaging, supplies, materials
and finished goods of every nature used or usable in connection with the
shipping, 

 

13

 

storing, advertising or sale of such goods and
merchandise, whether now owned or hereafter acquired, and all such other
property the sale or other disposition of which would give rise to an Account
Receivable or cash.

 

“L/C Issuer” means National City Bank or
such other bank or financial institution as the Administrative Agent may select
in its sole and absolute discretion.

 

“L/C Subfacility” means that portion of the
Total Revolving Loan Commitment equal to $5,000,000.

 

“Lease” means any lease of real property to
which any Loan Party or any of its Subsidiaries is a party as lessor or lessee.

 

“Lender” has the meaning specified therefor
in the preamble hereto.

 

“Letter of Credit” has the meaning specified
therefor in Section 3.01(a).

 

“Letter of Credit Application” has the
meaning specified therefor in Section 3.01(a).

 

“Letter of Credit Collateral Account” has
the meaning specified therefor in Section 3.01(b).

 

“Letter of Credit Fee” has the meaning
specified therefor in Section 3.03(b).

 

“Letter of Credit Obligations” means, at any
time and without duplication, the sum of (i) the Reimbursement Obligations
at such time, plus (ii) the aggregate maximum amount available for
drawing under the Letters of Credit outstanding at such time, plus (iii) all
amounts for which the Administrative Agent may be liable to the L/C Issuer in
respect of any Letter of Credit.

 

“Liabilities” has the meaning specified
therefor in Section 2.07.

 

“LIBOR” means, for any LIBOR Loan for any
Interest Period therefor, the rate per annum (rounded upwards to the nearest
1/100 of 1%) equal to:

 

(i)            the rate per annum appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered
rate for deposits in Dollars at approximately 11:00 A.M. (London time) two
(2) Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period. 
If for any reason such rate is not available, the term “LIBOR” shall
mean, for any LIBOR Loan for any Interest Period therefor, the rate per annum
(rounded upwards to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits in Dollars at approximately
11:00 A.M. (London time) two (2) Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period; provided, however,
if more than one rate is specified on Reuters Screen LIBO Page, the applicable
rate shall be the arithmetic mean of all such rates (rounded upwards to the
nearest 1/100 of 1%).  If, for any
reason, neither of such rates is available, then “LIBOR” shall mean the rate
per annum at which, as determined by the Administrative Agent, Dollars in an
amount comparable to the Loans then requested or otherwise in question are
being offered to leading banks at approximately 11:00 A.M. London time,
two (2) Business Days prior to the 

 

14

 

commencement of the applicable
Interest Period for settlement in immediately available funds by leading banks
in the London interbank market for a period equal to the Interest Period
selected; divided by

 

(ii)           one minus the percentage (expressed
as a decimal and rounded upwards to the next higher 1/100th of 1%) which is in
effect for such day as prescribed by the Board (or any successor) for
determining the maximum reserve requirement (including without limitation, any
basic, supplemental or emergency reserves) in respect of Eurocurrency
liabilities, as defined in Regulation D of the Board as in effect from time to
time, or any similar category of liabilities for a member bank of the Federal
Reserve System in New York City.

 

“LIBOR Loans” means Loans, the rate of
interest applicable to which is based on the LIBOR.

 

“Lien” means any mortgage, deed of trust,
pledge, lien (statutory or otherwise), security interest, charge or other
encumbrance or security or preferential arrangement of any nature, including,
without limitation, any conditional sale or title retention arrangement, any
Capitalized Lease and any assignment, deposit arrangement or financing lease
intended as, or having the effect of, security.

 

“Loan” means Term Loan A, Term Loan B or any
Revolving Loan made by a Lender to the Borrowers pursuant to this Agreement.

 

“Loan Account” means an account maintained
hereunder by the Administrative Agent on its books of account at the Payment
Office and, with respect to the Borrowers, in which the Borrowers will be
charged with all Loans made to, and all other Obligations incurred by, the
Borrowers.

 

“Loan Document” means this Agreement, any
Guaranty, any Security Agreement, any Pledge Agreement, any Mortgage, any
Letter of Credit Application, the Fee Letter, any UCC Filing Authorization
Letter, any deposit account control agreement and any other agreement,
instrument, and other document executed and delivered pursuant hereto or
thereto or otherwise evidencing, pertaining to or securing any Loan, any Letter
of Credit Obligation or any other Obligation.

 

“Loan Party” means the Borrowers and/or any
Guarantor.

 

“Material Adverse Effect” means a material
adverse effect on any of (i) the operations, business, assets, properties
or condition (financial or otherwise) of the Loan Parties taken as a whole, (ii) the
ability of any Loan Party to perform in any material respect any of its
obligations under any Loan Document to which it is a party, (iii) the
legality, validity or enforceability of this Agreement or any other Loan
Document, (iv) the rights and remedies of Administrative Agent or any
Lender under any Loan Document, or (v) the validity, perfection or
priority of a Lien in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders on any of the Collateral.

 

15

 

“Material Leased Real Property” means real
property leased by any Loan Party, other than leased premises used primarily
for the conduct of retail sales by such or any other Loan Party.

 

“Material Owned Real Property” means real
property owned by any Loan Party having an aggregate fair market value in
excess of $500,000.

 

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

 

“Mortgage” means a mortgage (including,
without limitation, a leasehold mortgage), deed of trust or deed to secure
debt, in form and substance satisfactory to the Administrative Agent, made by a
Loan Party in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders, securing the Obligations and delivered to
the Administrative Agent pursuant to Section 5.01(d), Section 7.01(j),
Section 7.01(k) or otherwise.

 

“Mortgaged Property” means each parcel of
real property in respect of which a Loan Party delivers a Mortgage.

 

“Multiemployer Plan” means a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA to which any Loan
Party or any of its ERISA Affiliates has contributed to, or has been obligated
to contribute, at any time during the preceding (including contingent liabilities)
six (6) years, or with respect to which any Loan Party or any of its ERISA
Affiliates otherwise has any liability.

 

“Net Cash Proceeds” means (i) with
respect to any Disposition by any Person or any of its Subsidiaries, the 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 such Person or such Subsidiary, in connection therewith
after deducting therefrom only (A) the amount of any Indebtedness secured
by any Lien permitted by Section 7.02(a) on any asset (other than
Indebtedness assumed by the purchaser of such asset) which is required to be,
and is, repaid in connection with such Disposition (other than Indebtedness
under this Agreement), (B) reasonable costs and expenses related thereto
incurred by such Person or such Subsidiary in connection therewith, (C) transfer
taxes paid to any taxing authorities by such Person or such Subsidiary in
connection therewith, and (D) net income taxes to be paid in connection
with such Disposition (after taking into account any tax credits or deductions
and any tax sharing arrangements) and (ii) with respect to the issuance or
incurrence of any Indebtedness by any Person or any of its Subsidiaries, or the
sale or issuance by any Person or any of its Subsidiaries of any 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 such Person or such Subsidiary in
connection therewith, after deducting therefrom only (A) reasonable costs
and expenses related thereto incurred by such Person or such Subsidiary in
connection therewith, (B) transfer taxes paid by such Person or such
Subsidiary in connection therewith and (C) net income taxes to be paid in
connection therewith (after taking into account any tax credits or deductions
and any tax sharing arrangements); in each case of clause (i) and (ii) to
the extent that the amounts so deducted are (x) actually paid to a Person
that, except in the case of reasonable out-of-pocket expenses, is not 

 

16

 

an Affiliate of such Person or any of its
Subsidiaries and (y) properly attributable to such transaction or to the
asset that is the subject thereof.

 

“Notice of Borrowing” has the meaning
specified therefor in Section 2.02(a).

 

“Notice of Conversion/Continuation” has the
meaning specified therefor in Section 2.04(f).

 

“Obligations” means all present and future
indebtedness, obligations, and liabilities of each Loan Party to the
Administrative Agent and the Lenders under the Loan Documents, whether or not
the right of payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured, unsecured, and whether or not such claim is
discharged, stayed or otherwise affected by any proceeding referred to in Section 8.01(f) or
(g).  Without limiting the generality of
the foregoing, the Obligations of each Loan Party under and in accordance with
the terms of the Loan Documents include (a) the obligation to pay
principal, interest, charges, expenses, fees, attorneys’ fees and disbursements,
indemnities and other amounts payable by such Person under the Loan Documents, (b) the
obligation of such Person to reimburse any amount in respect of any of the
foregoing that the Administrative.  Agent
or any Lender (in its sole discretion) pursuant to the terms hereof or of any
other Loan Document may elect to pay or advance on behalf of such Person and (c) obligations
of Borrower to any Lender to the extent arising in connection with a Hedging
Agreement required pursuant to Section 5.02(n).

 

“Operating Lease Obligations” means all
obligations for the payment of rent for any real or personal property under
leases or agreements to lease, other than Capitalized Lease Obligations.

 

“Organization Documents” means (a) for
any corporation, the certificate or articles of incorporation, the bylaws, any
certificate of designations or preferences or other instrument relating to the
rights of preferred shareholders of such corporation and any shareholders or
similar agreement, (b) for any partnership, the partnership agreement and,
if applicable, certificate of limited partnership, (c) for any limited
liability company, the operating or limited liability company agreement and
articles or certificate of formation or (d) for any other entity, any
similar agreement or instrument.

 

“Parent” has the meaning specified therefor
in the preamble hereto.

 

“Parent Certificate of Incorporation” means
the Amended and Restated Certificate of Incorporation of Parent filed with the
office of the Secretary of State of Delaware on September 29, 2006.

 

“Participant Register” has the meaning
specified therefor in Section 11.06(b)(v).

 

“Payment Office” means the Administrative
Agent’s office located at One North Franklin Street, 35th floor, Chicago, Illinois
60606, or at such other office or offices of the Administrative Agent as may be
designated in writing from time to time by the Administrative Agent to the
Administrative Borrower.

 

17

 

“PBGC” means the Pension Benefit Guaranty Corporation
or any successor thereto.

 

“Permitted Acquisition” means any
Acquisition by the Parent or a wholly-owned Subsidiary of the Parent that is a
Loan Party of the Capital Stock or assets of any other Person (such acquired
assets or Capital Stock are referred to herein as the “Acquired Assets”),
in each case to the extent that each of the following conditions shall have
been satisfied:

 

(a)           the total consideration paid or
payable (including, without limitation, in respect of seller notes, earnouts
and other deferred payments, in each case, for this purpose assumed to be equal
the maximum amount payable in respect thereof) for all Acquisitions consummated
during (i) any Fiscal Year shall not exceed $2,500,000, (ii) the term
of this Agreement shall not exceed $7,500,000;

 

(b)           the Administrative Borrower shall
have furnished to the Administrative Agent at least fifteen (15) Business Days
prior to the consummation of such Acquisition for distribution to Lenders, (1) to
the extent available, an executed term sheet and/or commitment letter (setting
forth in reasonable detail the terms and conditions of such Acquisition) or, if
not available, a written notice including a reasonable description of such
Acquisition and, at the reasonable request of the Administrative Agent, such
other information and documents that the Administrative Agent or Lenders may
reasonably request, including, without limitation, to the extent available,
executed counterparts of the respective agreements, documents or instruments
pursuant to which such Acquisition is to be consummated (including, without
limitation, any related management, non-compete, employment, option or other
material agreements), any schedules to such agreements, documents or
instruments and all other material ancillary agreements, instruments and
documents to be executed or delivered in connection therewith, (2) pro
forma financial statements of the Parent and its Subsidiaries after giving
effect to the consummation of such Acquisition, (3) the most recent income
statement dated not more than ninety (90) days prior to the proposed date of
such Acquisition for the twelve (12) months then ended (and on a month-to-month
basis for such twelve month period to the extent such month-to-month income
statements are obtained by the Parent) and the most recent balance sheet and
statement of cash flows for the Acquired Assets dated not more than ninety (90)
days prior to the proposed Acquisition, (4) a certificate of an Authorized
Officer of the Parent demonstrating on a pro forma basis compliance with the
maximum Senior Leverage Ratio then permitted pursuant to Section 7.03(a) hereof
after giving effect to the consummation of such Acquisition (with the
calculation of Adjusted Consolidated EBITDA, for this purpose, to be made in
accordance with the definition of Pro Forma EBITDA) and, if lower, and (5) copies
of such other agreements, instruments and other documents (including, without
limitation, the Loan Documents required by Sections 7.01(j) and 7.01(k))
as the Administrative Agent or Lenders shall reasonably request.

 

(c)           (1) neither any of the Loan
Parties nor any of their Subsidiaries shall, in connection with such
Acquisition, assume or remain liable in respect of any Indebtedness of the
Permitted Acquisition Seller, or other obligation of the Permitted Acquisition
Seller (except for obligations incurred in the ordinary course of business in
operating the property so acquired and necessary and desirable to the continued
operation of such property and Indebtedness which constitutes Permitted
Indebtedness), and (2) the Acquired Assets shall be free and clear of any
and all Liens, except for Permitted Liens (and if the Acquired Assets are
subject to any Lien not 

 

18

 

permitted by this clause
(2), then concurrently with such Acquisition, such Lien shall be released);

 

(d)           the Acquired Assets shall be used in
the business or businesses described on Schedule 6.01(1);

 

(e)           such Acquisition shall be effected in
a manner such that the Acquired Assets are owned (1) if such Acquisition
is in respect of Capital Stock, either by the Parent or a wholly-owned
Subsidiary of the that is a Loan Party, and (2) if such Acquisition is in
respect of assets, by a wholly-owned Subsidiary of the Parent that is a Loan
Party;

 

(f)            such Acquisition is not hostile and
has been approved by the board of directors (or other similar body) and/or the
stockholders or other equityholders of the Permitted Acquisition Seller;

 

(g)           no Default or Event of Default shall
then exist or would exist after giving effect thereto and, without limiting the
foregoing, after giving effect to such Acquisition, the representations and
warranties of the Loan Parties contained herein and in the other Loan Documents
shall be true and correct in all material respects except such representations
and warranties that are qualified by materiality, which shall be true and
correct in all respects (it being understood and agreed that any representation
or warranty which by its terms is made as of a specified date shall be required
to be true and correct in all material respects only as of such specified date,
unless such representation or warranty is qualified by materiality, in which
case it shall be true and correct in all respects as of such specified date);
and

 

(h)           after giving effect to such
Acquisition, Availability shall be not less than $5,000,000.

 

“Permitted Acquisition Seller” means,
collectively, all Persons selling, conveying, assigning or otherwise
transferring any Acquired Assets to a Loan Party in connection with a Permitted
Acquisition.

 

“Permitted Indebtedness” means:

 

(a)           any Indebtedness owing to the
Administrative Agent and any Lender under this Agreement and the other Loan
Documents;

 

(b)           any other Indebtedness listed on
Schedule 7.02(b), and the extension of maturity, refinancing or modification of
the terms thereof; provided, however, that (i) such extension,
refinancing or modification is pursuant to terms that are not less favorable to
the Loan Parties and the Lenders than the terms of the Indebtedness being
extended, refinanced or modified and (ii) after giving effect to such
extension, refinancing or modification, the principal amount of such
Indebtedness is not greater than the principal amount of Indebtedness
outstanding immediately prior to such extension, refinancing or modification;

 

(c)           Indebtedness evidenced by Capitalized
Lease Obligations and purchase money Indebtedness secured by Liens permitted by
clause (e) of the definition of “Permitted 

 

19

 

Liens”; provided that the aggregate principal amount of all such Indebtedness
does not exceed $3,000,000 at any one time outstanding;

 

(d)           intercompany Indebtedness permitted
under Section 7.02(e);

 

(e)           Letter of Credit Obligations;

 

(f)            unsecured Subordinated Indebtedness (i) to
Permitted Acquisition Sellers, to the extent incurred in connection with
Permitted Acquisitions, not to exceed $3,000,000 at any one time outstanding,
and (ii) to any other Persons, not to exceed $3,000,000 at any one time
outstanding;

 

(g)           Indebtedness of the Parent evidenced
by Redemption Notes;

 

(h)           unsecured Indebtedness relating to
any Hedging Agreements entered into by Borrower to the extent required pursuant
to Section 5.02(n), and

 

(i)            any Indebtedness issued in exchange
for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund (collectively, together with correlative meanings,
to “Refinance”), the Indebtedness described in preceding clause (b) (or,
in each case, a previous refinancing thereof under this clause (i)); provided,
that (i) the principal amount of such Indebtedness so Refinanced.  does not exceed the principal amount of the
Indebtedness outstanding at the time of such Refinancing (plus unpaid accrued
interest and premium thereon and reasonable expenses incurred in connection
with such Refinancing), (ii) if the Indebtedness being Refinanced is
subordinated in right of payment to the Obligations, such Indebtedness shall be
subordinated in right of payment to the Obligations on terms at least as
favorable to the Administrative Agent and Lenders as those contained in the
documentation governing the Indebtedness being Refinanced at the time of such
Refinancing, (iii) no such Indebtedness shall have different obligors, or
greater guarantees or security, than the Indebtedness being Refinanced and (iv) if
the Indebtedness being Refinanced is secured by any collateral, such
Indebtedness may be secured by such (but no other) collateral on terms no less
favorable to the Administrative Agent and Lenders than those contained in the
documentation governing the Indebtedness being Refinanced at the time of such
Refinancing.

 

“Permitted Investments” means (i) marketable
direct obligations issued or unconditionally guaranteed by the United States or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case, maturing within six months from the date of
acquisition thereof; (ii) commercial paper, maturing not more than one
year after the date of issue rated P-1 by Moody’s or A-1 by Standard &
Poor’s; (iii) certificates of deposit maturing not more than one year
after the date of issue, issued by commercial banking institutions and money
market or demand deposit accounts maintained at commercial banking
institutions, each of which is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$250,000,000; (iv) repurchase agreements having maturities of not more
than ninety (90) days from the date of acquisition which are entered into with
major money center banks included in the commercial banking institutions
described in clause (iii) above and which are secured by readily
marketable direct obligations of the United States or any agency thereof; (v) money
market accounts maintained with mutual funds having assets in 

 

20

 

excess of $2,500,000,000 which has substantially
all of its assets invested in the types of investments described in clauses
(i), (ii) and (iii) above; and (vi) tax exempt securities rated
A or better by Moody’s or A+ or better by Standard & Poor’s.

 

“Permitted Liens” means:

 

(a)           Liens securing the Obligations;

 

(b)           Liens for taxes, assessments and
governmental charges the payment of which is not required under Section 7.01(b);

 

(c)           Liens imposed by law, such as
carriers’, warehousemen’s, mechanics’, materialmen’s and other similar Liens
arising in the ordinary course of business and securing obligations (other than
Indebtedness for borrowed money) that are not overdue by more than 60 days or
are being contested in good faith and by appropriate proceedings promptly
initiated and diligently conducted, and a reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made therefor;

 

(d)           Liens existing as of the Closing Date
(after giving effect to the Body Shop Acquisition and the effectiveness of the
Closing Date Joinder Agreement) and described on Schedule 7.02(a), but not the
extension of coverage thereof to other property or the extension of maturity,
refinancing or other modification of the terms thereof or the increase of the
Indebtedness secured thereby, except in connection with a refinancing thereof
permitted pursuant to clause (h) of the definition of the term “Permitted
Indebtedness”;

 

(e)           (i) purchase money Liens on
equipment acquired or held by any Loan Party or any of its Subsidiaries in the
ordinary course of its business to secure the purchase price of such equipment
or Indebtedness incurred solely for the purpose of financing the acquisition of
such equipment and permitted under clause (c) of the definition of
Permitted Indebtedness or (ii) Liens existing on such equipment at the
time of its acquisition; provided, however, that (A) no such Lien shall
extend to or cover any other property of any Loan Party or any of its
Subsidiaries, and (B) the Indebtedness secured by any such Lien is
incurred within ninety (90) days after the acquisition of such equipment;

 

(f)            deposits and pledges of cash
securing (i) obligations incurred in respect of workers’ compensation,
unemployment insurance or other forms of governmental insurance or benefits, (ii) the
performance of bids, tenders, leases, contracts (other than for the payment of
money) and statutory obligations or (iii) obligations on surety or appeal
bonds, but only to the extent such deposits or pledges are incurred or
otherwise arise in the ordinary course of business and secure obligations not
past due;

 

(g)           easements, zoning restrictions and
similar encumbrances on real property and minor irregularities in the title
thereto that do not (i) secure obligations for the payment of money or (ii) materially
impair the value of such property or its use by any Loan Party or any of its Subsidiaries
in the normal conduct of such Person’s business;

 

(h)           Liens arising out of the existence of
judgments or awards that do not constitute an Event of Default under Section 8.01(k);

 

21

 

(i)            (x) leases or subleases granted
by any Loan Party to other Persons not interfering in any material respect with
the normal conduct of the business of such or any other Loan Party or the
exercise by the Administrative Agent or any Lender of any of their respective rights
or remedies hereunder or under any of the other Loan Documents, and (y) any
interest or title of a lessor, sublessor or licensor under any lease or license
agreement permitted by this Agreement to which any Loan Party is a party;

 

(j)            Liens securing Indebtedness
evidenced by Capitalized Lease Obligations permitted by subsection (c) of
the definition of Permitted Indebtedness.

 

“Person” means an individual, corporation,
limited liability company, partnership, association, joint-stock company,
trust, unincorporated organization, joint venture or other enterprise or entity
or Governmental Authority.

 

“Pledge Agreement” means a Pledge Agreement
made by a Loan Party in favor of the Administrative Agent for the benefit of
the Administrative Agent and the Lenders, in form and substance satisfactory to
the Administrative Agent.

 

“Point of Sale Capital Expenditures” means
Capital Expenditures in respect of all hardware, software and related
capitalized costs associated with replacing, upgrading or otherwise improving
Borrowers’ retail, catalog or internet technology infrastructure.

 

“Pro Forma EBITDA” means, with respect to
any Acquired Assets acquired in a Permitted Acquisition, the amount of the
Acquired Asset’s EBITDA for the most recent trailing twelve (12) month period
ending as of the last day of the month preceding the closing of the respective
Permitted Acquisition for which financial statements are available, adjusted as
provided herein.  Such amount shall be
determined by the Parent and shall be subject to the consent of Administrative
Agent based upon and derived from financial information delivered to
Administrative Agent prior to the consummation of such Permitted
Acquisition.  In each instance, the
Acquired Asset’s historical EBITDA shall be adjusted by (x) verifiable
cost savings attributable to operating efficiencies reasonably expected to be
realized by such Acquired Assets as operated and controlled by the Parent or by
a Subsidiary of the Parent (in each case, to the extent permitted under the definition
of Permitted Acquisition) and (y) an amount which gives effect to the
prorating of any year end adjustments made to the most recent annual financial
statements of the Acquired Assets and which should have been accrued during
such year in accordance with GAAP, all of which shall be reasonably determined
by the Parent, and shall be subject to the consent of Administrative Agent (Pro
Forma EBITDA for such Acquired Assets as calculated and consented to as of such
closing being referred to as the “Initial Pro Forma EBITDA”).  After the closing of such Permitted
Acquisition and unless otherwise agreed by Administrative Agent, the Parent and
the Borrowers, Pro Forma EBITDA with respect thereto shall equal Initial Pro
Forma EBITDA multiplied by a fraction the numerator of which is 365 minus the
number of days after the closing of the Permitted Acquisition included in any
period for which financial statements have been delivered and the denominator
of which is 365.

 

For purposes of demonstration only, assuming that a
Permitted Acquisition closes on June 1, 2007 and Initial Pro Forma EBITDA
has been determined to be $1,000,000, Pro Forma EBITDA with respect to the
Acquired Assets for the measurement period ending September 30,

 

22

 

2007
(assuming financial statements for the period ending September 30, 2007
have been delivered) shall equal:

 

$1,000,000 x (365 – 122*) / 365 = $665,750.00

 

*
the number of days elapsed between June 1, 2007 and September 30,
2007).

 

“Pro
Rata Share” means, subject to the terms and provisions hereof:

 

(a)           with respect to a Lender’s obligation to make Revolving
Loans and receive payments of interest, fees, and principal with respect
thereto, the percentage obtained by dividing (i) such Lender’s Revolving
Loan Commitment, by (ii) the Total Revolving Loan Commitment, provided,
that, if the Total Revolving Loan Commitment has been reduced to zero or
terminated, the numerator shall be the aggregate unpaid principal amount of
such Lender’s Revolving Loans and its interest in the Letter of Credit
Obligations and the denominator shall be the aggregate unpaid principal amount
of all Revolving Loans and Letter of Credit Obligations,

 

(b)           with respect to a Lender’s obligation to make Term Loan A
and receive payments of interest; fees, and principal with respect thereto, the
percentage obtained by dividing (i) such Lender’s Term Loan A Commitment,
by (ii) the Total Term Loan A Commitment, provided that if Term Loan A has
been funded, the numerator shall be the aggregate unpaid principal amount of
such Lender’s portion of Term Loan A and the denominator shall be the aggregate
unpaid principal amount of Term Loan A,

 

(c)           with respect to a Lender’s obligation to make Term Loan B
and receive payments of interest, fees, and principal with respect thereto, the
percentage obtained by dividing (i) such Lender’s Term Loan B Commitment,
by (ii) the Total Term Loan B Commitment, provided that if Term Loan B has
been funded, the numerator shall be the aggregate unpaid principal amount of
such Lender’s portion of Term Loan B and the denominator shall be the aggregate
unpaid principal amount of Term Loan B, and

 

(d)           with respect to all other matters (including, without
limitation, indemnification obligations arising under Section 9.05), the
percentage obtained by dividing (i) the sum of such Lender’s Revolving
Loan Commitment and the unpaid principal amount of such Lender’s portion of the
Term Loans, by (ii) the sum of the Total Revolving Loan Commitment and the
aggregate unpaid principal amount of the Term Loans, provided, that if
(i) such Lender’s Revolving Loan Commitment shall have been reduced to
zero or terminated, such Lender’s Revolving Loan Commitment shall be deemed to
be the aggregate unpaid principal amount of such Lender’s Revolving Loans and
its interest in the Letter of Credit Obligations, and (ii) the Total
Revolving Loan Commitment shall have been reduced to zero, the Total Revolving
Loan Commitment shall be deemed to be the aggregate unpaid principal amount of
all Revolving Loans and Letter of Credit Obligations.

 

“Property”
means any right or interest in or to property of any kind whatsoever, whether
real, personal or mixed and whether tangible or intangible.

 

“Rating
Agencies” has the meaning specified therefor in Section 2.07.

 

23

 

“Redemption
Notes” means promissory notes issued by the Parent to employees or officers
of any Loan Party, or the spouses, former spouses or estates of any such
Persons, in each case who, from time to time, are holders of Capital Stock of
the Parent to fund all or a portion of the purchase price paid in connection
with the repurchase by Holdings of its Capital Stock from such Persons; provided,
that (a) the aggregate outstanding principal amount of all such promissory
notes does not exceed $5,000,000 at any time and (b) each such promissory
note shall be subordinated in writing at all times in right to, and time of,
payment to the prior payment in full of the Obligations pursuant to subordination
and other terms and conditions satisfactory to the Administrative Agent in its
discretion; and provided, further, that each such repurchase is
occasioned by the death, permanent disability or termination of employment or
term of office, as the case may be, of such employee or officer from or in
respect of whom such Capital Stock are repurchased.

 

“Register”
has the meaning specified therefor in Section 11.06(d).

 

“Registered
Loan” has the meaning specified therefore in Section 11.06(d).

 

“Regulation
T”, “Regulation U” and “Regulation X” mean, respectively,
Regulations T, U and X of the Board or any successor, as the same may be
amended or supplemented from time to time.

 

“Reimbursement
Obligations” means the obligation of the Borrowers to reimburse the Administrative
Agent or any Lender for amounts payable by the Administrative Agent or any
Lender in respect of any drawing made under any Letter of Credit, together with
interest thereon as provided in Section 2.04.

 

“Related
Transactions” means that the transactions contemplated by the Related
Transactions Documents and includes, without limitation, the Body Shop
Acquisition.

 

“Related
Transaction Documents” means the Body Shop Acquisition Documents, and the
Equity Documents.

 

“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, seeping, migrating, dumping or disposing of any
Hazardous Material (including the abandonment or discarding of barrels,
containers and other closed receptacles containing any Hazardous Material) into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through or in the ambient air, soil, surface or ground
water, or property.

 

“Remedial
Action” means all actions taken to (i) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate or in any other way address Hazardous
Materials in the indoor or outdoor environment; (ii) prevent or minimize a
Release or threatened Release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (iii) perform pre-remedial studies and investigations
and post-remedial operation and maintenance activities; or (iv) perform
any other actions authorized by 42 U.S.C. § 9601.

 

24

 

“Reportable
Event” means an event described in Section 4043 of ERISA (other than
an event for which the requirement of 30-day notice to the PBGC has been waived
under the regulations promulgated under such Section).

 

“Required
Lenders” means (i) if there is only one Lender, such Lender, and
(ii) if there is more than one Lender, at least two (2) or more
unaffiliated Lenders (other than Defaulting Lenders) having (a) fifty-one
percent (51%) or more of the sum of the Total Revolving Loan Commitment of
Lenders that are not Defaulting Lenders and the outstanding principal balance
of Term Loans of all Lenders that are not Defaulting Lenders or (b) if the
Total Revolving Loan Commitment has been reduced to zero or terminated.,
fifty-one percent (51%) or more of the aggregate outstanding principal balance
of the Loans and Letter of Credit Obligations of all Lenders that are not
Defaulting Lenders.

 

“Required
Revolving Lenders” means (i) if there is only one Revolving Lender,
such Revolving Lender, and (ii) if there is more than one Revolving
Lender, at least two (2) or more unaffiliated Revolving Loan Lenders
(other than Defaulting Lenders) having (a) fifty-one percent (51%) or more
of the sum of the Total Revolving Loan Commitment of Revolving Loan Lenders
that are not Defaulting Lenders or (b) if the Total Revolving Loan
Commitment has been reduced to zero or terminated, fifty-one percent (51%) or
more of the aggregate outstanding principal balance of the Revolving Loans and
Letter of Credit Obligations of all Revolving Loan Lenders that are not
Defaulting Lenders.

 

“Response
Action” means any required or voluntary actions taken to (a) clean up,
remove, remediate, correct, contain, manage, treat or otherwise address
Hazardous Materials in the environment or (b) investigate, assess,
evaluate, or monitor Hazardous Materials in the environment (including without
limitation pre-remedial studies and investigations).

 

“Restricted
Payment” means (i) any dividend or other distribution, direct or
indirect, on account of any Capital Stock of any Loan Party or any of its
Subsidiaries, now or hereafter outstanding, (ii) any repurchase,
redemption, retirement, defeasance, sinking fund or similar payment, purchase
or other acquisition for value, direct or indirect, of any Capital Stock of any
Loan Party or, except as otherwise expressly permitted pursuant to the terms
and provisions of this Agreement, any direct or indirect parent of any Loan
Party, now or hereafter outstanding, (iii) any payment to retire or to
purchase, or to obtain the surrender of, any Redemption Note, outstanding
warrants, options or other rights for the purchase or acquisition of shares of
any class of Capital Stock of any Loan Party, now or hereafter outstanding,
(iv) any payment or prepayment of interest on, principal of, premium, if
any, fees, redemption, conversion, exchange, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, any Subordinated Indebtedness;
or (v) payment of any management fees or any other fees or expenses
(including the reimbursement thereof by any Loan Party or any of its
Subsidiaries) pursuant to any management, consulting or other services
agreement to any of the shareholders or other equityholders of any Loan Party
or any of its Subsidiaries or other Affiliates, or to any other Subsidiary or
Affiliate of any Loan Party.

 

“Revolving
Loan” means a loan made by a Lender to any Borrower pursuant to
Section 2.01(a)(i).

 

25

 

“Revolving
Loan Commitment” means, with respect to each Lender, the commitment of such
Lender to make Revolving Loans to the Borrowers in the amount set forth
opposite such Lender’s name in Schedule 1.01(A) hereto, as such amount may
be terminated or reduced from time to time in accordance with the terms of this
Agreement.

 

“Revolving
Loan Commitment Termination Date” means the earlier of October 1, 2012
and the termination in accordance with the terms of this Agreement of the Total
Revolving Loan Commitment.

 

“Revolving
Loan Lender” means a Lender with a Revolving Loan Commitment.

 

“SEC”
means the Securities and Exchange Commission or any other similar or successor
agency of the Federal government administering the Securities Act.

 

“Securities
Act” means the Securities Act of 1933, as amended, or any similar Federal
statute, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect from time to time.

 

“Securitization”
has the meaning specified therefor in Section 2.07.

 

“Security
Agreement” means a Security Agreement made by a Loan Party in favor of the
Administrative Agent for the benefit of the Administrative Agent and the
Lenders, in form and substance satisfactory to the Administrative Agent.

 

“Seller”
means any of Jerrold Rosenbaum, as Trustee of Ronnie Rosenbaum Family Trust 1,
Jerrold Rosenbaum, as Trustee of Marital Trust 1 for Jerrold Rosenbaum, Jerrold
Rosenbaum as Trustee of Marital Trust 2 for Jerrold Rosenbaum, Jerrold Rosenbaum,
Beth R. Angelo, Laurie I. Bauguss and Curtis Hill.

 

“Seller
Representative” means Jerrold Rosenbaum, as Seller Representative, under
the Body Shop Acquisition Agreement.

 

“Senior
Leverage Ratio” is defined in the Compliance Certificate.

 

“Settlement
Period” has the meaning specified therefor in
Section 9.10(a) hereof.

 

“Solvent”
means, with respect to any Person on a particular date, that on such date
(i) the fair value of the property of such Person is not less than the
total amount of the liabilities of such Person, (ii) the present fair
salable value of the assets of such Person is not less than the amount that
will be required to pay the probable liability of such Person on its existing
debts as they become absolute and matured, (iii) such Person is able to
realize upon its assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (iv) such Person does not intend to, and does not believe that
it will, incur debts or liabilities beyond such Person’s ability to pay as such
debts and liabilities mature, and (v) 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.

 

“Sponsor”
means Westview Capital Partners, L.P.

 

26

 

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

 

“Subordinated
Indebtedness” means Indebtedness of any Loan Party the terms of which are
satisfactory to the Administrative Agent and which has been expressly
subordinated, including in right of payment, to all Obligations of such Loan
Party under the Loan Documents, in a manner satisfactory to the Administrative
Agent.

 

“Subsidiary”
means, with respect to any Person at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity (i) the accounts of which would be
consolidated with those of such Person in such Person’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP
or (ii) of which more than 50% of (A) the outstanding Capital Stock
having (in the absence of contingencies) ordinary voting power to elect a
majority of the board of directors or other managing body of such Person,
(B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (C) in the case of a trust, estate, association, joint venture
or other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such Person.

 

“Syndication
Agent” has the meaning specified therefor in the preamble hereto.

 

“Term
Loan A” means, collectively, the loans made by the Term Loan A Lenders to
the Borrowers on the Closing Date pursuant to Section 2.01(a)(ii).

 

“Term
Loan A Commitment” means, with respect to each Lender, the commitment of
such Lender to make Term Loan A to the Borrowers in the amount set forth in
Schedule 1.01(A) hereto, as the same may be terminated in accordance with
the terms of this Agreement.

 

“Term
Loan A Lender” means a Lender with a Term Loan A Commitment.

 

“Term
Loan B” means, collectively, the loans made by the Term Loan B Lenders to
the Borrowers on the Closing Date pursuant to Section 2.01(a)(iii).

 

“Term
Loan B Commitment” means, with respect to each Lender, the commitment of
such Lender to make Term Loan B to the Borrowers in the amount set forth in
Schedule 1.01(A) hereto, as the same may be terminated in accordance with
the terms of this Agreement.

 

“Term
Loan B Lender” means a Lender with a Term Loan B Commitment.

 

“Term
Loans” means, together, Term Loan A and Term Loan B.

 

“Termination
Event” means (i) a Reportable Event with respect to any Employee Plan,
(ii) any event that causes any Loan Party or any of its ERISA Affiliates
to incur liability under Section 409, 502(i), 502(1), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
Internal Revenue Code, (iii) the filing of a notice of intent to terminate
an Employee Plan or the treatment of an Employee Plan amendment as a
termination

 

27

 

under
Section 4041 of ERISA, (iv) the institution of proceedings by the
PBGC to terminate an Employee Plan, or (v) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Employee
Plan.

 

“Title
Insurance Policy” means a mortgagee’s loan policy, in form and substance
satisfactory to the Administrative Agent, together with all endorsements made
from time to time thereto, issued by or on behalf of a title insurance company
satisfactory to the Administrative Agent, insuring the Lien created by a
Mortgage in an amount and on terms satisfactory to the Administrative Agent,
delivered to the Administrative Agent.

 

“Total
Commitment” means the sum of the Total Revolving Loan Commitment and the
Total Term Loan Commitment.

 

“Total
Revolving Loan Commitment” means the sum of the amounts of the Lenders’
Revolving Loan Commitments.

 

“Total
Term Loan A Commitment” means the sum of the amounts of the Lenders’ Term
Loan A Commitments.

 

“Total
Term Loan B Commitment” means the sum of the amounts of the Lenders’ Term
Loan B Commitments.

 

“Total
Term Loan Commitments” means the Total Term Loan A Commitments and Total
Term Loan B Commitments.

 

“UCC
Filing Authorization Letter” means a letter duly executed by each Loan
Party authorizing the Administrative Agent to file appropriate financing
statements on Form UCC-1 without the signature of such Loan Party in such
office or offices as may be necessary or, in the opinion of the Administrative
Agent, desirable to perfect the security interests purported to be created by
each Security Agreement, each Pledge Agreement, each Mortgage and any other
relevant Loan Document.

 

“Uniform
Commercial Code” has the meaning specified therefor in Section 1.03.

 

“Unused
Line Fee” has the meaning specified therefor in Section 2.06(b).

 

“WARN”
has the meaning specified therefor in Section 6.01(w).

 

Section 1.02.  Terms Generally.  The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter foe’s.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  The word “will” shall be construed to have
the same meaning and effect as the word “shall”.  Unless the context requires otherwise,
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth

 

28

 

herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns,
(c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not
to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the
words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.  References in this Agreement to “determination”
by Administrative Agent include good faith estimates by Administrative Agent
(in the case of quantitative determinations) and good faith beliefs by
Administrative Agent (in the case of qualitative determinations).

 

Section 1.03.  Accounting and Other Terms.  Unless otherwise expressly provided herein,
each accounting term used herein shall have the meaning given it under GAAP
applied on a basis consistent with those used in preparing the Financial
Statements.  All terms used in this
Agreement which are defined in Article 8 or Article 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York (the “Uniform
Commercial Code”) and which are not otherwise defined herein shall have the
same meanings herein as set forth therein, provided that terms used herein
which are defined in the Uniform Commercial Code on the date hereof shall
continue to have the same meaning notwithstanding any replacement or amendment
of such statute except as Administrative Agent may otherwise determine.

 

Section 1.04.  Time References.  Unless otherwise indicated herein, all
references to time of day refer to Eastern Standard Time or Eastern daylight
saving time, as in effect in New York City on such day.  For purposes of the computation of a period
of time from a specified date to a later specified date, the word “from” means “from
and including” and the words “to” and “until” each means “to but excluding”; provided, however,
that with respect to a computation of fees or interest payable to
Administrative Agent, any Lender or the L/C Issuer, such period shall in any
event consist of at least one full day.

 

ARTICLE 2.

THE LOANS

 

Section 2.01.  Commitments.  Subject to the terms and conditions and
relying upon the representations and warranties herein set forth:

 

(i)            each Revolving Loan Lender severally agrees to make
Revolving Loans to the Borrowers at any time and from time to time from the
Closing Date to the day immediately preceding the Revolving Loan Commitment
Termination Date, in an aggregate principal amount of Revolving Loans at any
time outstanding not to exceed the amount of such Lender’s Revolving Loan
Commitment;

 

(ii)           each Term Loan A Lender severally agrees to make Term Loan
A to the Borrowers on the Closing Date, in an aggregate principal amount not to
exceed the amount of such Lender’s Term Loan A Commitment; and

 

29

 

(iii)          each Term Loan B Lender severally agrees to make Term Loan
B to the Borrowers on the Closing Date, in an aggregate principal amount not to
exceed the amount of such Lender’s Term Loan B Commitment.

 

(b)           Notwithstanding the foregoing:

 

(i)            The aggregate principal amount of Revolving Loans
outstanding at any time to the Borrowers shall not exceed the lower at such
time of (A) the amount by which (x) the Total Revolving Loan
Commitment exceeds (y) the aggregate Letter of Credit Obligations and
(B) the amount by which (x) the then current Borrowing Base exceeds
(y) the aggregate Letter of Credit Obligations.  The Revolving Loan Commitment of each Lender
shall automatically and permanently be reduced to zero on the Revolving Loan
Commitment Termination Date.  Within the
foregoing limits and subject to the terms, provisions and limitations set forth
herein, the Borrowers may borrow, repay and reborrow Revolving Loans, on or
after the Closing Date and up to but excluding the Revolving Loan Commitment
Termination Date.

 

(ii)           The aggregate principal amount of Term Loan A made on the
Closing Date shall not exceed the Total Term Loan A Commitment.  Any principal amount of Term Loan A which is
repaid or prepaid may not be reborrowed.

 

(iii)          The aggregate principal amount of Term Loan B made on the
Closing Date shall not exceed the Total Term Loan B Commitment.  Any principal amount of Term Loan B which is
repaid or prepaid may not be reborrowed.

 

Section 2.02.  Making the Loans.  (a) Except for the Loans made on the
Closing Date, the Administrative Borrower shall give the Administrative Agent
prior telephonic notice (promptly confirmed in writing, in substantially the
form of Exhibit F hereto (a “Notice of Borrowing”)), (i) not
later than 1:00 p.m. (New York City time) on the date which is one
(1) Business Day prior to the date of borrowing of a Base Rate Loan and
(ii) not later than 1:00 p.m. (New York City time) on the date which
is three (3) Business Days prior to the date of borrowing of a LIBOR
Loan.  Such Notice of Borrowing shall be
irrevocable and shall specify (a) the principal amount of the proposed
Loan, (b) in the case of Loans requested on the Closing Date, whether such
Loan is requested to be a Revolving Loan or a Term Loan, (c) the proposed
borrowing date, which must be a Business Day, and, with respect to a Term Loan,
must be the Closing Date and (d) whether the proposed Loan shall be a Base
Rate Loan or a LIBOR Loan, or a combination thereof, and if a LIBOR Loan, the
Interest Period therefor, provided such LIBOR Loan shall be in a minimum
principal amount of $1,000,000 or a whole multiple of $100,000 in excess
thereof.  The Administrative Agent and
the Lenders may act without liability upon the basis of written, telecopied or
telephonic notice believed by the Administrative Agent in good faith to be from
the Administrative Borrower (or from any Authorized Officer thereof).  The Administrative Agent’s record of the
terms of any telephonic Notice of Borrowing shall be prima facie evidence of
such terms.  The Administrative Agent and
each Lender shall be entitled to rely conclusively on any Authorized Officer’s
authority to request a Loan on behalf of the Borrowers until the Administrative
Agent receives written notice to the contrary. 
The Administrative Agent and the Lenders shall have no duty to verify
the authenticity of the signature appearing on any written Notice of Borrowing.

 

30

 

(b)                                 Subject to Section 4.06, each Notice of Borrowing pursuant to this Section 2.02
shall be irrevocable and the Borrowers shall be bound to make a borrowing in
accordance therewith.  Each Revolving
Loan shall be made in a minimum amount of $100,000 and shall be in an integral
multiple of $10,000.

 

(c)                                  (i)            No Lender shall be
responsible for any default by any other Lender in that other Lender’s
obligations to make a Loan requested hereunder, nor shall the Commitment of any
Lender be increased or decreased as a result of the default by any other Lender
in that other Lender’s obligation to make a Loan requested hereunder, and each
Lender shall be obligated to make the Loans required to be made by it by the
terms of this Agreement regardless of the failure by any other Lender.

 

(ii)           Notwithstanding any other provision
of this Agreement, and in_ order to reduce the number of fund transfers among
the Borrowers, the Administrative Agent and the Lenders, the Borrowers, the
Administrative Agent and the Lenders agree that the Administrative Agent may
(but shall not be obligated to), and the Borrowers and the Lenders hereby
irrevocably authorize the Administrative Agent to, fund, on behalf of the
Revolving Loan Lenders, Revolving Loans pursuant to Section 2.01, subject
to the procedures for settlement set forth in Section 9.10(a); provided, however,
that (a) the Administrative shall in no event fund any such Revolving
Loans if the Administrative Agent shall have received written notice from the
Required Lenders on the Business Day prior to the date of the proposed
Revolving Loan that one or more of the conditions precedent contained in Section 5.03
will not be satisfied at the time of the proposed Revolving Loan, and (b) the
Administrative Agent shall not otherwise be required to determine that, or take
notice whether, the conditions precedent in Section 5.03 have been
satisfied.  If the Administrative
Borrower gives a Notice of Borrowing requesting a Revolving Loan and the
Administrative Agent elects not to fund such Revolving Loan on behalf of the
Revolving Loan Lenders, then promptly after receipt of the Notice of Borrowing
requesting such Revolving Loan, the Administrative Agent shall notify each
Revolving Loan Lender of the specifics of the requested Revolving Loan and that
it will not fund the requested Revolving Loan on behalf of the Revolving Loan
Lenders.  If the Administrative Agent
notifies the Revolving Loan Lenders that it will not fund a requested Revolving
Loan on behalf of the Revolving Loan Lenders, each Revolving Loan Lender shall
make its Pro Rata Share of the Revolving Loan available to the Administrative
Agent, in immediately available funds, in the Administrative Agent’s Account no
later than 3:00 p.m. (New York City time) (provided that the Administrative
Agent requests payment from such Revolving Loan Lender not later than 1:00 p.m.
(New York City time)) on the date of the proposed Revolving Loan.  The Administrative Agent will make the
proceeds of such Revolving Loans available to the Borrowers on the day of the
proposed Revolving Loan by causing an amount, in immediately available funds,
equal to the proceeds of all such Revolving Loans received by the
Administrative Agent in the Administrative Agent’s Account or the amount funded
by the Administrative Agent on behalf of the Revolving Loan Lenders to be
deposited in an account designated by the Administrative Borrower.

 

(iii)          If the Administrative Agent has
notified the Revolving Loan Lenders that the Administrative Agent, on behalf of
the Revolving Loan Lenders, will not 

 

31

 

fund
a particular Revolving Loan pursuant to Section 2.02(c)(ii), the
Administrative Agent may assume that each such Revolving Loan Lender has made
such amount available to the Administrative Agent on such day and the
Administrative Agent, in its sole discretion, may, but shall not be obligated
to, cause a corresponding amount to be made available to the Borrowers on such
day.  If the Administrative Agent makes
such corresponding amount available to the Borrowers and such corresponding
amount is not in fact made available to the Administrative Agent by any such
Revolving Loan Lender, the Administrative Agent shall be entitled to recover
such corresponding amount on demand from such Revolving Loan Lender together
with interest thereon, for each .day from the date such payment was due until
the date such amount is paid to the Administrative Agent, at the Federal Funds
Rate for three (3) Business Days and thereafter at the Base Rate.  During the period in which such Revolving Loan
Lender has not paid such corresponding amount to the Administrative Agent,
notwithstanding anything to the contrary contained in this Agreement or any
other Loan Document, the amount so advanced by the Administrative Agent to the
Borrowers shall, for all purposes hereof, be a Revolving Loan made by the
Administrative Agent for its own account. 
Upon any such failure by a Revolving Loan Lender to pay the
Administrative Agent, the Administrative Agent shall promptly thereafter notify
the Administrative Borrower of such failure and the Borrowers shall immediately
pay such corresponding amount to the Administrative Agent for its own account.

 

(iv)          Nothing in this subsection 2.02(c) shall
be deemed to relieve any Revolving Loan Lender from its obligations to fulfill
its Revolving Loan Commitment hereunder or to prejudice any rights that the
Administrative Agent or the Borrowers may have against any Revolving Loan
Lender as a result of any default by such Revolving Loan Lender hereunder.

 

Section 2.03.  Repayment of Loans; Evidence of Debt.  (a) The outstanding principal of all
Revolving Loans shall be due and payable on the Revolving Loan Commitment
Termination Date.

 

(b)                                 The outstanding principal of the Term Loans shall be repaid through
periodic principal amortization payments on the dates and in the amounts
indicated below:

 

	
  Date

  	
   

  	
  Term Loan A Amount

  	
   

  
	
  December 31, 2006

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  500,000

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  1,250,000

  	
   

  

 

32

 

	
  Date

  	
   

  	
  Term Loan A Amount

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  September 30, 2010

  	
   

  	
  $

  	
  1,250,000

  	
   

  
	
  December 31, 2010

  	
   

  	
  $

  	
  1,500,000

  	
   

  
	
  March 31, 2011

  	
   

  	
  $

  	
  1,500,000

  	
   

  
	
  June 30, 2011

  	
   

  	
  $

  	
  1,500,000

  	
   

  
	
  September 30, 2011

  	
   

  	
  $

  	
  1,500,000

  	
   

  
	
  December 31, 2011

  	
   

  	
  $

  	
  1,875,000

  	
   

  
	
  March 31, 2012

  	
   

  	
  $

  	
  1,875,000

  	
   

  
	
  June 30, 2012

  	
   

  	
  $

  	
  1,875,000

  	
   

  
	
  September 30, 2012

  	
   

  	
  $

  	
  1,875,000

  	
   

  

 

The outstanding principal of Term Loan B shall be
due and payable on October 1, 2013.

 

(c)                                  The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrowers to each Lender hereunder and (iii) the amount of any sum
received by the Administrative Agent hereunder for the account of the Lenders
and each Lender’s share thereof.

 

(d)                                 The entries made in the accounts maintained pursuant to paragraph (c) of
this Section shall be prima  facie evidence of the existence
and amounts of the obligations recorded therein; provided that the
failure of any Lender or the Administrative Agent to maintain such accounts or
any error therein shall not in any manner affect the obligation of the
Borrowers to repay the Loans in accordance with the terms of this Agreement.

 

(e)                                  Any Lender may request that Loans made by it be evidenced by a
promissory note.  In such event, the
Borrowers shall execute and deliver to such Lender a promissory note payable to
the order of such Lender (or, if requested by such Lender, to such Lender and
its registered assigns) in a form furnished by the Administrative Agent and
reasonably acceptable to the Administrative Borrower.  Thereafter, the Loans evidenced by such
promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 11.06) be represented by one or more
promissory notes in such form payable to the order of the payee named therein.

 

Section 2.04.  Interest.  (a) Revolving Loans.  Subject to the provisions of Section 2.04(c),
Revolving Loans shall bear interest as follows:

 

(i)            Base Rate Loans.  During such periods as Revolving Loans shall
be comprised of Base Rate Loans, each such Base Rate Loan shall bear interest
at a per annum rate equal .to the sum of the Base Rate plus the
Applicable Margin with respect thereto; and

 

33

 

(ii)           LIBOR Loans.  During such periods as Revolving Loans shall
be comprised of LIBOR Loans, each such LIBOR Loan shall bear interest at a per
annum rate equal to the sum of the LIBOR plus the Applicable Margin with
respect thereto.

 

(b)                                 Term Loans.  Subject to the provisions of Section 2.04(c),
each Term Loan shall bear interest as follows:

 

(i)            Base Rate Loans.  During such periods as such Term Loan shall
be comprised of Base Rate Loans, each such Base Rate Loan shall bear interest
at a per annum rate equal to the sum of the Base Rate plus the
Applicable Margin with respect thereto; and

 

(ii)           LIBOR Loans.  During such periods as such Term Loan shall
be comprised of LIBOR Loans, each such LIBOR Loan shall bear interest at a per
annum rate equal to the sum of the LIBOR plus the Applicable Margin with
respect thereto.

 

(c)                                  Default Interest.  To the extent permitted by law, at the
written request of Administrative Agent or Required Lenders, at any time during
the continuance of an Event of Default, the principal of, all accrued and
unpaid interest on, all Loans, fees, outstanding Reimbursement Obligations or
any other Obligations of the Loan Parties under this Agreement and the other
Loan Documents, shall bear interest, from the date of such request until the
date such Event of Default is cured or waived in writing in accordance
herewith, at a rate per annum equal to the Default Rate.

 

(d)                                 Interest Payment.  Interest on each Loan shall be payable, in
arrears, on each Interest Payment Date. 
Interest at the Default Rate shall be payable on demand of
Administrative Agent or Required Lenders.

 

(e)                                  Computations.  All interest shall be computed on the basis
of a year of 360 days for the actual number of days, including the first day
but excluding the last day, elapsed.

 

(f)                                    LIBOR Conversion and Continuation Options.

 

(i)            The Administrative Borrower may elect
from time to time to convert Base Rate Loans to LIBOR Loans, by giving the
Administrative Agent at least three (3) Business Days’ prior irrevocable
written notice of such election in the form of Exhibit G hereto (a “Notice
of Conversion/Continuation”).  If the
date upon which a Base Rate Loan is to be converted to a LIBOR Loan is not a
Business Day, then such conversion shall be made on the next succeeding
Business Day.  All or any part of
outstanding Base Rate Loans may be converted as provided herein, provided
that (x) at the request of the Administrative Agent or Required Lenders,
no Loan may be converted into a LIBOR Loan when any Default or Event of Default
has occurred and is continuing and (y) conversions to LIBOR Loans shall be
in an aggregate principal amount of $1,000,000 or a whole multiple of $100,000
in excess thereof.

 

(ii)           Any LIBOR Loans may be continued as
such upon the expiration of an Interest Period with respect thereto by
compliance by the Borrowers with the notice provisions contained in Section 2.04(f)(i);
provided, that at the request of the 

 

34

 

Administrative
Agent or Required Lenders, no LIBOR Loan may be continued as such when any
Default or Event of Default has occurred and is continuing, in which case such
Loan shall be automatically converted to a Base Rate Loan at the end of the
applicable Interest Period with respect thereto.  If the continuation of LIBOR Loans is not
permitted hereunder, such LIBOR Loans shall be automatically converted to Base
Rate Loans at the end of the applicable Interest Period with respect
thereto.  If the Administrative Borrower
shall fail to give timely notice of an election to continue a LIBOR Loan, such
LIBOR Loan shall be automatically converted to a LIBOR Loan with an Interest
Period of thirty (30) days at the end of the applicable Interest Period with
respect thereto.

 

Section 2.05.  Reduction of Commitment; Prepayment of
Loans.

 

(a)                                  Reduction of Commitments.

 

(i)            Revolving Loan Commitments.  The Total Revolving Loan Commitment shall
terminate on the Revolving Loan Commitment Termination Date.  The Borrowers may, without premium or
penalty, reduce the Total Revolving Loan Commitment to an amount not less than
the sum of (A) the aggregate unpaid principal amount of all Revolving
Loans then outstanding, (B) the aggregate principal amount of all
Revolving Loans not yet made as to which a Notice of Borrowing has been given
by the Administrative Borrower under Section 2.02, (C) the Letter of
Credit Obligations at such time, and (D) the stated amount of all Letters
of Credit not yet issued as to which a request has been made and not
withdrawn.  Each such reduction shall be
in an amount which is an integral multiple of $1,000,000 (unless the Total
Revolving Loan Commitment in effect immediately prior to such reduction is less
than $1,000,000), shall be made by providing not less than three (3) Business
Days’ prior written notice to the Administrative Agent and shall be
irrevocable.  Once reduced, the Total Revolving
Loan Commitment may not be increased. 
Each such reduction of the Total Revolving Loan Commitment shall reduce
the Revolving Loan Commitment of each Lender proportionately in accordance with
its Pro Rata Share thereof.

 

(ii)           Term Loans.  The Total Term Loan Commitment shall
terminate at 5:00 p.m. (New York City time) on the Closing Date.

 

(b)                                 Optional Prepayment.

 

(i)            Revolving Loans.  The Borrowers may prepay without penalty or
premium (but subject to LIBOR Breakage Fees pursuant to Section 2.06(c))
the principal of any Revolving Loan, in whole or in part.

 

(ii)           Term Loans.  The Borrowers may prepay without penalty or
premium (but subject to LIBOR Breakage Fees pursuant to Section 2.06(c))
the principal of the Term Loans, in whole or in part.  Each prepayment made pursuant to this clause
(b)(ii) shall be accompanied by the payment of accrued interest to the
date of such payment on the amount prepaid. 
Each such prepayment shall be applied to the Term Loans pro rata based
on the respective principal amounts thereof and, as to each Term Loan, against
the remaining principal amortization payments of such Term Loan pro rata 

 

35

 

based
on the respective amounts thereof; provided,
however, in the event Senior Leverage Ratio
as of the last day of the most recent fiscal quarter for which financial
statements have been delivered is less than 2.25 to 1.00, all or any portion of
such prepayment may, at Administrative Borrower’s option exercised by notice in
writing to Administrative Agent of the time of such prepayment, be applied
first to Term Loan B.

 

(iii)          General.  Each partial prepayment of (x) that
portion of a Term Loan that consists of Base Rate Loans shall be in a minimum
principal amount of $100,000 and integral multiples of $50,000 in excess
thereof, (y) that portion of a Term Loan that consists of LIBOR Loans
shall be in a minimum principal amount of $100,000 and integral multiples of
$50,000 in excess thereof.  The Borrowers
shall give three (3) Business Days’ irrevocable notice in the case of a
prepayment of LIBOR Loans and one (1) Business Day irrevocable notice in
the case of a prepayment of Base Rate Loans, to the Administrative Agent (which
shall notify the Lenders thereof as soon as practicable).

 

(c)                                  Mandatory Prepayment.

 

(i)            Overadvance.  The Borrowers will immediately prepay the
Revolving Loans at any time when the aggregate principal amount of all
Revolving Loans plus the outstanding amount of all Letter of Credit Obligations
exceeds the Borrowing Base, to the full extent of any such excess.  If at any time after the Borrowers have
complied with the first sentence of this Section 2.05(c)(i), the aggregate
Letter of Credit Obligations is greater than the then current Borrowing Base,
the Borrowers shall provide cash collateral to the Administrative Agent in an
amount equal to 105% of such excess, which cash collateral shall be deposited
in the Letter of Credit Collateral Account and, provided that no Default or
Event of Default shall have occurred and be continuing, returned to the
Borrowers, at such time as the aggregate Letter of Credit Obligations plus the
aggregate principal amount of all outstanding Revolving Loans no longer exceeds
the then current Borrowing Base.

 

(ii)           Excess Cash Flow.  Within thirty (30) days after the earlier of
delivery to the Administrative Agent and the Lenders of audited annual
financial statements pursuant to Section 7.01(a)(i) or the date on
which such financial statements are required to be delivered, commencing with the
delivery to the Administrative Agent and the Lenders of the financial
statements for the Fiscal Year ended December 31, 2007, the Borrowers
shall prepay the outstanding principal amount of the Loans in accordance with Section 2.05(d) in
an amount equal to (A) 75% of the Excess Cash Flow of the Parent and its
Subsidiaries for such Fiscal Year if Senior Leverage Ratio as of the last day
of such Fiscal Year is equal to or greater than 2.25 to 1.00 and (B) 50%
of the Excess Cash Flow of the Parent and its Subsidiaries for such Fiscal Year
if Senior Leverage Ratio as of the last day of such Fiscal Year is less than
2.25 to 1.00.

 

(iii)          Dispositions.  Immediately upon any Disposition by any Loan
Party or its Subsidiaries pursuant to Section 7.02(c)(ii)(B) and (C),
the Borrowers shall prepay the outstanding principal amount of the Loans in an
amount equal to 100% of the Net Cash Proceeds received by such Person in
connection with such Disposition to the extent that the aggregate amount of Net
Cash Proceeds received by all Loan Parties and 

 

36

 

their
Subsidiaries (and not paid to the Administrative Agent as a prepayment of the
Term Loans) shall exceed for all such Dispositions in the Fiscal Year in which
such Disposition is consummated $500,000. 
Nothing contained in this subsection (iii) shall permit any Loan Party
or any of its Subsidiaries to make a Disposition of any property other than in
accordance with Section 7.02(c)(ii). 
Notwithstanding the foregoing and provided no Event of Default has
occurred and is continuing, such Net Cash Proceeds shall not be required to be
so applied to the extent (A) the Borrowers deliver to the Administrative
Agent within thirty (30) days following such Disposition a certificate stating
that it intends to use such Net Cash Proceeds to acquire fixed or capital
assets used in the Loan Parties’ business within one hundred eighty (180) days
of the receipt of such Net Cash Proceeds and (B) Borrowers in fact
reinvests such Net Cash Proceeds within such one hundred eighty (180) day
period.  Pending such reinvestment, the
Net Cash Proceeds shall be applied as a prepayment of Revolving Loans but not
as a permanent reduction in the Total Revolving Loan Commitment.  Any Net Cash Proceeds not so reinvested shall
be applied to permanently prepay the Loans in accordance with Section 2.05(d).

 

(iv)          Equity or Debt Issuances.  Upon the issuance or incurrence by any Loan
Party or any of its Subsidiaries of any Indebtedness (other than Permitted
Indebtedness), or the sale or issuance by any Loan Party or any of its
Subsidiaries of any shares of its Capital Stock (other than the issuance by the
Parent of Capital Stock to management or other employees of the Loan Parties),
the Borrowers shall prepay the outstanding principal amount of the Loans in
accordance with Section 2.05(d) in an amount equal to 100% of the Net Cash
Proceeds received by such Person in connection therewith.  The provisions of this subsection (iv) shall
not be deemed to be implied consent to any such issuance, incurrence or sale
otherwise prohibited by the terms and conditions of this Agreement.

 

(v)           Extraordinary Receipts.  Upon the receipt by any Loan Party or any of
its Subsidiaries of any Extraordinary Receipts, the Borrowers shall prepay the
outstanding principal amount of the Loans in an amount equal to 100% of such
Extraordinary Receipts, net of any reasonable expenses incurred in collecting
such Extraordinary Receipts, to the extent that the aggregate amount of such
Extraordinary Receipts received by all Loan Parties and their Subsidiaries (and
not paid to the Administrative Agent as a prepayment of the Term Loans) shall
exceed, for all such Extraordinary Receipts in the Fiscal Year in which such
Extraordinary Receipts are received, $500,000. 
Notwithstanding the foregoing and provided no Event of Default has
occurred and is continuing, Extraordinary Receipts consisting of proceeds of
casualty insurance and/or condemnation awards shall not be required to be so
applied to the extent (A) the Borrowers deliver to the Administrative
Agent promptly following the casualty or condemnation a certificate stating
that it intends to use such Extraordinary Receipts to repair or replace the
assets so destroyed or condemned within one hundred eighty (180) days of
receipt of such Extraordinary Receipts and (B) Borrowers in fact reinvest
such Extraordinary Receipts within such one hundred eighty (180) day
period.  Pending such reinvestment, the
Net Cash Proceeds shall be applied as a prepayment of Revolving Loans but not
as a permanent reduction in the Total Revolving Loan Commitment.  Any Extraordinary Receipts not so reinvested
shall be applied to permanently prepay the Loans in accordance with Section 2.05(d).

 

37

 

(d)           Application of Payments.  Each prepayment pursuant to subsections
(c)(ii), (c)(iii), (c)(iv) and (c)(v) above (other than prepayments
of Revolving Loans as set forth therein) shall be applied, first, to the Term
Loans, and, after the Term Loans have been paid in full, to the Revolving Loans
but without a permanent reduction in the Total Revolving Loan Commitment.  Each such prepayment of the Term Loans shall
be applied pro rata based on the respective amounts thereof and, as to each
Term Loan, against the remaining principal amortization payments of such Term
Loan pro rata based on the respective amounts thereof; provided, however, in the event
Senior Leverage Ratio as of the last day of the most recent fiscal quarter for
which financial statements have been delivered is less than 2.25 to 1.00, all
or any portion of such prepayment may, at Administrative Borrower’s option
exercised by notice in writing to Administrative Agent at the time of such
prepayment, be applied first to Term Loan B. 
Considering each type of Loan being prepaid separately, any such
prepayment shall be applied first to Base Rate Loans of the type required to be
prepaid before application to LIBOR Loans of the type required to be prepaid,
and then to LIBOR Loans with the shortest Interest Periods remaining so as to
minimize any resulting LIBOR Breakage Fee.

 

(e)           Interest and Fees.  Any prepayment made pursuant to this Section 2.05
shall be accompanied by any LIBOR Breakage Fees pursuant to Section 2.06(c) and
other than with respect to prepayments made pursuant to subsections (c)(i) of
this Section 2.05, accrued interest on the principal amount being prepaid
to the date of prepayment .

 

(f)            Cumulative Prepayments.  Except as otherwise expressly provided in
this Section 2.05, payments with respect to any subsection of this Section 2.05
are in addition to payments made or required to be made under any other
subsection of this Section 2.05.

 

Section 2.06.   Fees.

 

(a)           Fees.  The Borrowers shall pay to Administrative
Agent the fees specified in the Fee Letter, in the amounts and at the times
specified therein.

 

(b)           Unused Line Fee.  From and after the Closing Date and until the
Revolving Loan Commitment Termination Date, the Borrowers shall pay to the
Administrative Agent for the account of the Revolving Loan Lenders other than a
Revolving Loan Lender for so long as it is a Defaulting Lender, in accordance
with their respective Revolving Loan Commitments and outstanding principal
balance of their funded Revolving Loans, an unused line fee (the “Unused
Line Fee”), which shall accrue at the rate per annum of 0.5% on the excess,
if any, of (i) the Total Revolving Loan Commitment excluding the Revolving
Loan Commitment of a Revolving Loan Lender for so long as it is a Defaulting
Lender over (ii) the sum of the average principal amount of all Revolving
Loans and Letter of Credit Obligations outstanding from time to time other than
those of a Revolving Loan Lender for so long as it is a Defaulting Lender, and
shall be payable quarterly in arrears on the first day of each calendar
quarter.

 

(c)           LIBOR Breakage Fees.  Upon (i) any default by the Borrowers in
making any borrowing of, conversion into or continuation of any LIBOR Loan
following Administrative Borrower’s delivery to Administrative Agent of any
Notice of Borrowing or Notice of Conversion/Continuation in respect thereof or (ii) any
payment of a LIBOR Loan on any day that is not the last day of the Interest
Period applicable thereto (regardless of the source of such 

 

38

 

prepayment and whether
voluntary, by acceleration or otherwise), the Borrowers shall pay
Administrative Agent, for the benefit of all Lenders that funded or were
prepared to fund any such LIBOR Loan, an amount (the “LIBOR Breakage Fee”)
equal to the amount of any losses, expenses and liabilities (including, without
limitation, any loss (including interest paid) in connection with the
re-employment of such funds but excluding loss of anticipated profit) that any
Lender may sustain as a result of such default or such payment; provided, however,
that Borrowers shall not be required to pay any LIBOR Breakage Fee to the
extent arising as a result of any such payment of any LIBOR Loan constituting a
mandatory prepayment of the Loans required pursuant to Section 2.5(c).  For purposes of calculating amounts payable
to a Lender under this subsection, each Lender shall be deemed to have actually
funded its relevant LIBOR Loan and having a maturity and repricing
characteristics comparable to the relevant Interest Period; provided, however,
that each Lender may fund each of its LIBOR Loans in any manner it sees fit,
and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this subsection.

 

(d)           Computations.  All computations of fees shall be made by the
Administrative Agent on the basis of a year of 360 days for the actual number
of days elapsed.

 

Section 2.07.  Securitization.  The Loan Parties hereby acknowledge that the
Lenders and their Affiliates may sell or securitize the Loans (a “Securitization”)
through the pledge of the Loans as collateral security for loans to the Lenders
or their Affiliates or through the sale of the Loans or the issuance of direct
or indirect interests in the Loans, which loans to the Lenders or their
Affiliates or direct or indirect interests will be rated by Moody’s, Standard &
Poor’s or one or more other rating agencies (the “Rating Agencies”).  The Loan Parties shall cooperate with the
Lenders and their Affiliates to effect the Securitization including, without
limitation, by (a) amending this Agreement and the other Loan Documents,
and executing such additional documents, as reasonably requested by the Lenders
in connection with the Securitization, provided that (i) any such
amendment or additional documentation does not impose additional costs on the
Loan Parties (other than costs in a de minimis
amount) and (ii) any such amendment or additional documentation does not
adversely affect the rights (other than costs of a de minimis
nature), or increase the obligations (other than increases of a de minimis nature), of the Loan Parties under the Loan
Documents or change or affect in a manner adverse to the Loan Parties the
financial terms of the Loans, and (b) providing such information as may be
reasonably requested by the Lenders in connection with the rating of the Loans
or the Securitization.

 

ARTICLE 3.

LETTERS OF CREDIT

 

Section 3.01.  Letters of Credit.

 

(a)           In order to assist the Borrowers in
establishing or opening standby letters of credit (each a “Letter of Credit”)
with the L/C Issuer, the Borrowers have requested the Administrative Agent to
join in, or in the sole discretion of the Administrative Agent, to cause an
Affiliate of the Administrative Agent which is also a Revolving Loan Lender
(any such Revolving Loan Lender being herein referred to as the “Letter of
Credit Agent”) to join in, the applications for such Letters of Credit
thereby lending such Person’s credit to that of the Borrowers, and the
Administrative Agent has agreed to do so on behalf of all Revolving Loan 

 

39

 

Lenders.  These arrangements shall be coordinated by
the Administrative Agent, subject to the terms and conditions set forth
below.  Neither the Administrative Agent
nor the Letter of Credit Agent shall be required to be the issuer of any Letter
of Credit.  The Borrowers will be the
account party for the application for each Letter of Credit, which shall be in
such written form or on a computer transmission system, in each case approved
by the Administrative Agent and the L/C Issuer, or in such other written form
or on such other computer transmission system as may from time to time be
approved by the Administrative Agent and the L/C Issuer, and shall be duly
completed in a manner and at a time reasonably acceptable to the Administrative
Agent, together with such other certificates, agreements, documents and other
papers and information as the Administrative Agent and the L/C Issuer may reasonably
request (the “Letter of Credit Application”).  In the event of any conflict between the
terms of any Letter of Credit Application and this Agreement, for purposes of
this Agreement, the terms of this Agreement shall control.

 

(b)           The aggregate Letter of Credit
Obligations shall not exceed the lowest of (i) the amount by which (A) the
Total Revolving Loan Commitment exceeds (B) the aggregate principal amount
of all Revolving Loans then outstanding, (ii) the amount by which (A) the
Borrowing Base exceeds (B) the aggregate principal amount of all Revolving
Loans then outstanding, and (iii) the L/C Subfacility.  In addition, the terms and conditions of all
Letters of Credit and all changes or modifications thereof by the Borrowers
and/or the L/C Issuer shall in all respects be subject to the prior approval of
the Administrative Agent; provided, however, that (i) the expiry date of all
Letters of Credit shall be no later than fifteen (15) days prior to the
Revolving Loan Commitment Termination Date unless, on or prior to fifteen (15)
days prior to the Revolving Loan Commitment Termination Date either (A) such
Letters of Credit shall be cash collateralized in an amount equal to 105% of
the face amount of such Letters of Credit by deposit of cash in such amount in
an account under the sole and exclusive control of the Administrative Agent for
the benefit of the Administrative Agent (acting on behalf of the Letter of
Credit Agent and the Revolving Loan Lenders) and/or the L/C Issuer (the “Letter
of Credit Collateral Account”) or (B) the Borrowers shall provide the
Administrative Agent, the Letter of Credit Agent and the Revolving Loan Lenders
with an indemnification, in form and substance reasonably satisfactory to the
Administrative Agent, from a commercial bank or other financial institution
acceptable to the Administrative Agent for any Letter of Credit Obligations
with respect to such Letters of Credit, (ii) no Letter of Credit shall
have an expiration date later than 365 days from the date of its issuance and (iii)
the Letters of Credit and all documentation in connection therewith shall be in
form and substance reasonably satisfactory to the Administrative Agent and the
L/C Issuer.

 

(c)           The Administrative Agent shall have
the right, upon notice (but, upon the occurrence and during the continuance of
an Event of Default, without notice) to the Borrowers, to charge the Loan
Account with the amount of any and all Indebtedness, liabilities and
obligations of any kind (including indemnification for breakage costs, capital
adequacy and reserve requirement charges) incurred by the Administrative Agent,
the Revolving Loan Lenders or the L/C Issuer with respect to a Letter of Credit
at the earlier of (i) payment by the Administrative Agent, the Revolving
Loan Lenders or the L/C Issuer under or in respect of any Letter of Credit or (ii) the
occurrence of any Event of Default.  Any
amount charged to the Loan Account shall be deemed a Revolving Loan hereunder
made by the Revolving Loan Lenders to the Borrowers, funded by the Administrative
Agent on behalf of the Revolving Loan Lenders and subject to Section 2.02
of this Agreement.  Any charges, fees,
commissions, costs and

 

40

 

expenses charged to the
Administrative Agent for the Borrowers’ account by the L/C Issuer in connection
with or arising out of Letters of Credit or transactions relating thereto will
be charged to the Loan Account in full when charged to or paid by the Administrative
Agent and, when charged, shall be conclusive on the Borrowers absent manifest
error.  Each of the Revolving Loan
Lenders and the Borrowers agree that the Administrative Agent shall have the
right to make such charges regardless of whether any Default or Event of
Default shall have occurred and be continuing or whether any of the conditions
precedent in Section 5.03 have been satisfied.

 

(d)           The Borrowers agree to
unconditionally indemnify Administrative Agent and each Lender and hold
Administrative Agent and each Lender harmless from any and all loss, claim or
liability incurred by Administrative Agent or any Lender arising from any
transactions or occurrences relating to Letters of Credit, any drafts or
acceptances thereunder, the Collateral relating thereto, and all Obligations in
respect thereof, including any such loss or claim due to any action taken by
the L/C Issuer, provided, however, in no event shall the L/C Issuer, the
Administrative Agent or any Lender be released of liability to the extent
arising out of the gross negligence or willful misconduct of the L/C Issuer,
Administrative Agent or any Lender as determined by a final judgment of a court
of competent jurisdiction.  The Borrowers
further agrees to hold Administrative Agent and each Lender (but not the L/C
Issuer) harmless from any errors or omission, negligence or misconduct by the
L/C Issuer.  The Borrowers’ unconditional
obligations to Administrative Agent, each Lender and the L/C Issuer with
respect to Letters of Credit hereunder shall not be modified or diminished for
any reason or in any manner whatsoever, other than as a result of
Administrative Agent’s, such Lender’s or the L/C Issuer’s gross negligence or
willful misconduct as determined by a final judgment of a court of competent
jurisdiction.  The Borrowers agree that
any charges incurred by the Administrative Agent or the L/C Issuer for the
Borrowers’ account hereunder may be charged to the Loan Account.

 

(e)           Upon any payments made to the L/C
Issuer in respect of any Letter of Credit, the Administrative Agent or the
Revolving Loan Lenders, as the case may be, shall, without prejudice to their
rights under this Agreement (including that such unreimbursed amounts shall
constitute Loans hereunder), acquire by subrogation, any rights, remedies,
duties or obligations granted or undertaken by a Borrower in favor of the L/C
Issuer in any application for Letters of Credit, any standing agreement
relating to Letters of Credit or otherwise, all of which shall be deemed to
have been granted to the Administrative Agent and the Revolving Loan Lenders
and apply in all respects to the Administrative Agent and the Revolving Loan
Lenders and shall be in addition to any rights, remedies, duties or obligations
contained herein.

 

Section
3.02.  Participations.

 

(a)           Purchase of Participations.  Immediately upon/issuance by the L/C Issuer
of any Letter of Credit pursuant to this Agreement, each Revolving Loan Lender
shall be deemed to have irrevocably and unconditionally purchased and received/
from the Administrative Agent or the Letter of Credit Agent, as the case may
be, without recourse or warranty, an undivided interest and participation, to
the extent of such Revolving Loan Lender’s Pro Rata Share, in all obligations
of the Administrative Agent or the Letter of Credit Agent, as the case may be,
in such Letter of Credit (including, without limitation, all Reimbursement
Obligations of the Borrowers with respect thereto).

 

41

 

(b)                                 Sharing of Payments.  In the event that the Administrative Agent or
the Letter of Credit Agent, as the case may be, makes any payment in respect of
any Letter of Credit and the Borrowers shall not have repaid such amount to
such Person, the Administrative Agent shall charge the Loan Account in the
amount of the Reimbursement Obligation, in accordance with Sections 3.01(c) and
4.02 of this Agreement.

 

(c)                                  Obligations Irrevocable.  The obligations of Borrowers and of Revolving
Loan Lenders to make payments to the Administrative Agent for the account of
the Administrative Agent, the Letter of Credit Agent, the Revolving Loan
Lenders or the L/C Issuer, as the case may be, with respect to a Letter of
Credit shall be irrevocable, without any qualification or exception whatsoever
and shall be made in accordance with the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:

 

(i)            any lack of validity or
enforceability of this Agreement or any of the other Loan Documents;

 

(ii)           the existence of any claim, setoff,
defense or other right which a Borrower or the Borrowers may have at any time
against a beneficiary named in such Letter of Credit or any transferee of such
Letter of Credit (or any Person for whom any such transferee may be acting),
Administrative Agent, the Letter of Credit Agent, any Lender, or any other
Person, whether in connection with this Agreement, such Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transactions between a Borrower or any other party and the
beneficiary named in such Letter of Credit);

 

(iii)          any draft, certificate or any 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;

 

(iv)          the surrender or impairment of any
security for the performance or observance of any of the terms of any of the
Loan Documents;

 

(v)           any failure by Administrative Agent
or any other Person to provide any notices required pursuant to this Agreement
relating to such Letter of Credit;

 

(vi)          any payment by the L/C Issuer under
such Letter of Credit against presentation of a draft or certificate which does
not comply with the terms of such Letter of Credit; or

 

(vii)         the occurrence of any Default or Event
of Default.  Section 3.03 Letters of
Credit.

 

(d)                                 Request for Issuance.  The Administrative Borrower may, upon notice
not later than 12:00 noon, New York City time, at least two (2) Business Days
in advance of the issuance thereof, request the Administrative Agent to assist
the Borrowers in establishing or opening a Letter of Credit by delivering to
the Administrative Agent, with a copy to the L/C Issuer, a Letter of Credit
Application, together with any necessary related documents.  The 

 

42

 

Administrative Agent
shall not arrange support with respect to any Letter of Credit if the
Administrative Agent shall have received written notice from the Required
Lenders on the Business Day immediately preceding the proposed issuance date
for such Letter of Credit that one or more of the conditions precedent in
Section 5.03 will not have been satisfied on such date, and the Administrative
Agent shall not otherwise be required to determine that, or take notice
whether, the conditions precedent set forth in Section 5.03 have been
satisfied.

 

(e)                                  Letter of Credit Fees.  (i) The Borrowers shall pay to the
Administrative Agent for the account of the Revolving Loan Lenders, in
accordance with the Revolving Loan Lenders’ Pro Rata Shares, a non-refundable
fee (the “Letter of Credit Fee”) for each Letter of Credit, from the
date of issuance thereof to the date of termination, equal to the product of
(A) the average daily Letter of Credit Obligations outstanding from time to
time, and (B) the Applicable Margin with respect to the Letter of Credit
Fee.  The Letter of Credit Fee shall be
payable monthly, in arrears, on the first day of each month.

 

(ii)           L/C Issuer Charges.  The Borrowers shall pay to the Administrative
Agent the standard charges assessed by the L/C Issuer in connection with the
issuance, administration, amendment, payment or cancellation of Letters of
Credit.

 

(iii)          Charges to the Loan Account.  The Borrowers hereby authorizes the
Administrative Agent to, and the Administrative Agent may, from time to time,
charge the Loan Account pursuant to Sections 3.01(c) and 4.02 of this Agreement
with the amount of any Letter of Credit fees or charges due under this Section
3.03.

 

ARTICLE
4.

PAYMENTS AND OTHER COMPENSATION

 

Section
4.01.  Payments; Computations; and
Statements.

 

(a)                                  The Borrowers shall make each payment under this Agreement not later
than 2:00 p.m. (New York City time) on the day when due, in lawful money of the
United States of America and in immediately available funds, to the
Administrative Agent’s Account.  All
payments received by the Administrative Agent after 12:00 noon (New York City
time) on any Business Day will be credited to the Loan Account on the next
succeeding Business Day.  All payments
shall be made by the Borrowers without set-off, counterclaim, deduction or
other defense to the Administrative Agent and the Lenders.  Except as provided in Section 9.10, after
receipt, the Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal ratably to the
Lenders in accordance with their Pro Rata Shares thereof and like funds
relating to the payment of any other amount payable to any Lender to such
Lender, in each case to be applied in accordance with the terms of this.  Agreement. 
The Lenders and the Borrowers hereby authorize the Administrative Agent
to, and the Administrative Agent may, from time to time, charge the Loan
Account of the Borrowers with any amount due and payable by the Borrowers under
any Loan Document; provided, however, that, notwithstanding the foregoing,
so long as no Event of Default shall have occurred and be continuing, (i) the
Administrative Agent shall give the Administrative Borrower not less than five
(5) Business Days notice prior to charging the Loan Account of the Borrowers
with any amount (other than any amount payable in respect of principal of and
interest on the Loans, any 

 

43

 

Unused Line Fee, any
Letter of Credit Fee or any scheduled collateral management or similar fee
payable to the Administrative Agent pursuant to the terms of this Agreement or
the Fee Letter), and (ii) to the extent that within five (5) Business Days
after the Administrative Borrower’s receipt of any such notice, the
Administrative Agent shall have received in immediately available funds the
applicable amount referred to in such notice, the Administrative Agent shall
not charge the Borrower’s account in lieu thereof.  Any amount charged to the Loan Account of the
Borrowers shall be deemed a Revolving Loan hereunder made by the Revolving Loan
Lenders to the Borrowers, funded by the Administrative Agent on behalf of the
Revolving Loan Lenders and subject to Section 2.02 of this Agreement.  The Lenders and the Borrowers confirm that
any charges which the Administrative Agent may so make to the Loan Account of
the Borrowers as herein provided will be made as an accommodation to the
Borrowers and solely at the Administrative Agent’s discretion.  Whenever any payment to be made under any
such Loan Document shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.  Each
determination by the Administrative Agent of an interest rate or fees hereunder
shall be conclusive and binding for all purposes in the absence of manifest
error.

 

(b)           The Administrative Agent shall
provide the Administrative Borrower, promptly after the end of each calendar
month, a summary statement (in the form from time to time used by the
Administrative Agent) of the opening and closing daily balances in the Loan
Account of the Borrowers during such month, the amounts and dates of all Loans
made to the Borrowers during such month, the amounts and dates of all payments
on account of the Loans to the Borrowers during such month and the Loans to
which such payments were applied, the amount of interest accrued on the Loans
to the Borrowers during such month, any Letters of Credit issued by the L/C
Issuer for the account of the Borrowers during such month, specifying the face
amount thereof, the amount of charges to the Loan Account and/or Loans made to
the Borrowers during such month to reimburse the Revolving Loan Lenders for
drawings made under Letters of Credit, and the amount and nature of any charges
to the Loan Account made during such month on account of fees, commissions,
expenses and other Obligations.  All
entries on any such statement shall be presumed to be correct and, thirty (30)
days after the same is received by Borrowers, shall be final and conclusive absent
manifest error.

 

Section
4.02.  Sharing of Payments, Etc.  Except as provided in Section 2.02 hereof, if
any Lender shall obtain any payment (whether voluntary, involuntary, through
the exercise of any right of set-off, or otherwise) on account of any
Obligation in excess of its ratable share of payments on account of similar
obligations obtained by all the Lenders, such Lender shall forthwith purchase
from the other Lenders such participations in such similar obligations held by
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided,
however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender’s ratable share (according to the
proportion of (i) the amount of such Lender’s required repayment to (ii) the
total amount so recovered from the purchasing Lender of any interest or other
amount paid by the purchasing Lender in respect of the total amount so
recovered).  The Borrowers agree that any
Lender so purchasing a participation from another Lender pursuant to this
Section 4.02 may, to the fullest 

 

44

 

extent permitted by law,
exercise all of its rights (including such Lender’s right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrowers in the amount of such participation.

 

Section
4.03.  Apportionment of Payments.  Subject to Section 2.02 hereof:

 

(a)           All payments of principal and
interest in respect of outstanding Loans, all payments in respect of the
Reimbursement Obligations, all payments of fees (other than the fees set forth
in Section 2.06(a) hereof) and all other payments in respect of any other
Obligations, shall be allocated by the Administrative Agent among such of the
Lenders as are entitled thereto, in proportion to their respective Pro Rata
Shares or otherwise as provided herein or, in respect of payments not made on
account of Loans or Letter of Credit Obligations, as designated by the Person
making payment when the payment is made in each instance, subject to Section
4.03(b).

 

(b)           After the occurrence and during the
continuance of an Event of Default, the Administrative Agent may, and upon the
direction of the Required Lenders shall, apply all payments in respect of any
Obligations and all proceeds of the Collateral, subject to the provisions of
this Agreement, (i) first, ratably to pay the Obligations in respect of
any fees, expense reimbursements, indemnities and other amounts then due to the
Administrative Agent or the L/C Issuer until paid in full; (ii) second,
ratably to pay the Obligations in respect of any accrued fees and interest then
due to the Lenders until paid in full; (iii) third, ratably to pay.  principal of the Loans, Reimbursement
Obligations and Letter of Credit Obligations (or, to the extent such
Obligations are contingent, to provide cash collateral in respect of such
Obligations) until paid in full; and (iv) fourth, ratably to pay all
other Obligations then due and payable.

 

(c)           For purposes of Section 4.03(b), “paid
in full” with respect to interest shall include interest accrued after the
commencement of any Insolvency Proceeding irrespective of whether a claim for
such interest is allowable in such Insolvency Proceeding.

 

(d)           In the event of a direct conflict
between the priority provisions of this Section 4.03 and other provisions
contained in any other Loan Document, it is the intention of the parties hereto
that both such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other.  In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section 4.03 shall control and govern.

 

Section
4.04.  Increased Costs and Reduced
Return.

 

(a)           If any Lender, the Administrative
Agent or the L/C Issuer shall have determined that the adoption or
implementation of, or any change in, any law, rule, treaty or regulation, or
any policy, guideline or directive of, or any change in, the interpretation or
administration thereof by, any court, central bank or other administrative or
Governmental Authority, or compliance by any Lender, Administrative Agent or
the L/C Issuer or any Person controlling any such Lender, Administrative Agent
or the L/C Issuer with any directive of, or guideline from, any central bank or
other Governmental Authority or the introduction of, or change in, any
accounting principles applicable to any Lender, Administrative Agent or the L/C
Issuer or any Person controlling any such Lender, Administrative Agent or the
L/C Issuer (in 

 

45

 

each case, whether or not
having the force of law), in each of the foregoing instances, after the date
hereof, shall (i) subject any Lender, Administrative Agent or the L/C Issuer,
or any Person controlling any such Lender, Administrative Agent or the L/C
Issuer to any tax, duty or other charge with respect to this Agreement or any
Loan made by such Lender or Administrative Agent or any Letter of Credit issued
by the L/C Issuer, or change the basis of taxation of payments to any Lender,
Administrative Agent or the L/C Issuer or any Person controlling any.  such Lender, Administrative Agent or the L/C
Issuer of any amounts payable hereunder (except for franchise taxes and taxes
on the overall net income of any Lender, Administrative Agent or the L/C Issuer
or any Person controlling any such Lender, Administrative Agent or the L/C
Issuer), (ii) impose, modify or deem applicable any reserve, special deposit or
similar requirement against any Loan, any Letter of Credit or against assets of
or held by, or deposits with or for the account of, or credit extended by, any
Lender, Administrative Agent or the L/C Issuer or any Person controlling any
such Lender, Administrative Agent or the L/C Issuer or (iii) impose on any
Lender, Administrative Agent or the L/C Issuer or any Person controlling any
such Lender, Administrative Agent or the L/C Issuer any other condition
regarding this Agreement or any Loan or Letter of Credit, and the result of any
event referred to in clauses (i), (ii) or (iii) above shall be to increase the
cost to any Lender, Administrative Agent or the L/C Issuer of making any Loan,
issuing, guaranteeing or participating in any Letter of Credit, or agreeing to
make any Loan or issue, guaranty or participate in any Letter of Credit, or to
reduce any amount received or receivable by any Lender, Administrative Agent or
the L/C Issuer hereunder, then, upon demand by any such Lender, Administrative
Agent or the L/C Issuer, the Borrowers shall pay within ten (10) days after
demand, to such Lender, Administrative Agent or the L/C Issuer such additional
amounts as will compensate such Lender, Administrative Agent or the L/C Issuer
for such increased costs or reductions in amount.

 

(b)           If any Lender, Administrative Agent
or the L/C Issuer shall have determined that any Capital Guideline or the
adoption or implementation of, or any change in, any Capital Guideline by the
Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender, Administrative Agent or the L/C Issuer or
any Person controlling such Lender, Administrative Agent or the L/C Issuer with
any Capital Guideline or with any request or directive of any such Governmental
Authority with respect to any Capital Guideline, or the implementation of, or
any change in, any applicable accounting principles (in each case, whether or
not having the force of law), in each of the foregoing instances, after the
date hereof, either (i) affects the amount of capital required or expected to
be maintained by any Lender, Administrative Agent or the L/C Issuer or any
Person controlling such Lender, Administrative Agent or the L/C Issuer, and any
Lender, Administrative Agent or the L/C Issuer determines that the amount of
such capital is increased as a direct or indirect consequence of any Loans made
or maintained, Letters of Credit issued or any guaranty or participation with
respect thereto, any Lender’s, Administrative Agent’s or the L/C Issuer’s or
any such other controlling Person’s other obligations hereunder, or (ii) has
the effect of reducing the rate of return on any Lender’s, Administrative Agent’s
or the L/C Issuer’s any such other controlling Person’s capital to a level
below that which such Lender, Administrative Agent or the L/C Issuer or such
controlling Person could have achieved but for such circumstances as a
consequence of any Loans made or maintained, Letters of Credit issued, or any
guaranty or participation with respect thereto or any agreement to make Loans,
to issue Letters of Credit or such Lender’s, Administrative Agent’s or the L/C
Issuer’s or such other controlling Person’s other obligations hereunder (in
each case, taking into consideration, such Lender’s, 

 

46

 

Administrative Agent’s or
the L/C Issuer’s or such other controlling Person’s policies with respect to
capital adequacy), then, within ten (10) days of demand by any Lender, Administrative
Agent or the L/C Issuer, the Borrowers shall pay to such Lender, Administrative
Agent or the L/C Issuer from time to time such additional amounts as will
compensate such Lender, Administrative Agent or the L/C Issuer for such cost of
maintaining such increased capital or such reduction in the rate of return on
such Lender’s, Administrative Agent’s or the L/C Issuer’s or such other
controlling Person’s capital.

 

(c)                                  All amounts payable under this Section 4.04 shall bear interest from the
date that is ten (10) days after the date of demand by any Lender,
Administrative Agent or the L/C Issuer until payment in full to such Lender,
Administrative Agent or the L/C Issuer at the Base Rate.  A certificate of such Lender, Administrative
Agent or the L/C Issuer claiming compensation under this Section 4.04,
specifying the event herein above described and the nature of such event shall
be submitted by such Lender, Administrative Agent or the L/C Issuer to the
Administrative Borrower, setting forth the additional amount due and an
explanation of the calculation thereof, and such Lender’s, Administrative Agent’s
or the L/C Issuer’s reasons for invoking the provisions of this Section 4.04,
and shall be final and conclusive absent manifest error; provided, that
the Borrowers shall not be required to compensate such Lender, the
Administrative Agent or the L/C Issuer pursuant to this Section 4.04 for
any increased costs or reductions incurred more than 180 days prior to the date
that such Lender, the Administrative Agent or the L/C Issuer notifies the
Borrower in writing of such increased costs or reductions and of such Lender’s,
the Administrative Agent’s or L/C Issuer’s intention to claim compensation
thereof, unless such amount became due or payable during such 180 day period
and retroactively applies to a date occurring prior to such 180 day period, in
which case the Borrowers shall compensate such Lender, the Administrative Agent
or L/C Issuer pursuant to this Section 4.04.

 

Section
4.05.  Taxes.

 

(a)                                  All payments made by any Loan Party hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any present
or future income, franchise, sales, use, excise, stamp or other taxes, levies,
imposts, deductions, charges, fees, withholdings, restrictions or conditions of
any nature now or hereafter imposed, levied, collected, withheld or assessed by
any jurisdiction (whether pursuant to Federal, state, local or foreign law) or
by any political subdivision or taxing authority thereof or therein, and all
interest, penalties or additional amounts, excluding taxes on the net income of
any Lender, Administrative Agent or the L/C Issuer imposed by the jurisdiction
in which Lender, Administrative Agent or the L/C Issuer is organized or any political
subdivision thereof or taxing authority thereof or any jurisdiction in which
such Person’s principal office is located or any political subdivision thereof
or taxing authority thereof (such nonexcluded taxes, levies, imposts,
deductions, charges, fees, withholdings, restrictions, conditions, interest,
penalties and additional amounts being hereinafter collectively referred to as “Taxes”).  If any Loan Party shall be required to deduct
or to withhold any Taxes from or in respect of any amount payable hereunder or
under any other Loan Document,

 

(i)            the amount so payable shall be
increased so that after making all required deductions and withholdings
(including Taxes on amounts payable pursuant to 

 

47

 

this
sentence) the Lenders, the Administrative Agent or the L/C Issuer, as the case
may be, receive an amount equal to the sum they would have received had no such
deduction or withholding been made,

 

(ii)           such Loan Party shall make such
deduction or withholding,

 

(iii)          such Loan Party shall pay the full
amount deducted or withheld to the relevant taxation authority in accordance
with applicable law, and

 

(iv)          as promptly as possible thereafter,
such Loan Party shall send the Lenders, the Administrative Agent and the L/C
Issuer an official receipt (or, if an official receipt is not available, such
other documentation as shall be satisfactory to the Lenders, the.  Administrative Agent or the L/C Issuer, as
the case may be) evidencing payment of the amount or amounts so deducted or
withheld.  In addition, each Loan Party
agrees to pay any present or future taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery, performance,
recordation or filing of, or otherwise with respect to, this Agreement, the
Letters of Credit or any other Loan Document other than the foregoing excluded
taxes (hereinafter referred to as “Other Taxes”).

 

(b)                                 The Loan Parties hereby jointly and severally indemnify and agree to
hold the Lenders, the Administrative Agent and the L/C Issuer harmless from and
against Taxes or Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section 4.05)
paid by any Lender, Administrative Agent or the L/C Issuer and any liability
(including penalties, interest and expenses for nonpayment, late payment or
otherwise) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted.  Such indemnification shall be paid within 10
days from the date on which any such Lender, any Administrative Agent or the
L/C Issuer makes written demand therefor, which demand shall identify in
reasonable detail the nature and amount of such Taxes or Other Taxes.

 

(c)                                  Each Lender that is organized in a jurisdiction outside the United
States hereby agrees that it shall, no later than the Closing Date or, in the
case of a Lender which becomes a party hereto pursuant to Section 11.06 hereof
after the Closing Date, the date upon which such Lender becomes a party hereto
(and from time to time thereafter upon the reasonable request of the
Administrative Agent), deliver to the Administrative Agent, but only if such
Lender is legally able to do so, one accurate, complete and signed originals of
any of U.S. Internal Revenue Service Form W-8BEN, Form W-81MY or Form W-8ECI,
or any subsequent versions thereof or successor forms thereto, in each case
indicating that such Lender is on the date of delivery thereof entitled to
receive payments of interest hereunder free from, or subject to a reduced rate
of, withholding of United States Federal income tax.  In addition, if such Lender is claiming
exemption from withholding of United States Federal income tax under Section 871(h)
or Section 881(c) of the Internal Revenue Code, such Lender hereby represents
and warrants that such Lender is (A) not a bank for purposes of Section 881(c)
of the Internal Revenue Code, (B) not a 10 percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Internal Revenue Code) of the Parent and
(C) not a controlled foreign corporation related to the Parent (within the
meaning of Section 864(d)(4) of the Internal Revenue Code (and such Lender
agrees 

 

48

 

that it shall provide the
Administrative Agent with prompt written notice at any time after becoming a
Lender hereunder in the event that at such time it can no longer make any of
the foregoing representations and warranties). 
Such foams shall be delivered by each such Lender on or before the date
it becomes a party to this Agreement and on or before the date, if any, such
Lender changes its applicable lending office by designating a different lending
office (a “New Lending Office”). 
In addition, each such Lender shall deliver such forms within 20 days
after receipt of a written request therefor from the Administrative Agent.  Notwithstanding any other provision of this
Section 4.05, no such Lender shall be required to deliver after the date hereof
any form pursuant to this Section 4.05(c) that such Lender is not legally able
to deliver.

 

(d)           If any Loan Party fails to perform
any of its obligations under this Section 4.05, the Loan Parties shall
indemnify the Lenders, the Administrative Agent and the L/C Issuer for any
taxes, interest or penalties that may become payable as a result of any such
failure.  The obligations of the Loan
Parties under this Section 4.05 shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.

 

Section
4.06.  Inability to Determine Interest
Rate.  Notwithstanding any other
provision of this Agreement, if (i) the Administrative Agent shall reasonably
determine (which determination shall be conclusive and binding absent manifest
error) that, by reason of circumstances affecting the relevant market,
reasonable and adequate means do not exist for ascertaining the LIBOR or an
Interest Period, or (ii) the Required Lenders shall reasonably determine (which
determination shall be conclusive and binding absent manifest error) that the
LIBOR does not adequately and fairly reflect the cost to such Lenders of
funding LIBOR Loans that the Borrowers have requested, the Administrative Agent
shall forthwith give telephone notice of such determination, confirmed in
writing, to the Administrative Borrower, and the Lenders prior to the first day
of such Interest Period.  Unless the
Administrative Borrower shall have notified the Administrative Agent upon
receipt of such telephone notice that it wishes to rescind or modify its
request regarding such LIBOR Loans, any Loans that were requested to be made as
LIBOR Loans shall be made as Base Rate Loans and any Loans that were requested
to be converted into or continued as LIBOR Loans shall remain as or be
converted into Base Rate Loans.  Until
any such notice has been withdrawn by the Administrative Agent, no further
Loans shall be made as, continued as, or converted into, LIBOR Loans for the Interest
Periods so affected.

 

Section
4.07.  Illegality.  Notwithstanding any other provision of this
Agreement, if the adoption of or any change in any requirement of law or in the
interpretation or application thereof by the relevant Governmental Authority to
any Lender shall make it unlawful for such Lender to make or maintain LIBOR
Loans as contemplated by this Agreement or to obtain in the interbank
eurodollar market the funds with which to make such Loans, (a) such Lender
shall promptly notify the Administrative Agent and the Borrowers thereof, (b)
the commitment of such Lender hereunder to make LIBOR Loans or continue LIBOR
Loans as such shall forthwith be suspended until such Lender shall give notice
to the Administrative Agent that the condition or situation which gave rise to
the suspension shall no longer exist, and (c) such Lender’s Loans then
outstanding as LIBOR Loans, if any, shall be converted on the last day of the
Interest Period for such Loans or within such earlier period as required by law
to Base Rate Loans.

 

49

 

Section
4.08.  Replacement of Lenders.  Within fifteen (15) days after (i) receipt by
the Borrowers of written notice and demand from any Lender for payment pursuant
to Section 4.04 or 4.05, (ii) receipt by the Borrowers of written notice from
any Lender pursuant to Section 4.07 specifying that it is unlawful for such
Lender to make or maintain LIBOR Loans, or (iii) as provided in Section
11.02(c), in the case of certain refusals by any Lender to consent to certain
proposed amendments, modifications, terminations or waivers with respect to
this Agreement that have been approved by Required Lenders (any such Lender
demanding such payment or refusing to, so consent being referred to herein as
an “Affected Lender”), the Borrowers may, at its option, notify
Administrative Agent and such Affected Lender of its intention to do one of the
following:

 

(a)           the Borrowers may obtain, at
Borrowers’ expense, a replacement Lender (“Replacement Lender”) for such
Affected Lender, which Replacement Lender shall be reasonably satisfactory to
Administrative Agent.  In the event
Borrowers obtain a Replacement Lender that will purchase all outstanding
Obligations owed-to such Affected Lender and assume its commitments hereunder
within ninety (90) days following notice of Borrowers’ intention to do so, the
Affected Lender shall sell and assign all of its rights and delegate all of its
obligations under this Agreement to such Replacement Lender in accordance with
the provisions of Section 11.06, provided that the Borrowers have reimbursed
such Affected Lender for any LIBOR Breakage Fee pursuant to Section 2.06(b) (as
though such payment constituted a prepayment) and any processing and
recordation fee payable pursuant to Section 11.06(b) and, in any case where
such replacement occurs as the result of a demand for payment pursuant to
Section 4.04, paid all amounts required to be paid to such Affected Lender
pursuant to Section 4.04 through the date of such sale and assignment; or

 

(b)           the Borrowers may prepay in full all
outstanding Obligations owed to such Affected Lender (including, without
limitation, any LIBOR Breakage Fee pursuant to Section 2.06(c)) and terminate
such Affected Lender’s Pro Rata Share of the Revolving Loan Commitment, in
which case the Revolving Loan Commitment will be reduced by the amount of such
Pro Rata Share.  The Borrowers shall,
within ninety (90) days following notice of its intention to do so, prepay in
full all outstanding Obligations owed to, such Affected Lender (including, in
any case where such prepayment occurs as the result of a demand for payment for
increased costs, such Affected Lender’s increased costs for which it is
entitled to reimbursement under this Agreement through the date of such
prepayment), and terminate such Affected Lender’s obligations under the
Revolving Loan Commitment.

 

Section
4.09.  Joint and Several Liability of
the Borrowers.

 

(a)           Notwithstanding anything in this
Agreement or any other Loan Document to the contrary, each of the Borrowers
hereby accepts joint and several liability hereunder and under the other Loan
Documents in consideration of the financial accommodations to be provided by
the Administrative Agent and the Lenders under this Agreement and the other
Loan Documents, for the mutual benefit, directly and indirectly, of each of the
Borrowers and in consideration of the undertakings of the other Borrowers to
accept joint and several liability for the Obligations.  Each of the Borrowers, jointly and severally,
hereby irrevocably and unconditionally accepts, not merely as a surety but also
as a co-debtor, joint and several liability with the other Borrowers, with
respect to the payment and performance of all of the Obligations

 

50

 

(including, without
limitation, any Obligations arising under this Section 4.09), it being the
intention of the parties hereto that all of the Obligations shall be the joint
and several obligations of each of the Borrowers without preferences or
distinction among them.  If and to the
extent that any of the Borrowers shall fail to make any payment with respect to
any of the Obligations as and when due or to perform any of the Obligations in
accordance with the terms thereof, then in each such event, the other Borrowers
will make such payment with respect to, or perform, such Obligation.  Subject to the terms and conditions hereof,
the Obligations of each of the Borrowers under the provisions of this Section 4.09
constitute the absolute and unconditional, full recourse Obligations of each of
the Borrowers, enforceable against each such Person to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement, the other Loan Documents or any other circumstances
whatsoever.

 

(b)           The provisions of this Section 4.09
are made for the benefit of the Administrative Agent, the Lenders and their
successors and assigns, and may be enforced by them from time to time against
any or all of the Borrowers as often as occasion therefor may arise and without
requirement on the part of the Administrative Agent, the Lenders or such
successors or assigns first to marshal any of its or their claims or to
exercise any of its or their rights against any of the other Borrowers or to
exhaust any remedies available to it or them against any of the other Borrowers
or to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy.  The provisions of this Section 4.09 shall
remain in effect until all of the Obligations shall have been paid in full or
otherwise fully satisfied.

 

(c)           Each of the Borrowers hereby agrees
that it will not enforce any of its rights of contribution or subrogation
against the other Borrowers with respect to any liability incurred by it
hereunder or under any of the other Loan Documents, any payments made by it to
the Administrative Agent or the Lenders with respect to any of the Obligations
or any Collateral, until such time as all of the Obligations have been paid in
full in cash.  Any claim which any
Borrower may have against any other Borrower with respect to any payments to
the Administrative Agent or the Lenders hereunder or under any other Loan
Documents are hereby expressly made subordinate and junior in right of payment,
without limitation as to any increases in the Obligations arising hereunder or
thereunder, to the prior payment in full in cash of the Obligations.

 

ARTICLE 5.

CONDITIONS TO LOANS

 

Section 5.01.  Conditions Precedent to Effectiveness.  This Agreement shall become effective as of
the Business Day when each of the following conditions precedent shall have
been satisfied in a manner reasonably satisfactory to the Administrative Agent
and Lenders:

 

(a)           Delivery of Documents.  The Administrative Agent (and each Lender who
has requested any of the following) shall have received (i) each of the
agreements, documents and instruments set forth in Sections I, III.A., IV,
V.A. and VII.A of the List of Closing Documents attached hereto as Exhibit H,
each in form and substance reasonably satisfactory to the Administrative Agent
and Lenders and, unless indicated otherwise, dated the Closing Date, and (ii) such
other agreements, instruments, approvals, opinions and other documents, each 

 

51

 

reasonably satisfactory
to Administrative Agent and Lenders and in form and substance, as
Administrative Agent may reasonably request.

 

(b)           Material Adverse Effect.  The Administrative Agent shall have determined,
in its sole judgment, that no event or development, individually, or in the
aggregate, shall have occurred since April 1, 2006, which could reasonably
be expected to have a Material Adverse Effect.

 

(c)           Approvals.  All consents, authorizations and approvals
of, and filings and registrations with, and all other actions in respect of,
any Governmental Authority or other Person required in connection with the
making of the Loans and consummation of the Related Transaction Documents,
including, without limitation, the Body Shop Acquisition, or the conduct of the
Loan Parties’ business shall have been obtained and shall be in full force and
effect.

 

(d)           Proceedings; Receipt of Documents.  All proceedings in connection with the making
of the initial Loans or the issuance of the initial Letters of Credit and the
other transactions contemplated by this Agreement, the other Loan Documents and
the Related Transaction Documents, and all documents incidental hereto and
thereto, shall be satisfactory to the Administrative Agent and its counsel, and
the Administrative Agent and such counsel shall have received all such
information and such counterpart originals or certified or other copies of such
documents as the Administrative Agent or such counsel may reasonably request.

 

(e)           Availability.  After giving effect to all Loans to be made
on the Closing Date and the Letters of Credit to be issued on the Closing Date,
(i) the Availability shall not be less than $12,000,000 and (ii) all
liabilities of the Loan Parties shall be current.  The Administrative Borrower shall deliver to
the Administrative Agent a current Borrowing Base Certificate.

 

(f)            Minimum EBITDA and Leverage.  The Administrative Agent shall have received
evidence satisfactory to it that, after giving pro forma effect to the Body
Shop Acquisition, (i) adjusted Consolidated EBITDA of the Parent and its
Subsidiaries for the twelve month period ending July 1, 2006 is equal to
or greater than $18,300,000 and (ii) the ratio of adjusted Gross
Consolidated Senior Funded Indebtedness of the Parent and its Subsidiaries for
the twelve month period ending July 1, 2006 to Consolidated EBITDA as of
the Closing Date is not greater than 2.95 to 1.00.

 

(g)           Minimum Cash on Balance Sheet.  The Administrative Agent shall have received
evidence satisfactory to it that, after giving pro forma effect to the Body
Shop Acquisition, the Parent and its Subsidiaries shall have not less than
$4,000,000 of cash on the balance sheet of the Parent and its consolidated
Subsidiaries.

 

(h)           Minimum Equity.  Not less than $30,500,000 cash equity shall
have been contributed to Borrowers, of which not less than $15,000,000 shall
have been contributed by Sponsor and not less than $15,200,000 of rollover
equity shall have been invested in the Parent by the Sellers.

 

52

 

Section 5.02.  Conditions Precedent to the Making of any
Loan after the Consummation of the Body Shop Acquisition.  The obligation of Administrative Agent or any
Lender to make any Loan on the Closing Date after the consummation of the Body
Shop Acquisition or of the Administrative Agent to assist the Borrowers in
establishing or opening any Letter of Credit on the Closing Date after the
consummation of the Body Shop Acquisition is subject to the fulfillment, in a
manner reasonably satisfactory to the Administrative Agent and Required
Lenders, of each of the following conditions:

 

(a)           Delivery of Documents.  The Administrative Agent (and each Lender who
has requested any of the following) shall have received (i) each of the
agreements, documents and instruments set forth in Sections II, III.B.,
V.B., VI and VII.B of the List of Closing Documents attached hereto as Exhibit H,
each in form and substance reasonably satisfactory to the Administrative Agent
and Required Lenders and, unless indicated otherwise, dated the Closing Date,
and (ii) such other agreements, instruments, approvals, opinions and other
documents, each reasonably satisfactory to Administrative Agent and Required
Lenders and in form and substance, as Administrative Agent may reasonably
request.

 

(b)           Consummation of Body Shop
Acquisition.  The Administrative
Agent shall have received evidence reasonably satisfactory to it that the Body
Shop Acquisition shall have been consummated in all material respects in
accordance with the Body Shop Acquisition Documents (no material provision of
any which shall have been amended or otherwise modified or waived without the
prior written consent of the Administrative Agent).

 

Section 5.03.  Conditions Precedent to All Loans and
Letters of Credit.  The obligation of
Administrative Agent or any Lender to make any Loan or of the Administrative
Agent to assist the Borrowers in establishing or opening any Letter of Credit
after the Closing Date is subject to the fulfillment, in a manner reasonably
satisfactory to the Administrative Agent, of each of the following conditions
precedent:

 

(a)           Payment of Fees, Etc.  The Borrowers shall have paid all fees,
costs, expenses and taxes then payable by the Borrowers pursuant to this
Agreement and the other Loan Documents, including, without limitation, Sections
2.06 and 11.03 hereof.

 

(b)           Representations and Warranties; No
Event of Default.  The following
statements shall be true and correct, and the submission by the Administrative
Borrower to the Administrative Agent of a Notice of Borrowing with respect to
each such Loan, and the Borrowers’ acceptance of the proceeds of such Loan, or
the submission by the Borrowers of a Letter of Credit Application with respect
to a Letter of Credit, and the issuance of such Letter of Credit, shall each be
deemed to be a representation and warranty by each Loan Party on the date of
such Loan or the date of issuance of such Letter of Credit that: (i) the
representations and warranties contained in Article 6 and in each other
Loan Document, certificate or other writing delivered to the Administrative
Agent or any Lender pursuant hereto or thereto on or prior to the date of such
Loan or such Letter of Credit are true and correct in all material respects on
and as of such date as though made on and as of such date (except to the extent
such representations and warranties (A) expressly refer to an earlier date, in
which case they shall be true and correct as of such earlier date, (B) are
not true and correct due to events or conditions, the occurrence or existence
of which are not prohibited by this Agreement or the other Loan Documents and
which 

 

53

 

do not, in and of
themselves, constitute a Default or an Event of Default or (C) are not
true and correct as a result of disclosures made in writing to, and approved
by, the Administrative Agent and Lenders in connection with Permitted
Acquisitions), (ii) at the time of and after giving effect to the making
of such Loan and the application of the proceeds thereof or at the time of
issuance of such Letter of Credit, no Default or Event of Default has occurred
and is continuing or would result from the making of the Loan to be made, or
the issuance of such Letter of Credit to be issued, on such date and (iii) the
conditions set forth in this Section 5.03 have been satisfied as of the
date of such request.

 

(c)           Legality.  The making of such Loan or the issuance of
such Letter of Credit shall not contravene any law, rule or regulation
applicable to Administrative Agent, any Lender or the L/C Issuer.

 

(d)           Notices.  The Administrative Agent shall have received (i) a
Notice of Borrowing pursuant to Section 2.02 hereof (or the Borrowers
shall have otherwise complied with the provisions of Section 2.02) and (ii) a
Letter of Credit Application pursuant to Section 3.03 hereof, if
applicable.

 

(e)           Proceedings; Receipt of Documents.  All proceedings in connection with the making
of such Loan or the issuance of such Letter of Credit and the other
transactions contemplated by this Agreement and the other Loan Documents, and
all documents incidental hereto and thereto, shall be reasonably satisfactory
to the Administrative Agent and their counsel, and the Administrative Agent and
such counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents, in form and substance
reasonably satisfactory to the Administrative Agent, as the Administrative Agent
or such counsel may reasonably request.

 

ARTICLE 6.

REPRESENTATIONS AND WARRANTIES

 

Section 6.01.  Representations and Warranties.  Each Loan Party hereby represents and
warrants to the Administrative Agent, the Lenders and the L/C Issuer as follows
(in each case, after giving pro forma effect to the Body Shop Acquisition and
the effectiveness of the Closing Date Joinder Agreement):

 

(a)           Organization, Good Standing, Etc.  Each Loan Party (i) is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of the state or jurisdiction of
its organization, (ii) has all requisite power and authority to conduct its
business as now conducted and as presently contemplated and, in the case of the
Borrowers, to make the borrowings hereunder, and to execute and deliver each
Loan Document and Related Transaction Document to which it is a party, and to
consummate the transactions contemplated thereby, and (iii) is duly
qualified to do business and is in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, except where
the failure to be so qualified and in good standing could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 

54

 

(b)                                 Authorization, Etc.  The execution, delivery and performance by
each Loan Party of each Loan Document and Related Transaction Document to which
it is or will be a party, (i) have been duly authorized by all necessary
action, (ii) do not and will not (x) contravene its Organization
Documents, or (y) contravene in any material respect any applicable material
law or material contractual obligation, in each case binding on or otherwise
affecting it or any of its properties, (iii) do not and will not result in
or require the creation of any Lien (other than pursuant to any Loan Document)
upon or with respect to any of its properties, and (iv) do not and will not
result in any material default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to its operations or any of its
properties.

 

(c)                                  Governmental Approvals.  No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority is required in
connection with the due execution, delivery and performance by any Loan Party of
any Loan Document or Related Transaction Document to which it is or will be a
party, except for those which have been obtained and/or made or those that
failures to obtain, give or file, as the case may be, could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 

(d)                                 Enforceability of Loan Documents.  This Agreement is, and each other Loan
Document and Related Transaction Document to which any Loan Party is or will be
a party, when delivered will be, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws.

 

(e)                                  Capitalization; Subsidiaries.

 

(i)            After giving effect to the
transactions contemplated hereby to occur on the Closing Date, the authorized
Capital Stock of the Parent, the issued and outstanding Capital Stock of the
Parent and the identity of the holders of such Capital Stock and number of
shares owned by them, are as set forth on Schedule 6.01(e)(i).  All of the issued and outstanding shares of
Capital Stock of the Parent have been validly issued and are fully paid and
non-assessable, and, except as set forth on Schedule 6.01(e)(i), the holders
thereof are not entitled to any preemptive, first refusal or other similar
rights.

 

(ii)           Schedule 6.01(e)(ii) is a
complete and correct description of the name, jurisdiction of incorporation,
organization or formation, as applicable, and ownership of the outstanding
Capital Stock of such Subsidiaries of the Parent.  All of the issued and outstanding shares of
Capital Stock of such Subsidiaries have been validly issued and are fully paid
and nonassessable, and the holders thereof are not entitled to any preemptive,
first refusal or other similar rights. 
Except as indicated on such Schedule, all such Capital Stock is owned by
the Parent or one or more of its wholly-owned Subsidiaries, free and clear of
all Liens, other than Liens in favor of Administrative Agent.  There are no outstanding debt or equity
securities of the Parent or any of its Subsidiaries and no outstanding
obligations of the Parent or any of its Subsidiaries convertible into or
exchangeable for, or warrants, options or other rights for the purchase 

 

55

 

or
acquisition from the Parent or any of its Subsidiaries, or other obligations of
any Subsidiary to issue, directly or indirectly, any shares of Capital Stock of
any Subsidiary of the Parent.

 

(f)                                    Litigation; Commercial Tort Claims.  Except as set forth in Schedule 6.01(f), (i) there
is no pending or, to the best knowledge of any Loan Party, threatened action,
suit or proceeding affecting any.  Loan
Party before any court or other Governmental Authority or any arbitrator that (A) if
adversely determined, could have, either individually or in the aggregate, a
Material Adverse Effect or (B) relates to this Agreement, any other Loan
Document or the Acquisition Agreement or any transaction contemplated hereby or
thereby and (ii) as of the Closing Date, none of the Loan Parties holds
any commercial tort claims in respect of which a claim has been filed in a
court of law or a written notice by an attorney has been given to a potential
defendant.

 

(g)                                 Financial Condition.

 

(i)            The Financial Statements, copies of
which have been delivered to Administrative Agent and each Lender, fairly
present in all material respects the consolidated financial condition of (x) Body
Shop and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations of Body Shop and its Subsidiaries for the
fiscal periods ended on such respective dates, and (y) CV and its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations of CV and its Subsidiaries for the fiscal periods ended on such
respective dates, all in accordance with GAAP. 
Since April 1, 2006 no event or development has occurred that has
had or could have, either individually or in the aggregate, a Material Adverse
Effect.

 

(ii)           The Parent has heretofore furnished
to Administrative Agent and each Lender (A) projected quarterly balance
sheets, income statements and statements of cash flows of the Parent and its
Subsidiaries for the period from the Closing Date, through December 31,
2007, and (B) projected annual balance sheets, income statements and
statements of cash flows of the Parent and its Subsidiaries for the Fiscal
Years ending in 2006 through 2010, which projected financial statements shall
be updated from time to time pursuant to Section 7.01(a)(vii).  Such projections (and such projections as so
updated), shall be believed by the Parent at the time furnished to be
reasonable, shall have been prepared on a reasonable basis and in good faith by
the Parent, and shall have been based on assumptions believed by the Parent to
be reasonable at the time made and upon the best information then reasonably
available to the Parent, and the Parent shall not be aware of any facts or
information that would lead it to believe that such projections, as so updated,
are incorrect or misleading in any material respect, it being recognized,
however, that projections as to future events are not to be viewed as facts and
that the actual results during the period of periods covered by the projections
may differ from the projected results and that the differences may be material.

 

(h)                                 Compliance with Law, Etc.  No Loan Party is in violation of its
Organization Documents.  No Loan Party is
in violation of any law, rule, regulation, judgment or order of any
Governmental Authority applicable to it or any of its property or assets, or
any term of any agreement or instrument binding on or otherwise affecting it or
any of its properties, 

 

56

 

which violation could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.  No Default or
Event of Default has occurred and is continuing.

 

(i)            ERISA.  (i) Each Employee Benefit Plan is in
substantial compliance with ERISA and, to the extent applicable, qualifies for
favorable tax treatment under the Internal Revenue Code, (ii) no
Termination Event has occurred nor is reasonably expected to occur with respect
to any Employee Benefit Plan, (iii) the most recent annual report (Form 5500
Series) with respect to each Employee Benefit Plan, including any required
Schedule B (Actuarial Information) thereto, copies of which have been filed
with the Internal Revenue Service and delivered to the Administrative Agent, is
complete and correct and fairly presents the funding status of such Employee
Benefit Plan, and since the date of such report there has been no material
adverse change in such funding status, (iv) copies of each agreement
entered into with the PBGC, the U.S. 
Department of Labor or the Internal Revenue Service with respect to any
Employee Benefit Plan have been delivered to the Administrative Agent, (v) no
Employee Benefit Plan had an accumulated or waived funding deficiency or
permitted decrease which would create a deficiency in its funding standard
account or has applied for an extension of any amortization period within the
meaning of Section 412 of the Internal Revenue Code at any time during the
previous 60 months, and (vi) no Lien imposed under the Internal Revenue
Code or ERISA exists or is likely to arise on account of any Employee Benefit
Plan subject to Section 412 of the Internal Revenue Code.  No Loan Party or any of its ERISA Affiliates
has incurred any withdrawal liability under ERISA with respect to any
Multiemployer Plan, or is aware of any facts indicating that it or any of its
ERISA Affiliates would in the future incur any such withdrawal liability in the
event of a partial withdrawal or complete withdrawal from a Multiemployer
Plan.  No Loan Party or any of its ERISA
Affiliates nor any fiduciary of any Employee Benefit Plan has (i) engaged
in a nonexempt prohibited transaction described in Sections 406 of ERISA or
4975 of the Internal Revenue Code, (ii) failed to pay any required
installment or other payment required under Section 412 of the Internal
Revenue Code on or before the due date for such required installment or
payment, (iii) engaged in a transaction within the meaning of Section 4069
of ERISA or (iv) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid.  There are no pending or, to the best
knowledge of any Loan Party, threatened claims, actions, proceedings or
lawsuits (other than claims for benefits in the normal course) asserted or
instituted against (A) any Employee Benefit Plan or its assets, (B) any
fiduciary with respect to any Employee Benefit Plan, or (C) any Loan Party
or any of its ERISA Affiliates with respect to any Employee Benefit Plan.  Except as required by Section 4980B of
the Internal Revenue Code, no Loan Party or any of its ERISA Affiliates
maintains an employee welfare benefit plan (as defined in Section 3(1) of
ERISA) which provides health or welfare benefits (through the purchase of
insurance or otherwise) for any retired or former employee of any Loan Party or
any of its ERISA Affiliates or coverage after a participant’s termination of
employment.

 

(j)            Taxes, Etc.  Except as set forth on Schedule 6.01(j) hereto,
all Federal, and, to the extent material to the Parent and its Subsidiaries
taken as a whole, all other tax returns and other reports required by
applicable law to be filed by any Loan Party have been filed, or extensions
have been obtained, and all Federal and other material taxes, assessments and
other governmental charges imposed upon any Loan Party or any property of any
Loan Party and which have become due and payable on or prior to the date hereof
have been paid, except to the 

 

57

 

extent contested in good
faith by proper proceedings which stay the imposition of any penalty, fine or
Lien resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof on the Financial
Statements in accordance with GAAP and no notice of Lien has been filed or
recorded.  There is no proposed tax
assessment against the Parent or any of its Subsidiaries which would, if the
assessment were made, either individually or in the aggregate, have a Material
Adverse Effect.

 

(k)                                  Regulations T, U and X.  No Loan Party is or will be engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation T, U or X), and no proceeds of any Loan
will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock.

 

(l)                                     Nature of Business.  The Parent is not engaged in any business
other than, upon consummation of the Body Shop Acquisition, ownership of all of
the outstanding Capital Stock of the Borrowers and performance of obligations
of the Parent under any Loan Document or any Related Transaction Document, in each
case, including matters which are reasonably incidental thereto.  No other Loan Party nor any Subsidiary of any
other Loan Party is engaged in any business other than the business of being a
multi-channel retailer of primarily young women’s fashion apparel and
accessories, including, without limitation, shoes, through retail stores, the
internet and catalogue sales.

 

(m)                               Adverse Agreements, Etc.  No Loan Party is a party to any agreement or
instrument, or subject to any Organizational Document restriction or any
judgment, order, regulation, ruling or other requirement of a court or other
Governmental Authority, which has had, or in the future could reasonably be
expected to have, a Material Adverse Effect.

 

(n)                                 Permits, Etc.  Each Loan Party has, and is in compliance
with, all permits, licenses, authorizations, approvals, entitlements and
accreditations required for such Person lawfully to own, lease, manage or
operate, or to acquire, each business currently owned, leased, managed or
operated, or to be acquired, by such Person, other than those permits,
licenses, authorizations, entitlements and accelerations, the lack of which
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.  No
condition exists or event has occurred which, in itself or with the giving of
notice or lapse of time or both, would result in the suspension, revocation,
impairment, forfeiture or non-renewal of any such permit, license,
authorization, approval, entitlement or accreditation, and there is no claim
that any thereof is not in full force and effect, where such suspension,
revocation, impairment, forfeiture or non-renewal could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.

 

(o)                                 Properties.  (i) Each Loan Party has good and
marketable title to, valid leasehold interests in, or valid licenses to use,
all property and assets material to its business, free and clear of all Liens,
except Permitted Liens.  All such
properties and assets are in good working order and condition, ordinary wear
and tear excepted.

 

(ii)           Schedule 6.01(o) sets forth a
complete and accurate list, as of the Closing Date, of the location, by state
and street address, of all real property owned or 

 

58

 

leased
by each Loan Party.  As of the Closing
Date, each Loan Party has valid leasehold interests in the Leases described on
Schedule 6.01(o) to which it is a party. 
Each such Lease is valid and enforceable in accordance with its terms in
all material respects and is in full force and effect.  No consent or approval of any landlord or
other third party in connection with any such Lease is necessary for any Loan
Party to enter into and execute the Loan Documents or Related Transaction
Documents to which it is a party, except as set forth on Schedule 6.01(o).  To the best knowledge of any Loan Party, no
other party to any such Lease is in default of its obligations thereunder, and
no Loan Party (or any other party to any such Lease) has at any time delivered
or received any notice of default which remains uncured under any such Lease
and, as of the Closing Date, no event has occurred which, with the giving of
notice or the passage of time or both, would constitute a default under any
such Lease.

 

(p)                                 Full Disclosure.  Each Loan Party has disclosed to the
Administrative Agent all agreements, instruments and corporate or other
restrictions to which it 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.  None of the
other reports, financial statements, certificates or other information
furnished by or on behalf of any Loan Party to the Administrative Agent in
connection with the negotiation of this Agreement or delivered hereunder (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 it
was made, not misleading; provided that, with respect to projected
financial information, each Loan Party represents only that such information
was prepared in good faith based upon assumptions believed to be reasonable at
the time.  There is no contingent
liability or fact that may have a Material Adverse Effect which has not been
set forth in a footnote included in the Financial Statements or a Schedule
hereto.

 

(q)                                 Environmental Matters.  Except as could not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect:

 

(i)            Continued Compliance; Permits.  (A) The operations of each Loan Party
are in compliance with all Environmental Laws and (B) each Loan Party
holds all licenses, permits and approvals required under any Environmental Laws
in connection with the operation of its business, properties and facilities;

 

(ii)           No Hazardous Materials; No
Releases.  (A) No Hazardous
Materials are present at, on or under the facilities or properties owned or
operated by any Loan Party, its Subsidiaries or predecessor in interest in a
quantity or condition that violates any Environmental Law or could reasonably
be expected to give rise to liabilities or obligations under applicable Environmental
Laws; (B) no Releases have occurred at, on, under or from (1) any
properties or facilities owned or operated by any Loan Party, its Subsidiaries
or predecessor in interest or (2) any disposal or treatment facility which
received Hazardous Materials generated or otherwise handled by any Loan Party,
its Subsidiaries or any predecessor in interest; and (C) no underground or
aboveground storage tanks are or at any time were located at any properties or
facilities owned or operated by any Loan Party, its Subsidiaries or predecessor
in interest that are or were not 

 

59

 

properly
registered under applicable Environmental Laws or are or were leaking or
disposing Hazardous Materials;

 

(iii)          No Actions or Notices.  (A) No Environmental Action has been
asserted against any Loan Party, its Subsidiaries or any predecessor in
interest, (B) no Loan Party has knowledge or notice of any threatened or
pending Environmental Action (1) against any Loan Party, its Subsidiaries
or any predecessor in interest or (2) against any facilities that may have
received Hazardous Materials generated by any Loan Party, its Subsidiaries or
any predecessor in interest which could have a Material Adverse Effect; (C) no
Loan Party has received any notification pursuant to any Environmental Laws
that (1) any work, repairs, construction, or Response Actions are required to
maintain compliance with applicable Environmental Laws or any license, permit
or approval issued pursuant thereto which have not been completed or (2) any
license, permit or approval referred to above is about to be reviewed, made,
subject to limitations or conditions, revoked, withdrawn or terminated; and

 

(iv)          Other Events or Conditions.  No Loan Party or predecessor in interest has
knowledge or notice of any event, condition, occurrence, circumstances,
activities, practices, incidents or actions which could reasonably be expected
to interfere with or prevent continued compliance with applicable Environmental
Laws, give rise to any common law or statutory liability or otherwise form the
basis of any claim, action, suit, demand, hearing or investigation relating to
violations, requirements or obligations under Environmental Laws.

 

(r)                                    Insurance.  Each Loan Party keeps its property adequately
insured and maintains (i) insurance to such extent and against such risks,
including fire, as is customary with companies in the same or similar
businesses, (ii) worker’s compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include
product liability insurance, in the amount customary with companies in the same
or similar business against claims for personal injury or death on properties
owned, occupied or controlled by it, and (iv) such other insurance as may
be required by law or as may be reasonably required by the Administrative Agent
(including, without limitation, against larceny, embezzlement or other criminal
misappropriation).

 

(s)                                  Use of Proceeds.  The proceeds of the Loans shall be used to (a) refinance
the existing indebtedness under the Existing Credit Facility, (b) finance
in part the Body Shop Acquisition, (c) pay fees and expenses incurred in
connection with the Related Transactions, and (d) fund working capital and
other general corporate purposes of the Borrowers and their respective
Subsidiaries, including Permitted Acquisitions.

 

(t)                                    Solvency.  After giving effect to the transactions
contemplated by this Agreement and the Related Transaction Documents and before
and after giving effect to each Loan and Letter of Credit, each Loan Party is,
and the Loan Parties on a consolidated basis are, Solvent.

 

(u)                                 Intellectual Property.  Except as set forth on Schedule 6.01(u) hereto,
each Loan Party owns or licenses or otherwise has the right to use all
licenses, permits, patents, patent

 

60

 

applications, trademarks,
trademark applications, service marks, tradenames, copyrights, copyright
applications, franchises, authorizations, non-governmental licenses and permits
and other intellectual property rights that are necessary for the operation of
its business, without infringement upon or conflict with the rights of any
other Person with respect thereto, except for such infringements and conflicts
which, individually or in the aggregate, could not have a Material Adverse
Effect.  Set forth on Schedule 6.01(u) is
a complete and accurate list of all such material licenses, permits, patents,
patent applications, trademarks, trademark applications, service marks,
tradenames, copyrights, copyright applications, franchises, authorizations,
non-governmental licenses and permits and other intellectual property rights of
each Loan Party.  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 infringes
upon or conflicts with any rights owned by any other Person, and no claim or
litigation regarding any of the foregoing is pending or threatened, except for
such infringements and conflicts which could not have, individually or in the
aggregate, a Material Adverse Effect.  To
the best knowledge of each Loan Party, no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or proposed, which, individually or in the aggregate, could have a
Material Adverse Effect.

 

(v)           Holding Company and Investment
Company Acts.  None of the Loan
Parties is (i) subject to regulation under the Public Utility Holding
Company Act of 2005, the Federal Power Act, the Interstate Commerce Act or any
state public utilities code, or (ii) an “investment company” or an “affiliated
person” or “promoter” of, or “principal underwriter” of or for, an “investment
company”, as such terms are defined in the Investment Company Act of 1940, as
amended.

 

(w)          Employee and Labor Matters.  There is (i) no unfair labor practice
complaint pending or, to the best knowledge of any Loan Party, threatened
against any Loan Party before any Governmental Authority and no grievance or
arbitration proceeding pending or threatened against any Loan Party which
arises out of or under any collective bargaining agreement, (ii) no
strike, labor dispute, slowdown, stoppage or similar action or grievance
pending or threatened against any Loan Party, other than employee grievances
arising in the ordinary course of business which could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect or (iii) to the best knowledge of any Loan Party, no union
representation question existing with respect to the employees of any Loan
Party and no union organizing activity taking place with respect to any of the
employees of any Loan Party.  No Loan
Party has incurred any liability or obligation under the Worker Adjustment and
Retraining Notification Act (“WARN”) or similar state law, which remains
unpaid or unsatisfied.  The hours worked
and payments made to employees of any Loan Party have not been in violation of
the Fair Labor Standards Act or any other applicable legal requirements, except
to the extent such violations could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.  All material payments due from any Loan Party
on account of wages and employee health and welfare insurance and other
benefits have been paid or accrued as a liability on the books of such Loan
Party, except where the failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

61

 

(x)                                   Related Transactions.

 

(i)            Body Shop Acquisition.  The Parent has delivered to the
Administrative Agent a complete and correct copy of the Body Shop Acquisition
Agreement and all of the other Body Shop Acquisition Documents, including all
schedules and exhibits thereto.  The Body
Shop Acquisition Documents set forth the entire agreement and understanding of
the Parent, and to the knowledge of the Parent, the other parties thereto, in
each case relating to the subject matter thereof, and there are no other
material agreements, arrangements or understandings, written or oral, of the
Parent or any other Loan Party relating to the matters covered thereby.  The execution, delivery and performance of
the Body Shop Acquisition Documents has been duly authorized by all necessary
action (including, without limitation, the obtaining of any consent of
stockholders or other holders of Capital Stock required by law or by any
applicable corporate or other Organization Documents) on the part of each such
Person.  No authorization or approval or
other action by, and no notice to filing with or license from, any Governmental
Authority is required for such sale other than such as have been obtained on or
prior to the Closing Date.  Each of the representations
and warranties contained in the Body Shop Acquisition Agreement is true,
correct and complete

 

(ii)           Equity Documents.  The Parent has delivered to the
Administrative Agent a complete and correct copy of each of the Equity
Documents, including all schedules and exhibits thereto.

 

(iii)          Consummation of Body Shop
Acquisition.  All conditions
precedent to the Body Shop Acquisition Agreement have been fulfilled or (with
the prior written consent of the Administrative Agent) waived, the Acquisition
Agreement has not been amended or otherwise modified, and there has been no
breach of any material term or condition of the Acquisition Agreement.

 

ARTICLE 7.

COVENANTS OF THE LOAN PARTIES

 

Section 7.01.  Affirmative Covenants.  So long as any principal of or interest on
any Loan, Reimbursement Obligation, Letter of Credit Obligation or any other
Obligation (whether or not due) shall remain unpaid or any Lender shall have
any Commitment hereunder, each Loan Party will, unless the Required Lenders
shall otherwise consent in writing:

 

(a)                                  Reporting Requirements.  Furnish to Administrative Agent (which upon
receipt thereof shall furnish to each Lender):

 

(i)            as soon as available, and in any
event within one hundred twenty (120) days after the end of each Fiscal Year of
the Parent and its Subsidiaries, (A) consolidated and consolidating
balance sheets, income statements, and statements of retained earnings and cash
flows of the Parent and its Subsidiaries as at the end of such Fiscal Year,
setting forth in each case in comparative form the corresponding figures for
the immediately preceding Fiscal Year, all in reasonable detail and prepared in
accordance with GAAP, (B) a report and an unqualified opinion, prepared in
accordance with generally accepted auditing standards, of independent certified
public accountants of recognized standing selected by the Parent and
satisfactory to the Administrative Agent 

 

62

 

(which
opinion shall be without (1) a “going concern” or like qualification or
exception, (2) any qualification or exception as to the scope of such
audit, or (3) 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 be to cause any noncompliance with the provisions of Section 7.03),
and (C) a fully completed and duly executed Excess Cash Flow Certificate;

 

(ii)           (A) as soon as available, and in
any event within forty-five (45) days after the Closing Date, internally
prepared consolidated and consolidating balance sheets, income statements and
statements of retained earnings and cash flows as at the Closing Date, and for
the period commencing as of July 1, 2006, and ending with September 30,
2006; (B) as soon as available, and in any event within thirty (30) days after
the end of each fiscal month of the Parent and its Subsidiaries commencing on
or about October 31, 2006 (or, in the case of the first nine fiscal months
following the Closing Date, within forty five (45) days after such the end of
each such month) internally prepared consolidated and consolidating balance
sheets, income statements and statements of retained earnings and cash flows as
at the end of such fiscal month, and for the period commencing at the Closing
Date or the end of the immediately preceding Fiscal Year, as applicable, and
ending with the end of such fiscal month, in the case of each of the foregoing
clauses (A) and (B), setting forth in each case (to the extent figures for
such corresponding date or period are available) in comparative form the
figures for the corresponding date or period of the immediately preceding
Fiscal Year and corresponding figures from the most recent projections for the
current Fiscal Year all in reasonable detail and certified by an Authorized
Officer of the Parent as fairly presenting, in all material respects, the
financial position of the Parent and its Subsidiaries as at such date or the
end of such fiscal month, as the case may be, and the results of operations,
retained earnings and cash flows of the Parent and its Subsidiaries for such
period or fiscal month, as the case may be, in accordance with GAAP applied in
a manner consistent with that of the most recent audited financial statements
furnished to the Administrative Agent and the Lenders, subject to normal
year-end adjustments and the absence of footnote disclosures and accounting for
lease leveling and tenant allowances;

 

(iii)          simultaneously with the delivery of
the financial statements of the Parent and its Subsidiaries required by
subsections (i) and (ii) above, a Compliance Certificate;

 

(iv)          as soon as available and in any event
within fifteen (15) days after the end of each fiscal month or more frequently
as may reasonably be requested, by Administrative Agent, a Borrowing Base
Certificate;

 

(v)           within thirty (30) days after the end
of each Fiscal Year, financial projections for the succeeding Fiscal Year,
prepared on a monthly basis, and for the immediately succeeding two (2) Fiscal
Years thereafter, on an annual basis, in each instance, in form satisfactory to
the Administrative Agent, all such financial projections to be prepared on a
reasonable basis and in good faith, and to be based on assumptions believed by
the Parent to be reasonable at the time made and from the best information then
available to the Parent;

 

63

 

(vi)          as soon as possible, and in any event
within three (3) days after the occurrence of an Event of Default, the
written statement of an Authorized Officer of the Administrative Borrower
setting forth the details of such Event of Default or Default or other event or
development having a Material Adverse Effect and the action which the affected
Loan Party proposes to take with respect thereto;

 

(vii)         simultaneously with the delivery of the
financial statements of the Parent and its Subsidiaries required by subsection (ii) above
for the months of March, June, September and December, a management report
prepared in reasonable detail, signed by an Authorized Officer of
Administrative Borrower, describing the operations and financial condition of
the Parent and its Subsidiaries for the portion of the Fiscal Year then ended
and discussing the reasons for any significant variations from the most recent
projections for such Fiscal Year;

 

(viii)        as soon as possible and in any event
within ten (10) days after any Loan Party or any ERISA Affiliate thereof
knows or has reason to know that (1) any Reportable Event with respect to
any Employee Plan has occurred, (2) any other Termination Event with
respect to any Employee Plan has occurred, or (3) an accumulated funding
deficiency has been incurred or an application has been made to the Secretary
of the Treasury for a waiver or modification of the minimum funding standard
(including installment payments) or an extension of any amortization period
under Section 412 of the Internal Revenue Code with respect to an Employee
Plan, a statement of an Authorized Officer of the Administrative Borrower
setting forth the details of such occurrence and the action, if any, which such
Loan Party or such ERISA Affiliate proposes to take with respect thereto, (B) promptly
and in any event within three (3) days after receipt thereof by any Loan
Party or any ERISA Affiliate thereof from the PBGC, copies of each notice
received by any Loan Party or any ERISA Affiliate thereof of the PBGC’s
intention to terminate any Plan or to have a trustee appointed to administer
any Plan, (C) promptly and in any event within 10 days after the filing
thereof with the Internal Revenue Service if requested by Administrative Agent,
copies of each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) with respect to each Employee Plan and Multiemployer Plan, (D) promptly
and in any event within 10 days after any Loan Party or any ERISA Affiliate
thereof knows or has reason to know that a required installment within the
meaning of Section 412 of the Internal Revenue Code has not been made when
due with respect to an Employee Benefit Plan, (E) promptly and in any
event within 3 days after receipt thereof by any Loan Party or any ERISA
Affiliate thereof from a sponsor of a Multiemployer Plan or from the PBGC, a
copy of each notice received by any Loan Party or any ERISA Affiliate thereof
concerning the imposition or amount of withdrawal liability under Section 4202
of ERISA or indicating that such Multiemployer Plan may enter reorganization
status under Section 4241 of ERISA, and (F) promptly and in any event
within 10 days after any Loan Party sends notice of a plant closing or mass
layoff (as defined in WARN) to employees, copies of each such notice sent by
such Loan Party;

 

(ix)           promptly after the commencement
thereof but in any event not later than five (5) days after service of
process with respect thereto on, or the obtaining of knowledge thereof by, any
Loan Party, notice of each action, suit or proceeding before 

 

64

 

any
court or other Governmental Authority or other regulatory body or any
arbitrator which, if adversely determined, could reasonably be expected to have
a Material Adverse Effect;

 

(x)            as soon as possible and in any event
within five (5) days after execution, receipt or delivery thereof, copies
of any material notices that any Loan Party executes or receives in connection
with the sale or other Disposition of the Capital Stock of, or all or
substantially all of the assets of, any Loan Party (other than in connection
with the issuance of Capital Stock of the Parent to employees or officers of
any Loan Party pursuant to a stock purchase or option plan maintained by such
Loan Party);

 

(xi)           promptly after the sending or filing
thereof, copies of all statements, reports and other information any Loan Party
files with the SEC or any national (domestic or foreign) securities exchange;

 

(xii)          promptly upon receipt thereof, copies
of all financial reports (including, without limitation, management letters),
if any, submitted to any Loan Party by its auditors in connection with any
annual or interim audit of the books thereof; and

 

(xiii)         promptly upon request, such other
information concerning the condition or operations, financial or otherwise, of
any Loan Party as Administrative Agent may from time to time reasonably
request.

 

(b)                                 Compliance with Laws, Etc.  (i) Comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and orders
(including, without limitation, all Environmental Laws) and all contractual
obligations, except to the extent noncompliance could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect, and (ii) pay and cause each of its Subsidiaries to pay, before the same
become delinquent all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any of its properties,
and all lawful claims which if unpaid might become a Lien or charge upon any of
its properties, except to the extent contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which adequate reserves have
been set aside for the payment thereof in accordance with GAAP.

 

(c)                                  Preservation of Existence, Etc.  Subject to the provisions of Section 7.02(c),
maintain and preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or remain, and cause
each of its Subsidiaries to become or remain, duly qualified and in good
standing in each jurisdiction in which the character of the properties owned or
leased by it or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified and in
good standing could not reasonably be expected to have, either individually, or
in the aggregate, a Material Adverse Effect.

 

(d)                                 Keeping of Records and Books of Account.  Keep, and cause each of its Subsidiaries to
keep, adequate records and books of account, with complete entries made to
permit the preparation of financial statements in accordance with GAAP.

 

65

 

(e)           Inspection Rights.  Permit, and cause each of its Subsidiaries to
permit, the Administrative Agent and representatives and agents of
Administrative Agent at any time and from time to time during normal business
hours and upon reasonable notice, at the expense of the Borrower (not to exceed
one (1) time per year unless an Event of Default has occurred and is
continuing), to examine and make copies of and abstracts from its records and
books of account, to visit and inspect its properties, to verify materials,
leases, notes, accounts receivable, deposit accounts and its other assets, to
conduct audits, physical counts, valuations, appraisals, Phase I Environmental
Site Assessments with respect to real property owned by a Loan Party (and, if
requested by the Administrative Agent based upon the results of any such Phase
I Environmental Site Assessment, a Phase II Environmental Site Assessment) or
examinations and to discuss its affairs, finances and accounts with any of its
directors, officers, managerial employees, independent accountants or any of
its other representatives. 
Representatives of each Lender will be permitted to accompany
Administrative Agent and its representatives and agents at such Lender’s
expense unless an Event of Default has occurred and is continuing, in which
event at Borrowers’ expense.  In
furtherance of the foregoing, each Loan Party hereby authorizes its independent
accountants, and the independent accountants of each of its Subsidiaries, to
discuss the affairs, finances and accounts of such Person (independently or
together with representatives of such Person) with the Administrative Agent and
representatives and agents of Administrative Agent in accordance with this Section 7.01(e).

 

(f)            Maintenance of Properties, Etc.  Maintain and preserve, and cause each of its
Subsidiaries to maintain and preserve, all of its properties which are necessary
or useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted.

 

(g)           Maintenance of Insurance.  Maintain, and cause each of its Subsidiaries
to maintain, insurance with responsible and reputable insurance companies or
associations (including, without limitation, comprehensive general liability,
hazard, rent and business interruption insurance) with respect to its
properties (including all real properties leased or owned by it) and business,
in such amounts and covering such risks as is required by any Governmental
Authority having jurisdiction with respect thereto and as is carried generally
in accordance with sound business practice by companies in similar businesses
similarly situated and such other insurance in amount, adequacy and scope
reasonably satisfactory to the Administrative Agent.  All policies covering the Collateral are to
be made payable to the Administrative Agent for the benefit of the Administrative
Agent and the Lenders, as its interests may appear, in case of loss, under a
standard non-contributory “lender” or “secured party” clause and are to contain
such other provisions as the Administrative Agent may reasonably require to
fully protect the Lenders’ interest in the Collateral and to any payments to be
made under such policies.  All
certificates of insurance are to be delivered to the Administrative Agent and
the policies are to be premium prepaid, with the loss payable and additional insured
endorsement in favor of the Administrative Agent and such other Persons as the
Administrative Agent may designate from time to time, and shall provide for not
less than 30 days’ prior written notice to the Administrative Agent of the
exercise of any right of cancellation. 
If any Loan Party or any of its Subsidiaries fails to maintain such
insurance, the Administrative Agent may arrange for such insurance, but at the
Borrowers’ expense and without any responsibility on the Administrative Agent’s
part for obtaining the insurance, the solvency of the insurance companies, the
adequacy of the coverage, or the collection of claims.  Upon the occurrence and during the
continuance of 

 

66

 

an Event of Default, the
Administrative Agent shall have the sole right, in the name of the Lenders, any
Loan Party and its Subsidiaries, to file claims under any insurance policies,
to receive, receipt and give acquittance for any payments that may be payable
thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies.

 

(h)                                 Obtaining of Permits, Etc.  Obtain, maintain and preserve, and cause each
of its Subsidiaries to obtain, maintain and preserve, and take all necessary
action to timely renew, all permits, licenses, authorizations, approvals,
entitlements and accreditations which are necessary or useful in the proper
conduct of its business, except for such permits, licenses, authorizations,
approvals, entitlements and accreditations, the lack of which could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.

 

(i)                                     Environmental.  (i) Keep any property either owned or
operated by it or any of its Subsidiaries free of any Environmental Liens; (ii) comply,
and cause each of its Subsidiaries to comply in all material respects with
Environmental Laws and provide to the Administrative Agent any documentation of
such compliance which the Administrative Agent may reasonably request; (iii) provide
the Administrative Agent written notice within five (5) days of any Loan
Party’s first obtaining knowledge of any Release of a Hazardous Material in
excess of any reportable quantity from or onto property at any time owned or
operated by it or any of its Subsidiaries and take any Response Actions
required to abate or otherwise respond to such Release in accordance with
applicable Environmental Laws; (iv) provide the Administrative Agent full
access to any property or facility subject to an Environmental Action or
Response Action and any documentation or other information related thereto; (v) provide
the Administrative Agent with written notice within ten (10) days of the
receipt of any of the following: (A) notice that an Environmental Lien has
been filed against any property of any Loan Party or any of its Subsidiaries; (B) commencement
of any Environmental Action or notice that an Environmental Action will be
filed against any Loan Party or any of its Subsidiaries; and (C) notice of
any Response Action, claim, violation, citation, demand or order pursuant to
Environmental Laws, in each case, which could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

 

(j)                                     Further Assurances.

 

(i)            Take such action and execute,
acknowledge and deliver, and cause each of its Subsidiaries to take such action
and execute, acknowledge and deliver, at its sole cost and expense, such
agreements, instruments or other documents as Administrative Agent may
reasonably require from time to time in order (A) to carry out more
effectively the purposes of this Agreement and the other Loan Documents, (B) to
subject to valid and perfected first priority Liens any of the Collateral or
any other property of any Loan Party and its Subsidiaries (other than real
property that does not constitute Material Owned Real Property), (C) to
establish and maintain the validity and effectiveness of any of the Loan
Documents and the validity, perfection and priority of the Liens intended to be
created thereby, and (D) to convey, grant, assign, transfer and confirm
unto Administrative Agent, each Lender and the L/C Issuer the rights now or
hereafter intended to be granted to it under this Agreement or any other Loan
Document.  

 

67

 

In
furtherance of the foregoing, to the maximum extent permitted by applicable
law, each Loan Party authorizes Administrative Agent to file any financing
statement required hereunder or under any other Loan Document, and any
continuation statement or amendment with respect thereto, in any appropriate
filing office without the signature of such Loan Party, and (iii) ratifies
the filing of any financing statement, and any continuation statement or
amendment with respect thereto, filed without the signature of such Loan Party
prior to the date hereof.

 

(ii)           Cause each Subsidiary of any Loan
Party not in existence on the Closing Date, to execute and deliver to the
Administrative Agent promptly and in any event within five (5) Business
Days after the formation, acquisition or change in status thereof (A) a
Guaranty guaranteeing the Obligations, (B) a Security Agreement, (C) if
such Subsidiary has any Subsidiaries, a Pledge Agreement together with (x) certificates
evidencing all of the Capital Stock of any Person owned by such Subsidiary, (y) undated
stock powers executed in blank with signature guaranteed, and (z) such
opinion of counsel and such approving certificate of such Subsidiary as the
Administrative Agent may reasonably request in respect of complying with any
legend on any such certificate or any other matter relating to such shares, (D) if
such real property constitutes Material Real Property, one or more Mortgages
creating on the real property of such Subsidiary owned in fee a perfected,
first priority Lien on such real property, a Title Insurance Policy covering
such real property, a current ALTA survey thereof and a surveyor’s certificate,
each in form and substance reasonably satisfactory to the Administrative Agent,
together with such other agreements, instruments and documents as the
Administrative Agent may require whether comparable to the documents required
under Section 7.01(k) or otherwise, and (E) such other
agreements, instruments, approvals, legal opinions or other documents
reasonably requested by the Administrative Agent in order to create, perfect,
establish the first priority of or otherwise protect any Lien purported to be
covered by any such Security Agreement, Pledge Agreement or Mortgage or
otherwise to effect the intent that such Subsidiary shall become bound by all
of the terms, covenants and agreements contained in the Loan Documents and that
all property and assets of such Subsidiary shall become Collateral for the
Obligations; and

 

(iii)          Cause each owner of the Capital Stock
of any such Subsidiary to execute and deliver promptly and in any event within
five (5) Business Days after the formation or acquisition of such
Subsidiary a Pledge Agreement, together with (A) certificates evidencing all of
the Capital Stock of such Subsidiary, (B) undated stock powers or other
appropriate instruments of assignment executed in blank with signature
guaranteed, (C) such opinion of counsel and such approving certificate of
such Subsidiary as the Administrative Agent may reasonably request in respect
of complying with any legend on any such certificate or any other matter
relating to such shares and (D) such other agreements, instruments,
approvals, legal opinions or other documents requested by the Administrative
Agent.

 

provided,
that, notwithstanding any term or provision to the contrary contained in the
foregoing or elsewhere in this Agreement or under any other Loan Document, with
respect to any Loan Party that is a United States person (as such term is
defined in Section 7701(a)(30) of the Internal Revenue Code), (a) no “controlled
foreign corporation” (within the meaning of Section 957 of 

 

68

 

the Internal Revenue Code) of such Loan Party shall
guarantee the obligations of, or pledge any of its assets as security for the
obligations of, any Loan Party and (b) not more than 65% of the voting
stock or other voting equity interests of any controlled foreign corporation of
any Loan Party shall be pledged as security for the obligations of any Loan
Party.

 

(k)                                  After Acquired Real Property.

 

(i)            Owned Real Property.  Upon the acquisition by it or any of its
Subsidiaries after the date hereof of any fee interest in any real property
(wherever located) that constitutes Material Owned Real Property (each such
interest being an “After Acquired Owned Property”), immediately so
notify the Administrative Agent, setting forth with specificity a description
of the interest acquired, the location of the real property, the nature of the
business to be conducted thereat and the approximate fair market value of the
Collateral to be located thereon.  With
respect to any After Acquired Owned Real Property, the Administrative Agent
shall notify such Loan Party whether it intends to require a Mortgage and the
other documents referred to below.  Upon
receipt of such notice requesting a Mortgage, the Person which has acquired
such After Acquired Owned Real Property shall immediately furnish to the
Administrative Agent the following, each in form and substance satisfactory to
the Administrative Agent: (i) a Mortgage with respect to such real
property and related assets located at the After Acquired Owned Property, each
duly executed by such Person and in recordable form; (ii) evidence of the
recording of the Mortgage referred to in clause (i) above in such office
or offices as may be necessary or, in the opinion of the Administrative Agent,
desirable to create and perfect a valid and enforceable first priority lien on
the property purported to be covered thereby or to otherwise protect the rights
of the Administrative Agent and the Lenders thereunder; (iii) a Title
Insurance Policy; (iv) a current ALTA survey of such real property,
certified to the Administrative Agent and to the issuer of the Title Insurance
Policy by a licensed professional surveyor reasonably satisfactory to the
Administrative Agent, and containing a flood plain certification; (v) Phase
I Environmental Site Assessments with respect to such real property, certified
to the Administrative Agent by a company reasonably satisfactory to the
Administrative Agent; and (viii) such other documents or instruments
(including guarantees and opinions of counsel) as the Administrative Agent may
reasonably require.

 

(ii)           Leased Real Property.  Upon the acquisition by it or any of its
Subsidiaries after the date hereof of any lease interest in any real property
(wherever located) that constitutes Material Leased Real Property (each such
interest being an “After Acquired Leased Real Property”), immediately so
notify the Administrative Agent, setting forth with specificity a description
of the interest acquired, the location of the leased real property, the nature
of the business to be conducted thereat and the approximate fair market value
of the Collateral to be located thereon. 
Concurrently with such notification the Person which has acquired such
After Acquired Leased Real Property shall furnish to the Administrative Agent (i)
a certified copy of the lease between the landlord and such Person with respect
to such After Acquired Leased Real Property and (ii) a landlord waiver and
collateral access agreement in form and substance reasonably satisfactory to
the Administrative Agent executed by such landlord.

 

69

 

(l)                                     Fiscal Year.  Cause the Fiscal Year of the Parent and its
Subsidiaries to end on the Saturday closing to December 31st of each
calendar year unless the Administrative Agent consents to a change in such
Fiscal Year (and appropriate related changes to this Agreement).

 

Section 7.02.  Negative Covenants.  So long as any principal of or interest on
any Loan, Reimbursement Obligation, Letter of Credit Obligation or any other
Obligation (whether or not due) shall remain unpaid or any Lender shall have
any Commitment hereunder, no Loan Party shall, unless the Required Lenders
shall otherwise consent in writing:

 

(a)                                  Liens, Etc.  Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Lien upon or with respect to any of its properties, whether now owned or
hereafter acquired; file or suffer to exist under the Uniform Commercial Code
or any similar law or statute of any jurisdiction, a financing statement (or
the equivalent thereof) that names it or any of its Subsidiaries as debtor;
sign or suffer to exist any security agreement authorizing any secured party
thereunder to file such financing statement (or the equivalent thereof); sell
any of its property or assets subject to an understanding or agreement,
contingent or otherwise, to repurchase such property or assets (including sales
of accounts receivable) with recourse to it or any of its Subsidiaries or
assign or otherwise transfer, or permit any of its Subsidiaries to assign or
otherwise transfer, any account or other right to receive income; other than,
as to all of the above, Permitted Liens.

 

(b)                                 Indebtedness.  Create, incur, assume, guarantee or suffer to
exist, or otherwise become or remain liable with respect to, or permit any of
its Subsidiaries to create, incur, assume, guarantee or suffer to exist or
otherwise become or remain liable with respect to, any Indebtedness other than
Permitted Indebtedness.

 

(c)                                  Fundamental Changes; Dispositions.  Wind-up, liquidate or dissolve, or merge,
consolidate or amalgamate with any Person, or convey, sell, lease or sublease,
transfer or otherwise dispose of, whether in one transaction or a series of
related transactions, all or any part of its business, property or assets,
whether now owned or hereafter acquired (or agree to do any of the foregoing),
or purchase or otherwise acquire, whether in one transaction or a series of
related transactions, all or substantially all of the assets of any Person (or
any division thereof) (or agree to do any of the foregoing), or permit any of
its Subsidiaries to do any of the foregoing; provided,
however, that

 

(i)            any wholly-owned Subsidiary of the
Parent may be merged, liquidated or wound up into another wholly-owned
Subsidiary of the Parent, or may consolidate with another wholly-owned
Subsidiary of the Parent, so long as (A) no other provision of this Agreement
would be violated thereby, (B) such Loan Party gives the Administrative
Agent at least 10 days’ prior written notice of such merger or consolidation, (C) no
Event of Default shall have occurred and be continuing either before or after
giving effect to such transaction, (D) the Lenders’ rights in any
Collateral, including, without limitation, the existence, perfection and
priority of any Lien thereon, are not adversely affected by such merger or
consolidation and (E) if a Borrower is a party to any such merger or
consolidation, a Borrower is the surviving or continuing entity and, if a
Borrower is not a party, the surviving Subsidiary, if any, is joined as a 

 

70

 

Loan
Party hereunder and is a party to a Guaranty and a Security Agreement and the
Capital Stock of which Subsidiary is the subject of a Pledge Agreement, in each
case, which is in full force and effect on the date of and immediately after
giving effect to such merger or consolidation; and

 

(ii)           any Loan Party and its Subsidiaries
may (A) sell Inventory in the ordinary course of business, (B) dispose of
obsolete or worn-out equipment in the ordinary course of business, and (C) sell
or otherwise dispose of other property or assets for cash in an aggregate
amount not less than the fair market value of such property or assets, provided
that the Net Cash Proceeds of such Dispositions in the case of clause (C) above
(x) do not exceed $1,000,000 in the aggregate in any twelve-month period
and (y) are paid to the Administrative Agent for the benefit of the
Lenders pursuant to the terms of Section 2.05(c)(iii) to the extent
required by such Section;

 

(iii)          Permitted Acquisitions may be
consummated; and

 

(iv)          the Body Shop Acquisition may be
consummated.

 

(d)                                 Change in Nature of Business.  Make, or permit any of its Subsidiaries to
make, any change in the nature of its business as described in Section 6.01(1).

 

(e)                                  Loans, Advances, Investments, Etc.  Make or commit or agree to make
any loan, advance guarantee of obligations, other extension of credit or
capital contributions to, or hold or invest in or commit or agree to hold or
invest in, or purchase or otherwise acquire or commit or agree to purchase or
otherwise acquire any shares of the Capital Stock, bonds, notes, debentures or
other securities of, or make or commit or agree to make any other investment
in, any other Person, or purchase or own any futures contract or otherwise
become liable for the purchase or sale of currency or other commodities at a
future date in the nature of a futures contract, or permit any of its Subsidiaries
to do any of the foregoing, except for: (i) investments existing on the
date hereof, as set forth on Schedule 7.02(e) hereto, but not any increase
in the amount thereof as set forth in such Schedule or any other modification
of the terms thereof, (ii) loans and advances by Borrowers to Subsidiaries
of Borrowers which are Loan Parties and by such.  Subsidiaries to other Subsidiaries which are
Loan Parties, in each case made in the ordinary course of business, (iii) loans
and advances by Borrowers to employees for moving, entertainment, travel and
other similar expenses in the ordinary course of business not to exceed
$500,000 in the aggregate at any time outstanding, (iv) obligations of
officers and employees of any Loan Party in connection with such officers’ and
employees’ acquisition of shares of Capital Stock of the Parent (so long as no
cash is actually advanced or otherwise exchanged by any Loan Party in
connection with the acquisition of such obligations) not to exceed $1,000,000
in the aggregate at any time outstanding, (v) investments constituting
Permitted Acquisitions, (vi) Permitted Investments, (vii) other such
loans, advances, guarantees of obligations, extensions of credit, capital
contributions, investments and commitments, in each in addition to those
permitted pursuant to foregoing clauses (i) through and including (vi) not
to exceed $500,000 in the aggregate at any time outstanding., and (viii) investments
with respect to and to the extent required in connection with a Hedging Agreement
required under Section 5.02(n).

 

71

 

(f)                                    Restricted Payments.  Declare, make or pay, or permit any of its
Subsidiaries to declare, make or pay, any Restricted Payments; provided,
that, following consummation of the Body Shop Acquisition and effectiveness of
the Closing Date Joinder Agreement

 

(i)                                     Borrowers may make payments and distributions to the Parent that are
used by the Parent to pay (x) federal and state income taxes then due and owing
by the Parent, and (y) franchise taxes and other similar licensing
expenses and other customary holding company costs and expenses, in each case
to the extent then due and owing by Parent and incurred by Parent in the
ordinary course of business; provided that the Borrowers’ aggregate
contribution to taxes as a result of the filing of a consolidated or combined
return by the Parent shall not be greater, nor the aggregate receipt of tax
benefits less, than they would have been had such Borrowers not filed a
consolidated or combined return with the Parent;

 

(ii)                                  any Subsidiary of the Borrowers may pay dividends to the Borrowers or
any wholly-owned Subsidiary of the Borrowers that is a Loan Party;

 

(iii)                               so long as such issuance does not result in a Change of Control, the
Parent may pay dividends in the form of Capital Stock;

 

(iv)                              Borrowers may pay regularly scheduled payments of a management fee
pursuant to a management agreement entered into after the Closing Date, in form
and substance reasonably satisfactory to Administrative Agent; provided however
that payments in respect of such management fee shall not exceed $500,000 in
the aggregate in any calendar year; and provided,
further that no such fees shall be paid
during any period while an Event of Default has occurred and is continuing or
would arise as a result of such payment or, in any event, in respect of any
fiscal year ending prior to the fiscal year in which such a management
agreement is entered into;

 

(v)                                 the Body Shop Acquisition may be consummated;

 

(vi)                              the Parent may issue Redemption Notes, provided, that, at the
time of issuance thereof, no Default or Event of Default has occurred and is
continuing or would arise as a result of such Restricted Payment; and

 

(vii)                           Borrowers may make Restricted Payments to the Parent which are
immediately used by the Parent (i) to make cash interest and principal payments
in respect of Redemption Notes, and (ii) upon the death, permanent
disability or termination of employment or term of office, as the case may be,
of an employee or officer of any Loan Party, to redeem or repurchase from such
Persons shares of the Parent common stock or warrants or options to acquire any
such shares provided all of the following conditions are satisfied:

 

(A)          no Default or Event of Default has
occurred and is continuing or would arise as a result of such Restricted
Payments;

 

72

 

(B)           after giving effect to such
Restricted Payment Borrowers are in compliance on a pro forma basis with the
covenants set forth in Section 7.03, recomputed for the most recent month
for which financial statements have been delivered;

 

(C)           the aggregate amount of all such
Restricted Payments permitted (x) in any Fiscal Year of Borrowers shall
not exceed $2,500,000 and (y) during the term of this Agreement shall not
exceed $5,000,000; and

 

(D)          after giving effect to such Restricted
Payment, Availability exceeds $5,000,000.

 

(viii)                        Borrowers may make a one-time payment to any applicable Seller with
respect to tax liabilities relating to pre-closing operations of Borrowers in
such amounts and at such times, in each case, as shall be required pursuant to Section 10.2(d)
of the Body Shop Acquisition Agreement; provided that no Default or Event of
Default has occurred and is continuing or would arise as a result of any such
payment; and provided further that the aggregate amount of all such payments to
Sellers shall not exceed $2,000,000.

 

(g)                                 Federal Reserve Regulations.  Permit any Loan or the proceeds of any Loan
under this Agreement to be used for any purpose that would cause such Loan to
be a margin loan under the provisions of Regulation T, U or X of the Board.

 

(h)                                 Transactions with Affiliates.  Enter into, renew, extend or be a party to,
or permit any of its Subsidiaries to enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease, transfer or exchange of property or
assets of any kind or the rendering of services of any kind) with any
Affiliate, except (i) in the ordinary course of business in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent
operation of its business, for fair consideration and on terms no less
favorable to it or its Subsidiaries than would be obtainable in a comparable
arm’s length transaction with a Person that is not an Affiliate thereof,
(ii) transactions with another Loan Party or Affiliate permitted pursuant
to another provision of this Agreement and (iii) transactions identified
on Schedule 7.02(h).

 

(i)                                     Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries.  Create or otherwise cause, incur, assume,
suffer or permit to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any Subsidiary of any Loan Party (i) to
pay dividends or to make any other distribution on any shares of Capital Stock
of such Subsidiary owned by any Loan Party or any of its Subsidiaries, (ii) to
pay or prepay or to subordinate any Indebtedness owed to any Loan Party or any
of its Subsidiaries, (iii) to make loans or advances to any Loan Party or
any of its Subsidiaries or (iv) to transfer any of its property or assets
to any Loan Party or any of its Subsidiaries, or permit any of its Subsidiaries
to do any of the foregoing; provided, however, that nothing in any of clauses (i) through
(iv) of this Section 7.02(i) shall prohibit or restrict
compliance with:

 

(A)          this Agreement and the other Loan
Documents;

 

73

 

(B)           any agreements in effect on the date
of this Agreement and described on Schedule 7.02(i);

 

(C)           any applicable law, rule or
regulation (including, without limitation, applicable currency control laws and
applicable state corporate statutes restricting the payment of dividends in
certain circumstances);

 

(D)          in the case of clause (iv) any
agreement setting forth customary restrictions on the subletting, assignment or
transfer of any property or asset that is a lease, license, conveyance or
contract of similar property or assets; or

 

(E)           in the case of clause (iv) any
agreement, instrument or other document evidencing a Permitted Lien from
restricting on customary terms the transfer of any property or assets subject
thereto.

 

(j)            Modifications of Indebtedness,
Organization Documents and Certain Other Agreements; Etc.  (i) Amend, modify or otherwise change
(or permit the amendment, modification or other change in any mariner of) any
of the provisions of any of its or its Subsidiaries’ Indebtedness or of any
instrument or agreement (including, without limitation, any purchase agreement,
indenture, loan agreement or security agreement) relating to any such
Indebtedness if such amendment, modification or change would (A) increase the
interest rate on such Indebtedness by more than 200 basis points; (B) accelerate
the dates upon which payments of principal or interest are due on, or increase
the principal amount of, such Indebtedness; (C) change in a manner adverse
to the Parent or any of its Subsidiaries any event of default or add or make
more restrictive any covenant with respect to such Indebtedness; (D) change in
a manner adverse to the Parent or any of its Subsidiaries the prepayment,
redemption or put provisions of such Indebtedness; (E) change the
subordination provisions thereof (or the subordination terms of any guaranty
thereof), if any; or (F) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Indebtedness in a manner
adverse to the Parent, any of its Subsidiaries or Lenders, (ii) except as
permitted by Section 7.02(c), amend, modify or otherwise change its name,
jurisdiction of organization, organizational identification number or FEIN or (iii) amend,
modify or otherwise change any of its Organization Documents, or any agreement
or arrangement entered into by it, with respect to any of its Capital Stock
(including any shareholders’ agreement), or enter into any new agreement with
respect to any of its Capital Stock, except any such amendments, modifications
or changes or any such new agreements or arrangements pursuant to this clause (iii) that
either individually or in the aggregate, are not adverse to Administrative
Agent and Lenders and could not reasonably be expected have a Material Adverse
Effect.

 

(k)           Investment Company Act of 1940.  Engage in any business, enter into any
transaction, use any securities or take any other action or permit any of its
Subsidiaries to do any of the foregoing, that would cause it or any of its
Subsidiaries to become subject to the registration requirements of the
Investment Company Act of 1940, as amended, by virtue of being an “investment
company” or a company “controlled” by an “investment company” not entitled to
an exemption within the meaning of such Act.

 

74

 

(l)                                     ERISA.  (i) Engage, or permit any ERISA
Affiliate to engage, in any transaction described in Section 4069 of
ERISA; (ii) engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction described in Section 406 of ERISA or 4975 of the
Internal Revenue Code for which a statutory or class exemption is not available
or a private exemption has not previously been obtained from the U.S.
Department of Labor; (iii) adopt or permit any ERISA Affiliate to adopt
any employee welfare benefit plan within the meaning of Section 3(1) of
ERISA which provides benefits to employees after termination of employment
other than as required by Section 601 of ERISA or applicable law; (iv) fail
to make any contribution or payment to any Multiemployer Plan which it or any
ERISA Affiliate may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto; (v) fail, or permit any
ERISA Affiliate to fail, to pay any required installment or any other payment
required under Section 412 of the Internal Revenue Code on or before the
due date for such installment or other payment; or (vi) fail to comply, or
permit any ERISA Affiliate to fail to comply, with any requirement of ERISA, if
such failure could reasonably be expected to result in, either individually or
in the aggregate, a Material Adverse Effect.

 

(m)                               Environmental.  Permit the use, handling, generation,
storage, transportation, treatment, Release or disposal of Hazardous Materials
at any property owned or leased by it or any of its Subsidiaries or
predecessors in interest, except to the extent that permitting any of the
foregoing activities could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect

 

(n)                                 Contingent Obligations.  Create or become or be liable for, or permit
any Subsidiary to create or become or be liable for any Contingent Obligation
other than:

 

(i)            those resulting from endorsement of
negotiable instruments for collection in the ordinary course of business;

 

(ii)           those existing on the Closing Date
and described in Schedule 7.02(n) hereto;

 

(iii)          those arising under indemnity
agreements to title insurers to cause such title insurers to issue to
Administrative Agent Title Insurance Policies;

 

(iv)          those arising with respect to
customary indemnification obligations incurred in connection with Dispositions
permitted hereunder;

 

(v)           those incurred in the ordinary course
of business with respect to surety and appeal bonds, performance and
return-of-money bonds and other similar obligations;

 

(vi)          those incurred in respect of
performance-based rental payments under real property operating leases entered
into in the ordinary course of business;

 

(vii)         those resulting from any unsecured
obligations to related to any Hedging Agreements to the extent required
pursuant to Sec ion 5.02(n); and

 

75

 

(viii)        other Contingent Obligations not
permitted by clauses (i) through (v) above, not to exceed $500,000 in
the aggregate at any time outstanding.

 

Section 7.03.  Financial Covenants.  So long as any principal of or interest on
any Loan, Reimbursement Obligation, Letter of Credit Obligation or any other
Obligation (whether or not due) shall remain unpaid or any Lender shall have
any Commitment hereunder, each Loan Party shall not, unless the Required
Lenders shall otherwise consent in writing:

 

(a)                                  Senior Leverage Ratio.  Permit the Senior Leverage Ratio of the
Parent and its Subsidiaries as of the end of any period of four (4) consecutive
fiscal quarters of the Parent and its Subsidiaries ending on or about any date
set forth below to be greater than the applicable ratio set forth below:

 

	
  Fiscal Quarter End

  	
   

  	
  Senior Leverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2006

  	
   

  	
  3.15

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2007

  	
   

  	
  3.15

  	
   

  
	
  June 30, 2007

  	
   

  	
  3.15

  	
   

  
	
  September 30, 2007

  	
   

  	
  3.15

  	
   

  
	
  December 31, 2007

  	
   

  	
  2.60

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2008

  	
   

  	
  2.50

  	
   

  
	
  June 30, 2008

  	
   

  	
  2.40

  	
   

  
	
  September 30, 2008

  	
   

  	
  2.30

  	
   

  
	
  December 31, 2008

  	
   

  	
  2.10

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2009

  	
   

  	
  2.00

  	
   

  
	
  June 30, 2009

  	
   

  	
  1.90

  	
   

  
	
  September 30, 2009

  	
   

  	
  1.80

  	
   

  
	
  December 31, 2009 and each fiscal quarter thereafter

  	
   

  	
  1.75

  	
   

  

 

(b)                                 Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage Ratio of the
Parent and its Subsidiaries for any period of four (4) consecutive fiscal
quarters ending on or about any date set forth below to be less than the
applicable ratio set forth opposite such date:

 

	
  Fiscal Quarter End

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2006

  	
   

  	
  1.05

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2007

  	
   

  	
  1.05

  	
   

  
	
  June 30, 2007

  	
   

  	
  1.05

  	
   

  
	
  September 30, 2007

  	
   

  	
  1.05

  	
   

  
	
  December 31, 2007

  	
   

  	
  1.05

  	
   

  

 

76

 

	
  Fiscal Quarter End

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31, 2008 and each fiscal quarter thereafter

  	
   

  	
  1.10

  	
   

  

 

(c)                                  Capital Expenditures.

 

(i)            Make or commit or agree to make, or
permit any of its Subsidiaries to make or commit or agree to make, any Point of
Sale Capital Expenditure (by purchase or Capitalized Lease) that would cause
the aggregate amount of all Point of Sale Capital Expenditures made by the
Parent and its Subsidiaries to exceed $3,000,000; or

 

(ii)           Make or commit or agree to make, or
permit any of its Subsidiaries to make or commit or agree to make, any Capital
Expenditure (other than a Point of Sale Capital Expenditure (by purchase or
Capitalized Lease) that would cause the aggregate amount of all Capital
Expenditures (other than Point of Sale Capital Expenditures) made by the Parent
and its Subsidiaries to exceed (A) $2,500,000 for the six month period
ended December 30, 2006, and (B) the amount set forth below for such
Fiscal Year ending on or about (the amount set forth below with respect to any
Fiscal Year being the “Capital Expenditure Limit” for such Fiscal Year):

 

	
  Fiscal Year End

  	
   

  	
  Maximum Capital

  Expenditures

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  4,400,000

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  5,650,000

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  5,200,000

  	
   

  
	
  December 31, 2010 and for each Fiscal Year thereafter

  	
   

  	
  $

  	
  5,000,000

  	
   

  

 

Notwithstanding the foregoing, in the event the
Parent and its Subsidiaries do not expend the entire Capital Expenditure Limit
on Capital Expenditures (other than Point of Sale Capital Expenditures) in any
Fiscal Year, the Parent and its Subsidiaries may carry forward to the
immediately succeeding Fiscal Year 50% of the unutilized portion of the Capital
Expenditure Limit to expend on Capital Expenditures (other than Point of Sale
Capital Expenditures) in such Fiscal Year. 
All Capital Expenditures (other than Point of Sale Capital Expenditures)
made by the Parent and its Subsidiaries shall first be applied to reduce the
applicable Capital Expenditure Limit and then to reduce the carry forward from
the previous Fiscal Year, if any.

 

ARTICLE 8.

EVENTS OF DEFAULT

 

Section 8.01.  Events of Default.  If any of the following Events of Default
shall occur and be continuing:

 

(a)                                  the Borrowers shall fail to pay (i) any principal of any Loan or
any Reimbursement Obligation when due (whether by scheduled maturity, required
repayment, 

 

77

 

acceleration or otherwise)
or (ii) within five (5) days after the due date, any interest on any
Loan, any fee, indemnity or other amount payable under this Agreement or any
other Loan Document (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise);

 

(b)           any representation or warranty made
or deemed made by or on behalf of any Loan Party or by any officer of the
foregoing under or in connection with any Loan Document or under or in
connection with any report, certificate, or other document delivered to
Administrative Agent, any Lender or the L/C Issuer pursuant to any Loan
Document shall have been incorrect in any material respect when made or deemed
made;

 

(c)           any Loan Party shall fail to perform
or comply with any covenant or agreement contained in (i) Sections
7.01(a)(i), (ii), (iii), (iv) or (vi), Section 7.01(c), Section 7.01(e),
Section 7.02 or Section 7.03;

 

(d)           any Loan Party shall fail to perform
or comply with any other term, covenant or agreement contained in any Loan
Document to be performed or observed by it and, except as set forth in
subsections (a), (b) and (c) of this Section 8.01, such failure,
if capable of being remedied, shall remain unremedied for thirty (30) days
after the earlier of the date a senior officer of any Loan Party becomes aware
of such failure and the date written notice of such default shall have been
given by Administrative Agent to Administrative Borrower;

 

(e)           (i) any Loan Party shall fail to
pay any principal of or interest on any of its Indebtedness (excluding
Indebtedness evidenced by this Agreement) or any Contingent Obligation, in any
instance, having a principal balance in excess of $2,000,000, when due (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise)
and such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness or
Contingent Obligation, or (ii) any other default or event shall occur or
condition exist and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default, event
or condition is to accelerate, or to permit the acceleration of, the maturity
of such Indebtedness or Contingent Obligation or (iii) any such Indebtedness
or Contingent Obligation shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased or an offer to prepay, redeem, purchase or
defease such Indebtedness or Contingent Obligation shall be required to be
made, in each case, prior to the stated maturity thereof;

 

(f)            the Parent or any of its
Subsidiaries (i) shall institute any proceeding or voluntary case seeking
to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for any such Person or for any substantial part of its
property, (ii) shall be generally not paying its debts as such debts
become due or shall admit in writing its inability to pay its debts generally, (iii) shall
make a general assignment for the benefit of creditors, or (iv) shall take
any action to authorize or effect any of the actions set forth above in this
subsection (f);

 

78

 

(g)           any proceeding shall be instituted
against the Parent or any of its Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for any such Person or for any
substantial part of its property, and either such proceeding shall remain
undismissed or unstayed for a period of sixty (60) days or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against any such Person or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
property) shall occur;

 

(h)           any provision of any Loan Document
shall at any time for any reason (other than pursuant to the express terms
thereof) cease to be valid and binding on or enforceable against any Loan Party
intended to be a party thereto, or the validity or enforceability thereof shall
be contested by any party thereto (other than the Administrative Agent or any
Lender), or a proceeding shall be commenced by any Loan Party or any
Governmental Authority having jurisdiction over any of them, seeking to
establish the invalidity or unenforceability thereof, or any Loan Party shall
deny in writing that it has any liability or obligation purported to be created
under any Loan Document;

 

(i)            any Security Agreement, any Pledge
Agreement, any Mortgage or any other security document, after delivery thereof
pursuant hereto, shall for any reason fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien in favor of the Administrative Agent for the benefit of the
Administrative Agent and Lenders on any Collateral purported to be covered
thereby;

 

(j)            [Reserved];

 

(k)           one or more judgments or orders for
the payment of money exceeding $1,500,000 in the aggregate shall be rendered
against the Parent or any of its Subsidiaries and remain unsatisfied and either
(i) enforcement proceedings shall have been commenced by any creditor upon
any such judgment or order, or (ii) there shall be a period of thirty (30)
consecutive days after entry thereof during which a stay of enforcement of any
such judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; provided, however, that any such judgment or order shall
not give rise to an Event of Default under this subsection (k) if and for
so long as (A) the amount of such judgment or order is covered by a valid
and binding policy of insurance between the defendant and the insurer covering
full payment thereof subject to standard and customary deductibles and (B) such
insurer has been notified, and has not disputed the claim made for payment, of
the amount of such judgment or order;

 

(l)            the Parent or any of its
Subsidiaries is enjoined, restrained or in any way prevented by the order of
any court or any Governmental Authority from conducting all or any material
part of its business for more than fifteen (15) days if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect;

 

(m)          any material damage to, or loss, theft
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days, the 

 

79

 

cessation or substantial
curtailment of revenue producing activities at any facility of any Loan Party,
if any such event or circumstance could reasonably be expected to have a
Material Adverse Effect;

 

(n)           any cessation of a substantial part
of the business of the Parent or any of its Subsidiaries which could reasonably
be expected to have a Material Adverse Effect;

 

(o)           the loss, suspension or revocation
of, or failure to renew, any license or permit now held or hereafter acquired
by the Parent or any of its Subsidiaries, if such loss, suspension, revocation
or failure to renew could reasonably be expected to have a Material Adverse
Effect;

 

(p)           the indictment, or the threatened
indictment of the Parent or any of its Subsidiaries under any criminal statute,
or commencement or threatened commencement of criminal or civil proceedings
against any Loan Party, pursuant to which statute or proceedings the penalties
or remedies sought or available include forfeiture to any Governmental
Authority of any material portion of the property of such Person;

 

(q)           any Loan Party or any of its ERISA
Affiliates shall have made a complete or partial withdrawal from a
Multiemployer Plan, and, as a result of such complete or partial withdrawal, any
Loan Party or any of its ERISA Affiliates incurs a withdrawal liability in an
annual amount exceeding $1,500,000; or a Multiemployer Plan enters
reorganization status under Section 4241 of ERISA, and, as a result
thereof any Loan Party’s or any of its ERISA Affiliates’ annual contribution
requirements with respect to such Multiemployer Plan increases in an annual
amount exceeding $1,500,000;

 

(r)            any Termination Event with respect
to any Employee Plan shall have occurred, and, 30 days after notice thereof
shall have been given to any Loan Party by Administrative Agent, (i) such
Termination Event (if correctable) shall not have been corrected, and (ii) the
then current value of such Employee Plan’s vested benefits exceeds the then
current value of assets allocable to such benefits in such Employee Plan by
more than $1,500,000 (or, in the case of a Termination Event involving
liability under Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069,
4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the Internal
Revenue Code, the liability is in excess of such amount);

 

(s)           the Parent or any of its Subsidiaries
shall be liable for any Environmental Liabilities or Costs the payment of which
could reasonably be expected to have a Material Adverse Effect; or

 

(t)            a Change of Control shall have
occurred; or

 

(u)           the Body Shop Acquisition shall not
have been consummated on the Closing Date in all material respects in
accordance with the BI Acquisition Documents;

 

then, and in any such event, the Administrative Agent
may, and shall at the request of the Required Revolving Lenders, by notice to
the Administrative Borrower, (i) terminate or reduce all Commitments,
whereupon all Commitments shall immediately be so terminated or reduced, (ii) declare
all or any portion of the Loans and Reimbursement Obligations then outstanding
to 

 

80

 

be due and payable, whereupon all or such portion
of the aggregate principal of all Loans and Reimbursement Obligations, all
accrued and unpaid interest thereon, all fees and all other amounts payable
under this Agreement and the other Loan Documents shall become due and payable
immediately, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by each Loan Party and (iii) exercise
any and all of its other rights and remedies under applicable law, hereunder
and under the other Loan Documents; provided,
however, that upon the occurrence of any
Event of Default described in subsection (f) or (g) of this Section 8.01,
without any notice to any Loan Party or any other Person or any act by
Administrative Agent or any Lender, all Commitments shall automatically
terminate and all Loans and Reimbursement Obligations then outstanding,
together with all accrued and unpaid interest thereon, all fees and all other
amounts due under this Agreement and the other Loan Documents shall become due
and payable automatically and immediately, without presentment, demand, protest
or notice of any kind, all of which are expressly waived by each Loan
Party.  Upon demand by the Administrative
Agent after the occurrence and during the continuation of any Event of Default,
the Borrowers shall deposit with the Administrative Agent with respect to each
Letter of Credit then outstanding cash in an amount equal to 105% of the
maximum amount for which such Letter of Credit may be drawn.  Such deposits shall be held by the
Administrative Agent in the Letter of Credit Collateral Account as security
for, and to provide for the payment of, the Letter of Credit Obligations.

 

ARTICLE 9.

AGENT

 

Section 9.01.  Appointment.  Each Lender (and each subsequent maker of any
Loan by its making thereof) hereby irrevocably appoints and authorizes the
Administrative Agent to perform the duties as set forth in this Agreement to
exercise such powers and duties as are delegated to it by the terms hereof or
the other Loan Documents (including, without limitation, the power to give or
to refuse to give notices, waivers, consents, approvals and instructions and
the power to make or to refuse to make determinations and calculations)
together with such powers as are reasonably incidental thereto to carry out the
purposes hereof and thereof. As to any matters not expressly provided for by
this Agreement and the other Loan Documents (including, without limitation,
enforcement or collection of the Loans), the Administrative Agent shall not be
required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders and
Required Revolving Lenders, as the case may be, and such instructions of the
Required Lenders or Required Revolving Lenders shall be binding upon all
Lenders and all makers of Loans; provided, however, that the L/C Issuer shall not be
required to refuse to honor a drawing under any Letter of Credit and the
Administrative Agent shall not be required to take any action which, in the
reasonable opinion of Administrative Agent, exposes Administrative Agent to
liability or which is contrary to this Agreement or any other Loan Document or
applicable law.

 

Section 9.02.  Nature of Duties.  The Administrative Agent shall have no duties
or responsibilities except those expressly set forth in this Agreement or in
the other Loan Documents.  The duties of
the Administrative Agent shall be mechanical and administrative in nature.  The Administrative Agent shall not have by
reason of this Agreement or any other Loan Document a fiduciary relationship in
respect of any Lender.  Nothing in this
Agreement or any 

 

81

 

other Loan Document,
express or implied, is intended to or shall be construed to impose upon the Administrative
Agent any obligations in respect of this Agreement or any other Loan Document
except as expressly set forth herein or therein.  Each Lender shall make its own independent
investigation of the financial condition and affairs of the Loan Parties in
connection with the making and the continuance of the Loans hereunder and shall
make its own appraisal of the creditworthiness of the Loan Parties and the
value of the Collateral, and the Administrative Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto, whether
coming into their possession before the initial Loan hereunder or at any time
or times thereafter, provided that, upon the reasonable request of a Lender,
Administrative Agent shall provide to such Lender any documents or reports
delivered to Administrative Agent by the Loan Parties pursuant to the terms of
this Agreement or any other Loan Document. 
If Administrative Agent seeks the consent or approval of the Required
Lenders or the Required Revolving Lenders to the taking or refraining from
taking any action hereunder, Administrative Agent shall send notice thereof to
each Lender.  Administrative Agent shall
promptly notify each Lender any time that the Required Lenders or Required
Revolving Lenders, as applicable, have instructed Administrative Agent to act
or refrain from acting pursuant hereto.

 

Section 9.03.  Rights, Exculpation, Etc.  The Administrative Agent and its directors,
officers, employees and agents shall not be liable for any action taken or
omitted to be taken by them under or in connection with this Agreement or the
other Loan Documents, except for their own gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction.  Without limiting the
generality of the foregoing, the Administrative Agent (i) may treat the
payee of any Loan as the owner thereof until the Administrative Agent receives
written notice of the assignment or transfer thereof, pursuant to Section 11.06
hereof, signed by such payee and in form satisfactory to the Administrative
Agent; (ii) may consult with legal counsel (including, without limitation,
counsel to Administrative Agent or counsel to the Loan Parties), independent
public accountants, and other experts selected by it and shall not be liable
for any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel or experts; (iii) may execute any of its
rights or duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys in fact and shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects with
reasonable care, (iv) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, certificates,
warranties or representations made in or in connection with this Agreement or
the other Loan Documents; (v) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents on the part of any
Person, the existence or possible existence of any Default or Event of Default,
or to inspect the Collateral or other property (including, without limitation,
the books and records) of any Person; (vi) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; and (vii) shall
not be deemed to have made any representation or warranty regarding the
existence, value or collectibility of the Collateral, the existence, priority
or perfection of the Administrative Agent’s Lien thereon, or any certificate
prepared by any Loan Party in connection therewith, nor shall the
Administrative Agent be responsible or liable to the Lenders for any failure to
monitor or maintain any portion of the Collateral.  The Administrative Agent shall not be liable
for any apportionment or 

 

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distribution of payments
made in good faith pursuant to Section 4.03, and if any such apportionment
or distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to
recover from other Lenders any payment in excess of the amount which they are
determined to be entitled (and such other Lenders hereby covenant and agree to
return promptly to such Lender any erroneous payment received by them).  The Administrative Agent may at any time
request instructions from the Lenders with respect to any actions or approvals
which by the terms of this Agreement or of any of the other Loan Documents the
Administrative Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, the Administrative Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval under any of the Loan Documents until it shall have received such
instructions from the Required Lenders or Required Revolving Lenders, as the
case may be.  Without limiting the
foregoing, no Lender shall have any right of action whatsoever against
Administrative Agent as a result of Administrative Agent acting or refraining
from acting under this Agreement or any of the other Loan Documents in
accordance with the instructions of the Required Lenders or the Required
Revolving Lenders, as applicable.

 

Section 9.04.  Reliance.  Administrative Agent shall be entitled to
rely upon any written notices, statements, certificates, orders or other
documents or any telephone message believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person, and
with respect to all matters pertaining to this Agreement or any of the other
Loan Documents and its duties hereunder or thereunder, upon advice of counsel
selected by it.

 

Section 9.05.  Indemnification.  To the extent that Administrative Agent or
the L/C Issuer is not reimbursed and indemnified by any Loan Party, the Lenders
will reimburse and indemnify Administrative Agent and the L/C Issuer from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Administrative Agent or the L/C Issuer in any way relating to or
arising out of this Agreement or any of the other Loan Documents or any action
taken or omitted by Administrative Agent or the L/C Issuer under this Agreement
or any of the other Loan Documents, in proportion to each Lender’s Pro Rata
Share, including, without limitation, advances and disbursements made pursuant
to Section 9.08; provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, advances or disbursements to the
extent there has been a final judicial determination that such liability
resulted from Administrative Agent’s or the L/C Issuer’s gross negligence or
willful misconduct.  The obligations of
the Lenders under this Section 9.05 shall survive the payment in full of
the Loans and the termination of this Agreement.

 

Section 9.06.  Administrative Agent Individually.  With respect to its Pro Rata Share of the
Total Commitment hereunder and the Loans made by it, Administrative Agent shall
have and may exercise the same rights and powers hereunder and is subject to
the same obligations and liabilities as and to the extent set forth herein for
any other Lender or maker of a Loan.  The
terms “Lenders,” “Required Lenders” or “Required Revolving Lenders” or any
similar terms shall, unless the context clearly otherwise indicates, include
Administrative Agent in its individual capacity as a Lender or one of the
Required Lenders or Required Revolving Lenders. 
Administrative Agent and its Affiliates may accept deposits from, lend
money to, acquire Capital 

 

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Stock of and generally
engage in any kind of banking, trust or other business with any Loan Party as
if it were not acting as the Administrative Agent pursuant hereto without any
duty to account to the other Lenders.

 

Section 9.07.  Successor Agent.

 

(a)           Administrative Agent may resign from
the performance of all its functions and duties hereunder and under the other
Loan Documents at any time by giving at least thirty (30) Business Days’ prior
written notice to the Administrative Borrower and each Lender.  Such resignation shall take effect upon the
acceptance by a successor Administrative Agent of appointment pursuant to clauses
(b) and (c) below or as otherwise provided below.

 

(b)           Upon any such notice of resignation,
the Required Lenders shall appoint from among the Lenders a successor
Administrative Agent that shall, so long as no Default or Event of Default has
occurred and is continuing, be reasonably acceptable to the Borrowers.  Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its
duties and obligations under this Agreement and the other Loan Documents.  After Administrative Agent’s resignation
hereunder as an Administrative Agent, the provisions of this Article 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was an Administrative Agent under this Agreement and the other Loan
Documents.

 

(c)           If a successor Administrative Agent
shall not have been so appointed within said thirty (30) Business Day period,
the retiring Administrative Agent shall then appoint from among the Lenders a
successor Administrative Agent who shall serve as an Administrative Agent until
such time, if any, as the Required Lenders appoint a successor Administrative
Agent as provided above.

 

Section 9.08.  Collateral Matters.

 

(a)           The Administrative Agent may from
time to time make such disbursements and advances (“Administrative Agent
Advances”) which the Administrative Agent, in its sole discretion, deems
necessary or desirable to preserve, protect, prepare for sale or lease or
dispose of the Collateral or any portion thereof, to enhance the likelihood or
maximize the amount of repayment by the Borrowers of the Loans, Reimbursement
Obligations, Letter of Credit Obligations and other Obligations or to pay any
other amount chargeable to the Borrowers pursuant to the terms of this
Agreement, including, without limitation, costs, fees and expenses as described
in Section 11.03 and costs and expenses incurred by Administrative Agent
in performing any covenant or agreement in accordance with the provisions of
this Agreement and the other Loan Documents required to be performed by Borrowers
which Borrowers has failed to perform, provided that the aggregate amount of
Administrative Agent Advances not reimbursed by Borrower shall not exceed
$2,500,000 without the consent of Required Lenders.  The Administrative Agent Advances shall be
repayable on demand and be secured by the Collateral.  The Administrative Agent Advances shall
constitute Obligations hereunder which may be charged to the Loan Account in
accordance with Section 4.01.  The
Administrative Agent shall 

 

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notify each Lender and
the Administrative Borrower in writing of each such Administrative Agent
Advance, which notice shall include a description of the purpose of such
Administrative Agent Advance.  Without
limitation to its obligations pursuant to Section 9.05, each Lender agrees
that it shall make available to the Administrative Agent, upon the
Administrative Agent’s demand, in Dollars in immediately available funds, the
amount equal to such Lender’s Pro Rata Share of each such Administrative Agent
Advance.  If such funds are not made
available to the Administrative Agent by such Lender, the Administrative Agent
shall be entitled to recover such funds on demand from such Lender, together
with interest thereon for each day from the date such payment was due until the
date such amount is paid to the Administrative Agent, at the Federal Funds Rate
for three (3) Business Days and thereafter at the Base Rate.

 

(b)           The Lenders hereby irrevocably
authorize the Administrative Agent, at its option and in its discretion, to
release any Lien granted to or held by the Administrative Agent upon any
Collateral upon termination of the Total Commitment and payment and
satisfaction of all Loans, Reimbursement Obligations, Letter of Credit Obligations,
and all other Obligations which have matured and which the Administrative Agent
has been notified in writing are then due and payable; or constituting property
being sold or disposed of in compliance with the terms of this Agreement and
the other Loan Documents; or constituting property in which the Loan Parties
owned no interest at the time the Lien was granted or at any time thereafter;
or if approved, authorized or ratified in writing by the Required Lenders or
all Lenders if required hereunder.

 

(c)           Without in any manner limiting the
Administrative Agent’s authority to act without any specific or further
authorization or consent by the Lenders (as set forth in Section 9.08(b)),
each Lender agrees to confirm in writing, upon request by the Administrative
Agent, the authority to release Collateral conferred upon the Administrative
Agent under Section 9.08(b).  Upon
receipt by the Administrative Agent of confirmation from the Lenders of its
authority to release any particular item or types of Collateral, and upon prior
written request by any Loan Party, the Administrative Agent shall (and is
hereby irrevocably authorized by the Lenders to) execute such documents as may
be necessary to evidence the release of the Liens granted to the Administrative
Agent for the benefit of the Administrative Agent and the Lenders upon such
Collateral; provided, however, that (i) the Administrative Agent shall not be
required to execute any such document on terms which, in the Administrative
Agent’s opinion, would expose the Administrative Agent to liability or create
any obligations or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any
manner discharge, affect or impair the Obligations or any Lien upon (or
obligations of any Loan Party in respect of) all interests in the Collateral
retained by any Loan Party.

 

(d)           The Administrative Agent shall have
no obligation whatsoever to any Lender to assure that the Collateral exists or
is owned by the Loan Parties or is cared for, protected or insured or has been
encumbered or that the Lien granted to the Administrative Agent pursuant to
this Agreement or any other Loan Document has been properly or sufficiently or
lawfully created, perfected, protected or enforced or is entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Administrative Agent
in this Section 9.08, elsewhere in this Agreement or in any other Loan
Document, it being understood and agreed that in respect of the Collateral, or
any act, omission 

 

85

 

or event related thereto,
the Administrative Agent may act in any manner it may deem appropriate, in its
sole discretion, given the Administrative Agent’s own interest in the
Collateral as one of the Lenders and that the Administrative Agent shall have
no duty or liability whatsoever to any other Lender, except as otherwise
provided herein.

 

Section 9.09.  Agency for Perfection.  Each Lender hereby appoints Administrative
Agent and each other Lender as agent and bailee for the purpose of perfecting
the security interests in and liens upon the Collateral in assets which, in
accordance with Article 9 of the Uniform Commercial Code, can be perfected
only by possession or control (or where the security interest of a secured
party with possession or control has priority over the security interest of
another secured party) and Administrative Agent and each Lender hereby
acknowledges that it holds possession of or otherwise controls any such
Collateral for the benefit of the Administrative Agent and the Lenders as
secured party.  Should the Administrative
Agent or any Lender obtain possession or control of any such Collateral, the
Administrative Agent or such Lender shall notify the Administrative Agent
thereof, and, promptly upon the Administrative Agent’s request therefor shall deliver
such Collateral to the Administrative Agent or in accordance with the
Administrative Agent’s instructions. 
Each Loan Party by its execution and delivery of this Agreement hereby
consents to the foregoing.

 

Section 9.10.  Settlement.

 

(a)           With respect to all periods for which
the Administrative Agent has funded Revolving Loans pursuant to Section 2.02(c),
on Friday of each week, or if the applicable Friday is not a Business Day, then
on the following Business Day, or such shorter period as the Administrative
Agent may from time to time select (any such week or shorter period being
herein called a “Settlement Period”), the Administrative Agent shall notify
each Revolving Loan Lender of the unpaid principal amount of the Revolving
Loans outstanding as of the last day of each such Settlement Period.  In the event that such amount is greater than
the unpaid principal amount of the Revolving Loans outstanding on the last day
of the Settlement Period immediately preceding such Settlement Period (or, if
there has been no preceding Settlement Period, the amount of the Revolving
Loans made on the date of such Revolving Loan Lender’s initial funding), each
Revolving Loan Lender shall promptly (and in any event not later than 2:00 p.m.
(New York City time) if the Administrative Agent requests payment from such
Lender not later than 12:00 noon (New York City time) on such day) make
available to the Administrative Agent in immediately available funds an amount
necessary such that, after giving effect thereto, the outstanding Revolving
Loans of such Revolving Loan Lender equals its Pro Rata Share.  In the event that such amount is less than
such unpaid principal amount, the Administrative Agent shall promptly pay over
to each Revolving Loan Lender in immediately available funds an amount
necessary such that, after giving effect thereto, the outstanding Revolving
Loans of such Revolving Loan Lender equals its Pro Rata Share.  In addition, if the Administrative Agent
shall so request at any time when a Default or an Event of Default shall have
occurred and be continuing, or any other event shall have occurred as a result
of which the Administrative Agent shall determine that it is desirable to
present claims against the Borrowers for repayment, each Revolving Loan Lender shall
promptly remit to the Administrative Agent or, as the case may be, the
Administrative Agent shall promptly remit to each Revolving Loan Lender,
sufficient funds to adjust the interests of the Revolving Loan Lenders in the
then outstanding Revolving Loans to such an extent that, after giving effect to
such adjustment, each such Revolving Loan Lender’s 

 

86

 

interest in the then
outstanding Revolving Loans will be equal to its Pro Rata Share thereof.  The obligations of the Administrative Agent
and each Revolving Loan Lender under this Section 9.10(a) shall be
absolute and unconditional.  Each
Revolving Loan Lender shall only be entitled to receive interest on, and Unused
Line Fees payable to a Revolving Loan Lender shall be calculated based upon,
the Revolving Loans which have been funded by such Revolving Loan Lender.

 

(b)           In the event that any Revolving Loan
Lender fails to make any payment required to be made by it pursuant to Section 9.10(a),
the Administrative Agent shall be entitled to recover such corresponding amount
on demand from such Revolving Loan Lender together with interest thereon, for
each day from the date such payment was due until the date such amount is paid
to the Administrative Agent, at the Federal Funds Rate for three (3) Business
Days and thereafter at the Base Rate. 
During the period in which such Revolving Loan Lender has not paid such
corresponding amount to the Administrative Agent, notwithstanding anything to
the contrary contained in this Agreement or any other Loan Document, the amount
so advanced by the Administrative Agent to the Borrowers shall, for all
purposes hereof, be a Revolving Loan made by the Administrative Agent for its
own account.  Upon any such failure by a
Revolving Loan Lender to pay the Administrative Agent, the Administrative Agent
shall promptly thereafter notify the Borrowers of such failure and the
Borrowers shall immediately pay such corresponding amount to the Administrative
Agent for its own account.  Nothing in
this Section 9.10(b) shall be deemed to relieve any Revolving Loan
Lender from its obligation to fulfill its Revolving Loan Commitment hereunder
or to prejudice any rights that the Administrative Agent or the Borrowers may
have against any Revolving Loan Lender as a result of any default by such
Revolving Loan Lender hereunder.

 

Section 9.11.  Syndication Agent and Documentation Agent.  Notwithstanding any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document, neither
the Syndication Agent nor the Documentation shall have any duties or
responsibilities, nor shall the Syndication Agent or the Documentation Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Syndication Agent or the Documentation Agent.  Reference to this Agreement in any Loan
Document need not make reference to the Syndication Agent or the Documentation
Agent.  The title “Syndication Agent”
shall be personal to Churchill Financial Cayman Ltd.  only and shall not be transferred or assigned
to any other Person.  The title “Documentation
Agent” shall be personal to NewStar Financial, Inc. only and shall not be
transferred or assigned to any other Person.

 

ARTICLE 10.

GUARANTY

 

Section 10.01.  Guaranty.  Each Guarantor hereby unconditionally and
irrevocably guarantees the punctual payment, performance and observance when
due, whether at stated maturity, by acceleration or otherwise, of all
Obligations of the Borrowers now or hereafter existing under any Loan Document,
whether for principal, interest (including, without limitation, all interest that
accrues after the commencement of any Insolvency Proceeding of the Borrowers,
whether or not constituting an allowed claim in such Insolvency Proceeding),
Letter of Credit 

 

87

 

Obligations, fees,
commissions, expense reimbursements, indemnifications or otherwise (such
obligations, to the extent not paid by the Borrowers, being the “Guaranteed
Obligations”), and agrees to pay any and all costs, fees and expenses
(including reasonable counsel fees and expenses) incurred by the Administrative
Agent, the Lenders and the L/C Issuer in enforcing any.  rights under the guaranty set forth in this Article 10.  Without limiting the generality of the
foregoing, each Guarantor’s liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by the
Borrowers to the Administrative Agent, the Lenders and the L/C Issuer under any
Loan Document but for the fact that they are unenforceable or not allowable due
to the existence of an Insolvency Proceeding involving the Borrowers or a
Borrower.

 

Section 10.02.  Guaranty Absolute.  Each Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Administrative Agent, the Lenders or the L/C Issuer with respect thereto.  The obligations of each Guarantor under this Article 10
are independent of the Guaranteed Obligations, and a separate action or actions
may be brought and prosecuted against each Guarantor to enforce such
obligations, irrespective of whether any action is brought against any Loan
Party or whether any Loan Party is joined in any such action or actions.  The liability of each Guarantor under this Article 10
constitutes a primary obligation, and not a contract of surety, and shall be
irrevocable, absolute and unconditional irrespective of, and each Guarantor
hereby irrevocably waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:

 

(a)           any lack of validity or
enforceability of any Loan Document or any agreement or instrument relating
thereto;

 

(b)           any change in the time, manner or place
of payment of, or in any other term of, all or any of the Guaranteed
Obligations, or any other amendment or waiver of or any consent to departure
from any Loan Document, including, without limitation, any increase in the
Guaranteed Obligations resulting from the extension of additional credit to any
Loan Party or otherwise;

 

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

 

(d)           any change, restructuring or
termination of the corporate, limited liability company or partnership
structure or existence of any Loan Party; or

 

(e)           any other circumstance (including,
without limitation, any statute of limitations) or any existence of or reliance
on any representation by the Administrative Agent, the Lenders or the L/C
Issuer that might otherwise constitute a defense available to, or a discharge
of, any Loan Party or any other guarantor or surety.

 

This Article 10 shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Obligations is rescinded or must otherwise be returned by

 

88

 

the Administrative Agent, the Lenders, the L/C
Issuer or any other Person upon the insolvency, bankruptcy or reorganization of
the Borrowers, a Borrower or otherwise (and whether as a result of any demand,
settlement, litigation or otherwise), all as though such payment had not been
made.

 

Section 10.03.  Waiver.  Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Guaranteed Obligations and this Article 10 and any requirement that the Administrative
Agent, the Lenders or the L/C Issuer exhaust any right or take any action
against any Loan Party or any other Person or any Collateral.  Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 10.03 is
knowingly made in contemplation of such benefits.  Each Guarantor hereby waives any right to
revoke this Article 10, and acknowledges that this Article 10 is
continuing in nature and applies to all Guaranteed Obligations, whether
existing now or in the future.

 

Section 10.04.  Continuing Guaranty; Assignments.  This Article 10 is a continuing guaranty
and shall (a) remain in full force and effect until the later of the cash
payment in full of the Guaranteed Obligations (other than indemnification
obligations as to which no claim has been made) and all other amounts payable
under this Article 10 and the Revolving Loan Commitment Termination Date, (b) be
binding upon each Guarantor, its successors and assigns and (c) inure to
the benefit of and be enforceable by the Administrative Agent, the Lenders and
the L/C Issuer and their successors, pledgees, transferees and assigns.  Without limiting the generality of the
foregoing clause (c), any Lender may pledge, assign or otherwise transfer all
or any portion of its rights and obligations under this Agreement (including,
without limitation, all or any portion of its Commitments, its Loans, the
Reimbursement Obligations and the Letter of Credit Obligations owing to it) to
any other Person, and such other Person shall thereupon become vested with all
the benefits in respect thereof granted such Lender herein or otherwise, in
each case as provided in Section 11.07.

 

Section 10.05.  Subrogation.  No Guarantor will exercise any rights that it
may now or hereafter acquire against any Loan Party or any other guarantor that
arise from the existence, payment, performance or enforcement of such Guarantor’s
obligations under this Article 10, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of the
Administrative Agent, the Lenders and the L/C Issuer against any Loan Party or
any other guarantor or any Collateral, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, including,
without limitation, the right to take or receive from any Loan Party or any
other guarantor, directly or indirectly, in cash or other property or by setoff
or in any other manner, payment or security solely on account of such claim,
remedy or right, unless and until all of the Guaranteed Obligations and all
other amounts payable under this Article 10 shall have been paid in full
in cash and the Revolving Loan Commitment Termination Date shall have occurred;
provided, that no Guarantor has any rights hereunder against any
Borrower or any of its or any other Loan Parties’ Subsidiaries if all or any
portion of the Guaranteed Obligations shall have been satisfied with proceeds
from the exercise of remedies in respect of the Capital Stock of such Person
pursuant to any Pledge Agreement.  In
addition, unless and until all of the Guaranteed Obligations and all other
amounts payable under this Article 10 shall have been paid in full in cash
and the Revolving Loan Commitment Termination Date shall have occurred, any 

 

89

 

Indebtedness of any Loan
Party now or hereafter held by any Guarantor is subordinated in right of
payment to the Guaranteed Obligations, and any such Indebtedness of any such
Loan Party to any Guarantor collected or received by Guarantor after an Event
of Default has occurred and is continuing prior to the date of all of the
Guaranteed Obligations and all other amounts payable under this Article 10
shall have been paid in full in cash and the Revolving Loan Commitment
Termination Date shall have occurred, shall be held in trust for Administrative
Agent on behalf of itself and the Lenders and shall forthwith be paid over to
Administrative Agent for the benefit of itself and the Lenders to be credited
and applied against the Guaranteed Obligations. 
If any amount shall be paid to any Guarantor in violation of the immediately
preceding two sentences, such amount shall be held in trust for the benefit of
the Administrative Agent, the Lenders and the L/C Issuer and shall forthwith be
paid to the Administrative Agent, the Lenders and the L/C Issuer to be credited
and applied to the Guaranteed Obligations and all other amounts payable under
this Article 10, whether matured or unmatured, in accordance with the
terms of this Agreement, or to be held as Collateral for any Guaranteed
Obligations or other amounts payable under this Article 10 thereafter
arising.  When all of the Guaranteed
Obligations and all other amounts payable under this Article 10 shall have
been paid in full in cash and the Revolving Loan Commitment Termination Date
shall have occurred, the Administrative Agent, the Lenders and the L/C Issuer
will, at such Guarantor’s request and expense, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor
of an interest in the Guaranteed Obligations resulting from such payment by
such Guarantor.

 

Section 10.06.  Maximum Obligations.  Notwithstanding any provision herein
contained to the contrary, each Guarantor’s liability with respect to the Obligations
shall be limited to an amount not to exceed, as of any date of determination,
the amount that could be claimed by Lenders from such Guarantor without
rendering such claim voidable or avoidable under Section 548 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law after taking
into account, among other things, such Guarantor’s right of contribution and
indemnification from the other Guarantors under Section 10.07.

 

Section 10.07.  Contribution.

 

(a)           To the extent that any Guarantor
shall make a payment of all or any of the Obligations (a “Guarantor Payment”)
that, taking into account all other Guarantor Payments then previously or
concurrently made by any other Guarantor, exceeds the amount that such
Guarantor would otherwise have paid if each Guarantor had paid the aggregate
Obligations satisfied by such Guarantor Payment in the same proportion that
such Guarantor’s Guarantor Allocable Amount (as determined immediately prior to
such Guarantor Payment) bore to the aggregate Guarantor Allocable Amounts of
all of the Guarantors as determined immediately prior to the making of such
Guarantor Payment, then, following Payment in Full, such Guarantor shall be
entitled to receive contribution and indemnification payments from, and be
reimbursed by, the other Guarantors for the amount of such excess, pro rata
based upon their respective Guarantor Allocable Amounts in effect immediately
prior to such Guarantor Payment.

 

(b)           As of any date of determination, the “Guarantor
Allocable Amount” of any Guarantor shall be equal to the maximum amount of
the claim that could then be recovered 

 

90

 

from such Guarantor
without rendering such claim voidable or avoidable under Section 548 of
the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

 

(c)           Each Guarantor acknowledges that the
rights of contribution and indemnification owing to such Guarantor under this Section 10.07
constitute assets of such Guarantor.

 

(d)           The rights of the Guarantors against
other Guarantors under this Section 10.07 shall be exercisable only upon
Payment in Full.

 

ARTICLE 11.

MISCELLANEOUS

 

Section 11.01.  Notices, Etc.  All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied or delivered,
if to any Loan Party, at the following address:

 

6225 Powers Avenue

Jacksonville, FL 32217

Attention: Chief Financial Officer

Telephone: (904) 737-0811

Telecopier: (904) 448-5271

 

with a copies to:

 

Westview Capital Partners

One International Place, 7th floor

Boston, MA 02110

Attention: John H. Turner

Telephone: (617) 261-2053

Telecopier: (617) 261-2060

 

and

 

Bingham McCutchen LLP

150 Federal Street

Boston, MA 02110

Attention: Marion Giliberti Barish, Esq.

Telephone: (617) 951-8801

Telecopier: (617) 951-8736

 

91

 

if to the Administrative Agent, to it at the
following address:

 

One North Franklin Street

Suite 3500

Chicago, Illinois 60606

Attention: Christopher O’Donnell

Telephone: (312) 755-8100

Telecopier: (312) 755-8101

 

with a copy to:

 

Katten Muchin Rosenman LLP

525 West Monroe Street, Suite 1900

Chicago, Illinois 60661

Attention: Denise S. Burn, Esq.

Telephone: (312) 902-5263

Telecopier: (312) 577-8778

 

or, as to each party, at such other address as
shall be designated by such party in a written notice to the other parties
complying as to delivery with the terms of this Section 11.01.  All such notices and other communications
shall be effective, (i) if mailed, when received or three days after
deposited in the mails, whichever occurs first, (ii) if telecopied, on the
date of transmission if transmitted before 4:00 p.m. (New York time)
otherwise on the next Business Day, (iii) if delivered by personal
delivery, upon delivery, or (iv) if delivered by overnight courier one (1) Business
Day after delivery to the courier, in each case, properly addressed, except
that notices to Administrative Agent or the L/C Issuer pursuant to Articles 1
and 2 shall not be effective until received by Administrative Agent or the L/C
Issuer, as the case may be.

 

Section 11.02.  Amendments, Etc.

 

(a)                                  No amendment or waiver of any provision of this Agreement, and no
consent to any departure by any Loan Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Required
Lenders or by the Administrative Agent with the consent of the Required
Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given, provided, however,
that:

 

(i)            no amendment, waiver or consent
shall (A) increase the Commitment of any Lender, reduce the principal of,
or interest on, the Loans or the Reimbursement Obligations payable to any
Lender, reduce the amount of any fee payable for the account of any Lender, or
postpone or extend any date fixed for any regularly scheduled amortization
payment of principal of, or any regularly scheduled payment of interest or fees
on, the Loans or Letter of Credit Obligations payable to any Lender, in each
case without the written consent of any Lender directly affected thereby, (B) change
the percentage of the Commitments or of the aggregate unpaid principal amount
of the Loans that is required for the Lenders or any of them to take any action
hereunder, (C) amend the definition of “Required Lenders” or “Pro Rata
Share”, (D) release all or a substantial portion of the Collateral (except
as otherwise provided in this Agreement and 

 

92

 

the
other Loan Documents), or release the Borrowers or any Guarantor, or (E) amend,
modify or waive Section 4.03 or this Section 11.02 of this Agreement,
in each case in clauses (B) through (E), without the written consent of
each Lender; and

 

(ii)           without limitation of the provisions
of the preceding clause (i), no amendment, waiver or consent shall (A) make
less restrictive the calculation of Availability, (B) change the
percentage of the Total Revolving Loan Commitment or of the aggregate unpaid
principal amount of the Revolving Loans that is required for the Revolving Loan
Lenders or any of them to take any action hereunder, (C) amend or waive
compliance with the conditions precedent to the obligations of Revolving Loan
Lenders to make any Revolving Loan (or to issue any Letter of Credit), (D) waive
any Default or Event of Default for the purpose of satisfying the conditions
precedent to the obligations of the Revolving Loan Lenders to make any
Revolving Loan (or to issue any Letter of Credit) or (E) amend the
definition of “Required Revolving Loan Lenders,” or this Section 11.02(a) of
this Agreement, in each case in clauses (A) through (E), without the
written consent of the Required Revolving Lenders.

 

Notwithstanding the foregoing, no amendment, waiver
or consent shall, unless in writing and signed by Administrative Agent, affect
the rights or duties of Administrative Agent (but not in its capacity as a
Lender) under this Agreement or the other Loan Documents.

 

(b)                                 No Waiver; Remedies, Etc.  No failure on the part of Administrative
Agent or any Lender to exercise, and no delay in exercising, any right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right.  The rights and remedies of the
Administrative Agent and the Lenders provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law.  The
rights of the Administrative Agent and the Lenders under any Loan Document
against any party thereto are not conditional or contingent on any attempt by
the Administrative Agent and the Lenders to exercise any of their rights under
any other Loan Document against such party or against any other Person.

 

(c)                                  Replacement.  If, in connection with any proposed
amendment, modification, termination or waiver of any of the provisions of this
Agreement requiring the consent or approval of all Lenders under Section 11.02(a),
the consent of Required Lenders is obtained but the consent of one or more
other Lenders whose consent is required to be obtained is not obtained, then
Borrowers shall have the right, so long as all such non-consenting Lenders are
either replaced or prepaid as described in clauses (i) or (ii) below, to
either (i) replace the non-consenting Lenders with one or more Replacement
Lenders pursuant to Section 4.08(a) so long as each such Replacement
Lender consents to the proposed amendment, modification, termination or waiver
or (ii) prepay in full the Obligations of the non-consenting Lenders and
terminate the non-consenting Lenders’ Pro Rata Share of the Revolving Loan
Commitment in accordance with Section 4.08(b).

 

Section 11.03.  Expenses; Taxes; Attorneys’ Fees.  The Borrowers will pay on demand, all costs
and expenses incurred by or on behalf of Administrative Agent (and, in the case
of clause (c) below, each Lender), regardless of whether the transactions
contemplated hereby are 

 

93

 

consummated, including,
without limitation, reasonable fees, costs, client charges and expenses of
counsel for Administrative Agent (and, in the case of clause (c) below,
each Lender), and all document, transfer, recording or filing taxes or fees and
similar impositions now or hereafter payable in connection with this Agreement
or any other Loan Document, arising from or relating to: (a) the
negotiation, preparation, execution, delivery, performance and administration
of this Agreement and the other Loan Documents (including, without limitation,
the preparation of any additional Loan Documents and/or the review of any of
the agreements, instruments and documents referred to in Sections 7.01(j) and
(k)) and the consummation and administration of the transactions contemplated
hereby, (b) any requested amendments, waivers or consents to this
Agreement or the other Loan Documents whether or not such documents become
effective or are given, or (c) the enforcement and/or preservation of any
of Agent’s or the Lenders’ rights under this Agreement or the other Loan
Documents, including the protection, collection, lease, sale, taking possession
of or liquidation of, any Collateral or other security in connection with this
Agreement or any other Loan Document and the enforcement of any Lien or
security interest in any Collateral or other security in connection with this
Agreement or any other Loan Document.

 

Section 11.04.  Right of Set-off.  Upon the occurrence and during the
continuance of any Event of Default, Administrative Agent or any Lender may,
and is hereby authorized to, at any time and from time to time, without notice
to any Loan Party (any such notice being expressly waived by the Loan Parties)
and to the fullest extent permitted by law, set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other Indebtedness at any time owing by Administrative Agent or such Lender to
or for the credit or the account of any Loan Party against any and all
obligations of the Loan Parties either now or hereafter existing under any Loan
Document, irrespective of whether or not Administrative Agent or such Lender
shall have made any demand hereunder or thereunder and although such
obligations may be contingent or unmatured. 
Administrative Agent and each Lender agrees to notify such Loan Party
promptly after any such set-off and application made by Administrative Agent or
such Lender provided that the failure to give such notice shall not affect the
validity of such set-off and application. 
The rights of the Administrative Agent and the Lenders under this Section 11.04
are in addition to the other rights and remedies (including other rights of
set-off) which the Administrative Agent and the Lenders may have, under this
Agreement or any other Loan Documents of law or otherwise.

 

Section 11.05.  Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

Section 11.06.  Assignments and Participations.

 

(a)           This Agreement and the other Loan
Documents shall be binding upon and inure to the benefit of each Loan Party and
Administrative Agent and each Lender and their respective successors and
assigns; provided, however, that none of the Loan Parties may assign or transfer any of
its rights hereunder without the prior written consent of each Lender and any
such assignment without the Lenders’ prior written consent shall be null and
void.

 

94

 

(b)           Each Lender may, with the written
consent of the Administrative Agent, which consent shall not be unreasonably
withheld, and with the written consent of Administrative Borrower, which
consent shall not be unreasonably withheld or delayed and which shall not be
required if an Event of Default has occurred and is continuing, assign to one
or more other Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitments,
the Loans made by it and its Pro Rata Share of Letter of Credit Obligations); provided, however,
that (i) unless otherwise permitted by the Administrative Agent, such
assignment is in an amount which is at least $5,000,000 or a multiple of
$1,000,000 in excess thereof (or the remainder of such Lender’s Commitment)
(except such minimum amount shall not apply to an assignment by a Lender to an
Affiliate of such Lender or a fund or account managed by such Lender or an
Affiliate of such Lender), (ii) the parties to each such assignment shall
execute and deliver to the Administrative Agent, for its acceptance, an
Assignment and Acceptance, together with any promissory note subject to such
assignment and, unless otherwise previously agreed to by the Administrative
Agent, such parties shall deliver to the Administrative Agent a processing and
recordation fee of $3,500 (except the payment of such fee shall not be required
in connection with an assignment by a Lender to an Affiliate of such Lender or
a fund or account managed by such Lender or an Affiliate of such Lender) and (iii) the
written consent of the Administrative Agent or Administrative Borrower shall
not be required in connection with any assignment by a Lender to an Affiliate
of such Lender or a fund or account managed by such Lender or an Affiliate of
such Lender or to any other Lender.  Upon
such execution, delivery and acceptance, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least three Business Days after the delivery thereof to the Administrative
Agent (or such shorter period as shall be agreed to by the Administrative Agent
and the parties to such assignment), (A) the assignee thereunder shall
become a “Lender” hereunder and, in addition to the rights and obligations
hereunder held by it immediately prior to such effective date, have the rights
and obligations hereunder that have been assigned to it pursuant to such
Assignment and Acceptance and (B) the assigning Lender thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease
to be a party hereto).

 

(c)           By executing and delivering an
Assignment and Acceptance, the assigning Lender and the assignee thereunder
confirm to and agree with each other and the other parties hereto as follows: (i) other
than as provided in such Assignment and Acceptance, the assigning Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any
other Loan Document furnished pursuant hereto; (ii) the assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Loan Party or any of its Subsidiaries or the
performance or observance by any Loan Party of any of its obligations under
this Agreement or any other Loan Document furnished pursuant hereto; (iii) such
assignee confirms that it has received a copy of this Agreement and the other
Loan Documents, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance 

 

95

 

upon the assigning
Lender, Administrative Agent or any Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents; (v) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Administrative Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental hereto and thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Loan Documents
are required to be performed by it as a Lender.

 

(d)           The Administrative Agent shall,
acting solely for this purpose as a non-fiduciary agent of the Borrowers,
maintain, or cause to be maintained at the Payment Office, a copy of each
Assignment and Acceptance delivered to and accepted by it and a register (the “Register”)
for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans (and stated interest thereon)
(the “Registered Loans”) and Letter of Credit Obligations owing to each
Lender from time to time.  The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrowers, the Administrative Agent and the Lenders shall treat
each Person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Agreement.  The
Register shall be available for inspection by the Administrative Borrower and
any Lender at any reasonable time and from time to time upon reasonable prior
notice.

 

(e)           Upon its receipt of an Assignment and
Acceptance executed by an assigning Lender and an assignee, together with any
promissory notes subject to such assignment, the Administrative Agent shall, if
the Administrative Agent consents to such assignment and if such Assignment and
Acceptance has been completed (i) accept such Assignment and Acceptance
and (ii) record the information contained therein in the Register.

 

(f)            A Registered Loan (and the
registered note, if any, evidencing the same) may be assigned or sold in whole
or in part only by registration of such assignment or sale on the Register (and
each registered note shall expressly so provide).  Any assignment or sale of all or part of such
Registered Loan (and the registered note, if any, evidencing the same) may be
effected only by registration of such assignment or sale on the Register,
together with the surrender of the registered note, if any, evidencing the same
duly endorsed by (or accompanied by a written instrument of assignment or sale
duly executed by) the holder of such registered note, whereupon, at the request
of the designated assignee(s) or transferee(s), one or more new registered
notes in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s).  Prior
to the registration of assignment or sale of any Registered Loan (and the
registered note, if any, evidencing the same), the Administrative Agent shall
treat the Person in whose name such Registered Loan (and the registered note,
if any, evidencing the same) is registered as the owner thereof for the purpose
of receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary.

 

(g)           In the event that any Lender sells
participations in a Registered Loan, such Lender shall maintain, acting solely
for this purpose as a non-fiduciary agent of the Borrowers, a register on which
it enters the name of all participants in the Registered Loans held by it and
the principal amount thereof (and stated interest thereon) (the “Participant
Register”).  A Registered

 

96

 

Loan (and the registered
note, if any, evidencing the same) may be participated in whole or in part only
by registration of such participation on the Participant Register (and each
registered note shall expressly so provide). 
Any participation of such Registered Loan (and the registered note, if
any, evidencing the same) may be effected only by the registration of such
participation on the Participant Register. 
The Participant Register shall be available for inspection by the
Administrative Borrower at any reasonable time and from time to time upon
reasonable prior notice.

 

(h)           Any Person that is organized in a
jurisdiction outside the United States which is assigned any portion of any
Registered Loan shall comply with Section 4.05(c) to the extent
applicable.

 

(i)            Each Lender may sell participations
to one or more banks or other entities in or to all or a portion of its rights
and obligations under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of its Commitments, the Loans made by it
and its Pro Rata Share of the Letter of Credit Obligations); provided,
that (i) such Lender’s obligations under this Agreement (including without
limitation, its Commitments hereunder) and the other Loan Documents shall
remain unchanged; (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, and the
Borrowers, the Administrative Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations under this Agreement and the other Loan Documents; and (iii) a
participant shall not be entitled to require such Lender to take or omit to
take any action hereunder except (A) action directly effecting an
extension of the maturity dates or decrease in the principal amount of the
Loans or Letter of Credit Obligations to the extent such Loans or Letter of
Credit Obligations are the subject of the participation, (B) action
directly effecting an extension of the due dates or a decrease in the rate of
interest payable on the Loans subject to the participation or the fees payable
under this Agreement, or (C) actions directly effecting a release of all
or a substantial portion of the Collateral or any Loan Party (except as set
forth in Section 9.08 of this Agreement or any other Loan Document).  The Loan Parties agree that each participant
shall be entitled to the benefits of Section 4.04 and Section 4.05 of
this Agreement with respect to its participation in any portion of the
Commitments and the Loans as if it was a Lender.

 

(j)            In furtherance and not in limitation
of Section 2.07, any Lender may at any time and from time to time pledge
or grant a security interest in all or any portion of its rights under this Agreement,
the other Loan Documents and the Loans made by it as collateral security to
secure obligations of such Lender, Affiliates of such Lender or funds or
accounts managed by such Lender or an Affiliate of such Lender (and any initial
or subsequent such pledgee or grantee, as the case may be, may in turn at any
time and from time to time pledge or grant a security interest in all or any
portion of such rights and Loans as collateral security to secure obligations
of such Person, Affiliates of such Person or funds or accounts managed by such
Person or an Affiliate of such Person); provided that neither the initial nor
any subsequent such pledge or grant of a security interest shall in any event (i) release
such Lender from any of its obligations hereunder, and (ii) substitute any
such pledgee or grantee for such Lender as a party hereto with any rights or
remedies hereunder or under any of the other Loan Documents.

 

97

 

Section 11.07.  Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. 
Delivery of an executed counterpart of this Agreement by telecopier
shall be equally as effective as delivery of an original executed counterpart
of this Agreement.  Any party delivering
an executed counterpart of this Agreement by telecopier also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement. 
The foregoing shall apply to each other Loan Document mutatis mutandis.

 

Section 11.08.  GOVERNING LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN THE STATE OF NEW YORK.

 

Section 11.09.  CONSENT TO JURISDICTION; SERVICE OF
PROCESS AND  VENUE.  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY HEREBY IRREVOCABLY ACCEPTS IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS.  EACH LOAN PARTY HEREBY
IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS ITS
AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
ADMINISTRATIVE BORROWER AT ITS ADDRESS FOR NOTICES AS SET FORTH IN SECTION 11.01
AND TO THE SECRETARY OF STATE OF THE STATE OF NEW YORK, SUCH SERVICE TO BECOME
EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT AND THE LENDERS TO SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANY LOAN PARTY IN ANY OTHER JURISDICTION. 
EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY LOAN PARTY HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM
ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO
JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF 

 

98

 

OR ITS PROPERTY, EACH
LOAN PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

Section 11.10.  WAIVER OF JURY TRIAL, ETC.  EACH LOAN PARTY, ADMINISTRATIVE AGENT AND
EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT,
DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE
DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION,
PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.  EACH LOAN PARTY CERTIFIES THAT NO
OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ADMINISTRATIVE AGENT OR ANY
LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ADMINISTRATIVE AGENT OR ANY
LENDER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM,
SEEK TO ENFORCE THE FOREGOING WAIVERS. 
EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO THIS
AGREEMENT.

 

Section 11.11.  Consent by ‘the Administrative Agent and
Lenders.  Except as otherwise
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an “Action”)
of Administrative Agent or any Lender shall be permitted or required pursuant
to any provision hereof or any provision of any other agreement to which any
Loan Party is a party and to which Administrative Agent or any Lender has
succeeded thereto, such Action shall be required to be in writing and may be
withheld or denied by Administrative Agent or such Lender, in its sole
discretion, with or without any reason, and without being subject to question
or challenge on the grounds that such Action was not taken in good faith.

 

Section 11.12.  No Party Deemed Drafter.  Each of the parties hereto agrees that no
party hereto shall be deemed to be the drafter of this Agreement.

 

Section 11.13.  Reinstatement; Certain Payments.  If any claim is ever made upon Administrative
Agent, any Lender or the L/C Issuer for repayment or recovery of any amount or
amounts received by Administrative Agent, such Lender or the L/C Issuer in
payment or on account of any of the Obligations, Administrative Agent, such
Lender or the L/C Issuer shall give prompt notice of such claim to
Administrative Agent and each Lender and the Administrative Borrower, and if
Administrative Agent, such Lender or the L/C Issuer repays all or part of such
amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over Administrative Agent, such Lender
or the L/C Issuer or any of its property, or (ii) any good faith
settlement or compromise of any such claim effected by Administrative Agent,
such Lender or the L/C Issuer with any such claimant, then and in such event
each Loan Party agrees that (A) any such judgment, decree, order,
settlement or compromise shall be binding upon it notwithstanding the
cancellation of any Indebtedness 

 

99

 

hereunder or under the
other Loan Documents or the termination of this Agreement or the other Loan
Documents, and (B) it shall be and remain liable to Administrative Agent,
such Lender or the L/C Issuer hereunder for the amount so repaid or recovered
to the same extent as if such amount had never originally been received by
Administrative Agent, such Lender or the L/C Issuer.

 

Section 11.14.
  Indemnification.

 

(a)       General Indemnity.  In addition to each Loan Party’s other Obligations
under this Agreement, each Loan Party agrees to, jointly and severally, defend,
protect, indemnify and hold harmless Administrative Agent, each Lender and the
L/C Issuer and all of their respective affiliates, officers, directors,
employees, attorneys, consultants and agents (collectively called the “Indemnitees”)
from and against any and all losses, damages, liabilities, obligations,
penalties, fees, reasonable costs and expenses (including, without limitation,
reasonable attorneys’ fees, costs and expenses) incurred by such Indemnitees,
whether prior to or from and after the Closing Date, whether direct, indirect
or consequential, as a result of or arising from or relating to or in
connection with any of the following: (i) the negotiation, preparation,
execution or performance or enforcement of this Agreement, any other Loan
Document, any of the Related Transaction Documents or any other agreement,
document or instrument executed in connection with the transactions
contemplated hereby or thereby, (ii) Administrative Agent’s or any Lender’s
furnishing of funds to the Borrowers or the L/C Issuer’s issuing of Letters of
Credit for the account of the Borrowers under this Agreement or the other Loan
Documents, including, without limitation, the management of any such Loans, the
Reimbursement Obligations or the Letter of Credit Obligations, (iii) any
matter relating to the financing transactions contemplated by this Agreement,
the other Loan Documents, any of the Related Transaction Documents or any
agreement, document or instrument executed in connection with the transactions
contemplated hereby or thereby, or (iv) any claim, action, litigation,
investigation or proceeding relating to any of the foregoing, whether or not
any Indemnitee is a party thereto (collectively, the “Indemnified Matters”);
provided, however,
that the Loan Parties shall not have any obligation to any Indemnitee under
this subsection (a) for any Indemnified Matter caused by the gross
negligence or willful misconduct of such Indemnitee, as determined by a final
judgment of a court of competent jurisdiction.

 

(b)      Environmental Indemnity.  Without limiting Section 11.14(a) hereof,
each Loan Party agrees to, jointly and severally, defend, indemnify, and hold
harmless the Indemnitees against any and all Environmental Liabilities and
Costs and all other claims, demands, penalties, fines, liability (including
strict liability), losses, damages, costs and expenses (including without
limitation, reasonable legal fees and expenses, consultant fees and laboratory
fees), arising out of or in connection with (i) any Releases or threatened
Releases at any property or facility currently or formerly owned or operated by
any Loan Party, any Subsidiary or any predecessor in interest or at any
property or facility which received Hazardous Materials generated, managed or
otherwise handled by any Loan Party, any Subsidiary or predecessor in interest;
(ii) any violations of applicable Environmental Laws by any Loan Party,
any Subsidiary or predecessor in interest; (iii) any Environmental Action
relating to any Loan Party, any Subsidiary or predecessor in interest; (iv) any
Response Action at a facility or property owned or operated at any time by any
Loan Party, any Subsidiary or predecessor in interest; (v) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of 

 

100

 

exposure to Hazardous
Materials used, handled, generated, transported or disposed by any Loan Party
or any Subsidiary of any Loan Party, or any predecessor in interest; or (vi) any
breach of any warranty or representation regarding environmental matters made
by the Loan Parties in Section 6.01(q) or the breach of any covenant
made by the Loan Parties in Section 7.01(i) or Section 7.02(m).  Notwithstanding the foregoing, the Loan
Parties shall not have any obligation to any Indemnitee under this subsection (b) regarding
any potential environmental matter covered hereunder which is caused by the
gross negligence or willful misconduct of such Indemnitee, as determined by a
final judgment of a court of competent jurisdiction.

 

(c)       The indemnification for all of the
foregoing losses, damages, fees, costs and expenses of the Indemnitees are
chargeable against the Loan Account.  To
the extent that the undertaking to indemnify, pay and hold harmless set forth
in this Section 11.14 may be unenforceable because it is violative of any
law or public policy, each Loan Party shall, jointly and severally, contribute
the maximum portion which it is permitted to pay and satisfy under applicable
law, to the payment and satisfaction of all Indemnified Matters incurred by the
Indemnitees.  The indemnities set forth
in this Section 11.14 shall survive the repayment of the Obligations and
discharge of any Liens granted under the Loan Documents.

 

Section 11.15.
  Records.  The unpaid principal of and interest on the
Loans, the interest rate or rates applicable to such unpaid principal and
interest, the duration of such applicability, the Commitments, and the accrued
and unpaid fees payable pursuant to Section 2.06 hereof, including,
without limitation, the closing fee, the Unused Line Fee, the Letter of Credit
Fee shall at all times be ascertained from the records of the Administrative Agent,
which shall be conclusive and binding absent manifest error.

 

Section 11.16.   Binding
Effect.  This Agreement shall become
effective when it shall have been executed by each Loan Party, Administrative
Agent and each Lender and when the conditions precedent set forth in Section 5.01
hereof have been satisfied or waived in writing by the Administrative Agent,
and thereafter shall be binding upon and inure to the benefit of each Loan
Party, Administrative Agent and each Lender, and their respective successors
and assigns, except that the Loan Parties shall not have the right to assign
their rights hereunder or any interest herein without the prior written consent
of each Lender, and any assignment by any Lender shall be governed by Section 11.06
hereof.

 

Section 11.17.
  Interest.  It is the intention of the parties hereto
that Administrative Agent and each Lender shall conform strictly to usury laws
applicable to it.  Accordingly, if the
transactions contemplated hereby or by any other Loan Document would be
usurious as to Administrative Agent or any Lender under laws applicable to it
(including the laws of the United States of America and the State of New York
or any other jurisdiction whose laws may be mandatorily applicable to
Administrative Agent or such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in this Agreement or any other Loan Document or any agreement entered into in
connection with or as security for the Obligations, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under law applicable
to Administrative Agent or any Lender that is contracted for, taken, reserved,
charged or received by Administrative Agent or such Lender under this Agreement
or any other Loan Document or agreements or otherwise in connection with the
Obligations shall under no circumstances exceed the maximum amount allowed by
such 

 

101

 

applicable law, any excess
shall be canceled automatically and if theretofore paid shall be credited by
Administrative Agent or such Lender on the principal amount of the Obligations
(or, to the extent that the principal amount of the Obligations shall have been
or would thereby be paid in full, refunded by Administrative Agent or such
Lender, as applicable, to the Borrowers; and (ii) in the event that the
maturity of the Obligations is accelerated by reason of any Event of Default
under this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to Administrative Agent or any Lender may never include more than
the maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
Administrative Agent or such Lender, as applicable, as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by
Administrative Agent or such Lender, as applicable, on the principal amount of
the Obligations (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by Administrative
Agent or such Lender to the Borrowers. 
All sums paid or -agreed to be paid to Administrative Agent or any
Lender for the use, forbearance or detention of sums due hereunder shall, to
the extent permitted by law applicable to Administrative Agent or such Lender,
be amortized, prorated, allocated and spread throughout the full term of the
Loans until payment in full so that the rate or amount of interest on account
of any Loans hereunder does not exceed the maximum amount allowed by such
applicable law.  If at an time and from
time to time (x) the amount of interest payable to Administrative Agent or
any Lender on any date shall be computed at the Highest Lawful Rate applicable
to Administrative Agent or such Lender pursuant to this Section 11.17 and (y) in
respect of any subsequent interest computation period the amount of interest
otherwise payable to Administrative Agent or such Lender would be less than the
amount of interest payable to Administrative Agent or such Lender computed at
the Highest Lawful Rate applicable to Administrative Agent or such Lender, then
the amount of interest payable to Administrative Agent or such Lender in
respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate applicable to Administrative Agent or such
Lender until the total amount of interest payable to Administrative Agent or
such Lender shall equal the total amount of interest which would have been
payable to Administrative Agent or such Lender if the total amount of interest
had been computed without giving effect to this Section 11.17.

 

For purposes of this Section 11.17, the term “applicable
law” shall mean that law in effect from time to time and applicable to the loan
transaction between the Borrowers on the one hand, and the Administrative Agent
and the Lenders, on the other, that lawfully permits the charging and
collection of the highest permissible, lawful non-usurious rate of interest on
such loan transaction and this Agreement, including laws of the State of New
York and, to the extent controlling, laws of the United States of America.

 

The right to accelerate the maturity of the
Obligations does not include the right to accelerate any interest that has not
accrued as of the date of acceleration.

 

Section 11.18.  Confidentiality.  Administrative Agent and each Lender agrees
(on behalf of itself, each of its affiliates and each of the directors,
officers, employees and representatives of such Person and its affiliates) to
use reasonable precautions to keep confidential, in accordance with its
customary procedures for handling confidential information of this nature and
in accordance with safe and sound practices of comparable commercial finance
companies, any 

 

102

 

non-public information
supplied to it by the Loan Parties pursuant to this Agreement or the other Loan
Documents (and which at the time is not, and does not thereafter become,
publicly available or available to such Person from another source not known to
be subject to a confidentiality obligation to such Person not to disclose such
information), provided that nothing herein shall limit the disclosure of
any such information (i) by any Lender to any affiliate of such Lender
(and to any director, officer, employee or representative of such affiliate), (ii) to
the extent required by statute, rule, regulation or judicial process, (iii) to
counsel for Administrative Agent or any Lender, (iv) to examiners,
auditors, accountants or rating agencies, (v) as may be required in
connection with any litigation to which Administrative Agent or any Lender (or
any affiliates of any Lender) is a party or (vi) to any assignee or
participant (or prospective assignee or participant) so long as such assignee
or participant (or prospective assignee or participant) first agrees, in
writing, to be bound by confidentiality provisions similar in substance to this
Section 11.18.  Administrative Agent
and each Lender agrees (on behalf of itself, each of its affiliates and each of
the directors, officers, employees and representatives of such Person and its
affiliates) that, upon receipt of a request or identification of the
requirement for disclosure pursuant to clause (v) hereof, it will make
reasonable efforts to keep the Loan Parties informed of such request or
identification (unless prohibited from doing so by law, rule, regulation or
court, administrative or other similar order); provided that the each
Loan Party acknowledges that Administrative Agent and each Lender (and each
affiliates thereof) may make disclosure as required or requested by any
Governmental Authority or any representative thereof or the Secured Valuation
Office of the National Association of Insurance Commissioners or
representatives thereof and that Administrative Agent and each Lender (and each
affiliate thereof) may be subject to review by other regulatory agencies and
may be required to provide to, or otherwise make available for review by, the
representatives of such parties or agencies any such non-public information.

 

Section 11.19.  Integration.  This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and thereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.  Execution of this Agreement by the Loan
Parties constitutes a full, complete and irrevocable release of any and all
claims which such Loan Parties may have at law or in equity in respect of all
prior discussions and understandings, oral or written, relating to the subject
matter of this Agreement and the other Loan Documents.  Neither Administrative Agent nor any Lender
shall be liable to any Loan Party or any other Person on any theory of
liability for any special indirect, consequential or punitive damages.

 

Section 11.20.  Administrative Borrower.  Each Borrower hereby irrevocably appoints the
Parent as the borrowing agent and attorney-in-fact for the Borrowers (the “Administrative
Borrower”) which appointment shall remain in full force and effect unless and
until the Administrative Agent shall have received prior written notice signed
by all of the Borrowers that such appointment has been revoked and that another
Borrower has been appointed Administrative Borrower.  Each Borrower hereby irrevocably appoints and
authorizes the Administrative Borrower (i) to provide to the
Administrative Agent and receive from the Administrative Agent all notices with
respect to Loans obtained for the benefit of any Borrower and all other notices
and instructions under this Agreement and (ii) to take such action as the
Administrative Borrower deems appropriate on its behalf to obtain Loans and to
exercise such other powers as are reasonably incidental thereto to carry out
the purposes of this Agreement.  It 

 

103

 

is understood that the
handling of the Loan Account and Collateral of the Borrowers in a combined
fashion, as more fully set forth herein, is done solely as an accommodation to
the Borrowers in order to utilize the collective borrowing powers of the
Borrowers in the most efficient and economical manner and at their request, and
that neither the Administrative Agent nor the Lenders shall incur liability to
the Borrowers as a result hereof.  Each
of the Borrowers expects to derive benefit, directly or indirectly, from the
handling of the Loan Account and the Collateral in a combined fashion since the
successful operation of each Borrower is dependent on the continued successful
performance of the integrated group.  To
induce the Administrative Agent and the Lenders to do so, and in consideration
thereof, each of the Borrowers hereby jointly and severally agrees to indemnify
the Indemnitees and hold the Indemnitees harmless against any and all
liability, expense, loss or claim of damage or injury, made against such
Indemnitee by any of the Borrowers or by any third party whosoever, arising
from or incurred by reason of (a) the handling of the Loan Account and
Collateral of the Borrowers as herein provided, (b) the Administrative
Agent and the Lenders relying on any instructions of the Administrative
Borrower, or (c) any other action taken by Agent or any Lender hereunder
or under the other Loan Documents.

 

[REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK]

 

104

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  BODY CENTRAL ACQUISITION CORP., a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carlo A. von Schroeder

  
	
   

  	
  Name:

  	
  Carlo A. von Schroeder

  
	
   

  	
  Title:

  	
  President

  

 

1

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  ADMINISTRATIVE AGENT:

  
	
   

  	
   

  
	
   

  	
  DYMAS FUNDING COMPANY, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Dymas Capital Management Company, LLC, its
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew D. Marek

  
	
   

  	
  Name:

  	
  Andrew D. Marek

  
	
   

  	
  Title:

  	
  Managing Director

  

 

2

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  SYNDICATION AGENT:

  
	
   

  	
   

  
	
   

  	
  CHURCHILL FINANCIAL CAYMAN LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Churchill Financial LLC, its agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher Cox

  
	
   

  	
  Name:

  	
  Christopher Cox

  
	
   

  	
  Title:

  	
  Principal

  

 

3

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  DOCUMENTATION AGENT:

  
	
   

  	
   

  
	
   

  	
  NEWSTAR FINANCIAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ P. Emery Covington

  
	
   

  	
  Name:

  	
  P. Emery Covington

  
	
   

  	
  Title:

  	
  NewStar Financial

  
	
   

  	
   

  	
  Managing Director

  
	
   

  	
   

  	
  Portfolio Management

  

 

4

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  A3 FUNDING LP, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  A3 Fund Management LLC, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Alexander J. Ornstein

  
	
   

  	
   

  	
  Name:

  	
  Alexander J. Ornstein

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

5

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  ABLECO FINANCE LLC, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Alexander J. Ornstein

  
	
   

  	
  Name:

  	
  Alexander J. Ornstein

  
	
   

  	
  Title:

  	
  Vice President

  

 

6

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  CHURCHILL FINANCIAL CAYMAN LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Churchill Financial LLC, its agent

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher Cox

  
	
   

  	
  Name:

  	
  Christopher Cox

  
	
   

  	
  Title:

  	
  Principal

  

 

7

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  NEWSTAR LLC 2005-1

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NewStar Financial, Inc., its Sole Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ P. Emery Covington

  
	
   

  	
  Name:

  	
  P. Emery Covington

  
	
   

  	
  Title:

  	
  NewStar Financial

  
	
   

  	
   

  	
  Managing Director

  
	
   

  	
   

  	
  Portfolio Management

  

 

8

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  NEWSTAR SHORT-TERM FUNDING LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NewStar Financial, Inc., its Designated
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ P. Emery Covington

  
	
   

  	
  Name:

  	
  P. Emery Covington

  
	
   

  	
  Title:

  	
  NewStar Financial

  
	
   

  	
   

  	
  Managing Director

  
	
   

  	
   

  	
  Portfolio Management

  

 

9

 

IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  NATIONAL CITY BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jennifer Taliaferro

  
	
   

  	
  Name:

  	
  Jennifer Taliaferro

  
	
   

  	
  Title:

  	
  Relationship Manager

  

 

10Exhibit
10.13

 

AMENDED AND SUBSTITUTE REVOLVING NOTE

 

	
  $2,706,766.92

  	
  October 1, 2006

  	
   

  

 

FOR VALUE RECEIVED, each of the undersigned, BODY SHOP OF AMERICA, INC., a Florida
corporation (“BSOA”), and CATALOGUE
VENTURES, INC., a Florida corporation (“CV”; CV and BSOA
are hereinafter sometimes referred to individually as a “Borrower” and
collectively as “Borrowers”), hereby jointly and severally and
unconditionally promises to pay to the order of CHURCHILL FINANCIAL CAYMAN LTD. (“Lender”), at the
Administrative Agent’s (as hereinafter defined) office at One North Franklin
Street, Suite 3500, Chicago, IL 60606, or at such other place as the
Administrative Agent may from time to time designate in writing, in lawful
money of the United States of America and in immediately available funds, the
principal sum of TWO MILLION SEVEN HUNDRED
SIX THOUSAND SEVEN HUNDRED SIXTY-SIX AND 92/100 DOLLARS ($2,706,766.92),
or, if less, the aggregate unpaid principal amount of all Revolving Loans made
pursuant to Article 2 of the Financing Agreement (as hereinafter defined),
at such times as are specified in, and in accordance with the provisions of,
the Financing Agreement. This Amended and Substitute Revolving Note (this “Revolving
Note”) is executed and delivered pursuant to that certain Financing
Agreement of even date herewith (as the same may be amended, restated,
supplemented or otherwise modified and in effect from time to time, the “Financing
Agreement”) by and, among Borrowers, each Person listed as a “Guarantor” on
the signature pages thereto, Dymas Funding Company, LLC, as administrative
agent (the “Administrative Agent”) for the benefit of all Lenders,
Churchill Financial Cayman Ltd., as Syndication Agent, NewStar Financial, Inc.,
as Documentation Agent, and the financial institutions who are parties thereto
(the “Lenders”), to which reference is hereby made for a statement of
the terms and conditions under which the Revolving Loan evidenced hereby was
made and is to be repaid. All terms which are capitalized and used herein (which
are not otherwise specifically defined herein) and which are defined in the
Financing Agreement shall be used in this Revolving Note as defined in the
Financing Agreement. This Revolving Note is secured by the Collateral.

 

Each Borrower jointly and
severally further promises to pay interest on the outstanding unpaid principal
amount hereof, as provided in the Financing Agreement, from the date hereof
until payment in full hereof at the applicable rate specified in subsection
2.04(a) of the Financing Agreement; provided, however, that if the
Administrative Agent or Required Lenders so elect, following the occurrence and
during the continuance of an Event of Default, each Borrower promises to pay to
Lender interest on the unpaid principal amount hereof at the applicable rate
specified in subsection 2.04(c) of the Financing Agreement. Interest shall
be payable in arrears on each Interest Payment Date, on the date of any
prepayment in full and at maturity, whether by acceleration, demand or
otherwise, or as otherwise required by the Financing Agreement.

 

If a payment hereunder
becomes due and payable on a day that is not a Business Day, the payment may be
made on the next succeeding Business Day, and such extension of time shall be
included in the computation of the amount of interest due on such succeeding
Business Day. Anything herein to the contrary notwithstanding, the obligations
of Borrowers hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by Lender would be contrary to the provisions of any law
applicable to Lender 

 

 

limiting the highest rate
of interest which may be lawfully contracted for, charged or received by
Lender, and in such event Borrowers shall pay Lender interest at the Highest
Lawful Rate.

 

If any suit or action is
instituted or attorneys are employed to collect this Revolving Note or any part
thereof, each Borrower hereby promises and agrees to pay all costs of
collection, including attorneys’ fees and court costs.

 

Each Borrower and each
endorser, guarantor and surety of this Revolving Note hereby waives presentment
for payment, protest and demand, and notice of demand, protest, dishonor and
nonpayment of this Revolving Note. Except as provided in the Financing
Agreement, each Borrower also waives all rights to notice and hearing of any
kind upon the occurrence of an Event of Default and prior to the exercise by
the Administrative Agent of its rights to repossess the Collateral without
judicial process or to replevy, attach or levy upon the Collateral without
notice or hearing.

 

THIS REVOLVING NOTE HAS BEEN
DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE AT NEW YORK CITY, NEW YORK
AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
SHALL BE DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS.  Whenever
possible each provision of this Revolving Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Revolving Note shall be prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Revolving Note. Whenever in this Revolving Note
reference is made to the Administrative Agent, Lender or Borrowers, such
reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns. The provisions of this Revolving Note shall
be binding upon and shall inure to the benefit of such successors and assigns. Borrowers’
successors and assigns shall include, without limitation, a receiver, trustee
or debtor in possession of or for any or each Borrower.

 

The obligations,
covenants and agreements of Borrowers hereunder shall be the joint and several
obligations, covenants and agreements of each Borrower.

 

This Revolving Note is a
registered note and, as provided in and subject to the terms of the Financing
Agreement, may be transferred in whole or in part only as provided therein. All
payments hereunder shall be made to the registered owner of this Revolving Note
as set forth in the Register maintained under subsection 11.06(d) of the
Financing Agreement.

 

It is expressly
understood and agreed by Borrowers that (i) the principal balance of this
Revolving Note includes certain Obligations hitherto evidenced by that certain
Revolving Note of even date herewith (“Existing Note”) executed by Body
Central Acquisition Corp., a Delaware corporation, in favor of Lender and (ii) to
the extent any of such Obligations are included in the principal balance of
this Revolving Note, this Revolving Note (a) merely re-evidences such
Obligations, (b) is given in substitution for, and not in payment of, the
Existing Note and (c) is in no way intended, and shall not be deemed or
construed, to constitute a novation of the Existing Note.

 

[Remainder of
Page Intentionally Left Blank; Signature Page Follows]

 

 

IN WITNESS WHEREOF, Borrowers have executed this Amended and
Substitute Revolving Note as of the date first above written.

 

	
   

  	
  BODY SHOP OF
  AMERICA, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George Kolber

  
	
   

  	
  Name:

  	
  George Kolber

  
	
   

  	
  Title:

  	
  President

  

 

 

	
   

  	
  CATALOGUE
  VENTURES, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George Kolber

  
	
   

  	
  Name:

  	
  George Kolber

  
	
   

  	
  Title:

  	
  President

  

 

 

AMENDED AND SUBSTITUTE TERM LOAN A NOTE

 

	
  $4,962,406.01

  	
  October 1, 2006

  	
   

  

 

FOR VALUE RECEIVED, each of the undersigned, BODY SHOP OF AMERICA, INC., a Florida
corporation (“BSOA”), and CATALOGUE
VENTURES, INC., a Florida corporation (“CV”; CV and BSOA
are hereinafter sometimes referred to individually as a “Borrower” and
collectively as “Borrowers”), hereby jointly and severally and
unconditionally promises to pay to the order of CHURCHILL FINANCIAL CAYMAN LTD. (“Lender”), at the
Administrative Agent’s (as hereinafter defined) office at One North Franklin
Street, Suite 3500, Chicago, IL 60606, or at such other place as the
Administrative Agent may from time to time designate in writing, in lawful
money of the United States of America and in immediately available funds, the principal
sum of FOUR MILLION NINE HUNDRED SIXTY-TWO
THOUSAND FOUR HUNDRED SIX AND 01/100 DOLLARS ($4,962,406.01), or, if
less, the aggregate unpaid principal amount of the Term Loan A made to
Borrowers by Lender pursuant to Article 2 of the Financing Agreement (as
hereinafter defined), at such times as are specified in, and in accordance with
the provisions of, the Financing Agreement. This Amended and Substitute Term
Loan A Note (this “Term Note”) is executed and delivered pursuant to
that certain Financing Agreement of even date herewith (as the same may be
amended, restated, supplemented or otherwise modified and in effect from time
to time, the “Financing Agreement”), by and among Borrowers, each Person
listed as a “Guarantor” on the signature pages thereto, Dymas Funding
Company, LLC, as administrative agent (the “Administrative Agent”) for
the benefit of all Lenders, Churchill Financial Cayman Ltd., as Syndication
Agent, NewStar Financial, Inc., as Documentation Agent, and the financial
institutions who are parties thereto (the “Lenders”), to which reference
is hereby made for a statement of the terms and conditions under which the Term
Loan A evidenced hereby was made and is to be repaid. All terms which are
capitalized and used herein (which are not otherwise specifically defined
herein) and which are defined in the Financing Agreement shall be used in this
Term Note as defined in the Financing Agreement. This Term Note is secured by
the Collateral.

 

Each Borrower jointly and
severally further promises to pay interest on the outstanding unpaid principal
amount hereof, as provided in the Financing Agreement, from the date hereof
until payment in full hereof at the applicable rate specified in subsection
2.04(b) of the Financing Agreement; provided, however, that if the
Administrative Agent or Required Lenders so elect, following the occurrence and
during the continuance of an Event of Default, each Borrower promises to pay to
Lender interest on the unpaid principal amount hereof at the applicable rate specified
in subsection 2.04(c) of the Financing Agreement. Interest shall be
payable in arrears on each Interest Payment Date, on the date of any prepayment
in full and at maturity, whether by acceleration, demand or otherwise, or as
otherwise required by the Financing Agreement.

 

If a payment hereunder
becomes due and payable on a day that is not a Business Day, the payment may be
made on the next succeeding Business Day, and such extension of time shall be
included in the computation of the amount of interest due on such succeeding
Business Day. Anything herein to the contrary notwithstanding, the obligations
of Borrowers hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by Lender would be contrary to the provisions of any law
applicable to Lender 

 

 

limiting the highest rate
of interest which may be lawfully contracted for, charged or received by
Lender, and in such event Borrowers shall pay Lender interest at the Highest
Lawful Rate.

 

If any suit or action is
instituted or attorneys are employed to collect this Term Note or any part
thereof, each Borrower hereby promises and agrees to pay all costs of
collection, including attorneys’ fees and court costs.

 

Each Borrower and each
endorser, guarantor and surety of this Term Note hereby waives presentment for
payment, protest and demand, and notice of demand, protest, dishonor and
nonpayment of this Term Note. Except as provided in the Financing Agreement,
each Borrower also waives all rights to notice and hearing of any kind upon the
occurrence of an Event of Default and prior to the exercise by the
Administrative Agent of its rights to repossess the Collateral without judicial
process or to replevy, attach or levy upon the Collateral without notice or
hearing.

 

THIS TERM NOTE HAS BEEN DELIVERED
AT AND SHALL BE DEEMED TO HAVE BEEN MADE AT NEW YORK CITY, NEW YORK AND SHALL
BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO SHALL BE
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS. 
Whenever possible each provision of this Term Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Term Note shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Term Note. Whenever in this Term Note reference is
made to the Administrative Agent, Lender or Borrowers, such reference shall be
deemed to include, as applicable, a reference to their respective successors
and assigns. The provisions of this Term Note shall be binding upon and shall
inure to the benefit of such successors and assigns. Borrowers’ successors and
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of or for any or each Borrower.

 

The obligations,
covenants and agreements of Borrowers hereunder shall be the joint and several
obligations, covenants and agreements of each Borrower.

 

This Term Note is a
registered note and, as provided in and subject to the terms of the Financing
Agreement, may be transferred in whole or in part only as provided therein. All
payments hereunder shall be made to the registered owner of this Term Note as
set forth in the Register maintained under subsection 11.06(d) of the
Financing Agreement.

 

It is expressly
understood and agreed by Borrowers that (i) the principal balance of this
Term Note includes certain Obligations hitherto evidenced by that certain Term
Loan A Note of even date herewith (“Existing Note”) executed by Body
Central Acquisition Corp., a Delaware corporation, in favor of Lender and (ii) to
the extent any of such Obligations are included in the principal balance of
this Term Note, this Term Note (a) merely re-evidences such Obligations, (b) is
given in substitution for, and not in payment of, the Existing Note and (c) is
in no way intended, and shall not be deemed or construed, to constitute a
novation of the Existing Note.

 

[Remainder
of Page Intentionally Left Blank; Signature Page Follows]

 

 

IN WITNESS WHEREOF, Borrowers have executed this Amended and
Substitute Revolving Note as of the date first above written.

 

	
   

  	
  BODY SHOP OF
  AMERICA, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George Kolber

  
	
   

  	
  Name:

  	
  George Kolber

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CATALOGUE
  VENTURES, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George Kolber

  
	
   

  	
  Name:

  	
  George Kolber

  
	
   

  	
  Title:

  	
  President

  

 

 

AMENDED AND SUBSTITUTE TERM LOAN B NOTE

 

	
  $4,330,827.07

  	
  October 1, 2006

  	
   

  

 

FOR VALUE RECEIVED, each of the undersigned, BODY SHOP OF AMERICA, INC., a
Florida corporation (“BSOA”), and CATALOGUE
VENTURES, INC., a Florida corporation (“CV”; CV and BSOA
are hereinafter sometimes referred to individually as a “Borrower” and
collectively as “Borrowers”), hereby jointly and severally and
unconditionally promises to pay to the order of CHURCHILL FINANCIAL CAYMAN LTD. (“Lender”), at the
Administrative Agent’s (as hereinafter defined) office at One North Franklin
Street, Suite 3500, Chicago, IL 60606, or at such other place as the
Administrative Agent may from time to time designate in writing, in lawful
money of the United States of America and in immediately available funds, the
principal sum of FOUR MILLION THREE HUNDRED
THIRTY THOUSAND EIGHT HUNDRED TWENTY-SEVEN AND 07/100 DOLLARS ($4,330,827.07),
or, if less, the aggregate unpaid principal amount of the Term Loan B made to
Borrowers by Lender pursuant to Article 2 of the Financing Agreement (as
hereinafter defined), at such times as are specified in, and in accordance with
the provisions of, the Financing Agreement. This Amended and Substitute Term
Loan B Note (this “Term Note”) is executed and delivered pursuant to
that certain Financing Agreement of even date herewith (as the same may be
amended, restated, supplemented or otherwise modified and in effect from time
to time, the “Financing Agreement”), by and among Borrowers, each Person
listed as a “Guarantor” on the signature pages thereto, Dymas
Funding Company, LLC, as administrative agent (the “Administrative Agent”) for
the benefit of all Lenders, Churchill Financial Cayman Ltd., as Syndication
Agent, NewStar Financial, Inc., as Documentation Agent, and the financial
institutions who are parties thereto (the “Lenders”), to which reference
is hereby made for a statement of the terms and conditions under which the Term
Loan B evidenced hereby was made and is to be repaid. All terms which are
capitalized and used herein (which are not otherwise specifically defined
herein) and which are defined in the Financing Agreement shall be used in this
Term Note as defined in the Financing Agreement. This Term Note is secured by
the Collateral.

 

Each Borrower jointly and
severally further promises to pay interest on the outstanding unpaid principal
amount hereof, as provided in the Financing Agreement, from the date hereof
until payment in full hereof at the applicable rate specified in subsection
2.04(b) of the Financing Agreement; provided, however, that if the
Administrative Agent or Required Lenders so elect, following the occurrence and
during the continuance of an Event of Default, each Borrower promises to pay to
Lender interest on the unpaid principal amount hereof at the applicable rate
specified in subsection 2.04(c) of the Financing Agreement. Interest shall
be payable in arrears on each Interest Payment Date, on the date of any
prepayment in full and at maturity, whether by acceleration, demand or
otherwise, or as otherwise required by the Financing Agreement.

 

If a payment hereunder
becomes due and payable on a day that is not a Business Day, the payment may be
made on the next succeeding Business Day, and such extension of time shall be
included in the computation of the amount of interest due on such succeeding
Business Day. Anything herein to the contrary notwithstanding, the obligations
of Borrowers hereunder shall be subject to the limitation that payments of
interest shall not be required, for any period for which interest is computed
hereunder, to the extent (but only to the extent) that contracting for or receiving
such payment by Lender would be contrary to the provisions of any law
applicable to Lender 

 

 

limiting the highest rate
of interest which may be lawfully contracted for, charged or received by
Lender, and in such event Borrowers shall pay Lender interest at the Highest
Lawful Rate.

 

If any suit or action is
instituted or attorneys are employed to collect this Term Note or any part
thereof, each Borrower hereby promises and agrees to pay all costs of
collection, including attorneys’ fees and court costs.

 

Each Borrower and each
endorser, guarantor and surety of this Term Note hereby waives presentment for
payment, protest and demand, and notice of demand, protest, dishonor and
nonpayment of this Term Note. Except as provided in the Financing Agreement,
each Borrower also waives all rights to notice and hearing of any kind upon the
occurrence of an Event of Default and prior to the exercise by the
Administrative Agent of its rights to repossess the Collateral without judicial
process or to replevy, attach or levy upon the Collateral without notice or
hearing.

 

THIS TERM NOTE HAS BEEN DELIVERED
AT AND SHALL BE DEEMED TO HAVE BEEN MADE AT NEW YORK CITY, NEW YORK AND SHALL
BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO SHALL BE
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS. 
Whenever possible each provision of this Term Note shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Term Note shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Term Note. Whenever in this Term Note reference is made to
the Administrative Agent, Lender or Borrowers, such reference shall be deemed
to include, as applicable, a reference to their respective successors and
assigns. The provisions of this Term Note shall be binding upon and shall inure
to the benefit of such successors and assigns. Borrowers’ successors and
assigns shall include, without limitation, a receiver, trustee or debtor in
possession of or for any or each Borrower.

 

The obligations,
covenants and agreements of Borrowers hereunder shall be the joint and several
obligations, covenants and agreements of each Borrower.

 

This Term Note is a
registered note and, as provided in and subject to the terms of the Financing
Agreement, may be transferred in whole or in part only as provided therein. All
payments hereunder shall be made to the registered owner of this Term Note as
set forth in the Register maintained under subsection 11.06(d) of the
Financing Agreement.

 

It is expressly understood
and agreed by Borrowers that (i) the principal balance of this Term Note
includes certain Obligations hitherto evidenced by that certain Term Loan B
Note of even date herewith (“Existing Note”) executed by Body Central
Acquisition Corp., a Delaware corporation, in favor of Lender and (ii) to
the extent any of such Obligations are included in the principal balance of
this Term Note, this Term Note (a) merely re-evidences such Obligations, (b) is
given in substitution for, and not in payment of, the Existing Note and (c) is
in no way intended, and shall not be deemed or construed, to constitute a
novation of the Existing Note.

 

 

IN WITNESS WHEREOF, Borrowers have executed this Amended and
Substitute Revolving Note as of the date first above written.

 

	
   

  	
  BODY SHOP OF
  AMERICA, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George Kolber

  
	
   

  	
  Name:

  	
  George Kolber

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CATALOGUE
  VENTURES, INC., a Florida corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ George Kolber

  
	
   

  	
  Name:

  	
  George Kolber

  
	
   

  	
  Title:

  	
  President

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