Document:

Exhibit
10.1

 

LOAN AND SECURITY AGREEMENT

 

by and among

 

OFFICEMAX INCORPORATED

OFFICEMAX CONTRACT, INC.

OFFICEMAX NORTH AMERICA, INC.

BIZMART, INC.

BIZMART (TEXAS), INC.

HONOLULU PAPER COMPANY LIMITED

RELIABLE EXPRESS CORPORATION

as Borrowers

 

and

 

OFFICEMAX CORP.

PICABO HOLDINGS, INC.

OFFICEMAX NEVADA COMPANY

OFFICEMAX SOUTHERN COMPANY

as Guarantors

 

THE LENDERS AND ISSUING BANK FROM TIME TO
TIME PARTY HERETO

 

WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL)

as Administrative Agent

 

BANK OF AMERICA, NATIONAL ASSOCIATION,

as Syndication Agent

 

GENERAL ELECTRIC CAPITAL CORPORATION

WELLS FARGO RETAIL FINANCE, LLC

THE CIT GROUP/BUSINESS CREDIT, INC.

as Documentation Agent

 

WACHOVIA CAPITAL MARKETS, LLC

BANC OF AMERICA SECURITIES LLC

as Joint Lead Arrangers

 

WACHOVIA CAPITAL MARKETS, LLC

as Sole Bookrunner

 

Dated: June
24, 2005

 

 

TABLE OF
CONTENTS

 

	
  SECTION 1. DEFINITIONS

  	
  1

  
	
   

  	
   

  
	
  SECTION 2. CREDIT FACILITIES

  	
  33

  
	
   

  	
   

  
	
  2.1 Loans

  	
  33

  
	
  2.2 Letters of Credit

  	
  35

  
	
  2.3 Increase in Maximum Credit

  	
  38

  
	
   

  	
   

  
	
  SECTION 3. INTEREST AND FEES

  	
  39

  
	
   

  	
   

  
	
  3.1
  Interest

  	
  39

  
	
  3.2 Fees

  	
  41

  
	
  3.3 Changes in Laws and Increased Costs of
  Loans

  	
  42

  
	
   

  	
   

  
	
  SECTION 4. CONDITIONS PRECEDENT

  	
  44

  
	
   

  	
   

  
	
  4.1 Conditions Precedent to Initial Loans
  and Letters of Credit

  	
  44

  
	
  4.2 Conditions Precedent to All Loans and
  Letters of Credit

  	
  46

  
	
   

  	
   

  
	
  SECTION 5. GRANT AND PERFECTION OF SECURITY
  INTEREST

  	
  47

  
	
   

  	
   

  
	
  5.1 Grant of Security Interest

  	
  47

  
	
  5.2 Perfection of Security Interests

  	
  49

  
	
   

  	
   

  
	
  SECTION 6. COLLECTION AND ADMINISTRATION

  	
  53

  
	
   

  	
   

  
	
  6.1 Borrowers’ Loan Accounts

  	
  53

  
	
  6.2
  Statements

  	
  53

  
	
  6.3 Cash Management; Collection of Inventory Proceeds

  	
  54

  
	
  6.4
  Payments

  	
  56

  
	
  6.5 Taxes

  	
  57

  
	
  6.6 Authorization to Make Loans

  	
  59

  
	
  6.7 Use of Proceeds

  	
  59

  
	
  6.8 Appointment of Administrative Borrower as Agent for Requesting
  Loans and Receipts of Loans and Statements

  	
  59

  
	
  6.9 Pro Rata Treatment

  	
  60

  
	
  6.10 Sharing of Payments, Etc.

  	
  60

  
	
  6.11 Settlement Procedures

  	
  61

  
	
  6.12 Obligations Several; Independent Nature of Lenders’ Rights

  	
  64

  
	
  6.13
  Bank Products

  	
  64

  
	
   

  	
   

  
	
  SECTION 7. COLLATERAL REPORTING AND COVENANTS

  	
  64

  
	
   

  	
   

  
	
  7.1 Collateral Reporting

  	
  64

  
	
  7.2 Accounts Covenants

  	
  67

  
	
  7.3 Inventory Covenants

  	
  67

  

 

i

 

	
  7.4
  Power of Attorney

  	
  68

  
	
  7.5
  Right to Cure

  	
  69

  
	
  7.6 Access to Premises

  	
  69

  
	
   

  	
   

  
	
  SECTION
  8. REPRESENTATIONS AND WARRANTIES

  	
  70

  
	
   

  	
   

  
	
  8.1 Corporate Existence, Power and
  Authority

  	
  70

  
	
  8.2 Name; State of Organization; Chief
  Executive Office; Collateral Locations

  	
  70

  
	
  8.3 Financial Statements; No Material
  Adverse Change

  	
  71

  
	
  8.4 Priority of Liens; Title to Properties

  	
  71

  
	
  8.5 Tax Returns

  	
  71

  
	
  8.6 Litigation

  	
  72

  
	
  8.7 Compliance with Other Agreements and
  Applicable Laws

  	
  72

  
	
  8.8 Environmental Compliance

  	
  72

  
	
  8.9 Employee Benefits

  	
  73

  
	
  8.10 Bank Accounts

  	
  74

  
	
  8.11 Intellectual Property

  	
  74

  
	
  8.12 Subsidiaries; Affiliates;
  Capitalization; Solvency

  	
  74

  
	
  8.13 Labor Disputes

  	
  75

  
	
  8.14 Restrictions on Subsidiaries

  	
  76

  
	
  8.15 Material Contracts

  	
  76

  
	
  8.16 Credit Card Agreements

  	
  76

  
	
  8.17 Interrelated Businesses

  	
  77

  
	
  8.18 Payable Practices

  	
  77

  
	
  8.19 Accuracy and Completeness of
  Information

  	
  77

  
	
  8.20 Survival of Warranties; Cumulative

  	
  77

  
	
   

  	
   

  
	
  SECTION
  9. AFFIRMATIVE AND NEGATIVE COVENANTS

  	
  78

  
	
   

  	
   

  
	
  9.1 Maintenance of Existence

  	
  78

  
	
  9.2 New Collateral Locations

  	
  78

  
	
  9.3 Compliance with Laws, Regulations, Etc.

  	
  78

  
	
  9.4 Payment of Taxes and Claims

  	
  79

  
	
  9.5 Insurance

  	
  79

  
	
  9.6 Financial Statements and Other
  Information

  	
  80

  
	
  9.7 Sale of Assets, Consolidation, Merger,
  Dissolution, Etc

  	
  82

  
	
  9.8 Encumbrances

  	
  84

  
	
  9.9 Indebtedness

  	
  86

  
	
  9.10 Investments

  	
  90

  
	
  9.11 Restricted Payments

  	
  91

  
	
  9.12 Transactions with Affiliates

  	
  92

  
	
  9.13 Compliance with ERISA

  	
  93

  
	
  9.14 End of Fiscal Years; Fiscal Quarters

  	
  93

  
	
  9.15 Change in Business

  	
  93

  
	
  9.16 Limitation of Restrictions Affecting
  Subsidiaries

  	
  93

  
	
  9.17 Capital Expenditures

  	
  94

  
	
  9.18 Fixed Charge Coverage Ratio

  	
  94

  

 

ii

 

	
  9.19 License Agreements

  	
  95

  
	
  9.20 Credit Card Agreements

  	
  96

  
	
  9.21 Modifications of Indebtedness,
  Organizational Documents and Certain Other Agreements; Certain Payments of
  Indebtedness, Etc

  	
  96

  
	
  9.22 Inactive Subsidiaries; OMX Inc.

  	
  97

  
	
  9.23 Foreign Assets Control Regulations,
  Etc

  	
  98

  
	
  9.24 Costs and Expenses

  	
  98

  
	
  9.25 Further Assurances

  	
  99

  
	
   

  	
   

  
	
  SECTION
  10. EVENTS OF DEFAULT AND REMEDIES

  	
  100

  
	
   

  	
   

  
	
  10.1 Events of Default

  	
  100

  
	
  10.2 Remedies

  	
  103

  
	
   

  	
   

  
	
  SECTION
  11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

  	
  106

  
	
   

  	
   

  
	
  11.1 Governing Law; Choice of Forum;
  Service of Process; Jury Trial Waiver.

  	
  106

  
	
  11.2 Waiver of Notices

  	
  108

  
	
  11.3 Amendments and Waivers

  	
  108

  
	
  11.4 Waiver of Counterclaims

  	
  110

  
	
  11.5 Indemnification

  	
  110

  
	
  11.6 Currency Indemnity

  	
  111

  
	
   

  	
   

  
	
  SECTION
  12. THE AGENT

  	
  112

  
	
   

  	
   

  
	
  12.1 Appointment, Powers and Immunities

  	
  112

  
	
  12.2 Reliance by Agent

  	
  112

  
	
  12.3 Events of Default

  	
  112

  
	
  12.4 Wachovia Capital in its Individual
  Capacity

  	
  113

  
	
  12.5 Indemnification

  	
  113

  
	
  12.6 Non-Reliance on Agent and Other
  Lenders; Securitization Intercreditor Agreement

  	
  114

  
	
  12.7 Failure to Act

  	
  114

  
	
  12.8 Additional Loans

  	
  114

  
	
  12.9 Concerning the Collateral and the
  Related Financing Agreements

  	
  115

  
	
  12.10 Field Audit, Examination Reports and
  other Information; Disclaimer by Lenders

  	
  115

  
	
  12.11 Collateral Matters

  	
  115

  
	
  12.12 Agency for Perfection

  	
  117

  
	
  12.13 Successor Agent

  	
  117

  
	
  12.14 Failure to Respond Deemed Consent

  	
  118

  
	
  12.15 Legal Representation of Agent

  	
  118

  
	
  12.16 Other Agent Designations

  	
  118

  
	
   

  	
   

  
	
  SECTION
  13. TERM OF AGREEMENT; MISCELLANEOUS

  	
  118

  
	
   

  	
   

  
	
  13.1 Term

  	
  118

  
	
  13.2 Interpretative Provisions

  	
  119

  
	
  13.3 Notices

  	
  121

  

 

iii

 

	
  13.4 Partial Invalidity

  	
  122

  
	
  13.5 Confidentiality

  	
  122

  
	
  13.6 Successors

  	
  123

  
	
  13.7 Assignments; Participations

  	
  124

  
	
  13.8 Entire Agreement

  	
  126

  
	
  13.9 USA Patriot Act

  	
  126

  
	
  13.10 Counterparts, Etc

  	
  126

  

 

iv

 

INDEX

TO

EXHIBITS AND SCHEDULES

 

	
  Exhibit A

  	
   

  	
  Form
  of Assignment and Acceptance

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of
  Borrowing Base Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  Information
  Certificate

  
	
   

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  Form of Compliance
  Certificate

  
	
   

  	
   

  	
   

  
	
  Schedule 1.54

  	
   

  	
  Existing
  Lenders

  
	
   

  	
   

  	
   

  
	
  Schedule 1.55

  	
   

  	
  Existing
  Letters of Credit

  
	
   

  	
   

  	
   

  
	
  Schedule 1.69

  	
   

  	
  Inactive
  Subsidiaries

  
	
   

  	
   

  	
   

  
	
  Schedule 1.94

  	
   

  	
  Note
  Documents

  
	
   

  	
   

  	
   

  
	
  Schedule 1.122

  	
   

  	
  Description
  of Securitization Assets

  
	
   

  	
   

  	
   

  
	
  Schedule 8.12(e)

  	
   

  	
  Description
  of Assets of Unrestricted Subsidiaries

  
	
   

  	
   

  	
   

  
	
  Schedule 9.14

  	
   

  	
  Fiscal
  Quarter Ends

  

 

v

 

LOAN AND SECURITY AGREEMENT

 

This Loan and
Security Agreement dated June 24, 2005 is entered into by and among OfficeMax
Incorporated, a Delaware corporation (“Parent”), OfficeMax Contract, Inc., a
Delaware corporation (“Contract”), OfficeMax North America, Inc., an Ohio
corporation (“North America”), BizMart, Inc., a Delaware corporation (“BizMart”)
and BizMart (Texas), Inc., a Delaware corporation (“BizMart Texas”), Honolulu
Paper Company Limited, a Hawaii corporation (“Honolulu”), and Reliable Express
Corporation, a Delaware corporation (“Reliable”, and together with Parent,
Contract, North America, BizMart and Honolulu, each individually a “Borrower”
and collectively, “Borrowers” as hereinafter further defined), OfficeMax Corp.,
an Ohio corporation (“Ohio”), Picabo Holdings, Inc., a Delaware corporation (“Picabo”),
OfficeMax Nevada Company, a Nevada corporation (“Nevada”), and OfficeMax
Southern Company, a Louisiana limited partnership (“Southern”, and together
with Ohio, Picabo and Nevada, each individually a “Guarantor” and collectively,
“Guarantors” as hereinafter further defined), the parties hereto from time to
time as lenders, whether by execution of this Agreement or an Assignment and
Acceptance (each individually, a “Lender” and collectively, “Lenders” as
hereinafter further defined) and Wachovia Capital Finance Corporation
(Central), an Illinois corporation, in its capacity as agent for Lenders (in
such capacity, “Agent” as hereinafter further defined).

 

W I T N E S S
E T H:

 

WHEREAS,
Borrowers and Guarantors have requested that Agent and Lenders enter into
financing arrangements with Borrowers pursuant to which Lenders may make loans
and provide other financial accommodations to Borrowers; and

 

WHEREAS, each
Lender is willing to agree (severally and not jointly) to make such loans and
provide such financial accommodations to Borrowers on a pro rata basis
according to its Commitment (as defined below) on the terms and conditions set
forth herein and Agent is willing to act as agent for Lenders on the terms and
conditions set forth herein and the other Financing Agreements;

 

NOW,
THEREFORE, in consideration of the mutual conditions and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

 

SECTION 1.  DEFINITIONS

 

For purposes
of this Agreement, the following terms shall have the respective meanings given
to them below:

 

1.1                     “Accounts”
shall mean, as to each Borrower, all present and future rights of such Borrower
to payment of a monetary obligation, whether or not earned by performance,
which is not evidenced by chattel paper or an instrument, (a) for property that
has been or is to be sold, leased, licensed, assigned, or otherwise disposed
of, (b) for services rendered or to be rendered, (c) for a secondary obligation
incurred or to be incurred, or (d) arising out of the use of a credit or charge
card or information contained on or for use with the card.

 

 

1.2                     “Adjusted
Eurodollar Rate” shall mean, with respect to each Interest Period for any
Eurodollar Rate Loan comprising part of the same borrowing (including
conversions, extensions and renewals), the rate per annum determined by
dividing (a) the London Interbank Offered Rate for such Interest Period by (b)
a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage.  For purposes hereof, “Reserve Percentage”
shall mean for any day, that percentage (expressed as a decimal) which is in
effect from time to time under Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental, emergency,
special, or marginal reserves) applicable with respect to Eurocurrency
liabilities as that term is defined in Regulation D (or against any other
category of liabilities that includes deposits by reference to which the
interest rate of Eurodollar Loans is determined), whether or not any Lender has
any Eurocurrency liabilities subject to such reserve requirement at that
time.  Eurodollar Loans shall be deemed
to constitute Eurocurrency liabilities and as such shall be deemed subject to
reserve requirements without benefits of credits for proration, exceptions or
offsets that may be available from time to time to a Lender.  The Adjusted Eurodollar Rate shall be
adjusted automatically on and as of the effective date of any change in the
Reserve Percentage.

 

1.3                     “Adjusted
Excess Availability” shall mean, at any time, Excess Availability at such time,
but without reduction for the Special Reserve from the calculation of the
Borrowing Base.

 

1.4                     “Administrative
Borrower” shall mean OfficeMax Incorporated, a Delaware corporation in its
capacity as Administrative Borrower on behalf of itself and the other Borrowers
pursuant to Section 6.8 hereof and its successors and assigns in such capacity.

 

1.5                     “Affiliate”
shall mean, with respect to a specified Person, any other Person which directly
or indirectly, through one or more intermediaries, controls or is controlled by
or is under common control with such Person, and without limiting the
generality of the foregoing, includes (a) any Person which beneficially owns or
holds five (5%) percent or more of any class of Voting Stock of such Person or
other equity interests in such Person, (b) any Person of which such Person
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock or in which such Person beneficially owns or holds five (5%) percent or
more of the equity interests and (c) any director or executive officer of such
Person.  For the purposes of this
definition, the term “control” (including with correlative meanings, the terms “controlled
by” and “under common control with”), as used with respect to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Stock, by agreement or otherwise.

 

1.6                     “Agent”
shall mean Wachovia Capital Finance Corporation (Central), in its capacity as
agent on behalf of Lenders pursuant to the terms hereof and any replacement or
successor agent hereunder.

 

1.7                     “Agent
Payment Account” shall mean account no. 5000000030266 of Agent at Wachovia, or
such other account of Agent as Agent may from time to time designate to
Administrative Borrower as the Agent Payment Account for purposes of this
Agreement and the other Financing Agreements.

 

2

 

1.8                             “Applicable
Margin” shall mean, at any time during any fiscal quarter, as to the interest
rate for Prime Rate Loans and the interest rate for Eurodollar Rate Loans, the
applicable percentage (on a per annum basis) set forth below if the Quarterly
Average Excess Availability for the immediately preceding fiscal quarter is at
or within the amounts indicated for such percentage as of the last day of the
immediately preceding fiscal quarter:

 

	
  Tier

  	
   

  	
  Quarterly Average

  Excess Availability

  	
   

  	
  Applicable

  Eurodollar

  Rate Margin

  	
   

  	
  Applicable Prime

  Rate Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Greater than
  $100,000,000

  	
   

  	
  1.00

  	
  %

  	
  0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Less than or
  equal to $100,000,000 and greater than $50,000,000

  	
   

  	
  1.25

  	
  %

  	
  0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Less than or
  equal to $50,000,000

  	
   

  	
  1.50

  	
  %

  	
  .25

  	
  %

  

 

provided, that, (i) the Applicable
Margin shall be calculated and established once each fiscal quarter and shall
remain in effect until adjusted thereafter after the end of such fiscal
quarter, (ii) each adjustment of the Applicable Margin shall be effective as of
the first day of a fiscal quarter based on the Quarterly Average Excess
Availability for the immediately preceding fiscal quarter and (iii) the
Applicable Margin through December 31, 2005 shall be the amount for Tier 2 set
forth above.

 

1.9                     “Assignment
and Acceptance” shall mean an Assignment and Acceptance substantially in the
form of Exhibit A attached hereto (with blanks appropriately completed)
delivered to Agent in connection with an assignment of a Lender’s interest
hereunder in accordance with the provisions of Section 13.7 hereof.

 

1.10               “Bank
Product Provider” shall mean any Lender, Affiliate of any Lender or other
financial institution (in each case as to any Lender, Affiliate or other
financial institution to the extent approved by Agent) that provides any Bank
Products to Borrowers or Guarantors.

 

1.11               “Bank
Products” shall mean any one or more of the following types or services or
facilities provided to a Borrower by Agent or a Bank Product Provider: (a)
credit cards or stored value cards or (b) cash management or related services,
including (i) the automated clearinghouse transfer of funds for the account of
a Borrower pursuant to agreement or overdraft for any accounts of Borrowers
maintained at Agent or any Bank Product Provider that are subject to the
control of Agent pursuant to any Deposit Account Control Agreement to which
Agent, such Affiliate of Agent, Lender or Affiliate of Lender is a party, as
applicable, and (ii) controlled disbursement services and (iii) Hedge
Agreements if and to the extent permitted hereunder.  Any of the foregoing shall only be included
in the definition of the term “Bank Products” to the extent that the Lender,
its Affiliate or the other financial institution has been approved by Agent.

 

1.12               “Blocked
Accounts” shall have the meaning set forth in Section 6.3 hereof.

 

3

 

1.13               “Borrowers”
shall mean, collectively, the following (together with their respective
successors and assigns):  (a) OfficeMax
Incorporated, a Delaware corporation; (b) OfficeMax Contract, Inc., a Delaware
corporation; (c) OfficeMax North America, Inc., an Ohio corporation; (d)
BizMart, Inc., a Delaware corporation; (e) BizMart (Texas), Inc., a Delaware
corporation; (f) Honolulu Paper Company Limited, a Hawaii corporation; (g)
Reliable Express Corporation, a Delaware corporation; and (g) any other Person
that at any time after the date hereof becomes a Borrower; each sometimes being
referred to herein individually as a “Borrower”.

 

1.14                       “Borrowing
Base” shall mean, at any time, the amount equal to: (a) sixty-five (65%)
percent multiplied by the Cost value of Eligible Inventory until such time as
Agent has received an appraisal of the Inventory satisfactory to it in
accordance with Section 7.3(d) hereof, and on and after the receipt by Agent of
such an appraisal, the lesser of (i) seventy (70%) percent multiplied by the
Value of the Eligible Inventory or (ii) ninety (90%) percent of the Net
Recovery Percentage multiplied by the Value of the Eligible Inventory minus (b)
Reserves (except for the Special Reserve for purposes of the determination of
Adjusted Excess Availability). The amounts of Eligible Inventory shall, at
Agent’s option, be determined based on the lesser of the amount of Inventory
set forth in the general ledger of such Borrower or the perpetual inventory
records maintained by such Borrower, as applicable.

 

1.15                       “Borrowing
Base Certificate” shall mean a certificate substantially in the form of Exhibit
B hereto, as such form may from time to time be modified by Agent, which is
duly completed (including all schedules thereto) and executed by the chief
financial officer or other appropriate financial officer of Borrowers
acceptable to Agent and delivered to Agent.

 

1.16               “Business
Day” shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the
State of Illinois or the State of North Carolina, and a day on which Agent is
open for the transaction of business, except that if a determination of a
Business Day shall relate to any Eurodollar Rate Loans, the term Business Day
shall also exclude any day on which banks are closed for dealings in dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market.

 

1.17               “Capital
Expenditures” shall mean with respect to any Person for any period the
aggregate of all expenditures by such Person and its Subsidiaries made during
such period that in accordance with GAAP are or should be included in “property,
plant and equipment” or in a similar fixed asset account on its balance sheet,
whether such expenditures are paid in cash or financed and including all
obligations under Capital Leases paid or payable during such period.

 

1.18               “Capital
Leases” shall mean, as applied to any Person, any lease of (or any agreement
conveying the right to use) any property (whether real, personal or mixed) by
such Person as lessee which in accordance with GAAP, is required to be
reflected as a liability on the balance sheet of such Person.

 

1.19               “Capital
Stock” shall mean, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of such Person’s
capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or

 

4

 

other interests
(but excluding any debt security that is exchangeable for or convertible into
such capital stock).

 

1.20               “Cash
Dominion Event” shall mean either (a) an Event of Default shall exist or have
occurred or (b) Adjusted Excess Availability shall at any time be less than
$60,000,000.

 

1.21               “Cash
Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a
maturity date of one hundred twenty (120) days or less issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and
credit of the United States of America is pledged in support thereof; (b)
certificates of deposit or bankers’ acceptances with a maturity of one hundred
twenty (120) days or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided
profits of not less than $1,000,000,000; (c) commercial paper (including
variable rate demand notes) with a maturity of one hundred twenty (120) days or
less issued by a corporation (except an Affiliate of any Borrower or Guarantor)
organized under the laws of any State of the United States of America or the
District of Columbia and rated at least A-1 by Standard & Poor’s Ratings
Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s
Investors Service, Inc.; (d) repurchase obligations with a term of not more
than sixty (60) days for underlying securities of the types described in clause
(a) above entered into with any financial institution having combined capital
and surplus and undivided profits of not less than $1,000,000,000; (e)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any governmental agency thereof and backed by the full
faith and credit of the United States of America, in each case maturing within
one hundred twenty (120) days or less from the date of acquisition; provided,
that, the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions with Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October
31, 1985; and (f) investments in money market funds and mutual funds which
invest substantially all of their assets in securities of the types described
in clauses (a) through (e) above.

 

1.22               “Change
of Control” shall mean (a) the transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of any Borrower or
Guarantor to any Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the
liquidation or dissolution of any Borrower or Guarantor or the adoption of a
plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act) of more than
thirty-five (35%) percent of beneficial ownership, directly or indirectly, of
the voting power of the total outstanding Voting Stock of Parent or the Board
of Directors of Parent; (d) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of
Parent (together with any new directors whose nomination for election by the
stockholders of Parent was approved by a vote of at least a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Parent then still in office; or (e) the failure of Parent to own
directly or indirectly one hundred (100%) percent of the voting power of

 

5

 

the total outstanding Voting Stock of any other Borrower or Guarantor,
or in the case of any Person that becomes a Borrower or Guarantor after the
date hereof pursuant to a Permitted Acquisition, as to such Borrower or
Guarantor, the failure of Parent to own directly or indirectly a majority of
the voting power of the total outstanding Voting Stock of such Borrower or
Guarantor.

 

1.23               “Code”
shall mean the Internal Revenue Code of 1986, as the same now exists or may
from time to time hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations thereunder or related
thereto.

 

1.24               “Collateral”
shall have the meaning set forth in Section 5 hereof.

 

1.25               “Collateral
Access Agreement” shall mean an agreement in writing, in form and substance
satisfactory to Agent, from any lessor of premises to any Borrower or Guarantor
(and in the case of a Guarantor, only to the extent any Collateral is at such
premises), or any other person to whom any Collateral is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, in
favor of Agent with respect to the Collateral at such premises or otherwise in
the custody, control or possession of such lessor, consignee or other person.

 

1.26               “Commercial
Letter of Credit” shall mean any Letter of Credit consisting of a letter of
credit issued for the purpose of providing the primary manner of payment for
the purchase price of goods or services by a Borrower in the ordinary course of
the business of such Borrower.

 

1.27               “Commitment”
shall mean, at any time, as to each Lender, the principal amount set forth
below such Lender’s signature on the signatures pages hereto designated as the
Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant
to which such Lender became a Lender hereunder in accordance with the
provisions of Section 13.7 hereof, as the same may be adjusted from time to
time in accordance with the terms hereof; sometimes being collectively referred
to herein as “Commitments”.

 

1.28               “Consolidated
Net Income” shall mean, with respect to any Person for any period, the
aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated basis, for such period (and as to Borrowers and Guarantors,
excluding to the extent included therein (i) any extraordinary, one-time or
non-recurring gains, (ii) extraordinary, one-time or non-recurring non-cash
losses or charges, and (iii) operations that have been discontinued on or
before the date hereof) after deducting all charges which should be deducted
before arriving at the net income (loss) for such period (but without regard to
operations that have been discontinued on or before the date hereof) and after
deducting the Provision for Taxes for such period, all as determined in
accordance with GAAP; provided, that,

 

(a) the net income of any Person that is accounted for by the equity
method of accounting shall be included only to the extent of the amount of
dividends or distributions paid or payable to such Person or a Subsidiary of
such Person;

 

(b) except to the extent included pursuant to the foregoing clause, the
net income of any Person accrued prior to the date it becomes a Subsidiary of
such Person or is merged into or

 

6

 

consolidated with
such Person or any of its Subsidiaries or that Person’s assets are acquired by
such Person or by any of its Subsidiaries shall be excluded;

 

(c) the net income (if positive) of any wholly-owned Subsidiary to the
extent that the declaration or payment of dividends or similar distributions by
such wholly-owned Subsidiary to such Person or to any other wholly-owned
Subsidiary of such Person is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such wholly-owned
Subsidiary shall be excluded.

 

For the purposes of this definition, net income excludes any gain and
non-cash loss together with any related Provision for Taxes for such gain and
non-cash loss realized upon the sale or other disposition of any assets that
are not sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions and for this purpose
sales or other dispositions of retail stores, warehouses, distribution centers
or corporate offices shall not be deemed to be in the ordinary course of the
business of Borrowers and Guarantors) or of any Capital Stock of such Person or
a Subsidiary of such Person and any net income or non-cash loss realized as a
result of changes in accounting principles or the application thereof to such
Person and any net income realized as the result of the extinguishment of debt.

 

1.29               “Contract
Division” shall mean, collectively, the Subsidiaries of Parent engaged
principally in the marketing and sale of office supplies and paper, technology
products and office furniture through field sales people, outbound telesales,
catalogs, the internet and stores, as conducted as of the date hereof.

 

1.30               “Cost”
shall mean, as to the Inventory as of any date, the cost of such Inventory as
of such date, determined on a first-in-first-out basis in accordance with GAAP.

 

1.31               “Credit
Card Acknowledgments” shall mean, collectively, the agreements by Credit Card
Issuers or Credit Card Processors who are parties to Credit Card Agreements in
favor of Agent acknowledging Agent’s first priority security interest, for and
on behalf of Lenders, in the monies due and to become due to a Borrower
(including, without limitation, credits and reserves) under the Credit Card
Agreements, and agreeing to transfer all such amounts to the Blocked Accounts,
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced, sometimes being referred to herein
individually as a “Credit Card Acknowledgment”.

 

1.32               “Credit
Card Agreements” shall mean all agreements now or hereafter entered into by any
Borrower or for the benefit of any Borrower, in each case with any Credit Card
Issuer or any Credit Card Processor, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced,
including, but not limited to, the agreements set forth on Schedule 8.9 hereto.

 

1.33               “Credit
Card Issuer” shall mean any person (other than a Borrower) who issues or whose
members issue credit cards, including, without limitation, MasterCard or VISA
bank credit or debit cards or other bank credit or debit cards issued through
MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and
American Express, Discover, Diners Club,

 

7

 

Carte Blanche and other non-bank credit or debit cards, including,
without limitation, credit or debit cards issued by or through American Express
Travel Related Services Company, Inc., Novus Services, Inc. and the OfficeMax
Card.

 

1.34               “Credit
Card Processor” shall mean any servicing or processing agent or any factor or
financial intermediary who facilitates, services, processes or manages the
credit authorization, billing transfer and/or payment procedures with respect
to any Borrower’s sales transactions involving credit card or debit card
purchases by customers using credit cards or debit cards issued by any Credit
Card Issuer.

 

1.35               “Credit
Facility” shall mean the Loans and Letters of Credit provided to or for the
benefit of any Borrower pursuant to Sections 2.1 and 2.2 hereof.

 

1.36               “Currency
Exchange Convention” shall mean in the calculation of the US Dollar Equivalent,
a procedure used by Agent or a Lender to value in US Dollars (a) the
obligations or assets of any Borrower or Guarantor that are originally measured
in Canadian Dollars or any other currency and (b) any other amount expressed in
Canadian Dollars or any other currency, other than US Dollars, in each case by
using the Exchange Rate for the purchase of US Dollars with Canadian Dollars or
such other currency, as the case may be.

 

1.37                       “Default”
shall mean an act, condition or event which with notice or passage of time or
both would constitute an Event of Default.

 

1.38               “Defaulting
Lender” shall have the meaning set forth in Section 6.11 hereof.

 

1.39               “Deposit
Account Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, the Borrower or Guarantor
with a deposit account at any bank and the bank at which such deposit account
is at any time maintained which provides that such bank will comply with
instructions originated by Agent directing disposition of the funds in the
deposit account without further consent by such Borrower or Guarantor and has
such other terms and conditions as Agent may require.

 

1.40               “EBITDA”
shall mean, as to any Person, with respect to any period, an amount equal to:
(a) the Consolidated Net Income of such Person and its Subsidiaries for such
period, plus (b) depreciation and amortization and other non-cash charges
including imputed interest, deferred compensation and in the case of Borrowers
and Guarantors or other Subsidiary of Parent, non-cash costs associated with
the closing of retail store, warehouse, distribution center or corporate office
locations, in each case for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person), all in accordance with
GAAP, plus (c) Interest Expense for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person), plus (d) the Provision
for Taxes for such period (to the extent deducted in the computation of
Consolidated Net Income of such Person).

 

1.41               “Eligible
Inventory” shall mean, as to each Borrower, Inventory of such Borrower
consisting of finished goods held for resale in the ordinary course of the
business of such Borrower that satisfy the criteria set forth below as
determined by Agent in good faith.  In
general, Eligible Inventory shall not include: 
(a) work-in-process; (b) spare parts for equipment; (c) packaging and
shipping materials; (d) supplies used or consumed in such Borrower’s

 

8

 

business; (e) Inventory at premises other than those owned or leased
and controlled by any Borrower; (f) Inventory subject to a security interest or
lien in favor of any Person except those permitted in Sections 9.8(a), (b),
(c), (d) and (n) (but as to Section 9.8(n) only to the extent that Agent has
established a Reserve as provided therein) and any other liens permitted under
this Agreement that are subject to an intercreditor agreement in form and
substance satisfactory to Agent between the holder of such security interest or
lien and Agent; (g) bill and hold goods; (h) unserviceable, obsolete or slow
moving Inventory; (i) Inventory that is not subject to the first priority, valid
and perfected security interest of Agent (except as to priority, subject to the
liens permitted under Sections 9.8(b), Section 9.8(c) and 9.8(n) hereof as to
any Inventory to the extent that such liens have priority over the liens of
Agent under applicable law, but as to liens under Section 9.8(n) only to the
extent that Agent has established a Reserve as provided therein); (j) returned
Inventory that is not saleable and held for sale in the ordinary course of
business, (k) damaged and/or defective Inventory; (l) Inventory purchased or
sold on consignment and (m) Inventory located outside the United States of
America. The criteria for Eligible Inventory set forth above may only be
changed and any new criteria for Eligible Inventory may only be established by
Agent in good faith based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) an event, condition or
other circumstance existing on the date hereof to the extent Agent has no
written notice thereof from a Borrower prior to the date hereof, in either case
under clause (i) or (ii) which adversely affects or could reasonably be
expected to adversely affect the Inventory in the good faith determination of
Agent.  Any Inventory that is not
Eligible Inventory shall nevertheless be part of the Collateral.

 

1.42               “Eligible
LC Inventory” shall mean Inventory that would otherwise be Eligible Inventory
(other than for its location) that as to which: (i) the Inventory is purchased
with and subject to a Letter of Credit issued by Wachovia as Issuing Bank, (ii)
the Inventory is then in transit (whether by vessel, air or land) from a
location outside of the continental United States of America to a location
permitted hereunder and for which Agent shall have received such evidence
thereof as Agent may require, (iii) the title of the Inventory has passed to,
and such Inventory is owned by, a Borrower and for which Agent shall have
received such evidence thereof as Agent may require, (iv) Agent has received
each of the following: (A) a Collateral Access Agreement, duly authorized,
executed and delivered by the customs broker, freight forwarder or other third
party handling the shipping and delivery of such Inventory, (B) a copy of the
certificate of marine cargo insurance in connection therewith in which Agent
has been named as an additional insured and loss payee in a manner acceptable
to Agent and (C) a copy of the invoice, packing slip and manifest with respect
thereto, (v) the Inventory is either (A) subject to a negotiable bill of
lading: (1) that is consigned to the Issuing Bank (unless and until such time
as Agent shall require that the same be consigned to Agent, then thereafter,
that is consigned to Agent either directly or by means of endorsements), (2)
that was issued by the carrier in respect of such Inventory and (3) is either
in the possession of the customs broker, freight forwarder or other third party
handling the shipping and delivery of such Inventory acting on behalf of Agent
or the subject of a telefacsimile or other electronic copy that Agent has
received from the Issuing Bank with respect to the Letter of Credit and as to
which Agent has also received confirmation from such Issuing Bank that such
document is in transit to Agent or the customs broker, freight forwarder or
other third party handling the shipping and delivery of such Inventory acting
on behalf of Agent or (B) subject to a negotiable cargo receipt and is not the
subject of a bill of lading (other than a negotiable bill of lading consigned
to, and in the possession of a consolidator or Agent, or their respective
agents) and such negotiable cargo receipt is (1) consigned to Issuing

 

9

 

Bank (unless and until such time as Agent shall require that the same be
consigned to Agent, then thereafter, that is consigned to Agent either directly
or by means of endorsements), (2) issued by a consolidator in respect of such
Inventory and (3) either in the possession of Agent or the customs broker,
freight forwarder or other third party handling the shipping and delivery of
such Inventory acting on behalf of Agent or the subject of a telefacsimile or
other electronic copy that Agent has received from the Issuing Bank with
respect to the Letter of Credit and as to which Agent has also received a
confirmation from such Issuing Bank that such document is in transit to Agent
or the customs broker, freight forwarder or other third party handling the
shipping and delivery of such Inventory, (vi) such Inventory is insured against
types of loss, damage, hazards, and risks, and in amounts, satisfactory to
Agent, and (vii) such Inventory shall not have been in transit for more than
forty-five (45) days.

 

1.43               “Eligible
Transferee” shall mean (a) any Lender; (b) the parent company of any Lender
and/or any Affiliate of such Lender which is at least fifty (50%) percent owned
by such Lender or its parent company; (c) any person (whether a corporation,
partnership, trust or otherwise) that is engaged in the business of making,
purchasing, holding or otherwise investing in bank revolving loans and similar
extensions of credit in the ordinary course of its business and is administered
or managed by a Lender or with respect to any Lender that is a fund which
invests in bank revolving loans and similar extensions of credit, any other
fund that invests in bank revolving loans and similar extensions of credit and
is managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor, and in each case is approved by Agent; and (d) any
other commercial bank, financial institution or “accredited investor” (as
defined in Regulation D under the Securities Act of 1933) approved by Agent, provided,
that, (i) neither any Borrower nor any Guarantor or any Affiliate of any
Borrower or Guarantor shall qualify as an Eligible Transferee and (ii) no
Person to whom any Indebtedness which is in any way subordinated in right of
payment to any other Indebtedness of any Borrower or Guarantor shall qualify as
an Eligible Transferee, except as Agent may otherwise specifically agree.

 

1.44               “Environmental
Laws” shall mean all foreign, Federal, State, Provincial and local laws
(including common law), legislation, rules, codes, licenses, permits (including
any conditions imposed therein), authorizations, judicial or administrative
decisions, injunctions or agreements between any Borrower or Guarantor and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b)  relating
to the exposure to, or the use, storage, recycling, treatment, generation,
manufacture, processing, distribution, transportation, handling, labeling,
production, release or disposal, or threatened release, of Hazardous Materials,
or (c) relating to all laws with regard to recordkeeping, notification, disclosure
and reporting requirements respecting Hazardous Materials.  The term “Environmental Laws” includes (i)
the Federal Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the
Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974,

 

10

 

(ii) applicable state counterparts to such laws and (iii) any common
law or equitable doctrine that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Materials.

 

1.45               “Equipment”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter acquired equipment, wherever located,
including machinery, data processing and computer equipment (whether owned or
licensed and including embedded software), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.

 

1.46               “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, together with
all rules, regulations and interpretations thereunder or related thereto.

 

1.47               “ERISA
Affiliate” shall mean any person required to be aggregated with any Borrower,
any Guarantor or any of its or their respective Subsidiaries under Sections
414(b), 414(c), 414(m) or 414(o) of the Code.

 

1.48               “ERISA
Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of
ERISA or the regulations issued thereunder, with respect to a Pension Plan,
other than events as to which the requirement of notice has been waived in
regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of
any amendment to a Pension Plan that would require the provision of security
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA;  (c) a complete or partial withdrawal by any
Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a
cessation of operations which is treated as such a withdrawal or notification
that a Multiemployer Plan is in reorganization; (d) the filing of a notice of
intent to terminate, the treatment of a Pension Plan amendment as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the
Pension Benefit Guaranty Corporation to terminate a Pension Plan; (e) an event
or condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan; (f) the imposition of any liability under Title IV of ERISA,
other than the Pension Benefit Guaranty Corporation premiums due but not
delinquent under Section 4007 of ERISA, upon any Borrower, Guarantor or any
ERISA Affiliate in excess of $2,500,000.

 

1.49               “Eurodollar
Rate Loans” shall mean any Loans or portion thereof on which interest is
payable based on the Adjusted Eurodollar Rate in accordance with the terms
hereof.

 

1.50               “Event
of Default” shall mean the occurrence or existence of any event or condition
described in Section 10.1 hereof.

 

1.51               “Excess
Availability” shall mean the amount, as determined by Agent, calculated at any
time equal to:

 

(a) the lesser of (i)  the
Borrowing Base or (ii) the Maximum Credit (in each case under (i) or (ii) after
giving effect to any Reserves other than any Reserves in respect of Letter of
Credit Obligations and in the case of (ii), other than the Special Reserve), minus

 

11

 

(b) the sum of (i) the amount of the then outstanding Loans, plus (ii)
the amount of all Reserves then established in respect of Letter of Credit
Obligations, plus (iii) the aggregate amount of (A) all then outstanding and
unpaid trade payables of Borrowers not subject to seasonal dating which are
outstanding more than sixty (60) days past the invoice date for them and (B)
all then outstanding and unpaid trade payables of Borrowers subject to seasonal
dating which are outstanding more than ninety (90) days past the invoice date
for them, in the case of clauses (A) and (B), as of the end of the immediately
preceding month or at Agent’s option, as of a more recent date based on such
reports as Agent may from time to time specify (other than trade payables being
contested or disputed by a Borrower in good faith and subject to such
arrangements of a Borrower with the vendor or any other party to whom such
payable is owed).

 

For purposes of determining the outstanding trade payables in the
ordinary course, Administrative Borrower shall provide to Agent the summary
reports of payables as set forth in Section 7.1(a) hereof, together with such
other information with respect thereto as Administrative Borrower may from time
to time desire.

 

1.52               “Exchange
Act” shall mean the Securities Exchange Act of 1934, together with all rules,
regulations and interpretations thereunder or related thereto.

 

1.53               “Exchange
Rate” shall mean the prevailing spot rate of exchange of Wachovia or if such
rate is not available from Wachovia, such other bank as Agent may reasonably
select for the purpose of conversion of one currency to another, at or around
11:00 a.m. New York City time, on the date on which any such
conversion of currency is to be made under this Agreement.

 

1.54               “Existing
Lenders” shall mean the lenders to Borrowers listed on Schedule 1.54 hereto
(and including JPMorgan Chase in its capacity as agent acting for such lenders)
and their respective predecessors, successors and assigns.

 

1.55               “Existing
Letters of Credit” shall mean, collectively, the letters of credit issued for
the account of a Borrower or Guarantor or for which such Borrower or Guarantor
is otherwise liable listed on Schedule 1.55 hereto, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

 

1.56  “Federal Funds Rate” shall mean, for any
period, a fluctuating interest rate per annum equal, for each day during such
period, to 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 for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
Chicago, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day on such transactions received
by the Agent from three Federal Funds brokers of recognized standing selected
by it.

 

1.57               “Fee
Letter” shall mean the letter agreement, dated of even date herewith, by and
among Borrowers, Guarantors and Agent, setting forth certain fees payable by
Borrowers in connection with the Credit Facility, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

 

12

 

1.58               “Financing
Agreements” shall mean, collectively, this Agreement and all notes, guarantees,
security agreements, deposit account control agreements, investment property
control agreements, intercreditor agreements and all other agreements,
documents and instruments now or at any time hereafter executed and/or
delivered by any Borrower or Guarantor in connection with this Agreement; provided,
that, the Financing Agreements shall not include Hedge Agreements.

 

1.59               “Fixed
Charge Coverage Ratio” shall mean, with respect to any date of determination,
the ratio of (a) the amount equal to EBITDA of any Person and its Subsidiaries,
on a consolidated basis, as of the end of a fiscal quarter for the immediately
preceding four (4) fiscal quarters (or in the case of Section 9.18 hereof, such
other period as may be provided for therein) to (b) Fixed Charges of such
Person and its Subsidiaries, on a consolidated basis, for such period.

 

1.60               “Fixed
Charges” shall mean, as to any Person and its Subsidiaries, on a consolidated
basis, with respect to any period, the sum of, without duplication, (a) all
cash Interest Expense, plus (b) all regularly scheduled (as determined at the
beginning of the respective period) principal payments of Indebtedness for
borrowed money (except as to Parent and its Subsidiaries, for purposes of
Section 9.18, Fixed Charges shall exclude $88,000,000 of principal payments
made by Parent or any of its Subsidiaries in the second fiscal quarter of
Parent in its 2005 fiscal year), Indebtedness for the deferred purchase price
of any property or services (other than an account payable to a trade creditor
(whether or not an Affiliate) incurred in the ordinary course of business of
such Person and payable in accordance with customary trade practices,
Indebtedness with respect to Capital Leases (and without duplicating in items
(a) and (b) of this definition, the interest component with respect to
Indebtedness under Capital Leases), plus (c) Provision for Taxes to the extent
actually paid in cash during such period (except as to Parent and its
Subsidiaries for purposes of Section 9.18, Fixed Charges shall exclude income
taxes of approximately $105,950,000 paid in cash in the first fiscal quarter of
the 2005 fiscal year of Parent), plus (d) dividends and other distributions in
respect of Capital Stock paid during such period, plus (e) expenses payable in
connection with the Permitted Securitization Facility during such period.

 

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

 

1.62               “Foreign
Subsidiary” shall mean a Subsidiary of Parent that is organized or incorporated
under the laws of any jurisdiction outside of the Untied States of America and
which has substantially all of its assets and operations in a jurisdiction
outside the United States of America; sometimes being referred to herein
collectively as “Foreign Subsidiaries”.

 

1.63               “Funding
Bank” shall have the meaning given to such term in Section 3.3 hereof.

 

1.64               “GAAP”
shall mean generally accepted accounting principles in the United States of
America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the

 

13

 

statements and pronouncements of the Financial Accounting Standards
Board which are applicable to the circumstances as of the date of determination
consistently applied, except that, unless otherwise agreed by Agent, for
purposes of Sections 9.17 and 9.18 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and consistent with those
used in the preparation of the most recent audited financial statements
delivered to Agent prior to the date hereof.

 

1.65               “Governmental
Authority” shall mean any nation or government, any state, province, or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

 

1.66               “Guarantors”
shall mean, collectively, the following (together with their respective
successors and assigns):  (a) OfficeMax
Corp., an Ohio corporation; (b) Picabo Holdings, Inc., a Delaware corporation;
(c) OfficeMax Nevada Company, a Nevada corporation; (d) OfficeMax Southern
Company, a Louisiana limited partnership; and (d) any other Person that at any
time after the date hereof becomes party to a guarantee in favor of Agent or
any Lender or otherwise liable on or with respect to the Obligations or who is
the owner of any property which is security for the Obligations (other than
Borrowers); each sometimes being referred to herein individually as a “Guarantor”;
provided, that, if at any time after the date hereof, a Guarantor
shall own any assets that would constitute Eligible Inventory if owned by a
Borrower, upon Administrative Borrower’s request, such Guarantor shall cease to
be a Guarantor hereunder and shall be deemed a Borrower effective on the date
of the confirmation by Agent to Administrative Borrower that Agent has received
such request and that Agent has received an appraisal with respect to such
Inventory and conducted a field examination with respect thereto, the results
of which are satisfactory to Agent in good faith, or alternatively, at Agent’s
option, Agent shall received such information with respect thereto as Agent may
in good faith require.

 

1.67               “Hazardous
Materials” shall mean any hazardous, toxic or dangerous substances, materials
and wastes, including hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, biological substances, polychlorinated
biphenyls, pesticides, herbicides and any other kind and/or type of pollutants
or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that
are or become classified as hazardous or toxic under any Environmental Law).

 

1.68               “Hedge
Agreement” shall mean an agreement between any Borrower or Guarantor and a Bank
Product Provider that is a rate swap agreement, basis swap, forward rate
agreement, commodity swap, forward commodity contracts, interest rate option,
forward foreign exchange agreement, spot foreign exchange agreement, rate cap
agreement rate, floor agreement, rate collar agreement, currency swap
agreement, cross-currency rate swap agreement, currency option, any other
similar agreement (including any option to enter into any of the foregoing or a
master agreement for any the foregoing together with all supplements thereto)
for the purpose of protecting against or managing exposure to fluctuations in
interest or exchange rates, currency

 

14

 

valuations or
commodity prices; sometimes being collectively referred to herein as “Hedge
Agreements”.

 

1.69               “Inactive
Subsidiary” shall mean, collectively, (a) each Subsidiary of Parent listed on
Schedule 1.69 hereto and (b) a Subsidiary of Parent designated in writing by
Administrative Borrower to Agent after the date hereof as an Inactive
Subsidiary and agreed to by Agent, provided, that, (i) such
Subsidiary so designated after the date hereof shall only be considered an
Inactive Subsidiary to the extent that the representations with respect thereto
set forth in Section 8.12(f) hereof are true and correct with respect thereto
and Agent shall have received such evidence thereof as it may require and (ii)
such Subsidiaries are sometimes referred to herein collectively as “Inactive
Subsidiaries”.

 

1.70               “Indebtedness”
shall mean, with respect to any Person, any liability, whether or not
contingent,

 

(a) in respect of borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof) or evidenced by bonds, notes, debentures or similar
instruments;

 

(b) representing the balance deferred and
unpaid of the purchase price of any property or services (other than an account
payable to a trade creditor (whether or not an Affiliate) incurred in the
ordinary course of business of such Person and payable in accordance with
customary trade practices);

 

(c) all obligations as lessee under leases
which have been, or should be, in accordance with GAAP recorded as Capital
Leases;

 

(d) any contractual obligation, contingent or otherwise, of such Person
to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge
thereof, or to maintain solvency, assets, level of income, or other financial
condition;

 

(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities
issued by such Person;

 

(f) all reimbursement obligations and other liabilities of such Person
with respect to surety bonds (whether bid, performance or otherwise), letters
of credit, banker’s acceptances, drafts or similar documents or instruments
issued for such Person’s account;

 

(g) all indebtedness of such Person in respect of indebtedness of another
Person for borrowed money or indebtedness of another Person otherwise described
in this definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time;

 

15

 

(h) all obligations, liabilities and indebtedness of such Person
(marked to market) arising under swap agreements, cap agreements and collar
agreements and other agreements or arrangements designed to protect such person
against fluctuations in interest rates or currency or commodity values or other
Hedge Agreement;

 

(i) all obligations owed by such Person under
License Agreements with respect to non-refundable, advance or minimum guarantee
royalty payments;

 

(j) indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer to the extent such Person is
liable therefor as a result of such Person’s ownership interest in such entity,
except to the extent that the terms of such indebtedness expressly provide that
such Person is not liable therefor or such Person has no liability therefor as
a matter of law;

 

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

 

(l) the principal and interest portions of all rental obligations of
such Person under any synthetic lease or similar off-balance sheet financing
where such transaction is considered to be borrowed money for tax purposes but
is classified as an operating lease in accordance with GAAP.

 

1.71               “Information
Certificate” shall mean, collectively, the Information Certificates of
Borrowers and Guarantors constituting Exhibit C hereto containing material
information with respect to Borrowers and Guarantors, their respective
businesses and assets provided by or on behalf of Borrowers and Guarantors to
Agent in connection with the preparation of this Agreement and the other
Financing Agreements and the financing arrangements provided for herein.

 

1.72               “Intellectual
Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and
Guarantor’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
applications, copyright registrations, trademarks, servicemarks, trade names,
trade styles, trademark and service mark applications, and licenses and rights
to use any of the foregoing and all applications, registrations and recordings
relating to any of the foregoing as may be filed in the United States Copyright
Office, the United States Patent and Trademark Office or in any similar office
or agency of the United States, any State thereof, any political subdivision
thereof or in any other country or jurisdiction, together with all rights and
privileges arising under applicable law with respect to any Borrower’s or
Guarantor’s use of any of the foregoing; all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing;
all rights to sue for past, present and future infringement of any of the
foregoing; inventions, trade secrets, formulae, processes, compounds, drawings,
designs, blueprints,

 

16

 

surveys, reports, manuals, and operating standards; goodwill (including
any goodwill associated with any trademark or servicemark, or the license of
any trademark or servicemark); customer and other lists in whatever form
maintained; trade secret rights, copyright rights, rights in works of
authorship, domain names and domain name registration; software and contract
rights relating to computer software programs, in whatever form created or
maintained.

 

1.73  “Interest Expense” shall mean, for any
period, as to any Person, as determined in accordance with GAAP, the amount
equal to:  (a) total interest expense of
such Person and its Subsidiaries on a consolidated basis for such period,
whether paid or accrued (including the interest component of any Capital Lease
for such period), and in any event, including, without limitation, (i) discounts
in connection with the sale of any Accounts, (ii) bank fees,  commissions, discounts and other fees and
charges owed with respect to letters of credit, banker’s acceptances or similar
instruments or any factoring or similar arrangements (including any Permitted
Securitization Facility), (ii) interest payable by addition to principal or in
the form of property other than cash and any other interest expense not payable
in cash, and (iii) the costs or fees for such period associated with Hedging
Agreements (to the extent not otherwise included in such total interest
expense), minus (b) the sum of (i) any net payments received by such Person and
its Subsidiaries on a consolidated basis during such period as interest income
received in respect of its investments in cash, and (ii) gains for such period
on Hedging Agreements (to the extent not included in interest income above),
plus (c) losses for such period on Hedging Agreements (to the extent not
deducted in the calculation of such total interest expenses).  As to Parent and its Subsidiaries, the
Interest Expense of OMX Timber Finance Investments I, LLC and OMX Timber
Finance Investments II, LLC in respect of the nonrecourse securitization notes
issued by them consisting of the Class A-1 Notes due 2019 each in the amount of
$735,000,000 for any period shall be reduced by the amount of interest income
received by each of them in cash during such period under the credit-enhanced
installment timber notes consisting of the $817,500,000 Installment Note
Guaranteed by Lehman Brothers Holdings Inc. and the $817,500,000 Installment
Notes Guaranteed by Wachovia Corporation payable to them.

 

1.74               “Interest
Period” shall mean for any Eurodollar Rate Loan, a period of approximately one
(1), two (2), three (3), or six (6) months duration as any Borrower (or
Administrative Borrower on behalf of such Borrower) may elect, the exact
duration to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, such Borrower (or Administrative
Borrower on behalf of such Borrower) may not elect an Interest Period which
will end after the last day of the then-current term of this Agreement.

 

1.75               “Interest
Rate” shall mean,

 

(a)                    Subject
to clause (b) of this definition below:

 

(i)                       as
to Prime Rate Loans, a rate equal to the then Applicable Margin for Prime Rate
Loans on a per annum basis plus the Prime Rate, and

 

(ii)                    as to Eurodollar Rate Loans, a rate equal to the then
Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the
Adjusted Eurodollar Rate.

 

17

 

(b)                   Notwithstanding
anything to the contrary contained herein, Agent may, at its option, and Agent
shall, at the direction of the Required Lenders, increase the Applicable Margin
otherwise used to calculate the Interest Rate for Prime Rate Loans and
Eurodollar Rate Loans in each case to the highest percentage set forth in the
definition of the term Applicable Margin for each category of Revolving Loans
(without regard to the amount of Quarterly Average Excess Availability) plus
two (2%) percent per annum: (i) for the period (A) from and after the effective
date of termination or non-renewal hereof until Agent and Lenders have received
full and final payment of all outstanding and unpaid Obligations which are not
contingent and cash collateral or letter of credit, as Agent may specify, in
the amounts and on the terms required under Section 13.1 hereof for contingent
Obligations (notwithstanding entry of a judgment against any Borrower or
Guarantor) and (B) from and after the date of the occurrence of an Event of
Default and for so long as such Event of Default is continuing and (ii) on
Loans at any time outstanding in excess of the Borrowing Base (whether or not
such excess(es) arise or are made with or without the knowledge or consent of
Agent or any Lender and whether made before or after an Event of Default).

 

1.76               “Inventory”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter existing or acquired goods, wherever
located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are
held by such Borrower or Guarantor for sale or lease or to be furnished under a
contract of service; (c) are furnished by such Borrower or Guarantor under a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business.

 

1.77               “Investment”
shall have the meaning set forth in Section 9.10 hereof.

 

1.78               “Investment
Property Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, any Borrower or Guarantor
(as the case may be) and any securities intermediary, commodity intermediary or
other person who has custody, control or possession of any investment property
of such Borrower or Guarantor acknowledging that such securities intermediary,
commodity intermediary or other person has custody, control or possession of
such investment property on behalf of Agent, that it will comply with
entitlement orders originated by Agent with respect to such investment
property, or other instructions of Agent, and has such other terms and
conditions as Agent may require.

 

1.79               “Issuing
Bank” shall mean Wachovia in its capacity as the issuer of Commercial Letters
of Credit hereunder and Wachovia, Wells Fargo Bank, N.A. (or any other Lender
as the Agent and Administrative Borrower may agree) in its capacity as the
issuer of Standby Letters of Credit hereunder, and in the case of Wells Fargo
Bank, N.A. or any other Lender only to the extent that such person is a party
hereto as an Issuing Bank and has executed and delivered such agreements with
respect thereto as Agent may require.

 

1.80               “Lenders”
shall mean the financial institutions who are signatories hereto as Lenders
(including Swing Line Lender) and other persons made a party to this Agreement
as a Lender in accordance with Section 13.7 hereof, and their respective
successors and assigns; each sometimes being referred to herein individually as
a “Lender”.

 

18

 

1.81               “Letter
of Credit Documents” shall mean, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments,
guarantees or other documents (whether general in application or applicable
only to such Letter of Credit) governing or providing for (a) the rights and
obligations of the parties concerned or at risk or (b) any collateral security
for such obligations.

 

1.82               “Letter
of Credit Limit” shall mean $100,000,000.

 

1.83               “Letter
of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate
undrawn amount of all Letters of Credit outstanding at such time, plus (b) the
aggregate amount of all drawings under Letters of Credit for which Issuing Bank
has not at such time been reimbursed, plus (c) without duplication, the
aggregate amount of all payments made by each Lender to Issuing Bank with
respect to such Lender’s participation in Letters of Credit as provided in
Section 2.2 for which Borrowers have not at such time reimbursed the Lenders,
whether by way of a Revolving Loan or otherwise.

 

1.84               “Letters
of Credit” shall mean all letters of credit (whether Commercial Letters of
Credit or Standby Letters of Credit and whether for the purchase of inventory,
equipment or otherwise) issued by an Issuing Bank for the account of any
Borrower pursuant to this Agreement, and all amendments, renewals, extensions
or replacements thereof.

 

1.85               “License
Agreements” shall have the meaning set forth in Section 8.11 hereof.

 

1.86               “Loans”
shall mean, collectively, the Revolving Loans and the Swing Line Loans.

 

1.87   “London Interbank Offered Rate” shall mean,
with respect to any Eurodollar Rate Loan for the Interest Period applicable
thereto, the rate of interest per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in U.S. 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,
that, if more than one rate is specified on Telerate Page 3750, the
applicable rate shall be the arithmetic mean of all such rates.  If, for any reason, such rate is not
available, the term “London Interbank Offered Rate” shall mean, with respect to
any Eurodollar Loan for the Interest Period applicable thereto, the rate of
interest per annum (rounded upwards, if necessary, 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.

 

1.88               “Material
Adverse Effect” shall mean a material adverse effect on (a) the financial
condition, business, performance or operations of Borrowers; (b) the legality,
validity or enforceability of this Agreement or any of the other Financing
Agreements; (c) the legality, validity, enforceability, perfection or priority
of the security interests and liens of Agent upon the Collateral; (d) the
Collateral or its value; (e) the ability of any Borrower to repay the Obligations
or of any Borrower to perform its obligations under this Agreement or any of
the other Financing

 

19

 

Agreements as and when to be performed; or (f) the ability of Agent or
any Lender to enforce the Obligations or realize upon the Collateral or
otherwise with respect to the rights and remedies of Agent and Lenders under
this Agreement or any of the other Financing Agreements.

 

1.89               “Material
Contract” shall mean (a) any contract or other agreement (other than the
Financing Agreements), written or oral, of any Borrower or Guarantor involving
monetary liability of or to any Person in an amount in excess of $50,000,000 in
any fiscal year (but excluding for this purpose contracts or other agreements
for the purchase and sale of goods or services where the other party thereto
has no obligation to purchase or sell such goods or services under such
contract or other agreement) and (b) any other contract or other agreement
(other than the Financing Agreements), whether written or oral, to which any
Borrower or Guarantor is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto would have a Material
Adverse Effect.

 

1.90               “Maturity
Date” shall mean shall have the meaning set forth in Section 13.1 hereof.

 

1.91               “Maximum
Credit” shall mean the amount of $500,000,000 (subject to adjustment as
provided in Section 2.3 hereof).

 

1.92               “Multiemployer
Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately
preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA
Affiliate or with respect to which any Borrower, Guarantor or any ERISA
Affiliate may incur any liability.

 

1.93               “Net
Recovery Percentage” shall mean the fraction, expressed as a percentage,  (a) the numerator of which is the amount
equal to the recovery on the aggregate amount of the Inventory at such time on
a “going out of business sale” basis as set forth in the most recent appraisal
of Inventory received by Agent in accordance with Section 7.3, net of operating
expenses, liquidation expenses and commissions, and (b) the denominator of
which is the applicable original cost of the aggregate amount of the Inventory
subject to appraisal.

 

1.94               “Note
Documents” shall mean, collectively, the indentures and notes set forth on
Schedule 1.94 hereto and related agreements, documents and instruments, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

 

1.95               “Obligations”
shall mean (a) any and all Revolving Loans, Swing Line Loans, Letter of Credit
Obligations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Agent or any
Lender, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, arising under this Agreement or any of the other Financing
Agreements, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to such Borrower under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or in
part in such case), whether direct or indirect, absolute or contingent, joint
or several, due or not due, primary or secondary, liquidated or unliquidated,
or secured or unsecured and (b)

 

20

 

for purposes only of Section 5.1 hereof and subject to the priority in
right of payment set forth in Section 6.4 hereof, all obligations, liabilities
and indebtedness of every kind, nature and description owing by any or all of
Borrowers or Guarantors to Agent or any Bank Product Provider arising under or
pursuant to any Bank Products, whether now existing or hereafter arising, provided,
that, (i) as to any such obligations, liabilities and indebtedness
arising under or pursuant to a Hedge Agreement, the same shall only be included
within the Obligations if upon Agent’s request, Agent shall have entered into
an agreement, in form and substance satisfactory to Agent, with the Bank
Product Provider that is a counterparty to such Hedge Agreement, as
acknowledged and agreed to by Borrowers and Guarantors, providing for the
delivery to Agent by such counterparty of information with respect to the
amount of such obligations and providing for the other rights of Agent and such
Bank Product Provider in connection with such arrangements, (ii) any Bank
Product Provider, other than Wachovia and its Affiliates, shall have delivered
written notice to Agent that (A) such Bank Product Provider has entered into a
transaction to provide Bank Products to a Borrower and Guarantor and (B) the
obligations arising pursuant to such Bank Products provided to Borrowers and
Guarantors constitute Obligations entitled to the benefits of the security
interest of Agent granted hereunder, and Agent shall have accepted such notice
in writing and (iii) in no event shall any Bank Product Provider to whom such
obligations, liabilities or indebtedness are owing be deemed a Lender for
purposes hereof to the extent of and as to such obligations, liabilities or
indebtedness other than for purposes of Section 5.1 hereof and other than for
purposes of Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9, 12.12 and 13.6
hereof and in no event shall such obligations be included in the Obligations to
the extent that the effect is that the value of the Collateral (as determined
by Agent) is less than the Obligations and in no event shall the approval of
any such person be required in connection with the release or termination of
any security interest or lien of Agent.

 

1.96               “OfficeMax
Card” shall mean the private label credit card issued by Associates Capital
Bank pursuant to the Credit Card Agreement of OfficeMax North America, Inc.
(formerly known as OfficeMax, Inc.) with such bank (or any subsequent Credit
Card Issuer) with respect to such private label card, as the same now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced (including any replacement with any other issuer after the date hereof
to the extent permitted hereunder).

 

1.97               “Other
Taxes” shall have the meaning given to such term in Section 6.5 hereof.

 

1.98               “Parent”
shall mean OfficeMax Incorporated, a Delaware corporation, and its successors
and assigns.

 

1.99               “Participant”
shall mean any financial institution that acquires and holds a participation in
the interest of any Lender in any of the Loans and Letters of Credit in
conformity with the provisions of Section 13.7 of this Agreement governing
participations.

 

1.100         “Permitted
Acquisitions” shall mean the purchase by a Borrower or Guarantor after the date
hereof of all or substantially all of the assets of any Person or a business or
division of such Person (including pursuant to a merger with such Person or the
formation of a wholly owned Subsidiary solely for such purpose that is merged
with such Person) or of all or a majority of the Capital Stock (such assets or
Person being referred to herein as the “Acquired Business”)

 

21

 

and in one or a series of transaction that satisfies each of the
following conditions as determined by Agent:

 

(a)  in the event that the total
consideration payable in respect of such Acquired Business is more than
$10,000,000,

 

(i)  Agent shall have received
not less than five (5) Business Days’ prior written notice of the proposed
acquisition and such information with respect thereto as Agent may request, in
each case with such information to include (A) the proposed date and amount of
the acquisition, (B) a list and description of the assets or shares to be
acquired, (C) the total purchase price for the assets to be purchased (and the
terms of payment of such purchase price), and (D) a summary of the due
diligence undertaken by Borrowers in connection with such acquisition,

 

(ii) Agent shall have received: (A) 
the most recent annual and interim financial statements with respect to
the Acquired Business and related statements of income and cash flows showing
positive cash flows for the immediately preceding fiscal year of such Acquired
Business, (B) detailed forecasts of cash flows for the Acquired Business
forecasting positive future cash flows, (C) detailed projections for Parent and
its Subsidiaries through the Maturity Date, on a monthly basis for the first
year after the acquisition and on a quarterly basis thereafter, giving pro
forma effect to such acquisition, based on assumptions satisfactory to Agent
and demonstrating pro forma compliance with all financial covenants set forth
in this Agreement, prepared in good faith an in a manner and using such
methodology as is consistent with the most recent financial statements
delivered to Agent pursuant to Section 9.6 hereof and in form and substance
satisfactory to Agent and (D) current, updated projections of the amount of the
Borrowing Base and Excess Availability for the twenty-four (24) month period
after the date of such acquisition, in a form reasonably satisfactory to Agent,
representing Borrowers’ reasonable best estimate of the future Borrowing Base
and Excess Availability for the period set forth therein as of the date not
more than ten (10) days prior to the date of such acquisition, which
projections shall have been prepared on the basis of the assumptions set forth
therein which Borrowers believe are fair and reasonable as of the date of
preparation in light of current and reasonably foreseeable business conditions,

 

(iii)  Agent shall have received
true, correct and complete copies of all agreements, documents and instruments
relating to such acquisition, which documents shall be reasonably satisfactory
to Agent,

 

(iv) Agent shall have received a certificate of the chief financial
officer or chief executive officer of Administrative Borrower certifying to
Agent and Lenders as to the matters set forth in this definition,

 

(b)  if Agent so elects and the
total consideration payable in respect of such Acquired Business is more than
$5,000,000 or the aggregate amount of all consideration paid for all Permitted
Acquisitions at the time of such Permitted Acquisition is more than
$20,000,000, Agent shall have received an appraisal of the inventory of the
Acquired Business and such other assets of the Acquired Business as Agent may
specify, in each case in form and containing assumptions and appraisal methods
satisfactory to Agent by an appraiser acceptable to Agent, on

 

22

 

which Agent and Lenders are expressly permitted to rely (and any
inventory of the Acquired Business may only be Eligible Inventory to the extent
that Agent has received such appraisal with respect thereto),

 

(c)  if Agent so elects and the
total consideration payable in respect of such Acquired Business is more than
$5,000,000 or the aggregate amount of all consideration paid for all Permitted
Acquisitions at the time of such Permitted Acquisition is more than
$20,000,000, Agent shall have completed a field examination with respect to the
business and assets of the Acquired Business in accordance with Agent’s
customary procedures and practices and as otherwise required by the nature and
circumstances of the business of the Acquired Business, the scope and results
of which shall be satisfactory to Agent and any inventory of the Acquired
Business shall only be Eligible Inventory to the extent that Agent has so
completed such field examination with respect thereto and the criteria for
Eligible Inventory set forth herein are satisfied with respect thereto in
accordance with this Agreement (or such other or additional criteria as Agent
may, at its option, establish with respect thereto in accordance with this
Agreement and subject to such Reserves as Agent may establish in connection
with the Acquired Business),

 

(d)  the Acquired Business shall
be an operating company that engages in a line of business substantially
similar to the business that Borrowers are engaged in on date hereof,

 

(e)  the consideration paid for
or in connection with the assets or shares of the Acquired Business (whether in
the form of cash, earn outs, property or assumption of Indebtedness, but
exclusive of common stock of Administrative Borrower) shall not exceed
$100,000,000 and after giving effect to all payments or other consideration
paid in respect of such acquisition, the aggregate amount of all payments made
or other consideration (whether in the form of cash, earn outs, property or
assumption of Indebtedness, but exclusive of common stock of Administrative
Borrower) delivered in connection with all Permitted Acquisitions shall not
exceed $250,000,000,

 

(f)  Agent shall have received
all items required by Sections 5.2 and 9.25 in connection with the Acquired
Business to the extent required under such Sections,

 

(g)  in the case of the
acquisition of the Capital Stock of another Person, (i) the board of directors
(or other comparable governing body) of such other Person shall have duly
approved such acquisition and such Person shall not have announced that it will
oppose such acquisition or shall not have commenced any action which alleges
that such acquisition will violate applicable law and (ii) to the extent that a
Person is a Receivables Financing Subsidiary, Agent shall have received a valid
pledge of all of the issued and outstanding Capital Stock of all classes of
such Person, together with stock powers endorsed in blank, as collateral
security for the payment and performance of the Obligations, together with such
agreements, documents and instruments as Agent may determine are necessary or
appropriate to give effect to such pledge of Capital Stock,

 

(h)  Adjusted Excess Availability
shall have been not less than $75,000,000 as of the date of the most recent
calculation of the Borrowing Base prior to the date of such acquisition and any
payment in respect of such acquisition and after giving effect to such
acquisition and any 

 

23

 

payment in respect of such acquisition, on a pro forma basis using the
Adjusted Excess Availability as of the date of the most recent calculation of
the Borrowing Base immediately prior to such acquisition and payment, Adjusted
Excess Availability shall be not less than $75,000,000,

 

(i)  no Default or Event of
Default shall exist or have occurred as of the date of the acquisition or any
payment in respect thereof and after giving effect to the acquisition or such
payment.

 

1.101         “Permitted
Dispositions” shall mean each of the following:

 

(a) sales of Inventory in the ordinary course of business,

 

(b) returns of Inventory to vendors in the ordinary course of business
of a Borrower or other Subsidiary of Parent on terms and conditions consistent
with the current practices of such Borrower or Subsidiary as of the date
hereof;

 

(c) the sale by Borrowers of the approximately $175,000,000 of
securities of Boise Cascade LLC and affiliates of Boise Cascade LLC owned by
Borrowers as of the date hereof;

 

(d) the sale or other disposition of assets (other than Collateral and
other than assets subject to clause (e) of this definition below) by a
Borrower, Guarantor or Restricted Subsidiary in the ordinary course of its
business that are no longer necessary or required in the conduct of such
Borrower’s, Guarantor’s or Restricted Subsidiary’s business and so long as
after giving effect to such sale or other disposition no Default or Event of
Default shall exist or have occurred;

 

(e)  sales or other dispositions
by any Borrower, Guarantor or Restricted Subsidiary of assets in connection
with the closing or sale of a retail store location, warehouse, distribution
center or corporate office of such Borrower, Guarantor or Restricted Subsidiary
which consist of leasehold interests in the premises of such store or
distribution center, the Equipment and fixtures located at such premises and
the books and records relating exclusively and directly to the operations of
such store or distribution center; provided, that, as to each and all such
sales and closings, (i) Agent shall have received written notice of such sale
or closing in accordance with Section 7.1(a) hereof, (ii) after giving effect
thereto, no Default or Event of Default shall exist or have occurred, and (iii)
such sale shall be on commercially reasonable prices and terms in a bona fide
arm’s length transaction,

 

(f) the grant by any Borrower, Guarantor or Restricted Subsidiary after
the date hereof of a non-exclusive license or an exclusive license to any
person for the use of any Intellectual Property consisting of trademarks owned
by such Borrower, Guarantor or Restricted Subsidiary; provided, that, other
than as to any implied license that may be deemed to have been granted to a
purchaser or recipient of goods bearing trademarks owned by a Borrower,
Guarantor or Restricted Subsidiary, each of the following conditions is
satisfied, (i) such license is only for the use of trademarks in the
manufacture, distribution or sale of products outside the United States of
America and Canada or, if such license is for the use of such trademarks in the
manufacture, distribution or sale of products within the United States of
America or Canada, it is

 

24

 

either (A) only for categories or types of Inventory other than the
type or category being sold by any Borrower or Guarantor as of the date of this
Agreement or that Borrower and Guarantors do not manufacture, distribute or
sell or (B) to private-label manufacturers of Inventory on behalf of a Borrower
on a non-exclusive basis in order to permit such private-label manufacturers to
manufacture Inventory at all times owned by such Borrower from time to time in
the ordinary course of its business, consistent with its current practice as of
the date hereof or (C) such license is on a non-exclusive basis and the rights
of the licensee shall be subject to the rights of Agent, and shall not
adversely affect, limit or restrict the rights of Agent to use any Intellectual
Property of a Borrower or Guarantor to sell or otherwise dispose of any
Inventory or other Collateral or otherwise in any manner limit or interfere in
any respect with the use of any such trademarks by Agent in connection with the
exercise of its rights or remedies hereunder or under the other Financing
Agreements, (ii) such licenses shall be on commercially reasonable prices and
terms in a bona fide arms’ length transactions, (iii) in the case of licenses
of the type described in clause (C) above, Agent shall have received a
description of such license to the extent and when required under Section
7.1(a) hereof, (iv) upon Agent’s request, Agent shall have received, true,
correct and complete copies of the executed license agreement and (v) as of the
date of the grant of any such license, and after giving effect thereto, no
Default or Event of Default shall exist or have occurred,

 

 (g) sales, transfers and
dispositions of assets of a Borrower to another Borrower or by a Guarantor or
other Subsidiary of Parent to a Borrower or Guarantor or by any Subsidiary that
is not a Borrower or Guarantor to another Subsidiary that is not a Borrower or
Guarantor, in each case to the extent otherwise permitted hereunder.

 

1.102                 “Permitted
Investments” shall mean each of the following:

 

(a)  the endorsement of instruments for collection
or deposit in the ordinary course of business;

 

(b)  Investments in cash or Cash Equivalents, provided,
that, (i) at any time on and after a Cash Dominion Event and for so long
as the same is continuing, no Loans are then outstanding, except  that
notwithstanding that any Loans are outstanding on and after a Cash Dominion
Event, (A) Borrowers, Guarantors and other Subsidiaries of Parent may from time
to time in the ordinary course of business consistent with their current
practices as of the date hereof make deposits of cash or other immediately
available funds in operating demand deposit accounts used for disbursements to
the extent required to provide funds for amounts drawn or anticipated to be
drawn shortly on such accounts and such funds may be held in Cash Equivalents
consisting of overnight investments until so drawn (so long as such funds and
Cash Equivalents are not held more than three (3) Business Days from the date
of the initial deposit thereof) and (B) 
Borrowers may have cash at retail store locations and in Store Accounts
to the extent permitted in Section 6.3(a) hereof and (ii) the terms and
conditions of Section 5.2 hereof shall have been satisfied with respect to the
deposit account, investment account or other account in which such cash or Cash
Equivalents are held;

 

(c)  the existing Investments of each Borrower and
Guarantor as of the date hereof in its Subsidiaries, provided, that,
no Borrower or Guarantor shall have any further obligations or

 

25

 

liabilities to
make any capital contributions or other additional investments or other
payments to or in or for the benefit of any of such Subsidiaries;

 

(d)  loans and advances by any Borrower, Guarantor
or other Subsidiary of Parent to employees of any Borrower, Guarantor or other
Subsidiary not to exceed the principal amount of $25,000,000 in the aggregate
at any time outstanding for: (i) reasonably and necessary work-related travel
or other ordinary business expenses to be incurred by such employee in
connection with their work for such Borrower or Guarantor and (ii) reasonable
and necessary relocation expenses of such employees (including home mortgage
financing for relocated employees), provided, that, Adjusted
Excess Availability shall have been not less than $75,000,000 as of the date of
the most recent calculation of the Borrowing Base prior to the date of making
any such loan or advance that would cause the aggregate amount of all such
loans and advances to exceed $5,000,000 and after giving effect to any such
loan or advance, on a pro forma basis using the Adjusted Excess Availability as
of the date of the most recent calculation of the Borrowing Base immediately
prior to such loan or advance, Adjusted Excess Availability shall be not less
than $75,000,000;

 

(e)  stock or obligations issued to any Borrower
or Guarantor by any Person (or the representative of such Person) in respect of
Indebtedness of such Person owing to such Borrower or Guarantor in connection
with the insolvency, bankruptcy, receivership or reorganization of such Person
or a composition or readjustment of the debts of such Person; provided, that,
the original of any such stock or instrument evidencing such obligations shall
be promptly delivered to Agent, upon Agent’s request, together with such stock
power, assignment or endorsement by such Borrower or Guarantor as Agent may
request;

 

(f)  obligations of account debtors to any
Borrower or Guarantor arising from Accounts which are past due evidenced by a
promissory note made by such account debtor payable to such Borrower or
Guarantor; provided, that, promptly upon the receipt of the
original of any such promissory note by such Borrower or Guarantor, such
promissory note shall be endorsed to the order of Agent by such Borrower or
Guarantor and promptly delivered to Agent as so endorsed.

 

1.103         “Permitted
Securitization Facility” shall mean a receivables financing pursuant to the
Securitization Facility Documents in which (a) a Borrower sells (as determined
in accordance with GAAP) trade Accounts arising from the sale of goods in the
ordinary course of business originated by such Borrower to the Receivables
Financing Subsidiary together with the related Securitization Assets in a
manner that legally isolates the Securitization Assets from such Borrower (such
that the transferred assets would not be included in the estate of such
Borrower in a bankruptcy, receivership or other insolvency proceeding of such
Borrower) and (b) the Receivables Financing Subsidiary finances its acquisition
of such transferred assets by selling an interest in such transferred assets to
a person that is not a Subsidiary or Affiliate of a Borrower or Guarantor or
borrows from such person and secures such borrowings by a pledge of such
receivables, provided, that, (i) no portion of any Indebtedness
or other obligations (contingent or otherwise) of the Receivables Financing
Subsidiary (A) is guaranteed by any Borrower or Guarantor or any of their
Subsidiaries (other than the Receivables Financing Subsidiary), (B) is recourse
to or obligations of any Borrower or Guarantor for any payment or (C) subjects
any property or asset, other than the Securitization Assets, directly or
indirectly, contingently or

 

26

 

otherwise, to the satisfaction of obligations in such transactions, in
each case other than (1) the repurchase of non-eligible receivables under the
terms of the Securitization Facility Documents or (2) indemnifications for
losses other than credit losses related to the trade Accounts sold, (ii)
Borrowers and Guarantors do not have any ongoing obligation to maintain or
preserve the financial condition of the Receivables Financing Subsidiary or
cause the Receivables Financing Subsidiary to achieve certain levels of
operation results, (iii) on and after a Cash Dominion Event, all amounts
payable to any Borrower or Guarantor under such transaction shall be remitted
to the Agent Payment Account and applied to the Obligations in the manner
provided for herein, (iv) such sales of the Securitization Assets will cease
upon a written notice by Agent to the agent under a Permitted Securitization
Facility and Administrative Borrower of an Event of Default, (v) Borrowers
shall receive fair value in the form of cash and other consideration for such
Securitization Assets, and the amount of such consideration payable in cash
shall not be less than such percentage of the amount of the Accounts so sold as
is acceptable to Agent, (vi) Agent shall have received an intercreditor
agreement with the purchasers of the interest in the Securitization Assets from
the Receivables Financing Subsidiary or the lenders to the Receivables Financing
Subsidiary, or their agent, as Agent may specify, duly authorized, executed and
delivered by such parties, (vii) Agent shall be satisfied in good faith with
the structure of and documentation for any such transaction and that the terms
of such transaction, including the discount at which Accounts are sold, the
term of the commitment of the purchasers of the interest in the Securitization
Assets from the Receivables Financing Subsidiary or the lenders to the
Receivables Financing Subsidiary thereunder and any termination events shall be
consistent (in the good faith judgment of Agent) with those prevailing in the
market for a similar transaction involving a receivables originator/servicer of
similar credit quality and a receivables pool of similar characteristics. and
(viii) the Securitization Facility Documents for such transaction shall be
acceptable to Agent.

 

1.104  “Person” or “person” shall mean any
individual, sole proprietorship, partnership, corporation (including any
corporation which elects subchapter S status under the Code), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.

 

1.105  “Prime Rate” shall mean, on any date, the
greater of (a) the rate from time to time publicly announced by Wachovia, or
its successors, as its prime rate, whether or not such announced rate is the
best rate available at such bank or (b) the Federal Funds Rate in effect on
such day plus one-half (1/2%) percent.

 

1.106         “Prime
Rate Loans” shall mean any Loans or portion thereof on which interest is
payable based on the Prime Rate in accordance with the terms thereof.  All Swing Line Loans shall be Prime Rate
Loans.

 

1.107         “Pro
Rata Share” shall mean as to any Lender, the fraction (expressed as a
percentage) the numerator of which is such Lender’s Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that,
if the Commitments have been terminated, the numerator shall be the unpaid
amount of such Lender’s Loans and its

 

27

 

interest in the Letters of Credit and the denominator shall be the
aggregate amount of all unpaid Loans and Letters of Credit.

 

1.108         “Provision
for Taxes” shall mean an amount equal to all taxes imposed on or measured by
net income, whether Federal, State, Provincial, county or local, and whether
foreign or domestic, that are paid or payable by any Person in respect of any
period in accordance with GAAP.

 

1.109         “Quarterly
Average Excess Availability” shall mean, for any fiscal quarter of Borrowers,
the daily average of the aggregate amount of the Excess Availability for such
fiscal quarter; provided, that, for purposes of this definition
Excess Availability shall be calculated without regard to the Maximum Credit.

 

1.110         “Real
Property” shall mean all now owned and hereafter acquired real property of each
Borrower and Guarantor, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.

 

1.111         “Receivables”
shall mean all of the following now owned or hereafter arising or acquired
property of each Borrower and Guarantor: (a) all Accounts; (b) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (c) all payment
intangibles of such Borrower or Guarantor; (d) 
letters of credit, indemnities, guarantees, security or other deposits
and proceeds thereof issued payable to any Borrower or Guarantor or otherwise
in favor of or delivered to any Borrower or Guarantor in connection with any
Account; or (e) all other accounts, contract rights, chattel paper,
instruments, notes, general intangibles and other forms of obligations owing to
any Borrower or Guarantor, whether from the sale and lease of goods or other
property, licensing of any property (including Intellectual Property or other
general intangibles), rendition of services or from loans or advances by any
Borrower or Guarantor or to or for the benefit of any third person (including
loans or advances to any Affiliates or Subsidiaries of any Borrower or
Guarantor) or otherwise associated with any Accounts, Inventory or general
intangibles of any Borrower or Guarantor (including, without limitation, choses
in action, causes of action, tax refunds, tax refund claims, any funds which
may become payable to any Borrower or Guarantor in connection with the
termination of any Plan or other employee benefit plan and any other amounts
payable to any Borrower or Guarantor from any Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, casualty
or any similar types of insurance and any proceeds thereof and proceeds of
insurance covering the lives of employees on which any Borrower or Guarantor is
a beneficiary).

 

1.112         “Receivables
Financing Subsidiary” shall mean a corporation that (a) is a direct or indirect
bankruptcy remote, special purpose entity, (b) satisfied, as of the date of its
formation, the special purpose entity criteria published by Standard & Poor’s
Rating Services, a division of The McGraw-Hill Companies, Inc. and in effect as
of such date, and (c) was created for the sole purpose of acquiring, and whose
only assets consist at all times of, the Securitization Assets.  As of the date hereof, Loving Creek Funding
Corporation, a Delaware corporation, is a Receivables Financing Subsidiary.

 

28

 

1.113         “Records”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s present and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and
other data relating to the Collateral or any account debtor, together with the
tapes, disks, diskettes and other data and software storage media and devices,
file cabinets or containers in or on which the foregoing are stored (including
any rights of any Borrower or Guarantor with respect to the foregoing
maintained with or by any other person).

 

1.114         “Register”
shall have the meaning set forth in Section 13.7 hereof.

 

1.115         “Required
Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate
more than fifty (50%) percent of the aggregate of the Commitments of all
Lenders, or if the Commitments shall have been terminated, Lenders to whom more
than fifty (50%) percent of the then outstanding Obligations are owing.

 

1.116         “Reserves”
shall mean as of any date of determination, such amounts as Agent may from time
to time establish and revise in good faith reducing the amount of Loans and
Letters of Credit which would otherwise be available to any Borrower under the
lending formula(s) provided for herein: 
(a) to reflect events, conditions, contingencies or risks which, as
determined by Agent in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations, its value or the amount that
might be received by Agent from the sale or other disposition or realization
upon such Collateral, or (ii) the assets, business or prospects of any Borrower
or Guarantor or (iii) the security interests and other rights of Agent or any
Lender in the Collateral (including the enforceability, perfection and priority
thereof) or (b) to reflect Agent’s good faith belief that any collateral report
or financial information furnished by or on behalf of any Borrower or Guarantor
to Agent is or may have been incomplete, inaccurate or misleading in any
material respect or (c) to reflect outstanding Letters of Credit as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Agent
determines in good faith constitutes a Default or an Event of Default.  Without limiting the generality of the
foregoing, Reserves may be established to reflect any of the following:  (i) inventory shrinkage, (ii) reserves in
respect of markdowns and cost variances (pursuant to discrepancies between the
purchase order price of Inventory and the actual cost thereof), (iii) amounts
due or to become due in respect of sales, use and/or withholding taxes, (iv)
any rental payments, service charges or other amounts due or to become due to
lessors of real property to the extent Inventory or Records are located in or
on such property or such Records are needed to monitor or otherwise deal with
the Collateral (other than for locations where Agent has received a Collateral
Access Agreement executed and delivered by the owner and lessor of such real
property that Agent has acknowledged in writing is in form and substance
satisfactory to Agent), provided, that, the Reserves established
pursuant to this clause (iv) as to retail store locations that are leased shall
not exceed at any time the aggregate of amounts payable for the next three (3)
months to the lessors of such retail store locations located in those States
where any right of the lessor to Collateral may have priority over the security
interest and lien of Agent therein, provided, that, such
limitation on the amount of the Reserves pursuant to this clause (iv) shall
only apply so long as: (A) no Event of Default shall exist or have occurred,
(B) neither a Borrower, Guarantor nor Agent shall have received notice of any
event of default under the lease with respect to such

 

29

 

location and (C) no Borrower has granted to the lessor a security
interest or lien upon any assets of such Borrower, (v) any rental payments,
service charges or other amounts due or to become due to lessors of personal
property; (vi) amounts owing to Credit Card Issuers or Credit Card Processors
in connection with the Credit Card Agreements, (vii) up to fifty (50%) percent
of the aggregate amount of merchandise gift certificates and coupons, (viii) an
increase in the number of days of the turnover of Inventory or a change in the
mix of the Inventory that results in an overall decrease in the value thereof
or a deterioration in its nature or quality (but only to the extent not
addressed by the lending formulas in a manner satisfactory to Agent), (ix)
variances between the perpetual inventory records of Borrowers and the results
of the test counts of Inventory conducted by Agent with respect thereto in
excess of the percentage acceptable to Agent, (x) the aggregate amount of
deposits, if any, received by any Borrower from its retail customers in respect
of unfilled orders for merchandise and the purchase price of layaway goods, and
(xi) obligations, liabilities or indebtedness (contingent or otherwise) of
Borrowers or Guarantors to any Bank Product Provider arising under or in
connection with any Bank Products of any Borrower or Guarantor with a Bank
Product Provider or as such Bank Product Provider may otherwise require and
Agent may agree in connection therewith to the extent that such obligation,
liabilities or indebtedness constitute Obligations as such term is defined
herein or otherwise receive the benefit of the security interest of Agent in
any Collateral.  The amount of any
Reserve established by Agent shall have a reasonable relationship to the event,
condition or other matter which is the basis for such Reserve as determined by
Agent in good faith and to the extent that such Reserve is in respect of
amounts that may be payable to third parties Agent may, at its option, deduct
such Reserve from the Maximum Credit at any time that such limit is less than
the amount of the Borrowing Base, but in no event shall the Special Reserve be
deducted from the Maximum Credit.  All
references herein to the term “Reserve” shall include, in addition and not in
limitation, the Special Reserve.  Agent
shall provide prior notice to Administrative Borrower of any material change in
the categories of Reserves established after the date hereof.

 

1.117         “Restricted
Payment” shall mean (a) any cash dividend or other cash distribution, direct or
indirect, on account of any shares of any class of Capital Stock of Parent or
any of its Subsidiaries, as the case may be, now or hereafter outstanding, (b)
any redemption, retirement, sinking fund or similar payment on account of, or
purchase or other acquisition for value, direct or indirect, of any shares of
any class of Capital Stock of Parent or any of its Subsidiaries, except for any
redemption, retirement, sinking funds or similar payment payable solely in such
shares of that class of stock or in any class of stock junior to that class,
(c) any cash payment made to redeem, purchase, repurchase or retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire any shares of any class of Capital Stock of Parent or any of its
Subsidiaries now or hereafter outstanding, or (d) any payment to any Affiliate
of any Borrower except to the extent expressly permitted in this Loan
Agreement.

 

1.118         “Restricted
Subsidiary” shall mean each direct or indirect Subsidiary of Parent, other than
the Unrestricted Subsidiaries; sometimes being collectively referred to herein
as “Restricted Subsidiaries”.

 

1.119         “Retail
Division” shall mean, collectively, the Subsidiaries of Parent engaged principally
in the marketing and sale of office supplies and paper, technology products and
office furniture through “OfficeMax” office supply superstores, as conducted as
of the date hereof.

 

30

 

1.120         “Revolving
Loans” shall mean the loans now or hereafter made by or on behalf of any Lender
or by Agent for the account of any Lender on a revolving basis pursuant to the
Credit Facility (involving advances, repayments and readvances) as set forth in
Section 2.1(a)(i) hereof.

 

1.121         “Secured
Parties” shall mean, collectively, (a) Agent, (b) Lenders, (c) the Issuing Bank
and (d) any Bank Product Provider; provided, that, (i) as to any
Bank Product Provider, only to the extent of the Obligations owing to such Bank
Product Provider and (ii) such parties are sometimes referred to herein
individually as a “Secured Party”.

 

1.122         “Securitization
Assets” shall mean, collectively, all Accounts which are transferred by a
Borrower to the Receivables Financing Subsidiary pursuant to any Permitted
Securitization Facility to the extent, and in accordance with, the
Securitization Facility Documents with respect to such transaction and the
related assets as described on Schedule 1.122 hereto, provided, that,
the Securitization Assets shall not include any interests which any Borrower or
Guarantor may acquire from the Receivables Financing Subsidiary or any other
party to the Securitization Facility Documents in any returned, repossessed or
foreclosed goods and/or merchandise the sale of which gave rise to an Account
that constitutes a Securitization Asset or in any Accounts that are not sold by
a Borrower to the Receivables Financing Subsidiary or any Accounts or Inventory
that are at any time repurchased by, or reconveyed to, any Borrower or
Guarantor.

 

1.123         “Securitization
Intercreditor Agreement” shall mean the Intercreditor Agreement, dated on or
about the date hereof, between Agent and the parties to the Securitization
Facility Documents, or the agent acting on behalf of such parties, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated, or replaced and any intercreditor agreement hereafter
entered into by Agent with the purchasers of the interest in the Securitization
Assets from the Receivables Financing Subsidiary or the lenders to the
Receivables Financing Subsidiary, or their agent, as Agent may specify.

 

1.124         “Securitization
Facility Documents” shall mean, collectively, the following (as the same now
exist or may hereafter exist or be amended, modified, supplemented, extended,
renewed, restated or replaced): (a) a receivables purchase agreement, pooling
and servicing agreement, credit agreement, agreements to acquire undivided
interests or other agreements to transfer, or create a security interest in,
Securitization Assets entered into by a Borrower or Guarantor,  and (b) each other instrument, agreement and
other document entered into by a Borrower or Guarantor related to the transaction
contemplated by the agreements referred to in clause (a) of this definition.

 

1.125         “Solvent”
shall mean, at any time with respect to any Person, that at such time such
Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured

 

31

 

liability (and including as to contingent liabilities arising pursuant
to any guarantee the face amount of such liability as reduced to reflect the
probability of it becoming a matured liability).

 

1.126         “Special
Agent Advances” shall have the meaning set forth in Section 12.11 hereof.

 

1.127         “Special
Reserve” shall mean a Reserve in the amount of $50,000,000.

 

1.128         “Standby
Letter of Credit” shall mean all Letters of Credit other than Commercial
Letters of Credit.

 

1.129         “Store
Accounts” shall have the meaning set forth in Section 6.3.

 

1.130         “Subordinated
Debt Documents” shall mean, collectively, any and all agreements, documents and
instruments evidencing or otherwise related to Indebtedness permitted under
Section 9.9(g) hereof.

 

1.131         “Subsidiary”
or “subsidiary” shall mean, with respect to any Person, any corporation,
limited liability company, limited liability partnership or other limited or
general partnership, trust, association or other business entity of which an
aggregate of at least a majority of the outstanding Capital Stock or other interests
entitled to vote in the election of the board of directors of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency), managers, trustees or other controlling
persons, or an equivalent controlling interest therein, of such Person is, at
the time, directly or indirectly, owned by such Person and/or one or more
subsidiaries of such Person.

 

1.132         “Swing
Line Lender” shall mean Wachovia Capital Finance Corporation (Central), in its
capacity as lender of Swing Line Loans.

 

1.133         “Swing
Line Loan Limit” shall mean $25,000,000.

 

1.134         “Swing
Line Loans” shall have the meaning set forth in Section 2.1 hereof.

 

1.135         “UCC”
shall mean the Uniform Commercial Code as in effect in the State of Illinois
and any successor statute, as in effect from time to time (except that terms
used herein which are defined in the Uniform Commercial Code as in effect in
the State of Illinois on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as
Agent may otherwise determine).

 

1.136         “Unrestricted
Subsidiary” shall mean each of the following Subsidiaries of Parent: (a) OMX
Timber Finance Holdings I, LLC, a Delaware corporation, (b) OMX Timber Finance
Holdings II, LLC, a Delaware corporation, (c) OMX Timber Finance Investments I,
LLC, a Delaware corporation, (d) OMX Timber Finance Investments II, LLC, a Delaware
corporation, (e) Cuban Electric Company, a Delaware corporation and (f) a
Subsidiary of Parent designated in writing by Administrative Borrower to Agent
after the date hereof and agreed to by Agent, provided, that, (i)
such Subsidiaries identified in clauses (a), (b), (c), (d) and (e) of this
definition shall only be considered Unrestricted Subsidiaries to the extent
that the representations with

 

32

 

respect thereto set forth in Section 8.12(e) hereof are true and
correct with respect thereto and (ii) such Subsidiaries are sometimes referred
to herein collectively as “Unrestricted Subsidiaries”.

 

1.137  “US Dollar Equivalent” shall mean at any time
(a) as to any amount denominated in US Dollars, the amount thereof at such
time, and (b) as to any amount denominated in Canadian Dollars or any other
currency, the equivalent amount in US Dollars calculated by Agent at such time
using the Currency Exchange Convention in effect on the Business Day of determination.

 

1.138  “US Dollars”, “US$” and “$” shall each mean
lawful currency of the United States of America.

 

1.139         “Value”
shall mean, as determined by Agent in good faith, with respect to Inventory,
the lower of (a) cost computed on a first-in first-out basis in accordance with
GAAP or (b) market value, provided, that, for purposes of the
calculation of the Borrowing Base, (i) the Value of the Inventory shall not
include:  (A) the portion of the value of
Inventory equal to the profit earned by any Affiliate on the sale thereof to
any Borrower or (B)  write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.

 

1.140         “Voting
Stock” shall mean with respect to any Person, (a) one (1) or more classes of
Capital Stock of such Person having general voting powers to elect at least a
majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.

 

1.141         “Wachovia”
shall mean Wachovia Bank, National Association, and its successors and assigns.

 

1.142         “Wachovia
Capital” shall mean Wachovia Capital Finance Corporation (Central), in its
individual capacity, and its successors and assigns.

 

SECTION 2. 
CREDIT FACILITIES

 

2.1  Loans.

 

(a)                    Subject
to and upon the terms and conditions contained herein,

 

(i)                       each
Lender severally (and not jointly) agrees to make its Pro Rata Share of
Revolving Loans to Borrowers from time to time in amounts requested by any
Borrower (or Administrative Borrower on behalf of Borrowers) up to the
aggregate amount outstanding equal to the Commitment of such Lender, provided,
that, after giving effect to any such Revolving Loan, the principal amount of
the Revolving Loans, Swing Line Loans and Letter of Credit Obligations
outstanding with respect to all Borrowers at any one time outstanding shall not

 

33

 

exceed the lesser of the
Borrowing Base at such time or the Maximum Credit as then in effect; and

 

(ii)                    the
Swing Line Lender agrees that it will make loans (“Swing Line Loans”) to
Borrowers from time to time in amounts requested by any Borrower (or
Administrative Borrower on behalf of Borrowers) up to the aggregate amount
outstanding equal to the Swing Line Loan Limit, provided, that, after giving
effect to any such Swing Line Loan the aggregate principal amount of the
Revolving Loans, Swing Line Loans and Letter of Credit Obligations outstanding
with respect to all Borrowers at any one time outstanding shall not exceed the
lesser of the Borrowing Base at such time or the Maximum Credit as then in
effect.

 

(b)                   On
the terms and subject to the conditions hereof, each Borrower may from time to
time borrow, prepay and reborrow Revolving Loans and Swing Line Loans.  No Lender shall be required to make any
Revolving Loan, if, after giving effect thereto the aggregate outstanding
principal amount of all Revolving Loans of such Lender, together with such
Lender’s Pro Rata Share of the aggregate amount of all Swing Line Loans and
Letter of Credit Obligations, would exceed such Lender’s Commitment.  Swing Line Lender shall not be required to
make Swing Line Loans, if, after giving effect thereto, the aggregate
outstanding principal amount of all Swing Line Loans would exceed the then
existing Swing Line Loan Limit or unless otherwise agreed by Swing Line Lender,
the sum of all Swing Line Loans and Revolving Loans made by Swing Line Lender,
plus Swing Line Lender’s Pro Rata Share of the aggregate amount of the then
outstanding Letter of Credit Obligations would exceed the Swing Line Lender’s
Commitment. Each Swing Line Loan shall be subject to all of the terms and
conditions applicable to other Prime Rate Loans funded by the Lenders, except
that all payments thereon shall be payable to the Swing Line Lender solely for
its own account.  All Revolving Loans and
Swing Line Loans shall be subject to the settlement among Lenders provided for
in Section 6.11 hereof.

 

(c)                    Upon
the making of a Swing Line Loan or a Special Agent Advance (whether before or
after the occurrence of a Default or Event of Default) or any Loan by Agent as
provided in Section 6.11, without further action by any party hereto, each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received from the Swing Line Lender or Agent, without recourse or warranty, an
undivided interest and participation to the extent of such Lender’s Pro Rata
Share in such Swing Line Loan, Special Agent Advance or other Loan.  To the extent that there is no settlement in
accordance with Section 6.11 below, the Swing Line Lender or Agent, as the case
may be, may at any time, require the Lenders to fund their participations.  From and after the date, if any, on which any
Lender is required to fund its participation in any Swing Line Loan, Special
Agent Advance or other Loan, Agent shall promptly distribute to such Lender,
such Lender’s Pro Rata Share of all payments of principal and interest received
by Agent in respect of such Swing Line Loan or Special Agent Advance.

 

(d)                   Except
in Agent’s discretion, with the consent of all Lenders, or as otherwise
provided herein, the aggregate amount of the Loans and the Letter of Credit
Obligations outstanding at any time shall not exceed the lesser of the Maximum
Credit or the Borrowing Base.

 

34

 

(e)                    In
the event that (i) the aggregate amount of the Loans and the Letter of Credit
Obligations outstanding at any time exceed the Maximum Credit, or (ii) except
as otherwise provided herein, the aggregate principal amount of the Revolving
Loans, Swing Line Loans and Letter of Credit Obligations outstanding to
Borrowers exceed the Borrowing Base, such event shall not limit, waive or
otherwise affect any rights of Agent or Lenders in such circumstances or on any
future occasions and Borrowers shall, upon demand by Agent, which may be made
at any time or from time to time, immediately repay to Agent the entire amount
of any such excess(es) for which payment is demanded.

 

2.2  Letters of Credit.

 

(a)                    Subject
to and upon the terms and conditions contained herein and in the Letter of
Credit Documents, at the request of a Borrower (or Administrative Borrower on
behalf of such Borrower), Agent agrees to cause an Issuing Bank to issue, and
each such Issuing Bank agrees to issue, for the account of such Borrower one or
more Letters of Credit, for the ratable risk of each Lender according to its
Pro Rata Share,  containing terms and
conditions acceptable to Agent and such Issuing Bank.

 

(b)                   The
Borrower requesting such Letter of Credit (or Administrative Borrower on behalf
of such Borrower) shall give Agent and the Issuing Bank with respect thereto
three (3) Business Days’ prior written notice of such Borrower’s request for
the issuance of a Letter of Credit.  Such
notice shall be irrevocable and shall specify the original face amount of the
Letter of Credit requested, the effective date (which date shall be a Business
Day and in no event shall be a date less than ten (10) days prior to the end of
the then current term of this Agreement) of issuance of such requested Letter
of Credit, whether such Letter of Credit may be drawn in a single or in partial
draws, the date on which such requested Letter of Credit is to expire (which
date shall be a Business Day and shall not be more than one year from the date
of issuance), the purpose for which such Letter of Credit is to be issued, and
the beneficiary of the requested Letter of Credit.  The Borrower requesting the Letter of Credit
(or Administrative Borrower on behalf of such Borrower) shall attach to such
notice the proposed terms of the Letter of Credit.  The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same as the issuance
of a new Letter of Credit hereunder.

 

(c)                    In
addition to being subject to the satisfaction of the applicable conditions
precedent contained in Section 4 hereof and the other terms and conditions
contained herein, no Letter of Credit shall be available unless each of the
following conditions precedent have been satisfied in a manner satisfactory to
Agent:  (i) the Borrower requesting such
Letter of Credit (or Administrative Borrower on behalf of such Borrower) shall
have delivered to Issuing Bank with respect thereto at such times and in such
manner as such Issuing Bank may require, an application, in form and substance
satisfactory to such Issuing Bank and Agent, for the issuance of the Letter of
Credit and such other Letter of Credit Documents as may be required pursuant to
the terms thereof, and the form and terms of the proposed Letter of Credit
shall be satisfactory to Agent and such Issuing Bank, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit, and no law, rule or regulation applicable to money center
banks generally and no request or directive (whether or not having the force of
law) from any Governmental Authority with

 

35

 

jurisdiction over money center
banks generally shall prohibit, or request that such Issuing Bank refrain from,
the issuance of letters of credit generally or the issuance of such Letter of
Credit, (iii) after giving effect to the issuance of such Letter of Credit, the
Letter of Credit Obligations shall not exceed the Letter of Credit Limit, and
(iv) the Excess Availability (calculated for this purpose without regard to the
amount of the past due trade payables) prior to giving effect to any Reserves
with respect to such Letter of Credit on the date of the proposed issuance of
any Letter of Credit shall be equal to or greater than: (A) if the proposed Letter
of Credit is for the purpose of purchasing Eligible LC Inventory, the sum of
(1) fifty (50%) percent multiplied by the Value of such Eligible LC Inventory,
plus (2) freight, taxes, duty and other amounts which Agent estimates must be
paid in connection with such Inventory upon arrival and for delivery to one of
such Borrower’s locations for Eligible Inventory within the United States of
America and (B) if the proposed Letter of Credit is for any other purpose, an
amount equal to one hundred (100%) percent of the Letter of Credit Obligations
with respect thereto.  Effective on the
issuance of each Letter of Credit, a Reserve shall be established in the
applicable amount set forth in Section 2.2(c)(iv)(A) or Section 2.2(c)(iv)(B).

 

(d)                   Except
in Agent’s discretion, with the consent of all Lenders, the amount of all
outstanding Letter of Credit Obligations shall not at any time exceed the
Letter of Credit Limit.

 

(e)                    Each
Borrower shall reimburse immediately the Issuing Bank for any draw under any
Letter of Credit issued by such Issuing Bank for the account of such Borrower
and pay each Issuing Bank the amount of all other charges and fees payable to
such Issuing Bank in connection with any Letter of Credit issued for the
account of such Borrower immediately when due, irrespective of any claim,
setoff, defense or other right which such Borrower may have at any time against
Issuing Bank or any other Person.  Each
drawing under any Letter of Credit or other amount payable in connection
therewith when due shall constitute a request by the Borrower for whose account
such Letter of Credit was issued to Agent for a Prime Rate Loan in the amount
of such drawing or other amount then due, and shall be made by Agent on behalf
of Lenders as a Revolving Loan (or Special Agent Advance, as the case may be).
The date of such Loan shall be the date of the drawing or as to other amounts,
the due date therefor.  Any payments made
by or on behalf of Agent or any Lender to an Issuing Bank and/or related
parties in connection with any Letter of Credit shall constitute additional
Revolving Loans to such Borrower pursuant to this Section 2 (or Special Agent
Advances as the case may be).

 

(f)                      Borrowers
and Guarantors shall indemnify and hold Agent and Lenders harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Agent or any Lender may suffer or incur in connection with any Letter of
Credit and any documents, drafts or acceptances relating thereto, including any
losses, claims, damages, liabilities, costs and expenses due to any action
taken by an Issuing Bank or correspondent with respect to any Letter of Credit,
except for such losses, claims, damages, liabilities, costs or expenses that
are a direct result of the gross negligence or willful misconduct of Agent or
any Lender as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.  Each Borrower
and Guarantor assumes all risks with respect to the acts or omissions of the
drawer under or beneficiary of any Letter of Credit and for such purposes the
drawer or beneficiary shall be deemed such Borrower’s agent.  Each Borrower and Guarantor assumes all risks
for, and agrees to pay, all foreign, Federal, State and local taxes, duties and
levies relating to any goods subject to any Letter of Credit or any documents,
drafts or

 

36

 

acceptances thereunder.  Each Borrower and Guarantor hereby releases
and holds Agent and Lenders harmless from and against any acts, waivers,
errors, delays or omissions with respect to or relating to any Letter of
Credit, except for the gross negligence or willful misconduct of Agent or any
Lender as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction.  The provisions
of this Section 2.2(f) shall survive the payment of Obligations and the
termination of this Agreement.

 

(g)                   In
connection with Inventory purchased pursuant to any Letter of Credit, Borrowers
and Guarantors shall, at Agent’s request, instruct all suppliers, carriers,
forwarders, customs brokers, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which Agent holds a security
interest that upon Agent’s request, such items are to be delivered to Agent
and/or subject to Agent’s order, and if they shall come into such Borrower’s or
Guarantor’s possession, to deliver them, upon Agent’s request, to Agent in
their original form.  Except as otherwise
provided herein, Agent shall not exercise such right to request such items so
long as no Default or Event of Default shall exist or have occurred and be
continuing.  Except as Agent may
otherwise specify, Borrowers and Guarantors shall designate the Issuing Bank
with respect to a Letter of Credit as the consignee on all bills of lading and
other negotiable and non-negotiable documents under such Letter of Credit.

 

(h)                   Each
Borrower and Guarantor hereby irrevocably authorizes and directs each Issuing
Bank to name such Borrower or Guarantor as the account party therein and to
deliver to Agent all instruments, documents and other writings and property
received by such Issuing Bank pursuant to the Letter of Credit and to accept
and rely upon Agent’s instructions and agreements with respect to all matters
arising in connection with the Letter of Credit or the Letter of Credit
Documents with respect thereto.  Nothing
contained herein shall be deemed or construed to grant any Borrower or
Guarantor any right or authority to pledge the credit of Agent or any Lender in
any manner.  Borrowers and Guarantors
shall be bound by any reasonable interpretation made in good faith by Agent, or
an Issuing Bank under or in connection with any Letter of Credit Accommodation
or any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of any Borrower or
Guarantor.

 

(i)                       Immediately
upon the issuance or amendment of any Letter of Credit, each Lender shall be
deemed to have irrevocably and unconditionally purchased and received, without
recourse or warranty, an undivided interest and participation to the extent of
such Lender’s Pro Rata Share of the liability with respect to such Letter of
Credit and the obligations of Borrowers with respect thereto (including all
Letter of Credit Obligations with respect thereto).  Each Lender shall absolutely, unconditionally
and irrevocably assume, as primary obligor and not as surety, and be obligated
to pay to the Issuing Bank therefor and discharge when due, its Pro Rata Share
of all of such obligations arising under such Letter of Credit.  Without limiting the scope and nature of each
Lender’s participation in any Letter of Credit, to the extent that an Issuing
Bank has not been reimbursed or otherwise paid as required hereunder or under
any such Letter of Credit, each such Lender shall pay to such Issuing Bank its
Pro Rata Share of such unreimbursed drawing or other amounts then due to such
Issuing Bank in connection therewith.

 

(j)                       The
obligations of Borrowers to pay each Letter of Credit Obligations and the
obligations of Lenders to make payments to Agent for the account of an Issuing
Bank with respect to Letters of Credit shall be absolute, unconditional and
irrevocable and shall be

 

37

 

performed strictly in
accordance with the terms of this Agreement under any and all circumstances,
whatsoever, notwithstanding the occurrence or continuance of any Default, Event
of Default, the failure to satisfy any other condition set forth in Section 4
or any other event or circumstance. If such amount is not made available by a
Lender when due, Agent shall be entitled to recover such amount on demand from
such Lender with interest thereon, for each day from the date such amount was
due until the date such amount is paid to Agent at the interest rate then
payable by any Borrower in respect of Loans that are Prime Rate Loans.  Any such reimbursement shall not relieve or
otherwise impair the obligation of Borrowers to reimburse an Issuing Bank under
any Letter of Credit or make any other payment in connection therewith.

 

2.3  Increase
in Maximum Credit.

 

(a)                    Administrative
Borrower may, at any time, deliver a written request to Agent to increase the
Maximum Credit.  Any such written request
shall specify the amount of the increase in the Maximum Credit that Borrowers
are requesting, provided, that, (i) in no event shall the aggregate amount of
any such increase in the Maximum Credit cause the Maximum Credit to exceed
$600,000,000, (ii)  such request shall be
for an increase of not less than $10,000,000, (iii)  any such request shall be irrevocable, and
(iv) in no event shall more than one such written request be delivered to Agent
in any calendar quarter.

 

(b)                   Upon
the receipt by Agent of any such written request, Agent shall notify each of
the Lenders of such request and each Lender shall have the option (but not the
obligation) to increase the amount of its Commitment by an amount up to its Pro
Rata Share of the amount of the increase in the Maximum Credit requested by
Administrative Borrower as set forth in the notice from Agent to such
Lender.  Each Lender shall notify Agent
within thirty (30) days after the receipt of such notice from Agent whether it
is willing to so increase its Commitment, and if so, the amount of such
increase; provided, that, (i) the minimum increase in the Commitments of each
such Lender providing the additional Commitments shall equal or exceed
$2,000,000, and (ii) no Lender shall be obligated to provide such increase in
its Commitment and the determination to increase the Commitment of a Lender
shall be within the sole and absolute discretion of such Lender.  If the aggregate amount of the increases in
the Commitments received from the Lenders does not equal or exceed the amount
of the increase in the Maximum Credit requested by Administrative Borrower,
Agent may seek additional increases from Lenders or Commitments from such
Eligible Transferees as it may determine, after consultation with
Administrative Borrower.  In the event Lenders
(or Lenders and any such Eligible Transferees, as the case may be) have
committed in writing to provide increases in their Commitments or new
Commitments in an aggregate amount in excess of the increase in the Maximum
Credit requested by Borrowers or permitted hereunder, Agent shall then have the
right to allocate such commitments, first to Lenders and then to Eligible
Transferees, in such amounts and manner as Agent may determine, after
consultation with Administrative Borrower.

 

(c)                    The
Maximum Credit shall be increased by the amount of the increase in Commitments
from Lenders or new Commitments from Eligible Transferees, in each case
selected in accordance with Section 2.3(a) above, for which Agent has received
Assignment and Acceptances sixty (60) days after the date of the request by
Administrative Borrower for the increase or such earlier date as Agent and
Administrative Borrower may agree (but subject to the satisfaction of the
conditions set forth below), whether or not the aggregate amount of the

 

38

 

increase in Commitments and new
Commitments, as the case may be, equal or exceed the amount of the increase in
the Maximum Credit requested by Administrative Borrower in accordance with the
terms hereof, effective on the date that each of the following conditions have
been satisfied:

 

(i)                       Agent
shall have received from each Lender or Eligible Transferee that is providing
an additional Commitment as part of the increase in the Maximum Credit, an
Assignment and Acceptance duly executed by such Lender or Eligible Transferee
and each Borrower, provided, that, the aggregate Commitments set forth in such
Assignment and Acceptance(s) shall be not less than $10,000,000;

 

(ii)                    the
conditions precedent to the making of Revolving Loans set forth in Section 4.2
shall be satisfied as of the date of the increase in the Maximum Credit, both
before and after giving effect to such increase;

 

(iii)                 Agent
shall have received an opinion of counsel to Borrowers in form and substance
and from counsel reasonably satisfactory to Agent and Lenders addressing such
matters as Agent may reasonably request (including an opinion as to no
conflicts with other Indebtedness);

 

(iv)                such
increase in the Maximum Credit on the date of the effectiveness thereof shall
not violate any applicable law, regulation or order or decree of any court or
other Governmental Authority and shall not be enjoined, temporarily,
preliminarily or permanently;

 

(v)                   there
shall have been paid to each Lender and Eligible Transferee providing an
additional Commitment in connection with such increase in the Maximum Credit
all fees and expenses due and payable to such Person on or before the
effectiveness of such increase;

 

(vi)                there
shall have been paid to Agent, for the account of the Agent and Lenders (in
accordance with any agreement among them) all fees and expenses (including
reasonable fees and expenses of counsel) due and payable pursuant to any of the
Financing Agreements on or before the effectiveness of such increase.

 

(d)                   As
of the effective date of any such increase in the Maximum Credit, each
reference to the term Maximum Credit herein, and in any of the other Financing
Agreements shall be deemed amended to mean the amount of the Maximum Credit
specified in the most recent written notice from Agent to Administrative
Borrower of the increase in the Maximum Credit.

 

SECTION
3.  INTEREST AND FEES

 

3.1  Interest.

 

(a)                    Borrowers
shall pay to Agent, for the benefit of Lenders, interest on the outstanding
principal amount of the Loans at the Interest Rate.  All interest accruing hereunder on and after
the date of any Event of Default or termination hereof shall be payable on
demand.

 

39

 

(b)                   Each
Borrower (or Administrative Borrower on behalf of such Borrower) may from time
to time request Eurodollar Rate Loans or may request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. 
Such request from a Borrower (or Administrative Borrower on behalf of
such Borrower) shall specify the amount of the Eurodollar Rate Loans or the
amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or the
amount of the Eurodollar Rate Loans to be continued (subject to the limits set
forth below) and the Interest Period to be applicable to such Eurodollar Rate
Loans.  Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by Agent of
such a request from a Borrower (or Administrative Borrower on behalf of such
Borrower), such Eurodollar Rate Loans shall be made or Prime Rate Loans shall
be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall
continue, as the case may be, provided, that, (i) no Default or
Event of Default shall exist or have occurred and be continuing, (ii) no party
hereto shall have sent any notice of termination of this Agreement, (iii) such
Borrower (or Administrative Borrower on behalf of such Borrower) shall have
complied with such customary procedures as are established by Agent and
specified by Agent to Administrative Borrower from time to time for requests by
Borrowers for Eurodollar Rate Loans, (iv) no more than eight (8) Interest
Periods may be in effect at any one time, (v) the aggregate amount of the
Eurodollar Rate Loans must be in an amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, and (vi) Agent and each
Lender shall have determined that the Interest Period or Adjusted Eurodollar
Rate is available to Agent and such Lender and can be readily determined as of
the date of the request for such Eurodollar Rate Loan by such Borrower.  Any request by or on behalf of a Borrower for
Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans
or to continue any existing Eurodollar Rate Loans shall be irrevocable.  Notwithstanding anything to the contrary
contained herein, Agent and Lenders shall not be required to purchase United
States Dollar deposits in the London interbank market or other applicable
Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Agent and Lenders had purchased such
deposits to fund the Eurodollar Rate Loans.

 

(c)                    Any
Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the
last day of the applicable Interest Period, unless Agent has received and
approved a request to continue such Eurodollar Rate Loan at least three (3)
Business Days prior to such last day in accordance with the terms hereof.  Any Eurodollar Rate Loans shall, at Agent’s
option, upon notice by Agent to Parent, be subsequently converted to Prime Rate
Loans in the event that this Agreement shall terminate or not be renewed.  Borrowers shall pay to Agent, for the benefit
of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan
account of any Borrower) any amounts required to compensate any Lender or
Participant for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

 

(d)                   Interest
shall be payable by Borrowers to Agent, for the account of Lenders, monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed, other than for Prime Rate Loans which shall be calculated on the basis
of three hundred sixty-five (365) or three hundred sixty-six (366) day year, as
applicable, and actual days elapsed.  The
interest rate on non-contingent Obligations (other than Eurodollar Rate Loans)
shall increase or decrease by an amount equal to each increase or decrease in
the Prime Rate effective on the date any change in

 

40

 

such Prime Rate is
announced.  In no event shall charges
constituting interest payable by Borrowers to Agent and Lenders exceed the
maximum amount or the rate permitted under any applicable law or regulation,
and if any such part or provision of this Agreement is in contravention of any
such law or regulation, such part or provision shall be deemed amended to
conform thereto.

 

3.2  Fees.

 

(a)                    Borrowers
shall pay to Agent, for the account of Lenders, monthly an unused line fee at a
rate equal to one-quarter (1/4%) percent (on a per annum basis) calculated upon
the amount by which the Maximum Credit exceeds the average daily principal
balance of the outstanding Revolving Loans and Letters of Credit during the
immediately preceding month (or part thereof) while the Loan Agreement is in
effect and for so long thereafter as any Obligations are outstanding.  Such fee shall be payable on the first day of
each month in arrears and calculated based on a three hundred sixty (360) day
year and actual days elapsed.

 

(b)                   Borrowers
shall pay to Agent, for the benefit of Lenders, monthly a fee in the case of
Standby Letters of Credit at the applicable rate determined as provided below
and in the case of Commercial Letters of Credit at the applicable rate
determined as provided below (in each case on a per annum basis) on the average
daily maximum amount available to be drawn under the applicable type of such
Letters of Credit for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month, computed for
each day from the date of issuance to the date of expiration. Such percentages
shall be increased or decreased, as the case may be, to the percentage (on a
per annum basis) set forth below based on the Quarterly Average Excess
Availability for the immediately preceding fiscal quarter being at or within
the amounts indicated for such percentage:

 

	
  Tier

  	
   

  	
  Quarterly Average

  Excess Availability

  	
   

  	
  Commercial

  LC Rate

  	
   

  	
  Standby LC Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Greater than
  $100,000,000

  	
   

  	
  .50

  	
  %

  	
  1.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Less than or
  equal to $100,000,000 and greater than $50,000,000

  	
   

  	
  .625

  	
  %

  	
  1.125

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Less than or
  equal to $50,000,000

  	
   

  	
  .75

  	
  %

  	
  1.25

  	
  %

  

 

provided, that, (i) the applicable percentage
shall be calculated and established once each fiscal quarter and shall remain
in effect until adjusted thereafter after the end of the next fiscal quarter,
(ii) notwithstanding anything to the contrary contained herein, the applicable
percentages through December 31, 2005 shall be the amount for Tier 2 set forth
above, and (iii) Borrowers shall, at Agent’s option or at the written direction
of the Required Lenders, pay such fees at a rate two (2%) percent greater than
the otherwise applicable rate on such average daily maximum amount for: (A) the
period from and after the date of termination or non-renewal hereof until
Lenders have received full and final payment of all Obligations
(notwithstanding entry of a judgment against any Borrower or Guarantor) and (B)
the period from and after the date of the

 

41

 

occurrence of an Event of Default for so long
as such Event of Default is continuing as determined by Agent.  Such letter of credit fees shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrowers to pay such fee shall survive the
termination or non-renewal of this Agreement.  
In addition to the letter of credit fees provided above, Borrowers shall
pay to Issuing Bank for its own account (without sharing with Lenders) the
letter of credit fronting and negotiation fees agreed to by Borrowers and
Issuing Bank from time to time and the customary charges from time to time of
Issuing Bank with respect to the issuance, amendment, transfer, administration,
cancellation and conversion of, and drawings under, such Letters of Credit.

 

(c)                    Borrowers
shall pay to Agent the other fees and amounts set forth in the Fee Letter in
the amounts and at the times specified therein. 
To the extent payment in full of the applicable fee is received by Agent
from Borrowers on or about the date hereof, Agent shall pay to each Lender its
share of such fees in accordance with the terms of the arrangements of Agent
with such Lender.

 

3.3  Changes
in Laws and Increased Costs of Loans.

 

(a)                    If
after the date hereof, either (i) any change in, or in the interpretation of,
any law or regulation is introduced, including, without limitation, with respect
to reserve requirements, applicable to any Lender or any banking or financial
institution from whom any Lender borrows funds or obtains credit (a “Funding
Bank”), or (ii) a Funding Bank or any Lender complies with any future guideline
or request from any central bank or other Governmental Authority or (iii) a
Funding Bank, any Lender or Issuing Bank determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or a Funding Bank, any Lender or Issuing Bank complies with any request
or directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, and in the case
of any event set forth in this clause (iii), such adoption, change or
compliance has or would have the direct or indirect effect of reducing the rate
of return on any Lender’s or Issuing Bank’s capital as a consequence of its
obligations hereunder to a level below that which such Lender or Issuing Bank
could have achieved but for such adoption, change or compliance (taking into
consideration the Funding Bank’s or Lender’s or Issuing Bank’s policies with
respect to capital adequacy) by an amount deemed by such Lender or Issuing Bank
to be material, and the result of any of the foregoing events described in
clauses (i), (ii) or (iii) is or results in an increase in the cost to any
Lender or Issuing Bank of funding or maintaining the Loans, the Letters of
Credit or its Commitment, then Borrowers and Guarantors shall from time to time
upon demand by Agent pay to Agent additional amounts sufficient to indemnify
such Lender or Issuing Bank, as the case may be, against such increased cost on
an after-tax basis (after taking into account applicable deductions and credits
in respect of the amount indemnified).  A
certificate as to the amount of such increased cost shall be submitted to
Administrative Borrower by Agent or the applicable Lender and shall be
conclusive, absent manifest error.

 

(b)                   If
prior to the first day of any Interest Period, (i) Agent shall have determined
in good faith (which determination shall be conclusive and binding upon
Borrowers and

 

42

 

Guarantors) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Adjusted Eurodollar Rate for such Interest
Period, (ii) Agent has received notice from the Required Lenders that the
Adjusted Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to Lenders of making or
maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar
deposits in the principal amounts of the Eurodollar Rate Loans to which such
Interest Period is to be applicable are not generally available in the London
interbank market, Agent shall give telecopy or telephonic notice thereof to
Administrative Borrower as soon as practicable thereafter, and will also give
prompt written notice to Administrative Borrower when such conditions no longer
exist.  If such notice is given (A) any
Eurodollar Rate Loans requested to be made on the first day of such Interest
Period shall be made as Prime Rate Loans, (B) any Loans that were to have been
converted on the first day of such Interest Period to or continued as
Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans
and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last
day of the then-current Interest Period thereof, to Prime Rate Loans.  Until such notice has been withdrawn by
Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor
shall any Borrower (or Administrative Borrower on behalf of any Borrower) have
the right to convert Prime Rate Loans to Eurodollar Rate Loans.

 

(c)                    Notwithstanding
any other provision herein, if the adoption of or any change in any law,
treaty, rule or regulation or final, non-appealable determination of an
arbitrator or a court or other Governmental Authority or in the interpretation
or application thereof occurring after the date hereof shall make it unlawful
for Agent or any Lender to make or maintain Eurodollar Rate Loans as
contemplated by this Agreement, (i) Agent or such Lender shall promptly give
written notice of such circumstances to Administrative Borrower (which notice
shall be withdrawn whenever such circumstances no longer exist), (ii) the
commitment of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender
shall then have a commitment only to make a Prime Rate Loan when a Eurodollar
Rate Loan is requested and (iii) such Lender’s Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Rate
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, Borrowers and Guarantors shall pay to such Lender
such amounts, if any, as may be required pursuant to Section 3.3(d) below.

 

(d)                   Borrowers
and Guarantors shall indemnify Agent and each Lender and to hold Agent and each
Lender harmless from any loss or expense which Agent or such Lender may sustain
or incur as a consequence of (i) default by any Borrower in making a borrowing
of, conversion into or extension of Eurodollar Rate Loans after such Borrower
(or Administrative Borrower on behalf of such Borrower) has given a notice
requesting the same in accordance with the provisions of this Agreement, (ii)
default by any Borrower in making any prepayment of a Eurodollar Rate Loan
after such Borrower has given a notice thereof in accordance with the
provisions of this Agreement, and (iii) the making of a prepayment of
Eurodollar Rate Loans on a day which is not the last day of an Interest Period
with respect thereto.  With respect to

 

43

 

Eurodollar Rate Loans, such
indemnification may include an amount equal to the excess, if any, of (A) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrow, convert or extend to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or extend, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Rate Loans provided for herein over (B) the amount of interest (as determined
by such Agent or such Lender) which would have accrued to Agent or such Lender
on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market.  This covenant shall survive the termination
or non-renewal of this Agreement and the payment of the Obligations.

 

SECTION 4. 
CONDITIONS PRECEDENT

 

4.1  Conditions Precedent to
Initial Loans and Letters of Credit.  The obligation of Lenders to make the initial
Loans or of Issuing Bank to issue the initial Letters of Credit hereunder is
subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such Loan or the issuance of such Letter of
Credit of each of the following conditions precedent:

 

(a)                    Agent
shall have received, in form and substance satisfactory to Agent, all releases,
terminations and such other documents as Agent may request to evidence and
effectuate the termination by the Existing Lenders of their respective financing
arrangements with Borrowers and Guarantors;

 

(b)                   all
requisite corporate action and proceedings in connection with this Agreement
and the other Financing Agreements shall be satisfactory in form and substance
to Agent, and Agent shall have received all information and copies of all
documents, including records of requisite corporate action and proceedings
which Agent may have requested in connection therewith, such documents where
requested by Agent or its counsel to be certified by appropriate corporate
officers or Governmental Authority (and including a copy of the certificate of
incorporation of each Borrower and Guarantor certified by the Secretary of
State (or equivalent Governmental Authority) which shall set forth the same
complete corporate name of such Borrower or Guarantor as is set forth herein
and such document as shall set forth the organizational identification number
of each Borrower or Guarantor, if one is issued in its jurisdiction of
incorporation);

 

(c)                    no
material adverse change shall have occurred in the assets, business or
prospects of Borrowers since the date of Agent’s latest field examination (not
including for this purpose the field review referred to in clause (d) below)
and no change or event shall have occurred which would impair the ability of
any Borrower or Guarantor to perform its obligations hereunder or under any of
the other Financing Agreements to which it is a party or of Agent or any Lender
to enforce the Obligations or realize upon the Collateral;

 

(d)                   Agent
shall have completed a field review of the Records and such other information
with respect to the Collateral as Agent may require to determine the amount of
Loans available to Borrowers (including, without limitation, current perpetual
inventory records

 

44

 

and/or roll-forwards of
Accounts and Inventory through the date of closing and test counts of the
Inventory in a manner satisfactory to Agent, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Agent to accurately identify and verify the
Collateral), the results of which in each case shall be satisfactory to Agent,
not more than seven (7) Business Days prior to the date hereof or such earlier
date as Agent may agree;

 

(e)                    Agent
shall have received, in form and substance satisfactory to Agent, (i) an
opening pro-forma balance sheet of Parent and its Restricted Subsidiaries (on a
consolidated basis), as of the end of the first fiscal quarter of the 2005
fiscal year of Parent, reflecting the transactions contemplated hereby and (ii)
projected quarterly balance sheets, income statements, statements of cash flows
and availability (including the Borrowing Base and Excess Availability) of
Parent and its Restricted Subsidiaries for the period through the end of the
2005 fiscal year, and projected annual balance sheets, income statements,
statements of cash flows and availability (including the Borrowing Base and
Excess Availability) of Parent and its Restricted Subsidiaries through the end
of the 2009 fiscal year, in each case with the results and assumptions set
forth in all of such projections in form and substance satisfactory to Agent;

 

(f)                      Agent
shall have received, in form and substance satisfactory to Agent, all consents,
waivers, acknowledgments and other agreements from third persons which Agent
may deem necessary or desirable in order to permit, protect and perfect its
security interests in and liens upon the Collateral or to effectuate the
provisions or purposes of this Agreement and the other Financing Agreements,
including, without limitation, Collateral Access Agreements and Credit Card
Acknowledgments;

 

(g)                   the
Excess Availability as determined by Agent, on or about the date hereof, shall
be not less than $75,000,000 after giving effect to the initial Loans made or
to be made and Letters of Credit issued or to be issued in connection with the
initial transactions hereunder;

 

(h)                   Agent
shall have received, in form and substance satisfactory to Agent, Deposit
Account Control Agreements by and among Agent, each Borrower and Guarantor, as
the case may be and each bank where such Borrower (or Guarantor) has a deposit
account, with respect to each deposit account of a Borrower or Guarantor (other
than Store Accounts) in each case, duly authorized, executed and delivered by
such bank and Borrower or Guarantor, as the case may be;

 

(i)                       Agent
shall have received evidence, in form and substance satisfactory to Agent, that
Agent has a valid perfected first priority security interest in all of the
Collateral;

 

(j)                       Agent
shall have received and reviewed lien and judgment search results for the
jurisdiction of organization of each Borrower and Guarantor, the jurisdiction
of the chief executive office of each Borrower and Guarantor and all jurisdictions
in which assets of Borrowers and Guarantors are located, which search results
shall be in form and substance satisfactory to Agent;

 

(k)                    Agent
shall have received a Borrowing Base Certificate setting forth the Loans and
Letters of Credit available to Borrowers as of the date hereof as completed in
a manner satisfactory to Agent and duly authorized, executed and delivered on
behalf of Borrowers;

 

45

 

(l)                       Agent
shall have received evidence of insurance and loss payee endorsements required
hereunder and under the other Financing Agreements, in form and substance
satisfactory to Agent, and certificates of insurance policies and/or
endorsements naming Agent as loss payee;

 

(m)                 Agent
shall have received evidence, in form and substance satisfactory to Agent, that
a Permitted Securitization Facility is in full force and effect on terms and
conditions satisfactory to Agent and all Securitization Facility Documents then
in effect in connection therewith;

 

(n)                   Agent
shall have received the Securitization Intercreditor Agreement, in form and
substance satisfactory to Agent, duly authorized, executed and delivered by the
parties to the existing Permitted Securitization Facility;

 

(o)                   no
material pending or threatened, litigation, proceeding, bankruptcy or
insolvency, injunction, order or claims with respect to Borrowers and
Guarantors shall exist;

 

(p)                   as
of the date hereof and after giving effect to the transactions contemplated
hereby, no defaults or events of default on any material Indebtedness
(including under any of the Note Documents or Securitization Facility
Documents) or any other Material Contracts of Borrowers, Guarantors or any
Restricted Subsidiary shall exist or have occurred;

 

(q)                   Agent
shall have received, in form and substance satisfactory to Agent, such opinion
letters of counsel to Borrowers and Guarantors with respect to the Financing
Agreements and such other matters as Agent may request; and

 

(r)                      the
other Financing Agreements and all instruments and documents hereunder and
thereunder shall have been duly executed and delivered to Agent, in form and
substance satisfactory to Agent.

 

4.2  Conditions
Precedent to All Loans and Letters of Credit.  The obligation of Lenders to make the Loans,
including the initial Loans, or of Issuing Bank to issue any Letter of Credit,
including the initial Letters of Credit, is subject to the further satisfaction
of, or waiver of, immediately prior to or concurrently with the making of each
such Loan or the issuance of such Letter of Credit of each of the following
conditions precedent:

 

(a)                    all
representations and warranties contained herein and in the other Financing
Agreements shall be true and correct with the same effect as though such
representations and warranties had been made on and as of the date of the
making of each such Loan or providing each such Letter of Credit and after
giving effect thereto, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date);

 

(b)                   no
law, regulation, order, judgment or decree of any Governmental Authority shall
exist, and no action, suit, investigation, litigation or proceeding shall be
pending or threatened in any court or before any arbitrator or Governmental
Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect
(A) the making of the Loans or providing the Letters of Credit, or (B) the consummation
of the transactions contemplated pursuant to the terms hereof

 

46

 

or the other Financing
Agreements or (ii) has or has a reasonable likelihood of having a Material
Adverse Effect; and

 

(c)                    no
Default or Event of Default shall exist or have occurred and be continuing on
and as of the date of the making of such Loan or providing each such Letter of
Credit and after giving effect thereto.

 

SECTION 5. 
GRANT AND PERFECTION OF SECURITY INTEREST

 

5.1  Grant
of Security Interest.  To secure payment and performance of all
Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and
the benefit of the Secured Parties, a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to Agent, for itself
and the benefit of the Secured Parties, as security, all of the following
personal property, and interests in personal property, of each Borrower and
Guarantor, whether now owned or hereafter acquired or existing, and wherever
located (together with all other collateral security for the Obligations at any
time granted to or held or acquired by Agent or any Secured Party,
collectively, the “Collateral”), including:

 

(i)                       all
Inventory;

 

(ii)                    all
chattel paper (including all tangible and electronic chattel paper) that arises
from or in connection with or relates to any of the Inventory or other
Collateral;

 

(iii)                 all
instruments (including all promissory notes) that arise from or in connection
with or relate to any of the Inventory or other Collateral;

 

(iv)                all
documents that arise from or in connection with or relate to any of the
Inventory or other Collateral (including all documents of title with respect to
Eligible LC Inventory or other Inventory);

 

(v)                   all
letters of credit, banker’s acceptances and similar instruments and including
all letter of credit rights that arise from or in connection with or relate to
any of the Inventory or other Collateral;

 

(vi)                all
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of any Inventory or
other Collateral, including (A) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the other Collateral; (B) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lienor or secured party; and (C) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, other Collateral, including returned, repossessed and reclaimed
goods;

 

(vii)             all
(A) monies, deposits and balances held in or for deposit in or otherwise
attributable to any lockboxes or deposit accounts established or used by a
Borrower or Guarantor in connection with the Credit Facility for the handling
of any proceeds of any Inventory or other Collateral, or any other deposit
account, investment account or other account at any depository or other
institution and including any investment property (including securities,
whether certificated

 

47

 

or uncertificated, securities
accounts, security entitlements, commodity contracts or commodity accounts) in
each case to the extent arising from or in connection with or related to any
Inventory or other Collateral and (B) all monies, credit balances, deposits and
other property of a Borrower or Guarantor now or hereafter held or received by
or in transit to Agent, its Affiliates, any Lender or its Affiliates and all
monies, credit balances, deposits or other property of a Borrower or Guarantor
at any other depository or other institution from or for the account of a
Borrower or Guarantor to be sent to Agent, its Affiliates, any Lender or its
Affiliates;

 

(viii)          all
commercial tort claims that arise from or in connection with or relate to any
of the Inventory or other Collateral, including, without limitation, those
identified in the Information Certificate;

 

(ix)                  to
the extent not described above, all accounts, contract rights, chattel paper,
instruments, notes, general intangibles and other forms of obligations owing to
any Borrower or Guarantor arising from or in connection with or related to the
sale, lease, license, transfer, assignment or other disposition of any
Inventory or other Collateral or otherwise associated with or related to any
Inventory or other Collateral, including, without limitation, (A) amounts or
other consideration at any time paid or to be paid to, or delivered or to be
delivered to, a Borrower or Guarantor under any Securitization Facility
Documents or otherwise in connection with any sale, transfer, assignment or
other disposition of any Accounts or other Securitization Assets of a Borrower
or Guarantor, (B) any interests which any Borrower or Guarantor may acquire
from the Receivables Financing Subsidiary or any other party to the
Securitization Facility Documents in (1) any returned, repossessed, reclaimed
or foreclosed goods, (2) merchandise the sale of which gave rise to an Account
that constitutes a Securitization Asset, (3) any Accounts or other Receivables
that are not sold by a Borrower to the Receivables Financing Subsidiary or (4)
any Accounts or Inventory that are at any time repurchased by, or reconveyed
to, any Borrower or Guarantor, (C) choses in action or causes of actions or
claims arising out of or with respect to Inventory or other Collateral, (D)
Federal, State, Provincial and local tax refund claims of any kind associated
with or related to any Inventory or other Collateral, (E) agreements or
arrangements with sales agents, distributors or the like and/or consignees,
warehouses or other third persons in possession of Inventory or other
Collateral, (F) customer lists, (G) guaranty, warranty or indemnification
claims with respect to any Inventory or other Collateral, (H) premium rebates
on any insurance of any kind (including fire and other hazard insurance and
credit insurance) associated with or related to any Inventory or other
Collateral), (I)  all Intellectual
Property affixed to or otherwise used in connection with the manufacture, sale
or distribution of any Inventory or other Collateral or in connection with the
monitoring or administration of Inventory or other Collateral; and (J) rights
and claims against carriers and shippers,

 

(x)                     all
Records relating to or used in connection with any of the Inventory or other
Collateral; and

 

(xi)                  all
products and proceeds of the foregoing, in any form, including insurance
proceeds (including fire and other hazard insurance and credit insurance) and
all claims against third parties for loss or damage to or destruction of or
other involuntary conversion of any kind or nature of any of the Inventory or
other Collateral.

 

48

 

(b)                   For
purposes hereof, Receivables payable to Borrowers and Guarantors consisting of
rebates from vendors for advertising, marketing and similar matters in the
ordinary course of the business of Borrowers and Guarantors shall not be deemed
to arise from or in connection with or relate to the sale, lease, license,
transfer, assignment or other disposition of any Inventory or other Collateral
or be otherwise associated with or related to any Inventory or other
Collateral.

 

(c)                    The
security interests and liens of Agent in any Securitization Assets shall be
terminated upon the sale by Borrowers of such Securitization Assets pursuant to
a Permitted Securitization Facility in accordance with the terms of the Securitization
Facility Documents prior to the Automatic Release Termination (as defined in
the Securitization Intercreditor Agreement) and otherwise subject to the terms
of the Securitization Intercreditor Agreement.

 

(d)                   Notwithstanding
anything to the contrary set forth in Section 5.1(a) above or the possession by
Agent thereof, the Collateral shall not include shares of Capital Stock of
Loving Creek Funding Corporation or any other Receivables Financing Subsidiary
at any time owned by Parent or any other Borrower or Guarantor or the
Promissory Note, dated November 17, 2000, issued by Loving Creek Funding
Corporation payable to Contract (or any other promissory note or other
instrument at any time issued by Loving Creek Funding Corporation or any other
Receivables Financing Subsidiary payable to any Borrower or Guarantor in
connection with any Permitted Securitization Facility), unless and until either
Excess Availability shall at any time be less than $75,000,000 or an Event of
Default shall exist or have occurred.  If
at any time Excess Availability is less than $75,000,000 or an Event of Default
shall exist or have occurred, the security interest and lien granted to Agent
above shall automatically and without further action by the parties hereto be
deemed to apply to such Capital Stock and such promissory note or notes and the
term Collateral as used herein shall include such Capital Stock and such
promissory note or notes.  Without
limiting any other rights of Agent hereunder or under any of the other Financing
Agreements, Borrowers and Guarantors shall take such other and further actions
as Agent may from time to time request in order to further evidence such
security interest and lien and to preserve, protect and perfect such security
interest.  Notwithstanding that such
Capital Stock and promissory note or notes are not Collateral, on or before
July 31, 2005, Borrowers and Guarantors shall deliver to Agent the originals of
all certificates representing such shares of Capital Stock, together with stock
powers endorsed in blank, and the originals of any such promissory note or
notes, together with note powers endorsed in blank, to the extent not received
by Agent as of the date hereof.  The
possession of such certificates and such promissory note or notes shall not be
deemed to give Agent a security interest or lien therein until such time as is
provided above.  If at any time after
such Capital Stock and promissory note or notes constitute Collateral, the
Excess Availability shall be greater than $75,000,000 for three (3) consecutive
months and no Event of Default shall exist or have occurred, the security
interests and liens of Agent therein shall be terminated, but without limiting
the reattachment of such security interests and liens of Agent therein if at any
time thereafter Excess Availability shall again be less than $75,000,000 or an
Event of Default shall exist or have occurred.

 

5.2  Perfection
of Security Interests.

 

(a)                    Each
Borrower and Guarantor irrevocably and unconditionally authorizes Agent (or its
agent) to file at any time and from time to time such financing statements with
respect to

 

49

 

the Collateral naming Agent or
its designee as the secured party and such Borrower or Guarantor as debtor, as
Agent may require, and including any other information with respect to such
Borrower or Guarantor or otherwise required by part 5 of Article 9 of the
Uniform Commercial Code of such jurisdiction as Agent may determine, together
with any amendment and continuations with respect thereto, which authorization
shall apply to all financing statements filed on, prior to or after the date
hereof.  Each Borrower and Guarantor
hereby ratifies and approves all financing statements naming Agent or its
designee as secured party and such Borrower or Guarantor, as the case may be,
as debtor with respect to the Collateral (and any amendments with respect to
such financing statements) filed by or on behalf of Agent prior to the date
hereof and ratifies and confirms the authorization of Agent to file such
financing statements (and amendments, if any). 
Each Borrower and Guarantor hereby authorizes Agent to adopt on behalf
of such Borrower and Guarantor any symbol required for authenticating any
electronic filing.  In the event that the
description of the collateral in any financing statement naming Agent or its
designee as the secured party and any Borrower or Guarantor as debtor includes
assets and properties of such Borrower or Guarantor that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to the extent of
the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral.  In no event shall any Borrower or Guarantor at
any time file, or permit or cause to be filed, any correction statement or
termination statement with respect to any financing statement (or amendment or
continuation with respect thereto) naming Agent or its designee as secured
party and such Borrower or Guarantor as debtor.

 

(b)                   Each
Borrower and Guarantor does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate.  In the event
that any Borrower or Guarantor shall be entitled to or shall receive any
chattel paper or instrument that constitutes Collateral after the date hereof,
Borrowers and Guarantors shall promptly notify Agent thereof in writing.  Promptly upon the receipt thereof by or on
behalf of any Borrower or Guarantor (including by any agent or representative),
such Borrower or Guarantor shall deliver, or cause to be delivered to Agent,
all tangible chattel paper and instruments that such Borrower or Guarantor has
or may at any time acquire, accompanied by such instruments of transfer or assignment
duly executed in blank as Agent may from time to time specify, in each case
except as Agent may otherwise agree.  At
Agent’s option, each Borrower and Guarantor shall, or Agent may at any time on
behalf of any Borrower or Guarantor, cause the original of any such instrument
or chattel paper to be conspicuously marked in a form and manner acceptable to
Agent with the following legend referring to chattel paper or instruments as
applicable: “This [chattel paper][instrument] is subject to the security interest
of Wachovia Capital Finance Corporation (Central) and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the
rights of such secured party.”

 

(c)                    In
the event that any Borrower or Guarantor shall at any time hold or acquire an
interest in any electronic chattel paper or any “transferable record” (as such
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction) that constitute
Collateral, such Borrower or Guarantor shall promptly notify Agent thereof in
writing.  Promptly upon Agent’s request,
such Borrower or Guarantor shall take, or cause to be

 

50

 

taken, such actions as Agent
may request to give Agent control of such electronic chattel paper under
Section 9-105 of the UCC and control of such transferable record under Section
201 of the Federal Electronic Signatures in Global and National Commerce Act
or, as the case may be, Section 16 of the Uniform Electronic Transactions Act,
as in effect in such jurisdiction.

 

(d)                   Each
Borrower and Guarantor does not have any deposit accounts as of the date
hereof, except as set forth in the Information Certificate.  Borrowers and Guarantors shall not, directly
or indirectly, after the date hereof open, establish or maintain any deposit
account, other than a Store Account, unless each of the following conditions is
satisfied:  (i) Agent shall have received
not less than five (5) Business Days prior written notice of the intention of
any Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of
the account, the owner of the account, the name and address of the bank at
which such account is to be opened or established, the individual at such bank
with whom such Borrower or Guarantor is dealing and the purpose of the account,
(ii) the bank where such account is opened or maintained shall be acceptable to
Agent, and (iii) on or before the opening of such deposit account, such
Borrower or Guarantor shall as Agent may specify either (A) deliver to Agent a
Deposit Account Control Agreement with respect to such deposit account duly
authorized, executed and delivered by such Borrower or Guarantor and the bank
at which such deposit account is opened and maintained or (B) arrange for Agent
to become the customer of the bank with respect to the deposit account on terms
and conditions acceptable to Agent. The terms of this subsection (d) shall not
apply to deposit accounts specifically and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the
benefit of any Borrower’s or Guarantor’s salaried employees.

 

(e)                    No
Borrower or Guarantor owns or holds, directly or indirectly, beneficially or as
record owner or both, any investment property, as of the date hereof, or have
any investment account, securities account, commodity account or other similar
account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth in the Information Certificate.

 

(i)                       In
the event that any Borrower or Guarantor shall be entitled to or shall at any
time after the date hereof hold or acquire any certificated securities that
constitute Collateral, such Borrower or Guarantor shall promptly endorse,
assign and deliver the same to Agent, accompanied by such instruments of
transfer or assignment duly executed in blank as Agent may from time to time
specify.  If any securities that
constitute Collateral, now or hereafter acquired by any Borrower or Guarantor
are uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, such Borrower or Guarantor shall immediately
notify Agent thereof and shall as Agent may specify, either (A) cause the
issuer to agree to comply with instructions from Agent as to such securities,
without further consent of any Borrower or Guarantor or such nominee, or (B)
arrange for Agent to become the registered owner of the securities.

 

(ii)                    Borrowers
and Guarantors shall not, directly or indirectly, after the date hereof open, establish
or maintain any investment account, securities account, commodity account or
any other similar account (other than a deposit account) with any securities
intermediary or commodity intermediary that constitute or do or will at any
time have any Collateral in them unless each of the following conditions is
satisfied: (A) Agent shall have

 

51

 

received not less than five (5)
Business Days prior written notice of the intention of such Borrower or
Guarantor to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Agent the name of the account,
the owner of the account, the name and address of the securities intermediary
or commodity intermediary at which such account is to be opened or established,
the individual at such intermediary with whom such Borrower or Guarantor is
dealing and the purpose of the account, (B) the securities intermediary or
commodity intermediary (as the case may be) where such account is opened or
maintained shall be acceptable to Agent, and (C) on or before the opening of
such investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower or Guarantor
shall as Agent may specify either (i) execute and deliver, and cause to be
executed and delivered to Agent, an Investment Property Control Agreement with
respect thereto duly authorized, executed and delivered by such Borrower or
Guarantor and such securities intermediary or commodity intermediary or (ii)
arrange for Agent to become the entitlement holder with respect to such
investment property on terms and conditions acceptable to Agent.

 

(f)                      Borrowers
and Guarantors are not the beneficiary or otherwise entitled to any right to
payment under any letter of credit, banker’s acceptance or similar instrument
as of the date hereof, except as set forth in the Information Certificate.  In the event that any Borrower or Guarantor
shall be entitled to or shall receive any right to payment under any letter of
credit, banker’s acceptance or any similar instrument, whether as beneficiary
thereof or otherwise after the date hereof that constitute Collateral, such
Borrower or Guarantor shall promptly notify Agent thereof in writing.  Such Borrower or Guarantor shall immediately,
as Agent may specify, either (i) deliver, or cause to be delivered to Agent,
with respect to any such letter of credit, banker’s acceptance or similar
instrument, the written agreement of the issuer and any other nominated person
obligated to make any payment in respect thereof (including any confirming or
negotiating bank), in form and substance satisfactory to Agent, consenting to
the assignment of the proceeds of the letter of credit to Agent by such Borrower
or Guarantor and agreeing to make all payments thereon directly to Agent or as
Agent may otherwise direct or (ii) cause Agent to become, at Borrowers’
expense, the transferee beneficiary of the letter of credit, banker’s
acceptance or similar instrument (as the case may be).

 

(g)                   Borrowers
and Guarantors do not have any commercial tort claims as of the date hereof,
except as set forth in the Information Certificate.  In the event that any Borrower or Guarantor
shall at any time after the date hereof have any commercial tort claims that
arise in connection with or are related to any other Collateral, such Borrower
or Guarantor shall promptly notify Agent thereof in writing, which notice shall
(i) set forth in reasonable detail the basis for and nature of such commercial
tort claim and (ii) include the express grant by such Borrower or Guarantor to
Agent of a security interest in such commercial tort claim (and the proceeds
thereof).  In the event that such notice
does not include such grant of a security interest, the sending thereof by such
Borrower or Guarantor to Agent shall be deemed to constitute such grant to
Agent. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein.  Without limiting the
authorization of Agent provided in Section 5.2(a) hereof or otherwise arising
by the execution by such Borrower or Guarantor of this Agreement or any of the
other Financing Agreements, Agent is hereby irrevocably authorized from time to
time and at any time to file such financing statements naming Agent or its
designee as secured party and such Borrower or Guarantor as

 

52

 

debtor, or any amendments to
any financing statements, covering any such commercial tort claim as
Collateral. In addition, each Borrower and Guarantor shall promptly upon Agent’s
request, execute and deliver, or cause to be executed and delivered, to Agent
such other agreements, documents and instruments as Agent may require in
connection with such commercial tort claim.

 

(h)                   Borrowers
and Guarantors do not have any goods, documents of title or other Collateral in
the custody, control or possession of a third party as of the date hereof,
except as set forth in the Information Certificate and except for goods located
in the United States in transit to a location of a Borrower or Guarantor
permitted herein in the ordinary course of business of such Borrower or
Guarantor in the possession of the carrier transporting such goods.  In the event that any goods, documents of
title or other Collateral are at any time after the date hereof in the custody,
control or possession of any other person not referred to in the Information
Certificate or such carriers, Borrowers and Guarantors shall promptly notify
Agent thereof in writing.  Promptly upon
Agent’s request, Borrowers and Guarantors shall deliver to Agent a Collateral
Access Agreement duly authorized, executed and delivered by such person and the
Borrower or Guarantor that is the owner of such Collateral.

 

(i)                       Borrowers
and Guarantors shall take any other actions reasonably requested by Agent from
time to time to cause the attachment, perfection and first priority of, and the
ability of Agent to enforce, the security interest of Agent in any and all of
the Collateral, including, without limitation, (i) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the UCC or other applicable law, to the extent, if any, that any Borrower’s
or Guarantor’s signature thereon is required therefor, (ii) causing Agent’s
name to be noted as secured party on any certificate of title for a titled good
if such notation is a condition to attachment, perfection or priority of, or
ability of Agent to enforce, the security interest of Agent in such Collateral,
(iii) complying with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iv) obtaining the
consents and approvals of any Governmental Authority or third party, including,
without limitation, any consent of any licensor, lessor or other person
obligated on Collateral, and taking all actions required by any earlier
versions of the UCC or by other law, as applicable in any relevant
jurisdiction.

 

SECTION
6.  COLLECTION AND
ADMINISTRATION

 

6.1  Borrowers’ Loan Accounts.  Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letters of
Credit and other Obligations and the Collateral, (b) all payments made by or on
behalf of any Borrower or Guarantor and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest.  All entries in the loan
account(s) shall be made in accordance with Agent’s customary practices as in
effect from time to time.

 

6.2  Statements.  Agent shall render to Administrative Borrower
each month a statement setting forth the balance in the Borrowers’ loan
account(s) maintained by Agent for Borrowers pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses.  Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers

 

53

 

and Guarantors and conclusively
binding upon Borrowers and Guarantors as an account stated except to the extent
that Agent receives a written notice from Administrative Borrower of any
specific exceptions of Administrative Borrower thereto within thirty (30) days after
the date such statement has been received by Parent.  Until such time as Agent shall have rendered
to Administrative Borrower a written statement as provided above, the balance
in any Borrower’s loan account(s) shall be presumptive evidence of the amounts
due and owing to Agent and Lenders by Borrowers and Guarantors.

 

6.3  Cash Management; Collection
of Inventory Proceeds.

 

(a)                    Each
Borrower and Guarantor shall establish and maintain, at its expense, deposit
account arrangements and merchant payment arrangements with the banks set forth
on Schedule 8.10 to the Information Certificate and subject to Section 5.2(d)
hereof such other banks as such Borrower or Guarantor may hereafter
select.  The banks set forth on Schedule
8.10 to the Information Certificate constitute all of the banks with which
Borrowers and Guarantors have deposit account arrangements and merchant payment
arrangements as of the date hereof and identifies each of the deposit accounts
at such banks that are used solely for receiving store receipts from a retail
store location of a Borrower (together with any other deposit accounts at any
time established or used by any Borrower for receiving such store receipts from
any retail store location, collectively, the “Store Accounts” and each individually,
a “Store Account”) or otherwise describes the nature of the use of such deposit
account by such Borrower.

 

(i)                       Each
Borrower shall deposit all proceeds from sales of Inventory in every form,
including, without limitation, cash, checks, credit card sales drafts, credit
card sales or charge slips or receipts and other forms of daily store receipts,
from each retail store location of such Borrower into the Store Account of such
Borrower used solely for such purpose in accordance with the current practices
of such Borrower as of the date hereof, but in any event no less frequently
than once every three (3) Business Days; provided, that, each retail store of a
Borrower may retain in such store funds of up to $10,000 immediately after each
deposit of funds from such store into the applicable Store Account.  All such funds deposited into the Store
Accounts shall be sent by wire transfer or other electronic funds transfer on
each Business Day to the Blocked Accounts as provided in Section 6.3(a)(ii)
below, except nominal amounts which are required to be maintained in such Store
Accounts under the terms of such Borrower’s arrangements with the bank at which
such Store Accounts are maintained (which amounts, together with all amounts
held at the retail store locations and not yet deposited in the Store Accounts,
shall not in the aggregate exceed $10,000,000 at any one time, except to the
extent from time to time additional amounts may be held in the retail stores or
the Store Accounts on Saturday, Sunday or other days where the applicable
depository bank is closed, which additional amounts are to be, and shall be,
transferred on the next Business Day to the Blocked Accounts) and except as
Agent may otherwise agree.

 

(ii)                    Each
Borrower shall establish and maintain, at its expense, deposit accounts with
such banks as are reasonably acceptable to Agent (the “Blocked Accounts”) into
which each Borrower shall promptly either cause all amounts on deposit in the
Store Accounts of such Borrower to be sent as provided in Section 6.3(a)(i)
above or shall itself deposit or cause to be deposited all proceeds of
Collateral, including all proceeds from sales of Inventory, all amounts

 

54

 

payable to each Borrower from
Credit Card Issuers and Credit Card Processors, all amounts payable to each
Borrower under the Permitted Securitization Facility and all other proceeds of
Collateral.

 

(iii)                 Borrowers
and Guarantors shall deliver, or cause to be delivered to Agent a Deposit
Account Control Agreement duly authorized, executed and delivered by each bank
where a Blocked Account is maintained as provided in Section 5.2 hereof. At any
time a Default or an Event of Default shall exist or have occurred and be
continuing, promptly upon Agent’s request, Borrowers and Guarantors shall
deliver, or cause to be delivered, to Agent a Deposit Account Control Agreement
duly authorized, executed and delivered by such banks where a Store Account is
maintained as Agent shall specify. 
Without limiting any other rights or remedies of Agent or Lenders, Agent
may, at its option, instruct the depository banks at which the Blocked Accounts
are maintained to transfer all available funds received or deposited into the
Blocked Accounts to the Agent Payment Account at any time that a Cash Dominion
Event occurs. Without limiting any other rights or remedies of Agent or
Lenders, in the event that a Deposit Account Control Agreement is in effect for
a Store Account, then Agent may, at its option, instruct the depository bank at
which the Store Account is maintained to transfer all available funds received
or deposited into the Store Account to the Agent Payment Account at any time
that an Event of Default shall exist or have occurred and be continuing. As to
the Blocked Accounts or the Store Accounts, as the case may be, Agent shall
send to Administrative Borrower a copy of any such written instruction sent by
Agent to the depository bank promptly thereafter.  At all times that Agent shall have notified
any depository bank to transfer funds from a Blocked Account or Store Account
to the Agent Payment Account, all payments made to such Blocked Accounts or
Store Accounts, whether in respect of the Receivables, as proceeds of Inventory
or other Collateral or otherwise shall be treated as payments to Agent in
respect of the Obligations and therefore shall constitute the property of Agent
and Lenders to the extent of the then outstanding Obligations.

 

(b)                   For
purposes of calculating the amount of the Loans available to each Borrower,
such payments will be applied (conditional upon final collection) to the
Obligations on the Business Day of receipt by Agent of immediately available
funds in the Agent Payment Account provided such payments and notice thereof
are received in accordance with Agent’s usual and customary practices as in
effect from time to time and within sufficient time to credit the applicable
loan account on such day, and if not, then on the next Business Day.

 

(c)                    Each
Borrower and Guarantor and their respective employees, agents and Subsidiaries
shall, acting as trustee for Agent, receive, as the property of Agent, any
monies, checks, notes, drafts or any other payment relating to and/or proceeds
of Accounts or other Collateral which come into their possession or under their
control and promptly upon receipt thereof, shall deposit or cause the same to
be deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Agent.  In no event
shall the same be commingled with any Borrower’s or Guarantor’s own funds.  Borrowers agree to reimburse Agent on demand
for any amounts owed or paid to any bank or other financial institution at
which a Blocked Account or any other deposit account or investment account is
established or any other bank, financial institution or other person involved
in the transfer of funds to or from the Blocked Accounts arising out of Agent’s
payments to or indemnification of such bank, financial institution or other
person.  The obligations of Borrowers to
reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the
termination of this Agreement.

 

55

 

6.4  Payments.

 

(a)                    All
Obligations shall be payable to the Agent Payment Account as provided in Section
6.3 or such other place as Agent may designate from time to time.  Agent shall apply payments received or
collected from any Borrower or Guarantor or for the account of any Borrower or
Guarantor (including the monetary proceeds of collections or of realization
upon any Collateral) as follows: first, to pay any fees, indemnities or
expense reimbursements then due to Agent from any Borrower or Guarantor; second,
to pay any fees, indemnities, or expense reimbursements then due to Lenders
from any Borrower or Guarantor; third, to pay interest due in respect of
any Loans (and including any Special Agent Advances); fourth, to pay
principal in respect of Special Agent Advances; fifth, to pay principal
in respect of the Swing Line Loans; sixth, to pay principal in respect
of the Revolving Loans and to pay or prepay Obligations then due arising under
or pursuant to any Hedge Agreements of a Borrower or Guarantor with a Bank
Product Provider (up to the amount of any then effective Reserve established in
respect of such Obligations), on a pro rata basis; seventh, to pay or
prepay any other Obligations whether or not then due, in such order and manner
as Agent determines or to be held as cash collateral in connection with any
Letter of Credit Obligations or other contingent Obligations (but not including
for this purpose any Obligations arising under or pursuant to any Bank
Products); and eighth, to pay or prepay any Obligations arising under or
pursuant to any Bank Products (other than to the extent provided for above) on
a pro rata basis.  Notwithstanding
anything to the contrary contained in this Agreement, (i) unless so directed by
Agent, or unless a Default or an Event of Default shall exist or have occurred
and be continuing, Agent shall not apply any payments which it receives to any
Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period
applicable to any such Eurodollar Rate Loans or (B) in the event that there are
no outstanding Prime Rate Loans and (ii) to the extent any Borrower uses any
proceeds of the Loans or Letters of Credit to acquire rights in or the use of
any Collateral or to repay any Indebtedness used to acquire rights in or the
use of any Collateral, payments in respect of the Obligations shall be deemed
applied first to the Obligations arising from Loans and Letter of Credit
Obligations that were not used for such purposes and second to the Obligations
arising from Loans and Letter of Credit Obligations the proceeds of which were
used to acquire rights in or the use of any Collateral in the chronological
order in which such Borrower acquired such rights in or the use of such
Collateral.

 

(b)                   At
Agent’s option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged directly to the loan account(s) of any Borrower maintained by
Agent.  If after receipt of any payment
of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Agent, any Lender or Issuing Bank is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Agent or such
Lender.  Borrowers and Guarantors shall
be liable to pay to Agent, and do hereby indemnify and hold Agent and Lenders
harmless for the amount of any payments or proceeds surrendered or
returned.  This Section 6.4(b) shall
remain effective notwithstanding any contrary action which may be taken by
Agent or any Lender in reliance upon such payment or proceeds.  This Section 6.4 shall survive the payment of
the Obligations and the termination of this Agreement.

 

56

 

6.5  Taxes.

 

(a)                    Any
and all payments by or on account of any of the Obligations shall be made free
and clear of and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees,
deductions, charges, withholdings, liabilities, restrictions or conditions of
any kind, excluding (i) in the case of each Lender, Issuing Bank and Agent (A)
taxes measured by its net income, and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) under the laws of which
such Lender, Issuing Bank or Agent (as the case may be) is organized and (B)
any United States withholding taxes payable with respect to payments under the
Financing Agreements under laws (including any statute, treaty or regulation)
in effect on the date hereof (or, in the case of an Eligible Transferee, the
date of the Assignment and Acceptance) applicable to such Lender, Issuing Bank
or Agent, as the case may be, but not excluding any United States withholding
taxes payable as a result of any change in such laws occurring after the date
hereof (or the date of such Assignment and Acceptance) and (ii) in the case of
each Lender, Issuing Bank or Agent, taxes measured by its net income, and
franchise taxes imposed on it as a result of a present or former connection
between such Lender and the jurisdiction of the Governmental Authority imposing
such tax or any taxing authority thereof or therein (all such non-excluded
taxes, levies, imposts, fees, deductions, charges, withholdings and liabilities
being hereinafter referred to as “Taxes”).

 

(b)                   If
any Taxes shall be required by law to be deducted from or in respect of any sum
payable in respect of the Obligations to any Lender, Issuing Bank or Agent (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 6.5), such Lender, Issuing Bank or Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the relevant Borrower or Guarantor shall make such
deductions, (iii) the relevant Borrower or Guarantor shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law and (iv) the relevant Borrower or Guarantor shall deliver to
Agent evidence of such payment.

 

(c)                    In
addition, each Borrower and Guarantor agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction, and all liabilities with respect thereto, in
each case arising from any payment made hereunder or under any of the other
Financing Agreements or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any of the other Financing
Agreements (collectively, “Other Taxes”).

 

(d)                   Each
Borrower and Guarantor shall indemnify each Lender, Issuing Bank and Agent for
the full amount of Taxes and Other Taxes (including any Taxes and Other Taxes
imposed by any jurisdiction on amounts payable under this Section 6.5) paid by
such Lender, Issuing Bank or Agent (as the case may be) and any liability
(including for penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted.  This indemnification
shall be made within thirty (30) days from the date such Lender, Issuing Bank
or Agent (as the case may be) makes written demand therefor.  A certificate as to the amount of such
payment or liability delivered to Administrative

 

57

 

Borrower by a Lender, an
Issuing Bank (with a copy to Agent) or by Agent on its own behalf or on behalf
of a Lender or an Issuing Bank, shall be conclusive absent manifest error.

 

(e)                    As
soon as practicable after any payment of Taxes or Other Taxes by any Borrower
or Guarantor, such Borrower or Guarantor shall furnish to Agent, at its address
referred to herein, the original or a certified copy of a receipt evidencing
payment thereof.

 

(f)                      Without
prejudice to the survival of any other agreements of any Borrower or Guarantor
hereunder or under any of the other Financing Agreements, the agreements and
obligations of such Borrower or Guarantor contained in this Section 6.5 shall
survive the termination of this Agreement and the payment in full of the
Obligations.

 

(g)                   Any
Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the applicable
Borrower is resident for tax purposes, or any treaty to which such jurisdiction
is a party, with respect to payments hereunder or under any of the other
Financing Agreements shall deliver to Administrative Borrower (with a copy to
Agent), at the time or times prescribed by applicable law or reasonably
requested by Administrative Borrower or Agent (in such number of copies as is
reasonably requested by the recipient), whichever of the following is
applicable (but only if such Foreign Lender is legally entitled to do so):  (i) duly completed copies of Internal Revenue
Service Form W-8BEN claiming exemption from, or a reduction to, withholding tax
under an income tax treaty, or any successor form, (ii)  duly completed copies of Internal Revenue
Service Form 8-8ECI claiming exemption from withholding because the income is
effectively connection with a U.S. trade or business or any successor form,
(iii)  in the case of a Foreign Lender
claiming the benefits of the exemption for portfolio interest under Sections
871(h) or 881(c) of the Code, (A) a certificate of the Lender to the effect
that such Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of
the Code, a “10 percent shareholder” of a Borrower within the meaning of
Section 881(c)(3)(B) of the Code or a “controlled foreign corporation”
described and Section 881(c)(3)(C) of the Code and (B) duly completed copies of
Internal Revenue Service Form W-8BEN claiming exemption from withholding under
the portfolio interest exemption or any successor form or (iv) any other
applicable form, certificate or document prescribed by applicable law as a
basis for claiming exemption from or a reduction in United States withholding
tax duly completed together with such supplementary documentation as may be
prescribed by applicable law to permit a Borrower to determine the withholding or
deduction required to be made.  Unless
Administrative Borrower and Agent have received forms or other documents
satisfactory to them indicating that payments hereunder or under any of the
other Financing Agreements to or for a Foreign Lender are not subject to United
States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, Borrowers or Agent shall withhold amounts required to be
withheld by applicable requirements of law from such payments at the applicable
statutory rate.  Borrowers and Guarantors
shall not be required to indemnify any Foreign Lender or to pay any additional
amounts to any Foreign Lender in respect of U.S. withholding tax pursuant
Section 6.5(b) or 6.5(d) above to the extent that the obligation to pay such
additional amounts would not have arisen but for a failure by such Foreign
Lender to comply with the provisions of this Section 6.5(g).  Should a Lender become subject to Taxes
because of its failure to deliver a form required hereunder, Borrowers and
Guarantors shall, at such Lender’s expense, take such steps as such Lender
shall reasonably request to assist such Lender to recover such Taxes.

 

58

 

(h)                   Any
Lender claiming any additional amounts payable pursuant to this Section 6.5
shall use its reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its applicable
lending office if the making of such a change would avoid the need for, or
reduce the amount of, any such additional amounts that would be payable or may
thereafter accrue and would not, in the sole determination of such Lender, be
otherwise disadvantageous in any material respect to such Lender.

 

6.6  Authorization
to Make Loans. 
Agent and Lenders are authorized to make the Loans based upon telephonic
or other instructions received from anyone purporting to be an officer of
Administrative Borrower or any Borrower or other authorized person or, at the
discretion of Agent, if such Loans are necessary to satisfy any
Obligations.  All requests for Loans or
Letters of Credit hereunder shall specify the date on which the requested
advance is to be made (which day shall be a Business Day) and the amount of the
requested Loan.  Requests received after
11:00 a.m. Chicago time on any day shall be deemed to have been made as of the
opening of business on the immediately following Business Day.  All Loans and Letters of Credit under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, any Borrower or Guarantor when deposited to
the credit of any Borrower or Guarantor or otherwise disbursed or established
in accordance with the instructions of any Borrower or Guarantor or in accordance
with the terms and conditions of this Agreement.

 

6.7  Use of Proceeds.  Borrowers shall use the initial proceeds of
the Loans and Letters of Credit hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrowers to
Agent on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. 
All other Loans made or Letters of Credit provided to or for the benefit
of any Borrower pursuant to the provisions hereof shall be used by such
Borrower only to finance acquisitions by a Borrower or Guarantor to the extent
permitted hereunder, or for general operating, working capital and other proper
corporate purposes of such Borrower not otherwise prohibited by the terms
hereof.  None of the proceeds will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purposes of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Loans to be considered a “purpose
credit” within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, as amended.

 

6.8  Appointment of Administrative
Borrower as Agent for Requesting Loans and Receipts of Loans and Statements.

 

(a)                    Each
Borrower hereby irrevocably appoints and constitutes Administrative Borrower as
its agent and attorney-in-fact to request and receive Loans and Letters of
Credit pursuant to this Agreement and the other Financing Agreements from Agent
or any Lender in the name or on behalf of such Borrower.  Agent and Lenders may disburse the Loans to
such bank account of Administrative Borrower or a Borrower or otherwise make
such Loans to a Borrower and provide such Letters of Credit to a Borrower as
Administrative Borrower may designate or direct, without notice to any other
Borrower or Guarantor.  Notwithstanding
anything to the contrary contained herein, Agent may at any time and from time
to time require that Loans to or for the account of any Borrower be disbursed
directly to an operating account of such Borrower.

 

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(b)                   Administrative
Borrower hereby accepts the appointment by Borrowers to act as the agent and
attorney-in-fact of Borrowers pursuant to this Section 6.8. Administrative
Borrower shall ensure that the disbursement of any Loans to each Borrower
requested by or paid to or for the account of Parent, or the issuance of any
Letter of Credit for a Borrower hereunder, shall be paid to or for the account
of such Borrower.

 

(c)                    Each
Borrower and other Guarantor hereby irrevocably appoints and constitutes
Administrative Borrower as its agent to receive statements on account and all
other notices from Agent and Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements.

 

(d)                   Any
notice, election, representation, warranty, agreement or undertaking by or on
behalf of any other Borrower or any Guarantor by Administrative Borrower shall
be deemed for all purposes to have been made by such Borrower or Guarantor, as
the case may be, and shall be binding upon and enforceable against such
Borrower or Guarantor to the same extent as if made directly by such Borrower
or Guarantor.

 

(e)                    No
purported termination of the appointment of Administrative Borrower as agent as
aforesaid shall be effective, except after ten (10) days’ prior written notice
to Agent.

 

6.9  Pro Rata Treatment.  Except to the extent otherwise provided in
this Agreement or as otherwise agreed by Lenders:  (a) the making and conversion of Loans shall
be made among the Lenders based on their respective Pro Rata Shares as to the
Loans and (b) each payment on account of any Obligations to or for the account
of one or more of Lenders in respect of any Obligations due on a particular day
shall be allocated among the Lenders entitled to such payments based on their
respective Pro Rata Shares and shall be distributed accordingly.

 

6.10  Sharing of Payments, Etc.

 

(a)                    Each
Borrower and Guarantor agrees that, in addition to (and without limitation of)
any right of setoff, banker’s lien or counterclaim Agent or any Lender may
otherwise have, each Lender shall be entitled, at its option (but subject, as
among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to
offset balances held by it for the account of such Borrower or Guarantor at any
of its offices, in dollars or in any other currency, against any principal of
or interest on any Loans owed to such Lender or any other amount payable to
such Lender hereunder, that is not paid when due (regardless of whether such
balances are then due to such Borrower or Guarantor), in which case it shall
promptly notify Administrative Borrower and Agent thereof; provided, that,
such Lender’s failure to give such notice shall not affect the validity
thereof.

 

(b)                   If
any Lender (including Agent) shall obtain from any Borrower or Guarantor
payment of any principal of or interest on any Loan owing to it or payment of
any other amount under this Agreement or any of the other Financing Agreements
through the exercise of any right of setoff, banker’s lien or counterclaim or
similar right or otherwise (other than from Agent as provided herein), and, as
a result of such payment, such Lender shall have received more than its Pro
Rata Share of the principal of the Loans or more than its share of such other
amounts then due hereunder or thereunder by any Borrower or Guarantor to such
Lender than the percentage

 

60

 

thereof received by any other
Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount
of such excess and simultaneously purchase from such other Lenders a
participation in the Loans or such other amounts, respectively, owing to such
other Lenders (or such interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining
or preserving such excess payment) in accordance with their respective Pro Rata
Shares or as otherwise agreed by Lenders. 
To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment
is rescinded or must otherwise be restored.

 

(c)                    Each
Borrower and Guarantor agrees that any Lender purchasing a participation (or
direct interest) as provided in this Section may exercise, in a manner
consistent with this Section, all rights of setoff, banker’s lien, counterclaim
or similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans or other amounts (as the case may be) owing to
such Lender in the amount of such participation.

 

(d)                   Nothing
contained herein shall require any Lender to exercise any right of setoff,
banker’s lien, counterclaims or similar rights or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other Indebtedness or obligation of any Borrower or Guarantor.  If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section applies, such Lender shall, to the extent
practicable, assign such rights to Agent for the benefit of Lenders and, in any
event, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section to share in
the benefits of any recovery on such secured claim.

 

6.11  Settlement Procedures.

 

(a)                    In
order to administer the Credit Facility in an efficient manner and to minimize
the transfer of funds between Agent and Lenders, Agent may, at its option,
subject to the terms of this Section, make available, on behalf of Lenders,
including the Swing Line Lender, the full amount of the Revolving Loans or
Swing Line Loans requested or charged to any Borrower’s loan account(s) or
otherwise to be advanced by Lenders pursuant to the terms hereof, without
requirement of prior notice to Lenders of the proposed Loans.

 

(b)                   With
respect to all Revolving Loans made by Agent on behalf of Lenders, or any Swing
Line Loans made by Swing Line Lender or Agent on behalf of Swing Line Lender,
the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be
computed weekly, and shall be adjusted upward or downward on the basis of the
amount of the outstanding Loans as of 5:00 p.m. Chicago time on the Business
Day immediately preceding the date of each settlement computation; provided,
that, Agent retains the absolute right at any time or from time to time
to make the above described adjustments at intervals more frequent than weekly,
but in no event more than twice in any week. 
Agent shall deliver to each of the Lenders after the end of each week,
or at such lesser period or periods as Agent shall determine, a summary
statement of the amount of outstanding Loans for such period (such week or
lesser period or periods being hereinafter referred to as a “Settlement Period”).  If the summary statement is sent by Agent and

 

61

 

received by a Lender prior to
12:00 p.m. Chicago time, then such Lender shall make the settlement transfer
described in this Section by no later than 3:00 p.m. Chicago time on the same
Business Day and if received by a Lender after 12:00 p.m. Chicago time, then
such Lender shall make the settlement transfer by not later than 3:00 p.m.
Chicago time on the next Business Day following the date of receipt.  If, as of the end of any Settlement Period,
the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than
such Lender’s Pro Rata Share of the outstanding Loans as of the end of the
previous Settlement Period, then such Lender shall forthwith (but in no event
later than the time set forth in the preceding sentence) transfer to Agent by
wire transfer in immediately available funds the amount of the increase.  Alternatively, if the amount of a Lender’s
Pro Rata Share of the outstanding Loans in any Settlement Period is less than
the amount of such Lender’s Pro Rata Share of the outstanding Loans for the
previous Settlement Period, Agent shall forthwith transfer to such Lender by
wire transfer in immediately available funds the amount of the decrease.  The obligation of each of the Lenders to
transfer such funds and effect such settlement shall be irrevocable and
unconditional and without recourse to or warranty by Agent.  Agent and each Lender agrees to mark its
books and records at the end of each Settlement Period to show at all times the
dollar amount of its Pro Rata Share of the outstanding Loans and Letters of
Credit.  Each Lender shall only be
entitled to receive interest on its Pro Rata Share of the Loans to the extent
such Loans have been funded by such Lender. 
Because the Agent on behalf of Lenders may be advancing and/or may be
repaid Loans prior to the time when Lenders will actually advance and/or be
repaid such Loans, interest with respect to Loans shall be allocated by Agent
in accordance with the amount of Loans actually advanced by and repaid to each
Lender and the Agent and shall accrue from and including the date such Loans
are so advanced to but excluding the date such Loans are either repaid by
Borrowers or actually settled with the applicable Lender as described in this
Section.

 

(c)                    To
the extent that Agent has made any such amounts available and the settlement
described above shall not yet have occurred, upon repayment of any Loans by a
Borrower, Agent may apply such amounts repaid directly to any amounts made
available by Agent pursuant to this Section. 
In lieu of weekly or more frequent settlements, Agent may, at its
option, at any time require each Lender to provide Agent with immediately
available funds representing its Pro Rata Share of each Loan, prior to Agent’s
disbursement of such Loan to Borrower. 
In such event, all Loans under this Agreement shall be made by the
Lenders simultaneously and proportionately to their Pro Rata Shares.  No Lender shall be responsible for any
default by any other Lender in the other Lender’s obligation 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 the other Lender’s
obligation to make a Loan hereunder.

 

(d)                   If
Agent is not funding a particular Loan to a Borrower (or Administrative
Borrower for the benefit of such Borrower) pursuant to Sections 6.11(a) and
6.11(b) above on any day, but is requiring each Lender to provide Agent with
immediately available funds on the date of such Loan as provided in Section
6.11(c) above, Agent may assume that each Lender will make available to Agent
such Lender’s Pro Rata Share of the Loan requested or otherwise made on such
day and Agent may, in its discretion, but shall not be obligated to, cause a
corresponding amount to be made available to or for the benefit of such
Borrower on such day.  If Agent makes
such corresponding amount available to a Borrower and such corresponding amount
is not in fact made available to Agent by such Lender, Agent shall be entitled
to recover such corresponding amount on demand from such Lender together with
interest thereon for each day from the date

 

62

 

such payment was due until the
date such amount is paid to Agent at the Federal Funds Rate for each day during
such period (as published by the Federal Reserve Bank of Chicago or at Agent’s
option based on the arithmetic mean determined by Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (Chicago
time) on that day by each of the three leading brokers of Federal funds
transactions in Chicago selected by Agent) and if such amounts are not paid
within three (3) days of Agent’s demand, at the highest Interest Rate provided
for in Section 3.1 hereof applicable to Prime Rate Loans.  During the period in which such Lender has
not paid such corresponding amount to Agent, notwithstanding anything to the
contrary contained in this Agreement or any of the other Financing Agreements,
the amount so advanced by Agent to or for the benefit of any Borrower shall,
for all purposes hereof, be a Loan made by Agent for its own account.  Upon any such failure by a Lender to pay
Agent, Agent shall promptly thereafter notify Administrative Borrower of such
failure and Borrowers shall pay such corresponding amount to Agent for its own
account within five (5) Business Days of Administrative Borrower’s receipt of
such notice.  A Lender who fails to pay
Agent its Pro Rata Share of any Loans made available by the Agent on such
Lender’s behalf, or any Lender who fails to pay any other amount owing by it to
Agent, is a “Defaulting Lender”.

 

(e)                    Agent
shall not be obligated to transfer to a Defaulting Lender any payments received
by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder (including any principal,
interest or fees).  Amounts payable to a
Defaulting Lender shall instead be paid to or retained by Agent.  Agent may hold and, in its discretion, relend
to a Borrower the amount of all such payments received or retained by it for
the account of such Defaulting Lender. 
For purposes of voting or consenting to matters with respect to this
Agreement and the other Financing Agreements and determining Pro Rata Shares,
such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s
Commitment shall be deemed to be zero (0). 
This Section shall remain effective with respect to a Defaulting Lender
until such default is cured.  The
operation of this Section shall not be construed to increase or otherwise
affect the Commitment of any Lender, or relieve or excuse the performance by
any Borrower or Guarantor of their duties and obligations hereunder.  Wachovia Capital or Administrative Borrower
shall have the right, but not the obligation, at any time, and upon the
exercise by Wachovia Capital or Administrative Borrower of such right, any
Defaulting Lender shall have the obligation, to sell, assign and transfer to
Wachovia Capital or such Eligible Transferee as Wachovia Capital may specify,
the Commitment of such Defaulting Lender and all rights and interests of such
Defaulting Lender pursuant thereto. 
Wachovia Capital shall provide the Defaulting Lender with prior written
notice of its intent to exercise its right under this Section (or if Wachovia
Capital does not exercise such right, Administrative Borrower shall provide
Agent and the Defaulting Lender with prior written notice of its intent to
exercise its right under this Section), which notice shall specify the date on
which such purchase and sale shall occur. 
Such purchase and sale shall be pursuant to the terms of an Assignment
and Acceptance (whether or not executed by the Defaulting Lender).

 

(f)                      Nothing
in this Section or elsewhere in this Agreement or the other Financing
Agreements shall be deemed to require Agent to advance funds on behalf of any
Lender or to relieve any Lender from its obligation to fulfill its Commitment
hereunder or to prejudice any rights that any Borrower may have against any
Lender as a result of any default by any Lender hereunder in fulfilling its
Commitment.

 

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6.12  Obligations
Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is
several, and no Lender shall be responsible for the obligation or commitment of
any other Lender hereunder.  Nothing
contained in this Agreement or any of the other Financing Agreements and no
action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity.  The amounts
payable at any time hereunder to each Lender shall be a separate and
independent debt, and subject to Section 12.3 hereof, each Lender shall be
entitled to protect and enforce its rights arising out of this Agreement and it
shall not be necessary for any other Lender to be joined as an additional party
in any proceeding for such purpose.

 

6.13  Bank Products.  Borrowers and Guarantors, or any of their
Subsidiaries, may (but no such Person is required to) request that the Bank
Product Providers provide or arrange for such Person to obtain Bank Products
from Bank Product Providers, and each Bank Product Provider may, in its sole discretion,
provide or arrange for such Person to obtain the requested Bank Products.  Borrowers and Guarantors or any of their
Subsidiaries that obtains Bank Products shall indemnify and hold Agent, each
Lender and their respective Affiliates harmless from any and all obligations
now or hereafter owing to any other Person by any Bank Product Provider in
connection with any Bank Products other than for gross negligence or willful
misconduct on the part of any such indemnified Person.  This Section 6.13 shall survive the payment
of the Obligations and the termination of this Agreement.  Borrower and its Subsidiaries acknowledge and
agree that the obtaining of Bank Products from Bank Product Providers (a) is in
the sole discretion of such Bank Product Provider, and (b) is subject to all
rules and regulations of such Bank Product Provider.  Each Bank Product Provider shall be deemed a
party hereto for purposes of any reference in a Financing Agreement to the
parties for whom Agent is acting, provided, that, the rights of such Bank
Product Provider hereunder and under any of the other Financing Agreements
shall consist exclusively of such Bank Product Provider’s right to share in
payments and collections out of the Collateral as set forth herein.  In connection with any such distribution of
payments and collections, Agent shall be entitled to assume that no amounts are
due to any Bank Product Provider unless such Bank Product Provider has notified
Agent in writing of any such liability owed to it as of the date of any such
distribution.

 

SECTION
7.  COLLATERAL REPORTING
AND COVENANTS

 

7.1  Collateral Reporting.

 

(a)                    Borrowers
shall provide Agent with the following documents in a form satisfactory to
Agent:

 

(i)                       as
soon as possible after the end of each fiscal month (but in any event within
ten (10) Business Days after the end thereof) so long as no Default or Event of
Default exists or has occurred and Excess Availability shall be greater than
$75,000,000 (and more frequently as Agent may require at any time a Default or
Event of Default exists or has occurred or Excess Availability is less than
$75,000,000), a Borrowing Base Certificate setting forth the calculation of the
Borrowing Base as of the last Business Day of the immediately preceding period
as to the Inventory, duly completed and executed by the chief financial
officer, vice president of finance, treasurer or controller of Administrative
Borrower, together with all

 

64

 

schedules required pursuant to
the terms of the Borrowing Base Certificate duly completed, including but not
limited to an inventory summary report by category (and upon Agent’s request,
letter of credit inventory) and identifying where such Inventory is located;

 

(ii)                    as
soon as possible after the end of each fiscal month (but in any event within
ten (10) Business Days after the end thereof), on a monthly basis or more
frequently as Agent may request,

 

(A)           perpetual
inventory summary reports by location and by Retail Division and Contract
Division (and including the amounts of Inventory and the value thereof at any
leased locations and at premises of warehouses, processors or other third
parties or is consigned inventory),

 

(B)             summary
aging of outstanding accounts payable (and including information indicating the
amounts owing to owners and lessors of leased premises, warehouses, fulfillment
centers, processors, custom brokers, freight forwarders and other third parties
from time to time in possession of any Collateral),

 

(C)             a
certificate by the chief financial officer, vice president of finance,
treasurer or controller of Administrative Borrower consisting of: (1) a
statement confirming the payment of rent and other amounts due to owners and
lessors of real property used by Borrower in the immediately preceding month,
subject to year-end or monthly percentage rent payment adjustments, (2) the
addresses of all new retail store or distribution center locations of Borrowers
and Guarantors opened and existing retail store or distribution center locations
closed or sold, in each case since the date of the most recent certificate
delivered to Agent containing the information required under this clause, (3) a
report of any new deposit account established or used by any Borrower or
Guarantor with any bank or other financial institution, including the Borrower
or Guarantor in whose name the account is maintained, the account number, the
name and address of the financial institution at which such account is
maintained, the purpose of such account and, if any, the amount held in such
account on or about the date of such report, (4) a description of any license
agreements with respect to Intellectual Property (other than licenses by a
Borrower to a private label manufacturer entered into in the ordinary course of
business for the production of Inventory on behalf of a Borrower or “click
through” licenses to website hosts or providers in connection with on-line
purchasing or licenses to a Borrower by a customer to use such customer’s
trademarks for purposes of goods or services provided by such Borrower to or
for such customer) entered into since the date of the most recent certificate
delivered to Agent listing the Intellectual Property subject to such license,
the name and address of the licensee, the term of the license arrangement and
the products and territory subject to such license and (5) a statement that all
sales and use taxes have been paid when due as of the date of the certificate,
except as specifically described in such certificate;

 

(D)            in
connection with any Permitted Acquisition for which the consideration is less
than $10,000,000, a certificate by the chief financial officer, vice president
of finance, treasurer or controller of Administrative Borrower setting forth
the date or proposed date and amount of such an acquisition that has occurred
since the date of the most recent certificate delivered to Agent containing the
information required under this clause or will occur prior to the date of the
next such certificate to be delivered to Agent, together with a list and
description of

 

65

 

the assets or shares acquired
or to be acquired, the total purchase price for the assets purchased or to be
purchased (and the terms of payment of such purchase price), and a summary of
the due diligence undertaken by Borrowers in connection with such acquisition;

 

(E)              as
to any Indebtedness incurred after the date hereof in an amount less than
$10,000,000 that is permitted hereunder, a certificate by the chief financial officer,
vice president of finance, treasurer or controller of Administrative Borrower
setting forth the Borrower or Guarantor that has incurred such Indebtedness,
the amount of such Indebtedness, the person or persons to whom such
Indebtedness will be owed, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Agent may
request with respect thereto,

 

(iii)                 upon
Agent’s request, (A) reports of sales for each category of Inventory,  (B) reports by retail store location of sales
and operating profits for each such retail store location, (C) summary reports
on sales and use tax collections, deposits and payments, including monthly
sales and use tax accruals, (D) true, correct and complete copies of all
agreements, documents and instruments relating to any Permitted Acquisition
which Agent has not otherwise received and (E) true, correct and complete
copies of all agreements, documents or instruments evidencing or otherwise
related to Indebtedness that Agent has not otherwise received; and

 

(iv)                such
other reports as to the Collateral as Agent shall request from time to time.

 

(b)                   Nothing
contained in any Borrowing Base Certificate shall be deemed to limit, impair or
otherwise affect the rights of Agent contained herein and in the event of any
conflict or inconsistency between the calculation of the Borrowing Base as set
forth in any Borrowing Base Certificate and as determined by Agent in good
faith, the determination of Agent shall govern and be conclusive and binding
upon Borrowers and Guarantors. Without limiting the foregoing, Borrowers shall
furnish to Agent any information which Agent may reasonably request regarding
the determination and calculation of any of the amounts set forth in any
Borrowing Base Certificate. The Borrowing Base may be adjusted based on the
information set forth in the reports received by Agent under Section 7.1(a)(i)
above.  In no event shall any Borrower or
Guarantor have any liability in connection with the calculation of the Reserves
in the Borrowing Base to the extent the amount of such Reserve is provided by
Agent to Borrowers or Guarantors for such purpose.  If any Borrower’s or Guarantor’s records or
reports of the Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, such Borrower and Guarantor hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Agent and to follow Agent’s
instructions with respect to further services.

 

(c)                    All
of the documents, reports and schedules provided by Borrowers to Agent
hereunder for Receivables payable in any currency other than US Dollars and
Inventory located outside the United States of America shall set forth the US
Dollar Equivalent for the amount of the Receivables and Value of the Inventory
included in any such documents, reports or schedules.  For purposes hereof, Agent may, at its
option, provide to Administrative Borrower, at least five (5) Business Days
prior to the date any such documents, reports or schedules are required to be
provided by Borrowers to Agent hereunder, the Exchange Rates required to set

 

66

 

forth the US Dollar Equivalent
in such documents, reports and schedules provided, that, in the event Agent
does not do so, Borrowers shall use such rates of exchange with respect to the
applicable currencies as Borrowers use for such purpose in the ordinary course
of business consistent with current practices as of the date hereof and shall
identify such rates of exchange in any such documents, reports and schedules.

 

7.2  Accounts Covenants.

 

(a)                    Borrowers
shall notify Agent promptly of the assertion of (i) any claims, offsets,
defenses or counterclaims by any account debtor, Credit Card Issuer or Credit
Card Processor or any disputes with any of such persons or any settlement,
adjustment or compromise thereof, to the extent any of the foregoing exceeds
$5,000,000 in any one case or $10,000,000 in the aggregate and (ii) all
material adverse information relating to the financial condition of any account
debtor, Credit Card Issuer or Credit Card Processor.  No credit, discount, allowance or extension
or agreement for any of the foregoing shall be granted to any account debtor,
Credit Card Issuer or Credit Card Processor except in the ordinary course of a
Borrower’s business in accordance with the current practices of such Borrower
as in effect on the date hereof.  At any
time that an Event of Default exists or has occurred and is continuing, Agent
shall, at its option, have the exclusive right to settle, adjust or compromise
any claim, offset, counterclaim or dispute with account debtors, Credit Card
Issuers or Credit Card Processors or grant any credits, discounts or
allowances.

 

(b)                   Borrowers
shall notify Agent promptly of:  (i) any
notice of a material default by such Borrower under any of the Credit Card
Agreements or of any default which has a reasonable likelihood of resulting in
the Credit Card Issuer or Credit Card Processor ceasing to make payments or
suspending payments to such Borrower, (ii) any notice from any Credit Card
Issuer or Credit Card Processor that such person is ceasing or suspending, or
will cease or suspend, any present or future payments due or to become due to
any Borrower from such person, or that such person is terminating or will
terminate any of the Credit Card Agreements, and (iii) the failure of such
Borrower to comply with any material terms of the Credit Card Agreements or any
terms thereof which has a reasonable likelihood of resulting in the Credit Card
Issuer or Credit Card Processor ceasing or suspending payments to such
Borrower.

 

(c)                    Agent
shall have the right at any time or times, in Agent’s name or in the name of a
nominee of Agent, to verify the validity, amount or any other matter relating
to any Receivables or other Collateral, by mail, telephone, facsimile
transmission or otherwise.

 

7.3  Inventory Covenants.  With respect to the Inventory: (a) each
Borrower and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower’s
or Guarantor’s cost therefor and daily withdrawals therefrom and additions
thereto; (b) Borrowers and Guarantors shall conduct a physical count of the
Inventory either through periodic cycle counts or wall to wall counts, so that
all Inventory is subject to such counts at least once each year, but at any
time or times as Agent may request at any time an Event of Default exists or
has occurred and is continuing, and promptly following such physical inventory
(whether through periodic cycle counts or wall to wall counts) shall supply
Agent with a report in the form and with such specificity as may be reasonably
satisfactory to Agent

 

67

 

concerning such physical count;
(c) Borrowers and Guarantors shall not remove any Inventory from the locations
set forth or permitted herein, without the prior written consent of Agent,
except for sales of Inventory in the ordinary course of its business and except
to move Inventory directly from one location set forth or permitted herein to
another such location and except for Inventory shipped from the manufacturer
thereof to such Borrower or Guarantor which is in transit to the locations set
forth or permitted herein; (d) upon Agent’s request, Borrowers shall, at their
expense, deliver or cause to be delivered to Agent written appraisals as to the
Inventory in form, scope and methodology acceptable to Agent and by an
appraiser acceptable to Agent, addressed to Agent and Lenders and upon which
Agent and Lenders are expressly permitted to rely, but so long as no Default or
Event of Default shall exist or have occurred, no more than two (2) such
appraisals at the cost and expense of Borrowers in any calendar year; provided,
that, without limiting any rights of Agent hereunder, Borrowers shall
within ninety (90) days after the date hereof deliver, or cause to be
delivered, to Agent, such written appraisals as to the Inventory; (e) Borrowers
and Guarantors shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) each Borrower and Guarantor
assumes all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory; (g) Borrowers and
Guarantors shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate any Borrower or
Guarantor to repurchase such Inventory except for the right of return given to
customers of such Borrower or Guarantor in the ordinary course of the business
of such Borrower or Guarantor in accordance with the then current return policy
of such Borrower or Guarantor; (h) Borrowers and Guarantors shall keep the
Inventory in good and marketable condition; and (i) Borrowers and Guarantors
shall not acquire or accept any Inventory on consignment or approval unless
such Inventory has been specifically identified in a report with respect
thereto provided by Administrative Borrower to Agent pursuant to Section 7.1(a)
hereof when required to be included in such report or Agent has otherwise
received prior written notice thereof in form and substance satisfactory to
Agent.

 

7.4  Power of Attorney.  Each Borrower and Guarantor hereby
irrevocably designates and appoints Agent (and all persons designated by Agent)
as such Borrower’s and Guarantor’s true and lawful attorney-in-fact, and authorizes
Agent, in such Borrower’s, Guarantor’s or Agent’s name, to: (a) at any time an
Event of Default exists or has occurred (i) demand payment on any Collateral,
(ii) enforce payment of any of the Collateral by legal proceedings or
otherwise, (iii) exercise all of such Borrower’s or Guarantor’s rights and
remedies to collect any Collateral, (iv) sell or assign any Collateral upon
such terms, for such amount and at such time or times as the Agent deems
advisable, (v) settle, adjust, compromise, extend or renew any of the
Collateral, (vi) discharge and release any Collateral, (vii) prepare, file and
sign such Borrower’s or Guarantor’s name on any proof of claim in bankruptcy or
other similar document against an account debtor or other obligor in respect of
any Collateral, (viii) notify the post office authorities to change the address
for delivery of remittances from account debtors or other obligors in respect
of Collateral to an address designated by Agent, and open and dispose of all
mail addressed to such Borrower or Guarantor and handle and store all mail
relating to the Collateral; and (ix) do all acts and things which are
necessary, in Agent’s determination, to fulfill such Borrower’s or Guarantor’s
obligations under this Agreement and the other Financing Agreements and (b) at
any time after a Cash Dominion Event to (i) take control in any manner of any
item of payment constituting

 

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Collateral or otherwise
received in or for deposit in the Blocked Accounts and (ii) have access to any
lockbox or postal box into which remittances from account debtors or other
obligors in respect of Collateral are sent or received if a Cash Dominion Event
has occurred, and (c) at any time to (i) take control of any item of payment
constituting Collateral that is received by Agent or any Lender, (ii) endorse
such Borrower’s or Guarantor’s name upon any items of payment in respect of
Collateral received by Agent and any Lender and deposit the same in Agent’s
account for application to the Obligations, (iii) endorse such Borrower’s or
Guarantor’s name upon any chattel paper, document, instrument, invoice, or
similar document or agreement relating to any Receivable or any goods
pertaining thereto or any other Collateral, including any warehouse or other
receipts, or bills of lading and other negotiable or non-negotiable documents,
(iv) clear Inventory the purchase of which was financed with a Letter of Credit
through U.S. Customs or foreign export control authorities in such Borrower’s
or Guarantor’s name, Agent’s name or the name of Agent’s designee, and to sign
and deliver to customs officials powers of attorney in such Borrower’s or
Guarantor’s name for such purpose, and to complete in such Borrower’s or
Guarantor’s or Agent’s name, any order, sale or transaction, obtain the
necessary documents in connection therewith and collect the proceeds thereof,
and (v) sign such Borrower’s or Guarantor’s name on any verification of amounts
owing constituting Collateral and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof.  Each Borrower and Guarantor hereby releases
Agent and Lenders and their respective officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and
in furtherance thereof, whether of omission or commission, except as a result
of Agent’s or any Lender’s own gross negligence or wilful misconduct as
determined pursuant to a final non-appealable order of a court of competent jurisdiction.

 

7.5  Right to
Cure.  Agent may, at its option, upon
notice to Administrative Borrower, (a) cure any default by any Borrower or
Guarantor under any material agreement with a third party that affects the
Collateral, its value or the ability of Agent to collect, sell or otherwise
dispose of the Collateral or the rights and remedies of Agent or any Lender
therein or the ability of any Borrower or Guarantor to perform its obligations
hereunder or under any of the other Financing Agreements, (b) pay or bond on
appeal any judgment entered against any Borrower or Guarantor, (c) discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (d) pay any amount, incur any
expense or perform any act which, in Agent’s judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Agent and Lenders with respect thereto.  Agent may add any amounts so expended to the
Obligations and charge any Borrower’s account therefor, such amounts to be
repayable by Borrowers on demand.  Agent
and Lenders shall be under no obligation to effect such cure, payment or
bonding and shall not, by doing so, be deemed to have assumed any obligation or
liability of any Borrower or Guarantor. 
Any payment made or other action taken by Agent or any Lender under this
Section shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed accordingly.

 

7.6  Access to Premises.  From time to time as requested by Agent, at
the cost and expense of Borrowers, (a) Agent or its designee shall have
complete access to all of each Borrower’s and Guarantor’s premises during
normal business hours and after notice to Parent, or at any time and without notice
to Administrative Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of each Borrower’s and Guarantor’s books and records,
including the Records, and (b)

 

69

 

each Borrower and Guarantor
shall promptly furnish to Agent such copies of such books and records or
extracts therefrom as Agent may request, and Agent or any Lender or Agent’s
designee may use during normal business hours such of any Borrower’s and Guarantor’s
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Receivables and realization of other
Collateral.

 

SECTION 8.  REPRESENTATIONS
AND WARRANTIES

 

Each Borrower and Guarantor
hereby represents and warrants to Agent, Lenders and Issuing Bank the
following:

 

8.1  Corporate
Existence, Power and Authority.  Each
Borrower and Guarantor is a corporation duly organized and in good standing
under the laws of its jurisdiction of organization and is duly qualified as a
foreign corporation and in good standing in all states or other jurisdictions
where the nature and extent of the business transacted by it or the ownership
of assets makes such qualification necessary, except for those jurisdictions in
which the failure to so qualify would not have a material adverse effect on
such Borrower’s or Guarantor’s financial condition, results of operation or
business or the rights of Agent in or to any of the Collateral.  The execution, delivery and performance of
this Agreement, the other Financing Agreements and the transactions
contemplated hereunder and thereunder (a) are all within each Borrower’s
and Guarantor’s corporate powers, (b) have been duly authorized, (c) are
not in contravention of law or the terms of any Borrower’s or Guarantor’s
certificate of incorporation, by laws, or other organizational documentation,
or any indenture, agreement or undertaking to which any Borrower or Guarantor
is a party or by which any Borrower or Guarantor or its property are bound and (d) will
not result in the creation or imposition of, or require or give rise to any
obligation to grant, any lien, security interest, charge or other encumbrance
upon any property of any Borrower or Guarantor. 
This Agreement and the other Financing Agreements to which any Borrower
or Guarantor is a party constitute legal, valid and binding obligations of such
Borrower and Guarantor enforceable in accordance with their respective terms.

 

8.2  Name;
State of Organization; Chief Executive Office; Collateral Locations.

 

(a)                    The exact
legal name of each Borrower and Guarantor is as set forth on the signature page of
this Agreement and in the Information Certificate.  No Borrower or Guarantor has, during the five
years prior to the date of this Agreement, been known by or used any other
corporate or fictitious name or been a party to any merger or consolidation, or
acquired all or substantially all of the assets of any Person, or acquired any
of its property or assets out of the ordinary course of business, except as set
forth in the Information Certificate.

 

(b)                   Each Borrower
and Guarantor is an organization of the type and organized in the jurisdiction
set forth in the Information Certificate. 
The Information Certificate accurately sets forth the organizational
identification number of each Borrower and Guarantor or accurately states that
such Borrower or Guarantor has none and accurately sets forth the federal
employer identification number of each Borrower and Guarantor.

 

70

 

(c)                    The chief
executive office and mailing address of each Borrower and Guarantor and each
Borrower’s and Guarantor’s Records concerning Accounts are located only at the
address identified as such in Schedule 8.2 to the Information Certificate
and its only other places of business and the only other locations of
Collateral, if any, are the addresses set forth in Schedule 8.2 to the
Information Certificate, subject to the rights of any Borrower or Guarantor to
establish new locations in accordance with Section 9.2 below.  The Information Certificate correctly
identifies any of such locations which are not owned by a Borrower or Guarantor
and sets forth the owners and/or operators thereof.

 

8.3  Financial
Statements; No Material Adverse Change.  All financial statements relating to any
Borrower or Guarantor which have been or may hereafter be delivered by any
Borrower or Guarantor to Agent and Lenders have been prepared in accordance
with GAAP (except as to any interim financial statements, to the extent such
statements are subject to normal year-end adjustments and do not include any
notes) and fairly present in all material respects the financial condition and
the results of operation of such Borrower and Guarantor as at the dates and for
the periods set forth therein.  Except as
disclosed in any interim financial statements furnished by Borrowers and
Guarantors to Agent prior to the date of this Agreement, there has been no act,
condition or event which has had or is reasonably likely to have a Material
Adverse Effect since the date of the most recent audited financial statements
of any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent
prior to the date of this Agreement.  The
projections dated June 2, 2005 for the fiscal years ending 2005 through
2009 that have been delivered to Agent or any projections hereafter delivered
to Agent have been prepared in light of the past operations of the businesses
of Borrowers and Guarantors and are based upon estimates and assumptions stated
therein, all of which Borrowers and Guarantors have determined to be reasonable
and fair in light of the then current conditions and current facts and reflect
the good faith and reasonable estimates of Borrowers and Guarantors of the
future financial performance of Parent and its Subsidiaries and of the other
information projected therein for the periods set forth therein.

 

8.4  Priority
of Liens; Title to Properties.  The
security interests and liens granted to Agent under this Agreement and the
other Financing Agreements constitute valid and perfected first priority liens
and security interests in and upon the Collateral subject only to the liens
indicated on Schedule 8.4 to the Information Certificate and the other
liens permitted under Section 9.8 hereof. 
Each Borrower and Guarantor has good and marketable fee simple title to
or valid leasehold interests in all of its Real Property and good, valid and
merchantable title to all of its other properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Agent and such others as are specifically listed
on Schedule 8.4 to the Information Certificate or permitted under Section 9.8
hereof.

 

8.5  Tax
Returns.  Each Borrower and Guarantor
has filed, or caused to be filed, in a timely manner all tax returns, reports
and declarations which are required to be filed by it.  All information in such tax returns, reports
and declarations is complete and accurate in all material respects.  Each Borrower and Guarantor has paid or
caused to be paid all taxes due and payable or claimed due and payable in any
assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower or Guarantor and with respect to which adequate
reserves have been set aside on

 

71

 

its books.  Adequate provision has been made for the
payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.

 

8.6  Litigation.  Except as set forth on Schedule 8.6 to
the Information Certificate, (a) there is no investigation by any
Governmental Authority pending, or to the best of any Borrower’s or Guarantor’s
knowledge threatened, against or affecting any Borrower or Guarantor, its or
their assets or business and (b) there is no action, suit, proceeding or
claim by any Person pending, or to the best of any Borrower’s or Guarantor’s
knowledge threatened, against any Borrower or Guarantor or its or their assets
or goodwill, or against or affecting any transactions contemplated by this
Agreement, in each case, which if adversely determined against such Borrower or
Guarantor has or could reasonably be expected to have a Material Adverse
Effect.

 

8.7  Compliance
with Other Agreements and Applicable Laws.

 

(a)                    Borrowers and
Guarantors are not in default in any respect under, or in violation in any
respect of the terms of, any material agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound.  Borrowers and Guarantors are in
compliance with the requirements of all applicable laws, rules, regulations and
orders of any Governmental Authority relating to their respective businesses,
including, without limitation, those set forth in or promulgated pursuant to
the Occupational Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, and all Environmental Laws.

 

(b)                   Borrowers and
Guarantors have obtained all material permits, licenses, approvals, consents,
certificates, orders or authorizations of any Governmental Authority required
for the lawful conduct of its business (the “Permits”).  All of the Permits are valid and subsisting
and in full force and effect.  There are
no actions, claims or proceedings pending or to the best of any Borrower’s or
Guarantor’s knowledge, threatened that seek the revocation, cancellation,
suspension or modification of any of the Permits.

 

8.8  Environmental
Compliance.

 

(a)                    Except as set
forth on Schedule 8.8 to the Information Certificate, Borrowers,
Guarantors and any Subsidiary of any Borrower or Guarantor have not generated,
used, stored, treated, transported, manufactured, handled, produced or disposed
of any Hazardous Materials, on or off its premises (whether or not owned by it)
in any manner which at any time violates in any material respect any applicable
Environmental Law or Permit, and the operations of Borrowers, Guarantors and
any Subsidiary of any Borrower or Guarantor complies in all material respects
with all Environmental Laws and all Permits.

 

(b)                   Except as set
forth on Schedule 8.8 to the Information Certificate, there has been no
investigation by any Governmental Authority or any proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
person nor is any pending or to the best of any Borrower’s or Guarantor’s
knowledge threatened, with respect to any non compliance with or violation of
the requirements of any Environmental Law by any Borrower or

 

72

 

Guarantor and any Restricted
Subsidiary or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which adversely affects or could
reasonably be expected to adversely affect in any material respect any Borrower
or Guarantor or its or their business, operations or assets or any properties
at which such Borrower or Guarantor has transported, stored or disposed of any
Hazardous Materials.

 

(c)                    Except as set
forth on Schedule 8.8 to the Information Certificate, Borrowers,
Guarantors and their Restricted Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.

 

(d)                   Borrowers,
Guarantors and their Restricted Subsidiaries have all Permits required to be
obtained or filed in connection with the operations of Borrowers and Guarantors
under any Environmental Law and all of such licenses, certificates, approvals
or similar authorizations and other Permits are valid and in full force and
effect.

 

8.9  Employee
Benefits.

 

(a)                    Each Plan is
in compliance in all material respects with the applicable provisions of ERISA,
the Code and other Federal or State law. 
Each Plan which is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the Internal
Revenue Service and to the best of any Borrower’s or Guarantor’s knowledge,
nothing has occurred which would cause the loss of such qualification.  Each Borrower and its ERISA Affiliates have
made all required contributions to any Plan subject to Section 412 of the
Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.

 

(b)                   There are no
pending, or to the best of any Borrower’s or Guarantor’s knowledge, threatened
claims, actions or lawsuits, or action by any Governmental Authority, with
respect to any Plan.  There has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan.

 

(c)                    (i) No
ERISA Event has occurred or is reasonably expected to occur; (ii) based on
the latest valuation of each Pension Plan and on the actuarial methods and
assumptions employed for such valuation (determined in accordance with the
assumptions used for funding such Pension Plan pursuant to Section 412 of
the Code), the aggregate current value of accumulated benefit liabilities of
such Pension Plan under Section 4001(a)(16) of ERISA does not exceed the
aggregate current value of the assets of such Pension Plan; (iii) each
Borrower and Guarantor, and their ERISA Affiliates, have not incurred and do
not reasonably expect to incur, any liability under Title IV of ERISA with
respect to any Plan (other than premiums due and not delinquent under Section 4007
of ERISA); (iv) each Borrower and Guarantor, and their ERISA Affiliates, have
not incurred and do not reasonably expect to incur, any liability (and no event
has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with
respect to a Multiemployer Plan;

 

73

 

and (v) each Borrower and
Guarantor, and their ERISA Affiliates, have not engaged in a transaction that
would be subject to Section 4069 or 4212(c) of ERISA.

 

8.10  Bank
Accounts.  All of the deposit
accounts, investment accounts or other accounts in the name of or used by any
Borrower or Guarantor maintained at any bank or other financial institution are
set forth on Schedule 8.10 to the Information Certificate, subject to the
right of each Borrower and Guarantor to establish new accounts in accordance
with Section 5.2 hereof.

 

8.11  Intellectual
Property. Each Borrower and Guarantor owns or licenses or otherwise has the
right to use all Intellectual Property necessary for the operation of its business
as presently conducted or proposed to be conducted.  As of the date hereof, Borrowers and
Guarantors do not have any Intellectual Property registered, or subject to
pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in Schedule 8.11
to the Information Certificate and has not granted any licenses with respect
thereto other than as set forth in Schedule 8.11 to the Information
Certificate.  No event has occurred which
permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights.  To the best of any Borrower’s and Guarantor’s
knowledge, no slogan or other advertising device, product, process, method,
substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by any
Borrower or Guarantor infringes any patent, trademark, servicemark, tradename,
copyright, license or other Intellectual Property owned by any other Person
presently and no claim or litigation is pending or threatened against or
affecting any Borrower or Guarantor contesting its right to sell or use any
such Intellectual Property.  Schedule 8.11
to the Information Certificate sets forth all of the agreements or other
arrangements of each Borrower and Guarantor pursuant to which such Borrower or
Guarantor has a license or other right to use any trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of such Borrower or Guarantor as in effect on the date
hereof (collectively, together with such agreements or other arrangements as
may be entered into by any Borrower or Guarantor after the date hereof,
collectively, the “License Agreements” and individually, a “License Agreement”).  No trademark, servicemark, copyright or other
Intellectual Property at any time used by any Borrower or Guarantor which is
owned by another person, or owned by such Borrower or Guarantor subject to any
security interest, lien, collateral assignment, pledge or other encumbrance in
favor of any person other than Agent, is affixed to any Eligible Inventory,
except (a) to the extent permitted under the term of the license
agreements listed on Schedule 8.11 to the Information Certificate and (b) to
the extent the sale of Inventory to which such Intellectual Property is affixed
is permitted to be sold by such Borrower or Guarantor under applicable law
(including the United States Copyright Act of 1976).

 

8.12  Subsidiaries;
Affiliates; Capitalization; Solvency.

 

(a)                    Each Borrower
and Guarantor does not have any direct or indirect Subsidiaries or Affiliates
and is not engaged in any joint venture or partnership except as set forth in Schedule 8.12
to the Information Certificate.

 

74

 

(b)                   Each Borrower
and Guarantor is the record and beneficial owner of all of the issued and
outstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.12
to the Information Certificate as being owned by such Borrower or Guarantor and
there are no proxies, irrevocable or otherwise, with respect to such shares and
no equity securities of any of the Subsidiaries are or may become required to
be issued by reason of any options, warrants, rights to subscribe to, calls or
commitments of any kind or nature and there are no contracts, commitments,
understandings or arrangements by which any Subsidiary is or may become bound
to issue additional shares of it Capital Stock or securities convertible into
or exchangeable for such shares.

 

(c)                    The issued and
outstanding shares of Capital Stock of each Borrower (other than Parent) and
Guarantor are directly and beneficially owned and held by the persons indicated
in the Information Certificate, and in each case all of such shares have been
duly authorized and are fully paid and non-assessable, free and clear of all
claims, liens, pledges and encumbrances of any kind, except as disclosed in
writing to Agent prior to the date hereof.

 

(d)                   Each Borrower
and Guarantor is Solvent and will continue to be Solvent after the creation of
the Obligations, the security interests of Agent and the other transaction
contemplated hereunder.

 

(e)                    The
Unrestricted Subsidiaries do not own any assets or have any liabilities and are
not engaged in any business or commercial activities, except (i) as to OMX
Timber Finance Holdings I, LLC, OMX Timber Finance Holdings II, LLC,  OMX Timber Finance Investments I, LLC,  OMX Timber Finance Investments II, LLC, in
each case to the extent related to the credit-enhanced installment timber notes
as described on Schedule 8.12(e) hereto, (ii) as to Cuban
Electric Company to the extent described on Schedule 8.12(e) hereto
and (iii) as to any Unrestricted Subsidiary so designated after the date
hereof and agreed to by Agent after the date hereof, such assets, liabilities,
business or commercial activities as Agent and Administrative Borrower may
agree in writing.  No Borrower, Guarantor
or Restricted Subsidiary has any obligation or liability (contingent or
otherwise) with respect to any of the Unrestricted Subsidiaries.

 

(f)                      The Inactive
Subsidiaries do not own any assets or have any liabilities and are not engaged
in any business or commercial activities, do not own any assets with a book
value of more than $10,000 in the aggregate and are not obligated or liable,
directly or indirectly, contingently or otherwise, in respect of any
Indebtedness or other obligations.

 

(g)                   Loving Creek
Funding Corporation is bankruptcy remote, special purpose entity, that as of
the date of its formation satisfied the special purpose entity criteria
published by Standard & Poor’s Rating Services, a division of The
McGraw-Hill Companies, Inc. and in effect as of such date, and was created
for the sole purpose of acquiring, and whose only assets consist at all times
of, the Securitization Assets.

 

8.13  Labor
Disputes.

 

(a)                    Set forth on Schedule 8.13
to the Information Certificate is a list (including dates of termination) of
all collective bargaining or similar agreements between or applicable to each

 

75

 

Borrower and Guarantor and any
union, labor organization or other bargaining agent in respect of the employees
of any Borrower or Guarantor on the date hereof.

 

(b)                   There is (i) no
significant unfair labor practice complaint pending against any Borrower or
Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge,
threatened against it, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the date hereof against
any Borrower or Guarantor or, to best of any Borrower’s or Guarantor’s
knowledge, threatened against it, and (ii) no significant strike, labor
dispute, slowdown or stoppage is pending against any Borrower or Guarantor
or, to the best of any Borrower’s or Guarantor’s knowledge, threatened against
any Borrower or Guarantor.

 

8.14  Restrictions
on Subsidiaries.  Except for
restrictions contained in this Agreement or any other agreement with respect to
Indebtedness of any Borrower or Guarantor permitted hereunder as in effect on
the date hereof, there are no contractual or consensual restrictions on any
Borrower or Guarantor or any of its Subsidiaries which prohibit or otherwise
restrict (a) the transfer of cash or other assets (i) between any
Borrower or Guarantor and any of its or their Subsidiaries or (ii) between
any Subsidiaries of any Borrower or Guarantor or (b) the ability of any
Borrower or Guarantor or any of its or their Subsidiaries to incur Indebtedness
or grant security interests to Agent or any Lender in the Collateral.

 

8.15  Material
Contracts.  Schedule 8.15 to the
Information Certificate sets forth all Material Contracts to which any Borrower
or Guarantor is a party or is bound as of the date hereof.  Borrowers and Guarantors have delivered true,
correct and complete copies of such Material Contracts to Agent on or before
the date hereof.  Borrowers and
Guarantors are not in breach or in default in any material respect of or under
any Material Contract and have not received any notice of the intention of any
other party thereto to terminate any Material Contract.

 

8.16  Credit
Card Agreements.  Set forth in Schedule 8.16
hereto is a correct and complete list of all of the Credit Card Agreements and
all other agreements, documents and instruments existing as of the date hereof
between or among any Borrower, any of its Affiliates, the Credit Card Issuers,
the Credit Card Processors and any of their Affiliates.  The Credit Card Agreements constitute all of
such agreements necessary for each Borrower to operate its business as
presently conducted with respect to credit cards and debit cards and no
Receivables of any Borrower arise from purchases by customers of Inventory with
credit cards or debit cards, other than those which are issued by Credit Card
Issuers with whom such Borrower has entered into one of the Credit Card
Agreements set forth on Schedule 8.16 hereto or with whom Borrower has
entered into a Credit Card Agreement in accordance with Section 9.20
hereof.  Each of the Credit Card
Agreements constitutes the legal, valid and binding obligations of the Borrower
that is party thereto and to the best of each Borrower’s and Guarantor’s
knowledge, the other parties thereto, enforceable in accordance with their
respective terms and is in full force and effect.  No material default or material event of
default, or act, condition or event which after notice or passage of time or
both, would constitute a material default or a material event of default under
any of the Credit Card Agreements exists or has occurred that would entitle the
other party thereto to suspend, withhold or reduce amounts that would otherwise
be payable to a Borrower.  Each Borrower
and the other parties thereto have complied in all material respects with all
of the terms and conditions of the Credit Card Agreements to the extent
necessary for such Borrower to

 

76

 

be entitled to receive all
payments thereunder.  Borrowers have
delivered, or caused to be delivered to Agent, true, correct and complete
copies of all of the Credit Card Agreements.

 

8.17  Interrelated
Businesses.  Borrowers and Guarantors
make up a related organization of various entities constituting a single
economic and business enterprise so that Borrowers and Guarantors share an
identity of interests such that any benefit received by any one of them
benefits the others.  Borrowers and Guarantors
render services to or for the benefit of the other Borrowers and/or Guarantors,
as the case may be, purchase or sell and supply goods to or from or for the
benefit of the others, make loans, advances and provide other financial
accommodations to or for the benefit of the other Borrowers and Guarantors
(including inter alia, the payment by Borrowers and Guarantors of creditors of
the other Borrowers or Guarantors and guarantees by Borrowers and Guarantors of
indebtedness of the other Borrowers and Guarantors and provide administrative, marketing,
payroll and management services to or for the benefit of the other Borrowers
and Guarantors).  Borrowers have a
central merchandising group that purchases substantially all of the Inventory
on behalf of all Borrowers.  Borrowers
and Guarantors have the same chief executive office, centralized accounting and
legal services, certain common officers and directors and generally do not
provide consolidating financial statements to creditors.

 

8.18  Payable
Practices.  Each Borrower and
Guarantor has not made any material change in its customary accounts payable
practices from those in effect immediately prior to the date hereof.

 

8.19  Accuracy
and Completeness of Information.  All
information furnished by or on behalf of any Borrower or Guarantor in writing
to Agent or any Lender in connection with this Agreement or any of the other
Financing Agreements or any transaction contemplated hereby or thereby,
including all information on the Information Certificate is true and correct in
all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading.  No event or
circumstance has occurred which has had or could reasonably be expected to have
a Material Adverse Affect, which has not been fully and accurately disclosed to
Agent in writing prior to the date hereof.

 

8.20  Survival
of Warranties; Cumulative.  All
representations and warranties contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and shall be deemed to have been made again to Agent and Lenders on the date of
each additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Agent and Lenders regardless of
any investigation made or information possessed by Agent or any Lender.  The representations and warranties set forth
herein shall be cumulative and in addition to any other representations or
warranties which any Borrower or Guarantor shall now or hereafter give, or
cause to be given, to Agent or any Lender.

 

77

 

SECTION 9.  AFFIRMATIVE
AND NEGATIVE COVENANTS

 

9.1  Maintenance
of Existence.

 

(a)                    Each Borrower
and Guarantor shall at all times preserve, renew and keep in full force and
effect its corporate existence and rights and franchises with respect thereto
and maintain in full force and effect all licenses, trademarks, tradenames,
approvals, authorizations, leases, contracts and Permits necessary to carry on
the business as presently or proposed to be conducted, other than as permitted
in Section 9.7 hereto.

 

(b)                   No Borrower or
Guarantor shall change its name unless each of the following conditions is satisfied:
(i) Agent shall have received not less than thirty (30) days prior written
notice from Administrative Borrower of such proposed change in its corporate
name, which notice shall accurately set forth the new name; and (ii) Agent
shall have received a copy of the amendment to the Certificate of Incorporation
of such Borrower or Guarantor providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of such
Borrower or Guarantor as soon as it is available.

 

(c)                    No Borrower or
Guarantor shall change its chief executive office or its mailing address or
organizational identification number (or if it does not have one, shall not
acquire one) unless Agent shall have received not less than thirty (30) days’
prior written notice from Administrative Borrower of such proposed change,
which notice shall set forth such information with respect thereto as Agent may
require and Agent shall have received such agreements as Agent may reasonably
require in connection therewith.  No
Borrower or Guarantor shall change its type of organization, jurisdiction of
organization or other legal structure.

 

9.2  New
Collateral Locations.  Each Borrower
and Guarantor may only open any new location so long as (a) such locations
are within the continental United States, (b) if it is a retail store,
warehouse or distribution center such location is set forth in the applicable
report provided for in Section 7.1(a) to the extent required under
such Section or for any other location, Agent has received ten (10) Business
Days’ prior written notice of the intended opening of any such new location and
(c) upon Agent’s request, such Borrower or Guarantor executes and
delivers, or causes to be executed and delivered, to Agent such agreements,
documents, and instruments as Agent may deem reasonably necessary or desirable
to protect its interests in the Collateral at such location.

 

9.3  Compliance
with Laws, Regulations, Etc.

 

(a)                    Each Borrower
and Guarantor shall, and shall cause any Restricted Subsidiary to, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, approvals, orders and other Permits applicable to it and duly observe
all requirements of any foreign, Federal, State or local Governmental Authority.

 

(b)                   Borrowers and
Guarantors shall give written notice to Agent immediately upon any Borrower’s
or Guarantor’s receipt of any notice of, or any Borrower’s or Guarantor’s
otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of any
Hazardous Material or (ii) any investigation, proceeding, complaint,
order, directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by any Borrower or
Guarantor or (B) the release, spill or discharge, threatened or actual, of
any Hazardous Material other than in the ordinary course of business and other
than as permitted under any applicable Environmental Law. Copies

 

78

 

of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by such Borrower or
Guarantor to Agent.  Each Borrower and
Guarantor shall take prompt action to respond to any material non-compliance
with any of the Environmental Laws and shall regularly report to Agent on such
response.

 

(c)                    Without
limiting the generality of the foregoing, whenever Agent reasonably determines
that there is non-compliance, or any condition which requires any action by or
on behalf of any Borrower or Guarantor in order to avoid any non compliance,
with any Environmental Law, Borrowers shall, at Agent’s request and Borrowers’
expense: (i) cause an independent environmental engineer reasonably
acceptable to Agent to conduct such tests of the site where non-compliance or
alleged non compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Agent a report as to such
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or such Borrower’s or
Guarantor’s response thereto or the estimated costs thereof, shall change in
any material respect.

 

(d)                   Each Borrower
and Guarantor shall indemnify and hold harmless Agent and Lenders and their
respective directors, officers, employees, agents, invitees, representatives,
successors and assigns, from and against any and all losses, claims, damages,
liabilities, costs, and expenses (including reasonable attorneys’ fees and
expenses) directly or indirectly arising out of or attributable to the use,
generation, manufacture, reproduction, storage, release, threatened release,
spill, discharge, disposal or presence of a Hazardous Material, including the
costs of any required or necessary repair, cleanup or other remedial work with
respect to any property of any Borrower or Guarantor and the preparation and
implementation of any closure, remedial or other required plans.  All representations, warranties, covenants
and indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.

 

9.4  Payment
of Taxes and Claims.  Each Borrower
and Guarantor shall, and shall cause any Restricted Subsidiary to, duly pay and
discharge all taxes, assessments, contributions and governmental charges upon
or against it or its properties or assets, except for taxes the validity of
which are being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower, Guarantor or Subsidiary, as the case
may be, and with respect to which adequate reserves have been set aside on its
books to the extent required by GAAP.

 

9.5  Insurance.  Each Borrower and Guarantor shall, and shall
cause any Restricted Subsidiary to, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established
reputation engaged in the same or similar businesses and similarly
situated.  Said policies of insurance
shall be reasonably satisfactory to Agent as to form, amount and insurer.  Borrowers and Guarantors shall furnish
certificates, policies or endorsements to Agent as Agent shall reasonably
require as proof of such insurance, and, if any Borrower or Guarantor fails to
do so, Agent is authorized, but not required, to obtain such insurance at the
expense of Borrowers.  All policies shall
provide for at

 

79

 

least thirty (30) days prior
written notice to Agent of any cancellation or reduction of coverage and that
Agent may act as attorney for each Borrower and Guarantor in obtaining, and at
any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance.  Borrowers and Guarantors shall cause Agent to
be named as a loss payee as its interests may appear and an additional insured
(but without any liability for any premiums) under such insurance policies and
Borrowers and Guarantors shall obtain non-contributory lender’s loss payable
endorsements to all insurance policies in form and substance satisfactory to
Agent.  Such lender’s loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Agent as its interests may appear and further specify that Agent and Lenders
shall be paid regardless of any act or omission by any Borrower, Guarantor or
any of its or their Affiliates. Without limiting any other rights of Agent or
Lenders, any insurance proceeds received by Agent at any time may be applied to
payment of the Obligations, whether or not then due, in any order and in such
manner as Agent may determine.  Upon
application of such proceeds to the Revolving Loans, Revolving Loans may be
available subject and pursuant to the terms hereof to be used for the costs of
repair or replacement of the Collateral lost or damages resulting in the
payment of such insurance proceeds.

 

9.6  Financial
Statements and Other Information.

 

(a)                    Each Borrower
and Guarantor shall, and shall cause any Restricted Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business
of such Borrower, Guarantor and its Subsidiaries in accordance with GAAP.  Borrowers and Guarantors shall promptly
furnish to Agent and Lenders all such financial and other information as Agent
shall reasonably request relating to the Collateral and the assets, business
and operations of Borrowers and Guarantors, and Borrower shall notify the
auditors and accountants of Borrowers and Guarantors that Agent is authorized
to obtain such information directly from them. 
Without limiting the foregoing, Borrowers shall furnish or cause to be
furnished to Agent, the following:

 

(i)                       at any time
after a Cash Dominion Event has occurred, within thirty (30) days after the end
of each fiscal month that is not the end of a fiscal quarter of Borrowers and
Guarantors and within forty-five (45) days after the end of each fiscal month
that is the end of a fiscal quarter of Borrowers and Guarantors, monthly
unaudited consolidated financial statements and unaudited consolidating
financial statements (including in each case balance sheets, statements of
income and loss, statements of cash flow, and statements of shareholders’
equity), all in reasonable detail, fairly presenting in all material respects
the financial position and the results of the operations of Parent and its
Subsidiaries as of the end of and through such fiscal month, certified to be
correct by the chief financial officer of Parent, subject to normal year-end
adjustments and accompanied by a compliance certificate substantially in the
form of Exhibit C hereto, along with a schedule in form reasonably
satisfactory to Agent of the calculations used in determining, as of the end of
such month, whether Borrowers and Guarantors were in compliance with the
covenants set forth in Sections 9.17 and 9.18 of this Agreement for such month,
and

 

(ii)                    within
forty-five days after the end of each fiscal quarter of Borrowers and
Guarantors, quarterly unaudited consolidated financial statements and unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss,

 

80

 

statements of cash flow, and
statements of shareholders’ equity), all in reasonable detail, fairly
presenting in all material respects the financial position and the results of
the operations of Parent and its Subsidiaries as of the end of and through such
fiscal quarter, certified to be correct by the chief financial officer of
Parent, subject to normal year-end adjustments and accompanied by a compliance
certificate substantially in the form of Exhibit C hereto, along with a schedule in
form reasonably satisfactory to Agent of the calculations used in determining,
as of the end of such quarter, whether Borrowers and Guarantors were in
compliance with the covenants set forth in Sections 9.17 and 9.18 of this
Agreement for such quarter, and

 

(iii)                 within ninety
(90) days after the end of each fiscal year, audited consolidated financial
statements and unaudited consolidating financial statements of Parent and its
Subsidiaries (including in each case balance sheets, statements of income and
loss, statements of cash flow and statements of shareholders’ equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting in all
material respects the financial position and the results of the operations of
Parent and its Subsidiaries as of the end of and for such fiscal year, together
with the unqualified opinion of independent certified public accountants with
respect to the audited consolidated financial statements, which accountants
shall be an independent accounting firm selected by Administrative Borrower and
acceptable to Agent, that such audited consolidated financial statements have
been prepared in accordance with GAAP, and present fairly in all material
respects the results of operations and financial condition of Parent and its
Subsidiaries as of the end of and for the fiscal year then ended, and

 

(iv)                at such time as
available, but in any event prior to the end of each fiscal year (commencing
with the fiscal year of Borrowers ending on the last Saturday in December of
2005), projected consolidated financial statements (including in each case,
forecasted balance sheets and statements of income and loss, statements of cash
flow, and statements of shareholders’ equity) of Parent and its Subsidiaries
for the next fiscal year, all in reasonable detail, and in a format consistent
with the projections delivered by Borrowers to Agent prior to the date hereof,
together with such supporting information as Agent may reasonably request.  Such projected financial statements shall be
prepared on a quarterly basis for the next succeeding year. Such projections
shall represent the reasonable best estimate by Borrowers and Guarantors of the
future financial performance of Parent and its Subsidiaries for the periods set
forth therein and shall have been prepared on the basis of the assumptions set
forth therein which Borrowers and Guarantors believe are fair and reasonable as
of the date of preparation in light of current and reasonably foreseeable
business conditions (it being understood that actual results may differ from
those set forth in such projected financial statements).

 

(b)                   Borrowers and
Guarantors shall promptly notify Agent in writing of the details of (i) any
loss, damage, investigation, action, suit, proceeding or claim relating to
Collateral having a value of more than $5,000,000 or which if adversely
determined would result in any material adverse change in any Borrower’s or
Guarantor’s business, properties, assets, goodwill or condition, financial or
otherwise, (ii) any Material Contract being terminated or amended or any
new Material Contract entered into (in which event Borrowers and Guarantors
shall provide Agent with a copy of such Material Contract), (iii) any
order, judgment or decree in excess of $5,000,000 shall have been entered
against any Borrower or Guarantor any of its or their properties or assets, (iv) any
notification of a material violation of laws or regulations received

 

81

 

by any Borrower or Guarantor, (v) any
ERISA Event, and (vi) the occurrence of any Default or Event of Default.

 

(c)                    Promptly after
the sending or filing thereof, Borrowers shall send to Agent copies of (i) all
reports which Parent or any of its Subsidiaries sends to its security holders
generally, (ii) all reports and registration statements which Parent or
any of its Subsidiaries files with the Securities Exchange Commission, any
national or foreign securities exchange or the National Association of
Securities Dealers, Inc., and such other reports as Agent may hereafter
specifically identify to Administrative Borrower that Agent will require be
provided to Agent, (iii) all press releases and (iv) all other
statements concerning material changes or developments in the business of a
Borrower or Guarantor made available by any Borrower or Guarantor to the
public.

 

(d)                   Borrowers and
Guarantors shall furnish or cause to be furnished to Agent such budgets, forecasts,
projections and other information respecting the Collateral and the business of
Borrowers and Guarantors, as Agent may, from time to time, reasonably
request.  Agent is hereby authorized to
deliver a copy of any financial statement or any other information relating to
the business of Borrowers and Guarantors to any court or other Governmental
Authority or to any Lender or Participant or prospective Lender or Participant
or any Affiliate of any Lender or Participant. Each Borrower and Guarantor
hereby irrevocably authorizes and directs all accountants or auditors to
deliver to Agent, at Borrowers’ expense, copies of the financial statements of
any Borrower and Guarantor and any reports or management letters prepared by
such accountants or auditors on behalf of any Borrower or Guarantor and to
disclose to Agent and Lenders such information as they may have regarding the
business of any Borrower and Guarantor. 
Any documents, schedules, invoices or other papers delivered to Agent or
any Lender may be destroyed or otherwise disposed of by Agent or such Lender
one (1) year after the same are delivered to Agent or such Lender, except
as otherwise designated by Administrative Borrower to Agent or such Lender in
writing.

 

9.7  Sale
of Assets, Consolidation, Merger, Dissolution, Etc.  Each Borrower and Guarantor shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,

 

(a)                    merge into or
with or consolidate with any other Person or permit any other Person to merge
into or with or consolidate with it except  that any wholly-owned
Subsidiary of Parent (other than any Borrower) may merge with and into or
consolidate with any other wholly-owned Subsidiary of Parent (other than any
Borrower, and including any such Subsidiary that only becomes a Subsidiary
after giving effect to such merger or consolidation subject to the conditions
set forth herein) and any Borrower may merge with and into or consolidate with
any other Borrower, provided, that, in each case each of the
following conditions is satisfied as determined by Agent:  (i) Agent shall have received not less
than ten (10) Business Days’ prior written notice of the intention of such
Subsidiaries to so merge or consolidate, which notice shall set forth in
reasonable detail satisfactory to Agent, the persons that are merging or
consolidating, which person will be the surviving entity, the locations of the
assets of the persons that are merging or consolidating, and the material
agreements and documents relating to such merger or consolidation, (ii) Agent
shall have received such other information with respect to such merger or
consolidation as Agent may reasonably request, (iii) as of the effective
date of the merger or consolidation and after giving effect thereto, no Default
or Event of Default shall exist or have

 

82

 

occurred, (iv) Agent shall
have received, true, correct and complete copies of all agreements, documents
and instruments relating to such merger or consolidation, including, but not
limited to, the certificate or certificates of merger to be filed with each
appropriate Secretary of State (with a copy as filed promptly after such
filing), (v) the surviving corporation shall expressly confirm, ratify and
assume the Obligations and the Financing Agreements to which it is a party in
writing, in form and substance satisfactory to Agent, and Borrowers and
Guarantors shall execute and deliver such other agreements, documents and
instruments as Agent may request in connection therewith and (vi) in the
case of a merger with a Person that is not a wholly-owned Subsidiary
immediately prior to such merger, such merger shall not be permitted unless it
is also permitted under Section 9.10(e) below;

 

(b)                   sell, issue,
assign, lease, license, transfer, abandon or otherwise dispose of any Capital
Stock or Indebtedness to any other Person or any of its assets to any other
Person, except for:

 

(i)                       Permitted
Dispositions,

 

(ii)                    the sale by
Borrowers of Securitization Assets pursuant to a Permitted Securitization
Facility in accordance with the terms of the Securitization Facility Documents
which sale shall be free and clear of the security interest and lien of Agent
in such Securitization Assets so sold prior to the Automatic Release
Termination (as defined in the Securitization Intercreditor Agreement) and
otherwise subject to the terms of the Securitization Intercreditor Agreement;

 

(iii)                 the issuance and
sale by any Borrower, Guarantor or Restricted Subsidiary of Capital Stock of
such Borrower, Guarantor or Subsidiary after the date hereof; provided, that,
(A) Agent shall have received not less than ten (10) Business Days’
prior written notice of such issuance and sale by such Borrower, Guarantor or
Subsidiary, which notice shall specify whether such shares are to be sold
pursuant to a public offering or if not a public offering, then the parties to
whom such shares are to be sold, the terms of such sale, the total amount which
it is anticipated will be realized from the issuance and sale of such stock and
the net cash proceeds which it is anticipated will be received by such Borrower
or Guarantor from such sale, (B) such Borrower, Guarantor or Subsidiary
shall not be required to pay any cash dividends or repurchase or redeem such
Capital Stock or make any other payments in respect thereof, except as
otherwise permitted in Section 9.11 hereof, (C) the terms of such
Capital Stock, and the terms and conditions of the purchase and sale thereof,
shall not include any terms that include any limitation on the right of any
Borrower to request or receive Loans or Letters of Credit or the right of any
Borrower and Guarantor to amend or modify any of the terms and conditions of
this Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrowers and Guarantors with Agent and
Lenders or are more restrictive or burdensome to any Borrower or Guarantor than
the terms of any Capital Stock in effect on the date hereof, (D) except as
Agent may otherwise agree in writing, at any time a Cash Dominion Event has
occurred, all of the proceeds of the sale and issuance of such Capital Stock
shall be paid to Agent for application to the Obligations in accordance with
the terms hereof and (E) as of the date of such issuance and sale and
after giving effect thereto, no Default or Event of Default shall exist or have
occurred,

 

83

 

(iv)                the issuance of
Capital Stock of any Borrower, Guarantor or Subsidiary consisting of common
stock pursuant to an employee stock option or grant or similar equity plan or
401(k) plans of such Borrower or Guarantor for the benefit of its employees,
directors and consultants, provided, that, in no event shall such
Borrower or Guarantor be required to issue, or shall such Borrower or Guarantor
issue, Capital Stock pursuant to such stock plans or 401(k) plans which would
result in a Change of Control or other Event of Default,

 

(c)                    wind up,
liquidate or dissolve except that any Guarantor or Subsidiary of Parent (other
than a Borrower) may wind up, liquidate and dissolve, provided, that,
each of the following conditions is satisfied, (i) the winding up,
liquidation and dissolution of such Guarantor or other Subsidiary shall not
violate any law or any order or decree of any court or other Governmental
Authority in any material respect and shall not conflict with or result in the
breach of, or constitute a default under, any indenture, mortgage, deed of
trust, or any other agreement or instrument to which any Borrower or Guarantor
is a party or may be bound, (ii) such winding up, liquidation or
dissolution shall be done in accordance with the requirements of all applicable
laws and regulations, (iii) effective upon such winding up, liquidation or
dissolution, all of the assets and properties of such Guarantor or other
Subsidiary shall be duly and validly transferred and assigned to its
shareholders, free and clear of any liens, restrictions or encumbrances other
than the security interest and liens of Agent (and Agent shall have received
such evidence thereof as Agent may require) and Agent shall have received such
deeds, assignments or other agreements as Agent may request to evidence and
confirm the transfer of such assets of such Guarantor to a Borrower, (iv) Agent
shall have received all documents and agreements that any Borrower or Guarantor
has filed with any Governmental Authority or as are otherwise required to
effectuate such winding up, liquidation or dissolution, (v) no Borrower or
Guarantor shall assume any Indebtedness, obligations or liabilities as a result
of such winding up, liquidation or dissolution, or otherwise become liable in
respect of any obligations or liabilities of the entity that is winding up,
liquidating or dissolving, unless such Indebtedness is otherwise expressly
permitted hereunder, (vi) Agent shall have received not less than ten (10) Business
Days prior written notice of the intention of such Guarantor or Subsidiary to
wind up, liquidate or dissolve, and (vii) as of the date of such winding
up, liquidation or dissolution and after giving effect thereto, no Default or
Event of Default shall exist or have occurred; or

 

(d)                   agree to do any
of the foregoing.

 

9.8  Encumbrances.  Each Borrower and Guarantor shall not, and
shall not permit any Restricted Subsidiary to, create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, or file or permit the filing of, or permit to remain
in effect, any financing statement or other similar notice of any security
interest or lien with respect to any such assets or properties, except:

 

(a)                    the security
interests and liens of Agent for itself and the benefit of the Secured Parties
and the rights of setoff of Secured Parties provided for herein or under
applicable law;

 

(b)                   liens securing
the payment of taxes, assessments or other governmental charges or levies
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to such
Borrower, or Guarantor or

 

84

 

Subsidiary, as the case may be
and with respect to which adequate reserves have been set aside on its books;

 

(c)                    non-consensual
statutory liens (other than liens securing the payment of taxes) arising in the
ordinary course of such Borrower’s, Guarantor’s or Subsidiary’s business to the
extent: (i) such liens secure Indebtedness which is not overdue or (ii) such
liens secure Indebtedness relating to claims or liabilities which are fully
insured and being defended at the sole cost and expense and at the sole risk of
the insurer or being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower, Guarantor or such Subsidiary, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books;

 

(d)                   zoning restrictions,
easements, licenses, covenants and other restrictions affecting the use of Real
Property which do not interfere in any material respect with the use of such
Real Property or ordinary conduct of the business of such Borrower, Guarantor
or such Subsidiary as presently conducted thereon or materially impair the
value of the Real Property which may be subject thereto;

 

(e)                    purchase money
security interests in assets other than Collateral to secure Indebtedness
permitted under Sections 9.9(b), 9.9(c) and 9.9(d) hereof;

 

(f)                      pledges and
deposits of cash by any Borrower, Guarantor or Subsidiary after the date hereof
in the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security benefits consistent
with the current practices of such Borrower, Guarantor or Subsidiary as of the
date hereof;

 

(g)                   pledges and
deposits of cash by any Borrower, Guarantor or Subsidiary after the date hereof
to secure the performance of tenders, bids, leases, trade contracts (other than
for the repayment of Indebtedness), statutory obligations and other similar
obligations in each case in the ordinary course of business consistent with the
current practices of such Borrower, Guarantor or Subsidiary as of the date
hereof; provided, that, in connection with any performance bonds
issued by a surety or other person, the issuer of such bond shall have waived
in writing any rights in or to, or other interest in, any of the Collateral in
an agreement, in form and substance satisfactory to Agent;

 

(h)                   pledges and
deposits of cash by any Borrower, Guarantor or Subsidiary after the date hereof
of up to $12,500,000 in the aggregate at any time to secure the obligations of
such Borrower or Guarantor under Hedging Agreements to protect against or
manage exposure to fluctuations in commodity prices to the extent the
Indebtedness under such Hedging Agreements are permitted under Section 9.9
hereof;

 

(i)                       liens
arising from (i) operating leases and the precautionary UCC financing
statement filings in respect thereof and (ii) equipment or other materials
which are not owned by any Borrower, Guarantor or Subsidiary located on the
premises of such Borrower, Guarantor or Subsidiary (but not in connection with,
or as part of, the financing thereof) from time to time in the ordinary course
of business and consistent with current practices of such Borrower or Guarantor
and the precautionary UCC financing statement filings in respect thereof;

 

85

 

(j)                       liens or
rights of setoff against credit balances of Borrowers with Credit Card Issuers
or Credit Card Processors or amounts owing by such Credit Card Issuers or
Credit Card Processors to Borrower in the ordinary course of business, but not
liens on or rights of setoff against any other property or assets of Borrowers,
pursuant to the Credit Card Agreements (as in effect on the date hereof) to
secure the obligations of Borrowers to the Credit Card Issuers or Credit Card
Processors as a result of fees and chargebacks;

 

(k)                    statutory or
common law liens or rights of setoff of depository banks with respect to funds
of any Borrower, Guarantor or Subsidiary at such banks to secure fees and
charges in connection with returned items or the standard fees and charges of
such banks in connection with the deposit accounts maintained by such Borrower,
Guarantor or Subsidiary at such banks (but not any other Indebtedness or
obligations);

 

(l)                       security
interests in favor of the Receivables Financing Subsidiary created or deemed to
exist in connection with a Permitted Securitization Facility (including any
related filings of financing statements) but only to the extent that any such
security interest relates to the applicable Securitization Assets actually sold
pursuant to such transaction and provided that such security interests shall be
released and terminated as to any Securitization Assets upon the repurchase or
reconveyance of such assets to a Borrower or Guarantor;

 

(m)                 security
interests in assets of a Borrower or Guarantor existing at the time such
Borrower or Guarantor is acquired pursuant to a Permitted Acquisition after the
date hereof; provided, that, each of the following conditions is
satisfied as determined by Agent: (i) such security interests were not
granted and did not arise in connection with, or in anticipation or
contemplation of, such Permitted Acquisition, (ii) the assets subject to
such security interests do not include any assets of the type or categories
that constitute Collateral and do not apply to any assets or properties of any
Borrower or other Guarantor other than assets or properties of the Borrower or
Guarantor so acquired, (iii) the Indebtedness secured by such assets is
permitted under Section 9.9(k) hereof;

 

(n)                   judgments and
other similar liens arising in connection with court proceedings that do not
constitute an Event of Default, provided, that, (i) such
liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision,
if any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish a
Reserve with respect thereto; and

 

(o)                   the security
interests and liens set forth on Schedule 8.4 to the Information
Certificate.

 

9.9  Indebtedness.  Each Borrower and Guarantor shall not, and
shall not permit any Restricted Subsidiary to, incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any Indebtedness,
or guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly), the Indebtedness, performance, obligations or dividends of any
other Person, except:

 

(a)                    the
Obligations;

 

86

 

(b)                   subject to the
proviso to this Section 9.9, purchase money Indebtedness (including
Capital Leases) arising after the date hereof, other than Indebtedness
described in Sections 9.9(c) or (d) hereof, to the extent secured by
purchase money security interests in assets other than Collateral; provided,
that, (i) the aggregate amount of such Indebtedness shall not
exceed $75,000,000 outstanding at any time, (ii) such Indebtedness shall
only be secured by the assets acquired with the proceeds of the loans or
advances giving rise to such Indebtedness, and (iii) such Indebtedness
shall not exceed the cost of the assets so acquired;

 

(c)                    subject to the
proviso to this Section 9.9, purchase money Indebtedness arising after the
date hereof, other than Indebtedness described in Sections 9.9(b) or (d) hereof,
to the extent secured by a purchase money mortgage on Real Property acquired by
any Borrower; provided, that, (i) the aggregate amount of
such Indebtedness outstanding at any time shall not exceed the amount equal to
$300,000,000 minus the then outstanding Indebtedness described in Section 9.9(d) below,
(ii) such Indebtedness shall only be secured by the Real Property acquired
with the proceeds of the loans or advances giving rise to such Indebtedness,
and (iii) such Indebtedness shall not exceed the cost of the Real Property
so acquired;

 

(d)                   subject to the
proviso to this Section 9.9, purchase money Indebtedness arising after the
date hereof, other than Indebtedness described in Sections 9.9(b) or (c) hereof,
to the extent secured by a purchase money security interests and mortgages on
Equipment and Real Property acquired by any Borrower in connection with the
construction and acquisition of new distribution and warehouse centers of such
Borrower; provided, that, (i) the aggregate amount of such
Indebtedness outstanding at any time shall not exceed the amount equal to
$200,000,000 minus the then outstanding Indebtedness described in Section 9.9(c) above,
(ii) such Indebtedness shall only be secured by the Equipment and Real
Property acquired with the proceeds of the loans or advances giving rise to
such Indebtedness, and (iii) such Indebtedness shall not exceed the cost
of the Equipment and Real Property so acquired;

 

(e)                    the
Indebtedness of any Borrower or Guarantor to any other Borrower or Guarantor or
any other Subsidiary of Parent arising after the date hereof pursuant to
Investments consisting of loans and advances permitted under Section 9.10(c) hereof,
provided, that, as to any such Indebtedness at any time owing by
a Borrower to a Guarantor or any other Subsidiary of Parent (other than a
Borrower), (i) the Indebtedness arising pursuant to such Investment shall
be subject to, and subordinate in right of payment to, the right of Agent and
Lenders to receive the prior final payment and satisfaction in full of all of
the Obligations on terms and conditions acceptable to Agent, (ii) promptly
upon Agent’s request, Agent shall have received a subordination agreement, in
form and substance satisfactory to Agent, providing for the terms of the
subordination in right of payment of such Indebtedness of such Borrower (or
such Guarantor, in the case of Indebtedness owing by a Guarantor to a
Subsidiary of Parent that is not a Borrower or Guarantor) to the prior final payment
and satisfaction in full of all of the Obligations, duly authorized, executed
and delivered by such Guarantor and such Borrower, (iii) such Borrower (or
such Guarantor, in the case of Indebtedness owing by a Guarantor to a
Subsidiary of Parent that is not a Borrower or Guarantor) shall not, directly
or indirectly make, or be required to make, any payments in respect of such
Indebtedness prior to the end of the then current term of this Agreement and (iv) in
the case of any Indebtedness owing to a Borrower or Guarantor, the Indebtedness
arising pursuant to any such loan shall not be evidenced by a promissory note
or other instrument, unless the single original of such note or other
instrument is promptly delivered

 

87

 

to Agent upon its request to
hold as part of the Collateral, with such endorsement and/or assignment by the
payee of such note or other instrument as Agent may require, (v) as of the
date any such Indebtedness, the Borrower or Guarantor making the loan or other
Investment giving rise to such Investment shall be Solvent, and (vi) as of
the date any such Indebtedness is incurred and after giving effect thereto, no
Default or Event of Default shall exist or have occurred;

 

(f)                      subject to
the proviso to this Section 9.9, unsecured guarantees of Indebtedness of
Subsidiaries and Affiliates of Parent; provided, that, (i) the
aggregate amount of the liability for Indebtedness under such guarantees shall
not exceed $50,000,000 in the aggregate outstanding at any time and (ii) as
of the date on which such guarantee is issued no Event of Default exists or has
occurred;

 

(g)                   subject to the
proviso to this Section 9.9, unsecured Indebtedness of any Borrower or
Guarantor arising after the date hereof to any third person (but not to any
other Borrower or Guarantor or other Subsidiary of Parent), provided, that,
each of the following conditions is satisfied as determined by Agent: (i) such
Indebtedness shall be on terms and conditions acceptable to Agent and shall be
subject and subordinate in right of payment to the right of Agent and Lenders
to receive the prior indefeasible payment and satisfaction in full payment of
all of the Obligations pursuant to the terms of an intercreditor agreement
between Agent and such third party, in form and substance satisfactory to
Agent, (ii) Agent shall have received not less than ten (10) days
prior written notice of the intention of such Borrower or Guarantor to incur
such Indebtedness, which notice shall set forth in reasonable detail
satisfactory to Agent the amount of such Indebtedness, the person or persons to
whom such Indebtedness will be owed, the interest rate, the schedule of
repayments and maturity date with respect thereto and such other information as
Agent may request with respect thereto, (iii) Agent shall have received
true, correct and complete copies of all Subordinated Debt Documents evidencing
or otherwise related to such Indebtedness, (iv) except as Agent may
otherwise agree in writing, all of the proceeds of the loans or other
accommodations giving rise to such Indebtedness shall be paid to Agent for
application to the Obligations in accordance with the terms hereof, (v) in
no event shall the aggregate principal amount of such Indebtedness incurred
during the term of this Agreement exceed $300,000,000, (vi) as of the date
of incurring such Indebtedness and after giving effect thereto, no Default or
Event of Default shall exist or have occurred, and (vii) Borrowers and
Guarantors shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may be;

 

(h)                   Indebtedness of
any Borrower or Guarantor entered into in the ordinary course of business
pursuant to a Hedge Agreement; provided, that, (i) such
arrangements are not for speculative purposes, (ii) such Indebtedness
shall be unsecured, except to the extent such Indebtedness constitutes part of
the Obligations arising under or pursuant to Hedge Agreements with any Bank
Product Provider that are secured under the terms hereof or except to the
extent secured by pledges or deposits of cash as permitted under Section 9.8
hereof and (iii) the terms and amounts of such Indebtedness shall be
reasonably acceptable to Agent;

 

(i)                       subject to
the proviso to this Section 9.9, other than the unsecured Indebtedness
described in Section 9.9(g) above, unsecured Indebtedness of any
Borrower or Guarantor arising

 

88

 

after the date hereof to any
third person (but not to any other Borrower or Guarantor or other Subsidiary of
Parent), provided, that, each of the following conditions is
satisfied as determined by Agent: (i) such Indebtedness shall be on terms
and conditions acceptable to Agent, (ii) as to any such Indebtedness in
excess of $10,000,000, Agent shall have received not less than ten (10) days
prior written notice of the intention of such Borrower or Guarantor to incur
such Indebtedness, which notice shall set forth in reasonable detail
satisfactory to Agent the amount of such Indebtedness, the person or persons to
whom such Indebtedness will be owed, the interest rate, the schedule of
repayments and maturity date with respect thereto and such other information as
Agent may request with respect thereto, (iii) as to any such Indebtedness
in excess of $10,000,000, Agent shall have received true, correct and complete
copies of all agreements, documents or instruments evidencing or otherwise
related to such Indebtedness, and as to any such Indebtedness less than such
amount, upon Agent’s request, (iv) except as Agent may otherwise agree in
writing, all of the proceeds of the loans or other accommodations giving rise
to such Indebtedness shall be paid to Agent for application to the Obligations
in accordance with the terms hereof, (v) in no event shall the aggregate
principal amount of such Indebtedness incurred during the term of this
Agreement exceed $50,000,000, (vi) as of the date of incurring such
Indebtedness and after giving effect thereto, no Default or Event of Default
shall exist or have occurred, and (vii) as to any such Indebtedness in
excess of $10,000,000, Borrowers and Guarantors shall furnish to Agent all
notices or demands in connection with such Indebtedness either received by any
Borrower or Guarantor or on its behalf promptly after the receipt thereof, or
sent by any Borrower or Guarantor or on its behalf concurrently with the
sending thereof, as the case may be;

 

(j)                       in
connection with the Permitted Securitization Facility, (i) in the case of
the Receivables Financing Subsidiary, (A)  Indebtedness owing to any
Borrower or Guarantor in connection with the sale by such Borrower or Guarantor
of Securitization Assets to the Receivables Financing Subsidiary under the
Securitization Facility Documents, provided, that, such
Indebtedness is evidenced by a promissory note and such promissory note is
pledged to Agent pursuant to the terms hereof and (B) Indebtedness arising
in connection with the Permitted Securitization Facility, provided, that,
the aggregate amount of such Indebtedness shall not exceed $200,000,000 at any
time outstanding and (ii) in the case of Borrowers and Guarantors,
contingent Indebtedness arising pursuant to the (A) obligations to
repurchase non-eligible Accounts under the terms of the Securitization Facility
Documents or (B) indemnifications for losses other than credit losses
related to the Accounts sold under the Securitization Facility Documents;

 

(k)                    subject to the
proviso to this Section 9.9, Indebtedness of a Borrower or Guarantor
existing at the time such Borrower or Guarantor is acquired pursuant to a
Permitted Acquisition; provided, that, each of the following
conditions is satisfied as determined by Agent: (i) such Indebtedness was
not incurred in connection with, or in anticipation or contemplation of, such
Permitted Acquisition, (ii) such Indebtedness is not secured by any assets
of the type or categories that constitute Collateral and is not secured by any
assets or properties of any Borrower or other Guarantor other than assets or
properties of the Borrower or Guarantor so acquired, (iii) no other
Borrower or Guarantor shall have any obligation or liability in respect of such
Indebtedness, (iv) if the amount of such Indebtedness is greater than
$5,000,000, it shall be on terms and conditions acceptable to Agent, and (v) the
aggregate amount of such Indebtedness pursuant to all Permitted Acquisitions
shall not exceed $25,000,000 at any time outstanding;

 

89

 

(l)                       guarantees
by any Borrower or Guarantor of the Obligations of the other Borrowers or
Guarantors in favor of Agent for the benefit of the Secured Parties;

 

(m)                 Indebtedness of
any Foreign Subsidiary; provided, that, (i) the occurrence
of a default or event of default with respect thereto shall not result in, or
permit any holder of any Indebtedness of any Borrower or Guarantor to declare,
a default or event of default on Indebtedness of any Borrower or Guarantor
(other than the Indebtedness of a Borrower or Guarantor arising pursuant to a
guarantee by such Borrower or Guarantor of such Indebtedness of the Foreign
Subsidiary to the extent such guarantee is permitted under Section 9.9(f) above)
or cause the payment thereof to be accelerated or payable prior to its stated
maturity and (ii) Borrowers and Guarantors shall not directly or
indirectly have any obligation or liability (whether contingent or otherwise)
in respect of such Indebtedness, except to the extent arising under a guarantee
of such Indebtedness to the extent permitted under Section 9.9(f) above;

 

(n)                   the
Indebtedness set forth on Schedule 9.9 to the Information Certificate; provided,
that, as to any such Indebtedness in excess of $10,000,000, Borrowers
and Guarantors shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by any Borrower or Guarantor or on its
behalf, promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf, concurrently with the sending thereof, as the case
may be

 

Provided,
that, in no event shall the Indebtedness incurred pursuant to Sections 9.9(b),
(c), (d), (f), (g), (i) and (k) exceed $600,000,000 in the aggregate
outstanding at any time.

 

9.10  Investments.  Each Borrower and Guarantor shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary immediately prior to such merger) any
Capital Stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or permit
to exist any loans or advances to, or make or permit to exist any investment or
any other interest in, any other Person, or purchase or otherwise acquire (in
one transaction or a series of transactions) any assets of any other Person
constituting a business unit or all or a substantial part of the assets or
property of any other Person (whether through purchase of assets, merger or
otherwise), or form or acquire any Subsidiaries, or agree to do any of the
foregoing (each of the foregoing an “Investment”), except:

 

(a)                    Permitted
Investments;

 

(b)                   Permitted
Acquisitions;

 

(c)                    Investments by
a Borrower, Guarantor or other Subsidiary of Parent in a Borrower, Guarantor or
other Subsidiary of Parent, in each case after the date hereof, provided,
that, (i) to the extent that such Investment gives rise to any
Indebtedness, such Indebtedness is permitted hereunder, (ii) to the extent
that such Investment gives rise to the issuance of any shares of Capital Stock,
such issuance is permitted hereunder and (iii) to the extent of any
Investments by a Borrower or Guarantor in a Subsidiary of Parent that is not a
Borrower or Guarantor, the aggregate amount of such Investments shall not
exceed $10,000,000 at any time

 

90

 

outstanding and as of the date
of any such Investment and after giving effect thereto, no Default or Event of
Default shall exist or have occurred;

 

(d)                   Investments
after the date hereof by any Borrower, Guarantor or other Subsidiary of Parent
in or to any Person (other than a Subsidiary of Parent and other than pursuant
to a Permitted Acquisition or as to a Foreign Subsidiary, other than as
provided in Section 9.10(e) below); provided, that, as
to any such Investments, each of the following conditions is satisfied as
determined by Agent:

 

(i)                       Agent shall
have received (A) not less than ten (10) Business Days’ prior written
notice thereof setting forth in reasonable detail the nature and terms thereof,
(B) true, correct and complete copies of all agreements, documents and
instruments relating thereto and (C) such other information with respect
thereto as Agent may request;

 

(ii)                    as of the date
of any such Investment, and in each case after giving effect thereto, no
Default or Event of Default shall exist or have occurred;

 

(iii)                 Adjusted Excess
Availability shall have been not less than $75,000,000 as of the date of the
most recent calculation of the Borrowing Base prior to the date of any such
Investment, and after giving effect to the payment of such Investment, on a pro
forma basis using the Adjusted Excess Availability as of the date of the most
recent calculation of the Borrowing Base immediately prior to any such payment,
Adjusted Excess Availability shall be not less than $75,000,000; and

 

(iv)                the Person receiving
such Investment shall be engaged in a business related, ancillary or
complementary to the business of Borrowers permitted in this Agreement;

 

(e)                    Investments
after the date hereof by a Foreign Subsidiary; provided, that, (i) as
of the date of any such Investment and after giving effect thereto, no Default
or Event of Default shall exist or have occurred and (ii) in no event
shall any Borrower or Guarantor make, or be required to make, any payment or
incur any obligation or liability (contingent or otherwise) in connection with
such Investment or take any other action otherwise prohibited hereunder, except
for Indebtedness of such Borrower or Guarantor otherwise permitted hereunder;
and

 

(f)                      the
Investments consisting of loans and advances set forth on Schedule 9.10 to
the Information Certificate; provided, that, as to such loans and
advances, Borrowers and Guarantors shall not, directly or indirectly, amend,
modify, alter or change the terms of such loans and advances or any agreement,
document or instrument related thereto and Borrowers and Guarantors shall
furnish to Agent all notices or demands in connection with such loans and
advances either received by any Borrower or Guarantor or on its behalf,
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf, concurrently with the sending thereof, as the case may be.

 

9.11  Restricted
Payments.  Each Borrower and
Guarantor shall not, and shall not permit any Restricted Subsidiary to, declare
or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except:

 

91

 

(a)                    Parent may
make Restricted Payments with respect to its Capital Stock payable solely in
additional shares of its Capital Stock that satisfies the requirements for
issuance of Capital Stock by Parent under Section 9.7(b)(iii) hereof;

 

(b)                   Subsidiaries of
Parent may make Restricted Payments to Parent;

 

(c)                    Borrowers and
Guarantors may repurchase Capital Stock consisting of common stock held by
employees pursuant to any employee stock ownership plan thereof upon the
termination, retirement or death of any such employee in accordance with the
provisions of such plan or pursuant to, and in accordance with the terms of,
the odd-lot buyback program to repurchase Capital Stock from the holders
thereof established by Borrowers prior to the date hereof, provided, that, as
to any such repurchase, each of the following conditions is satisfied: (i) as
of the date of the payment for such repurchase and after giving effect thereto,
no Default or Event of Default shall exist or have occurred and be continuing, (ii) such
repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its or their property are
bound, and (iv) the aggregate amount of all payments for such repurchases
in any calendar year shall not exceed $12,000,000;

 

(d)                   Parent may make
Restricted Payments for the purpose of paying dividends and paying other
distributions in respect of its Capital Stock or the repurchase of its Capital
Stock; provided, that, each of the following conditions is satisfied
as determined by Agent, (i) in the case of dividends, Agent shall have
received from Administrative Borrower a copy of the public notice issued by
Parent of the declaration of its dividends (which notice will specify the date
of payment thereof) and as to any dividends that may not be subject to such
public notice or any other distributions or repurchases, Agent shall have
received from Administrative Borrower not less than ten (10) Business Days’
written notice prior to the date of the payment of any other dividends or other
distributions or any other repurchases (specifying the amount to be paid by
Borrowers or Guarantors), (ii) such dividends, distributions or
repurchases shall paid with funds legally available therefor, (iii) such
dividends, distributions or repurchases shall not violate any law or regulation
or the terms of any indenture, agreement or undertaking to which such Borrower
or Guarantor is a party or by which such Borrower or Guarantor or its or their
property are bound, (iv) as to dividends, distributions or repurchases in
any fiscal year of Parent, Adjusted Excess Availability shall have been not
less than $75,000,000 as of the date of the most recent calculation of the
Borrowing Base prior to the date of any such payment and after giving effect to
the payment of such dividends or other distributions or repurchases in excess
of such amount, on a pro forma basis using the Adjusted Excess Availability as
of the date of the most recent calculation of the Borrowing Base immediately prior
to any such payment, Adjusted Excess Availability shall be not less than
$75,000,000, and (v) as of the date of any such payment and after giving
effect thereto, no Default or Event of Default shall exist or have occurred.

 

9.12  Transactions
with Affiliates.  Each Borrower and
Guarantor shall not, directly or indirectly, purchase, acquire or lease any
property from, or sell, transfer or lease any property to, any officer,
director or other Affiliates of such Borrower or Guarantor, except in the
ordinary course of and pursuant to the reasonable requirements of such Borrower’s
or Guarantor’s business (as the case may be) and upon fair and reasonable terms
no less favorable to such

 

92

 

Borrower or Guarantor than such
Borrower or Guarantor would obtain in a comparable arm’s length transaction
with an unaffiliated person and except as otherwise disclosed to and approved
by Agent.

 

9.13  Compliance
with ERISA.  Each Borrower and
Guarantor shall, and shall cause each of its ERISA Affiliates to: (a) maintain
each Plan in compliance in all material respects with the applicable provisions
of ERISA, the Code and other Federal and State law; (b) cause each Plan
which is qualified under Section 401(a) of the Code to maintain such
qualification; (c) not terminate any Pension Plan so as to incur any
material liability to the Pension Benefit Guaranty Corporation; (d) not
allow or suffer to exist any prohibited transaction involving any Plan or any
trust created thereunder which would subject such Borrower, Guarantor or such
ERISA Affiliate to a material tax or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA; (e) make all
required contributions to any Plan which it is obligated to pay under Section 302
of ERISA, Section 412 of the Code or the terms of such Plan; (f) not
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such Pension Plan; (g)  not engage in a
transaction that could be subject to Section 4069 or 4212(c) of
ERISA; or (h) not allow or suffer to exist any occurrence of a reportable
event or any other event or condition which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any Plan that is a
single employer plan, which termination could result in any material liability
to the Pension Benefit Guaranty Corporation.

 

9.14  End
of Fiscal Years; Fiscal Quarters.  Each
Borrower and Guarantor shall, for financial reporting purposes, cause its, and
each of its Subsidiaries’ (a) fiscal years to end on (i) the last
Saturday in December of each year, in the case of Subsidiaries organized
under the laws of any jurisdiction in the United States of America and (ii) December 31
of each year, in the case of Subsidiaries organized under the laws of a
jurisdiction outside the United States of America, and (b) fiscal quarters
to end on the dates for such fiscal quarter for the fiscal year 2005 set forth
on Schedule 9.14 and thereafter to end on such dates consistent with a
fiscal year ending on the last Saturday of each December with fiscal
quarters ending in March, June, September and December on the basis
of fiscal quarters consisting of four (4) fiscal weeks, four (4) fiscal
weeks and five (5) fiscal weeks as to each such fiscal quarter (or in the
case of those fiscal years with fifty-three (53) weeks, four (4) fiscal
weeks, five (5) fiscal weeks and five (5) fiscal weeks as to the last
fiscal quarter of such fifty-three (53) week fiscal year), and as specified by
Administrative Borrower to Agent within thirty (30) days prior to the
commencement of each fiscal year.

 

9.15  Change
in Business.  Each Borrower and
Guarantor shall not engage in any business other than the business of such
Borrower or Guarantor on the date hereof and any business reasonably related,
ancillary or complimentary to the business in which such Borrower or Guarantor
is engaged on the date hereof.

 

9.16  Limitation
of Restrictions Affecting Subsidiaries. 
Each Borrower and Guarantor shall not, directly, or indirectly, create
or otherwise cause or suffer to exist any encumbrance or restriction which
prohibits or limits the ability of any Subsidiary of such Borrower or Guarantor
to (a) pay dividends or make other distributions or pay any Indebtedness
owed to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor; (b) make loans or advances to such Borrower or Guarantor or any
Subsidiary of such Borrower or Guarantor, (c) transfer any of

 

93

 

its properties or assets to
such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor; or (d) create,
incur, assume or suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, except  for
encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement, (iii) the Securitization Facility Documents, (iv) customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (v) customary restrictions on dispositions of real
property interests found in reciprocal easement agreements of such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor, (vi) any
agreement relating to permitted Indebtedness incurred by a Subsidiary of such
Borrower or Guarantor prior to the date on which such Subsidiary was acquired
by such Borrower or such Guarantor and outstanding on such acquisition date,
and (vii) the extension or continuation of contractual obligations in
existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Agent and Lenders than those encumbrances and restrictions
under or pursuant to the contractual obligations so extended or continued.

 

9.17  Capital
Expenditures.  Borrowers and
Guarantors shall not permit the aggregate amount of all Capital Expenditures of
Borrowers and Guarantors during any fiscal year to exceed the amount indicated
for such fiscal year set forth below:

 

	
  Fiscal Year

  	
   

  	
  Capital Expenditure Limit

  	
   

  
	
  2005

  	
   

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
  2006

  	
   

  	
   

  	
  $

  	
  275,000,000

  	
   

  
	
  2007

  	
   

  	
   

  	
  $

  	
  250,000,000

  	
   

  
	
  2008

  	
   

  	
   

  	
  $

  	
  210,000,000

  	
   

  
	
  2009

  	
   

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
  Each Fiscal
  Year Thereafter

  	
   

  	
   

  	
  $

  	
  200,000,000

  	
   

  

 

provided, that, (a) in
the event that the actual amount of Capital Expenditures of Borrowers and
Guarantors during any fiscal year are less than the amount for such fiscal year
set forth above, Capital Expenditures may be made in the immediately following
fiscal year thereafter in the amount for such following fiscal year set forth
above plus the amount of such excess and (b)  in no event shall any
Capital Expenditures that are part of a Permitted Acquisition be included in
the calculation of Capital Expenditures for purposes of this Section 9.17.

 

9.18  Fixed
Charge Coverage Ratio.  At any time
that the Adjusted Excess Availability is less than $75,000,000, (a) commencing
as of the end of the 2005 fiscal year of Parent, the Fixed Charge Coverage
Ratio of Parent and its Restricted Subsidiaries (on a consolidated basis)
determined as of the end of the fiscal quarter most recently ended for which
Agent has received financial statements shall be not less than 1.0 to 1.0 for
the period of the immediately preceding

 

94

 

four (4) fiscal
quarters ending as of such quarter end and (b) prior to the end of the
2005 fiscal year of Parent, the Fixed Charge Coverage Ratio of Parent and its
Restricted Subsidiaries for the first two (2) fiscal quarters of the 2005
fiscal year of Parent (treated as a single accounting period) determined as of
the end of the second quarter of such fiscal year shall be not less than 1.0 to
1.0 for such period and for the first three (3) fiscal quarters of the
2005 fiscal year (treated as a single accounting period) determined as of the
end of the third quarter of such fiscal year shall be not less than 1.0 to 1.0
for such period.

 

9.19  License
Agreements.

 

(a)                    With respect
to a License Agreement applicable to Intellectual Property that is owned by a third
party and licensed to a Borrower or Guarantor and that is affixed to or
otherwise used in connection with the manufacture, sale or distribution of any
Inventory (other than an off-the-shelf product with a shrink wrap license),
each Borrower and Guarantor shall (i) give Agent not less than ninety (90)
days prior written notice of its intention to not renew or to terminate,
cancel, surrender or release its rights under any such License Agreement, or to
amend any such License Agreement or related arrangements to limit the scope of
the right of such Borrower or Guarantor to use the Intellectual Property
subject to such License Agreement in any material respect, either with respect
to product, territory, term or otherwise, or to increase in any material respect
the amounts to be paid by such Borrower or Guarantor thereunder or in
connection therewith (and Agent may establish such Reserves as a result of any
of the foregoing as Agent may reasonably determine), (ii) give Agent
prompt written notice of any such License Agreement entered into by such
Borrower or Guarantor after the date hereof, or any material amendment to any
such License Agreement existing on the date hereof, in each case together with
a true, correct and complete copy thereof and such other information with
respect thereto as Agent may in good faith request, (iii) give Agent
prompt written notice of any material breach of any obligation, or any default,
by the third party that is the licensor or by the Borrower or Guarantor that is
the licensee or any other party under any such License Agreement, and deliver
to Agent (promptly upon the receipt thereof by such Borrower or Guarantor in
the case of a notice to such Borrower or Guarantor and concurrently with the
sending thereof in the case of a notice from such Borrower or Guarantor) a copy
of each notice of default and any other notice received or delivered by such
Borrower or Guarantor in connection with any such a License Agreement that
relates to the scope of the right, or the continuation of the right, of such
Borrower or Guarantor to use the Intellectual Property subject to such License
Agreement or the amounts required to be paid thereunder.

 

(b)                   With respect to
a License Agreement applicable to Intellectual Property that is owned by a
third party and licensed to a Borrower or Guarantor and that is affixed to or
otherwise used in connection with the manufacture, sale or distribution of any
Inventory (other than an off-the-shelf product with a shrink wrap license), at
any time an Event of Default shall exist or have occurred and be continuing or
if after giving effect to any Reserves, or the reduction in the applicable
Borrowing Base as a result of Eligible Inventory using such licensed
Intellectual Property ceasing to be Eligible Inventory, the aggregate amount of
the Excess Availability of Borrowers is less than $5,000,000, Agent shall have,
and is hereby granted, the irrevocable right and authority, at its option, to
renew or extend the term of such License Agreement, whether in its own name and
behalf, or in the name and behalf of a designee or nominee of Agent or in the
name and behalf of such Borrower or Guarantor, subject to and in

 

95

 

accordance with the terms of
such License Agreement.  Agent may, but
shall not be required to, perform any or all of such obligations of such
Borrower or Guarantor under any of the License Agreements, including, but not
limited to, the payment of any or all sums due from such Borrower or Guarantor
thereunder.  Any sums so paid by Agent
shall constitute part of the Obligations.

 

9.20  Credit
Card Agreements.  Each Borrower shall
(a) observe and perform all material terms, covenants, conditions and
provisions of the Credit Card Agreements to be observed and performed by it at
the times set forth therein; and (b) at all times maintain in full force
and effect the Credit Card Agreements and not terminate, cancel, surrender,
modify, amend, waive or release any of the Credit Card Agreements, or consent
to or permit to occur any of the foregoing; except, that, (i) any Borrower
may terminate or cancel any of the Credit Card Agreements in the ordinary
course of the business of such Borrower; provided, that, such Borrower shall
give Agent not less than thirty (30) days prior written notice of its intention
to so terminate or cancel any of the Credit Card Agreements; (d) not enter
into any new Credit Card Agreements with any new Credit Card Issuer unless (i) Agent
shall have received not less than thirty (30) days prior written notice of the
intention of such Borrower to enter into such agreement (together with such
other information with respect thereto as Agent may request) and (ii) such
Borrower delivers, or causes to be delivered to Agent, a Credit Card
Acknowledgment in favor of Agent, (e) give Agent immediate written notice
of any Credit Card Agreement entered into by such Borrower after the date
hereof, together with a true, correct and complete copy thereof and such other
information with respect thereto as Agent may request; and (f) furnish to
Agent, promptly upon the request of Agent, such information and evidence as
Agent may require from time to time concerning the observance, performance and
compliance by such Borrower or the other party or parties thereto with the
terms, covenants or provisions of the Credit Card Agreements.

 

9.21  Modifications
of Indebtedness, Organizational Documents and Certain Other Agreements; Certain
Payments of Indebtedness, Etc.  Borrowers
and Guarantors shall not, and shall not permit any Restricted Subsidiary to:

 

(a)                    amend, modify
or otherwise change its certificate of incorporation, articles of association,
certificate of formation, limited liability agreement or other organizational
documents, as applicable, including, without limitation, entering into any new
agreement with respect to any of its Capital Stock, except for amendments,
modifications or other changes that do not affect the rights and privileges of
any Borrower or Guarantor, or its Subsidiaries and do not affect the ability of
a Borrower, Guarantor or such Subsidiary to amend, modify, renew or supplement
the terms of this Agreement or any of the other Financing Agreements, or
otherwise affect the interests of Agent or Lenders and so long as at the time
of any such amendment, modification or change, no Default or Event of Default
shall exist or have occurred;

 

(b)                   amend, modify
or otherwise change (or permit the amendment, modification or other change in
any manner of) any of the provisions of any of Note Documents, the Securitization
Facility Documents, the Subordinated Debt Documents or the agreements related
to the Indebtedness permitted under Section 9.9(l) hereof, except, that,
Borrowers and Guarantors, and any Subsidiary, may, after prior written notice
to Agent, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof, or defer the timing of any

 

96

 

payments in respect thereof, or
to forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith;

 

(c)                    make or agree
to make any payment, prepayment, redemption, retirement, defeasance, purchase
or sinking fund payment or other acquisition for value of any of its
Indebtedness (including, without limitation, by way of depositing money or
securities with the trustee therefor before the date required for the purpose
of paying any portion of such Indebtedness when due), or otherwise set aside or
deposit or invest any sums for such purpose, 
except  that Borrowers, Guarantors or any such Subsidiary
may (i) make payments of regularly scheduled principal and interest or
other mandatory payments as and when due in respect of Indebtedness permitted
under Section 9.9 hereof and (ii) prepay, redeem, retire or
repurchase such Indebtedness in cash or other immediately available funds; provided,
that, (A) in the case of any such prepayment, redemption,
retirement or repurchase by any Borrower or Guarantor each of the following
conditions is satisfied as determined by Agent, (1) Agent shall have
received not less than ten (10) Business Days’ prior written notice of the
intention to make such payment in respect of such Indebtedness, which notice
shall specify the Indebtedness to which the payment relates, the amount of the
payment, when such payment is to be made and such other information with
respect thereto as Agent may request, and (2) Adjusted Excess Availability
shall have been not less than $75,000,000 as of the date of the most recent
calculation of the Borrowing Base prior to the date of any such payment, and
after giving effect to the payment of such payment, on a pro forma basis using
the Adjusted Excess Availability as of the date of the most recent calculation
of the Borrowing Base immediately prior to any such payment, Adjusted Excess
Availability shall be not less than $75,000,000, and (B) in the case of
any such prepayment, redemption, retirement or repurchase, as of the date of
any such payment and after giving effect thereto, no Default or Event of
Default shall exist or have occurred.

 

9.22  Inactive
Subsidiaries; OMX Inc.

 

(a)                    Except as
otherwise provided in Section 9.22(b) below, Borrowers and Guarantors
will not permit any Inactive Subsidiary to (i) engage in any business or
conduct any operations, (ii) own assets with a book value of more than
$10,000 in the aggregate and (iii) incur any obligations or liabilities in
respect of any Indebtedness or otherwise.

 

(b)                   In the event
that a Borrower or Guarantor intends to have any then Inactive Subsidiary
commence any business or operations or own assets with a book value of more
than $10,000 in the aggregate or incur any obligations or liabilities in
respect of any Indebtedness or otherwise, (i) Borrowers and Guarantors
shall give Agent not less than ten (10) Business Days’ prior written
notice thereof with reasonable detail and specificity and such other
information with respect thereto as Agent may request and (ii) at any time
thereafter, promptly upon the request of Agent, Borrowers and Guarantors shall
cause such Inactive Subsidiary to execute and deliver to Agent, in form and
substance satisfactory to Agent, (A) an absolute and unconditional
guarantee of payment of any and all Obligations, (B) a security agreement
granting to Agent a first security interest and lien (except as otherwise
consented to in writing by Agent) upon all of the assets of such Subsidiary of
the types or categories constituting Collateral, and (C) such other
agreements, documents and instruments as Agent may require in connection with
the documents referred to above in order to make such Subsidiary a party to
this Agreement as a “Guarantor”, including, but not limited to, supplements and
amendments hereto, authorization to file UCC

 

97

 

financing
statements, Collateral Access Agreements and other consents, waivers,
acknowledgments and other agreements from third persons which Agent may deem
necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the assets of such Subsidiary, corporate
resolutions and other organization and authorizing documents of such Person,
and favorable opinions of counsel to such person and (iii) upon the
satisfaction of each of the conditions set forth in this Section 9.22(b),
such Inactive Subsidiary shall cease to be deemed an Inactive Subsidiary for
purposes of this Agreement.

 

(c)                    On or before July 31,
2005, Borrowers and Guarantors shall either (i) cause OMX, Inc. to
execute and deliver to Agent, in form and substance satisfactory to Agent, (A) an
absolute and unconditional guarantee of payment of any and all Obligations, (B) a
security agreement granting to Agent a first security interest and lien (except
as otherwise consented to in writing by Agent) upon all of the assets of OMX, Inc.
of the types or categories constituting Collateral, and (C) such other
agreements, documents and instruments as Agent may require in connection with
the documents referred to above in order to make such Subsidiary a party to
this Agreement as a “Guarantor”, including, but not limited to, supplements and
amendments hereto, authorization to file UCC financing statements, Collateral
Access Agreements and other consents, waivers, acknowledgments and other
agreements from third persons which Agent may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the assets of such Subsidiary, corporate resolutions and other organization and
authorizing documents of such Person, and favorable opinions of counsel to such
person or (ii) shall duly and validly transfer all trademarks (including
goodwill related thereto) and other assets of OMX, Inc. of the type or
category that would constitute Intellectual Property if owned by a Borrower to
a Borrower and shall provide such evidence thereof as Agent may require,
together with such other agreements, documents and instruments as Agent may
require in connection therewith and such favorable opinions of counsel with
respect to the validity and enforceability of such transfer as Agent may
require.

 

9.23  Foreign
Assets Control Regulations, Etc.  None
of the requesting or borrowing of the Loans or the requesting or issuance,
extension or renewal of any Letter of Credit or the use of the proceeds of any
thereof will violate the Trading With the Enemy Act (50 USC §1 et seq., as
amended) (the “Trading With the Enemy Act”) or any of the foreign assets
control regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”)
or any enabling legislation or executive order relating thereto (including, but
not limited to (a) Executive order 13224 of September 21, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive
Order”) and (b) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56).  None of Borrowers
or any of their Subsidiaries or other Affiliates is or will become a “blocked
person” as described in the Executive Order, the Trading with the Enemy Act or
the Foreign Assets Control Regulations or engages or will engage in any
dealings or transactions, or be otherwise associated, with any such “blocked
person”.

 

9.24  Costs
and Expenses.  Borrowers and
Guarantors shall pay to Agent on demand all costs, expenses, filing fees and
taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, syndication, administration, collection,
liquidation,

 

98

 

enforcement and defense of the
Obligations, Agent’s rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and thereof,
including:  (a) all costs and
expenses of filing or recording (including UCC financing statement filing taxes
and fees, documentary taxes, intangibles taxes and mortgage recording taxes and
fees, if applicable); (b) costs and expenses and fees for insurance
premiums, environmental audits, title insurance premiums, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees, background
checks, costs and expenses of remitting loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Blocked Accounts,
together with Agent’s customary charges and fees with respect thereto; (c) charges,
fees or expenses charged by any Issuing Bank in connection with any Letter of
Credit; (d) costs and expenses of preserving and protecting the
Collateral; (e) costs and expenses paid or incurred in connection with
obtaining payment of the Obligations, enforcing the security interests and
liens of Agent, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Agent or any
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f) all
out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Agent during the course of periodic field examinations of the
Collateral and such Borrower’s or Guarantor’s operations, plus a per diem
charge at Agent’s then standard rate for Agent’s examiners in the field and
office (which rate as of the date hereof is $850 per person per day); and (g) the
fees and disbursements of counsel (including legal assistants) to Agent in connection
with any of the foregoing.

 

9.25  Further
Assurances.

 

(a)                    In the case of
the formation or acquisition by a Borrower or Guarantor of any Subsidiary after
the date hereof (other than a Foreign Subsidiary or Unrestricted Subsidiary),
as to any such Subsidiary, (i) the Borrower or Guarantor forming such
Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, the
following (each in formand substance satisfactory to Agent), (A) an
absolute and unconditional guarantee of payment of the Obligations, (B) a
security agreement granting to Agent a first security interest and lien (except
as otherwise consented to in writing by Agent) upon all of the assets of any
such Subsidiary, and (C) such other agreements, documents and instruments
as Agent may require in connection with the documents referred to above in
order to make such Subsidiary a party to this Agreement as a “Borrower” or as a
“Guarantor” as Agent may determine, including, but not limited to, supplements
and amendments hereto, authorization to file UCC financing statements,
Collateral Access Agreements and other consents, waivers, acknowledgments and
other agreements from third persons which Agent may deem necessary or desirable
in order to permit, protect and perfect its security interests in and liens
upon the assets purchased, corporate resolutions and other organization and
authorizing documents of such Person, and favorable opinions of counsel to such
person and (ii) the Borrower or Guarantor forming such Subsidiary shall (A) execute
and deliver to Agent, a pledge and security agreement, in form and substance
satisfactory to Agent, granting to Agent a first pledge of and lien on all of
the issued and outstanding shares of Capital Stock of any such Subsidiary, and (B) deliver
the original stock certificates evidencing such shares of Capital Stock (or
such other evidence as may be issued in the case of a limited liability

 

99

 

company),
together with stock powers with respect thereto duly executed in blank (or the
equivalent thereof in the case of a limited liability company in which such
interests are certificated, or otherwise take such actions as Agent shall
require with respect to Agent’s security interests therein).

 

(iii)                 In the case of an
acquisition of assets (other than Capital Stock) by a Borrower or Guarantor
after the date hereof, Agent shall have received, in form and substance
satisfactory to Agent, (i) evidence that Agent has valid and perfected
security interests in and liens upon all purchased assets to the extent such
assets constitute Collateral hereunder, (ii) all Collateral Access
Agreements and other consents, waivers, acknowledgments and other agreements
from third persons which Agent may deem necessary or desirable in order to
permit, protect and perfect its security interests in and liens upon the assets
purchased, (iii) the agreement of the seller consenting to the collateral
assignment by the Borrower or Guarantor purchasing such assets of all rights
and remedies and claims for damages of such Borrower or Guarantor relating to
the Collateral (including, without limitation, any bulk sales indemnification)
under the agreements, documents and instruments relating to such acquisition
and (iv) such other agreements, documents and instruments as Agent may
require in connection with the documents referred to above, including, but not
limited to, supplements and amendments hereto, corporate resolutions and other
organization and authorizing documents and favorable opinions of counsel to
such person.

 

(b)                   At the request
of Agent at any time and from time to time, Borrowers and Guarantors shall, at
their expense, duly execute and deliver, or cause to be duly executed and
delivered, such further agreements, documents and instruments, and do or cause
to be done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the security interests and the priority thereof
in the Collateral and to otherwise effectuate the provisions or purposes of this
Agreement or any of the other Financing Agreements.  Agent may at any time and from time to time
request a certificate from an officer of any Borrower or Guarantor representing
that all conditions precedent to the making of Loans and providing Letters of Credit
contained herein are satisfied.  In the
event of such request by Agent, Agent and Lenders may, at Agent’s option, cease
to make any further Loans or provide any further Letters of Credit until Agent
has received such certificate and, in addition, Agent has determined that such
conditions are satisfied.

 

SECTION 10.  EVENTS
OF DEFAULT AND REMEDIES

 

10.1  Events
of Default.  The occurrence or
existence of any one or more of the following events are referred to herein
individually as an “Event of Default”, and collectively as “Events of Default”:

 

(a)                    (i) any
Borrower fails to pay any of the Obligations when due or (ii) any Borrower
or Guarantor fails to perform any of the covenants contained in Sections 9.3,
9.4, 9.6, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure shall
continue for fifteen (15) days; provided, that, such fifteen (15)
day period shall not apply in the case of: (A) any failure to observe any
such covenant which is not capable of being cured at all or within such fifteen
(15) day period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach by any Borrower or Guarantor of any
such covenant or (iii) any Borrower or

 

100

 

Guarantor
fails to perform any of the terms, covenants, conditions or provisions
contained in this Agreement or any of the other Financing Agreements other than
those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;

 

(b)                   any
representation, warranty or statement of fact made by any Borrower or Guarantor
to Agent in this Agreement, the other Financing Agreements or any other written
agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;

 

(c)                    any Guarantor
revokes or terminates or purports to revoke or terminate or fails to perform
any of the terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such party in favor of Agent or any Lender;

 

(d)                   any judgment
for the payment of money is rendered against any Borrower or Guarantor in
excess of $50,000,000 in the aggregate (to the extent not covered by insurance
where the insurer has assumed responsibility in writing for such judgment) and
shall remain undischarged or unvacated for a period in excess of thirty (30)
days or execution shall at any time not be effectively stayed, or any judgment
other than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any Borrower or Guarantor or any of the
Collateral having a value in excess of $50,000,000;

 

(e)                    any Borrower
or Guarantor dissolves or suspends or discontinues doing business, other than
as permitted under Section 9.7 hereof;

 

(f)                      any Borrower
or Guarantor makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors in connection with a moratorium or adjustment of the Indebtedness due
to them;

 

(g)                   a case or
proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in equity) is filed
against any Borrower or Guarantor or all or any part of its properties and such
petition or application is not dismissed within thirty (30) days after the date
of its filing or any Borrower or Guarantor shall file any answer admitting or
not contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;

 

(h)                   a case or
proceeding under the bankruptcy laws of the United States of America now or
hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed
by any Borrower or Guarantor or for all or any part of its property;

 

(i)                       any default
in respect of any Indebtedness of any Borrower or Guarantor in any case in an
amount in excess of $25,000,000 (including under any of the Note Documents or
the Securitization Facility Documents), which default continues for more than
the applicable cure period, if any, with respect thereto, including any
termination event or liquidation event under any of the Securitization Facility
Documents or if at any time a Borrower shall cease to be the

 

101

 

servicer or
shall receive a notice that it is to cease being the servicer under a Permitted
Securitization Facility or any default by any Borrower or Guarantor under any
Material Contract, which default continues for more than the applicable cure
period, if any, with respect thereto and/or is not waived in writing by the
other parties thereto or any Credit Card Issuer or Credit Card Processor (other
than with a Credit Card Issuer or Credit Card Processor where the sales using
the applicable card are less than ten (10%) percent of all such sales in the
immediately preceding fiscal year) withholds payment of amounts otherwise
payable to a Borrower to fund a reserve account or otherwise hold as
collateral, or shall require a Borrower to pay funds into a reserve account or
for such Credit Card Issuer or Credit Card Processor to otherwise hold as
collateral, or any Borrower shall provide a letter of credit, guarantee,
indemnity or similar instrument to or in favor of such Credit Card Issuer or
Credit Card Processor such that in the aggregate all of such funds in the
reserve account, other amounts held as collateral and the amount of such
letters of credit, guarantees, indemnities or similar instruments shall exceed
$10,000,000 or any such Credit Card Issuer or Credit Card Processor shall debit
or deduct any amounts in excess of $25,000,000 in the aggregate in any fiscal
year of Borrowers and Guarantors from any deposit account of any Borrower;

 

(j)                       any Credit
Card Issuer or Credit Card Processor shall send notice to Borrower that it is
ceasing to make or suspending payments to Borrower of amounts due or to become
due to Borrower or shall cease or suspend such payments, or shall send notice to
Borrower that it is terminating its arrangements with Borrower or such
arrangements shall terminate as a result of any event of default under such
arrangements, which continues for more than the applicable cure period, if any,
with respect thereto, unless Borrower shall have entered into arrangements with
another Credit Card Issuer or Credit Card Processor, as the case may be, within
sixty (60) days after the date of any such notice;

 

(k)                    any bank at
which any deposit account of Borrower or Guarantor is maintained shall fail to
comply with any of the material terms of any Deposit Account Control Agreement
to which such bank is a party or any securities intermediary, commodity
intermediary or other financial institution at any time in custody, control or possession
of any investment property of Borrower or Guarantor shall fail to comply with
any of the material terms of any Investment Property Control Agreement to which
such person is a party;

 

(l)                       any
material provision hereof or of any of the other Financing Agreements shall for
any reason cease to be valid, binding and enforceable with respect to any party
hereto or thereto (other than Agent) in accordance with its terms, or any such
party shall challenge the enforceability hereof or thereof, or shall assert in
writing, or take any action or fail to take any action based on the assertion
that any provision hereof or of any of the other Financing Agreements has
ceased to be or is otherwise not valid, binding or enforceable in accordance
with its terms, or any security interest provided for herein or in any of the
other Financing Agreements shall cease to be a valid and perfected first
priority security interest in any of the Collateral purported to be subject
thereto (except as otherwise permitted herein or therein);

 

(m)                 an ERISA Event
shall occur which results in or could reasonably be expected to result in
liability of any Borrower in an aggregate amount in excess of $10,000,000;

 

(n)                   any Change of
Control;

 

102

 

(o)                   the indictment
by any Governmental Authority, or as Agent may reasonably and in good faith
determine, the threatened indictment by any Governmental Authority of any
Borrower or Guarantor of which any Borrower, Guarantor or Agent receives
notice, in either case, as to which there is a reasonable possibility of an
adverse determination, in the good faith determination of Agent, under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against such Borrower or Guarantor, pursuant to which statute
or proceedings the penalties or remedies sought or available include forfeiture
of (i) any of the Collateral having a value in excess of $10,000,000 or (ii) any
other property of any Borrower or Guarantor which is necessary or material to
the conduct of its business;

 

(p)                   there shall be
a material adverse change in the business, assets or prospects of Borrowers
(taken as whole) after the date hereof.

 

10.2  Remedies.

 

(a)                    At any time an
Event of Default exists or has occurred and is continuing, Agent and Lenders
shall have all rights and remedies provided in this Agreement, the other
Financing Agreements, the UCC and other applicable law, all of which rights and
remedies may be exercised without notice to or consent by any Borrower or
Guarantor, except as such notice or consent is expressly provided for hereunder
or required by applicable law.  All
rights, remedies and powers granted to Agent and Lenders hereunder, under any
of the other Financing Agreements, the UCC or other applicable law, are
cumulative, not exclusive and enforceable, in Agent’s discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Borrower or
Guarantor of this Agreement or any of the other Financing Agreements.  Subject to Section 12 hereof, Agent may,
and at the direction of the Required Lenders shall, at any time or times,
proceed directly against any Borrower or Guarantor to collect the Obligations
without prior recourse to the Collateral.

 

(b)                   Without
limiting the generality of the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, at its option and shall
upon the direction of the Required Lenders, (i) upon notice to
Administrative Borrower, accelerate the payment of all Obligations and demand
immediate payment thereof to Agent for itself and the benefit of Lenders (provided,
that, upon the occurrence of any Event of Default described in Sections
10.1(g) and 10.1(h), all Obligations shall automatically become
immediately due and payable), and (ii) terminate the Commitments whereupon
the obligation of each Lender to make any Loan and an Issuing Bank to issue any
Letter of Credit shall immediately terminate (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), the Commitments and any other obligation of the Agent or a Lender
hereunder shall automatically terminate).

 

(c)                    Without
limiting the foregoing, at any time an Event of Default exists or has occurred
and is continuing, Agent may, in its discretion (i) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (ii) require any Borrower or Guarantor, at
Borrowers’ expense, to assemble and make available to Agent any part or all of
the Collateral at any place

 

103

 

and time
designated by Agent, (iii) collect, foreclose, receive, appropriate,
setoff and realize upon any and all Collateral, (iv) remove any or all of
the Collateral from any premises on or in which the same may be located for the
purpose of effecting the sale, foreclosure or other disposition thereof or for
any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including entering into contracts with
respect thereto, public or private sales at any exchange, broker’s board, at
any office of Agent or elsewhere) at such prices or terms as Agent may deem
reasonable, for cash, upon credit or for future delivery, with the Agent having
the right to purchase the whole or any part of the Collateral at any such
public sale, all of the foregoing being free from any right or equity of
redemption of any Borrower or Guarantor, which right or equity of redemption is
hereby expressly waived and released by Borrowers and Guarantors and/or (vi) terminate
this Agreement.  If any of the Collateral
is sold or leased by Agent upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Agent.  If notice of
disposition of Collateral is required by law, ten (10) days prior notice
by Agent to Administrative Borrower designating the time and place of any public
sale or the time after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable notice thereof and
Borrowers and Guarantors waive any other notice.  In the event Agent institutes an action to recover
any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, each Borrower and Guarantor waives the posting of any bond which might
otherwise be required. At any time an Event of Default exists or has occurred
and is continuing, upon Agent’s request, Borrowers will either, as Agent shall
specify, furnish cash collateral to each Issuing Bank to be used to secure and
fund the reimbursement obligations to such Issuing Bank in connection with any
Letter of Credit Obligations or furnish cash collateral to Agent for the Letter
of Credit Obligations.  Such cash
collateral shall be in the amount equal to one hundred ten (110%) percent of
the amount of the Letter of Credit Obligations plus the amount of any fees and
expenses payable in connection therewith through the end of the latest
expiration date of the Letters of Credit giving rise to such Letter of Credit
Obligations.

 

(d)                   At any time or
times that an Event of Default exists or has occurred and is continuing, Agent
may, in its discretion, enforce the rights of any Borrower or Guarantor against
any account debtor, secondary obligor or other obligor in respect of any of the
Accounts or other Receivables.  Without
limiting the generality of the foregoing, Agent may, in its discretion, at such
time or times (i) notify any or all account debtors, secondary obligors or
other obligors in respect thereof that the Receivables have been assigned to
Agent and that Agent has a security interest therein and Agent may direct any
or all account debtors, secondary obligors and other obligors to make payment
of Receivables directly to Agent, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Receivables or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any secondary obligors or other obligors in respect thereof
without affecting any of the Obligations, 
(iii) demand, collect or enforce payment of any Receivables or such
other obligations, but without any duty to do so, and Agent and Lenders shall
not be liable for any failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests and the interests of Lenders. 
At any time that an Event of Default exists or has occurred and is
continuing, at Agent’s request, all invoices and statements sent to any account
debtor shall state that the Accounts and such other obligations have been
assigned to Agent and are payable directly and

 

104

 

only to Agent
and Borrowers and Guarantors shall deliver to Agent such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Agent may require. 
In the event any account debtor returns Inventory when an Event of
Default exists or has occurred and is continuing, Borrowers shall, upon Agent’s
request, hold the returned Inventory in trust for Agent, segregate all returned
Inventory from all of its other property, dispose of the returned Inventory
solely according to Agent’s instructions, and not issue any credits, discounts
or allowances with respect thereto without Agent’s prior written consent.

 

(e)                    To the extent
that applicable law imposes duties on Agent or any Lender to exercise remedies
in a commercially reasonable manner (which duties cannot be waived under such
law), each Borrower and Guarantor acknowledges and agrees that it is not
commercially unreasonable for Agent or any Lender (i) to fail to incur
expenses reasonably deemed significant by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of
any Governmental Authority or other third party for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors, secondary obligors or
other persons obligated on Collateral or to remove liens or encumbrances on or
any adverse claims against Collateral, (iv) to exercise collection
remedies against account debtors and other persons obligated on Collateral
directly or through the use of collection agencies and other collection
specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in
the same business as any Borrower or Guarantor, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets
of the types included in the Collateral or that have the reasonable capability
of doing so, or that match buyers and sellers of assets, (ix) to dispose
of assets in wholesale rather than retail markets, (x) to disclaim disposition
warranties, (xi) to purchase insurance or credit enhancements to insure Agent
or Lenders against risks of loss, collection or disposition of Collateral or to
provide to Agent or Lenders a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by Agent,
to obtain the services of other brokers, investment bankers, consultants and
other professionals to assist Agent in the collection or disposition of any of
the Collateral. Each Borrower and Guarantor acknowledges that the purpose of
this Section is to provide non-exhaustive indications of what actions or
omissions by Agent or any Lender would not be commercially unreasonable in the
exercise by Agent or any Lender of remedies against the Collateral and that
other actions or omissions by Agent or any Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this Section.
Without limitation of the foregoing, nothing contained in this Section shall
be construed to grant any rights to any Borrower or Guarantor or to impose any
duties on Agent or Lenders that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section.

 

(f)                      For the
purpose of enabling Agent to exercise the rights and remedies hereunder, each
Borrower and Guarantor hereby grants to Agent, to the extent assignable, an
irrevocable,

 

105

 

non-exclusive
license (exercisable at any time an Event of Default shall exist or have
occurred and for so long as the same is continuing) without payment of royalty
or other compensation to any Borrower or Guarantor, to use, assign, license or
sublicense any of the trademarks, service-marks, trade names, business names,
trade styles, designs, logos and other source of business identifiers and other
Intellectual Property and general intangibles now owned or hereafter acquired
by any Borrower or Guarantor, wherever the same maybe located, including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer programs used for the compilation
or printout thereof.

 

(g)                   At any time an
Event of Default exists or has occurred and is continuing, Agent may apply the
cash proceeds of Collateral actually received by Agent from any sale, lease,
foreclosure or other disposition of the Collateral to payment of the
Obligations, in whole or in part and in accordance with the terms hereof,
whether or not then due or may hold such proceeds as cash collateral for the
Obligations.  Borrowers and Guarantors
shall remain liable to Agent and Lenders for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including attorneys’ fees and expenses.

 

(h)                   Without
limiting the foregoing, upon the occurrence of a Default or an Event of
Default, (i) Agent and Lenders may, at Agent’s option, and upon the
occurrence of an Event of Default at the direction of the Required Lenders,
Agent and Lenders shall, without notice, (A) cease making Loans or
arranging for Letters of Credit or reduce the lending formulas or amounts of
Loans and Letters of Credit available to Borrowers and/or (B) terminate
any provision of this Agreement providing for any future Loans to be made by
Agent and Lenders or Letters of Credit to be issued by an Issuing Bank and (ii) Agent
may, at its option, establish such Reserves as Agent determines, without
limitation or restriction, notwithstanding anything to the contrary contained
herein.

 

SECTION 11.  JURY
TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

 

11.1  Governing
Law; Choice of Forum; Service of Process; Jury Trial Waiver.

 

(a)                    The validity,
interpretation and enforcement of this Agreement and the other Financing
Agreements (except as otherwise provided therein) and any dispute arising out
of the relationship between the parties hereto, whether in contract, tort,
equity or otherwise, shall be governed by the internal laws of the State of
Illinois but excluding any principles of conflicts of law or other rule of
law that would cause the application of the law of any jurisdiction other than
the laws of the State of Illinois.

 

(b)                   Borrowers,
Guarantors, Agent, Lenders and each Issuing Bank irrevocably consent and submit
to the non-exclusive jurisdiction of the Circuit Court of Cook County, Illinois
and the United States District Court for the Northern District of Illinois,
whichever Agent may elect, and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related

 

106

 

hereto or thereto, in each case
whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise, and agree that any dispute with respect to any such
matters shall be heard only in the courts described above (except that Agent
and Lenders shall have the right to bring any action or proceeding against any
Borrower or Guarantor or its or their property in the courts of any other
jurisdiction which Agent deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against any Borrower or
Guarantor or its or their property).

 

(c)                    Each Borrower
and Guarantor hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by certified mail (return
receipt requested) directed to its address set forth herein and service so made
shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Agent’s option, by service upon any
Borrower or Guarantor (or Administrative Borrower on behalf of such Borrower or
Guarantor) in any other manner provided under the rules of any such
courts.  Within thirty (30) days after
such service, such Borrower or Guarantor shall appear in answer to such
process, failing which such Borrower or Guarantor shall be deemed in default
and judgment may be entered by Agent against such Borrower or Guarantor for the
amount of the claim and other relief requested.

 

(d)                   BORROWERS,
GUARANTORS, AGENT, LENDERS AND EACH ISSUING BANK EACH HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  BORROWERS, GUARANTORS, AGENT, LENDERS AND ANY
ISSUING BANK EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT ANY BORROWER, ANY GUARANTOR, AGENT, ANY LENDER OR ISSUING BANK MAY FILE
AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

 

(e)                    Agent and
Secured Parties shall not have any liability to any Borrower or Guarantor
(whether in tort, contract, equity or otherwise) for losses suffered by such
Borrower or Guarantor in connection with, arising out of, or in any way related
to the transactions or relationships contemplated by this Agreement, or any
act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Agent, such Lender and Issuing Bank, that the losses were the result of acts or
omissions constituting gross negligence or willful misconduct.  In any such litigation, Agent, Lenders and
each Issuing Bank shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.  Each Borrower and Guarantor:  (i) certifies that neither Agent, any
Lender, any Issuing Bank nor any representative, agent or attorney acting for
or on behalf of Agent, any

 

107

 

Lender or
Issuing Bank has represented, expressly or otherwise, that Agent, Lenders and
each Issuing Bank would not, in the event of litigation, seek to enforce any of
the waivers provided for in this Agreement or any of the other Financing
Agreements and (ii) acknowledges that in entering into this Agreement and the
other Financing Agreements, Agent, Lenders and each Issuing Bank are relying
upon, among other things, the waivers and certifications set forth in this Section 11.1
and elsewhere herein and therein.

 

11.2  Waiver
of Notices.  Each Borrower and
Guarantor hereby expressly waives demand, presentment, protest and notice of
protest and notice of dishonor with respect to any and all instruments and
chattel paper, included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein.  No notice to or demand on any Borrower or
Guarantor which Agent or any Lender may elect to give shall entitle such
Borrower or Guarantor to any other or further notice or demand in the same,
similar or other circumstances.

 

11.3  Amendments
and Waivers.

 

(a)                    Neither this
Agreement nor any other Financing Agreement nor any terms hereof or thereof may
be amended, waived, discharged or terminated unless such amendment, waiver,
discharge or termination is in writing signed by Agent and the Required Lenders
or at Agent’s option, by Agent with the authorization or consent of the
Required Lenders, and as to amendments to any of the Financing Agreements
(other than with respect to any provision of Section 12 hereof), by any
Borrower and such amendment, waiver, discharger or termination shall be
effective and binding as to all Lenders and each Issuing Bank only in the
specific instance and for the specific purpose for which given; except, that,
no such amendment, waiver, discharge or termination shall:

 

(i)                       reduce the
interest rate or any fees or extend the time of payment of principal, interest
or any fees or reduce the principal amount of any Loan or Letters of Credit, in
each case without the consent of each Lender directly affected thereby,

 

(ii)                    increase the
Commitment of any Lender over the amount thereof then in effect or provided
hereunder, in each case without the consent of the Lender directly affected
thereby,

 

(iii)                 increase the
amount of the Maximum Credit without the consent of all Lenders (provided,
that, the increase provided for in Section 2.3 hereof shall not be deemed
an increase requiring the consent of any Lender) or the Letter of Credit Limit
without the consent of Agent and all of Lenders;

 

(iv)                release any
Collateral (except as expressly required hereunder or under any of the other
Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof),
without the consent of Agent and all of Lenders,

 

(v)                   reduce any
percentage specified in the definition of Required Lenders, without the consent
of Agent and all of Lenders,

 

108

 

(vi)                consent to the
assignment or transfer by any Borrower or Guarantor of any of their rights and
obligations under this Agreement, without the consent of Agent and all of
Lenders,

 

(vii)             amend, modify or
waive any terms of this Section 11.3 hereof, without the consent of Agent
and all of Lenders,

 

(viii)          increase the amount of
the dollar limits in Section 12.8(a) or Section 12.11(a)(ii) hereof
without the consent of Agent and all of Lenders; or

 

(ix)                  increase the
advance rates constituting part of the Borrowing Base (other than as provided
for in the definition of such term), or amend, modify or waive any provisions
of the definition of the term Borrowing Base or any of the defined terms
referred to in the definition of the term Borrowing base, in each case as to
any of the foregoing if the effect thereof increases the amount of the
Borrowing Base, without the consent of Agent and all of Lenders.

 

(b)                   Agent, Lenders
and each Issuing Bank shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its or their rights, powers
and/or remedies unless such waiver shall be in writing and signed as provided
herein.  Any such waiver shall be
enforceable only to the extent specifically set forth therein.  A waiver by Agent, any Lender or Issuing Bank
of any right, power and/or remedy on any one occasion shall not be construed as
a bar to or waiver of any such right, power and/or remedy which Agent, any
Lender or Issuing Bank would otherwise have on any future occasion, whether
similar in kind or otherwise.

 

(c)                    Notwithstanding
anything to the contrary contained in Section 11.3(a) above, in
connection with any amendment, waiver, discharge or termination, in the event
that any Lender whose consent thereto is required shall fail to consent or fail
to consent in a timely manner (such Lender being referred to herein as a “Non-Consenting
Lender”), but the consent of any other Lenders to such amendment, waiver,
discharge or termination that is required are obtained, if any, then Wachovia
Capital or Administrative Borrower shall have the right, but not the
obligation, at any time thereafter, and upon the exercise by Wachovia Capital
or Administrative Borrower of such right, such Non-Consenting Lender shall have
the obligation, to sell, assign and transfer to Wachovia Capital or such
Eligible Transferee as Wachovia Capital may specify, the Commitment of such
Non-Consenting Lender and all rights and interests of such Non-Consenting
Lender pursuant thereto.  Wachovia
Capital shall provide the Non-Consenting Lender with prior written notice of
its intent to exercise its right under this Section (or if Wachovia
Capital does not exercise such right, Administrative Borrower shall provide
Agent and the Non-Consenting Lender with prior written notice of its intent to
exercise its right under this Section), which notice shall specify the date on
which such purchase and sale shall occur. 
Such purchase and sale shall be pursuant to the terms of an Assignment
and Acceptance (whether or not executed by the Non-Consenting Lender), except
that on the date of such purchase and sale, Wachovia Capital, or such Eligible
Transferee specified by Wachovia Capital shall pay to the Non-Consenting Lender
(except as Wachovia Capital and such Non-Consenting Lender may otherwise agree)
the amount equal to: (i) the principal balance of the Loans held by the
Non-Consenting Lender outstanding as of the close of business on the business
day immediately preceding the effective date of such purchase and sale, plus (ii) amounts
accrued and unpaid in

 

109

 

respect of
interest and fees payable to the Non-Consenting Lender to the effective date of
the purchase (but in no event shall the Non-Consenting Lender be deemed
entitled to any early termination fee). 
Such purchase and sale shall be effective on the date of the payment of
such amount to the Non-Consenting Lender and the Commitment of the
Non-Consenting Lender shall terminate on such date.

 

(d)                   The consent of
Agent shall be required for any amendment, waiver or consent affecting the
rights or duties of Agent hereunder or under any of the other Financing
Agreements, in addition to the consent of the Lenders otherwise required by
this Section and the exercise by Agent of any of its rights hereunder with
respect to Reserves or Eligible Accounts or Eligible Inventory shall not be
deemed an amendment to the advance rates provided for in this Section 11.3.  The consent of an Issuing Bank shall be
required for any amendment, waiver or consent affecting the rights or duties of
such Issuing Bank hereunder or under any of the other Financing Agreements, in
addition to the consent of the Lenders otherwise required by this Section, provided,
that, the consent of any Issuing Bank shall not be required for any
other amendments, waivers or consents. 
Notwithstanding anything to the contrary contained in Section 11.3(a) above,
(i) in the event that Agent shall agree that any items otherwise required
to be delivered to Agent as a condition of the initial Loans and Letters of
Credit hereunder may be delivered after the date hereof, Agent may, in its
discretion, agree to extend the date for delivery of such items or take such
other action as Agent may deem appropriate as a result of the failure to
receive such items as Agent may determine or may waive any Event of Default as
a result of the failure to receive such items, in each case without the consent
of any Lender and (ii) Agent may consent to any change in the type of
organization, jurisdiction of organization or other legal structure of any
Borrower, Guarantor or any of their Subsidiaries and amend the terms hereof or
of any of the other Financing Agreements as may be necessary or desirable to
reflect any such change, in each case without the approval of any Lender.

 

(e)                    The consent of
Agent and any Bank Product Provider that is providing Bank Products and has
outstanding any such Bank Products at such time that are secured hereunder
shall be required for any amendment to the priority of payment of Obligations
arising under or pursuant to any Hedge Agreements of a Borrower or Guarantor or
other Bank Products as set forth in Section 6.4(a) hereof.

 

11.4  Waiver
of Counterclaims.  Each Borrower and
Guarantor waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other then compulsory counterclaims) in any action
or proceeding with respect to this Agreement, the Obligations, the Collateral
or any matter arising therefrom or relating hereto or thereto.

 

11.5  Indemnification.  Each Borrower and Guarantor shall, jointly
and severally, indemnify and hold Agent, each Lender and Issuing Bank, and
their respective officers, directors, agents, employees, advisors and counsel
and their respective Affiliates (each such person being an “Indemnitee”),
harmless from and against any and all losses, claims, damages, liabilities,
costs or expenses (including attorneys’ fees and expenses) imposed on, incurred
by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated
hereby or any

 

110

 

act, omission, event or
transaction related or attendant thereto, including amounts paid in settlement,
court costs, and the fees and expenses of counsel except that Borrowers and
Guarantors shall not have any obligation under this Section 11.5 to
indemnify an Indemnitee with respect to a matter covered hereby resulting from
the gross negligence or wilful misconduct of such Indemnitee as determined
pursuant to a final, non-appealable order of a court of competent jurisdiction
(but without limiting the obligations of Borrowers or Guarantors as to any
other Indemnitee).   To the extent that
the undertaking to indemnify, pay and hold harmless set forth in this Section may
be unenforceable because it violates any law or public policy, Borrowers and
Guarantors shall pay the maximum portion which it is permitted to pay under
applicable law to Agent and Lenders in satisfaction of indemnified matters
under this Section.  To the extent
permitted by applicable law, no Borrower or Guarantor shall assert, and each
Borrower and Guarantor hereby waives, any claim against any Indemnitee, on any
theory of liability for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any of the other Financing Agreements or any
undertaking or transaction contemplated hereby. 
No Indemnitee referred to above shall be liable for any damages arising
from the use by unintended recipients of any information or other materials
distributed by it through telecommunications, electronic or other information
transmission systems in connection with this Agreement or any of the other
Financing Agreements or the transaction contemplated hereby or thereby.  All amounts due under this Section shall
be payable upon demand. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.

 

11.6  Currency
Indemnity.  If, for the purposes of
obtaining judgment in any court in any jurisdiction with respect to this
Agreement or any of the other Financing Agreements, it becomes necessary to
convert into the currency of such jurisdiction (the “Judgment Currency”) any
amount due under this Agreement or under any of the other Financing Agreements
in any currency other than the Judgment Currency (the “Currency Due”), then
conversion shall be made at the Exchange Rate at which Agent is able, on the
relevant date, to purchase the Currency Due with the Judgment Currency
prevailing on the Business Day before the day on which judgment is given.  In the event that there is a change in the
rate of Exchange Rate prevailing between the Business Day before the day on
which the judgment is given and the date of receipt by Agent of the amount due,
Borrowers will, on the date of receipt by Agent, pay such additional amounts,
if any, or be entitled to receive reimbursement of such amount, if any, as may
be necessary to ensure that the amount received by Agent on such date is the
amount in the Judgment Currency which when converted at the rate of exchange
prevailing on the date of receipt by Agent is the amount then due under this
Agreement or such other of the Financing Agreements in the Currency Due.  If the amount of the Currency Due which Agent
is able to purchase is less than the amount of the Currency Due originally due
to it, Borrowers shall indemnify and save Agent harmless from and against loss
or damage arising as a result of such deficiency.  The indemnity contained herein shall
constitute an obligation separate and independent from the other obligations
contained in this Agreement and the other Financing Agreements, shall give rise
to a separate and independent cause of action, shall apply irrespective of any
indulgence granted by Agent from time to time and shall continue in full force
and effect notwithstanding any judgment or order for a liquidated sum in
respect of an amount due under this Agreement or any of the other Financing
Agreements or under any judgment or order.

 

111

 

SECTION 12.  THE
AGENT

 

12.1  Appointment,
Powers and Immunities.  Each Secured
Party irrevocably designates, appoints and authorizes Wachovia Capital to act
as Agent hereunder and under the other Financing Agreements with such powers as
are specifically delegated to Agent by the terms of this Agreement and of the
other Financing Agreements, together with such other powers as are reasonably
incidental thereto.  Agent (a) shall
have no duties or responsibilities except those expressly set forth in this
Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Secured Party; (b) shall not be responsible to Secured Parties for any
recitals, statements, representations or warranties contained in this Agreement
or in any of the other Financing Agreements, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or any other Financing Agreement, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Financing Agreement or any other document referred to or provided for
herein or therein or for any failure by any Borrower or any Guarantor or any
other Person to perform any of its obligations hereunder or thereunder; and (c) shall
not be responsible to Secured Parties for any action taken or omitted to be
taken by it hereunder or under any other Financing Agreement or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct as determined by a final non-appealable judgment of a court
of competent jurisdiction.  Agent may
employ agents and attorneys in fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys in fact selected by it
in good faith.  Agent may deem and treat
the payee of any note as the holder thereof for all purposes hereof unless and
until the assignment thereof pursuant to an agreement (if and to the extent
permitted herein) in form and substance satisfactory to Agent shall have been
delivered to and acknowledged by Agent.

 

12.2  Reliance
by Agent.  Agent shall be entitled to
rely upon any certification, notice or other communication (including any
thereof by telephone, telecopy, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Agent.  As to any matters not expressly provided for
by this Agreement or any other Financing Agreement, Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or
thereunder in accordance with instructions given by the Required Lenders or all
of Lenders as is required in such circumstance, and such instructions of such
Agents and any action taken or failure to act pursuant thereto shall be binding
on all Lenders.

 

12.3  Events
of Default.

 

(a)                    Agent shall
not be deemed to have knowledge or notice of the occurrence of a Default or an
Event of Default or other failure of a condition precedent to the Loans and
Letters of Credit hereunder, unless and until Agent has received written notice
from a Lender, or Borrower specifying such Event of Default or any unfulfilled
condition precedent, and stating that such notice is a “Notice of Default or
Failure of Condition”.  In the event that
Agent receives such a Notice of Default or Failure of Condition, Agent shall
give prompt notice thereof to the Lenders. 
Agent shall (subject to Section 12.7) take such action with respect
to any such Event of

 

112

 

Default or failure of condition
precedent as shall be directed by the Required Lenders to the extent provided
for herein; provided, that, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to or by reason of
such Event of Default or failure of condition precedent, as it shall deem
advisable in the best interest of Lenders. 
Without limiting the foregoing, and notwithstanding the existence or
occurrence and continuance of an Event of Default or any other failure to
satisfy any of the conditions precedent set forth in Section 4 of this
Agreement to the contrary, unless and until otherwise directed by the Required
Lenders, Agent may, but shall have no obligation to, continue to make Loans and
an Issuing Bank may, but shall have no obligation to, issue or cause to be
issued any Letter of Credit for the ratable account and risk of Lenders from
time to time if Agent believes making such Loans or issuing or causing to be
issued such Letter of Credit is in the best interests of Lenders.

 

(b)                   Except with the
prior written consent of Agent, no Secured Party may assert or exercise any
enforcement right or remedy in respect of the Loans, Letter of Credit
Obligations or other Obligations, as against any Borrower or Guarantor or any
of the Collateral or other property of any Borrower or Guarantor.

 

12.4  Wachovia
Capital in its Individual Capacity.  With
respect to its Commitment and the Loans made and Letters of Credit issued or
caused to be issued by it (and any successor acting as Agent), so long as Wachovia
Capital shall be a Lender hereunder, it shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as Agent, and the term “Lender” or “Lenders” shall, unless the context
otherwise indicates, include Wachovia Capital in its individual capacity as
Lender hereunder.  Wachovia Capital (and
any successor acting as Agent) and its Affiliates may (without having to
account therefor to any Lender) lend money to, make investments in and
generally engage in any kind of business with Borrowers (and any of its
Subsidiaries or Affiliates) as if it were not acting as Agent, and Wachovia
Capital and its Affiliates may accept fees and other consideration from any
Borrower or Guarantor and any of its Subsidiaries and Affiliates for services
in connection with this Agreement or otherwise without having to account for
the same to Lenders.

 

12.5  Indemnification.  Lenders agree to indemnify Agent and each
Issuing Bank (to the extent not reimbursed by Borrowers hereunder and without
limiting any obligations of Borrowers hereunder) ratably, in accordance with
their Pro Rata Shares, for any and all claims of any kind and nature whatsoever
that may be imposed on, incurred by or asserted against Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Financing Agreement
or any other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including the costs and expenses
that Agent is obligated to pay hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, provided, that,
no Lender shall be liable for any of the foregoing to the extent it arises from
the gross negligence or willful misconduct of the party to be indemnified as
determined by a final non-appealable judgment of a court of competent
jurisdiction.  The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.

 

113

 

12.6  Non-Reliance
on Agent and Other Lenders; Securitization Intercreditor Agreement.

 

(a)                    Each Secured
Party agrees that it has, independently and without reliance on Agent or any
other Secured Party, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of Borrowers and Guarantors
and has made its own decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Secured Party, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any of the other Financing Agreements.  Agent shall not be required to keep itself
informed as to the performance or observance by any Borrower or Guarantor of
any term or provision of this Agreement or any of the other Financing Agreements
or any other document referred to or provided for herein or therein or to
inspect the properties or books of any Borrower or Guarantor.  Agent will use reasonable efforts to provide
Lenders with any information received by Agent from any Borrower or Guarantor
which is required to be provided to Lenders or deemed to be requested by
Lenders hereunder and with a copy of any Notice of Default or Failure of
Condition received by Agent from any Borrower or any Lender; provided, that,
Agent shall not be liable to any Lender for any failure to do so, except to the
extent that such failure is attributable to Agent’s own gross negligence or
willful misconduct as determined by a final non-appealable judgment of a court
of competent jurisdiction.  Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Agent or deemed requested by Lenders hereunder (including the
documents provided for in Section 12.10 hereof), Agent shall not have any
duty or responsibility to provide any Lender with any other credit or other
information concerning the affairs, financial condition or business of any
Borrower or Guarantor that may come into the possession of Agent.

 

(b)                   Each Lender
acknowledges that it has received and reviewed a copy of the Securitization
Intercreditor Agreement and any exhibits and schedules thereto, authorizes the
execution and delivery thereof by Agent, and agrees with effect on the date
hereof to be bound in all respects by the terms of the Securitization
Intercreditor Agreement and obligated to perform any and all obligations of
Agent thereunder, as if a direct signatory party thereto.

 

12.7  Failure
to Act.  Except for action expressly
required of Agent hereunder and under the other Financing Agreements, Agent
shall in all cases be fully justified in failing or refusing to act hereunder
and thereunder unless it shall receive further assurances to its satisfaction
from Lenders of their indemnification obligations under Section 12.5
hereof against any and all liability and expense that may be incurred by it by
reason of taking or continuing to take any such action.

 

12.8  Additional
Loans.  Agent and Swing Line Lender
(or Agent on behalf of Swing Line Lender) shall not make any Loans or an
Issuing Bank provide any Letter of Credit to any Borrower on behalf of Lenders
intentionally and with actual knowledge that such Loans or Letter of Credit
would cause the aggregate amount of the total outstanding Loans and Letters of
Credit to exceed the Borrowing Base, without the prior consent of all Lenders,
except, that, Agent may make such additional Revolving Loans or an Issuing Bank
may provide such additional Letter of Credit on behalf of Lenders,
intentionally and with actual knowledge that such Revolving Loans or Letter of
Credit will cause the total outstanding Loans and Letters of Credit to exceed
the Borrowing Base, as Agent may deem necessary or advisable in its discretion,
provided, that: (a) the total principal amount of the
additional Revolving Loans or additional Letters of Credit to any Borrower
which Agent may make or provide after obtaining such actual knowledge that the

 

114

 

aggregate principal amount of
the Loans equal or exceed the Borrowing Bases of Borrowers, plus the amount of
Special Agent Advances made pursuant to Section 12.11(a)(ii) hereof
then outstanding, shall not exceed the aggregate amount of $25,000,000 and
shall not cause the total principal amount of the Loans and Letters of Credit
to exceed the Maximum Credit and (b) no such additional Revolving Loan or
Letter of Credit shall be outstanding more than ninety (90) days after the date
such additional Revolving Loan or Letter of Credit is made or issued (as the
case may be), except as the Required Lenders may otherwise agree.  Each Lender shall be obligated to pay Agent
the amount of its Pro Rata Share of any such additional Revolving Loans or
Letters of Credit.

 

12.9  Concerning
the Collateral and the Related Financing Agreements.  Each Secured Party authorizes and directs
Agent to enter into this Agreement and the other Financing Agreements.  Each Secured Party agrees that any action
taken by Agent or Required Lenders (or such greater percentage as may be
required hereunder) in accordance with the terms of this Agreement or the other
Financing Agreements and the exercise by Agent or Required Lenders (or such
greater percentage as may be required hereunder) of their respective powers set
forth therein or herein, together with such other powers that are reasonably incidental
thereto, shall be binding upon all Secured Parties.

 

12.10  Field
Audit, Examination Reports and other Information; Disclaimer by Lenders.  By signing this Agreement, each Lender:

 

(a)                    is deemed to
have requested that Agent furnish such Lender (and Agent agrees that it will
furnish to such Lender), promptly after it becomes available, a copy of each
field audit or examination report and report with respect to the Borrowing Base
prepared or received by Agent (each field audit or examination report and
report with respect to the Borrowing Base being referred to herein as a “Report”
and collectively, “Reports”), appraisals with respect to the Collateral and
financial statements with respect to Parent and its Subsidiaries received by
Agent;

 

(b)                   expressly
agrees and acknowledges that Agent (i) does not make any representation or
warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall
not be liable for any information contained in any Report, appraisal or
financial statement;

 

(c)                    expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or any other party performing any audit or examination
will inspect only specific information regarding Borrowers and Guarantors and
will rely significantly upon Borrowers’ and Guarantors’ books and records, as
well as on representations of Borrowers’ and Guarantors’ personnel; and

 

(d)                   agrees to keep
all Reports confidential and strictly for its internal use in accordance with
the terms of Section 13.5 hereof, and not to distribute or use any Report
in any other manner.

 

12.11  Collateral
Matters.

 

(a)                    Agent may, at
its option, from time to time, at any time on or after an Event of Default and
for so long as the same is continuing or upon any other failure of a condition

 

115

 

precedent to
the Loans and Letters of Credit hereunder, make such disbursements and advances
(“Special Agent Advances”) which Agent, in its sole discretion, (i) deems
necessary or desirable either to preserve or protect the Collateral or any
portion thereof or (ii) to enhance the likelihood or maximize the amount
of repayment by Borrowers and Guarantors of the Loans and other Obligations, provided,
that, (A) the aggregate principal amount of the Special Agent
Advances pursuant to this clause (ii) outstanding at any time, plus the
then outstanding principal amount of the additional Loans and Letters of Credit
which Agent may make or provide as set forth in Section 12.8 hereof, shall
not exceed $25,000,000 and (B) the aggregate principal amount of the
Special Agent Advances pursuant to this clause (ii) outstanding at any
time, plus the then outstanding principal amount of the Loans and the Letter of
Credit Obligations, shall not exceed the Maximum Credit, or (iii) to pay
any other amount chargeable to any Borrower or Guarantor pursuant to the terms
of this Agreement or any of the other Financing Agreements consisting of (A) costs,
fees and expenses and (B) payments to Issuing Bank in respect of any
Letter of Credit Obligations.  The
Special Agent Advances shall be repayable on demand and together with all
interest thereon shall constitute Obligations secured by the Collateral.  Special Agent Advances shall not constitute
Loans but shall otherwise constitute Obligations hereunder.  Interest on Special Agent Advances shall be
payable at the Interest Rate then applicable to Prime Rate Loans and shall be
payable on demand.  Without limitation of
its obligations pursuant to Section 6.11, each Lender agrees that it shall
make available to Agent, upon Agent’s demand, in immediately available funds,
the amount equal to such Lender’s Pro Rata Share of each such Special Agent
Advance.  If such funds are not made
available to Agent by such Lender, such Lender shall be deemed a Defaulting
Lender and 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 Agent at the Federal Funds Rate
for each day during such period (as published by the Federal Reserve Bank of
Chicago or at Agent’s option based on the arithmetic mean determined by Agent
of the rates for the last transaction in overnight Federal funds arranged prior
to 9:00 a.m. (Chicago time) on that day by each of the three leading
brokers of Federal funds transactions in Chicago selected by Agent) and if such
amounts are not paid within three (3) days of Agent’s demand, at the
highest Interest Rate provided for in Section 3.1 hereof applicable to
Prime Rate Loans.

 

(b)                   Lenders hereby
irrevocably authorize Agent, at its option and in its discretion to release any
security interest in, mortgage or lien upon, any of the Collateral (i) upon
termination of the Commitments and payment and satisfaction of all of the
Obligations and delivery of cash collateral to the extent required under Section 13.1
below, or (ii) constituting property being sold or disposed of if
Administrative Borrower or any Borrower or Guarantor certifies to Agent that
the sale or disposition is made in compliance with Section 9.7 hereof (and
Agent may rely conclusively on any such certificate, without further inquiry),
or (iii) constituting property in which any Borrower or Guarantor did not
own an interest at the time the security interest, mortgage or lien was granted
or at any time thereafter, or (iv) having a value in the aggregate in any
twelve (12) month period of less than $20,000,000, and to the extent Agent may
release its security interest in and lien upon any such Collateral pursuant to
the sale or other disposition thereof, such sale or other disposition shall be
deemed consented to by Lenders, or (v) if required or permitted under the
terms of any of the other Financing Agreements, including any intercreditor
agreement, or (vi) approved, authorized or ratified in writing by all of
Lenders.  Except as provided above, Agent
will not release any security interest in, mortgage or lien upon, any of the
Collateral without the prior written authorization of all of Lenders. Upon
request by

 

116

 

Agent at any
time, Lenders will promptly confirm in writing Agent’s authority to release
particular types or items of Collateral pursuant to this Section.  In no event shall the consent or approval of
an Issuing Bank to any release of Collateral be required.  Nothing contained herein shall be construed
to require the consent of any Bank Product Provider to any release of any
Collateral or termination of security interests in any Collateral.

 

(c)                    Without any
manner limiting Agent’s authority to act without any specific or further
authorization or consent by the Required Lenders, each Lender agrees to confirm
in writing, upon request by Agent, the authority to release Collateral
conferred upon Agent under this Section. 
Agent shall (and is hereby irrevocably authorized by Lenders to) execute
such documents as may be necessary to evidence the release of the security
interest, mortgage or liens granted to Agent upon any Collateral to the extent
set forth above; provided, that, (i) Agent shall not be
required to execute any such document on terms which, in Agent’s opinion, would
expose Agent to liability or create any obligations or entail any consequence
other than the release of such security interest, mortgage or liens without
recourse or warranty and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any security interest, mortgage
or lien upon (or obligations of any Borrower or Guarantor in respect of) the
Collateral retained by such Borrower or Guarantor.

 

(d)                   Agent shall
have no obligation whatsoever to any Secured Party or any other Person to
investigate, confirm or assure that the Collateral exists or is owned by any
Borrower or Guarantor or is cared for, protected or insured or has been
encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letters of Credit hereunder, or
whether any particular reserves are appropriate, or that the liens and security
interests granted to Agent pursuant hereto or any of the Financing Agreements
or otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are 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 Agent in this Agreement or in
any of the other Financing Agreements, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto,
subject to the other terms and conditions contained herein, Agent may act in
any manner it may deem appropriate, in its discretion, given Agent’s own
interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any other Lender or Issuing Bank.

 

12.12  Agency
for Perfection.  Each Secured Party
hereby appoints Agent and each other Secured Party as agent and bailee for the
purpose of perfecting the security interests in and liens upon the Collateral
of Agent in assets which, in accordance with Article 9 of the UCC can be
perfected only by possession (or where the security interest of a secured party
with possession has priority over the security interest of another secured
party) and Agent and each Secured Party hereby acknowledges that it holds
possession of any such Collateral for the benefit of Agent as secured party.  Should any Secured Party obtain possession of
any such Collateral, such Lender shall notify Agent thereof, and, promptly upon
Agent’s request therefor shall deliver such Collateral to Agent or in
accordance with Agent’s instructions.

 

12.13  Successor
Agent.  Agent may resign as Agent
upon thirty (30) days’ notice to Lenders and Parent. If Agent resigns under
this Agreement, the Required Lenders shall appoint

 

117

 

from among the Lenders a
successor agent for Lenders.  If no successor
agent is appointed prior to the effective date of the resignation of Agent,
Agent may appoint, after consulting with Lenders and Parent, a successor agent
from among Lenders.  Upon the acceptance
by the Lender so selected of its appointment as successor agent hereunder, such
successor agent shall succeed to all of the rights, powers and duties of the
retiring Agent and the term “Agent” as used herein and in the other Financing
Agreements shall mean such successor agent and the retiring Agent’s appointment,
powers and duties as Agent shall be terminated. 
After any retiring Agent’s resignation hereunder as Agent, the
provisions of this Section 12 shall inure to its benefit as to any actions
taken or omitted by it while it was Agent under this Agreement.  If no successor agent has accepted appointment
as Agent by the date which is thirty (30) days after the date of a retiring
Agent’s notice of resignation, the retiring Agent’s resignation shall
nonetheless thereupon become effective and Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.

 

12.14  Failure
to Respond Deemed Consent.  In the
event any Lender’s consent is required pursuant to the provisions of this
Agreement and such Lender does not respond to any request by Agent for such
consent within twelve (12) Business Days after such request is made to such
Lender, such failure to respond shall be deemed a consent.

 

12.15  Legal
Representation of Agent.  In
connection with the negotiation, drafting, and execution of this Agreement and
the other Financing Agreements, or in connection with future legal
representation relating to loan administration, amendments, modifications,
waivers, or enforcement of remedies, Otterbourg, Steindler, Houston &
Rosen, P.C. has only represented and shall only represent Wachovia in its
capacity as Issuing Bank and Wachovia Capital in its capacity as Agent and as a
Lender.  Each other Lender hereby
acknowledges that such firm does not represent it in connection with any such
matters.

 

12.16  Other
Agent Designations.  Agent may at any
time and from time to time determine that a Lender may, in addition, be a “Co-Agent”,
“Syndication Agent”, “Documentation Agent” or similar designation hereunder and
enter into an agreement with such Lender to have it so identified for purposes
of this Agreement.  Any such designation
shall be effective upon written notice by Agent to Administrative Borrower of
any such designation.  Any Lender that is
so designated as a Co-Agent, Syndication Agent, Documentation Agent or such
similar designation by Agent shall have no right, power, obligation, liability,
responsibility or duty under this Agreement or any of the other Financing
Agreements other than those applicable to all Lenders as such.  Without limiting the foregoing, the Lenders
so identified shall not have or be deemed to have any fiduciary relationship
with any Lender and no Lender shall be deemed to have relied, nor shall any
Lender rely, on a Lender so identified as a Co-Agent, Syndication Agent,
Documentation Agent or such similar designation in deciding to enter into this
Agreement or in taking or not taking action hereunder.

 

SECTION 13.  TERM
OF AGREEMENT; MISCELLANEOUS

 

13.1  Term.

 

(a)                    This Agreement
and the other Financing Agreements shall become effective as of the date set
forth on the first page hereof and shall continue in full force and effect
for a term

 

118

 

ending on June 24, 2010 (the
“Maturity Date”), unless sooner terminated pursuant to the terms hereof.   In addition, Borrowers may terminate this
Agreement at any time upon ten (10) days prior written notice to Agent
(which notice shall be irrevocable) and Agent may, at its option, and shall at
the direction of Required Lenders, terminate this Agreement at any time on or
after an Event of Default.  Upon the
Maturity Date or any other effective date of termination of the Financing
Agreements, Borrowers shall pay to Agent all outstanding and unpaid Obligations
and shall furnish cash collateral to Agent (or at Agent’s option, a letter of
credit issued for the account of Borrowers and at Borrowers’ expense, in form
and substance satisfactory to Agent, by an issuer acceptable to Agent and
payable to Agent as beneficiary) in such amounts as Agent determines are
reasonably necessary to secure Agent and Lenders from loss, cost, damage or
expense, including attorneys’ fees and expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Obligations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
and indefeasible payment (and including any contingent liability of Agent to
any bank at which deposit accounts of Borrowers and Guarantors are maintained
under any Deposit Account Control Agreement) and for any of the Obligations
arising under or in connection with any Bank Products in such amounts as the
party providing such Bank Products may require (unless such Obligations arising
under or in connection with any Bank Products are paid in full in cash and
terminated in a manner satisfactory to such other party).  The amount of such cash collateral (or letter
of credit, as Agent may determine) as to any Letter of Credit Obligations shall
be in the amount equal to one hundred ten (110%) percent of the amount of the
Letter of Credit Obligations plus the amount of any fees and expenses payable
in connection therewith through the end of the latest expiration date of the
then outstanding Letters of Credit.  Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to the Agent Payment Account or such other bank
account of Agent, as Agent may, in its discretion, designate in writing to
Administrative Borrower for such purpose. 
Interest shall be due until and including the next Business Day, if the
amounts so paid by Borrowers to the Agent Payment Account or other bank account
designated by Agent are received in such bank account later than 12:00 noon,
Chicago time.

 

(b)                   No termination
of the Commitments, this Agreement or any of the other Financing Agreements
shall relieve or discharge any Borrower or Guarantor of its respective duties,
obligations and covenants under this Agreement or any of the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Agent’s continuing security interest in the Collateral and the rights
and remedies of Agent and Lenders hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid.  Accordingly, each Borrower and Guarantor
waives any rights it may have under the UCC to demand the filing of termination
statements with respect to the Collateral and Agent shall not be required to
send such termination statements to Borrowers or Guarantors, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid and satisfied
in full in immediately available funds.

 

13.2  Interpretative
Provisions.

 

(a)                    All terms used
herein which are defined in Article 1, Article 8 or Article 9 of
the UCC shall have the meanings given therein unless otherwise defined in this
Agreement.

 

119

 

 

(b)                   All references
to the plural herein shall also mean the singular and to the singular shall
also mean the plural unless the context otherwise requires.

 

(c)                    All references
to any Borrower, Guarantor, Agent and Lenders pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include
their respective successors and assigns.

 

(d)                   The words “hereof”,
“herein”, “hereunder”, “this Agreement” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.

 

(e)                    The word “including”
when used in this Agreement shall mean “including, without limitation” and the
word “will” when used in this Agreement shall be construed to have the same
meaning and effect as the word “shall”.

 

(f)                      An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 11.3 or is cured in a manner
satisfactory to Agent, if such Event of Default is capable of being cured as
determined by Agent.

 

(g)                   All references
to the term “good faith” used herein when applicable to Agent or any Lender
shall mean, notwithstanding anything to the contrary contained herein or in the
UCC, honesty in fact in the conduct or transaction concerned.  Borrowers and Guarantors shall have the
burden of proving any lack of good faith on the part of Agent or any Lender
alleged by any Borrower or Guarantor at any time.

 

(h)                   Any accounting
term used in this Agreement shall have, unless otherwise specifically provided
herein, the meaning customarily given in accordance with GAAP, and all
financial computations hereunder shall be computed unless otherwise
specifically provided herein, in accordance with GAAP as consistently applied
and using the same method for inventory valuation as used in the preparation of
the financial statements of Parent most recently received by Agent prior to the
date hereof.  Notwithstanding anything to
the contrary contained in GAAP or any interpretations or other pronouncements
by the Financial Accounting Standards Board or otherwise, the term “unqualified
opinion” as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is unqualified and also does not include
any explanation, supplemental comment or other comment concerning the ability
of the applicable person to continue as a going concern or the scope of the
audit.

 

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

 

(j)                       Unless
otherwise expressly provided herein, (i) references herein to any
agreement, document or instrument shall be deemed to include all subsequent
amendments, modifications, supplements, extensions, renewals, restatements or
replacements with respect thereto, but only to the extent the same are not
prohibited by the terms hereof or of any other Financing Agreement, and (ii) references
to any statute or regulation are to be construed as

 

120

 

including all
statutory and regulatory provisions consolidating, amending, replacing,
recodifying, supplementing or interpreting the statute or regulation.

 

(k)                    The captions
and headings of this Agreement are for convenience of reference only and shall
not affect the interpretation of this Agreement.

 

(l)                       This
Agreement and other Financing Agreements may use several different limitations,
tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements
are cumulative and shall each be performed in accordance with their terms.

 

(m)                 This Agreement
and the other Financing Agreements are the result of negotiations among and
have been reviewed by counsel to Agent and the other parties, and are the
products of all parties.  Accordingly,
this Agreement and the other Financing Agreements shall not be construed
against Agent or Lenders merely because of Agent’s or any Lender’s involvement
in their preparation.

 

13.3  Notices.

 

(a)                    All notices,
requests and demands hereunder shall be in writing and deemed to have been
given or made:  if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified
mail, return receipt requested, five (5) days after mailing.  Notices delivered through electronic
communications shall be effective to the extent set forth in Section 13.3(b) below.  All notices, requests and demands upon the
parties are to be given to the following addresses (or to such other address as
any party may designate by notice in accordance with this Section):

 

	
  If to any Borrower or
  Guarantor:

  	
   

  	
  OfficeMax Incorporated

  
	
   

  	
   

  	
  150 Pierce Road

  
	
   

  	
   

  	
  Itasca, Illinois 60143

  
	
   

  	
   

  	
  Attention:

  	
  Mr. Theodore Crumley

  
	
   

  	
   

  	
   

  	
  Executive Vice President
  and

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
  Telephone No.: 630-773-5000

  
	
   

  	
   

  	
  Telecopy No.: 630-438-2468

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Bell, Boyd &
  Lloyd LLC

  
	
   

  	
   

  	
  70 West Madison Street

  
	
   

  	
   

  	
  Suite 3300

  
	
   

  	
   

  	
  Chicago, Illinois 60602-4207

  
	
   

  	
   

  	
  Attention: Kenneth A.
  Peterson, Esq.

  
	
   

  	
   

  	
  Telephone No.: 312-807-4395

  
	
   

  	
   

  	
  Telecopy No.:312-827-8147

  

 

121

 

	
  If to Agent or Issuing
  Bank:

  	
   

  	
  Wachovia Capital Finance
  Corporation

  (Central)

  150 South Wacker Drive, Suite 2200

  Chicago, Illinois 60606-4202

  Attention: Portfolio Administrator

  Telephone No.: 312-332-0420

  Telecopy No.: 312-332-0424

  

 

(b)                   Notices and
other communications to Lenders and an Issuing Bank hereunder may be delivered
or furnished by electronic communication (including e-mail and Internet or
intranet websites) pursuant to procedures approved by Agent or as otherwise
determined by Agent, provided, that, the foregoing shall not
apply to notices to any Lender or Issuing Bank pursuant to Section 2
hereof if such Lender or Issuing Bank, as applicable, has notified Agent that
it is incapable of receiving notices under such Section by electronic
communication.  Unless Agent otherwise requires,
(i) notices and other communications sent to an e-mail address shall be
deemed received upon the sender’s receipt of an acknowledgement from the
intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgement), provided, that, if
such notice or other communication is not given during the normal business
hours of the recipient, such notice shall be deemed to have been sent at the
opening of business on the next Business Day for the recipient, and (ii) notices
or communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that such
notice or communications is available and identifying the website address
therefor.

 

13.4  Partial
Invalidity.  If any provision of this
Agreement is held to be invalid or unenforceable, such invalidity or unenforceability
shall not invalidate this Agreement as a whole, but this Agreement shall be
construed as though it did not contain the particular provision held to be
invalid or unenforceable and the rights and obligations of the parties shall be
construed and enforced only to such extent as shall be permitted by applicable
law.

 

13.5  Confidentiality.

 

(a)                    Agent, each
Lender and Issuing Bank shall use all reasonable efforts to keep confidential,
in accordance with its customary procedures for handling confidential
information and safe and sound lending practices, any non-public information
supplied to it by any Borrower pursuant to this Agreement which is clearly and
conspicuously marked as confidential at the time such information is furnished
by such Borrower to Agent, such Lender or Issuing Bank, provided,
that, nothing contained herein shall limit the disclosure of any such
information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators,
auditors and/or accountants,  in
connection with any litigation to which Agent, such Lender or Issuing Bank is a
party, (iii) to any Lender or Participant (or prospective Lender or
Participant) or Issuing Bank or to any Affiliate of any Lender so long as such
Lender, Participant (or prospective Lender or Participant), Issuing Bank or
Affiliate shall have been instructed to treat such information as confidential
in accordance with this Section 13.5, or (iv) to

 

122

 

counsel for
Agent, any Lender, Participant (or prospective Lender or Participant) or
Issuing Bank.

 

(b)                   In the event
that Agent, any Lender or Issuing Bank receives a request or demand to disclose
any confidential information pursuant to any subpoena or court order, Agent or
such Lender or Issuing Bank, as the case may be, agrees (i) to the extent
permitted by applicable law or if permitted by applicable law, to the extent
Agent or such Lender or Issuing Bank determines in good faith that it will not
create any risk of liability to Agent or such Lender or Issuing Bank, Agent or
such Lender or Issuing Bank will promptly notify Administrative Borrower of
such request so that Administrative Borrower may seek a protective order or
other appropriate relief or remedy and (ii) if disclosure of such
information is required, disclose such information and, subject to
reimbursement by Borrowers of Agent’s or such Lender’s or Issuing Bank’s expenses,
cooperate with Administrative Borrower in the reasonable efforts to obtain an
order or other reliable assurance that confidential treatment will be accorded
to such portion of the disclosed information which Administrative Borrower so
designates, to the extent permitted by applicable law or if permitted by
applicable law, to the extent Agent or such Lender or Issuing Bank determines
in good faith that it will not create any risk of liability to Agent or such
Lender or Issuing Bank.

 

(c)                    In no event
shall this Section 13.5 or any other provision of this Agreement, any of
the other Financing Agreements or applicable law be deemed: (i) to apply
to or restrict disclosure of information that has been or is made public by any
Borrower, Guarantor or any third party or otherwise becomes generally available
to the public other than as a result of a disclosure in violation hereof, (ii) to
apply to or restrict disclosure of information that was or becomes available to
Agent, any Lender (or any Affiliate of any Lender) or Issuing Bank on a
non-confidential basis from a person other than a Borrower or Guarantor, (iii) to
require Agent, any Lender or Issuing Bank to return any materials furnished by
a Borrower or Guarantor to Agent, a Lender or Issuing Bank or prevent Agent, a
Lender or Issuing Bank from responding to routine informational requests in
accordance with the Code of Ethics for the Exchange of Credit Information
promulgated by The Robert Morris Associates or other applicable industry
standards relating to the exchange of credit information.  The obligations of Agent, Lenders and Issuing
Bank under this Section 13.5 shall supersede and replace the obligations
of Agent, Lenders and Issuing Bank under any confidentiality letter signed
prior to the date hereof or any other arrangements concerning the
confidentiality of information provided by any Borrower or Guarantor to Agent
or any Lender.

 

(d)                   Agent and
Lenders may share with their respective Affiliates any information relating to
the Credit Facility and Borrowers and Guarantors.  Agent and Lenders may disclose information
relating to the Credit Facility to Gold Sheets and other similar bank trade publications
with such information to consist of deal terms and other information
customarily found in such publications. 
In addition, Agent and Lenders and their respective Affiliates may
otherwise use the corporate names, logos and other insignia of Borrowers and
Guarantors in “tombstones” or other advertisements or public statements or
other marketing materials of Agent and Lenders and their respective Affiliates.

 

13.6  Successors.
 This Agreement, the other Financing
Agreements and any other document referred to herein or therein shall be
binding upon and inure to the benefit of and be

 

123

 

enforceable by Agent, Secured
Parties, Borrowers, Guarantors and their respective successors and assigns,
except that no Borrower may assign its rights under this Agreement, the other
Financing Agreements and any other document referred to herein or therein
without the prior written consent of Agent and Lenders.  Any such purported assignment without such
express prior written consent shall be void. 
No Secured Party may assign its rights and obligations under this
Agreement without the prior written consent of Agent, except as provided in Section 13.7
below. The terms and provisions of this Agreement and the other Financing
Agreements are for the purpose of defining the relative rights and obligations
of Borrowers, Guarantors, Agent and Secured Parties with respect to the
transactions contemplated hereby and there shall be no third party
beneficiaries of any of the terms and provisions of this Agreement or any of
the other Financing Agreements.

 

13.7  Assignments;
Participations.

 

(a)                    Each Lender
may, with the prior written consent of Agent, assign all or, if less than all,
a portion equal to at least $10,000,000 in the aggregate for the assigning
Lender, of such rights and obligations under this Agreement to one or more
Eligible Transferees (but not including for this purpose any assignments in the
form of a participation), each of which assignees shall become a party to this
Agreement as a Lender by execution of an Assignment and Acceptance; provided,
that, (i) such transfer or assignment will not be effective until
recorded by Agent on the Register and (ii) Agent shall have received for
its sole account payment of a processing fee from the assigning Lender or the
assignee in the amount of $5,000. Agent shall notify Administrative Borrower of
any assignment as provided herein upon Agent’s receipt of written notice of the
intention of a Lender to make any such assignment.

 

(b)                   Agent shall
maintain a register of the names and addresses of Lenders, their Commitments
and the principal amount of their Loans (the “Register”).  Agent shall also maintain a copy of each
Assignment and Acceptance delivered to and accepted by it and shall modify the
Register to give effect to each Assignment and Acceptance.  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and any
Borrowers, Guarantors, Agent and Lenders may 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 Administrative Borrower and any Lender at any
reasonable time and from time to time upon reasonable prior notice.

 

(c)                    Upon such
execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance,  the assignee thereunder shall be a party hereto
and to the other Financing Agreements and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations (including, without limitation, the
obligation to participate in Letter of Credit Obligations) of a Lender
hereunder and thereunder and the assigning Lender 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.

 

(d)                   By execution
and delivery of an Assignment and Acceptance, the assignor and 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

 

124

 

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 of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Borrower, Guarantor
or any of their Subsidiaries or the performance or observance by any Borrower
or Guarantor of any of the Obligations; (iii) such assignee confirms that
it has received a copy of this Agreement and the other Financing Agreements,
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
upon the assigning Lender, Agent 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
Financing Agreements, (v) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably
incidental 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 Financing Agreements are required to be performed by it
as a Lender.  Agent and Lenders may
furnish any information concerning any Borrower or Guarantor in the possession
of Agent or any Lender from time to time to assignees and Participants.

 

(e)                    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
Financing Agreements (including, without limitation, all or a portion of its Commitments
and the Loans owing to it and its participation in the Letter of Credit
Obligations, without the consent of Agent or the other Lenders); provided,
that, (i) such Lender’s obligations under this Agreement
(including, without limitation, its Commitment hereunder) and the other
Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantors, the other Lenders and Agent 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 Financing Agreements,
and (iii) the Participant shall not have any rights under this Agreement
or any of the other Financing Agreements (the Participant’s rights against such
Lender in respect of such participation to be those set forth in the agreement
executed by such Lender in favor of the Participant relating thereto) and all
amounts payable by any Borrower or Guarantor hereunder shall be determined as
if such Lender had not sold such participation.

 

(f)                      Nothing in
this Agreement shall prevent or prohibit any Lender from pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders
from such Federal Reserve Bank; provided, that, no such pledge
shall release such Lender from any of its obligations hereunder or substitute
any such pledgee for such Lender as a party hereto.

 

(g)                   Borrowers and
Guarantors shall assist Agent or any Lender permitted to sell assignments or
participations under this Section 13.7 in whatever manner reasonably
necessary in order to enable or effect any such assignment or participation,
including (but not limited to) the execution and delivery of any and all
agreements, notes and other documents and instruments

 

125

 

as shall be
requested and the delivery of informational materials, appraisals or other
documents for, and the participation of relevant management in meetings and
conference calls with, potential Lenders or Participants. Borrowers shall
certify the correctness, completeness and accuracy, in all material respects,
of all descriptions of Borrowers and Guarantors and their affairs provided,
prepared or reviewed by any Borrower or Guarantor that are contained in any
selling materials and all other information provided by it and included in such
materials.

 

(h)                   Any Lender that
is an Issuing Bank may at any time assign all of its Commitments pursuant to this
Section 13.7.  If such Issuing Bank
ceases to be Lender, it may, at its option, resign as Issuing Bank and such
Issuing Bank’s obligations to issue Letters of Credit shall terminate but it
shall retain all of the rights and obligations of Issuing Bank hereunder with
respect to Letters of Credit outstanding as of the effective date of its
resignation and all Letter of Credit Obligations with respect thereto
(including the right to require Lenders to make Revolving Loans or fund risk
participations in outstanding Letter of Credit Obligations), shall continue.

 

13.8  Entire
Agreement.  This Agreement, the other
Financing Agreements, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represents the entire agreement and understanding concerning the subject matter
hereof and thereof between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written. 
In the event of any inconsistency between the terms of this Agreement
and any schedule or exhibit hereto, the terms of this Agreement shall
govern.

 

13.9  USA
Patriot Act.  Each Lender subject to
the USA PATRIOT Act (Title III of Pub.L. 107-56 (signed into law October 26,
2001) (the “Act”) hereby notifies Borrowers and Guarantors that pursuant to the
requirements of the Act, it is required to obtain, verify and record
information that identifies each person or corporation who opens an account
and/or enters into a business relationship with it, which information includes
the name and address of Borrowers and Guarantors and other information that
will allow such Lender to identify such person in accordance with the Act and
any other applicable law.  Borrowers and
Guarantors are hereby advised that any Loans or Letters of Credit hereunder are
subject to satisfactory results of such verification.

 

13.10  Counterparts,
Etc.  This Agreement or any of the
other Financing Agreements may be executed in any number of counterparts, each
of which shall be an original, but all of which taken together shall constitute
one and the same agreement. Delivery of an executed counterpart of this
Agreement or any of the other Financing Agreements by telefacsimile or other
electronic method of transmission shall have the same force and effect as the
delivery of an original executed counterpart of this Agreement or any of such
other Financing Agreements.  Any party
delivering an executed counterpart of any such agreement by telefacsimile or
other electronic method of transmission shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.

 

126

 

IN WITNESS WHEREOF, Agent,
Lenders, Borrowers and Guarantors have caused these presents to be duly
executed as of the day and year first above written.

 

	
  AGENT

  	
   

  	
  BORROWERS

  
	
   

  	
   

  	
   

  
	
  WACHOVIA CAPITAL FINANCE

  	
   

  	
  OFFICEMAX INCORPORATED

  
	
  CORPORATION (CENTRAL), as
  Agent

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
  By:

  	
  /s/ Irene Rosen Marks

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President
  and Chief

  	
   

  
	
  Title:

  	
  Director

  	
   

  	
   

  	
  Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OFFICEMAX CONTRACT, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President
  and Chief

  	
   

  
	
   

  	
   

  	
  Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OFFICEMAX NORTH AMERICA,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President
  and Chief

  	
   

  
	
   

  	
   

  	
  Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BIZMART, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President
  and Chief

  	
   

  
	
   

  	
   

  	
  Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BIZMART (TEXAS), INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President
  and Chief

  	
   

  
	
   

  	
   

  	
  Financial Officer

  	
   

  
												

 

[SIGNATURES CONTINUED ON NEXT
PAGE]

 

 

[SIGNATURES CONTINUED FROM
PREVIOUS PAGE]

 

	
   

  	
   

  	
  HONOLULU PAPER COMPANY
  LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RELIABLE EXPRESS
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GUARANTORS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OFFICEMAX CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PICABO HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OFFICEMAX NEVADA COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OFFICEMAX SOUTHERN COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/Ted Crumley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
							

 

[SIGNATURES CONTINUED ON NEXT
PAGE]

 

 

[SIGNATURES CONTINUED FROM
PREVIOUS PAGE]

 

	
  LENDERS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WACHOVIA CAPITAL FINANCE

  CORPORATION (CENTRAL)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Irene Rosen Marks

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Director

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $70,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BANK OF AMERICA, N.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Peter Foley

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $65,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GENERAL ELECTRIC CAPITAL

  CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Charles D. Chiodo

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Duly Authorized Signatory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $55,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  THE CIT GROUP/BUSINESS
  CREDIT, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Robert L. Klein

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $55,000,000

  	
   

  	
   

  
													

 

[SIGNATURES CONTINUED ON NEXT
PAGE]

 

 

[SIGNATURES CONTINUED FROM
PREVIOUS PAGE]

 

	
  WELLS FARGO RETAIL
  FINANCE, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Corey Loftus

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  AVP Account Executive

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $55,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  NATIONAL CITY BUSINESS
  CREDIT,

  INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Kathryn Ellero

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $35,000,000

  	
   

  	
   

  
									

 

[SIGNATURES CONTINUED ON NEXT
PAGE]

 

 

[SIGNATURES CONTINUED FROM
PREVIOUS PAGE]

 

	
  PNC BANK, N.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/George W. Barrow

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $25,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  HARRIS N.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Jean R. Elie

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $25,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  UPS CAPITAL CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/John P. Holloway

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Director of Portfolio
  Management

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $20,000,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  KEYBANK NATIONAL
  ASSOCIATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Alex Strazzella

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  SVP

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $20,000,000

  	
   

  	
   

  
												

 

[SIGNATURES CONTINUED ON NEXT
PAGE]

 

 

 

[SIGNATURES CONTINUED FROM
PREVIOUS PAGE]

 

	
  NM ROTHSCHILD & SONS
  LIMITED

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Christopher Coleman

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Managing Director

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $15,000,000

  	
   

  	
   

  
							

 

[SIGNATURES CONTINUED ON NEXT
PAGE]

 

 

[SIGNATURES CONTINUED FROM
PREVIOUS PAGE]

 

	
  ABN AMRO BANK N.V.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Terrence J. Ward

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Senior Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $17,500,000

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LASALLE RETAIL FINANCE, 

  a Division of LaSalle Business Credit, LLC, 

  as agent for Standard Federal Bank, N.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/Craig Nutbrown

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Vice President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $17,500,000

  	
   

  	
   

  
									

 

 

[SIGNATURES CONTINUED FROM
PREVIOUS PAGE]

 

	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Charles Edmondson

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  VP

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commitment: $25,000,000

  	
   

  	
   

  
						

 

 

EXHIBIT A

to

LOAN AND SECURITY AGREEMENT

 

ASSIGNMENT
AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND
ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as of                     ,
200    is made between                                     
(the “Assignor”) and                               
(the “Assignee”).

 

W I T N E S S E T H:

 

WHEREAS, Wachovia Capital
Finance Corporation (Central), in its capacity as agent pursuant to the Loan
Agreement (as hereinafter defined) acting for and on behalf of the financial
institutions which are parties thereto as lenders (in such capacity, “Agent”),
and the financial institutions which are parties to the Loan Agreement as
lenders (individually, each a “Lender” and collectively, “Lenders”) have
entered or are about to enter into financing arrangements pursuant to which Agent
and Lenders may make loans and advances and provide other financial
accommodations to                ,
              ,
               ,
and                
(collectively, “Borrowers”) as set forth in the Loan and Security Agreement,
dated                ,  20   , by and among Borrowers,
certain of their affiliates, Agent and Lenders (as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, the “Loan Agreement”), and the other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto (all of the foregoing, together with
the Loan Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the “Financing Agreements”);

 

WHEREAS, as provided under
the Loan Agreement, Assignor committed to making Loans (the “Committed Loans”)
to Borrowers in an aggregate amount not to exceed $                 
(the “Commitment”);

 

WHEREAS, Assignor wishes to
assign to Assignee [part of the] [all] rights and obligations of Assignor under
the Loan Agreement in respect of its Commitment in an amount equal to $                     
(the “Assigned Commitment Amount”) on the terms and subject to the conditions
set forth herein and Assignee wishes to accept assignment of such rights and to
assume such obligations from Assignor on such terms and subject to such
conditions;

 

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

 

A-1

 

1.               Assignment and
Acceptance.

 

(a)                                  Subject
to the terms and conditions of this Assignment and Acceptance,  Assignor hereby sells, transfers and assigns
to Assignee, and Assignee hereby purchases, assumes and undertakes from
Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) an interest in (i) the
Commitment and each of the Committed Loans of Assignor and (ii) all
related rights, benefits, obligations, liabilities and indemnities of the
Assignor under and in connection with the Loan Agreement and the other
Financing Agreements, so that after giving effect thereto, the Commitment of
Assignee shall be as set forth below and the Pro Rata Share of Assignee shall
be             (   %)
percent.

 

(b)                                 With
effect on and after the Effective Date (as defined in Section 5 hereof),
Assignee shall be a party to the Loan Agreement and succeed to all of the
rights and be obligated to perform all of the obligations of a Lender under the
Loan Agreement, including the requirements concerning confidentiality and the
payment of indemnification, with a Commitment in an amount equal to the
Assigned Commitment Amount.  Assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Agreement are required to be
performed by it as a Lender.  It is the
intent of the parties hereto that the Commitment of Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Commitment Amount
and Assignor shall relinquish its rights and be released from its obligations
under the Loan Agreement to the extent such obligations have been assumed by
Assignee; provided, that, Assignor shall not relinquish its
rights under Sections 2.2, 6.4, 6.9, 11.5 and 12.5 of the Loan Agreement to the
extent such rights relate to the time prior to the Effective Date.

 

(c)                                  After
giving effect to the assignment and assumption set forth herein, on the
Effective Date Assignee’s Commitment will be $                    .

 

(d)                                 After
giving effect to the assignment and assumption set forth herein, on the Effective
Date Assignor’s Commitment will be $                     
(as such amount may be further reduced by any other assignments by Assignor on
or after the date hereof).

 

2.               Payments.

 

(a)                                  As
consideration for the sale, assignment and transfer contemplated in Section 1
hereof, Assignee shall pay to Assignor on the Effective Date in immediately
available funds an amount equal to $                  ,
representing Assignee’s Pro Rata Share of the principal amount of all Committed
Loans.

 

(b)                                 Assignee
shall pay to Agent the processing fee in the amount specified in Section 13.7(a) of
the Loan Agreement.

 

3.               Reallocation of
Payments.  Any interest, fees and
other payments accrued to the Effective Date with respect to the Commitment,
Committed Loans and outstanding Letters of Credit shall be for the account of
Assignor.  Any interest, fees and other
payments accrued on and after the Effective Date with respect to the Assigned
Commitment Amount shall be for the account of Assignee.  Each of Assignor and Assignee agrees that it
will hold in trust for the other party any interest, fees and other amounts
which it may receive to which the other party is

 

A-2

 

entitled
pursuant to the preceding sentence and pay to the other party any such amounts
which it may receive promptly upon receipt.

 

4.               Independent
Credit Decision.  Assignee
acknowledges that it has received a copy of the Loan Agreement and the
Schedules and Exhibits thereto, together with copies of the most recent financial
statements of                     
and its Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter
into this Assignment and Acceptance and agrees that it will, independently and
without reliance upon Assignor, 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 and legal decisions in taking or not taking action under the Loan
Agreement.

 

5.               Effective Date;
Notices.

 

(c)                                  As
between Assignor and Assignee, the effective date for this Assignment and
Acceptance shall be                        ,
200   (the “Effective Date”); provided, that, the
following conditions precedent have been satisfied on or before the Effective
Date:

 

(i)                                     this
Assignment and Acceptance shall be executed and delivered by Assignor and
Assignee;

 

(ii)                                  the
consent of Agent as required for an effective assignment of the Assigned
Commitment Amount by Assignor to Assignee shall have been duly obtained and
shall be in full force and effect as of the Effective Date;

 

(iii)                               written
notice of such assignment, together with payment instructions, addresses and
related information with respect to Assignee, shall have been given to
Administrative Borrower and Agent;

 

(iv)                              Assignee
shall pay to Assignor all amounts due to Assignor under this Assignment and
Acceptance; and

 

(v)                                 the
processing fee referred to in Section 2(b) hereof shall have been
paid to Agent.

 

(d)                                 Promptly
following the execution of this Assignment and Acceptance, Assignor shall
deliver to Administrative Borrower and Agent for acknowledgment by Agent, a
Notice of Assignment in the form attached hereto as Schedule 1.

 

6.               Agent.  [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]

 

(e)                                  Assignee
hereby appoints and authorizes Assignor in its capacity as Agent to take such
action as agent on its behalf to exercise such powers under the Loan Agreement
as are delegated to Agent by Lenders pursuant to the terms of the Loan Agreement.

 

(f)                                    Assignee
shall assume no duties or obligations held by Assignor in its capacity as Agent
under the Loan Agreement.]

 

A-3

 

7.               Withholding Tax.  Assignee (a) represents and warrants to
Assignor, Agent and Borrowers that under applicable law and treaties no tax
will be required to be withheld by Assignee, Agent or Borrowers with respect to
any payments to be made to Assignee hereunder or under any of the Financing
Agreements, (b) agrees to furnish (if it is organized under the laws of
any jurisdiction other than the United States or any State thereof) to Agent
and Borrowers prior to the time that Agent or Borrowers are required to make
any payment of principal, interest or fees hereunder, duplicate executed
originals of either U.S. Internal Revenue Service Form W-8BEN or W-8ECI,
as applicable (wherein Assignee claims entitlement to the benefits of a tax
treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new such forms
upon the expiration of any previously delivered form or comparable statements
in accordance with applicable U.S. law and regulations and amendments thereto,
duly executed and completed by Assignee, and (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.

 

8.               Representations
and Warranties.

 

(a)                                  Assignor
represents and warrants that (i) it is the legal and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and
clear of any security interest, lien, encumbrance or other adverse claim, (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to
fulfill its obligations hereunder, (iii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance, and apart from any agreements or undertakings or
filings required by the Loan Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligation of Assignor, enforceable against Assignor in accordance with the
terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors’ rights and to general equitable principles.

 

(b)                                 Assignor
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Loan Agreement or any of the other Financing Agreements or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Loan Agreement or any other instrument or document furnished pursuant
thereto.  Assignor makes no
representation or warranty in connection with, and assumes no responsibility
with respect to, the solvency, financial condition or statements of Borrowers,
Guarantors or any of their respective Affiliates, or the performance or
observance by Borrowers, Guarantors or any other Person, of any of its
respective obligations under the Loan Agreement or any other instrument or
document furnished in connection therewith.

 

(c)                                  Assignee
represents and warrants that (i) it is duly organized and existing and it
has full power and authority to take, and has taken, all action necessary to
execute and

 

A-4

 

deliver this Assignment and Acceptance and
any other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder, (ii) no notices to, or consents, authorizations or approvals
of, any Person are required (other than any already given or obtained) for its
due execution, delivery and performance of this Assignment and Acceptance, and
apart from any agreements or undertakings or filings required by the Loan
Agreement, no further action by, or notice to, or filing with, any Person is
required of it for such execution, delivery or performance; and (iii) this
Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of Assignee, enforceable
against Assignee in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors’ rights to
general equitable principles.

 

9.               Further
Assurances.  Assignor and Assignee
each hereby agree to execute and deliver such other instruments, and take such
other action, as either party may reasonably request in connection with the
transactions contemplated by this Assignment and Acceptance, including the
delivery of any notices or other documents or instruments to Borrowers or
Agent, which may be required in connection with the assignment and assumption
contemplated hereby.

 

10.         Miscellaneous.

 

(d)                                 Any
amendment or waiver of any provision of this Assignment and Acceptance shall be
in writing and signed by the parties hereto. 
No failure or delay by either party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof and any waiver
of any breach of the provisions of this Assignment and Acceptance shall be
without prejudice to any rights with respect to any other for further breach
thereof.

 

(e)                                  All
payments made hereunder shall be made without any set-off or counterclaim.

 

(f)                                    Assignor
and Assignee shall each pay its own costs and expenses incurred in connection
with the negotiation, preparation, execution and performance of this Assignment
and Acceptance.

 

(g)                                 This
Assignment and Acceptance may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute one and the
same instrument.

 

(h)                                 THIS
ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF                     .  Assignor and Assignee each irrevocably
submits to the non-exclusive jurisdiction of any State or Federal court sitting
in                      
County,             
over any suit, action or proceeding arising out of or relating to this
Assignment and Acceptance and irrevocably agrees that all claims in respect of
such action or proceeding may be heard and determined in such                     
State or Federal court.  Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.

 

A-5

 

(i)                                     ASSIGNOR
AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE,
THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY RELATED
DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).

 

IN WITNESS
WHEREOF, Assignor and Assignee have caused this Assignment and Acceptance to be
executed and delivered by their duly authorized officers as of the date first
above written.

 

	
   

  	
  [ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

A-6

 

SCHEDULE 1

 

NOTICE
OF ASSIGNMENT AND ACCEPTANCE

 

     , 20   

 

 

 

 

Attn.:                

 

Re:               

 

Ladies and Gentlemen:

 

Wachovia Capital Finance
Corporation (Central), in its capacity as agent pursuant to the Loan Agreement
(as hereinafter defined) acting for and on behalf of the financial institutions
which are parties thereto as lenders (in such capacity, “Agent”), and the
financial institutions which are parties to the Loan Agreement as lenders
(individually, each a “Lender” and collectively, “Lenders”) have entered or are
about to enter into financing arrangements pursuant to which Agent and Lenders
may make loans and advances and provide other financial accommodations to                  ,
                 ,
                  ,
and                   
(collectively, “Borrowers”) as set forth in the Loan and Security Agreement,
dated                     ,
20   , by and among Borrowers, certain of their affiliates,
Agent and Lenders (as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”),
and the other agreements, documents and instruments referred to therein or at
any time executed and/or delivered in connection therewith or related thereto
(all of the foregoing, together with the Loan Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, being collectively referred to herein as the “Financing
Agreements”).  Capitalized terms not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Loan Agreement.

 

1.  We hereby give you notice of, and request
your consent to, the assignment by                                        
(the “Assignor”) to                                          
(the “Assignee”) such that after giving effect to the assignment Assignee shall
have an interest equal to             
(   %) percent of the total Commitments pursuant to the
Assignment and Acceptance Agreement attached hereto (the “Assignment and
Acceptance”).  We understand that the
Assignor’s Commitment shall be reduced by $                    ,
as the same may be further reduced by other assignments on or after the date
hereof.

 

2.  Assignee agrees that, upon receiving the
consent of Agent to such assignment, Assignee will be bound by the terms of the
Loan Agreement as fully and to the same extent as if the Assignee were the
Lender originally holding such interest under the Loan Agreement.

 

A-7

 

3.  The following administrative details apply to
Assignee:

 

(A)                              Notice address:

 

	
  Assignee
  name:

  	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  	
   

  
	
  Telephone:

  	
   

  	
   

  	
   

  
	
  Telecopier:

  	
   

  	
   

  	
   

  

 

(B)                                Payment
instructions:

 

	
  Account
  No.:

  	
   

  	
   

  	
   

  
	
  At:

  	
   

  	
   

  	
   

  
	
  Reference:

  	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  	
   

  

 

4.  You are entitled to rely upon the
representations, warranties and covenants of each of Assignor and Assignee
contained in the Assignment and Acceptance.

 

A-8

 

IN WITNESS WHEREOF, Assignor
and Assignee have caused this Notice of Assignment and Acceptance to be
executed by their respective duly authorized officials, officers or agents as
of the date first above mentioned.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND
  ASSIGNMENT

  	
   

  
	
  CONSENTED TO:

  	
   

  
	
   

  	
   

  
	
  WACHOVIA CAPITAL FINANCE
  CORPORATION

  	
   

  
	
   (CENTRAL), as Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
								

 

A-9

 

EXHIBIT D

TO

LOAN AND SECURITY AGREEMENT

 

Compliance
Certificate

 

To:                              Wachovia
Capital Finance Corporation
  (Central), as Agent

150 South Wacker Drive, Suite 2200

Chicago, Illinois 60606-4202

 

Ladies and Gentlemen:

 

I hereby certify to you
pursuant to Section 9.6 of the Loan Agreement (as defined below) as
follows:

 

1.                                       I am the duly
elected Chief Financial Officer of                      ,
a               
corporation,                     ,
a                
corporation and                  ,
a                
corporation (collectively, “Borrowers”). 
Capitalized terms used herein without definition shall have the meanings
given to such terms in the Loan and Security Agreement, dated          ,
20   , by and among Wachovia Capital Finance Corporation
(Central), as agent for the financial institutions party thereto as lenders (in
such capacity, “Agent”) and the financial institutions party thereto as lenders
(collectively, “Lenders”), Borrowers and certain of their affiliates (as such
Loan and Security Agreement is amended, modified or supplemented, from time to
time, the “Loan Agreement”).

 

2.                                       I have reviewed
the terms of the Loan Agreement, and have made, or have caused to be made under
my supervision, a review in reasonable detail of the transactions and the
financial condition of Borrowers and Guarantors, during the immediately
preceding fiscal month.

 

3.                                       The review
described in Section 2 above did not disclose the existence during or at
the end of such fiscal month, and I have no knowledge of the existence and
continuance on the date hereof, of any condition or event which constitutes a
Default or an Event of Default, except as set forth on Schedule I attached
hereto.  Described on Schedule I
attached hereto are the exceptions, if any, to this Section 3 listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which any Borrower or Guarantor has taken, is taking, or
proposes to take with respect to such condition or event.

 

4.                                       I further
certify that, based on the review described in Section 2 above, no
Borrower or Guarantor has at any time during or at the end of such fiscal
month, except as specifically described on Schedule II attached hereto or
as permitted by the Loan Agreement, done any of the following:

 

(a)                                  Changed its
respective corporate name, or transacted business under any trade name, style,
or fictitious name, other than those previously described to you and set forth
in the Financing Agreements.

 

D-1

 

(b)                                 Changed the location
of its chief executive office, changed its jurisdiction of incorporation,
changed its type of organization or changed the location of or disposed of any
of its properties or assets (other than pursuant to the sale of Inventory in
the ordinary course of its business or as otherwise permitted by Section 9.7
of the Loan Agreement), or established any new asset locations.

 

(c)                                  Materially
changed the terms upon which it sells goods (including sales on consignment) or
provides services, nor has any vendor or trade supplier to any Borrower or
Guarantor during or at the end of such period materially adversely changed the
terms upon which it supplies goods to any Borrower or Guarantor.

 

(d)                                 Permitted or
suffered to exist any security interest in or liens on any of its properties,
whether real or personal, other than as specifically permitted in the Financing
Agreements.

 

(e)                                  Received any
notice of, or obtained knowledge of any of the following not previously
disclosed to Agent:  (i) the
occurrence of any event involving the release, spill or discharge of any
Hazardous Material in violation of applicable Environmental Law in a material
respect or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any applicable Environmental Law by any
Borrower or Guarantor in any material respect or (B) the release, spill or
discharge of any Hazardous Material in violation of applicable Environmental
Law in a material respect or (C) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials in violation of applicable Environmental Laws in a material respect
or (D) any other environmental, health or safety matter, which has a
material adverse effect on any Borrower or Guarantor or its business,
operations or assets or any properties at which such Borrower or Guarantor
transported, stored or disposed of any Hazardous Materials.

 

(f)                                    Become aware
of, obtained knowledge of, or received notification of, any breach or violation
of any material covenant contained in any instrument or agreement in respect of
Indebtedness for money borrowed by any Borrower or Guarantor.

 

5.                                       Attached hereto
as Schedule III are the calculations used in determining, as of the end of
such fiscal month whether Borrowers and Guarantors are in compliance with the
covenants set forth in Section 9.17 and Section 9.18 of the Loan
Agreement for such fiscal month.

 

The foregoing certifications
are made and delivered this day of                  ,
20   .

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

D-2Exhibit 10.2

 

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

This
First Amendment to Loan and Security Agreement (this “Amendment”) is entered
into as of March 15, 2005, by and between Venture Banking Group, a
division of Greater Bay Bank NA. (“Bank”) and Focus Enhancements, Inc. (“Borrower”).

 

RECITALS

 

Borrower
and Bank are parties to that certain Loan and Security Agreement dated as of November 15,
2004, as amended (the “Agreement”). Borrower and Bank desire to amend certain
provisions of the Agreement, all in accordance with the terms of this
Amendment.

 

NOW,
THEREFORE, the parties agree as follows

 

1.         Amendment to Agreement. The Agreement is hereby amended as follows:

 

(a) Section 6.9 is amended to read as
follows:

 

6.9     Maximum Net Loss

 

For any fiscal quarter of Borrower, Borrower shall
not incur a net loss of more than one hundred twenty percent (120%) of the
projected amount of net loss for such period as set forth in Borrower’s
financial projections, delivered to Bank on March 7, 2005 and attached hereto
as Exhibit E.

 

2.         Conditions Precedent to Effectiveness. This Amendment shall become effective only
upon:

 

(a)             receipt by the Bank of the following (each of
which shall be in form and substance satisfactory to Bank):

 

(i)              counterparts of this Amendment duly executed
on behalf of the Borrower and the Bank;

 

(ii)             affirmation of guaranty by Carl Berg;

 

(b)              completion of such other matters and delivery
of such other agreements, documents and certificates as Bank may reasonably
request.

 

3.           Representation and Warranties. Borrower represents and warrants that the
Representations and Warranties contained in the Agreement are true and correct
as of the date of this Amendment, and that no Event of Default has occurred and
is continuing.

 

4.         MISCELLANEOUS.

 

(a)           Successors and Assigns. This Amendment shall be binding upon and
shall inure to the benefit of Borrower and Bank and their respective successors
and assigns; provided, however, that the foregoing shall not authorize any
assignment by Borrower of its rights or duties hereunder.

 

(b)           Entire Agreement. This Amendment and the Loan Documents contain
the entire agreement of the parties hereto and supersede any other oral or
written agreements or understandings.

 

 

(c)           Course of Dealing; Waivers. No course of dealing on the part of Bank or
its officers, nor any failure or delay in the exercise of any right by Bank,
shall operate as a waiver thereof, and any single or partial exercise of any
such right shall not preclude any later exercise of any such right. Bank’s failure at any time to
require strict performance by Borrower of any
provision shall not affect any right of Bank thereafter to demand strict
compliance and performance. Any suspension or waiver of a right must be in
writing signed by an officer of Bank.

 

(d)           Legal Effect. Except as amended by this Amendment, the Loan Documents
remain in full force and effect. If any provision of this Amendment conflicts
with applicable law, such provision shall be deemed severed from
this Amendment, and the balance of this Amendment shall remain in full force
and effect. Unless otherwise defined, all capitalized terms in this Amendment
shall have the meaning set forth in the Agreement.

 

(e)             Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

 

IN WITNESS WHEREOF, the undersigned have executed
this Amendment as of the first date above written.

 

	
   

  	
  Focus
  Enhancements, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Gary Williams

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VENTURE
  BANKING GROUP, A DIVISION OF

  GREATER BAY BANK N.A.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Todd Racine

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  	
  Vice President

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