Document:

exv10w1

Exhibit 10.1

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

BANK OF AMERICA, N.A.

Agent for

The Lenders Referenced Herein

BANC OF AMERICA SECURITIES LLC

as Sole Lead Arranger and Bookrunner

and

HASTINGS ENTERTAINMENT, INC.

The Borrower

 

 

July 22, 2010

 

 

TABLE OF CONTENTS

	 	 	 	 	 

	ARTICLE 1 — Definitions
	 	 	  1	 
	 
	 	 	 	 
	ARTICLE 2 — The Revolving Credit:
	 	 	 27	 
	 
	 	 	 	 
	2-1. Establishment of Revolving Credit
	 	 	27	 
	2-2. Advances in Excess of Borrowing Base (OverLoans)
	 	 	28	 
	2-3. Risks of Value of Collateral
	 	 	28	 
	2-4. Commitment to Make Revolving Credit Loans and Support Letters of Credit
	 	 	28	 
	2-5. Revolving Credit Loan Requests
	 	 	28	 
	2-6. Making of Revolving Credit Loans
	 	 	30	 
	2-7. SwingLine Loans
	 	 	31	 
	2-8. The Loan Account
	 	 	31	 
	2-9. The Revolving Credit Notes
	 	 	32	 
	2-10. Payment of The Loan Account
	 	 	32	 
	2-11. Interest on Revolving Credit Loans
	 	 	33	 
	2-12. Revolving Credit Commitment Fee
	 	 	34	 
	2-13. Agent’s Fee
	 	 	34	 
	2-14. Unused Line Fee
	 	 	34	 
	2-15. Reserved
	 	 	34	 
	2-16. Concerning Fees
	 	 	34	 
	2-17. Agent’s and Revolving Credit Lenders’ Discretion
	 	 	35	 
	2-18. Procedures For Issuance of L/C’s
	 	 	36	 
	2-19. Fees For L/C’s
	 	 	37	 
	2-20. Concerning L/C’s
	 	 	38	 
	2-21. Changed Circumstances
	 	 	40	 
	2-22. Lenders’ Commitments
	 	 	41	 
	 
	 	 	 	 
	ARTICLE 3 — Conditions Precedent:
	 	 	 42	 
	 
	 	 	 	 
	3-1. Corporate Due Diligence
	 	 	42	 
	3-2. Opinion
	 	 	42	 
	3-3. Additional Documents
	 	 	42	 
	3-4. Officers’ Certificates
	 	 	43	 
	3-5. Representations and Warranties
	 	 	43	 
	3-6. Minimum Day One Availability
	 	 	43	 
	3-7. All Fees and Expenses Paid
	 	 	43	 
	3-8. Borrower Not InDefault
	 	 	43	 
	3-9. No Adverse Change
	 	 	43	 
	3-10. Benefit of Conditions Precedent
	 	 	43	 
	 
	 	 	 	 
	ARTICLE 4 — General Representations, Covenants and Warranties:
	 	 	 44	 
	 
	 	 	 	 
	4-1. Payment and Performance of Liabilities
	 	 	44	 
	4-2. Due Organization. Authorization. No Conflicts
	 	 	44	 
	4-3. Trade Names
	 	 	45	 
	4-4. Infrastructure
	 	 	45	 
	4-5. Locations
	 	 	46	 
	4-6. Title to Assets
	 	 	47	 
	4-7. Indebtedness
	 	 	48	 
	4-8. Insurance
	 	 	48	 
	4-9. Licenses
	 	 	49	 

ii

 

	 	 	 	 	 

	4-10. Leases
	 	 	49	 
	4-11. Requirements of Law
	 	 	49	 
	4-12. Labor Relations
	 	 	50	 
	4-13. Maintain Properties
	 	 	50	 
	4-14. Taxes
	 	 	51	 
	4-15. No Margin Stock
	 	 	52	 
	4-16. ERISA
	 	 	52	 
	4-17. Hazardous Materials
	 	 	53	 
	4-18. Litigation
	 	 	53	 
	4-19. Dividends, Investments, Corporate Action
	 	 	53	 
	4-20. Loans
	 	 	54	 
	4-21. Protection of Assets
	 	 	54	 
	4-22. Line of Business
	 	 	55	 
	4-23. Affiliate Transactions
	 	 	55	 
	4-24. Further Assurances
	 	 	55	 
	4-25. Adequacy of Disclosure
	 	 	56	 
	4-26. No Restrictions on Liabilities
	 	 	56	 
	4-27. Other Covenants
	 	 	56	 
	 
	 	 	 	 
	ARTICLE 5 — Financial Reporting and Performance Covenants:
	 	 	 57	 
	 
	 	 	 	 
	5-1. Maintain Records
	 	 	57	 
	5-2. Access to Records
	 	 	57	 
	5-3. Prompt Notice to Agent
	 	 	58	 
	5-4. Borrowing Base Certificate
	 	 	59	 
	5-5. Monthly Reports
	 	 	59	 
	5-6. Quarterly Reports
	 	 	61	 
	5-7. Annual Reports
	 	 	61	 
	5-8. Officers’ Certificates
	 	 	62	 
	5-9. Inventories, Appraisals, and Audits
	 	 	62	 
	5-10. Additional Financial Information
	 	 	64	 
	5-11. Financial Performance Covenant
	 	 	64	 
	 
	 	 	 	 
	ARTICLE 6 — Use of Collateral:
	 	 	 64	 
	 
	 	 	 	 
	6-1. Use of Inventory Collateral
	 	 	64	 
	6-2. Inventory Quality
	 	 	65	 
	6-3. Adjustments and Allowances
	 	 	65	 
	6-4. Validity of Accounts
	 	 	65	 
	6-5. Notification to Account Debtors
	 	 	65	 
	 
	 	 	 	 
	ARTICLE 7 — Cash Management, Payment of Liabilities:
	 	 	 65	 
	 
	 	 	 	 
	7-1. Depository Accounts
	 	 	65	 
	7-2. Credit Card Receipts
	 	 	66	 
	7-3. The Concentration, Blocked, and Operating Accounts
	 	 	66	 
	7-4. Proceeds and Collections
	 	 	67	 
	7-5. Payment of Liabilities
	 	 	67	 
	7-6. The Operating Account
	 	 	68	 
	 
	 	 	 	 
	ARTICLE 8 — Grant of Security Interest:
	 	 	 69	 
	 
	 	 	 	 
	8-1. Grant of Security Interest
	 	 	69	 
	8-2. Extent and Duration of Security Interest
	 	 	70	 

iii

 

	 	 	 	 	 

	 
	 	 	 	 
	ARTICLE 9 — Agent As Borrower’s Attorney-In-Fact:
	 	 	 70	 
	 
	 	 	 	 
	9-1. Appointment as Attorney-In-Fact
	 	 	70	 
	9-2. No Obligation to Act
	 	 	71	 
	 
	 	 	 	 
	ARTICLE 10 — Events of Default:
	 	 	 71	 
	 
	 	 	 	 
	10-1. Failure to Pay the Revolving Credit
	 	 	71	 
	10-2. Failure To Make Other Payments
	 	 	71	 
	10-3. Failure to Perform Covenant or Liability (No Grace Period)
	 	 	71	 
	10-4. Reporting Requirements
	 	 	72	 
	10-5. Failure to Perform Covenant or Liability (Grace Period)
	 	 	72	 
	10-6. Misrepresentation
	 	 	72	 
	10-7. Acceleration of Other Debt. Breach of Lease
	 	 	72	 
	10-8. Default Under Other Agreements
	 	 	72	 
	10-9. Uninsured Casualty Loss
	 	 	73	 
	10-10. Attachment. Judgment. Restraint of Business
	 	 	73	 
	10-11. Business Failure
	 	 	73	 
	10-12. Bankruptcy
	 	 	73	 
	10-13. Default by Guarantor
	 	 	74	 
	10-14. Indictment — Forfeiture
	 	 	74	 
	10-15. Termination of Guaranty
	 	 	74	 
	10-16. Challenge to Loan Documents
	 	 	74	 
	10-17. Change in Control
	 	 	74	 
	 
	 	 	 	 
	ARTICLE 11 — Rights and Remedies Upon Default:
	 	 	 75	 
	 
	 	 	 	 
	11-1. Acceleration
	 	 	75	 
	11-2. Rights of Enforcement
	 	 	75	 
	11-3. Sale of Collateral
	 	 	75	 
	11-4. Occupation of Business Location
	 	 	76	 
	11-5. Grant of Nonexclusive License
	 	 	77	 
	11-6. Assembly of Collateral
	 	 	77	 
	11-7. Rights and Remedies
	 	 	77	 
	 
	 	 	 	 
	ARTICLE 12 — Revolving Credit Fundings and Distributions:
	 	 	 77	 
	 
	 	 	 	 
	12-1. Revolving Credit Funding Procedures
	 	 	77	 
	12-2. SwingLine Loans
	 	 	78	 
	12-3. Agent’s Covering of Fundings
	 	 	78	 
	12-4. Ordinary Course Distributions
	 	 	80	 
	 
	 	 	 	 
	ARTICLE 13 — Acceleration and Liquidation:
	 	 	 81	 
	 
	 	 	 	 
	13-1. Acceleration Notices
	 	 	81	 
	13-2. Acceleration
	 	 	82	 
	13-3. Initiation of Liquidation
	 	 	82	 
	13-4. Actions At and Following Initiation of Liquidation
	 	 	82	 
	13-5. Agent’s Conduct of Liquidation
	 	 	82	 
	13-6. Distribution of Liquidation Proceeds
	 	 	83	 
	13-7. Relative Priorities To Proceeds of Liquidation
	 	 	83	 
	 
	 	 	 	 
	ARTICLE 14 -The Agent:
	 	 	 84	 
	 
	 	 	 	 
	14-1. Appointment of The Agent
	 	 	84	 
	14-2. Responsibilities of Agent
	 	 	84	 
	14-3. Concerning Distributions By the Agent
	 	 	85	 

iv

 

	 	 	 	 	 

	14-4. Dispute Resolution
	 	 	86	 
	14-5. Distributions of Notices and of Documents
	 	 	86	 
	14-6. Confidential Information
	 	 	87	 
	14-7. Reliance by Agent
	 	 	87	 
	14-8. Non-Reliance on Agent and Other Revolving Credit Lenders
	 	 	87	 
	14-9. Indemnification
	 	 	88	 
	14-10. Resignation of Agent
	 	 	88	 
	 
	 	 	 	 
	ARTICLE 15 — Action By Agents — Consents — Amendments — Waivers:
	 	 	 89	 
	 
	 	 	 	 
	15-1. Administration of Credit Facilities
	 	 	89	 
	15-2. Actions Requiring or On Direction of Majority Lenders
	 	 	90	 
	15-3. Actions Requiring or On Direction of SuperMajority Lenders
	 	 	90	 
	15-4. Actions Requiring Certain Consent
	 	 	90	 
	15-5. Actions Requiring or Directed By Unanimous Consent
	 	 	91	 
	15-6. Actions Requiring SwingLine Lender Consent
	 	 	92	 
	15-7. Actions Requiring Agent’s Consent
	 	 	92	 
	15-8. Miscellaneous Actions
	 	 	92	 
	15-9. Actions Requiring Borrower’s Consent
	 	 	93	 
	15-10. NonConsenting Revolving Credit Lender
	 	 	93	 
	 
	 	 	 	 
	ARTICLE 16 —  Assignments By Revolving Credit Lenders:
	 	 	 94	 
	 
	 	 	 	 
	16-1. Assignments and Assumptions
	 	 	94	 
	16-2. Assignment Procedures
	 	 	95	 
	16-3. Effect of Assignment
	 	 	96	 
	 
	 	 	 	 
	ARTICLE 17 — Notices:
	 	 	 96	 
	 
	 	 	 	 
	17-1. Notice Addresses
	 	 	96	 
	17-2. Notice Given
	 	 	97	 
	 
	 	 	 	 
	ARTICLE 18 — Term:
	 	 	 98	 
	 
	 	 	 	 
	18-1. Termination of Revolving Credit
	 	 	98	 
	18-2. Actions On Termination
	 	 	98	 
	 
	 	 	 	 
	ARTICLE 19 — General:
	 	 	 99	 
	 
	 	 	 	 
	19-1. Protection of Collateral
	 	 	99	 
	19-2. Publicity
	 	 	99	 
	19-3. Successors and Assigns
	 	 	99	 
	19-4. Severability
	 	 	100	 
	19-5. Amendments
	 	 	100	 
	19-6. Application of Proceeds
	 	 	101	 
	19-7. Increased Costs
	 	 	101	 
	19-8. Costs and Expenses of the Agent
	 	 	102	 
	19-9. Copies and Facsimiles
	 	 	102	 
	19-10. Massachusetts Law
	 	 	103	 
	19-11. Consent to Jurisdiction
	 	 	103	 
	19-12. Indemnification
	 	 	103	 
	19-13. Rules of Construction
	 	 	104	 
	19-14. Intent
	 	 	105	 
	19-15. Participations
	 	 	105	 
	19-16. Right of Set-Off
	 	 	106	 
	19-17. Pledges To Federal Reserve Banks
	 	 	106	 

v

 

	 	 	 	 	 

	19-18. Maximum Interest Rate
	 	 	106	 
	19-19. Waivers
	 	 	107	 
	19-20. ENTIRE AGREEMENT
	 	 	108	 
	19-21. Foreign Asset Control Regulations
	 	 	108	 
	19-22. USA PATRIOT Act Notice
	 	 	109	 
	19-23. No Advisory or Fiduciary Responsibility
	 	 	109	 
	19-24. Original Credit Agreement Amended and Restated
	 	 	110	 

vi

 

EXHIBITS

	 	 	 	 	 

	2-7(c)

	 	:
	 	SwingLine Note
	2-9

	 	:
	 	Revolving Credit Note
	2-22

	 	:
	 	Revolving Credit Lenders’ Commitments
	4-2

	 	:
	 	Subsidiaries
	4-3

	 	:
	 	Trade Names
	4-5

	 	:
	 	Locations, Leases, and Landlords
	4-6

	 	:
	 	Encumbrances
	4-7

	 	:
	 	Indebtedness
	4-8

	 	:
	 	Insurance Policies
	4-10

	 	:
	 	Capital Leases
	4-14

	 	:
	 	Taxes
	4-16(a)

	 	:
	 	ERISA
	4-18

	 	:
	 	Litigation
	5-4

	 	:
	 	Borrowing Base Certificate
	7-1

	 	:
	 	DDAs
	7-2

	 	:
	 	Credit Card Arrangements
	16-2

	 	:
	 	Assignment / Assumption

vii

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

July 22, 2010

     THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) is made between

     Bank of America, N.A. (in such capacity, herein the “Agent”), a national banking
association with offices at 100 Federal Street, Boston, Massachusetts 02110, as agent for
the ratable benefit of the “Revolving Credit Lenders”, who are, at present, those financial
institutions identified on the signature pages of this Agreement and who in the future are
those Persons (if any) who become “Revolving Credit Lenders” in accordance with the
provisions of Section 2-22, below,

     and

     Hastings Entertainment, Inc. ( the “ Borrower”), a Texas corporation with its principal
executive offices at 3601 Plains Boulevard, Amarillo, Texas 79102

in consideration of the mutual covenants contained herein and benefits to be derived herefrom,

WITNESSETH:

     WHEREAS, the Borrower has entered into a Loan and Security Agreement, dated as of August 29,
2000 (as amended and in effect, the “Original Credit Agreement”), among the Borrower, the
“Revolving Credit Lenders” as defined therein, and Bank of America, N.A., successor to Fleet Retail
Finance Inc., as Agent for the Revolving Credit Lenders; and

     WHEREAS, in accordance with Article 15 of the Original Credit Agreement, the Borrower, the
Revolving Credit Lender, and the Agent desire to amend and restate the Original Credit Agreement as
provided herein.

     NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this
Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged,
the undersigned hereby agree that the Original Credit Agreement shall be amended and restated in
its entirety to read as follows:

ARTICLE 1 — Definitions

     As used herein, the following terms have the following meanings or are defined in the section
of this Agreement so indicated:

“Acceleration”: The making of demand or declaration that any indebtedness, not otherwise due
and payable, is due and payable. Derivations of the word “Acceleration” (such as
“Accelerate”) are used with like meaning in this Agreement.

1

 

“Acceleration Notice”: Written notice as follows:

     (a) From the Agent to the Revolving Credit Lenders, as provided in Section
13-1(a).

     (b) From the SuperMajority Lenders to the Agent, as provided in Section
13-1(b).

“Account Debtor”: Has the meaning given that term in the UCC.

“Accounts” and “Accounts Receivable” include, without limitation, “accounts” as defined in
the UCC, and also all: accounts, accounts receivable, receivables, and rights to
payment (whether or not earned by performance) for: property that has been or is to be
sold, leased, licensed, assigned, or otherwise disposed of; services rendered or to be
rendered; a policy of insurance issued or to be issued; a secondary obligation incurred
or to be incurred; energy provided or to be provided; for the use or hire of a vessel;
arising out of the use of a credit or charge card or information contained on or used
with that card; winnings in a lottery or other game of chance; and also all Inventory
which gave rise thereto, and all rights associated with such Inventory, including the
right of stoppage in transit; all reclaimed, returned, rejected or repossessed
Inventory (if any) the sale of which gave rise to any Account.

“ACH”: Automated clearing house.

“Affiliate”: The following:

     (a) With respect to any two Persons, a relationship in which (i) one holds,
directly or indirectly, not less than twenty five percent (25%) of the Voting Stock,
beneficial interests, partnership interests, or other equity interests of the other;
or (ii) one has, directly or indirectly, the right, under ordinary circumstances, to
vote for the election of a majority of the directors (or other body or Person who
has those powers customarily vested in a board of directors of a corporation); or
(iii) not less than twenty five percent (25%) of their respective ownership is
directly or indirectly held by the same third Person.

     (b) Any Person which has its tax returns or financial statements consolidated
with the Borrower’s; or is a member of the same controlled group of corporations
(within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code
of 1986, as amended from time to time) of which the Borrower is a member.

“Agent”: Is referred to in the Preamble.

“Agent’s Cover”: Is defined in Section 12-3(c)(i).

“Agent’s Fee”: Is defined in Section 2-13.

2

 

“Agreement”: Is referred to in the Preamble.

“Agent’s Rights and Remedies”: Is defined in Section 11-7.

“Applicable Fee Rate”: For any period of calculation, (a) if the average daily sum of the
unpaid principal balance of the Loan Account and the undrawn Stated Amount of L/C’s
outstanding for the preceding three month period is greater than or equal to
$50,000,000, 0.30% per annum, or (ii) if the average daily sum of the unpaid principal
balance of the Loan Account and the undrawn Stated Amount of L/C’s outstanding for the
preceding three month period is less than $50,000,000, 0.375% per annum.

“Applicable Law”: As to any Person: (i) All statutes, rules, regulations, orders, or other
requirements having the force of law and (ii) all court orders and injunctions,
arbitrator’s decisions, and/or similar rulings, in each instance ((i) and (ii)) of or
by any federal, state, municipal, and other governmental authority, or court, tribunal,
panel, or other body which has or claims jurisdiction over such Person, or any property
of such Person.

“Appraised Inventory Liquidation Value”: The net recovery (stated as a percentage of the
Cost of Borrower’s Inventory), as reflected on the then most recent appraisal (which
shall be undertaken by an independent appraiser engaged by the Agent) of the Borrower’s
Inventory, as recoverable on the Borrower’s Inventory in the event of an in-store
liquidation of that Inventory.

“Assignee Revolving Credit Lender”: Is defined in Section 16-1(a).

“Assigning Revolving Credit Lender”: Is defined in Section 16-1(a).

“Assignment and Acceptance”: Is defined in Section 16-2.

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

     (a) is the result of

	 	(i)	 	The Revolving Credit Ceiling
	 
	 	 	 	Minus
	 
	 	(ii)	 	The aggregate unpaid balance of the Loan Account
	 
	 	 	 	Minus
	 
	 	(iii)	 	The aggregate undrawn Stated
Amount of all then outstanding
	 
	 	 	 	L/C’s.

     (b) is the result of

	 	(i)	 	The Borrowing Base
	 
	 	 	 	Minus
	 
	 	(ii)	 	The aggregate unpaid balance of the Loan Account

3

 

	 	 	 	Minus
	 
	 	(iv)	 	The aggregate undrawn Stated
Amount of all then outstanding
	 
	 	 	 	L/C’s.

“Availability Reserves”: Such reserves as the Agent from time to time reasonably determines
in the Agent’s reasonable discretion as being appropriate to avoid the Borrower’s
breach of any financial covenant included herein or to reflect the impediments to the
Agent’s ability to realize upon the Collateral.

“Bank of America” means Bank of America, N.A. and its successors.

“Banker’s Acceptance” means a time draft or bill of exchange or other deferred payment
obligation relating to a documentary L/C which has been accepted by the Issuer.

“Bank Products” means any services or facilities provided to the Borrower by the
Agent, any Lender, or any of their respective Affiliates, including, without
limitation, on account of Swap Contracts, but excluding Cash Management Services.

“Bankruptcy Code”: Title 11, U.S.C., as amended from time to time.

“Base”: For any day a fluctuating rate per annum equal to the highest of (a) the rate of
interest in effect for such day as publicly announced from time to time by Bank of
America as its “prime rate”; (b) the Federal Funds Rate for such day, plus 0.50%; and
(c) the Libor Offer Rate for a 30 day interest period as determined on such day, plus
1.0%. The “prime rate” is a rate set by Bank of America based upon various factors
including Bank of America’s costs and desired return, general economic conditions and
other factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. Any change in Bank of America’ s prime
rate, the Federal Funds Rate or the Libor Offer Rate, respectively, shall take effect
at the opening of business on the day specified in the public announcement of such
change.

“Base Margin”: Initially, the rate set forth in Level I below. Commencing
November 1, 2010, and on the first day of each Fiscal quarter thereafter, the Base
Margin shall be the following percentages based upon the following criteria:

	 	 	 	 	 
	Level	 	Average Availability	 	Base Margin
	I
	 	Greater than $55,000,000	 	1.00%
	 
	II
	 	Greater than $40,000,000 and less than or equal to $55,000,000	 	1.25%
	III
	 	Greater than $25,000,000 and less than or equal to $40,000,000	 	1.50%
	IV
	 	Less than or equal to $25,000,000	 	1.75%

4

 

On the first day of each Fiscal quarter, the Base Margin shall be adjusted based
upon the Borrower’s aggregate daily average Availability for the immediately
preceding Fiscal quarter divided by the total number of days in such immediately
preceding Fiscal quarter. provided, however, upon the occurrence of an Event of
Default, the Base Margin shall be immediately increased to the percentage set forth
in Level IV above (even if the average Availability requirements for another Level
have been met) and interest shall be determined in the manner set forth in Section
2-11(f).

“Base Margin Loan”: Any Revolving Credit Loan which bears interest at the Base
Margin Rate.

“Base Margin Rate”: That rate per annum which is the aggregate of Base plus the Base
Margin.

“Blocked Account”: Is defined in Section 7-3(a)(ii).

“Blocked Account Agreement”: An Agreement, in form reasonably satisfactory to the Agent,
which Agreement recognizes the Agent’s Collateral Interest in the contents of the DDA
which is the subject of such Agreement and agrees that such contents shall be
transferred only to the Concentration Account or as otherwise instructed by the Agent.

“Borrower”: Is defined in the Preamble.

“Borrowing Base”: At any time of calculation, the sum of (a) 85% of Eligible Credit Card
Receivables plus (b) (i) 85% multiplied by (ii) the Appraised Inventory
Liquidation Value multiplied by (iii) the Cost of the Borrower’s Eligible
Inventory (net of Inventory Reserves), less (c) Availability Reserves.

“Borrowing Base Certificate”: Is defined in Section 5-4.

“Business Day”: Any day other than (a) a Saturday or Sunday; (b) any day on which banks in
Boston, Massachusetts or in Amarillo, Texas generally are not open to the general
public for the purpose of conducting commercial banking business; or (c) a day on which
the principal office of the Agent is not open to the general public to conduct
business.

“Business Plan”: The Borrower’s business plan previously delivered to the Agent for Fiscal
year 2010, and any revision, amendment, or update of such business plan.

“Capital Expenditures”: The expenditure of funds or the incurrence of liabilities which is
required to be capitalized in accordance with GAAP.

“Capital Lease”: Any lease which is required to be capitalized in accordance with GAAP.

“Cash Dominion Event”: Either (i) the occurrence and continuance of any Event of
Default, or (ii) the failure of the Borrowers to maintain Availability equal to at
least twenty percent

5

 

(20%) of the Borrowing Base at any time. For purposes of this Agreement, the
occurrence of a Cash Dominion Event shall be deemed continuing (i) so long as such
Event of Default has not been waived, and/or (ii) if the Cash Dominion Event arises
as a result of the Borrowers’ failure to achieve Availability as required hereunder,
until Availability has exceeded twenty percent (20%) of the Borrowing Base for sixty
(60) consecutive calendar days, in which case a Cash Dominion Event shall no longer
be deemed to be continuing for purposes of this Agreement; provided that a Cash
Dominion Event shall be deemed continuing (even if an Event of Default is no longer
continuing and/or Availability exceeds the required amount for sixty (60)
consecutive calendar days) at all times for the remainder of such Fiscal year after
a Cash Dominion Event has already occurred and been discontinued once in the same
Fiscal Year. The termination of a Cash Dominion Event as provided herein shall in
no way limit, waive or delay the occurrence of a subsequent Cash Dominion Event in
the event that the conditions set forth in this definition again arise.

“Cash Management Services” means any one or more of the following types or services
or facilities provided to the Borrower by the Agent or any Lender or any of their
respective Affiliates: (a) ACH transactions, (b) cash management services, including,
without limitation, controlled disbursement services, treasury, depository, overdraft,
and electronic funds transfer services, (c) foreign exchange facilities, (d) credit
card processing services, and (e) purchase, credit, or debit cards or similar products.

“Change in Control”: The occurrence of any of the following:

     (a) The acquisition, by any group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended) or by any Person, other than the
Marmaduke Family or any member thereof, of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission) of (i) 25% or more of the
issued and outstanding capital stock of the Borrower having the right, under
ordinary circumstances, to vote for the election of directors of the Borrower, and
(ii) issued and outstanding capital stock of the Borrower having the right, under
ordinary circumstances, to vote for the election of directors of the Borrower in an
amount greater than the Marmaduke Family.

     (b) More than half of the persons who were directors of the Borrower on the
first day of any period consisting of twelve (12) consecutive calendar months (the
first of which twelve (12) month periods commencing with the first day of the month
during

6

 

which this Agreement was executed), cease, for any reason other than death,
disability, or retirement, to be directors of the Borrower.

“Chattel Paper”: Has the meaning given that term in the UCC.

“Collateral”: Is defined in Section 8-1.

“Collateral Interest”: Any interest in property to secure an obligation, including, without
limitation, a security interest, mortgage, and deed of trust.

“Commercial Tort Claim”: Has the meaning given that term in the UCC.

“Concentration Account”: Is defined in Section 7-3(a)(i).

“Consent”: Actual consent given by the Revolving Credit Lender from whom such consent is
sought; or the passage of seven (7) Business Days from receipt of written notice to a
Revolving Credit Lender from the Agent of a proposed course of action to be followed by
the Agent without such Revolving Credit Lender’s giving the Agent written notice of
that Revolving Credit Lender’s objection to such course of action, provided that the
Agent may rely on such passage of time as consent by a Revolving Credit Lender only if
such written notice states that consent will be deemed effective if no objection is
received within such time period.

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

“Consolidated EBITDA”: At any date of determination, an amount equal to Consolidated Net
Income of the Borrower and its Subsidiaries on a Consolidated basis for the most
recently completed twelve Fiscal months, plus (a) the following to the extent deducted
in calculating such Consolidated Net Income: (i) Consolidated Interest Charges, (ii)
the provision for federal, state, local and foreign income Taxes, (iii) depreciation
and amortization expense, (iv) stock-based compensation expenses and store asset
impairment expenses which do not represent a cash item in such period or any future
period, and (v) other non-recurring expenses and extraordinary losses reducing such
Consolidated Net Income which do not represent a cash item in such period or any future
period, minus (b) the following to the extent included in calculating such Consolidated
Net Income: (i) all extraordinary gains increasing such Consolidated Net Income which
do not represent a cash item in such period or any future period, and (ii) all non-cash
items increasing Consolidated Net Income, all as determined on a Consolidated basis in
accordance with GAAP.

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“Consolidated Fixed Charge Coverage Ratio”: At any date of determination, the ratio of (a)
(i) Consolidated EBITDA for such period minus (ii) Capital Expenditures made during
such period, minus (iii) the aggregate amount of federal, state, local and foreign
income taxes paid in cash during such period to (b) the sum of (1) Debt Service
Charges, plus (2) any ownership, redemption, retirement, purchase, repurchase, or
acquisition of any of the Borrower’s capital stock made during such period, in each
case, of or by Borrower and its Subsidiaries for the most recently completed twelve
Fiscal months, all as determined on a Consolidated basis in accordance with GAAP.

“Consolidated Interest Charges” At any time of calculation, for the most recently completed
twelve (12) Fiscal months, the sum of (a) all interest, premium payments, debt
discount, fees, charges and related expenses in connection with borrowed money
(including capitalized interest) or in connection with the deferred purchase price of
assets, in each case to the extent treated as interest in accordance with GAAP,
including, without limitation, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers’ acceptance financing and net costs
under Swap Contracts, and (b) the portion of rent expense with respect to such period
under Capital Leases that is treated as interest in accordance with GAAP, in each case
of or by the Borrower and its Subsidiaries, all as determined on a Consolidated basis
in accordance with GAAP.

“Consolidated Net Income” As of any date of determination, the net income of Borrower and
its Subsidiaries for the most recently completed twelve (12) Fiscal months, all as
determined on a Consolidated basis in accordance with GAAP.

“Contract Rate”: Is defined in Section 19-18(b).

“Cost”: Cost of purchases, based upon the Borrower’s accounting practices, known to the
Agent, which practices are in effect on the date on which this Agreement was executed
as such calculated cost is determined from: invoices received by the Borrower; the
Borrower’s purchase journal; or the Borrower’s By-Department monthly report generated
by the Borrower’s inventory control system. (“Cost” does not include inventory
capitalization costs or other non-purchase price charges (such as freight) used in the
Borrower’s calculation of cost of goods sold).

“Costs of Collection”: Includes, without limitation, all attorneys’ reasonable fees and
reasonable out-of-pocket expenses incurred by the Agent’s attorneys, and all reasonable
out-of-pocket costs incurred by the Agent in the administration of the Liabilities
and/or the Loan Documents, including, without limitation, reasonable costs and expenses
associated with travel on behalf of the Agent, where such costs and expenses are
directly or indirectly

8

 

related to or in respect of the Agent’s: administration and management of the
Liabilities; negotiation, documentation, and amendment of any Loan Document; or
efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities,
and/or the Agent’s Rights and Remedies and/or any of the rights and remedies of the
Agent against or in respect of any guarantor or other person liable in respect of
the Liabilities (whether or not suit is instituted in connection with such efforts).
“Costs of Collection shall also include the reasonable fees and expenses of
Lenders’ Special Counsel. The Costs of Collection are Liabilities, and at the
Agent’s option may bear interest at the then effective Base Margin Rate.

“Credit Card Receivables” Each Account, together with all income, payments and proceeds
thereof, owed by a major credit or debit card issuer (including, but not limited to,
Visa, MasterCard, American Express, and Discover and such other issuers approved by the
Agent) to the Borrower resulting from charges by a customer of the Borrower on credit
or debit cards issued by such issuer in connection with the sale of goods by the
Borrower, or services performed by the Borrower, in each case in the ordinary course of
its business.

“DDA”: Any checking or other demand daily depository account maintained by the Borrower.

“Debt Service Charges”: At any time of calculation, for the most recently completed
twelve (12) Fiscal months, the sum of (a) Consolidated Interest Charges paid or
required to be paid for such period, plus (b) principal payments made or required to be
made on account of Indebtedness (excluding the Liabilities but including, without
limitation, obligations with respect to Capital Leases) for such period, in each case
determined on a Consolidated basis in accordance with GAAP.

“Delinquent Revolving Credit Lender”: Is defined in Section 12-3(c).

“Deposit Account”: Has the meaning given that term in the UCC.

“Documents”: Has the meaning given that term in the UCC.

“Documents of Title”: Has the meaning given that term in the UCC.

“Eligible Assignee”: A bank, insurance company, or company engaged in the business of making
commercial loans having a combined capital and surplus in excess of $300 Million or any
Affiliate of any Revolving Credit Lender, or any Person to whom a Revolving Credit
Lender assigns its rights and obligations under this Agreement as part of a programmed
assignment and transfer of such Revolving Credit Lender’s rights in and to a material
portion of such Revolving Credit Lender’s portfolio of asset based

9

 

credit facilities, all of which assignees must be acceptable to the Borrower
pursuant to Section 2-22(e).

“Eligible Credit Card Receivables” means at the time of any determination thereof, each
Credit Card Receivable that satisfies the following criteria at the time of creation
and continues to meet the same at the time of such determination: such Credit Card
Receivable (i) has been earned by performance and represents the bona fide amounts due
to the Borrower from a credit card payment processor and/or credit card issuer, and in
each case originated in the ordinary course of business of the Borrower, and (ii) in
each case is acceptable to the Agent in its discretion, and is not ineligible for
inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a)
through (i) below. Without limiting the foregoing, to qualify as an Eligible Credit
Card Receivable, an Account shall indicate no Person other than the Borrower as payee
or remittance party. In determining the amount to be so included, the face amount of
an Account shall be reduced by, without duplication, to the extent not reflected in
such face amount, (i) the amount of all accrued and actual discounts, claims, credits
or credits pending, promotional program allowances, price adjustments, finance charges
or other allowances (including any amount that the Borrower may be obligated to rebate
to a customer, a credit card payment processor, or credit card issuer pursuant to the
terms of any agreement or understanding (written or oral)) and (ii) the aggregate
amount of all cash received in respect of such Account but not yet applied by the
Borrower to reduce the amount of such Credit Card Receivable. Except as otherwise
agreed by the Administrative Agent, any Credit Card Receivable included within any of
the following categories shall not constitute an Eligible Credit Card Receivable:

	 	(a)	 	Credit Card Receivables that have been outstanding for more than five (5)
Business Days from the date of sale;
	 
	 	(b)	 	Credit Card Receivables (i) that are not subject to a perfected first-priority
security interest in favor of the Agent, or (ii) with respect to which the Borrower
does not have good, valid and marketable title thereto, free and clear of any
Encumbrance (other than Encumbrances granted to the Agent);
	 
	 	(c)	 	Credit Card Receivables which are disputed, are with recourse, or with respect
to which a claim, counterclaim, offset or chargeback has been asserted (to the extent
of such claim, counterclaim, offset or chargeback);

10

 

	 	(d)	 	Credit Card Receivables as to which the processor has the right under
certain circumstances to require the Borrower to repurchase the Accounts from such
credit card processor;
	 
	 	(e)	 	Credit Card Receivables due from an issuer or payment processor of the
applicable credit card which is the subject of any bankruptcy or insolvency
proceedings;
	 
	 	(f)	 	Credit Card Receivables which are not a valid, legally enforceable obligation
of the applicable issuer with respect thereto;
	 
	 	(g)	 	Credit Card Receivables which do not conform to all representations, warranties
or other provisions in the Loan Documents relating to Credit Card Receivables;
	 
	 	(h)	 	Credit Card Receivables which are evidenced by “chattel paper” or an
“instrument” of any kind unless such “chattel paper” or “instrument” is in the
possession of the Agent, and to the extent necessary or appropriate, endorsed to the
Agent; or
	 
	 	(i)	 	Credit Card Receivables which the Agent determines in its discretion to be
uncertain of collection or which do not meet such other reasonable eligibility criteria
for Credit Card Receivables as the Agent may determine.

“Eligible Inventory”: will be calculated in a manner consistent with current tracking
practices, based on the Borrower’s By-Department monthly report generated by the
Borrower’s inventory control system, which report reflects the functional equivalent of
a stock ledger inventory at cost, and shall consist of the following: Such of the
Borrower’s Inventory as to which the Agent has a perfected security interest which is
prior and superior to all security interests, claims, and all Encumbrances other than
Permitted Encumbrances. (“Eligible Inventory” includes traditional rental videos and
DVD’s and similar items (net of accumulated depreciation) but does not include, nor, to
the extent such items may have been included at any time in the Agent’s discretion, is
the Agent under any obligation to continue to include: any revenue sharing video tapes
or DVD’s or similar items; non-merchandise inventory (such as labels, bags, and
packaging materials); damaged goods; packaways; consigned inventory; inventory
in-transit to the Borrower from a foreign location prior to such inventory arriving at
a domestic distribution center of the Borrower; and other similar categories of Goods).

“Employee Benefit Plan”: As defined in ERISA.

“Encumbrance”: Each of the following:

     (a) A Collateral Interest or agreement to create or grant a Collateral
Interest; the interest of a lessor under a Capital Lease; conditional sale or other
title retention agreement; sale of accounts receivable or chattel paper; or other
arrangement pursuant to

11

 

which any Person is entitled to any preference or priority with respect to the
property or assets of another Person or the income or profits of such other Person;
each of the foregoing whether consensual or non-consensual and whether arising by
way of agreement, operation of law, legal process or otherwise.

     (b) The filing of any financing statement under the UCC or comparable law of
any jurisdiction.

“End Date”: The date upon which both (a) all Liabilities have been paid in full and
(b) all obligations of any Revolving Credit Lender to make loans and advances and to
provide other financial accommodations to the Borrower hereunder shall have been
irrevocably terminated.

“Environmental Laws”: All of the following:

     (a) Applicable Law which regulates or relates to, or imposes any standard of
conduct or liability on account of or in respect to environmental protection
matters, including, without limitation, Hazardous Materials, as are now or hereafter
in effect.

     (b) The common law relating to damage to Persons or property from Hazardous
Materials.

“Equipment”: Includes, without limitation, “equipment” as defined in the UCC, and also all
furniture, store fixtures, rolling stock, machinery, office equipment, plant equipment,
tools, dies, molds, and other goods, property, and assets which are used and/or were
purchased for use in the operation or furtherance of the Borrower’s business, and any
and all accessions or additions thereto, and substitutions therefor, but does not
include motor vehicles.

“ERISA”: The Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate”: Any Person which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and
which would be treated as a single employer under Section 414 of the Internal Revenue
Code of 1986, as amended.

“Events of Default”: Is defined in Article 10. An “Event of Default” shall be deemed to
have occurred and to be continuing unless and until that Event of Default has been duly
waived by the requisite Lenders or by the Agent as applicable (following which, and in
the event of such waiver, that Event of Default shall be deemed not to have occurred).

“Exempt Assets”: Revenue sharing videos, motor vehicles, and Leasehold Interests.

12

 

“Exempt DDA”: Depository Accounts maintained by the Borrower, the only contents of which may
be transfers from the Operating Account or the Payroll Account and actually used solely
(i) for petty cash purposes; (ii) for payroll; or (iii) employee benefits.

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

“Fee Letter”: That letter dated July 22, 2010 and styled “Revolving Credit Facility
Fee Letter” between the Borrower and the Agent, as such letter may from time to time be
amended.

“Fiscal”: When followed by “month”, “quarter” or “year”, the relevant fiscal period based on
the Borrower’s fiscal year and Borrower’s practices. (e.g. the Borrower’s fiscal year
ends in January 2010, reference to that year would be to the Borrower’s “Fiscal 2009”).

“Fixtures”: Has the meaning given that term in the UCC.

“GAAP”: Generally accepted accounting principles in the United States which are consistent
with those promulgated or adopted by the Financial Accounting Standards Board and its
predecessors (or successors) in effect and applicable to that accounting period in
respect of which reference to GAAP is being made, provided, however, in the event of a
Material Accounting Change, then unless otherwise specifically agreed to by the Agent,
(a) the Borrower’s compliance with the financial performance covenants imposed pursuant
to Section 5-11 shall be determined as if such Material Accounting Change had not taken
place and (b) the Borrower shall include, with its monthly, quarterly, and annual
financial statements a schedule, certified by the Borrower’s chief financial officer,
on which the effect of such Material Accounting Change on that statement shall be
described.

“General Intangibles”: Includes, without limitation, “general intangibles” as defined in the
UCC; and also all: rights to payment for credit extended; deposits; amounts due to the
Borrower; credit memoranda in favor of the Borrower; warranty claims; tax refunds and
abatements; insurance refunds and premium rebates; all means and vehicles of

13

 

investment or hedging, including, without limitation, options, warrants, and futures
contracts; records; customer lists; telephone numbers; goodwill; causes of action;
judgments; payments under any settlement or other agreement; literary rights; rights
to performance; royalties; license and/or franchise fees; rights of admission;
licenses; franchises; license agreements, including all rights of the Borrower to
enforce same; permits, certificates of convenience and necessity, and similar rights
granted by any governmental authority; patents, patent applications, patents
pending, and other intellectual property; internet addresses and domain names;
developmental ideas and concepts; proprietary processes; blueprints, drawings,
designs, diagrams, plans, reports, and charts; catalogs; manuals; technical data;
computer software programs (including the source and object codes therefor),
computer records, computer software, rights of access to computer record service
bureaus, service bureau computer contracts, and computer data; tapes, disks,
semi-conductors chips and printouts; trade secrets rights, copyrights, mask work
rights and interests, and derivative works and interests; user, technical reference,
and other manuals and materials; trade names, trademarks, service marks, and all
goodwill relating thereto; applications for registration of the foregoing; and all
other general intangible property of the Borrower in the nature of intellectual
property; proposals; cost estimates, and reproductions on paper, or otherwise, of
any and all concepts or ideas, and any matter related to, or connected with, the
design, development, manufacture, sale, marketing, leasing, or use of any or all
property produced, sold, or leased, or credit extended or services performed, by the
Borrower, whether intended for an individual customer or the general business of the
Borrower, or used or useful in connection with research by the Borrower.

“Goods”: Has the meaning given that term in the UCC, and also includes computer programs
embedded in goods and any supporting information provided in connection with a
transaction relating to the program if (i) the program is associated with the goods in
such manner that it customarily is considered part of the goods or (ii) by becoming the
owner of the goods, a Person acquires a right to use the program in connection with the
goods.

“Gross Margin”: With respect to the subject accounting period for which being calculated,
the decimal equivalent of the following (determined in accordance with the cost method
of accounting):

Sales (Minus) Cost of Goods Sold

Sales

14

 

“Hazardous Materials”: Any substance which is defined or regulated as a hazardous material
or oil in or under any Environmental Law.

“Increased Reporting Event”: Either (i) the occurrence and continuance of any Event of
Default, or (ii) the failure of the Borrower to maintain Availability at least equal to
twenty percent (20%) of the Borrowing Base. For purposes of this Agreement, the
occurrence of an Increased Reporting Event shall be deemed continuing (i) so long as
such Event of Default has not been waived, and/or (ii) if the Increased Reporting Event
arises as a result of the Borrowers ’ failure to achieve Availability as required
hereunder, until Availability has exceeded twenty percent (20%) of the Borrowing Base
for sixty (60) consecutive calendar days, in which case an Increased Reporting Event
shall no longer be deemed to be continuing for purposes of this Agreement. The
termination of an Increased Reporting Event as provided herein shall in no way limit,
waive or delay the occurrence of a subsequent Increased Reporting Event in the event
that the conditions set forth in this definition again arise.

“Indebtedness”: All indebtedness and obligations of or assumed by any Person on account of
or in respect to any of the following:

     (a) In respect of money borrowed (including any indebtedness which is
non-recourse to the credit of such Person but which is secured by an Encumbrance on
any asset of such Person) whether or not evidenced by a promissory note, bond,
debenture or other written obligation to pay money.

     (b) In connection with any letter of credit or acceptance transaction
(including, without limitation, the face amount of all letters of credit and
acceptances issued for the account of such Person or reimbursement on account of
which such Person would be obligated).

     (c) In connection with the sale or discount of accounts receivable or chattel
paper of such Person.

     (d) As lessee under Capital Leases.

     (e) In connection with any sale and leaseback transaction.

“Indebtedness” also includes:

     (x) Indebtedness of others secured by an Encumbrance on any
asset of such Person, whether or not such Indebtedness is assumed by
such Person.

15

 

     (y) Any guaranty, endorsement, suretyship or other undertaking
pursuant to which that Person may be liable on account of any
obligation of any third party.

     (z) The Indebtedness of a partnership or joint venture for which
such Person is liable as a general partner or joint venturer.

“InDefault”: Any occurrence, circumstance, or state of facts with respect to the Borrower
which (a) is an Event of Default; or (b) would become an Event of Default if any
requisite notice were given and/or any requisite period of time were to run and such
occurrence, circumstance, or state of facts were not absolutely cured within any
applicable grace period.

“Indemnified Person”: Is defined in Section 19-12.

“Instruments”: Has the meaning given that term in the UCC.

“Interest Payment Date”: With reference to:

     Each Libor Loan: The last day of the Interest Period relating thereto (and on
the last day of month three for any such Libor Loan which has a six month Interest
Period); the Termination Date; and the End Date.

     Each Base Margin Loan: The first Business Day of each month; the Termination
Date; and the End Date.

“Interest Period”: The following:

     (a) With respect to each Libor Loan: Subject to Subsection (c) below, the
period commencing on the date of the making or continuation of, or conversion to,
the subject Libor Loan and ending one, two, three, or six months thereafter, as the
Borrower may elect by notice (pursuant to Section 2-5) to the Agent.

     (b) With respect to each Base Margin Loan: Subject to Subsection (c) below, the
period commencing on the date of the making or continuation of or conversion to such
Base Margin Loan and ending on that date (i) as of which the subject Base Margin
Loan is converted to a Libor Loan, as the Borrower may elect by notice (pursuant to
Section 2-5) to the Agent, or (ii) on which the subject Base Margin Loan is paid by
the Borrower.

     (c) The setting of Interest Periods is in all instances subject to the
following:

     (i) Any Interest Period for a Base Margin Loan which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day.

16

 

     (ii) Any Interest Period for a Libor Loan which would otherwise end on
a day that is not a Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is in the next calendar
month, in which event such Interest Period shall end on the last Business
Day of the month during which the Interest Period ends.

     (iii) Subject to Subsection (iv) below, any Interest Period applicable
to a Libor Loan, which Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period ends, shall end on the last Business Day of the month during
which that Interest Period ends.

     (iv) Any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.

     (v) The number of Interest Periods in effect at any one time is subject
to Section 2-11(d) hereof.

“Inventory”: Includes, without limitation, “inventory” as defined in the UCC and also all:
(a) Goods which are leased by a Person as lessor; are held by a Person for sale or
lease or to be furnished under a contract of service; are furnished by a Person under a
contract of service; or consist of raw materials, work in process, or materials used or
consumed in a business; (b) Goods of said description in transit; (c) Goods of said
description which all returned, repossessed and rejected; (d) packaging, advertising,
and shipping materials related to any of the foregoing; (e) all names, marks, and
General Intangibles affixed or to be affixed or associated thereto; and (f) Documents
and Documents of Title which represent any of the foregoing.

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

“Investment Property”: Has the meaning given that term in the UCC.

“Issuance Conditions”: The satisfaction of each of the following conditions:

(a) no order, judgment or decree of any governmental authority or arbitrator shall
by its terms purport to enjoin or restrain the Issuer from issuing such L/C, or any
Applicable Law applicable to the Issuer or any request or directive (whether or not
having the force of law) from any governmental authority with jurisdiction over the
Issuer shall not prohibit, or request that the Issuer refrain from, the issuance of
letters of credit generally

17

 

or such L/C in particular or shall not impose upon the Issuer with respect to such
L/C any restriction, reserve or capital requirement (for which the Issuer is not
otherwise compensated hereunder) not in effect on the date hereof, or shall not
impose upon the Issuer any unreimbursed loss, cost or expense which was not
applicable on the date hereof and which the Issuer in good faith deems material to
it;

(b) the issuance of such L/C would not violate one or more policies of the Issuer
applicable to letters of credit generally;

(c) such L/C is not to be denominated in a currency other than Dollars; and

(d) such L/C does not contain any provisions for automatic reinstatement of the
Stated Amount after any drawing thereunder.

“Issuer”: The issuer of any L/C.

“L/C”: Any letter of credit, the issuance of which is procured by the Agent for the account
of the Borrower and any Banker’s Acceptance made on account of such letter of credit.

“Lease”: Any lease or other agreement, no matter how styled or structured, pursuant to which
the Borrower is entitled to the use or occupancy of any space.

“Leasehold Interest”: Any interest of the Borrower as lessee under any Lease.

“Lenders’ Special Counsel”: A single counsel, selected by the Majority Lenders following the
occurrence of an Event of Default, to represent the interests of the Revolving Credit
Lenders in connection with the enforcement, attempted enforcement, or preservation of
any rights and remedies under this, or any other Loan Document, as well as in
connection with any “workout”, forbearance, or restructuring of the credit facility
contemplated hereby.

“Letter-of-Credit Right”: Has the meaning given that term in UCC and also refers to any
right to payment or performance under an L/C, whether or not the beneficiary has
demanded or is at the time entitled to demand payment or performance.

“Liabilities”: Includes, without limitation, the following:

          (a) All and each of the following, whether now existing or hereafter arising under this
Agreement or under any of the other Loan Documents:

     (i) Any and all direct and indirect liabilities, debts, and obligations of the
Borrower to the Agent or any Revolving Credit Lender, each of every kind, nature,
and description.

     (ii) Each obligation to repay any loan, advance, indebtedness, note,
obligation, overdraft, or amount now or hereafter owing by the Borrower to the Agent
or any Revolving Credit Lender (including all future advances whether or not made

18

 

pursuant to a commitment by the Agent or any Revolving Credit Lender), whether
or not any of such are liquidated, unliquidated, primary, secondary, secured,
unsecured, direct, indirect, absolute, contingent, or of any other type, nature, or
description, or by reason of any cause of action which the Agent or any Revolving
Credit Lender may hold against the Borrower.

     (iii) All notes and other obligations of the Borrower now or hereafter assigned
to or held by the Agent or any Revolving Credit Lender, each of every kind, nature,
and description, including, without limitation, on account of Bank Products and Cash
Management Services.

     (iv) All interest, fees, and charges and other amounts which may be charged by
the Agent or any Revolving Credit Lender to the Borrower and which may be due from
the Borrower to the Agent or any Revolving Credit Lender from time to time.

     (v) All costs and expenses incurred or paid by the Agent or any Revolving
Credit Lender in respect of any Loan Document between the Borrower and the Agent or
any Revolving Credit Lender or Loan Document furnished by the Borrower to the Agent
or any Revolving Credit Lender (including, without limitation, Costs of Collection,
attorneys’ reasonable fees, and all court and litigation costs and expenses) and
which are required to be paid by the Borrower.

     (vi) Any and all covenants of the Borrower to or with the Agent or any
Revolving Credit Lender and any and all obligations of the Borrower to act or to
refrain from acting in accordance with any Loan Document between the Borrower and
the Agent or any Revolving Credit Lender or Loan Document furnished by the Borrower
to the Agent or any Revolving Credit Lender.

     (vii) Each of the foregoing as if each reference to the “the Agent or any
Revolving Credit Lender” were to each Affiliate of the Agent.

          (b) Any and all direct or indirect liabilities, debts, and obligations of the Borrower
to the Agent or any Affiliate of the Agent, each of every kind, nature, and description
owing on account of any service or accommodation provided to, or for the account of the
Borrower pursuant to this or any other Loan Document, including Bank Products, Cash
Management Services and the issuances of L/C’s.

“Libor Business Day”: Any day which is both a Business Day and a day on which the principal
interbank market for Libor deposits in London in which Bank of America participates is
open for dealings in United States Dollar deposits.

“Libor Loan”: Any Revolving Credit Loan which bears interest at the Libor Margin Rate.

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

“Libor Margin”: Initially, the rate set forth in Level I below. Commencing November 1,
2010, and on the first day of each Fiscal quarter thereafter, the Libor Margin shall be
the following percentages based upon the following criteria:

	 	 	 	 	 
	Level	 	Average Availability	 	Libor Margin
	I	 	Greater than $55,000,000
	 	2.00%
	 
	II	 	Greater than $40,000,000 and less than or equal to $55,000,000
	 	2.25%
	III	 	Greater than $25,000,000 and less than or equal to $40,000,000
	 	2.50%
	IV	 	Less than or equal to $25,000,000
	 	2.75%

On the first day of each Fiscal quarter, the Libor Margin shall be adjusted based
upon the Borrower’s aggregate daily average Availability for the immediately
preceding Fiscal quarter divided by the total number of days in such immediately
preceding Fiscal quarter. provided, however, upon the occurrence of an Event of
Default, the Libor Margin shall be immediately increased to the percentage set forth
in Level IV above (even if the average Availability requirements for another Level
have been met) and interest shall be determined in the manner set forth in Section
2-11(f).

“Libor Margin Rate”: The rate per annum which is the aggregate of the Libor Rate plus the
Libor Margin.

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“Libor Rate”: With respect to any Libor Loan for any Interest Period, an interest rate per
annum (rounded upwards, if necessary, to the next 1/16 of one percent (1%)) equal to
the Libor Offer Rate for such Interest Period multiplied by the Statutory Reserve Rate.
The Libor Rate will be adjusted automatically as to all Libor Loans then outstanding
as of the effective date of any change in the Statutory Reserve Rate.

“Liquidation”: The exercise, by the Agent, of those rights accorded to the Agent under the
Loan Documents as a creditor of the Borrower following and on account of the occurrence
of an Event of Default and Acceleration looking towards the realization on the
Collateral. Derivations of the word “Liquidation” (such as “Liquidate”) are used with
like meaning in this Agreement.

“Loan Account”: Is defined in Section 2-8(a).

“Loan Commitment”: With respect to each Revolving Credit Lender, that Revolving
Credit Lender’s Revolving Credit Dollar Commitment.

“Loan Documents”: This Agreement, each instrument and document executed and/or
delivered as contemplated by Article 3 below, and each other instrument or document
from time to time executed and/or delivered in connection with the arrangements
contemplated hereby or in connection with any transaction with the Agent or any
Affiliate of the Agent, including, without limitation, any Bank Product, Cash
Management Services, and any transaction which arises out of any investment, letter of
credit, interest rate protection, or equipment leasing services provided by the Agent
or any Affiliate of the Agent, as each may be amended from time to time.

“Majority Lenders”: So long as there are only two (2) Revolving Credit Lenders party to this
Agreement, “Majority Lenders” shall mean both such Revolving Credit Lenders (unless one
of the Revolving Credit Lenders is a Delinquent Revolving Credit Lender, in which case,
“Majority Lenders shall mean the other Revolving Credit Lender), and if there are more
than two (2) Revolving Credit Lenders party to this Agreement, “Majority Lenders” shall
mean Revolving Credit Lenders (other than Delinquent Revolving Credit Lenders) holding
51% or more of the Revolving Credit Dollar Commitment (other than any Loan Commitments
held by Delinquent Revolving Credit Lenders).

“Marmaduke Family”: John Marmaduke, the Estate of Sam Marmaduke, the John H. Marmaduke
Family Limited Partnership, the Stephen S. Marmaduke Family Limited Partnership, and
members of the immediate families of John Marmaduke and Steve Marmaduke.

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“Material Accounting Change”: Any change in GAAP applicable to accounting periods subsequent
to the Borrower’s Fiscal year most recently completed prior to the execution of this
Agreement, which change has a material effect on the Borrower’s financial condition or
operating results, as reflected on financial statements and reports prepared by or for
the Borrower, when compared with such condition or results as if such change had not
taken place or where preparation of the Borrower’s statements and reports in compliance
with such change results in the breach of a financial performance covenant imposed
pursuant to Section 5-11 where such a breach would not have occurred if such change had
not taken place or visa versa.

“Maturity Date”: July 22, 2014.

“Maximum Rate”: The maximum nonusurious rate of interest permitted by applicable law.

“Nominee”: A business entity (such as a corporation or limited partnership) formed by the
Agent to own or manage any Post Foreclosure Asset.

“NonConsenting Revolving Credit Lender”: Is defined in Section 15-10.

“Operating Account”: Is defined in Section 7-3(a)(iii).

“OverLoan”: A loan, advance, or providing of credit support (such as the issuance of any
L/C) to the extent that, immediately after its having been made, Availability is less
than zero.

“Participant”: Is defined in Section 19-15, hereof.

“Payment Conditions”: At the time of determination with respect to any specified transaction
or payment, that (a) no Event of Default then exists or would arise as a result of
entering into such transaction or the making of such payment, and (b) after giving
effect to such transaction or payment, the Pro Forma Availability Condition has been
satisfied and the Consolidated Fixed Charge Coverage Ratio, on a pro-forma basis for
the twelve Fiscal months preceding such transaction or payment, is equal to or greater
than 1.1:1.0. For the avoidance of doubt, the Consolidated Fixed Charge Coverage
Ratio will be calculated at the end of each applicable calendar month (and not more
frequently). Prior to undertaking any transaction or payment which is subject to the
Payment Conditions, the Borrower shall deliver to the Agent evidence of satisfaction of
the conditions contained in clause (b) above on a basis (including, without limitation,
giving due consideration to results for prior periods) reasonably satisfactory to the
Agent.

“Payment Intangible”: Has the meaning given that term in UCC and also refers to any general
intangible under which the Account Debtor’s primary obligation is a monetary
obligation.

“Payroll Account”: Is defined in Section 7-3(a)(iv).

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“Permissible OverLoans”: Revolving Credit Loans which are OverLoans, but as to which each
of the following conditions is satisfied: (a) the Revolving Credit Ceiling is not
exceeded; and (b) when aggregated with all other Permissible OverLoans, such Revolving
Credit Loans do not aggregate more than 10% of the aggregate of the Borrowing Base; and
(c) such Revolving Credit Loans are made or undertaken in the Agent’s discretion to
protect and preserve the interests of the Revolving Credit Lenders.

“Permitted Encumbrances”: Those Encumbrances permitted as provided in Section 4-6(a) hereof.

“Person”: Any natural person, and any corporation, limited liability company, trust,
partnership, joint venture, or other enterprise or entity.

“Post Foreclosure Asset”: All or any part of the Collateral, ownership of which is
acquired by the Agent or a Nominee on account of the “bidding in” at a disposition as
part of a Liquidation or by reason of a “deed in lieu” type of transaction.

“Pro Forma Availability Condition”: For any date of calculation with respect to any
transaction or payment, the Pro Forma Availability following, and after giving effect
to, such transaction or payment, will be equal to or greater than twenty-five percent
(25%) of the lesser of the Revolving Credit Ceiling or the Borrowing Base.

“Pro Forma Availability” For any date of calculation, after giving pro forma effect
to the transaction then to be consummated, (i) the projected average daily Availability
for each Fiscal month during any subsequent projected twelve (12) Fiscal months, and
(ii) average daily Availability for each of the three (3) Fiscal months immediately
preceding such transaction.

“Proceeds”: Includes, without limitation, “Proceeds” as defined in the UCC and each type of
property described in Section 8-1 hereof.

“Protective Advances”: The aggregate of Revolving Credit Loans and expenditures and
incurrences of obligations by the Agent respectively which are made or undertaken in
the Agents’ reasonable discretion to: protect or preserve the Collateral Interests
which secure the Liabilities and the Agent’s rights upon an Event of Default or which
the Agent determines in its reasonable discretion, are appropriate to facilitate a
Liquidation, provided, however, “Protective Advances” shall not exceed $3.5 Million in
the aggregate at any one time outstanding.

“Receipts”: All cash, cash equivalents, checks, and credit card slips, receipts and other
Proceeds from any sale of the Collateral.

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“Receivables Collateral”: That portion of the Collateral which consists of the Borrower’s
Accounts, Accounts Receivable, General Intangibles, Chattel Paper, Instruments,
Documents of Title, Documents, Investment Property, Payment Rights, Letter-of-Credit
Rights, bankers’ acceptances held by the Borrower, and all other rights to payment.

“Register”: Is defined in Section 16-2(c).

“Requirements of Law”: As to any Person:

     (a) Applicable Law.

     (b) That Person’s organizational documents, if any.

     (c) That Person’s by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.

“Reserves”: The following: Availability Reserves and Inventory Reserves.

“Revolving Credit”: Is defined in Section 2-1(a).

“Revolving Credit Ceiling”: $100,000,000.00.

“Revolving Credit Commitment Fee”: Is defined in Section 2-12.

“Revolving Credit Dollar Commitment”: As set forth on EXHIBIT 2-22, annexed hereto (as such
amounts may change in accordance with the provisions of this Agreement).

“Revolving Credit Lenders”: Each Revolving Credit Lender to which reference is made in the
Preamble of this Agreement and any other Person who becomes a “Revolving Credit Lender”
in accordance with the provisions of this Agreement.

“Revolving Credit Loans”: Loans made under the Revolving Credit, except that where the term
“Revolving Credit Loan” is used with reference to available interest rates applicable
to the loans under the Revolving Credit, it refers to so much of the unpaid principal
balance of the Loan Account as bears the same rate of interest for the same Interest
Period. (See Section 2-11(c)).

“Revolving Credit Note”: Is defined in Section 2-9.

“Revolving Credit Percentage Commitment”: As set forth on EXHIBIT 2-22, annexed hereto (as
such amounts may change in accordance with the provisions of this Agreement).

“SEC”: The Securities and Exchange Commission.

“Specified Default” means the failure of the Borrower to comply with the terms of Section
5-11 or Section 7-4, or the occurrence of any Event of Default specified in Section
10-1, Section 10-2, Section 10-3, Section 10.6, Section 10-11, or Section 10-12.

“Stated Amount”: The maximum amount for which an L/C may be honored.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which
is the number one and the denominator of which is the number one minus the aggregate of

24

 

the maximum reserve percentages (including any marginal, special, emergency or
supplemental reserves) expressed as a decimal established by the Board of Governors
of the Federal Reserve System of the United States (the “Board”) to which the Agent
is subject with respect to the Libor Offer Rate, for eurocurrency funding (currently
referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Libor Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any reserve
percentage.

“Subsidiary”: for any Person, any corporation or other entity of which at least a majority
of the securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other Persons having
similar powers is at the time directly or indirectly owned by such Person.

“SuperMajority Lenders”: Revolving Credit Lenders (other than Delinquent Revolving Credit
Lenders) holding 66-2/3% or more of the Revolving Credit Dollar Commitment (other than
Loan Commitments held by a Delinquent Revolving Credit Lender), except that unless and
until there are more than two Revolving Credit Lenders, “SuperMajority Lenders shall
refer to all Revolving Credit Lenders who are not Delinquent Revolving Credit Lenders.

“Supporting Obligation”: Has the meaning given that term in UCC and also refers to a
Letter-of-Credit Right or secondary obligation which supports the payment or
performance of an Account, Chattel Paper, a Document, a General Intangible, an
Instrument, or Investment Property.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or bond
price or bond index swaps or options or forward bond or forward bond price or forward
bond index transactions, interest rate options, forward foreign exchange transactions,
cap transactions, floor transactions, collar transactions, currency swap transactions,
cross-currency rate swap transactions, currency options, spot contracts, or any other
similar transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is governed by
or subject

25

 

to any master agreement, and (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or governed
by, any form of master agreement published by the International Swaps and
Derivatives Association, Inc., any International Foreign Exchange Master Agreement,
or any other master agreement (any such master agreement, together with any related
schedules, a “Master Agreement”), including any such obligations or liabilities
under any Master Agreement.

“SwingLine”: The facility pursuant to which the SwingLine Lender may advance Revolving
Credit Loans aggregating up to the SwingLine Loan Ceiling.

“SwingLine Lender”: Bank of America and any successor thereto in the capacity of lender of
Swingline Loans.

“SwingLine Loan Ceiling”: $2.5 Million (subject to increase as provided in Section 15-4(b)).

“SwingLine Loans”: Defined in Section 2-7(a).

“Termination Date”: The earliest of (a) the Maturity Date; or (b) the occurrence of any
event described in Section 10-12, below; or (c) the Agent’s notice to the Borrower
setting the Termination Date on account of the occurrence of any Event of Default other
than as described in Section 10-12, below; or (d) that date, sixty (60) days
irrevocable written notice of which is provided by the Borrower to the Agent.

“Transfer”: Wire transfer pursuant to the wire transfer system maintained by the Board of
Governors of the Federal Reserve Board, or as otherwise may be agreed to from time to
time by the Agent making such transfer and the subject Revolving Credit Lender. Wire
instructions may be changed in the same manner that Notice Addresses may be changed
(Section 17-1), except that no change of the wire instructions for Transfers to any
Revolving Credit Lender shall be effective without the consent of the Agent.

“UCC”: The Uniform Commercial Code as in effect from time to time in Massachusetts.

“Unanimous Consent”: Consent of Revolving Credit Lenders (other than Delinquent Revolving
Credit Lenders) holding 100% or more of the Revolving Credit Dollar Commitment (other
than Loan Commitments held by a Delinquent Revolving Credit Lender).

“Unused Line Fee”: Is defined in Section 2-14.

“Voting Stock”: shares of any class or classes (however designated) of any corporation
having ordinary voting power for the election of at least a majority of the members of
the board of directors (or other governing bodies) of such corporation.

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  ARTICLE 2 — The Revolving Credit: 

     2-1. Establishment of Revolving Credit.

          (a) The Revolving Credit Lenders hereby establish a revolving line of credit (the “Revolving
Credit”) in the Borrower’s favor pursuant to which each Revolving Credit Lender, subject to, and in
accordance with, this Agreement, acting through the Agent, shall make loans and advances and
otherwise provide financial accommodations to and for the account of the Borrower as provided
herein.

          (b) Loans, advances, and financial accommodations under the Revolving Credit shall be made
with reference to the Borrowing Base and shall be subject to Availability. The Borrowing Base and
Availability shall be determined by the Agent by reference to Borrowing Base Certificates furnished
as provided in Section 5-4, below, and shall be subject to the following:

          (i) Such determination shall take into account those Reserves as the Agent may
determine as being applicable thereto.

          (ii) The Cost of Eligible Inventory will be determined in a manner consistent with
current tracking practices, based on the Borrower’s By-Department monthly report generated
by the Borrower’s inventory control system, which report reflects the functional equivalent
of a stock ledger inventory.

          (c) The commitment of each Revolving Credit Lender to provide such loans, advances, and
financial accommodations is subject to Section 2-22.

          (d) The proceeds of borrowings under the Revolving Credit shall be used solely in accordance
with the Business Plan for the Borrower’s working capital and Capital Expenditures, all solely to
the extent permitted by this Agreement. No proceeds of a borrowing under the Revolving Credit may
be used, nor shall any be requested, with a view towards the accumulation of any general fund or
funded reserve of the Borrower other than in the ordinary course of the Borrower’s business and
consistent with the provisions of this Agreement. Subject to the foregoing, the proceeds of
borrowings under the Revolving Credit Facility shall be used for the following purposes:

          (i) To provide on-going working capital requirements and capital expenditure needs of
the Borrower.

          (ii) To support issuance of letters of credit by the letter of credit issuer for the
account of the Borrower.

          (iii) To provide funds for the Borrower’s repurchase of its capital stock as permitted
herein.

27

 

     2-2. Advances in Excess of Borrowing Base (OverLoans).

          (a) No Revolving Credit Lender has any obligation to make any loan or advance, or otherwise to
provide any credit to or for the benefit of the Borrower where the result of such loan, advance, or
credit is an OverLoan.

          (b) The Revolving Credit Lenders’ obligations, among themselves, are subject to Section
12-3(a) (which relates to each Revolving Credit Lender’s making amounts available to the Agent) and
to Section 15-3(a) (which relates to Permissible OverLoans).

          (c) The Revolving Credit Lenders’ providing of an OverLoan on any one occasion does not affect
the obligations of the Borrower hereunder (including the Borrower’s obligation to immediately repay
any amount which otherwise constitutes an OverLoan) nor obligate the Revolving Credit Lenders to do
so on any other occasion.

     2-3. Risks of Value of Collateral. The Agent’s reference to a given asset in connection with
the making of loans, credits, and advances and the providing of financial accommodations under the
Revolving Credit and/or the monitoring of compliance with the provisions hereof shall not be deemed
a determination by the Agent or any Revolving Credit Lender relative to the actual value of the
asset in question. All risks concerning the value of the Collateral are and remain upon the
Borrower. All Collateral secures the prompt, punctual, and faithful performance of the Liabilities
whether or not relied upon by the Agent in connection with the making of loans, credits, and
advances and the providing of financial accommodations under the Revolving Credit.

     2-4. Commitment to Make Revolving Credit Loans and Support Letters of Credit. Subject to the
provisions of this Agreement, the Revolving Credit Lenders shall make a loan or advance under the
Revolving Credit and the Agent shall have an L/C issued for the account of the Borrower, in each
instance if duly and timely requested by the Borrower as provided herein provided that:

          (a) Borrowing Base will not be exceeded.

          (b) The amount of the loan or advance or L/C so requested does not exceed Availability.

          (c) The Borrower is not InDefault.

     2-5. Revolving Credit Loan Requests.

          (a) Requests for loans and advances under the Revolving Credit or for the continuance or
conversion of an interest rate applicable to a Revolving Credit Loan may be requested by the
Borrower in the manner set forth herein or in such other manner as may from time to time be
reasonably acceptable to the Agent.

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          (b) Subject to the provisions of this Agreement, the Borrower may request a Revolving Credit
Loan and elect an interest rate and Interest Period to be applicable to that Revolving Credit Loan
by giving notice to the Agent by no later than the following:

          (i) If such Revolving Credit Loan is to be or is to be converted to a Base Margin Loan:
By 11:30AM on the Business Day on which the subject Revolving Credit Loan is to be made or
is to be so converted. Base Margin Loans requested by the Borrower, other than those
resulting from the conversion of a Libor Loan, shall not be less than $10,000.00.

          (ii) If such Revolving Credit Loan is to be, or is to be continued as, or converted to,
a Libor Loan: By 1:00PM three (3) Libor Business Days before the commencement of any new
Interest Period or the end of the then applicable Interest Period. Libor Loans and
conversions to Libor Loans shall each be not less than $1,000,000.00 and in increments of
$250,000.00 in excess of such minimum.

          (iii) Any Libor Loan which matures while the Borrower is InDefault shall be converted,
at the option of the Agent, to a Base Margin Loan notwithstanding any notice from the
Borrower that such Loan is to be continued as a Libor Loan.

          (c) Any request for a Revolving Credit Loan or for the continuance or conversion of an
interest rate applicable to a Revolving Credit Loan which is made after the applicable deadline
therefor, as set forth above, shall be deemed to have been made at the opening of business on the
then next Business Day or Libor Business Day, as applicable.

          (d) The Borrower may request that the Agent cause the issuance by the Issuer of L/C’s for the
account of the Borrower as provided in Section 2-18.

          (e) The Agent may rely on any request for a loan or advance, or other financial accommodation
under the Revolving Credit which the Agent, in good faith, believes to have been made by a Person
duly authorized to act on behalf of the Borrower and may decline to make any such requested loan or
advance, or issuance, or to provide any such financial accommodation pending the Agent’s being
furnished with such documentation concerning that Person’s authority to act as may be reasonably
satisfactory to the Agent.

          (f) A request by the Borrower for loan or advance, or other financial accommodation under the
Revolving Credit shall be irrevocable and shall constitute certification by the Borrower that as of
the date of such request, each of the following is true and correct:

          (i) There has been no material adverse change in the Borrower’s financial condition
from the most recent financial information furnished Agent pursuant to this Agreement.

29

 

               (ii) Each representation which is made herein or in any of the Loan Documents is then
true and complete in all material respects as of and as if made on the date of such request.

               (iii) The Borrower is not InDefault.

          (g) If, at any time or from time to time, the Borrower is InDefault:

               (i) The Agent may suspend the Revolving Credit immediately.

               (ii) Neither the Agent nor any Revolving Credit Lender shall be obligated, during such
suspension, to make any loans or advance, or to provide any financial accommodation
hereunder or to seek the issuance of any L/C.

               (iii) The Agent may suspend the right of the Borrower to request any Libor Loan or to
convert any Base Margin Loan to a Libor Loan.

     2-6. Making of Revolving Credit Loans.

          (a) A Revolving Credit Loan shall be made by the transfer of the proceeds of such Revolving
Credit Loan to the Operating Account or as otherwise instructed by the Borrower.

          (b) A Revolving Credit Loan shall be deemed to have been made under the Revolving Credit (and
the Borrower shall be indebted to the Agent and the Revolving Credit Lenders for the amount thereof
immediately) at the following:

               (i) The Agent’s initiation of the transfer of the proceeds of such Revolving Credit
Loan in accordance with the Borrower’s instructions (if such Revolving Credit Loan is of
funds requested by the Borrower).

               (ii) The charging of the amount of such Revolving Credit Loan to the Loan Account (in
all other circumstances).

          (c) There shall not be any recourse to or liability of the Agent or any Revolving Credit
Lender, on account of any of the following which is beyond the reasonable control of the Agent:

               (i) Any delay in the making of any loan or advance requested under the Revolving
Credit.

               (ii) Any delay by any bank or other depository institution in treating the proceeds of
any such loan or advance as collected funds.

               (iii) Any delay in the receipt, and/or any loss, of funds which constitute a Revolving
Credit Loan under the Revolving Credit, the wire transfer of which was properly initiated by
the Agent in accordance with wire instructions provided to the Agent by the Borrower.

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     2-7. SwingLine Loans.

          (a) For ease of administration, Base Margin Loans may be made by the SwingLine Lender (in the
aggregate, the “SwingLine Loans”) in accordance with the procedures set forth in this Agreement for
the making of loans and advances under the Revolving Credit. The unpaid principal balance of the
SwingLine Loans shall not at any one time be in excess of the SwingLine Loan Ceiling.

          (b) The aggregate unpaid principal balance of SwingLine Loans shall bear interest at the rate
applicable to Base Margin Loans and shall be repayable as a Revolving Credit Loan.

          (c) The Borrower’s obligation to repay SwingLine Loans shall be evidenced by a Note in the
form of EXHIBIT 2-7(c), annexed hereto, executed by the Borrower, and payable to the SwingLine
Lender. Neither the original nor a copy of that Note shall be required, however, to establish or
prove any Liability. The Borrower shall execute a replacement of any SwingLine Note which has been
lost, mutilated, or destroyed and deliver such replacement to the SwingLine Lender.

          (d) For all purposes of this Loan Agreement, the SwingLine Loans and the Borrower’s
obligations to the SwingLine Lender constitute Revolving Credit Loans and are secured as
“Liabilities”.

          (e) SwingLine Loans may be subject to periodic settlement with the Revolving Credit Lenders as
provided in this Agreement.

     2-8. The Loan Account.

          (a) An account (“Loan Account”) shall be opened on the books of the Agent in which a record
shall be kept of all Revolving Credit Loans.

          (b) The Agent shall also keep a record (either in the Loan Account or elsewhere, as the Agent
may from time to time elect) of all interest, fees, service charges, costs, expenses, and other
debits owed to the Agent and each Revolving Credit Lender on account of the Liabilities and of all
credits against such amounts so owed.

          (c) All credits against the Liabilities shall be conditional upon final payment to the Agent
for the account of each Revolving Credit Lender of the items giving rise to such credits. The
amount of any item credited against the Liabilities which is charged back against the Agent or any
Revolving Credit Lender for any reason or is not so paid shall be a Liability and shall be added to
the Loan Account, whether or not the item so charged back or not so paid is returned.

          (d) Except as otherwise provided herein, all fees, service charges, costs, and expenses for
which the Borrower is obligated hereunder are payable on demand. In the determination of
Availability, the Agent may deem fees, service charges, accrued interest, and other payments which
will be due and payable between the date of such determination and the first day of the then next
succeeding 

31

 

month as having been advanced under the Revolving Credit whether or not such amounts are
then due and payable.

          (e) The Agent, without the request of the Borrower, may advance under the Revolving Credit any
interest, fee, service charge, or other payment to which the Agent or any Revolving Credit Lender
is entitled and which are due and payable from the Borrower pursuant hereto and may charge the same
to the Loan Account notwithstanding that such amount so advanced may result in Borrowing Base’s
being exceeded. Such action on the part of the Agent shall not constitute a waiver of the Agent’s
rights and the Borrower’s obligations under Section 2-10(b). Any amount which is added to the
principal balance of the Loan Account as provided in this Section 2-8(e) shall bear interest at the
interest rate then and thereafter applicable to Base Margin Loans.

          (f) Any statement rendered by the Agent or any Revolving Credit Lender to the Borrower
concerning the Liabilities shall be considered correct and accepted by the Borrower and shall be
conclusively binding upon the Borrower unless the Borrower provides the Agent with written
objection thereto within twenty (20) days from the mailing of such statement, which written
objection shall indicate, with particularity, the reason for such objection. In the absence of
manifest error, the Loan Account and the Agent’s books and records concerning the loan arrangement
contemplated herein and the Liabilities shall be prima facie evidence and proof of the items
described therein.

     2-9. The Revolving Credit Notes. The Borrower’s obligation to repay loans and advances under
the Revolving Credit, with interest as provided herein, shall be evidenced by Notes (each, a
“Revolving Credit Note”) in the form of EXHIBIT 2-9, annexed hereto, executed by the Borrower, one
payable to each Revolving Credit Lender. Neither the original nor a copy of any Revolving Credit
Note shall be required, however, to establish or prove any Liability. In the event that any
Revolving Credit Note is ever lost, mutilated, or destroyed, the Borrower shall execute a
replacement thereof and deliver such replacement to the Agent.

     2-10. Payment of The Loan Account.

          (a) The Borrower may repay all or any portion of the principal balance of the Loan Account
from time to time until the Termination Date.

          (b) The Borrower, without notice or demand from the Agent or any Revolving Credit Lender,
shall pay the Agent that amount, from time to time, which is necessary so that there is no OverLoan
outstanding.

          (c) The Borrower shall repay the then entire unpaid balance of the Loan Account and all other
Liabilities on the Termination Date.

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          (d) The Agent shall endeavor to cause the application of payments (if any), pursuant to
Sections 2-10(a) and 2-10(b) against Libor Loans then outstanding in such manner as results in the
least cost to the Borrower, but shall not have any affirmative obligation to do so nor liability on
account of the Agent’s failure to have done so. In no event shall action or inaction taken by the
Agent excuse the Borrower from any indemnification obligation under Section 2-10(e).

          (e) Within ten (10) days from the date a Revolving Credit Lender or the Agent (as the case may
be) makes written demand therefor, the Borrower shall indemnify the Agent and each Revolving Credit
Lender and hold the Agent and each Revolving Credit Lender harmless from and against any loss, cost
or expense (including loss of anticipated profits and amounts payable by the Agent or such
Revolving Credit Lender on account of “breakage fees” (so-called)) which the Agent or such
Revolving Credit Lender may sustain or incur (including, without limitation, by virtue of
acceleration after the occurrence of any Event of Default) as a consequence of the following:

          (i) Default by the Borrower in payment of the principal amount of or any interest on
any Libor Loan as and when due and payable, including any such loss or expense arising from
interest or fees payable by such Revolving Credit Lender in order to maintain its Libor
Loans.

          (ii) Default by the Borrower in making a borrowing or conversion after the Borrower has
given (or is deemed to have given) a request for a Revolving Credit Loan or a request to
convert a Revolving Credit Loan from one applicable interest rate to another.

          (iii) The making of any payment on a Libor Loan or the making of any conversion of any
such Loan to a Base Margin Loan on a day that is not the last day of the applicable Interest
Period with respect thereto.

     2-11. Interest on Revolving Credit Loans.

          (a) Each Revolving Credit Loan shall be a Base Margin Loan and shall bear interest at the Base
Margin Rate unless timely notice is given (as provided in Section 2-5) that the subject Revolving
Credit Loan (or a portion thereof) is, or is to be converted to, a Libor Loan.

          (b) Each Revolving Credit Loan which consists of a Libor Loan shall bear interest at the
applicable Libor Margin Rate.

          (c) Subject to, and in accordance with, the provisions of this Agreement, the Borrower may
cause all or a part of the unpaid principal balance of the Loan Account to bear interest at the
Base Margin Rate or the Libor Margin Rate as specified from time to time by the Borrower.

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          (d) The Borrower shall not select, renew, or convert any interest rate for a Revolving Credit
Loan such that, in addition to interest at the Base Margin Rate, there are more than six (6) Libor
Margin Rates applicable to the Revolving Credit Loans at any one time.

          (e) The Borrower shall pay accrued and unpaid interest on each Revolving Credit Loan in
arrears as follows:

          (i) On the applicable Interest Payment Date for that Revolving Credit Loan.

          (ii) On the Termination Date and on the End Date.

          (iii) Following the occurrence of any Event of Default, with such frequency as may be
reasonably determined by the Agent.

          (f) Following the occurrence of any Specified Default (and whether or not the Agent exercises
the Agent’s rights on account thereof), each Revolving Credit Loan shall bear interest, at the
option of the Agent or at the instruction of the SuperMajority Lenders at rate which is the rate
then in effect for such Revolving Credit Loan, plus two percent (2%) per annum.

     2-12. Revolving Credit Commitment Fee. In consideration of the commitment to make loans and
advances to the Borrower under the Revolving Credit, and to maintain sufficient funds available
for such purpose, there has been earned and the Borrower shall pay the “Revolving Credit Commitment
Fee” (so referred to herein) in the amount and payable as provided in the Fee Letter.

     2-13. Agent’s Fee. In addition to any other fee or expense to be paid by the Borrower on
account of the Revolving Credit, the Borrower shall pay the Agent the “Agent’s Fee” at the times
and in the amounts as set forth the Fee Letter.

     2-14. Unused Line Fee. In addition to any other fee to be paid by the Borrower on account of
the Revolving Credit, the Borrower shall pay the Agent the “Unused Line Fee” (so referred to
herein) equal to the Applicable Fee Rate multiplied by the difference, during the quarter just
ended (or relevant period with respect to the payment being made on the Termination Date) between
the Revolving Credit Ceiling and the average of
the unpaid principal balance of the Loan Account and the undrawn Stated Amount of L/C’s
outstanding during the relevant period. The Unused Line Fee shall be paid in arrears, on the first
day of each quarter after the execution of this Agreement and on the Termination Date.

     2-15. Reserved.

     2-16. Concerning Fees.

          (a) In addition to any other right to which the Agent is then entitled on account thereof, the
Agent may assess an additional fee payable by the Borrower on account of the

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accommodation, from
time to time, by the Agent of the Borrower’s request that the Agent depart or dispense with one or
more of the administrative provisions of this Agreement and/or the Borrower’s failure to comply
with any of such provisions, which additional fee shall be reasonable.

          (i) By way of non-exclusive example, the Agent may assess a fee on account of any of
the following:

          (A) The Borrower’s failure to pay that amount which is necessary so that no
OverLoan is outstanding (as required under Section 2-10(b) hereof).

          (B) The providing of a loan or advance under the Revolving Credit or charging
of the Loan Account such that an OverLoan is made.

          (C) The foreshortening of any of the time frames with respect to the making of
Revolving Credit Loans as set forth in Section 2-5.

          (D) The Borrower’s failure to provide a financial statement or report within
the applicable time frame provided for such report under Article 5 hereof.

          (ii) The inclusion of the foregoing right on the part of the Agent to assess a fee does
not constitute an obligation, on the part of the Agent, to waive any provision of this
Agreement under any circumstances. The assessment of any such fee in any particular
circumstance shall not constitute the Agent’s waiver of any breach of this Agreement on
account of which such fee was assessed nor a course of action on which the Borrower may
rely.

          (b) The Borrower shall not be entitled to any credit, rebate or repayment of any fee earned by
the Agent or any Revolving Credit Lender pursuant to this Agreement or any Loan Document
notwithstanding any termination of this Agreement pursuant to the terms hereof or suspension or
termination pursuant to the terms hereof of the Agent’s and any Revolving Credit Lender’s
respective obligation to make loans and advances hereunder.

     2-17. Agent’s and Revolving Credit Lenders’ Discretion.

          (a) Each reference in the Loan Documents to the exercise of discretion or the like by the
Agent or any Revolving Credit Lender shall be to such Person’s exercise of its reasonable judgment,
in good faith (which shall be presumed), based upon such Person’s consideration of any such factors
as the Agent or that Revolving Credit Lender, taking into account information of which that Person
then has actual knowledge, reasonably believes:

          (i) Will or reasonably could be expected to adversely affect the value of the
Collateral, the enforceability of the Agent’s Collateral Interests therein, or the amount
which the Agent would likely realize therefrom (taking into account delays which may
possibly be encountered in the Agent’s realizing upon the Collateral and likely Costs of
Collection).

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          (ii) Indicates that any report or financial information delivered to the Agent or any
Revolving Credit Lender by or on behalf of the Borrower is incomplete, inaccurate, or
misleading in any material manner or was not prepared in any material respect in accordance
with the requirements of this Agreement.

          (iii) Suggests an increase in the likelihood that the Borrower will become the subject
of a bankruptcy or insolvency proceeding.

          (iv) Suggests that the Borrower is InDefault.

          (b) In the exercise of such judgment, the Agent and each Revolving Credit Lender also may take
into account any of the following factors:

          (i) Those included in, or tested by, the definitions of “Eligible Inventory” and
“Cost”.

          (ii) The current financial and business climate of the industry in which the Borrower
competes (having regard for the Borrower’s position in that industry).

          (iii) General macroeconomic conditions which have a material effect on the Borrower’s
cost structure.

          (iv) Material changes in or to the mix of the Borrower’s Inventory.

          (v) Seasonality with respect to the Borrower’s Inventory and patterns of retail sales.

          (vi) Such other factors as the Agent and each Revolving Credit Lender reasonably
determines as having a material bearing on credit risks associated with the providing of
loans and financial accommodations to the Borrower.

          (c) The burden of establishing the failure of the Agent or any Revolving Credit Lender to have
acted in a reasonable manner in such Person’s exercise of such discretion shall be the Borrower’s.

     2-18. Procedures For Issuance of L/C’s.

          (a) The Borrower may request that the Agent cause the issuance by the Issuer of L/C’s for the
account of the Borrower, and the Issuer shall, if so requested, issue one or more L/C’s for the
account of the Borrower from time to time pursuant to the terms hereof. Each such request shall be
in the manner set forth herein or in such other manner as may from time to time be reasonably
acceptable to the Agent.

          (b) The Agent shall cause the issuance of any L/C so requested by the Borrower, provided that,
at the time that the request is made, both the Issuance Conditions are satisfied and Revolving
Credit has not been suspended as provided in Section 2-5(g) and if so issued:

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          (i) The aggregate Stated Amount of all L/C’s then outstanding, does not exceed
$20,000,000.00

          (ii) The expiry of the L/C is not later than the earlier of thirty (30) days prior to
the Maturity Date or the following:

          (A) Standby L/Cs: One (1) year from initial issuance.

          (B) Documentary L/Cs: Sixty (60) days from issuance.

          (iii) An OverLoan will not result from the issuance of the subject L/C.

          (c) The Borrower shall execute such documentation to apply for and support the issuance of an
L/C as may be required by the Issuer.

          (d) Unless within the control of the Agent or a Revolving Credit Lender, there shall not be
any recourse to, nor liability of, the Agent or any Revolving Credit Lender on account of

          (i) Any delay or refusal by an Issuer to issue an L/C;

          (ii) Any action or inaction of an Issuer on account of or in respect to, any L/C.

          (e) The Borrower shall reimburse the Issuer for the amount of any honoring of a drawing under
an L/C on the same day on which such honoring takes place. The Agent, without the request of the
Borrower, may advance under the Revolving Credit (and charge to the Loan Account) the amount of any
honoring of any L/C and other amount for which the Borrower, the Issuer, or the Revolving Credit
Lenders become obligated on account of, or in respect to, any L/C. Such advance shall be made
whether or not the Borrower is InDefault or such advance would result in an OverLoan. Such action
shall not constitute a waiver of the Agent’s rights under Section 2-10(b) hereof.

     2-19. Fees For L/C’s.

          (a) The Borrower shall pay to the Agent a fee, on account of L/C’s, monthly in arrears, and on
the Termination Date and on the End Date, determined at the following per annum rate of the
weighted average Stated Amount of all L/C’s outstanding during the period in respect of which such
fee is being paid except that, following the occurrence of any Event of Default, such fee shall be
increased by two percent (2%) per annum:

          (i) Standby L/Cs:       200 basis points.

          (ii) Documentary L/Cs:       150 basis points.

          (b) In addition to the fee to be paid as provided in Subsection 2-19(a) above, the Borrower
shall pay to the Agent (or to the Issuer, if so requested by Agent), on demand, all customary
issuance, processing, negotiation, amendment, and administrative fees and other amounts customarily
charged by the Issuer on account of, or in respect to, any L/C.

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          (c) If any change in Applicable Law after the date of this Agreement shall either:

          (i) impose, modify or deem applicable any reserve, special deposit or similar
requirements against letters of credit heretofore or hereafter issued by any Issuer or with
respect to which any Revolving Credit Lender or any Issuer has an obligation to lend to fund
drawings under any L/C; or

          (ii) impose on any Issuer any other condition or requirements relating to any such
letters of credit;

and the result of any event referred to in Section 2-19(c)(i) or 2-19(c)(ii), above, shall be to
increase the cost to any Revolving Credit Lender or to any Issuer of issuing or maintaining any L/C
(which increase in cost shall be the result of such Issuer’s reasonable allocation among that
Revolving Credit Lender’s or Issuer’s letter of credit customers of the aggregate of such cost
increases resulting from such events), then within ten (10) days after demand by the Agent and
delivery by the Agent to the Borrower of a certificate of an officer of the subject Revolving
Credit Lender or the subject Issuer describing, with reasonable particularity, such change in law,
executive order, regulation, directive, or interpretation thereof, its effect on such Revolving
Credit Lender or such Issuer, and the basis for determining such increased costs and their
allocation, the Borrower shall immediately pay to the Agent, from time to time as specified by the
Agent, such amounts as shall be sufficient to compensate the subject Revolving Credit Lender or the
subject Issuer for such increased cost. In the absence of manifest error, any Revolving Credit
Lender’s or any Issuer’s determination of costs incurred under Section 2-19(c)(i) or 2-19(c)(ii),
above, and the allocation, if any, of such costs among the Borrower and other letter of credit
customers of such Revolving Credit Lender or such Issuer, if done in good faith and made on an
equitable basis and in accordance with such officer’s certificate, shall be conclusive and binding
on the Borrower. Notwithstanding the foregoing, any demand for such increased letter of credit
costs shall not include any increased letter of credit costs of which the Issuer, any Revolving
Credit Lender, or the Agent making demand therefor had knowledge more than 90 days prior to the
date that the Issuer, any Revolving Credit Lender or the Agent makes demand therefor.

     2-20. Concerning L/C’s.

          (a) None of the Issuer, the Issuer’s correspondents, any Revolving Credit Lender, the Agent,
or any advising, negotiating, or paying bank with respect to any L/C shall be responsible in any
way for:

          (i) The performance by any beneficiary under any L/C of that beneficiary’s obligations
to the Borrower.

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          (ii) The form, sufficiency, correctness, genuineness, authority of any person signing;
falsification; or the legal effect of any documents called for under any L/C if (with
respect to the foregoing) such documents on their face appear to be in order.

          (b) The Issuer may honor, as complying with the terms of any L/C and of any drawing
thereunder, any drafts or other documents otherwise in order, but signed or issued by an
administrator, executor, conservator, trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, liquidator, receiver, or other legal representative of the party authorized
under such L/C to draw or issue such drafts or other documents.

          (c) Unless otherwise agreed to, in the particular instance, the Borrower hereby authorizes any
Issuer to:

          (i) Select an advising bank, if any.

          (ii) Select a paying bank, if any.

          (iii) Select a negotiating bank.

          (d) All directions, correspondence, and funds transfers relating to any L/C are at the risk of
the Borrower. The Issuer shall have discharged the Issuer’s obligations under any L/C which, or the
drawing under which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other commercially reasonable
and comparable method). None of the Agent, any Revolving Credit Lender, or the Issuer shall have
any responsibility for any inaccuracy, interruption, error, or delay in transmission or delivery by
post, telegraph or cable, or for any inaccuracy of translation, except through its gross negligence
or willful misconduct.

          (e) The Agent’s, each Revolving Credit Lender’s, and the Issuer’s rights, powers, privileges
and immunities specified in or arising under this Agreement are in addition to any heretofore or at
any time hereafter otherwise created or arising, whether by statute or rule of law or contract.

          (f) Except to the extent otherwise expressly provided hereunder or agreed to in writing by the
Issuer and the Borrower, documentary L/C’s will be governed by the Uniform Customs and Practice for
Documentary Credits, International Chamber of Commerce, Publication No. 500, and standby L/C’s will
be governed by International Standby Practices ISP98 (adopted by the International Chamber of
Commerce on April 6, 1998) and any respective subsequent revisions thereof.

          (g) The obligations of the Borrower under this Agreement with respect to L/C’s are absolute,
unconditional, and irrevocable and shall be performed strictly in accordance with the terms hereof
under all circumstances, whatsoever including, without limitation, the following:

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          (i) Any lack of validity or enforceability or restriction, restraint, or stay in the
enforcement of this Agreement, any L/C, or any other agreement or instrument relating
thereto.

          (ii) The Borrower’s consent to any amendment or waiver of, or consent to the departure
from, any L/C.

          (iii) The existence of any claim, set-off, defense, or other right which the Borrower
may have at any time against the beneficiary of any L/C.

          (iv) Any good faith honoring of a drawing under any L/C, which drawing possibly could
have been dishonored based upon a strict construction of the terms of the L/C.

     2-21. Changed Circumstances.

          (a) The Agent may advise the Borrower that the Agent has made the good faith determination
(which determination shall be final and conclusive) of any of the following:

          (i) Adequate and fair means do not exist for ascertaining the rate for Libor Loans.

          (ii) The continuation of or conversion of any Revolving Credit Loan to a Libor Loan has
been made impossible or unlawful by the occurrence after the date of this Agreement of a
contingency that materially and adversely affects the applicable market or the compliance by
the Agent or any Revolving Credit Lender in good faith with any Applicable Law.

          (iii) The indices on which the interest rates for Libor Loans are based shall no longer
fairly and adequately represent the effective cost to the Agent or any Revolving Credit
Lender for U.S. dollar deposits in the interbank market for deposits in which it regularly
participates.

          (b) In the event that the Agent advises the Borrower of an occurrence described in Section
2-21(a), then, until the Agent notifies the Borrower that the circumstances giving rise to such
notice no longer apply:

          (i) The obligation of the Agent or each Revolving Credit Lender to make loans of the
type affected by such changed circumstances or to permit the Borrower to select the affected
interest rate as otherwise applicable to any Revolving Credit Loans shall be suspended.

          (ii) Any notice which the Borrower had given the Agent with respect to any Libor Loan,
the time for action with respect to which has not occurred prior to the Agent’s having given
notice pursuant to Section 2-21(a) above, shall be deemed to be given for a Base Margin
Loan.

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     2-22. Lenders’ Commitments.

          (a) Subject to Section 16-1 (which provides for assignments and assumptions of commitments),
each Revolving Credit Lender’s “Revolving Credit Percentage Commitment” and “Revolving Credit
Dollar Commitment” (respectively so referred to herein) are set forth on EXHIBIT 2-22, annexed
hereto.

          (b) The obligations of each Revolving Credit Lender are several and not joint. No Revolving
Credit Lender shall have any obligation to make any loan or advance under the Revolving Credit in
excess of the lesser of the following:

          (i) That Revolving Credit Lender’s Revolving Credit Commitment Percentage of the
subject loan or advance or of Availability.

          (ii) that Revolving Credit Lender’s Revolving Credit Dollar Commitment.

          (c) No Revolving Credit Lender shall have any liability to the Borrower on account of the
failure of any other Revolving Credit Lender to provide any loan or advance under the Revolving
Credit nor any obligation to make up any shortfall which may be created by such failure.

          (d) In the event of the Borrower’s exercise of its right to reduce the Revolving Credit
Ceiling, the effect of such reduction shall be distributed, pro rata, amongst the Revolving Credit
Lenders based on their then respective Revolving Credit Dollar Commitments.

          (e) The Revolving Credit Dollar Commitments, Revolving Credit Commitment Percentages, and
identities of the Revolving Credit Lenders may be changed, from time to time by the reallocation or
assignment of Revolving Credit Dollar Commitments and Revolving Credit Commitment Percentages
amongst the Revolving Credit Lenders or with other Persons who determine to become “Revolving
Credit Lenders”, provided, however unless an Event of Default has occurred (in which event, no
consent of the Borrower is required) any assignment to a Person not then a Revolving Credit Lender
shall be subject to the prior written consent of the Borrower (not to be unreasonably withheld),
which consent will be deemed given unless the Borrower provides the Agent with written objection,
not more than five (5) Business Days after the Agent shall have given the Borrower written notice
of a proposed assignment).

          (f) Upon written notice given the Borrower from time to time by the Agent, of any assignment
or allocation referenced in Section 2-22(e):

          (i) The Borrower shall execute one or more replacement Revolving Credit Notes to
reflect such changed Revolving Credit Dollar Commitments, Revolving Credit Commitment
Percentages, and identities and shall deliver such replacement Revolving Credit Notes to the
Agent (which promptly thereafter shall deliver to the Borrower the Revolving Credit Notes so
replaced) provided however, in the event that a Revolving Credit Note is to be

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exchanged following its acceleration or the entry of an order for relief under the
Bankruptcy Code with respect to the Borrower, the Agent, in lieu of causing the Borrower to
execute one or more new Revolving Credit Notes, may issue the Agent’s Certificate confirming
the resulting Revolving Credit Dollar Commitments and Revolving Credit Percentage
Commitments.

          (ii) Such change shall be effective from the effective date specified in such written
notice and any Person added as a Revolving Credit Lender shall have all rights and
privileges of a Revolving Credit Lender hereunder thereafter as if such Person had been a
signatory to this Agreement and any other Loan Document to which a Revolving Credit Lender
is a signatory and any Person removed as a Revolving Credit Lender shall be relieved of any
obligations or responsibilities of a Revolving Credit Lender hereunder thereafter.

ARTICLE 3 — Conditions Precedent: 

     As a condition to the effectiveness of this Agreement, the establishment of the Revolving
Credit, and the making of the first loan under the Revolving Credit, each of the documents
respectively described in Sections 3-1 through and including 3-4, (each in form and substance
reasonably satisfactory to the Agent) shall have been delivered to the Agent, and the conditions
respectively described in Sections 3-5 through and including 3-9, shall have been satisfied:

     3-1. Corporate Due Diligence.

          (a) A Certificate of corporate good standing issued by the Secretary of State of Texas.

          (b) Certificates of due qualification, in good standing, issued by the Secretary(ies) of State
of each State in which the nature of the Borrower’s business conducted or assets owned could
require such qualification.

          (c) A Certificate of the Borrower’s Secretary of the due adoption, continued effectiveness,
and setting forth the texts of, each corporate resolution adopted in connection with the
establishment of the loan arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan Documents.

     3-2. Opinion. An opinion of counsel to the Borrower in form and substance reasonably
satisfactory to the Agent.

     3-3. Additional Documents. Such additional instruments and documents as the Agent or its
counsel reasonably may require or request.

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     3-4. Officers’ Certificates. Certificates executed by the President and the Chief
Financial Officer or Vice President — Finance of the Borrower and stating that the representations
and warranties made by the Borrower to the Agent and the Revolving Credit Lenders in the Loan
Documents are true and complete in all material respects as of the date of such Certificate (other
than those representations and warranties which are qualified by “materiality”, each of which are
true and correct in all respects), and that no event has occurred which is or which, solely with
the giving of notice or passage of time (or both) would be an Event of Default.

     3-5. Representations and Warranties. Each of the representations made by or on behalf of the
Borrower in this Agreement or in any of the other Loan Documents or in any other report, statement,
document, or paper provided by or on behalf of the Borrower shall be true and complete in all
material respects as of the date as of which such representation or warranty was made.

     3-6. Minimum Day One Availability. After giving effect to the first funding under the
Revolving Credit; Availability shall not be less than $50 Million.

     3-7. All Fees and Expenses Paid.

     All reasonable fees due at or immediately after the first funding under the Revolving Credit
and all reasonable costs and expenses incurred by the Agent in connection with the amendment and
restatement of the credit facility contemplated hereby (including the reasonable fees and expenses
of counsel to the Agent) shall have been paid in full.

     3-8. Borrower Not InDefault. The Borrower is not InDefault.

     3-9. No Adverse Change. No event shall have occurred or failed to occur, which occurrence or
failure is or could have a materially adverse effect upon the Borrower’s financial condition when
compared with such financial condition at April 30, 2010.

     3-10. Benefit of Conditions Precedent. The conditions set forth in this Article 3 are for the
sole benefit of the Agent and the Revolving Credit Lenders and may be waived by the Agent in whole
or in part without prejudice to the Agent or any Revolving Credit Lender.

No document shall be deemed delivered to the Agent or any Revolving Credit Lender until received
and accepted by the Agent or its counsel at its offices in Boston, Massachusetts. Under no
circumstances shall this Agreement take effect until executed and accepted by the Agent at said
offices.

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ARTICLE 4 — General Representations, Covenants and Warranties:

     To induce each Revolving Credit Lender to establish the credit facility contemplated herein
and to induce the Revolving Credit Lenders to provide Revolving Credit Loans (each of which
Revolving Credit Loans shall be deemed to have been made in reliance thereupon) the Borrower, in
addition to all other representations, warranties, and covenants made by the Borrower in any other
Loan Document, makes those representations, warranties, and covenants included in this Agreement.

     4-1. Payment and Performance of Liabilities. The Borrower shall pay each payment Liability
when due (or when demanded, if payable on demand) and shall promptly, punctually, and faithfully
perform each other Liability.

     4-2. Due Organization. Authorization. No Conflicts.

          (a) The Borrower presently is and shall hereafter remain in good standing as a Texas
corporation and is and shall hereafter remain duly qualified and in good standing in every other
State in which, by reason of the nature or location of the Borrower’s assets or operation of the
Borrower’s business, such qualification may be necessary, except where the failure to so qualify
would not have a material adverse effect on the business or assets of the Borrower.

          (b) The Borrower’s organizational identification number assigned to it by the State of Texas
is 306162-0 and its federal employer identification number is 75-1386375.

          (c) The Borrower shall not change its State of organization; any organizational identification
number assigned to the Borrower by that State; or the Borrower’s federal employer identification
number without giving the Agent thirty (30) days prior written notice thereof.

          (d) Each Subsidiary is listed on EXHIBIT 4-2, annexed hereto. The Borrower shall provide the
Agent with prior written notice of any entity’s becoming or ceasing to be a Subsidiary.

          (e) The Borrower has all requisite power and authority to execute and deliver all Loan
Documents to which the Borrower is a party and has and will hereafter retain all requisite power to
perform all Liabilities.

          (f) The execution and delivery by the Borrower of each Loan Document to which it is a party;
the Borrower’s consummation of the transactions contemplated by such Loan Documents (including,
without limitation, the creation of Collateral Interests by the Borrower to secure the
Liabilities); the Borrower’s performance under those of the Loan Documents to which it is a party;
the borrowings hereunder; and the use of the proceeds thereof:

          (i) Have been duly authorized by all necessary action.

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          (ii) Do not, and will not, contravene in any material respect any provision of any
Requirement of Law or obligation of the Borrower, except to the extent such contravention
would not have a material adverse effect on the business or assets of the Borrower.

          (iii) Will not result in the creation or imposition of, or the obligation to create or
impose, any Encumbrance upon any assets of the Borrower pursuant to any Requirement of Law
or obligation, except pursuant to the Loan Documents.

          (g) The Loan Documents have been duly executed and delivered by the Borrower and are the
legal, valid and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms except as such enforceability may be limited by the effect
of bankruptcy, insolvency, or similar laws affecting creditors’ rights generally or by general
equitable principles.

     4-3. Trade Names.

          (a) EXHIBIT 4-3, annexed hereto, is a listing of:

          (i) All names under which the Borrower ever conducted its business since June 1, 2005.

          (ii) All Persons with whom the Borrower, since June 1, 2005, consolidated or merged, or
from whom the Borrower ever acquired in a single transaction or in a series of related
transactions substantially all of such Person’s assets.

          (b) The Borrower will provide the Agent with not less than twenty-one (21) days prior written
notice (with reasonable particularity) of any change to the Borrower’s name from that under which
the Borrower is conducting its business at the execution of this Agreement and will not effect such
change unless the Borrower is then in compliance in all material respects with all provisions of
this Agreement.

     4-4. Infrastructure.

          (a) The Borrower owns and possesses, or has the right to use (and will hereafter own, possess,
or have such right to use) all patents, industrial designs, trademarks, trade names, trade styles,
brand names, service marks, logos, copyrights, trade secrets, know-how, confidential information,
and other intellectual or proprietary property of any third Person necessary for the Borrower’s
conduct of the Borrower’s business, except where the failure to do so would not have a material
adverse effect on the business or assets of the Borrower.

          (b) The conduct by the Borrower of the Borrower’s business does not presently infringe (nor
will the Borrower conduct its business in the future so as to infringe) the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks, logos, copyrights,
trade

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secrets, know-how, confidential information, or other intellectual or proprietary property of
any third Person.

     4-5. Locations.

          (a) The Collateral, and the books, records, and papers of Borrower’s pertaining thereto, are
kept and maintained solely at the following locations:

          (i) The Borrower’s chief executive offices which are at 3601 Plains Boulevard,
Amarillo, Texas 79102.

          (ii) Those locations which are listed on EXHIBIT 4-5, annexed hereto, which EXHIBIT
includes, with respect to each such location, the name and address of the landlord on the
Lease which covers such location (or an indication that the Borrower owns the subject
location) and of all service bureaus with which any such records are maintained.

          (b) The Borrower shall not remove any of the Collateral from said chief executive office or
those locations listed on EXHIBIT 4-5 except for the following purposes:

          (i) To accomplish sales or rentals of Inventory in the ordinary course of business.

          (ii) To move Inventory from one such location to another such location.

          (iii) To utilize such of the Collateral as is removed from such locations in the
ordinary course of business.

          (iv) To accomplish other sales and dispositions as are permitted hereunder.

          (c) The Borrower will not:

          (i) Execute, alter, modify, or amend any Lease after the occurrence of any Event of
Default.

          (ii) Commit to, or open or close any location at which the Borrower maintains, offers
for sale, or stores any of the Collateral, except that upon notice to and consent of the
Agent and provided that no Event of Default then exists, the Borrower may:

          (A) Acquire one or more new store locations.

          (B) Close one or more store locations.

          (d) Except as otherwise disclosed pursuant to, or permitted by, this Section 4-5, no tangible
personal property of the Borrower is in the care or custody of any third party or stored or
entrusted with a bailee or other third party and none shall hereafter be placed under such care,
custody, storage, or entrustment.

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     4-6. Title to Assets.

          (a) The Borrower is, and shall hereafter remain, the owner of the Collateral free and clear of
all Encumbrances with the exceptions of the following (the “Permitted Encumbrances”):

          (i) Encumbrances in favor of the Agent.

          (ii) Liens securing the payment of taxes, either not yet overdue or the validity of
which are being contested in good faith by appropriate proceedings and provided that no lien
has been filed in respect thereof.

          (iii) Non-consensual statutory liens (other than liens securing the payment of taxes)
arising in the ordinary course of the Borrower’s business to the extent: such liens secure
obligations which are not overdue or such liens secure obligations relating to claims or
liabilities which are fully insured (subject to commercially reasonable deductibles) and are
being defended at the sole cost and expense and at the sole risk of the insurer or are being
contested in good faith by appropriate proceedings diligently pursued and available to the
Borrower, in each instance prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside on the
Borrower’s books.

          (iv) Carriers’, warehousemen’s, materialmen’s, mechanics, repairmen’s or similar liens
incurred in the ordinary course of business.

          (v) Purchase money security interests in equipment securing obligations not in excess
of $10 Million unpaid principal balance outstanding at any one time on account of the
purchase of new equipment.

          (vi) Zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property.

          (vii) Deposits under workmen’s compensation, unemployment insurance, pensions, and
other employee benefits, and social security laws, or to secure the performance of bids,
tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure
statutory obligations or surety or appeal bonds, or to secure indemnity, performance or
other similar bonds arising in the ordinary course of business.

          (viii) Landlord’s liens by operation of law where waivers thereof have not been
obtained.

          (ix) Interests of lessors under Capital Leases.

          (x) Liens consisting of security deposits made by the Borrower.

          (xi) Those Encumbrances (if any) listed on EXHIBIT 4-6, annexed hereto.

          (b) The Borrower does not, and shall not, have possession of any property on consignment to
the Borrower having a Cost aggregating more than $600,000.00 at any one time.

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          (c) The Borrower shall not acquire or obtain the right to use any Equipment, the acquisition
or right to use of which Equipment is otherwise permitted by this Agreement, in which Equipment any
third party has an interest, except for:

          (i) Equipment which is merely incidental to the conduct of the Borrower’s business.

          (ii) Equipment, the acquisition or right to use of which has been consented to by the
Agent, which consent may be conditioned upon the Agent’s receipt of such agreement with the
third party which has an interest in such Equipment as is satisfactory to the Agent.

     4-7. Indebtedness. The Borrower does not and shall not hereafter have any Indebtedness with
the exceptions of:

          (a) Any Indebtedness on account of the Liabilities.

          (b) The Indebtedness (if any) listed on EXHIBIT 4-7, annexed hereto and all renewals,
extensions, refinancings, and modifications (but not increases) thereof.

          (c) Current liabilities for taxes incurred in the ordinary course of business which are not
yet due and payable or which are being contested in good faith by appropriate proceedings for which
adequate reserves, if required by GAAP, have been established.

          (d) Trade payables arising in the ordinary course of business (i) that are paid within the
earlier of (A) 60 days of the date when payment thereof is due and payable and (B) 180 days of the
date the respective goods are delivered or services are rendered or (ii) which are being contested
in good faith by appropriate proceedings for which adequate reserves, if required by GAAP, have
been established.

          (e) Purchase money Indebtedness for equipment purchases which does not exceed, in aggregate,
$10,000,000 principal outstanding at any one time.

     4-8. Insurance.

          (a) EXHIBIT 4-8, annexed hereto, is a schedule of all insurance policies owned by the
Borrower or under which the Borrower is the named insured. Each of such policies is in full force
and effect. Neither the Borrower nor, to the Borrower’s knowledge, the issuer of any such policy
is in default or violation of any such policy.

          (b) The Borrower shall have and maintain at all times from responsible companies insurance
covering such risks, in such amounts, containing such terms, in such form, for such periods, and
written by such companies as may be reasonably satisfactory to the Agent.

          (c) All insurance carried by the Borrower shall provide for a minimum of thirty (30) days’
written notice of cancellation to the Agent and all such insurance which covers the Collateral
shall

48

 

include an endorsement in favor of the Agent, which endorsement shall provide that the
insurance, to the extent of the Agent’s interest therein, shall not be impaired or invalidated, in
whole or in part, by reason of any act or neglect of the Borrower or by the failure of the Borrower
to comply with any warranty or condition of the policy.

          (d) The coverage reflected on EXHIBIT 4-8 presently satisfies the foregoing requirements, it
being recognized by the Borrower, however, that such requirements may change hereafter to reflect
changing circumstances.

          (e) The Borrower shall furnish the Agent from time to time with certificates or other evidence
reasonably satisfactory to the Agent regarding compliance by the Borrower with the foregoing
requirements.

          (f) In the event of the failure by the Borrower to maintain insurance as required herein, the
Agent, at its option, may obtain such insurance, provided, however, the Agent’s obtaining of such
insurance shall not constitute a cure or waiver of any Event of Default occasioned by the
Borrower’s failure to have maintained such insurance.

     4-9. Licenses. Each license, distributorship, franchise, and similar agreement issued to, or
to which the Borrower is a party is in full force and effect, except where the failure to do so
would not have a material adverse effect on the business or assets of the Borrower. To the
Borrower’s knowledge, no party to any such license or agreement is in default or violation thereof.
The Borrower has not received any notice or threat of cancellation of any such license or
agreement.

     4-10. Leases. EXHIBIT 4-10, annexed hereto, is a schedule of all presently effective
Capital Leases. To the Borrower’s knowledge, each of such Capital Leases is in full force and
effect. To the Borrower’s knowledge, no party to any Lease or Capital Lease is in default or
violation of any such Lease or Capital Lease. The Borrower has not received any notice or threat
of cancellation of any such Lease or Capital Lease. The Borrower hereby authorizes the Agent at
any time and from time to time, after the occurrence of an Event of Default, to contact any of the
Borrower’s landlords in order to confirm the Borrower’s continued compliance with the terms and
conditions of the Lease(s) between the Borrower and that landlord and to discuss such issues,
concerning the Borrower’s occupancy under such Lease(s), as the Agent may determine.

     4-11. Requirements of Law. The Borrower is in compliance with, and shall hereafter
comply with and use its assets in compliance with, all Requirements of Law except where the failure
of such compliance would not have a material adverse effect on the Borrower’s business or assets.
The Borrower has not received any notice of any violation of any Requirement of Law (other than of
a violation which

49

 

would not have a material adverse effect on the Borrower’s business or assets), which
violation has not been cured or otherwise remedied.

     4-12. Labor Relations.

          (a) The Borrower has not been and is not presently a party to any collective bargaining or
other labor contract.

          (b) There is not presently pending and, to the Borrower’s knowledge, there is not threatened
any of the following:

          (i) Any strike, slowdown, picketing, work stoppage, or employee grievance process.

          (ii) Any proceeding against or affecting the Borrower relating to the alleged violation
of any Applicable Law pertaining to labor relations or before the National Labor Relations
Board, the Equal Employment Opportunity Commission, or any comparable governmental body,
organizational activity, or other labor or employment dispute against or affecting the
Borrower, which, if determined adversely to the Borrower could reasonably be expected to
have a material adverse effect on the business or assets of the Borrower.

          (iii) Any lockout of any employees by the Borrower (and no such action is contemplated
by the Borrower).

          (iv) Any application for the certification of a collective bargaining agent.

          (c) No event has occurred or circumstance exists which could reasonably be expected to provide
the basis for any work stoppage or other labor dispute.

          (d) The Borrower:

          (i) Has complied in all material respects with all Applicable Law relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing.

          (ii) Is not liable for the payment of compensation, damages, taxes, fines, penalties,
or other amounts, however designated, for the Borrower’s failure to comply with any
Applicable Law referenced in Section 4-12(d)(i), the amount of which would have a material
adverse effect on the business or assets of the Borrower.

     4-13. Maintain Properties. The Borrower shall:

          (a) Keep the Collateral in good order and repair (ordinary reasonable wear and tear and
insured casualty excepted).

          (b) Not suffer or cause the waste or destruction of any material part of the Collateral.

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          (c) Not use any of the Collateral in violation of any policy of insurance thereon.

          (d) Not sell, lease, or otherwise dispose of any of the Collateral, other than the following:

          (i) The sale or rental of Inventory in compliance with this Agreement.

          (ii) The disposal of Equipment which is obsolete, worn out, or damaged beyond repair,
which Equipment is replaced to the extent necessary to preserve or improve the operating
efficiency of the Borrower.

          (iii) The turning over to the Agent of all Receipts as provided herein.

          (iv) The sales of previously viewed movies and games.

          (v) The sales of fixed assets (which shall not include sale of previously viewed movies
and games) during each Fiscal year which have an aggregate book value not in excess of 10%
of the book value of the Borrower’s total fixed assets as of the beginning of such Fiscal
year.

     4-14. Taxes.

          (a) With respect to the Borrower’s federal, state, and local tax liability and obligations:

          (i) The Borrower, in compliance with all Applicable Law, has properly filed all returns
due to be filed up to the date of this Agreement, except to the extent any failure to file
would not have a material adverse effect on the business or assets of the Borrower.

          (ii) Except as described on EXHIBIT 4-14:

          (A) The Borrower has not received from any taxing authority any request to
perform any examination of or with respect to the Borrower nor any other written or
verbal notice in any way relating to any claimed failure by the Borrower to comply
with all Applicable Law concerning payment of any taxes or other amounts in the
nature of taxes, in each case that has not been resolved.

          (B) No agreement is extant which waives or extends any statute of limitations
applicable to the right of any taxing authority to assert a deficiency or make any
other claim for or in respect to federal income taxes.

          (C) No issue has been raised in any tax examination of the Borrower which, by
application of similar principles, reasonably could be expected to result in the
assertion by any taxing authority of a material deficiency for any Fiscal year open
for examination, assessment, or claim.

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          (b) The Borrower has, and hereafter shall: pay, as they become due and payable, all taxes and
unemployment contributions and other charges of any kind or nature levied, assessed or claimed
against the Borrower or the Collateral by any person or entity, except those taxes, contributions
and charges that are being contested in good faith by appropriate proceedings for which adequate
reserves, if required by GAAP, have been established, and provided that no lien has been filed in
respect thereto, properly exercise any trust responsibilities imposed upon the Borrower by reason
of withholding from employees’ pay or by reason of the Borrower’s receipt of sales tax or other
funds for the account of any third party; timely make all contributions and other payments as may
be required pursuant to any Employee Benefit Plan now or hereafter established by the Borrower; and
timely file all tax and other returns and other reports with each governmental authority to whom
the Borrower is obligated to so file, except where the failure to file would not have a material
adverse effect on the business or assets of the Borrower.

     4-15. No Margin Stock. The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying any margin stock (within the meaning of Regulations U, T, and
X of the Board of Governors of the Federal Reserve System of the United States). No part of the
proceeds of any borrowing hereunder will be used at any time to purchase or carry any such margin
stock or to extend credit to others for the purpose of purchasing or carrying any such margin
stock.

     4-16. ERISA.

          (a) Except as disclosed on EXHIBIT 4-16(a), annexed hereto, neither the Borrower nor any ERISA
Affiliate is aware of or has knowingly:

          (i) Violated or failed to be in full compliance with the Borrower’s Employee Benefit
Plan.

          (ii) Failed timely to file all reports and filings required by ERISA to be filed by the
Borrower.

          (iii) Engaged in any nonexempt “prohibited transactions” or “reportable events”
(respectively as described in ERISA).

          (iv) Engaged in, or committed, any act such that a tax or penalty reasonably could be
imposed upon the Borrower on account thereof pursuant to ERISA, which tax or penalty would
have a material adverse effect on the business or assets of the Borrower.

          (v) Accumulated any material cumulative funding deficiency within the meaning of ERISA.

          (vi) Terminated any Employee Benefit Plan such that a lien could be asserted against
any assets of the Borrower on account thereof pursuant to ERISA.

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          (vii) Been a member of, contributed to, or have any obligation under any Employee
Benefit Plan which is a multiemployer plan within the meaning of Section 4001(a) of ERISA.

          (b) Neither the Borrower nor any ERISA Affiliate shall ever knowingly or intentionally engage
in any action of the type described in Section 4-16(a).

     4-17. Hazardous Materials.

          (a) To the best of the Borrower’s knowledge the Borrower has never: (i) been legally
responsible for any release or threat of release of any Hazardous Material or (ii) received
notification of the incurrence of any material expense in connection with the assessment,
containment, or removal of any Hazardous Material for which the Borrower would be responsible.

          (b) The Borrower shall: (i) dispose of any Hazardous Material only in compliance with all
Environmental Laws and (ii) have possession of any Hazardous Material only in the ordinary course
of the Borrower’s business and in compliance with all Environmental Laws.

     4-18. Litigation. Except as described in EXHIBIT 4-18, annexed hereto, there is not presently
pending or, to the knowledge of the Borrower, threatened by or against the Borrower any suit,
action, proceeding, or investigation which, if determined adversely to the Borrower, would have a
material adverse effect upon the Borrower’s financial condition or ability to conduct its business
as such business is presently conducted or is contemplated to be conducted in the foreseeable
future.

     4-19. Dividends, Investments, Corporate Action. The Borrower shall not:

          (a) Pay any cash dividend or make any other distribution in respect of any class of the
Borrower’s capital stock.

          (b) (i) Own, redeem, retire, purchase, repurchase, or acquire any of the Borrower’s capital
stock, provided that (A) if, after giving effect to each such transaction, the Pro Forma
Availability Condition is satisfied, the Borrower may redeem, retire, purchase, repurchase, or
acquire the Borrower’s capital stock provided that the amount of consideration paid for all such
transactions after the date hereof shall not exceed $10,000,000 in the aggregate unless the
provisions of subsection (B) of this clause (b)(i) are satisfied, or (B) if, after giving effect to
each such transaction, the Payment Conditions are satisfied, the Borrower may redeem, retire,
purchase, repurchase, or acquire the Borrower’s capital stock without any limitation on the
aggregate consideration paid; and

          (ii) Borrower may repurchase stock options issued under the Borrower’s employee stock option
plan for non-cash consideration consisting of restricted stock of the Borrower.

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          (c) Invest in or purchase any stock or securities or rights to purchase any such stock or
securities, of any Person.

          (d) Merge or consolidate or be merged or consolidated with or into any other corporation or
other entity, provided, that a subsidiary of the Borrower may merge or consolidate into the
Borrower.

          (e) Consolidate any of the Borrower’s operations with those of any other Person, other than a
subsidiary of the Borrower.

          (f) Organize or create any Subsidiary, without notifying the Agent, and contemporaneously with
such formation, causing such Subsidiary to execute (i) an Unconditional and Unlimited Guaranty of
all of the Borrower’s Liabilities, substantially in the form of the guaranty agreement executed on
August 29, 2000 by the Borrower’s existing Subsidiary, and (ii) a Security Agreement granting to
the Agent a first perfected interest in its business assets, substantially in the form of the
security agreement executed on August 17, 2006 by the Borrower’s existing Subsidiary.

          (g) Subordinate any debts or obligations owed to the Borrower by any third party to any other
debts owed by such third party to any other Person.

          (h) Acquire any assets other than in the ordinary course and conduct of the Borrower’s
business as conducted at the execution of this Agreement.

     4-20. Loans. The Borrower shall not make any loans or advances to, nor acquire the
Indebtedness of, any Person, provided, however, the foregoing does not prohibit any of the
following:

          (a) Advance payments made to the Borrower’s suppliers in the ordinary course.

          (b) Advances to the Borrower’s officers, employees, and salespersons with respect to
reasonable expenses to be incurred by such officers, employees, and salespersons for the benefit of
the Borrower, which expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrower.

          (c) Advances and loans to the Borrower’s Subsidiaries.

     4-21. Protection of Assets The Agent, in the Agent’s reasonable discretion, and from time to
time, may discharge any tax or Encumbrance on any of the Collateral, or take any other action which
the Agent may deem reasonably necessary to repair, insure, maintain, preserve, collect, or realize
upon any of the Collateral. The Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken except where there is
a specific finding in a judicial proceeding (in which the Agent has had an opportunity to be
heard), from which finding no further appeal is available, that the Agent had acted in actual bad
faith or in a grossly negligent manner.

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The Borrower shall pay to the Agent, on demand, or the Agent, in its discretion, may add to the
Loan Account, all amounts paid or incurred by the Agent pursuant to this Section 4-21.

     4-22. Line of Business. The Borrower shall not engage in any business other than the business
in which it is currently engaged or a business reasonably related thereto (the conduct of which
reasonably related business is reflected in the Business Plan).

     4-23. Affiliate Transactions. The Borrower shall not enter into any transaction with any
Affiliate, other then transactions in the ordinary course of business which are on fair and
reasonable terms, no less favorable to the Borrower than those which would have been imposed in a
comparable arms length transaction with a person who is not an Affiliate.

     4-24. Further Assurances.

          (a) The Borrower is not the owner of, nor has it any interest in, any property or asset (other
than any Exempt Asset) which, immediately upon the satisfaction of the conditions precedent to the
effectiveness of the credit facility contemplated hereby (Article 3) will not be subject to a
perfected Collateral Interest in favor of the Agent (subject only to Permitted Encumbrances) to
secure the Liabilities.

          (b) The Borrower will not hereafter acquire any asset or any interest in property (other than
any Exempt Asset) which is not, immediately upon such acquisition, subject to such a perfected
Collateral Interest in favor of the Agent to secure the Liabilities (subject only to Permitted
Encumbrances).

          (c) The Borrower shall execute and deliver to the Agent such instruments, documents, and
papers, and shall do all such things from time to time hereafter as the Agent may reasonably
request to carry into effect the provisions and intent of this Agreement; to protect and perfect
the Agent’s Collateral Interests in the Collateral; and to facilitate the collection of the
Receivables Collateral. The Borrower shall execute all such instruments as may be reasonably
required by the Agent with respect to the recordation and/or perfection of the Collateral Interests
created or contemplated herein.

          (d) The Borrower hereby designates the Agent as and for the Borrower’s true and lawful
attorney, with full power of substitution, to sign and file any financing statements in order to
perfect the Agent’s Collateral Interests in the Collateral.

          (e) The Borrower hereby authorizes the Agent to file such financing statements as the Agent
determines as appropriate to perfect or protect the Agent’s Collateral Interests in the Collateral.

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          (f) A carbon, photographic, or other reproduction of this Agreement or of any financing
statement or other instrument executed pursuant to this Section 4-24 shall be sufficient for filing
to perfect the security interests granted herein.

     4-25. Adequacy of Disclosure.

          (a) All financial statements furnished to the Agent and to each Revolving Credit Lender by the
Borrower have been prepared in accordance with GAAP consistently applied and present fairly in all
material respects the financial condition of the Borrower at the date(s) thereof and the results of
operations and cash flows for the period(s) covered (provided however, that unaudited financial
statements are subject to normal year end adjustments and to the absence of footnotes). There has
been no change in the financial condition, results of operations, or cash flows of the Borrower
since the date(s) of such financial statements, other than changes in the ordinary course of
business, which changes have not been materially adverse, either singularly or in the aggregate.

          (b) The Borrower does not have any contingent obligations or obligation under any Lease
or Capital Lease which is required to be reflected in financial statements prepared in accordance
with GAAP and that is not noted in the Borrower’s financial statements furnished to the Agent prior
to the execution of this Agreement.

          (c) To the Borrower’s knowledge, no document, instrument, agreement, or paper now or hereafter
given to the Agent and to each Revolving Credit Lender by or on behalf of the Borrower or any
guarantor of the Liabilities in connection with the execution of this Agreement by the Agent and to
each Revolving Credit Lender contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the statements therein not
misleading. There is no fact known to the Borrower which has, or which, in the foreseeable future
could reasonably be expected to have, a material adverse effect on the financial condition of the
Borrower or any such guarantor which has not been disclosed in writing to the Agent and to each
Revolving Credit Lender.

     4-26. No Restrictions on Liabilities. The Borrower shall not enter into or directly or
indirectly become subject to any agreement which prohibits or restricts, in any manner, the
Borrower’s:

          (a) Creation of, and granting of Collateral Interests in favor of the Agent.

          (b) Incurrence of Liabilities.

     4-27. Other Covenants. The Borrower shall not indirectly do or cause to be done any act
which, if done directly by the Borrower, would breach any covenant contained in this Agreement.

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ARTICLE 5 — Financial Reporting and Performance Covenants:

     5-1. Maintain Records. The Borrower shall:

          (a) At all times, keep proper books of account, in which full, true, and accurate entries
shall be made of all of the Borrower’s financial transactions, all in accordance with GAAP applied
consistently with prior periods to fairly reflect in all material respects the financial condition
of the Borrower at the close of, and its results of operations for, the periods in question.

          (b) Timely provide the Agent with those financial reports, statements, and schedules required
by this Article 5 or otherwise, each of which reports, statements and schedules shall be prepared,
to the extent applicable, in accordance with GAAP applied consistently with prior periods to fairly
reflect in all material respects the financial condition of the Borrower at the close of, and the
results of operations for, the period(s) covered therein.

          (c) At all times, keep accurate current records of the Collateral including, without
limitation, accurate current stock, cost, and sales records of its Inventory, accurately and
sufficiently itemizing and describing the kinds, types, and quantities of Inventory and the cost
and selling prices thereof.

          (d) At all times, retain an independent registered public accounting firm which is reasonably
satisfactory to the Agent and instruct such accountants to discuss with the Agent the Borrower’s
financial performance, financial condition, operating results, controls, and such other matters,
within the scope of the retention of such accountants (and subject to work product and
accountant/client privileged information), as may be requested by the Agent.

          (e) Not change the Borrower’s Fiscal year.

     5-2. Access to Records.

          (a) The Borrower shall accord the Agent with access from time to time as the Agent may require
to all properties owned by or over which the Borrower has control. The Agent shall have the right,
and the Borrower will permit the Agent from time to time as Agent may reasonably request, to
examine, inspect, copy, and make extracts from any and all of the Borrower’s books, records,
electronically stored data, papers, and files. The Borrower shall make all of the Borrower’s
copying facilities available to the Agent.

          (b) The Borrower hereby authorizes the Agent to:

          (i) Inspect, copy, duplicate, review, cause to be reduced to hard copy, run off, draw
off, and otherwise use any and all computer or electronically stored information or data
which relates to the Borrower, of the Borrower, or any service bureau, contractor,
accountant, or

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other person, and directs any such service bureau, contractor, accountant, or other
person fully to cooperate with the Agent with respect thereto.

          (ii) Verify at any time the Collateral or any portion thereof, including verification
with Account Debtors, and/or with the Borrower’s computer billing companies, collection
agencies, and accountants and to sign the name of the Borrower on any notice to the
Borrower’s Account Debtors or verification of the Collateral. .

          (c) The Agent from time to time may designate one or more representatives to exercise the
Agent’s rights under this Section 5-2 as fully as if the Agent were doing so.

     5-3. Prompt Notice to Agent.

          (a) The Borrower shall provide the Agent with written notice promptly upon the occurrence of
any of the following events, which written notice shall be with reasonable particularity as to the
facts and circumstances in respect of which such notice is being given:

          (i) Any change in the Borrower’s President and chief financial officer.

          (ii) Any ceasing of the Borrower’s making of payment, in the ordinary course, to any of
its creditors (other than its ceasing of making of such payments on account of a de minimis
dispute).

          (iii) Any failure by the Borrower to pay rent at any of the Borrower’s locations, which
failure continues for more than three (3) days following the last day on which such rent was
payable (including any grace periods therefor) without more than a de minimis adverse effect
to the Borrower.

          (iv) Any material adverse change in the business, operations, or financial condition of
the Borrower.

          (v) The Borrower’s becoming InDefault.

          (vi) Any intention on the part of the Borrower to discharge the Borrower’s present
independent registered public accounting firm or any withdrawal or resignation by such
independent registered public accounting firm from their acting in such capacity (as to
which, see Subsection 5-1(d)).

          (vii) Any litigation which, if determined adversely to the Borrower, might reasonably
be expected to have a material adverse effect on the financial condition of the Borrower.

          (b) The Borrower shall:

          (i) Provide the Agent, when so distributed, with copies of any materials distributed to
the shareholders of the Borrower (qua such shareholders).

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          (ii) Provide the Agent:

          (A) When filed, copies of the Borrower’s Form 10-K, Form 8-K, Form 10-Q and
Form 14A filed with the SEC.

          (B) When received, copies of all correspondence from the SEC, other than
routine non-substantive general communications from the SEC.

          (iii) Provide the Agent, when received by the Borrower, with a copy of any management
letter or similar communications from any accountant of the Borrower.

     5-4. Borrowing Base Certificate. The Borrower shall provide the Agent by 11:30 a.m. Central
time, on the fifteenth day of each Fiscal month, with a Borrowing Base Certificate (in the form of
EXHIBIT 5-4 annexed hereto, as such form may be revised from time to time by the Agent (the
“Borrowing Base Certificate”)). Notwithstanding the foregoing, if an Increased Reporting Event
has occurred and is continuing, instead of providing the Agent with a Borrowing Base Certificate on
a monthly basis, the Borrower shall provide the Agent with a Borrowing Base Certificate on a weekly
basis, on Wednesday of each week (as of the immediately preceding Saturday), commencing with the
week in which the Increased Reporting Event occurs. The Agent acknowledges that so long as the
Borrower is required to provide such information to the Agent on a weekly basis, the Borrower will
be providing such weekly information based upon its good faith estimates of its Inventory (except
for the information provided for the final week of each Fiscal month, which shall not be based upon
estimates); provided, however, the Borrower acknowledges and agrees with the Agent that the
Borrower shall use its best efforts and good faith to provide the Agent with as accurate
information as possible for such weekly Borrowing Base Certificates. Such Certificate may be sent
to the Agent by facsimile transmission, electronic mail transmission, or may otherwise be posted on
a secure Internet or intranet website, if any, to which the Agent and Lenders have access, provided
that the original thereof is forwarded to the Agent on the date of such transmission.

     5-5. Monthly Reports.

          (a) Monthly, the Borrower shall provide the Agent with original counterparts of the following
(each in such form as the Agent from time to time may reasonably specify):

          (i) Within fifteen (15) days of the end of the previous Fiscal month:

          (A) A report generated by the Borrower’s inventory control system, which report
reflects the functional equivalent of a stock ledger inventory.

          (B) An Inventory Certificate (signed by the Borrower’s President or Chief
Financial Officer or Vice President-Finance).

          (C) By Department Inventory Report

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          (D) Distribution Center Inventory Report (By Department).

          (E) Return Center Inventory Report (By Department).

          (F) Notwithstanding the foregoing, if an Increased Reporting Event has occurred
and is continuing, instead of providing the Agent with the information required by
this subsection 5-5(a)(i)(A),(B), (C),(D) and (E) on a monthly basis, the Borrower
shall provide the Agent with such information on a weekly basis, on Wednesday of
each week (as of the immediately preceding Saturday ), commencing with the week in
which the Increased Reporting Event occurs. The Agent acknowledges that so long as
the Borrower is required to provide such information to the Agent on a weekly basis,
the Borrower will be providing such weekly information based upon its good faith
estimates (except for the information provided for the final week of each Fiscal
month, which shall not be based upon estimates); provided, however, the Borrower
acknowledges and agrees with the Agent that the Borrower shall use its best efforts
and good faith to provide the Agent with as accurate information as possible for
such weekly reports. The weekly report required to be delivered by the Borrower to
the Agent for the final week of each Fiscal month while the provisions of this
paragraph are in effect shall provide, in addition to the information required by
this subsection 5-5(a)(i)(A), (B), (C), (D) and (E), a reconciliation of any
discrepancies in the information which was previously provided to the Agent in the
prior weekly reports for such Fiscal month.

          (ii) Within thirty (30) days of the end of the previous Fiscal month:

          (A) Reconciliation of the above described Report and Inventory Certificate
(Section 5-5(a)(i)(A)) to Availability and to the general ledger as of the end of
the subject month.

          (B) A schedule of purchases from the Borrower’s twenty largest vendors (in
terms of year to date purchases), which schedule shall be in such form as may be
satisfactory to the Agent and shall include year to date cumulative purchases.

          (C) A summary aging of the Borrower’s accounts payable by vendor type.

          (D) A Store Activity Report.

          (E) The officer’s compliance certificate described in Section 5-8.

          (F) An internally prepared consolidated financial statement of the financial
condition of the Borrower and its Subsidiaries and the results of operations for,
the period ending with the end of the subject month, which financial statement shall
include, at a minimum, a balance sheet, income statement, cash flow and comparison
of

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total same store sales detailed by merchandise and rental for the corresponding
month of the then immediately previous year, as well as to the Business Plan.

          (b) For purposes of Sections 5-5(a)(i), above, and 5-5(a)(ii), above, the first “previous
month” in respect of which the items respectively required by those Sections shall be the month
prior to that which dates this Agreement, except that the first group of items required to be
provided pursuant to Section 5-5(a)(i) shall be included with those provided pursuant to Section
5-5(a)(ii); thereafter, those items shall be provided in accordance with the requirements of
Section 5-5(a)(i).

     5-6. Quarterly Reports. Quarterly, within forty-five (45) days following the end of each of
the Borrower’s Fiscal quarters, the Borrower shall provide the Agent with the following:

          (a) A copy of the management prepared consolidated financial statement of the Borrower and its
Subsidiaries for the period from the beginning of the Borrower’s then current Fiscal year through
the end of the subject quarter, with comparative information for the same period of the previous
Fiscal year, which statement shall include, at a minimum, a balance sheet, income statement,
statement of changes in shareholders’ equity, and cash flows and comparisons for the corresponding
quarter of the then immediately previous year, as well as to the Business Plan.

          (b) The officer’s compliance certificate described in Section 5-8

          (c) Store specific EBITDA.

          (d) A schedule of any DDAs that have been opened in the previous Fiscal quarter, which shall
include, with respect to each depository: (i) the name and address of that depository; (ii) the
account number(s) of the account(s) maintained with such depository; and (iii) a contact person at
such depository.

     5-7. Annual Reports.

     Annually, within ninety (90) days following the end of the Borrower’s Fiscal year, the
Borrower shall furnish the Agent with the following:

          (i) A copy of the annual consolidated financial statement for the Borrower and its
Subsidiaries, which statement shall have been prepared by, and bear the unqualified opinion
of, the Borrower’s independent registered public accounting firm (i.e. said statement shall
be “certified” by such accountants) and shall include, at a minimum (with comparative
information for the then prior Fiscal year) a balance sheet, income statement, statement of
changes in shareholders’ equity, and cash flows.

          (ii) The officer’s compliance certificate described in Section 5-8.

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     5-8. Officers’ Certificates. The Borrower shall cause either the Borrower’s President or its
Chief Financial Officer or Vice President-Finance, in each instance, to provide a Certificate with
those monthly statements required pursuant to Section 5-5(a)(ii), quarterly, and annual statements
to be furnished pursuant to this Agreement, which Certificate shall:

          (a) Indicate that the subject statement was prepared in accordance with GAAP consistently
applied and presents fairly in all material respects the consolidated financial condition of the
Borrower and its Subsidiaries at the close of, and the consolidated results of the Borrower’s and
its Subsidiaries’ operations and cash flows for, the period(s) covered, subject, however to the
following:

          (i) Usual year end adjustments (this exception shall not be included in the Certificate
which accompanies such annual statement).

          (ii) Material Accounting Changes (in which event, such Certificate shall include a
schedule (in reasonable detail) of the effect of each such Material Accounting Change) not
previously specifically taken into account in the determination of the financial performance
covenant imposed pursuant to Section 5-11.

          (b) Indicate either that (i) the Borrower is not InDefault, or (ii) if such an event has
occurred, its nature (in reasonable detail) and the steps (if any) being taken or contemplated by
the Borrower to be taken on account thereof.

          (c) Include calculations concerning the Borrower’s compliance (or failure to comply) at the
date of the subject statement with each of the financial performance covenants included in Section
5-11 hereof.

     5-9. Inventories, Appraisals, and Audits.

          (a) The Agent, at the expense of the Borrower, may participate in and/or observe each internal
cycle count and/or inventory of so much of the Collateral as consists of Inventory which is
undertaken on behalf of the Borrower.

          (b) The Borrower, at its own expense, shall conduct regular cycle inventory counts that
determine total inventory value at least twice at each of its locations in each twelve (12) month
period during which this Agreement is in effect (the spacing of the scheduling of which inventories
shall be subject to the Agent’s discretion) conducted by such inventory takers as are satisfactory
to the Agent and following such methodology as may be satisfactory to the Agent.

          (i) The Borrower shall provide the Agent with a copy of the preliminary results of each
such inventory (as well as of any other physical inventory undertaken by the Borrower)
within ten (10) days following the completion of such inventory.

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          (ii) The Borrower, within thirty (30) days following the completion of such
inventory, shall provide the Agent with a reconciliation of the results of each such
inventory (as well as of any other physical inventory undertaken by the Borrower) and shall
post such results to the Borrower’s By-Department monthly report generated by the Borrower’s
inventory control system and, as applicable to the Borrower’s other financial books and
records.

          (iii) The Agent, in its discretion, if the Borrower is InDefault, may cause such
additional inventories to be taken as the Agent determines (each, at the expense of the
Borrower).

          (c) Upon the request of the Agent after reasonable prior notice, the Borrower shall permit,
and cooperate with, the Agent or professionals (including appraisers) retained by the Agent to
conduct appraisals of the Collateral, including, without limitation, the assets included in the
Borrowing Base. The Borrower shall pay the fees and expenses of the Agent and such professionals
with respect to such appraisals. Without limiting the foregoing, the Borrower acknowledges that
the Agent may, in its discretion, undertake up to two (2) appraisals in any Fiscal year at the
Borrower’s expense, provided that during the continuance of an Increased Reporting Event arising as
a result of the Borrower’s failure to maintain the required Availability, the Agent may undertake
up to three (3) appraisals in any Fiscal year at the Borrower’s expense Notwithstanding the
foregoing, the Agent may cause additional appraisals to be undertaken (i) as it in its discretion
deems necessary or appropriate, at its own expense or, (ii) if required by Applicable Law or if the
Borrower is InDefault, at the expense of the Borrower.

          (d) Upon the request of the Agent after reasonable prior notice, the Borrower shall permit,
and cooperate with, the Agent or professionals (including investment bankers, consultants,
accountants, and lawyers) retained by the Agent to conduct commercial finance examinations and
other evaluations, including, without limitation, of (i) the Borrower’s practices in the
computation of the Borrowing Base and (ii) the assets included in the Borrowing Base and related
financial information such as, but not limited to, sales, gross margins, payables, accruals and
reserves. The Borrower shall pay the fees and expenses of the Agent and such professionals with
respect to such examinations and evaluations. Without limiting the foregoing, the Borrower
acknowledges that the Agent may, in its discretion, undertake up to two (2) commercial finance
examinations in any Fiscal year at the Borrower’s expense, provided that during the continuance of
an Increased Reporting Event arising as a result of the Borrower’s failure to maintain the required
Availability, the Agent may undertake up to three (3) commercial finance examinations in any Fiscal
year at the Borrower’s expense. Notwithstanding the foregoing, the Agent may cause additional
commercial finance examinations to be undertaken (i) as it in its discretion deems necessary or
appropriate, at its own expense or, (ii) if required by Applicable Law or if the Borrower is
InDefault, at the expense of the Borrower.

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          (e) The Agent from time to time (in all events, at the Borrower’s expense) may undertake
“mystery shopping” (so-called) visits to all or any of the Borrower’s business premises.

     5-10. Additional Financial Information.

          (a) In addition to all other information required to be provided pursuant to this Article 5,
the Borrower promptly shall provide the Agent with such other and additional information concerning
the Borrower, the Collateral, the operation of the Borrower’s business, and the Borrower’s
financial condition, including original counterparts of financial reports and statements, as the
Agent may from time to time reasonably request from the Borrower.

          (b) The Borrower may provide the Agent, from time to time hereafter, with updated forecasts of
the Borrower’s anticipated performance and operating results.

          (c) In all events, the Borrower, no sooner than ninety (90) nor later than sixty (60) days
prior to the end of each of the Borrower’s Fiscal years, shall provide the Agent with an updated
and extended forecast which shall go out at least through the end of the then next Fiscal year and
shall include an income statement, balance sheet, and statement of cash flow, by month, each
prepared in conformity with GAAP and consistent with the Borrower’s then current practices.

          (d) The Borrower recognizes that all appraisals, inventories, analysis, financial information,
and other materials which the Agent may obtain, develop, or receive with respect to the Borrower
are confidential to the Agent and that, except as otherwise provided herein, the Borrower is not
entitled to receipt of any of such appraisals, inventories, analysis, financial information, and
other materials, nor copies or extracts thereof or therefrom.

          (e) The Borrower’s Business Plan has been delivered to the Agent.

     5-11. Financial Performance Covenant. The Borrower shall maintain Availability of not less
than $10 Million at all times.

  ARTICLE 6 — Use of Collateral:

     6-1. Use of Inventory Collateral.

          (a) The Borrower shall not engage

          (i) In any sale of the Inventory other than for fair consideration in the conduct of
the Borrower’s business in the ordinary course.

          (ii) Sales or other dispositions to creditors.

          (iii) Sales or other dispositions in bulk.

          (iv) Sales of any Collateral in breach of any provision of this Agreement.

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          (b) No sale of Inventory shall be on consignment, approval, or under any other circumstances
such that, with the exception of the Borrower’s customary return policy applicable to the return of
inventory purchased by the Borrower’s retail customers in the ordinary course, such Inventory may
be returned to the Borrower without the consent of the Agent.

     6-2. Inventory Quality. All Inventory now owned or hereafter acquired by the Borrower is and
will be of good and merchantable quality and free from defects (other than defects within customary
trade tolerances).

     6-3. Adjustments and Allowances. The Borrower may grant such allowances or other adjustments
to the Borrower’s Account Debtors as the Borrower may reasonably deem to accord with sound business
practice, provided, however, the authority granted the Borrower pursuant to this Section 6-3 may be
limited or terminated by the Agent at any time after the occurrence of an Event of Default in the
Agent’s discretion.

     6-4. Validity of Accounts.

          (a) The amount of each Account shown on the books, records, and invoices of the Borrower
represented as owing by each Account Debtor is and will be the correct amount actually owing by
such Account Debtor and shall have been fully earned by performance by the Borrower.

          (b) The Borrower has no knowledge of any impairment of the validity or collectibility of any
of the Accounts. The Borrower shall notify the Agent of any such impairment immediately after the
Borrower becomes aware of any such impairment.

     6-5. Notification to Account Debtors. The Agent shall have the right after the occurrence of
an Event of Default to notify any of the Borrower’s Account Debtors to make payment directly to the
Agent and to collect all amounts due on account of the Collateral.

  ARTICLE 7 — Cash Management, Payment of Liabilities:

     7-1. Depository Accounts.

          (a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present DDA’s, which Schedule includes,
with respect to each depository (i) the name and address of that depository; (ii) the
account number(s) of the account(s) maintained with such depository; and (iii) a contact
person at such depository.

          (b) The Borrower shall deliver to the Agent, as a condition to the effectiveness of this
Agreement, Blocked Account Agreements with Amarillo National Bank and Bank of America, N.A..

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          (c) Upon the request of the Agent after the occurrence and during the continuance of a Cash
Dominion Event, to the extent not previously provided, the Borrower shall deliver to the Agent
notifications, executed on behalf of the Borrower, to each depository institution with which any
DDA is maintained (other than any Exempt DDA and the Blocked Account), in form reasonably
satisfactory to the Agent of the Agent’s interest in such DDA.

     7-2. Credit Card Receipts.

          (a) Annexed hereto as EXHIBIT 7-2, is a Schedule which describes all arrangements to which the
Borrower is a party with respect to the payment to the Borrower of the proceeds of credit card
charges for sales by the Borrower.

          (b) To the extent not previously delivered, the Borrower shall deliver to the Agent, as a
condition to the effectiveness of this Agreement, notification, executed on behalf of the Borrower,
to each of the Borrower’s credit card clearinghouses and processors of notice (in form reasonably
satisfactory to the Agent), which notice provides that payment of all credit card charges submitted
by the Borrower to that clearinghouse or other processor and any other amount payable to the
Borrower by such clearinghouse or other processor shall be directed to the Blocked Account (or if
the Borrower prefers to so specify in such notice, to the Concentration Account). The Borrower
shall not change such direction or designation except upon and with the prior written consent of
the Agent.

     7-3. The Concentration, Blocked, and Operating Accounts.

          (a) The following checking accounts have been or will be established (and are so referred to
herein):

          (i) The “Concentration Account” (so referred to herein): Established by the Borrower
with Bank of America.

          (ii) The “Blocked Account” (so referred to herein): Established by the Borrower with
Amarillo National Bank.

          (iii) The “Operating Account” (so referred to herein): Established by the Borrower
with Amarillo National Bank.

          (iv) The “Payroll Account” (so referred to herein) and established by the Borrower with
Amarillo National Bank.

          (b) The contents of each DDA (other than the Operating Account and the Payroll Account) and of
the Blocked Account constitutes Collateral and Proceeds of Collateral.

          (c) The Borrower shall pay all fees and charges of, and maintain such impressed balances as
may be required by the depository in which any account is opened as required hereby (even if such
account is opened by and/or is the property of the Agent).

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     7-4. Proceeds and Collections.

          (a) All Receipts and all cash proceeds of any sale or other disposition of any of the
Borrower’s assets constitute Collateral and proceeds of Collateral. After the occurrence and
during the continuance of a Cash Dominion Event, all Receipts and all cash proceeds of any sale or
other disposition of any of the Borrower’s assets shall be held in trust by the Borrower for the
Agent; shall not be commingled with any of the Borrower’s other funds, and shall be deposited
and/or transferred only to the Blocked Account or the Concentration Account.

          (b) After the occurrence and during the continuance of a Cash Dominion Event, the Borrower
shall cause the ACH or wire transfer to the Blocked Account, no less frequently than daily (and
whether or not there is then an outstanding balance in the Loan Account) of the following:

          (i) The then contents of each DDA (other than any Exempt DDA), each such transfer to be
net of any minimum balance, not to exceed $1,500.00 as may be required to be maintained in
the subject DDA by the bank at which such DDA is maintained).

          (ii) The proceeds of all credit card charges not otherwise provided for pursuant
hereto.

          (c) Whether or not any Liabilities are then outstanding, after the occurrence and during the
continuance of a Cash Dominion Event, the Borrower shall cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily, of the entire ledger balance of the Blocked
Account, net of such minimum balance, not to exceed $1,000.00 as may be required to be maintained
in the Blocked Account by the depository with which the Blocked Account is maintained. Telephone
advice (confirmed by written notice) shall be provided to the Agent on each Business Day on which
any such transfer is made.

          (d) In the event that, notwithstanding the provisions of this Section 7-4, after the
occurrence and during the continuance of a Cash Dominion Event, the Borrower receives or otherwise
has dominion and control of any Receipts, or any proceeds or collections of any Collateral, such
Receipts, proceeds, and collections shall be held in trust by the Borrower for the Agent and shall
not be
commingled with any of the Borrower’s other funds or deposited in any account of the Borrower
other than the Blocked Account.

     7-5. Payment of Liabilities.

          (a) On each Business Day during the continuance of a Cash Dominion Event, the Agent shall
apply the then collected balance of the Concentration Account (net of fees charged, and of such
impressed balances as may be required by the bank at which the Concentration Account is maintained,
not to exceed $1,500.00) First, towards the SwingLine Loans and Second, towards the unpaid

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balance
of the Loan Account and all other Liabilities, provided, however, for purposes of the calculation
of interest on the unpaid principal balance of the Loan Account, such payment shall be deemed to
have been made one (1) Business Day after such transfer.

          (b) The following rules shall apply to deposits and payments under and pursuant to this
Agreement:

          (i) Funds shall be deemed to have been deposited to the Concentration Account on the
Business Day on which deposited, provided that notice of such deposit is available to the
Agent by 2:00PM (Boston time) on that Business Day.

          (ii) Funds paid to the Agent, other than by deposit to the Concentration Account, shall
be deemed to have been received on the Business Day when they are good and collected funds,
provided that notice of such payment is available to the Agent by 2:00PM (Boston time) on
that Business Day.

          (iii) If notice of a deposit to the Concentration Account (Section 7-5(b)(i)) or
payment (Section 7-5(b)(ii)) is not available to the Agent until after 2:00PM (Boston time)
on a Business Day, such deposit or payment shall be deemed to have been made at 9:00AM on
the then next Business Day.

          (iv) All deposits to the Concentration Account and other payments to the Agent are
subject to clearance and collection.

          (c) The Agent shall transfer to the Operating Account any surplus in the Concentration Account
remaining after the application towards the Liabilities referred to in Section 7-5(a), above, on a
daily basis (less those amounts which are to be netted out, as provided therein) provided, however,
in the event that

          (i) the Borrower is InDefault; and

          (ii) one or more L/C’s are then outstanding,

then the Agent may establish a funded reserve of up to 110% of the aggregate Stated Amounts of such
L/C’s. Such funded reserve shall either be (i) returned to the Borrower provided that the Borrower
is not
InDefault or (ii) applied towards the Liabilities following the occurrence of any Event of Default
described in Section 10-12 or acceleration following the occurrence of any other Event of Default.

     7-6. The Operating Account. Except as otherwise specifically provided in, or permitted by,
this Agreement, all checks shall be drawn by the Borrower upon, and other disbursements shall be
made by the Borrower solely from, the Operating Account or the Payroll Account.

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  ARTICLE 8 - Grant of Security Interest:

     8-1. Grant of Security Interest. To secure the Borrower’s prompt, punctual, and faithful
performance of all and each of the Liabilities, the Borrower hereby grants to the Agent, for the
ratable benefit of the Revolving Credit Lenders, a continuing security interest in and to, and
assigns to the Agent, for the ratable benefit of the Revolving Credit Lenders, the following, and
each item thereof, whether now owned or now due, or in which the Borrower has an interest, or
hereafter acquired, arising, or to become due, or in which the Borrower obtains an interest, and
all products, Proceeds, substitutions, and accessions of or to any of the following (all of which,
together with any other property in which the Agent may in the future be granted a security
interest, is referred to herein as the “Collateral”):

          (a) All Accounts and accounts receivable.

          (b) All Inventory.

          (c) All General Intangibles.

          (d) All Equipment.

          (e) All Goods.

          (f) All Fixtures.

          (g) All Chattel Paper.

          (h) All Letter-of-Credit Rights.

          (i) All Payment Intangibles.

          (j) All Supporting Obligations.

          (k) All Commercial Tort Claims.

          (l) All books, records, and information relating to the Collateral and/or to the operation of
the Borrower’s business, and all rights of access to such books, records, and information, and all
property in which such books, records, and information are stored, recorded, and maintained.

          (m) All Investment Property, Instruments, Documents, Deposit Accounts, policies and
certificates of insurance, deposits, impressed accounts, compensating balances, money, cash, or
other property.

          (n) All insurance proceeds, refunds, and premium rebates, including, without limitation,
proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates
arise out of any of the foregoing ((a) through (m)) or otherwise.

          (o) All liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing
((a) through (n)), including the right of stoppage in transit.

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     8-2. Extent and Duration of Security Interest.

          (a) The security interest created and granted herein is in addition to, and supplemental of,
any security interest previously granted by the Borrower to the Agent and shall continue in full
force and effect applicable to all Liabilities until both (a) all Liabilities have been paid and/or
satisfied in full and (b) the Revolving Credit Dollar Commitment of each Revolving Credit Lender is
terminated.

          (b) It is intended that the Collateral Interests created herein extend to and cover all assets
of the Borrower, other than Exempt Assets.

  ARTICLE 9 — Agent As Borrower’s Attorney-In-Fact:

     9-1. Appointment as Attorney-In-Fact. The Borrower hereby irrevocably constitutes and appoints
the Agent as the Borrower’s true and lawful attorney, with full power of substitution, following
the occurrence and during the continuance of an Event of Default, to convert the Collateral into
cash at the sole risk, cost, and expense of the Borrower, but for the sole benefit of the Agent and
the Revolving Credit Lenders. The rights and powers granted the Agent by this appointment,
following the occurrence and during the continuance of an Event of Default, include but are not
limited to the right and power to:

          (a) Prosecute, defend, compromise, or release any action relating to the Collateral.

          (b) Sign change of address forms to change the address to which the Borrower’s mail is to be
sent to such address as the Agent shall designate; receive and open the Borrower’s mail; remove any
Receivables Collateral and Proceeds of Collateral therefrom and turn over the balance of such mail
either to the Borrower or to any trustee in bankruptcy or receiver of the Borrower, or other legal
representative of the Borrower whom the Agent determines to be the appropriate person to whom to so
turn over such mail.

          (c) Endorse the name of the Borrower in favor of the Agent upon any and all checks, drafts,
notes, acceptances, or other items or instruments; sign and endorse the name of the Borrower on,
and receive as secured party, any of the Collateral, any invoices, schedules of Collateral, freight
or express receipts, or bills of lading, storage receipts, warehouse receipts, or other documents
of title respectively relating to the Collateral.

          (d) Sign the name of the Borrower on any notice to the Borrower’s Account Debtors or
verification of the Receivables Collateral; sign the Borrower’s name on any proof of claim in
bankruptcy against Account Debtors, and on notices of lien, claims of mechanic’s liens, or
assignments or releases of mechanic’s liens securing the Accounts.

          (e) Take all such action as may be necessary to obtain the payment of any letter of credit
and/or banker’s acceptance of which the Borrower is a beneficiary.

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          (f) Repair, manufacture, assemble, complete, package, deliver, alter or supply goods, if any,
necessary to fulfill in whole or in part the purchase order of any customer of the Borrower.

          (g) Use, license or transfer any or all General Intangibles of the Borrower.

     9-2. No Obligation to Act. The Agent shall not be obligated to do any of the acts or to
exercise any of the powers authorized by Section 9-1 herein, but if the Agent elects to do any such
act or to exercise any of such powers, it shall not be accountable for more than it actually
receives as a result of such exercise of power, and shall not be responsible to the Borrower for
any act or omission to act except for any act or omission to act as to which there is a final
determination made in a judicial proceeding (in which proceeding the Agent has had an opportunity
to be heard), which determination includes a specific finding that the subject act or omission to
act had been grossly negligent or in actual bad faith.

  ARTICLE 10 — Events of Default:

     The occurrence of any event described in this Article 10 respectively shall constitute an
“Event of Default” herein. Upon the occurrence of any Event of Default described in Section 10-12,
any and all Liabilities shall become due and payable without any further act on the part of the
Agent. Upon the occurrence of any other Event of Default, the Agent may, and on the instruction of
the SuperMajority Lenders as provided in Section 13-1(b) shall, declare any and all Liabilities
immediately due and payable. The occurrence of any Event of Default shall also constitute, without
notice or demand, a default under all other agreements between the Agent or any Revolving Credit
Lender and the Borrower and instruments and papers heretofore, now, or hereafter given the Agent or
any Revolving Credit Lender by the Borrower.

     10-1. Failure to Pay the Revolving Credit. The failure by the Borrower to pay when due any
principal of, interest on, or fees in respect of, the Revolving Credit.

     10-2. Failure To Make Other Payments. The failure by the Borrower to pay when due (or upon
demand, if payable on demand) any payment Liability other than any payment liability on account of
the principal of, or interest on, or fees in respect of, the Revolving Credit.

     10-3. Failure to Perform Covenant or Liability (No Grace Period). The failure by the Borrower
to promptly, punctually, faithfully and timely perform, discharge, or comply with any covenant or
Liability included in any of the following provisions hereof:

	 	 	 
	Section	 	Relates to:
	4-7

	 	Indebtedness

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	Section	 	Relates to:
	4-14

	 	Pay taxes
	4-19

	 	Dividends, Investments, Other Corporate Actions
	4-23

	 	Affiliate Transactions
	5-11

	 	Financial Performance Covenant
	Article 7

	 	Cash Management

     10-4. Reporting Requirements. The failure by the Borrower to promptly, punctually, faithfully
and timely perform, discharge, or comply with the financial reporting requirements included in the
following Section of this Agreement, subject, however, to the following limited number of grace
periods applicable to certain of those requirements:

	 	 	 	 	 	 	 
	 	 	REQUIRED	 	 	 	NUMBER OF GRACE
	REPORT / STATEMENT	 	BY SECTION	 	GRACE PERIOD	 	PERIODS
	Borrowing Base Certificate

	 	5-4
	 	Two Business Days
	 	Three in any 12 months
	 
	 	 	 	 	 	 
	Monthly Report (15 Days) -

	 	5-5(a)(i)
	 	Three Business Days
	 	Two in any 12 months
	 
	 	 	 	 	 	 
	Monthly Reports (30 Days)

	 	5-5(a)(ii)
	 	Three Business Days
	 	Two in any 12 months

     10-5. Failure to Perform Covenant or Liability (Grace Period). The failure by the Borrower, within ten (10) Business Days following the earlier of the
Borrower’s knowledge of a breach of any covenant or Liability not described in any of Sections
10-1, 10-2, or 10-3 or of its receipt of written notice from the Agent of the breach of any of such
covenants or Liabilities to cure such breach.

     10-6. Misrepresentation. The determination by the Agent that any representation or warranty
at any time made by the Borrower to the Agent or any Revolving Credit Lender was not true or
complete in all material respects when given.

     10-7. Acceleration of Other Debt. Breach of Lease. The occurrence of any event such that any
Indebtedness of the Borrower in excess of $500,000 to any creditor other than the Agent or any
Revolving Credit Lender is accelerated or, without the consent of the Borrower, any Lease with
annual rentals in excess of $500,000 is terminated.

     10-8. Default Under Other Agreements. The occurrence of any breach of any covenant or
Liability imposed by, or of any default under, any agreement (including any Loan Document) between
the Agent or any Revolving Credit Lender and the Borrower or instrument given by the Borrower to
the Agent or any Revolving Credit Lender and the expiry, without cure, of any applicable grace
period

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(notwithstanding that the subject Agent or Revolving Credit Lender may not have exercised
all or any of its rights on account of such breach or default).

     10-9. Uninsured Casualty Loss. The occurrence of any uninsured loss, theft, damage, or
destruction of or to any material portion of the Collateral.

     10-10. Attachment. Judgment. Restraint of Business.

          (a) The service of process upon the Agent or any Revolving Credit Lender or any Participant
seeking to attach, by trustee, mesne, or other process, any funds of the Borrower, in an amount in
excess of $200,000, on deposit with, or assets of the Borrower in the possession of, the Agent or
that Revolving Credit Lender or such Participant.

          (b) The entry of any judgment against the Borrower for the payment of money in excess of
$500,000, which judgment is not satisfied (if a money judgment) or appealed from (with execution or
similar process stayed) within thirty (30) days of its entry.

          (c) The entry of any order or the imposition of any other process having the force of law, the
effect of which is to restrain in any material way the conduct by the Borrower of its business in
the ordinary course and such order or imposition is not dismissed or appealed from within thirty
(30) days of its entry.

     10-11. Business Failure. Any act by, against, or relating to the Borrower, or its property or
assets, which act constitutes the determination, by the Borrower, to initiate a program of partial
or total self-liquidation; application for, consent to, or sufferance of the appointment of a
receiver, trustee, or other person, pursuant to court action or otherwise, over all, or any part of
the Borrower’s property; the granting of any trust mortgage or execution of an assignment for the
benefit of the creditors of the Borrower, or the occurrence of any other voluntary liquidation or
extension of debt agreement for the Borrower; the offering by or entering into by the Borrower of
any composition, extension, or any other arrangement seeking relief from or extension of the debts
of the Borrower; or the initiation of any judicial or non-judicial proceeding or agreement by, the
Borrower which seeks or intends to accomplish a reorganization or arrangement with creditors;
and/or the initiation by the Borrower of the liquidation or winding up of all or any part of the
Borrower’s business or operations.

     10-12. Bankruptcy. The failure by the Borrower to generally pay the debts of the Borrower as
they mature; adjudication of bankruptcy or insolvency relative to the Borrower; the entry of an
order for relief or similar order with respect to the Borrower in any proceeding pursuant to the
Bankruptcy Code or any other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower

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initiating any matter in which the Borrower is or may be granted any
relief from the debts of the Borrower pursuant to the Bankruptcy Code or any other insolvency
statute or procedure; the filing of any complaint, application, or petition against the Borrower
initiating any matter in which the Borrower is or may be granted any relief from the debts of the
Borrower pursuant to the Bankruptcy Code or any other insolvency statute or procedure, which
complaint, application, or petition is not timely contested in good faith by the Borrower by
appropriate proceedings or, if so contested, is not dismissed within forty-five (45) days of when
filed.

     10-13. Default by Guarantor. The occurrence of any of the foregoing Events of Default with
respect to any guarantor of the Liabilities, as if such guarantor were the “Borrower” described
therein.

     10-14. Indictment — Forfeiture. The indictment of, or institution of any legal process or
proceeding against, the Borrower, under any Applicable Law where the relief, penalties, or remedies
sought or available include the forfeiture of any material property of the Borrower and/or the
imposition of any stay or other order, the effect of which could be to restrain in any material way
the conduct by the Borrower of its business in the ordinary course, which is not dismissed or
appealed from within thirty (30) days when instituted or imposed.

     10-15. Termination of Guaranty. The termination or attempted termination of any guaranty by
any guarantor of the Liabilities.

     10-16. Challenge to Loan Documents.

          (a) Any challenge by or on behalf of the Borrower or any guarantor of the Liabilities to the
validity of any Loan Document or the applicability or enforceability of any Loan Document strictly
in accordance with the subject Loan Document’s terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan Document or any payment
made pursuant thereto.

          (b) Any determination by any court or any other judicial or government authority that any Loan
Document is not enforceable in accordance in all material respects with the subject Loan Document’s
terms or which voids, avoids, limits, or otherwise adversely affects in any material way any
security interest created by any Loan Document or any payment made pursuant thereto.

     10-17. Change in Control. Any Change in Control.

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  ARTICLE 11 — Rights and Remedies Upon Default:

     11-1. Acceleration. Upon the occurrence of any Event of Default as described in Section
10-12, all Indebtedness of the Borrower to the Revolving Credit Lenders shall be immediately due
and payable. Upon the
occurrence of any Event of Default other than as described in Section 10-12, the Agent may
(and on the issuance of Acceleration Notice(s) requisite to the causing of Acceleration, the Agent
shall) declare all Indebtedness of the Borrower to the Revolving Credit Lenders to be immediately
due and payable and may exercise all of the Agent’s Rights and Remedies as the Agent from time to
time thereafter determines as appropriate.

     11-2. Rights of Enforcement. The Agent shall have all of the rights and remedies of a secured
party upon default then available to the Agent under the UCC, in addition to which the Agent shall
have all and each of the following rights and remedies upon an Event of Default and Acceleration:

          (a) To give notice to any bank at which any DDA or Blocked Account is maintained and in which
Proceeds of Collateral are deposited, to turn over such Proceeds directly to the Agent.

          (b) To give notice to any of the Borrower’s customs brokers to follow the instructions of the
Agent as provided in any written agreement or undertaking of such broker in favor of the Agent.

          (c) To collect the Receivables Collateral with or without the taking of possession of any of
the Collateral.

          (d) To take possession of all or any portion of the Collateral.

          (e) To sell, lease, or otherwise dispose of any or all of the Collateral, in its then
condition or following such preparation or processing as the Agent deems advisable and with or
without the taking of possession of any of the Collateral.

          (f) To conduct one or more going out of business sales which include the sale or other
disposition of the Collateral.

          (g) To apply the Receivables Collateral or the Proceeds of the Collateral towards (but not
necessarily in complete satisfaction of) the Liabilities.

          (h) To exercise all or any of the rights, remedies, powers, privileges, and discretions under
all or any of the Loan Documents.

     11-3. Sale of Collateral.

          (a) Any sale or other disposition of the Collateral may be at public or private sale upon such
terms and in such manner as the Agent deems advisable, having due regard to compliance with any
statute or regulation which might affect, limit, or apply to the Agent’s disposition of the
Collateral.

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          (b) The Agent, in the exercise of the Agent’s rights and remedies upon an Event of Default,
may conduct one or more going out of business sales, in the Agent’s own right or by one or more
agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or
occupied by the Borrower. The Agent and any such agent or contractor, in conjunction with any such
sale, may augment the Inventory with other goods (all of which other goods shall remain the sole
property of the Agent or such agent or contractor). Any amounts realized from the sale of such
goods which constitute augmentations to the Inventory (net of an allocable share of the costs and
expenses incurred in their disposition) shall be the sole property of the Agent or such agent or
contractor and neither the Borrower nor any Person claiming under or in right of the Borrower shall
have any interest therein.

          (c) Unless the Collateral is perishable or threatens to decline speedily in value, or is of a
type customarily sold on a recognized market (in which event the Agent shall provide the Borrower
such notice as may be practicable under the circumstances), the Agent shall give the Borrower at
least ten (10) days prior written notice of the date, time, and place of any proposed public sale,
and of the date after which any private sale or other disposition of the Collateral may be made.
The Borrower agrees that such written notice shall satisfy all requirements for notice to the
Borrower which are imposed under the UCC or other applicable law with respect to the exercise of
the Agent’s rights and remedies upon default.

          (d) The Agent and any Revolving Credit Lender may purchase the Collateral, or any portion of
it at any sale held under this Article.

          (e) If any of the Collateral is sold, leased, or otherwise disposed of by the Agent on credit,
the Liabilities shall not be deemed to have been reduced as a result thereof unless and until
payment is finally received thereon by the Agent.

          (f) The Agent shall apply the proceeds of the Agent’s exercise of its rights and remedies upon
default pursuant to this Article 11 in accordance with Sections 13-6 and 13-7.

     11-4. Occupation of Business Location. In connection with the Agent’s exercise of the Agent’s
rights under this Article 11, the Agent may enter upon, occupy, and use any premises owned or
occupied by the Borrower, and may exclude the Borrower from such premises or portion thereof as may
have been so entered upon, occupied, or used by the Agent. The Agent shall not be required to
remove any of the Collateral from any such premises upon the Agent’s taking possession thereof, and
may render any Collateral unusable to the Borrower. In no event shall the Agent be liable to the
Borrower for use or occupancy by the Agent of any premises pursuant to this Article 11, nor for any
charge (such as wages for the Borrower’s employees and utilities) incurred in connection with the
Agent’s exercise of the Agent’s Rights and Remedies.

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     11-5. Grant of Nonexclusive License. The Borrower hereby grants to the Agent a royalty free nonexclusive irrevocable license,
after the occurrence and during the continuance of an Event of Default to use, apply, and affix any
trademark, trade name, logo, or the like in which the Borrower now or hereafter has rights, such
license being with respect to the Agent’s exercise of the rights hereunder including, without
limitation, in connection with any completion of the manufacture of Inventory or sale or other
disposition of Inventory.

     11-6. Assembly of Collateral. The Agent may require the Borrower to assemble the Collateral
and make it available to the Agent at the Borrower’s sole risk and expense at a place or places
which are reasonably convenient to both the Agent and the Borrower.

     11-7. Rights and Remedies. The rights, remedies, powers, privileges, and discretions of the
Agent hereunder (herein, the “Agent’s Rights and Remedies”) shall be cumulative and not exclusive
of any rights or remedies which it would otherwise have. No delay or omission by the Agent in
exercising or enforcing any of the Agent’s Rights and Remedies shall operate as, or constitute, a
waiver thereof. No waiver by the Agent of any Event of Default or of any default under any other
agreement shall operate as a waiver of any other default hereunder or under any other agreement.
No single or partial exercise of any of the Agent’s Rights or Remedies, and no express or implied
agreement or transaction of whatever nature entered into between the Agent and any person, at any
time, shall preclude the other or further exercise of the Agent’s Rights and Remedies. No waiver
by the Agent of any of the Agent’s Rights and Remedies on any one occasion shall be deemed a waiver
on any subsequent occasion, nor shall it be deemed a continuing waiver. The Agent’s Rights and
Remedies may be exercised at such time or times and in such order of preference as the Agent may
determine. The Agent’s Rights and Remedies may be exercised without resort or regard to any other
source of satisfaction of the Liabilities.

  ARTICLE 12 — Revolving Credit Fundings and Distributions: 

     12-1. Revolving Credit Funding Procedures. Subject to Section 12-2:

          (a) The Agent shall advise each Revolving Credit Lender, no later than 2:00PM (Boston Time) on
a date on which any Revolving Credit Loan (other than a SwingLine Loan) is to be made on that date.
Such advice, in each instance, may be by telephone or facsimile transmission, provided
that if such advice is by telephone, it shall be confirmed in writing. Advice of a Revolving
Credit Loan shall include the amount of and interest rate applicable to the subject Revolving
Credit Loan.

          (b) Subject to that Revolving Credit Lender’s Revolving Credit Dollar Commitment, each
Revolving Credit Lender, by no later than the end of business on the day on which the subject

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Revolving Credit Loan is to be made, shall Transfer that Revolving Credit Lender’s Revolving Credit
Percentage Commitment of the subject Revolving Credit Loan to the Agent.

     12-2. SwingLine Loans.

          (a) In the event that, when a Revolving Credit Loan is requested, the aggregate unpaid balance
of the SwingLine Loan is less than the SwingLine Loan Ceiling, then the SwingLine Lender may advise
the Agent that the SwingLine Lender has determined to include up to the amount of the requested
Revolving Credit Loan as part of the SwingLine Loan. In such event, the SwingLine Lender shall
Transfer the amount of the requested Revolving Credit Loan to the Agent.

          (b) The SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving
Credit Lenders participate as follows:

          (i) At any time and from time to time, the SwingLine Lender may advise the Agent that
all, or any part of the SwingLine Loan is to be converted to a Revolving Credit Loan in
which all Revolving Credit Lenders participate.

          (ii) At the initiation of a Liquidation, the then entire unpaid principal balance of
the SwingLine Loan shall be converted to a Revolving Credit Loan in which all Revolving
Credit Lenders participate.

In either such event, the Agent shall advise each Revolving Credit Lender of such conversion as if,
and with the same effect as if such conversion were the making of a Revolving Credit Loan as
provided in Section 12-1.

          (c) The SwingLine Lender, in separate capacities, may also be the Agent and a Revolving Credit
Lender.

          (d) The SwingLine Lender, in its capacity as SwingLine Lender, is not a “Revolving Credit
Lender” for any of the following purposes:

          (i) Except as otherwise specifically provided in the relevant Section, any distribution
pursuant to Section 13-6.

          (ii) Determination of whether the requisite Loan Commitments have Consented to action
requiring such Consent.

     12-3. Agent’s Covering of Fundings.

          (a) Each Revolving Credit Lender shall make available to the Agent, as provided herein, that
Revolving Credit Lender’s Revolving Credit Percentage Commitment of the following:

          (i) Each Revolving Credit Loan, up to the maximum amount of that Revolving Credit
Lender’s Revolving Credit Dollar Commitment of the Revolving Credit Loans.

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          (ii) Up to the maximum amount of that Revolving Credit Lender’s Revolving Credit Dollar
Commitment of each L/C Drawing (to the extent that such L/C Drawing is not “covered” by a
Revolving Credit Loan as provided herein).

          (b) In all circumstances, the Agent may:

          (i) Assume that each Revolving Credit Lender, subject to Section 12-3(a), timely shall
make available to the Agent that Revolving Credit Lender’s Revolving Credit Percentage
Commitment of each Revolving Credit Loan, notice of which is provided pursuant to Section
12-1.

          (ii) In reliance upon such assumption, make available the corresponding amount to the
Borrower.

          (iii) Assume that each Revolving Credit Lender timely shall pay, and shall make
available, to the Agent all other amounts which that Revolving Credit Lender is obligated to
so pay and/or make available hereunder or under any of the Loan Documents.

          (c) In the event that, in reliance upon any of such assumptions, the Agent makes available, a
Revolving Credit Lender’s Revolving Credit Percentage Commitment of one or more Revolving Credit
Loans, or any other amount to be made available hereunder or under any of the Loan Documents, which
amount a Revolving Credit Lender (a “Delinquent Revolving Credit Lender”) fails to provide to the
Agent within one (1) Business Day of written notice of such failure, then:

          (i) The amount which had been made available by the Agent is an “Agent’s Cover” (and is
so referred to herein).

          (ii) All interest paid by the Borrower on account of the Revolving Credit Loan or
coverage of the subject L/C Drawing which consist of the Agent’s Cover shall be retained by
the Agent until the Agent’s Cover, with interest, has been paid by the Delinquent Revolving
Credit Lender.

          (iii) The Delinquent Revolving Credit Lender shall pay to the Agent, on demand,
interest at a rate equal to the prevailing Federal Funds Rate on any Agent’s Cover in
respect of that Delinquent Revolving Credit Lender.

          (iv) The Agent shall have succeeded to all rights to payment to which the Delinquent
Revolving Credit Lender otherwise would have been entitled hereunder in respect of
those amounts paid by or in respect of the Borrower on account of the Agent’s Cover
together with interest until it is repaid. Such payments shall be deemed made first towards
the amounts in respect of which the Agent’s Cover was provided and only then towards amounts
in which the Delinquent Revolving Credit Lender is then participating. For purposes of
distributions to be made pursuant to Section 12-4(a) (which relates to ordinary course
distributions) or Section 13-6

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(which relates to distributions of proceeds of a Liquidation)
below, amounts shall be deemed distributable to a Delinquent Revolving Credit Lender (and
consequently, to the Agent to the extent to which the Agent is then entitled) at the highest
level of distribution (if applicable) at which the Delinquent Revolving Credit Lender would
otherwise have been entitled to a distribution.

                    (v) Subject to Subsection 12-3(c)(iv), the Delinquent Revolving Credit Lender shall be
entitled to receive any payments from the Borrower to which the Delinquent Revolving Credit
Lender is then entitled, provided however there shall be deducted from such amount and
retained by the Agent any interest to which the Agent is then entitled on account of Section
12-3(c)(ii), above.

          (d) A Delinquent Revolving Credit Lender shall not be relieved of any obligation of such
Delinquent Revolving Credit Lender hereunder (all and each of which shall constitute continuing
obligations on the part of any Delinquent Revolving Credit Lender).

          (e) A Delinquent Revolving Credit Lender may cure its status as a Delinquent Revolving Credit
Lender by paying the Agent the aggregate of the following:

                    (i) The Agent’s Cover (to the extent not previously repaid by the Borrower and retained
by the Agent in accordance with Subsection 12-3(c)(iv), above) with respect to that
Delinquent Revolving Credit Lender.

                    Plus

                    (ii) The aggregate of the amount payable under Subsection 12-3(c)(iii), above (which
relates to interest to be paid by that Delinquent Revolving Credit Lender).

                    Plus

                    (iii) All such costs and expenses as may be incurred by the Agent in the enforcement of
the Agent’s rights against such Delinquent Revolving Credit Lender.

     12-4. Ordinary Course Distributions. (This Section 12-4 applies unless the provisions of
Section 13-6 (which relates to distributions in the event of a Liquidation) becomes operative).

          (a) Weekly, on such day as may be set from time to time by the Agent (or more frequently at
the Agent’s option) the Agent and each Revolving Credit Lender shall settle up on amounts advanced
under the Revolving Credit and collected funds received in the Concentration Account.

          (b) The Agent shall distribute to the SwingLine Lender and to each Revolving Credit Lender,
such Person’s respective pro-rata share of interest payments on the Revolving Credit Loans when
actually received and collected by the Agent (excluding the one (1) Business Day for settlement
provided for in Section 7-5(a), which shall be for the account of the Agent only). For purposes of
calculating

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interest due to a Revolving Credit Lender, that Revolving Credit Lender shall be
entitled to receive interest on the actual amount contributed by that Revolving Credit Lender
towards the principal balance of the Revolving Credit Loans outstanding during the applicable
period covered by the interest payment made by the Borrower. Any net principal reductions to the
Revolving Credit Loans received by the Agent in accordance with the Loan Documents during such
period shall not reduce such actual amount so contributed, for purposes of calculation of interest
due to that Revolving Credit Lender, until the Agent has distributed to that Revolving Credit
Lender its pro-rata share thereof.

          (c) The Agent shall distribute the Unused Line Fee and the fees for L/C’s provided for in
Section 2-19(a) pro rata to the Revolving Credit Lenders and shall distribute the L/C issuance fee
provided for in Section 2-19(b) to the Issuer.

          (d) No Revolving Credit Lender shall have any interest in, or right to receive any part of any
interest which reflects “float” as described in the proviso included in Section 7-5(a). Any such
float shall be for the account of the Agent only.

          (e) No Revolving Credit Lender shall have any interest in, or right to receive any part of,
the Agent’s Fee to be paid by the Borrower to the Agent pursuant to this Agreement.

          (f) Any amount received by the Agent as reimbursement for any cost or expense (including
without limitation, attorneys’ reasonable fees) shall be distributed by the Agent to that Person
which is entitled to such reimbursement as provided in this Agreement (and if such Person(s) is
(are) the Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit
Commitment Percentages at the date on which the expense, in respect of which such reimbursement is
being made, was incurred).

          (g) Each distribution pursuant to this Section 12-4 is subject to Section 12-3(c), above.

  ARTICLE 13 — Acceleration and Liquidation:

     13-1. Acceleration Notices.

          (a) The Agent may give the Revolving Credit Lenders an Acceleration Notice at any time
following the occurrence of an Event of Default.

          (b) The SuperMajority Lenders may give the Agent an Acceleration Notice at any time following
the occurrence of an Event of Default. Such notice may be by multiple counterparts, provided that
counterparts executed by the requisite Revolving Credit Lenders are received by the Agent within a
period of five (5) consecutive Business Days.

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     13-2. Acceleration. Unless stayed by judicial or statutory process, the Agent shall
Accelerate the Revolving Credit Obligations within a commercially reasonable time following:

          (a) The Agent’s giving of an Acceleration Notice to the Revolving Credit Lenders as provided
in Section 13-1(a).

          (b) The Agent’s receipt of an Acceleration Notice from the SuperMajority Lenders, in
compliance with Section 13-1(b) .

     13-3. Initiation of Liquidation. Unless stayed by judicial or statutory process, a
Liquidation shall be initiated by the Agent within a commercially reasonable time following
Acceleration of the Revolving Credit Obligations.

     13-4. Actions At and Following Initiation of Liquidation

          (a) At the initiation of a Liquidation:

          (i) The unpaid principal balance of the SwingLine Loan (if any) shall be converted,
pursuant to Section 12-2(b)(ii), to a Revolving Credit Loan in which all Revolving Credit
Lenders participate.

          (ii) The Agent and the Revolving Credit Lenders shall “net out” each Revolving Credit
Lender’s respective contributions towards the Revolving Credit Loans, so that each Revolving
Credit Lender holds that Revolving Credit Lender’s Revolving Credit Percentage Commitment of
the Revolving Credit Loans and advances.

          (b) Following the initiation of a Liquidation, each Revolving Credit Lender shall contribute,
towards any L/C thereafter honored and not immediately reimbursed by the Borrower, that Revolving
Credit Lender’s Revolving Credit Percentage Commitment of such honoring.

     13-5. Agent’s Conduct of Liquidation

          (a) Any Liquidation shall be conducted by the Agent, with the advice and assistance of the
Revolving Credit Lenders.

          (b) The Agent may establish one or more Nominees to “bid in” or otherwise acquire ownership to
any Post Foreclosure Asset.

          (c) The Agent shall manage the Nominee and manage and dispose of any Post Foreclosure Assets
with a view towards the realization of the economic benefits of the ownership of the Post
Foreclosure Assets and in such regard, the Agent and/or the Nominee may operate, repair, manage,
maintain, develop, and dispose of any Post Foreclosure Asset in such manner as the Agent
determines as appropriate under the circumstances.

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          (d) The Agent may decline to undertake or to continue taking a course of action or to execute
an action plan (whether proposed by the Agent or any Revolving Credit Lender) unless indemnified to
the Agent’s satisfaction by the Revolving Credit Lenders against any and all liability and expense
which may be incurred by the Agent by reason of taking or continuing to take that course of action
or action plan.

          (e) Each Revolving Credit Lender shall execute all such instruments and documents not
inconsistent with the provisions of this Agreement as the Agent and/or the Nominee reasonably may
request with respect to the creation and governance of any Nominee, the conduct of the Liquidation,
and the management and disposition of any Post Foreclosure Asset.

     13-6. Distribution of Liquidation Proceeds.

          (a) The Agent may establish one or more reasonably funded reserve accounts into which proceeds
of the conduct of any Liquidation may be deposited in anticipation of future expenses which may be
incurred by the Agent in the exercise of rights as a secured creditor of the Borrower and prior
claims which the Agent anticipates may need to be paid.

          (b) The Agent shall distribute the net proceeds of Liquidation in accordance with the relative
priorities set forth in Section 13-7.

          (c) Each Revolving Credit Lender, on the written request of the Agent and/or any Nominee, not
more frequently than once each month, shall reimburse the Agent and/or any Nominee, Pro-Rata, for
any cost or expense reasonably incurred by the Agent and/or the Nominee in the conduct of a
Liquidation, which amount is not covered out of current proceeds of the Liquidation, which
reimbursement shall be paid over to and distributed by the Agent.

     13-7. Relative Priorities To Proceeds of Liquidation. The relative priorities to the proceeds
of a Liquidation are as follows:

          (a) To the Agent as reimbursement for all reasonable third party costs and expenses incurred
by the Agent and to Lenders’ Special Counsel in accordance with this Agreement and to any funded
reserve established pursuant to Section 13-6(a) and to each Revolving Credit Lender to the extent
of contributions made to the Agent pursuant to Section 13-6(c) not previously reimbursed to that
Revolving Credit Lender; and then

          (b) To the SwingLine Lender, on account of any SwingLine loans not converted to Revolving
Credit Loans pursuant to Section 13-4(a)(i); and then

          (c) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender),
pro-rata, to the unpaid principal balance of the Revolving Credit; and then

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          (d) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender),
pro-rata, to accrued interest on the Revolving Credit; and then

          (e) To the Revolving Credit Lenders (other than any Delinquent Revolving Credit Lender),
pro-rata, to those fees distributable hereunder to the Revolving Credit Lenders; and then

          (f) To any Delinquent Revolving Credit Lenders, pro-rata to amounts to which such Revolving
Credit Lenders otherwise would have been entitled pursuant to Sections 13-7(c), 13-7(d), 13-7(e);
and then

          (g) To any other Liabilities; and then

          (h) To The Borrower.

ARTICLE 14 — The Agent:

     14-1. Appointment of The Agent.

          (a) Each Lender appoints and designates Bank of America as the “Agent” hereunder and under the
Loan Documents.

          (b) Each Revolving Credit Lender authorizes the Agent:

          (i) To execute those of the Loan Documents and all other instruments relating thereto
to which the Agent is a party.

          (ii) To take such action on behalf of the Revolving Credit Lenders and to exercise all
such powers as are expressly delegated to the Agent hereunder and in the Loan Documents and
all related documents, together with such other powers as are reasonably incident thereto.

     14-2. Responsibilities of Agent.

          (a) The Agent shall not have any duties or responsibilities to, or any fiduciary relationship
with, any Revolving Credit Lender except for those expressly set forth in this Agreement.

          (b) Neither the Agent nor any of its Affiliates shall be responsible to any Revolving Credit
Lender for any of the following:

          (i) Any recitals, statements, representations or warranties made by the Borrower or any
other Person.

          (ii) Any appraisals or other assessments of the assets of the Borrower or of any other
Person responsible for or on account of the Liabilities.

          (iii) The value, validity, effectiveness, genuineness, enforceability, or sufficiency
of the Loan Agreement, the Loan Documents or any other document referred to or provided for
therein.

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          (iv) Any failure by the Borrower or any other Person (other than the Agent) to perform
its obligations under the Loan Documents.

          (c) The Agent may employ attorneys, accountants, and other professionals and agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such
attorneys, accountants, and other professionals or agents or attorneys-in-fact selected by the
Agent with reasonable care. No such attorney, accountant, other professional, agent, or
attorney-in-fact shall be responsible for any action taken or omitted to be taken by any other such
Person.

          (d) Neither the Agent, nor any of its directors, officers, or employees shall be responsible
for any action taken or omitted to be taken or omitted to be taken by any other of them in
connection herewith in reliance upon advice of its counsel nor, in any other event except for any
action taken or omitted to be taken as to which a final judicial determination has been or is made
(in a proceeding in which such Person has had an opportunity to be heard) that such Person had
acted in a grossly negligent manner, in actual bad faith, or in willful misconduct.

          (e) The Agent shall not have any responsibility in any event for more funds than the Agent
actually receives and collects.

          (f) The Agent in its capacity as a Lender, shall have the same rights and powers hereunder as
any other Revolving Credit Lender.

     14-3. Concerning Distributions By the Agent.

          (a) The Agent in the Agent’s reasonable discretion based upon the Agent’s determination of the
likelihood that additional payments will be received, expenses incurred, and/or claims made by
third parties to all or a portion of such proceeds, may delay the distribution of any payment
received on account of the Liabilities.

          (b) The Agent may disburse funds prior to determining that the sums which the Agent expects to
receive have been finally and unconditionally paid to the Agent. If and to the extent that the
Agent does disburse funds and it later becomes apparent that the Agent did not then receive a
payment in an amount equal to the sum paid out, then any Revolving Credit Lender to whom the Agent
made the funds available, on demand from the Agent, shall refund to the Agent the sum paid to that
person.

          (c) If, in the opinion of the Agent, the distribution of any amount received by the Agent
might involve the Agent in liability, or might be prohibited hereby, or might be questioned by any
Person, then the Agent may refrain from making distribution until the Agent’s right to make
distribution has been adjudicated by a court of competent jurisdiction.

          (d) The proceeds of any Revolving Credit Lender’s exercise of any right of, or in the nature
of, set-off shall be deemed, First, to the extent that a Revolving Credit Lender is entitled to any

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distribution hereunder, to constitute such distribution and Second, shall be shared with the other
Revolving Credit Lenders as if distributed pursuant to (and shall be deemed as distributions under)
Section 13-7.

          (e) Each Revolving Credit Lender recognizes that the crediting of the Borrower with the
“proceeds” of any transaction in which a Post Foreclosure Asset is acquired is a non-cash
transaction and that, in consequence, no distribution of such “proceeds” will be made by the Agent
to any Lender.

          (f) In the event that (x) a court of competent jurisdiction shall adjudge that any amount
received and distributed by the Agent is to be repaid or disgorged or (y) the SuperMajority Lenders
determine to effect such repayment or disgorgement, then each Revolving Credit Lender to which any
such distribution shall have been made shall repay, to the Agent which had made such distribution,
that Revolving Credit Lender’s Pro-Rata share of the amount so adjudged or determined to be repaid
or disgorged.

     14-4. Dispute Resolution. Any dispute among the Revolving Credit Lenders and/or the Agent
concerning the interpretation, administration, or enforcement of the financing arrangements
contemplated by this or any other Loan Document or the interpretation or administration of this or
any other Loan Document which cannot be resolved amicably shall be resolved in the United States
District Court for the District of Massachusetts, sitting in Boston or in the Superior Court of
Suffolk County, Massachusetts, to the jurisdiction of which courts each Revolving Credit Lender
hereto hereby submits.

     14-5. Distributions of Notices and of Documents. The Agent shall distribute to each
Revolving Credit Lender those periodic reports which the Agent customarily distributes in like
credits in which it is acting as Agent and will forward to each Revolving Credit Lender, promptly
after the Agent’s receipt thereof, a copy of each notice or other document furnished to the Agent
pursuant to this Agreement, including monthly, quarterly, and annual financial statements received
from the Borrower pursuant to Article 5 of this Agreement, other than any of the following:

          (a) Routine communications associated with requests for Revolving Credit Loans and/or the
issuance of L/C’s.

          (b) Routine or nonmaterial communications.

          (c) Any notice or document required by any of the Loan Documents to be furnished to the
Revolving Credit Lenders by the Borrower.

          (d) Any notice or document of which the Agent has knowledge that such notice or document had
been forwarded to the Revolving Credit Lenders other than by the Agent.

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     14-6. Confidential Information.

          (a) Each Revolving Credit Lender will maintain, as confidential, all of the following:

          (i) Proprietary approaches, techniques, and methods of analysis which are applied by
the Agent in the administration of the credit facility contemplated by this Agreement.

          (ii) Proprietary forms and formats utilized by the Agent in providing reports to the
Revolving Credit Lenders pursuant hereto, which forms or formats are not of general
currency.

          (b) Nothing included herein shall prohibit the disclosure of any such information as may be
required to be provided by judicial process or by regulatory authorities having jurisdiction over
any party to this Agreement.

     14-7. Reliance by Agent. The Agent shall be entitled to rely upon any certificate, notice or
other document (including any cable, telegram, telex, or facsimile) reasonably believed by the
Agent 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 attorneys, accountants and other experts
selected by the AgentAs to any matters not expressly provided for in this Agreement, any Loan
Document, or in any other document referred to therein, the Agent shall in all events be fully
protected in acting, or in refraining from acting, in accordance with the applicable Consent
required by this Agreement. Instructions given with the requisite Consent shall be binding on all
Revolving Credit Lenders.

     14-8. Non-Reliance on Agent and Other Revolving Credit Lenders.

          (a) Each Revolving Credit Lender represents to all other Revolving Credit Lenders and to the
Agent that such Revolving Credit Lender:

          (i) Independently and without reliance on any representation or act by Agent or by any
other Revolving Credit Lender, and based on such documents and information as that
Revolving Credit Lender has deemed appropriate, has made such Revolving Credit Lender’s
own appraisal of the financial condition and affairs of the Borrower and decision to enter
into this Agreement.

          (ii) Has relied upon that Revolving Credit Lender’s review of the Loan Documents by
that Revolving Credit Lender and by counsel to that Revolving Credit Lender as that
Revolving Credit Lender deemed appropriate under the circumstances.

          (b) Each Revolving Credit Lender agrees that such Revolving Credit Lender, independently and
without reliance upon Agent or any other Revolving Credit Lender, and based upon such documents and
information as such Revolving Credit Lender shall deem appropriate at the time, will continue to
make such Revolving Credit Lender’s own appraisals of the financial condition and affairs of

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the
Borrower when determining whether to take or not to take any discretionary action under this
Agreement.

          (c) The Agent, in the discharge of that Agent’s duties hereunder, shall not be required to
make inquiry of, or to inspect the properties or books of, any Person.

          (d) Except for notices, reports, and other documents and information expressly required to be
furnished to the Revolving Credit Lenders by the Agent hereunder (as to which, see Section 14-5),
the Agent shall not have any affirmative duty or responsibility to provide any Lender with any
credit or other information concerning any Person, which information may come into the possession
of Agent or any Affiliate of the Agent.

          (e) Each Revolving Credit Lender, at such Revolving Credit Lender’s request, shall have
reasonable access to all nonprivileged documents in the possession of the Agent, which documents
relate to the Agent’s performance of its duties hereunder.

     14-9. Indemnification.  Without limiting the Liabilities of the Borrower under this
or any of the other Loan Documents, each Revolving Credit Lender shall indemnify the Agent,
pro-rata for any and all Liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever (including attorney’s
reasonable fees and expenses and other out-of-pocket expenditures) which may at any time be imposed
on, incurred by, or asserted against the Agent and in any way relating to or arising out of this
Agreement or any other Loan Document or any documents contemplated by or referred to therein or the
transactions contemplated thereby or the enforcement of any of terms hereof or thereof or of any
such other documents, provided, however, no Revolving Credit Lender shall be liable for any of the
foregoing to the extent that any of the foregoing arises from any action taken or omitted to be
taken by the Agent as to which a final judicial determination has been or is
made (in a proceeding in which the agent has had an opportunity to be heard) that the Agent
had acted in a grossly negligent manner, or in actual bad faith, or engaged in willful misconduct.

     14-10. Resignation of Agent.

          (a) The Agent may resign at any time by giving 60 days prior written notice thereof to the
Revolving Credit Lenders. Upon receipt of any such notice of resignation, the SuperMajority Lenders
shall have the right to appoint a successor to such Agent (and if no Event of Default has occurred,
with the consent of the Borrower, not to be unreasonably withheld and, in any event, deemed given
by the Borrower if no written objection is provided by the Borrower to the (resigning) Agent within
seven (7) Business Days notice of such proposed appointment). If a successor Agent shall not have
been so appointed and accepted such appointment within 30 days after the giving of notice by the
resigning Agent, then the resigning Agent may appoint a successor Agent, which shall be a
financial institution

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having a combined capital and surplus in excess of $1,000,000,000.00. The
consent of the Borrower otherwise required by this Section 14-10(a) shall not be required if an
Event of Default has occurred.

          (b) Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such
successor shall thereupon succeed to, and become vested with, all the rights, powers, privileges,
and duties of the (resigning) Agent so replaced, and the (resigning) Agent shall be discharged from
the (resigning) Agent’s duties and obligations hereunder, other than on account of any
responsibility for any action taken or omitted to be taken by the (resigning) Agent as to which a
final judicial determination has been or is made (in a proceeding in which the (resigning) Person
has had an opportunity to be heard) that such Person had acted in a grossly negligent manner or in
bad faith.

          (c) After any retiring Agent’s resignation, the provisions of this Agreement and of all other
Loan Documents shall continue in effect for the retiring Person’s benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent.

ARTICLE 15 — Action By Agents — Consents — Amendments — Waivers: 

     15-1. Administration of Credit Facilities.

          (a) Except as otherwise specifically provided in this Agreement, the Agent may take any
action with respect to the credit facility contemplated by the Loan Documents as the Agent
determines to be appropriate, provided, however, the Agent is not under any affirmative obligation
to take any action which it is not required by this Agreement or the Loan Documents specifically to
so take.

          (b) Except as specifically provided in the following Sections of this Agreement, whenever a
Loan Document or this Agreement provides that action may be taken or omitted to be taken
in an Agent’s discretion, the Agent shall have the sole right to take, or refrain from taking,
such action without, and notwithstanding, any vote of the Revolving Credit Lenders:

	 	 	 
	Actions Described in Section	 	Type of Consent Required
	15-2

	 	Majority Lenders
	15-3

	 	SuperMajority Lenders
	15-4

	 	Certain Consent
	15-5

	 	Unanimous Consent
	15-6

	 	Consent of SwingLine Lender
	15-7

	 	Consent of the Agent

          (c) The rights granted to the Revolving Credit Lenders in those sections referenced in Section
15-1(b) shall not otherwise limit or impair the Agent’s exercise of its discretion under the Loan
Documents.

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     15-2. Actions Requiring or On Direction of Majority Lenders. Except as otherwise provided in
this Agreement, the Consent or direction of the Majority Lenders is required for any amendment,
waiver, or modification of any Loan Document.

     15-3. Actions Requiring or On Direction of SuperMajority Lenders.  The Consent or
direction of the SuperMajority Lenders is required as follows:

          (a) The Revolving Credit Lenders agree that any loan or advance under the Revolving Credit
which results in a Permissible OverLoan may be made by the Agent in its discretion without the
Consent of the Revolving Credit Lenders and that each Revolving Credit Lender shall be bound
thereby, provided, however, the Consent or direction of the SuperMajority Lenders is required to
permit a Permissible OverLoan (other than any Permissible OverLoan to the extent that it is also a
Protective Advance as to which no such Consent or direction is so required) to be outstanding for
more than 45 consecutive Business Days or more than twice in any twelve month period.

          (b) If the Borrower is then InDefault, the SuperMajority Lenders may direct the Agent to
suspend the Revolving Credit (including the making of any Permissible OverLoans), whereupon, as
long as the Borrower is InDefault, the only Revolving Credit Loans which may be made are either

          (i) Revolving Credit Loans made or undertaken in the Agent’s discretion to protect and
preserve the interests of the Revolving Credit Lenders; or

          (ii) Revolving Credit Loans made with Consent of the SuperMajority Lenders.

          (c) If an Event of Default has occurred and not been duly waived, the SuperMajority Lenders
may:

          (i) Give the Agent an Acceleration Notice in accordance with Section 13-1(b).

          (ii) Direct the Agent to increase the rate of interest to the default rate of interest
as provided in, and to the extent permitted by, this Agreement.

     15-4. Actions Requiring Certain Consent.

          (a) The Consent of the Revolving Credit Lender whose Revolving Credit Lender’s Revolving
Credit Dollar Commitment or Revolving Credit Percentage Commitment is to be so increased is
required for any increase in any Revolving Credit Lender’s Revolving Credit Dollar Commitment or
Revolving Credit Percentage Commitment (other than by reason of the application of Section 15-10
(which deals with NonConsenting Revolving Credit Lenders) or Section 16-1 (which deals with
assignments and participations).

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          (b) The consent of the SwingLine Lender and the Consent of the SuperMajority Lenders shall be
required to increase the SwingLine Loan Ceiling.

     15-5. Actions Requiring or Directed By Unanimous Consent.  None of the following may
take place except with the Consent of each Revolving Credit Lender adversely affected thereby or
with Unanimous Consent:

          (a) Any decrease in any interest rate or fee payable to the Revolving Credit Lenders on
account of the Revolving Credit Loans.

          (b) Any extension of the Maturity Date.

          (c) Any forgiveness of all or any portion of any payment Liability.

          (d) Any decrease in any interest rate or fee payable under any of the Loan Documents (other
than any Agent’s Fee (for which the consent of only the Agent shall be required)) and of any fee
payable to the Revolving Credit Lenders provided for by the Fee Letter (which may be amended by
written agreement between the Borrower on the one hand, and the Agent on the other).

          (e) Any release of a material portion of the Collateral not otherwise required or provided for
in the Loan Documents or to facilitate a Liquidation.

          (f) Any amendment of the definition of the terms “Borrowing Base” or “Availability” or of any
Definition of any component thereof, such that more credit would be available to the Borrower,
based on the same assets, as would have been available to the Borrower immediately prior to such
amendment , it being understood, however, that:

          (i) The foregoing shall not limit the adjustment by the Agent of any Reserve in the
Agent’s administration of the Revolving Credit as otherwise permitted by this Agreement.

          (ii) The foregoing shall not prevent the Agent, in its administration of the Revolving
Credit, from restoring any component of Borrowing Base which had been lowered by the Agent
back to the value of such component, as stated in this Agreement or to an intermediate
value.

          (g) Any release of any Person obligated on account of the Liabilities.

          (h) The making of any Revolving Credit Loan which, when made, exceeds Availability and is not
a Permissible OverLoan, provided, however,

          (i) no Consent shall be required in connection with the making of any Revolving Credit
Loan to “cover” any honoring of a drawing under any L/C; and

          (ii) each Lender recognizes that subsequent to the making of a Revolving Credit Loan
which does not constitute a Permissible OverLoan, the unpaid principal balance of

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the Loan
Account may exceed Borrowing Base on account of changed circumstances beyond the control of
the Agent (such as a drop in collateral value).

          (i) The waiver of the obligation of the Borrower to reduce the unpaid principal balance of
loans under the Revolving Credit to an amount which does not exceed a Permissible OverLoan or,
subject to the time limits included in Section 15-3(a) (which places time and frequency limits on
Permissible OverLoans), to eliminate an OverLoan.

          (j) Any amendment of this Article 15.

          (k) Amendment of any of the following Definitions:

“Appraised Inventory Liquidation Value”

“Majority Lender”

“Permissible OverLoan”

“Protective Advances”

“SuperMajority Lenders

“Unanimous Consent”

     15-6. Actions Requiring SwingLine Lender Consent. No action, amendment, or waiver of
compliance with, any provision of the Loan Documents or of this Agreement which affects the
SwingLine Lender may be undertaken without the Consent of the SwingLine Lender.

     15-7. Actions Requiring Agent’s Consent.

          (a) No action, amendment, or waiver of compliance with, any provision of the Loan Documents or
of this Agreement which affects the Agent in its capacity as Agent may be undertaken without the
written consent of the Agent.

          (b) No action referenced herein which affects the rights, duties, obligations, or liabilities
of the Agent shall be effective without the written consent of the Agent.

     15-8. Miscellaneous Actions.

          (a) Notwithstanding any other provision of this Agreement, no single Revolving Credit Lender
independently may exercise any right of action or enforcement against or with respect to the
Borrower.

          (b) The Agent shall be fully justified in failing or refusing to take action under this
Agreement or any Loan Document on behalf of any Revolving Credit Lender unless the Agent shall
first

          (i) receive such clear, unambiguous, written instructions as the Agent deems
appropriate; and

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          (ii) be indemnified to the Agent’s satisfaction by the Revolving Credit Lenders against
any and all liability and expense which may be incurred by the Agent by reason of taking or
continuing to take any such action, unless such action had been grossly negligent, in
willful misconduct, or in bad faith.

          (c) The Agent may establish reasonable procedures for the providing of direction and
instructions from the Revolving Credit Lenders to the Agent, including its reliance on multiple
counterparts, facsimile transmissions, and time limits within which such direction and instructions
must be received in order to be included in a determination of whether the requisite Loan
Commitments has provided its direction, Consent, or instructions.

     15-9. Actions Requiring Borrower’s Consent.  The Borrower’s consent is required for
any amendment of this Agreement.

     15-10. NonConsenting Revolving Credit Lender.

          (a) In the event that a Revolving Credit Lender (in this Section 15-10, a “NonConsenting
Revolving Credit Lender”) does not provide its Consent to a proposal by the Agent to take action
which requires consent under this Article 15, then one or more Revolving Credit Lenders who
provided Consent to such action may require the assignment, without recourse and in accordance with
the procedures outlined in Section 16-1, below, of the NonConsenting Revolving Credit Lender’s
commitment hereunder on fifteen (15) days written notice to the Agent and to the NonConsenting
Revolving Credit Lender.

          (b) At the end of such fifteen (15) days, and provided that the NonConsenting Revolving Credit
Lender delivers the Revolving Credit Note held by the NonConsenting Revolving Credit Lender to the
Agent, the Revolving Credit Lenders who have given such written notice shall Transfer the following
to the NonConsenting Revolving Credit Lender:

          (i) Such NonConsenting Revolving Credit Lender’s Pro-Rata share of the principal and
interest of the Revolving Credit Loans to the date of such assignment.

          (ii) All fees distributable hereunder to the NonConsenting Revolving Credit Lender to
the date of such assignment.

          (iii) Any reasonable out-of-pocket costs and expenses for which the NonConsenting
Revolving Credit Lender is entitled to reimbursement from the Borrower.

          (c) In the event that the NonConsenting Revolving Credit Lender fails to deliver to the Agent
the Revolving Credit Note held by the NonConsenting Revolving Credit Lender as provided in Section
15-10(b), then:

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          (i) The amount otherwise to be Transferred to the NonConsenting Revolving Credit Lender
shall be Transferred to the Agent and held by the Agent, without interest, to be turned over
to the NonConsenting Revolving Credit Lender upon delivery of the Revolving Credit Note held
by that NonConsenting Revolving Credit Lender.

          (ii) The Revolving Credit Note held by the NonConsenting Revolving Credit Lender shall
have no force or effect whatsoever.

          (iii) The NonConsenting Revolving Credit Lender shall cease to be a “Revolving Credit
Lender”.

          (iv) The Revolving Credit Lender(s) which have Transferred the amount to the Agent as
described above shall have succeeded to all rights and become subject to all of the
obligations of the NonConsenting Revolving Credit Lender as “Revolving Credit Lender”.

          (d) In the event that more than one (1) Revolving Credit Lender wishes to require such
assignment, the NonConsenting Revolving Credit Lender’s commitment hereunder shall be divided among
such Revolving Credit Lenders, pro-rata based upon their respective Revolving Credit Percentage
Commitments, with the Agent coordinating such transaction.

          (e) The Agent shall coordinate the retirement of the Revolving Credit Note held by the
NonConsenting Revolving Credit Lender and the issuance of Revolving Credit Notes to those Revolving
Credit Lenders which “take-out” such NonConsenting Revolving Credit Lender, provided,
however, no processing fee otherwise to be paid as provided in Section 16-2(b) shall be due
under such circumstances.

ARTICLE 16 — Assignments By Revolving Credit Lenders:

     16-1. Assignments and Assumptions.

          (a) Except as provided herein, each Revolving Credit Lender (in this Section 16-1(a), an
“Assigning Revolving Credit Lender”) may assign to one or more Eligible Assignees (in this Section
16-1(a), each an “Assignee Revolving Credit Lender”) all or a portion of that Revolving Credit
Lender’s interests, rights and obligations under this Agreement and the Loan Documents (including
all or a portion of its Commitment) and the same portion of the Revolving Credit Loans at the time
owing to it, and of the Revolving Credit Note held by the Assigning Revolving Credit Lender,
provided that:

          (i) The Agent shall have given its prior written consent to such assignment, which
consent shall not be unreasonably withheld, but need not be given if the proposed assignment
would result in Bank of America’s holding a Revolving Credit Dollar Commitment of less than
$15 Million.

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          (ii) Unless an Event of Default has occurred, any assignment to a person not then a
Revolving Credit Lender shall be subject to the prior written consent of the Borrower (not
to be unreasonably withheld).

               (iii) Each such assignment shall be of a constant, and not a varying, percentage of all the
Assigning Revolving Credit Lender’s rights and obligations under this Agreement.

               (iv) Such assignment shall not result in Bank of America holding a Loan Commitment of less
than $15,000,000.00, provided, however, Bank of America shall be relieved of any “minimum hold”
obligation following the occurrence of any Event of Default.

     16-2. Assignment Procedures. (This Section 16-2 describes the procedures to be followed in
connection with an assignment effected pursuant to this Article 16 and permitted by Section 16-1).

          (a) The parties to such an assignment shall execute and deliver to the Agent, for recording in
the Register, an Assignment and Acceptance substantially in the form of EXHIBIT 16-1, annexed
hereto (an “Assignment and Acceptance”).

          (b) The Assigning Revolving Credit Lender shall deliver to the Agent, with such Assignment and
Acceptance, the Revolving Credit Note held by the subject Assigning Revolving Credit Lender and the
Agent’s processing fee of $3,500.00, provided, however, no such processing fee shall be
due where the Assigning Revolving Credit Lender is one of the Revolving Credit Lenders at the
initial execution of this Agreement.

          (c) The Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a
register or similar list (the “Register”) for the recordation of the names and addresses of the
Revolving Credit Lenders and of the Revolving Credit Percentage Commitment and Revolving Credit
Percentage Commitment of each Revolving Credit Lender. The Register shall be available for
inspection by the Revolving Credit Lenders and the Borrower at any reasonable time and from time to
time upon reasonable prior notice. In the absence of manifest error, the entries in the Register
shall be conclusive and binding on all Revolving Credit Lenders. The Agent and the Revolving
Credit Lenders may treat each Person whose name is recorded in the Register as a “Revolving Credit
Lender” hereunder for all purposes of this Agreement.

          (d) The Assigning Revolving Credit Lender and Assignee Revolving Credit Lender, directly
between themselves, shall make all appropriate adjustments in payments for periods prior to the
effective date of an Assignment and Assumption.

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     16-3. Effect of Assignment.

          (a) From and after the effective date specified in an Assignment and Acceptance which has been
executed, delivered, and recorded (which effective date the Agent may delay by up to five (5)
Business Days after the delivery of such Assignment and Acceptance):

          (i) The Assignee Revolving Credit Lender:

          (A) Shall be a party to this Agreement and the Loan Documents (and to any
amendments thereof) as fully as if the Assignee Revolving Credit Lender had executed
each.

          (B) Shall have the rights of a Revolving Credit Lender hereunder to the extent
of the Revolving Credit Percentage Commitment and Revolving Credit Percentage
Commitment assigned by such Assignment and Acceptance.

          (ii) The Assigning Revolving Credit Lender shall be released from the Assigning
Revolving Credit Lender’s obligations under this Agreement and the Loan Documents to the
extent of the Commitment assigned by such Assignment and Acceptance.

          (iii) The Agent shall undertake to obtain and distribute replacement Revolving Credit
Notes to the subject Assigning Revolving Credit Lender and Assignee Revolving Credit Lender.

          (b) By executing and delivering an Assignment and Acceptance, the parties thereto confirm to
and agree with each other and with all parties to this Agreement as to those matters which are set
forth in the subject Assignment and Acceptance.

     ARTICLE 17 — Notices:

     17-1. Notice Addresses. All notices, demands, and other communications made in respect of any
Loan Document (other than a request for a loan or advance or other financial accommodation under
the Revolving Credit) shall be made to the following addresses, each of which may be changed upon
seven (7) days written notice to all others given by certified mail, return receipt requested:

If to the Agent:

	 	 	 	 	 	 	 

	 	 	Bank of America, N.A.	 	 
	 	 	100 Federal Street	 	 
	 	 	Boston, Massachusetts 02110	 	 
	 

	 	Attention
	 	: James Ward	 	 
	 

	 	 	 	  Managing Director
	 	 
	 

	 	Fax
	 	: 617 434-4312 	 	 
	 

	 	E-mail
	 	: james.ward@baml.com	 	 

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     With a copy to (which shall not constitute notice):

	 	 	 	 	 	 	 

	 	 	Riemer & Braunstein LLP	 	 
	 	 	Three Center Plaza	 	 
	 	 	Boston, Massachusetts 02108	 	 
	 

	 	Attention
	 	: David S. Berman, Esquire
	 	 
	 

	 	Fax
	 	: 617 880 3456 	 	 
	 

	 	Email
	 	: dberman@riemerlaw.com	 	 

If to the Borrower:

	 	 	 	 	 	 	 

	 	 	Hastings Entertainment, Inc.	 	 
	 	 	3601 Plains Boulevard	 	 
	 	 	Amarillo, Texas 79102	 	 
	 

	 	Attention
	 	: Dan Crow	 	 
	 

	 	Fax
	 	: 806 351 2424 
	 	 
	 

	 	Email
	 	: Danny.Crow@goHastings.com	 	 

     With a copy to (which shall not constitute notice):

	 	 	 	 	 	 	 

	 	 	Kelly Hart & Hallman LLP	 	 
	 	 	201 Main Street, Suite 2500	 	 
	 	 	Fort Worth, Texas 76102	 	 
	 

	 	Attention
	 	: F. Richard Bernasek, Esquire
	 	 
	 

	 	Fax:
	 	: 817 878 9709 	 	 
	 

	 	Email
	 	: dick.bernasek@kellyhart.com	 	 

     17-2. Notice Given.

          (a) Except as otherwise specifically provided herein, notices shall be deemed made and
correspondence received, as follows (all times being local to the place of delivery or receipt):

          (i) By mail: the sooner of when actually received or three (3) days following deposit
in the United States mail, postage prepaid.

          (ii) By recognized overnight express delivery: the Business Day following the day when
sent.

          (iii) By Hand: If delivered on a Business Day after 9:00 AM and no later than three (3)
hours prior to the close of customary business hours of the recipient, when delivered.
Otherwise, at the opening of the then next Business Day.

          (iv) By Facsimile transmission (which must include a header on which the party sending
such transmission is indicated): If sent on a Business Day after 9:00 AM and no later than
three (3) hours prior to the close of customary business hours of the recipient, one (1)
hour after being sent. Otherwise, at the opening of the then next Business Day.

          (v) By electronic mail transmission (which must include a header on which the party
sending such transmission is indicated): Upon receipt of a return e-mail from the recipient
confirming such notice has been received, or upon receipt of an automatically generated

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e-mail confirmation that such communication has been delivered, i.e. by the “return receipt
requested” function).

          (b) Rejection or refusal to accept delivery and inability to deliver because of a changed
address or Facsimile Number for which no due notice was given shall each be deemed receipt of the
notice sent.

ARTICLE 18 — Term:

     18-1. Termination of Revolving Credit. The Revolving Credit shall remain in effect (subject
to suspension as provided in Section 2-5(g) hereof) until the Termination Date.

     18-2. Actions On Termination.

          (a) On the Termination Date, the Borrower shall pay the Agent (whether or not then due), in
immediately available funds, all then Liabilities including, without limitation: the following:

          (i) The entire balance of the Loan Account (including the unpaid principal balance of
the Revolving Credit Loans, and the SwingLine Loan ).

          (ii) Any then remaining installments of the Revolving Credit Commitment Fee.

          (iii) Any then remaining installments of the Agent’s Fee.

          (iv) Any payments due on account of the indemnification obligations included in Section
2-10(e).

          (v) Any accrued and unpaid Unused Line Fee.

          (vi) All unreimbursed costs and expenses of the Agent and of Lenders’ Special Counsel
for which the Borrower is responsible.

          (b) On the Termination Date, the Borrower shall also make such arrangements concerning any
L/C’s then outstanding as are reasonably satisfactory to the Agent.

          (c) Until such payment (Section 18-2(a)) and arrangements concerning L/C’s (Section 18-2(b)),
all provisions of this Agreement, other than those included in Article 2 which place any obligation
on the Agent or any Revolving Credit Lender to make any loans or advances or to provide any
financial accommodations to the Borrower shall remain in full force and effect until all
Liabilities shall have been paid in full.

          (d) The release by the Agent of the Collateral Interests granted the Agent by the Borrower
hereunder may be upon such conditions and indemnifications as the Agent may require. Without
limiting the foregoing, in connection with the termination of this Agreement and the release and
termination of the security interests in the Collateral, the Agent may require such indemnities and

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collateral security as it shall reasonably deem necessary or appropriate to protect the Agent and
the Lenders against (x) loss on account of credits previously applied to the Liabilities that may
subsequently be reversed or revoked, (y) any obligations that may thereafter arise with respect to
Bank Products and Cash Management Services, and (z) any Liabilities that may thereafter arise under
Section 19-12 hereof.

     ARTICLE 19 — General:

     19-1. Protection of Collateral. The Agent has no duty as to the collection or protection of
the Collateral beyond the safe custody of such of the Collateral as may come into the possession of
the Agent.

     19-2. Publicity.  (a) The Agent may issue a “tombstone” notice of the establishment of the
credit facility contemplated by this Agreement and may make reference to the Borrower (and may
utilize any logo or other distinctive symbol associated with the Borrower) in connection with any
advertising, promotion, or marketing undertaken by the Agent.

          (b) Each Revolving Credit Lender, the Issuer and the Agent agrees to use reasonable
precautions to keep confidential, in accordance with customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking practices, any non-public
information supplied to it by the Borrower pursuant to this Agreement which is identified by the
Borrower as being confidential at the time the same is delivered to the Revolving Credit Lenders,
the Issuer or the Agent, provided that nothing herein shall limit the disclosure of any such
information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to
counsel for any Revolving Credit Lender, the Issuer or the Agent, (iii) to bank examiners, auditors
or accountants of any Revolving Credit Lender, the Issuer or the Agent (iv) to any other Revolving
Credit Lender, the Issuer or the Agent, (v) in connection with any litigation to which any
Revolving Credit Lender, the Issuer or the Agent is a party, provided, further, that, unless
specifically prohibited by applicable Law or court order, each Revolving Credit Lender, the Issuer
and the Agent shall use best efforts to notify the Borrower of any request for disclosure of any
such non-public information (A) by any governmental agency or representative thereof (other than
any such request in connection with an examination of such Revolving Credit Lender’s financial
condition by such governmental agency) or (B) pursuant to a legal process, (vi) to any Eligible
Assignee (or prospective Eligible Assignee) so long as such Eligible Assignee (or prospective
Assignee) agrees in writing to be bound by this confidentiality provision in all material respects,
or (vii) to the extent necessary in connection with any right or remedy under this Agreement or any
other Loan Document.

     19-3. Successors and Assigns. This Agreement shall be binding upon the Borrower and the
Borrower’s representatives, successors, and assigns and shall enure to the benefit of the Agent and
each

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Revolving Credit Lender and their respective successors and assigns, provided, however, no
trustee or other fiduciary appointed with respect to the Borrower shall have any rights hereunder.
In the event that the Agent or any Revolving Credit Lender assigns or transfers its rights under
this Agreement, in accordance with this Agreement the assignee shall thereupon succeed to and
become vested with all rights, powers, privileges, and duties of such assignor hereunder and such
assignor shall thereupon be discharged and relieved from its duties and obligations hereunder.

     19-4. Severability. Any determination that any provision of this Agreement or any application
thereof is invalid, illegal, or unenforceable in any respect in any instance shall not affect the
validity, legality, or enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.

     19-5. Amendments.

          (a) This Agreement and the other Loan Documents incorporate all discussions and negotiations
between the Borrower and the Agent and each Revolving Credit Lender, either express or implied,
concerning the matters included herein and in such other instruments, any custom, usage, or course
of dealings to the contrary notwithstanding. No such discussions, negotiations, custom, usage, or
course of dealings shall limit, modify, or otherwise affect the provisions thereof. No failure by
the Agent or any Revolving Credit Lender to give notice to the Borrower of the Borrower’s having
failed to observe and comply with any warranty or covenant included in any Loan Document shall
constitute a waiver of such warranty or covenant or the amendment of the subject Loan Document. No
change made by the Agent to the manner by which Borrowing Base is determined shall obligate the
Agent to continue to determine Borrowing Base in that manner.

          (b) The Borrower may undertake any action otherwise prohibited hereby, and may omit to take
any action otherwise required hereby, upon and with the express prior written consent of the Agent.
Subject to Article 15, no consent, modification, amendment, or waiver of any provision of any Loan
Document shall be effective unless executed in writing by or on behalf of the party to be charged
with such modification, amendment, or waiver (and if such party is the Agent then by a duly
authorized officer thereof). Any modification, amendment, or waiver provided by the Agent shall be
in reliance upon all representations and warranties theretofore made to the Agent by or on behalf
of the Borrower (and any guarantor, endorser, or surety of the Liabilities) and consequently may be
rescinded in the event that any of such representations or warranties was not true and complete in
all material respects when given.

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     19-6. Application of Proceeds. The proceeds of any collection, sale, or disposition of the
Collateral, or of any other payments received hereunder, shall be applied towards the Liabilities
in such order and manner as the Agent determines in its sole discretion, consistent, however, with
Sections 13-6 and 13-7 and any other
applicable provisions of this Agreement. The Borrower shall remain liable for any deficiency
remaining following such application.

     19-7. Increased Costs. If, as a result of any adoption of, or change in, any requirement of
law, or of the interpretation or application thereof by any court or by any governmental or other
authority or entity charged with the administration thereof, whether or not having the force of
law, which:

          (a) subjects any Revolving Credit Lender to any taxes or changes the basis of taxation, or
increases any existing taxes, on payments of principal, interest or other amounts payable by the
Borrower to the Agent or any Revolving Credit Lender under this Agreement (except for taxes on the
Agent or any Revolving Credit Lender based on net income or capital imposed by the jurisdiction in
which the principal or lending offices of the Agent or that Revolving Credit Lender are located);

          (b) imposes, modifies or deems applicable any reserve, cash margin, special deposit or similar
requirements against assets held by, or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Revolving Credit Lender;

          (c) imposes on any Revolving Credit Lender any other condition with respect to any Loan
Document; or

          (d) imposes on any Revolving Credit Lender a requirement to maintain or allocate capital in
relation to the Liabilities;
and the result of any of the foregoing, in such Revolving Credit Lender’s reasonable opinion, is to
increase the cost to that Revolving Credit Lender of making or maintaining any loan, advance or
financial accommodation or to reduce the income receivable by that Revolving Credit Lender in
respect of any loan, advance or financial accommodation by an amount which that Revolving Credit
Lender deems to be material, then upon written notice from the Agent, from time to time, to the
Borrower (such notice to set out in reasonable detail the facts giving rise to and a summary
calculation of such increased cost or reduced income), the Borrower shall forthwith pay to the
Agent, for the benefit of the subject Revolving Credit Lender, within 30 days after receipt of such
notice, that amount which shall compensate the subject Revolving Credit Lender for such additional
cost or reduction in income. Each Revolving Credit Lender shall, in accordance with its internal
policy, use reasonable efforts to designate a different lending office for funding or booking its
Revolving Credit Dollar Commitment hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such Revolving Credit
Lender, such designation or assignment: (i) would eliminate or reduce such amounts

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due (with
respect to additional costs or reduction in income), and (ii) would not subject such Revolving
Credit Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to
such
Revolving Credit Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Revolving Credit Lender in connection with any such designation or assignment.

     19-8. Costs and Expenses of the Agent.

          (a) The Borrower shall pay from time to time on demand all Costs of Collection and all
reasonable costs, expenses, and disbursements (including attorneys’ reasonable fees and expenses)
which are incurred by the Agent in connection with the preparation, negotiation, execution, and
delivery of this Agreement and of any other Loan Documents, and all other reasonable costs,
expenses, and disbursements which may be incurred by the Agent in connection with or in respect to
the credit facility contemplated hereby or which otherwise are incurred with respect to the
Liabilities.

          (b) The Borrower shall pay from time to time on demand all reasonable costs and expenses
(including attorneys’ reasonable fees and expenses) incurred, following the occurrence of any Event
of Default, by the Revolving Credit Lenders to Lenders’ Special Counsel.

          (c) The Borrower authorizes the Agent to pay all such fees and expenses and in the Agent’s
discretion, to add such fees and expenses to the Loan Account.

          (d) The undertaking on the part of the Borrower in this Section 19-8 shall survive payment of
the Liabilities and/or any termination, release, or discharge executed by the Agent in favor of the
Borrower, other than a termination, release, or discharge which makes specific reference to this
Section 19-8.

     19-9. Copies and Facsimiles. Each Loan Document and all documents and papers which relate
thereto which have been or may be hereinafter furnished the Agent or any Revolving Credit Lender
may be reproduced by that Revolving Credit Lender or by the Agent by any photographic, microfilm,
xerographic, digital imaging, or other process, and such Person making such reproduction may
destroy any document so reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made in the regular course of business). Any
facsimile which bears proof of transmission shall be binding on the party which or on whose behalf
such transmission was initiated and likewise shall be so admissible in evidence as if the original
of such facsimile had been delivered to the party which or on whose behalf such transmission was
received.

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     19-10. Massachusetts Law. This Agreement and all rights and obligations hereunder, including matters of construction,
validity, and performance, shall be governed by the law of the Commonwealth of Massachusetts.

     19-11. Consent to Jurisdiction.

          (a) Each of the parties hereto agree that any legal action, proceeding, case, or controversy
against it with respect to any Loan Document may be brought in the Superior Court of Suffolk County
Massachusetts or in the United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent’s sole discretion. By execution and delivery of
this Agreement, each of the parties hereto, for itself and in respect of its property, accepts,
submits, and consents generally and unconditionally, to the jurisdiction of the aforesaid courts.

          (b) Each of the parties hereto WAIVES personal service of any and all process upon it, and
irrevocably consents to the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by certified mail, postage prepaid, to it at
its address for notices as specified herein, such service to become effective five (5) Business
Days after such mailing.

          (c) Each of the parties hereto WAIVES any objection based on forum non conveniens and any
objection to venue of any action or proceeding instituted under any of the Loan Documents and
consents to the granting of such legal or equitable remedy as is deemed appropriate by the Court.

          (d) Nothing herein shall affect the right of the Agent to bring legal actions or proceedings
in any other competent jurisdiction.

          (e) The Borrower agrees that any action commenced by the Borrower asserting any claim arising
under or in connection with this Agreement or any other Loan Document shall be brought solely in
the Superior Court of Suffolk County Massachusetts or in the United States District Court, District
of Massachusetts, sitting in Boston, Massachusetts, and that such Courts shall have exclusive
jurisdiction with respect to any such action.

     19-12. Indemnification. The Borrower shall indemnify, defend, and hold the Agent and each
Revolving Credit Lender and any of their respective employees, officers, or agents (each, an
“Indemnified Person”) harmless of and from any claim brought or threatened against any Indemnified
Person by the Borrower, any guarantor or endorser of the liabilities, or any other Person (as well
as from attorneys’ reasonable fees, expenses, and disbursements in connection therewith) on account
of the relationship between the Agent and Revolving Credit Lenders, on the one hand, and the
Borrower or of any other guarantor or endorser of the Liabilities, on the other hand (each of
claims which may be defended, compromised, settled, or pursued
by the Indemnified Person with counsel of the Lender’s selection, but at

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the expense of the
Borrower) other than any claim as to which a final determination is made in a judicial proceeding
(in which the Agent and the other Indemnified Person has had an opportunity to be heard) which
determination includes a specific finding that the Indemnified Person seeking indemnification had
acted in a grossly negligent manner or in actual bad faith. This indemnification shall survive
payment of the Liabilities and/or any termination, release, or discharge executed by the Agent in
favor of the Borrower, other than a termination, release, or discharge duly executed on behalf of
the Agent which makes specific reference to this Section 19-12.

     19-13. Rules of Construction. The following rules of construction shall be applied in the
interpretation, construction, and enforcement of this Agreement and of the other Loan Documents:

          (a) Unless otherwise specifically provided for herein, interest and any fee or charge which is
stated as a per annum percentage shall be calculated based on a 360 day year and actual days
elapsed.

          (b) Words in the singular include the plural and words in the plural include the singular.

          (c) Titles, headings (indicated by being underlined or shown in Small
Capitals) and any Table of Contents are solely for convenience of reference; do not constitute
a part of the instrument in which included; and do not affect such instrument’s meaning,
construction, or effect.

          (d) The words “includes” and “including” are not limiting.

          (e) Text which follows the words “including, without limitation” (or similar words) is
illustrative and not limitational.

          (f) Text which is shown in italics (other than italicized text in parenthesis), shown in bold,
shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to be
conspicuous.

          (g) The words “may not” are prohibitive and not permissive.

          (h) Any reference to a Person’s “knowledge” (or words of similar import) are to such Person’s
knowledge assuming that such Person has undertaken reasonable and diligent investigation with
respect to the subject of such “knowledge” (whether or not such investigation has actually been
undertaken).

          (i) Terms which are defined in one section of any Loan Document are used with such definition
throughout the instrument in which so defined.

          (j) The symbol “$” refers to United States Dollars.

          (k) Unless limited by reference to a particular Section or provision, any reference to
“herein”, “hereof”, or “within” is to the entire Loan Document in which such reference is made.

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          (l) References to “this Agreement” or to any other Loan Document is to the subject instrument
as amended to the date on which application of such reference is being made.

          (m) Except as otherwise specifically provided, all references to time are to Boston time.

          (n) In the determination of any notice, grace, or other period of time prescribed or allowed
hereunder:

          (i) Unless otherwise provided (I) the day of the act, event, or default from which the
designated period of time begins to run shall not be included and the last day of the period
so computed shall be included unless such last day is not a Business Day, in which event the
last day of the relevant period shall be the then next Business Day and (II) the period so
computed shall end at 5:00 PM on the relevant Business Day.

          (ii) The word “from” means “from and including”.

          (iii) The words “to” and “until” each mean “to, but excluding”.

          (iv) The word “through” means “to and including”.

          (o) The Loan Documents shall be construed and interpreted in a harmonious manner and in
keeping with the intentions set forth in Section 19-14 hereof, provided, however, in the event of
any inconsistency between the provisions of this Agreement and any other Loan Document, the
provisions of this Agreement shall govern and control.

     19-14. Intent. It is intended that:

          (a) This Agreement take effect as a sealed instrument.

          (b) The scope of all Collateral Interests created by the Borrower to secure the Liabilities be
broadly construed in favor of the Agent and that they cover all assets of the Borrower, other than
Exempt Assets.

          (c) All Collateral Interests created in favor of the Agent at any time and from time to time
by any the secure all Liabilities, whether now existing or contemplated or hereafter arising.

          (d) All reasonable costs, expenses, and disbursements incurred by the Agent and, to the extent
provide in Section 19-8 each Revolving Credit Lender, in connection with such Person’s
relationship(s) with the Borrower shall be borne by the Borrower.

          (e) Unless otherwise explicitly provided herein, the Agent’s consent to any action of the
Borrower which is prohibited unless such consent is given may be given or refused by the Agent in
its sole discretion and without reference to Section 2-17 hereof.

     19-15. Participations. Each Revolving Credit Lender may sell participations to one or more
financial institutions (each, a “Participant”) in that Revolving Credit Lender’s interests herein
provided

105

 

that no such participation shall include any provision which accords that Participant with
any rights, vis a vis the Agent, with respect to any requirement herein for approval by a requisite
number or proportion of the Revolving Credit Lenders. No such sale of a participation shall
relieve a Revolving Credit Lender from that Revolving Credit Lender’s obligations hereunder nor
obligate the Agent to any Person other than a Revolving Credit Lender.

     19-16. Right of Set-Off. Any and all deposits or other sums at any time credited by or due to
the Borrower from the Agent or any Revolving Credit Lender, and any cash, securities, instruments
or other property of the Borrower in the possession of any of the foregoing, whether for
safekeeping or otherwise (regardless of the reason such Person had received the same) shall at all
times constitute security for all Liabilities and for any and all obligations of the Borrower to
the Agent and such Revolving Credit Lender and may be applied or set off against the Liabilities
and against such obligations at any time after the occurrence of an Event of Default, whether or
not other collateral is then available to the Agent or that Revolving Credit Lender.

     19-17. Pledges To Federal Reserve Banks. Nothing included in this Agreement shall prevent or
limit any Revolving Credit Lender, to the extent that such Revolving Credit Lender is subject to
any of the twelve Federal Reserve Banks organized under §4 of the Federal Reserve Act (12 U.S.C.
§341) from pledging all or any portion of that Lender’s interest and rights under this Agreement,
provided, however, neither such pledge nor the enforcement thereof shall release the pledging
Revolving Credit Lender from any of its obligations hereunder or under any of the Loan Documents.

     19-18. Maximum Interest Rate.

          (a) No interest rate specified in this Agreement or any other Loan Document shall at any time
exceed the Maximum Rate.

          (b) If at any time the interest rate (the “Contract Rate”) for any Liability shall exceed the
Maximum Rate, so that, as provided in Section 19-18(a), interest accruing on such Liability is
limited to the Maximum Rate, then any subsequent reduction in the Contract Rate for such Liability
shall not reduce the rate of interest on such Liability below the Maximum Rate until the aggregate
amount of interest accrued on such Liability equals the aggregate amount of interest which would
have accrued on such Liability if the Contract Rate for such Liability had at all times been in
effect.

          (c) Notwithstanding anything to the contrary contained in this Agreement or the other Loan
Documents, none of the terms and provisions of this Agreement or the other Loan Documents shall
ever be construed to create a contract or obligation to pay interest at a rate in excess of the
Maximum Rate; and neither the Agent nor any Revolving Credit Lender shall ever charge, receive,
take, collect, reserve or apply, as interest on the Liabilities, any amount in excess of the
Maximum Rate. The Agent, each Revolving Credit Lender and the Borrower each agrees that any
interest, charge, fee, expense or other Liability provided for in this Agreement or in the other
Loan Documents which constitutes interest under applicable law, ipso facto and under any and all
circumstances, shall be limited or reduced to an amount equal to the lesser of (x) the amount of
such interest, charge, fee, expense or other Liability that would be payable in the absence of this
Section 19-18, or (y) an amount, which when added to all other interest payable under this
Agreement and the other Loan Documents, equals the Maximum Rate. If, notwithstanding the
foregoing, the Agent or any Revolving Credit Lender ever contracts for, charges, receives, takes,

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collects, reserves or applies as interest any amount in excess of the Maximum Rate, such amount
which would be deemed excessive interest shall be deemed a partial payment or prepayment of
principal of the Liabilities and treated hereunder as such; and if the Liabilities, or applicable
portions thereof, are paid in full, any remaining excess shall promptly be paid to the Borrower.
In determining whether the interest paid or payable, under any specific contingency, exceeds the
Maximum Rate, the Agent, each Revolving Credit Lender and the Borrower, to the maximum extent
permitted by Applicable Law, shall (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest
throughout the actual term of the Liabilities, or applicable portions thereof, so that the interest
rate does not exceed the Maximum Rate at any time during the term of the Liabilities.

     19-19. Waivers.

          (a) The Borrower (and all guarantors, endorsers, and sureties of the Liabilities) make each of
the waivers included in Section 19-19(b), below, knowingly, voluntarily, and intentionally, and
understands that Agent and each Revolving Credit Lender, in establishing the facilities
contemplated
hereby and in providing loans and other financial accommodations to or for the account of the
Borrower as provided herein, whether not or in the future, is relying on such waivers.

          (b) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER, AND EACH SUCH GUARANTOR,
ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:

          (i) Except as otherwise specifically required hereby, notice of non-payment, demand,
presentment, protest and all forms of demand and notice, both with respect to the
Liabilities and the Collateral.

          (ii) Except as otherwise specifically required hereby, the right to notice and/or
hearing prior to the Agent’s exercising of the Agent’s rights upon default.

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          (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE AGENT OR
ANY REVOLVING CREDIT LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST THE AGENT OR ANY REVOLVING CREDIT LENDER OR IN WHICH THE AGENT OR
ANY REVOLVING CREDIT LENDER IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES
OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER
PERSON (AND THE AGENT OR EACH REVOLVING CREDIT LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN
ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

          (iv) The benefits or availability of any stay, limitation, hindrance, delay, or
restriction (including, without limitation, any automatic stay which otherwise might be
imposed pursuant to Section 362 of the Bankruptcy Code) with respect to any action which the
Agent may or may become entitled to take hereunder.

          (v) Any defense, counterclaim, set-off, recoupment, or other basis on which the amount
of any Liability, as stated on the books and records of the Agent, could be reduced or
claimed to be paid otherwise than in accordance with the tenor of and written terms of such
Liability.

          (vi) Any claim to consequential, special, or punitive damages.

     19-20. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND ALL OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER COVERED HEREBY AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN
AGREEMENTS BETWEEN THE PARTIES.

     19-21. Foreign Asset Control Regulations. Neither the advance of the Revolving Credit Loans
nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. §
1 et seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended)
(the “Foreign Assets Control Regulations”) or any enabling legislation or executive order relating
thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive
Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive
Order”) and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Furthermore, neither the
Borrower nor any of its Affiliates (a) is or will

108

 

become a “blocked person” as described in the
Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b)
engages or will engage in any dealings or transactions, or be otherwise associated, with any such
“blocked person” or in any manner violative of any such order.

     19-22. USA PATRIOT Act Notice. Each Revolving Credit Lender that is subject to the Act (as
hereinafter defined) and the Agent (for itself and not on behalf of any Revolving Credit Lender)
hereby notifies the Borrower and Guarantors that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is
required to obtain, verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will allow such Revolving
Credit Lender or the Agent, as applicable, to identify the Borrower in accordance with the Act. The
Borrower is in compliance, in all material respects, with the Patriot Act. No part of the proceeds
of the Revolving Credit Loans will be used by the Borrower, directly or indirectly, for any
payments to any governmental official or employee, political party, official of a political party,
candidate for political office, or anyone else acting in an official capacity, in order to obtain,
retain or direct business or obtain any improper advantage, in violation of the United States
Foreign Corrupt Practices Act of 1977, as amended.

     19-23. No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction
contemplated hereby, the Borrower
acknowledges and agrees that: (i) the credit facility provided for hereunder and any related
arranging or other services in connection therewith (including in connection with any amendment,
waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial
transaction between the Borrower, on the one hand, and the Agent and the Revolving Credit Lenders,
on the other hand, and the Borrower is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated hereby and by the other
Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in
connection with the process leading to such transaction, each Revolving Credit Lender is and has
been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the
Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii)
none of the Agent or the Revolving Credit Lenders has assumed or will assume an advisory, agency or
fiduciary responsibility in favor of the Borrower with respect to any of the transactions
contemplated hereby or the process leading thereto, including with respect to any amendment, waiver
or other modification hereof or of any other Loan Document (irrespective of whether any of the
Agent or Revolving Credit Lenders has advised or is currently advising the Borrower or any of its
Affiliates on other matters) and none of the Agent or Revolving Credit Lenders has any obligation
to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby
except those obligations

109

 

expressly set forth herein and in the other Loan Documents; (iv) the Agent
and the Revolving Credit Lenders and their respective Affiliates may be engaged in a broad range of
transactions that involve interests that differ from those of the Borrower and its Affiliates, and
none of the Agent or the Revolving Credit Lenders has any obligation to disclose any of such
interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Agent and the
Revolving Credit Lenders have not provided and will not provide any legal, accounting, regulatory
or tax advice with respect to any of the transactions contemplated hereby (including any amendment,
waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted
its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate.
The Borrower hereby waives and releases, to the fullest extent permitted by law, any claims that it
may have against each of the Agent and Revolving Credit Lenders with respect to any breach or
alleged breach of agency or fiduciary duty.

     19-24. Original Credit Agreement Amended and Restated. Upon satisfaction of the conditions
precedent to the effectiveness of this Agreement, (a) this Agreement shall amend and restate the
Original Credit Agreement in its entirety, and (b) the rights and obligations of the parties under
the Original Credit Agreement shall be subsumed within, and be governed by , this Agreement;
provided, however, that the Borrower hereby agrees that (i) the L/Cs outstandings
under the Original Credit Agreement on the effective date hereof shall be L/Cs hereunder, and
(ii) all outstanding Liabilities of the Borrower under the Original Credit Agreement shall remain
outstanding, shall constitute continuing Liabilities secured by the Collateral, and this Agreement
shall not be deemed to evidence or result in a novation or repayment and reborrowing of such
obligations and other liabilities.

[Signature Pages Follow]

110

 

HASTINGS ENTERTAINMENT, INC.,

As Borrower

	 	 	 	 	 

	By

	 	/s/ Dan Crow
 

	 	 
	Print Name: Dan Crow	 	 
	Title: CFO and Vice President	 	 

BANK OF AMERICA, N.A.,

As Agent and Revolving Credit Lender

	 	 	 	 	 

	By

	 	/s/ Matthew Potter
 

	 	 
	Print Name: Matthew Potter	 	 
	Title: Vice President	 	 

Signature Page to Loan and Security Agreementexv10w14w2

Exhibit 10.14.2

T. ROWE PRICE GROUP, INC.

2004 STOCK INCENTIVE PLAN

HM REVENUE AND CUSTOMS APPROVED RULES FOR UK EMPLOYEES

(“THE SUB-PLAN”)

Adopted by the Company on:

Approved by the HM Revenue and Customs on:

HM Revenue and Customs reference no:

PricewaterhouseCoopers

Plumtree Court

London

EC4A 4HT

 

 

SCHEDULE

T. ROWE PRICE GROUP, INC. 2004 STOCK INCENTIVE PLAN

HM REVENUE AND CUSTOMS APPROVED RULES FOR UK EMPLOYEES

(“THE SUB-PLAN”)

	1.	 	General
	 
	 	 	This schedule to T. Rowe Price Group, Inc. 2004 Stock Incentive Plan (“the Plan”) and
appended Statement of Additional Terms and Conditions regarding the Annual Option Grants
(“the Terms”) sets out the HM Revenue and Customs Approved Rules for UK Employees (together
referred to as “the Sub-Plan”).
	 
	2.	 	Establishment of Sub-Plan
	 
		 	T. Rowe Price Group, Inc. (“the Company”) has established the Sub-Plan under Section 3 of
the Plan1 which authorises the Administrator to adopt and interpret such rules,
regulations, agreements, guidelines and instruments for the administration of the Plan.
	 
	3.	 	Purpose of Sub-Plan
	 
	 	 	The purpose of the Sub-Plan is to enable the grant to, and subsequent exercise by,
employees and directors in the United Kingdom, on a tax favoured basis, of options to
acquire shares in the Company under the Plan.
	 
	4.	 	HM Revenue and Customs approval of Sub-Plan
	 
	 	 	The Sub-Plan is intended to be approved by HM Revenue and Customs under Schedule 4 to ITPEA
2003.
	 
	5.	 	Rules of Sub-Plan
	 
	 	 	The rules of the Plan, in their present form and as amended from time to time, shall, with
the modifications set out in this schedule, form the rules of the Sub-Plan. In the event of
any conflict between the rules of the Plan and this schedule, the schedule shall prevail.
	 
	6.	 	Relationship of Sub-Plan to Plan
	 
	 	 	The Sub-Plan shall form part of the Plan and not a separate and independent plan.
	 
	7.	 	Interpretation
	 
	 	 	In the Sub-Plan, unless the context otherwise requires, the following words and expressions
have the following meanings:

2

 

	 	 	 

	Acquiring Company

	 	a company which obtains Control of the Company in
the circumstances referred to in rule 26;
	 
	 	 
	Approval Date

	 	the date on which the Sub-Plan is approved by HM
Revenue and Customs under Schedule 4 to ITEPA 2003;
	 
	 	 
	Associated Company

	 	the meaning given to that expression by paragraph
35 of Schedule 4 to ITEPA 2003;2
	 
	 	 
	Close Company

	 	the meaning given to that expression by 414(1) of
ICTA as referred by paragraph 37 of Schedule 4 to,
ITEPA 2003;3
	 
	 	 
	Consortium

	 	the meaning given to that word by paragraph 36(2)
of Schedule 4 to ITEPA
2003;4
	 
	 	 
	Control

	 	the meaning given to that word by section 719 of
ITEPA 2003 and “Controlled” shall be construed
accordingly;5
	 
	 	 
	Date of Grant

	 	the date on which an Option is granted to an
Eligible Employee determined in accordance with
Section 6(b) of the Plan;
	 
	 	 
	Eligible Employee

	 	an individual who falls within Section 5 of the
Plan and who is:
	 
	 	 
	 

	 	(a)   an employee (other than a director) of the
Company or a company participating in the Sub-Plan;
or

	 
	 	 
	 

	 	(b)   a director of the Company or a company
participating in the Sub-Plan who is contracted to
work at least 25 hours per week for the Company and
its subsidiaries or any of them (exclusive of meal
breaks)

	 
	 	 
	 

	 	and who, in either case, does not have at the Date
of Grant of an Option, and has not had during the
preceding twelve months, a Material Interest in a
Close Company which is the Company or a company
which has Control of the Company or a member of a
Consortium which owns the Company;
	 
	 	 
	Grantee

	 	An individual who holds an Option, or where

3

 

	 	 	 

	 

	 	the context permits, his legal personal
representatives;
	 
	 	 
	ITA 2007

	 	The Income Tax Act 2007;
	 
	 	 
	ITEPA 2003

	 	the Income Tax (Earnings and Pensions Act 2003);
	 
	 	 
	Market Value

	 	notwithstanding Section 2(k) of the Plan
	 
	 	 
	 

	 	(a)   in the case of an Option granted under the Sub
Plan:

	 
	 	 
	 

	 	(i)   if at the relevant time the Shares are listed
on The NASDAQ Stock Market, the NASDAQ Official
Closing Price (NOCP) for the Date of Grant of the
Option, or if no reported price for that day, the
preceding day for which there was a reported price
(or in the event Shares are no longer listed on The
NASDAQ Stock Market but instead are listed on
another stock exchange registered with the
Securities and Exchange Commission of the United
States as a national securities exchange, the
comparable last or closing selling price on that
exchange);6

	 
	 	 
	 

	 	(ii)   if paragraph (i) does not apply, the market
value of a Share as determined in accordance with
Part VIII of the Taxation of Chargeable Gains Act
1992 and agreed in advance with HM Revenue and
Customs Shares Valuation on the Date of Grant of
the Option or such earlier date or dates as may be
agreed with HM Revenue and Customs;

	 
	 	 
	 

	 	(b)   in the case of an option granted under any
other share option scheme, the market value of an
ordinary share in the capital of the Company
determined under the rules of such scheme for the
purpose of the grant of the option;

	 
	 	 
	Material Interest

	 	The meaning given to that expression by

4

 

	 	 	 

	 

	 	paragraphs
9 to 14 of Schedule 4 to ITEPA 2003;7
	 
	 	 
	New Option

	 	an option granted by way of exchange under rule
26.1;
	 
	 	 
	New Shares

	 	the shares subject to a New Option referred to in
rule 26.1;
	 
	 	 
	Option

	 	a subsisting right to acquire Shares granted under
the Sub-Plan;
	 
	 	 
	Ordinary Share Capital

	 	the meaning given to that expression by section 989
of ITA 2007;
	 
	 	 
	Shares

	 	ordinary shares of Common Stock of the Company, par
value twenty cents ($0.20) per share.

          In this schedule, unless the context otherwise requires:

	 	•	 	words and expressions not defined above have the same meanings as are given to them
in the Plan;
	 
	 	•	 	the rule headings are inserted for ease of reference only and do not affect their
interpretation;
	 
	 	•	 	a reference to a rule is a reference to a rule in this schedule;
	 
	 	•	 	the singular includes the plural and vice-versa and the masculine includes the
feminine; and
	 
	 	•	 	a reference to a statutory provision is a reference to a United Kingdom statutory
provision and includes any statutory modification, amendment or re-enactment thereof.

	8.	 	Companies participating in Sub-Plan
	 
	 	 	The companies participating in the Sub-Plan shall be the Company and any company Controlled
by the Company which has been nominated by the Company to participate in the Sub-Plan.
	 
	9.	 	Shares used in Sub-Plan
	 
	 	 	The Shares shall form part of the Ordinary Share Capital of the Company and shall at all
times comply with the requirements of paragraphs 16 to 20 of Schedule 4 to ITEPA
2003.8

	 
	10.	 	Grant of Options

5

 

	 	 	An option granted under the Sub-Plan shall be granted under and subject to the rules
of the Plan as modified by this schedule.
	 
	11.	 	Identification of Options
	 
	 	 	A Grant Agreement issued in respect of an Option shall expressly state that it is
issued in respect of an Option. An option which is not so identified shall not constitute
an Option.
	 
	12.	 	Contents of Grant Agreement
	 
	 	 	A Grant Agreement, being the Sub-Plan, Terms and Notice taken together, also referred to in
the Sub-Plan as the “Agreement”, will be issued in respect of an Option and shall state:

	 	•	 	that it is issued in respect of an Option;
	 
	 	•	 	the date of grant of the Option;
	 
	 	•	 	the number of Shares subject to the Option;
	 
	 	•	 	the exercise price under the Option;
	 
	 	•	 	any performance target or other condition imposed on the exercise of the Option;
	 
	 	•	 	the date(s) on which the Option will ordinarily become exercisable; and
	 
	 	•	 	the period during which an Option shall remain exercisable following termination of
employment.

	13.	 	Earliest date for grant of Options
	 
	 	 	An Option may not be granted earlier than the Approval Date.
	 
	14.	 	Persons to whom Options may be granted
	 
	 	 	Notwithstanding the provisions of Section 5 of the Plan, an Option may not be granted to an
individual who is not an Eligible Employee at the Date of Grant.
	 
	15.	 	Options non transferable
	 
	 	 	An Option shall be personal to the Eligible Employee to whom it is granted and,
subject to rule 25, shall not be capable of being transferred, charged or otherwise
alienated and shall lapse immediately if the Grantee purports to transfer, charge or
otherwise alienate the Option.
	 
	 	 	Reference in Section 7(b) of the Plan to transfers by a Grantee otherwise than by will or
the laws of descent and distribution shall be disapplied for the purposes of the Sub-Plan.

6

 

	16.	 	Limit on number of Shares placed under Option under Sub-Plan
	 
	 	 	For the avoidance of doubt, Shares placed under Option under the Sub-Plan shall be
taken into account for the purpose of Section 4 of the Plan.
	 
	17.	 	HM Revenue and Customs limit (£30,000)
	 
	 	 	An Option may not be granted under this Sub-Plan to an Eligible Employee if the result of
granting the Option would be that the aggregate Market Value of the shares subject to all
outstanding options granted to him under the Sub-Plan or any other share option scheme
established by the Company or an Associated Company and approved by HM Revenue and Customs
under Schedule 4 to ITEPA 2003 (other than a savings related share option scheme) would
exceed sterling £30,000 or such other limit as may from time to time be specified in
paragraph 6 of Schedule 4 to ITEPA 20039. For this purpose, the United Kingdom
sterling equivalent of the market value of a share on any day shall be determined by taking
the spot sterling/US dollar exchange rate for that day as shown in the Wall Street Journal.
If the grant of an Option would otherwise cause the limit in this rule 17 to be exceeded,
it shall take effect as the grant of an option under the Plan.
	 
	18.	 	Exercise price under Options
	 
	 	 	The amount payable per Share on the exercise of an Option shall not be less than the Market
Value of a Share on the Date of Grant and shall be stated on the Date of Grant.
	 
	19.	 	Performance target or other condition imposed on exercise of Option
	 
	 	 	Any performance target or other condition imposed on the exercise of an Option under
Sections 3(b)(ii) (D) and 6(a) of the Plan, shall be:

	 	19.1	 	objective;
	 
	 	19.2	 	such that, once satisfied, the exercise of the Option is not subject to the
discretion of any person; and
	 
	 	19.3	 	stated on the Date of Grant.

	 	 	If an event occurs as a result of which the Administrator
considers that a performance target or other condition imposed
on the exercise of an Option is no longer appropriate and
substitutes, varies or waives under Section 3(c) of the Plan the
performance target or condition, such substitution, variation or
waiver shall:

	 	19.4	 	be reasonable in the circumstances; and
	 
	 	19.5	 	produce a fairer measure of performance and be neither more nor less
difficult to satisfy.

7

 

	20.	 	Exercise of Options by leavers
	 
	 	 	The period during which an Option shall remain exercisable following termination of
employment, shall be stated in the Grant Agreement.
	 
	21.	 	Latest date for exercise of Options
	 
	 	 	Notwithstanding rule 25 the period during which an Option shall remain exercisable shall be
stated in the Grant Agreement and any Option not exercised by that time shall lapse
immediately.
	 
	22.	 	Material Interest
	 
	 	 	An Option may not be exercised if the Grantee then has, or has had within the preceding
twelve months, a Material Interest in a Close Company which is the Company or which is a
company which has Control of the Company or which is a member of a Consortium which owns
the Company.
	 
	23.	 	Manner of payment for Shares on exercise of Options
	 
	 	 	Paragraph 3 of the Terms provides for the method of exercising the Option and payment of
the exercise price, together with any amounts due under rule 30. Notwithstanding any
provisions of the Plan, the amount may not be paid by the transfer to the Company of Shares
or any other shares or securities.
	 
	24.	 	Issue or transfer of Shares on exercise of Options
	 
	 	 	Subject to compliance by the Grantee with the rules of the Sub-Plan and to any delay
necessary to complete or obtain:

	 	24.1	 	the listing of the Shares on any stock exchange on which Shares are then
listed; or
	 
	 	24.2	 	such registration or other qualification of the Shares under any applicable
law, rule or regulation as the Company determines is necessary or desirable.

	 	 	The Company shall, as soon as reasonably practicable and in any event not later than thirty
days after the date of exercise of an Option, issue or transfer to the Grantee, or procure
the issue or transfer to the Grantee of, the number of Shares specified in the notice of
exercise and shall deliver to the Grantee, in the case of the partial exercise of an
Option, a Grant Agreement in respect of, or the original Grant Agreement endorsed to show,
the unexercised part of the Option, subject only to:

	 	24.3	 	the making of provision for the payment or withholding of any taxes required
to be withheld in accordance with any applicable law in respect of the exercise of the
Option or the receipt of the Shares.

8

 

	 	24.4	 	Notwithstanding Section 6(a) of the Plan, deferral of the individual’s
delivery of Shares that would otherwise be due to such individual by virtue of the
exercise of the Option is disapplied for the purposes of the Sub-Plan.

	 	 	Unless and until the Grantee requests the Company to deliver a share certificate to the
Grantee, or deliver Shares electronically or in certificate form to the Grantee’s
designated broker, bank or nominee on the Grantee’s behalf, the Company will retain the
Shares that the Grantee purchased through exercise of the Option in uncertificated book
entry form.
	 
	25.	 	Death of Grantee
	 
	 	 	If a Grantee dies, his personal representatives shall be entitled to exercise his Options
for the period stated in the Grant Agreement, but in no event later than the twelve month
period following his death. If not so exercised, the Options shall lapse immediately.
	 
	26.	 	Change in Control of Company
	 
	26.1	 	Exchange of Options
	 
	 	 	If a company (“Acquiring Company”) obtains Control of the Company as a result of
making:

	 	26.1.1	 	a general offer to acquire the whole of the issued ordinary share capital of the
Company which is made on a condition such that if it is satisfied the person making
the offer will have Control of the Company; or
	 
	 	26.1.2	 	a general offer to acquire all the shares in the Company of the same class as the
Shares

	 	 	a Grantee may, at any time during the period set out in rule 26.2, by agreement with the
Acquiring Company, release his Option in whole or in part in consideration of the grant to
him of a new option (“New Option”) which is equivalent to the Option but which relates to
shares (“New Shares”) in:

	 	26.1.3	 	the Acquiring Company;
	 
	 	26.1.4	 	a company which has Control of the Acquiring Company; or
	 
	 	26.1.5	 	a company which either is, or has Control of, a company which is a member of a
Consortium which owns either the Acquiring Company or a company having Control of the
Acquiring Company.

	26.2	 	Period allowed for exchange of Options
	 
	 	 	The period referred to in rule 26.1 is the period of six months beginning with the time
when the person making the offer has obtained Control of the Company and any condition
subject to which the offer is made has been satisfied.
	 
	26.3	 	Meaning of “equivalent”

9

 

	 	 	The New Option shall not be regarded for the purpose of this rule 26 as equivalent to the
Option unless:

	 	26.3.1	 	the New Shares satisfy the conditions in paragraphs 16 to 20 of Schedule 4 to ITEPA
2003; and
	 
	 	26.3.2	 	save for any performance target or other condition imposed on the exercise of the
Option, the New Option will be exercisable in the same manner as the Option and
subject to the provisions of the Sub-Plan as it had effect immediately before the
release of the Option; and
	 
	 	26.3.3	 	the total market value, immediately before the release of the Option, of the Shares
which were subject to the Option is equal to the total market value, immediately after
the grant of the New Option, of the New Shares (market value being determined for this
purpose in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992);
and
	 
	 	26.3.4	 	the total amount payable by the Grantee for the acquisition of the New Shares under
the New Option is equal to the total amount that would have been payable by the
Grantee for the acquisition of the Shares under the Option.

	26.4	 	Date of grant of New Option
	 
	 	 	The date of grant of the New Option shall be deemed to be the same as the Date of Grant of
the Option.
	 
	26.5	 	Application of Sub-Plan to New Option
	 
	 	 	In the application of the Sub-Plan to the New Option, where appropriate, references to
“Company” and “Shares” shall be read as if they were references to the company to whose
shares the New Option relates and the New Shares, respectively, save that in the definition
of “Administrator” the reference to “Company” shall be read as if it were a reference to T.
Rowe Price Group, Inc.
	 
	27.	 	Rights attaching to Shares issued on exercise of Options
	 
	 	 	All Shares issued on the exercise of an Option shall, as to any voting, dividend, transfer
and other rights, including those arising on a liquidation of the Company, rank equally in
all respects and as one class with the Shares in issue at the date of such exercise save as
regards any rights attaching to such Shares by reference to a record date prior to the date
of such exercise.
	 
	28.	 	Adjustment of Options
	 
	 	 	Notwithstanding Sections 3(b)(ii)(E) and 7(c) of the Plan, no adjustment of an Option
made pursuant to rule 8 of the Terms shall take effect until it has been approved by HM
Revenue and Customs.

10

 

	29	 	Tax and social security withholding
	 
	29.1	 	Where, in relation to the exercise of an Option granted under the Sub-Plan the Company or, if
different, the Grantee’s employing company, is liable, or is in accordance with current
practice believed to be liable, to account to any revenue or other authority for any sum in
respect of any tax or social security liability of the Grantee, the Option may not be
exercised unless the Grantee has beforehand paid to the Company or such employing company an
amount sufficient to discharge the liability. Alternatively, the Grantee may, by agreement
with the Company, enter into some other arrangement to ensure that such amount is available to
it (for example, by authorising the sale of some or all of the Shares subject to his Option
and the payment to the Company or such employing company of the requisite amount out of the
proceeds of sale). .Where this is the case the Option shall not be treated as exercised until
the Company determines that such arrangements are satisfactory to it.
	 
	29.2	 	The Company may, at its discretion, impose requirements for the payment by the Grantee of all
or any part of the employer’s National Insurance Contributions liability that may arise as a
result of the exercise of his Option (“Employer’s NIC”). Such requirements may include in
particular, but not by way of limitation, a determination that the Option may not be exercised
unless the Grantee has beforehand paid to the Company (or, if different, the Grantee’s
employing company) an amount sufficient to discharge all or any part of the Employer’s NIC,
as appropriate. Alternatively, the Grantee may, by agreement with the Company enter into some
other arrangement to ensure that such amount is available to them or it (for example, by
authorising the sale of some or all of the Shares subject to his Option and the payment to the
Company of the requisite amount out of the proceeds of sale). Where this is the case the
Option shall not be treated as exercised until the Company determines that such arrangements
are satisfactory to it.
	 
	29.3	 	The Company may require a Grantee to execute a copy of the Grant Agreement or some other
document in order to bind himself contractually to any such arrangement as is referred to in
rule 29.1 and/or 29.2 and return the executed document to the Company by a specified date.
Failure to return the executed document by the specified date being no more than 30 days after
the Date of Grant shall cause the Option to lapse.
	 
	30.	 	Exercise of discretion by Administrator
	 
	 	 	In exercising any discretion which it may have under the Sub-Plan, the Administrator
shall act fairly and reasonably.
	 
	31.	 	Disapplication of certain provisions of Plan
	 
	31.1	 	The provisions of the Plan dealing with:

	 	•	 	stock appreciation rights;

11

 

	 	•	 	stock awards;
	 
	 	•	 	incentive stock options (unless an Option is also designated to be an incentive
stock option at the Date of Grant under Clause 15 of the Statement of Additional Terms
and Conditions relating to Option grants under the Sub-Plan);
	 
	 	•	 	the authority of the Administrator to accelerate or otherwise change the time in
which an Option may be exercised or becomes payable and waive or accelerate the lapse,
in whole or in part, of any restriction or condition with respect to such Option, as
outlined in section 3(b)(ii)(D) of the Plan;
	 
	 	•	 	awards in substitution for stock options granted by other entities, as outlined in
Section 7(d) of the Plan; and
	 
	 	•	 	reference in Section 7(c)(i) of the Plan to “... or the payment of a stock
dividend”;
	 
	 	•	 	the provisions of 7(c)(ii) of the Plan;
	 
	 	•	 	the provisions of 3(b)(ii)(E) of the Plan; and
	 
	 	•	 	the provisions of 3(b)(ii)(F) of the Plan

	 	 	shall not form part of, and no such rights may be granted under, the Sub-Plan
	 
	31.2	 	In rule 6 (a) of the Plan (“Awards in General”) the words “The Administrator may permit or
require a recipient of an Award to defer such individual’s receipt of the payment of cash or
the delivery of Common Stock that would otherwise be due to such individual by virtue of the
exercise of, payment of, or lapse or waiver of restrictions respecting, any Award. If any such
payment deferral is required or permitted, the Administrator shall, in its sole discretion,
establish rules and procedures for such payment deferrals.” shall be disapplied and of no
effect.

			
	 
	Notes 	
	 
	1	 	The Company is the “scheme organiser” as defined in paragraph 2 of Schedule 4 to
ITEPA 2003 because it has established the Sub-Plan. In most cases, it will also be the Company
which grants options under the Sub-Plan, although this is not a requirement of UK tax legislation.
	 
	2	 	A company is treated as another’s “associated company” at a given time if, at that
time or at any other time within one year previously, one of the two has control of the other, or
both are under the control of the same person or persons. A person is taken to have control of a
company if he exercises, or is able to exercise or is entitled to acquire, direct or indirect
control over the company’s affairs and, in particular, if

12

 

			
	 	 	he possesses or is entitled to acquire
the greater part of the company’s issued share capital or the voting power in the company. UK tax
legislation contains two definitions of control: the definition of control here is different from
that in paragraph 4 below.
	 
	3	 	A close company is a company which is under the control (as defined in paragraph 1
above) of five or fewer participators (eg shareholders) or of any number of participators who are
directors. There are attributed to a participator all the rights and powers (eg shares, voting
power) of, inter alia, a company which he controls or of an “associate” (eg relative) of his.
Ordinarily, a company is excluded from being a close company if it is non UK resident or 35% of the
voting power in the company is held by the public and its shares have been listed, and the subject
of dealings, on a recognised stock exchange within the preceding 12 months. However, for the
purpose of the material interest test (see paragraph 5 below), this exclusion does not apply with
the result that the normal definition of a “close company” is extended.
	 
	4	 	A company is a member of a consortium owning another company if it is one of a
number of companies which between them beneficially own not less than three-quarters of the other
company’s ordinary share capital and each of which beneficially owns not less than one-twentieth of
that capital.
	 
	5	 	In relation to a body corporate (company A), “Control” means the power of a person
(P) to secure:

	(a)	 	by means of the holding of shares or the possession of voting power in or in relation to that
or any other body corporate; or
	 
	(b)	 	as a result of any powers conferred by the articles of association or other document
regulating that or any other body corporate
	 
	
that the affairs of company A are conducted in accordance with P’s wishes.
	 
	6 	 	In accordance with paragraph 29026 of the HM Revenue and Customs Employee Share
Schemes Manual, unless the relevant overseas recognised stock exchange is the NYSE, NASDAQ or the
American Stock Exchange then clearance is required from HM Revenue and Customs Shares Valuation
before the quoted price on the relevant stock exchange may be used to determine the market value of
the listed share.
	 
	7  	 	A person has a material interest in a company if he, either on his own or with one
or more associates, or if any associate of his with or without such other associates:
	 
	(a)	 	is the beneficial owner of, or able, directly or through the medium of other companies, or by
any other indirect means to control, more than 10 per cent of the ordinary share capital of
the company; or
	 
	(b)	 	where the company is a close company, possesses, or is entitled to acquire, such rights as
would, in the event of the winding-up of the company or in any other circumstances, give an
entitlement to receive more than 10 per cent of the assets which would then be available for
distribution among the participators.
	 
	8  	 	The shares used in the scheme must be:
	 
	(a)	 	ordinary shares;
	 
	(b)	 	fully paid up;
	 
	(c)	 	not redeemable; and

13

 

	(d)	 	save for certain limited exceptions, not subject to any restrictions which do not apply to
all shares of the same class.

The shares used in the scheme must be:

	(a)	 	of a class listed on a recognised stock exchange; or

	(b)	 	shares in a company which is not under the control of another company; or

	(c)	 	shares in a company which is under the control of another company (other than a company which
is, or would if resident in the UK be, a close company) whose shares are listed on a
recognised stock exchange.

The shares used in the scheme form part of the ordinary share capital of:

	(a)	 	the grantor (ie the company which has established the scheme); or

	(b)	 	a company which has control of the grantor; or

	(c)	 	a company which either is, or has control of, a company which is a member of a consortium
owning either the grantor or a company having control of the grantor.

Where the company whose shares are to be used in a scheme has more than one class of ordinary
share, the majority of the issued shares of the same class as those which are to be used must be
either employee control shares (see below) or:

	(a)	 	must not be held by persons (including trustees holding shares on behalf of such persons) who
acquired their shares in pursuance of a right conferred on them or opportunity offered to them
as directors or employees of any company, and not in pursuance of an offer to the public; and

	(b)	 	if the shares are not listed on a recognised stock exchange and the company is under the
control of another company whose shares are so listed, must not be held by companies which
have control of the company whose shares are in question or of which that company is an
associated company.

Shares are employee control shares if:

	(a)	 	the persons holding them are, by virtue of their holding of shares of that class, together
able to control the company; and

	(b)	 	those persons are, or have been, employees or directors of the company or of another company
which is under the control of the company.

	9	 	UK tax legislation imposes a limit (currently £30,000) on the “value” of the
outstanding options which may be held by an individual participant in an HM Revenue and Customs
approved executive share option scheme.

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