Document:

exv10w1

 

EXHIBIT 10.1

 

CREDIT AGREEMENT

dated as of

April 29, 2008

among

PACIFIC SUNWEAR OF CALIFORNIA, INC.

The Lenders Party Hereto;

JPMORGAN CHASE BANK, N.A.

as Administrative Agent;

BANK OF AMERICA, N.A.,

as Syndication Agent;

J.P. MORGAN SECURITIES INC. and BANC OF AMERICA SECURITIES LLC,

as Joint Bookrunners and Joint Lead Arrangers;

and

BRANCH BANKING AND TRUST COMPANY,

U.S. BANK NATIONAL ASSOCIATION and

WELLS FARGO RETAIL FINANCE, LLC

as Co-Documentation Agents

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I Definitions
	 	 	1	 
	 
	 	 	 	 
	SECTION 1.01. Defined Terms
	 	 	1	 
	SECTION 1.02. Classification of Loans and Borrowings
	 	 	30	 
	SECTION 1.03. Terms Generally
	 	 	31	 
	SECTION 1.04. Accounting Terms; GAAP
	 	 	31	 
	 
	 	 	 	 
	ARTICLE II The Credits
	 	 	31	 
	 
	 	 	 	 
	SECTION 2.01. Commitments
	 	 	31	 
	SECTION 2.02. Loans and Borrowings
	 	 	31	 
	SECTION 2.03. Requests for Revolving Borrowings
	 	 	32	 
	SECTION 2.04. [Intentionally Omitted.]
	 	 	33	 
	SECTION 2.05. Swingline Loans and Overadvances
	 	 	33	 
	SECTION 2.06. Letters of Credit
	 	 	35	 
	SECTION 2.07. Funding of Borrowings
	 	 	39	 
	SECTION 2.08. Interest Elections
	 	 	40	 
	SECTION 2.09. Termination and Reduction of Commitments
	 	 	41	 
	SECTION 2.10. Repayment of Loans; Evidence of Debt
	 	 	42	 
	SECTION 2.11. Prepayment of Loans
	 	 	43	 
	SECTION 2.12. Fees
	 	 	43	 
	SECTION 2.13. Interest
	 	 	45	 
	SECTION 2.14. Alternate Rate of Interest
	 	 	45	 
	SECTION 2.15. Increased Costs
	 	 	46	 
	SECTION 2.16. Break Funding Payments
	 	 	47	 
	SECTION 2.17. Taxes
	 	 	48	 
	SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
	 	 	50	 
	SECTION 2.19. Mitigation Obligations; Replacement of Lenders
	 	 	52	 
	SECTION 2.20. Expansion Option
	 	 	53	 
	 
	 	 	 	 
	ARTICLE III Representations and Warranties
	 	 	54	 
	 
	 	 	 	 
	SECTION 3.01. Organization; Powers; Subsidiaries
	 	 	54	 
	SECTION 3.02. Authorization; Enforceability
	 	 	54	 
	SECTION 3.03. Governmental Approvals; No Conflicts
	 	 	54	 
	SECTION 3.04. Financial Condition; No Material Adverse Change
	 	 	55	 
	SECTION 3.05. Properties
	 	 	55	 
	SECTION 3.06. Litigation and Environmental Matters
	 	 	55	 
	SECTION 3.07. Compliance with Laws and Agreements
	 	 	56	 
	SECTION 3.08. Investment Company Status
	 	 	56	 
	SECTION 3.09. Taxes
	 	 	56	 
	SECTION 3.10. ERISA
	 	 	56	 
	SECTION 3.11. Disclosure
	 	 	56	 
	SECTION 3.12. Federal Reserve Regulations
	 	 	57	 
	SECTION 3.13. No Default
	 	 	57	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	SECTION 3.14. [Intentionally Omitted]
	 	 	57	 
	SECTION 3.15. Solvency
	 	 	57	 
	SECTION 3.16. Insurance
	 	 	57	 
	SECTION 3.17. Security Interest in Collateral
	 	 	57	 
	SECTION 3.18. Credit Card Processors
	 	 	58	 
	 
	 	 	 	 
	ARTICLE IV Conditions
	 	 	58	 
	 
	 	 	 	 
	SECTION 4.01. Effective Date
	 	 	58	 
	SECTION 4.02. Each Credit Event
	 	 	60	 
	 
	 	 	 	 
	ARTICLE V Affirmative Covenants
	 	 	61	 
	 
	 	 	 	 
	SECTION 5.01. Financial Statements; Borrowing Base and Other Information
	 	 	61	 
	SECTION 5.02. Notices of Material Events
	 	 	64	 
	SECTION 5.03. Existence; Conduct of Business
	 	 	65	 
	SECTION 5.04. Payment of Obligations
	 	 	65	 
	SECTION 5.05. Maintenance of Properties
	 	 	66	 
	SECTION 5.06. Books and Records; Inspection Rights
	 	 	66	 
	SECTION 5.07. Compliance with Laws
	 	 	66	 
	SECTION 5.08. Use of Proceeds and Letters of Credit
	 	 	66	 
	SECTION 5.09. Insurance
	 	 	66	 
	SECTION 5.10. Casualty and Condemnation
	 	 	67	 
	SECTION 5.11. Field Examinations and Appraisals
	 	 	67	 
	SECTION 5.12. Depository Banks; Control Agreements
	 	 	68	 
	SECTION 5.13. Credit Card Processors
	 	 	68	 
	SECTION 5.14. Additional Collateral; Further Assurances
	 	 	69	 
	 
	 	 	 	 
	ARTICLE VI Negative Covenants
	 	 	70	 
	 
	 	 	 	 
	SECTION 6.01. Indebtedness
	 	 	70	 
	SECTION 6.02. Liens
	 	 	72	 
	SECTION 6.03. [Intentionally Omitted]
	 	 	73	 
	SECTION 6.04. Fundamental Changes
	 	 	73	 
	SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions
	 	 	74	 
	SECTION 6.06. Asset Sales
	 	 	75	 
	SECTION 6.07. Sale and Leaseback Transactions
	 	 	76	 
	SECTION 6.08. Swap Agreements
	 	 	76	 
	SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness
	 	 	76	 
	SECTION 6.10. Transactions with Affiliates
	 	 	77	 
	SECTION 6.11. Restrictive Agreements
	 	 	78	 
	SECTION 6.12. Minimum Fixed Charge Coverage Ratio
	 	 	78	 
	 
	 	 	 	 
	ARTICLE VII Events of Default
	 	 	78	 
	 
	 	 	 	 
	ARTICLE VIII The Administrative Agent
	 	 	81	 

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	ARTICLE IX Miscellaneous
	 	 	84	 
	 
	 	 	 	 
	SECTION 9.01. Notices
	 	 	84	 
	SECTION 9.02. Waivers; Amendments
	 	 	85	 
	SECTION 9.03. Expenses; Indemnity; Damage Waiver
	 	 	87	 
	SECTION 9.04. Successors and Assigns
	 	 	89	 
	SECTION 9.05. Survival
	 	 	92	 
	SECTION 9.06. Counterparts; Integration; Effectiveness
	 	 	92	 
	SECTION 9.07. Severability
	 	 	92	 
	SECTION 9.08. Right of Setoff
	 	 	93	 
	SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process
	 	 	93	 
	SECTION 9.10. WAIVER OF JURY TRIAL
	 	 	94	 
	SECTION 9.11. Headings
	 	 	94	 
	SECTION 9.12. Confidentiality
	 	 	94	 
	SECTION 9.13. USA PATRIOT Act
	 	 	95	 
	SECTION 9.14. Appointment for Perfection
	 	 	95	 
	SECTION 9.15. Interest Rate Limitation
	 	 	95	 
	SECTION 9.16. Waiver of California Suretyship Laws
	 	 	96	 

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TABLE OF CONTENTS

(continued)

SCHEDULES:

Schedule 2.01 – Commitments

Schedule 2.06 – Existing Letters of Credit

Schedule 3.01 – Subsidiaries

Schedule 3.06 – Disclosed Matters

Schedule 3.18 – Credit Card Processors

Schedule 6.01 – Existing Indebtedness

Schedule 6.02 – Existing Liens

Schedule 6.05 – Existing Investments

Schedule 6.11 — Restrictive Agreements

EXHIBITS:

Exhibit A – Form of Assignment and Assumption

Exhibit B – Form of Opinion of Loan Parties’ Counsel

Exhibit C – Form of Increasing Lender Supplement

Exhibit D – Form of Augmenting Lender Supplement

Exhibit E – List of Closing Documents

Exhibit F – Form of Borrowing Base Certificate

Exhibit G– Form of Applicable Rate Certificate

- iv - 

 

          CREDIT AGREEMENT dated as of April 29, 2008 among PACIFIC SUNWEAR OF CALIFORNIA, INC., the
LENDERS party hereto, JPMORGAN CHASE BANK, N.A., as Administrative Agent, BANK OF AMERICA, N.A. as
Syndication Agent, J.P. MORGAN SECURITIES INC. as Joint Lead Arranger and Joint Bookrunner, BANC OF
AMERICA SECURITIES LLC as Joint Lead Arranger and Joint Bookrunner, BRANCH BANK AND TRUST COMPANY
as Co-Documentation Agent, U.S. BANK NATIONAL ASSOCIATION as Co-Documentation Agent and WELLS FARGO
RETAIL FINANCE, LLC as Co-Documentation Agent.

          The parties hereto agree as follows:

ARTICLE I

Definitions

          SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:

          “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to
the Alternate Base Rate.

          “Account” has the meaning assigned to such term in the Security Agreement.

          “Account Debtor” means any Person obligated on an Account.

          “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to
(a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

          “Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
administrative agent for the Lenders hereunder.

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

          “Affiliate” means, with respect to a specified Person, another Person (other than any
officer or director of such specified Person in their capacity as an officer or director of such
specified Person) that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

          “Aggregate Revolving Credit Exposure” means, at any time, the aggregate Revolving
Credit Exposure of all of the Lenders.

          “Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a)
the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime

 

 

Rate or the Federal Funds Effective Rate shall be effective from and including the effective
date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

          “Applicable Inventory Advance Rate” means (a) at any time during the third fiscal
quarter of each fiscal year, 80% and (b) at any time (other than the period referred to in clause
(a)), 75%

          “Applicable Inventory Percentage” means (a) at any time during the third fiscal
quarter of each fiscal year, 90% and (b) at any time (other than the period referred to in clause
(a)), 85%.

          “Applicable Percentage” means, with respect to any Lender, the percentage of the total
Commitments represented by such Lender’s Commitment. If the Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the Commitments most recently in
effect, giving effect to any assignments.

          “Applicable Rate” means, for any day, with respect to any ABR Loan or Eurodollar
Revolving Loan, or with respect to the commercial Letter of Credit fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption “ABR Spread”,
“Eurodollar Spread” or “Commercial Letter of Credit Rate”, as the case may be, based upon the
Trailing Average Quarterly Availability as of the most recent determination date:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Eurodollar	 	ABR	 	Commercial Letter
	Trailing Average Quarterly Availability:	 	Spread	 	Spread	 	of Credit Rate
	Level I: < $35,000,000
	 	 	1.75	%	 	 	0.75	%	 	 	0.70	%
	Level II: > $35,000,000 but < $75,000,000
	 	 	1.50	%	 	 	0.50	%	 	 	0.60	%
	Level III: > $75,000,000
	 	 	1.25	%	 	 	0.25	%	 	 	0.45	%

     For purposes of the foregoing, (a) the Applicable Rate shall be determined as of the end of
each fiscal quarter based upon the Borrowing Base Certificates and related information delivered
pursuant to Section 5.01 and (b) each change in the Applicable Rate resulting from a change in
Trailing Average Quarterly Availability shall be effective during the period commencing on and
including the date of delivery to the Administrative Agent of the Borrowing Base Certificate as of
the end of the most recent fiscal quarter and ending on the date immediately preceding the
effective date of the next such change, provided that the Trailing Average Quarterly Availability
shall be deemed to be (i) in Level III during the period from the Effective Date to the date of
delivery to the Administrative Agent of the Borrowing Base Certificate for the fiscal period ending
November 1, 2008; and (ii) in Level I at the option of the Administrative Agent or at the request
of the Required Lenders (x) at any time that an Event of Default has occurred and is continuing or
(y) if the Borrower fails to deliver any Borrowing Base Certificate or related information required
to be delivered pursuant to Section 5.01, during the period from the expiration of the time for
delivery thereof until such Borrowing Base Certificate and related information are delivered. The
Borrower shall deliver to the Administrative Agent, together with each Borrowing Base Certificate
delivered pursuant to Section 5.01(e) in respect of

- 2 -

 

the last month of each fiscal quarter (or in respect of each fiscal quarter, as applicable),
an Applicable Rate Certificate setting forth the Trailing Average Quarterly Availability for the
fiscal quarter then ended and corresponding Applicable Rate.

          “Applicable Rate Certificate” means a certificate, signed by a Financial Officer of
the Borrower, in substantially the form of Exhibit G attached hereto.

          “Approved Fund” has the meaning assigned to such term in Section 9.04.

          “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required by Section 9.04),
and accepted by the Administrative Agent, in the form of Exhibit A or any other form
approved by the Administrative Agent.

          “Augmenting Lender” has the meaning assigned to such term in Section 2.20.

          “Availability” means, at any time, an amount equal to (a) the lesser of the total
Commitments of all of the Lenders and the Borrowing Base minus (b) the Aggregate Revolving
Credit Exposure.

          “Availability Period” means the period from and including the Effective Date to but
excluding the earlier of the Maturity Date and the date of termination of the Commitments.

          “Banking Services” means each and any of the following bank services provided to any
Loan Party by any Lender or any of its Affiliates: (a) commercial credit cards, (b) stored value
cards and (c) treasury management services (including, without limitation, controlled disbursement,
automated clearinghouse transactions, return items, overdrafts and interstate depository network
services).

          “Banking Services Obligations” of the Loan Parties means any and all obligations of
the Loan Parties, whether absolute or contingent and howsoever and whensoever created, arising,
evidenced or acquired (including all renewals, extensions and modifications thereof and
substitutions therefor) in connection with Banking Services.

          “Banking Services Reserves” means all Reserves which the Administrative Agent from
time to time establishes in its Permitted Discretion for Banking Services then provided or
outstanding.

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

          “Borrower” means Pacific Sunwear of California, Inc., a California corporation.

          “Borrowing” means (a) Revolving Loans of the same Type, made, converted or continued
on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in
effect, (b) a Swingline Loan, and (c) an Overadvance.

          “Borrowing Base” means, at any time, the sum of:

- 3 -

 

          (a) 90% of the Loan Parties’ Eligible Credit Card Accounts at such time, plus

          (b) the lesser of (i) the product of (x) the Applicable Inventory Advance Rate multiplied by
(y) the Loan Parties’ Eligible Inventory, valued at the lower of cost (determined on a
first-in-first-out basis) or market value at such time and (ii) the product of (x) up the
Applicable Inventory Percentage at such time multiplied by (y) the Net Orderly Liquidation Value
Percentage identified in or derived from the most recent inventory appraisal ordered by the
Administrative Agent multiplied by (z) the Loan Parties’ Eligible Inventory, valued at the lower of
cost (determined on a first-in-first-out basis) or market value at such time, plus

          (c) the lesser of (i) the product of (x) the Applicable Inventory Advance Rate multiplied by
(y) the Loan Parties’ Eligible LC Inventory, valued at the lower of cost (determined on a
first-in-first-out basis) or market value at such time and (ii) the product of (x) up the
Applicable Inventory Percentage at such time multiplied by (y) the Net Orderly Liquidation Value
Percentage identified in or derived from the most recent inventory appraisal ordered by the
Administrative Agent multiplied by (z) the Loan Parties’ Eligible LC Inventory, valued at the lower
of cost (determined on a first-in-first-out basis) or market value at such time, plus

          (d) 100% of Eligible Cash at such time, minus

          (e) Reserves.

          “Borrowing Base Certificate” means a certificate, signed by a Financial Officer of the
Borrower, in substantially the form of Exhibit F or another form which is acceptable to the
Administrative Agent in its sole discretion.

          “Borrowing Request” means a request by the Borrower for a Revolving Borrowing in
accordance with Section 2.03.

          “Business Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain closed; provided
that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also
exclude any day on which banks are not open for dealings in dollar deposits in the London interbank
market.

          “Capital Expenditures” means, without duplication, any expenditures that should be
included in “additions to property, plant or equipment” or comparable items reflected in the
consolidated statement of cash flows of the Borrower and its Subsidiaries prepared in accordance
with GAAP.

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

- 4 -

 

          “Cash Dominion Restoration Period” means (a) in respect of any Cash Dominion
Triggering Event under clause (a) of the definition of “Cash Dominion Triggering Event”, the period
commencing on the date upon which such Event of Default first occurred and continuing until such
time as such Event of Default is no longer continuing or has been cured or waived in accordance
with this Agreement (or such earlier time as there shall be no Loans or Letters of Credit (other
than Letters of Credit that have been fully cash collateralized in accordance with Section 2.06(j))
outstanding hereunder) or (b) in respect of any Cash Dominion Triggering Event under clause (b) of
the definition of “Cash Dominion Triggering Event”, any period of ninety (90) consecutive days
following the occurrence of such Cash Dominion Triggering Event during which Availability shall
exceed the greater of (i) $20,000,000 and (ii) 13.33% of the total Commitments in effect at such
time.

          “Cash Dominion Triggering Event” shall mean the occurrence of either of the following:
(a) an Event of Default shall have occurred and be continuing and there shall be any Loans or
Letters of Credit (other than Letters of Credit that are fully cash collateralized in accordance
with Section 2.06(j) within three Business Days after receipt of notice from the Administrative
Agent of such Event of Default) outstanding hereunder or (b) for a period of ten consecutive days,
Availability shall fall below the greater of (i) $20,000,000 or (ii) 13.33% of the total
Commitments in effect at such time.

          “Change in Control” means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of Rule 13d-5 of the
Securities Exchange Act of 1934 as in effect on the date hereof), of Equity Interests representing
more than 35% of the aggregate ordinary voting power represented by the issued and outstanding
Equity Interests of the Borrower; or (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were neither (i) nominated by the
board of directors of the Borrower nor (ii) appointed by directors so nominated; provided,
however, that any merger effected for the sole purpose of reincorporating the Borrower in
Delaware (other than through the formation of a holding company that will own any portion of the
Equity Interest of the Borrower following such merger) and any changes in ownership resulting
therefrom shall not constitute a Change in Control.

          “Change in Law” means (a) the adoption of any law, rule, treaty or regulation after
the date of this Agreement, (b) any change in any law, rule, treaty or regulation or in the
interpretation or application thereof by any Governmental Authority after the date of this
Agreement or (c) compliance by any Lender or any Issuing Bank (or, for purposes of Section 2.15(b),
by any office of such Lender from or at which Loans and/or Letters of Credit are made or issued, or
are booked, as the case may be, in accordance with the terms of this Agreement) with any request,
guideline or directive (whether or not having the force of law) of any Governmental Authority made
or issued after the date of this Agreement.

          “Charges” has the meaning assigned to such term in Section 9.15.

          “Chase” means JPMorgan Chase Bank, N.A., a national banking association, in its
individual capacity, and its successors.

- 5 -

 

          “Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are Revolving Loans, Swingline Loans or Overadvances.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time.

          “Collateral” has the meaning assigned to such term in the Security Agreement.

          “Collateral Access Agreement” has the meaning assigned to such term in the Security
Agreement.

          “Collateral Documents” means, collectively, the Security Agreement and any other
documents granting a Lien upon the Collateral as security for payment of the Secured Obligations.

          “Commitment” means, with respect to each Lender, the commitment of such Lender to make
Revolving Loans and to acquire participations in Letters of Credit, Swingline Loans and
Overadvances hereunder, expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to
time pursuant to Section 2.09, (b) increased from time to time pursuant to Section 2.20 and (c)
reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to
Section 9.04. The initial amount of each Lender’s Commitment is set forth on Schedule
2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its
Commitment, as applicable. The initial aggregate amount of the Lenders’ Commitments is
$150,000,000.

          “Commitment Fee Rate” means 0.25% per annum.

          “Concentration Account” has the meaning assigned to such term in the Security
Agreement.

          “Consolidated Capital Expenditures” means, with reference to any period, the Capital
Expenditures of the Borrower and its Subsidiaries calculated on a consolidated basis for such
period; provided that (i) expenditures for Permitted Acquisitions and other investments and
(ii) replacement Capital Expenditures from insurance and condemnation proceeds shall be excluded
from this definition.

          “Consolidated EBITDAR” means, with reference to any period, Consolidated Net Income
for such period plus, to the extent deducted in determining such Consolidated Net Income, (i)
Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv)
amortization, (v) Consolidated Rent Expense, (vi) charges arising from the impairment of goodwill,
(vii) any non-cash charges or expenses resulting from any currently outstanding stock options or
any future grant, exercise or cancellation of stock options, shares of restricted stock, or
warrants or from any restructuring or consolidation, and (viii) any other non-cash charges or
expenses which do not represent a cash item in such period or any future period (it being
understood and agreed that a write-down of inventory shall be considered a cash expense in the
relevant period) minus, to the extent included in determining such Consolidated Net Income, any
extraordinary non-cash income or gains which do not represent a cash item in

- 6 -

 

such period or any future period, all calculated for the Borrower and its Subsidiaries in
accordance with GAAP on a consolidated basis.

          “Consolidated Fixed Charges” means, with reference to any period, Consolidated
Interest Expense paid during such period (excluding Non-Cash Interest Expense) plus
Consolidated Rent Expense for such period plus scheduled principal payments on Indebtedness
of the Borrower or any Subsidiary paid in cash during such period plus expense for taxes of
the Borrower or any Subsidiary paid in cash during such period (net of any tax refunds received in
cash) plus dividends or distributions (excluding payments made for stock repurchases) paid
by the Borrower or any Subsidiary in cash during such period (which, for the avoidance of doubt,
shall exclude any dividends or distributions made to any Loan Party) plus cash payments by
the Borrower or any Subsidiary in respect of Capital Lease Obligations during such period (which,
for the avoidance of doubt, shall exclude any dividends or distributions made to any Loan Party),
all of the foregoing calculated for the Borrower and its Subsidiaries on a consolidated basis
without duplication.

          “Consolidated Interest Expense” means, with reference to any period, total interest
expense (including that attributable to Capital Lease Obligations) of the Borrower and its
Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers’ acceptance financing and net costs under Swap Agreements in respect
of interest rates to the extent such net costs are allocable to such period in accordance with
GAAP), minus total interest income of the Borrower and its Subsidiaries not exceeding
$25,000,000 for such period (including net interest income under Swap Agreements in respect of
interest rates to the extent such net interest income is allocable to such period), all calculated
on a consolidated basis for the Borrower and its Subsidiaries for such period in accordance with
GAAP.

          “Consolidated Net Income” means, with reference to any period, the net income (or
loss) of the Borrower and its Subsidiaries calculated in accordance with GAAP on a consolidated
basis (without duplication) for such period.

          “Consolidated Rent Expense” means, with reference to any period, all rent and common
area maintenance payments payable under Operating Leases to the extent deducted in computing
Consolidated Net Income, calculated in accordance with GAAP for the Borrower and its Subsidiaries
on a consolidated basis for such period.

          “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.

          “Control Agreement” means an agreement, in form and substance reasonably satisfactory
to the Administrative Agent, among (i) the applicable Loan Party, (ii) a banking institution,
securities broker or securities intermediary at which such Loan Party maintains a Deposit Account
or a Securities Account, and (iii) the Administrative Agent, providing for the

- 7 -

 

Administrative Agent to have control over the funds or securities and other financial assets
held in such Deposit Account or Securities Account.

          “Credit Card Accounts” means any Account, right of payment or Payment Intangible due
to any Loan Party from a Credit Card Processor.

          “Credit Card Processor” means a Person that provides credit card or debit card
processing services for any merchant, including without limitation, the establishment of one or
more credit card or debit card merchant accounts on behalf of such merchant to accept payments for
retail transactions.

          “Default” means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

          “Deposit Account” has the meaning set forth in Article 9 of the UCC.

          “Disclosed Matters” means the actions, suits and proceedings and the environmental
matters disclosed in Schedule 3.06.

          “Document” has the meaning assigned to such term in the Security Agreement.

          “Dollars” or “$” refers to lawful money of the United States of America.

          “Domestic Subsidiary” means a Subsidiary organized under the laws of a jurisdiction
located in the United States of America.

          “Effective Date” means the date on which the conditions specified in Section 4.01 are
satisfied (or waived in accordance with Section 9.02).

          “Eligible Cash” means, at of any date of determination, the amount of cash, Permitted
Investments or other cash equivalents of any Loan Party (a) which is subject to a first priority
Lien in favor the Administrative Agent (subject to Permitted Encumbrances), (b) which is not
subject to any Lien (other than the Liens in favor of the Administrative Agent to secure the
Secured Obligations, Permitted Encumbrances and customary rights of setoff of the institution
maintaining the Deposit Account or Securities Account in which such cash, Permitted Investment or
other cash equivalent is deposited), (c) which is not held or earmarked for the specific purpose of
payroll, payroll taxes, earnest money, escrows or deposits and which is otherwise generally
available to satisfy the claims of creditors of the Loan Parties, and (d) which is deposited in or
credited to a Deposit Account or Securities Account maintained by the Loan Parties with Chase or
Bank of America, N.A. or any of their respective Affiliates, which Deposit Account or Securities
Account is subject to a Control Agreement (provided that the Administrative Agent may determine, in
its Permitted Discretion, that Control Agreements shall not be required for certain Deposit
Accounts maintained at Chase or any of its Affiliates and certain Securities Accounts maintained
with Chase or any of its Affiliates (all such Deposit Accounts and Securities Accounts so
determined by the Administrative Agent shall be collectively referred to herein as the
“Specified Chase Accounts”)).

- 8 -

 

          “Eligible Credit Card Accounts” means, at any time, Credit Card Accounts due to any
Loan Party on a non-recourse basis (other than standard chargebacks and standard fees due to the
Credit Card Processor) from (i) Visa, MasterCard, American Express Co., PNC Merchant Services,
Alliance Data Systems, World Financial Network Bank, First Data Merchant Services or Discover or
(ii) any other Credit Card Processor acceptable to the Administrative Agent, arising in the
ordinary course of business for the purchase of goods sold by such Loan Party; provided,
however, that Eligible Credit Card Accounts shall be calculated net of fees and chargebacks
owed to Credit Card Processors and deposits, holdbacks or escrows held by Credit Card Processors
and shall in no event include:

          (a) Credit Card Accounts that have been outstanding for more than five (5) Business Days from
the date of sale, or for such longer period(s) as may be approved by the Administrative Agent in
its reasonable discretion;

          (b) Credit Card Accounts with respect to which the Loan Parties do not have good, valid and
marketable title thereto, free and clear of any Lien (other than (i) Liens granted to the
Administrative Agent, and (ii) Permitted Encumbrances);

          (c) Credit Card Accounts that are not subject to Liens in favor of the Administrative Agent
that are senior in priority to all other Liens (except for (i) standard fees due by any Loan Party,
and (ii) Permitted Encumbrances);

          (d) Credit Card Accounts which are disputed, or with respect to which a claim, counterclaim,
offset or chargeback (other than setoffs and chargebacks in the ordinary course by the Credit Card
Processors) has been asserted, by the related Credit Card Processor (but only to the extent of such
dispute, counterclaim, offset or chargeback);

          (e) Credit Card Accounts arising from any private label credit card receivables of any Loan
Party or Credit Card Accounts as to which the Credit Card Processor has the right under certain
circumstances to require the applicable Loan Party to repurchase the Credit Card Accounts from such
Credit Card Processor; provided that Credit Card Accounts owing from (i) World Financial Network
Bank or any of its Affiliates, or (ii) any other Credit Card Processor acceptable to the
Administrative Agent in its Permitted Discretion that may administer private label credit cards for
any Loan Party after the Effective Date, in each case, shall not be excluded from “Eligible Credit
Card Accounts” pursuant to this clause (e) so long as (x) such Credit Card Accounts meet all other
criteria for eligibility set forth herein and (y) World Financial Network Bank or its Affiliates,
or such other Credit Card Processor, retains the consumer credit risk with respect to such Credit
Card Accounts;

          (f) Credit Card Accounts due from a Credit Card Processor which the Administrative Agent
determines in its Permitted Discretion to be unlikely to be collected;

          (g) Credit Card Accounts due from a Credit Card Processor with respect to which a Processor
Control Agreement/Letter has not been obtained; and

          (h) Purchased Private Label Accounts.

          “Eligible Inventory” means, at any time, the Inventory of a Loan Party which the

- 9 -

 

Administrative Agent determines in its Permitted Discretion is eligible as the basis for the
extension of Revolving Loans, Swingline Loans and the issuance of Letters of Credit hereunder.
Without limiting the Administrative Agent’s discretion provided herein, Eligible Inventory shall
not include any Inventory:

          (a) which is not subject to a first priority perfected Lien in favor of the Administrative
Agent (other than Permitted Encumbrances);

          (b) which is subject to any Lien other than (i) Liens in favor of the Administrative Agent and
(ii) Permitted Encumbrances;

          (c) which is, in the Administrative Agent’s Permitted Discretion, slow moving, obsolete,
unmerchantable, defective, used, unfit for sale, not salable at prices approximating at least the
cost of such Inventory in the ordinary course of business or unacceptable due to age, type,
category and/or quantity;

          (d) which does not conform in all material respects to standards imposed by any Governmental
Authority;

          (e) in which any Person other than such Loan Party shall (i) have any direct or indirect
ownership, interest or title to such Inventory or (ii) be indicated on any purchase order or
invoice with respect to such Inventory as having or purporting to have an interest therein;

          (f) which is not finished goods or which constitutes work-in-process, raw materials, spare or
replacement parts, subassemblies, packaging and shipping material, manufacturing supplies, samples,
prototypes, displays or display items, bill-and-hold goods, goods that are returned or marked for
return, repossessed goods, defective or damaged goods, goods held on consignment, or goods which
are not of a type held for sale in the ordinary course of business;

          (g) which is not located in the U.S. or is in transit with a common carrier from vendors and
suppliers; provided that goods in transit within the U.S. or on the high seas with a common
carrier having a value (based on invoiced amounts) not exceeding $20,000,000 in the aggregate at
any time shall not be excluded from “Eligible Inventory” pursuant to this clause (g) so
long as (i) such Inventory has been paid for in full by the applicable Loan Party, (ii) the
Administrative Agent shall have received evidence that such Inventory is covered by casualty
insurance and the Administrative Agent shall have been named as loss payee with respect to such
casualty insurance, and (iii) if Availability at such time shall be less than $50,000,000, the
Administrative Agent shall have received a duly executed Collateral Access Agreement from the
applicable Loan Party’s customs broker with respect to such Inventory;

          (h) which is located in (i) any Leased Distribution Center (other than the Kansas Distribution
Facility) or (ii) any location leased by such Loan Party (other than a Leased Distribution Center)
in any Landlord Lien State, in each case, unless (A) the lessor has delivered to the Administrative
Agent a Collateral Access Agreement or (B) a Reserve for rent, charges, and other amounts due or to
become due with respect to such facility has been established by the Administrative Agent in its
Permitted Discretion, provided that such Reserve shall not exceed two month’s rent for the
applicable location;

- 10 -

 

          (i) which is located in any third party warehouse or is in the possession of a bailee (other
than a third party processor) (in either case, other than (for avoidance of doubt) the Kansas
Distribution Facility) and is not evidenced by a Document, unless (i) such warehouseman or bailee
has delivered to the Administrative Agent a Collateral Access Agreement and such other
documentation as the Administrative Agent may require or (ii) an appropriate Reserve has been
established by the Administrative Agent in its Permitted Discretion, provided that such Reserve
shall not exceed two month’s rent for the applicable location;

          (j) which is being processed offsite at a third party location or outside processor;

          (k) which is a discontinued product or component thereof;

          (l) which is the subject of a consignment by such Loan Party as consignor;

          (m) which contains or bears any intellectual property rights licensed to such Loan Party
unless the Administrative Agent is satisfied that it may sell or otherwise dispose of such
Inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such
licensor, or (iii) incurring any liability with respect to payment of royalties other than
royalties incurred pursuant to sale of such Inventory under the current licensing agreement;

          (n) which is not reflected in the applicable Loan Party’s merchandise management reports or
other inventory reports; or

          (o) for which reclamation rights have been asserted by the seller.

          “Eligible LC Inventory” means, at any time, Inventory of the Loan Parties that would
be Eligible Inventory but for the fact that the Loan Parties have not paid for such Inventory and
instead, such Inventory is subject to commercial Letters of Credit issued for the account(s) of one
or more of the Loan Parties and for the benefit of the sellers of such Inventory, which commercial
Letters of Credit have expiry dates that are no later than ninety (90) days from the date of the
most recent Borrowing Base Certificate delivered to the Administrative Agent, and which Inventory
is and at all times continues to be acceptable to the Administrative Agent in its Permitted
Discretion.

          “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions or binding agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the environment, preservation or reclamation of
natural resources, the management, release or threatened release of any Hazardous Material or to
health and safety matters.

          “Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the
Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any contract,

- 11 -

 

agreement or other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

          “Equity Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such equity interest.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time.

          “ERISA Affiliate” means any trade or business (whether or not incorporated) that,
together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code
or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

          “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or
the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC
or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is,
or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

          “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.

          “Event of Default” has the meaning assigned to such term in Article VII.

          “Excluded Accounts” means, collectively, (i) any Deposit Account of any Loan Party
which is used exclusively for the payment of payroll, payroll taxes, employee benefits or escrow
deposits, (ii) any other Deposit Account of any Loan Party, so long as at least once during any
period of six (6) consecutive Business Days occurring after the Effective Date, the aggregate
amount of available funds on deposit in such Deposit Account does not exceed $100,000, (iii) any
Securities Account used exclusively to hold the bonds issued pursuant to the Kansas IRB Documents
and (iv) any Securities Account of any Loan Party, so long as at least once during any period of
six (6) consecutive Business Days occurring after the Effective Date,

- 12 -

 

the aggregate value of the securities, cash and cash equivalents maintained in such Securities
Account does not exceed $500,000.

          “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, any
Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of
the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by
the United States of America, or by any other Governmental Authority as a result of a present or
former connection between the Administrative Agent, any Lender, any Issuing Bank or any other
recipient of any payment to be made by the Borrower under this Agreement and the jurisdiction of
the Governmental Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the Administrative Agent,
any Lender, any Issuing Bank or any other recipient of any payment to be made by the Borrower under
this Agreement having executed, delivered or performed its obligations or received a payment under,
or enforced, this Agreement or any other Loan Document), (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other jurisdiction described in
clause (a) above and (c) in the case of a Foreign Lender, including any Issuing Bank that is a
Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section
2.19(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time
such Foreign Lender becomes a party to this Agreement (or (i) causes pursuant to Section 2.02(b) a
new branch or an Affiliate to make any Loan, or (ii) designates a new lending office) or is
attributable to such Foreign Lender’s failure to comply with Section 2.17(e), 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 Borrower with respect to
such withholding tax pursuant to Section 2.17(a), and (d) any amounts with respect to any taxes
described in clause (a), (b) or (c) above that are imposed as a result of any event occurring after
the Administrative Agent, any Lender, any Issuing Bank or any other recipient of any payment to be
made by the Borrower under this Agreement becomes a party to this Agreement, other than a Change in
Law.

          “Existing Credit Agreement” means the Credit Agreement dated as of September 13, 2005
among the Borrower, the lenders party thereto, National City Bank and U.S. Bank National
Association, as Co-Documentation Agents, Bank of America, N.A., as Syndication Agent, and JPMorgan
Chase Bank, N.A., as Administrative Agent, as amended from time to time.

          “Existing Letters of Credit” has the meaning assigned to such term in Section 2.06.

          “Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

- 13 -

 

          “Financial Covenant Period” has the meaning assigned to such term in Section 6.12.

          “Financial Officer” means the chief financial officer, vice president of finance,
principal accounting officer, treasurer or controller of the Borrower.

          “Fitch” means Fitch Ratings.

          “Fixed Charge Coverage Ratio” means the ratio, determined as of the end of each fiscal
quarter of the Borrower for the most-recently ended four fiscal quarters, of (a) Consolidated
EBITDAR minus the unfinanced portion of Consolidated Capital Expenditures (in any event,
excluding any Consolidated Capital Expenditures to be funded with any insurance proceeds or
condemnation awards or with any proceeds of Indebtedness permitted hereunder (other than proceeds
of Revolving Loans)) to (b) Consolidated Fixed Charges, all calculated for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.

          For the purposes of calculating the Fixed Charge Coverage Ratio for any period of four
consecutive fiscal quarters (each, a “Reference Period”), (i) if at any time during such
Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the
Consolidated EBITDAR, Consolidated Capital Expenditures and Consolidated Fixed Charges for such
Reference Period shall be reduced by an amount equal to the Consolidated EBITDAR, Consolidated
Capital Expenditures and Consolidated Fixed Charges (in each case, if positive) attributable to the
property that is the subject of such Material Disposition for such Reference Period or increased by
an amount equal to the Consolidated EBITDAR, Consolidated Capital Expenditures and Consolidated
Fixed Charges (in each case, if negative) attributable thereto for such Reference Period, and (ii)
if during such Reference Period the Borrower or any Subsidiary shall have made a Material
Acquisition, Consolidated EBITDAR, Consolidated Capital Expenditures and Consolidated Fixed Charges
for such Reference Period shall be calculated after giving pro forma effect thereto (taking into
account (A) such adjustments with respect to cost savings as are consistent with the standards set
forth in Rule 11-02(b)(6) of Regulation S-X and (B) all transactions that are directly related to
such Material Acquisition and are entered into in connection and substantially contemporaneously
therewith) as if such Material Acquisition occurred on the first day of such Reference Period. As
used in this definition, “Material Acquisition” means any acquisition of property or series
of related acquisitions of property that (a) constitutes (i) assets comprising all or substantially
all or any significant portion of a business or operating unit of a business, or (ii) all or
substantially all of the common stock or other Equity Interests of a Person, and (b) involves the
payment of consideration and/or the assumption of Indebtedness by the Borrower and its Subsidiaries
in an aggregate amount in excess of $10,000,000; “Material Disposition” means any
disposition of property or series of related dispositions of property that yields gross proceeds to
the Borrower or any of its Subsidiaries in excess of $10,000,000 (it being understood, for the
avoidance of doubt, that any disposition or shutting down of any d.e.m.o. stores or One Thousand
Steps stores, any disposition of the Anaheim distribution center or any other disposition of real
property by the Borrower or any Subsidiary shall be deemed to be a Material Disposition). In
making any calculation pursuant to this paragraph with respect to a Material Acquisition of a
Person, business or rights for which quarterly financial statements are not available, the Borrower
shall base such calculation on the financial statements of such Person, business or rights for the
then most recently completed

- 14 -

 

period of twelve consecutive calendar months for which such financial statements are available
and shall deem the contribution of such Person, business or rights to Consolidated EBITDAR,
Consolidated Capital Expenditures and Consolidated Fixed Charges, respectively, for the period from
the beginning of the applicable Reference Period to the date of such Material Acquisition to be
equal to the product of (x) the number of days in such period divided by 365 multiplied by (y) the
amount of Consolidated EBITDAR, Consolidated Capital Expenditures and Consolidated Fixed Charges,
respectively, of such Person, business or rights for the twelve-month period referred to above
(calculated on the basis set forth in this definition)

          “Fixed Charge Coverage Restoration Period” means, with respect to any Fixed Charge
Coverage Ratio Triggering Event, any period of ninety (90) consecutive days following the
occurrence of such Fixed Charge Coverage Ratio Triggering Event during which Availability shall
exceed the greater of (a) $15,000,000 and (b) 10% of the aggregate Commitments of all of the
Lenders in effect at such time.

          “Fixed Charge Coverage Ratio Triggering Event” means that, at any time, Availability
shall fall below the greater of (a) $15,000,000 or (b) 10% of the aggregate Commitments of all of
the Lenders in effect at such time.

          “Foreign Lender” means any Lender that is organized under the laws of (or the
applicable lending office of which is located in) a jurisdiction other than that in which the
Borrower is located. For purposes of this definition, the United States of America, each State
thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

          “Funding Accounts” has the meaning assigned to such term in Section 4.01(i).

          “GAAP” means generally accepted accounting principles in the United States of America.

          “Governmental Authority” means the government of the United States of America, any
other nation or 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.

          “Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or obligation;
provided, that the term

- 15 -

 

Guarantee shall not include endorsements for collection or deposit in the ordinary course of
business.

          “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.

          “Hostile Acquisition” means (a) the acquisition of the Equity Interests of a Person
through a tender offer or similar solicitation of the owners of such Equity Interests which has not
been approved (prior to such acquisition) by the board of directors (or any other applicable
governing body) of such Person or by similar action if such Person is not a corporation and (b) any
such acquisition as to which such approval has been withdrawn.

          “Increasing Lender” has the meaning assigned to such term in Section 2.20.

          “Indebtedness” of any Person means, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of
such Person under conditional sale or other title retention agreements relating to property
acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase
price of property or services (excluding accounts payable and accrued expense obligations incurred
in the ordinary course of business), (e) all Indebtedness of others secured by any Lien on property
owned or acquired by such Person (to the extent of such Person’s interest in such property),
whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person
of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations,
contingent or otherwise, of such Person as an account party in respect of letters of credit and
letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of any other
entity (including any partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or other relationship
with such entity, except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor. For purposes of all calculations provided for in this Agreement, there shall
be disregarded any Guarantee of any Person in respect of any Indebtedness of any other Person with
which the accounts of such first Person are then required to be consolidated in accordance with
GAAP.

          “Indemnified Taxes” means Taxes other than Excluded Taxes.

          “Information Memorandum” means the Confidential Information Memorandum dated March
2008 relating to the Borrower and the Transactions.

          “Interest Election Request” means a request by the Borrower to convert or continue a
Revolving Borrowing in accordance with Section 2.08.

          “Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline
Loan), the first day of each month for the prior month then ended and the Maturity

- 16 -

 

Date, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable
to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months’ duration, each day prior to the last day of such
Interest Period that occurs at intervals of three months’ duration after the first day of such
Interest Period and (c) with respect to any Swingline Loan, the day that such Loan is required to
be repaid and the Maturity Date.

          “Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months thereafter, as the Borrower may elect;
provided, that (i) if any Interest Period would end on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case such Interest Period
shall end on the next preceding Business Day and (ii) any Interest Period that commences on the
last Business Day of a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last Business Day of the
last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and, in the case of a Revolving
Borrowing, thereafter shall be the effective date of the most recent conversion or continuation of
such Borrowing.

          “Inventory” has the meaning assigned to such term in the Security Agreement.

          “Investment” means, as applied to any Person, any direct or indirect purchase or other
acquisition by such Person of Equity Interests or other securities of, or any assets constituting a
business unit of, any other Person, or any direct or indirect loan, advance or capital contribution
by such Person to any other Person. In computing the amount involved in any Investment at the time
outstanding, (a) undistributed earnings of, and unpaid interest accrued in respect of Indebtedness
owing by, such other Person shall not be included, (b) there shall not be deducted from the amounts
invested in such other Person any amounts received as earnings (in the form of dividends, interest
or otherwise) on such Investment or as loans from such other Person and (c) unrealized increases or
decreases in value, or write-ups, write-downs or write-offs, of Investments in such other Person
shall be disregarded.

          “Issuing Bank” means, as the context may require, (a) JPMorgan Chase Bank, N.A. and
Bank of America, N.A., each with respect to Letters of Credit issued by it, or (b) any other Lender
that becomes an Issuing Bank pursuant to Section 2.06(k), with respect to Letters of Credit issued
by it, and in each case its successors in such capacity as provided in Section 2.06(i). Each
Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by
Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such
Affiliate with respect to Letters of Credit issued by such Affiliate; provided,
however, that no arrangement of a type described in this sentence shall be permitted if,
immediately after giving effect thereto, amounts would become payable by the Borrower under Section
2.15 or 2.17 that are in excess of those that would be payable under such Section if such
arrangement were not implemented and, provided further, that the fees payable to any such Affiliate
shall be subject to the second sentence of Section 2.12(b).

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          “Joinder Agreements” has the meaning assigned to such term in Section 5.14.

          “Kansas Distribution Facility” has the meaning assigned to such term in the definition
of “Kansas IRB Financing”.

          “Kansas IRB Documents” means all agreements and documents which evidence the Kansas
IRB Financing, including (i) the Trust Indenture dated as of July 1, 2007 by and between the City
of Olathe, Kansas and U.S. Bank National Association, as trustee, (ii) the Bond Purchase Agreement
dated as of July 4, 2007 by and between the City of Olathe, Kansas and Pacific Sunwear Stores
Corp., (iii) the Performance Agreement dated as of July 1, 2007 by and between the City of Olathe,
Kansas and Pacific Sunwear Stores Corp. and (iv) the Lease Agreement dated as of July 1, 2007 by
and between the City of Olathe, Kansas and Pacific Sunwear Stores Corp., each as amended,
supplemented or otherwise modified from time to time.

          “Kansas IRB Financing” means that certain industrial revenue bond financing,
structured as a sale and leaseback transaction, entered into on July 1, 2007 between the City of
Olathe, Kansas and Pacific Sunwear Stores Corp., whereby the City of Olathe, Kansas issued
Industrial Revenue Bonds (PacSun Project), Series 2007, purchased by Pacific Sunwear Stores Corp.
for the purpose of financing the acquisition, construction and installation of certain real
property, machinery and equipment constituting a distribution facility located in the City of
Olathe, Johnson County, Kansas (the “Kansas Distribution Facility”), which facility was sold and
deeded by Pacific Sunwear Stores Corp. to the City of Olathe, Kansas and leased back by the City of
Olathe, Kansas to Pacific Sunwear Stores Corp.

          “Kansas IRB Unwind Transaction” means (i) the purchase by Pacific Sunwear Stores Corp.
of the Kansas Distribution Facility from the City of Olathe, Kansas pursuant to Article XI of the
lease described in clause (iv) of the definition of the term Kansas IRB Documents, (ii) the
redemption of bonds outstanding under the indenture described in clause (i) of the definition of
the term Kansas IRB Documents and the funding of such redemption by the Loan Parties, and (iii) all
other transactions related to clauses (i) and (ii).

          “Landlord Lien State” means the States of Pennsylvania, Washington and Virginia and
the Commonwealth of Puerto Rico; provided that if the laws of any such jurisdiction are changed
after the Effective Date so as to provide for the liens in favor of the Administrative Agent on
Inventory to have priority over the liens in favor of the landlords of such jurisdiction, then such
jurisdiction shall no longer be a “Landlord Lien State” as such term is used herein.

          “LC Collateral Account” has the meaning assigned to such term in Section 2.06(j).

          “LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter of
Credit.

          “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements
that have not yet been reimbursed by or on behalf of the Borrower at such time.

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The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC
Exposure at such time.

          “Leased Distribution Center” means any distribution center or facility leased or
subleased by any Loan Party (as lessee or sub-lessee, as applicable), including the Kansas
Distribution Facility and any other distribution center or facilities that any Loan Party leases
(as lessee) pursuant to any sale leaseback transaction permitted under Section 6.07, in each case
where the average monthly book value of Inventory in such distribution center or facility exceeds
$1,000,000.

          “Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption or an Augmenting Lender
Supplement, other than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Swingline
Lender.

          “Letter of Credit” means any standby or commercial letter of credit issued pursuant to
this Agreement, including but not limited to, any Existing Letter of Credit.

          “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the rate appearing on Page 3750 of the Dow Jones Market Service (or on any successor or substitute
page of such Service, or any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of interest rates
applicable to deposits in Dollars in the London interbank market) at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest Period, as the rate
for deposits in Dollars with a maturity comparable to such Interest Period. In the event that such
rate is not available at such time for any reason, then the “LIBO Rate” with respect to
such Eurodollar Borrowing for such Interest Period shall be the rate at which deposits in Dollars
of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal
London office of the Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of
such Interest Period.

          “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call
or similar right of a third party with respect to such securities.

          “Loan Documents” means this Agreement, the Subsidiary Guaranty, any promissory notes
executed and delivered pursuant to Section 2.10, the Collateral Documents and all other agreements,
documents and certificates identified in Section 4.01 executed and delivered to, or in favor of,
the Administrative Agent or any Lenders and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, letter of credit agreements and all other written matter
whether heretofore, now or hereafter delivered to the Administrative

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Agent or any Lender in connection with this Agreement or the transactions contemplated
thereby. Any reference in the Agreement or any other Loan Document to a Loan Document shall
include all appendices, exhibits or schedules thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document
as the same may be in effect at any and all times such reference becomes operative.

          “Loan Parties” means, collectively, the Borrower and the Subsidiary Guarantors.

          “Loans” means the loans and advances made by the Lenders to the Borrower pursuant to
this Agreement, including Swingline Loans and Overadvances.

          “Material Adverse Effect” means a material adverse effect on (a) the business, assets,
condition, financial or otherwise, of the Borrower and the Subsidiaries taken as a whole, (b) the
validity or enforceability of the Loan Documents, (c) the rights or remedies of the Administrative
Agent and the Lenders under the Loan Documents or (d) the Collateral or the Administrative Agent’s
Liens (on behalf of itself and the Lenders) on the Collateral or the priority of such Liens.

          “Material Indebtedness” means Indebtedness (other than the Loans, obligations under
the Subsidiary Guaranty and Letters of Credit), or obligations in respect of one or more Swap
Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal
amount exceeding $10,000,000. For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at
any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such
time.

          “Maturity Date” means April 29, 2013.

          “Maximum Rate” has the meaning assigned to such term in Section 9.15.

          “Moody’s” means Moody’s Investors Service, Inc.

          “Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.

          “Net Orderly Liquidation Value Percentage” means, with respect to Inventory of any
Loan Party, the fraction, expressed as a percentage (a) the numerator of which is the amount equal
to the orderly liquidation value thereof to be realized at an orderly, negotiated sale, as
determined in a manner reasonably acceptable to the Administrative Agent by an appraiser acceptable
to the Administrative Agent in the most recent appraisal conducted as set forth in Section 5.11(b),
net of all costs of liquidation thereof, and (b) the denominator of which is the lower of the cost
(based on first-in, first out) or market value of such Inventory.

          “Net Proceeds” means, with respect to any event relating to the assets of any Loan
Party, (a) the cash proceeds received by such Loan Party in respect of such event including (i) any
cash received in respect of any non-cash proceeds (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or purchase

- 20 -

 

price adjustment receivable or otherwise, but excluding any interest payments), but only as
and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the case of a
condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i)
all reasonable fees and out-of-pocket expenses paid to third parties (other than Affiliates) in
connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset
(including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar
proceeding), the amount of all payments required to be made as a result of such event to repay
Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment
as a result of such event and (iii) the amount of all taxes paid (or reasonably estimated to be
payable) and the amount of any reserves established to fund contingent liabilities reasonably
estimated to be payable, in each case during the year that such event occurred or the next
succeeding year and that are directly attributable to such event (as determined reasonably and in
good faith by a Financial Officer).

          “Non-Cash Interest Expense” means, with respect to the Borrower and its Subsidiaries
for any period, the sum of the following amounts to the extent included in the definition of
Interest Expense: (a) the amount of debt discount and debt issuance costs amortized, (b) charges
relating to write-ups or write-downs in the book or carrying value of existing Indebtedness, (c)
interest payable in evidences of Indebtedness or by addition to the principal of the related
Indebtedness and (d) other non-cash interest.

          “Obligations” means all unpaid principal of and accrued and unpaid interest on the
Loans, all LC Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities
and other obligations of the Loan Parties to the Lenders or to any Lender, the Administrative
Agent, the Issuing Banks or any indemnified party arising under the Loan Documents.

          “Operating Lease” of a Person means any lease of property (other than a capital lease
under GAAP) by such Person as lessee which has an original term (including any required renewals
and any renewals effective at the option of the lessor) of one year or more.

          “Other Taxes” means any and 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 from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

          “Overadvance” has the meaning assigned to such term in Section 2.05(d).

          “Participant” has the meaning set forth in Section 9.04.

          “Payment Intangible” has the meaning assigned to such term in the Security Agreement.

          “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.

          “Permitted Acquisition” means any acquisition (whether by purchase, merger,
consolidation or otherwise but excluding in any event a Hostile Acquisition) or series of related

- 21 -

 

acquisitions by any Loan Party of (i) all or substantially all or any significant portion of
the assets of a Person or division or line of business or a business unit of a Person, (ii) the
Equity Interests of a Person or (iii) if clauses (i) and (ii) above are inapplicable, the rights of
any licensee (including by means of the termination of such licensee’s rights under such license)
under a trademark license to such licensee from the Borrower or any Subsidiary Guarantor, if, at
the time of and immediately after giving effect thereto:

          (a) no Default has occurred and is continuing or would arise after giving effect thereto;

          (b) the assets so acquired or the assets of a Person so acquired, as the case may be, shall be
in a Related Line of Business;

          (c) if (i) such acquisition is consummated during a Financial Covenant Period, (ii)
Availability (determined on a pro forma basis taking into account the financing required for such
acquisition but excluding the Collateral to be acquired) shall be less than $50,000,000, or (iii)
the aggregate consideration paid and Indebtedness assumed in respect of such acquisition exceeds
$100,000,000, then Borrower and the Subsidiaries shall be in compliance, on a pro forma basis after
giving effect to such acquisition (taking into account such adjustments with respect to cost
savings as are consistent with the standards set forth in Rule 11-02(b)(6) of Regulation S-X), with
the covenant contained in Section 6.12 recomputed as of the last day of the most recently ended
fiscal quarter of the Borrower for which financial statements are available, as if such acquisition
(and any related incurrence or repayment of Indebtedness, with any new Indebtedness being deemed to
be amortized over the applicable testing period in accordance with its terms) had occurred on the
first day of each relevant period for testing such compliance, and the Borrower shall have
delivered to the Administrative Agent a certificate of a Financial Officer of the Borrower to such
effect, together with all relevant material financial information utilized by the Borrower in
making its determination to complete such acquisition included in any pro forma calculations
described in this clause (c);

          (d) in the case of a merger, consolidation or amalgamation involving the Borrower or a
Subsidiary Guarantor, the Borrower or a Subsidiary Guarantor is the surviving entity of such
merger, consolidation and/or amalgamation (or, in the case of a merger involving a Subsidiary
Guarantor, the surviving entity is a Person that will become a Subsidiary Guarantor upon the
effectiveness of such merger, consolidation or amalgamation); provided that in the case of
a merger, consolidation or amalgamation in which the Borrower is one of the entities being merged,
consolidated and/or amalgamated, the Borrower shall be the surviving entity of such merger,
consolidation and/or amalgamation;

          (e) the assets or equity interests being acquired shall be located in the United States and,
in the case of an acquisition structured as a stock or other equity acquisition, the entity whose
equity interests are being acquired shall be organized under the laws of the United States or any
state thereof and either (i) the Person so acquired shall become a direct wholly-owned Subsidiary
of a Loan Party and a Subsidiary Guarantor or (ii) such Person shall be merged with and into a Loan
Party (subject to the foregoing clause (d));

- 22 -

 

          (f) the Administrative Agent shall have received Lien searches reasonably satisfactory to the
Administrative Agent with respect to the assets or Person being acquired; and

          (g) with respect to any acquisition involving the payment of consideration and/or the
assumption of Indebtedness by the Borrower and its Subsidiaries in an aggregate amount in excess of
$10,000,000, the Administrative Agent shall have received a Borrowing Base Certificate dated as of
the last day of the month most recently ended prior to the date of consummation of such
acquisition, demonstrating that, after giving effect to the consummation of such acquisition,
Availability (determined on a pro forma basis taking into account the financing required for such
acquisition but excluding the Collateral to be acquired (unless the Administrative Agent in its
Permitted Discretion shall have determined that all requirements set forth in the last sentence of
this definition will be satisfied as of the date of consummation of such acquisition)) shall not be
less than the greater of (A) $22,500,000 or (B) 15% of the aggregate Commitments of all of Lenders
in effect at such time.

          For the avoidance of doubt, no portion of the Collateral acquired in such acquisition or owned by
the Person so acquired shall be eligible for inclusion in the Borrowing Base until (i) the
Administrative Agent shall have obtained a perfected Lien on such Collateral, and (ii) unless
otherwise approved by the Administrative Agent in its Permitted Discretion, the Administrative
Agent shall have performed and been satisfied with the results of its field examination (and, if
reasonably requested by the Administrative Agent, appraisals) of the Person or Collateral so
acquired.

          “Permitted Discretion” means a determination made in good faith and in the exercise
of reasonable (from the perspective of a secured asset-based lender) business judgment.

          “Permitted Encumbrances” means:

          (a) Liens imposed by law for taxes and duties, assessments, governmental charges or levies
that are not yet due or are being contested in compliance with Section 5.04;

          (b) (i) landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and
other like Liens imposed by law, Liens of collecting banks under the Uniform Commercial Code on
items in the course of collection, Liens and rights of set-off of banks, in each case arising in
the ordinary course of business and securing obligations that are not overdue by more than thirty
(30) days or are being contested in compliance with Section 5.04, (ii) landlord’s Liens arising by
operation of law which are subordinated to the Liens in favor of the Administrative Agent, and
(iii) landlord’s Liens in Landlord Lien States arising by operation of law;

          (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;

          (d) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in
each case in the ordinary course of business or letter of credit guarantees issued in respect
thereof;

- 23 -

 

          (e) attachment, judgment or other similar liens in respect of judgments that do not constitute
an Event of Default under clause (k) of Article VII;

          (f) easements, zoning restrictions, rights-of-way, restrictive covenants, encroachments, and
similar encumbrances on real property imposed by law or arising in the ordinary course of business
that do not secure any monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the Borrower or any
Subsidiary;

          (g) possessory Liens in favor of brokers and dealers arising in connection with the
acquisition or disposition of Permitted Investments;

          (h) Liens in favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods so long as such Liens attach
only to the imported goods;

          (i) licenses, leases or subleases granted to third parties and not interfering in any material
respect with the conduct of the business of the Borrower or any of its Subsidiaries taken as a
whole;

          (j) any (i) interest or title of a lessor or sublessor under any lease, (ii) Lien or
restriction that the interest or title of such lessor or sublessor may be subject to, or (iii)
subordination of the interest of the lessee or sublessee under such lease to any Lien or
restriction referred to in clause (ii); and

          (k) customary rights of setoff and chargebacks of Credit Card Processors under credit card
processing agreements (including Liens granted under the Credit Card Processor Agreements existing
as of the Effective Date to the extent copies thereof have been provided to the Administrative
Agent);

provided that the term “Permitted Encumbrances” shall not include any Lien securing
Indebtedness.

          “Permitted Investment Policy” shall mean the investment policy of the Borrower and its
Subsidiaries as in effect on the Effective Date, which has been approved by the board of directors
of the Borrower, as amended, restated, supplemented or otherwise modified from time to time, so
long as such amendment, restatement, supplement or modification has been approved by the
Administrative Agent, which approval shall not be unreasonably withheld.

          “Permitted Investments” means:

          (a) direct obligations of, or obligations the principal of and interest on which are directly
and fully guaranteed or insured by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United States of America);

          (b) investments in commercial paper having, at such date of acquisition, a credit rating of at
least A-2 from S&P or P-2 from Moody’s or F-2 from Fitch;

- 24 -

 

          (c) investments in certificates of deposit, eurodollar time deposits, banker’s acceptances and
time deposits maturing within one year from the date of acquisition thereof issued or guaranteed by
or placed with, and money market deposit accounts issued or offered by, any Lender or any
commercial bank which has a combined capital and surplus and undivided profits of not less than
$100,000,000;

          (d) repurchase agreements with a term of not more than thirty (30) days for securities
described in clause (a) above and entered into with a financial institution satisfying the criteria
described in clause (c) above;

          (e) securities with maturities of two years or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United States or by any political
subdivision or taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth or territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated, at such date of acquisition, at
least A by S&P or A2 by Moody’s or F-2 by Fitch;

          (f) securities with maturities of two years or less from the date of acquisition backed by
standby letters of credit issued by any Lender or any commercial bank satisfying the requirements
of clause (c) of this definition;

          (g) shares of money market funds that (i) comply with the criteria set forth in Securities and
Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, and (ii) have portfolio
assets of at least (x) in the case of funds that invest exclusively in assets satisfying the
requirements of clause (a) of this definition, $250,000,000 and (y) in all other cases,
$500,000,000;

          (h) in the case of investments by any foreign Subsidiary, obligations of a credit quality and
maturity comparable to that of the items referred to in clauses (a) through (g) above that are
available in local markets;

          (i) investments in auction rate securities with a rating of AAA from S&P or Aaa from Moody’s
or AAA from Fitch and a maximum holding period of forty-five (45) days, for which the reset date
will be used to determine the maturity date;

          (j) investments in short term loan participations of up to thirty-five (35) days if the short
term debt rating thereof is A-2 from S&P or P-2 from Moody’s or F-2 from Fitch or an equivalent
long term rating of investment grade by Moody’s or S&P of Fitch exists with respect thereto; and

          (k) investments made in accordance with the Permitted Investment Policy.

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

          “Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were

- 25 -

 

terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA.

          “Prime Rate” means the rate of interest per annum publicly announced from time to time
by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City;
each change in the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective.

          “Processor Control Agreement/Letter” means, with respect to (a) any Credit Card
Processor (other than American Express Co. and its Affiliates or any other Person that as a policy
does not execute an agreement described in this clause (a)) providing credit or debit card
processing services for or on behalf of any Loan Party, an agreement in form and substance
reasonably satisfactory to the Administrative Agent in its Permitted Discretion, executed and
delivered by the applicable Loan Party, such Credit Card Processor and the Administrative Agent,
pursuant to which such Credit Card Processor shall agree, among other things, to follow
instructions originated by the Administrative Agent regarding amounts payable by such Credit Card
Processor to such Loan Party pursuant to the applicable credit card processing agreement without
the further consent of such Loan Party under circumstances specified therein, as such agreement may
be amended, supplemented or otherwise modified from time to time, and (b) American Express Co. and
its Affiliates or such other Person, a letter from the applicable Loan Party to American Express
Co. or any of its Affiliates or such other Person in form and substance reasonably satisfactory to
the Administrative Agent in its Permitted Discretion directing American Express Co. or such
Affiliate or such other Person to remit all payments due under the applicable credit card
processing agreements between the applicable Loan Party and American Express Co. or such Affiliate
or such other Person to a Deposit Account subject to a Control Agreement in favor of the
Administrative Agent, and instructing American Express Co. or such Affiliate or such other Person
not to remit any payments owing to the applicable Loan Party from American Express Co. or such
Affiliate or such other Person to any other Deposit Account unless otherwise instructed by the
Administrative Agent.

          “Purchased Private Label Accounts” has the meaning assigned to such term in Section
6.05(k).

          “Register” has the assigned to such term in Section 9.04.

          “Regulation S-X” means Regulation S-X under the Securities Act of 1933, as amended.

          “Related Line of Business” means: (a) any line of business in which the Borrower or
any of its Subsidiaries is engaged as of, or immediately prior to, the Effective Date, (b) any
wholesale, retail or other distribution of products or services under any domestic or foreign
patent, trademark, service mark, trade name, copyright or license or (c) any similar or related or
complementary business and any business which provides a service and/or supplies products in
connection with any business described in clause (a) or (b) above.

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

          “Report” means reports prepared by the Administrative Agent or another Person showing
the results of appraisals, field examinations or audits pertaining to the Loan Parties’ assets from
information furnished by or on behalf of the Loan Parties, after the Administrative Agent has
exercised its rights of inspection pursuant to this Agreement, which Reports may be distributed to
the Lenders by the Administrative Agent.

          “Required Lenders” means, at any time, Lenders having Revolving Credit Exposures and
unused Commitments representing more than 50% of the sum of the total Revolving Credit Exposures
and unused Commitments at such time; provided that if at any time there are two or more Lenders
having Revolving Credit Exposures or unused Commitments, “Required Lenders” shall mean at least two
Lenders having Revolving Credit Exposures and unused Commitments representing more than 50% of the
sum of the total Revolving Credit Exposures and unused Commitments at such time.

          “Reserves” means any and all reserves which the Administrative Agent deems necessary,
in its Permitted Discretion, to maintain (including, without limitation, Banking Services Reserves,
reserves for rent at any retail store location leased by any Loan Party in any Landlord Lien State
for which the applicable landlord has not executed and delivered a Collateral Access Agreement (it
being agreed that the maximum amount of any Reserve for any retail store in any Landlord Lien State
shall not exceed two month’s rent for such location), reserves for rent with respect to any Leased
Distribution Center (other than the Kansas Distribution Facility) for which the applicable landlord
has not executed and delivered a Collateral Access Agreement (it being agreed that the maximum
amount of any Reserve for any Leased Distribution Center shall not exceed two month’s rent for such
location) and for consignee’s, warehousemen’s and bailee’s charges, reserves for gift cards,
reserves for Inventory shrinkage, reserves for customs charges and shipping charges related to any
Inventory in transit, reserves for Swap Obligations, reserves for uninsured losses of any Loan
Party, reserves for uninsured, underinsured, un-indemnified or under-indemnified liabilities or
potential liabilities with respect to any litigation and reserves for taxes, fees, assessments, and
other governmental charges) with respect to the Collateral or any Loan Party. The Administrative
Agent may, in its Permitted Discretion, implement additional reserves or adjust existing reserves
from time to time upon two (2) Business Days’ prior notice to the Borrower.

          “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the Borrower or any
Subsidiary, or any payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in the Borrower or any option, warrant or
other right to acquire any such Equity Interests in the Borrower. Notwithstanding the foregoing,
“Restricted Payment” shall not include any of the following: (i) the repurchase or reacquisition of
equity interests of the Borrower deemed to occur upon the exercise of stock options, warrants or
other convertible securities, (ii) cash payments in lieu of the issuance of fractional shares in
connection with the exercise of warrants, options or other securities convertible into or

- 27 -

 

exchangeable for the Borrower’s equity interests, or (iii) the withholding or reacquisition of
equity interests to pay the exercise price of, or tax withholding obligations arising in connection
with, such options, warrants or other convertible securities or other equity or equity-based awards
granted by the Borrower.

          “Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of
(a) the outstanding principal amount of such Lender’s Revolving Loans and its LC Exposure and
Swingline Exposure at such time (excluding Overadvances) plus (b) an amount equal to its
Applicable Percentage of the aggregate principal amount of Overadvances at such time.

          “Revolving Loan” means a Loan made pursuant to Section 2.01(a).

          “S&P” means Standard & Poor’s Rating Services, a division of The McGraw Hill
Companies, Inc.

          “Secured Obligations” means all Obligations, together with all (i) Banking Services
Obligations and (ii) Swap Obligations owing to one or more Lenders or their respective Affiliates;
provided that at or prior to the time that any transaction relating to such Swap Obligation
is executed, the Lender party thereto (other than Chase) shall have delivered written notice to the
Administrative Agent that such a transaction has been entered into and that it constitutes a
Secured Obligation entitled to the benefits of the Collateral Documents.

          “Security Agreement” means that certain Security Agreement, dated as of the date
hereof, between the Loan Parties and the Administrative Agent, for the benefit of the
Administrative Agent and the Lenders, and any other security agreement entered into, after the date
of this Agreement by any other Loan Party and the Administrative Agent, for the benefit of itself
and the Lenders (as required by this Agreement or any other Loan Document), in each case, as the
same may be amended, restated or otherwise modified from time to time.

          “Securities Account” has the meaning assigned to such term in Article 8 of the UCC.

          “Specified Chase Accounts” has the meaning assigned to such term in the definition of
“Eligible Cash”.

          “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 Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar 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.

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          “Subordinated Indebtedness” means any Indebtedness of any Loan Party which is
contractually subordinated to the payment of the Loans and other Obligations on terms and pursuant
to documentation acceptable to the Administrative Agent in its Permitted Discretion.

          “subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity the accounts of
which would be consolidated with those of the parent in the parent’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50% of the equity or
more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by
the parent and one or more subsidiaries of the parent.

          “Subsidiary” means any subsidiary of the Borrower.

          “Subsidiary Guarantor” means each Domestic Subsidiary that becomes a party to the
Subsidiary Guaranty. The Subsidiary Guarantors on the Effective Date are identified as such in
Schedule 3.01 hereto.

          “Subsidiary Guaranty” means that certain Guaranty dated as of the Effective Date
(including any and all supplements thereto) and executed by each Subsidiary Guarantor, as amended,
restated, supplemented or otherwise modified from time to time.

          “Supermajority Revolving Lenders” means, at any time, Lenders having Revolving
Exposure and unused Revolving Commitments representing at least 85% of the sum of the total
Revolving Credit Exposure and unused Revolving Commitments at such time.

          “Swap Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a
Swap Agreement.

          “Swap Obligations” of the Borrower or any Subsidiary means any and all obligations of
the Borrower or such Subsidiary, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and modifications
thereof and substitutions therefor), under (a) any and all Swap Agreements of the Borrower or such
Subsidiary, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of
any Swap Agreement transaction of the Borrower or such Subsidiary.

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          “Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall
be its Applicable Percentage of the total Swingline Exposure at such time.

          “Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of
Swingline Loans hereunder.

          “Swingline Loan” means a Loan made pursuant to Section 2.05.

          “Syndication Agent” means Bank of America, N.A., in its capacity as syndication agent
hereunder.

          “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

          “Trailing Average Quarterly Availability” means, for any fiscal quarter, an amount
equal to the average daily Availability during such fiscal quarter.

          “Transactions” means the execution, delivery and performance by the Loan Parties of
the Loan Documents, the borrowing of Loans and other credit extensions, the use of the proceeds
thereof and the issuance of Letters of Credit hereunder and the granting of Liens by the Loan
Parties pursuant to the Loan Documents.

          “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Adjusted LIBO Rate or the Alternate Base Rate.

          “UCC” means the Uniform Commercial Code as in effect from time to time in the State of
New York or any other state the laws of which are required to be applied in connection with the
issue of perfection of security interests.

          “Unliquidated Obligations” means, at any time, any Secured Obligations (or portion
thereof) that are contingent in nature or unliquidated at such time, including any Secured
Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter
of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in
nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.

          “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

          SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or
by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “Eurodollar
Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a
“Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type
(e.g., a “Eurodollar Revolving Borrowing”).

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          SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter 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 (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular provision hereof,
(d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect and to refer to any
and all tangible and intangible assets and properties, including cash, securities, accounts and
contract rights.

          SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if the Borrower notifies the Administrative Agent
that the Borrower requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on the operation of
such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders
request an amendment to any provision hereof for such purpose), regardless of whether any such
notice is given before or after such change in GAAP or in the application thereof, then such
provision shall be interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been withdrawn or such
provision amended in accordance herewith.

ARTICLE II

The Credits

          SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Revolving Loans to the Borrower in Dollars from time to time during the
Availability Period in an aggregate principal amount that will not result in (a) such Lender’s
Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the Aggregate Revolving Credit
Exposure exceeding the lesser of (i) the total Commitments of all of the Lenders or (ii) the
Borrowing Base, subject to the Administrative Agent’s authority in its sole discretion, to make
Overadvances pursuant to the terms of Section 2.05(d). Within the foregoing limits and subject to
the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving
Loans.

          SECTION 2.02. Loans and Borrowings. (a) Each Loan (other than a Swingline Loan or
an Overadvance) shall be made as part of a Borrowing consisting of Loans of the same Class and
Type made by the Lenders ratably in accordance with their respective Commitments.

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The failure of any Lender to make any Loan required to be made by it shall not relieve any
other Lender of its obligations hereunder; provided that the Commitments of the Lenders
are several and no Lender shall be responsible for any other Lender’s failure to make Loans as
required. Any Overadvance and any Swingline Loan shall be made in accordance with the procedures
set forth in Section 2.05.

          (b) Subject to Section 2.14, each Revolving Borrowing shall be comprised entirely of ABR Loans
or Eurodollar Loans as the Borrower may request in accordance herewith. Each Swingline Loan shall
be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement; provided further that no such option may be exercised by any
Lender if, immediately after giving effect thereto, amounts would become payable by the Borrower
under Section 2.15 or 2.17 that are in excess of those that would be payable under such Section if
such option were not exercised.

          (c) At the commencement of each Interest Period for any Eurodollar Revolving Borrowing, such
Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less
than $5,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in
an aggregate amount that is an integral multiple of $500,000 and not less than $500,000;
provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Commitments of all of the Lenders or that is required to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.06(e). Each Swingline Loan
shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000.
Borrowings of more than one Type and Class may be outstanding at the same time; provided
that there shall not at any time be more than a total of ten (10) Eurodollar Revolving Borrowings
outstanding.

          (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled
to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Maturity Date.

          SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing,
the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of
a Eurodollar Borrowing, not later than 1:00 p.m., Chicago time, three (3) Business Days before the
date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m.,
Chicago time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall
be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by
the Borrower. Each such telephonic and written Borrowing Request shall specify the following
information in compliance with Section 2.02:

     (i) the aggregate amount of the requested Borrowing;

     (ii) the date of such Borrowing, which shall be a Business Day;

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     (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

     (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of the term
“Interest Period”; and

     (v) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.07.

If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any
requested Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an
Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

          SECTION 2.04. [Intentionally Omitted.]

          SECTION 2.05. Swingline Loans and Overadvances. (a) Subject to the terms and
conditions set forth herein, the Swingline Lender agrees to make Swingline Loans in Dollars to the
Borrower from time to time during the Availability Period, in an aggregate principal amount at any
time outstanding that will not result in (i) the aggregate principal amount of outstanding
Swingline Loans exceeding $15,000,000 or (ii) the Aggregate Revolving Credit Exposure exceeding
the lesser of total Commitments of all of the Lenders and the Borrowing Base (subject to the
Administrative Agent’s authority, in its sole discretion, to make Overadvances pursuant to the
terms of Section 2.05(d)); provided that the Swingline Lender shall not be required to
make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow
Swingline Loans.

          (b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such
request by telephone (confirmed by telecopy), not later than 1:00 p.m., Chicago time, on the day of
a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested
date (which shall be a Business Day) and amount of the requested Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such notice received from the
Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means
of a credit to the Funding Account(s) (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.06(e), by remittance to the relevant
Issuing Bank, and, in the case of repayment of another Loan or fees or expenses as provided by
Section 2.18(c), by remittance to the Administrative Agent to be distributed to the Lenders) by
4:00 p.m., Chicago time, on the requested date of such Swingline Loan.

          (c) The Swingline Lender may by written notice given to the Administrative Agent not later
than 10:00 a.m., Chicago time, on any Business Day require the Lenders to acquire participations on
such Business Day in all or a portion of the Swingline Loans

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outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which
Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give
notice thereof to each Lender, specifying in such notice such Lender’s Applicable Percentage of
such Swingline Loan or Loans. Each Lender hereby absolutely and unconditionally agrees, upon
receipt of notice as provided above, to pay to the Administrative Agent, for the account of the
Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender
acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant
to this paragraph is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default or reduction or termination of
the Commitments, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as provided in
Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from
the Lenders. The Administrative Agent shall notify the Borrower of any participations in any
Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such
Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any
amounts received by the Swingline Lender from the Borrower (or other party on behalf of the
Borrower) in respect of a Swingline Loan after receipt by the Swingline Lender of the proceeds of a
sale of participations therein shall be promptly remitted to the Administrative Agent; any such
amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent
to the Lenders that shall have made their payments pursuant to this paragraph and to the Swingline
Lender, as their interests may appear; provided that any such payment so remitted shall be repaid
to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such
payment is required to be refunded to the Borrower for any reason. The purchase of participations
in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the
payment thereof.

          (d) Any provision of this Agreement to the contrary notwithstanding, the Administrative Agent
may in its sole discretion (but with absolutely no obligation), make Revolving Loans to the
Borrower, on behalf of the Lenders, in amounts that exceed Availability (any such excess Revolving
Loans are herein referred to collectively as “Overadvances”); provided that, no
Overadvance shall result in a Default due to the Borrower’s failure to comply with Section 2.01 for
so long as such Overadvance remains outstanding in accordance with the terms of this paragraph, but
solely with respect to the amount of such Overadvance. In addition, Overadvances may be made even
if the condition precedent set forth in Section 4.02(c) has not been satisfied. All Overadvances
shall constitute ABR Borrowings. The authority of the Administrative Agent to make Overadvances is
limited to an aggregate amount not to exceed $7,500,000 at any time, no Overadvance may remain
outstanding for more than thirty days and no Overadvance shall cause any Lender’s Revolving Credit
Exposure to exceed its Revolving Commitment; provided that, the Required Lenders may at any
time revoke the Administrative Agent’s authorization to make Overadvances. Any such revocation
must be in writing and shall become effective prospectively upon the Administrative Agent’s receipt
thereof.

          (e) Upon the making of an Overadvance by the Administrative Agent, each Lender shall be
deemed, without further action by any party hereto, to have unconditionally and

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irrevocably purchased from the Administrative Agent without recourse or warranty, an undivided
interest and participation in such Overadvance in proportion to its Applicable Percentage of the
total Commitments. The Administrative Agent may, at any time, require the Lenders to fund their
participations. From and after the date, if any, on which any Lender is required to fund its
participation in any Overadvance purchased hereunder, the Administrative Agent shall promptly
distribute to such Lender, such Lender’s Applicable Percentage of all payments of principal and
interest and all proceeds of Collateral received by the Administrative Agent in respect of such
Loan.

          SECTION 2.06. Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of, and each Issuing Bank
agrees to issue, Letters of Credit denominated in Dollars (or the amendment, renewal or extension
of an outstanding Letter of Credit) for its own account or for the account of any of its
Subsidiaries, in a form reasonably acceptable to the relevant Issuing Bank, at any time and from
time to time during the Availability Period. In the event of any inconsistency between the terms
and conditions of this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by the Borrower with,
the relevant Issuing Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control. The letters of credit identified on Schedule 2.06 (collectively,
the “Existing Letters of Credit”) shall be deemed to have been issued pursuant hereto, and
from and after the Effective Date shall be subject to and governed by the terms and conditions
hereof so long as they remain outstanding.

          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter
of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication,
if arrangements for doing so have been approved by the relevant Issuing Bank) to an Issuing Bank
and the Administrative Agent (reasonably in advance of the requested date of issuance, amendment,
renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the
Letter of Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other information as
shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by such
Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Bank’s
standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of
each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving
effect to such issuance, amendment, renewal or extension, (a) the Aggregate Revolving Credit
Exposure shall not exceed the lesser of the total Commitments of the Lenders and the Borrowing Base
then in effect, (b) the LC Exposure shall not exceed $75,000,000 at such time and (c) the aggregate
amount available to be drawn under all outstanding standby Letters of Credit shall not exceed
$10,000,000 at such time.

          (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one year after the date of the issuance of such Letter of
Credit (or, in the case of any renewal or extension thereof, one year after such renewal or

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extension) and (ii) the date that is five (5) Business Days prior to the Maturity Date;
provided that any such Letter of Credit with a tenor of one year shall, if requested by the
Borrower or any of its Subsidiaries, have renewal periods for additional one year periods so long
as the expiration date shall not extend beyond the date described in clause (ii).

          (d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action on the part of any
Issuing Bank or the Lenders, each Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from each Issuing Bank, a participation in such Letter of Credit equal to such Lender’s
Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit.
In consideration and in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of the relevant Issuing
Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not
reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in
respect of Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or
the occurrence and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding or reduction
whatsoever.

          (e) Reimbursement. If any Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative
Agent in Dollars the amount equal to such LC Disbursement, calculated as of the date such Issuing
Bank made such LC Disbursement not later than 2:00 p.m., Chicago time, on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to
12:00 noon, Chicago time, on such date, or, if such notice has not been received by the Borrower
prior to such time on such date, then not later than 2:00 p.m., Chicago time, on (i) the Business
Day that the Borrower receives such notice, if such notice is received prior to 12:00 noon, Chicago
time, on the day of receipt, or (ii) the Business Day immediately following the day that the
Borrower receives such notice, if such notice is not received prior to such time on the day of
receipt; provided that, if such LC Disbursement is not less than $500,000, the Borrower
may, subject to the conditions to borrowing set forth herein, request in accordance with Section
2.03 or 2.05 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in an
equivalent amount of such LC Disbursement and, to the extent so financed, the Borrower’s obligation
to make such payment shall be discharged and replaced by the resulting ABR Revolving Borrowing or
Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent
shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower
in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of
such notice, each Lender (other than such Issuing Bank) shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in
Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply,
mutatis mutandis, to the payment obligations of the Lenders), and the
Administrative Agent shall promptly pay to such Issuing Bank the amounts so received by it from the
Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower
pursuant to

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this paragraph, the Administrative Agent shall distribute such payment to the applicable
Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to
reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may
appear. Any payment made by a Lender pursuant to this paragraph to reimburse an Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline Loan as
contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its
obligation to reimburse such LC Disbursement.

          (f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as
provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an
Issuing Bank under a Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of, or provide a right of setoff against,
the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor any
Issuing Bank, nor any of their Related Parties, shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or
failure to make any payment thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or 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
(including any document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the relevant Issuing
Bank; provided that the foregoing shall not be construed to excuse any Issuing Bank from
liability to the Borrower to the extent of any direct damages (as opposed to consequential damages,
claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable
law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or
willful misconduct on the part of any Issuing Bank (as finally determined by a court of competent
jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented which appear on their face to be in substantial
compliance with the terms of a Letter of Credit, each Issuing Bank may, in its sole discretion,
either accept and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or 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.

          (g) Disbursement Procedures. Each Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment under a Letter of
Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether such

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Issuing Bank has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement. Each Issuing
Bank shall, on each Business Day (or such longer frequency as is agreed to by the Administrative
Agent), deliver to the Administrative Agent and the Borrower a report via facsimile or e-mail
setting forth a list of all Letters of Credit issued by such Issuing Bank outstanding as of such
day (or, if the Administrative Agent has agreed to a longer frequency, the previous date of
delivery of such report by such Issuing Bank), together with the LC Exposure, the outstanding LC
Disbursements and the expiration date of each such Letter of Credit.

          (h) Interim Interest. Except as otherwise agreed with any Issuing Bank with respect
to any Letter of Credit relating to the period beginning on any date an LC Disbursement is made and
ending two Business Days after the Borrower’s receiving notice from such Issuing Bank of such LC
Disbursement, if any Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall
reimburse such LC Disbursement in full on the date such LC Disbursement is made (or, if such date
is not a Business Day, on or prior to the next Business Day), the unpaid amount thereof shall bear
interest, for each day from and including the date such LC Disbursement is made to but excluding
the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Revolving Loans; provided that, if the Borrower fails to reimburse such LC
Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(d) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of such Issuing Bank, except
that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of
this Section to reimburse such Issuing Bank shall be for the account of such Lender to the extent
of such payment.

          (i) Replacement of Any Issuing Bank. Any Issuing Bank may be replaced at any time by
written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the
successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement
of an Issuing Bank. At the time any such replacement shall become effective, the Borrower shall
pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section
2.12(b). From and after the effective date of any such replacement, (i) the successor Issuing Bank
shall have all the rights and obligations of an Issuing Bank under this Agreement with respect to
Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank”
shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing
Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have
all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of
Credit issued by it prior to such replacement, but shall not be required to issue additional
Letters of Credit.

          (j) Cash Collateralization. The Borrower may at any time, and if any Event of Default
shall occur and be continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been
accelerated, Lenders with LC Exposure representing greater than 50% of the total LC Exposure)
demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall, deposit in
an account with the Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders (the “LC Collateral Account”), an amount in cash equal to 103% of
the

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LC Exposure as of such date plus any accrued and unpaid interest thereon; provided
that the obligation to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i)
of Article VII. Such deposit shall be held by the Administrative Agent as collateral for the
payment and performance of the Secured Obligations. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such account and the
Borrower hereby grants the Administrative Agent a security interest in the LC Collateral Account.
Other than any interest earned on the investment of such deposits, which investments shall be made
at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and
expense, such deposits shall not bear interest. Interest or profits, if any, on such investments
shall accumulate in such account. Moneys in such account shall be applied by the Administrative
Agent to reimburse the relevant Issuing Bank for LC Disbursements for which it has not been
reimbursed and, to the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of
the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing
greater than 50% of the total LC Exposure), be applied to satisfy other Secured Obligations. If
the Borrower is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be
returned to the Borrower within three (3) Business Days after all Events of Default have been cured
or waived. If the Borrower otherwise provides an amount of cash collateral hereunder, such amount
(to the extent not applied as aforesaid) shall be returned to the Borrower within three (3)
Business Days after the Borrower’s request for such return so long as no Event of Default shall
have occurred and be continuing.

          (k) Additional Issuing Banks. The Borrower may, at any time and from time to time
with the consent of the Administrative Agent (which consent shall not be unreasonably withheld) and
such Lender, designate one or more additional Lenders to act as an issuing bank under the terms of
this Agreement. Any Lender designated as Issuing Bank pursuant to this paragraph (k) shall be
deemed to be an “Issuing Bank” for the purposes of this Agreement (in addition to being a
Lender) with respect to Letters of Credit issued by such Lender.

          (l) Confirmation of Existing Letters of Credit Issued Under Existing Credit Agreement.
All Existing Letters of Credit (including those issued under the Existing Credit Agreement)
outstanding on the Effective Date shall be deemed to be Letters of Credit issued hereunder.

          SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of immediately available funds
by 2:00 p.m., Chicago time, to the account of the Administrative Agent most recently designated by
it for such purpose by notice to the Lenders in an amount equal to such Lender’s Applicable
Percentage; provided that Swingline Loans shall be made as provided in Section 2.05. The
Administrative Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received, in like funds, to the Funding Account(s); provided that ABR Revolving
Loans made to finance the reimbursement of (i) an LC Disbursement as provided in Section 2.06(e)
shall be remitted by the Administrative Agent to the relevant Issuing Bank and (ii) an Overadvance
shall be retained by the Administrative Agent.

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          (b) Unless the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any 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 paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the Borrower a corresponding amount. In such
event, if a Lender has not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to but excluding the
date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest
rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then
such amount shall constitute such Lender’s Loan included in such Borrowing.

          SECTION 2.08. Interest Elections. (a) Each Revolving Borrowing initially shall be
of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar
Revolving Borrowing, shall have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect Interest Periods
therefor, all as provided in this Section. The Borrower may elect different options with respect
to different portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans
comprising each such portion shall be considered a separate Borrowing. This Section shall not
apply to Swingline Borrowings or Overadvances which may not be converted or continued.

          (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative
Agent of such election by telephone by the time that a Borrowing Request would be required under
Section 2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in a form approved by the
Administrative Agent and signed by the Borrower.

          (c) Each telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:

     (i) the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case the information to be specified
pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

     (ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

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     (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and

     (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a period
contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an
Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one
month’s duration.

          (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall
advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

          (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest Period such
Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative Agent, at the request
of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is
continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar
Borrowing and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.

          SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously
terminated, the Commitments shall terminate on the Maturity Date.

          (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments
without premium or penalty but subject to Section 2.16 with respect to any Loans in the event such
Loans are required to be repaid as a result of such termination or reduction; provided that
(i) each reduction of the Commitments shall be in an amount that is an integral multiple of
$100,000 and not less than $1,000,000 or, if less, the remaining amount of the total Commitments,
and (ii) the Borrower shall not terminate or reduce the Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.11, the Aggregate Revolving Credit
Exposure would exceed the total Commitments of all Lenders.

          (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce
the Commitments under paragraph (b) of this Section at least two (2) Business Days prior to the
effective date of such termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section
shall be irrevocable; provided that a notice of termination of the Commitments delivered by
the Borrower may state that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if

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such condition is not satisfied. Any termination or reduction of the Commitments shall be
permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance
with their respective Commitments.

          SECTION 2.10. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Revolving Loan on the Maturity Date, (ii) to the Swingline
Lender the then unpaid principal amount of each Swingline Loan on the earlier of the fifth
(5th) Business Day after such Swingline Loan is made or the Maturity Date;
provided that on each date that a Revolving Borrowing is made, the Borrower shall repay
all Swingline Loans then outstanding and (iii) to the Administrative Agent the then unpaid
principal amount of each Overadvance on the earliest of the Maturity Date, the 30th day after such
Overadvance is made, and demand by the Administrative Agent.

          (b) At all times that full cash dominion is in effect pursuant to Section 7.2 of the Security
Agreement, on each Business Day, the Administrative Agent shall apply all funds credited to the
Concentration Account the previous Business Day (whether or not immediately available) as follows:
(i) if no Event of Default shall have occurred and be continuing at such time, first to prepay any
Overadvances that may be outstanding, pro rata, second to prepay the Revolving Loans (including
Swing Line Loans) pro rata, third, to cash collateralize outstanding LC Exposure, and fourth, the
balance, if any, to the Borrower’s general operating account; or (ii) if an Event of Default shall
have occurred and be continuing at such time, in accordance with the provisions of Section 2.18(b).

          (c) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.

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

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

          (f) Any Lender may request that Loans made by it be evidenced by a promissory note. In such
event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to
the order of such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times

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(including after assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such promissory note is
a registered note, to such payee and its registered assigns).

          SECTION 2.11. Prepayment of Loans.

          (a) The Borrower shall have the right at any time and from time to time to prepay voluntarily
any Borrowing in whole or in part, without premium or penalty, subject to prior notice in
accordance with paragraph (d) of this Section and subject to Section 2.16.

          (b) Except for Overadvances permitted under Section 2.05, in the event and on such occasion
that the Aggregate Revolving Credit Exposure exceeds the lesser of (A) the aggregate Commitments of
all Lenders or (B) the Borrowing Base then in effect, the Borrower shall prepay the Revolving Loans
and/or Swingline Loans and/or cash collateralize the LC Exposure in an aggregate amount equal to
such excess.

          (c) At all times that full cash dominion is in effect pursuant to Section 7.2 of the Security
Agreement, the Borrower shall prepay the Loans and cash collateralize the LC Exposure in accordance
with Section 2.10(b).

          (d) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a
Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 1:00
p.m., Chicago time, one (1) Business Day before the date of prepayment, (ii) in the case of
prepayment of an ABR Revolving Borrowing, not later than 1:00 p.m., Chicago time, on the date of
prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 2:00 p.m.,
Chicago time, on the date of prepayment. Each such notice shall be irrevocable and shall specify
the prepayment date, the principal amount of each Borrowing or portion thereof to be prepaid and
whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a
combination thereof, the amount allocable to each; provided that, if a notice of prepayment
is given in connection with a conditional notice of termination of the Commitments as contemplated
by Section 2.09, then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.09. Promptly following receipt of any such notice relating to
a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof.
Each partial prepayment of any Revolving Borrowing shall be in an amount that is an integral
multiple of $100,000 and not less than $500,000. Each prepayment of a Revolving Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.13.

          SECTION 2.12. Fees. (a) The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a commitment fee, which shall accrue at the Commitment Fee Rate on the
average daily unused amount of the Commitment of such Lender during the period from and including
the Effective Date to but excluding the date on which such Commitment terminates. Accrued
commitment fees shall be payable in arrears on the first day of each calendar month and on the
date on which the Commitments terminate, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the

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basis of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

          (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender
a participation fee with respect to its participations in Letters of Credit, which shall accrue, in
the case of standby Letters of Credit at the same Applicable Rate used to determine the interest
rate applicable to Eurodollar Revolving Loans and, in the case of commercial Letters of Credit, at
the Applicable Rate applicable to such Letters of Credit, in each case on the average daily amount
of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the Effective Date to but excluding the later
of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases
to have any LC Exposure and (ii) to the applicable Issuing Bank a fronting fee, which shall accrue
at the rate of 0.125% per annum or such other rate as is separately agreed upon between the
Borrower and such Issuing Bank on the average daily amount of the LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) attributable to Letters of Credit
issued by such Issuing Bank during the period from and including the Effective Date to but
excluding the later of the date of termination of the Commitments and the date on which there
ceases to be any LC Exposure, as well as such Issuing Bank’s standard fees and commissions
(including without limitation standard commissions with respect to commercial Letters of Credit,
payable at the time of invoice of such amounts) with respect to the issuance, amendment,
cancellation, negotiation, transfer, presentment, renewal or extension of any Letter of Credit or
processing of drawings thereunder. For the avoidance of doubt, in any case where, in accordance
with the second sentence of the definition of Issuing Bank, an Issuing Bank arranges for one or
more Letters of Credit to be issued by an Affiliate of such Issuing Bank, the fees agreed upon by
such Issuing Bank with the Borrower shall be deemed to have been agreed upon by such Affiliate
unless the Borrower and such Affiliate otherwise agree. Unless otherwise specified above,
participation fees and fronting fees accrued through and including the last day of each calendar
month shall be payable on the first day of each calendar month following such last day, commencing
on the first such date to occur after the Effective Date; provided that all such fees shall
be payable on the date on which the Commitments terminate and any such fees accruing after the date
on which the Commitments terminate shall be payable on demand. Any other fees payable to any
Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but excluding the last
day).

          (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable
in the amounts and at the times separately agreed upon between the Borrower and the Administrative
Agent.

          (d) All fees payable hereunder shall be paid on the dates due, in immediately available funds,
to the Administrative Agent (or to the relevant Issuing Bank, in the case of fees payable to it)
for distribution, in the case of commitment fees and participation fees, to the Lenders. Fees paid
shall not be refundable under any circumstances (other than in the case, and to the extent, of any
overpayment thereof by the Loan Parties).

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          SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including each
Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

          (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

          (c) Each Overadvance shall bear interest at the Alternate Base Rate plus the Applicable Rate
for Revolving Loans plus 2%.

          (d) Notwithstanding the foregoing, during the occurrence and continuance of an Event of
Default, the Administrative Agent or the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 9.02 requiring the consent of “each Lender affected thereby” for reductions in
interest rates), declare that (i) all Loans shall bear interest at 2% plus the rate otherwise
applicable to such Loans as provided in the preceding paragraphs of this Section or (ii) in the
case of any other amount outstanding hereunder, such amount shall accrue at 2% plus the rate
applicable to such fee or other obligation as provided hereunder.

          (e) Accrued interest on each Loan (for ABR Loans, accrued through the last day of the prior
calendar month) shall be payable in arrears on each Interest Payment Date for such Loan and, in the
case of Revolving Loans, upon termination of the Commitments; provided that (i) interest
accrued pursuant to paragraph (d) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to
the end of the Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) in the event of any
conversion of any Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

          (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that
interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year) and in each case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO
Rate shall be determined by the Administrative Agent, and such determination shall be conclusive
absent manifest error.

          SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

          (a) the Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO
Rate or the LIBO Rate, as applicable, for such Interest Period; or

          (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or
the LIBO Rate, as applicable, for such Interest Period will not adequately

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and fairly reflect the cost to such Lenders (or Lender) of making or maintaining their Loans
(or its Loan) included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing
to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective and
(ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be
made as an ABR Borrowing; provided that if the circumstances giving rise to such notice
affect only one Type of Borrowings, then the other Type of Borrowings shall be permitted.

          SECTION 2.15. Increased Costs. (a) If any Change in Law shall:

     (i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended by,
any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any
Issuing Bank; or

     (ii) impose on any Lender or any Issuing Bank or the London interbank market any other
condition affecting this Agreement or Eurodollar 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 Eurodollar Loan (or of maintaining its obligation to make such Loan) or to increase
the cost to such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter
of Credit or to reduce the amount of any sum received or receivable by such Lender or such Issuing
Bank hereunder, whether of principal, interest or otherwise, then the Borrower will pay to such
Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred
or reduction suffered.

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

          (c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary
to compensate such Lender or such Issuing Bank, as the case may be, as specified in paragraph (a)
or (b) of this Section, containing a reasonably detailed explanation of the basis on which such
amount or amounts were calculated and explaining the Change in Law

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by reason of which it has become entitled to be so compensated, shall be delivered to the
Borrower and shall be conclusive absent manifest error. No Lender or Issuing Bank shall be
entitled to the benefits of this Section 2.15 unless such Lender or Issuing Bank shall have
complied with the requirements of this Section 2.15. The Borrower shall pay such Lender or such
Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10)
days after receipt thereof.

          (d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s
right to demand such compensation; provided that the Borrower shall not be required to
compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or
reductions incurred more than 270 days prior to the date that such Lender or such Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the 270-day period referred to above shall be extended to include
the period of retroactive effect thereof. Notwithstanding any other provision of this Section
2.15, no Lender shall demand compensation for any increased costs or reduction referred to above in
this Section if it shall not then be the general policy of such Lender to demand such compensation
in similar circumstances from comparable borrowers under comparable provisions of other credit
agreements, if any (it being understood, for the avoidance of doubt, that a waiver by any Lender in
any given case of its right to demand such compensation from any given borrower shall not, in and
of itself, be deemed to constitute a change in the general policy of such Lender).

          (e) Notwithstanding any other provision to the contrary, this Section 2.15 shall have no
application with respect to any Indemnified Taxes, Other Taxes or any Excluded Taxes, which
matters, for the avoidance of doubt, shall be dealt with exclusively under Section 2.17.

          SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(b) and is
revoked in accordance therewith) or (d) the assignment of any Eurodollar Loan other than on the
last day of the Interest Period applicable thereto as a result of a request by the Borrower
pursuant to Section 2.19, then, in any such event, the Borrower shall compensate each Lender for
the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender
to be the excess, if any, of (i) the amount of interest which would have accrued on the principal
amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last day of the then
current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for
the period that would have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the interest

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rate which such Lender would bid were it to bid, at the commencement of such period, for
deposits in Dollars of a comparable amount and period from other banks in the eurodollar market.
A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

          SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation of
the Borrower hereunder shall be made free and clear of and without deduction for any Indemnified
Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased
as necessary so that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or the relevant
Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower
shall pay the full amount deducted to the relevant Governmental Authority in accordance with
applicable law.

          (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority
in accordance with applicable law.

          (c) The Borrower shall indemnify the Administrative Agent, each Lender and any Issuing Bank,
as promptly as possible but in any event within thirty (30) days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such
Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed on
or attributable to amounts payable under this Section) 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 by the relevant Governmental Authority. A certificate as
to the amount of such payment or liability delivered to the Borrower by a Lender or any Issuing
Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or any Issuing
Bank, shall be conclusive absent manifest error.

          (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Governmental Authority, the 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) Each Foreign Lender (including each Issuing Bank that is a Foreign Lender) shall deliver
to the Borrower (with a copy to the Administrative Agent), at the time it becomes a Lender (or, in
the case of any Participant, on or before the date such Participant purchases the related
participation) and at all times prescribed by applicable law or reasonably requested by the
Borrower, such properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made without withholding or
at a reduced rate of withholding. No Person shall be deemed to be a

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Lender or Participant as defined herein unless it shall have complied with the requirements of
the first sentence of this paragraph (if such requirements are applicable to it).

          In addition, any Lender, if requested by the Borrower or the Administrative Agent, shall
deliver such other documentation prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent as will enable the 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 the Borrower is resident
for tax purposes in the United States of America, any Foreign Lender shall deliver to the Borrower
and the Administrative Agent (in such number of copies as shall be requested by the recipient) on
or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from
time to time thereafter upon the request of the Borrower or the Administrative Agent, but only if
such Foreign Lender is legally entitled to do so), whichever of the following is applicable:

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

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

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

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

          (f) If the Administrative Agent, a Lender or an Issuing Bank determines that it has received a
refund which, in the good faith judgment of the Administrative Agent, such Lender or such Issuing
Bank, as the case may be, is allocable to any Indemnified Taxes or Other Taxes as to which it has
been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts
pursuant to this Section 2.17, it shall promptly pay over such refund to the Borrower (but only to
the extent of indemnity payments made, or additional amounts paid, by the Borrower under this
Section 2.17 with respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than
any interest paid by the relevant Governmental Authority with respect to such refund); provided,
that the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the
amount paid over to the Borrower (plus any penalties,

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interest or other charges imposed by the relevant Governmental Authority) to the
Administrative Agent or such Lender in the event the Administrative Agent or such Lender is
required to repay such refund to such Governmental Authority. This Section shall not be construed
to require the Administrative Agent or any Lender to make available its tax returns (or any other
information relating to its taxes which it deems confidential) to the Borrower or any other Person.

          SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

          (a) The Borrower shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section
2.15, 2.16 or 2.17, or otherwise) prior to 12:00 noon, Chicago time on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts received after such time
on any date may, in the discretion of the Administrative Agent, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New York, New York,
except payments to be made directly to an Issuing Bank or Swingline Lender as expressly provided
herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made
directly to the Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate recipient promptly
following receipt thereof. If any payment hereunder shall be due on a day that is not a Business
Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the period of such
extension. All payments hereunder shall be made in Dollars. At all times that full cash dominion
is in effect pursuant to Section 7.2 of the Security Agreement, solely for purposes of determining
the amount of Loans available for borrowing purposes, checks (in addition to immediately available
funds applied pursuant to Section 2.10(b)) from collections of items of payment and proceeds of any
Collateral shall be applied in whole or in part against the Obligations, on the Business Day after
receipt, subject to actual collection.

          (b) Any proceeds of Collateral received by the Administrative Agent (i) not constituting
either (A) a specific payment of principal, interest, fees or other sum payable under the Loan
Documents (which shall be applied as specified by the Borrower), (B) a mandatory prepayment (which
shall be applied in accordance with Section 2.11) or (C) amounts to be applied from the
Concentration Account when full cash dominion is in effect (which shall be applied in accordance
with Section 2.10(b)) or (ii) after an Event of Default has occurred and is continuing and the
Administrative Agent so elects or the Required Lenders so direct, such funds shall be applied
ratably first, to pay any fees, indemnities, or expense reimbursements including amounts
then due to the Administrative Agent and the Issuing Banks from the Borrower (other than in
connection with Banking Services or Swap Obligations), second, to pay any fees or expense
reimbursements then due to the Lenders from the Borrower (other than in connection with Banking
Services or Swap Obligations), third, to pay interest due in respect of the Overadvances,
fourth, to pay the principal of the Overadvances, fifth, to pay interest then due
and payable on the Loans (other than the Overadvances) ratably, sixth, to prepay principal
on the Loans (other than the Overadvances) and unreimbursed LC Disbursements ratably,
seventh, to pay an amount to the Administrative Agent equal to 103% of the aggregate
undrawn face amount of all outstanding Letters of Credit and the aggregate amount of any unpaid LC
Disbursements,

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to be held as cash collateral for such Obligations, eighth, to payment of any amounts
owing with respect to Banking Services and Swap Obligations owing to the Lenders and their
respective Affiliates, ninth, to the payment of any other Secured Obligation due to the
Administrative Agent or any Lender by the Borrower and, tenth, the balance, if any, to the
Loan Parties or as otherwise required by law. Notwithstanding anything to the contrary contained in
this Agreement, unless so directed by the Borrower, or unless an Event of Default has occurred and
is continuing, neither the Administrative Agent nor any Lender shall apply any payment which it
receives to any Eurodollar Loan of a Class, except (a) on the expiration date of the Interest
Period applicable to any such Eurodollar Loan or (b) in the event, and only to the extent, that
there are no outstanding ABR Loans of the same Class and, in any such event, the Borrower shall pay
the break funding payment required in accordance with Section 2.16. The Administrative Agent and
the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and
all such proceeds and payments to any portion of the Secured Obligations.

          (c) At the election of the Administrative Agent, all payments of principal, interest, LC
Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all
reimbursement for fees and expenses pursuant to Section 9.03), and other sums payable under the
Loan Documents, may be paid from the proceeds of Borrowings made hereunder whether made following a
request by the Borrower pursuant to Section 2.03 or a deemed request as provided in this Section or
may be deducted from any deposit account of the Borrower maintained with the Administrative Agent.
The Borrower hereby irrevocably authorizes (i) the Administrative Agent to make a Borrowing for the
purpose of paying each payment of principal, interest and fees as it becomes due hereunder or any
other amount due under the Loan Documents and agrees that all such amounts charged shall constitute
Loans (including Swingline Loans and Overadvances) and that all such Borrowings shall be deemed to
have been requested pursuant to Sections 2.03 or 2.05, as applicable and (ii) the Administrative
Agent to charge any deposit account of the Borrower maintained with the Administrative Agent for
each payment of principal, interest and fees as it becomes due hereunder or any other amount due
under the Loan Documents.

          (d) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Revolving Loans or
participations in LC Disbursements, Swingline Loans or Overadvances resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and
participations in LC Disbursements, Swingline Loans and Overadvances and accrued interest thereon
than the proportion received by any other Lender, then the Lender receiving such greater proportion
shall purchase (for cash at face value) participations in the Revolving Loans and participations in
LC Disbursements, Swingline Loans and Overadvances of other Lenders to the extent necessary so that
the benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Revolving Loans and
participations in LC Disbursements, Swingline Loans and Overadvances; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price restored to the extent of
such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed
to apply to any payment made by the Borrower pursuant to and in accordance with the express terms
of this Agreement or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or

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participations in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply).
The Borrower 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 the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower in the amount of
such participation.

          (e) Unless the Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of the Lenders or the
Issuing Banks hereunder that the Borrower will not make such payment, the Administrative Agent may
assume that the Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders or the Issuing Banks, as the case may be,
the amount due. In such event, if the Borrower has not in fact made such payment, then each of the
Lenders or each Issuing Bank, as the case may be, severally agrees to repay to the Administrative
Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank 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 Effective Rate
and a rate determined by the Administrative Agent in accordance with banking industry rules on
interbank compensation.

          (f) If any Lender shall fail to make any payment required to be made by it pursuant to
Sections 2.05(c), 2.05(e), 2.06(d), 2.06(e), 2.07(b), 2.18(e) or 9.03(c), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender to satisfy such
Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

          SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.15, or if the Borrower is required to pay any additional
amount to any Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.17, 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 judgment of such Lender,
such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section
2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

          (b) If any Lender requests compensation under Section 2.15, or if the Borrower is required to
pay any additional amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.17, or if any Lender defaults in its obligation to fund Loans hereunder, then
the Borrower may, at its 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 Section 9.04), all its

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interests, rights and obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such assignment);
provided that (i) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans and participations in
LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued
interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any
such assignment resulting from a claim for compensation under Section 2.15 or payments required to
be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation
or payments. A Lender shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply. No such assignment shall be
deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other
Lender shall have against the replaced Lender. Each reference to any Lender in this Section 2.19
shall also refer to any Issuing Bank.

          SECTION 2.20. Expansion Option. The Borrower may from time to time elect to request
that the Commitments be increased in a minimum amount of $5,000,000 so long as, after giving
effect thereto, the aggregate amount of the Commitments does not exceed $225,000,000. The
Borrower may arrange for any such increase to be provided by one or more Lenders (each Lender so
agreeing to an increase in its Commitment, an “Increasing Lender”), or by one or more new
banks, financial institutions or other entities (each such new bank, financial institution or
other entity, an “Augmenting Lender”), to increase their existing Commitments, or extend
Commitments, as the case may be, provided that (i) each Augmenting Lender, shall be reasonably
acceptable to the Borrower, (ii) each Augmenting Lender shall be acceptable to the Administrative
Agent, in its Permitted Discretion, (iii) (x) in the case of an Increasing Lender, the Borrower
and such Increasing Lender execute an agreement substantially in the form of Exhibit C
hereto, and (y) in the case of an Augmenting Lender, the Borrower and such Augmenting Lender
execute an agreement substantially in the form of Exhibit D hereto and (iv) any Lender
approached to so increase its Commitment may elect or decline, in its sole discretion, to provide
any such increase. Increases and new Commitments created pursuant to this Section 2.20 shall
become effective on the date agreed by the Borrower, the Administrative Agent and the relevant
Increasing Lenders or Augmenting Lenders and the Administrative Agent shall notify each Lender
thereof. Notwithstanding the foregoing, no increase in the Commitments (or in the Commitment of
any Lender), shall become effective under this paragraph unless, (i) on the proposed date of the
effectiveness of such increase, the conditions set forth in paragraphs (a), (b) and (c) of Section
4.02 shall be satisfied or waived by the Required Lenders and the Administrative Agent shall have
received a certificate to that effect dated such date and executed by a Responsible Officer of the
Borrower, (ii) the Administrative Agent shall have received documents consistent with those
delivered on the Effective Date as to the corporate power and authority of the Borrower to borrow
hereunder after giving effect to such increase and (iii) the Administrative Agent shall have
received a written opinion addressed to the Administrative Agent and the Lenders and dated the
effective date of such increase of counsel to the Loan Parties in form and substance reasonably
satisfactory to the Administrative Agent in its Permitted Discretion. On the effective date of
any increase in the Commitments, (i) each relevant Increasing Lender and Augmenting Lender

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shall make available to the Administrative Agent such amounts in immediately available funds
as the Administrative Agent shall determine, for the benefit of the other Lenders, as being
required in order to cause, after giving effect to such increase and the use of such amounts to
make payments to such other Lenders, each Lender’s portion of the outstanding Revolving Loans of
all the Lenders to equal its Applicable Percentage of such outstanding Revolving Loans, and (ii)
the Borrower shall be deemed to have repaid and reborrowed all outstanding Revolving Loans as of
the date of any increase in the Commitments (with such reborrowing to consist of the Types of
Revolving Loans, with related Interest Periods if applicable, specified in a notice delivered by
the Borrower in accordance with the requirements of Section 2.03). The deemed payments made
pursuant to clause (ii) of the immediately preceding sentence shall be accompanied by payment of
all accrued interest on the amount prepaid and, in respect of each Eurodollar Loan, shall be
subject to indemnification by the Borrower pursuant to the provisions of Section 2.16 if the
deemed payment occurs other than on the last day of the related Interest Periods.

ARTICLE III

Representations and Warranties

          The Borrower represents and warrants to the Lenders that:

          SECTION 3.01. Organization; Powers; Subsidiaries. Each of the Borrower and each of
its Subsidiaries is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry on its business
as now conducted and, except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is required. Schedule
3.01 hereto (as supplemented from time to time) identifies each Subsidiary, the jurisdiction
of its incorporation or organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the Borrower and the
other Subsidiaries and, if such percentage is not 100% (excluding directors’ qualifying shares as
required by law), a description of each class issued and outstanding.

          SECTION 3.02. Authorization; Enforceability. The Transactions are within each Loan
Party’s organizational powers and have been duly authorized by all necessary organizational
actions and, if required, actions by such Loan Party’s equity holders. The Loan Documents to
which each Loan Party is a party have been duly executed and delivered by such Loan Party and
constitute a legal, valid and binding obligation of such Loan Party, enforceable 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.

          SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other action by, any
Governmental Authority, except (i) such as have been obtained or made and are (in each case) in
full force and effect, (ii) filings required by applicable securities laws, rules or regulations
or stock exchange rules and (iii) filings necessary to perfect Liens created pursuant to the Loan

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Documents, (b) will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of the Borrower or any of its Subsidiaries or any order of any
Governmental Authority binding on the Borrower or any Subsidiary, (c) will not violate or result
in a default under any indenture, agreement or other instrument binding upon the Borrower or any
of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be
made by the Borrower or any of its Subsidiaries other than any violation or default that could not
reasonably be expected to result in a Material Adverse Effect, and (d) will not result in the
creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries (other
than Liens permitted under Section 6.02).

          SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has
heretofore furnished to the Lenders its consolidated balance sheet and statements of income,
stockholders equity and cash flows as of and for the fiscal year ended February 2, 2008 reported
on by Deloitte & Touche LLP, independent public accountants. Such financial statements present
fairly, in all material respects, the financial position and results of operations and cash flows
of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP.

          (b) Since February 2, 2008, there has been no material adverse change in the business, assets,
operations or condition, financial or otherwise, of the Borrower and its Subsidiaries, taken as a
whole.

          SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good
title to, or valid leasehold interests in, all its real and personal property material to its
business, except for minor defects in title that do not interfere with its ability to conduct its
business as currently conducted or to utilize such properties for their intended purposes or such
other defects as, in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, free of all Liens other than those permitted by Section 6.02.

          (b) Each of the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual property material to its business as
currently conducted, and the use thereof by the Borrower and its Subsidiaries does not infringe
upon the rights of any other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse Effect.

          SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits
or proceedings by or before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any of its Subsidiaries
(i) as to which there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect (other than the Disclosed Matters) or (ii) that involve this Agreement
or the Transactions. There are no labor controversies pending against or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any of its Subsidiaries (i) which could
reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect
(other than the Disclosed Matters), or (ii) that involve this Agreement or the Transactions.

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          (b) Except for the Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in a Material Adverse
Effect, neither the Borrower nor any of its Subsidiaries (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.

          (c) Since the date of this Agreement, there has been no change in the status of the Disclosed
Matters that, individually or in the aggregate, has resulted in a Material Adverse Effect.

          SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any Governmental Authority
applicable to it or its property and all indentures, agreements and other instruments binding upon
it or its property, except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

          SECTION 3.08. Investment Company Status. Neither the Borrower nor any of its
Subsidiaries is an “investment company” as defined in, or subject to regulation under, the
Investment Company Act of 1940.

          SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and has paid or caused
to be paid all Taxes required to have been paid by it (and no tax liens have been filed and no
claims are being asserted with respect to any such taxes), in each case, except (a) Taxes that are
being contested in good faith by appropriate proceedings and for which the Borrower or such
Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that
the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

          SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse Effect. The
present value of all accumulated benefit obligations under each Plan (based on the assumptions
used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more than $10,000,000
the fair market value of the assets of such Plan, and the present value of all accumulated benefit
obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $10,000,000 the fair market value of the
assets of all such underfunded Plans.

          SECTION 3.11. Disclosure. The Information Memorandum together with any of the other
reports, financial statements, certificates or other information furnished by or on behalf of the
Borrower to the Administrative Agent or any Lender in connection with the negotiation of this
Agreement or hereafter delivered hereunder or reports filed pursuant to the Securities Exchange
Act of 1934 (as modified or supplemented by other information so

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furnished prior to the date on which this representation or warranty is made or deemed made)
do not contain any material misstatement of fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they were made, not
misleading; provided that, with respect to projected financial information, the Borrower
represents only that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time, provided further that the Borrower makes no representation or
warranty whatsoever concerning the information contained in the Information Memorandum under the
heading “Industry Overview” or any financial information delivered pursuant to the definition of
“Permitted Acquisition”.

          SECTION 3.12. Federal Reserve Regulations. No part of the proceeds of any Loan have
been used or will be used, whether directly or indirectly, for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations T, U and X.

          SECTION 3.13. No Default. No Default or Event of Default has occurred and is
continuing.

          SECTION 3.14. [Intentionally Omitted]

          SECTION 3.15. Solvency. Immediately after the consummation of the Transactions to
occur on the Effective Date, (i) the fair value of the assets of the Loan Parties, on a
consolidated basis, at a fair valuation, will exceed their debts and liabilities, subordinated,
contingent or otherwise; (ii) the present fair saleable value of the property of the Loan Parties,
on a consolidated basis, will be greater than the amount that will be required to pay the probable
liability of their debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (iii) the Loan Parties, on a consolidated
basis, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (iv) the Loan Parties, on a
consolidated basis, will not have unreasonably small capital with which to conduct the business in
which they are engaged as such business is now conducted and is proposed to be conducted after the
Effective Date. For purposes of this Section 3.15, the amount of any contingent liability at any
time shall be computed as the amount that, in light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an actual or matured
liability.

          SECTION 3.16. Insurance. Schedule 3.16 sets forth in all material respects a
description of all insurance maintained by or on behalf of the Loan Parties and the Subsidiaries
as of the Effective Date. As of the Effective Date, all material premiums in respect of such
insurance that are due have been paid.

          SECTION 3.17. Security Interest in Collateral. The provisions of the Collateral
Documents create legal and valid Liens on all the Collateral in favor of the Administrative Agent,
for the benefit of the Administrative Agent and the Lenders, and such Liens constitute perfected
and continuing Liens on the Collateral, securing the Secured Obligations, enforceable against the
applicable Loan Party, and having priority over all other Liens on the Collateral except in the
case of (a) Permitted Encumbrances and other Liens permitted by Section 6.02(h), to the extent any
such Permitted Encumbrances and such other Liens would have priority over

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the Liens in favor of the Administrative Agent pursuant to any applicable law or otherwise
and (b) Liens perfected by possession or control (including possession of any certificate of
title) to the extent the Administrative Agent has not obtained or does not maintain possession of,
or control over, such Collateral.

          SECTION 3.18. Credit Card Processors. As of the Effective Date, and after giving
effect to the Transactions on the Effective Date, Schedule 3.18 lists all Credit Card
Processors that provide any Loan Party with credit card or debit card processing services, and
such Schedule correctly identifies the name and address of each Credit Card Processor, and the
name in which such services are provided. True and complete copies of each agreement listed on
Schedule 3.18 have been delivered to the Administrative Agent, together with all
amendments, waivers and other modifications thereto. All such agreements are valid, subsisting,
in full force and effect, are currently binding and will continue to be binding upon each Loan
Party that is a party thereto and, to the best knowledge of the Borrower, binding upon the other
parties thereto in accordance with their terms. The Loan Parties are not in default under any
such agreements, other than any such default which could not reasonably be expected to have a
Material Adverse Effect.

ARTICLE IV

Conditions

          SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of
any Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

          (a) The Administrative Agent (or its counsel) shall have received (i) from each party hereto
either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence
reasonably satisfactory to the Administrative Agent (which may include telecopy transmission of a
signed signature page of this Agreement) that such party has signed a counterpart of this Agreement
and (ii) duly executed copies of the Loan Documents, including any promissory notes requested by a
Lender pursuant to Section 2.10 payable to the order of each such requesting Lender.

          (b) The Administrative Agent shall have received a favorable written opinion (addressed to the
Administrative Agent and the Lenders and dated the Effective Date) of O’Melveny & Myers LLP,
counsel for the Loan Parties, substantially in the form of Exhibit B. The Borrower hereby
requests such counsel to deliver such opinion.

          (c) The Lenders shall have received (i) reasonably satisfactory audited consolidated financial
statements of the Borrower for the two most recent fiscal years ended prior to the Effective Date
as to which such financial statements are available, (ii) reasonably satisfactory unaudited interim
consolidated financial statements of the Borrower for each quarterly period ended subsequent to the
date of the latest financial statements delivered pursuant

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to clause (i) of this paragraph as to which such financial statements are available and (iii)
reasonably satisfactory financial statement projections through and including the Borrower’s 2011
fiscal year, together with such information as the Administrative Agent and the Lenders shall
reasonably request (including, without limitation, a reasonably detailed description of the
assumptions used in preparing such projections).

          (d) The Administrative Agent shall have received such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to the organization, existence
and good standing of the Borrower, the authorization of the Transactions and any other legal
matters relating to the Loan Parties, the Loan Documents or the Transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel and as further described in the
list of closing documents attached as Exhibit E.

          (e) The Administrative Agent shall have received a certificate, dated the Effective Date and
signed by the President, a Vice President or a Financial Officer of the Borrower, confirming
compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02.

          (f) Concurrently with the funding of the initial Loans hereunder, the Borrower shall have
caused to be repaid in full all outstanding Indebtedness under the Existing Credit Agreement.

          (g) The Administrative Agent shall have received all fees and other amounts due and payable on
or prior to the Effective Date (including the reasonable fees and expenses of legal counsel),
including, to the extent invoiced, reimbursement or payment of all reasonable out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder.

          (h) The Administrative Agent shall have received the results of a recent lien search in each
of the jurisdictions where assets of the Loan Parties are located, and such search shall reveal no
liens on any of the assets of the Loan Parties except for liens permitted by Section 6.02 or
discharged on or prior to the Effective Date pursuant to a pay-off letter or other documentation
satisfactory to the Administrative Agent.

          (i) The Administrative Agent shall have received a notice setting forth the deposit account(s)
of the Borrower (the “Funding Accounts”) to which the Administrative Agent is authorized by
the Borrower to transfer the proceeds of any Borrowings requested or authorized pursuant to this
Agreement.

          (j) The Administrative Agent shall have received each Control Agreement set forth on Part A of
Annex C of the Security Agreement.

          (k) The Administrative Agent shall have received a Borrowing Base Certificate which calculates
the Borrowing Base as of April 5, 2008 (it being understood that for purposes of computing the
Borrowing Base as of April 5, 2008, the Liens created pursuant to the Security Agreement, Control
Agreements and Processor Control Agreements/Letters in effect on the Effective Date shall be deemed
to have been in effect on April 5, 2008).

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          (l) After giving effect to all Borrowings to be made on the Effective Date and the issuance of
any Letters of Credit on the Effective Date and payment of all fees and expenses due hereunder, and
with all of the Loan Parties’ indebtedness, liabilities, and obligations current, Availability
shall not be less than $75,000,000.

          (m) The Administrative Agent shall have received evidence of insurance coverage in form,
scope, and substance reasonably satisfactory to the Administrative Agent and otherwise in
compliance with the terms of Section 5.09 and Section 4.8 of the Security Agreement.

          (n) The Administrative Agent shall have received a properly completed letter of credit
application (or, to the extent that the Borrower has theretofore executed and delivered a letter of
credit application covering such Letter of Credit to the applicable Issuing Bank, a properly
completed letter of credit request), if the issuance of a Letter of Credit will be required on the
Effective Date.

          (o) The Loan Parties shall have delivered to the Administrative Agent a Processor Control
Agreement/Letter with respect to each Credit Card Processor listed on Part A of
Schedule 3.18 attached hereto.

          The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such
notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived pursuant to
Section 9.02) at or prior to 3:00 p.m., Chicago time, on the Effective Date (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at such time).

          SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the
occasion of any Borrowing, and of any Issuing Bank to issue, increase, renew or extend any Letter
of Credit, is subject to the satisfaction of the following conditions:

          (a) The representations and warranties of the Borrower set forth in this Agreement shall be
true and correct in all material respects on and as of the date of such Borrowing or the date of
issuance, increase, renewal or extension of such Letter of Credit, as applicable (other than such
representations as are made as of a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of such earlier date).

          (b) At the time of and immediately after giving effect to such Borrowing or the issuance,
increase, renewal or extension of such Letter of Credit, as applicable, no Default shall have
occurred and be continuing.

          (c) After giving effect to any Borrowing or the issuance of any Letter of Credit, Availability
is not less than zero (provided that the Administrative Agent may, in its sole discretion, make
Overadvances from time to time in accordance with Section 2.05(d)).

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          Each Borrowing and each issuance, increase, renewal or extension of a Letter of Credit shall be
deemed to constitute a representation and warranty by the Borrower on the date thereof as to the
matters specified in paragraphs (a), (b) and (c) of this Section.

ARTICLE V

Affirmative Covenants

          Until the Commitments have expired or been terminated and the principal of and interest on
each Loan and all fees, expenses and other amounts payable hereunder shall have been paid in full
and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

          SECTION 5.01. Financial Statements; Borrowing Base and Other Information. The
Borrower will furnish to the Lenders through the Administrative Agent:

          (a) within ninety (90) days after the end of each fiscal year of the Borrower, its audited
consolidated balance sheet and related statements of operations, stockholders’ equity and cash
flows as of the end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by Deloitte & Touche LLP or other independent
public accountants of recognized national standing (without a “going concern” or like qualification
or exception and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all material respects the
financial condition and results of operations of the Borrower and its consolidated Subsidiaries on
a consolidated basis in accordance with GAAP consistently applied; provided,
however, that, so long as the Borrower is required to file reports under Section 13 of the
Securities and Exchange Act of 1934, the requirements of this paragraph shall be deemed satisfied
by the delivery of, the Annual Report of the Borrower on Form 10-K for such fiscal year, signed by
the duly authorized officer or officers of the Borrower;

          (b) within forty-five (45) days after the end of each of the first three fiscal quarters of
each fiscal year of the Borrower, its consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and
the then elapsed portion of the fiscal year, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the
end of) the previous fiscal year, all certified by one of its Financial Officers as presenting
fairly in all material respects the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of footnotes;
provided, however, that, so long as the Borrower is required to file reports under
Section 13 of the Securities and Exchange Act of 1934, the requirements of this paragraph shall be
deemed satisfied by the delivery of the Quarterly Report of the Borrower on Form 10-Q for the
relevant fiscal quarter, signed by the duly authorized officer or officers of the Borrower;

          (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a
certificate of a Financial Officer of the Borrower (x) stating that he or she has

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obtained no knowledge that a Default has occurred (other than as set forth in such
certificate) and, if a Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (y) stating whether any change in GAAP or in the
application thereof has occurred since the date of the audited financial statements referred to in
Section 3.04 which has had an effect on such financial statements and, if any such change has
occurred, specifying the effect of such change on the financial statements accompanying such
certificate, and (z) if a Financial Covenant Period is then in effect, setting forth reasonably
detailed calculations demonstrating compliance with Section 6.12; provided, that if a Fixed
Charge Coverage Ratio Triggering Event shall occur after the delivery of financial statements under
clause (a) or (b) above, which Fixed Charge Coverage Ratio Triggering Event shall trigger a
Financial Covenant Period that includes the fiscal quarter most recently ended for which financial
statements have already been delivered pursuant to clause (a) or (b) above, then, as soon as
available but in any event within ten (10) Business Days of the occurrence of such Fixed Charge
Coverage Ratio Triggering Event, the Borrower will furnish to the Administrative Agent a
supplemental certificate setting forth reasonably detailed calculations demonstrating compliance
with Section 6.12 as of the last day of such fiscal quarter;

          (d) as soon as available, but in any event not later than the end of each fiscal year of the
Borrower, a copy of the plan and forecast (including a projected consolidated balance sheet, income
statement and funds flow statement) of the Borrower and its Subsidiaries, on a consolidated basis,
for each fiscal quarter of the upcoming fiscal year (the “Projections”) in form reasonably
satisfactory to the Administrative Agent;

          (e) as soon as available but in any event within twenty (20) days of the end of each fiscal
quarter (or, if during any calendar month, any Loans have been outstanding hereunder, then within
twenty (20) days of the end of such calendar month), as of the period then ended, a Borrowing Base
Certificate, and supporting information in connection therewith, together with any additional
reports with respect to the Borrowing Base as the Administrative Agent may reasonably request;
provided that (i) if there shall occur and be continuing an Event of Default or if at any
time Availability shall fall below the greater of (A) $20,000,000 or (B) 13.33% of the total
Commitments in effect at such time, the Borrower shall deliver Borrowing Base Certificates with
such greater frequency as the Administrative Agent may require (but in any event not more
frequently than weekly), and (ii) if, at the time the Lenders make any Loan to the Borrower
hereunder, the Borrower shall not have delivered a Borrowing Base Certificate within the preceding
thirty (30) days, the Borrower shall deliver a Borrowing Base Certificate to the Administrative
Agent as soon as available but in any event within ten (10) Business Days of the funding of such
Loan, which Borrowing Base Certificate shall set forth the Borrowing Base as of the last day of the
calendar month most recently ended;

          (f) as soon as available but in any event within twenty (20) days of the end of each fiscal
quarter (or, if during any calendar month, any Loans have been outstanding hereunder, then within
twenty (20) days of the end of such calendar month), as of the period then ended, all delivered
electronically in a text formatted file acceptable to the Administrative Agent:

               (i) a schedule detailing the Loan Parties’ Eligible Credit Card Accounts, in form reasonably
satisfactory to the Administrative Agent;

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               (ii) an Inventory Cost & Retail by Store report, in form reasonably satisfactory to the
Administrative Agent, including schedules detailing the Loan Parties’ Inventory, in form
satisfactory to the Administrative Agent, (1) by location (showing Eligible Inventory, Eligible LC
Inventory, Inventory in transit, any Inventory located with a third party under any consignment,
bailee arrangement, or warehouse agreement), by class (raw material, work-in-process and finished
goods), by product type, and by volume on hand, which Inventory shall be valued at the lower of
cost (determined on a first-in, first-out basis) or market and adjusted for Reserves as the
Administrative Agent has previously indicated to the Borrower are deemed by the Administrative
Agent to be appropriate, (2) including a report of any variances or other results of Inventory
counts performed by the Borrower since the last Inventory schedule (including information regarding
sales or other reductions, additions, returns, credits issued by any Loan Party and complaints and
claims made against any Loan Party), and (3) reconciled to the Borrowing Base Certificate delivered
as of such date;

               (iii) a worksheet of calculations prepared by the Borrower in form reasonably satisfactory to
the Administrative Agent to determine Eligible Credit Card Accounts, Eligible Inventory and
Eligible LC Inventory, such worksheets detailing the Accounts and Inventory excluded from Eligible
Credit Card Accounts, Eligible Inventory and Eligible LC Inventory and the reason for such
exclusion;

               (iv) a roll forward report (which report shall include beginning inventory for the fiscal
month plus purchases/receivings during such month less returns to vendors, cost adjustments and
cost of goods for such month to arrive at ending inventory) in form reasonably satisfactory to the
Administrative Agent;

               (v) a gift card liability report in form reasonably satisfactory to the Administrative Agent;
and

               (vi) a report showing retail sales for the month, in form reasonably satisfactory to the
Administrative Agent;

provided that if there shall occur and be continuing an Event of Default or if at any time
Availability shall fall below the greater of (x) $20,000,000 or (y) 13.33% of the total Commitments
in effect at such time, the Borrower shall deliver the information set forth in clauses (i) through
(v) above with such greater frequency as the Administrative Agent may require (but not more
frequently than weekly);

          (g) as soon as available but in any event within twenty (20) days of the end of each fiscal
quarter (or, if during any calendar month, any Loans have been outstanding hereunder, then within
twenty (20) days of the end of such calendar month), as of the period then ended (i) a copy of the
Loan Parties’ outstanding checks list for each such period ending prior to such time as schedules
and agings of the Loan Parties’ accounts payable are available, and (ii) a schedule and aging of
the Loan Parties’ accounts payable (which may be delivered electronically in a text formatted file
acceptable to the Administrative Agent) for each such period ending from and after such time as
schedules and agings of the Loan Parties’ accounts payable are available; provided that if
there shall occur and be continuing an Event of Default or if at any time Availability shall fall
below the greater of (A) $20,000,000 or (B) 13.33% of the total

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Commitments in effect at such time, the Borrower shall deliver (x) such information described
in clause (i) above with such greater frequency as the Administrative Agent may require (but not
more frequently than weekly) and (y) such information described in clause (ii) above, after such
time as schedules and agings of the Loan Parties’ accounts payable are available, with such greater
frequency as the Administrative Agent may require (but not more frequently than weekly);

          (h) as soon as available but in any event within twenty (20) days of the end of each fiscal
quarter (or, if during any calendar month, any Loans have been outstanding hereunder, then within
twenty (20) days of the end of such calendar month), copies of all bank statements with respect to
deposit accounts where Eligible Cash is held (and, if weekly reporting is in effect, weekly screen
prints of balances in such accounts); provided that if there shall occur and be continuing
an Event of Default or if at any time Availability shall fall below the greater of (A) $20,000,000
or (B) 13.33% of the total Commitments in effect at such time, the Borrower shall deliver such
information with such greater frequency as the Administrative Agent may require (but not more
frequently than weekly);

          (i) promptly after the same become publicly available, copies of all other periodic and other
reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the
Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the
functions of said Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; provided, however,
that, so long as the Borrower files any such material with the Securities Exchange Commission
pursuant to the requirements of the Securities and Exchange Act of 1934, the requirements of this
paragraph shall be deemed satisfied by such filings;

          (j) with respect to any Permitted Acquisition involving the payment of consideration and/or
the assumption of Indebtedness by the Borrower and its Subsidiaries in an aggregate amount in
excess of $10,000,000, the Loan Parties shall deliver or cause to be delivered to the
Administrative Agent within ten (10) days following the date of consummation of such acquisition
(A) copies of all material acquisition documents and (B) in the case of the acquisition of a
Person, the historical audited financial statements of the Person so acquired for the three prior
fiscal years (or, if such historical audited financial statements shall not be available, such
financial information regarding the Person so acquired as reasonably requested by the
Administrative Agent in its Permitted Discretion, it being understood to the extent that the
Administrative Agent requests such financial information after the consummation of such
acquisition, the Loan Parties shall deliver or cause to be delivered to the Administrative Agent
such financial information within ten (10) days following such request); and

          (k) promptly following any request therefor, such other information regarding the operations,
business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the
terms of this Agreement, as the Administrative Agent or any Lender may reasonably request.

          SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Lenders
through the Administrative Agent prompt written notice of the following:

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          (a) the occurrence of any Default upon obtaining knowledge thereof;

          (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator
or Governmental Authority against or affecting the Borrower or any Affiliate thereof that could
reasonably be expected to result in a Material Adverse Effect;

          (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, could reasonably be expected to result in liability of the Borrower and its
Subsidiaries in an aggregate amount exceeding $5,000,000; and

          (d) any Lien securing an amount in excess of $1,000,000 (other than Permitted Encumbrances or
Liens permitted under Section 6.02(h)) or claim made or asserted against any portion of the
Collateral having a value in excess of $1,000,000;

          (e) any loss, damage, or destruction to the Collateral in the amount of $5,000,000 or more,
whether or not covered by insurance;

          (f) any and all default notices received under or with respect to any public warehouse or
Leased Distribution Center where Collateral is located;

          (g) all material amendments to any lease relating to a Leased Distribution Center, together
with a copy of each such amendment; and

          (h) any other development that results in, or would reasonably be expected to result in, a
Material Adverse Effect.

          Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer
or other executive officer of the Borrower setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect thereto.

          SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each
of its Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business except, in each case (other than the case of
the foregoing requirements insofar as they relate to the legal existence of the Borrower and the
Subsidiary Guarantors), to the extent that failure to do so could not reasonably be expected to
result in a Material Adverse Effect; provided that the foregoing shall not prohibit any
merger, consolidation, liquidation or dissolution permitted under Section 6.04.

          SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its
Subsidiaries to pay its obligations (including Tax liabilities), that, if not paid, could
reasonably be expected to result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make
payment pending such contest could not reasonably be expected to result in a Material Adverse
Effect.

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          SECTION 5.05. Maintenance of Properties. Except where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect, the Borrower will, and will cause
each of its Subsidiaries to, maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted.

          SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will
cause each of its Subsidiaries to (i) keep proper books of record and account in which entries in
conformity in all material respects with all applicable laws, rules and regulations of any
Governmental Authority are made of all dealings and transactions in relation to its business and
activities and (ii) permit any representatives designated by the Administrative Agent or any
Lender (including employees of the Administrative Agent, any Lender or any consultants,
accountants, lawyers and appraisers retained by the Administrative Agent), upon reasonable prior
notice, to visit and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers and independent
accountants, all during reasonable business hours and as often as reasonably requested;
provided, however, that, so long as no Event of Default has occurred and is
continuing, the Borrower shall not be obligated to reimburse the Administrative Agent or any
Lender for the costs and expenses of more than one such inspection under this Section 5.06 in the
aggregate during each period of twelve consecutive months. The Borrower, on behalf of itself and
the other Loan Parties, acknowledges that the Administrative Agent, after exercising its rights of
inspection, may prepare and distribute to the Lenders certain Reports pertaining to the Loan
Parties’ assets for internal use by the Administrative Agent and the Lenders.

          SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority
applicable to it or its property (including without limitation Environmental Laws), except where
the failure to do so, individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse Effect.

          SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans will
be used only to refinance the Indebtedness under the Existing Credit Agreement and to finance the
working capital needs, capital expenditures, acquisitions (including Permitted Acquisitions),
Restricted Payments and other payments permitted by Section 6.09, and for general corporate
purposes of, the Borrower and its Subsidiaries. No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any of the Regulations
of the Board, including Regulations T, U and X. Standby letters of credit will be issued only to
support insurance, utilities, workers’ compensation and lease obligations, in each case incurred
in the ordinary course of business by the Borrower or any Subsidiary.

          SECTION 5.09. Insurance. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable carriers having a financial strength rating of at
least A- by A.M. Best Company (a) insurance in such amounts and against such risks and such other
hazards, as is customarily maintained by companies of established repute engaged in the same or
similar businesses operating in the same or similar locations and (b) all insurance required
pursuant to the Collateral Documents; provided that, if the financial strength rating of
any carrier that provides insurance to the Borrower or any Subsidiary shall fall below A- by

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A.M. Best Company at any time after the commencement of the binding of such insurance by such
carrier, the Borrower shall promptly notify the Administrative Agent and, if so requested by the
Administrative Agent in its Permitted Discretion, within sixty (60) days of such notice the
Borrower shall obtain insurance from a carrier with a financial strength rating of at least A- by
A.M. Best Company to replace the insurance provided by the carrier whose financial strength rating
fell below A-. The Borrower will, and will cause each Subsidiary to, furnish to the Lenders, upon
request of the Administrative Agent, information in reasonable detail as to the insurance so
maintained.

          SECTION 5.10. Casualty and Condemnation. The Borrower (a) will furnish to the
Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage
to any of the Collateral in an amount exceeding $1,000,000 per occurrence or the commencement of
any action or proceeding for the taking of any of the Collateral or interest therein in an amount
exceeding $1,000,000 per occurrence under power of eminent domain or by condemnation or similar
proceeding and (b) will ensure that the Net Proceeds of any such event (whether in the form of
insurance proceeds, condemnation awards or otherwise) are, subject to the Kansas IRB Documents,
collected and applied in accordance with Section 2.18(b) of this Agreement and Section 7.3 of the
Security Agreement, as applicable; provided, however, that, so long as no Event of
Default shall have occurred and be continuing, the Borrower may, or may cause one or more of its
Subsidiaries to, apply any such Net Proceeds to pay or reimburse the costs of repairing, restoring
or replacing the assets in respect of which such Net Proceeds were received or, to the extent not
so applied, to be applied in a manner that is not prohibited by this Agreement and the Collateral
Documents. Notwithstanding anything to the contrary provided herein, the requirements set forth
in this Section 5.10 do not apply to any Net Proceeds received in respect of any loss or damage to
Collateral equal to or less than $1,000,000 per occurrence.

          SECTION 5.11. Field Examinations and Appraisals. (a) The Borrower will, and will
cause each of its Subsidiaries to, permit the Administrative Agent to conduct field audit
examinations of the Borrower’s and such Subsidiary’s assets, liabilities, books and records once
during each period of twelve consecutive months; provided that, after the occurrence and
during the continuance of an Event of Default, the Borrower will, and will cause each of its
Subsidiaries to, permit the Administrative Agent to conduct such field audit examinations at such
times and with such greater frequency as the Administrative Agent may reasonably require.

          (b) In the event that the Administrative Agent so requests in its Permitted Discretion, the
Borrower will, and will cause each of its Subsidiaries to, provide the Administrative Agent with an
appraisal or update thereof of its Inventory once during each period of twelve consecutive months,
such appraisals and updates to be from an appraiser selected and engaged by the Administrative
Agent, prepared on a basis satisfactory to the Administrative Agent and to include, without
limitation, information required by applicable law and regulations; provided,
however, that, after the occurrence and during the continuance of an Event of Default, the
Borrower will, and will cause each of its Subsidiaries to, provide the Administrative Agent with
such appraisals and updates at such times and with such greater frequency as the Administrative
Agent may reasonably require. All appraisals and updates provided pursuant to this Section 5.11(b)
shall be at the sole expense of the Borrower.

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          SECTION 5.12. Depository Banks; Control Agreements.

          (a) The Borrower will, and will cause each of its Subsidiaries to maintain Chase, Bank of
America, N.A., one or more of the other Lenders and/or one or more of their respective Affiliates
as its principal depository bank, including for the maintenance of operating, administrative, cash
management, collection activity, and other deposit accounts for the conduct of its business.

          (b) The Borrower will, and will cause each Subsidiary that is a Loan Party to, cause each
depository bank or other institution at which any Deposit Account or Securities Account is
maintained as of the Effective Date (other than Excluded Accounts, those accounts listed on Part A
of Annex C to the Security Agreement for which Control Agreements were obtained as of the Effective
Date, and the Specified Chase Accounts) to enter into a Control Agreement with respect to such
Deposit Account or Securities Account within 90 days after the Effective Date; provided
that, in the event that the Borrower or such Subsidiary is unable to obtain a Control Agreement
with respect to any such Deposit Account or Securities Account within such 90 day period, then,
unless waived by the Administrative Agent, within 30 days after the expiration of such 90 day
period, the Borrower shall, or shall cause such Subsidiary to, close each such Deposit Account or
Securities Account (other than an Excluded Account and any Specified Chase Account) for which a
Control Agreement was not obtained, and to transfer cash or securities (or proceeds thereof)
maintained in such accounts to new Deposit Accounts or Securities Accounts maintained with a
depository bank, securities broker, securities intermediary or other financial institution that is
a party to a Control Agreement.

          (c) The Borrower will, and will cause each Subsidiary that is a Loan Party to, (i) provide
prompt written notice to the Administrative Agent of the establishment of any Deposit Account or
Securities Account after the Effective Date (other than an Excluded Account) and (ii)
contemporaneous with the establishment of such Deposit Account or Securities Account (other than an
Excluded Account and any Specified Chase Account), obtain a Control Agreement with respect to such
Deposit Account or Securities Account.

          SECTION 5.13. Credit Card Processors. The Borrower will, and will cause each of its
Subsidiaries that is a Loan Party to (a) comply in all material respects with all obligations of
the Borrower or such Subsidiary under each credit or debit card processing agreement to which the
Borrower or such Subsidiary is a party, (b) maintain each credit or debit card processing
agreement set forth on Schedule 3.18 and each credit or debit card processing agreement
entered into after the Effective Date in full force and effect and take or cause to be taken all
actions necessary to maintain, preserve and protect the rights and interests of the Administrative
Agent in all material respects with respect to all such agreements; provided that the
Borrower or any Subsidiary that is a Loan Party may at any time terminate or amend any credit or
debit card processing agreement, including any such agreement with Alliance Data Systems or World
Financial Network Bank, if the Borrower or such Subsidiary deems such termination or amendment
appropriate and provides prompt written notice of such termination or amendment to the
Administrative Agent, (c) use commercially reasonable efforts to obtain a Processor Control
Agreement/Letter with respect to each Credit Card Processor providing any credit card or debit
card processing services for or on behalf of the Borrower or such Subsidiary and listed on
Schedule 3.18 (other than those obtained as of the Effective Date and listed on

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Part A of such Schedule) within 90 days after the Effective Date (provided
that in the event that the Borrower or such Subsidiary is unable to obtain any Processor Control
Agreement/Letter described in this clause (c) within such 90 day period, then, unless waived by
the Administrative Agent, the Borrower or such Subsidiary shall terminate the applicable credit
card processing agreement within 30 days after the expiration of such 90 day period) and (d)
promptly notify the Administrative Agent of the entry by the Borrower or such Subsidiary into any
credit or debit card processing agreement with any Credit Card Processor after the Effective Date
and (subject to Section 5.14(d) with respect to any credit card processing agreement acquired by
the Borrower or such Subsidiary in connection with the consummation of a Permitted Acquisition)
obtain a Processor Control Agreement/Letter with respect to each such Credit Card Processor
contemporaneously with the entry by the Borrower or such Subsidiary into such credit or debit card
processing agreement.

          SECTION 5.14. Additional Collateral; Further Assurances. (a) Subject to applicable
law, the Borrower will, and will cause each Subsidiary that is a Loan Party to, cause each of its
domestic Subsidiaries formed or acquired after the date of this Agreement in accordance with the
terms of this Agreement to become a Loan Party by executing the Joinder Agreement in the form of
Exhibit A to the Subsidiary Guaranty and the Joinder Agreement in the form of Annex
F to the Security Agreement (collectively, the “Joinder Agreements” and each a
“Joinder Agreement”) within 30 days of such formation or acquisition. Upon execution and
delivery thereof, each such Person (i) shall automatically become a Subsidiary Guarantor under the
Subsidiary Guaranty and thereupon shall have all of the rights, benefits, duties, and obligations
in such capacity under the Loan Documents to which it is a party and (ii) shall automatically
become a Grantor under the Security Agreement and shall grant Liens to the Administrative Agent,
for the benefit of the Administrative Agent and the Lenders, in any property of such Loan Party
which constitutes Collateral.

          (b) Without limiting the foregoing, the Borrower will, and will cause each Subsidiary that is
a Loan Party to, execute and deliver, or cause to be executed and delivered, to the Administrative
Agent such documents, agreements, opinions and instruments, and will take or cause to be taken such
further actions (including the filing and recording of financing statements and other documents and
such other actions or deliveries of the type required by Section 4.01, as applicable), which may be
required by law or which the Administrative Agent may, from time to time, reasonably request to
carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure
perfection and priority of the Liens created or intended to be created by the Collateral Documents,
all at the expense of the Loan Parties.

          (c) If the Borrower or any Subsidiary that is a Loan Party acquires any Deposit Account or
Securities Account (other than an Excluded Account and any Specified Chase Account) in connection
with the consummation of a Permitted Acquisition, the Borrower shall, or shall cause such
Subsidiary to (i) provide prompt written notice to the Administrative Agent of the acquisition of
such Deposit Account or Securities Account, and (ii) obtain a Control Agreement with respect to
such Deposit Account or Securities Account within 90 days following the consummation of such
Permitted Acquisition. In the event that the Borrower or such Subsidiary is unable to obtain a
Control Agreement with respect to any Deposit Account or Securities Account (other than an Excluded
Account and any Specified Chase Account) acquired

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in connection with a Permitted Acquisition within such 90 day period, the Borrower shall, or
shall cause such Subsidiary to, unless waived by the Administrative Agent, within 30 days after the
expiration of such 90 day period, close such Deposit Account or Securities Account and transfer the
cash or securities (or proceeds thereof) maintained in such accounts to new Deposit Accounts or
Securities Accounts maintained with a depository bank, securities broker, securities intermediary
or other financial institution that is a party to a Control Agreement or to any Specified Chase
Account.

          (d) The Borrower will, and will cause each Subsidiary that is a Loan Party to, use
commercially reasonable efforts to obtain a Processor Control Agreement/Letter with respect to each
Credit Card Processor party to a credit card processing agreement acquired by the Borrower or such
Subsidiary in connection with the consummation of any Permitted Acquisition, within 90 days after
the consummation of such Permitted Acquisition; provided that in the event that the
Borrower or such Subsidiary is unable to obtain any such Processor Control Agreement/Letter within
such 90 day period, then, unless waived by the Administrative Agent, the Borrower or such
Subsidiary shall terminate the applicable credit card processing agreement within 30 days after the
expiration of such 90 day period).

ARTICLE VI

Negative Covenants

          Until the Commitments have expired or terminated and the principal of and interest on each
Loan and all fees, expenses and other amounts payable hereunder have been paid in full and all
Letters of Credit have expired or terminated and all LC Disbursements shall have been reimbursed,
the Borrower covenants and agrees with the Lenders that:

          SECTION 6.01. Indebtedness. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:

          (a) Indebtedness created under the Loan Documents;

          (b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and
extensions, renewals and replacements of any such Indebtedness with Indebtedness of a similar type
that does not increase the outstanding principal amount thereof;

          (c) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or
any other Subsidiary, provided that (i) Indebtedness of any Subsidiary that is not a Loan
Party to the Borrower or any Subsidiary Guarantor shall be subject to Sections 6.05 and 6.10 and
(ii) Indebtedness of the Borrower to any Subsidiary and Indebtedness of any Subsidiary Guarantor to
any Subsidiary that is not a Loan Party shall be subordinated to the Secured Obligations on terms
reasonably satisfactory to the Administrative Agent;

          (d) Guarantees by (i) the Borrower of (A) Indebtedness of any Subsidiary or (B) any lease
obligations of any Subsidiary and (ii) by any Subsidiary of (A) Indebtedness of the Borrower or any
other Subsidiary or (B) lease obligations of the Borrower or any other Subsidiary, provided
that (x) the Indebtedness so Guaranteed is permitted by this Section 6.01, (y) Guarantees by the
Borrower or any Subsidiary Guarantor of Indebtedness or lease obligations

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of any Subsidiary that is not a Loan Party shall be subject to Sections 6.05 and 6.10 and (z)
Guarantees permitted under this clause (d) shall be contractually subordinated to the Secured
Obligations of the applicable Subsidiary on the same terms as the Indebtedness so Guaranteed is
contractually subordinated to the Secured Obligations;

          (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition,
construction or improvement of any fixed or capital assets, including Capital Lease Obligations and
any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien
on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount thereof;
provided that (i) such Indebtedness is incurred prior to or within one hundred eighty (180)
days after such acquisition or the completion of such construction or improvement and (ii) the
aggregate principal amount of Indebtedness permitted by this clause (e) shall not exceed
$25,000,000 at any time outstanding;

          (f) Indebtedness of the Borrower or any Subsidiary as an account party in respect of letters
of credit;

          (g) Indebtedness of any Person that becomes a Subsidiary or merges into an existing Subsidiary
after the date hereof or Indebtedness assumed by the Borrower or any Subsidiary in connection with
an asset acquisition (and any extension, renewal, refinancing, replacement or refunding thereof);
provided that (i) such Indebtedness (other than such extension, renewal, refinancing,
replacement or refunding thereof) exists at the time such Person becomes a Subsidiary or at the
time of such asset acquisition and is not created in contemplation of or in connection with such
Person becoming a Subsidiary or in connection with such asset acquisition and (ii) the aggregate
principal amount of Indebtedness permitted by this clause (g) shall not exceed $50,000,000 at any
one time outstanding;

          (h) Guarantees by the Borrower and any Subsidiary of sublessees of any subleases entered into
by the Borrower or any Subsidiary as sublessors;

          (i) Indebtedness of Pacific Sunwear Stores Corp. and other Loan Parties arising under the
Kansas IRB Financing, including any Capital Lease Obligations arising thereunder;

          (j) Indebtedness of the Borrower or any Subsidiary arising under any documentation entered
into in connection with any sale and leaseback transaction permitted by Section 6.07, including any
Capital Lease Obligations arising thereunder;

          (k) Indebtedness of the Borrower or any of its Subsidiaries not otherwise permitted by this
Section 6.01, in an aggregate principal amount at any time outstanding not exceeding $150,000,000;
provided that (i) such Indebtedness may not be secured by any Collateral or any other
assets of the Borrower or any Subsidiary (other than real property and the assets affixed thereto
or integral to the operation thereof), (ii) the aggregate principal amount of Indebtedness
permitted by this clause (k) to the extent constituting (x) Indebtedness of the Borrower or any
Subsidiary secured by a Lien on any asset of the Borrower or any Subsidiary permitted by the
foregoing clause (i) of this proviso or (y) Indebtedness of any Subsidiary which

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is not a Subsidiary Guarantor shall not in the aggregate exceed $40,000,000 at any time
outstanding, and (iii) if any such Indebtedness shall be secured by a Lien on any real property on
which Collateral is or may in the future be located, the holder of such Lien shall have executed
and delivered to the Administrative Agent a Collateral Access Agreement with respect to the real
property subject to such Lien;

          (l) Indebtedness (i) under any Swap Agreements or (ii) for bank overdrafts in the ordinary
course of business that are promptly repaid;

          (m) Indebtedness arising from other agreements of the Borrower or any Subsidiary providing for
indemnification, adjustment of purchase price or similar customary obligations, in each case
incurred or assumed in connection with the acquisition or disposition or sale and leaseback of any
business or assets of the Borrower or any Subsidiary permitted by the Loan Documents; and

          (n) Indebtedness which may be deemed to exist pursuant to any worker’s compensation claims,
self insurance obligations, performance, surety, statutory, appeal, custom bonds or similar
obligations incurred in the ordinary course of business.

For purposes of this subsection 6.01, any Person becoming a Subsidiary of the Borrower after the
date of this Agreement shall be deemed to have incurred all of its then outstanding Indebtedness at
the time it becomes a Subsidiary, and any Indebtedness assumed by the Borrower or any of its
Subsidiaries shall be deemed to have been incurred on the date of assumption.

          SECTION 6.02. Liens. The Borrower will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any property or asset (other than any real
property and the assets affixed thereto or integral to the operation thereof) now owned or
hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable)
or rights in respect of any thereof, except:

          (a) Liens created pursuant to the Loan Documents;

          (b) Permitted Encumbrances;

          (c) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date
hereof and set forth in Schedule 6.02, provided that (i) such Lien shall not apply
to any other property or asset of the Borrower or Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and extensions, renewals and replacements
thereof that do not increase the outstanding principal amount thereof;

          (d) any Lien existing on any property or asset (other than Collateral) prior to the
acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset (other
than Collateral) of any Person that becomes a Subsidiary after the date hereof prior to the time
such Person becomes a Subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as
the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or
any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date
of such acquisition or the date such Person becomes a Subsidiary, as the case may be and

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extensions, renewals and replacements thereof that do not increase the outstanding principal
amount thereof;

          (e) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any
Subsidiary; provided that (i) such security interests secure Indebtedness permitted by
Section 6.01(e), (ii) such security interests and the Indebtedness secured thereby are incurred
prior to or within one hundred eighty (180) days after such acquisition or the completion of such
construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the
cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security
interests shall not apply to any other property or assets of the Borrower or any Subsidiary;

          (f) Liens arising from precautionary Uniform Commercial Code financing statement filings with
respect to leases entered into by the Borrower or any of its Subsidiaries in the ordinary course;

          (g) Liens granted by the Borrower or any of its Subsidiaries in connection with the Kansas IRB
Financing or any other sale and leaseback transactions permitted by Section 6.07;

          (h) Liens solely on any cash earnest money deposits made by the Borrower or any of its
Subsidiaries in connection with any purchase agreements or letters of intent permitted hereunder;
and

          (i) Liens securing Indebtedness permitted under Section 6.01(k).

          Notwithstanding the foregoing, none of the Liens permitted pursuant to this Section 6.02 may at any
time attach to any Loan Party’s (1) Credit Card Accounts, other than Permitted Encumbrances and
those permitted under clause (a) above, (2) Inventory, other than Permitted Encumbrances and those
permitted under clause (a) above and (3) cash, cash equivalents and Deposit Accounts other than
Permitted Encumbrances and those permitted under clauses (a) and (h) above.

          SECTION 6.03. [Intentionally Omitted].

          SECTION 6.04. Fundamental Changes. (a) The Borrower will not, and will not permit
any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to
merge into or consolidate with it, or liquidate or dissolve, except that, if at the time thereof
and immediately after giving effect thereto no Default shall have occurred and be continuing (i)
any Person may merge into the Borrower in a transaction in which the Borrower is the surviving
corporation, (ii) any Person/Loan Party (other than the Borrower) may merge into any Loan Party in
a transaction in which the surviving entity is a Loan Party or in which the surviving entity is a
Person that will become a Loan Party upon the effectiveness of such merger, (iii) any merger
effected for the sole purpose of reincorporating the Borrower in Delaware (other than through the
formation of a holding company that will own any portion of the Equity Interest of the Borrower
following such merger) and (iv) any Subsidiary may liquidate or dissolve if the Borrower
determines in good faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the

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Lenders and except that the Borrower or any Subsidiary may effect any acquisition permitted
by Section 6.05 by means of a merger of the Person that is the subject of such acquisition with
the Borrower or any of its Subsidiaries (provided that, in the case of a merger with the Borrower,
the Borrower is the survivor).

          (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to any
material extent in any business other than a Related Line of Business.

          SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions. The
Borrower will not, and will not permit any of its Subsidiaries to, purchase, hold or acquire
(including pursuant to any merger with any Person that was not a wholly owned Subsidiary prior to
such merger) any capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or
any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business unit, except

          (a) Permitted Investments;

          (b) Permitted Acquisitions;

          (c) investments by the Borrower and its Subsidiaries in their respective Subsidiaries or in
the capital stock of their respective Subsidiaries, provided that at the time of and after
giving effect to the funding of any investment by any Loan Party in any Subsidiary that is not a
Loan Party, Availability shall be not less than the greater of (A) $22,500,000 or (B) 15% of the
aggregate Commitments of all of Lenders in effect at such time;

          (d) loans or advances made by the Borrower to, and Guarantees by the Borrower of obligations
of, any Subsidiary, and loans or advances made by any Subsidiary to, and Guarantees by any
Subsidiary of obligations of, the Borrower or any other Subsidiary, provided that, at the time of
and after giving effect to the funding of any such loan or advance by any Loan Party to any
Subsidiary that is not a Loan Party or any such Guarantee by any Loan Party of the obligations of
any Subsidiary that is not a Loan Party, Availability shall not be less than the greater of (A)
$22,500,000 or (B) 15% of the aggregate Commitments of all of Lenders in effect at such time;

          (e) Guarantees constituting Indebtedness permitted by Section 6.01;

          (f) advances or loans made in the ordinary course of business to non-executive officers and
employees of the Borrower and its Subsidiaries;

          (g) Investments existing on the date hereof not otherwise permitted under this Agreement and
described in Schedule 6.05 hereto;

          (h) Investments received in connection with the bona fide settlement of any defaulted
Indebtedness or other liability owed to the Borrower or any Subsidiary;

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          (i) joint ventures, loans to contractors, loans in connection with retail development,
deposits to landlords and other Investments, provided that the aggregate amount of such investments
shall not exceed $50,000,000 at any time;

          (j) Investments in any industrial revenue bonds or any other instruments issued in connection
with the Kansas IRB Financing or any other sale and leaseback transactions of the Borrower or any
of its Subsidiaries permitted by Section 6.07; and

          (k) purchases by the Loan Parties from Alliance Data Systems and/or its Affiliates of Accounts
(such Accounts so purchased shall be collectively referred to herein as the “Purchased Private
Label Accounts”) in connection with any termination of the credit card processing agreement
with Alliance Data Systems and/or its Affiliates, provided, that the Loan Parties shall
deliver to the Administrative Agent written notice of such purchase at least two (2) Business Days
prior to such purchase.

          SECTION 6.06. Asset Sales. The Borrower will not, nor will it permit any Subsidiary
to, sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned
by it, nor will the Borrower permit any Subsidiary to issue any additional Equity Interest in such
Subsidiary (other than to the Borrower or another Subsidiary in compliance with Section 6.04),
except:

          (a) sales, transfers and dispositions of (i) Inventory in the ordinary course of business and
(ii) used, obsolete, worn out or surplus equipment or property in the ordinary course of business;

          (b) sales, transfers and dispositions to the Borrower or any Subsidiary, provided that any
such sales, transfers or dispositions involving a Subsidiary that is not a Loan Party shall be made
in compliance with Section 6.10;

          (c) sale and leaseback transactions permitted by Section 6.07;

          (d) dispositions resulting from 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 any
Borrower or any Subsidiary; and

          (e) sale or other disposition of any interest in real property (and assets affixed thereon or
integral to the operation thereof), including by lease or in connection with any sale leaseback
transaction permitted hereunder;

          (f) sale or disposition of any d.e.m.o. or One Thousand Steps stores (or groups of stores) or
the discontinuation of any operations related thereto or the sale or disposition of any assets
related thereto;

          (g) sales, transfers and other dispositions of assets (other than Equity Interests in a
Subsidiary unless all Equity Interests in such Subsidiary are sold) that are not permitted by any
other paragraph of this Section, provided that the aggregate fair market value of all
assets sold, transferred or otherwise disposed of in reliance upon this paragraph (e) shall not
exceed $50,000,000 during any fiscal year of the Borrower; and

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          (h) sales, transfers and other dispositions of Purchased Private Label Accounts;
provided that if Availability at the time of any such sale, transfer or other disposition
is less than $75,000,000, such sale, transfer or other disposition shall be on terms and pursuant
to documentation reasonably satisfactory to the Administrative Agent in its Permitted Discretion.

          SECTION 6.07. Sale and Leaseback Transactions. The Borrower will not, nor will it
permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall
sell or transfer any property, real or personal, used or useful in its business, whether now owned
or hereafter acquired, and thereafter rent or lease such property or other property that it
intends to use for substantially the same purpose or purposes as the property sold or transferred,
except for (a) any such sale of any fixed or capital assets by any Borrower or any Subsidiary that
is made for cash consideration in an amount not less than the fair value of such fixed or capital
asset and is consummated within 180 days after such Borrower or such Subsidiary acquires or
completes the construction of such fixed or capital asset, (b) the Kansas IRB Financing and (c)
any other sale leaseback transaction of real property of the Borrower or any Subsidiary (and any
other assets affixed thereto or integral to the operation thereof); provided that in connection
with any sale leaseback of real property (other than the Kansas IRB Financing) on which any
Collateral is or may in the future be located, the Person acquiring title to such real property
shall have executed and delivered to the Administrative Agent a Collateral Access Agreement with
respect to such real property.

          SECTION 6.08. Swap Agreements. The Borrower will not, and will not permit any of its
Subsidiaries to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge
or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in
respect of Equity Interests of the Borrower or any of its Subsidiaries), and (b) Swap Agreements
entered into in order to effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate or otherwise) with respect to any
interest-bearing liability or investment of the Borrower or any Subsidiary.

          SECTION 6.09. Restricted Payments; Certain Payments of Indebtedness. (a) The
Borrower will not, nor will it permit any Subsidiary to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise)
to do so, except (i) the Borrower may declare and pay dividends or distributions with respect to
its common stock payable solely in additional shares of its common stock, and, with respect to its
preferred stock, payable solely in additional shares of such preferred stock or in shares of its
common stock, (ii) Subsidiaries may declare and pay dividends and distributions ratably with
respect to their Equity Interests, (iii) the Borrower may make additional Restricted Payments, not
exceeding $10,000,000 during any fiscal year, pursuant to and in accordance with stock option
plans or other benefit plans for future, present or former management, directors, consultants or
employees of the Borrower and its Subsidiaries and (iv) the Borrower may make other Restricted
Payments so long as (A) no Event of Default has occurred and is continuing or would result after
giving effect to such payment and (B) the Borrower shall have Availability of not less than the
greater of (A) $22,500,000 or (B) 15% of the aggregate Commitments of all of Lenders in effect at
such time, after giving effect to such Restricted Payment.

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          (b) The Borrower will not, nor will it permit any Subsidiary to, make or agree to pay or make,
directly or indirectly, any payment (whether in cash, securities or other property) of or in
respect of principal of or interest on any Indebtedness, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of any Indebtedness,
except:

               (i) payment of Indebtedness created under the Loan Documents;

               (ii) payment of regularly scheduled interest and principal payments as and when due in respect
of any Indebtedness, other than payments in respect of the Subordinated Indebtedness prohibited by
the subordination provisions thereof;

               (iii) refinancings of Indebtedness to the extent permitted by Section 6.01;

               (iv) payment of secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;

               (v) the Kansas IRB Unwind Transaction; and

               (vi) payments of Indebtedness not otherwise permitted under this Section 6.09(b) or any
payment on account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any Indebtedness not otherwise permitted under this Section 6.09(b), in each case,
so long as (A) no Event of Default has occurred and is continuing or would result after giving
effect to such payment and (B) the Borrower shall have Availability of not less than the greater of
(A) $22,500,000 or (B) 15% of the aggregate Commitments of all of Lenders in effect at such time,
after giving effect to such payment.

Notwithstanding any other provisions to the contrary, the consummation of the Kansas IRB Unwind
Transaction shall be permitted under this Agreement.

          SECTION 6.10. Transactions with Affiliates. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices
and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among
the Borrower and Subsidiary Guarantors (including between and among Subsidiary Guarantors) not
involving any other Affiliate, (c) payments and other transactions permitted under Sections 6.04,
6.05 or 6.09, (d) any employment or other compensation, incentive and benefit arrangement entered
into by the Borrower or any of its Subsidiaries in the ordinary course of business and the payment
of compensation, incentives and benefits and the reimbursement of expenses pursuant thereto, (e)
payment of reasonable fees and expenses to directors, and (f) indemnification of officers and
directors of the Borrower and its Subsidiaries pursuant to customary indemnification provisions.

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          SECTION 6.11. Restrictive Agreements. The Borrower will not, nor will it permit any
Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other
arrangement (other than the Loan Documents and the Kansas IRB Documents) that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any of its Subsidiaries to
create, incur or permit to exist any Lien in favor of the Administrative Agent upon any of its
property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or advances to the
Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other
Subsidiary; provided that (i) the foregoing shall not apply to restrictions and conditions
imposed by law or by any Loan Document, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.11 (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary or any assets of the
Borrower or any Subsidiary pending such sale, provided such restrictions and conditions apply only
to the Subsidiary or assets that are to be sold and such sale is permitted hereunder, (iv) clause
(a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness, (v) clause (a) of the foregoing
shall not apply to restrictions or conditions imposed by any documents governing any sale
leaseback transaction permitted by Section 6.07 if such restrictions or conditions apply only to
the real property (or assets affixed thereon or integral to the operation thereof) which is the
subject to such sale leaseback transaction, (vi) clause (a) of the foregoing shall not apply to
customary provisions in leases restricting the assignment thereof, (vii) the foregoing shall not
apply to customary provisions in joint venture agreements and other similar arrangements relating
solely to the securities, assets and revenues of such joint venture, and (viii) the foregoing
shall not apply to restrictions in agreements evidencing Indebtedness permitted by Section 6.01(g)
that impose restrictions on the property so acquired.

          SECTION 6.12. Minimum Fixed Charge Coverage Ratio. If a Fixed Charge Coverage Ratio
Triggering Event shall occur, then, as of the last day of each fiscal quarter during the period
(the “Financial Covenant Period”) commencing on the last day of the fiscal quarter ended
immediately prior to the occurrence of such Fixed Charge Coverage Ratio Triggering Event and
ending on the completion of the Fixed Charge Coverage Restoration Period related to such Fixed
Charge Coverage Ratio Triggering Event, the Borrower will not permit the Fixed Charge Coverage
Ratio, to be less than 1.00 to 1.00.

ARTICLE VII

Events of Default

          If any of the following events (“Events of Default”) shall occur:

          (a) the Borrower shall fail to pay (i) any principal of any Loan when and as the same shall
become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof
or otherwise, or (ii) any reimbursement obligation in respect of any LC

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Disbursement when and as the same shall become due and payable, and such failure to pay such
reimbursement obligation shall continue unremedied for a period of two (2) Business Days;

          (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in clause (a) of this Article) payable under this Agreement, when
and as the same shall become due and payable, and such failure shall continue unremedied for a
period of two (2) Business Days;

          (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any
Subsidiary in or in connection with this Agreement or any other Loan Document or any amendment or
modification thereof or waiver thereunder, or in any report, certificate, financial statement or
other document furnished pursuant to or in connection with this Agreement or any other Loan
Document or any amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect in any material respect when made or deemed made;

          (d) (i) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in Sections 5.02(a), 5.03 (with respect to the Borrower’s existence) or 5.08 or in
Article VI or (ii) any Loan Document shall for any reason not be or shall cease to be in full force
and effect or is declared to be null and void, or the Borrower or any Subsidiary takes any action
for the purpose of terminating, repudiating or rescinding any Loan Document or any of its
obligations thereunder;

          (e) the Borrower or any Subsidiary Guarantor, as applicable, shall fail to observe or perform
any covenant, condition or agreement contained in this Agreement (other than those specified in
clause (a), (b) or (d) of this Article) or any other Loan Document, and such failure shall continue
unremedied for a period of (i) five (5) days after the earlier of the Borrower or any Subsidiary
Guarantor’s knowledge of such breach or notice thereof from the Administrative Agent to the
Borrower (which notice will be given at the request of any Lender) if such breach relates to terms
or provisions of Section 5.01, 5.02 (other than Section 5.02(a), 5.03 through 5.07 or 5.09 through
5.14 of this Agreement or (ii) thirty (30) days after the earlier of the Borrower or any Subsidiary
Guarantor’s knowledge of such breach or notice thereof from the Administrative Agent to the
Borrower (which notice will be given at the request of any Lender) if such breach relates to any
other terms or provisions of any Loan Document;

          (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness, when and as the same
shall become due and payable beyond the period (without giving effect to any extensions, waivers,
amendments or other modifications of or to such period) of grace, if any, provided in the
instrument or agreement under which such Material Indebtedness was created;

          (g) any event or condition occurs (after giving effect to any applicable grace periods and
after giving effect to any extensions, waivers, amendments or other modifications of any applicable
provision or agreement) that results in any Material Indebtedness becoming due prior to its
scheduled maturity or that enables or permits the holder or holders of any Material Indebtedness or
any trustee or agent on its or their behalf to cause, with the giving of an acceleration or similar
notice if required, any Material Indebtedness to become due, or to require

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the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result
of the voluntary sale or transfer of the property or assets securing such Indebtedness;

          (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any
Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for
the Borrower or any Subsidiary or for a substantial part of its assets, and, in any such case, such
proceeding or petition shall continue undismissed for sixty (60) days or an order or decree
approving or ordering any of the foregoing shall be entered;

          (i) the Borrower or any Subsidiary shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition
described in clause (h) of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action for the purpose of effecting any of the
foregoing;

          (j) the Borrower or any Subsidiary shall become unable, admit in writing its inability or fail
generally to pay its debts as they become due;

          (k) one or more judgments for the payment of money in an aggregate amount (not paid or covered
by insurance) in excess of $10,000,000 shall be rendered against the Borrower, any Subsidiary or
any combination thereof and the same shall remain undischarged for a period of thirty (30)
consecutive days from the entry thereof during which execution shall not be effectively stayed or
bonded, or any action shall be legally taken by a judgment creditor to attach or levy upon any
assets of the Borrower or any Subsidiary to enforce any such judgment;

          (l) an ERISA Event shall have occurred that, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to result in a Material Adverse Effect;

          (m) a Change in Control shall occur;

          (n) the Subsidiary Guaranty shall fail in any material respect to remain in full force or
effect other than for expiration or release in accordance with its terms or in accordance with the
Loan Documents or any Loan Party shall contest the enforceability thereof in writing, or any
Subsidiary Guarantor shall deny in writing that it has any further liability under the Subsidiary
Guaranty to which it is a party, or shall give notice to such effect; or

          (o) any Collateral Document shall for any reason (other than the failure on the part of the
Administrative Agent to take actions necessary to perfect such security interest) fail in

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any material respect to create a valid and perfected security interest in any Collateral
purported to be covered thereby, except as permitted by the terms of any Loan Document, or any
Collateral Document shall fail to remain in full force or effect (other than due to expiration or
release in accordance with its respective terms or in accordance with the Loan Documents) or any
action shall be taken by any Loan Party to discontinue or to assert the invalidity or
unenforceability of any Collateral Document in any material respect;

then, and in every such event (other than an event with respect to the Borrower described in clause
(h) or (i) of this Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be due and payable),
and thereupon the principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued hereunder and under the
other Loan Documents, shall become due and payable immediately, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of
any event with respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then outstanding, together
with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder
and under the other Loan Documents, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by the
Borrower. Upon the occurrence and during the continuance of an Event of Default, the
Administrative Agent may, and at the request of the Required Lenders shall, exercise any rights and
remedies provided to the Administrative Agent under the Loan Documents or at law or equity,
including all remedies provided under the UCC; provided that notwithstanding anything to
the contrary set forth in the Loan Documents, the Administrative Agent shall not give any notices
of full dominion, sole control or other similar instructions unless a Cash Dominion Triggering
Event shall have occurred (and then only until the completion of the Cash Dominion Restoration
Period related thereto).

ARTICLE VIII

The Administrative Agent

          Each of the Lenders and the Issuing Banks hereby irrevocably appoints the Administrative Agent
as its agent and authorizes the Administrative Agent to take such actions on its behalf, including
execution of the other Loan Documents, and to exercise such powers as are delegated to the
Administrative Agent by the terms of the Loan Documents, together with such actions and powers as
are reasonably incidental thereto.

          The bank serving as the Administrative Agent hereunder shall have the same rights and powers
in its capacity as a Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

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          The Administrative Agent shall not have any duties or obligations except those expressly set
forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is
required to exercise in writing as directed by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section
9.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall
not have any duty to disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank
serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent
shall not be liable for any action taken or not taken by it with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under
the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or
willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Administrative Agent by the Borrower or a
Lender, and the Administrative Agent 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 any Loan
Document, (ii) the contents of any certificate, report or other document delivered hereunder or in
connection with any Loan Document, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth in any Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the
existence of the 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
Administrative Agent.

          The Administrative 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 believed by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any liability for relying
thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), 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.

          The Administrative Agent may perform any and all its duties and exercise its rights and powers
by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the preceding paragraphs
shall apply to any such sub-agent and to the Related Parties of the Administrative Agent 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 Administrative Agent.

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          Subject to the appointment and acceptance of a successor Administrative Agent as provided in
this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the
Issuing Banks and the Borrower. Upon any such resignation, the Required Lenders shall have the
right, subject to, so long as no Event of Default has occurred and is continuing, the consent of
the Borrower (such consent not to be unreasonably withheld), to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing
Banks, appoint a successor Administrative Agent which shall be a bank with an office in New York,
New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The
fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall
continue in effect for the benefit of such retiring Administrative 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 it was acting as Administrative Agent.

          Each Lender (including each Issuing Bank) acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender 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 also acknowledges that it will, independently and without reliance
upon the Administrative Agent or any other Lender 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, any related agreement or
any document furnished hereunder or thereunder.

          Each Lender hereby agrees that (a) it has requested a copy of each Report prepared by or on
behalf of the Administrative Agent; (b) the Administrative Agent (i) makes no representation or
warranty, express or implied, as to the completeness or accuracy of any Report or any of the
information contained therein or any inaccuracy or omission contained in or relating to a Report
and (ii) shall not be liable for any information contained in any Report; (c) the Reports are not
comprehensive audits or examinations, and that any Person performing any field 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 and
that the Administrative Agent undertakes no obligation to update, correct or supplement the
Reports; (d) it will keep all Reports confidential and strictly for its internal use, not share the
Report with any Loan Party or any other Person except as otherwise permitted pursuant to this
Agreement; provided, that the Administrative Agent may at any time (but shall have no
obligation to) share any final Reports with any Loan Party; and (e) without limiting the generality
of any other indemnification provision contained in this Agreement, it will pay and protect, and
indemnify, defend, and hold the Administrative Agent and any such other Person preparing a Report
harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other
amounts (including reasonable attorney fees) incurred by as the direct or

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indirect result of any third parties who might obtain all or part of any Report through the
indemnifying Lender.

          Neither the Syndication Agent, nor any Co-Documentation Agent shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than those applicable to
all Lenders as such.

ARTICLE IX

Miscellaneous

          SECTION 9.01. Notices. (a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and
other communications provided for herein and in the other Loan Documents shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or registered mail or
sent by telecopy, as follows:

     (i) if to the Borrower, to it at 3450 E. Miraloma Avenue, Anaheim, California 92806,
Attention of Michael Henry, Senior Vice President and Chief Financial Officer (Telecopy No.
(714) 414-4251);

     (ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., Mail Code:
NY1-K855, 270 Park Avenue, 44th Floor, New York, New York 10017, Attention of
Mark Cuccinello (Telecopy No. (212) 646-2274);

     (iii) if to an Issuing Bank, to it at (A) in the case of JPMorgan Chase Bank, N.A., to
it at JPMorgan Chase Bank, N.A., Mail Code: NY1-K855, 270 Park Avenue, 44th
Floor, New York, New York 10017, Attention of Mark Cuccinello (Telecopy No. (212)
646-2274), (B) in the case of Bank of America, N.A., to it at Bank of America, N.A.,
LC’s/Global Trade & Treasury, Mail Code: NY1-503-04-06, 335 Madison Avenue, New York, New
York 10017, Attention of Susan T. Gilligan (Telecopy No. (212) 503-7897) and (C) in the
case of any other Issuing Bank, to it at the address and telecopy number specified from time
to time by such Issuing Bank to the Borrower and the Administrative Agent;

     (iv) if to the Swingline Lender, to it at JPMorgan Chase Bank, N.A., Mail Code:
NY1-K855, 270 Park Avenue, 44th Floor, New York, New York 10017, Attention of
Mark Cuccinello (Telecopy No. (212) 646-2274); and

     (v) if to any other Lender, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.

All such notices and other communications (i) sent by hand or overnight courier service, or mailed
by certified or registered mail, shall be deemed to have been given when received or (ii) sent by
facsimile shall be deemed to have been given when sent, provided 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.

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          (b) Notices and other communications to the Lenders (including any Issuing Bank) hereunder may
be delivered or furnished to the Lenders through the Administrative Agent by electronic
communications (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 pursuant to
Article II or to compliance and no Event of Default certificates delivered pursuant to Section
5.01(c) unless otherwise agreed by the Administrative Agent and the applicable Lender. The
Administrative Agent or the Borrower (on behalf of the Loan Parties) may, in its discretion, agree
to accept notices and other communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be limited to particular
notices or communications. All such notices and other communications (i) 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 not given during the normal business hours of
the recipient, such notice or communication shall be deemed to have been given at the opening of
business on the next Business Day for the recipient, and (ii) 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 (b)(i) of notification that such notice or
communication is available and identifying the website address therefor.

          (c) Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto (or, in the case of any Lender, by
notice to the Administrative Agent and the Borrower).

          SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative
Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any
other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder
and under any other Loan Document are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of any Loan document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender
or any Issuing Bank may have had notice or knowledge of such Default at the time.

          (b) Neither this Agreement nor any other Loan Document nor provision hereof or thereof may be
waived, amended or modified except (i) in the case of this Agreement, pursuant to an agreement or
agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and
the Administrative Agent with the consent of the Required Lenders or (ii) in the case of any other
Loan Document, pursuant to an agreement in writing entered into by the Administrative Agent and the
Loan Party or Loan Parties that are parties thereto with the consent of the Required Lenders;
provided that no such agreement shall

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(A) increase the Commitment of any Lender without the written consent of such Lender, (B)
reduce or forgive the principal amount of any Loan or LC Disbursement or reduce or forgive the rate
of interest thereon, or reduce or forgive any fees payable hereunder, without the written consent
of each Lender affected thereby (provided that the decision to charge or not to charge or to revoke
notice of interest at the default rate pursuant to Section 2.13(d) shall be made by the Required
Lenders), (C) postpone the scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of,
waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment,
without the written consent of each Lender affected thereby, (D) change Section 2.18(b) or (d) in a
manner that would alter the pro rata sharing of payments required thereby, without the written
consent of each Lender, (E) change any of the provisions of this Section or the definitions of
“Required Lenders” or “Supermajority Revolving Lenders” or any other provision hereof specifying
the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make
any determination or grant any consent hereunder, without the written consent of each Lender, (F)
increase the advance rates set forth in the definition of Borrowing Base, add new categories of
eligible assets or amend the definitions of “Eligible Cash”, “Eligible Credit Card Accounts”,
“Eligible Inventory” or “Eligible LC Inventory”, in each case, if the effect of any such amendment
to any definition would be to increase the amount of credit available to the Borrower hereunder,
without the written consent of the Supermajority Revolving Lenders, (G) release any Subsidiary
Guarantor from its obligation under its Subsidiary Guaranty (except as otherwise permitted herein
or in the other Loan Documents), without the written consent of each Lender or (H) except as
provided in subsection (c) of this Section 9.02 or in any Collateral Document, release all or
substantially all of the Collateral, without the written consent of each Lender; provided
further that no such agreement shall amend, modify or otherwise affect the rights or duties
of the Administrative Agent, any Issuing Bank or the Swingline Lender hereunder without the prior
written consent of the Administrative Agent, such Issuing Bank or the Swingline Lender, as the case
may be.

          (c) The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in
its sole discretion, to (i) release any Liens granted to the Administrative Agent by the Loan
Parties on any Collateral (A) upon the termination of all Commitments, payment and satisfaction in
full in cash of all Secured Obligations (other than Unliquidated Obligations), and the cash
collateralization of all Unliquidated Obligations of a type referred to in clause (i) of the
definition thereof in a manner reasonably satisfactory to each affected Lender, (B) constituting
property being sold or disposed of if the Loan Party disposing of such property certifies to the
Administrative Agent that the sale or disposition is made in compliance with the terms of this
Agreement (and the Administrative Agent may rely conclusively on any such certificate, without
further inquiry), (C) constituting property leased to a Loan Party under a lease which has expired
or been terminated in a transaction permitted under this Agreement or (D) as required to effect any
sale or other disposition of such Collateral in connection with any exercise of remedies of the
Administrative Agent and the Lenders pursuant to Article VII and (ii) release any Subsidiary
Guarantor from its obligations (other than Unliquidated Obligations) under any and all Loan
Documents upon (A) the termination of all Commitments, payment and satisfaction in full in cash of
all Secured Obligations (other than Unliquidated Obligations), and the cash collateralization of
all Unliquidated Obligations of a type referred to in clause (i) of the definition thereof in a
manner reasonably satisfactory to each affected Lender (B) the sale of all of the Equity Interests
of such Subsidiary Guarantor if the Loan Party disposing of such Equity

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Interests certifies to the Administrative Agent that the sale or disposition is made in
compliance with the terms of this Agreement (and the Administrative Agent may rely conclusively on
any such certificate, without further inquiry) or (C) as required to effect any sale or other
disposition of such Equity Interests in connection with any exercise of remedies of the
Administrative Agent and the Lenders pursuant to Article VII. Except as provided in the preceding
sentence, the Administrative Agent will not release any Liens on Collateral without the prior
written authorization of the Required Lenders; provided that, the Administrative Agent may
in its discretion, release its Liens on Collateral valued in the aggregate not in excess of
$10,000,000 during any calendar year without the prior written authorization of the Required
Lenders. Any such release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in
respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of
which shall continue to constitute part of the Collateral.

          SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i)
all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates,
including the reasonable fees, charges and disbursements of one counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for herein, the
preparation and administration of the Loan Documents or any amendments, modifications or waivers
of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by any Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of Credit or any
demand for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative
Agent, any Issuing Bank or any Lender, including the fees, charges and disbursements of any
counsel for the Administrative Agent, any Issuing Bank or any Lender, in connection with the
enforcement, collection or protection of its rights in connection with the Loan Documents,
including its rights under this Section, or in connection with the Loans made or Letters of Credit
issued hereunder, including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit. Expenses being
reimbursed by the Borrower under this Section include, without limiting the generality of the
foregoing, reasonable costs and expenses incurred by the Administrative Agent in connection with:

               (i) appraisals and insurance reviews to the extent permitted hereunder;

               (ii) field examinations to the extent permitted hereunder and the preparation of Reports based
on the reasonable fees charged by a third party retained by the Administrative Agent or the
internally allocated fees for each Person employed by the Administrative Agent with respect to each
field examination;

               (iii) background checks regarding senior management and/or key investors, as deemed necessary
or appropriate in the sole discretion of the Administrative Agent;

               (iv) taxes, fees and other charges for (A) lien searches and (B) filing financing statements
and continuations, and other actions to perfect, protect, and continue the Administrative Agent’s
Liens;

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               (v) sums paid or incurred to take any action required of any Loan Party under the Loan
Documents that such Loan Party fails to pay or take; and

               (vi) forwarding loan proceeds, collecting checks and other items of payment, and establishing
and maintaining the accounts and lock boxes, and costs and expenses of preserving and protecting
the Collateral.

     All of the foregoing costs and expenses may be charged to the Borrower as Revolving Loans or
to another deposit account, all as described in Section 2.18(c).

          (b) The Borrower shall indemnify the Administrative Agent, each Issuing Bank and each Lender,
and each Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of the Loan Documents or any
agreement or instrument contemplated thereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any other transactions
contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom
(including any refusal by any Issuing Bank 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 the Borrower or any of its Subsidiaries, or any
Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any
actual or prospective claim, litigation, investigation or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory and regardless of whether any
Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related
expenses 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.

          (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the
Administrative Agent, any Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Administrative Agent, any Issuing Bank or the
Swingline Lender, 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
Administrative Agent, any Issuing Bank or the Swingline Lender in its capacity as such.

          (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

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          (e) All amounts due under this Section shall be payable promptly after written demand
therefor.

          SECTION 9.04. Successors and Assigns. (a) 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 (including any Affiliate of an Issuing Bank that issues any Letter of
Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no
Lender (including any Issuing Bank) may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section. 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 (including any Affiliate of the Issuing Bank
that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this
Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

          (b) (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign
to one or more assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing to it) with the prior
written consent (such consent not to be unreasonably withheld, it being understood that withholding
of consent by the Borrower or the Administrative Agent with respect to an assignment (including any
assignment to a Lender, an Affiliate of a Lender or an Approved Fund) because amounts that would
become payable by the Borrower under Section 2.15 or 2.17 (including amounts payable under Section
2.17 in respect of withholding taxes) are in excess of those that would be payable under such
Section in respect of the amount assigned if such assignment were not made, will not be considered
to be unreasonable) of:

     (A) the Borrower, provided that no consent of the Borrower shall be
required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund
or, if an Event of Default has occurred and is continuing, any other assignee;

     (B) the Administrative Agent; and

     (C) the Issuing Banks.

          (ii) Assignments shall be subject to the following additional conditions:

     (A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s Commitment
or Loans of any Class, the amount of the Commitment or 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)
shall not be less than $5,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent;

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     (B) 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,
provided that this clause shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender’s rights and obligations in respect
of one Class of Commitments or Loans;

     (C) 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 payable by the assignor or the assignee; and

     (D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire and any tax forms required by
Section 2.17(e).

          For the purposes of this Section 9.04(b), the term “Approved Fund” has the following
meaning:

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

     (iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this
Section, from and after the effective date specified in each Assignment and Assumption the
assignee thereunder shall be a party hereto and, to the extent of the interest assigned by
such Assignment and Assumption, have the rights and obligations of a Lender under this
Agreement (including, in the case of any Foreign Lender (including each Issuing Bank that is
a Foreign Lender), obligations under Section 2.17(e)), 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 2.15, 2.16, 2.17 and 9.03), provided, however, that no such
assignment or transfer shall be deemed to be a waiver of any rights which the Borrower, the
Administrative Agent or any other Lender shall have against such Lender. Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not comply with
this Section 9.04 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 paragraph (c) of this
Section.

     (iv) The Administrative Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices 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
Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in the
Register shall be conclusive, and the Borrower, the

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Administrative Agent, the Issuing Banks 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 Borrower, any Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.

     (v) Upon its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire and
any required tax forms (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and any written
consent to such assignment required by paragraph (b) of this Section, the Administrative
Agent shall accept such Assignment and Assumption and record the information contained
therein in the Register; provided that if either the assigning Lender or the
assignee shall have failed to make any payment required to be made by it pursuant to Section
2.05, 2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), the Administrative Agent shall have no
obligation to accept such Assignment and Assumption and record the information therein in
the Register unless and until such payment shall have been made in full, together with all
accrued interest thereon. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.

          (c) (i) Any Lender may, without the consent of the Borrower, the Administrative Agent, the
Issuing Banks or the Swingline Lender, sell participations to one or more banks or other entities
(a “Participant”) in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that
(A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of such obligations and
(C) the Borrower, the Administrative Agent, the Issuing Banks and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. 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, modification or waiver described in the
first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of
this Section, the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.15, 2.16 and 2.17 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law,
each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender,
provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.

     (ii) A Participant shall not be entitled to the benefits of Section 2.15, 2.16 or 2.17
unless such Participant shall have complied with the requirements of such Section; provided,
that in any case in which a Participant is so entitled, any such Participant shall not be
entitled to receive any greater payment under Section 2.15, 2.16 or 2.17 than the applicable
Lender would have been entitled to receive with respect to the participation

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sold to such Participant, unless the sale of the participation to such Participant is
made with the 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 2.17 unless the
Borrower is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 2.17(e) as though it were a
Lender.

          (d) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including without limitation
any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall
not apply to any such pledge or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

          SECTION 9.05. Survival. All covenants, agreements, representations and warranties
made by the Loan Parties in the Loan Documents and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the other parties hereto and shall survive the execution
and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of
Credit, regardless of any investigation made by any such other party or on its behalf and shall
continue in full force and effect as long as the principal of or any accrued interest on any Loan
or any fee or any other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.
The provisions of Sections 2.15, 2.16, 2.17, 2.18 and 9.03 and Article VIII shall survive and
remain in full force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

          SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different counterparts), each of
which shall constitute an original, but all of which when taken together shall constitute a single
contract. This Agreement, the other Loan Documents and any separate letter agreements with
respect to fees payable to the Administrative Agent 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
which, when taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. Delivery of an executed counterpart of a signature page of
this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.

          SECTION 9.07. Severability. Any provision of this Agreement or any other Loan
Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such

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jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining provisions hereof or
thereof; and the invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

          SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and other obligations
at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the Secured Obligations held by such Lender, irrespective of whether or not
such Lender shall have made any demand under the Loan Documents and although such obligations may
be unmatured. The applicable Lender shall notify the Borrower and the Administrative Agent of
such set-off or application, provided that any failure to give or any delay in giving such
notice shall not affect the validity of any such set-off or application under this Section. The
rights of each Lender under this Section are in addition to other rights and remedies (including
other rights of setoff) which such Lender may have.

          SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This
Agreement shall be construed in accordance with and governed by the law of the State of New York.

          (b) Each party hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the Supreme Court 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 the
Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto
hereby 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 or, to the extent permitted by 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 any other Loan
Document shall affect any right that any party hereto may otherwise have to bring any action or
proceeding relating to this Agreement or any other Loan Document against any other party hereto or
its properties in the courts of any jurisdiction.

          (c) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to this Agreement or any
other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such court.

          (d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. Nothing in this Agreement or any other Loan

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Document will affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

          SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY 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, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY 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 BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION.

          SECTION 9.11. Headings. Article and Section headings and the Table of Contents used
herein 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.

          SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Banks
and the Lenders agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information confidential), (b) to the extent
requested by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap
or derivative transaction relating to the Loan Parties and their obligations, (g) with the consent
of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section or (ii) becomes available to the Administrative Agent, any
Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For
the purposes of this Section, “Information” means all information received from the
Borrower relating to the Borrower or its business, other than any such information that is
available to the Administrative Agent, any Issuing Bank or any Lender on a nonconfidential basis
prior to disclosure by the Borrower; provided that, in the case of information received
from the Borrower after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its obligation to do so if such

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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 LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THIS SECTION 9.12 FURNISHED TO IT
PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND
ITS AFFILIATES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS
DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT
WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE
LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

          ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER OR
THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE
SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER,
THE LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH
LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS
ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL
NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING
FEDERAL AND STATE SECURITIES LAWS.

          SECTION 9.13. USA PATRIOT Act. Each Lender that is subject to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
“Act”) hereby notifies the Borrower that pursuant to the requirements of the Act, it is
required to obtain, verify and record information that identifies the Borrower, which information
includes the name and address of the Borrower and other information that will allow such Lender to
identify the Borrower in accordance with the Act.

          SECTION 9.14. Appointment for Perfection. Each Lender hereby appoints each other
Lender as its agent for the purpose of perfecting Liens, for the benefit of the Administrative
Agent and the Lenders, in assets which, in accordance with Article 9 of the UCC or any other
applicable law can be perfected only by possession. Should any Lender (other than the
Administrative Agent) obtain possession of any such Collateral, such Lender shall notify the
Administrative Agent thereof, and, promptly upon the Administrative Agent’s request therefor shall
deliver such Collateral to the Administrative Agent or otherwise deal with such Collateral in
accordance with the Administrative Agent’s instructions.

          SECTION 9.15. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges
and other amounts which are treated as interest on such Loan under applicable law (collectively
the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which
may be contracted for, charged, taken, received or reserved by the Lender holding such

- 95 -

 

Loan in accordance with applicable law, the rate of interest payable in respect of such Loan
hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum
Rate and, to the extent lawful, the interest and Charges that would have been payable in respect
of such Loan but were not payable as a result of the operation of this Section shall be cumulated
and the interest and Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount, together with
interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been
received by such Lender.

          SECTION 9.16. Waiver of California Suretyship Laws. Without limiting the generality
of any waiver or other provisions set forth in this Agreement, each Loan Party hereby absolutely,
knowingly, unconditionally and expressly waives any and all claim, defense or benefit arising
directly or indirectly under any one or more of Sections 2787 to 2855 inclusive of the California
Civil Code to the extent any one or more of such Sections are applicable to such Loan Party.

[Signature Pages Follow]

- 96 -

 

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

	 	 	 	 	 
	 	PACIFIC SUNWEAR OF CALIFORNIA, INC.

 	 
	 	By  	/s/ Sally Frame Kasaks
 	 
	 	 	Sally Frame Kasaks 	 
	 	 	Chief Executive Officer 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., individually as a

Lender, as the Swingline Lender, as an Issuing

Bank and as Administrative Agent

 	 
	 	By  	/s/ Joseph A. Lisack
 	 
	 	 	Joseph A. Lisack 	 
	 	 	Vice President 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A., individually as

a Lender, as Syndication Agent and as an

Issuing Bank

 	 
	 	By  	/s/ Stephen J. Garvin
 	 
	 	 	Stephen J. Garvin 	 
	 	 	Managing Director 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

	 	 	 	 	 
	 	BRANCH BANK AND TRUST COMPANY, individually as

a Lender and as a Co-Documentation Agent

 	 
	 	By  	/s/ Roberts A. Bass
 	 
	 	 	Roberts A. Bass 	 
	 	 	Senior Vice President 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION,

individually as a Lender and as a Co-Documentation Agent

 	 
	 	By  	/s/ Conan Schleicher
 	 
	 	 	Conan Schleicher 	 
	 	 	Vice President 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

	 	 	 	 	 
	 	WELLS FARGO RETAIL FINANCE, LLC,
 individually
as a Lender and as a Co-Documentation Agent

 	 
	 	By  	/s/ Matthew N. Williams
 	 
	 	 	Matthew N. Williams 	 
	 	 	Vice President 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

	 	 	 	 	 
	 	PNC BANK, N.A., individually as a Lender

 	 
	 	By  	/s/ Steve Davey
 	 
	 	 	Steve Davey 	 
	 	 	Vice President 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

	 	 	 	 	 
	 	UPS CAPITAL CORPORATION, individually as a Lender

 	 
	 	By  	/s/ John P. Holloway
 	 
	 	 	John P. Holloway 	 
	 	 	Director, Portfolio Management 	 
	 

Signature Page to Credit Agreement

Pacific Sunwear of California, Inc.

 

 

SCHEDULE 2.01

COMMITMENTS

	 	 	 	 	 
	LENDER	 	COMMITMENT
	JPMORGAN CHASE BANK, N.A.
	 	$	35,000,000	 
	 
	BANK OF AMERICA, N.A.
	 	$	35,000,000	 
	 
	BRANCH BANK AND TRUST COMPANY
	 	$	20,000,000	 
	 
	U.S. BANK NATIONAL ASSOCIATION
	 	$	20,000,000	 
	 
	WELLS FARGO RETAIL FINANCE, LLC
	 	$	20,000,000	 
	 
	PNC BANK
	 	$	10,000,000	 
	 
	UPS CAPITAL CORPORATION
	 	$	10,000,000	 
	 
	 	 	 	 
	TOTAL COMMITMENTS
	 	$	150,000,000exv10w2

 

EXHIBIT 10.2

SECURITY AGREEMENT

     THIS SECURITY AGREEMENT (as it may be amended or modified from time to time, this
“Security Agreement”) is entered into as of April 29, 2008, by and among PACIFIC SUNWEAR OF
CALIFORNIA, INC., a California corporation (the “Borrower”), PACIFIC SUNWEAR STORES CORP.,
a California corporation (“PSSC”), MIRALOMA CORP., a California corporation
(“Miraloma”), and each additional entity that hereafter becomes a party to this Security
Agreement by executing a joinder substantially in the form of Annex E hereto (collectively
with the Borrower, PSSC and Miraloma, the “Grantors” and, each individually, a
“Grantor”), and JPMORGAN CHASE BANK, N.A., in its capacity as administrative agent (the
“Administrative Agent”) for the lenders party to the Credit Agreement referred to below.

PRELIMINARY STATEMENT

     Reference is hereby made (i) to the Credit Agreement dated as of April 29, 2008 (as it may be
amended or modified from time to time, the “Credit Agreement”) by and among the Borrower,
the banks and financial institutions from time to time party thereto as “Lenders” thereunder, the
Administrative Agent, in its capacity as “Administrative Agent” for the Lenders, and the other
entities from time to time party thereto; and (ii) the Guaranty dated as of April 29, 2008 (as it
may be amended or modified from time to time, the “Subsidiary Guaranty”) by and among PSSC
and Miraloma (together with each additional entity that hereafter becomes a party to such
Subsidiary Guaranty, the “Guarantors”) in favor of the Administrative Agent, in its
capacity as “Administrative Agent” for the Lenders.

     WHEREAS, it is a condition precedent to the Lenders’ willingness to make loans and extend
credit to the Borrower under the Credit Agreement that each Grantor execute and deliver this
Security Agreement and grant the security interests herein provided, and each Grantor is entering
into this Security Agreement in order to induce the Lenders to make loans and extend credit to the
Borrower under the Credit Agreement.

     NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants
set forth herein, each of the Grantors and the Administrative Agent, on behalf of the Lenders,
hereby agree as follows:

ARTICLE I

DEFINITIONS

     1.1. Terms Defined in Credit Agreement. All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Credit Agreement.

     1.2. Terms Defined in UCC. Terms defined in the UCC which are not otherwise defined
in this Security Agreement are used herein as defined in the UCC.

     1.3. Definitions of Certain Terms Used Herein. As used in this Security Agreement,
the following terms shall have the following meanings:

 

 

     “Account” has the meaning set forth in Article 9 of the UCC.

     “Article” means a numbered article of this Security Agreement, unless another document
is specifically referenced.

     “Cash Dominion Restoration Period” has the meaning set forth in the Credit Agreement.

     “Cash Dominion Triggering Event” has the meaning set forth in the Credit Agreement.

     “Collateral” has the meaning set forth in Article II.

     “Collateral Access Agreement” means any landlord waiver or other agreement, in form
and substance satisfactory to the Administrative Agent, between the Administrative Agent and any
third party (including any bailee, consignee, customs broker, or other similar Person) in
possession of any Inventory or any landlord of any Grantor for any real property where any
Inventory is located, as such landlord waiver or other agreement may be amended, restated, or
otherwise modified from time to time.

     “Concentration Accounts” has the meaning set forth in Section 7.1.

     “Control” has the meaning set forth in Section 9-104 or 9-107 (as applicable) of
Article 9 of the UCC.

     “Control Agreement” has the meaning set forth in the Credit Agreement.

     “Deposit Account” has the meaning set forth in the Credit Agreement.

     “Document” has the meaning set forth in Article 9 of the UCC.

     “Effective Date” has the meaning set forth in the Credit Agreement.

     “Event of Default” means an event described in Section 5.1.

     “Excluded Accounts” has the meaning set forth in the Credit Agreement.

     “Exhibit” refers to a specific exhibit to this Security Agreement, unless another
document is specifically referenced.

     “General Intangibles” has the meaning set forth in Article 9 of the UCC.

     “Inventory” has the meaning set forth in Article 9 of the UCC.

     “Payment Intangible” has the meaning set forth in Article 9 of the UCC.

     “Section” means a numbered section of this Security Agreement, unless another document
is specifically referenced.

     “Secured Obligations” means all “Secured Obligations” under and as defined in the
Credit Agreement and all obligations of the Guarantors under the Subsidiary Guaranty, in each

2

 

case, whether such obligations are due or to become due, now existing or hereafter arising,
direct or indirect or absolute contingent.

     “Securities Account” has the meaning set forth in Article 8 of the UCC.

     “UCC” means the Uniform Commercial Code, as in effect from time to time, of the State
of New York or of any other state the laws of which are required as a result thereof to be applied
in connection with the attachment, perfection or priority of, or remedies with respect to,
Administrative Agent’s or any Lender’s Lien on any Collateral.

     The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms.

ARTICLE II

GRANT OF SECURITY INTEREST

     To secure the prompt and complete payment and performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Secured
Obligations, each Grantor hereby pledges, assigns and grants to the Administrative Agent, on behalf
of and for the ratable benefit of itself and the Lenders, a security interest in all of its right,
title and interest in, to the following personal property and other assets, whether now owned by,
or hereafter acquired by or arising in favor of such Grantor (including under any trade name or
derivations thereof), regardless of where located (all of which (excluding the Excluded Collateral)
will be collectively referred to as the “Collateral”):

	 	(i)	 	all cash and cash equivalents;
	 
	 	(ii)	 	all Credit Card Accounts;
	 
	 	(iii)	 	all Deposit Accounts and Securities Accounts;
	 
	 	(iv)	 	all Inventory;
	 
	 	(v)	 	all Documents relating to Inventory; and
	 
	 	(vi)	 	all accessions to, substitutions for and
replacements, proceeds, insurance proceeds and products of the
foregoing.

     Notwithstanding anything herein to the contrary, in no event shall the Collateral include, and
no Grantor shall be deemed to have granted a security interest in, the following (the “Excluded
Collateral”): any of such Grantor’s rights or interests in or under, any license, contract,
permit, Instrument, security or franchise to which such Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant would, under the
terms of such license, contract, permit, Instrument, security or franchise, result in a breach of
the terms of, or constitute a default under, such license, contract, permit, Instrument, security
or franchise (other than to the extent that any such term would be rendered ineffective pursuant to
the UCC or any other applicable law (including the bankruptcy code) or principles of equity);
provided, that (i) immediately upon the ineffectiveness, lapse or termination of any such

3

 

provision the Collateral shall include, and such Grantor shall be deemed to have granted a
security interest in, all such rights and interests as if such provision had never been in effect
and (ii) to the extent that any such license, contract, permit, Instrument, security, franchise
would otherwise constitute Collateral (but for the provisions of this paragraph), all proceeds
resulting from the sale or disposition by any Grantor of any rights of such Grantor under such
license, contract, permit, Instrument, security or franchise shall constitute Collateral.

     In addition to the security interest granted pursuant to this Article II, for the purpose of
enabling the Administrative Agent to exercise the rights and remedies under Article V hereof at
such time as the Administrative Agent shall be lawfully entitled to exercise such rights and
remedies, each Grantor (to the extent (and only to the extent) such Grantor is lawfully able to do
so without breaching the terms of or defaulting in its obligations under any license, contract,
permit, Instrument, security or franchise related to any Licensed Asset) hereby (a) grants to the
Administrative Agent an irrevocable, nonexclusive license (exerciseable without payment of any
royalty or other compensation to any Grantor) to use to the extent (and only to the extent)
necessary for the sale, disposition, collection or other realization by the Administrative Agent of
any Collateral: (i) all General Intangibles of such Grantor (including contract rights) and (ii)
all of such Grantor’s books, records, customer lists, credit files, computer files, programs,
printouts and other computer materials and records relating to any of the Collateral (the assets
described in the foregoing clauses (i) and (ii) collectively, the “Licensed Assets”) and
(b) agrees to grant the Administrative Agent access to (and, to the extent applicable, copies of)
the Licensed Assets at all times after the occurrence and during the continuation of an Event of
Default in order to enable the Administrative Agent to exercise any of the rights and remedies
described in Article V hereof.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

     Each Grantor represents and warrants to the Administrative Agent and the Lenders that:

     3.1. Title, Perfection and Priority. Such Grantor has good and valid rights in or the
power to transfer the Collateral and title to the Collateral with respect to which it has purported
to grant a security interest hereunder (except for minor defects in title that do not interfere
with such Grantor’s ability to conduct its business as currently conducted or to utilize such
Collateral for its intended purpose or such other defects as, in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect), free and clear of all Liens except
for Liens permitted under Section 4.1(e) hereof or Section 6.02 of the Credit Agreement, and has
full power and authority to grant to the Administrative Agent the security interest in such
Collateral pursuant hereto. The UCC-1 financing statement filed against such Grantor in the
offices listed on Annex A is sufficient to perfect the security interest in favor of the
Administrative Agent in that Collateral of such Grantor in which a security interest may be
perfected by filing, subject only to Liens permitted under Section 4.1(e).

     3.2. Type and Jurisdiction of Organization, Organizational and Identification Numbers.
The type of entity of such Grantor, its state of organization, the organizational number issued to
it by its state of organization and its federal employer identification number (if any) are set
forth on Annex B.

4

 

     3.3. Principal Location. Such Grantor’s mailing address and the location of its place
of business (if it has only one) or its chief executive office (if it has more than one place of
business), is disclosed on Annex B.

     3.4. Distribution Centers; Location of Records. The mailing address and location of
each distribution center owned or leased by any Grantor (and, with respect to each leased
distribution center, the name and mailing address of the landlord) is listed on Annex B.
All books and records relating to the Collateral are held at the locations listed on Annex
B.

     3.5. Deposit Accounts and Securities Accounts. All of such Grantor’s Deposit Accounts
and Securities Accounts are listed on Annex C.

     3.6. Credit Card Processors. The name and address of each Credit Card Processor that
is obligated to any Grantor in respect of any Credit Card Account is listed on Annex D.

     3.7. Exact Names. Such Grantor’s name in which it has executed this Security
Agreement is the exact name as it appears in such Grantor’s organizational documents, as amended,
as filed with such Grantor’s jurisdiction of organization. Such Grantor has not, during the past
five years, been a party to any merger or consolidation or, except as described on Annex B,
been known by or used any other corporate or fictitious name.

     3.8. No Financing Statements, Security Agreements. No financing statement or security
agreement describing all or any portion of the Collateral which has not lapsed or been terminated
naming such Grantor as debtor has been filed or is of record in any jurisdiction except (a) for
financing statements or security agreements naming the Administrative Agent on behalf of the
Lenders as the secured party and (b) as permitted by Section 4.1(e).

ARTICLE IV

COVENANTS

     From the date of this Security Agreement, and thereafter until this Security Agreement is
terminated, each Grantor agrees that:

     4.1. General.

          (a) Collateral Records. Such Grantor will maintain complete and accurate books and
records, in all material respects, with respect to the Collateral owned by it, and furnish to the
Administrative Agent, with sufficient copies for each of the Lenders, such reports relating to such
Collateral as required by the Loan Documents.

          (b) Authorization to File Financing Statements; Ratification. Such Grantor hereby
authorizes the Administrative Agent to file, and if requested will deliver to the Administrative
Agent, all financing statements in order to maintain a first priority perfected security interest
in the Collateral owned by such Grantor. Any financing statement filed by the Administrative Agent
may be filed in any filing office in any UCC jurisdiction and may (i) indicate such Grantor’s
Collateral by any description which reasonably approximates the description contained in this
Security Agreement, and (ii) contain any other information required by Article 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement

5

 

or amendment, including whether such Grantor is an organization, the type of organization and
any organization identification number issued to such Grantor. Such Grantor also agrees to furnish
any such information to the Administrative Agent promptly upon request. Such Grantor also ratifies
its authorization for the Administrative Agent to have filed in any UCC jurisdiction any initial
financing statements or amendments thereto if filed prior to the date hereof.

          (c) Further Assurances. Such Grantor will, if so requested by the Administrative
Agent, furnish to the Administrative Agent, as often as required by the Loan Documents, statements
and schedules further identifying and describing the Collateral owned by it and such other reports
and information in connection with its Collateral as the Administrative Agent may reasonably
request, all in such detail as required pursuant to the Loan Documents. Such Grantor also agrees
to take any and all actions reasonably necessary to defend title to the Collateral against all
persons and to defend the security interest of the Administrative Agent in its Collateral and the
priority thereof against any Lien not expressly permitted hereunder.

          (d) Disposition of Collateral. Such Grantor will not sell, lease or otherwise dispose
of the Collateral owned by it except for dispositions specifically permitted pursuant to Section
6.06 of the Credit Agreement or otherwise pursuant to the Loan Documents.

          (e) Liens. Such Grantor will not create, incur, or suffer to exist any Lien on the
Collateral owned by it except (i) the security interest created by the Loan Documents, (ii)
Permitted Encumbrances and (iii) Liens permitted pursuant to Section 6.02(h) of the Credit
Agreement.

          (f) Other Financing Statements. Such Grantor will not authorize the filing of any
financing statement naming it as debtor covering all or any portion of the Collateral owned by it,
except as permitted by Section 4.1(e).

          (g) Locations. Such Grantor will not maintain any Inventory owned by it at any
location other than stores or facilities owned or leased by a Grantor (other than (i) Inventory in
transit and (ii) offsite storage sites from time to time used by certain stores of such Grantor,
provided that (x) the book value of Inventory located at each such storage site does not at
any time exceed $250,000 and (y) the aggregate book value of Inventory located at all such storage
sites used by all Grantors does not at any time exceed $500,000).

          (h) Compliance with Terms. Such Grantor will perform and comply with, in all material
respects, all obligations in respect of the Collateral owned by it and all agreements to which it
is a party or by which it is bound relating to such Collateral.

6

 

     4.2. Credit Card Accounts. Such Grantor will comply in all material respects with the
provisions of Section 5.13 of the Credit Agreement with respect to all credit card processing
agreements to which such Grantor is a party.

     4.3. Inventory. Such Grantor will use commercially reasonable efforts to maintain,
preserve, protect and keep its Inventory in good and saleable condition, except for damaged or
defective goods arising in the ordinary course of such Grantor’s business.

     4.4. No Interference. Such Grantor agrees that it will not interfere with any right,
power and remedy of the Administrative Agent provided for in this Security Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of
the exercise by the Administrative Agent of any one or more of such rights, powers or remedies.

     4.5. Insurance. (a) All insurance policies maintained by the Grantors with respect
to the Collateral, and all business interruption policies maintained by the Grantors, shall name
the Administrative Agent (for the benefit of the Administrative Agent and the Lenders) as loss
payee, as applicable, and shall contain loss payable clauses or mortgagee clauses, through
endorsements in form and substance reasonably satisfactory to the Administrative Agent, which
provide that: (i) all proceeds thereunder with respect to any Collateral in excess of $1,000,000
per occurrence shall be payable to the Administrative Agent; and (ii) with respect to any property
and casualty policy with respect to Inventory, such policy and the related loss payable or
mortgagee clauses may not be canceled or terminated prior to the expiration date of such policy
without at least thirty days prior written notice given to the Administrative Agent. All general
liability policies maintained by the Grantors shall name the Administrative Agent (for the benefit
of the Administrative Agent and the Lenders) as an additional insured.

          (b) All premiums on any such insurance shall be paid when due by such Grantor, and copies of
the policies delivered to the Administrative Agent. If such Grantor fails to obtain any insurance
as required by this Section, the Administrative Agent may obtain such insurance at the Borrower’s
expense.

     4.6. Collateral Access Agreements. Such Grantor shall use commercially reasonable
efforts for a period of 60 days after the Effective Date (or for a period of 60 days after the
execution date of such lease, as applicable) to obtain a Collateral Access Agreement from the
lessor of each headquarters site and each Leased Distribution Center (other than the Kansas
Distribution Facility) (collectively, the “Specified Sites”) which agreement or letter
shall provide access rights, contain a waiver or subordination of Liens or claims that the landlord
or mortgagee may assert against the Collateral at that location, and shall otherwise be reasonably
satisfactory in form and substance to the Administrative Agent. Such Grantor shall timely and
fully pay and perform its obligations in all material respects under all leases under which Grantor
is a lessee relating to any Specified Site where any Collateral is or may be located.

     4.7. Control Agreements. Contemporaneously with the execution of this Security
Agreement, the Grantors have delivered to the Administrative Agent Control Agreements with respect
to each of the Deposit Accounts listed on Part A of Annex C attached hereto.

7

 

     4.8. Change of Name or Location; Change of Fiscal Year. Such Grantor shall not (a)
change its name as it appears in official filings in the state of its incorporation or
organization, (b) change its chief executive office, principal place of business, mailing address,
corporate offices, or the location of its records concerning the Collateral, (c) change the type of
entity that it is, (d) change its organization identification number, if any, issued by its state
of incorporation or other organization, or (e) change its state of incorporation or organization,
in each case, unless the Administrative Agent shall have received at least ten Business Days prior
written notice of such change. Such Grantor shall not change its fiscal year which currently ends
on the Saturday closest to January 31 of each calendar year.

ARTICLE V

EVENTS OF DEFAULT AND REMEDIES

          (a) Events of Default. The occurrence of any “Event of Default” under, and as defined
in, the Credit Agreement shall constitute an Event of Default hereunder.

     5.2. Remedies.

          (a) Upon the occurrence and during the continuation of an Event of Default, the Administrative
Agent may exercise any or all of the following rights and remedies:

               (i) those rights and remedies provided in this Security Agreement, the Credit Agreement, or
any other Loan Document; provided that, this Section 5.2(a) shall not be understood to limit any
rights or remedies available to the Administrative Agent and the Lenders prior to an Event of
Default;

               (ii) those rights and remedies available to a secured party under the UCC (whether or not the
UCC applies to the affected Collateral) or under any other applicable law (including, without
limitation, any law governing the exercise of a bank’s right of setoff or bankers’ lien) when a
debtor is in default under a security agreement; and

               (iii) without notice (except as specifically provided in Section 8.1 or in the Loan
Documents), demand or advertisement of any kind to any Grantor or any other Person, enter the
premises of any Grantor where any Collateral is located (through self-help and without judicial
process) to collect, receive, assemble, process, appropriate, sell, lease, assign, grant an option
or options to purchase or otherwise dispose of, deliver, or realize upon, the Collateral or any
part thereof in one or more parcels at public or private sale or sales (which sales may be
adjourned or continued from time to time with or without notice and may take place at any Grantor’s
premises or elsewhere), for cash, on credit or for future delivery without assumption of any credit
risk, and upon such other terms as the Administrative Agent may deem commercially reasonable.

          (b) In addition to (and without limitation of) all of the rights of the Administrative Agent
set forth herein, after the occurrence of a Cash Dominion Triggering Event and until such time as a
Cash Dominion Restoration Period shall have occurred the Administrative Agent shall have all of the
rights set forth in Section 7.2 (it being understood, for the avoidance of doubt, that
notwithstanding anything to the contrary set forth in the Loan Documents, the Administrative Agent
shall have the right to give notice of control under any

8

 

Control Agreement or any Processor Control Agreement/Letter only after the occurrence of a
Cash Dominion Triggering Event and before the completion of a Cash Dominion Restoration Period and
the Administrative Agent does not have the right to give any such notice of control during any
other period.)

          (c) The Administrative Agent, on behalf of the Lenders, may comply with any applicable state
or federal law requirements in connection with a disposition of the Collateral and compliance will
not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

          (d) The Administrative Agent shall have the right upon any such public sale or sales and, to
the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of
the Administrative Agent and the Lenders, the whole or any part of the Collateral so sold, free of
any right of equity redemption, which equity redemption the Grantor hereby expressly releases.

          (e) Until the Administrative Agent is able to effect a sale, lease, or other disposition of
Collateral, the Administrative Agent shall have the right to hold or use Collateral, or any part
thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its
value or for any other purpose deemed appropriate by the Administrative Agent. The Administrative
Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of
Collateral and to enforce any of the Administrative Agent’s remedies (for the benefit of the
Administrative Agent and Lenders), with respect to such appointment without prior notice or hearing
as to such appointment.

          (f) If, after the Credit Agreement has terminated by its terms and all of the Obligations have
been paid in full, there remain Swap Obligations to any Lender or any of its Affiliates
outstanding, the applicable Lenders and their applicable Affiliates may exercise the remedies
provided in this Section 5.2 upon the occurrence of any event which would allow or require the
termination or acceleration of any Swap Obligations pursuant to the terms of the Swap Agreement.

          (g) Notwithstanding the foregoing, neither the Administrative Agent nor the Lenders shall be
required to (i) make any demand upon, or pursue or exhaust any of their rights or remedies against,
any Grantor, any other obligor, guarantor, pledgor or any other Person with respect to the payment
of the Secured Obligations or to pursue or exhaust any of their rights or remedies with respect to
any Collateral therefor or any direct or indirect guarantee thereof, (ii) marshal the Collateral or
any guarantee of the Secured Obligations or to resort to the Collateral or any such guarantee in
any particular order, or (iii) effect a public sale of any Collateral.

     5.3. Grantor’s Obligations Upon Event of Default. Upon the request of the
Administrative Agent after the occurrence and during the continuation of an Event of Default, each
Grantor will:

          (a) assemble and make available to the Administrative Agent the Collateral and all books and
records relating thereto at any place or places specified by the Administrative Agent, whether at a
Grantor’s premises or elsewhere;

9

 

          (b) permit the Administrative Agent, by the Administrative Agent’s representatives and agents,
to enter, occupy and use any premises where all or any part of the Collateral, or the books and
records relating thereto, or both, are located, to take possession of all or any part of the
Collateral or the books and records relating thereto, or both, to remove all or any part of the
Collateral or the books and records relating thereto, or both, and to conduct sales of the
Collateral, without any obligation to pay the Grantor for such use and occupancy; and

          (c) at its own expense, cause the independent certified public accountants then engaged by
each Grantor to prepare and deliver to the Administrative Agent and each Lender, at any time, and
from time to time, promptly upon the Administrative Agent’s request, the following reports with
respect to the applicable Grantor: (i) a reconciliation of all Credit Card Accounts; (ii) trial
balances; and (iii) a test verification of Credit Card Accounts.

ARTICLE VI

CREDIT CARD ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

     6.1. Credit Card Account Verification. The Administrative Agent may at any time, in
the Administrative Agent’s own name, in the name of a nominee of the Administrative Agent, or in
the name of any Grantor communicate (by mail, telephone, facsimile or otherwise) with Credit Card
Processors of any Grantor to verify with such Persons, to the Administrative Agent’s reasonable
satisfaction, the existence, amount, terms of, and any other matter relating to, Credit Card
Accounts.

     6.2. Authorization for Secured Party to Take Certain Action.

          (a) Subject to the provisions of Section 6.2(b), each Grantor irrevocably authorizes the
Administrative Agent and appoints the Administrative Agent as its attorney in fact (i) to execute
on behalf of such Grantor as debtor and to file financing statements necessary or desirable in the
Administrative Agent’s reasonable discretion to perfect and to maintain the perfection and priority
of the Administrative Agent’s security interest in the Collateral, (ii) to endorse and collect any
cash proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this
Security Agreement or any financing statement with respect to the Collateral as a financing
statement and to file any other financing statement or amendment of a financing statement (which
does not add new collateral or add a debtor) in such offices as the Administrative Agent in its
reasonable discretion deems necessary or desirable to perfect and to maintain the perfection and
priority of the Administrative Agent’s security interest in the Collateral, (iv) to apply the
proceeds of any Collateral received by the Administrative Agent to the Secured Obligations as
provided in Sections 7.2 and 7.3, (v) to discharge past due taxes, assessments, charges, fees or
Liens on the Collateral (except for Permitted Encumbrances and Liens permitted under Section
6.02(h) of the Credit Agreement), (vi) to contact Credit Card Processors, (vii) to demand payment
or enforce payment of Credit Card Accounts in the name of the Administrative Agent or such Grantor
and to endorse any and all checks, drafts, and other instruments for the payment of money relating
to Credit Card Accounts or the proceeds of the sale of Inventory, (viii) to exercise rights and
remedies with respect to the collection of Credit Card Accounts and other Collateral, (ix) to
settle, adjust, compromise, extend or renew Credit Card Accounts, (x) to settle, adjust or
compromise any legal proceedings brought to collect Credit Card Accounts, (xi) to prepare, file and
sign such Grantor’s name on a proof of claim in

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bankruptcy or similar document against any Credit Card Processor of such Grantor, (xii) to
prepare, file and sign such Grantor’s name on any notice of Lien, assignment or satisfaction of
Lien or similar document in connection with Credit Card Accounts or Inventory, (xiii) to change the
address for delivery of mail addressed to such Grantor to such address as the Administrative Agent
may designate and to receive, open and dispose of all mail addressed to such Grantor, and (xiv) to
do all other acts and things reasonably necessary to carry out this Security Agreement; and such
Grantor agrees to reimburse the Administrative Agent on demand for any reasonable payment made or
any reasonable expense incurred by the Administrative Agent in connection with any of the
foregoing; provided that, this authorization shall not relieve such Grantor of any of its
obligations under this Security Agreement or under the Credit Agreement.

          (b) All acts of said attorney or designee are hereby ratified and approved. The powers
conferred on the Administrative Agent, for the benefit of the Administrative Agent and Lenders,
under this Section 6.2 are solely to protect the Administrative Agent’s interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Lender to exercise any such
powers. The Administrative Agent agrees that, except for the powers granted in (x) Sections
6.2(a)(i), 6.2(a)(iii), 6.2(a)(vi) (in the case of such Section 6.2(a)(vi), solely with respect to
Credit Card Account verification as provided in Section 6.1) and 6.2(a)(xiv) which may be exercised
by the Administrative Agent at any time and (y) Sections 6.2(a)(ii) and 6.2(a)(iv) which may be
exercised by the Administrative Agent at any time after the occurrence of a Cash Dominion
Triggering Event and until the completion of a Cash Dominion Restoration Period, the Administrative
Agent shall not exercise any power or authority granted to it under Section 6.2(a) unless an Event
of Default has occurred and is continuing.

     6.3. Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF THE ADMINISTRATIVE
AGENT AS ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE
UNTIL THE DATE ON WHICH THIS SECURITY AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.14.
NOTWITHSTANDING ANYTHING CONTAINED HEREIN, NEITHER THE ADMINISTRATIVE AGENT, NOR ANY LENDER, NOR
ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL
HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME
AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT IN RESPECT
OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT SHALL THEY BE LIABLE
FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

ARTICLE VII

COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; CREDIT CARD

PROCESSORS; DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS

     7.1. Collection of Credit Card Accounts. The Borrower has established certain Deposit
Accounts with Bank of America, N.A. into which cash, checks, electronic funds transfers and other
similar payments relating to or constituting payments made in respect of

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Credit Card Accounts are and will continue to be deposited (the “Concentration
Accounts”), which Concentration Accounts are identified as such on Annex D. Each
Grantor shall cause all payments and other proceeds in respect of Credit Card Accounts to be
remitted directly to the Concentration Accounts (subject to the Administrative Agent’s right
following the occurrence of a Cash Dominion Triggering Event until the completion of a Cash
Dominion Restoration Period related thereto to direct Credit Card Processors to remit payments in
respect of Credit Card Accounts directly to the Administrative Agent.

     7.2. Cash Dominion. At any time after the occurrence of a Cash Dominion Triggering
Event and until the completion of the Cash Dominion Restoration Period related thereto, the
Administrative Agent shall have the right (i) to declare that full cash dominion is in effect, (ii)
to give a notice of sole control or other instruction under any Processor Control Agreement/Letter,
(iii) to notify each banking institution, securities broker or securities intermediary at which any
Grantor maintains Deposit Accounts (including the Concentration Accounts) or Securities Accounts
(in each case, other than Excluded Accounts) with respect to which there is a Control Agreement,
that (A) the Administrative Agent has taken full dominion and control over all Deposit Accounts and
Securities Accounts (in each case, other than Excluded Accounts) with respect to which there is a
Control Agreement, and all funds from time to time on deposit therein, (B) such banking
institutions, securities brokers and securities intermediaries shall follow all instructions given
by the Administrative Agent with respect to such Deposit Accounts and Securities Accounts, and (C)
such banking institutions shall remit directly to the Administrative Agent on a daily basis (or on
such other basis as the Administrative Agent shall direct) all funds from time to time deposited
into such Deposit Accounts and Securities Accounts, and (iv) to automatically apply, on a daily
basis, all funds remitted to the Administrative Agent from such Deposit Accounts and Securities
Accounts, and all other proceeds of the Collateral, to repay the Loans and other Obligations in
accordance with Sections 2.10(b) and 2.18 of the Credit Agreement.

     7.3. Application of Collateral Proceeds. In the case of any sale or other disposition
of Collateral by the Administrative Agent in the exercise of its remedies provided herein or in any
other Loan Document, the proceeds of such sale or other disposition shall be applied in accordance
with Section 2.18 of the Credit Agreement. In the event that the proceeds from any sale or other
disposition of Collateral are insufficient to pay all Secured Obligations in full, the Grantors
shall remain liable for any deficiency, including any attorneys’ fees and other expenses incurred
by the Administrative Agent or any Lender to collect such deficiency.

     7.4. Restoration of Pre-Cash Dominion Triggering Event Cash Management. If the
Administrative Agent has given any notice of full dominion or sole control or other similar
instruction under any Processor Control Agreement/Letter or under any Control Agreement after the
occurrence of a Cash Dominion Triggering Event, then upon the completion of the Cash Dominion
Restoration Period with respect thereto, the Administrative Agent shall take all necessary actions
and/or refrain from taking actions, in each case to permit the Grantors to regain access to and to
have the right to direct the disposition of the funds and securities held in or subject to the
Deposit Accounts, Securities Accounts and Credit Card Processor Agreements over which the
Administrative Agent had exercised full dominion and control, which actions shall include (i)
executing amendments to the applicable Control Agreements and/or Processor Control
Agreements/Letters (or, subject to the immediately following sentence, replacements of

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the applicable Control Agreements and/or Processor Control Agreements/Letters) to effect the
foregoing and (ii) giving notices and instructions to counterparties to the applicable Control
Agreements and/or Processor Control Agreements/Letters to effect the foregoing; provided
that after giving effect to the execution of such amendments and delivery of notices and
instructions, the Administrative Agent shall continue to have all rights under Section 7.2 at any
time after the occurrence of a subsequent Cash Dominion Triggering Event and until the completion
of the Cash Dominion Restoration Period with respect thereto. Without limiting the generality of
the foregoing, with respect to any Processor Control Agreement/Letter or Control Agreement
(collectively, “Existing Control Agreements”) existing as of the occurrence of any Cash
Dominion Triggering Event, if, following the completion of the Cash Dominion Restoration Period
with respect to such Cash Dominion Triggering Event, the Grantors shall have obtained a replacement
Processor Control Agreement/Letter or Control Agreement (as applicable) with respect to such
Existing Control Agreement, the Administrative Agent shall deliver a notice to the applicable
financial institution or Credit Card Processor terminating such Existing Control Agreement;
provided, that the Administrative Agent shall have no obligation to deliver such notice of
termination until such time as the Grantors shall have delivered to the Administrative Agent a
replacement Processor Control Agreement/Letter or Control Agreement (as applicable) with respect to
such Existing Control Agreement.

ARTICLE VIII

GENERAL PROVISIONS

     8.1. Waivers. Each Grantor hereby waives notice of the time and place of any public
sale or the time after which any private sale or other disposition of all or any part of the
Collateral may be made. To the extent such notice may not be waived under applicable law, any
notice made shall be deemed reasonable if sent to the Grantors, addressed as set forth in Article
IX, at least ten days prior to (i) the date of any such public sale or (ii) the time after which
any such private sale or other disposition may be made. To the maximum extent permitted by
applicable law, each Grantor waives all claims, damages, and demands against the Administrative
Agent or any Lender arising out of the repossession, retention or sale of the Collateral, except
such as arise out of the gross negligence or willful misconduct of the Administrative Agent or such
Lender as finally determined by a court of competent jurisdiction. To the extent it may lawfully do
so, each Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of,
and covenants not to assert against the Administrative Agent or any Lender, any valuation, stay,
appraisal, extension, moratorium, redemption or similar laws and any and all rights or defenses it
may have as a surety now or hereafter existing which, but for this provision, might be applicable
to the sale of any Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Security Agreement, or otherwise. Except as otherwise
specifically provided herein, each Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.

     8.2. Limitation on Administrative Agent’s and Lenders’ Duty with Respect to the
Collateral. The Administrative Agent shall have no obligation to clean-up or otherwise prepare
the Collateral for sale. The Administrative Agent and each Lender shall use reasonable care with
respect to the Collateral in its possession or under its control. Neither the Administrative Agent

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nor any Lender shall have any other duty as to any Collateral in its possession or control or
in the possession or control of any agent or nominee of the Administrative Agent or such Lender, or
any income thereon or as to the preservation of rights against prior parties or any other rights
pertaining thereto. To the extent that applicable law imposes duties on the Administrative Agent
to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that
it is commercially reasonable for the Administrative Agent (i) to fail to incur expenses deemed
significant by the Administrative Agent to prepare Collateral for disposition, (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Credit Card Processors or other Persons obligated on Collateral or to remove Liens
on or any adverse claims against Collateral, (iv) to exercise collection remedies against Credit
Card Processors and other Persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is of a specialized
nature, (vi) to contact other Persons, whether or not in the same business as such Grantor, for
expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or
more professional auctioneers to assist in the disposition of Collateral, whether or not the
Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites
that provide for the auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of
assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure
the Administrative Agent against risks of loss, collection or disposition of Collateral or to
provide to the Administrative Agent a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by the Administrative Agent, to obtain the
services of other brokers, investment bankers, consultants and other professionals to assist the
Administrative Agent in the collection or disposition of any of the Collateral. Each Grantor
acknowledges that the purpose of this Section 8.2 is to provide non-exhaustive indications of what
actions or omissions by the Administrative Agent would be commercially reasonable in the
Administrative Agent’s exercise of remedies against the Collateral and that other actions or
omissions by the Administrative Agent shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section 8.2. Without limitation upon the foregoing, nothing
contained in this Section 8.2 shall be construed to grant any rights to any Grantor or to impose
any duties on the Administrative Agent that would not have been granted or imposed by this Security
Agreement or by applicable law in the absence of this Section 8.2.

     8.3. Compromises and Collection of Collateral. The Grantors and the Administrative
Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors
with respect to certain of the Credit Card Accounts, that certain of the Credit Card Accounts may
be or become uncollectible in whole or in part and that the expense and probability of success in
litigating a disputed Credit Card Account may exceed the amount that reasonably may be expected to
be recovered with respect to a Credit Card Account. In view of the foregoing, each Grantor agrees
that the Administrative Agent may at any time and from time to time, if an Event of Default has
occurred and is continuing, compromise with the obligor on any Credit Card Account, accept in full
payment of any Credit Card Account such amount as the Administrative Agent in its sole discretion
shall determine or abandon any Credit Card Account,

14

 

and any such action by the Administrative Agent shall be commercially reasonable so long as
the Administrative Agent acts in good faith based on information known to it at the time it takes
any such action.

     8.4. Secured Party Performance of Debtor Obligations. Without having any obligation
to do so, the Administrative Agent may perform or pay any obligation which any Grantor has agreed
to perform or pay in this Security Agreement and the Grantors shall reimburse the Administrative
Agent for any amounts paid by the Administrative Agent pursuant to this Section 8.4. The Grantors’
obligation to reimburse the Administrative Agent pursuant to the preceding sentence shall be a
Secured Obligation payable on demand.

     8.5. Specific Performance of Certain Covenants. Each Grantor acknowledges and agrees
that a breach of any of the covenants contained in Sections 4.1(d), 4.1(e), 4.2, 4.5, 4.6, 4.7,
4.8, 5.3, or 8.7 or in Article VII will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and Lenders have no adequate remedy at law in respect of
such breaches and therefore agrees, without limiting the right of the Administrative Agent or the
Lenders to seek and obtain specific performance of other obligations of the Grantors contained in
this Security Agreement, that the covenants of the Grantors contained in the Sections referred to
in this Section 8.5 shall be specifically enforceable against the Grantors.

     8.6. Dispositions Not Authorized. No Grantor is authorized to sell or otherwise
dispose of the Collateral except as set forth in Section 4.1(d) or otherwise permitted under the
Loan Documents and notwithstanding any course of dealing between any Grantor and the Administrative
Agent or other conduct of the Administrative Agent, no authorization to sell or otherwise dispose
of the Collateral (except as set forth in Section 4.1(d) or otherwise permitted under the Loan
Documents) shall be binding upon the Administrative Agent or the Lenders unless such authorization
is in writing signed by the Administrative Agent.

     8.7. No Waiver; Amendments; Cumulative Remedies. No delay or omission of the
Administrative Agent or any Lender to exercise any right or remedy granted under this Security
Agreement shall impair such right or remedy or be construed to be a waiver of any Default or an
acquiescence therein, and any single or partial exercise of any such right or remedy shall not
preclude any other or further exercise thereof or the exercise of any other right or remedy. No
waiver, amendment or other variation of the terms, conditions or provisions of this Security
Agreement whatsoever shall be valid unless in writing signed by the Administrative Agent and then
only to the extent in such writing specifically set forth. All rights and remedies contained in
this Security Agreement or by law afforded shall be cumulative and all shall be available to the
Administrative Agent and the Lenders until the Secured Obligations have been paid in full.

     8.8. Limitation by Law; Severability of Provisions. All rights, remedies and powers
provided in this Security Agreement may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this Security Agreement
are intended to be subject to all applicable mandatory provisions of law that may be controlling
and to be limited to the extent necessary so that they shall not render this Security Agreement
invalid, unenforceable or not entitled to be recorded or registered, in whole or in part. Any
provision in any this Security Agreement that is held to be inoperative, unenforceable, or invalid
in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid

15

 

without affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to this end the
provisions of this Security Agreement are declared to be severable.

     8.9. Reinstatement. This Security Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against any Grantor for liquidation or
reorganization, should any Grantor become insolvent or make an assignment for the benefit of any
creditor or creditors or should a receiver or trustee be appointed for all or any significant part
of any Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Secured Obligations, or any part thereof, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent
conveyance,” or otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

     8.10. Benefit of Agreement. The terms and provisions of this Security Agreement shall
be binding upon and inure to the benefit of the Grantors, the Administrative Agent and the Lenders
and their respective successors and permitted assigns (including all persons who become bound as a
debtor to this Security Agreement), except that no Grantor shall have the right to assign its
rights or delegate its obligations under this Security Agreement or any interest herein, without
the prior written consent of the Administrative Agent. No sales of participations, assignments,
transfers, or other dispositions of any agreement governing the Secured Obligations or any portion
thereof or interest therein permitted by the Loan Documents shall in any manner impair the Lien
granted to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders,
hereunder.

     8.11. Survival of Representations. All representations and warranties of the Grantors
contained in this Security Agreement shall survive the execution and delivery of this Security
Agreement.

     8.12. Taxes and Expenses. Any material taxes (including income taxes) payable or
ruled payable by Federal or State authority in respect of this Security Agreement shall be paid by
the Grantors, together with interest and penalties, if any. The Grantors shall reimburse the
Administrative Agent for any and all reasonable out-of-pocket expenses and internal charges
(including reasonable attorneys’, auditors’ and accountants’ fees and reasonable time charges of
attorneys, paralegals, auditors and accountants who may be employees of the Administrative Agent)
paid or incurred by the Administrative Agent in connection with the preparation, execution,
delivery, administration, collection and enforcement of this Security Agreement and in the audit,
analysis, administration, collection, preservation or sale of the Collateral (including the
expenses and charges associated with any periodic or special audit of the Collateral). Any and all
costs and expenses incurred by the Grantors in the performance of actions required pursuant to the
terms hereof shall be borne solely by the Grantors.

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     8.13. Headings. The title of and section headings in this Security Agreement are for
convenience of reference only, and shall not govern the interpretation of any of the terms and
provisions of this Security Agreement.

     8.14. Termination. This Security Agreement shall continue in effect (notwithstanding
the fact that from time to time there may be no Secured Obligations outstanding) until (i) the
Credit Agreement has terminated pursuant to its express terms and (ii) all of the Secured
Obligations (other than Unliquidated Obligations) have been indefeasibly paid and performed in full
and all outstanding Letters of Credit have expired or terminated or have been cash collateralized
in accordance with the terms of the Credit Agreement and no commitments of the Administrative Agent
or the Lenders which would give rise to any Secured Obligations are outstanding.

     8.15. Entire Agreement. This Security Agreement embodies the entire agreement and
understanding between the Grantors and the Administrative Agent relating to the Collateral and
supersedes all prior agreements and understandings between the Grantors and the Administrative
Agent relating to the Collateral.

     8.16. CHOICE OF LAW. THIS SECURITY AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

     8.17. CONSENT TO JURISDICTION. EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND EACH GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE ADMINISTRATIVE AGENT OR ANY
LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

     8.18. WAIVER OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS SECURITY

17

 

AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

     8.19. Indemnity. Each Grantor hereby agrees to indemnify the Administrative Agent and
the Lenders, and their respective successors, assigns, agents and employees, from and against any
and all liabilities, damages, penalties, suits, costs, and expenses of any kind and nature
(including, without limitation, all reasonable expenses of litigation or preparation therefor
whether or not the Administrative Agent or any Lender is a party thereto) imposed on, incurred by
or asserted against the Administrative Agent or the Lenders, or their respective successors,
assigns, agents and employees, in any way relating to or arising out of this Security Agreement, or
the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use,
operation, condition, sale, return or other disposition of any Collateral, in each case except such
as arise out of the gross negligence or willful misconduct of the Administrative Agent or such
Lender as finally determined by a court of competent jurisdiction.

     8.20. Counterparts. This Security Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and any of the parties
hereto may execute this Security Agreement by signing any such counterpart.

     8.21. Lien Absolute. All rights of the Administrative Agent hereunder, and all
obligations of each Grantor hereunder, shall be absolute and unconditional irrespective of:

          (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document or
any other agreement or instrument governing or evidencing any Secured Obligations;

          (b) any change in the time, manner or place of payment of, or in any other term of, all or any
part of the Secured Obligations, or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any other agreement or instrument
governing or evidencing any Secured Obligations;

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

          (d) the insolvency of any Person; or

          (e) any other circumstance which might otherwise constitute a defense available to, or a
discharge of, any Grantor.

     8.22. Release.

          (a) At the time provided in Section 9.02(c)(i)(A) of the Credit Agreement, the Collateral
shall be released from the Lien created hereby and this Agreement and all obligations (other than
those expressly stated to survive such termination) of the Administrative Agent and each Grantor
hereunder shall terminate, all without delivery of any instrument or performance of any act by any
party, and all rights to the Collateral shall revert to the Grantors. At the request and sole
expense of any Grantor following any such termination, the Administrative Agent shall

18

 

deliver to such Grantor any Collateral of such Grantor held by the Administrative Agent
hereunder and execute and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.

          (b) If the Administrative Agent shall be directed or permitted pursuant to Section
9.02(c)(i)(B), (C) or (D) of the Credit Agreement to release any Lien created hereby upon any
Collateral (including any Collateral sold or disposed of by any Grantor in a transaction permitted
by the Credit Agreement), such Collateral shall be released from the Lien created hereby to the
extent provided under, and subject to the terms and conditions set forth in, Section 9.02(c)(i)(B),
(C) or (D) of the Credit Agreement. In connection therewith, the Administrative Agent, at the
request and sole expense of the Grantors, shall execute and deliver to the Grantors all releases or
other documents, including, without limitation, UCC termination statements, reasonably necessary or
desirable for the release of the Lien created hereby on such Collateral. If the Administrative
Agent shall be directed or permitted pursuant to Section 9.02(c)(ii)(B) of the Credit Agreement to
release any Grantor from its obligations, at the request and sole expense of the Grantors, such
Grantor shall be released from its obligations.

     8.23. Joinder. Any other Subsidiary of the Borrower that is required to become a
party to the Agreement pursuant to Section 5.14 of the Credit Agreement may become a party hereto
by executing and delivering to the Administrative Agent a joinder hereto substantially in the form
of Annex E hereto and upon the execution and delivery of such joinder to the Administrative
Agent such Subsidiary shall be become a “Grantor” hereunder and shall become bound by the terms and
provisions hereof with the same force and effect as if originally named a Grantor herein. The
obligations each Grantor hereunder shall remain in full force and effect notwithstanding the
additional of any new Grantor hereunder.

ARTICLE IX

NOTICES

     9.1. Sending Notices. Any notice required or permitted to be given under this
Security Agreement shall be sent by United States mail, telecopier, personal delivery or nationally
established overnight courier service, and shall be deemed received (a) when received, if sent by
hand or overnight courier service, or mailed by certified or registered mail notices or (b) when
sent, if sent by telecopier (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), in each case addressed to the Grantors at the notice address set forth on
Annex B hereto, and to the Administrative Agent and the Lenders at the addresses set forth
in accordance with Section 9.01 of the Credit Agreement.

     9.2. Change in Address for Notices. Each of the Grantors, the Administrative Agent
and the Lenders may change the address for service of notice upon it by a notice in writing to the
other parties.

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ARTICLE X

THE ADMINISTRATIVE AGENT

     JPMorgan Chase Bank, N.A. has been appointed Administrative Agent for the Lenders hereunder
pursuant to Article VIII of the Credit Agreement. It is expressly understood and agreed by the
parties to this Security Agreement that any authority conferred upon the Administrative Agent
hereunder is subject to the terms of the delegation of authority made by the Lenders to the
Administrative Agent pursuant to the Credit Agreement, and that the Administrative Agent has agreed
to act (and any successor Administrative Agent shall act) as such hereunder only on the express
conditions contained in such Article VIII. Any successor Administrative Agent appointed pursuant
to Article VIII of the Credit Agreement shall be entitled to all the rights, interests and benefits
of the Administrative Agent hereunder.

[Signature Page Follows]

20

 

     IN WITNESS WHEREOF, the Grantors and the Administrative Agent have executed this Security
Agreement as of the date first above written.

	 	 	 	 	 
	 	GRANTORS:

PACIFIC SUNWEAR OF CALIFORNIA, INC.

 	 
	 	By:  	/s/ Michael L. Henry
 	 
	 	 	Michael L. Henry 	 
	 	 	Chief Financial Officer and Secretary 	 
	 
	 	PACIFIC SUNWEAR STORES CORP.

 	 
	 	By:  	/s/ Michael L. Henry
 	 
	 	 	Michael L. Henry 	 
	 	 	Chief Financial Officer and Secretary 	 
	 
	 	MIRALOMA CORP.

 	 
	 	By:  	/s/ Michael L. Henry
 	 
	 	 	Michael L. Henry 	 
	 	 	Chief Financial Officer and Secretary 	 
	 
	 	ADMINISTRATIVE AGENT:

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 	 
	 	By:  	/s/ Joseph A. Lisack
 	 
	 	 	Joseph A. Lisack 	 
	 	 	Vice President

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