Document:

Exhibit 10.3

 

ROCKWOOD
HOLDINGS, INC.

FORM OF PERFORMANCE
RESTRICTED STOCK UNIT AWARD AGREEMENT

 

THIS AGREEMENT (the “Agreement”), is made, effective as of [December 12,]
2008 (the “Grant Date”) between Rockwood Holdings, Inc.,
a Delaware corporation (hereinafter called the “Company”),
and Seifollah Ghasemi, an employee of the Company or an Affiliate, hereinafter
referred to as the “Employee”.  For purposes of this Agreement, capitalized
terms not otherwise defined above or below, or in the Plan, shall have the
meanings set forth in Appendix A attached to this Agreement and incorporated by
reference herein.

 

WHEREAS, the Company desires to grant the
Employee performance-based restricted stock unit awards as provided for
hereunder (the “Restricted Stock Unit Awards”),
ultimately payable in shares of common stock of the Company, par value $0.01
per share (the “Common Stock”), pursuant to the
2008 Amended and Restated Stock Purchase and Option Plan for Rockwood Holdings, Inc.
and Subsidiaries  (the “Plan”), the terms of which are hereby incorporated by
reference and made a part of this Agreement; and

 

WHEREAS, the committee of the Company’s Board
appointed to administer the Plan (the “Committee”) has determined that it would
be to the advantage and best interest of the Company and its shareholders to
grant the shares of Common Stock provided for herein to the Employee as an
incentive for increased efforts during his term of office with the Company or
an Affiliate, and has advised the Company thereof and instructed the
undersigned officers to grant said Restricted Stock Unit Awards.

 

NOW, THEREFORE, in consideration of the
mutual covenants herein contained and other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto do hereby agree as
follows:

 

1.                                       Grant
of the Restricted Stock Units. 
Subject to the terms and conditions of the Plan and the additional terms
and conditions set forth in this Agreement, the Company hereby grants to the
Employee the opportunity to vest in the Restricted Stock Unit Awards, which
shall vest in accordance with Section 2 herein (the “Performance-Based
RSUs”) up to [insert 200% of Target
Performance-Based RSUs] Performance-Based RSUs (the “Maximum Performance-Based RSUs”), of which [insert target number of Performance-Based RSUs]
Performance-Based RSUs represent the Employee’s “Target
Performance-Based RSUs.”  An “RSU”
represents the right to receive one share of Common Stock.

 

2.                                       Vesting.

 

(a)                                  Performance-Based
RSUs.  The vesting of the
Performance-Based RSUs shall be subject to the satisfaction of the conditions
set forth in both subsection (i)(A) or (B), as applicable, and
subsection (ii) of this Section 2(a):

 

 

(i)                                 Service
Vesting Requirement.

 

(A)  Unless otherwise provided in this Agreement, so long as the
Employee continues to be employed by the Company or its Subsidiaries through December 31,
2011 (the “Vesting Date”), the Employee shall, on
the Vesting Date, become vested in a number of Performance-Based RSUs (not to
exceed the number of Maximum Performance-Based RSUs set forth in Section 1
above) determined based on the formulas set forth in Section 2(a)(ii) below.

 

(B)  If, prior to the Vesting Date (and absent the occurrence of
any Change of Control), the Employee’s employment with Company and its
Subsidiaries is terminated (x) for any reason by the Employee (other than
due to the Employee’s death, Disability or Retirement) or (y) by the
Company and its Subsidiaries for Cause, then the Performance-Based RSUs shall
be forfeited by the Employee without consideration as of such termination date
and this Agreement shall terminate without payment in respect thereof.

 

(C)  If, prior to the Vesting Date (and absent the occurrence of
any Change of Control), the Employee’s employment with the Company and its
Subsidiaries is terminated (x) by the Company and its Subsidiaries other
than for Cause or (y) by the Employee due to the Employee’s death,
Disability or Retirement, then this Agreement shall remain outstanding and, as
of the Vesting Date, the Employee shall become entitled to receive a
distribution of a number of shares of Common Stock equal to the product of (i) the
number of Performance-Based RSUs in which the Employee would have become vested
pursuant to Section 2(a)(ii) below, if the Employee had remained
employed with the Company or a Subsidiary through the Vesting Date, and (ii) (ii) a
fraction, the numerator of which is equal to the number of days between (and
including) the Grant Date and the date such employment so terminates, and the
denominator of which is equal to 1097 (such shares, the “Prorated
Performance-Based Shares”).

 

(ii)                                  Performance
Vesting Requirement.

 

(A)  The Performance-Based RSUs shall, so long as the Employee
remains employed with the Company or its Subsidiaries through the Vesting Date
(or the provisions of Section 2(a)(i)(C) otherwise apply), vest on
the Vesting Date as follows:  up to 100%
of the Maximum Performance-Based RSUs awarded hereunder shall become vested if
and to the extent that, during fiscal year 2009 of the Company (the “Performance Period”), (x) the 2009 Actual Adjusted
EBITDA, as compared to the 2009 Budgeted Adjusted EBITDA, and (y) the 2009
Actual Adjusted EPS, as compared to the 2009 Budgeted Adjusted EPS, is
achieved, in each case by certain specified percentages, relative to a targeted
2009 Budgeted Adjusted EBITDA amount (the “2009 EBITDA Target”)
and a 2009 Budgeted Adjusted EPS amount (the “2009 EPS
Target”), respectively, all as set forth on Schedule I attached
hereto and incorporated by reference herein.

 

(B)  Whether and to what extent the Performance-Based RSUs have
become vested shall be determined by the Committee at its first meeting after
the Financial Statement Approval Date following the end of the Performance
Period (the “Determination 

 

2

 

Date”), upon the Committee’s certification of
achievement of the applicable performance goals set forth in Section 2(a)(ii)(A) above.

 

(C)  Notwithstanding anything set forth in this Section 2(b) to
the contrary, if the Board does not establish, within the first 120 days of
calendar year 2009, any or either of the 2009 EBITDA Target or the 2009 EPS
Target, the Performance-Based RSUs shall, so long as the Employee remains
employed with the Company or its Subsidiaries through the Vesting Date (or an
event described in Section 2(a)(i)(C) occurs), become 100% vested as
to the number of Target Performance-Based RSUs awarded hereunder, and all other
Performance-Based RSUs granted hereunder shall be forfeited without
consideration.

 

(iii)                               Settlement
of Performance-Based RSUs.  Promptly
after the Vesting Date (but in no event later than 75 days after the end of the
calendar year in which the Vesting Date occurs (i.e.,
by no later than March 15, 2012)), the Company shall distribute to the
Employee a number of shares of Common Stock equal to the number of
Performance-Based RSUs that become vested in accordance with Section 2(a) hereof.  Any number of Performance-Based RSUs that do
not become vested in accordance with Section 2(a) hereof (to the
extent not already previously forfeited pursuant to Section 2(a)(i)(B) above)
shall, effective as of the Vesting Date, be forfeited by the Employee without
consideration and this Agreement shall terminate without payment in respect
thereof.

 

(b)                                 Effect
of Change of Control. 
Notwithstanding anything set forth in Section 2(a) or (b) above,
if there occurs a Change of Control, the following rules shall apply with
respect to the RSUs granted hereunder:

 

(i)                                     If
a Change of Control occurs, and the Employee is still employed with the Company
or its Subsidiaries upon the occurrence of such Change of Control, if

 

(A) such Change of Control occurs prior
to the Determination Date, only the number of Target Performance-Based RSUs
granted hereunder shall immediately vest (and all other Performance-Based RSUs
shall be forfeited by the Employee without consideration), and shall become
converted into the right to receive a cash payment equal to the product of (x) the
total number of such Performance-Based RSUs and (y) the price per share
paid for one share of Common Stock in the Change of Control transaction (such
price, the “CIC Price”) (and all other
Performance-Based RSUs granted hereunder shall be forfeited upon such event), but if

 

(B) such Change of Control occurs after the Determination Date but
before the date the Performance-Based RSUs are settled under Section 2(a)(iii) above,
only the number of Performance-Based RSUs granted hereunder that become vested
under Section 2(a)(ii) above shall become converted into the right to
receive a cash payment equal to the product of (x) the total number of
such Performance-Based RSUs and (y) the CIC 

 

3

 

Price (and all other Performance-Based RSUs granted hereunder shall be
forfeited upon such event);

 

and in either event described in clause (A) or (B) above
occurs, such cash payment shall be made as soon as administratively practicable
following the Vesting Date (but in no event later than December 31, 2012);

 

(ii)  Notwithstanding Section 2(b)(i) above, if,
following the occurrence of a Change of Control but prior to the Vesting Date, (A) the
Employee’s employment is terminated by the Company and its Subsidiaries without
Cause or by the Employee for Good Reason, the timing of the payment of the
amount otherwise due and payable under Section 2(b)(i)(A) or (B), as
applicable, shall be accelerated and shall be paid to the Employee as soon as
practicable following such termination of employment; or (B) the Employee’s
employment with the Company and its Subsidiaries is terminated by the Company
and its Subsidiaries for Cause or by the Employee for any reason (other than
due to the Employee’s death, Disability, Retirement or by the Employee for Good
Reason), then the Performance-Based RSUs and the right to receive any cash as
set forth in Section 2(b)(i)(A) or (B), as applicable, shall be
forfeited by the Employee without consideration and this Agreement shall
terminate without payment in respect thereof; but if

 

(iii)                               the
Employee has ceased to be employed with the Company or its Subsidiaries prior
to such Change of Control under circumstances set forth in Section 2(a)(i)(C) above,
then the Employee shall, in lieu of the number of Prorated Performance-Based
Shares otherwise distributable pursuant to Section 2(a)(i)(C), instead be
entitled to receive a cash payment, equal to the product of (x) the total
number of such Prorated Performance-Based Shares and (y) the CIC Price.
This cash payment shall be made as soon as practicable following the Change of
Control (but in no event later than 90 days following such event).

 

3.                                       Dividend
Equivalents.  With respect to each
cash dividend or distribution (if any) paid with respect to Common Stock to
holders of record on and after the Grant Date, a number of shares of Common
Stock shall be accrued on the books and records of the Company, in an amount
equal to the product of (i) the amount of such dividend or distribution
paid with respect to one share of Common Stock, multiplied by (ii) the
number of vested RSUs (if any) granted hereunder then held by the
Employee.  At such time(s) thereafter
as the Employee receives a distribution of shares of Common Stock in respect of
his or her vested RSUs granted hereunder pursuant to the applicable provision
of Section 2 above, the Company shall also distribute to the Employee such
number of shares of Common Stock accrued under this Section 3 that relate
to the vested RSUs in respect of which such distribution of shares is otherwise
being made.  In the event of any stock
dividend, the provisions of Section 8 of the Plan shall apply to this
Restricted Stock Unit Award.

 

4.                                       Limitation
on Obligations.  The Company’s
obligation with respect to the RSUs 
granted hereunder is limited solely to the delivery to the Employee of
shares of Common Stock on the date when such shares are due to be delivered
hereunder, and in no way shall the Company become obligated to pay cash in
respect of such obligation, unless as otherwise 

 

4

 

provided for herein.  This
Restricted Stock Unit Award shall not be secured by any specific assets of the
Company or any of its Subsidiaries, nor shall any assets of the Company or any
of its subsidiaries be designated as attributable or allocated to the
satisfaction of the Company’s obligations under this Agreement.

 

5.                                       
Rights as a Stockholder.  The
Employee shall not have any rights of a common stockholder of the Company
unless and until the Employee becomes entitled to receive the shares of Common
Stock pursuant to Section 2 above. 
As soon as practicable following the date that the Employee becomes
entitled to receive the shares of Common Stock pursuant to Section 2,
certificates for the Common Stock shall be delivered to the Employee or to the
Employee’s legal guardian or representative.

 

6.                                       Transferability.  The RSUs 
shall not be subject to alienation, garnishment, execution or levy of
any kind, and any attempt to cause any such awards to be so subjected shall not
be recognized.  The shares of Common
Stock acquired by the Employee pursuant to Section 2 of this Agreement may
not at any time be transferred, sold, assigned, pledged, hypothecated or
otherwise disposed of unless such transfer, sale, assignment, pledge,
hypothecation or other disposition complies with applicable securities laws.

 

7.                                       
Purchaser’s Employment by the Company.  
Nothing contained in this Agreement obligates the Company or any
Subsidiary to employ the Employee in any capacity whatsoever or prohibits or
restricts the Company (or any Subsidiary) from terminating the employment, if
any, of the Employee at any time or for any reason whatsoever, with or without
Cause, and the Employee hereby acknowledges and agrees that neither the Company
nor any other Person has made any representations or promises whatsoever to the
Employee concerning the Employee’s employment or continued employment by the
Company or any Affiliate thereof.

 

8.                                       Change
in Capitalization.  In the event of
any change in the outstanding Common Stock by reason of a stock split,
spin-off, stock dividend, stock combination or reclassification,
recapitalization or merger, change of control, or similar event, the provisions
of Section 8 of the Plan shall govern the treatment of this Restricted
Stock Unit Award.

 

9.                                       Withholding.   It shall be a condition of the obligation of
the Company upon delivery of Common Stock to the Employee pursuant to Section 2
above that the Employee pay to the Company such amount as may be requested by
the Company for the purpose of satisfying any liability for any federal, state
or local income or other taxes required by law to be withheld with respect to
such Common Stock.  The Company shall be
authorized to take such action as may be necessary, in the opinion of the
Company’s counsel (including, without limitation, withholding Common Stock
otherwise deliverable to the Employee hereunder and/or withholding amounts from
any compensation or other amount owing from the Company to the Employee), to
satisfy the obligations for payment of the minimum amount of any such
taxes.  In addition, if the Company’s
accountants determine that there would be no adverse accounting implications to
the Company, the Employee may be permitted to elect to use Common Stock
otherwise deliverable to the Employee hereunder to satisfy any such
obligations, subject to such 

 

5

 

procedures as the Company’s accountants may require.  The Employee is hereby advised to seek his
own tax counsel regarding the taxation of the grant of RSUs made hereunder.

 

10.                                   Securities Laws.  Upon the delivery of any Common Stock to the
Employee, the Company may require the Employee to make or enter into such
written representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.  The delivery of the Common
Stock hereunder shall be subject to all applicable laws, rules and
regulations and to such approvals of any governmental agencies as may be required.

 

11.                                 Section 409A
of the Code.  In the event that it is
reasonably determined by the Company that, as a result of the deferred
compensation tax rules under Section 409A of the Code (and any
related regulations or other pronouncements thereunder) (“the Deferred Compensation Tax Rules”), benefits that the
Employee is entitled to under the terms of this Agreement may not be made at
the time contemplated by the terms hereof or thereof, as the case may be,
without causing Employee to be subject to tax under the Deferred Compensation
Tax Rules, the Company shall, in lieu of providing such benefit when otherwise
due under this Agreement, instead provide such benefit on the first day on
which such provision would not result in the Employee incurring any tax
liability under the Deferred Compensation Tax Rules; which day, if the Employee
is a “specified employee” (within the meaning of the Deferred Compensation Tax
Rules), may, in the event the benefit to be provided is due to the Employee’s “separation
from service” (within the meaning of the Deferred Compensation Tax Rules) with
the Company and its Subsidiaries, shall be the first day following the
six-month period beginning on the date of such separation from service.

 

12.                                 Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Employee shall be addressed to him
at the address given beneath his signature hereto.  By a notice given pursuant to this Section 12,
either party may hereafter designate a different address for notices to be
given to him.  Any notice which is
required to be given to the Employee shall, if the Employee is then deceased,
be given to the Employee’s personal representative if such representative has
previously informed the Company of his status and address by written notice
under this Section 12.  Any notice
shall have been deemed duly given when enclosed in a properly sealed envelope
or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service

 

13.                                 Governing
Law.  The laws of the State of
Delaware (or if the Company reincorporates in another state, the laws of that
state) shall govern the interpretation, validity and performance of the terms
of this Agreement regardless of the law that might be applied under principles
of conflicts of laws.

 

15.                                 Restricted
Stock Unit Award Subject to Plan.  
The Restricted Stock Unit Award shall be subject to all applicable terms
and provisions of the Plan, to the extent applicable to the Common Stock.   In the event of any conflict between this
Agreement and the Plan, the terms of the Plan shall control.

 

6

 

14.                                 Signature
in Counterparts.  This Agreement may
be signed in counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.

 

[Signatures
on next page.]

 

7

 

IN WITNESS WHEREOF, the parties
hereto have executed this Agreement effective as of the date hereof.

 

 

	
   

  	
  ROCKWOOD HOLDINGS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SEIFOLLAH GHASEMI

  

 

8

 

Schedule I

 

70% of the Target Performance-Based RSUs (the
“EBITDA RSUs”) shall vest subject to the
achievement of the 2009 EBITDA Target, as follows:

 

	
  2009
  Actual Adjusted EBITDA

  Performance as Compared to 2009

  Budgeted Adjusted EBITDA (70% of

  Target Performance-Based Units)

  	
   

  	
  % of
  EBITDA RSUs Vested*

  
	
  Less than 90%

  	
   

  	
  0%

  
	
  90%

  	
   

  	
  50%

  
	
  100%

  	
   

  	
  100%

  
	
  Greater than 120%

  	
   

  	
  200%

  

 

30% of the Target Performance-Based RSUs (the
“EPS RSUs”) shall vest subject to the
achievement of the 2009 EPS Target, as follows:

 

	
  2009
  Actual Adjusted EPS Performance as

  Compared to 2009 Budgeted Adjusted EPS

  (30% of Target Performance-Based Units)

  	
   

  	
  % of EPS
  RSUs Vested*

  
	
  Less than 90%

  	
   

  	
  0%

  
	
  90%

  	
   

  	
  50%

  
	
  100%

  	
   

  	
  100%

  
	
  Greater than 120%

  	
   

  	
  200%

  

 

With respect to both the EBITDA RSUs and the
EPS RSUs, the number of EBITDA RSUs and EPS RSUs that shall become vested
hereunder shall be interpolated for any achievement of the 2009 EBITDA Target
and 2009 EPS Target, respectively, which falls between the above amounts as
applicable.

 

The
Company shall communicate to the Employee the 2009 EBITDA Target and the 2009
EPS Target as soon as administratively practicable following the date the Board
and/or the Committee establishes such targets.

 

9

 

Appendix A

 

Definitions

 

“2009 Actual Adjusted EBITDA” shall mean the Adjusted EBITDA as
reported in the Company’s Form 10-K filed with the Securities Exchange
Commission in respect of the 2009 fiscal year of the Company.

 

“2009 Actual Adjusted EPS” shall mean the earnings per share of the
Company, on a fully diluted basis, as reported in the Company’s Form 10-K
filed with the Securities Exchange Commission in respect of the 2009 fiscal
year of the Company, adjusted for non-recurring and unusual items and budgeted
exchange rates for currencies other than the United States dollar to be
converted into the United States dollar.

 

“2009 Budgeted Adjusted EBITDA” shall mean the budgeted Adjusted EBITDA
in respect of the 2009 fiscal year of the Company, as determined and approved
by the Board and/or the Committee, which is anticipated to be so determined and
approved by no later than April 30, 2009.

 

“2009 Budgeted Adjusted EPS” shall mean the budgeted earnings per share
of the Company, on a fully diluted basis, in respect of the 2009 fiscal year of
the Company, with budgeted exchange rates for currencies other than the United
States dollar to be converted into the United States dollar, as determined and
approved by the Board and/or the Committee, which is anticipated to be so
determined and approved by no later than April 30, 2009.

 

“Adjusted EBITDA” shall mean EBITDA adjusted for all items, as
applicable, set forth in the definition of “Consolidated EBITDA” in the Credit
Agreement dated as of July 30, 2004 among Rockwood Specialties Group, Inc.,
Rockwood Specialties Limited, Rockwood Specialties International, Inc.,
the lenders party thereto, Credit Suisse First Boston, acting through its
Cayman Islands Branch, as administrative agent and collateral agent, and UBS
Securities LLC and Goldman Sachs Credit Partners L.P., as co-syndication agents
thereunder, filed as Exhibit 10.1 to Rockwood Specialties Group, Inc.’s
Report on Form 8-K filed with the Securities and Exchange Commission on August 4,
2004 (“Credit Agreement”), except that, for the purposes of this Agreement, any
component of EBITDA that is translated in currencies other than United States
dollars shall be converted into United States dollars using budgeted exchange
rates.

 

“Cause” shall mean (i) the Employee’s willful and continued
failure to perform duties, which are within the control of the Employee and
consistent with such Employee’s title and position, that is not cured within 15
days following written notice of such failure, (ii) the Employee’s
conviction of or plea of guilty or no contest to a (x) felony or (y) crime
involving moral turpitude, (iii) the Employee’s willful malfeasance or
misconduct which is injurious to the Company or its Subsidiaries, other than in
a manner that is insignificant or inconsequential, (iv) a breach by
Employee of the material terms of any non-compete, non-solicitation or
confidentiality covenants or agreements by which the Employee may be bound,
following notice of such breach (which notice may be oral or written) or (v) any
violation by the Employee of any material 

 

10

 

written Company policy after written notice of such breach, if such
violation is shown by the Company to be reasonably expected to result in
material injury to the business, reputation or financial condition of the
Company.

 

 “Change in Control” shall mean
the earliest to occur of the following:

 

(i)  any Person (which term shall mean any individual,
corporation, partnership, group, association or other “person,” as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended, other than the Company or any employee benefit plans
sponsored by the Company) is or becomes the “beneficial owner” (as defined in Rule 13d-3
under such Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company’s
outstanding Voting Securities (which term shall mean securities which under
ordinary circumstances are entitled to vote for the election of directors)
other than through the purchase of Voting Securities directly from the Company
through a private placement;

 

(ii)  individuals who constitute the Board on the date hereof (the
“Incumbent Board”) cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
comprising the Incumbent Board shall from and after such election be deemed to
be a member of the Incumbent Board;

 

(iii)  a merger or consolidation involving the Company or its
stock or an acquisition by the Company, directly or indirectly or through one
or more subsidiaries, of another entity or its stock or assets in exchange for
the stock of the Company is consummated, unless, immediately following
such transaction, 50.1% or more of the then outstanding Voting Securities of
the surviving or resulting corporation or entity will be (or is) then
beneficially owned, directly or indirectly, by the individuals and entities who
were the beneficial owners of the Company’s outstanding Voting Securities
immediately prior to such transaction (treating, for purposes of determining
whether the 50.1% continuity test is met, any ownership of the Voting
Securities of the surviving or resulting corporation or entity that results
from a stockholder’s ownership of the stock of, or other ownership interest in,
the corporation or other entity with which the Company is merged or
consolidated as not owned by persons who were beneficial owners of the Company’s
outstanding Voting Securities immediately prior to the transaction); or

 

(iv)  all or substantially all of the assets of the Company are
sold or transferred to a Person as to which (A) the Incumbent Board does
not have authority (whether by law or contract) to directly control the use or
further disposition of such assets and (B) the financial results of the
Company and such Person are not consolidated for financial reporting purposes.

 

Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur unless such transaction or occurrence constitutes a change in
ownership or effective control within the meaning of Section 409A(a)(2)(A)(v) of
the Code.

 

11

 

“Disability” shall mean a determination, made at the request of the
Employee or upon the reasonable request of the Company set forth in a notice to
the Employee, by a physician selected by the Company and the Employee, that the
Employee is unable to perform his duties as an employee of the Company or its
subsidiaries and in all reasonable medical likelihood such inability will
continue for a period in excess of 180 consecutive days.

 

““Financial Statement Approval Date” shall mean the date on which the
audited financial statements of the Company for the 2009 fiscal year of the
Company have been finally approved by the auditing firm engaged by the Company to
review such statements (which approval shall in no event occur later than March 31,
2010).

 

“Good Reason” shall mean without the Employee’s consent, (i) a
reduction in the Employee’s base salary or annual bonus opportunity (other than
a reduction in base salary that is offset by an increase in bonus opportunity
upon the attainment of reasonable financial targets, which reduction may not
exceed 10% of the Employee’s base salary in any 12 month period), (ii) a
substantial reduction in the Employee’s duties and responsibilities, which
continues beyond 15 days after written notice by the Employee to the Company of
such reduction, (iii) the elimination or reduction of the Employee’s
eligibility to participate in the Company’s benefit programs that is inconsistent
with the eligibility of similarly situated employees of the Company to
participate therein, (iv) a transfer of the Employee’s primary workplace
by more than 35 miles from the current workplace, (v) any serious chronic
mental or physical illness of an immediate family member that requires the
Employee to terminate his or her employment with Company because of a
substantial interference with his or her duties at the Company or (vi) any
failure by the Company to pay when due any payment owed to the Employee within
15 days after the date such payment becomes due.

 

“Retirement”
shall mean retirement at age 62 or over (or such other age as may be approved
by the Board of Directors) after having been employed by the Company or a
Subsidiary for at least five years.

 

12Exhibit 10.1

 

 

 

 

CREDIT
AGREEMENT

 

dated as of December 15, 2008

 

among

 

TUESDAY MORNING, INC.,

as the Lead Borrower

 

For

 

The Borrowers Party Hereto

 

The BORROWERS Party Hereto

 

The GUARANTORS Party Hereto

 

BANK OF AMERICA, N.A.

as Administrative Agent, Collateral Agent, Swing Line Lender

and

L/C Issuer,

 

and

 

The Other Lenders Party Hereto

 

BANC OF AMERICA SECURITIES LLC

WELLS FARGO RETAIL FINANCE, LLC

as Joint Lead Arrangers and Joint Bookrunners

 

WELLS FARGO RETAIL FINANCE, LLC

as Syndication Agent

 

 

 

 

TABLE
OF CONTENTS

 

	
  Section

  	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I.
  DEFINITIONS AND ACCOUNTING TERMS 1

  	
  1

  
	
   

  	
   

  
	
  1.01

  	
  Defined Terms

  	
  1

  
	
  1.02

  	
  Other Interpretive Provisions

  	
  50

  
	
  1.03

  	
  Accounting Terms

  	
  51

  
	
  1.04

  	
  Rounding

  	
  52

  
	
  1.05

  	
  Times of Day

  	
  52

  
	
  1.06

  	
  Letter of Credit Amounts

  	
  52

  
	
  1.07

  	
  Timing of Payment and Performance

  	
  52

  
	
   

  	
   

  	
   

  
	
  ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS 

  	
  52

  
	
   

  	
   

  
	
  2.01

  	
  Committed Loans; Reserves

  	
  52

  
	
  2.02

  	
  Borrowings, Conversions and Continuations of Committed Loans

  	
  54

  
	
  2.03

  	
  Letters of Credit

  	
  57

  
	
  2.04

  	
  Swing Line Loans

  	
  67

  
	
  2.05

  	
  Prepayments

  	
  70

  
	
  2.06

  	
  Termination or Reduction of Commitments

  	
  72

  
	
  2.07

  	
  Repayment of Loans

  	
  72

  
	
  2.08

  	
  Interest

  	
  72

  
	
  2.09

  	
  Fees

  	
  73

  
	
  2.10

  	
  Computation of Interest and Fees

  	
  75

  
	
  2.11

  	
  Evidence of Debt

  	
  75

  
	
  2.12

  	
  Payments Generally; Administrative Agent’s Clawback

  	
  76

  
	
  2.13

  	
  Sharing of Payments by Lenders

  	
  78

  
	
  2.14

  	
  Settlement Amongst Lenders

  	
  78

  
	
  2.15

  	
  Increase in Commitments

  	
  79

  
	
   

  	
   

  	
   

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

  	
  81

  
	
   

  	
   

  
	
  3.01

  	
  Taxes

  	
  81

  
	
  3.02

  	
  Illegality

  	
  84

  
	
  3.03

  	
  Inability to Determine Rates

  	
  84

  
	
  3.04

  	
  Increased Costs; Reserves on LIBO Rate Loans

  	
  84

  
	
  3.05

  	
  Compensation for Losses

  	
  86

  
	
  3.06

  	
  Mitigation Obligations; Replacement of Lenders

  	
  86

  
	
  3.07

  	
  Survival

  	
  87

  
	
  3.08

  	
  Designation of Lead Borrower as Borrowers’ Agent

  	
  87

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

  	
  87

  
	
   

  	
   

  
	
  4.01

  	
  Conditions of Initial Credit Extension

  	
  87

  
	
  4.02

  	
  Conditions to all Credit Extensions

  	
  91

  
	
   

  	
   

  	
   

  
	
  ARTICLE V. REPRESENTATIONS AND WARRANTIES

  	
  92

  
	
   

  	
   

  
	
  5.01

  	
  Existence, Qualification and Power

  	
  92

  
							

 

i

 

	
  5.02

  	
  Authorization; No Contravention

  	
  92

  
	
  5.03

  	
  Governmental Authorization; Other Consents

  	
  93

  
	
  5.04

  	
  Binding Effect

  	
  93

  
	
  5.05

  	
  Financial Statements; No Material Adverse Effect

  	
  93

  
	
  5.06

  	
  Litigation

  	
  94

  
	
  5.07

  	
  No Default

  	
  94

  
	
  5.08

  	
  Ownership of Property; Liens

  	
  94

  
	
  5.09

  	
  Environmental Compliance

  	
  95

  
	
  5.10

  	
  Insurance

  	
  95

  
	
  5.11

  	
  Taxes

  	
  96

  
	
  5.12

  	
  ERISA Compliance

  	
  96

  
	
  5.13

  	
  Subsidiaries; Equity Interests

  	
  97

  
	
  5.14

  	
  Margin Regulations; Investment Company Act

  	
  97

  
	
  5.15

  	
  Disclosure

  	
  97

  
	
  5.16

  	
  Compliance with Laws

  	
  98

  
	
  5.17

  	
  Intellectual Property; Licenses, Etc.

  	
  98

  
	
  5.18

  	
  Labor Matters

  	
  98

  
	
  5.19

  	
  Security Documents

  	
  99

  
	
  5.20

  	
  Solvency

  	
  99

  
	
  5.21

  	
  Deposit Accounts; Credit Card Arrangements

  	
  99

  
	
  5.22

  	
  Brokers

  	
  99

  
	
  5.23

  	
  Customer and Trade Relations

  	
  99

  
	
  5.24

  	
  Material Contracts

  	
  100

  
	
  5.25

  	
  Casualty

  	
  100

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI. AFFIRMATIVE COVENANTS

  	
  100

  
	
   

  	
   

  
	
  6.01

  	
  Financial Statements

  	
  100

  
	
  6.02

  	
  Certificates; Other Information

  	
  102

  
	
  6.03

  	
  Notices

  	
  104

  
	
  6.04

  	
  Payment of Obligations

  	
  105

  
	
  6.05

  	
  Preservation of Existence, Etc.

  	
  105

  
	
  6.06

  	
  Maintenance of Properties

  	
  106

  
	
  6.07

  	
  Maintenance of Insurance

  	
  106

  
	
  6.08

  	
  Compliance with Laws

  	
  107

  
	
  6.09

  	
  Books and Records; Accountants

  	
  107

  
	
  6.10

  	
  Inspection Rights

  	
  108

  
	
  6.11

  	
  Use of Proceeds

  	
  108

  
	
  6.12

  	
  Additional Loan Parties

  	
  109

  
	
  6.13

  	
  Cash Management

  	
  109

  
	
  6.14

  	
  Information Regarding the Collateral

  	
  111

  
	
  6.15

  	
  Physical Inventories

  	
  111

  
	
  6.16

  	
  Environmental Laws

  	
  111

  
	
  6.17

  	
  Further Assurances

  	
  112

  
	
  6.18

  	
  Compliance with Terms of Leaseholds

  	
  112

  
	
  6.19

  	
  Material Contracts

  	
  113

  
	
  6.20

  	
  Post-Closing Matters

  	
  113

  
					

 

ii

 

	
  ARTICLE VII.
  NEGATIVE COVENANTS

  	
  114

  
	
   

  	
   

  
	
  7.01

  	
  Liens

  	
  115

  
	
  7.02

  	
  Investments

  	
  115

  
	
  7.03

  	
  Indebtedness; Disqualified Stock

  	
  115

  
	
  7.04

  	
  Fundamental Changes

  	
  115

  
	
  7.05

  	
  Dispositions

  	
  116

  
	
  7.06

  	
  Restricted Payments

  	
  116

  
	
  7.07

  	
  Prepayments of Indebtedness

  	
  116

  
	
  7.08

  	
  Change in Nature of Business

  	
  116

  
	
  7.09

  	
  Transactions with Affiliates

  	
  117

  
	
  7.10

  	
  Burdensome Agreements

  	
  117

  
	
  7.11

  	
  Use of Proceeds

  	
  117

  
	
  7.12

  	
  Amendment of Material Documents

  	
  117

  
	
  7.13

  	
  Corporate Name; Fiscal Year.

  	
  118

  
	
  7.14

  	
  Blocked Accounts; Credit Card Processors

  	
  118

  
	
  7.15

  	
  Consolidated Fixed Charge Coverage Ratio

  	
  118

  
	
  7.16

  	
  Availability

  	
  118

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII. EVENTS OF DEFAULT AND
  REMEDIES

  	
  118

  
	
   

  	
   

  
	
  8.01

  	
  Events of Default

  	
  118

  
	
  8.02

  	
  Remedies Upon Event of Default

  	
  121

  
	
  8.03

  	
  Application of Funds

  	
  122

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX. ADMINISTRATIVE AGENT

  	
  124

  
	
   

  	
   

  
	
  9.01

  	
  Appointment and Authority

  	
  124

  
	
  9.02

  	
  Rights as a Lender

  	
  124

  
	
  9.03

  	
  Exculpatory Provisions

  	
  125

  
	
  9.04

  	
  Reliance by Agents

  	
  126

  
	
  9.05

  	
  Delegation of Duties

  	
  126

  
	
  9.06

  	
  Resignation of Agents

  	
  126

  
	
  9.07

  	
  Non-Reliance on Administrative Agent and Other Lenders

  	
  127

  
	
  9.08

  	
  No Other Duties, Etc.

  	
  128

  
	
  9.09

  	
  Administrative Agent May File Proofs of Claim

  	
  128

  
	
  9.10

  	
  Collateral and Guaranty Matters

  	
  128

  
	
  9.11

  	
  Notice of Transfer

  	
  129

  
	
  9.12

  	
  Reports and Financial Statements

  	
  129

  
	
  9.13

  	
  Agency for Perfection

  	
  130

  
	
  9.14

  	
  Indemnification of Agents

  	
  130

  
	
  9.15

  	
  Relation among Lenders

  	
  131

  
	
  9.16

  	
  Defaulting Lender

  	
  131

  
	
   

  	
   

  	
   

  
	
  ARTICLE X. MISCELLANEOUS

  	
  132

  
	
   

  	
   

  
	
  10.01

  	
  Amendments, Etc.

  	
  132

  
	
  10.02

  	
  Notices; Effectiveness; Electronic Communications

  	
  134

  
	
  10.03

  	
  No Waiver; Cumulative Remedies

  	
  136

  
	
  10.04

  	
  Expenses; Indemnity; Damage Waiver

  	
  136

  
					

 

iii

 

	
  10.05

  	
  Payments
  Set Aside

  	
  138

  
	
  10.06

  	
  Successors
  and Assigns

  	
  138

  
	
  10.07

  	
  Treatment
  of Certain Information; Confidentiality

  	
  142

  
	
  10.08

  	
  Right
  of Setoff

  	
  143

  
	
  10.09

  	
  Interest
  Rate Limitation

  	
  144

  
	
  10.10

  	
  Counterparts;
  Integration; Effectiveness

  	
  144

  
	
  10.11

  	
  Survival

  	
  144

  
	
  10.12

  	
  Severability

  	
  144

  
	
  10.13

  	
  Replacement
  of Lenders

  	
  145

  
	
  10.14

  	
  Governing
  Law; Jurisdiction; Etc.

  	
  146

  
	
  10.15

  	
  Waiver
  of Jury Trial

  	
  147

  
	
  10.16

  	
  No
  Advisory or Fiduciary Responsibility

  	
  147

  
	
  10.17

  	
  USA
  PATRIOT Act Notice

  	
  148

  
	
  10.18

  	
  Foreign
  Asset Control Regulations

  	
  148

  
	
  10.19

  	
  Time
  of the Essence

  	
  148

  
	
  10.20

  	
  Press
  Releases

  	
  149

  
	
  10.21

  	
  Additional
  Waivers

  	
  149

  
	
  10.22

  	
  No
  Strict Construction

  	
  151

  
	
  10.23

  	
  Attachments

  	
  151

  
	
   

  	
   

  	
   

  
	
  SIGNATURES

  	
  S-1

  

 

iv

 

	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  1.01

  	
   

  	
  Borrowers

  	
   

  	
   

  
	
  1.02

  	
   

  	
  Guarantors

  	
   

  	
   

  
	
  1.03

  	
   

  	
  Subsidiary Restructuring

  	
   

  	
   

  
	
  2.01

  	
   

  	
  Commitments and Applicable
  Percentages

  	
   

  	
   

  
	
  5.01

  	
   

  	
  Loan Parties;
  Organizational Information

  	
   

  	
   

  
	
  5.06

  	
   

  	
  Litigation

  	
   

  	
   

  
	
  5.08(b)(1)

  	
   

  	
  Owned Real Estate

  	
   

  	
   

  
	
  5.08(b)(2)

  	
   

  	
  Leased Real Estate

  	
   

  	
   

  
	
  5.09

  	
   

  	
  Environmental Matters

  	
   

  	
   

  
	
  5.10

  	
   

  	
  Insurance

  	
   

  	
   

  
	
  5.13

  	
   

  	
  Subsidiaries; Other Equity
  Investments

  	
   

  	
   

  
	
  5.17

  	
   

  	
  Intellectual Property
  Matters

  	
   

  	
   

  
	
  5.18

  	
   

  	
  Collective Bargaining
  Agreements

  	
   

  	
   

  
	
  5.21(a)

  	
   

  	
  DDAs

  	
   

  	
   

  
	
  5.21(b)

  	
   

  	
  Credit Card Arrangements

  	
   

  	
   

  
	
  5.24

  	
   

  	
  Material Contracts

  	
   

  	
   

  
	
  6.02

  	
   

  	
  Financial and Collateral
  Reporting

  	
   

  	
   

  
	
  7.01

  	
   

  	
  Existing Liens

  	
   

  	
   

  
	
  7.02

  	
   

  	
  Existing Investments

  	
   

  	
   

  
	
  7.03

  	
   

  	
  Existing Indebtedness

  	
   

  	
   

  
	
  10.02

  	
   

  	
  Administrative
  Agent’s Office; Certain Addresses for Notices

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Form of

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A-1

  	
   

  	
  Committed Loan Notice

  	
   

  	
   

  
	
  A-2

  	
   

  	
  Conversion/Continuation
  Notice

  	
   

  	
   

  
	
  B

  	
   

  	
  Swing Line Loan Notice

  	
   

  	
   

  
	
  C

  	
   

  	
  Note

  	
   

  	
   

  
	
  D

  	
   

  	
  Compliance Certificate

  	
   

  	
   

  
	
  E

  	
   

  	
  Assignment and Assumption

  	
   

  	
   

  
	
  F

  	
   

  	
  Borrowing Base Certificate

  	
   

  	
   

  
	
  G

  	
   

  	
  Credit Card Notification

  	
   

  	
   

  
	
  H

  	
   

  	
  Joinder Agreement

  	
   

  	
   

  

 

v

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”)
is entered into as of December 15, 2008, among

 

TUESDAY MORNING, INC., a
Texas corporation, for itself and as agent (in such capacity, the “Lead
Borrower”) for the other Borrowers now or hereafter party hereto;

 

the BORROWERS now or
hereafter party hereto;

 

the GUARANTORS now or
hereafter party hereto;

 

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

 

BANK OF AMERICA, N.A., as
Administrative Agent, Collateral Agent, Swing Line Lender and L/C Issuer.

 

The Borrowers have requested
that the Lenders provide a revolving credit facility, and the Lenders have
indicated their willingness to lend and the L/C Issuer has indicated its
willingness to issue Letters of Credit, in each case on the terms and
conditions set forth herein.

 

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

 

ARTICLE
I.

DEFINITIONS
AND ACCOUNTING TERMS

 

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

 

“Accelerated Borrowing
Base Delivery Event” means either (i) the occurrence and continuance
of any Event of Default, or (ii) the failure of the Borrowers to maintain
Availability for five (5) consecutive calendar days at least equal to
fifteen percent (15%) of the Borrowing Base.

 

“ACH” means automated
clearing house transfers.

 

“Accommodation Payment”
as defined in Section 10.21(d).

 

“Account” means “accounts”
as defined in the UCC, and also means a right to payment of a monetary
obligation, whether or not earned by performance, (a) for property that
has been or is to be sold, leased, licensed, assigned, or otherwise disposed
of, (b) for services rendered or to be rendered, (c) for a policy of
insurance issued or to be issued, (d) for a secondary obligation incurred
or to be incurred, (e) for energy provided or to be provided, (f) for
the use or hire of a vessel under a charter or other contract, (g) arising
out of the use of a credit or charge card or information contained on or for
use with the card, or (h) as winnings in a lottery or other game of chance
operated or sponsored by a state, governmental unit of a state, or person
licensed or

 

1

 

authorized
to operate the game by a state or governmental unit of a state. The term “Account”
includes health-care-insurance receivables.

 

“Acquisition” means,
with respect to any Person, (a) an Investment in, or a purchase of a
Controlling interest in, the Equity Interests of any other Person (whether by
merger or consolidation of such Person with any other Person or otherwise), (b) a
purchase or other acquisition of all or substantially all of the assets or
properties of another Person or of any business unit of another Person (whether
by merger or consolidation of such Person with any other Person or otherwise),
or (c) any acquisition of any Store locations of any Person, in each case
in any transaction or group of transactions which are part of a common plan.

 

“Additional Commitment
Lender” has the meaning provided in Section 2.15(c).

 

“Adjusted LIBO Rate”
means:

 

(a)           for any Interest Period with respect to any LIBO Loan, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of one
percent) equal to (a) the LIBO Rate for such Interest Period multiplied
by (b) the Statutory Reserve Rate; and

 

(b)           for any interest rate calculation with respect to any
Prime Rate Loan, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of one percent) equal to (i) the LIBO Rate for an Interest
Period commencing on the date of such calculation and ending on the date that
is thirty (30) days thereafter multiplied by (ii) the Statutory
Reserve Rate.

 

The
Adjusted LIBO Rate will be adjusted automatically as of the effective date of
any change in the Statutory Reserve Rate.

 

“Adjustment Date”
means the first day of each Fiscal Quarter, provided  that the
first Adjustment Date after the Closing Date shall be July 1, 2009.

 

“Administrative Agent”
means Bank of America, in its capacity as administrative agent under any of the
Loan Documents, or any successor administrative agent.

 

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

 

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

 

“Affiliate” means,
with respect to any Person, (i) another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified, (ii) any other Person
directly or indirectly holding 25% or more of any class of the Equity Interests
of that Person, and (iii) any other Person 25% or more of any class of
whose Equity Interests is held directly or indirectly by that Person.

 

“Agent Parties” has
the meaning specified in Section 10.02(c).

 

2

 

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

 

“Aggregate Commitments”
means the Commitments of all the Lenders. As of the Closing Date the Aggregate
Commitments shall be $150,000,000, as such amount may be increased or otherwise
modified pursuant to the terms of this Agreement.

 

“Agreement” has the
meaning specified in the introductory paragraph hereto.

 

“Allocable Amount”
has the meaning specified in Section 10.21(d).

 

“Applicable Margin”
means:

 

(a)           From and after the Closing Date until the first Adjustment
Date, the percentages set forth in Level II of the pricing grid below, unless
Average Daily Availability does not support the requirements of Level II or
lower, in which event the Applicable Margin will be set at Level III. In no
event shall the Applicable Margin be set at Level I prior to the first
Adjustment Date (even if the Average Daily Availability requirements for Level
I have been met); and

 

(b)           From and after the first Adjustment Date, the Applicable
Margin shall be determined from the following pricing grid based upon the
Average Daily Availability for the most recent Fiscal Quarter ended immediately
preceding such Adjustment Date; provided, however, that
notwithstanding anything to the contrary set forth herein, upon the occurrence
and during the continuance of an Event of Default, the Administrative Agent
may, and at the direction of the Required Lenders shall, immediately increase
the Applicable Margin to that set forth in Level III (even if the Average Daily
Availability requirements for a different Level have been met); provided
further that, if any Borrowing Base Certificate delivered pursuant to Section 6.02(b) of
this Agreement is at any time restated or otherwise revised, or if the
information set forth in any such Borrowing Base Certificate otherwise proves
to be false or incorrect such that the Applicable Margin would have been higher
than was otherwise in effect during any period, without constituting a waiver
of any Default or Event of Default arising as a result thereof, interest due
under this Agreement shall be immediately recalculated at such higher rate for
any applicable periods and shall be due and payable on demand.

 

	
  Level

  	
   

  	
  Average Daily

  Availability(1)

  	
   

  	
  LIBO Applicable

  Margin

  	
   

  	
  Prime Rate

  Applicable Margin

  	
   

  
	
  I

  	
   

  	
  Greater than $150,000,000

  	
   

  	
  2.50

  	
  %

  	
  2.50

  	
  %

  
	
  II

  	
   

  	
  Less than or equal to $150,000,000 but greater than
  $75,000,000

  	
   

  	
  2.75

  	
  %

  	
  2.75

  	
  %

  
	
  III

  	
   

  	
  Less than or equal to $75,000,000

  	
   

  	
  3.00

  	
  %

  	
  3.00

  	
  %

  

 

(1) The Average Daily
Availability requirements set forth herein may be modified by the
Administrative Agent in its reasonable discretion in the event that the
Aggregate Commitments are increased pursuant to the terms of Section 2.15
of this Agreement or decreased pursuant to the terms of Section 2.06
of this Agreement, in each case, in order to preserve the original intent of
such requirements.

 

3

 

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

 

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

 

“Appraised Value”
means the appraised orderly liquidation value, net of costs and expenses to be
incurred in connection with any such liquidation, which value is expressed as a
percentage of Cost of the Borrowers’ Eligible Inventory as set forth in the
Borrowers’ inventory stock ledger, which value shall be determined from time to
time by the most recent appraisal undertaken by an independent appraiser
engaged by the Administrative Agent.

 

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

 

“Arrangers” means,
collectively, Banc of America Securities LLC and Wells Fargo Retail Finance,
LLC, in their capacities as joint lead arrangers and joint bookrunners.

 

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

 

4

 

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

 

“Attributable
Indebtedness” means, on any date, (a) in respect of any Capital Lease
Obligation of any Person, the capitalized amount thereof that would appear on a
balance sheet of such Person prepared as of such date in accordance with GAAP,
and (b) in respect of any Synthetic Lease Obligation, the capitalized
amount of the remaining lease or similar payments under the relevant lease or
other applicable agreement or instrument that would appear on a balance sheet
of such Person prepared as of such date in accordance with GAAP if such lease,
agreement or instrument were accounted for as a capital lease.

 

“Audited Financial
Statements” means the audited Consolidated balance sheet of the Parent and
its Subsidiaries for the Fiscal Year ended June 30, 2008, and the related
Consolidated statements of income or operations, Shareholders’ Equity and cash
flows for such fiscal year of the Parent and its Subsidiaries, including the
notes thereto.

 

“Auto-Extension Letter of
Credit” has the meaning provided in Section 2.03(b)(iii).

 

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

 

(a)                                  The Loan Cap as
of such date;

 

Minus

 

(b)                                 The Total
Outstandings on such date.

 

In calculating Availability
at any time and for any purpose under this Agreement, the Lead Borrower shall
certify to the Administrative Agent that all accounts payable and Taxes are
being paid on a timely basis and consistent with past practices (absent which
the Administrative Agent may establish a Reserve therefor).

 

“Availability Condition”
means (a) at the time of determination with respect to any Acquisition,
Availability for the three months immediately preceding, and on a pro forma
basis for the six months immediately following, and after giving effect to,
such Acquisition was, and is projected to be, equal to or greater than an
amount equal to twenty percent (20%) of the Aggregate Commitments, and (b) at
the time of determination with respect to any other transaction or payment,
Availability for the three months immediately preceding, and on a pro forma
basis for the six months immediately following, and after giving effect to,
such transaction or payment was, and is projected to be, equal to or greater
than an amount equal to twenty five percent (25%) of the Aggregate Commitments.

 

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

 

5

 

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

 

“Availability Reserves”
means, without duplication of any other Reserves or items that are otherwise
addressed or excluded through eligibility criteria, such reserves as the
Administrative Agent from time to time determines in its Permitted Discretion
as being appropriate (a) to reflect the impediments to the Agents’ ability
to realize upon the Collateral, (b) to reflect claims and liabilities that
the Administrative Agent reasonably determines will need to be satisfied in
connection with the realization upon the Collateral, (c) to reflect
criteria, events, conditions, contingencies or risks which materially adversely
affect any component of the Borrowing Base or which could reasonably be
expected to result in a Material Adverse Effect, or (d) to reflect that a
Default or an Event of Default then exists. Without limiting the generality of
the foregoing, Availability Reserves may include (but are not limited to), in
the Administrative Agent’s discretion, reserves based on: (i) rent (unless
a Collateral Access Agreement has been received by the Administrative Agent); (ii) customs
duties and other costs to release Inventory which is being imported into the
United States; (iii) freight and other costs and expenses to release
Eligible In-Transit Inventory; (iv) outstanding Taxes and other
governmental charges, including, without limitation, ad valorem, real estate,
personal property, sales, and other Taxes which the Administrative Agent
determines could reasonably be expected to have priority over the interests of
the Collateral Agent in the Collateral; (v) salaries, wages and benefits
due to employees of any Borrower which the Administrative Agent determines
could reasonably be expected to have priority over the interests of the
Collateral Agent in the Collateral; (vi) Gift Certificate/Card and
Merchandise Credit Liabilities; (vii) customer deposits; (viii) warehousemen’s
or bailee’s charges and other Permitted Encumbrances which may have priority
over the interests of the Collateral Agent in the Collateral (unless a
Collateral Access Agreement, if applicable, has been received by the
Administrative Agent); (ix) amounts due to vendors on account of consigned
goods; (x) Cash Management Reserves; and (xi) Bank Product Reserves.

 

“Average Daily
Availability” means, as of any date of determination, the average daily
Availability for the immediately preceding Fiscal Quarter.

 

“Banker’s Acceptance”
means a time draft or bill of exchange relating to a Commercial Letter of Credit
which has been accepted by the L/C Issuer.

 

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

 

“Bank Products” means
any services or facilities provided to any Loan Party by a Lender or any of its
Affiliates, including, without limitation, on account of (a) Swap
Contracts, (b) purchase cards, and/or (c) leasing, but excluding Cash
Management Services.

 

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

 

“BAS” means Banc of
America Securities LLC and its successors.

 

6

 

“Blocked Account”
means any DDA of a Loan Party in which funds from one or more DDAs are
concentrated and with respect to which a Blocked Account Agreement has been, or
is required to be, executed in accordance with the terms hereof.

 

“Blocked Account
Agreement” means, with respect to a Blocked Account established by a Loan
Party, an agreement, in form and substance reasonably satisfactory to the
Collateral Agent, establishing Control (as defined in the Security Agreement)
of such account by the Collateral Agent and whereby the Blocked Account Bank
maintaining such Blocked Account agrees, upon the occurrence and during the
continuance of a Cash Dominion Event, to comply only with the instructions
originated by the Collateral Agent without the further consent of any Loan
Party.

 

“Blocked Account Bank”
means Bank of America, N.A. and each other bank with whom a Blocked Account is
maintained.

 

“Borrower Materials”
has the meaning specified in Section 6.02.

 

“Borrowers” means,
collectively, the Lead Borrower, the Persons named on Schedule 1.01
annexed hereto, and each other Person who shall from time to time enter into a
Joinder Agreement as a Borrower.

 

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

 

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

 

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

 

plus

 

(b)                                 the lesser of (i) the
Cost of Eligible Inventory, net of Inventory Reserves, multiplied by the
Appraisal Percentage of the Appraised Value of Eligible Inventory, or (ii) the
Cost of Eligible Inventory, net of Inventory Reserves, multiplied by the
Inventory Advance Rate;

 

plus

 

(c)                                  with respect to
any Eligible Letter of Credit, the lesser of (i) the Cost of the Inventory
supported by such Eligible Letter of Credit, net of Inventory Reserves, multiplied
by the Appraisal Percentage of the Appraised Value of the Inventory
supported by such Eligible Letter of Credit, or (ii) the Stated Amount of
such Eligible Letter of Credit, multiplied by the Inventory Advance
Rate;

 

plus

 

(d)                                 ninety-eight
percent (98%) of all Eligible Cash on Hand, provided  that
Eligible Cash on Hand included in the Borrowing Base may not be withdrawn from
the

 

7

 

Blocked
Account in which it is maintained, thereby reducing the Borrowing Base, unless
and until the Lead Borrower furnishes the Administrative Agent with (i) a
request for such proposed withdrawal and written instructions designating the
account to which the Lead Borrower would like the withdrawn funds to be
transferred and (ii) a Borrowing Base Certificate as of the date of such
proposed withdrawal reflecting that, after giving effect to such withdrawal, no
Overadvance will result;

 

minus

 

(e)                                  the then amount
of all Availability Reserves.

 

“Borrowing Base
Certificate” means a certificate substantially in the form of Exhibit F
hereto (with such changes therein as may be required by the Administrative
Agent to reflect the components of, and reserves against, the Borrowing Base as
provided for hereunder from time to time), executed and certified as accurate
and complete by a Responsible Officer of the Lead Borrower, which shall include
appropriate exhibits, schedules, supporting documentation and additional
reports in accordance with the terms of Schedule 6.02.

 

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

 

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

 

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

 

“Cash Collateral Account”
means a non-interest bearing account established by one or more of the Loan
Parties with Bank of America, and in the name of, the Collateral Agent under
the sole and exclusive dominion and control of the Collateral Agent, in the
name of the Collateral Agent or as the Collateral Agent shall otherwise direct,
in which deposits are required to be made in accordance with Section 2.03(g) or
Section 8.02(c).

 

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

 

8

 

“Cash Dominion Event”
means either (a) the occurrence and continuance of any Event of Default,
or (b) the failure of the Borrowers to maintain Availability for five (5) consecutive
Business Days equal to or greater than seventeen and one-half percent (17.5%)
of the Loan Cap.  For purposes of this
Agreement, the occurrence of a Cash Dominion Event shall be deemed continuing,
at the Administrative Agent’s option, (i) so long as such Event of Default
has not been waived, and/or (ii) if such Cash Dominion Event arises as a
result of the Borrowers’ failure to maintain Availability as required
hereunder, until either (A) Availability is equal to or greater than seventeen
and one-half percent (17.5%) of the Loan Cap for sixty (60) consecutive
calendar days or (B) (1) Availability is equal to or greater than
seventeen and one-half percent (17.5%) of the Loan Cap for thirty (30)
consecutive calendar days and (2) the Borrowers have provided evidence
reasonably satisfactory to the Administrative Agent that Availability, on a pro
forma basis for the twelve months following the discontinuance of such Cash
Dominion Event, is projected to be equal to or greater than twenty percent
(20%) of the Loan Cap, in which case such 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 the conditions specified in clause (ii) of
this definition have been satisfied) at all times after a Cash Dominion Event
has occurred and been discontinued on two (2) occasions after the Closing
Date.

 

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

 

“Cash Management Services”
means any one or more of the following types or services or facilities provided
to any Loan Party by a Lender or any of its Affiliates: (a) ACH
transactions, (b) cash management services, including, without limitation,
controlled disbursement services, treasury, depository, overdraft, and
electronic funds transfer services, (c) foreign exchange facilities,
and/or (d) credit or debit cards.

 

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

 

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

 

“Change in Law” means
the occurrence, after the date of this Agreement, of any of the following: (a) the
adoption or taking effect of any law, rule, regulation or treaty, (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the
making or issuance of any request, guideline or directive (whether or not
having the force of law) by any Governmental Authority.

 

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

 

(a)                                  any “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but excluding any employee benefit plan of
such person or its subsidiaries, and any person or entity acting in its
capacity as trustee,

 

9

 

agent
or other fiduciary or administrator of any such plan) other than Madison
Dearborn Capital Partners II, L.P. and its Affiliates (or their respective
successors) becomes the “beneficial owner” (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, except that a person or group
shall be deemed to have “beneficial ownership” of all securities that such
person or group has the right to acquire, whether such right is exercisable
immediately or only after the passage of time (such right, an “option right”)),
directly or indirectly, of the greater of (i) twenty five percent (25%) or
more of the Equity Interests of the Parent entitled to vote for members of the
board of directors or equivalent governing body of the Parent on a
fully-diluted basis (and taking into account all such Equity Interests that
such “person” or “group” has the right to acquire pursuant to any option right)
or (ii) a percentage that is greater than the percentage of the Equity
Interests of the Parent entitled to vote for members of the board of directors
or equivalent governing body of the Parent that is then beneficially owned by
Madison Dearborn Capital Partners II, L.P. and its Affiliates (or their
respective successors); or

 

(b)                                 during any
period of 12 consecutive months, a majority of the members of the board of
directors or other equivalent governing body of the Parent cease to be composed
of individuals (i) who were members of that board or equivalent governing
body on the first day of such period, (ii) whose election or nomination to
that board or equivalent governing body was approved by individuals referred to
in clause (i) above constituting at the time of such election or
nomination at least a majority of that board or equivalent governing body or (iii) whose
election or nomination to that board or other equivalent governing body was
approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority of
that board or equivalent governing body (excluding, in the case of both clause (ii) and
clause (iii), any individual whose initial nomination for, or assumption of
office as, a member of that board or equivalent governing body occurs as a
result of an actual or threatened solicitation of proxies or consents for the
election or removal of one or more directors by any person or group other than
a solicitation for the election of one or more directors by or on behalf of the
board of directors); or

 

(c)                                  the Parent
fails at any time to own, directly or indirectly, 100% of the Equity Interests
of each other Loan Party free and clear of all Liens (other than the Liens in
favor of the Collateral Agent), except where such failure is as a result of a
transaction permitted by the Loan Documents.

 

“Clean-down Period”
means a period of thirty (30) consecutive days at any time during the period
from December 28th of each calendar year through January 31st
of the immediately following calendar year.

 

“Closing Date” means
the date of this Agreement.

 

“Code” means the
Internal Revenue Code of 1986.

 

10

 

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

 

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

 

“Collateral Agent”
means Bank of America, acting in its capacity as collateral agent for its own
benefit and the benefit of the other Credit Parties, or any successor
collateral agent.

 

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

 

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

 

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

 

“Commitment Increase”
has the meaning provided in Section 2.15(a).

 

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

 

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

 

“Committed Loan Notice”
means a notice of a Committed Borrowing pursuant to Section 2.02,
which, if in writing, shall be substantially in the form of Exhibit A-1.

 

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

 

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

 

11

 

“Consent” means (a) actual
consent given by a Lender from whom such consent is sought or (b) the
passage of fifteen (15) Business Days from receipt of written notice to a
Lender from the Administrative Agent of a proposed course of action to be
followed by the Administrative Agent without such Lender’s giving the
Administrative Agent written notice of that Lender’s objection to such course
of action.

 

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

 

“Consolidated EBITDA”
means, at any date of determination, an amount equal to Consolidated Net Income
of the Parent and its Subsidiaries on a Consolidated basis for the most
recently completed Measurement Period, 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 and (iv) other
non-recurring expenses reducing such Consolidated Net Income which do not
represent a cash item in such period or any future period (in each case of or
by the Parent and its Subsidiaries for such Measurement Period), minus (b) the
following to the extent included in calculating such Consolidated Net Income: (i) federal,
state, local and foreign income tax credits and (ii) all non-cash items
increasing Consolidated Net Income (in each case of or by the Parent and its
Subsidiaries for such Measurement Period), all as determined on a Consolidated
basis in accordance with GAAP.

 

“Consolidated EBITDAR”
means, at any date of determination, the sum (without duplication) of (a) Consolidated
EBITDA for the most recently completed Measurement Period plus (b) Consolidated
Rental Expense for the such Measurement Period to the extent deducted in
determining Consolidated Net Income for such period, all as determined on a
Consolidated basis in accordance with GAAP.

 

“Consolidated Fixed
Charge Coverage Ratio” means, at any date of determination, the ratio of (a) (i) Consolidated
EBITDAR for the most recently completed Measurement Period minus (ii) Capital
Expenditures made during such Measurement Period minus (iii) the
aggregate amount of Federal, state, local and foreign income taxes paid in cash
during such Measurement Period to (b) the sum of (i) Debt Service
Charges for such Measurement Period plus (ii) the aggregate amount
of all Restricted Payments made during such Measurement Period, plus (iii) Consolidated
Rental Expense for such Measurement Period, in each case, of or by the Parent
and its Subsidiaries, all as determined on a Consolidated basis in accordance
with GAAP.

 

 “Consolidated Interest Charges” means,
for any Measurement Period, 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, but excluding any
non-cash or deferred interest financing costs, (b) all interest paid or
payable with respect to discontinued operations and (c) the portion of
rent expense with respect to such period

 

12

 

under
Capital Lease Obligations that is treated as interest in accordance with GAAP,
in each case of or by the Parent and its Subsidiaries for the most recently
completed Measurement Period, all as determined on a Consolidated basis in
accordance with GAAP.

 

“Consolidated Net Income”
means, as of any date of determination, the net income of the Parent and its
Subsidiaries for the most recently completed Measurement Period, all as
determined on a Consolidated basis in accordance with GAAP, provided, however,
that there shall be excluded (a) extraordinary gains and extraordinary
losses for such Measurement Period, (b) the income (or loss) of such
Person during such Measurement Period in which any other Person has a joint
interest, except to the extent of the amount of cash dividends or other
distributions actually paid in cash to such Person during such period, (b) the
income (or loss) of such Person during such Measurement Period and accrued
prior to the date it becomes a Subsidiary of a Person or any of such Person’s
Subsidiaries or is merged into or consolidated with a Person or any of its
Subsidiaries or that Person’s assets are acquired by such Person or any of its
Subsidiaries, and (c) the income of any direct or indirect Subsidiary of a
Person to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time permitted by
operation of the terms of its Organization Documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, except that the Parent’s equity in
any net loss of any such Subsidiary for such Measurement Period shall be
included in determining Consolidated Net Income.

 

“Consolidated Rental
Expense” means, as of any date of determination, all obligations in respect
of base, percentage and other rent paid or due during such period under any
rental agreements or leases of real or personal property (other than Capital
Lease Obligations), net of sublease income, in each case of the Parent and its
Subsidiaries on for the most recently completed Measurement Period, determined
on a Consolidated basis in accordance with GAAP.

 

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

 

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

 

“Conversion/Continuation
Notice” means a notice of (a) a conversion of Loans from one Type to
the other, or (b) a continuation of LIBO Rate Loans, pursuant to Section 2.02(b),
which, if in writing, shall be substantially in the form of Exhibit A-2.

 

“Cost” means the lower
of cost or market value of Inventory, determined in accordance with the
accounting policies used in the preparation of the Borrowers’ audited financial
statements (pursuant to which the retail method of accounting is utilized for
substantially all merchandise Inventories), which policies are in effect on the
Closing Date.  “Cost” does not include
inventory capitalization costs or other non-purchase price charges (such as
freight) used in the Borrowers’ calculation of cost of goods sold.

 

13

 

“Covenant Compliance
Event” means either (a) that an Event of Default has occurred and is
continuing or (b) Availability at any time is less than or equal to
seventeen and one-half percent (17.5%) of the Loan Cap.  For purposes hereof, the occurrence of a
Covenant Compliance Event shall be deemed continuing at the Administrative
Agent’s option (i) so long as such Event of Default has not been waived,
and/or (ii) if such Covenant Compliance Event arises as a result of the Borrowers’
failure to maintain Availability as required hereunder, until either (A) Availability
has exceeded seventeen and one-half percent (17.5%) of the Loan Cap for sixty
(60) consecutive calendar days or (B)(1) Availability has exceeded
seventeen and one-half percent (17.5%) of the Loan Cap for thirty (30)
consecutive calendar days and (2) the Borrowers have provided evidence
reasonably satisfactory to the Administrative Agent that Availability, on a pro
forma basis for the twelve months following the discontinuance of such Covenant
Compliance Event, is projected to be equal to or greater than twenty percent
(20%) of the Loan Cap, in which case a Covenant Compliance Event shall no
longer be deemed to be continuing for purposes of this Agreement; provided  that a Covenant Compliance Event shall be deemed
continuing (even if an Event of Default is no longer continuing and/or the
conditions specified in clause (ii) of this definition have been
satisfied) at all times after a Covenant Compliance Event has occurred and been
discontinued on two (2) occasions after the Closing Date.

 

 “Credit Card Advance Rate” means 85%.

 

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

 

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

 

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

 

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

 

“Credit Party Expenses”
means, without limitation: (a) all reasonable out-of-pocket expenses
incurred by the Agents, the Arrangers and their respective Affiliates, in
connection with this Agreement and the other Loan Documents, including, without
limitation, (i) the reasonable fees, charges and disbursements of (A) one
primary counsel and one local counsel in each applicable jurisdiction for the
Agents and the Arrangers, (B) outside consultants for the Agents, (C) appraisers,
(D) commercial finance examinations, and (E) all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of the Obligations,

 

14

 

(ii) in connection with (A) the syndication of the credit
facilities provided for herein, (B) the preparation, negotiation,
administration, management, execution and delivery of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (C) the enforcement or protection of their
rights in connection with this Agreement or the Loan Documents or efforts to
preserve, protect, collect, or enforce the Collateral or in connection with any
proceeding under any Debtor Relief Laws, or (D) any workout, restructuring
or negotiations in respect of any Obligations; and (b) with respect to the
L/C Issuer, and its Affiliates, all reasonable out-of-pocket expenses incurred
in connection with the issuance, amendment, renewal or extension of any Letter
of Credit or any demand for payment thereunder; and (c) all reasonable
out-of-pocket expenses incurred by the Credit Parties who are not the Agents,
the Arrangers, the L/C Issuer or any Affiliate of any of them, after the
occurrence and during the continuance of an Event of Default, provided  that
such Credit Parties shall be entitled to reimbursement for no more than one
counsel representing all such Credit Parties (absent a conflict of interest in
which case the Credit Parties may engage and be reimbursed for additional
counsel).

 

“Customs
Broker Agreement” means an agreement, in form and substance reasonably
satisfactory to the Collateral Agent, among a Borrower, a customs broker or
other carrier, and the Collateral Agent, in which the customs broker or other
carrier acknowledges that it has control over and holds the documents
evidencing ownership of the subject Inventory for the benefit of the Collateral
Agent and agrees, upon notice from the Collateral Agent, to hold and dispose of
the subject Inventory solely as directed by the Collateral Agent.

 

“Dallas
Property” means the land owned in fee by Tuesday Morning, Inc. and
Tuesday Morning Partners, Ltd., together with the buildings, structures,
parking areas, and other improvements thereon, located in Dallas, Texas, as
more particularly described in the Mortgage.

 

“DDA”
means each checking, savings or other demand deposit account maintained by any
of the Loan Parties.  All funds in each
DDA shall be presumed to be Collateral and proceeds of Collateral and the
Agents and the Lenders shall have no duty to inquire as to the source of the
amounts on deposit in any DDA.

 

“Debt
Service Charges” means for any Measurement Period, the sum of (a) Consolidated
Interest Charges paid or required to be paid for such Measurement Period, plus
(b) principal payments made or required to be made on account of
Indebtedness (excluding the Obligations and any Synthetic Lease Obligations,
but including, without limitation, any Capital Lease Obligations) during such
Measurement Period, in each case determined on a Consolidated basis in
accordance with GAAP.

 

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

 

15

 

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

 

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

 

“Defaulting
Lender” means any Lender that (a) has failed to fund any portion of
the Committed Loans, participations in L/C Obligations or participations in
Swing Line Loans required to be funded by it hereunder within one Business Day
of the date required to be funded by it hereunder, (b) has otherwise
failed to pay over to the Administrative Agent or any other Lender any other
amount required to be paid by it hereunder within one Business Day of the date
when due, unless the subject of a good faith dispute, or (c) has been
deemed insolvent by the Administrative Agent or become the subject of any
proceeding under any Debtor Relief Law.

 

“Deteriorating
Lender” means any Defaulting Lender or any Lender as to which (a) the
L/C Issuer believes in good faith that such Lender has defaulted in fulfilling
its obligations under one or more other syndicated credit facilities, or (b) a
Person that Controls such Lender has been deemed insolvent by the
Administrative Agent or become the subject of any proceeding under any Debtor
Relief Law.

 

“Disposition”
or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction and any sale,
transfer, license or other disposition of (whether in one transaction or in a
series of transactions) all or substantially all of its assets to or in favor
of any Person) of any property (including, without limitation, any Equity
Interests) by any Person (or the granting of any option or other right to do
any of the foregoing), including any sale, assignment, transfer or other
disposal, with or without recourse, of any notes or accounts receivable or any
rights and claims associated therewith; provided, however, that “Disposition”
and “Dispose” shall not be deemed to include the issuance by the Parent of any
of its Equity Interests to another Person.

 

“Disqualified
Stock” means any Equity Interest that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in each
case at the option of the holder thereof), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the Loans
mature; provided, however, that (i) only the portion of such
Equity Interests which so matures or is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such date shall be deemed to be Disqualified Stock and (ii) with
respect to any Equity Interests issued to any employee or to any plan for the
benefit of employees of the Lead Borrower or its Subsidiaries or by any such
plan to such employees, such Capital Stock shall not constitute Disqualified
Stock solely because it may be required to be

 

16

 

repurchased by the Lead Borrower or one of its Subsidiaries in order to
satisfy applicable statutory or regulatory obligations or as a result of such
employee’s termination, resignation, death or disability and if any class of
Capital Stock of such Person that by its terms authorizes such Person to
satisfy its obligations thereunder by delivery of an Equity Interest that is
not Disqualified Stock, such Equity Interests shall not be deemed to be
Disqualified Stock. Notwithstanding the preceding sentence, any Capital Stock
that would constitute Disqualified Stock solely because the holders thereof have
the right to require a Loan Party to repurchase such Capital Stock upon the
occurrence of a change of control or an asset sale shall not constitute
Disqualified Stock.  The amount of
Disqualified Stock deemed to be outstanding at any time for purposes of this
Agreement will be the maximum amount that the Lead Borrower and its
Subsidiaries may become obligated to pay upon maturity of, or pursuant to any
mandatory redemption provisions of, such Disqualified Stock or portion thereof,
plus accrued dividends.

 

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

 

“Domestic
Subsidiary” means any Subsidiary that is organized under the laws of the
United States, any state thereof or the District of Columbia.

 

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

 

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

 

“Eligible Cash
on Hand” means cash of a Borrower from time to time deposited in a Blocked
Account maintained with Bank of America (excluding any amounts on deposit in
the Cash Collateral Account, the Concentration Account, the Exempt Accounts or
in any other escrow, special purpose or restricted account, such as an account
specifically designated for payroll or sales taxes) and subject to a Blocked
Account Agreement in favor of the Collateral Agent (which Blocked Account
Agreement provides that the Collateral Agent has sole control of the
disposition of the amounts so deposited, whether or not a Cash Dominion Event
exists), which Blocked Account is subject to a first perfected security
interest in favor of the Collateral Agent.

 

“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 a Borrower from a credit card payment
processor and/or credit card issuer, and in each case originated in the
ordinary

 

17

 

course of business of such Borrower, (ii) unless owed by Visa,
Mastercard, American Express Company or Discover, is acceptable to the
Administrative Agent in its Permitted Discretion and (iii) in each case,
is not ineligible for inclusion in the calculation of the Borrowing Base
pursuant to any of clauses (a) through (k) below.  Without limiting the foregoing, to qualify as
an Eligible Credit Card Receivable, an Account shall indicate no Person other
than a 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 a
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 Loan Parties to
reduce the amount of such Credit Card Receivable.  Any Credit Card Receivables meeting the
foregoing criteria shall be deemed Eligible Credit Card Receivables but only as
long as such Credit Card Receivable is not included within any of the following
categories, in which case such Credit Card Receivable shall not constitute an
Eligible Credit Card Receivable:

 

(a)           Credit Card Receivables which do not constitute an “Account”
(as defined in the UCC);

 

(b)           Credit Card Receivables that have been outstanding for
more than five (5) Business Days from the date of sale;

 

(c)           Credit Card Receivables with respect to which a Loan Party
does not have good, valid and marketable title, free and clear of any Lien
(other than Liens granted to the Collateral Agent);

 

(d)           Credit Card Receivables that are not subject to a first
priority security interest in favor of the Collateral Agent (it being the
intent that chargebacks in the ordinary course by such processors shall not be
deemed violative of this clause);

 

(e)           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);

 

(f)            Credit Card Receivables as to which the processor has the
right under certain circumstances to require a Loan Party to repurchase the
Accounts from such credit card processor;

 

(g)           Credit Card Receivables due from an issuer or payment
processor of the applicable credit card which is the subject of any proceeding
under any Debtor Relief Law;

 

(h)           Credit Card Receivables which are not a valid, legally
enforceable obligation of the applicable issuer with respect thereto;

 

18

 

(i)            Credit Card Receivables which do not conform to all
representations, warranties or other provisions in the Loan Documents relating
to Credit Card Receivables;

 

(j)            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 Collateral Agent, and to the extent necessary or
appropriate, endorsed to the Collateral Agent; or

 

(k)           Credit Card Receivables which the Administrative Agent
determines in its Permitted Discretion to be uncertain of collection.

 

“Eligible
In-Transit Inventory” means, as of any date of determination thereof,
Inventory:

 

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

 

(b)           which has been shipped from (i) a foreign location
for receipt by a Borrower within thirty (30) days of the date of shipment or (ii) a
domestic location for receipt by a Borrower within fifteen (15) days of the
date of shipment, but, in either case, which has not yet been delivered to such
Borrower;

 

(c)           for which (i) the purchase order is in the name of a
Borrower and title has passed to such Borrower or (ii) the document of
title reflects a Borrower as consignee or, if requested by the Collateral Agent
after the occurrence and during the continuance of a Default or an Event of
Default, names the Collateral Agent as consignee;

 

(d)           in the case of any Inventory described in clause (b)(i) above,
as to which the Collateral Agent has received a Customs Broker Agreement;

 

(e)           which is insured to the reasonable satisfaction of the
Collateral Agent; and

 

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

 

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

 

19

 

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

 

(b)           Inventory that is leased by, or is on consignment to, a
Borrower,  or that is consigned by a Borrower to a Person which is not a Loan
Party;

 

(c)           Inventory (other than Eligible In-Transit Inventory) that
is not located in the United States of America (excluding territories or
possessions of the United States);

 

(d)           Inventory (other than Eligible In-Transit Inventory) that (i) is
not located at a location that is owned or leased by a Borrower  or (ii) is
located at a distribution center or warehouse leased by a Borrower with
Inventory having a value in excess of $1,000,000 at any such location, except
in the case of this clause (ii) to the extent that the Borrowers have
furnished the Administrative Agent with (A) any UCC financing statements
or other documents that the Administrative Agent may determine to be necessary
to perfect its security interest in such Inventory at such location, and (B) a
Collateral Access Agreement executed by the Person owning any such location on
terms reasonably acceptable to the Administrative Agent;

 

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

 

(f)            Inventory that is not subject to a perfected first
priority security interest in favor of the Collateral Agent (other than
Permitted Encumbrances (including, without limitation, landlords’ Liens
permitted pursuant to clause (j) of the definition of Permitted
Encumbrances as to which either a Collateral Access Agreement has been
delivered or an Availability Reserve has been imposed) having priority over the
Lien of the Collateral Agent under applicable Law);

 

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

 

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

 

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

 

(j)            Inventory that is subject to any licensing, patent,
royalty, trademark, trade name or copyright agreement with any third party from
which any Borrower or any of its Subsidiaries has received notice of a dispute
in respect of any such agreement unless the Administrative Agent is reasonably
satisfied that it may sell or otherwise Dispose of such

 

20

 

Inventory
without (i) infringing the rights of such third party, (ii) violating
any contract with such third party or (iii) incurring any liability with
respect to the payment of royalties other than royalties incurred in connection
with the sale of such Inventory pursuant to the current licensing agreement
relating thereto;  or

 

(k)           Inventory acquired in a Permitted Acquisition, unless and
until the Collateral Agent has completed or received an appraisal of such
Inventory from appraisers satisfactory to the Collateral Agent, establishes an
Inventory advance rate and Inventory Reserves (if applicable) therefor, and
otherwise agrees that such Inventory shall be deemed Eligible Inventory, all of
the results of the foregoing to be reasonably satisfactory to the Agents.

 

“Eligible
Letter of Credit” means, as of any date of determination thereof, a
Commercial Letter of Credit which supports the purchase of Inventory, (i) which
Inventory does not constitute Eligible In-Transit Inventory and for which no
documents of title have then been issued, (ii) which Inventory, when
completed, otherwise would constitute Eligible Inventory, (iii) which
Commercial Letter of Credit has an expiry within thirty (30) days of the date
of initial issuance of such Commercial Letter of Credit, and (iv) which
Commercial Letter of Credit provides that it may be drawn only after the
Inventory is completed and after documents of title have been issued for such
Inventory reflecting a Borrower or the Collateral Agent as consignee of such
Inventory.

 

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

 

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

 

“Environmental
Permit” means any permit, approval, identification number, license or other
authorization required under any Environmental Law.

 

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

 

“Equity
Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the
warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership

 

21

 

or profit interests in) such Person, all of the securities convertible
into or exchangeable for shares of capital stock of (or other ownership or
profit interests in) such Person or warrants, rights or options for the
purchase or acquisition from such Person of such shares (or such other
interests), and all of the other ownership or profit interests in such Person
(including partnership, member or trust interests therein), whether voting or
nonvoting.

 

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

 

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

 

“ERISA
Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by a Loan Party or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) the incurrence by a Loan Party or any ERISA Affiliate of any
liability in connection with a withdrawal from, reorganization of (within the
meaning of Section 421 of ERISA), or insolvency (within the meaning of Section 4245
of ERISA) of, a Multiemployer Plan, in each case which could reasonably be
expected to result in a Material Adverse Effect; (d) the filing of a
notice of intent to terminate, the treatment of a Plan amendment as a
termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an
event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan with respect to which a Loan Party or any
ERISA Affiliate shall incur any liability which could reasonably be expected to
result in a Material Adverse Effect; or (f) the imposition upon a Loan
Party or any ERISA Affiliate of any liability under Title IV of ERISA, other
than for PBGC premiums due but not delinquent under Section 4007 of ERISA,
which could reasonably be expected to have a Material Adverse Effect.

 

“Event of
Default” has the meaning provided in Section 8.01.

 

“Excluded
Taxes” means, with respect to the Administrative Agent, any Lender, the L/C
Issuer or any other recipient of any payment to be made by or on account of any
obligation of any Loan Party hereunder, (a) taxes imposed on or measured
by its overall net income or overall gross income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the
jurisdiction (or any political subdivision thereof) under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable Lending Office is located, (b) any
branch profits taxes imposed by the United States or any similar tax imposed by
any other jurisdiction in which any Loan Party is located and (c) in the
case of a successor administrative agent that is organized under the laws of a
jurisdiction other than that in which any Borrower is resident for tax purposes
or a Foreign Lender (other than an assignee pursuant to a request by the Lead
Borrower under Section 10.13), any withholding tax that is imposed
on amounts payable to such successor administrative agent or Foreign Lender at
the time such successor administrative agent or Foreign Lender becomes a

 

22

 

party hereto (or designates a new Lending Office) or is attributable to
such successor administrative agent’s or Foreign Lender’s failure or inability
(other than as a result of a Change in Law) to comply with Section 3.01(d),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new Lending Office (or assignment),
to receive additional amounts from the Borrowers with respect to such withholding
tax pursuant to Section 3.01(a).

 

“Executive
Order” has the meaning provided in Section 10.18.

 

“Exempt
Accounts” has the meaning provided in Section 6.13(e).

 

“Existing
Credit Agreement” means that certain Credit Agreement dated as of December 22,
2004 by and among the Lead Borrower, the Parent, TMI Holdings, Inc., the
lenders who are a party to the agreement, Wachovia Bank, National Association,
as administrative agent, Wells Fargo Bank, N.A. and LaSalle Bank National
Association, as co-syndication agents, U.S. Bank National Association and
Sovereign Bank, as co-documentation agents, Wachovia Capital Markets, LLC
as a co-lead arranger and sole book manager, and Wells Fargo Bank, N.A. as a
co-lead arranger, as amended and in effect as of the date hereof.

 

“Extraordinary
Receipt” means any cash received by, or paid to or for the account of,
any Person not in the ordinary course of business, including tax refunds,
pension plan reversions, indemnity payments and any purchase price adjustments,
but excluding any cash received by, or paid to or for the account of, any
Person in connection with any of the events described in clauses (a) through
(d) of the definition of Prepayment Event.

 

“Facility
Guaranty” means a Guaranty made by a Guarantor in favor of the
Administrative Agent, the Collateral Agent and the Lenders, in form reasonably
satisfactory to the Agents.

 

 “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 Administrative Agent.

 

“Fee Letter”
means the letter agreement, dated October 15, 2008, among the Lead
Borrower, the Administrative Agent and BAS, as amended and restated pursuant to
the terms of that certain letter agreement, dated as of the Closing Date, among
the Loan Parties, the Administrative Agent and BAS.

 

“Fiscal
Month” means any fiscal month of any Fiscal Year of the Parent.

 

“Fiscal
Quarter” means any fiscal quarter of any Fiscal Year of the Parent.

 

23

 

“Fiscal
Year” means any period of twelve consecutive months ending on June 30th
of any calendar year.

 

“Foreign
Asset Control Regulations” has the meaning provided in Section 10.18.

 

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

 

“Foreign
Subsidiary” means a Subsidiary that is not a Domestic Subsidiary.

 

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

 

“Fronting
Fee” has the meaning provided in Section 2.03(j).

 

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

 

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

 

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

 

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

 

“Guarantee”
means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or services
for the purpose of assuring the obligee in respect of such Indebtedness or
other obligation of the

 

24

 

payment or performance of such Indebtedness or other obligation, (iii) to
maintain working capital, equity capital or any other financial statement
condition or liquidity or level of income or cash flow of the primary obligor
so as to enable the primary obligor to pay such Indebtedness or other
obligation, or (iv) entered into for the purpose of assuring in any other
manner the obligee in respect of such Indebtedness or other obligation of the
payment or performance thereof or to protect such obligee against loss in
respect thereof (in whole or in part), or (b) any Lien on any assets of
such Person securing any Indebtedness or other obligation of any other Person,
whether or not such Indebtedness or other obligation is assumed by such Person
(or any right, contingent or otherwise, of any holder of such Indebtedness to
obtain any such Lien).  The amount of any
Guarantee shall be deemed to be an amount equal to the stated or determinable
amount of the related primary obligation, or portion thereof, in respect of
which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the
guaranteeing Person in good faith.  The
term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantor”
means the Parent, each direct or indirect Subsidiary of the Parent (other than
any Foreign Subsidiary) listed on Schedule 1.02 annexed hereto and each
other direct or indirect Subsidiary of the Parent that shall be required to
execute and deliver a Facility Guaranty or Facility Guaranty supplement
pursuant to Section 6.12.

 

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

 

“Honor Date”
has the meaning provided in Section 2.03(c)(i).

 

“Increase
Effective Date” shall have the meaning provided in Section 2.15(d).

 

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

 

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

 

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

 

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

 

(d)           all obligations of such Person to pay the deferred
purchase price of property or services (other than trade accounts payable in
the ordinary course of business not past due for more than thirty (30) days or
which are being contested in good faith by appropriate proceedings);

 

25

 

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

 

(f)            all Attributable Indebtedness of
such Person;

 

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

 

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

 

For all purposes hereof, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture (other than a joint venture that is itself a corporation or
limited liability company) in which such Person is a general partner or a joint
venturer, unless such Indebtedness is expressly made non-recourse to such
Person.  The amount of any net obligation
under any Swap Contract on any date shall be deemed to be the Swap Termination
Value thereof as of such date.  The
amount of Indebtedness of any Person for purposes of clause (e) shall be
deemed to be equal to the lesser of (i) the aggregate unpaid amount of
such Indebtedness and (ii) the fair market value of the property
encumbered thereby, as determined by such Person in good faith.

 

“Indemnified Taxes”
means Taxes other than Excluded Taxes.

 

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

 

“Information” has the
meaning specified in Section 10.07.

 

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

 

26

 

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

 

“Interest Payment Date”
means, (a) as to any Loan other than a Prime Rate Loan, the last day of
each Interest Period applicable to such Loan and the Maturity Date; provided,
however, that if any Interest Period for a LIBO Rate Loan exceeds three
months, the respective dates that fall every three months after the beginning
of such Interest Period shall also be Interest Payment Dates; and (b) as
to any Prime Rate Loan (including a Swing Line Loan), the last Business Day of
each month and the Maturity Date.

 

“Interest Period”
means, as to each LIBO Rate Loan, the period commencing on the date such LIBO
Rate Loan is disbursed or converted to or continued as a LIBO Rate Loan and
ending on the date one, two, three or six months thereafter, as selected by the
Lead Borrower in its Committed Loan Notice; provided  that:

 

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

 

(b)           any Interest Period that begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period;

 

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

 

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

 

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

 

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

 

“Inventory Advance Rate”
means seventy five percent (75%).

 

27

 

“Inventory Reserves”
means, without duplication of any
factors considered in the Appraised Value of Inventory and without
duplication of any other Reserves or items that are otherwise addressed or
excluded through eligibility criteria, such reserves as may be established from
time to time by the Administrative Agent in the Administrative Agent’s
Permitted Discretion with respect to the determination of the saleability, at
retail, of the Eligible Inventory or which reflect such other factors as may
affect the market value of the Eligible Inventory.  Without limiting the
generality of the foregoing, Inventory Reserves may, in the Administrative
Agent’s Permitted Discretion, include (but are not limited to) reserves based
on: (a) obsolescence; (b) seasonality; (c) Shrink; (d) imbalance;
(e) change in Inventory character; (f) change in Inventory
composition; (g)   change in Inventory
mix; (h) mark-downs (both permanent and point of sale); (i) retail
mark-ons and mark-ups inconsistent with prior period practice and performance,
industry standards, current business plans or advertising calendar and planned
advertising events; and (j) out-of-date and/or expired Inventory.

 

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

 

“IRS” means the
United States Internal Revenue Service.

 

“ISP” means, with
respect to any Letter of Credit, the “International Standby Practices 1998”
published by the Institute of International Banking Law & Practice (or
such later version thereof as may be in effect at the time of issuance).

 

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

 

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

 

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

 

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

 

28

 

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

 

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

 

“L/C Issuer” means
Bank of America, in its capacity as issuer of Letters of Credit hereunder, or
any successor issuer of Letters of Credit hereunder (which successor may only
be a Lender selected by the Administrative Agent in its discretion  and reasonably
acceptable to the Lead Borrower).  The
L/C Issuer may, in its discretion, arrange for one or more Letters of Credit to
be issued by Affiliates of the L/C Issuer, in which case the term “L/C Issuer”
shall include any such Affiliate with respect to Letters of Credit issued by
such Affiliate.

 

“L/C Obligations”
means, as at any date of determination, the aggregate undrawn amount available
to be drawn under all outstanding Letters of Credit plus the aggregate
of all Unreimbursed Amounts, including all L/C Borrowings.  For purposes of computing the amounts
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.06.  For all purposes of this Agreement, if on any
date of determination a Letter of Credit has expired by its terms but any
amount may still be drawn thereunder by reason of the operation of Rule 3.14
of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the
amount so remaining available to be drawn.

 

“Lead Borrower” has
the meaning specified in the introductory paragraph hereto.

 

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

 

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

 

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

 

“Letter of Credit”
means each Standby Letter of Credit, each Commercial Letter of Credit and each
Banker’s Acceptance issued hereunder.

 

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

 

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

 

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

 

29

 

“Letter of Credit
Sublimit” means an amount equal to $30,000,000.  The Letter of Credit Sublimit is part of, and
not in addition to, the Aggregate Commitments. 
A permanent reduction of the Aggregate Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Aggregate Commitments are reduced to an amount less
than the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be
reduced to an amount equal to (or, at the Lead Borrower’s option, less than)
the Aggregate Commitments.

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

“Loan Account” has
the meaning provided in Section 2.11(a).

 

“Loan Cap” means, at
any time of determination, the lesser of (a) the Aggregate Commitments or (b) the
Borrowing Base.

 

“Loan Documents”
means this Agreement, each Note, each Issuer Document, the Fee Letter, all
Borrowing Base Certificates, the Security Documents, each Facility Guaranty,
and any other instrument or agreement now or hereafter executed and delivered
in connection herewith.

 

“Loan Parties” means,
collectively, the Borrowers and each Guarantor. 
“Loan Party” means any one of such Persons.

 

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

 

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

 

“Material Indebtedness”
means Indebtedness (other than the Obligations) of the Loan Parties in an
aggregate principal amount exceeding $5,000,000.   For purposes of determining the amount of
Material Indebtedness at any time, the amount of the obligations in respect of
any Swap Contract at such time shall be calculated at the Swap Termination
Value thereof.

 

“Maturity Date” means
December 15, 2013.

 

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

 

“Measurement Period”
means, at any date of determination, the most recently completed four fiscal
quarters of the Parent or, if fewer than four consecutive fiscal quarters of
the Parent have been completed since the Closing Date, the fiscal quarters of
the Parent that have been completed since the Closing Date.

 

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

 

“Mortgage” means the
Revolving Credit Deed of Trust, Assignment of Leases, Security Agreement and
Fixture Filing on the Dallas Property dated as of the Closing Date made by
Tuesday Morning, Inc. and Tuesday Morning Partners, Ltd. in favor of the
Collateral Agent.

 

“Mortgage Policy” has
the meaning given that term in Section 4.01(a)(xvi).

 

31

 

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

 

“Net Proceeds” means:

 

(a)           with respect to any Prepayment Event
described in clauses (a), (b) or (e) of the definition thereof, the
excess, if any, of (i) the sum of cash and cash equivalents received in
connection with such Prepayment Event (including any cash or cash equivalents
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise, but only as and when so received) over (ii) the
sum of (A) the principal amount of any Indebtedness that is secured by the
applicable asset by a Lien permitted hereunder which is senior to the
Collateral Agent’s Lien on such asset and that is required to be repaid (or to
establish an escrow for the future repayment thereof) in connection with such
Prepayment Event (other than Indebtedness under the Loan Documents), (B) the
reasonable and customary out-of-pocket expenses incurred by such Loan Party or such Subsidiary in
connection with such Prepayment Event (including, without limitation,
appraisals, and brokerage, legal, title and recording or transfer tax expenses
and commissions or taxes due as a result of such Prepayment Event) paid by any
Loan Party to third parties (other than Subsidiaries)); and

 

(b)           with respect to any Prepayment Event
described in clauses (c) or (d) of the definition thereof, the excess
of (i) the sum of the cash and cash equivalents received in connection
with such Prepayment Event over (ii) the underwriting discounts and
commissions, and other reasonable and customary out-of-pocket expenses,
incurred by such Loan Party or such Subsidiary in connection therewith.

 

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

 

“Non-Extension Notice
Date” has the meaning provided in Section 2.03(b)(iii).

 

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

 

 “NPL” means the National Priorities List
under CERCLA.

 

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

 

32

 

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

 

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

 

“Other Taxes” means
all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made
hereunder or under any other Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement or any other Loan
Document.  For the avoidance of doubt,
the term “Other Taxes” does not include Excluded Taxes.

 

“Outstanding Amount”
means: (i) with respect to Committed Loans and Swing Line Loans on any
date, the aggregate outstanding principal amount thereof after giving effect to
any borrowings and prepayments or repayments of Committed Loans and Swing Line
Loans, as the case may be, occurring on such date; and (ii) with respect
to any L/C Obligations on any date, the amount of such L/C Obligations on such
date after giving effect to any L/C Credit Extension occurring on such date and
any other changes in the aggregate amount of the L/C Obligations as of such
date, including as a result of any reimbursements by the Borrowers of
Unreimbursed Amounts.

 

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

 

“Parent” means
Tuesday Morning Corporation, a Delaware corporation.

 

“Participant” has the
meaning provided in Section 10.06(c).

 

“Patriot Act” has the
meaning provided in Section 4.01(k).

 

“Payment Conditions”
means, at the time of determination with respect to any specified transaction
or payment, that (a) no Default or Event of Default then exists or would
arise as a result of entering into such transaction or the making such payment,
and (b) either (i) the Availability Condition has been satisfied and
the Consolidated Fixed Charge Coverage Ratio, as calculated on a trailing
twelve months basis and as projected on a pro-forma basis for the twelve months
following such transaction or payment, will be equal to or greater than
1.10:1.00, or (ii) the Loan Parties shall have provided the Administrative
Agent with a solvency opinion

 

33

 

(including
an analysis of future Availability demonstrating that the Availability
Condition will be satisfied) from an unaffiliated third party valuation firm
reasonably satisfactory to the Administrative Agent.  Prior to undertaking any transaction or
payment which is subject to the Payment Conditions, the Loan Parties shall
deliver to the Administrative Agent either (a) evidence of satisfaction of
the conditions contained in clause(b)(i) above on a basis (including,
without limitation, giving due consideration to results for prior periods)
reasonably satisfactory to the Administrative Agent or (b) or the solvency
opinion referred to in clause (b)(ii).

 

“PBGC” means the
Pension Benefit Guaranty Corporation.

 

“PCAOB” means the
Public Company Accounting Oversight Board.

 

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

 

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

 

(a)           No Default or Event of Default then
exists or would arise from the consummation of such Acquisition;

 

(b)           Such Acquisition shall have been
approved by the Board of Directors (or other authorized officers) of the Person
which is the subject of such Acquisition and such Person shall not have
announced that it will oppose such Acquisition or shall not have commenced any
action which alleges that such Acquisition shall violate applicable Law;

 

(c)           The Lead Borrower shall have
furnished the Administrative Agent with fifteen (15) days’ prior written notice
(or such shorter period of time as to which the Administrative Agent may agree
in writing) of such intended Acquisition and shall have furnished the
Administrative Agent with a current draft of the documents, agreements and
instruments contemplated to be executed in connection therewith (and final
copies thereof as and when executed), a summary (if available) of any due
diligence undertaken by the Loan Parties in connection with such Acquisition,
appropriate financial statements of the Person which is the subject of such
Acquisition, pro forma projected financial statements for the twelve (12) month
period following such Acquisition after giving effect to such Acquisition
(including balance sheets, cash flows and income statements by month for the
acquired Person, individually, and on a Consolidated basis with all Loan Parties),
and such other information as the Administrative Agent may reasonably require;

 

(d)           If the proceeds of any Credit
Extension are being used to directly or indirectly finance all or any portion
of such Acquisition, either (i) the legal structure of such Acquisition
shall be reasonably acceptable to the Administrative Agent in its discretion,
or (ii) the Loan Parties shall have provided the Administrative Agent with
a

 

34

 

solvency opinion from an unaffiliated third party valuation firm
reasonably satisfactory to the Administrative Agent;

 

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

 

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

 

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

 

(i)            If (i) the Person which is the
subject of such Acquisition will be maintained as a Subsidiary of a Loan Party
and will own assets of the type included in the Borrowing Base or (ii) the
assets acquired in such Acquisition are of the type included in the Borrowing
Base and will be transferred to a Subsidiary which is not then a Loan Party,
such Subsidiary shall have been joined as a “Borrower” hereunder (unless the
Administrative Agent and the Lead Borrower otherwise determine that such
Subsidiary shall be joined as a “Guarantor” hereunder), and, except as
otherwise expressly provided herein, the Collateral Agent shall have received a
first priority security interest in such Subsidiary’s Equity Interests,
Inventory, Accounts and other property of the same nature as constitutes collateral
under the Security Documents (subject only to Permitted Encumbrances); and

 

(j)            The Loan Parties shall have
satisfied the Availability Condition.

 

“Permitted Discretion”
means the Administrative Agent’s commercially reasonable business judgment, exercised
in good faith in accordance with customary business practices for comparable
asset-based lending transactions in the retail industry.

 

“Permitted Disposition”
means any of the following:

 

(a)           Dispositions of Inventory in the
ordinary course of business;

 

(b)           bulk sales or other Dispositions of
the Inventory of a Loan Party not in the ordinary course of business in
connection with Store closings, at arm’s length, provided  that
such Store closures and related Inventory Dispositions shall not exceed (i) in
any Fiscal Year of the Parent and its Subsidiaries, five percent (5%) of the
number of the

 

35

 

Loan Parties’ Stores as of the beginning of such Fiscal Year (net of
new Store openings) and (ii) in the aggregate from and after the Closing
Date, ten percent (10%) of the number of the Loan Parties’ Stores in existence
as of the Closing Date (net of new Store openings), provided  further
that all sales of Inventory in connection with Store closings that exceed the
foregoing limits shall be in accordance with liquidation agreements and with
professional liquidators reasonably acceptable to the Agents, provided  further
that all Net Proceeds received in connection therewith are applied to the
Obligations if then required in accordance with Section 2.05
hereof;

 

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

 

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

 

(e)           Dispositions of property in the
ordinary course of business that is substantially worn, damaged, obsolete or,
in the judgment of a Loan Party, no longer useful or necessary in its business
or that of any Subsidiary;

 

(f)            sales, transfers and Dispositions (i) among
the Loan Parties or (ii) by any Subsidiary to a Loan Party;

 

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

 

(h)           as long as no Default or Event of
Default then exists or would arise therefrom, sales of Real Estate of any Loan
Party (or sales of any Person or Persons created to hold such Real Estate or
the Equity Interests in such Person or Persons), including sale-leaseback
transactions involving any such Real Estate pursuant to Leases on market terms,
as long as, (i) such sale is made for fair market value, (ii) all Net
Proceeds received in connection with any such sale are applied to the
Obligations if then required in accordance with Section 2.05
hereof, and (iii) in the case of any sale-leaseback transaction permitted
hereunder, the Agents shall have received from each purchaser or transferee a
Collateral Access Agreement on terms and conditions reasonably satisfactory to
the Agents;

 

(i)            to the extent constituting a
Disposition, Dispositions permitted pursuant to Section 7.04;

 

(j)            Dispositions of cash, cash
equivalents and Permitted Investments described in clauses (a) through (e) of
the definition thereof, in each case on ordinary business terms;

 

(k)           Dispositions consisting of the
compromise, settlement or collection of accounts receivable in the ordinary
course of business, consistent with past practices; and

 

36

 

(l)            other Dispositions by a Loan Party
or any of its Subsidiaries not otherwise expressly permitted pursuant to Section 7.05,
provided  that (i) no Default or Event of Default then exists
or would arise therefrom, (ii) the aggregate fair market value of all
assets Disposed of in reliance upon this clause (l) shall not exceed
$5,000,000, (iii) any Loan Party or Subsidiary Disposing of assets in
reliance upon this clause (l) shall have received cash consideration in an
amount equal to at least seventy five percent (75%) of the total purchase price
for such assets, and (iv) all Net Proceeds received in connection with any
such Disposition are applied to the Obligations if then required in accordance
with Section 2.05 hereof.

 

“Permitted
Encumbrances” means:

 

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

 

(b)           carriers’, warehousemen’s, mechanics’,
materialmen’s, repairmen’s and other like Liens imposed by applicable Law,
arising in the ordinary course of business and securing obligations that are
not overdue by more than forty-five (45) days or are being contested in
compliance with Section 6.04;

 

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

 

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

 

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

 

(f)            easements, covenants, conditions,
restrictions, building code laws, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially interfere with the ordinary conduct of business of a Loan Party and
such other minor title defects or survey matters that are or would be disclosed
by current surveys that, in each case, do not materially interfere with the
current use of the real property;

 

(g)           Liens existing on the date hereof and
listed on Schedule 7.01 and any modifications, replacements, renewals or
extensions thereof, provided  that (i) the property or assets
covered thereby is not changed (other than with respect to after-acquired
property that is affixed thereto or incorporated therein and the proceeds
thereof), (ii) if such Liens secure Indebtedness, the amount secured or
benefited thereby is not increased except to the extent permitted by clauses (a) or
(m) of the definition of Permitted Indebtedness, and (iii) any
renewal or extension of the obligations secured or benefited thereby is
permitted by clause (a) of the definition of Permitted Indebtedness;

 

37

 

(h)           Liens on assets (other than assets of
the type included in the Borrowing Base) acquired by any Loan Party which are
permitted under clauses (c) and (f) of the definition of Permitted
Indebtedness so long as (i) such Liens and the Indebtedness secured
thereby are incurred prior to or within one hundred twenty (120) days after
such acquisition, (ii) the Indebtedness secured thereby does not exceed
the cost of acquisition of such assets and (iii) such Liens shall not
extend to any other property or assets of the Loan Parties;

 

(i)            Liens in favor the Collateral Agent;

 

(j)            landlords’ and lessors’ Liens in
respect of rent not overdue for more than thirty (30) days and the existence of which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect;

 

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

 

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

 

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

 

(n)           Liens on property in existence at the
time such property is acquired pursuant to a Permitted Acquisition or on such
property of a Subsidiary of a Loan Party in existence at the time such
Subsidiary is acquired pursuant to a Permitted Acquisition; provided  that
such Liens are not incurred in connection with, or in anticipation of, such
Permitted Acquisition and do not attach to any other assets of any Loan Party
or any Subsidiary; and

 

(o)           Liens in favor of customs and
revenues authorities imposed by applicable Law arising in the ordinary course
of business in connection with the importation of goods and securing
obligations (i) that are not overdue by more than thirty (30) days, (ii)(A) that
are being contested in good faith by appropriate proceedings, (B) the
applicable Loan Party or Subsidiary has set aside on its books adequate
reserves with respect thereto in accordance with GAAP and (C) such contest
effectively suspends collection of the contested obligation and enforcement of
any Lien securing such obligation during the pendency of such contest or (iii) the
existence of which could not reasonably be expected to result in a Material
Adverse Effect;

 

38

 

(p)           encumbrances referred to in Schedule
B of the Mortgage Policy insuring the Mortgage;

 

(q)           any interest or title of a licensor,
sublicensor, lessor or sublessor under licenses, sublicenses, leases or
subleases entered into by the Loan Parties in the ordinary course of business
and not interfering in any material respect with the business of the Loan
Parties;

 

(r)            Liens (i) on cash advances in
favor of the seller of any property to be acquired in an Investment permitted
pursuant to clauses (m) and (s) of the definition of Permitted Investments
to be applied against the purchase price for such Investment, (ii) consisting
of an agreement to Dispose of any property in a Permitted Disposition, in each
case, solely to the extent such Investment or Disposition, as the case may be,
would have been permitted on the date of the creation of such Lien;

 

(s)           any subordination of the interest of
any Loan Party or any Subsidiary, as lessee under any Lease, to the Lien of any
mortgage or deed of trust encumbering the interest or title of the lessor under
such Lease; and

 

(t)            other Liens on assets other than
those of the type included in the Borrowing Base securing Indebtedness in an
aggregate principal amount not to exceed $1,500,000 outstanding at any time.

 

“Permitted
Indebtedness” means each of the following:

 

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

 

(b)           Indebtedness of (i) any Loan
Party to any other Loan Party, (ii) any Subsidiary of the Parent that is
not a Loan Party owed to (A) any other Subsidiary of the Parent that is
not a Loan Party or (B) the Parent or any other Loan Party in respect of
an Investment permitted pursuant to clauses (g) and (s) of the
definition of Permitted Investments, and (iii) as long as no Default or
Event of Default has occurred and is continuing at the time of the incurrence
of such Indebtedness or would arise therefrom, any Loan Party to any Subsidiary
of the Parent that is not a Loan Party, provided  that all such
Indebtedness of any Loan Party pursuant to this clause (iii) shall be
expressly subordinated to the Obligations on terms reasonably acceptable to the
Administrative Agent;

 

(c)           without duplication of Indebtedness
described in clause (f) of this definition, purchase money Indebtedness of
any Loan Party to finance the acquisition, repair or improvement of any fixed
or capital assets, including Capital Lease Obligations and Synthetic Lease
Obligations, and any Indebtedness assumed in connection with the acquisition of
any such assets or secured by a Lien on any such assets prior to the
acquisition thereof, and any Permitted Refinancing Indebtedness in respect
thereof; provided, however, that the aggregate principal amount
of Indebtedness permitted by this clause (c) shall not exceed $10,000,000
at any time outstanding; provided  further that, if requested by
the Collateral Agent, the Loan Parties shall use commercially reasonable 

 

39

 

efforts to cause the holders of such Indebtedness to enter into an
agreement on terms reasonably satisfactory to the Collateral Agent permitting
the Collateral Agent to utilize such fixed or capital assets in connection with
the Collateral Agent’s exercise of remedies under the Loan Documents;

 

(d)           obligations (contingent or otherwise)
of any Loan Party or any Subsidiary thereof existing or arising under any Swap
Contract, provided  that such obligations are (or were) entered
into by such Person in the ordinary course of business and not for purposes of
speculation or taking a “market view;” provided  further that the
aggregate Swap Termination Value thereof shall not exceed $10,000,000 at any
time outstanding;

 

(e)           contingent liabilities under surety
bonds or similar instruments incurred in the ordinary course of business in
connection with the construction or improvement of Real Estate;

 

(f)            Indebtedness incurred for the
construction, acquisition, repair or improvement of, or to finance or to
refinance, any Real Estate owned or leased by any Loan Party (including therein
any Indebtedness incurred in connection with sale-leaseback transactions
permitted hereunder), provided  that the Loan Parties shall use
commercially reasonable efforts to cause the holders of such Indebtedness to
enter into a Collateral Access Agreement;

 

 (g)          Indebtedness
with respect to the deferred purchase price for any Permitted Acquisition, provided
that such Indebtedness is subordinated to the Obligations on terms
reasonably acceptable to the Administrative Agent;

 

(h)           Indebtedness of any Person that
becomes a Subsidiary of a Loan Party in a Permitted Acquisition, which
Indebtedness is existing at the time such Person becomes a Subsidiary of a Loan
Party (other than Indebtedness incurred solely in contemplation of such Person’s
becoming a Subsidiary of a Loan Party);

 

(i)            the Obligations;

 

(j)            Indebtedness of the Lead Borrower or
its Subsidiaries constituting obligations in respect of purchase price or other
similar adjustments in connection with Permitted Dispositions;

 

(k)           Indebtedness in respect of netting
services, overdraft protections and similar arrangements, in each case in
connection with deposit accounts;

 

(l)            Guarantees (i) by any Loan
Party and its Subsidiaries of any Indebtedness of any other Loan Party
permitted hereunder, and (ii) as long as no Default or Event of Default
has occurred and is continuing or would arise therefrom, by any Loan Party and
its Subsidiaries of any Indebtedness otherwise permitted hereunder of any
Subsidiary that is not a Loan Party to the extent such Guarantees are permitted
pursuant to Section 7.02; and

 

40

 

(m)          so long as no Default or Event of
Default has occurred and is continuing at the time of the incurrence of such
Indebtedness or would arise therefrom, other Indebtedness in an aggregate
principal amount not to exceed $1,500,000 outstanding at any time.

 

“Permitted
Investments” means each of the following:

 

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

 

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

 

(c)           time deposits with, or insured
certificates of deposit or bankers’ acceptances of, any commercial bank that (i) (A) is
a Lender or (B) is organized under the laws of the United States of
America, any state thereof or the District of Columbia or is the principal
banking subsidiary of a bank holding company organized under the laws of the
United States of America, any state thereof or the District of Columbia, and is
a member of the Federal Reserve System, (ii) issues (or the parent of
which issues) commercial paper rated as described in clause (b) of this
definition and (iii) has combined capital and surplus of at least
$500,000,000, in each case with maturities of not more than 180 days from the
date of acquisition thereof;

 

(d)           fully collateralized repurchase
agreements with a term of not more than thirty (30) days for securities
described in clause (a) above (without regard to the limitation on
maturity contained in such clause) and entered into with a financial
institution satisfying the criteria described in clause (c) above or with
any primary dealer and having a market value at the time that such repurchase
agreement is entered into of not less than 100% of the repurchase obligation of
such counterparty entity with whom such repurchase agreement has been entered
into;

 

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

 

(f)            Investments existing on the Closing
Date, and set forth on Schedule 7.02,  and any modification,
replacement, renewal or extension thereof, but not any increase in the amount
thereof except as otherwise permitted under this definition;

 

(g)           (i) Investments by any Loan
Party and its Subsidiaries in their respective Subsidiaries outstanding on the
date hereof, (ii) additional Investments by the Parent and 

 

41

 

its Subsidiaries (including Subsidiaries that are not Loan Parties) in
Loan Parties (other than the Parent), and (iii) additional Investments by
Subsidiaries of the Loan Parties that are not Loan Parties in other
Subsidiaries that are not Loan Parties;

 

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

 

(i)            Guarantees constituting Permitted
Indebtedness;

 

(j)            Investments by any Loan Party in
Swap Contracts permitted hereunder;

 

(k)           Investments received in connection
with the bankruptcy or reorganization of, or settlement of delinquent accounts
and disputes with, customers and suppliers, in each case in the ordinary course
of business and upon the foreclosure or other transfer of title with respect to
any secured Investment;

 

(l)            advances to officers, directors and
employees of the Loan Parties and Subsidiaries in the ordinary course of
business in an amount not to exceed $500,000 to any individual at any time or
in an aggregate amount not to exceed $1,000,000 at any time outstanding;

 

(m)          Investments constituting Permitted
Acquisitions;

 

(n)           capital contributions made by any
Loan Party to another Loan Party;

 

(o)           to the extent constituting an
Investment, Investments arising out of transactions permitted pursuant to Sections
7.01, 7.05 and 7.06;

 

(p)           Investments in the form of promissory
notes or other non-cash consideration received by any Loan Party from
purchasers of any assets in connection with Permitted Dispositions;

 

(q)           Investments in the ordinary course of
business consisting of endorsements for collection or deposit;

 

(r)            to the extent constituting an
Investment, the Subsidiary Restructuring;

 

(s)           as long as no Default or Event of
Default has occurred and is continuing at the time of the making of such
Investment or would arise therefrom, and as long as Availability immediately
preceding, and on a pro forma basis for the six months immediately following,
and after giving effect to, such Investment was, and is projected to be, equal
to or greater than $50,000,000, other Investments in an aggregate amount not to
exceed $5,000,000 at any time outstanding;

 

42

 

provided, however, that
notwithstanding the foregoing, after the occurrence and during the continuance
of a Cash Dominion Event, no such Investments specified in clauses (a) through
(e) shall be permitted unless (i) the Investment is a temporary
Investment pending expiration of an Interest Period for a LIBO Rate Loan, the
proceeds of which Investment will be applied to the Obligations after the
expiration of such Interest Period, and (ii) such Investments are pledged
to the Collateral Agent as additional collateral for the Obligations pursuant
to such agreements as may be reasonably required by the Collateral Agent.

 

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

 

(a)           Is made to maintain, protect or
preserve the Collateral and/or the Credit Parties’ rights under the Loan
Documents or which is otherwise for the benefit of the Credit Parties; or

 

(b)           Is made to enhance the likelihood of,
or to maximize the amount of, repayment of any Obligation; or

 

(c)           Is made to pay any other amount
chargeable to any Loan Party hereunder; and

 

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

 

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

 

“Permitted
Refinancing Indebtedness” means, with respect to any Person, any
refinancing, refunding, renewal or extension of any Indebtedness of such Person
(or any successor of such Person); provided  that (i) the
amount of such Indebtedness is not increased at the time of such refinancing,
refunding, renewal or extension except by an amount equal to a reasonable
premium or other reasonable amount paid, and fees and expenses reasonably
incurred, in connection with such refinancing and by an amount equal to any
existing commitments unutilized thereunder or as otherwise permitted pursuant
to clause (m) of the definition of Permitted Indebtedness, (ii) the
result of such extension, renewal or replacement shall not be an earlier
maturity date or decreased weighted average life of such Indebtedness, and (iii) the
terms relating to principal amount, amortization, maturity, collateral (if any)
and 

 

43

 

subordination (if any), and other material terms taken as a whole, of
any such refinancing, refunding, renewing or extending Indebtedness, and of any
agreement entered into and of any instrument issued in connection therewith,
are not materially less to the Loan Parties or the Lenders than the terms of
any agreement or instrument governing the Indebtedness being refinanced,
refunded, renewed or extended.

 

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

 

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

 

“Platform”
has the meaning specified in Section 6.02.

 

“Pledge Agreement”
means, collectively, the Pledge Agreements dated as of the Closing Date among
the Loan Parties party thereto and the Collateral Agent, as amended and in
effect from time to time.

 

“Pre-Increase
Lenders” has the meaning specified in Section 2.15(e).

 

“Prepayment
Event” means:

 

(a)           Any sale, transfer or other
Disposition (including pursuant to a sale and leaseback transaction, but excluding any Disposition permitted pursuant to clauses (a), (c),
(d), (e), (f), (g), (j) and (k) of the definition of Permitted
Dispositions) of any property or asset of a Loan Party; provided  that,
prior to the occurrence of a Cash Dominion Event, a Loan Party may reinvest the
proceeds from the sale, transfer or other Disposition of any property or assets
other than those of the type included in the Borrowing Base in replacement
property or assets useful in the business of the Loan Parties within 90 days of
the Disposition of the property or assets being replaced; provided  further
that any individual Disposition or series of related Dispositions for which any
Loan Party or any of its Subsidiaries receives Net Proceeds in an amount not to
exceed $1,000,000 prior to the occurrence of a Cash Dominion Event shall not be
deemed a Prepayment Event;

 

(b)           Any casualty or other insured damage
to, or any taking under power of eminent domain or by condemnation or similar
proceeding of, any property or asset of a Loan Party, unless (i) the
proceeds therefrom are required to be paid to the holder of a Lien on such
property or asset having priority over the Lien of the Collateral Agent or (ii) prior
to the occurrence of a Cash Dominion Event, the proceeds therefrom are utilized
for purposes of replacing or repairing the assets in respect of which such
proceeds, awards or payments were received within 180 days of the occurrence of
the damage to or loss of the assets being repaired or replaced; provided
that any individual casualty or other insured damage to, or taking under
power of eminent domain or by condemnation or similar proceeding of, any
property or asset of a Loan Party for which any Loan Party receives 

 

44

 

Net Proceeds in an amount not to exceed $1,000,000 prior to the
occurrence of a Cash Dominion Event shall not be deemed a Prepayment Event;

 

(c)           The issuance by a Loan Party of any
Equity Interests, other than (i) any such issuance by the Parent of any of
its Equity Interests consisting of common stock and (ii) any such issuance
of Equity Interests (A) to a Loan Party, (B) as consideration for a
Permitted Acquisition or (C) as a compensatory issuance to any employee,
director, or consultant (including under any option plan);

 

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

 

(e)           The receipt by any Loan Party of any
Extraordinary Receipts; provided  that the receipt by any Loan
Party of Net Proceeds of Extraordinary Receipts from any individual event or
series of related events in an amount not to exceed $1,000,000 prior to the
occurrence of a Cash Dominion Event shall not be deemed a Prepayment Event.

 

“Prime Rate”
means, for any day, a fluctuating rate per annum equal to the highest of (a) the
Federal Funds Rate plus one-half of one percent (0.50%), (b) except during
any period of time during which a notice delivered to the Lead Borrower in
accordance with Section 3.03 shall remain in full force and effect,
the Adjusted LIBO Rate plus one percent (1.00%) or (c) the rate of
interest in effect for such day as publicly announced from time to time by Bank
of America as its “prime rate.”  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 such rate announced by Bank of
America shall take effect at the opening of business on the day specified in
the public announcement of such change.

 

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

 

“Public
Lender” has the meaning specified in Section 6.02.

 

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

 

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

 

“Registered
Public Accounting Firm” has the meaning specified by the Securities Laws
and shall be independent of the Parent and its Subsidiaries as prescribed by
the Securities Laws.

 

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

 

45

 

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

 

“Reports” has the meaning provided in Section 9.12(b).

 

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

 

“Required Lenders” means, as of any
date of determination, (a) if there are two or fewer Lenders, all Lenders,
or (b) if there are three or more Lenders, Lenders holding more than 50%
of the Aggregate Commitments or, if the commitment of each Lender to make Loans
and the obligation of the L/C Issuer to make L/C Credit Extensions have been
terminated pursuant to Section 8.02, Lenders holding in the
aggregate more than 50% of the Total Outstandings (with the aggregate amount of
each Lender’s risk participation and funded participation in L/C Obligations
and Swing Line Loans being deemed “held” by such Lender for purposes of this
definition); provided  that the Commitment of, and the portion of
the Total Outstandings held or deemed held by, any Defaulting Lender shall be
excluded for purposes of making a determination of Required Lenders.

 

 “Reserves”
means all (if any) Inventory Reserves and Availability Reserves.

 

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

 

“Restricted Payment” means any
dividend or other distribution (whether in cash, securities or other property)
with respect to any capital stock or other Equity Interest of any Person or any
of its Subsidiaries, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, defeasance, acquisition, cancellation or
termination of any such capital stock or other Equity Interest, or on account
of any return of capital to such Person’s stockholders, partners or members (or
the equivalent of any thereof).  Without
limiting the foregoing, “Restricted Payments” with respect to any Person shall
also include all payments made by such Person with any proceeds of a
dissolution or liquidation of such Person to the extent not otherwise expressly
permitted hereunder.

 

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

 

“Sarbanes-Oxley” means the
Sarbanes-Oxley Act of 2002, as amended and in effect from time to time.

 

46

 

“SEC” means the Securities and
Exchange Commission, or any Governmental Authority succeeding to any of its
principal functions.

 

“Securities Laws” means the Securities
Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the
applicable accounting and auditing principles, rules, standards and practices
promulgated, approved or incorporated by the SEC or the PCAOB.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

47

 

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

 

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

 

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

 

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

 

“Subordination Provisions” has the
meaning specified in Section 8.01(p).

 

“Subsidiary” of a Person means a
corporation, partnership, joint venture, limited liability company or other
business entity of which a majority of the Equity Interests having ordinary
voting power for the election of directors or other governing body are at the
time beneficially owned, or the management of which is otherwise Controlled,
directly or indirectly, through one or more intermediaries, or both, by such
Person.  Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary
or Subsidiaries of a Loan Party.

 

“Subsidiary Restructuring” means the
merger and/or conversion of certain Subsidiaries of the Parent in existence on
the Closing Date, as more fully described on Schedule 1.03 annexed
hereto.

 

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

 

48

 

Swaps and Derivatives
Association, Inc., any International Foreign Exchange Master Agreement, or
any other master agreement (any such master agreement, together with any
related schedules, a “Master Agreement”), including any such obligations
or liabilities under any Master Agreement.

 

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

 

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

 

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

 

“Swing Line Lender” means Bank of
America, in its capacity as provider of Swing Line Loans, or any successor
swing line lender hereunder.

 

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

 

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

 

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

 

“Syndication Agent” means Wells Fargo
Retail Finance, LLC, in its capacity as syndication agent.

 

“Synthetic Lease Obligation” means the
monetary obligation of a Person under (a) a so-called synthetic,
off-balance sheet or tax retention lease, or (b) an agreement for the use
or possession of property (including sale and leaseback transactions), in each
case, creating obligations that do not appear on the balance sheet of such
Person but which, upon the application of any Debtor Relief Laws to such Person,
would be characterized as the indebtedness of such Person (without regard to
accounting treatment).

 

“Taxes” means all present or future
taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or
other charges imposed by any Governmental Authority, including any interest,
additions to tax or penalties applicable thereto.

 

“Termination Date” means the earliest
to occur of (i) the Maturity Date, (ii) the date on which the
maturity of the Obligations is accelerated (or deemed accelerated) and the 

 

49

 

Commitments are irrevocably
terminated (or deemed terminated) in accordance with Section 8.02,
or (iii) the date of the occurrence of any Event of Default pursuant to Section 8.01(f).

 

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

 

“Trading with the Enemy Act” has the
meaning provided in Section 10.18.

 

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

 

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

 

“UFCA” has the meaning provided in Section 10.21(d).

 

“UFTA” has the meaning provided in Section 10.21(d).

 

“Unfunded Pension Liability” means the
excess of a Pension Plan’s aggregate actuarial present value of the aggregate
benefit liabilities under Section 4001(a)(16) of ERISA, over the aggregate
current value of that Pension Plan’s assets, determined in accordance with the
actuarial assumptions used for purposes of Statement of Financial Accounting
Standard No. 35 as of the most recent valuation dates reflected in the
Parent’s annual financial statements for the applicable plan year.

 

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

 

“U.S. Lender” has the meaning provided
in Section 3.01(e).

 

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

 

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

 

(a)           The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation.”  The word “will”
shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any
definition of or reference 

 

50

 

to any agreement, instrument or
other document (including any Organization Document) shall be construed as
referring to such agreement, instrument or other document as from time to time
amended, restated, amended and restated, supplemented or otherwise modified
(subject to any restrictions on such amendments, restatements, amendments and
restatements, supplements or modifications set forth herein or in any other
Loan Document), (ii) any reference herein to any Person shall be construed
to include such Person’s successors and assigns, (iii) the words “herein,”
“hereof” and “hereunder,” and words of similar import when used
in any Loan Document, shall be construed to refer to such Loan Document in its
entirety and not to any particular provision thereof, (iv) all references
in a Loan Document to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
the Loan Document in which such references appear, (v) any reference to
any law shall include all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting such law and any reference
to any law or regulation shall, unless otherwise specified, refer to such law
or regulation as amended, modified or supplemented from time to time, and (vi) the
words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.

 

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

 

(c)           Article and Section headings
used herein and in the other Loan Documents are for convenience of reference
only, are not part of this Agreement and shall not affect the construction of,
or be taken into consideration in interpreting, this Agreement.

 

1.03         Accounting Terms.

 

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

 

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

 

51

 

1.04         Rounding.  Any financial ratios required to be
maintained by the Borrowers pursuant to this Agreement shall be calculated by
dividing the appropriate component by the other component, carrying the result
to one place more than the number of places by which such ratio is expressed
herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number).

 

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

 

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

 

1.07         Timing
of Payment and Performance.  Whenever
the payment of any obligation or the performance of any covenant, duty or
obligation is stated to be due or performance required on a day which is not a
Business Day, the date of such payment or performance shall be extended to the
immediately succeeding Business Day (except as set forth in the definition of
Interest Period) and such extension of time shall be reflected in computing
interest or fees, as the case may be.

 

ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01         Committed Loans;
Reserves.

 

(a)           Subject to the terms and conditions
set forth herein, each Lender severally agrees to make loans (each such loan, a
“Committed Loan”) to the Borrowers from time to time, on any Business
Day during the Availability Period in an aggregate amount not to exceed at any time outstanding
the lesser of (x) the amount of such Lender’s Commitment, or (y) such
Lender’s Applicable Percentage of the Borrowing Base, subject in each case to
the following limitations:

 

(i)            after giving effect to any Committed
Borrowing, the Total Outstandings shall not exceed the Loan Cap;

 

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

 

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

 

52

 

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

 

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

 

(i)            Shrink (an Inventory Reserve): An
amount equal to one-half of one percent (0.50%) of the gross sales of the
Borrowers for the Fiscal Year to date;

 

(ii)           Rent (an Availability Reserve): An
amount equal to two (2) months’ rent for all of the Borrowers’ leased
locations in the States of Pennsylvania, Virginia and Washington, other than
leased locations with respect to which the Collateral Agent has received a
Collateral Access Agreement in form reasonably satisfactory to the Collateral
Agent;

 

(iii)          Gift Certificate/Card and Merchandise
Credit Liabilities (an Availability Reserve): An amount equal to seventy-five
percent (75%) of the Gift Certificate/Card and Merchandise Credit Liabilities
as reflected in the Borrowers’ books and records;

 

(iv)          Customer Deposits (an Availability Reserve):
An amount equal to one hundred percent (100%) of the amount of all outstanding
customer deposits as reflected in the Borrowers’ books and records;

 

(v)           Taxes (an Availability Reserve): An
amount equal to $2,000,000 in respect of all outstanding Taxes and other
governmental charges due and payable by the Borrowers on account of ad valorem,
real estate, personal property and other Taxes;

 

(vi)          Letter of Credit Landing Costs (an
Availability Reserve):  Without
duplication of the Reserves established pursuant to clause (vii) below, to
the extent Eligible In-Transit Inventory or Inventory supported by an Eligible
Letter of Credit is included in the Borrowing Base, landing costs and any other
commissions, customs, duty, freight, and other out-of-pocket costs and expenses
which will be expended by the Borrowers relative to such Inventory;

 

(vii)         Domestic Freight Costs (an Availability
Reserve):  To the extent Eligible
In-Transit Inventory shipped from a domestic location is included in the
Borrowing Base, an amount equal to the freight and other out-of-pocket costs
and expenses which will be expended by the Borrowers to release such Inventory;

 

(viii)        Self-Funded Insurance Liabilities (an
Availability Reserve): An amount equal to the average monthly amount paid to
cover all claims and other liabilities which are self-insured by the Borrowers;

 

53

 

(ix)           Customer Refunds (an Availability
Reserve): An amount equal to one hundred percent (100%) of the amount of all
outstanding customer refund checks as reflected in the Borrowers’ books and
records; and

 

(x)            Consignment Payables (an
Availability Reserve): An amount equal to one hundred percent (100%) of the
amount of all outstanding accounts payable owing to any consignment vendor.

 

(c)           The Administrative Agent shall have
the right, at any time and from time to time after the Closing Date in its
Permitted Discretion, to establish new, or modify or eliminate any existing,
eligibility criteria or Reserves upon two (2) Business Days prior notice
to the Lead Borrower (during which period the Administrative Agent shall be
available to discuss any such proposed changes with the Borrowers at reasonable
times and upon reasonable advance notice); provided  that no such
prior notice shall be required (i) after the occurrence and during the
continuance of a Default or Event of Default or (ii) for (A) changes
to any Reserves resulting solely by virtue of mathematical calculations of the
amount of the Reserve in accordance with the methodology of calculation
previously disclosed and utilized, or (B) changes to any Reserves or the
establishment of additional Reserves if a Material Adverse Effect has occurred
or could reasonably be expected to occur were such Reserves not changed or established
prior to the expiration of such two (2) Business Day period.

 

2.02         Borrowings,
Conversions and Continuations of Committed Loans.

 

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

 

(b)           Each Committed Borrowing, each
conversion of Committed Loans from one Type to the other, and each continuation
of LIBO Rate Loans shall be made upon the Lead Borrower’s irrevocable notice to
the Administrative Agent, which may be given by telephone.  Each such notice must be received by the
Administrative Agent not later than 12:00 noon (i) three (3) Business
Days prior to the requested date of any Borrowing of, conversion to, or
continuation of, LIBO Rate Loans or of any conversion of LIBO Rate Loans to
Prime Rate Loans, and (ii) on the requested date of any Borrowing of Prime
Rate Loans.  Each telephonic notice by
the Lead Borrower pursuant to this Section 2.02(b) must be
confirmed promptly by delivery to the Administrative Agent of a written Committed
Loan Notice or Conversion/Continuation Notice, as the case may be,
appropriately completed and signed by a Responsible Officer of the Lead
Borrower.  Each Borrowing of, conversion
to, or continuation of, LIBO Rate Loans shall be in a principal amount of
$1,000,000 or a whole multiple of $500,000 in excess thereof.  Except as provided in Sections 2.03(c) and
2.04(b), each Borrowing of or conversion to Prime Rate Loans shall be in
a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Each Committed Loan Notice (whether
telephonic or written) shall specify (i) the requested date of the
Borrowing (which shall be a Business 

 

54

 

Day), (ii) the principal amount of Committed Loans to be borrowed,
(iii) the Type of Committed Loans to be borrowed, and (iv) if
applicable, the duration of the Interest Period with respect thereto.  Each Conversion/Continuation Notice (whether
telephonic or written) shall specify (i) whether the Borrowers are
requesting a conversion of Committed Loans from one Type to the other or a
continuation of LIBO Rate Loans, (ii) the requested date of the conversion
or continuation, as the case may be (which shall be a Business Day), (iii) the
principal amount of Committed Loans to be converted or continued, (iv) the
Type of Committed Loans to which existing Committed Loans are to be converted,
and (v) if applicable, the duration of the Interest Period with respect
thereto.  If the Lead Borrower fails to
specify a Type of Committed Loan in a Committed Loan Notice or if the Lead
Borrower fails to give a timely notice of a conversion or continuation in a
Conversion/Continuation Notice, then the applicable Committed Loans shall be
made as, or converted to, Prime Rate Loans. 
Any such automatic conversion to Prime Rate Loans shall be effective as
of the last day of the Interest Period then in effect with respect to the
applicable LIBO Rate Loans.  If the Lead
Borrower requests a Borrowing of LIBO Rate Loans in any such Committed Loan
Notice or a conversion to, or continuation of, LIBO Rate Loans in a
Conversion/Continuation Notice, but fails to specify an Interest Period, it
will be deemed to have specified an Interest Period of one month.  Notwithstanding anything to the contrary
herein, a Swing Line Loan may not be converted to a LIBO Rate Loan.

 

(c)           Following receipt of a Committed Loan
Notice, the Administrative Agent shall promptly notify each Lender of the
amount of its Applicable Percentage of the applicable Committed Loans, and if
no timely notice of a conversion or continuation in a Conversion/Continuation
Notice is provided by the Lead Borrower, the Administrative Agent shall notify
each Lender of the details of any automatic conversion to Prime Rate Loans
described in Section 2.02(b). 
In the case of a Committed Borrowing, each Lender shall make the amount
of its Committed Loan available to the Administrative Agent in immediately
available funds at the Administrative Agent’s Office not later than 2:00 p.m.
on the Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable
conditions set forth in Section 4.02 (and, if such Borrowing is the
initial Credit Extension, Section 4.01), the Administrative Agent
shall make all funds so received from each Lender available to the Borrowers in
like funds by no later than 4:00 p.m. on the day of receipt by the
Administrative Agent either by (i) crediting the account of the Lead
Borrower on the books of Bank of America with the amount of such funds or (ii) wire
transfer of such funds, in each case in accordance with instructions provided
to (and reasonably acceptable to) the Administrative Agent by the Lead
Borrower; provided, however, that if, on the date the Committed
Loan Notice with respect to such Borrowing is given by the Lead Borrower, there
are L/C Borrowings outstanding, then the proceeds of such Borrowing, first,
shall be applied to the payment in full of any such L/C Borrowings, and, second,
shall be made available to the Borrowers as provided above.

 

(d)           The Administrative Agent, without the
request of the Lead Borrower, may advance (i) any interest or fee payable
pursuant to Sections 2.03(i) and 2.09, to which any Credit
Party is entitled from the Loan Parties pursuant hereto or any other Loan
Document, as and when due and payable, and (ii) may advance any other
payments for 

 

55

 

which the Loan Parties are responsible
pursuant hereto or any other Loan Document to the extent the same have not been
paid by the Loan Parties within ten (10) days after notice thereof from
the Administrative Agent (provided  that, if an Event of Default has
occurred and is continuing, no such prior notice shall be required), and, in
each case, may charge the same to the Loan Account notwithstanding that an
Overadvance may result thereby.  Unless
prior notice is required and provided pursuant to the immediately preceding
sentence, the Administrative Agent shall advise the Lead Borrower of any such
advance or charge promptly after the making thereof.  Such action on the part of the Administrative
Agent shall not constitute a waiver of the Administrative Agent’s rights and
the Borrowers’ obligations under Section 2.05.  Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2.02(d) shall
bear interest at the interest rate then and thereafter applicable to Prime Rate
Loans.

 

(e)                                  Except
as otherwise provided herein, a LIBO Rate Loan may be continued or converted
only on the last day of an Interest Period for such LIBO Rate Loan.  During the existence of an Event of Default,
no Loans may be requested as, converted to, or continued as, LIBO Rate Loans
without the Consent of the Required Lenders.

 

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

 

(g)                                 After
giving effect to all Committed Borrowings, all conversions of Committed Loans
from one Type to the other, and all continuations of Committed Loans as the
same Type, there shall not be more than seven (7) Interest Periods in
effect with respect to Committed Loans.

 

(h)                                 The Administrative
Agent, the Lenders, the Swing Line Lender and the L/C Issuer shall have no
obligation to make any Loan or to provide any Letter of Credit if an
Overadvance would result.  The Administrative
Agent may, in its discretion, make Permitted Overadvances without the consent
of the Lenders, the Swing Line Lender and the L/C Issuer and each Lender shall
be bound thereby.  Any Permitted
Overadvance may constitute a Swing Line Loan. A Permitted Overadvance is for
the account of the Borrowers and shall constitute a Loan and an Obligation and
shall be repaid by the Borrowers in accordance with the provisions of Section 2.05(c).  The making of any such Permitted Overadvance
on any one occasion shall not obligate the Administrative Agent or any Lender
to make or permit any Permitted Overadvance on any other occasion or to permit
such Permitted Overadvances to remain outstanding. The making by the
Administrative Agent of a Permitted Overadvance shall not modify or abrogate
any of the provisions of Section 2.03 regarding the Lenders’
obligations to purchase participations with respect to Letters of Credit or of Section 2.04
regarding the Lenders’ obligations to purchase participations with respect to
Swing Line Loans.  The Administrative
Agent shall have no liability for, and no Loan Party or Credit Party shall have
the right to, or shall, bring any claim of any kind whatsoever against the
Administrative Agent with

 

56

 

respect to “inadvertent Overadvances” (i.e.
where an Overadvance results from changed circumstances beyond the control of
the Administrative Agent (such as a reduction in the collateral value))
regardless of the amount of any such Overadvance(s).

 

2.03                           Letters
of Credit.

 

(a)                                  The
Letter of Credit Commitment.

 

(i)                                     Subject
to the terms and conditions set forth herein, (A) the L/C Issuer agrees,
in reliance upon the agreements of the Lenders set forth in this Section 2.03,
(1) from time to time on any Business Day during the period from the
Closing Date until the Letter of Credit Expiration Date, to issue Letters of
Credit for the account of the Borrowers, and to amend or extend Letters of
Credit previously issued by it, in accordance with Section 2.03(b) below,
and (2) to honor drawings under the Letters of Credit, and (B) the
Lenders severally agree to participate in Letters of Credit issued for the
account of the Borrowers and any drawings thereunder; provided  that,
after giving effect to any L/C Credit Extension with respect to any Letter of
Credit, (x) the Total Outstandings shall not exceed the Loan Cap, (y) the
aggregate Outstanding Amount of the Committed Loans of any Lender, plus
such Lender’s Applicable Percentage of the Outstanding Amount of all L/C
Obligations, plus such Lender’s Applicable Percentage of the Outstanding
Amount of all Swing Line Loans shall not exceed such Lender’s Commitment, and (z) the
Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit
Sublimit.  Each request by the Lead
Borrower for the issuance or amendment of a Letter of Credit shall be deemed to
be a representation by the Borrowers that the L/C Credit Extension so requested
complies with the conditions set forth in the proviso to the preceding
sentence.  Within the foregoing limits,
and subject to the terms and conditions hereof, the Borrowers’ ability to
obtain Letters of Credit shall be fully revolving, and accordingly the
Borrowers may, during the foregoing period, obtain Letters of Credit to replace
Letters of Credit that have expired or that have been drawn upon and
reimbursed.

 

(ii)                                  The
L/C Issuer shall not issue any Letter of Credit, if:

 

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

 

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

 

(C)                                the
expiry date of such requested Letter of Credit would occur after the Letter of
Credit Expiration Date, unless either (x) such 

 

57

 

Letter of Credit is Cash
Collateralized or otherwise secured by back-to-back letters of credit from an
issuing bank reasonably acceptable to the L/C Issuer and the Administrative
Agent and upon terms and conditions reasonably acceptable to the L/C Issuer and
the Administrative Agent on or prior to the Letter of Credit Expiration Date or
(y) all the Lenders have approved such expiry date.

 

(iii)                               The
L/C Issuer shall not issue any Letter of Credit without the prior consent of
the Administrative Agent if:

 

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

 

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

 

(C)                                except
as otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter
of Credit is in an initial Stated Amount less than $100,000;

 

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

 

(E)                                 such
Letter of Credit contains any provisions for automatic reinstatement of the
Stated Amount after any drawing thereunder; or

 

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

 

58

 

(iv)                              The
L/C Issuer shall not amend any Letter of Credit if the L/C Issuer would not be
permitted at such time to issue such Letter of Credit in its amended form under
the terms hereof or if the beneficiary of such Letter of Credit does not accept
the proposed amendment to such Letter of Credit.

 

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

 

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

 

(i)                                     Each
Letter of Credit shall be issued or amended, as the case may be, upon the
request of the Lead Borrower delivered to the L/C Issuer (with a copy to the
Administrative Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Responsible Officer of the Lead Borrower.  Such Letter of Credit Application must be
received by the L/C Issuer and the Administrative Agent not later than 1:00 p.m.
at least two Business Days (or such other date and time as the Administrative
Agent and the L/C Issuer may agree in a particular instance in their sole
discretion) prior to the proposed issuance date or date of amendment, as the
case may be.  In the case of a request
for an initial issuance of a Letter of Credit, such Letter of Credit Application
shall specify in form and detail reasonably satisfactory to the L/C Issuer: (A) the
proposed issuance date of the requested Letter of Credit (which shall be a
Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the
name and address of the beneficiary thereof; (E) the documents to be
presented by such beneficiary in case of any drawing thereunder; (F) the
full text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; (G) the identity of the Borrower for the account of
which such Letter of Credit is requested to be issued; and (H) such other
matters as the L/C Issuer may reasonably require.  In the case of a request for an amendment of
any outstanding Letter of Credit, such Letter of Credit Application shall
specify in form and detail reasonably satisfactory to the L/C Issuer: (A) the
Letter of Credit to be amended; (B) the proposed date of amendment thereof
(which shall be a Business Day); (C) the nature of the proposed amendment;
and (D) such other matters as the L/C Issuer may reasonably require.  Additionally, the Lead Borrower shall furnish
to the L/C Issuer and the Administrative Agent such other documents and
information pertaining to such requested Letter of Credit issuance or amendment,
including any Issuer Documents, as the L/C Issuer or the Administrative Agent
may reasonably require.

 

59

 

(ii)                                  Promptly
after receipt of any Letter of Credit Application, the L/C Issuer will confirm
with the Administrative Agent (by telephone or in writing) that the
Administrative Agent has received a copy of such Letter of Credit Application
from the Lead Borrower and, if not, the L/C Issuer will provide the
Administrative Agent with a copy thereof. 
Unless the L/C Issuer has received written notice from any Lender, the
Administrative Agent or any Loan Party, at least one Business Day prior to the
requested date of issuance or amendment of the applicable Letter of Credit,
that one or more applicable conditions contained in Article IV
shall not then be satisfied, then, subject to the terms and conditions hereof,
the L/C Issuer shall, on the requested date, issue a Letter of Credit for the
account of the applicable Borrower or enter into the applicable amendment, as
the case may be, in each case in accordance with the L/C Issuer’s usual and
customary business practices. 
Immediately upon the issuance or amendment of each Letter of Credit,
each Lender shall be deemed to (without any further action), and hereby
irrevocably and unconditionally agrees to, purchase from the L/C Issuer,
without recourse or warranty, a risk participation in such Letter of Credit in
an amount equal to the product of such Lender’s Applicable Percentage times
the amount of such Letter of Credit. 
Upon any change in the Commitments under this Agreement, it is hereby
agreed that with respect to all L/C Obligations, there shall be an automatic
adjustment to the participations hereby created to reflect the new Applicable
Percentages of the assigning and assignee Lenders.

 

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

 

60

 

satisfied, and in each such case directing
the L/C Issuer not to permit such extension.

 

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

 

(c)                                  Drawings
and Reimbursements; Funding of Participations.

 

(i)                                     Upon
receipt from the beneficiary of any Letter of Credit of any notice of a drawing
under such Letter of Credit, the L/C Issuer shall notify the Lead Borrower and
the Administrative Agent thereof; provided, however, that any
failure to give or delay in giving such notice shall not relieve the Borrowers
of their obligation to reimburse the L/C Issuer and the Lenders with respect to
any such payment.  If the L/C Issuer
notifies the Lead Borrower of any such notice of a drawing not later than 12:00
noon on the date of any payment by the L/C Issuer under a Letter of Credit
(each such date, an “Honor Date”), the Borrowers shall reimburse the L/C
Issuer through the Administrative Agent on the same day in an amount equal to
the amount of such drawing.  If the L/C
Issuer notifies the Lead Borrower of any such notice of a drawing later than
12:00 noon on any Honor Date, the Borrowers shall reimburse the L/C Issuer
through the Administrative Agent by 3:00 p.m. on the next day in an amount
equal to the amount of such drawing and such extension of time shall be
reflected in computing fees in respect of any such Letter of Credit.  If the Borrowers fail to so reimburse the L/C
Issuer by such time, the Administrative Agent shall promptly notify each Lender
of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed
Amount”), and the amount of such Lender’s Applicable Percentage
thereof.  In such event, the Borrowers
shall be deemed to have requested a Committed Borrowing of Prime Rate Loans to
be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount,
without regard to the minimum and multiples specified in Section 2.02
for the principal amount of Prime Rate Loans, but subject to the amount of the
unutilized portion of the Aggregate Commitments and the conditions set forth in
Section 4.02 (other than the delivery of a Committed Loan
Notice).  Any notice given by the L/C
Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may
be given by telephone if immediately confirmed in writing; provided  that
the lack of such an immediate confirmation shall not affect the conclusiveness
or binding effect of such notice.

 

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

 

61

 

shall be deemed to have made a Prime Rate
Loan to the Borrowers in such amount. 
The Administrative Agent shall remit the funds so received to the L/C
Issuer.

 

(iii)                               With
respect to any Unreimbursed Amount that is not fully refinanced by a Committed
Borrowing of Prime Rate Loans because the conditions set forth in Section 4.02
cannot be satisfied or for any other reason, the Borrowers shall be deemed to
have incurred from the L/C Issuer an L/C Borrowing in the amount of the Unreimbursed
Amount that is not so refinanced, which L/C Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the Default
Rate.  In such event, each Lender’s
payment to the Administrative Agent for the account of the L/C Issuer pursuant
to Section 2.03(c)(i) shall be deemed payment in respect of
its participation in such L/C Borrowing and shall constitute an L/C Advance
from such Lender in satisfaction of its participation obligation under this Section 2.03.

 

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

 

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

 

(vi)                              If
any Lender fails to make available to the Administrative Agent for the account
of the L/C Issuer any amount required to be paid by such Lender pursuant to the
foregoing provisions of this Section 2.03(c) by the time
specified in Section 2.03(c)(i), the L/C Issuer shall be entitled
to recover from such Lender (acting through the Administrative Agent), on
demand, such amount with interest thereon for the period from the date such
payment is required to the date on which such payment is immediately available
to the L/C Issuer at a rate per annum equal to the greater of the Federal Funds
Rate and a rate determined by the L/C Issuer in accordance with banking
industry rules on interbank compensation plus any administrative,
processing or similar fees customarily charged by the L/C Issuer

 

62

 

in connection with the foregoing.  If such Lender pays such amount (with
interest and fees as aforesaid), the amount so paid shall constitute such
Lender’s Committed Loan included in the relevant Committed Borrowing or L/C
Advance in respect of the relevant L/C Borrowing, as the case may be.  A certificate of the L/C Issuer submitted to
any Lender (through the Administrative Agent) with respect to any amounts owing
under this clause (vi) shall be conclusive absent manifest error.

 

(d)                                 Repayment
of Participations.

 

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

 

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

 

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

 

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

 

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

 

63

 

contemplated hereby or by such Letter of
Credit or any agreement or instrument relating thereto, or any unrelated
transaction;

 

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

 

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

 

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

 

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

 

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

 

(f)                                    Role
of L/C Issuer.  Each Lender and the
Borrowers agree that, in paying any drawing under a Letter of Credit, the L/C
Issuer shall not have any responsibility to obtain any document (other than any
sight draft, certificates and documents expressly required by the Letter of
Credit) or to ascertain or inquire as to the validity or accuracy of any such
document or the authority of the Person executing or delivering any such
document.  None of the L/C Issuer, the
Administrative Agent, any of their respective Related Parties nor any
correspondent, participant or permitted assignee of the L/C Issuer shall be
liable to any Lender for (i) any action taken or omitted in connection
herewith at the request or with the approval of the Lenders or the Required
Lenders, as applicable; (ii) any action taken or omitted in the absence of
gross negligence or willful misconduct; (iii) any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit or any error in
interpretation of technical terms; or (iv) the due execution,
effectiveness, validity or enforceability of any document or instrument related
to any Letter of Credit or Issuer Document. 
The Borrowers hereby assume all risks of the acts or omissions of any 

 

64

 

beneficiary or transferee with respect to its
use of any Letter of Credit; provided, however, that this
assumption is not intended to, and shall not, preclude the Borrowers’ pursuing
such rights and remedies as it may have against the beneficiary or transferee
at law or under any other agreement. 
None of the L/C Issuer, the Administrative Agent, any of their
respective Related Parties nor any correspondent, participant or permitted
assignee of the L/C Issuer shall be liable or responsible for any of the
matters described in clauses (i) through (v) of Section 2.03(e);
provided, however, that anything in such clauses to the contrary
notwithstanding, the Borrowers may have a claim against the L/C Issuer, and the
L/C Issuer may be liable to the Borrowers, to the extent, but only to the
extent, of any direct, as opposed to consequential or exemplary, damages
suffered by the Borrowers which the Borrowers prove were caused by the L/C
Issuer’s willful misconduct or gross negligence or the L/C Issuer’s willful
failure to pay under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with
the terms and conditions of a Letter of Credit. 
In furtherance, and not in limitation, of the foregoing, the L/C Issuer
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary (or the L/C Issuer may refuse to accept and make
payment upon such documents if such documents are not in strict compliance with
the terms of such Letter of Credit), and the L/C Issuer shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason.

 

(g)                                 Cash
Collateral.  Upon the request of the
Administrative Agent, (i) if the L/C Issuer has honored any full or
partial drawing request under any Letter of Credit and such drawing has
resulted in an L/C Borrowing because the conditions set forth in Section 4.02
cannot be satisfied or for any other reason, the Borrowers shall immediately
Cash Collateralize the then Outstanding Amount of such L/C Borrowing, or (ii) if,
as of the Letter of Credit Expiration Date, any L/C Obligation for any reason
remains outstanding, the Borrowers shall immediately Cash Collateralize the
then Outstanding Amount of all L/C Obligations. 
Sections 2.05 and 8.02(c) set forth certain
additional requirements to deliver Cash Collateral hereunder.  For purposes of this Section 2.03,
Section 2.05 and Section 8.02(c), “Cash
Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances in an
amount equal to one hundred three percent (103%) of the Outstanding Amount of
all L/C Obligations, pursuant to documentation in form and substance reasonably
satisfactory to the Administrative Agent and the L/C Issuer (which documents
are hereby Consented to by the Lenders). 
Derivatives of such term have corresponding meanings.  The Borrowers hereby grant to the Collateral
Agent, for the benefit of the Credit Parties, a security interest in all such
cash, deposit accounts and all balances therein and all proceeds of the
foregoing.  Cash Collateral shall be
maintained in the Cash Collateral Account. 
If, at any time, the Administrative Agent determines that any funds held
as Cash Collateral are subject to any right or claim of any Person other than
the Administrative Agent or that the total amount of such funds is less than
the aggregate Outstanding Amount of all L/C Obligations, the Borrowers will,
forthwith upon demand by the Administrative Agent, pay to the Administrative
Agent, as additional funds to be deposited as Cash Collateral, 

 

65

 

an amount equal to the excess of (x) such
aggregate Outstanding Amount over (y) the total amount of funds, if any,
then held as Cash Collateral that the Administrative Agent determines to be
free and clear of any such right and claim. 
Upon the drawing of any Letter of Credit for which funds are on deposit
as Cash Collateral, such funds shall be applied, to the extent permitted under
applicable Laws, to reimburse the L/C Issuer and, to the extent not so applied,
shall thereafter be applied to satisfy other Obligations then due and payable.

 

(h)                                 Applicability
of ISP and UCP.  Unless otherwise
expressly agreed by the L/C Issuer and the Lead Borrower when a Letter of
Credit is issued, (i) the rules of the ISP shall apply to each
Standby Letter of Credit, and (ii) the rules of the Uniform Customs
and Practice for Documentary Credits, as most recently published by the
International Chamber of Commerce at the time of issuance shall apply to each
Commercial Letter of Credit.

 

(i)                                     Letter
of Credit Fees.  The Borrowers shall pay
to the Administrative Agent for the account of each Lender in accordance with
its Applicable Percentage a Letter of Credit fee (the “Letter of Credit Fee”)
for each Letter of Credit equal the Applicable Margin for LIBO Rate Loans multiplied
by the daily Stated Amount under such Letter of Credit (whether or not such
maximum amount is then in effect under such Letter of Credit).  For purposes of computing the daily amount
available to be drawn under any Letter of Credit, the amount of the Letter of
Credit shall be determined in accordance with Section 1.06.  Letter of Credit Fees shall be (i) due
and payable on the first Business Day after the end of each calendar quarter,
commencing with the first such date to occur after the issuance of such Letter
of Credit, on the Letter of Credit Expiration Date and thereafter on demand,
and (ii) computed on a quarterly basis in arrears.  If there is any change in the Applicable
Margin during any quarter, the daily amount available to be drawn under of each
Letter of Credit shall be computed and multiplied by the Applicable Margin
separately for each period during such quarter that such Applicable Margin was
in effect.  Notwithstanding anything to
the contrary contained herein, while any Event of Default exists, the Administrative
Agent may, and upon the request of the Required Lenders shall, notify the Lead
Borrower that all Letter of Credit Fees shall accrue at the Default Rate and
thereafter such Letter of Credit Fees shall accrue at the Default Rate to the
fullest extent permitted by applicable Laws.

 

(j)                                     Fronting
Fee and Documentary and Processing Charges Payable to L/C Issuer.  The Borrowers shall pay directly to the L/C
Issuer for its own account a fronting fee (the “Fronting Fee”) with
respect to each Letter of Credit at a rate equal to 0.125% per annum, computed
on the daily amount available to be drawn under such Letter of Credit and
payable on a quarterly basis in arrears. 
Such fronting fees shall be due and payable on the first Business Day
after the end of each calendar quarter, commencing with the first such date to
occur after the issuance of such Letter of Credit, on the Letter of Credit
Expiration Date and thereafter on demand.  
For purposes of computing the daily amount available to be drawn under
any Letter of Credit, the amount of the Letter of Credit shall be determined in
accordance with Section 1.06. 
In addition, the Borrowers shall pay directly to the L/C Issuer, for its
own account, the customary issuance, presentation, amendment and other processing
fees, and other standard costs

 

66

 

and charges, of the L/C Issuer relating to
letters of credit as from time to time in effect.  Such customary fees and standard costs and
charges are due and payable on demand and are nonrefundable.

 

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

 

2.04                           Swing
Line Loans.

 

(a)                                  The
Swing Line.  Subject to the terms and
conditions set forth herein, the Swing Line Lender may, in its discretion and
in reliance upon the agreements of the other Lenders set forth in this Section 2.04,
make loans (each such loan, a “Swing Line Loan”) to the Borrowers from
time to time on any Business Day during the Availability Period in an aggregate
amount not to exceed at any time outstanding the amount of the Swing Line
Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated
with the Applicable Percentage of the Outstanding Amount of Committed Loans and
L/C Obligations of the Lender acting as Swing Line Lender, may exceed the
amount of such Lender’s Commitment; provided, however, that after
giving effect to any Swing Line Loan, (i) the Total Outstandings shall not
exceed the Loan Cap, and (ii) the aggregate Outstanding Amount of the
Committed Loans of any Lender at such time, plus such Lender’s
Applicable Percentage of the Outstanding Amount of all L/C Obligations at such
time, plus such Lender’s Applicable Percentage of the Outstanding Amount
of all Swing Line Loans at such time shall not exceed such Lender’s Commitment,
and provided, further, that the Borrowers shall not use the
proceeds of any Swing Line Loan to refinance any outstanding Swing Line
Loan.  Within the foregoing limits, and
subject to the other terms and conditions hereof, the Borrowers may borrow
under this Section 2.04, prepay under Section 2.05, and
reborrow under this Section 2.04. 
Each Swing Line Loan shall bear interest only at a rate based on the
Prime Rate.  Immediately upon the making
of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably
and unconditionally agrees to, purchase from the Swing Line Lender a risk
participation in such Swing Line Loan in an amount equal to the product of such
Lender’s Applicable Percentage times the amount of such Swing Line Loan.

 

(b)                                 Borrowing
Procedures.  Each Swing Line
Borrowing shall be made upon the Lead Borrower’s irrevocable notice to the
Swing Line Lender and the Administrative Agent, which may be given by
telephone. Each such notice must be received by the Swing Line Lender and the
Administrative Agent not later than 1:00 p.m. on the requested borrowing
date, and shall specify (i) the amount to be borrowed, which shall be a
minimum of $500,000, and (ii) the requested borrowing date, which shall be
a Business Day.  Each such telephonic
notice must be confirmed promptly by delivery to the Swing Line Lender and the
Administrative Agent of a written Swing Line Loan Notice, appropriately
completed and signed by a Responsible Officer of the Lead Borrower.  Promptly after receipt by the Swing Line
Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will
confirm with the Administrative Agent (by 

 

67

 

telephone or in writing) that
the Administrative Agent has also received such Swing Line Loan Notice and, if
not, the Swing Line Lender will notify the Administrative Agent (by telephone
or in writing) of the contents thereof. 
Unless the Swing Line Lender has received notice (by telephone or in
writing) from the Administrative Agent at the request of the Required Lenders
prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing
the Swing Line Lender not to make such Swing Line Loan as a result of the
limitations set forth in the proviso to the first sentence of Section 2.04(a),
or (B) that one or more of the applicable conditions specified in Article IV
is not then satisfied, then, subject to the terms and conditions hereof, the
Swing Line Lender may, in its discretion, not later than 3:00 p.m. on the
borrowing date specified in such Swing Line Loan Notice, make the amount of its
Swing Line Loan available to the Borrowers at its office by crediting the
account of the Lead Borrower on the books of the Swing Line Lender in immediately
available funds.

 

(c)                                  Refinancing
of Swing Line Loans.

 

(i)                                     The
Swing Line Lender, at any time in its sole and absolute discretion, may
request, on behalf of the Borrowers (which hereby irrevocably authorize the
Swing Line Lender to so request on their behalf), that each Lender make a Prime
Rate Loan in an amount equal to such Lender’s Applicable Percentage of the
amount of Swing Line Loans then outstanding. 
Such request shall be made in writing (which written request shall be
deemed to be a Committed Loan Notice for purposes hereof) and in accordance
with the requirements of Section 2.02, without regard to the
minimum and multiples specified therein for the principal amount of Prime Rate
Loans, but subject to the unutilized portion of the Aggregate Commitments and
the conditions set forth in Section 4.02.  The Swing Line Lender shall furnish the Lead
Borrower with a copy of the applicable Committed Loan Notice promptly after
delivering such notice to the Administrative Agent.  Each Lender shall make an amount equal to its
Applicable Percentage of the amount specified in such Committed Loan Notice
available to the Administrative Agent in immediately available funds for the account
of the Swing Line Lender at the Administrative Agent’s Office not later than
1:00 p.m. on the day specified in such Committed Loan Notice, whereupon,
subject to Section 2.04(c)(ii), each Lender that so makes funds
available shall be deemed to have made a Prime Rate Loan to the Borrowers in
such amount.  The Administrative Agent
shall remit the funds so received to the Swing Line Lender.

 

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

 

(iii)                               If
any Lender fails to make available to the Administrative Agent for the account
of the Swing Line Lender any amount required to be paid by such Lender pursuant
to the foregoing provisions of this Section 2.04(c) by the
time specified in Section 2.04(c)(i), the Swing Line Lender shall
be entitled to recover 

 

68

 

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

 

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

 

(d)                                 Repayment
of Participations.

 

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

 

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

 

69

 

Lenders under this clause shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

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

 

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

 

2.05                           Prepayments.

 

(a)                                  The
Borrowers may, upon irrevocable notice from the Lead Borrower to the
Administrative Agent, at any time or from time to time voluntarily prepay
Committed Loans in whole or in part, without premium or penalty, provided
that (i) such notice must be received by the Administrative Agent
not later than 1:00 p.m. (A) three Business Days prior to any date of
prepayment of LIBO Rate Loans and (B) on the date of prepayment of Prime
Rate Loans; (ii) any prepayment of LIBO Rate Loans shall be in a principal
amount of $1,000,000 or a whole multiple of $500,000 in excess thereof; and (iii) any
prepayment of Prime Rate Loans shall be in a principal amount of $500,000 or a
whole multiple of $100,000 in excess thereof or, in each case, if less, the
entire principal amount thereof then outstanding.  Each such notice shall specify the date and
amount of such prepayment and the Type(s) of Loans to be prepaid and, if
LIBO Rate Loans, the Interest Period(s) of such Loans.  The Administrative Agent will promptly notify
each Lender of its receipt of each such notice, and of the amount of such
Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Lead Borrower,
the Borrowers shall make such prepayment and the payment amount specified in
such notice shall be due and payable on the date specified therein.  Any prepayment of a LIBO Rate Loan shall be
accompanied by all accrued interest on the amount prepaid, together with any
additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the
Committed Loans of the Lenders in accordance with their respective Applicable
Percentages.  Notwithstanding anything to
the contrary contained herein, the Borrowers may rescind any notice of
prepayment provided pursuant to this Section 2.05(a) if such
prepayment would have resulted from a refinancing of all of the Loans
hereunder, which refinancing shall not have been consummated or shall otherwise
have been delayed.

 

(b)                                 The
Borrowers may, upon irrevocable notice from the Lead Borrower to the Swing Line
Lender (with a copy to the Administrative Agent), at any time or from time to
time, voluntarily prepay Swing Line Loans in whole or in part without premium
or penalty; provided  that (i) such notice must be received
by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m.
on the date of the prepayment, and (ii) any such prepayment shall be in a
minimum principal amount of $100,000. 
Each such notice shall specify the date and amount of such
prepayment.  If such notice is given by 

 

70

 

the Lead Borrower, the
Borrowers shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein.  Notwithstanding anything to the contrary
contained herein, the Borrowers may rescind any notice of prepayment provided
pursuant to this Section 2.05(b) if such prepayment would have
resulted from a refinancing of all of the Loans hereunder, which refinancing
shall not have been consummated or shall otherwise have been delayed.

 

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

 

(d)                                 The
Borrowers shall pay to the Administrative Agent, on the first day of each
Clean-down Period, an amount equal to the amount by which (A) the aggregate principal amount of all
Committed Loans, L/C Borrowings and Swing Line Loans outstanding on such day exceeds
(B) $45,000,000 and shall not thereafter request Committed Loans and/or
Swing Line Loans hereunder if such request would cause the aggregate principal amount of all Committed
Loans, L/C Borrowings and Swing Line Loans to exceed $45,000,000 at any
time during such Clean-down Period.

 

(e)                                  After
the occurrence and during the continuance of a Cash Dominion Event, the
Borrowers shall prepay the Loans in accordance with the provisions of Section 6.13
hereof.  In addition, any Net Proceeds
received by a Loan Party upon the occurrence of a Prepayment Event,
irrespective of whether or not a Cash Dominion Event then exists and is
continuing, shall be paid over to the Administrative Agent on receipt by the
Loan Parties and shall be utilized to prepay the Loans in the order of priority
set forth in Section 2.05(f). 
The application of such Net Proceeds to the Loans shall not reduce the Commitments.  If all Obligations then due are paid, any
excess Net Proceeds shall be remitted to the operating account of the Borrowers
maintained with the Administrative Agent or such other account as the Lead
Borrower may designate.

 

(f)                                    Prepayments
made pursuant to this Section 2.05, first, shall be applied
ratably to the L/C Borrowings and the Swing Line Loans, second, shall be
applied ratably to the outstanding Committed Loans (without any reduction in
the Commitments), third, shall be used to Cash Collateralize the
remaining L/C Obligations to the extent required pursuant to Section 2.03(g),
and, fourth, the amount remaining, if any, after the prepayment in full
of all L/C Borrowings, Swing Line Loans and Committed Loans outstanding at such
time and the Cash Collateralization of the remaining L/C Obligations in full
may be retained by the Borrowers for use in the ordinary course of its
business.  Upon the drawing of any Letter
of Credit that has been Cash Collateralized, the funds held as Cash Collateral
shall be applied (without any further action by or notice to or from the
Borrowers or any other Loan Party) to reimburse the L/C Issuer or the Lenders,
as applicable.

 

71

 

2.06                           Termination
or Reduction of Commitments.

 

(a)                                  The
Borrowers may, upon irrevocable notice from the Lead Borrower to the
Administrative Agent, terminate the Aggregate Commitments, the Letter of Credit
Sublimit or the Swing Line Sublimit or from time to time permanently reduce the
Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line
Sublimit; provided  that (i) any such notice shall be
received by the Administrative Agent not later than 1:00 p.m. five
Business Days prior to the date of termination or reduction, (ii) any such
partial reduction shall be in an aggregate amount of $5,000,000 or any whole
multiple of $1,000,000 in excess thereof, and (iii) the Borrowers shall
not terminate or reduce (A) the Aggregate Commitments if, after giving
effect thereto and to any concurrent prepayments hereunder, the Total
Outstandings would exceed the Aggregate Commitments, (B) the Letter of
Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C
Obligations not fully Cash Collateralized hereunder would exceed the Letter of
Credit Sublimit, and (C) the Swing Line Sublimit if, after giving effect
thereto, and to any concurrent payments hereunder, the Outstanding Amount of
Swing Line Loans hereunder would exceed the Swing Line Sublimit.  Notwithstanding anything to the contrary
contained herein, the Borrowers may rescind any notice of termination or
reduction provided pursuant to this Section 2.06(a) if such
termination or reduction would have resulted from a refinancing of all of the
Loans hereunder, which refinancing shall not have been consummated or shall
otherwise have been delayed.

 

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

 

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

 

2.07                           Repayment
of Loans.

 

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

 

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

 

2.08                           Interest.

 

(a)                                  Subject
to the provisions of Section 2.08(b) below, (i) each LIBO
Rate Loan shall bear interest on the outstanding principal amount thereof for
each Interest 

 

72

 

Period at a rate per annum
equal to the LIBO Rate for such Interest Period plus the Applicable
Margin; (ii) each Prime Rate Loan shall bear interest on the outstanding
principal amount thereof from the applicable borrowing date at a rate per annum
equal to the Prime Rate plus the Applicable Margin; and (iii) each
Swing Line Loan shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date at a rate per annum equal to the Prime Rate plus
the Applicable Margin.

 

(b)                                 (i)                                     If
any amount payable under any Loan Document is not paid when due (after giving
effect to any applicable grace periods), whether at stated maturity, by acceleration
or otherwise, such amount shall thereafter bear interest at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Laws.

 

(ii)                                  If
any other Event of Default exists, then the Administrative Agent may, and upon
the request of the Required Lenders shall, notify the Lead Borrower that all
outstanding Obligations (other than any Other Liabilities) shall thereafter
bear interest at a fluctuating interest rate per annum at all times equal to
the Default Rate and thereafter such Obligations shall bear interest at the
Default Rate to the fullest extent permitted by applicable Laws.

 

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

 

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

 

2.09                           Fees.  In addition to
certain fees described in clauses (i) and (j) of Section 2.03:

 

(a)                                  Commitment
Fee.  The Borrowers shall pay to the
Administrative Agent for the account of each Lender in accordance with its
Applicable Percentage, a commitment fee (the “Commitment Fee”) based
upon the average daily outstanding Credit Extensions (excluding Swing Line
Loans) for the most recent Fiscal Quarter ended immediately preceding the
applicable payment date equal to the percentages set forth in the grid below times
the actual daily amount by which the Aggregate Commitments exceed the Total
Outstandings.

 

	
  Level

  	
   

  	
  Average Daily 

  Outstanding 

  Credit Extensions

  	
   

  	
  Commitment

  Fee

  	
   

  
	
  I

  	
   

  	
  Less than 33% of Aggregate Commitments

  	
   

  	
  0.75

  	
  %

  

 

73

 

	
  II

  	
   

  	
  Greater than or equal to 33% but less than 66% of Aggregate
  Commitments

  	
   

  	
  0.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  Greater than or equal to 66% of Aggregate Commitments

  	
   

  	
  0.375

  	
  %

  

 

The Commitment Fee shall accrue at all times
during the Availability Period, including at any time during which one or more
of the conditions in Article IV is not met, and shall be due and
payable monthly in arrears on the last Business Day of each calendar month,
commencing with the first such date to occur after the Closing Date, and on the
last day of the Availability Period; provided  that any Commitment
Fee accrued with respect to the Commitment of a Defaulting Lender during the
period prior to the time that such Lender became a Defaulting Lender and unpaid
at such time shall not be payable by the Borrowers so long as such Lender shall
remain a Defaulting Lender, except to the extent that such Commitment Fee shall
otherwise have been due and payable by the Borrowers prior to such time; provided
further that no Commitment Fee shall accrue on the Commitment of a
Defaulting Lender so long as such Lender shall be a Defaulting Lender.

 

(b)                                 Early
Termination Fee.  In the event that
the Termination Date occurs, for any reason, prior to the Maturity Date, or in
the event that the Borrowers elect to permanently reduce the Aggregate
Commitments pursuant to Section 2.06 hereof, the Borrowers shall
pay to the Administrative Agent, for the ratable benefit of the Lenders, a fee
(the “Early Termination Fee”) in respect of amounts which are or become
payable by reason thereof equal to the following: (i) one and one-half
percent (1.50%) of the Aggregate Commitments then in effect if the Termination
Date or such reduction of the Aggregate Commitments shall occur at any time on
or before the first anniversary of the Closing Date; (ii) one percent
(1.00%) of the Aggregate Commitments then in effect if the Termination Date or
such reduction of the Aggregate Commitments shall occur at any time on or after
first anniversary of the Closing Date but prior to the second anniversary of
the Closing Date; and (iii) one-half of one percent (0.50%) of the
Aggregate Commitments then in effect if the Termination Date or such reduction
of the Aggregate Commitments shall occur at any time on or after second
anniversary of the Closing Date but prior to the third anniversary of the
Closing Date.  There will be no Early
Termination Fee due after the third anniversary of the Closing Date.  All parties to this Agreement agree and
acknowledge that the Lenders will have suffered damages on account of the early
termination of this Agreement or the permanent reduction of the Aggregate
Commitments and that, in view of the difficulty in ascertaining the amount of 

 

74

 

such damages, the Early
Termination Fee constitutes reasonable compensation and liquidated damages to
compensate the Lenders on account thereof.

 

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

 

2.10                           Computation of Interest
and Fees.  All computations of
interest for Prime Rate Loans shall be made on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more fees or interest, as applicable, being paid than if computed on
the basis of a 365-day year).  Interest
shall accrue on each Loan for the day on which the Loan is made, and shall not
accrue on a Loan, or any portion thereof, for the day on which the Loan or such
portion is paid, provided  that any Loan that is repaid on the
same day on which it is made shall, subject to Section 2.12(a),
bear interest for one day.  Each
determination by the Administrative Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest error.

 

2.11                           Evidence
of Debt.

 

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

 

75

 

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

 

2.12                           Payments
Generally; Administrative Agent’s Clawback.

 

(a)                                  General.  All payments to be made by the Borrowers
shall be made without condition or deduction for any counterclaim, defense,
recoupment or setoff.  Except as
otherwise expressly provided herein, all payments by the Borrowers hereunder
shall be made to the Administrative Agent, for the account of the respective
Lenders to which such payment is owed, at the Administrative Agent’s Office in
Dollars and in immediately available funds not later than 2:00 p.m. on the
date specified herein.  The
Administrative Agent will promptly distribute to each Lender its Applicable
Percentage (or other applicable share as provided herein) of such payment in
like funds as received by wire transfer to such Lender’s Lending Office in
accordance with the provisions of Section 2.14.  All payments received by the Administrative
Agent after 2:00 p.m. shall, at the option of the Administrative Agent, be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue.

 

(b)                                 (i)                                     Funding
by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have
received notice from a Lender prior to the proposed date of any Borrowing of
LIBO Rate Loans (or, in the case of any Borrowing of Prime Rate Loans, prior to
12:00 noon on the date of such Borrowing) that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing,
the Administrative Agent may assume that such Lender has made such share
available on such date in accordance with Section 2.02 (or, in the
case of a Borrowing of Prime Rate Loans, that such Lender has made such share
available in accordance with, and at the time required by, Section 2.02)
and may, in reliance upon such assumption, make available to the Borrowers a
corresponding amount.  In such event, if
a Lender has not in fact made its share of the applicable Committed Borrowing
available to the Administrative Agent, then the applicable Lender and the
Borrowers severally agree to pay to the Administrative Agent forthwith on
demand such corresponding amount in immediately available funds with interest
thereon, for each day from and including the date such amount is made available
to the Borrowers to but excluding the date of payment to the Administrative
Agent, at (A) in the case of a payment to be made by such Lender, the
greater of the Federal Funds Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation,
plus any administrative processing or similar fees customarily charged by the
Administrative Agent in connection with the foregoing, and (B) in the case
of a payment to be made by the Borrowers, the interest rate applicable to Prime
Rate Loans.  If the Borrowers and such
Lender shall pay such interest to the Administrative Agent for the same or an
overlapping period, the Administrative Agent shall promptly remit to the
Borrowers the amount of such interest paid by the Borrowers for such
period.  If such 

 

76

 

Lender pays its share of the
applicable Committed Borrowing to the Administrative Agent, then the amount so
paid shall constitute such Lender’s Committed Loan included in such Committed
Borrowing.  Any payment by the Borrowers
shall be without prejudice to any claim the Borrowers may have against a Lender
that shall have failed to make such payment to the Administrative Agent.

 

(ii)                                  Payments
by Borrowers; Clawback by Administrative Agent.  Unless the Administrative Agent shall have
received notice from the Lead Borrower prior to the time at which any payment
is due to the Administrative Agent for the account of the Lenders or the L/C
Issuer hereunder that the Borrowers will not make such payment, the
Administrative Agent may assume that the Borrowers have made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the L/C Issuer, as the case may be, the amount
due.  In such event, if the Borrowers
have not in fact made such payment, then each of the Lenders or the L/C Issuer,
as the case may be, severally agrees to repay to the Administrative Agent
forthwith on demand the amount so distributed to such Lender or the L/C Issuer,
in immediately available funds with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date
of payment to the Administrative Agent, at the greater of the Federal Funds
Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation. 

 

A notice of the Administrative
Agent to any Lender or the Lead Borrower with respect to any amount owing under
this Section 2.12(b) shall be conclusive, absent manifest
error.

 

(c)                                  Failure
to Satisfy Conditions Precedent.  If
any Lender makes available to the Administrative Agent funds for any Loan to be
made by such Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to the Borrowers by the Administrative
Agent because the conditions to the applicable Credit Extension set forth in Article IV
are not satisfied or waived in accordance with the terms hereof, the
Administrative Agent shall return such funds (in like funds as received from
such Lender) to such Lender, without interest.

 

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

 

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

 

77

 

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

 

(a)                                  if
any such participations or subparticipations are purchased and all or any
portion of the payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

 

(b)                                 the
provisions of this Section 2.13 shall not be construed to apply to (x) any
payment made by the Loan Parties pursuant to, and in accordance with, the
express terms of this Agreement or (y) any payment obtained by a Lender as
consideration for the assignment of, or sale of a participation in, any of its
Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to
any Eligible Assignee or Participant.

 

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

 

2.14                           Settlement
Amongst Lenders.

 

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

 

(b)                                 The
Administrative Agent shall deliver to each of the Lenders promptly after a
Settlement Date a summary statement of the amount of outstanding Committed
Loans for the period and the amount of repayments received for the period.  As reflected on the summary statement, (i) the
Administrative Agent shall transfer to each Lender its Applicable Percentage of
repayments, and (ii) each Lender shall transfer to the Administrative
Agent (as provided below) or the Administrative Agent shall transfer to each
Lender, such amounts as are necessary to insure that, after giving effect to
all such transfers, the amount of Committed Loans made by each Lender shall be
equal to such

 

78

 

Lender’s Applicable Percentage of all Committed Loans outstanding as of
such Settlement Date.  If the summary
statement requires transfers to be made to the Administrative Agent by the
Lenders and is received prior to 1:00 p.m. on a Business Day, such
transfers shall be made in immediately available funds no later than 3:00 p.m.
that day; and, if received after 1:00 p.m., then no later than 3:00 p.m.
on the next Business Day. The obligation of each Lender to transfer such funds
is irrevocable, unconditional and without recourse to or warranty by the
Administrative Agent.  If and to the extent
any Lender shall not have so made its transfer to the Administrative Agent,
such Lender agrees to pay to the Administrative Agent, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Administrative Agent, equal to the greater of
the Federal Funds Rate and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation plus any
administrative, processing, or similar fees customarily charged by the
Administrative Agent in connection with the foregoing.

 

2.15                           Increase
in Commitments.

 

(a)                                  Request
for Increase.  Provided no Default or
Event of Default then exists or would arise therefrom, upon notice to the
Administrative Agent (which shall promptly notify the Lenders), the Lead
Borrower may, from time to time, request an increase in the Aggregate
Commitments by an amount (for all such requests) not exceeding $100,000,000 in
the aggregate (each such increase, a “Commitment Increase”); provided
that any such request for a Commitment Increase shall be in a minimum
amount of $25,000,000.  At the time of
sending such notice, the Lead Borrower (in consultation with the Administrative
Agent) shall specify the time period within which each Lender is requested to
respond (which shall in no event be less than ten (10) Business Days from
the date of delivery of such notice to the Lenders).

 

(b)                                 Lender
Elections to Increase.  Each Lender
shall notify the Administrative Agent within such time period whether or not it
agrees to increase its Commitment and, if so, whether by an amount equal to,
greater than, or less than its Applicable Percentage of such requested
Commitment Increase.  Any Lender not
responding within such time period shall be deemed to have declined to increase
its Commitment.

 

(c)                                  Notification
by Administrative Agent; Additional Commitment Lenders.  The Administrative Agent shall notify the
Lead Borrower and each Lender of the Lenders’ responses to each request made
hereunder.  To achieve the full amount of
a requested Commitment Increase and subject to the approval of the
Administrative Agent, the L/C Issuer and the Swing Line Lender (which approvals
shall not be unreasonably withheld), to the extent that the existing Lenders
decline to increase their Commitments, or decline to increase their Commitments
to the amount requested by the Lead Borrower, the Administrative Agent and BAS,
in consultation with the Lead Borrower, will use their commercially reasonable
efforts to arrange for other Eligible Assignees to become a Lender hereunder
and to issue commitments in an amount equal to the amount of the increase in
the Aggregate Commitments requested by the Lead Borrower and not accepted by
the existing Lenders (and the Lead Borrower may also invite additional Eligible
Assignees to become Lenders) (each such Eligible Assignee issuing a

 

79

 

commitment and becoming a Lender, an “Additional Commitment Lender”);
provided,  however,
that without the consent of the Administrative Agent, at no time shall the
Commitment of any Additional Commitment Lender be less than $10,000,000.

 

(d)                                 Effective
Date and Allocations.  If the
Aggregate Commitments are increased in accordance with this Section 2.15,
the Administrative Agent and the Lead Borrower shall determine the effective
date (the “Increase Effective Date”) and the final allocation of such
Commitment Increase.  The Administrative
Agent shall promptly notify the Lead Borrower and the Lenders of the final
allocation of such Commitment Increase and the Increase Effective Date and, on
the Increase Effective Date, (i) the Aggregate Commitments under, and for
all purposes of, this Agreement shall be increased by the aggregate amount of
such Commitment Increase, and (ii) Schedule 2.01 shall be deemed
modified, without further action, to reflect the revised Commitments and
Applicable Percentages of the Lenders.

 

(e)                                  Conditions
to Effectiveness of Commitment Increase. 
As a condition precedent to such Commitment Increase: (i) the Lead
Borrower shall have delivered to the Administrative Agent a certificate of each
Loan Party dated as of the Increase Effective Date signed by a Responsible
Officer of such Loan Party (A) certifying and attaching the resolutions
adopted by such Loan Party approving or consenting to such Commitment Increase,
and (B) in the case of the Borrowers, certifying that, before and after
giving effect to such Commitment Increase, (1) the representations and
warranties contained in Article V and the other Loan Documents are
true and correct in all material respects on and as of the Increase Effective
Date, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they are true and correct
in all material respects as of such earlier date, and except that for purposes
of this Section 2.15, the representations and warranties contained
in subsections (a) and (b) of Section 5.05 shall be
deemed to refer to the most recent statements furnished pursuant to clauses (a) and
(b), respectively, of Section 6.01; (ii) the Borrowers, the
Administrative Agent, and any Additional Commitment Lender shall have executed
and delivered a joinder to the Loan Documents in such form as the
Administrative Agent shall reasonably require; (iii) the Borrowers shall
have paid such fees and other compensation to the Additional Commitment Lenders
as the Lead Borrower, the Administrative Agent and such Additional Commitment
Lenders shall agree; (iv) the Borrowers shall have paid such arrangement
fees to BAS and the Administrative Agent as the Lead Borrower and the
Administrative Agent may agree; (v) the Administrative Agent shall have
adjusted the Average Daily Availability requirements set forth in the
definition of the “Applicable Margin” as it deems appropriate in its reasonable
discretion in order to preserve the original intent of such requirements; (vi) the
Borrowers and the Additional Commitment Lender shall have delivered such other
instruments, documents and agreements as the Administrative Agent may
reasonably have requested; and (vii) no Default or Event of Default shall
have occurred and be continuing.  On each
Increase Effective Date, each of the Lenders having a Commitment prior to such
Increase Effective Date (the “Pre-Increase Lenders”) shall assign to any
Additional Commitment Lender, at the principal amount thereof, such interests
in the Loans and participation interests in L/C Obligations and Swing Line
Loans outstanding on such Increase Effective Date as shall be necessary in
order that, after giving effect to all such

 

80

 

assignments and purchases, such Loans and participation interests in
L/C Obligations and Swing Line Loans will be held by Pre-Increase Lenders and
Additional Commitment Lenders ratably in accordance with their Commitments
after giving effect to such Commitment Increase.

 

(f)                                    Closing
Date Request for Increase.  It is
hereby acknowledged and agreed that, as of the Closing Date, the Lead Borrower
has requested a Commitment Increase in the amount of $50,000,000 (the “Closing
Date Commitment Increase”) and that that the Administrative Agent and BAS,
in consultation with the Lead Borrower, have agreed to use their commercially
reasonable efforts to arrange for one or more Additional Commitment Lenders to
become lenders hereunder and to issue commitments in an amount equal to the
Closing Date Commitment Increase.  It is
hereby further acknowledged and agreed that the conditions precedent to the
effectiveness of the Closing Date Commitment Increase set forth in clauses (i),
(iv), (v) and (vi) of Section 2.15(e) are hereby
waived.

 

(g)                                 Conflicting
Provisions.  This Section 2.15
shall supersede any provisions in Sections 2.13 or 10.01 to the
contrary.

 

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY;

APPOINTMENT OF LEAD BORROWER

 

3.01                           Taxes.

 

(a)                                  Payments
Free of Taxes.  Except as expressly
provided in this Section 3.01, any and all payments by or on
account of any obligation of the Borrowers hereunder or under any other Loan
Document shall be made free and clear of, and without reduction or withholding
for, any Indemnified Taxes or Other Taxes, provided  that, if the
Borrowers shall be required by applicable Law to deduct any Indemnified Taxes
(including any Other Taxes) from such payments, then (i) the sum payable
shall be increased as necessary so that, after making all required deductions
(including deductions applicable to additional sums payable under this Section 3.01),
the Administrative Agent, Lender or L/C Issuer, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) the Borrowers shall make such deductions and (iii) the
Borrowers shall timely pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable Law.

 

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

 

(c)                                  Indemnification
by the Loan Parties.  The Loan
Parties shall indemnify the Administrative Agent, each Lender and the L/C
Issuer, within ten (10) days after demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01)
paid by the Administrative Agent, such Lender or the

 

81

 

L/C Issuer, as the case may be, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to the Lead Borrower by a Lender or the L/C
Issuer (with a copy to the Administrative Agent), or by the Administrative
Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be
presumed correct absent manifest error.

 

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

 

(e)                                  Status
of Lenders.

 

(i)                                     Each
Administrative Agent, Lender and L/C Issuer that is a “United States person”
within the meaning of section 7701(a)(30) of the Code (each, a “U.S. Lender”)
shall deliver to the Administrative Agent and the Lead Borrower two duly
signed, properly completed copies of IRS Form W-9 on or prior to the
Closing Date (or on or prior to the date such Person becomes a party to this
Agreement), certifying that such U.S. Lender is entitled to an exemption from
United States backup withholding tax, or any successor form.  If such U.S. Lender fails to deliver such
forms, then the Administrative Agent may withhold from any payment to such U.S.
Lender an amount equivalent to the applicable backup withholding tax imposed by
the Code.

 

(ii)                                  Any
Foreign Lender that is entitled to an exemption from, or reduction of,
withholding tax under the law of the jurisdiction in which any Borrower is
resident for tax purposes, or any treaty to which such jurisdiction is a party,
with respect to payments hereunder or under any other Loan Document shall
deliver to the Lead Borrower (with a copy to the Administrative Agent), at the
time or times prescribed by applicable Law or reasonably requested by the Lead
Borrower or the Administrative Agent, such properly completed and executed
documentation prescribed by applicable Law as will permit such payments to be
made without withholding or at a reduced rate of withholding.  In addition, any Lender, at the times
prescribed by applicable Law or if requested by the Lead Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by
applicable Law or reasonably requested by the Lead Borrower or the Administrative
Agent as will enable the Lead Borrower or the Administrative Agent to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements.

 

Without limiting the generality of the
foregoing, in the event that any Borrower is resident for tax purposes in the
United States, any Foreign Lender shall deliver to the Lead Borrower and the
Administrative Agent (in such number of copies as shall be

 

82

 

requested by the recipient) on or prior to the date on which such
Foreign Lender becomes a Lender under this Agreement (and from time to time
thereafter upon the request of the Lead Borrower or the Administrative Agent,
but only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:

 

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

 

(B)                                duly completed copies
of Internal Revenue Service Form W-8ECI or successor thereto;

 

(C)                                in the case of a
Foreign Lender claiming the benefits of the exemption for portfolio interest
under section 881(c) of the Code, (x) a certificate to the effect
that such Foreign Lender is not (A) a “bank” within the meaning of section
881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the
Borrowers within the meaning of section 871(h)(3)(B) of the Code, or (C) a
“controlled foreign corporation” within the meaning of section 957(a) of
the Code and (y) duly completed copies of 
Internal Revenue Service Form W-8BEN or successor thereto; or

 

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

 

(f)                                    Treatment
of Certain Refunds.  If the
Administrative Agent, any Lender or the L/C Issuer determines, in its
reasonable discretion, that it has received a refund of any Taxes or Other
Taxes as to which it has been indemnified by the Borrowers or with respect to
which the Borrowers have paid additional amounts pursuant to this Section 3.01,
it shall pay to the Borrowers an amount equal to such refund (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrowers
under this Section 3.01 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all out-of-pocket expenses of the
Administrative Agent, such Lender or the L/C Issuer, as the case may be, and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund), provided  that the
Borrowers, upon the request of the Administrative Agent, such Lender or the L/C
Issuer, agree to repay the amount paid over to the Borrowers (plus any
penalties, interest or other charges imposed by the relevant Governmental Authority)
to the Administrative Agent, such Lender or the L/C Issuer in the event the
Administrative Agent, such Lender or the L/C Issuer is required to repay such
refund to such Governmental Authority. 
This subsection shall not be construed to require the Administrative
Agent, any Lender or the L/C Issuer to make available its tax returns (or any
other information relating to its taxes that it deems confidential) to the
Borrowers or any other Person.

 

83

 

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

 

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

 

3.04                           Increased
Costs; Reserves on LIBO Rate Loans.

 

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

 

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

 

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

 

84

 

of, or any change in the rate of, any Excluded Tax payable by such
Lender or the L/C Issuer (in each case, as to which Section 3.01
shall govern); or

 

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

 

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

 

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

 

(c)                                  Certificates
for Reimbursement.  A certificate of
a Lender or the L/C Issuer setting forth a calculation in reasonable detail of
the amount or amounts necessary to compensate such Lender or the L/C Issuer or
its holding company, as the case may be, as specified in clauses (a) or (b) of
this Section 3.04 and delivered to the Lead Borrower shall be
conclusive absent manifest error.  The
Borrowers shall pay such Lender or the L/C Issuer, as the case may be, the
amount shown as due on any such certificate within 10 days after receipt
thereof.

 

(d)                                 Delay
in Requests.  Failure or delay on the
part of any Lender or the L/C Issuer to demand compensation pursuant to the
foregoing provisions of this Section 3.04 shall not constitute a
waiver of such Lender’s or the L/C Issuer’s right to demand such

 

85

 

compensation, provided  that the Borrowers shall not be
required to compensate a Lender or the L/C Issuer pursuant to the foregoing
provisions of this Section 3.04 for any increased costs incurred or
reductions suffered more than one hundred eighty (180) days prior to the date
that such Lender or the L/C Issuer, as the case may be, notifies the Lead
Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender’s or the L/C Issuer’s intention to claim compensation
therefor (except that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall
be extended to include the period of retroactive effect thereof).

 

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

 

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

 

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

 

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

 

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

 

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

 

3.06                           Mitigation
Obligations; Replacement of Lenders.

 

(a)                                  Designation
of a Different Lending Office.  If
any Lender requests compensation under Section 3.04, or the
Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender gives a notice pursuant to Section 3.02, then such
Lender shall use reasonable efforts to designate a different Lending Office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or Affiliates, if, in the
reasonable judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 3.01 or Section 3.04,
as the case may be, in the future, or eliminate

 

86

 

the need for the notice pursuant to Section 3.02, as
applicable, and (ii) in each case, would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender.  The Borrowers hereby agree to
pay all reasonable out-of-pocket costs and expenses incurred by any Lender in
connection with any such designation or assignment.

 

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

 

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

 

3.08                           Designation
of Lead Borrower as Borrowers’ Agent.

 

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

 

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

 

(c)                                  The
Lead Borrower shall act as a conduit for each Borrower (including itself, as a “Borrower”)
on whose behalf the Lead Borrower has requested a Credit Extension.  Neither the Administrative Agent nor any
other Credit Party shall have any obligation to see to the application of such
proceeds therefrom.

 

ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

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

 

(a)                                  The
Administrative Agent’s receipt of the following, each of which shall be
originals or telecopies (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing Loan
Party, each dated

 

87

 

the Closing Date (or, in the case of certificates of governmental
officials, a recent date before the Closing Date) and each in form and
substance reasonably satisfactory to the Administrative Agent:

 

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

 

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

 

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

 

(iv)                              copies
of each Loan Party’s Organization Documents and such other documents and
certifications as the Administrative Agent may reasonably require to evidence
that each Loan Party is duly organized or formed, and that each Loan Party is
validly existing, in good standing and qualified to engage in business in each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect;

 

(v)                                 an
opinion of counsel to the Loan Parties, addressed to the Administrative Agent
and each Lender, in each case as to such matters concerning the Loan Parties
and the Loan Documents as the Administrative Agent may reasonably request
(including, without limitation, with respect to enforceability, due
authorization and perfection of the Liens in favor of the Collateral Agent);

 

(vi)                              a
certificate signed by a Responsible Officer of the Lead Borrower, reasonably
satisfactory in form and substance to the Administrative Agent, certifying (A) that
the conditions specified in Sections 4.02(a) and 4.02(b) have
been satisfied and (B) that, as of the Closing Date after giving effect to
the transactions contemplated hereby, the Loan Parties on a Consolidated basis
are Solvent;

 

(vii)                           a
Borrowing Base Certificate dated the Closing Date, relating to the month ended
on October 31, 2008, and executed by a Responsible Officer of the Lead
Borrower;

 

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

 

88

 

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

 

(x)                                   except
as otherwise provided in Section 6.20, the Security Documents and
certificates evidencing any stock being pledged thereunder, together with
undated stock powers executed in blank, each duly executed by the applicable
Loan Parties;

 

(xi)                                except
as otherwise provided in Section 6.20, all other Loan Documents,
each duly executed by the applicable Loan Parties;

 

(xii)                             (A) an
appraisal (based on net liquidation value) by a third party appraiser
acceptable to the Collateral Agent of all Inventory of the Borrowers, the
results of which are reasonably satisfactory to the Collateral Agent, (B) a
written report regarding the results of a commercial finance examination of the
Loan Parties, which shall be reasonably satisfactory to the Collateral Agent,
and (C) other due diligence materials (including, without limitation, with
respect to the Loan Parties’ and their Subsidiaries’ organizational structure)
reasonably requested by the Administrative Agent;

 

(xiii)                          results
of searches or other evidence reasonably satisfactory to the Collateral Agent
(in each case dated as of a date reasonably satisfactory to the Collateral
Agent) indicating the absence of Liens on the assets of the Loan Parties,
except for Permitted Encumbrances and Liens for which termination statements
and releases, satisfactions and discharges of any mortgages, and releases or
subordination agreements reasonably satisfactory to the Collateral Agent are
being tendered concurrently with such extension of credit or other arrangements
satisfactory to the Collateral Agent for the delivery of such termination
statements and releases, satisfactions and discharges have been made;

 

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

 

(xv)                            except
as otherwise provided in Section 6.20, Collateral Access
Agreements, as required by the Collateral Agent;

 

89

 

(xvi)                         except
as otherwise provided in Section 6.20, evidence that all other
actions that the Collateral Agent may deem necessary or desirable in order to
create a valid first and subsisting Lien on the Dallas Property described in
the Mortgage, subject only to Permitted Encumbrances, has been taken; and

 

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

 

(b)                                 After
giving effect to (i) the first funding under the Loans, (ii) any
charges to the Loan Account made in connection with the establishment of the
credit facility contemplated hereby and (iii) all Letters of Credit to be
issued at, or immediately subsequent to, such establishment, Availability shall
be not less than $100,000,000.

 

(c)                                  The
Administrative Agent shall be reasonably satisfied that any financial
statements delivered to it fairly present in all material respects the business
and financial condition of the Loan Parties.

 

(d)                                 There
shall not be any other Material Indebtedness of the Loan Parties outstanding
immediately after the Closing Date other than the Obligations.

 

(e)                                  The
Administrative Agent shall have received and be reasonably satisfied with (i) the
Audited Financial Statements, (ii) a detailed forecast for the period
commencing on the Closing Date and ending on December 31, 2009, which
shall include an Availability model, Consolidated income statement, balance
sheet, and statement of cash flow, by Fiscal Quarter, (iii) a detailed
forecast, which shall include an Availability model, Consolidated income
statement, balance sheet and statement of cash flow, on an annual basis
thereafter through and including the year in which the Maturity Date occurs, in
each case prepared in conformity with GAAP and consistent with the Loan Parties’
then current practices, and (iv) such other information (financial or
otherwise) reasonably requested by the Administrative Agent.

 

(f)                                    All
necessary consents and approvals to the transactions contemplated hereby shall
have been obtained and shall be reasonably satisfactory to the Administrative
Agent, other than those which, individually or in the aggregate, could not
have, and could not reasonably be expected to have, a Material Adverse Effect.

 

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

 

(h)                                 There
shall not have occurred any default of any Material Contract of any Loan Party
which could reasonably be expected to have a Material Adverse Effect.

 

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

 

90

 

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

 

(k)                                  The
Administrative Agent shall have received all documentation and other
information required by regulatory authorities under applicable “know your
customer” and anti-money laundering rules and regulations, including,
without limitation, the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)) (the “Patriot Act”).

 

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

 

Without limiting the generality of the
provisions of Section 9.04, for purposes of determining compliance
with the conditions specified in this Section 4.01, each Lender
that has signed this Agreement shall be deemed to have Consented to, approved
or accepted or to be satisfied with, each document or other matter required
thereunder to be Consented to or approved by or acceptable or satisfactory to a
Lender unless the Administrative Agent shall have received notice from such
Lender prior to the proposed Closing Date specifying its objection thereto.

 

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

 

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

 

(b)                                 No
Default or Event of Default shall exist, or would result from such proposed
Credit Extension or from the application of the proceeds thereof.

 

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

 

91

 

(d)                                 No
event or circumstance which could reasonably be expected to result in a
Material Adverse Effect shall have occurred.

 

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

 

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

 

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

 

5.01                           Existence,
Qualification and Power.  Each Loan Party and each Subsidiary
thereof (a) is a corporation, limited liability company, partnership or
limited partnership, duly organized or formed, validly existing and, where
applicable, in good standing under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority
and all requisite governmental licenses, permits, authorizations, consents and
approvals to (i) own or lease its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents to which it is a
party, and (c) is duly qualified and is licensed and, where applicable, in
good standing under the Laws of each jurisdiction where its ownership, lease or
operation of properties or the conduct of its business requires such
qualification or license; except in each case referred to in clauses (a) (other
than with respect to any Loan Party), (b)(i) or (c), to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect.  Schedule 5.01 annexed
hereto sets forth, as of the Closing Date, each Loan Party’s name as it appears
in official filings in its state of incorporation or organization, its state of
incorporation or organization, organization type, organization number, if any,
issued by its state of incorporation or organization, and its federal employer
identification number.

 

5.02                           Authorization;
No Contravention.  The execution, delivery and
performance by each Loan Party of each Loan Document to which such Person is or
is to be a party, has been duly authorized by all necessary corporate or other
organizational action, and does not and will not: (a) contravene the terms
of any of such Person’s Organization Documents; (b) conflict with or
result in any breach, termination, or contravention of, or constitute a default
under, or require any payment to be made under (i) any Material Contract
or any Material Indebtedness to which

 

92

 

such Person is a party or
affecting such Person or the properties of such Person or any of its
Subsidiaries or (ii) any order, injunction, writ or decree of any
Governmental Authority or any arbitral award to which such Person or its
property is subject, except, in each case referred to in this clause (b), to
the extent that any such conflict, breach, termination, contravention, default
or payment could not reasonably be expected to have a Material Adverse Effect; (c) result
in or require the creation of any Lien upon any asset of any Loan Party (other
than Liens in favor of the Collateral Agent under the Security Documents); or (d) violate
any applicable Law, except to the extent that any such violation could not
reasonably be expected to have a Material Adverse Effect.

 

5.03                           Governmental
Authorization; Other Consents.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, any Loan Party of this Agreement or any other Loan Document, except
for (a) the perfection or maintenance of the Liens created under the
Security Documents (including the first priority nature thereof), (b) such as have been obtained or
made and are in full force and effect or (c) those the failure of which to
obtain or make could not reasonably be expected to have a Material Adverse
Effect.

 

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

 

5.05                           Financial
Statements; No Material Adverse Effect.

 

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

 

(b)                                 The
unaudited Consolidated balance sheet of the Parent and its Subsidiaries dated September 30,
2008, and the related Consolidated statements of income or operations,
Shareholders’ Equity and cash flows for the fiscal quarter ended on that date (i) were
prepared in accordance with GAAP consistently applied throughout the period
covered thereby, except as otherwise expressly noted therein, and (ii) fairly
present in all material respects the financial condition of the Parent and its
Subsidiaries as of the date thereof and their results of operations for the
period covered thereby, subject, in the case of clauses (i) and (ii), to
the absence of footnotes and to normal year-end audit adjustments.

 

93

 

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

 

(d)                                 The
Consolidated forecasted balance sheet and statements of income and cash flows
of the Parent and its Subsidiaries delivered pursuant to Sections 4.01
or 6.01 were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were believed to be fair in light of the
conditions existing at the time of delivery of such forecasts (it being
understood that actual results may vary from such forecasts and that such
variations may be significant).

 

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

 

5.07                           No
Default.  No Loan Party or any
Subsidiary is in default under or with respect to, or party to, any (a) Material
Contract or (b) any Material Indebtedness which, in the case of this
clause (b), could reasonably be expected to have a Material Adverse
Effect.  No Default or Event of Default
has occurred and is continuing or would result from the consummation of the
transactions contemplated by this Agreement or any other Loan Document.

 

5.08                           Ownership
of Property; Liens.

 

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

 

(b)                                 Schedule
5.08(b)(1) sets forth the address (including street address, county
and state) of all Real Estate that is owned by the Loan Parties as of the
Closing Date.  Schedule 5.08(b)(2) sets
forth the address (including street address, county and state) of all Leases of
the Loan Parties, together with a list of the lessor and its contact
information with respect to each such Lease, in each case as of the Closing
Date.  To the knowledge of the Loan
Parties, each of such Leases is in full force and effect as of the Closing Date
and the Loan Parties are not in default of the terms thereof except, in each
case, as could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.

 

94

 

(c)                                  The
property of each Loan Party and each of its Subsidiaries is subject to no
Liens, other than Liens set forth on Schedule 7.01 and other Permitted
Encumbrances.

 

5.09                           Environmental
Compliance.

 

(a)                                  Except
as specifically disclosed in Schedule 5.09, no Loan Party or any
Subsidiary thereof (i) has failed to comply with any Environmental Law or
to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability, except, in each case, as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Except
as otherwise set forth in Schedule 5.09 or as could not reasonably be
expected to have a Material Adverse Effect, (i) none of the properties
currently or formerly owned or operated by any Loan Party or any Subsidiary
thereof, is listed or proposed for listing on the NPL or on the CERCLIS or any
analogous foreign, state or local list or is adjacent to any such property; (ii) there
are no and never have been any underground or above-ground storage tanks or any
surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous
Materials are being or have been treated, stored or disposed on any property
currently owned or operated by any Loan Party or any Subsidiary thereof or, to
its knowledge, on any property formerly owned or operated by any Loan Party or
Subsidiary thereof; (iii) there is no asbestos or asbestos-containing
material on any property currently owned or operated by any Loan Party or
Subsidiary thereof; and (iv) Hazardous Materials have not been released,
discharged or disposed of on any property currently or formerly owned or
operated by any Loan Party or any Subsidiary thereof.

 

(c)                                  Except
as otherwise set forth on Schedule 5.09, (i) as of the Closing
Date, no Loan Party or any Subsidiary thereof is undertaking, and no Loan Party
or any Subsidiary thereof has completed, either individually or together with
other potentially responsible parties, any investigation or assessment or
remedial or response action relating to any actual or threatened release,
discharge or disposal of Hazardous Materials at any site, location or operation
owned or operated by a Loan Party, either voluntarily or pursuant to the order
of any Governmental Authority or the requirements of any Environmental Law; and
(ii) all Hazardous Materials generated, used, treated, handled or stored
at, or transported to or from, any property currently or formerly owned or
operated by any Loan Party or any Subsidiary thereof have been disposed of, at
all times during which such property was owned by any Loan Party or any
Subsidiary thereof, in a manner that could not reasonably be expected to result
in material liability to any Loan Party or any Subsidiary thereof.

 

5.10                           Insurance.  The properties of
the Loan Parties and their Subsidiaries are insured with financially sound and
reputable insurance companies (after giving effect any self-insurance
reasonable and customary for similarly situated Persons engaged in the same or
similar business as the Loan Parties), in such amounts, with such deductibles
and covering such risks (including, without limitation, workmen’s compensation,
commercial general liability, business interruption

 

95

 

and property damage insurance)
as are customarily carried by companies engaged in similar businesses and
owning similar properties in localities where the Loan Parties or the
applicable Subsidiary operates.  Schedule
5.10 sets forth a description of all insurance maintained by or on behalf
of the Loan Parties as of the Closing Date. 
As of the Closing Date, each insurance policy listed on Schedule 5.10
is in full force and effect and all premiums in respect thereof that are due
and payable have been paid.

 

5.11                           Taxes.
 The
Loan Parties and their Subsidiaries have filed all Federal, state and other
material tax returns and reports required to be filed, and have paid all
Federal, state and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except (a) those which (i) are
being contested in good faith by appropriate proceedings being diligently
conducted, (ii) for which adequate reserves have been provided in
accordance with GAAP, and (iii) as to which Taxes no Lien has been filed
and which contest effectively suspends the collection of the contested
obligation and the enforcement of any Lien securing such obligation or (b) those
which could not reasonably be expected to result in a Material Adverse Effect.  There is no proposed tax assessment against
any Loan Party or any Subsidiary that would, if made, have a Material Adverse
Effect.  No Loan Party or any Subsidiary
thereof is a party to any tax sharing agreement.

 

5.12                           ERISA
Compliance.

 

(a)                                  Except
as could not reasonably be expected to have a Material Adverse Effect, each
Plan is in compliance with the applicable provisions of ERISA, the Code and
other Federal or state Laws.  Each Plan
that is intended to qualify under Section 401(a) of the Code either (i) has
been determined by the IRS to be qualified under Section 401(a) of
the Code or (ii) has an applicable remedial amendment period that will not
have ended before the Closing Date, and, to the knowledge of the Lead Borrower,
nothing has occurred which, if known by the IRS, could reasonably be expected
to prevent, or cause the loss of, such qualification.  Except as could not reasonably be expected to
have a Material Adverse Effect, the Loan Parties and each ERISA Affiliate have
made all required contributions to each Pension Plan subject to Section 412
of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Pension Plan.  Except as
could not reasonably be expected to have a Material Adverse Effect, no Lien
imposed under the Code or ERISA exists or is likely to arise on account of any
Plan.

 

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

 

(c)                                  (i)                                     Except
as could not reasonably be expected to have a Material Adverse Effect, no ERISA
Event has occurred or is reasonably expected to occur; (ii) no Pension
Plan has any Unfunded Pension Liability; (iii) neither any Loan Party nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of

 

96

 

ERISA); (iv) neither any
Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither
any Loan Party nor any ERISA Affiliate has engaged in a transaction that could
be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13                           Subsidiaries;
Equity Interests.  As of the Closing Date, the Loan
Parties have no Subsidiaries other than those specifically disclosed in Part (a) of
Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of
incorporation or formation and authorized Equity Interests of the Loan Parties
and each such Subsidiary as of the Closing Date.  All of the outstanding Equity Interests in
the Loan Parties and such Subsidiaries have been validly issued, are fully paid
and non-assessable and are owned as of the Closing Date by a Loan Party (or a
Subsidiary of a Loan Party) in the amounts specified on Part (a) of Schedule
5.13 free and clear of all Liens, except for those created under the
Security Documents and Permitted Encumbrances specified in clauses (a), (e),
(i), (k) and (l) of the definition thereof.  Except as set forth in Schedule 5.13,
as of the Closing Date, there are no outstanding rights to purchase any Equity
Interests in the Loan Parties (other than the Parent) or any Subsidiary.  As of the Closing Date, the Loan Parties have
no equity investments in any other corporation or entity other than those
specifically disclosed in Part (b) of Schedule 5.13.  The copies of the Organization Documents of
each Loan Party and each amendment thereto provided as of the Closing Date
pursuant to Section 4.01 are true and correct copies of each such
document, each of which is valid and in full force and effect as of the Closing
Date.

 

5.14                           Margin
Regulations; Investment Company Act.

 

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

 

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

 

5.15                           Disclosure.  The Lead Borrower has disclosed to the
Administrative Agent and the Lenders all agreements, instruments and corporate
or other restrictions to which any Loan Party or any of its Subsidiaries is
subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate
or other information furnished in writing by or on behalf of any Loan Party to
the Administrative Agent or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered
hereunder or under any other Loan Document (in each case, as modified or
supplemented by other information so

 

97

 

furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not materially misleading; provided  that, with respect
to projected financial information, the Loan Parties represent only that such information
was prepared in good faith based upon assumptions believed to be reasonable at
the time (it being understood that actual results may vary from such projected
financial information and that such variations may be significant).

 

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

 

5.17                           Intellectual
Property; Licenses, Etc.  The Loan Parties and their
Subsidiaries own, or possess the right to use, all of the Intellectual
Property, licenses, permits and other authorizations that are reasonably necessary
for the operation of their respective businesses, without conflict with the
rights of any other Person, except for such conflicts which, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.  To the
knowledge of the Lead Borrower, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by any Loan Party or any Subsidiary infringes upon
any rights held by any other Person, except for such infringement which, either
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.  Except as
specifically disclosed in Schedule 5.17, no claim or litigation
regarding any of the foregoing is pending or, to the knowledge of the Lead
Borrower, threatened, which, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.

 

5.18                           Labor
Matters.  There are no strikes,
lockouts, slowdowns or other labor disputes against any Loan Party or any
Subsidiary thereof pending or, to the knowledge of any Loan Party, threatened.
The hours worked by, and payments made to, employees of the Loan Parties comply
with the Fair Labor Standards Act and any other applicable federal, state,
local or foreign Law dealing with such matters, except to the extent that any
such violation could not reasonably be expected to have a Material Adverse
Effect. No Loan Party or any of its Subsidiaries has incurred any liability or
obligation under the Worker Adjustment and Retraining Act or similar state
Law.  All payments due from any Loan
Party and its Subsidiaries, or for which any claim may be made against any Loan
Party, on account of wages and employee health and welfare insurance and other
benefits, have been paid or properly accrued in accordance with GAAP as a
liability on the books of such Loan Party. Except as set forth on Schedule
5.18, as of the Closing Date, no Loan Party or any Subsidiary is a party to
or bound by any collective bargaining agreement, management agreement,
employment agreement, bonus, restricted stock, stock option, or stock
appreciation plan or agreement or any similar plan, agreement or arrangement.
There are no representation proceedings pending or, to any Loan Party’s
knowledge, threatened to be filed with the National Labor Relations Board, and
no labor organization or group of employees of any Loan Party or any Subsidiary
has made a pending demand for recognition. There are no complaints, unfair
labor practice charges, grievances, arbitrations, unfair

 

98

 

employment practices charges or
any other claims or complaints against any Loan Party or any Subsidiary pending
or, to the knowledge of any Loan Party, threatened to be filed with any
Governmental Authority or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment of
any employee of any Loan Party or any of its Subsidiaries. The consummation of
the transactions contemplated by the Loan Documents will not give rise to any
right of termination or right of renegotiation on the part of any union under
any collective bargaining agreement to which any Loan Party or any of its
Subsidiaries is bound.

 

5.19                           Security
Documents.  The Security Documents
create in favor of the Collateral Agent a legal, valid, continuing and
enforceable security interest in the Collateral, and the Security Documents
constitute, or will upon the filing of financing statements and/or the
obtaining of “control”, in each case with respect to the relevant Collateral as
required under applicable Law, the creation of a fully perfected first priority
Lien on, and security interest in, all right, title and interest of the Loan
Parties thereunder in such Collateral, in each case prior and superior in right
to any other Person, except for Permitted Encumbrances.

 

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

 

5.21                           Deposit
Accounts; Credit Card Arrangements.

 

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

 

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

 

5.22                           Brokers.  No broker or finder brought about the
obtaining, making or closing of the Loans or transactions contemplated by the
Loan Documents, and no Loan  Party or
Affiliate thereof has any obligation to any Person in respect of any finder’s
or brokerage fees in connection therewith.

 

5.23                           Customer
and Trade Relations.  There exists no
actual or, to the knowledge of any Loan Party, threatened, termination or
cancellation of, or any material adverse modification or change in the business
relationship of any Loan Party with any supplier that could reasonably be
expected to have a Material Adverse Effect.

 

99

 

5.24         Material
Contracts.  Schedule 5.24 sets
forth all Material Contracts to which any Loan Party is a party or is bound as
of the Closing Date.  The Loan Parties
have delivered to the Administrative Agent true, correct and complete copies of
those Material Contracts which have been reasonably requested by the
Administrative Agent on or before the Closing Date.  As of the Closing Date, the Loan Parties are
not in breach or in default of or under any Material Contract, and have not
received any notice of the intention of any other party thereto to terminate
any Material Contract, in each case which could reasonably be expected to have
a Material Adverse Effect.

 

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

 

ARTICLE VI.

AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any
Commitment hereunder, any Loan or other Obligation (other than any Obligation
in respect of the Other Liabilities) hereunder shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding (except to the
extent fully Cash Collateralized or supported by another letter of credit in a
manner reasonably satisfactory to the L/C Issuer and the Administrative Agent),
the Loan Parties shall, and shall (except in the case of the covenants set
forth in Sections 6.01, 6.02, and 6.03) cause each
Subsidiary to:

 

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

 

(a)           as soon as available, but in any
event within ninety (90) days after the end of each Fiscal Year of the Parent
(commencing with the Fiscal Year ending June 30, 2009), a Consolidated
(and, if requested by the Administrative Agent, consolidating) balance sheet of
the Parent and its Subsidiaries as at the end of such Fiscal Year, and the
related Consolidated (and, if requested by the Administrative Agent,
consolidating) statements of income or operations, Shareholders’ Equity and
cash flows for such Fiscal Year, setting forth in each case in comparative form
the figures for the previous Fiscal Year, all in reasonable detail and prepared
in accordance with GAAP, such Consolidated statements to be audited and
accompanied by a report and opinion of a Registered Public Accounting Firm of
nationally recognized standing or otherwise reasonably acceptable to the
Administrative Agent, which report and opinion shall be prepared in accordance
with generally accepted auditing standards and shall not be subject to any “going
concern” or like qualification or exception or any qualification or exception
as to the scope of such audit, and, to the extent that the Administrative Agent
has requested consolidating statements, such consolidating statements to be
certified by a Responsible Officer of the Lead Borrower to the effect that such
statements are fairly stated in all material respects when considered in
relation to the Consolidated financial statements of the Parent and its
Subsidiaries;

 

100

 

(b)           as soon as available, but in any
event within forty-five (45) days after the end of each Fiscal Quarter of each
Fiscal Year (other than the fourth Fiscal Quarter of each Fiscal Year) of the
Parent (commencing with the Fiscal Quarter ending December 31, 2008), a
Consolidated (and, if requested by the Administrative Agent, consolidating)
balance sheet of the Parent and its Subsidiaries as at the end of such Fiscal
Quarter, and the related Consolidated (and, if requested by the Administrative
Agent, consolidating) statements of income or operations and cash flows for
such Fiscal Quarter and for the portion of the Parent’s Fiscal Year then ended,
setting forth in each case in comparative form the figures for (i) such
period set forth in the projections delivered pursuant to Section 6.01(d) hereof,
(ii) the corresponding Fiscal Quarter of the previous Fiscal Year and (iii) the
corresponding portion of the previous Fiscal Year, all in reasonable detail,
such Consolidated statements to be certified by a Responsible Officer of the
Lead Borrower as fairly presenting in all material respects the financial
condition, results of operations and cash flows of the Parent and its
Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of footnotes,
and, to the extent that the Administrative Agent has requested consolidating
statements, such consolidating statements to be certified by a Responsible
Officer of the Lead Borrower to the effect that such statements are fairly
stated in all material respects when considered in relation to the Consolidated
financial statements of the Parent and its Subsidiaries;

 

(c)           as soon as available, but in any
event within thirty (30) days after the end of each Fiscal Month of each Fiscal
Year (other than the third Fiscal Month of each Fiscal Quarter) of the Parent
(commencing with the Fiscal Month ending January 31, 2009), a Consolidated
(and, if requested by the Administrative Agent, consolidating) balance sheet of
the Parent and its Subsidiaries as at the end of such Fiscal Month, and the
related Consolidated (and, if requested by the Administrative Agent,
consolidating) statements of income or operations and cash flows for such Fiscal
Month, and for the portion of the Parent’s Fiscal Year then ended, setting
forth in each case in comparative form the figures for (A) such period set
forth in the projections delivered pursuant to Section 6.01(d) hereof,
(B) the corresponding Fiscal Month of the previous Fiscal Year and (C) the
corresponding portion of the previous Fiscal Year, all in reasonable detail,
such Consolidated statements to be certified by a Responsible Officer of the
Lead Borrower as fairly presenting in all material respects the financial
condition, results of operations and cash flows of the Parent and its
Subsidiaries as of the end of such Fiscal Month in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of footnotes,
and, to the extent that the Administrative Agent has requested consolidating
statements, such consolidating statements to be certified by a Responsible
Officer of the Lead Borrower to the effect that such statements are fairly
stated in all material respects when considered in relation to the Consolidated
financial statements of the Parent and its Subsidiaries; and

 

(d)           as soon as available, but in any
event within forty-five (45) days after the beginning of each Fiscal Year of
the Parent, forecasts prepared by management of the Lead Borrower, in form
reasonably satisfactory to the Administrative Agent, of Consolidated balance
sheets and statements of income or operations and cash flows of the

 

101

 

Parent and its Subsidiaries on
a monthly basis for the immediately following Fiscal Year (including the Fiscal
Year in which the Maturity Date occurs).

 

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

 

(a)           (i) concurrently
with the delivery of the financial statements referred to in Sections
6.01(a), 6.01(b) and 6.01(c) (commencing with the
delivery of the financial statements for the Fiscal Quarter ending December 31,
2008), a duly completed Compliance Certificate
signed by a Responsible Officer of the Lead Borrower (to be furnished even if a
Covenant Compliance Event is not then in effect, provided, however,
that the Lead Borrower shall not be required to demonstrate compliance with the
Consolidated Fixed Charge Coverage Ratio except during the existence of a
Covenant Compliance Event) and (ii) in
connection with delivery of the financial statements referred to in Sections
6.01(a) and 6.01(b), a copy of management’s discussion and
analysis with respect to such financial statements (it being agreed that the
form and substance of the management discussion and analysis currently being
provided by the Parent in its Form 10-Q as of the Closing Date shall be
acceptable for purposes of satisfying the requirements of this clause (ii) in
connection with delivery of the financial statements referred to in Section 6.01(b)).  In the event of any change in GAAP used in
the preparation of such financial statements, the Lead Borrower shall also
provide a statement of reconciliation conforming such financial statements to
GAAP in accordance with Section 1.03(b);

 

(b)           on the tenth Business Day of each
Fiscal Month, a Borrowing Base Certificate showing the Borrowing Base as of the
close of business as of the last day of the immediately preceding Fiscal Month;
provided  that, upon the occurrence and during the continuance of
an Accelerated Borrowing Base Delivery Event, such Borrowing Base Certificate
shall be delivered on Wednesday of each week, as of the close of business on
the immediately preceding Saturday;

 

(c)           promptly upon receipt, (i) copies
of any detailed annual audit reports and, upon the request of the
Administrative Agent, final management letters or final recommendations
submitted to the board of directors (or the audit committee of the board of
directors) of any Loan Party by its Registered Public Accounting Firm in
connection with the accounts or books of the Loan Parties or any Subsidiary,
and (ii) if provided by its Registered Public Accounting Firm and
requested by the Administrative Agent, a report of such Registered Public
Accounting Firm assessing the Loan Parties’ internal controls over financial
reporting that contains no statement that there is a material weakness in such
internal controls, except for such material weaknesses as to which the Required
Lenders do not object;

 

(d)           promptly after the same are
available, copies of each annual report and proxy statement and copies of all
annual, regular, periodic and special reports and registration statements which
any Loan Party may file or be required to file with the SEC under Sections 13
or 15(d) of the Securities Exchange Act of 1934 or with any national

 

102

 

securities exchange, and in any
case not otherwise required to be delivered to the Administrative Agent
pursuant hereto;

 

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

 

(f)            concurrently with the delivery of
the financial statements referred to in Section 6.01(a), a report
summarizing the insurance coverage (specifying type, amount and carrier) in
effect for each Loan Party and its Subsidiaries and containing such additional
information as the Administrative Agent, or any Lender through the
Administrative Agent, may reasonably specify;

 

(g)           promptly, and in any event within
five (5) Business Days after receipt thereof by any Loan Party or any
Subsidiary thereof, copies of each notice or other correspondence received from
any Governmental Authority (including, without limitation, the SEC (or
comparable agency in any applicable non-U.S. jurisdiction)) concerning any
proceeding with, or investigation or possible investigation or other inquiry by
such Governmental Authority regarding financial or other operational results of
any Loan Party or any Subsidiary thereof or any other matter which could
reasonably be expected to have a Material Adverse Effect; and

 

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

 

Documents required
to be delivered pursuant to Sections 6.01(a),  (b), or (c) or
Section 6.02(d) may be delivered electronically and, if so
delivered, shall be deemed to have been delivered on the date (i) on which
the Lead Borrower posts such documents, or provides a link thereto on the Lead
Borrower’s website on the Internet at the website address listed on Schedule
10.02; (ii) on which such documents are posted on the Lead Borrower’s
behalf on an Internet or intranet website, if any, to which each Lender and the
Administrative Agent have access (whether a commercial, third-party website or
whether sponsored by the Administrative Agent); or (iii) on which Parent
files its Form 10-K or 10-Q, as applicable, with the SEC (to the extent
that any such documents are included therein); provided  that: (i) the
Lead Borrower shall deliver paper copies of such documents to the
Administrative Agent on behalf of any Lender that requests the Lead Borrower to
deliver such paper copies until a written request to cease delivering paper
copies is given by the Administrative Agent or such Lender and (ii) the
Lead Borrower shall notify the Administrative Agent and each Lender (by
telecopier or electronic mail) of the posting of any such documents and provide
to the Administrative Agent by electronic mail electronic versions (i.e.,
soft copies) of such documents. 
Notwithstanding anything contained herein, in every instance, the Lead
Borrower shall be required to provide paper copies of the Compliance
Certificates required by Section 6.02(a) to the Administrative
Agent.  The Administrative Agent shall
have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to
monitor compliance by the Loan Parties with any such request for delivery, and
each Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents.

 

103

 

The Loan Parties hereby acknowledge that (a) the
Administrative Agent and/or BAS will make available to the Lenders and the L/C
Issuer materials and/or information provided by or on behalf of the Loan
Parties hereunder (collectively, “Borrower Materials”) by posting the
Borrower Materials on IntraLinks or another similar electronic system (the “Platform”)
and (b) certain of the Lenders may be “public-side” Lenders (i.e.,
Lenders that do not wish to receive material non-public information with
respect to the Loan Parties or their securities) (each, a “Public Lender”).  The Loan Parties hereby agree that so long as any Loan Party is the issuer of
any outstanding debt or equity securities that are registered or issued
pursuant to a private offering or is actively contemplating issuing any such
securities they will use commercially reasonable efforts to identify
that portion of the Borrower Materials that may be distributed to the Public
Lenders and that (w) all such Borrower Materials shall be clearly and conspicuously
marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall
appear prominently on the first page thereof; (x) by marking Borrower
Materials “PUBLIC,” the Loan Parties shall be deemed to have authorized the
Administrative Agent, BAS, the L/C Issuer and the Lenders to treat such
Borrower Materials as not containing any material non-public information
(although it may be sensitive and proprietary) with respect to the Loan Parties
or their securities for purposes of United States Federal and state securities
laws (provided, however, that to the extent such Borrower Materials
constitute Information, they shall be treated as set forth in Section 10.07);
(y) all Borrower Materials marked “PUBLIC” are permitted to be made
available through a portion of the Platform designated “Public Investor”; and (z) the
Administrative Agent and BAS shall be entitled to treat any Borrower Materials
that are not marked “PUBLIC” as being suitable only for posting on a portion of
the Platform not designated “Public Investor.”

 

6.03         Notices.  Promptly, and in any event within
five (5) Business Days (or such other time period indicated below) of a
Responsible Officer or any other executive officer of a Loan Party becoming
aware thereof, notify the Administrative Agent:

 

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

 

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

 

(c)           of the occurrence of any ERISA Event
that could reasonably be expected to have a Material Adverse Effect;

 

(d)           of any material change in accounting
policies or financial reporting practices by any Loan Party or any Subsidiary
thereof at the time of delivery of any Compliance Certificate;

 

104

 

(e)           of any change in the Lead Borrower’s
chief executive officer or chief financial officer;

 

(f)            of the discharge by any Loan Party
of its present Registered Public Accounting Firm or any withdrawal or
resignation by such Registered Public Accounting Firm;

 

(g)           of the filing of any Lien for unpaid
Taxes (other than any such Lien which constitutes a Permitted Encumbrance)
against any Loan Party in excess of $500,000;

 

(h)           of any casualty or other insured
damage to the Collateral or the commencement of any action or proceeding for
the taking of any interest in the Collateral under power of eminent domain or
by condemnation or similar proceeding, or if any of the Collateral is damaged
or destroyed, in each case which could reasonably be expected to result in a
Material Adverse Effect; and

 

(i)            of the failure by any Loan Party to
pay rent at any one or more of such Loan Party’s locations if such failure
continues for more than ten (10) days following the day on which such rent
first came due and such failure, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.

 

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

 

6.04         Payment of
Obligations.  Pay and discharge, as
the same shall become due and payable, all its obligations and liabilities,
including (a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, (b) all lawful claims
(including, without limitation, claims of landlords, warehousemen, customs
brokers, and carriers) which, if unpaid, would by law become a Lien upon its
property; and (c) all Indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness, except, in each case, where (a) (i) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, (ii) such Loan Party has set aside on its books adequate
reserves with respect thereto in accordance with GAAP, (iii) such contest
effectively suspends collection of the contested obligation and enforcement of
any Lien securing such obligation, and (iv) no Lien has been filed with
respect thereto (other than a Lien permitted pursuant to clause (a) of the
definition of Permitted Encumbrances) or (b) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect. Nothing contained herein shall be deemed to limit the rights of
the Administrative Agent with respect to establishing Reserves pursuant to this
Agreement.

 

6.05         Preservation of
Existence, Etc.  (a) Preserve,
renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization or formation
except in a transaction permitted by Sections 7.04 or 7.05; (b) take
all reasonable action to maintain all rights, privileges, permits, licenses and
franchises necessary or desirable in

 

105

 

the normal conduct of its business, except to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (c) preserve or renew all of its Intellectual
Property, except to the extent such Intellectual Property is no longer used or
useful in the conduct of the business of the Loan Parties or the failure to do
so could not reasonably be expected to result in a Material Adverse Effect.

 

6.06         Maintenance of
Properties.  (a) Maintain,
preserve and protect all of its material properties and equipment necessary in
the operation of its business in good working order and condition, ordinary
wear and tear and casualty and condemnation excepted; and (b) make all
necessary repairs thereto and renewals and replacements thereof except where
the failure to do so could not reasonably be expected to have a Material
Adverse Effect.

 

6.07         Maintenance of
Insurance.  Maintain
with financially sound and reputable insurance companies reasonably acceptable
to the Administrative Agent, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by
Persons engaged in the same or similar business and operating in the same or
similar locations or as is required by applicable Law, of such types and in
such amounts (after giving effect to any self-insurance reasonable and
customary for similarly situated Persons engaged in the same or similar
business as the Loan Parties) as are customarily carried under similar
circumstances by such other Persons.

 

(a)           Fire and extended coverage policies
maintained with respect to any Collateral shall name the Collateral Agent as a
loss payee and shall be endorsed or otherwise amended (i) to include (A) a
non-contributing mortgage clause (regarding improvements to real property) and
lenders’ loss payable clause (regarding personal property), in form and
substance reasonably satisfactory to the Collateral Agent, which endorsements
or amendments shall provide that the insurer shall pay all proceeds otherwise
payable to the Loan Parties under the policies jointly to the Collateral Agent
and the applicable Loan Party (provided  that, unless a Prepayment
Event has occurred or a Cash Dominion Event has occurred and is continuing, the
Collateral Agent shall promptly endorse over the proceeds to the Lead Borrower
or as the Lead Borrower may direct), and (B) such other provisions as the
Collateral Agent may reasonably require from time to time to protect the
interests of the Credit Parties, and (ii) to exclude any co-insurance
provision. Commercial general liability policies shall be endorsed to name the
Collateral Agent as an additional insured. 
Each such policy referred to in this Section 6.07(a) shall
also provide that it shall not be canceled or not renewed (i) by reason of
nonpayment of premium except upon not less than ten (10) days prior
written notice thereof by the insurer to the Collateral Agent (giving the
Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for
any other reason except upon not less than thirty (30) days prior written
notice thereof by the insurer to the Collateral Agent. The Lead Borrower shall
deliver to the Collateral Agent, prior to the cancellation or non-renewal of
any such policy of insurance, a certificate of insurance in form and substance
reasonably satisfactory to the Collateral Agent which evidences the renewal or
replacement of any such policy of insurance required pursuant to this Section 6.07(a),
together with evidence reasonably satisfactory to the Collateral Agent of
payment of the premium therefor.

 

106

 

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

 

(c)           Maintain for themselves and
their Subsidiaries, a Directors and Officers insurance policy, and a “Blanket
Crime” policy including employee dishonesty, forgery or alteration, theft,
disappearance and destruction, robbery and safe burglary, property, and
computer fraud coverage with responsible companies in such amounts as are
customarily carried by business entities engaged in similar businesses
similarly situated, and will, upon request by the Administrative Agent, furnish
the Administrative Agent certificates evidencing renewal of each such policy.

 

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

 

6.09         Books and Records;
Accountants.

 

(a)           Maintain proper books of record and
account sufficient to allow the preparation of financial statements in
accordance with GAAP consistently applied.

 

(b)           At all times, retain a Registered
Public Accounting Firm which is reasonably satisfactory to the Administrative
Agent and instruct such Registered Public Accounting Firm to cooperate with,
and be available to, the Administrative Agent or its representatives to discuss
the Loan Parties’ financial performance, financial condition, operating
results, controls, and such other matters, within the scope of the retention of
such Registered Public Accounting Firm, as may be raised by the Administrative
Agent; provided  that the Lead Borrower shall have the opportunity
to participate in any discussions with the Loan Parties’ accountants.

 

107

 

6.10         Inspection Rights.

 

(a)           Permit representatives and
independent contractors of the Administrative Agent to visit and inspect any of
its properties, to examine its corporate, financial and operating records, and
make copies thereof or abstracts therefrom, and to discuss its affairs,
finances and accounts with its directors, officers, and Registered Public
Accounting Firm (provided  that the Lead Borrower shall have the
opportunity to participate in any such discussions) at the expense of the Loan
Parties and at such reasonable times during normal business hours, but no more
than two (2) times in any calendar year, upon reasonable advance notice to
the Lead Borrower; provided, however, that upon the occurrence
and during the continuance of an Event of Default, the Administrative Agent (or
any of its representatives or independent contractors) may do any of the
foregoing as often as may be reasonably desired at the expense of the Loan
Parties at any time during normal business hours and without advance notice.

 

(b)           Upon the request of the
Administrative Agent after reasonable prior notice, permit the Administrative
Agent or professionals (including investment bankers, consultants, accountants,
lawyers and appraisers) retained by the Administrative Agent to conduct
appraisals, commercial finance examinations and other evaluations, including,
without limitation, of (i) the Lead Borrower’s practices in the
computation of the Borrowing Base and (ii) the assets included in the
Borrowing Base and related financial information such as, but not limited to,
sales, gross margins, payables, accruals and reserves.  Subject to the following sentences, the Loan
Parties shall pay the fees and expenses of the Administrative Agent or such
professionals with respect to such evaluations and appraisals.  The Loan Parties acknowledge that the
Administrative Agent shall undertake one (1) inventory appraisal and one (1) commercial
finance examination each Fiscal Year at the Loan Parties’ expense; provided
that, if Availability at any time is less than fifty percent (50%) of
the Loan Cap, the Loan Parties acknowledge that the Administrative Agent may,
in its reasonable discretion, or at the direction of the Required Lenders
shall, undertake up to two (2) inventory appraisals and up to two (2) commercial
finance examinations each Fiscal Year at the Loan Parties’ expense; provided
further that, if Availability at any time is less than fifteen percent
(15%) of the Loan Cap, the Loan Parties acknowledge that the Administrative
Agent may, in its reasonable discretion, or at the direction of the Required
Lenders shall, undertake up to three (3) inventory appraisals and up to
three (3) commercial finance examinations each Fiscal Year at the Loan
Parties’ expense.  Notwithstanding
anything to the contrary contained herein, the Administrative Agent may cause
additional inventory appraisals and commercial finance examinations to be
undertaken (i) as it in its reasonable discretion deems necessary or
appropriate, at its own expense, or (ii) if required by applicable Law or
if a Default or Event of Default shall have occurred and be continuing, at the
expense of the Loan Parties.

 

6.11         Use of Proceeds.  Use the proceeds of the Credit Extensions (a) to
refinance the Indebtedness of the Loan Parties and their Subsidiaries under the
Existing Credit Agreement, (b) to finance transaction fees and expenses
related hereto, (c) to finance the working capital needs of the Loan
Parties and their Subsidiaries, including the purchase of Inventory and
Equipment, (d) to finance Capital Expenditures of the Borrowers, and (e) for
general corporate purposes of the Loan Parties, in each case to the extent
expressly not prohibited under applicable Law and the Loan Documents.

 

108

 

6.12         Additional Loan
Parties.  Notify
the Administrative Agent at the time that any Person becomes a Subsidiary, and
promptly thereafter (and, in any event, within fifteen (15) days or such longer
period of time as to which the Administrative Agent may agree in writing),
cause any such Person (a) which is not a Foreign Subsidiary, to (i) become
a Loan Party by executing and delivering to the Administrative Agent a Joinder
Agreement and/or a Facility Guaranty, (ii) grant a Lien to the Collateral
Agent on such Person’s assets to secure the Obligations, and (iii) deliver
to the Administrative Agent documents of the types referred to in Sections
4.01(a)(iii) and 4.01(a)(iv) and, if reasonably requested
by the Administrative Agent, an opinion of counsel to such Person (which shall
cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to in clause (a)), and (b) if
any Equity Interests or Indebtedness of such Person are owned by or on behalf
of any Loan Party, to pledge such Equity Interests and promissory notes
evidencing such Indebtedness (except that, if such Subsidiary is a Foreign
Subsidiary, the Equity Interests of such Subsidiary to be pledged shall be
limited to 65% of the outstanding Equity Interests of such Subsidiary and such
time period may be extended based on local law or practice).  In no event shall compliance with this Section 6.12
waive or be deemed a waiver or Consent to any transaction giving rise to the
need to comply with this Section 6.12 if such transaction was not
otherwise expressly permitted by this Agreement or constitute or be deemed to
constitute, with respect to any Subsidiary, an approval of such Person as a
Borrower or permit the inclusion of any acquired assets in the computation of
the Borrowing Base.

 

6.13         Cash Management.

 

(a)           Except as otherwise provided pursuant
to Section 6.20, on or prior to the Closing Date:

 

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

 

(ii)           enter into a Blocked Account
Agreement with each Blocked Account Bank.

 

(b)           The Borrowers shall use commercially
reasonable efforts to cause the ACH or wire transfer of all payments due from
credit card processors (whether or not there are then any outstanding
Obligations) to be made to a Blocked Account with such frequency as is
consistent with the Borrowers’ current business practices as in effect on the
Closing Date.

 

(c)           After the occurrence and during the
continuance of a Cash Dominion Event, the Collateral Agent may direct the
Blocked Account Bank to ACH or wire transfer no less frequently than each
Business Day (or with such other frequency as may be agreed to by the
Collateral Agent in its sole discretion), whether or not there are then any
outstanding Obligations, to the concentration account maintained by the
Collateral 

 

109

 

Agent at Bank of America (the “Concentration
Account”), all cash receipts and collections, including, without
limitation, the following:

 

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

 

(ii)           all proceeds of collections of
Accounts;

 

(iii)          all Net Proceeds, and all other cash
payments received by a Loan Party from any Person or from any source or on
account of any sale or other transaction or event, including, without
limitation, any Prepayment Event;

 

(iv)          the then contents of each DDA (net of
any minimum balance, not to exceed $10,000.00, as may be required to be kept in
the subject DDA by the depository institution at which such DDA is maintained);

 

(v)           the then entire ledger balance of
each Blocked Account (net of any minimum balance, not to exceed $25,000.00, as
may be required to be kept in the subject Blocked Account by the applicable
Blocked Account Bank); and

 

(vi)          the proceeds of all credit card
charges.

 

(d)           The Concentration Account shall at
all times be under the sole dominion and control of the Collateral Agent.  The Loan Parties hereby acknowledge and agree
that (i) the Loan Parties have no right of withdrawal from the
Concentration Account, (ii) the funds on deposit in the Concentration
Account shall at all times be collateral security for all of the Obligations
and (iii) the funds on deposit in the Concentration Account shall be
applied as provided in Sections 2.05(f) or 8.03, as
applicable, of this Agreement; provided  that, upon the
termination or expiration of a Cash Dominion Event, the Collateral Agent shall
direct each Blocked Account Bank to cease transferring funds to the
Concentration Account, and all funds on deposit in the Concentration Account
(if any) shall be remitted to the Loan Parties for deposit in one or more
Blocked Accounts.  In the event that,
notwithstanding the provisions of this Section 6.13, any Loan Party
receives or otherwise has dominion and control of any such proceeds or
collections, such proceeds and collections shall be held in trust by such Loan
Party for the Collateral Agent, shall not be commingled with any of such Loan
Party’s other funds or deposited in any account of such Loan Party and shall,
not later than the Business Day after receipt thereof, be deposited into the
Concentration Account or dealt with in such other fashion as such Loan Party
may be instructed by the Collateral Agent.

 

(e)           The Loan Parties may maintain one or
more accounts (the “Exempt Accounts”) in the ordinary course of business
to be used by the Loan Parties for the sole purpose of funding payroll
obligations and tax obligations and for holding funds owned by Persons other
than Loan Parties and amounts on deposit constituting tax obligations.
Notwithstanding anything in any Loan Document to the contrary, so long as no
Event of Default has occurred and is continuing, no Exempt Accounts shall be subject
to a Blocked Account Agreement or subject to the dominion and control of the
Administrative Agent.

 

110

 

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

 

6.14         Information
Regarding the Collateral.  Furnish to
the Administrative Agent at least fifteen (15) days prior written notice (or
such shorter period as may be agreed to by the Administrative Agent in its sole
discretion) of any change in: (i) any Loan Party’s name or in any trade
name used to identify it in the conduct of its business or in the ownership of
its properties; (ii) the location of any Loan Party’s chief executive
office, its principal place of business, any office in which it maintains books
or records relating to Collateral owned by it or any distribution center at
which Collateral owned by it is located (including the establishment of any
such new distribution center); (iii) any Loan Party’s type of organization
or jurisdiction of incorporation or formation; or (iv) any Loan Party’s
Federal Taxpayer Identification Number or organizational identification number
assigned to it by its state of organization.

 

6.15         Physical
Inventories.

 

(a)          Cause two (2) physical
inventories to be undertaken for each Store location and one (1) physical
inventory to be undertaken for each distribution center, at the expense of the
Loan Parties, in each twelve (12) month period conducted by the Lead Borrower
(or, upon the occurrence and during the continuance of a Default, such
inventory takers as are reasonably satisfactory to the Collateral Agent) and
following such methodology as is consistent with the methodology used in the
immediately preceding inventory or as otherwise may be satisfactory to the
Collateral Agent.  The Collateral Agent,
at the expense of the Loan Parties, may participate in and/or observe each scheduled
physical count of Inventory which is undertaken on behalf of any Loan
Party.   The Lead Borrower, within thirty
(30) days following the completion of such inventory, shall provide the
Collateral Agent with a reconciliation of the results of such inventory (as
well as of any other physical inventory undertaken by a Loan Party) and shall
post such results to the Loan Parties’ stock ledgers and general ledgers, as
applicable.

 

(b)         Upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent, in its reasonable discretion,
may cause additional such inventories to be taken as the Collateral Agent
determines (each, at the expense of the Loan Parties).

 

6.16         Environmental Laws.  Except as could not reasonably be expected to
have a Material Adverse Effect, (a) conduct its operations and keep and
maintain its Real Estate in material compliance with all Environmental Laws and
Environmental Permits; (b) obtain and renew all Environmental Permits
necessary for its operations and properties; and (c) implement any and all
investigation, remediation, removal and response actions that are appropriate
or necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws pertaining to the presence,
generation, treatment, storage, use, disposal, transportation or release of any
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate; provided, however, that neither a Loan Party nor any of
its Subsidiaries

 

111

 

shall be required to undertake any such
cleanup, removal, remedial or other action to the extent that its obligation to
do so is being contested in good faith and by proper proceedings and adequate
reserves have been set aside and are being maintained by the Loan Parties with
respect to such circumstances in accordance with GAAP.

 

6.17         Further Assurances.

 

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

 

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

 

(c)          Upon the request of the Collateral
Agent, cause each of its customs brokers to deliver an agreement (including,
without limitation, a Customs Broker Agreement) to the Collateral Agent
covering such matters and in such form as the Collateral Agent may reasonably
require.

 

6.18         Compliance with
Terms of Leaseholds.  Except as
otherwise expressly permitted hereunder, make all payments and otherwise
perform all obligations in respect of all Leases to which any Loan Party or any
of its Subsidiaries is a party, use commercially reasonable efforts to keep
such Leases in full force and effect and not allow such Leases to lapse or be
terminated (other than upon any stated expiration date) or any rights to renew
such leases to be forfeited or cancelled except pursuant to an express
termination right (other than in connection with any default by a Loan Party)
set forth in such Lease or in connection with a default on the part of the
landlord thereunder, notify the Administrative Agent of any default by any
party with respect to such Leases and cooperate with the Administrative Agent
in all respects to cure any such default, and cause each of its Subsidiaries to
do so, except, in any case, where the failure to do so, either individually or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect.

 

112

 

6.19         Material Contracts.  Perform and observe all the terms and
provisions of each Material Contract to be performed or observed by it,
maintain each such Material Contract in full force and effect, enforce each
such Material Contract in accordance with its terms, take all such action to
such end as may be from time to time requested by the Administrative Agent and,
upon request of the Administrative Agent, make to each other party to each such
Material Contract such demands and requests for information and reports or for
action as any Loan Party or any of its Subsidiaries is entitled to make under
such Material Contract, and cause each of its Subsidiaries to do so, except, in
any case, where the failure to do so, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.

 

6.20         Post-Closing
Matters.

 

(a)          Within thirty (30) days after the
Closing Date, the Borrowers shall deliver to the Collateral Agent a fully paid
(or, as to which, evidence of the payment of the applicable premium has been
provided to the Collateral Agent) Loan Policy of Title Insurance (Form T-2)
in the form prescribed by the Texas Commissioner of Insurance and in effect on
the date hereof (the “Mortgage Policy”) in form and substance, with
endorsements and in an amount reasonably acceptable to the Collateral Agent,
issued by a title insurer reasonably acceptable to the Collateral Agent,
insuring the Mortgage to be a valid first and subsisting Lien on the property
described therein, free and clear of all defects (including, but not limited
to, mechanics’ and materialmen’s Liens) and encumbrances, excepting only
Permitted Encumbrances and other Liens permitted under the Loan Documents, and
providing for such other affirmative insurance (including, without limitation,
endorsements for future advances under the Loan Documents) and such coinsurance
and direct access reinsurance as the Collateral Agent may reasonably deem
necessary or desirable.

 

(b)         Within thirty (30) days after the
Closing Date (or such longer period as may be agreed to by the Administrative
Agent in its sole discretion), the Borrowers shall deliver to the Collateral
Agent a Blocked Account Agreement with Wells Fargo Bank, N.A. with respect to
account numbers #4000035063, #4000038307, #4121387708, #4000038299,
#4000063719, #4000038281, #4945002210 and #4950040097.  In the event that the Borrowers are unable to
deliver the foregoing Blocked Account Agreement within the timeframe set forth
herein (as the same may be extended pursuant hereto) or make other arrangements
acceptable to the Collateral Agent, the Collateral Agent may, in its sole
discretion, require the Borrowers to move the applicable Blocked Account to
Bank of America, N.A. or another depository institution that is willing to
execute and deliver a Blocked Account Agreement in form and substance
reasonably satisfactory to the Collateral Agent.

 

(c)          Within thirty (30) days after the
Closing Date (or such longer period as may be agreed to by the Administrative
Agent in its sole discretion), the Borrowers shall close account number #12719258
and shall deliver to the Collateral Agent a Blocked Account Agreement with
Wells Fargo Bank, N.A. with respect to investment account number
#12830618.  In the event that the
Borrowers are unable to deliver the foregoing Blocked Account Agreement within
the timeframe set forth herein (as the same may be extended pursuant hereto) or
make other arrangements acceptable to the Collateral Agent,

 

113

 

the Collateral Agent may, in
its sole discretion, require the Borrowers to move the applicable Blocked
Account to Bank of America, N.A. or another depository institution that is
willing to execute and deliver a Blocked Account Agreement in form and
substance reasonably satisfactory to the Collateral Agent.

 

(d)         The Borrowers shall use commercially
reasonable efforts to deliver to the Collateral Agent a Customs Broker
Agreement with each customs broker acting on behalf of the Borrowers.  The Borrowers hereby acknowledge and agree
that, until such time as the Borrowers deliver such Customs Broker
Agreement(s), the Administrative Agent is under no obligation to include any
in-transit Inventory shipped from a foreign location which would otherwise
constitute Eligible In-Transit Inventory or Inventory supported by an otherwise
Eligible Letter of Credit in the Borrowing Base.

 

(e)          The Borrowers shall use commercially
reasonable efforts to deliver to the Collateral Agent a subordination
agreement, in form and substance reasonably satisfactory to the Collateral
Agent, with the landlord for the leased property of the Lead Borrower located
at 6808 Huebner Street, San Antonio, Texas 78238.  The Borrowers hereby acknowledge and agree
that, until such time as the Borrowers deliver such subordination agreement,
the Administrative Agent is under no obligation to include any Inventory
maintained at such location which would otherwise constitute Eligible Inventory
in the Borrowing Base.

 

(f)          Within thirty (30) days after the
Closing Date, the Borrowers shall deliver to the Collateral Agent Collateral
Access Agreements for each of the following leased locations: (i) 4252
Simonton Road, Farmers Branch, Texas; and (ii) Alpha and Welch Roads,
Farmers Branch, Texas.  Notwithstanding
anything to the contrary contained herein, the Administrative Agent hereby
acknowledges and agrees that all Inventory that is maintained at the foregoing
leased locations and otherwise meets the eligibility criteria set forth in this
Agreement shall be deemed to be “Eligible Inventory” until the expiration of
the above time period; provided, however, that in the event that
the Borrowers are unable to deliver a Collateral Access Agreement for one or
more of the foregoing leased locations within the above time period, all
Inventory located at any such leased location shall be deemed to be excluded
from “Eligible Inventory”, notwithstanding that such Inventory may otherwise
meet the eligibility criteria set forth in this Agreement, from and after the
expiration of the above time period until such time as the Borrowers are able
to obtain a Collateral Access Agreement for such leased location.

 

ARTICLE VII.

NEGATIVE COVENANTS

 

So long as any Lender shall have any
Commitment hereunder, any Loan or other Obligation (other than any Obligation
in respect of the Other Liabilities) hereunder shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding (except to the
extent fully Cash Collateralized or supported by another letter of credit in a
manner reasonably satisfactory to the L/C Issuer and the Administrative Agent),
no Loan Party shall, nor shall it permit any Subsidiary to, directly or
indirectly:

 

114

 

7.01         Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, or sign or file or suffer to exist under the UCC or any
similar Law or statute of any jurisdiction a financing statement that names any
Loan Party or any Subsidiary thereof as debtor; sign any security agreement
authorizing any Person thereunder to file such financing statement; sell any of
its property or assets subject to an understanding or agreement (contingent or
otherwise) to repurchase such property or assets with recourse to it or any of
its Subsidiaries; other than, as to all of the above, Permitted Encumbrances; provided
that, if any such financing statement is filed without the knowledge or
consent of a Loan Party, such Loan Party shall have a reasonable period of time
after obtaining knowledge thereof to obtain its termination.

 

7.02         Investments.  Make any
Investments, except Permitted Investments.

 

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

 

7.04         Fundamental
Changes.  Merge,
dissolve, liquidate, consolidate with or into another Person (or agree to do
any of the foregoing), except that, so long as no Default or Event of Default
shall have occurred and be continuing prior to, or immediately after giving
effect to, any action described below or would result therefrom:

 

(a)          any Subsidiary of the Parent may merge
or consolidate with, or dissolve or liquidate into, (i) a Loan Party, provided
that (A) the Loan Party shall be the continuing or surviving Person
or (B) the surviving Person shall expressly assume the Obligations of such
Loan Party under this Agreement and the other Loan Documents pursuant to
documentation and on terms reasonably acceptable to the Administrative Agent,
or (ii) any one or more other Subsidiaries, provided  that
when any wholly-owned Subsidiary is merging with another Subsidiary, the
wholly-owned Subsidiary shall be the continuing or surviving Person;

 

(b)         in connection with a Permitted
Investment, any Subsidiary of a Loan Party may merge with or into or
consolidate with any other Person or permit any other Person to merge with or
into or consolidate with it; provided  that (i) the Person
surviving such merger or consolidation shall be a wholly-owned Subsidiary of a
Loan Party and (ii) in the case of any such merger or consolidation to
which any Loan Party is a party, (A) such Loan Party is the surviving
Person or (B) the surviving Person shall expressly assume the Obligations
of such Loan Party under this Agreement and the other Loan Documents pursuant
to documentation and on terms reasonably acceptable to the Administrative
Agent;

 

(c)          (i) any Subsidiary of the Parent
(other than a Loan Party) may Dispose of all or substantially all of its assets
(upon voluntary liquidation or otherwise) to a Loan Party or any one or more
other Subsidiaries and (ii) any Loan Party may Dispose of all or
substantially all of its assets (upon voluntary liquidation or otherwise) to a
Loan Party;

 

115

 

(d)         the Loan Parties and their Subsidiaries
may consummate the Subsidiary Restructuring; and

 

(e)          any Loan Party and any Subsidiary of a
Loan Party may merge, dissolve, liquidate or consolidate with any other Person
in connection with a Disposition permitted pursuant to clauses (b), (f), (g), (h) or
(l) of the definition of Permitted Dispositions.

 

7.05         Dispositions.  Make any Disposition, except Permitted
Dispositions.

 

7.06         Restricted Payments.  Declare or make, directly or indirectly, any
Restricted Payment, or incur any obligation (contingent or otherwise) to do so,
or issue any Equity Interests or accept any capital contribution, except that:

 

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

 

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

 

(c)          if the Payment Conditions are
satisfied, the Loan Parties and each Subsidiary may purchase, redeem or
otherwise acquire Equity Interests issued by it;

 

(d)         if the Payment Conditions are
satisfied, the Parent may declare or pay cash dividends to its shareholders;

 

(e)          the Loan Parties may issue and sell
Equity Interests (other than Disqualified Stock), provided  that (i) no
Subsidiary of any Loan Party shall issue any additional Equity Interests except
to a Loan Party; and

 

(f)          To the extent constituting Restricted
Payments, the Loan Parties and their Subsidiaries may enter into transactions
permitted pursuant to Section 7.04.

 

7.07         Prepayments of
Indebtedness.  Prepay, redeem,
purchase, defease or otherwise satisfy prior to the scheduled maturity thereof
in any manner any Indebtedness, or make any payment in violation of any
subordination terms of any Subordinated Indebtedness, except (a) as long
as no Default or Event of Default then exists or would arise therefrom,
regularly scheduled or mandatory repayments, repurchases, redemptions or
defeasances of Permitted Indebtedness, and (b) voluntary prepayments,
repurchases, redemptions or defeasances of Permitted Indebtedness (but
excluding on account of any Subordinated Indebtedness) as long as the Payment
Conditions are satisfied, and (c) refinancings and refundings of such
Indebtedness to the extent permitted hereunder.

 

7.08         Change in Nature of Business.

 

(a)          In the case of the Parent, engage in any
business or activity other than (i) the direct or indirect ownership of
all outstanding Equity Interests in the other Loan Parties, (ii) maintaining
its corporate existence, (iii) participating in tax, accounting and

 

116

 

other administrative activities as the parent
of the consolidated group of companies, including the Loan Parties, (iv) the
execution and delivery of the Loan Documents to which it is a party and the
performance of its obligations thereunder, and (v) activities incidental
to the businesses or activities described in clauses (i) through (iv) of
this Section 7.08(a).

 

(b)         In the case of each of the other Loan
Parties, engage in any line of business substantially different from the
Business conducted by such Loan Parties and their Subsidiaries on the date
hereof or any business substantially related, ancillary or incidental thereto.

 

7.09         Transactions with Affiliates.  Enter into any transaction of any
kind with any Affiliate of any Loan Party, whether or not in the ordinary
course of business, other than on fair and reasonable terms substantially as
favorable to the Loan Parties or such Subsidiary as would be obtainable by the
Loan Parties or such Subsidiary at the time in a comparable arm’s length
transaction with a Person other than an Affiliate, provided  that
the foregoing restriction shall not apply to a transaction between or among the
Loan Parties and their Subsidiaries not prohibited hereunder.

 

7.10         Burdensome
Agreements.  Enter
into or permit to exist any Contractual Obligation (other than this Agreement
or any other Loan Document) that: (a) limits the ability (i) of any
Subsidiary to make Restricted Payments or other distributions to any Loan Party
or to otherwise transfer property to or invest in a Loan Party, (ii) of
any Subsidiary to Guarantee the Obligations, (iii) of any Subsidiary to
make or repay loans to a Loan Party, or (iv) of the Loan Parties or any
Subsidiary to create, incur, assume or suffer to exist Liens on property of
such Person in favor of the Collateral Agent; provided, however,
that this clause (iv) shall not prohibit any negative pledge incurred or
provided in favor of any holder of Indebtedness permitted under clauses (c) or
(f) of the definition of Permitted Indebtedness solely to the extent any
such negative pledge relates to the property financed by or the subject of such
Indebtedness; or (b) requires the grant of a Lien to secure an obligation
of such Person, which Lien is required to be pari passu or superior to the Lien
of the Collateral Agent; other than, in the case of each of clauses (a) and
(b), for any agreement (i) in effect as of the Closing Date, (ii) in
effect at the time any Subsidiary becomes a Subsidiary of a Loan Party so long
as the agreement was not entered into solely in contemplation of such Person
becoming a Subsidiary of a Loan Party, (iii) representing Permitted
Indebtedness of a Subsidiary which is not a Loan Party, and (iv) containing
customary restrictions on leases, subleases, licenses or joint venture
agreements otherwise permitted hereby so long as such restrictions relate to
the assets subject thereto.

 

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

 

7.12         Amendment of
Material Documents.  Amend, modify or waive any of a Loan
Party’s rights under (a) its Organization Documents in a manner materially
adverse to the Credit Parties or (b) any Material Contract or Material
Indebtedness (other than on account of any

 

117

 

refinancing thereof otherwise permitted
hereunder), in each case to the extent that such amendment, modification or
waiver could reasonably be expected to have a Material Adverse Effect.

 

7.13         Corporate Name;
Fiscal Year.

 

(a)          Change the Fiscal Year of any Loan Party,
or the accounting policies or reporting practices of the Loan Parties, except
in accordance with GAAP.

 

(b)         (i) Change its name as it appears
in official filings in the state of its incorporation or other organization (ii) change
its chief executive office, principal place of business, distribution centers
at which Collateral is held or stored, or the location of its records
concerning the Collateral, (iii) change the type of entity that it is, (iv) change
its organization identification number, if any, issued by its state of
incorporation or other organization, or (v) change its state of
incorporation or organization, in each case without at least fifteen (15) days
prior written notice (or such shorter period as may be agreed to by the
Administrative Agent in its sole discretion) to the Collateral Agent, provided
that any such new location shall be in the continental United
States.  The Loan Parties agree not to
effect or permit any change referred to in clause (v) of the preceding
sentence unless all filings have been made (or will be made concurrently with
such change) under the UCC or otherwise that are required in order for the
Collateral Agent to continue at all times following such change to have a
valid, legal and perfected first priority security interest in all the
Collateral for its own benefit and the benefit of the other Credit Parties.

 

7.14         Blocked Accounts;
Credit Card Processors.  Not open new
Blocked Accounts or enter into new agreements with credit card processors
unless the Loan Parties shall have delivered to the Collateral Agent
appropriate Blocked Account Agreements or Credit Card Notifications, as
applicable, consistent with the provisions of Section 6.13 and
otherwise satisfactory to the Collateral Agent.

 

7.15         Consolidated Fixed
Charge Coverage Ratio.  During the
continuance of a Covenant Compliance Event, permit the Consolidated Fixed
Charge Coverage Ratio, calculated as of the occurrence of such Covenant
Compliance Event and as of the last day of each month thereafter based upon the
most recent Measurement Period, to be less than 1.0 to 1.0.

 

7.16         Availability.  Permit Availability at any time to be less
than an amount equal to the lesser of (a) the product of (i) the
amount generated by adding clauses (a) through (d) of the Borrowing
Base multiplied by (ii) seven and one-half percent (7.50%) or (b) the
product of (i) the Aggregate Commitments then in effect multiplied by
(ii) seven and one-half percent (7.50%).

 

ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

 

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

 

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

 

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any interest on any Loan or on
any L/C Obligation, or any fee due hereunder, or (iii) any other amount payable
hereunder or under any other Loan Document; or

 

(b)         Specific Covenants.  Any Loan Party fails to perform or observe
any term, covenant or agreement contained in any of Sections 6.01, 6.02(a),
6.02(b), 6.02(e), 6.03(a), 6.05 (but only as it
pertains to the obligation of each Loan Party to maintain its legal existence),
6.07, 6.10, 6.11, 6.12, 6.13, 6.20 or
Article VII; or

 

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

 

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

 

(e)          Cross-Default.  (i) Any Loan Party or any Subsidiary
thereof (A) fails to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) in respect
of any Material Indebtedness (other than Indebtedness hereunder and
Indebtedness under any Swap Contract provided to any Loan Party by a Lender or
any of its Affiliates), or (B) fails to observe or perform any other
agreement or condition relating to any such Material Indebtedness or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event occurs, the effect of which default or other event is to cause, or
to permit the holder or holders of such Material Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause, with the giving of notice
if required, such Material Indebtedness to be demanded or to become due or to
be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or
an offer to repurchase, prepay, defease or redeem such Material Indebtedness to
be made, prior to its stated maturity; or (ii) there occurs under any Swap
Contract provided to any Loan Party by a Lender or any of its Affiliates an
Early Termination Date (as defined in such Swap Contract) resulting from (A) any
event of default under such Swap Contract as to which a Loan Party or any
Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract)
or (B) any Termination Event (as so defined) under such Swap Contract as
to which a Loan Party or any Subsidiary thereof is an Affected Party (as so
defined); or

 

(f)          Insolvency Proceedings, Etc.  Any Loan Party or any of its Subsidiaries
(other than any Foreign Subsidiary) institutes or consents to the institution
of any proceeding under any Debtor Relief Law, or makes an assignment for the
benefit of creditors; or applies for or consents to the appointment of any
receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer for it or for all or any material part of its property; or a proceeding
shall be commenced or a petition filed, without the application or consent of
such Person, seeking or requesting the appointment of any

 

119

 

receiver, trustee, custodian,
conservator, liquidator, rehabilitator or similar officer is appointed and the
appointment continues undischarged, undismissed or unstayed for sixty (60)
calendar days or an order or decree approving or ordering any of the foregoing
shall be entered; or any proceeding under any Debtor Relief Law relating to any
such Person or to all or any material part of its property is instituted
without the consent of such Person and continues undismissed or unstayed for
sixty (60) calendar days, or an order for relief is entered in any such
proceeding; or

 

(g)         Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Subsidiary
(other than any Foreign Subsidiary) thereof becomes unable or admits in writing
its inability or fails generally to pay its debts as they become due in the
ordinary course of business, or (ii) any writ or warrant of attachment or
execution or similar process is issued or levied against all or any material
part of the property of any such Person and is not released, vacated or fully
bonded within forty-five (45) days after its issuance or levy; or

 

(h)         Judgments.  There is entered against any Loan Party or
any Subsidiary thereof (i) one or more judgments or orders for the payment
of money in an aggregate amount (as to all such judgments and orders) exceeding
$5,000,000 (to the extent not covered by independent third-party insurance as
to which the insurer has been notified of the potential claim and does not
dispute coverage), or (ii) any one or more non-monetary judgments that
have, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect and, in either case, (A) enforcement
proceedings are commenced by any creditor upon such judgment or order, or (B) there
is a period of forty-five (45) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, is not in effect; or

 

(i)           ERISA.  (i) An ERISA Event occurs with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of any Loan Party under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate
amount in excess of $5,000,000 or which could reasonably be expected to result
in a Material Adverse Effect, or (ii) a Loan Party or any ERISA Affiliate
fails to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$5,000,000 or which could reasonably be expected to result in a Material
Adverse Effect; or

 

(j)           Invalidity of Loan Documents.  (i)  Any provision of any Loan Document,
at any time after its execution and delivery and for any reason other than as
expressly permitted hereunder or thereunder (including as a result of a
transaction permitted under Sections 7.04 or 7.05 or satisfaction
in full of all the Obligations), ceases to be in full force and effect; or any
Loan Party or any Subsidiary contests in writing the validity or enforceability
of any provision of any Loan Document; or any Loan Party denies that it has any
or further liability or obligation under any provision of any Loan Document, or
purports to revoke, terminate or rescind any provision of any Loan Document or
seeks to avoid, limit or otherwise adversely affect any Lien purported to be
created under any

 

120

 

Security Document; or (ii) any
Lien purported to be created under any Security Document shall cease to be, or
shall be asserted by any Loan Party or any other Person not to be, a valid and
perfected Lien on any Collateral (other than an immaterial portion of the
Collateral not of the type included in the Borrowing Base, as determined by the
Administrative Agent in its Permitted Discretion), with the priority required
by the applicable Security Document; or

 

(k)          Change of Control.  There occurs any Change of Control; or

 

(l)           Cessation of Business.  Except as otherwise expressly permitted
hereunder, any Loan Party shall suspend the operation of its business in the
ordinary course, liquidate all or a material portion of its assets or Store
locations, or employ an agent or other third party to conduct a program of
closings, liquidations or “Going-Out-Of-Business” sales of any material portion
of its business; or

 

(m)         Loss of Collateral.  There occurs any uninsured loss to any of the
Collateral which could reasonably be expected to have a Material Adverse
Effect; or

 

(n)         Breach of Contractual Obligation.  Any Loan Party or any Subsidiary thereof
fails to make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) in respect of any Material
Contract or fails to observe or perform any other agreement or condition
relating to any such Material Contract or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event occurs,
the effect of which default or other event is to cause, or to permit, the
counterparty to such Material Contract to terminate such Material Contract; or

 

(o)         Indictment.  The indictment of any Loan Party or any
Subsidiary thereof, under any federal, state, municipal, and other criminal
statute, rule, regulation, order, or other requirement having the force of law
for a felony; or

 

(p)         Subordination.  (i)  The subordination provisions of the
documents evidencing or governing any Subordinated Indebtedness (the “Subordination
Provisions”) shall, in whole or in part, terminate, cease to be effective
or cease to be legally valid, binding and enforceable against any holder of the
applicable Subordinated Indebtedness; or (ii) any Borrower or any other
Loan Party shall, directly or indirectly, disavow or contest in writing (A) the
effectiveness, validity or enforceability of any of the Subordination
Provisions, (B) that the Subordination Provisions exist for the benefit of
the Credit Parties, or (C) that all payments of principal of or premium
and interest on the applicable Subordinated Indebtedness, or realized from the
liquidation of any property of any Loan Party, shall be subject to any of the
Subordination Provisions.

 

8.02         Remedies Upon
Event of Default.  If any Event of Default occurs and
is continuing, the Administrative Agent may, or, at the request of the Required
Lenders, shall, take any or all of the following actions:

 

121

 

(a)          declare the Commitments of each Lender to make Loans and
any obligation of the L/C Issuer to make L/C Credit Extensions to be
terminated, whereupon such Commitments and obligation shall be terminated; 

 

(b)         declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Loan Parties; 

 

(c)          require that the Loan Parties Cash
Collateralize the L/C Obligations; and

 

(d)         whether or not
the maturity of the Obligations shall have been accelerated pursuant hereto,
proceed to protect, enforce and exercise all rights and remedies of the Credit
Parties under this Agreement, any of the other Loan Documents or applicable
Law, including, but not limited to, by suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations are evidenced, and, if such amount
shall have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the entry of an order for relief
with respect to any Loan Party or any Subsidiary thereof under the Bankruptcy
Code of the United States of America, the obligation of each Lender to make
Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall
automatically terminate, the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due
and payable, and the obligation of the Loan Parties to Cash Collateralize the
L/C Obligations as aforesaid shall automatically become effective, in each case
without further act of the Administrative Agent or any Lender.

 

No remedy
herein is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of Law.

 

8.03         Application of Funds.  After the exercise of remedies
provided for in Section 8.02 (or after the Loans have automatically
become immediately due and payable and the L/C Obligations have automatically
been required to be Cash Collateralized as set forth in the proviso to Section 8.02),
any amounts received on account of the Obligations shall be applied by the
Administrative Agent in the following order:

 

First,
to payment of that portion of the Obligations (excluding the Other Liabilities)
constituting fees, indemnities, Credit Party Expenses and other amounts
(including fees, charges and disbursements of counsel to the Administrative
Agent and the Collateral Agent payable pursuant to Section 10.04
and amounts payable under Article III) payable to the Administrative
Agent and the Collateral Agent, each in its capacity as such;

 

122

 

Second,
to payment of that portion of the Obligations (excluding the Other Liabilities)
constituting indemnities, Credit Party Expenses, and other amounts (other than
principal, interest and fees) payable to the Lenders and the L/C Issuer
(including fees, charges and disbursements of counsel to the respective Lenders
and the L/C Issuer payable pursuant to Section 10.04 and amounts
payable under Article III), ratably among them in proportion to the
amounts described in this clause Second payable to them;

 

Third,
to the extent not previously reimbursed by the Lenders, to payment to the
Lenders of that portion of the Obligations constituting principal and accrued
and unpaid interest on any Permitted Overadvances, ratably among the Lenders in
proportion to the amounts described in this clause Third payable to
them;

 

Fourth,
to the extent that Swing Line Loans have not been refinanced by a Committed
Loan, payment to the Swing Line Lender of that portion of the Obligations
constituting accrued and unpaid interest on the Swing Line Loans;

 

Fifth,
to payment of that portion of the Obligations constituting accrued and unpaid
interest on the Loans, L/C Borrowings and other Obligations, and fees
(including Letter of Credit Fees), ratably among the Lenders and the L/C Issuer
in proportion to the respective amounts described in this clause Fifth
payable to them;

 

Sixth,
to the extent that Swing Line Loans have not been refinanced by a Committed
Loan, to payment to the Swing Line Lender of that portion of the Obligations
constituting unpaid principal of the Swing Line Loans;

 

Seventh,
to payment of that portion of the Obligations constituting unpaid principal of
the Loans and L/C Borrowings, ratably among the Lenders and the L/C Issuer in
proportion to the respective amounts described in this clause Seventh
held by them;

 

Eighth,
to the Administrative Agent for the account of the L/C Issuer, to Cash
Collateralize that portion of L/C Obligations comprised of the aggregate
undrawn amount of Letters of Credit;

 

Ninth,
to payment of all other Obligations (including, without limitation, the cash
collateralization of unliquidated indemnification obligations as provided in Section 10.04,
but excluding any Other Liabilities), ratably among the Credit Parties in
proportion to the respective amounts described in this clause Ninth held
by them;

 

Tenth,
to payment of that portion of the Obligations arising from Cash Management
Services to the extent secured under the Security Documents, ratably among the
Credit Parties in proportion to the respective amounts described in this clause
Tenth held by them;

 

Eleventh,
to payment of all other Obligations arising from Bank Products to the extent
secured under the Security Documents, ratably among the Credit Parties in
proportion to the respective amounts described in this clause Eleventh
held by them; and

 

123

 

Last,
the balance, if any, after all of the Obligations have been indefeasibly paid
in full, to the Loan Parties or as otherwise required by Law.

 

Subject to Section 2.03(c),
amounts used to Cash Collateralize the aggregate undrawn amount of Letters of
Credit pursuant to clause Eighth above shall be applied to satisfy
drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

ARTICLE IX.

ADMINISTRATIVE AGENT

 

9.01         Appointment and Authority.

 

(a)          Each of the Lenders and the L/C Issuer hereby irrevocably
appoints Bank of America to act on its behalf as the Administrative Agent
hereunder and under the other Loan Documents and authorizes the Administrative
Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof or thereof, together
with such actions and powers as are reasonably incidental thereto.  The provisions of this Article IX
are solely for the benefit of the Administrative Agent, the Lenders and the L/C
Issuer, and no Loan Party or any Subsidiary thereof shall have rights as a third
party beneficiary of any of such provisions.

 

(b)         Each of the Lenders (in its capacities as a Lender), Swing
Line Lender and the L/C Issuer hereby irrevocably appoints Bank of America as
Collateral Agent and authorizes the Collateral Agent to act as the agent of
such Lender and the L/C Issuer for purposes of acquiring, holding and enforcing
any and all Liens on Collateral granted by any of the Loan Parties to secure
any of the Obligations, together with such powers and discretion as are
reasonably incidental thereto.  In this
connection, the Collateral Agent, as “collateral agent” and any co-agents,
sub-agents and attorneys-in-fact appointed by the Collateral Agent pursuant to Section 9.05
for purposes of holding or enforcing any Lien on the Collateral (or any portion
thereof) granted under the Collateral Documents, or for exercising any rights
and remedies thereunder at the direction of the Collateral Agent), shall be
entitled to the benefits of all provisions of this Article IX and Article X
(including Section 10.04(c)), as though such co-agents, sub-agents
and attorneys-in-fact were the “collateral agent” under the Loan Documents, as
if set forth in full herein with respect thereto.

 

9.02         Rights as a Lender.  The Persons serving as the Agents
hereunder shall have the same rights and powers in their capacity as a Lender
as any other Lender and may exercise the same as though they were not the
Administrative Agent or the Collateral Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise
requires, include the Person serving as the Administrative Agent or the
Collateral Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits
from, lend money to, act as the financial advisor or in any other advisory
capacity for and generally engage in any kind of business with the Loan Parties
or any Subsidiary or other 

 

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Affiliate
thereof as if such Person were not the Administrative Agent or the Collateral
Agent hereunder and without any duty to account therefor to the Lenders.

 

9.03         Exculpatory Provisions.  The Agents shall not have any
duties or obligations except those expressly set forth herein and in the other
Loan Documents.  Without limiting the
generality of the foregoing, the Agents:

 

(a)          shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default or Event of Default has occurred and is
continuing;

 

(b)         shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the
Administrative Agent or the Collateral Agent, as applicable, is required to exercise
as directed in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be expressly provided for herein or in the
other Loan Documents), provided  that no Agent shall be required
to take any action that, in its respective opinion or the opinion of its
counsel, may expose such Agent to liability or that is contrary to any Loan
Document or applicable Law; and

 

(c)           shall not, except as expressly set
forth herein and in the other Loan Documents, have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to
the Loan Parties or any of its Affiliates that is communicated to or obtained
by the Person serving as the Administrative Agent, the Collateral Agent or any
of its Affiliates in any capacity.

 

No Agent shall be liable for any action taken
or not taken by it (i) with the Consent or at the request of the Required
Lenders (or such other number or percentage of the Lenders as shall be
necessary, or as such Agent shall believe in good faith shall be necessary,
under the circumstances as provided in Sections 10.01 and 8.02)
or (ii) in the absence of its own gross negligence or willful misconduct,
as determined by a final and non-appealable judgment of a court of competent
jurisdiction.

 

The Agents shall not be deemed
to have knowledge of any Default unless and until notice describing such
Default is given to such Agent by the Loan Parties, a Lender or the L/C Issuer. In the event that the Agents obtain
such actual knowledge or receive such a notice, the Agents shall give prompt
notice thereof to each of the other Credit Parties.  Upon the occurrence of an Event of Default,
the Agents shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders.  Unless and until the Agents shall have
received such direction, the Agents may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to any such
Default or Event of Default as they shall deem advisable in the best interest
of the Credit Parties.  In no event shall
the Agents be required to comply with any such directions to the extent that
any Agent believes that its compliance with such directions would be unlawful.

 

The Agents shall not be
responsible for, or have any duty to ascertain or inquire into, (i) any
statement, warranty or representation made in or in connection with this
Agreement or any

 

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other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or thereunder or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or therein or the occurrence of any Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document or the
creation, perfection or priority of any Lien purported to be created by the
Security Documents, (v) the value or the sufficiency of any Collateral, or
(vi) the satisfaction of any condition set forth in Article IV
or elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to the Agents.

 

9.04         Reliance by Agents. 
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including, but not limited
to, any electronic message, Internet or intranet website posting or other
distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated by the proper Person. 
Each Agent also may rely upon any statement made to it orally or by telephone
and believed by it to have been made by the proper Person, and shall not incur
any liability for relying thereon.  In
determining compliance with any condition hereunder to the making of a Loan, or
the issuance of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or the L/C Issuer, the Administrative Agent may presume
that such condition is satisfactory to such Lender or the L/C Issuer unless the
Administrative Agent shall have received written notice to the contrary from
such Lender or the L/C Issuer prior to the making of such Loan or the issuance
of such Letter of Credit.  Each Agent may
consult with legal counsel (who may be counsel for any Loan Party), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.

 

9.05         Delegation of Duties.  Each Agent may perform any and all
of its duties and exercise its rights and powers hereunder or under any other
Loan Document by or through any one or more sub-agents appointed by such
Agent.  Each Agent and any such sub-agent
may perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. 
The exculpatory provisions of this Article IX shall apply to
any such sub-agent and to the Related Parties of the Agents and any such
sub-agent, and shall apply to their respective activities in connection with
the syndication of the credit facilities provided for herein as well as
activities as such Agent.

 

9.06         Resignation of Agents.  Either Agent may at any time give
fifteen (15) days prior written notice of its resignation to the Lenders, the
L/C Issuer and the Lead Borrower.  Upon
receipt of any such notice of resignation, the Required Lenders shall have the
right to appoint a successor, which shall be a bank with an office in the
United States, or an Affiliate of any such bank with an office in the United
States, and shall, unless an Event of Default has occurred and is continuing at
the time of such appointment, be reasonably acceptable to the Lead Borrower
(whose consent shall not be unreasonably withheld or delayed).  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may on behalf of the Lenders and the L/C Issuer, appoint a
successor Administrative Agent or Collateral Agent, as applicable, meeting the
qualifications set forth above; provided  that, if the
Administrative Agent or the Collateral Agent shall notify the Lead Borrower and
the Lenders that no qualifying

 

126

 

Person has accepted such appointment, then
such resignation shall nonetheless become effective in accordance with such
notice and (a) the retiring Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents (except that in the case
of any Collateral held by the Collateral Agent on behalf of the Lenders or the
L/C Issuer under any of the Loan Documents, the retiring Collateral Agent shall
continue to hold such collateral security until such time as a successor
Collateral Agent is appointed) and (b) all payments, communications and
determinations provided to be made by, to or through the Administrative Agent
shall instead be made by or to each Lender and the L/C Issuer directly, until
such time as the Required Lenders appoint a successor Administrative Agent as
provided for above in this Section 9.06.  Upon the acceptance of a successor’s
appointment as Administrative Agent or Collateral Agent, as applicable,
hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged
therefrom as provided above in this Section 9.06).  The fees payable by the Borrowers to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Lead Borrower and such
successor.  After the retiring Agent’s
resignation hereunder and under the other Loan Documents, the provisions of
this Article IX and Section 10.04 shall continue in
effect for the benefit of such retiring Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while the retiring Agent was acting as Administrative
Agent or Collateral Agent hereunder.

 

Any resignation by Bank of
America as Administrative Agent pursuant to this Section 9.06 shall
also constitute its resignation as L/C Issuer and Swing Line Lender.  Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, (a) such successor shall
succeed to and become vested with all of the rights, powers, privileges and
duties of the retiring L/C Issuer and Swing Line Lender, (b) the retiring
L/C Issuer and Swing Line Lender shall be discharged from all of their
respective duties and obligations hereunder or under the other Loan Documents,
and (c) the successor L/C Issuer shall issue letters of credit in substitution
for the Letters of Credit, if any, outstanding at the time of such succession
or make other arrangements satisfactory to the retiring L/C Issuer to
effectively assume the obligations of the retiring L/C Issuer with respect to
such Letters of Credit.

 

9.07         Non-Reliance on Administrative Agent and Other Lenders.  Each Lender and the
L/C Issuer acknowledges that it has, independently and without reliance upon
the Agents or any other Lender or any of their Related Parties and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement.  Each Lender and the L/C Issuer also
acknowledges that it will, independently and without reliance upon the Agents
or any other Lender or any of their Related Parties and based on such documents
and information as it shall from time to time deem appropriate, continue to
make its own decisions in taking or not taking action under or based upon this
Agreement, any other Loan Document or any related agreement or any document
furnished hereunder or thereunder. 
Except as provided in Section 9.12, the Agents shall not
have any duty or responsibility to provide any Credit Party with any other
credit or other information concerning the affairs, financial condition or
business of any Loan Party that may come into the possession of the Agents.

 

127

 

9.08         No Other Duties, Etc. 
Anything herein to the contrary notwithstanding, none of the Arrangers
or the Syndication Agent shall have any powers, duties or responsibilities
under this Agreement or any of the other Loan Documents, except in its
capacity, as applicable, as the Administrative Agent, Collateral Agent, a
Lender or the L/C Issuer hereunder.

 

9.09         Administrative Agent May File Proofs of Claim.  In case of the
pendency of any proceeding under any Debtor Relief Law or any other judicial
proceeding relative to any Loan Party, the Administrative Agent (irrespective
of whether the principal of any Loan or L/C Obligation shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Loan
Parties) shall be entitled and empowered, by intervention in such proceeding or
otherwise

 

(a)           to file and prove a claim for the
whole amount of the principal and interest owing and unpaid in respect of the
Loans, L/C Obligations and all other Obligations that are owing and unpaid and
to file such other documents as may be necessary or advisable in order to have
the claims of the Lenders, the L/C Issuer, the Administrative Agent and the
other Credit Parties (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders, the L/C Issuer, the
Administrative Agent, such Credit Parties and their respective agents and
counsel and all other amounts due the Lenders, the L/C Issuer the
Administrative Agent and such Credit Parties under Sections 2.03(i) and
2.03(j), as applicable, 2.09 and 10.04) allowed in such
judicial proceeding; and

 

(b)           to collect and receive any monies or
other property payable or deliverable on any such claims and to distribute the
same;

 

and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Lender and the L/C Issuer to
make such payments to the Administrative Agent and, if the Administrative Agent
shall consent to the making of such payments directly to the Lenders and the
L/C Issuer, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 2.09 and 10.04.

 

Nothing contained herein shall
be deemed to authorize the Administrative Agent to authorize or consent to or
accept or adopt on behalf of any Lender or the L/C Issuer any plan of
reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or the L/C Issuer or to authorize the
Administrative Agent to vote in respect of the claim of any Lender or the L/C
Issuer in any such proceeding.

 

9.10         Collateral and Guaranty Matters.  The Credit Parties irrevocably
authorize the Agents, at their option and in their discretion,

 

(a)           to release any Lien on any property
granted to or held by the Collateral Agent under any Loan Document (i) upon
termination of the Aggregate Commitments and payment in full of all Obligations
(other than contingent indemnification obligations for which no claim has been
asserted and any Other Liabilities which are not by their

 

128

 

terms then due and payable, provided
that the Agents shall have received such indemnities and collateral
security as they shall have required in accordance with the terms of Section 10.11
to protect the Credit Parties against any obligations that may thereafter arise
with respect to such Other Liabilities) and the expiration or termination of
all Letters of Credit (except to the extent fully Cash Collateralized or
supported by another letter of credit in a manner reasonably satisfactory to
the L/C Issuer and the Administrative Agent), (ii) that is sold or to be
sold as part of or in connection with any sale permitted hereunder or under any
other Loan Document, or (iii) if approved, authorized or ratified in
writing by the Required Lenders in accordance with Section 10.01;

 

(b)         to subordinate any Lien on any property granted to or held
by the Collateral Agent under any Loan Document to the holder of any Lien on
such property that is permitted by clause (h) of the definition of
Permitted Encumbrances; and

 

(c)          to release any Guarantor from its obligations under any
Facility Guaranty if such Person ceases to be a Subsidiary as a result of a
transaction permitted hereunder.

 

Upon request by any Agent at any time, the
Required Lenders will confirm in writing such Agent’s authority to release or
subordinate its interest in particular types or items of property, or to
release any Guarantor from its obligations under the Facility Guaranty pursuant
to this Section 9.10.  In
each case as specified in this Section 9.10, the Agents will, at
the Loan Parties’ expense, execute and deliver to the applicable Loan Party
such documents as such Loan Party may reasonably request to evidence the
release of such item of Collateral from the assignment and security interest
granted under the Security Documents or to subordinate its interest in such
item, or to release such Guarantor from its obligations under the Facility
Guaranty, in each case in accordance with the terms of the Loan Documents and
this Section 9.10.

 

9.11         Notice of Transfer.  The Agents may deem and treat a
Lender party to this Agreement as the owner of such Lender’s portion of the
Obligations for all purposes, unless and until, and except to the extent, an
Assignment and Acceptance shall have become effective as set forth in Section 10.06.

 

9.12         Reports and Financial Statements.  By signing this Agreement, each
Lender:

 

(a)          agrees to furnish the Administrative Agent, after the
occurrence and during the continuance of a Cash Dominion Event (and thereafter
at such frequency as the Administrative Agent may reasonably request), with a
summary of all Other Liabilities due or to become due to such Lender. In
connection with any distributions to be made hereunder, the Administrative
Agent shall be entitled to assume that no amounts are due to any Lender on
account of Other Liabilities unless the Administrative Agent has received
written notice thereof from such Lender;

 

(b)         is deemed to have requested that the Administrative Agent
furnish such Lender, promptly after they become available, copies of all
financial statements required to be delivered by the Lead Borrower hereunder
and all commercial finance examinations and appraisals of the Collateral
received by the Agents (collectively, the “Reports”);

 

129

 

(c)          expressly agrees and acknowledges that the Administrative
Agent makes no representation or warranty as to the accuracy of the Reports,
and shall not be liable for any information contained in any Report;

 

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

 

(e)          agrees to keep all Reports confidential in accordance with
the provisions of Section 10.07 hereof; and

 

(f)          without limiting the generality of any other
indemnification provision contained in this Agreement, agrees: (i) to hold
the Agents and any such other Lender preparing a Report harmless from any
action the indemnifying Lender may take or conclusion the indemnifying Lender
may reach or draw from any Report in connection with any Credit Extensions that
the indemnifying Lender has made or may make to the Borrowers, or the
indemnifying Lender’s participation in, or the indemnifying Lender’s purchase
of, a Loan or Loans; and (ii) to pay and protect, and indemnify, defend,
and hold the Agents and any such other Lender preparing a Report harmless from
and against, the claims, actions, proceedings, damages, costs, expenses, and
other amounts (including attorney costs) incurred by the Agents and any such
other Lender preparing a Report as the direct or indirect result of any third
parties who might obtain all or part of any Report through the indemnifying
Lender.

 

9.13         Agency for Perfection.  Each Lender hereby appoints each other Lender
as agent for the purpose of perfecting Liens for the benefit of the Agents and
the Lenders, in assets which, in accordance with Article 9 of the UCC or
any other applicable Law of the United States can be perfected only by
possession.  Should any Lender (other
than the Agents) obtain possession of any such Collateral, such Lender shall
notify the Agents thereof, and, promptly upon the Collateral Agent’s request
therefor shall deliver such Collateral to the Collateral Agent or otherwise
deal with such Collateral in accordance with the Collateral Agent’s
instructions.

 

9.14         Indemnification of Agents.  The Lenders shall indemnify the Agents (to
the extent not reimbursed by the Loan Parties and without limiting the
obligations of Loan Parties hereunder), ratably according to their Applicable
Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by, or
asserted against any Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or omitted to be taken
by any Agent in connection therewith; provided, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent’s gross negligence or willful misconduct as
determined by a final and nonappealable judgment of a court of competent
jurisdiction.

 

130

 

9.15         Relation
among Lenders.  The Lenders are not
partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Agents)
authorized to act for, any other Lender.

 

9.16         Defaulting Lender.

 

(a)           If for any reason any Lender shall fail or
refuse to abide by its obligations under this Agreement, including without
limitation its obligation to make available to the Administrative Agent its
Applicable Percentage of any Loans, expenses or setoff or purchase its
Applicable Percentage of a participation interest in the Swingline Loans or L/C
Borrowings and such failure is not cured within two (2) days of receipt
from the Administrative Agent of written notice thereof, then, in addition to the
rights and remedies that may be available to the other Credit Parties, the Loan
Parties or any other party at law or in equity, and not in limitation thereof, (i) such
Defaulting Lender’s right to participate in the administration of, or
decision-making rights related to, the Obligations, this Agreement or the other
Loan Documents shall be suspended during the pendency of such failure or
refusal, and (ii) a Defaulting Lender shall be deemed to have assigned any
and all payments due to it from the Loan Parties, whether on account of
outstanding Loans, interest, fees or otherwise, to the remaining non-Defaulting
Lenders for application to, and reduction of, their proportionate shares of all
outstanding Obligations until, as a result of application of such assigned
payments the Lenders’ respective Applicable Percentages of all outstanding
Obligations shall have returned to those in effect immediately prior to such
delinquency and without giving effect to the nonpayment causing such
delinquency.  The Defaulting Lender’s
decision-making and participation rights and rights to payments as set forth in
clauses (i) and (ii) hereinabove shall be restored only upon the
payment by the Defaulting Lender of its Applicable Percentage of any
Obligations, any participation obligation, or expenses as to which it is
delinquent, together with interest thereon at the rate set forth in Section 2.12
hereof from the date when originally due until the date upon which any such
amounts are actually paid.

 

(b)           The non-Defaulting Lenders shall also have
the right, but not the obligation, in their respective, sole and absolute
discretion, to cause the termination and assignment, without any further action
by the Defaulting Lender for no cash consideration (pro  rata,
based on the respective Commitments of those Lenders electing to exercise such
right), of the Defaulting Lender’s Commitment to fund future Loans.  Upon any such purchase of the Applicable
Percentage of any Defaulting Lender, the Defaulting Lender’s share in future
Credit Extensions and its rights under the Loan Documents with respect thereto
shall terminate on the date of purchase, and the Defaulting Lender shall
promptly execute all documents reasonably requested to surrender and transfer
such interest, including, if so requested, an Assignment and Acceptance.

 

(c)           Each Defaulting Lender shall indemnify the
Administrative Agent and each non-Defaulting Lender from and against any and
all loss, damage or expenses, including but not limited to reasonable attorneys’
fees and funds advanced by the Administrative Agent or by any non-Defaulting
Lender, on account of a Defaulting

 

131

 

Lender’s failure to timely fund its Applicable Percentage of a Loan or
to otherwise perform its obligations under the Loan Documents.

 

ARTICLE X.

MISCELLANEOUS

 

10.01       Amendments, Etc.  No amendment or
waiver of any provision of this Agreement or any other Loan Document, and no
Consent to any departure by any Loan Party therefrom, shall be effective unless
in writing signed by the Administrative Agent, with the Consent of the Required
Lenders, and the Lead Borrower or the applicable Loan Party, as the case may
be, and acknowledged by the Administrative Agent, and each such waiver or
Consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such
amendment, waiver or consent shall:

 

(a)           extend, or increase, the Commitment of any
Lender (or reinstate any Commitment terminated pursuant to Section 8.02)
without the written Consent of such Lender (it being understood that a waiver
of any condition precedent set forth in Section 4.02 or the waiver
of any Event of Default or mandatory prepayment shall not constitute an
extension or increase of the Commitment of any Lender);

 

(b)           postpone any date fixed by this Agreement or
any other Loan Document for any payment or mandatory prepayment of principal,
interest, fees or other amounts due to the Lenders (or any of them) hereunder
or under any of the other Loan Documents without the written Consent of each
affected Lender entitled to such payment;

 

(c)           reduce the principal of, or the rate of
interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (v) of
the second proviso to this Section 10.01) any fees or other amounts
payable hereunder or under any other Loan Document, without the written Consent
of each affected Lender entitled to such amount; provided, however,
that only the Consent of the Required Lenders shall be necessary to amend the
definition of “Default Rate” or to waive any obligation of the Borrowers to pay
interest or Letter of Credit Fees at the Default Rate;

 

(d)           change the definition of the term “Clean-down
Period” or amend, waive or otherwise modify the provisions of Section 2.05(d) without
the written Consent of each Lender;

 

(e)           change Section 2.13 or Section 8.03
in a manner that would alter the pro rata sharing of payments required thereby
without the written Consent of each Lender;

 

(f)            change any provision of this Section 10.01
or the definition of “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any
consent hereunder, without the written Consent of each Lender;

 

132

 

(g)           except as expressly permitted hereunder or
under any other Loan Document, release, or limit the liability of, any Loan
Party without the written Consent of each Lender;

 

(h)           except for Permitted Dispositions, release
all or substantially all of the Collateral from the Liens of the Security
Documents without the written Consent of each Lender;

 

(i)            except as provided in Section 2.15,
increase the Aggregate Commitments without the written Consent of each Lender;

 

(j)            change the definition of the term “Borrowing
Base” or any component definition thereof if, as a result thereof, the amounts
available to be borrowed by the Borrowers would be increased without the
written Consent of each Lender, provided
that the foregoing shall not limit the discretion of the
Administrative Agent to change, establish or eliminate any Reserves;

 

(k)           change the definition of the terms “Covenant
Compliance Event”, “Consolidated Fixed Charge Coverage Ratio” or any component
definition thereof or amend, waive or otherwise modify the provisions of Section 7.15
without the written Consent of each Lender;

 

(l)            amend, waive or otherwise modify the
provisions of Section 7.16 without the written Consent of each
Lender;

 

(m)          modify the definition of Permitted
Overadvance so as to increase the amount thereof or, except as provided in such
definition, the time period for a Permitted Overadvance without the written
Consent of each Lender; and

 

(n)           except as expressly permitted herein or in
any other Loan Document, subordinate the Obligations hereunder or the Liens
granted hereunder or under the other Loan Documents, to any other Indebtedness
or Lien, as the case may be without the written Consent of each Lender;

 

and, provided  further, that (i) no
amendment, waiver or Consent shall, unless in writing and signed by the L/C
Issuer in addition to the Lenders required above, affect the rights or duties
of the L/C Issuer under this Agreement or any Issuer Document relating to any
Letter of Credit issued or to be issued by it; (ii) no amendment, waiver
or Consent shall, unless in writing and signed by the Swing Line Lender in
addition to the Lenders required above, affect the rights or duties of the Swing
Line Lender under this Agreement; (iii) no amendment, waiver or Consent
shall, unless in writing and signed by the Administrative Agent in addition to
the Lenders required above, affect the rights or duties of the Administrative
Agent under this Agreement or any other Loan Document; (iv) no amendment,
waiver or Consent shall, unless in writing and signed by the Collateral Agent
in addition to the Lenders required above, affect the rights or duties of the
Collateral Agent under this Agreement or any other Loan Document; and (v) the
Fee Letter may be amended, or rights or privileges thereunder waived, in a
writing executed only by the parties thereto. 
Notwithstanding anything to the contrary herein, no Defaulting Lender
shall have any right to approve or disapprove any amendment, waiver or Consent
hereunder,

 

133

 

except that the Commitment of such Lender may
not be increased or extended without the consent of such Lender.

 

If any Lender does
not Consent (a “Non-Consenting Lender”) to a proposed amendment, waiver,
consent or release with respect to any Loan Document that requires the Consent
of each Lender and that has been approved by the Required Lenders, the Lead
Borrower may replace such Non-Consenting Lender in accordance with Section 10.13;
provided  that such amendment, waiver, consent or release can be
effected as a result of the assignment contemplated by such Section (together
with all other such assignments required by the Lead Borrower to be made pursuant
to this paragraph).

 

10.02       Notices; Effectiveness;
Electronic Communications.

 

(a)           Notices Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in clause (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopier as follows, and all notices and other communications expressly
permitted hereunder to be given by telephone shall be made to the applicable
telephone number, as follows:

 

(i)            if to the Loan Parties, the Agents, the L/C
Issuer or the Swing Line Lender, to the address, telecopier number, electronic
mail address or telephone number specified for such Person on Schedule 10.02;
and

 

(ii)           if to any other Lender, to the address,
telecopier number, electronic mail address or telephone number specified in its
Administrative Questionnaire.

 

Notices sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have
been given upon the earlier of (i) actual receipt by the relevant party or
(ii)(A) if delivered by hand or by courier, when signed for by or on
behalf of the relevant party hereto, (B) if delivered by mail, four (4) Business
Days after deposit in the mails, postage prepaid and properly addressed or (C) if
delivered by telecopier, when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the
opening of business on the next Business Day for the recipient).  Notices delivered through electronic
communications to the extent provided in clause (b) below, shall be
effective as provided in such clause (b).

 

(b)           Electronic Communications.  Notices and other communications to the
Lenders and the L/C Issuer hereunder may be delivered or furnished by
electronic communication (including e-mail and Internet or intranet websites)
pursuant to procedures approved by the Administrative Agent, provided  that
the foregoing shall not apply to notices to any Lender or the L/C Issuer
pursuant to Article II if such Lender or the L/C Issuer, as
applicable, has notified the Administrative Agent that it is incapable of
receiving notices under Article II by electronic
communication.  The Administrative Agent
or the Lead Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures

 

134

 

approved by it, provided  that approval of such procedures
may be limited to particular notices or communications.

 

Unless the Administrative Agent otherwise prescribes, (i) notices
and other communications sent to an e-mail address shall be deemed received
upon the sender’s receipt of an acknowledgement from the intended recipient
(such as by the “return receipt requested” function, as available, return
e-mail or other written acknowledgement), provided  that if such
notice or other communication is not sent during the normal business hours of
the recipient, such notice or communication shall be deemed to have been sent
at the opening of business on the next Business Day for the recipient, and (ii) notices
or communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address
therefor.

 

(c)           The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS
AVAILABLE.”  THE AGENT PARTIES (AS
DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER
MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR
ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR
OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER
MATERIALS OR THE PLATFORM.  In no event
shall the Agents or any of their Related Parties (collectively, the “Agent
Parties”) have any liability to any Loan Party, any Lender, the L/C Issuer
or any other Person for losses, claims, damages, liabilities or expenses of any
kind (whether in tort, contract or otherwise) arising out of the Loan Parties’
or the Administrative Agent’s transmission of Borrower Materials through the
Internet, except to the extent that such losses, claims, damages, liabilities
or expenses are determined by a court of competent jurisdiction by a final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Agent Party; provided, however, that in no
event shall any Agent Party have any liability to any Loan Party, any Lender, the L/C Issuer or any other Person for
indirect, special, incidental, consequential or punitive damages (as opposed to
direct or actual damages).

 

(d)           Change of Address, Etc.  Each of the Loan Parties, the Agents, the L/C
Issuer and the Swing Line Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to
the other parties hereto.  Each other
Lender may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the Lead Borrower, the Agents, the
L/C Issuer and the Swing Line Lender.  In
addition, each Lender agrees to notify the Administrative Agent from time to
time to ensure that the Administrative Agent has on record (i) an effective
address, contact name, telephone number, telecopier number and electronic mail
address to which notices and other communications may be sent and (ii) accurate
wire instructions for such Lender.

 

135

 

(e)           Reliance by Agents, L/C Issuer and
Lenders.  The Agents, the L/C Issuer
and the Lenders shall be entitled to rely and act upon any notices (including
telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly
given by or on behalf of the Loan Parties even if (i) such notices were
not made in a manner specified herein, were incomplete or were not preceded or
followed by any other form of notice specified herein, or (ii) the terms
thereof, as understood by the recipient, varied from any confirmation
thereof.  The Loan Parties shall
indemnify the Agents, the L/C Issuer, each Lender and the Related Parties of
each of them from all losses, costs, expenses and liabilities resulting from
the reliance by such Person on each notice purportedly given by or on behalf of
the Loan Parties.  All telephonic notices
to and other telephonic communications with the Agents may be recorded by the
Agents, and each of the parties hereto hereby consents to such recording.

 

10.03       No Waiver; Cumulative
Remedies.  No
failure by any Credit Party to exercise, and no delay by any such Person in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder or under any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.  The rights,
remedies, powers and privileges provided herein and in the other Loan Documents
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.  Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default or Event of Default,
regardless of whether any Credit Party may have had notice or knowledge of such
Default or Event of Default at the time.

 

10.04       Expenses; Indemnity;
Damage Waiver.

 

(a)           Costs
and Expenses.  The Borrowers shall
pay all Credit Party Expenses.

 

(b)           Indemnification
by the Loan Parties.  The Loan
Parties shall indemnify the Agents (and any sub-agent thereof), each other
Credit Party, and each Related Party of any of the foregoing Persons (each such
Person being called an “Indemnitee”) against, and hold each Indemnitee
harmless (on an after tax basis) from, any and all losses, claims, causes of
action, damages, liabilities, settlement payments, costs and related expenses
(including the reasonable fees, charges and disbursements of any counsel for
any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee
by any third party or by any Borrower or any other Loan Party arising out of,
in connection with, or as a result of (i) the execution or delivery of
this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto of their
respective obligations hereunder or thereunder or the consummation of the
transactions contemplated hereby or thereby, or, in the case of the Agents (and
any sub-agents thereof) and their Related Parties only, the administration of
this Agreement and the other Loan Documents, (ii) any Loan or Letter of
Credit or the use or proposed use of the proceeds therefrom (including any
refusal by the L/C Issuer to honor a demand for payment under a Letter of
Credit if the documents presented in connection with such demand do not
strictly comply with the terms of such Letter of Credit), (iii) any actual
or alleged presence or release of Hazardous Materials on or from any property
owned or operated by any Loan Party or any of its Subsidiaries, or any
Environmental Liability related in any way to any

 

136

 

Loan Party or any of its Subsidiaries, (iv) any claims of, or
amounts paid by any Credit Party to, a Blocked Account Bank or other Person
which has entered into a control agreement with any Credit Party hereunder, or (v) any
actual or prospective claim, litigation, investigation or proceeding relating
to any of the foregoing, whether based on contract, tort or any other theory,
whether brought by a third party or by any Borrower or any other Loan Party or
any of the Loan Parties’ directors, shareholders or creditors, and regardless
of whether any Indemnitee is a party thereto, in all cases, whether or not
caused by or arising, in whole or in part, out of the comparative, contributory
or sole negligence of the Indemnitee; provided  that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (x) are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or (y) result from a claim brought by a Borrower or any
other Loan Party against an Indemnitee for breach in bad faith of such
Indemnitee’s obligations hereunder or under any other Loan Document, if the
Borrowers or such Loan Party has obtained a final and nonappealable judgment in
its favor on such claim as determined by a court of competent jurisdiction.

 

(c)           Reimbursement
by Lenders.  Without limiting their obligations
under Section 9.14 hereof, to the extent that the Loan Parties for
any reason fail to indefeasibly pay any amount required under clauses (a) or (b) of
this Section 10.04 to be paid by it, each Lender severally agrees
to pay to the Agents (or any such sub-agent), the L/C Issuer or such Related
Party, as the case may be, such Lender’s Applicable Percentage (determined as
of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount, provided  that the unreimbursed
expense or indemnified loss, claim, damage, liability or related expense, as
the case may be, was incurred by or asserted against the Agents (or any such
sub-agent) or the L/C Issuer in its capacity as such, or against any Related
Party of any of the foregoing acting for the Agents (or any such sub-agent) or
L/C Issuer in connection with such capacity. 
The obligations of the Lenders under this clause (c) are
subject to the provisions of Section 2.12(d).

 

(d)           Waiver
of Consequential Damages, Etc.  To
the fullest extent permitted by applicable Law, the parties hereto shall not
assert, and hereby waive, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby, the transactions contemplated hereby or thereby, any Loan
or Letter of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages
arising from the use by unintended recipients of any information or other
materials distributed to such unintended recipients by such Indemnitee through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby
or thereby other than for direct or actual damages resulting from the gross
negligence or willful misconduct of, or breach in bad faith of any Loan
Document by, such Indemnitee as determined by a final and nonappealable
judgment of a court of competent jurisdiction.

 

(e)           Payments.  All amounts due under this Section 10.04
shall be payable within ten (10) days after demand therefor.

 

137

 

(f)            Survival.  The agreements in this Section 10.04
shall survive the resignation of any Agent and the L/C Issuer, the assignment
of any Commitment or Loan by any Lender, the replacement of any Lender, the
termination of the Aggregate Commitments and the repayment, satisfaction or
discharge of all the other Obligations.

 

10.05       Payments Set Aside.  To the extent that
any payment by or on behalf of the Loan Parties is made to any Credit Party, or
any Credit Party exercises its right of setoff, and such payment or the
proceeds of such setoff or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by such Credit Party in its discretion)
to be repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Debtor Relief Law or otherwise, then (a) to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred, and (b) each
Lender and the L/C Issuer severally agrees to pay to the Agents upon demand its
Applicable Percentage (without duplication) of any amount so recovered from or
repaid by the Agents, plus interest thereon from the date of such demand to the
date such payment is made at a rate per annum equal to the Federal Funds Rate
from time to time in effect.  The
obligations of the Lenders and the L/C Issuer under clause (b) of the
preceding sentence shall survive the payment in full of the Obligations and the
termination of this Agreement.

 

10.06       Successors and Assigns.

 

(a)           Successors and Assigns Generally.  The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that no Loan Party
may assign or otherwise transfer any of its rights or obligations hereunder or
under any other Loan Document without the prior written Consent of the
Administrative Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an
Eligible Assignee in accordance with the provisions of Section 10.06(b),
(ii) by way of participation in accordance with the provisions of Section 10.06(d),
or (iii) by way of pledge or assignment of a security interest subject to
the restrictions of Section 10.06(f) (and any other attempted
assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in Section 10.06(d) and, to the extent
expressly contemplated hereby, the Related Parties of each of the Credit
Parties) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

 

(b)           Assignments by Lenders.  Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment(s) and the
Loans (including for purposes of this Section 10.06(b),
participations in L/C Obligations and in Swing Line Loans) at the time owing to
it); provided  that any such assignment shall be subject to the
following conditions:

 

138

 

(i)            Minimum Amounts.

 

(A)          in the case of an
assignment of the entire remaining amount of the assigning Lender’s Commitment
and the Loans at the time owing to it or in the case of an assignment to a
Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender,
no minimum amount need be assigned; and

 

(B)           in any case not
described in Section 10.06(b)(i)(A), the aggregate amount of the
Commitment (which for this purpose includes Loans outstanding thereunder) or,
if the Commitment is not then in effect, the principal outstanding balance of
the Loans of the assigning Lender subject to each such assignment, determined
as of the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent or, if “Trade Date” is specified in the
Assignment and Assumption, as of the Trade Date, shall not be less than
$10,000,000 unless each of the Administrative Agent and, so long as no Event of
Default has occurred and is continuing, the Lead Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed); provided,
however, that concurrent assignments to members of an Assignee Group and
concurrent assignments from members of an Assignee Group to a single Eligible
Assignee (or to an Eligible Assignee and members of its Assignee Group) will be
treated as a single assignment for purposes of determining whether such minimum
amount has been met;

 

(ii)           Proportionate Amounts.  Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender’s rights and
obligations under this Agreement with respect to the Loans or the Commitment
assigned, except that this clause (ii) shall not apply to the Swing Line
Lender’s rights and obligations in respect of Swing Line Loans;

 

(iii)          Required Consents.  No consent shall be required for any
assignment except to the extent required by Section 10.06(b)(i)(B) and,
in addition:

 

(A)          the consent of the Lead
Borrower (such consent not to be unreasonably withheld or delayed) shall be
required unless (1) an Event of Default has occurred and is continuing at
the time of such assignment or (2) such assignment is to a Lender, an
Affiliate of a Lender or an Approved Fund; and

 

(B)           the consent of the
Administrative Agent (such consent not to be unreasonably withheld or delayed)
shall be required for assignments in respect of any Commitment if such
assignment is to a Person that is not a Lender, an Affiliate of such Lender or
an Approved Fund with respect to such Lender; and

 

139

 

(C)           the consent of the L/C Issuer (such
consent not to be unreasonably withheld or delayed) shall be required for any
assignment that increases the obligation of the assignee to participate in
exposure under one or more Letters of Credit (whether or not then outstanding);
and

 

(D)          the consent of the Swing Line Lender
(such consent not to be unreasonably withheld or delayed) shall be required for
any assignment in respect of the assignment of any Commitment.

 

(iv)          Assignment
and Assumption.  The parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Assumption, together with a processing and recordation fee of $3,500; provided,
however, that the Administrative Agent may, in its sole discretion,
elect to waive such processing and recordation fee in the case of any
assignment. The assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

 

Subject to acceptance and recording thereof
by the Administrative Agent pursuant to Section 10.06(c), from and
after the effective date specified in each Assignment and Assumption, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto) but shall continue to be entitled to the
benefits of Sections 3.01, 3.04, 3.05, and 10.04
with respect to facts and circumstances occurring prior to the effective date
of such assignment.  Upon request, the
Borrowers (at their expense) shall execute and deliver a Note to the assignee
Lender upon the return to the Lead Borrower of any existing Note to be
replaced.  Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply
with this subsection shall be treated for purposes of this Agreement as a sale
by such Lender of a participation in such rights and obligations in accordance
with Section 10.06(d).

 

(c)           Register.  The Administrative Agent, acting solely for
this purpose as an agent of the Borrowers, shall maintain at the Administrative
Agent’s Office a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitments of, and principal amounts of the Loans and L/C Obligations owing
to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, absent manifest error, and the Loan Parties, the Administrative
Agent and the Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Lead Borrower and any Lender at any reasonable time and from
time to time upon reasonable prior notice.

 

(d)           Participations.  Any Lender may at any time, without the
consent of, or notice to, the Loan Parties or the Administrative Agent, sell
participations to any Person 

 

140

 

(other than a natural person or the Loan Parties or any of the Loan Parties’
Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion
of such Lender’s rights and/or obligations under this Agreement (including all
or a portion of its Commitment and/or the Loans (including such Lender’s
participations in L/C Obligations and/or Swing Line Loans) owing to it); provided
that (i) such Lender’s obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the
Loan Parties, the Agents, the Lenders and the L/C Issuer shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Agreement. 
Any Participant shall agree in writing to comply with all
confidentiality obligations set forth in Section 10.07 as if such
Participant was a Lender hereunder.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any  provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 10.01 that
affects such Participant.  Subject to Section 10.06(e),
the Loan Parties agree that each Participant shall be entitled to the benefits
of Sections 3.01, 3.04 and 3.05  to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 10.06(b).  To the extent permitted by Law, each
Participant also shall be entitled to the benefits of Section 10.08  as though it were a Lender, provided  that
such Participant agrees to be subject to Section 2.13 as though it
were a Lender.

 

(e)           Limitations
upon Participant Rights.  A
Participant shall not be entitled to receive any greater payment under Sections
3.01, 3.04  or 3.05
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Lead Borrower’s prior
written consent.  A Participant that
would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 3.01 unless the Lead Borrower is notified of
the participation sold to such Participant and such Participant agrees, for the
benefit of the Loan Parties, to comply with Section 3.01(e) as
though it were a Lender.

 

(f)            Certain
Pledges.  Any Lender may at any time
pledge or assign a security interest in all or any portion of its rights under
this Agreement (including under its Note, if any) to secure obligations of such
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank; provided  that no such pledge or assignment shall
release such Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for such Lender as a party hereto.

 

(g)           Electronic
Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and
Assumption shall be deemed to include electronic signatures or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable Law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic 

 

141

 

Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.

 

(h)           Resignation
as L/C Issuer or Swing Line Lender after Assignment.  Notwithstanding anything to the contrary
contained herein, if at any time Bank of America assigns all of its Commitment
and Loans pursuant to Section 10.06(b), Bank of America may, (i) upon
30 days’ notice to the Lead Borrower and the Lenders, resign as L/C Issuer
and/or (ii) upon 30 days’ notice to the Lead Borrower, resign as Swing
Line Lender.  In the event of any such
resignation as L/C Issuer or Swing Line Lender, the Lead Borrower shall be entitled
to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender
hereunder; provided, however, that no failure by the Lead
Borrower to appoint any such successor shall affect the resignation of Bank of
America as L/C Issuer or Swing Line Lender, as the case may be.  If Bank of America resigns as L/C Issuer, it
shall retain all the rights, powers, privileges and duties of the L/C Issuer
hereunder with respect to all Letters of Credit outstanding as of the effective
date of its resignation as L/C Issuer and all L/C Obligations with respect
thereto (including the right to require the Lenders to make Prime Rate Loans or
fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If Bank of America resigns as Swing Line Lender,
it shall retain all the rights of the Swing Line Lender provided for hereunder
with respect to Swing Line Loans made by it and outstanding as of the effective
date of such resignation, including the right to require the Lenders to make
Prime Rate Loans or fund risk participations in outstanding Swing Line Loans
pursuant to Section 2.04(c). 
Upon the appointment of a successor L/C Issuer and/or Swing Line Lender,
(a) such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line
Lender, as the case may be, and (b) the successor L/C Issuer shall issue
letters of credit in substitution for the Letters of Credit, if any,
outstanding at the time of such succession or make other arrangements
satisfactory to Bank of America to effectively assume the obligations of Bank
of America with respect to such Letters of Credit.

 

10.07  Treatment
of Certain Information; Confidentiality.  Each of the Credit
Parties agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its Affiliates and
to its and its Affiliates’ respective partners, directors, officers, employees,
agents, funding sources, attorneys, advisors and representatives (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential) solely in connection with the transactions
contemplated hereby, (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by applicable Laws or regulations
or by any subpoena or similar legal process (and such Credit Party will, to the
extent permitted by Law, give notice of such disclosure to the Lead Borrower), (d) to
any other party hereto, (e) in connection with the exercise of any
remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of
rights hereunder or thereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section 10.07,
to (i) any assignee of or Participant in, or any prospective assignee of
or Participant in, any of its rights or obligations under this Agreement or (ii) any
actual or prospective 

 

142

 

counterparty
(or its advisors) to any swap or derivative transaction relating to any Loan
Party and its obligations, (g) with the consent of the Lead Borrower or (h) to
the extent such Information (x) becomes publicly available other than as a
result of a breach of this Section 10.07 or (y) becomes
available to any Credit Party or any of their respective Affiliates on a
non-confidential basis from a source other than the Loan Parties not known by
such Credit Party to be subject to disclosure restrictions with respect to such
Information.

 

For purposes of this Section 10.07, “Information”
means all information received from the Loan Parties or any Subsidiary thereof
relating to the Loan Parties or any Subsidiary thereof or their respective
businesses, other than any such information that is available to any Credit
Party on a non-confidential basis prior to disclosure by the Loan Parties or
any Subsidiary thereof, provided  that, in the case of information
received from any Loan Party or any Subsidiary after the date hereof, such
information will be deemed confidential unless clearly identified at the time
of delivery as non-confidential.  Any
Person required to maintain the confidentiality of Information as provided in
this Section 10.07 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information
may include material non-public information concerning the Loan Parties or a
Subsidiary, as the case may be, (b) it has developed compliance procedures
regarding the use of material non-public information and (c) it will
handle such material non-public information in accordance with applicable Law,
including Federal and state securities Laws.

 

10.08  Right of
Setoff.  If an Event of Default shall have occurred and be
continuing, each Lender, the L/C Issuer and each of their respective Affiliates
is hereby authorized at any time and from time to time, after obtaining the
prior written consent of the Administrative Agent or the Required Lenders, to
the fullest extent permitted by applicable Law, to set off and apply any and
all deposits (general or special, time or demand, provisional or final, in
whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender, the L/C Issuer or any such
Affiliate to or for the credit or the account of the Borrowers or any other
Loan Party against any and all of the Obligations now or hereafter existing
under this Agreement or any other Loan Document to such Lender, the L/C Issuer
or any such Affiliate, regardless of the adequacy of the Collateral, and irrespective
of whether or not such Lender, the L/C Issuer or any such Affiliate shall have
made any demand under this Agreement or any other Loan Document and although
such obligations of the Borrowers or such Loan Party may be contingent or
unmatured or are owed to a branch or office of such Lender, the L/C Issuer or
any such Affiliate different from the branch or office holding such deposit or
obligated on such indebtedness.  The
rights of each Lender, the L/C Issuer and their respective Affiliates under this
Section 10.08 are in addition to other rights and remedies
(including other rights of setoff) that such Lender, the L/C Issuer or their
respective Affiliates may have.  Each
Lender, the L/C Issuer and their respective Affiliates agree to notify the Lead
Borrower and the Administrative Agent promptly after any such setoff and
application, provided  that the failure to give such notice shall
not affect the validity of such setoff and application.

 

143

 

10.09  Interest
Rate Limitation.  Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under
the Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender
shall receive interest in an amount that exceeds the Maximum Rate, the excess
interest shall be applied to the principal of the Loans or, if it exceeds such
unpaid principal, refunded to the Borrowers. 
In determining whether the interest contracted for, charged, or received
by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the contemplated term of the Obligations hereunder.

 

10.10  Counterparts;
Integration; Effectiveness.  This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.  This
Agreement and the other Loan Documents constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the
subject matter hereof.  Except as
provided in Section 4.01, this Agreement shall become effective
when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof that, when taken
together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy or other electronic
transmission shall be as effective as delivery of a manually executed counterpart
of this Agreement.

 

10.11  Survival.  All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith
or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been
or will be relied upon by the Credit Parties, regardless of any investigation
made by any Credit Party or on their behalf and notwithstanding that any Credit
Party may have had notice or knowledge of any Default or Event of Default at
the time of any Credit Extension, and shall continue in full force and effect
as long as any Loan or any other Obligation (other than any Obligation in
respect of the Other Liabilities) hereunder shall remain unpaid or unsatisfied
or any Letter of Credit shall remain outstanding.  Further, the provisions of Article III,
Article IX and Section 10.04 shall survive and remain
in full force and effect until the expiration or termination of the Letters of
Credit and the Commitments or the termination of this Agreement or any
provision hereof and repayment of all of the Obligations (including, without
limitation, those arising under Article III, Article IX
and Section 10.04) hereunder. 
In connection with the termination of this Agreement and the release and
termination of the security interests in the Collateral, the Agents may require
such indemnities and collateral security as they shall reasonably deem
necessary or appropriate to protect the Credit Parties against (x) loss on
account of credits previously applied to the Obligations that may subsequently
be reversed or revoked, and (y) any obligations that may thereafter arise
with respect to the Other Liabilities.

 

10.12  Severability.  If
any provision of this Agreement or the other Loan Documents is held to be
illegal, invalid or unenforceable, (a) the legality, validity and
enforceability of the

 

144

 

remaining
provisions of this Agreement and the other Loan Documents shall not be affected
or impaired thereby and (b) the parties shall endeavor in good faith
negotiations to replace the illegal, invalid or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

10.13       Replacement of Lenders.   If any Lender requests compensation under Section 3.04,
or if the Borrowers are required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 3.01,
or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the
Lead Borrower may, at the Borrowers’ sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 10.06), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided  that:

 

(a)          the
Administrative Agent shall have received the assignment fee specified in Section 10.06(b);

 

(b)         such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and L/C Advances, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder and under the other Loan
Documents (including any amounts under Section 3.05) from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrowers (in the case of all other amounts);

 

(c)          in
the case of any such assignment resulting from a claim for compensation under Section 3.04
or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments
thereafter; and

 

(d)         such
assignment does not conflict with applicable Laws.

 

A Lender shall not be required to make any
such assignment or delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrowers to require
such assignment and delegation cease to apply.

 

Any Lender being replaced pursuant to this Section 10.13
shall (i) execute and deliver an Assignment and Assumption with respect to
such Lender’s Commitment and outstanding Loans and participations in L/C
Obligations and (ii) deliver any Notes evidencing such Loans to the Lead
Borrower or the Administrative Agent. 
Each Lender hereby grants to the Administrative Agent an irrevocable
power of attorney (which power is coupled with an interest) to execute and
deliver, on behalf of such Lender as assignor, any Assignment and Assumption
necessary to effectuate any assignment of such Lender’s interests hereunder in
respect of circumstances contemplated by this Section 10.13.

 

145

 

10.14       Governing Law; Jurisdiction; Etc.

 

(a)          GOVERNING
LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

 

(b)         SUBMISSION
TO JURISDICTION.  EACH PARTY HERETO
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW
YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE
COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL
COURT.  EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS
AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT
PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)          WAIVER
OF VENUE.  EACH PARTY HERETO IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN CLAUSE (B) OF THIS SECTION 10.14.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

(d)         SERVICE
OF PROCESS.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES
IN SECTION 10.02.  NOTHING IN
THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

146

 

(e)          ACTIONS
COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT IT WILL BRING ANY
ACTION ASSERTING ANY CLAIM OR COUNTERCLAIM AGAINST ANY CREDIT PARTY ARISING UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SOLELY IN A
COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT
SITTING THEREIN AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH
RESPECT TO ANY SUCH ACTION; PROVIDED  HOWEVER, THAT, IN THE EVENT
THAT ANY CREDIT PARTY BRINGS AN ACTION ASSERTING A CLAIM AGAINST ANY LOAN PARTY
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
IN A COURT OF COMPETENT JURISDICTION OTHER THAN ONE OF THOSE REFERENCED HEREIN,
SUCH LOAN PARTY SHALL BE ENTITLED TO ASSERT ANY COMPULSORY COUNTERCLAIM RELATED
THERETO IN THE SAME COURT.

 

10.15       Waiver of Jury Trial.  EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). 
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.15.

 

10.16       No Advisory or Fiduciary Responsibility.  In connection with all aspects of each
transaction contemplated hereby, the Loan Parties each acknowledge and agree
that: (i) the credit facility
provided for hereunder and any related arranging or other services in
connection therewith (including in connection with any amendment, waiver or
other modification hereof or of any other Loan Document) are an arm’s-length
commercial transaction between the Loan Parties, on the one hand, and the
Credit Parties, on the other hand, and each
of the Loan Parties is capable of evaluating and understanding and understands
and accepts the terms, risks and conditions of the transactions contemplated
hereby and by the other Loan Documents (including any amendment, waiver or
other modification hereof or thereof); (ii) in connection with the process
leading to such transaction, each Credit Party is and has been acting solely as
a principal and is not the financial advisor, agent or fiduciary, for the Loan
Parties or any of their respective
Affiliates, stockholders, creditors or employees or any other Person; (iii) none
of the Credit Parties has assumed or will assume an advisory, agency or
fiduciary responsibility in favor of the Loan Parties with respect to any of
the transactions contemplated hereby or the process leading thereto, including
with respect to any amendment, waiver or other modification hereof or of any
other Loan Document (irrespective of whether any of the Credit Parties has
advised or is currently advising any Loan Party or any of its Affiliates on other matters) and
none of the Credit

 

147

 

Parties has
any obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated
hereby, except those obligations expressly set forth herein and in the other
Loan Documents; (iv) the Credit Parties and their respective Affiliates
may be engaged in a broad range of transactions that involve interests that
differ from those of the Loan Parties and their respective Affiliates, and none of the Credit Parties has
any obligation to disclose any of such interests by virtue of any advisory,
agency or fiduciary relationship; and (v) the Credit Parties have not
provided, and will not provide, any legal, accounting, regulatory or tax advice
with respect to any of the transactions contemplated hereby (including any amendment,
waiver or other modification hereof or of any other Loan Document), and each of the Loan Parties has consulted
its own legal, accounting, regulatory and tax advisors to the extent it has
deemed appropriate.  Each of the Loan Parties hereby waives
and releases, to the fullest extent permitted by Law, any claims that it may
have against each of the Credit Parties with respect to any breach or alleged
breach of agency or fiduciary duty.

 

10.17  USA PATRIOT
Act Notice.  Each Lender that is subject to the Patriot Act and
the Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Loan Parties that pursuant to the requirements of the Patriot Act,
it is required to obtain, verify and record information that identifies each
Loan Party, which information includes the name and address of each Loan Party
and other information that will allow such Lender or the Administrative Agent,
as applicable, to identify each Loan Party in accordance with the Patriot
Act.  No part of the proceeds of the
Loans will be used by the Loan Parties, directly or indirectly, for any
payments to any governmental official or employee, political party, official of
a political party, candidate for political office, or anyone else acting in an
official capacity, in order to obtain, retain or direct business or obtain any
improper advantage, in violation of the United States Foreign Corrupt Practices
Act of 1977, as amended.

 

10.18  Foreign Asset
Control Regulations.  Neither the
advance of the Loans nor the use of the proceeds of any thereof will violate
the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the “Trading
With the Enemy Act”) or any of the foreign assets control regulations of
the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) (the “Foreign Assets Control Regulations”) or any enabling
legislation or executive order relating thereto (which for the avoidance of
doubt shall include, but shall not be limited to (a) Executive Order 13224
of September 21, 2001 Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg.
49079 (2001)) (the “Executive Order”) and (b) the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (Public Law 107-56)).  Furthermore, none of the Loan Parties or
their Subsidiaries (a) is or will become a “blocked person” as described
in the Executive Order, the Trading With the Enemy Act or the Foreign Assets
Control Regulations or (b) engages or will engage in any dealings or
transactions, or be otherwise associated, with any such “blocked person” or in
any manner violative of any such order.

 

	
  10.19  Time
  of the Essence.    Time is of
  the essence of the Loan Documents.

  

 

148

 

10.20       Press Releases.

 

(a)          Each
Credit Party executing this Agreement agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure using
the name of Administrative Agent or its Affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business
Days prior notice to Administrative Agent and without the prior written consent
of Administrative Agent unless (and only to the extent that) such Credit Party
or Affiliate is required to do so under applicable Law and then, in any event,
such Credit Party or Affiliate will consult with the Administrative Agent
before issuing such press release or other public disclosure.

 

(b)         Each
Loan Party consents to the publication by Administrative Agent or any Lender of
advertising material relating to the financing transactions contemplated by
this Agreement using any Loan Party’s name, product photographs, logo or
trademark.  Administrative Agent or such
Lender shall provide a draft reasonably in advance of any advertising material
to the Lead Borrower for review and comment prior to the publication
thereof.  Administrative Agent reserves
the right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements

 

10.21       Additional Waivers.

 

(a)          The Obligations hereunder are the
joint and several obligation of each Borrower. 
To the fullest extent permitted by applicable Law, the obligations of
each Loan Party shall not be affected by (i) the failure of any Credit
Party to assert any claim or demand or to enforce or exercise any right or
remedy against any other Loan Party under the provisions of this Agreement, any
other Loan Document or otherwise, (ii) any rescission, waiver, amendment or
modification of, or any release from any of the terms or provisions of, this
Agreement or any other Loan Document (except as expressly set forth in such
recission, waiver, amendment or modification), (iii) the failure to
perfect any security interest in, or the release of, any of the Collateral or
other security held by or on behalf of the Collateral Agent or any other Credit
Party, or (iv) the lack of legal existence of any Loan Party or legal
obligation to discharge any of the Obligations by any Loan Party for any reason
whatsoever, including, without limitation, in any insolvency, bankruptcy or
reorganization of any Loan Party.

 

(b)         The obligations of each Loan Party
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason (other than the indefeasible payment in full in cash
of the Obligations after the termination of the Commitments), including any
claim of waiver, release, surrender, alteration or compromise of any of the
Obligations, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of any of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Loan Party hereunder shall
not be discharged or impaired or otherwise affected by the failure of any Agent
or any other Credit Party to assert any claim or demand or to enforce any
remedy under this Agreement, any other Loan Document or any other agreement, by
any waiver or modification of any provision of any thereof, any default,
failure or delay, willful or otherwise, in the performance of any of the
Obligations, or by any other act or omission 

 

149

 

that may or might in any manner
or to any extent vary the risk of any Loan Party or that would otherwise
operate as a discharge of any Loan Party as a matter of law or equity (other
than the indefeasible payment in full in cash of all the Obligations after the
termination of the Commitments).

 

(c)          To the fullest extent permitted by
applicable Law, each Loan Party waives any defense based on or arising out of
any defense of any other Loan Party or the unenforceability of the Obligations
or any part thereof from any cause, or the cessation from any cause of the
liability of any other Loan Party, other than the indefeasible payment in full
in cash of all the Obligations and the termination of the Commitments. The
Collateral Agent and the other Credit Parties may, at their election, foreclose
on any security held by one or more of them by one or more judicial or
nonjudicial sales, accept an assignment of any such security in lieu of
foreclosure, compromise or adjust any part of the Obligations, make any other
accommodation with any other Loan Party, or exercise any other right or remedy
available to them against any other Loan Party, without affecting or impairing
in any way the liability of any Loan Party hereunder except to the extent that
all the Obligations have been indefeasibly paid in full in cash and the
Commitments have been terminated. 
Pursuant to, and to the extent permitted by, applicable Law, each Loan
Party waives any defense arising out of any such election and waives any
benefit of, and right to participate in, any such foreclosure action, even
though such election operates, pursuant to applicable Law, to impair or to
extinguish any right of reimbursement, indemnity, contribution or subrogation
or other right or remedy of such Loan Party against any other Loan Party, as
the case may be, or any security.  Each
Loan Party agrees that it shall not assert any claim in competition with any
Agent or any other Credit Party in respect of any payment made hereunder in
connection with any proceedings under any Debtor Relief Laws.

 

(d)         Each Borrower is obligated to repay the
Obligations hereunder as joint and several obligors under this Agreement.  Upon payment by any Loan Party of any
Obligations, all rights of such Loan Party against any other Loan Party arising
as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and
junior in right of payment to the prior indefeasible payment in full in cash of
all the Obligations and the termination of the Commitments. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations.  Notwithstanding
the foregoing, prior to the occurrence of an Event of Default, any Loan Party
may make payments to any other Loan Party on account of any such
indebtedness.  After the occurrence and
during the continuance of an Event of Default, no Loan Party will demand, sue
for, or otherwise attempt to collect any such indebtedness until (i) the
Aggregate Commitments have expired or been terminated, (ii) all of the
Obligations have been paid in full in cash or otherwise satisfied, (iii) all
L/C Obligations have been reduced to zero (or fully Cash Collateralized or
supported by another letter of credit in a manner reasonably satisfactory to
the L/C Issuer and the Administrative Agent), and (iv) the L/C Issuer has
no further obligation to issue Letters of Credit under the Credit Agreement.  If any amount shall erroneously be paid to
any Loan Party on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of
any Loan 

 

150

 

Party, such amount shall be
held in trust for the benefit of the Credit Parties and shall forthwith be paid
to the Administrative Agent to be credited against the payment of the
Obligations, whether matured or unmatured, in accordance with the terms of this
Agreement.  Subject to the foregoing, to
the extent that any Borrower shall, under this Agreement as a joint and several
obligor, repay any of the Obligations constituting Loans made to another
Borrower hereunder or other Obligations incurred directly and primarily by any
other Borrower (an “Accommodation Payment”), then the Borrower making
such Accommodation Payment shall be entitled to contribution and
indemnification from, and be reimbursed by, each of the other Borrowers in an
amount, for each of such other Borrowers, equal to a fraction of such
Accommodation Payment, the numerator of which fraction is such other Borrower’s
Allocable Amount and the denominator of which is the sum of the Allocable
Amounts of all of the Borrowers.  As of
any date of determination, the “Allocable Amount” of each Borrower shall
be equal to the maximum amount of liability for Accommodation Payments which
could be asserted against such Borrower hereunder without (a) rendering
such Borrower “insolvent” within the meaning of Section 101 (31) of the
Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”)
or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving
such Borrower with unreasonably small capital or assets, within the meaning of Section 548
of the Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the
UFCA, or (c) leaving such Borrower unable to pay its debts as they become
due within the meaning of Section 548 of the Bankruptcy Code or Section 4
of the UFTA, or Section 5 of the UFCA.

 

10.22       No Strict Construction. 
The parties hereto have participated jointly in the negotiation and
drafting of this Agreement.  In the event
an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.

 

10.23       Attachments.  The
exhibits, schedules and annexes attached to this Agreement are incorporated
herein and shall be considered a part of this Agreement for the purposes stated
herein, except that in the event of any conflict between any of the provisions
of such exhibits and the provisions of this Agreement, the provisions of this
Agreement shall prevail.

 

[SIGNATURE
PAGES FOLLOW]

 

151

 

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

 

	
   

  	
  TUESDAY
  MORNING, INC., as Lead Borrower 

  and as a Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie
  Bowman

  
	
   

  	
  Name:

  	
  Stephanie
  Bowman

  
	
   

  	
  Title:

  	
  Executive
  Vice President, Chief Financial

  
	
   

  	
   

  	
  Officer and
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TUESDAY MORNING PARTNERS, LTD., as a 

  Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Days of the Week, Inc., its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie
  Bowman

  
	
   

  	
  Name:

  	
  Stephanie
  Bowman

  
	
   

  	
  Title:

  	
  Executive
  Vice President, Chief Financial

  
	
   

  	
   

  	
  Officer and
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TUESDAY MORNING CORPORATION, as a 

  Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie
  Bowman

  
	
   

  	
  Name:

  	
  Stephanie
  Bowman

  
	
   

  	
  Title:

  	
  Executive
  Vice President, Chief Financial

  
	
   

  	
   

  	
  Officer,
  Secretary and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TMI HOLDINGS, INC., as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie
  Bowman

  
	
   

  	
  Name:

  	
  Stephanie Bowman

  
	
   

  	
  Title:

  	
  Vice President, Secretary and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FRIDAY MORNING, INC., as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie
  Bowman

  
	
   

  	
  Name:

  	
  Stephanie Bowman

  
	
   

  	
  Title:

  	
  Executive Vice President, Chief Financial

  
	
   

  	
   

  	
  Officer and Secretary

  

 

Signature Page to Credit Agreement

 

S-1

 

	
   

  	
  DAYS OF THE WEEK, INC., as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie
  Bowman

  
	
   

  	
  Name:

  	
  Stephanie Bowman

  
	
   

  	
  Title:

  	
  Executive Vice President, Chief Financial

  
	
   

  	
   

  	
  Officer and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NIGHTS OF THE WEEK, INC., as a Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephanie
  Bowman

  
	
   

  	
  Name:

  	
  Stephanie Bowman

  
	
   

  	
  Title:

  	
  Vice President, Secretary and Treasurer

  

 

Signature Page to Credit Agreement

 

S-2

 

	
   

  	
  BANK OF
  AMERICA, N.A., as Administrative 

  Agent and as Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen Garvin

  
	
   

  	
  Name:

  	
  Stephen Garvin

  
	
   

  	
  Title:

  	
  Managing Director

  

 

Signature Page to Credit Agreement

 

S-3

 

	
   

  	
  BANK OF
  AMERICA, N.A., as a Lender, L/C 

  Issuer and Swing Line Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen Garvin

  
	
   

  	
  Name:

  	
  Stephen Garvin

  
	
   

  	
  Title:

  	
  Managing Director

  

 

Signature Page to Credit Agreement

 

S-4

 

	
   

  	
  WELLS FARGO
  RETAIL FINANCE, LLC, as 

  Joint Lead Arranger, Joint Bookrunner and 

  Syndication Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ William Chan

  
	
   

  	
  Name:

  	
  William Chan

  
	
   

  	
  Title:

  	
  Vice President

  

 

Signature Page to Credit
Agreement

 

S-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00150-of-00352.parquet"}]]