Document:

Exhibit
        4.1

         

         

         

         

        
         

        
        SECOND LIEN CREDIT AGREEMENT

        by
        and among

        
        BAKERS FOOTWEAR GROUP, INC.

        as
        Borrower,

        
        and

        THE
        LENDERS THAT ARE SIGNATORIES HERETO

        as
        the Lenders,

        
        and

        
        PRIVATE EQUITY MANAGEMENT GROUP, INC.

        as
        the Arranger and Administrative Agent

        Dated
        as of February 1, 2008

        
         

         

         

         

         

        
        

        

         

        
        SECOND LIEN CREDIT AGREEMENT

        
        THIS SECOND LIEN CREDIT AGREEMENT (this
        "Agreement"), is entered into as of
        February 1, 2008, by and among the lenders identified on the signature pages hereof (such
        lenders, together with their respective successors and permitted assigns, are referred to
        hereinafter each individually as a
        "Lender" and collectively as the
        "Lenders"),
        PRIVATE EQUITY MANAGEMENT GROUP, INC., a Nevada
        corporation, as the arranger and administrative agent for the Lenders (in such capacity,
        together with its successors and assigns in such capacity,
        "Agent"), and
        BAKERS FOOTWEAR GROUP, INC., a Missouri
        corporation ("Borrower").

        
        INTRODUCTION

        
        All defined terms not otherwise defined above or in this Introduction are as
        defined in Schedule 1.1 or as defined
        elsewhere herein.

        
        Borrower has requested that the Lenders agree to make Borrower a secured
        term loan of $7,500,000 the proceeds of which will be used for (i) the partial pay down of
        the Indebtedness outstanding under the Senior Loan Agreement, (ii) working capital for
        business operations, and (iii) fees and expenses related to the transactions contemplated
        by the Loan Documents.

        
        To provide assurance and security for the repayment of the loans and other
        Obligations of Borrower hereunder, Borrower will provide or will cause to be provided to
        Agent (for the benefit of the Lender Group) a security interest in all of its personal
        property assets pursuant to the Security Agreement (as defined herein).

        
        As additional inducement to the Lenders, the Borrower has agreed that, on
        the Funding Date, the Borrower will issue to Agent or its Affiliates shares of the
        Borrower’s Common Stock as is set forth next to such Person’s name on
        Schedule E-1 hereto, which shares shall in the
        aggregate total 350,000 shares of the Common Stock of the Borrower. On the Funding Date,
        the parties will enter into the Registration Rights Agreement, pursuant to which, among
        other things the Borrower will agree to provide certain registration rights under the
        Securities Act. The Agent, each Lender and Borrower are executing and delivering this
        Agreement and the Loan Documents in reliance upon the exemption from securities
        registration afforded by the provisions of Regulation D as promulgated by the SEC under the
        Securities Act.

        
        Subject to the terms and conditions set forth herein, Agent is willing to
        act as agent for the Lenders and each Lender is willing to make loans to Borrower in an
        aggregate amount not in excess of its Commitment hereunder.

        
        Accordingly, the parties hereto hereby agree as follows:

        
            	
                        
                        1.

                    	
                        
                        DEFINITIONS AND CONSTRUCTION.

                    

        

        
        1.1       Definitions.
        Except as otherwise provided herein, capitalized terms used in this Agreement shall have
        the meanings specified therefor on Schedule 1.1.

         

        
        

        

         

        
        1.2       Accounting Terms.
        All accounting terms not specifically defined herein shall be construed in accordance with
        GAAP. When used herein, the term "financial statements" shall include the notes and
        schedules thereto. Whenever the term "Borrower" is used in respect of a financial covenant
        or a related definition, it shall be understood to mean Borrower and its Subsidiaries on a
        consolidated basis unless the context clearly requires otherwise. If at any time any change
        in GAAP would affect the computation of any financial ratio or requirement set forth in any
        Loan Document, and either the Borrower or the Agent shall so request, the Agent and the
        Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the
        original intent thereof in light of such change in GAAP; provided that, until so amended,
        (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior
        to such change therein and (ii) the Borrower shall provide to the Agent financial
        statements and other documents required under this Agreement or as reasonably requested
        hereunder setting forth a reconciliation between calculations of such ratio or requirement
        made before and after giving effect to such change in GAAP.

        
        1.3       Code. Any terms
        used in this Agreement that are defined in the Code shall be construed and defined as set
        forth in the Code unless otherwise defined herein, provided, however, that to the extent
        that the Code is used to define any term herein and such term is defined differently in
        different Divisions of the Code, the definition of such term contained in Article 9 shall
        govern.

        
        1.4       Construction.
        Unless the context of this Agreement or any other Loan Document clearly requires otherwise,
        references to the plural include the singular, references to the singular include the
        plural, the terms "includes" and "including" are not limiting, the term "or" has, except
        where otherwise indicated, the inclusive meaning represented by the phrase "and/or," and
        any provision that is set forth herein as part of a list or series is to be construed in a
        manner that does not result in duplication of any other provision in such list or series.
        The words "hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement or
        any other Loan Document refer to this Agreement or such other Loan Document, as the case
        may be, as a whole and not to any particular provision of this Agreement or such other Loan
        Document, as the case may be. Section, subsection, clause, schedule, and exhibit references
        herein are to this Agreement unless otherwise specified. Any reference in this Agreement or
        in the other Loan Documents to any agreement, instrument, or document shall include all
        alterations, amendments, changes, extensions, modifications, renewals, replacements,
        substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to
        any restrictions on such alterations, amendments, changes, extensions, modifications,
        renewals, replacements, substitutions, joinders, and supplements set forth herein). Any
        reference herein to the satisfaction or repayment in full of the Obligations shall mean the
        repayment in full in cash (or cash collateralization in accordance with the terms hereof)
        of all Obligations other than contingent indemnification Obligations. Any reference herein
        to any Person shall be construed to include such Person's successors and assigns. Any
        requirement of a writing contained herein or in the other Loan Documents shall be satisfied
        by the transmission of a Record and any record transmitted shall constitute a
        representation and warranty as to the accuracy and completeness of the information
        contained therein, subject to qualifications of materiality set forth in the Loan
        Documents.

        
        1.5       Schedules and
        Exhibits. All of the schedules and exhibits attached to this Agreement shall be
        deemed incorporated herein by reference.

         

        
        2

         

        
        

        

         

        
            	
                        
                        2.

                    	
                        
                        TERM LOAN AND TERMS OF PAYMENT.

                    

        

        
            	
                        
                         

                    	
                        
                        2.1

                    	
                        
                        INTENTIONALLY OMITTED.

                    

        

         

        
            	
                        
                         

                    	
                        
                        2.2

                    	
                        
                        Term Loan.

                    

        

        
        (a)       Subject to the terms and
        conditions of this Agreement, on the Closing Date, each Lender agrees (severally, not
        jointly or jointly and severally) to make a term loan (collectively, the
        "Term Loan") to Borrower in an amount
        equal to such Lender's Pro Rata Share of the Commitment.

        
        (b)       All amounts outstanding under
        the Term Loan shall constitute Obligations. No portion of the Term Loan which is repaid or
        prepaid may be reborrowed. The Term Loan shall be repaid in installments as set forth in
        the tables set forth in subsections (c) and (d) below; provided, however, that the
        outstanding unpaid principal balance and all accrued and unpaid interest under the Term
        Loan shall be due and payable on the date of termination of this Agreement, whether by its
        terms, by prepayment, or by acceleration.

        
        (c)       Subject to subsection (b) above
        and subsection (d) below, the principal of the Term Loan shall be repaid in installments as
        follows:

        
        (i)        
        commencing on March 1, 2008, and continuing on the first day of each of the
        34 consecutive months thereafter, equal installments of $208,333.33; and

        
        (ii)        on the
        Maturity Date, a final installment in an amount equal to the then unpaid principal balance
        of the Term Loan.

        
        (d)       If Borrower prepays any portion
        of the Term Loan prior to the Maturity Date, such prepayment shall be made in the inverse
        order of maturity, and the payment schedule for the remaining balance shall be recalculated
        so as to result in equal payments which fully amortize the remaining principal balance over
        the remaining term of the Term Loan.

        
            	
                        
                         

                    	
                        
                        2.3

                    	
                        
                        Borrowing Procedure.

                    

        

        
        (a)       Generally.

        
        (i)        
        The Borrowing of the Term Loan shall be made by an irrevocable written
        request by an Authorized Person delivered to Agent and the Lenders. Such notice must be
        received by Agent and the Lenders no later than 10:00 a.m. (California time) on the Closing
        Date, specifying the requested Funding Date, which shall be a Business Day.

        
            	
                        
                         

                    	
                        
                        (ii)

                    	
                        
                        [INTENTIONALLY OMITTED]

                    

        

        
        (iii)       Borrower
        shall borrow pursuant to Section 2.2(a)
        an amount equal to the Term Loan in a single drawing.

        
        (iv)       Subject to
        the other conditions set forth in this Section
        2.3(a), each Lender shall make the amount of such Lender's Pro
        Rata Share of the requested Borrowing

         

        
        3

         

        
        

        

         

        
        available to Agent in immediately available funds, to Agent's Account, not
        later than 10:00 a.m. (California time) on the Funding Date. After Agent's receipt of such
        funds, Agent shall make such funds available to Borrower on the Funding Date by
        transferring immediately available funds equal to such proceeds received by Agent to
        Borrower's Designated Account;
        provided,
        however, that Agent shall not request any
        Lender to make, and no Lender shall have the obligation to make, any portion of the Term
        Loan if Agent shall have actual knowledge that one or more of the applicable conditions
        precedent set forth in Section 3 will
        not be satisfied on the requested Funding Date for the Borrowing unless such condition has
        been waived. In the event any Lender shall not have made the amount of Lender’s Pro
        Rata Share of the requested Borrowing in accordance with the provisions of this
        Section 2.3(a), Agent or its designee shall
        fund any such shortfall and the Lenders’ Pro Rata Shares shall be deemed to be
        adjusted accordingly.

        
        (v)        Agent
        shall not be obligated to transfer to a Defaulting Lender any payments respecting the Term
        Loan made by Borrower to Agent for the Defaulting Lender's benefit, and, in the absence of
        such transfer to the Defaulting Lender, Agent shall transfer any such payments to each
        other non-Defaulting Lender member of the Lender Group ratably in accordance with their
        Commitments (but only to the extent that such Defaulting Lender's portion of the Term Loan
        was funded by the other members of the Lender Group). Solely for the purposes of voting or
        consenting to matters with respect to the Loan Documents, such Defaulting Lender shall be
        deemed not to be a "Lender" and such
        Lender's Commitment shall be deemed to be zero. This Section shall remain effective with
        respect to such Lender until (x) the Obligations under this Agreement shall have been
        declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders,
        Agent, and Borrower shall have waived such Defaulting Lender's default in writing, or (z)
        the Defaulting Lender makes its Pro Rata Share of the applicable portion of the Term Loan
        and pays to Agent all amounts owing by Defaulting Lender in respect thereof. The operation
        of this Section shall not be construed to increase or otherwise affect the Commitment of
        any Lender, to relieve or excuse the performance by such Defaulting Lender or any other
        Lender of its duties and obligations hereunder, or to relieve or excuse the performance by
        Borrower of its duties and obligations hereunder to Agent or to the Lenders other than such
        Defaulting Lender. Any such failure to fund by any Defaulting Lender shall constitute a
        material breach by such Defaulting Lender of this Agreement and shall entitle Borrower at
        its option, upon written notice to Agent, to arrange for a substitute Lender to assume the
        Commitment of such Defaulting Lender, such substitute Lender to be reasonably acceptable to
        Agent. In connection with the arrangement of such a substitute Lender, the Defaulting
        Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and
        deliver a completed form of Assignment and Acceptance in favor of the substitute Lender
        (and agrees that it shall be deemed to have executed and delivered such document if it
        fails to do so) subject only to being repaid its share of the outstanding Obligations
        without any premium or penalty of any kind whatsoever; provided however, that any such
        assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a
        waiver of any of the Lender Group's or Borrower's rights or remedies against any such
        Defaulting Lender arising out of or in relation to such failure to fund.

        
        (b)       
        Notation. Agent shall record on its books the
        principal amount of the Term Loan owing to each Lender, and the interests therein of each
        Lender, from time to time and

         

        
        4

         

        
        

        

         

        such
        records shall, absent manifest error, gross negligence or willful misconduct on the part of
        Agent, conclusively be presumed to be correct and accurate.

        
        (c)       
        Lenders' Failure to Perform. All portions of
        the Term Loan shall be made by the Lenders contemporaneously and in accordance with their
        Pro Rata Shares and subject to Section
        2.2. It is understood that (i) no Lender shall be responsible for
        any failure by any other Lender to perform its obligation to make any portion of the Term
        Loan (or other extensions of credit) hereunder, nor shall any Commitment of any Lender be
        increased or decreased as a result of any failure by any other Lender to perform its
        obligations hereunder, and (ii) no failure by any Lender to perform its obligations
        hereunder shall excuse any other Lender from its obligations hereunder.

        
            	
                        
                         

                    	
                        
                        2.4

                    	
                        
                        Payments.

                    

        

        
        (a)       Payments by
        Borrower.

        
        (i)        
        Except as otherwise expressly provided herein and subject to the Senior Loan
        Subordination Agreement, all payments by Borrower shall be made in Dollars to Agent's
        Account for the account of the Lender Group and shall be made in immediately available
        funds, no later than 11:00 a.m. (California time) on the date specified herein. Any payment
        received by Agent later than 11:00 a.m. (California time) shall be deemed to have been
        received on the following Business Day, and any applicable interest or fee shall continue
        to accrue until such following Business Day.

        
        (ii)        Unless
        Agent receives notice from Borrower prior to the date on which any payment is due to the
        Lenders that Borrower will not make such payment in full as and when required, Agent may
        assume that Borrower has made (or will make) such payment in full to Agent on such date in
        immediately available funds and Agent may (but shall not be so required), in reliance upon
        such assumption, distribute to each Lender on such due date an amount equal to the amount
        then due such Lender. If and to the extent Borrower does not make such payment in full to
        Agent on the date when due, each Lender severally shall repay to Agent on demand such
        amount distributed to such Lender, together with interest thereon at the Defaulting Lender
        Rate for each day from the date such amount is distributed to such Lender until the date
        repaid.

        
        (b)       Apportionment and
        Application.

        
        (i)        
        Except as otherwise provided with respect to Defaulting Lenders and except
        as otherwise provided in the Loan Documents (including agreements between Agent and
        individual Lenders), aggregate principal and interest payments shall be apportioned ratably
        among the Lenders (according to the unpaid principal balance of the Obligations to which
        such payments relate held by each Lender), and payments of fees and expenses (other than
        fees or expenses that are for Agent's separate account, after giving effect to any
        agreements between Agent and individual Lenders) shall be apportioned ratably among the
        Lenders. Subject to the Senior Loan Subordination Agreement, all payments shall be remitted
        to Agent and all such payments, and all proceeds of Collateral received by Agent, shall be
        applied as follows:

         

        
        5

         

        
        

        

         

        
        (A)       
        first, ratably to pay any Lender Group Expenses
        then due to Agent or any of the Lenders under the Loan Documents, until paid in
        full,

        
        (B)       
        second, ratably to pay any fees or premiums
        then due to Agent (for its separate account, after giving effect to any agreements between
        Agent and individual Lenders) or any of the Lenders under the Loan Documents until paid in
        full,

        
        (C)       
        third, ratably to pay interest due in respect
        of the Term Loan until paid in full,

        
        (D)       
        fourth, ratably to pay any principal amount
        then due and payable with respect to the Term Loan until paid in full; provided that, if
        Borrower is making a prepayment of the Term Loan in accordance with
        Sections 2.4(d) or 2.4(e), in accordance
        with Section 2.2(d); and

        
        (E)       
        fifth, to Borrower (to be wired to the
        Designated Account) or such other Person entitled thereto under applicable law.

        
        (ii)        Agent
        promptly shall distribute to each Lender, pursuant to the applicable wire instructions
        received from each Lender in writing, such funds as it may be entitled to
        receive.

        
        (iii)       In each
        instance, so long as no Event of Default has occurred and is continuing, this
        Section 2.4(b) shall not apply to any payment
        made by Borrower to Agent and specified by Borrower to be for the payment of specific
        Obligations then due and payable (or prepayable) under any provision of this
        Agreement.

        
        (iv)       For purposes
        of the foregoing, "paid in full" means
        payment of all amounts owing under the Loan Documents according to the terms thereof,
        including loan fees, service fees, professional fees, interest (and specifically including
        interest accrued after the commencement of any Insolvency Proceeding), default interest,
        interest on interest, and expense reimbursements, except to the extent that default or
        overdue interest (but not any other interest) and loan fees, each arising from or
        related to a default, are disallowed in any Insolvency Proceeding.

        
        (v)        In the
        event of a direct conflict between the priority provisions of this
        Section 2.4 and other provisions contained in
        any other Loan Document, it is the intention of the parties hereto that such priority
        provisions in such documents shall be read together and construed, to the fullest extent
        possible, to be in concert with each other. In the event of any actual, irreconcilable
        conflict that cannot be resolved as aforesaid, the terms and provisions of this
        Section 2.4 shall control and
        govern.

        
        (vi)       The
        provisions of this Section 2.4
        constitute an agreement among Borrower and the Lender Group as to the
        application of payments, Collections and proceeds of Collateral and do not constitute any
        subordination of (x) any Obligations or (y) the right to payment of any
        Obligations.

        
        (c)       Mandatory
        Prepayments.

         

        
        6

         

        
        

        

         

        
        (i)        [INTENTIONALLY
        OMITTED]

        
        (ii)        No
        later than two (2) Business Days following receipt of Net Cash Proceeds from any voluntary
        or involuntary sale or disposition by Borrower or any of its Subsidiaries of property or
        assets after the Closing Date (other than sales or dispositions of Inventory or Equipment
        or other fixed assets in the ordinary course of business and other than any proceeds from
        the termination of the lease for Borrower’s store located on 34th Street,
        New York City, NY), subject to the Senior Loan Subordination Agreement, Borrower shall
        prepay the outstanding Obligations in accordance with clause
        (d) below in an amount equal to 100% of the Net Cash Proceeds in
        excess of $500,000 in any fiscal year of Borrower received by such Person in connection
        with such sales or dispositions to the extent that the aggregate amount of Net Cash
        Proceeds received by Borrower and its Subsidiaries (and not paid to Agent as a prepayment
        of the Obligations) for all such sales or dispositions shall exceed $500,000 in any fiscal
        year. Nothing contained in this subclause (ii)
        shall permit Borrower or any of its Subsidiaries to sell or otherwise
        dispose of any property or assets other than in accordance with
        Section 6.4.

        
        (iii)       No later
        than two (2) Business Days following the receipt by Borrower or any of its Subsidiaries of
        any cash or other collected funds in respect of Extraordinary Receipts after the Closing
        Date in excess of $500,000 in the aggregate in any fiscal year of Borrower ending after the
        Closing Date, subject to the Senior Loan Subordination Agreement, Borrower shall prepay the
        outstanding Obligations in accordance with clause (d)
        below in an amount equal to 100% of such Extraordinary Receipts in excess of
        $500,000 in the aggregate in any fiscal year of Borrower ending after the Closing Date, net
        of any reasonable expenses incurred in collecting such Extraordinary Receipts.

        
        (iv)       No later than
        two (2) Business Days following the issuance or incurrence by Borrower or any of its
        Subsidiaries of any Indebtedness (other than Indebtedness referred to in clauses (a)
        through (c) and (e) through (g) of Section
        6.1) after the Closing Date, or the sale or issuance by Borrower
        or any of its Subsidiaries of any shares of its Capital Stock in an amount in excess of
        $500,000 in any one transaction or series of related transactions, subject to the Senior
        Loan Subordination Agreement and excluding proceeds from the issuance of Capital Stock as a
        result of the exercise of options, warrants or subordinated convertible debentures
        outstanding prior to the Closing Date or the exercise of rights with respect to any Capital
        Stock based compensation awarded to officers, directors or employees of Borrower, Borrower
        shall prepay the outstanding principal of the Obligations in accordance with
        clause (d) in an amount equal to 50% of the Net
        Cash Proceeds received by Borrower or its Subsidiaries in connection with such sale,
        issuance, or incurrence. The provisions of this subsection
        (iv) shall not be deemed to be implied consent to any such sale,
        issuance, or incurrence otherwise prohibited by the terms and conditions of this
        Agreement.

        
        (d)       Application of
        Prepayments.

        
        (i)        
        Each prepayment pursuant to subclauses (c)(ii) and
        (c)(iii) above (in each case except with respect to insurance
        proceeds and condemnation awards related to a casualty or loss of Collateral) and
        subclause (c)(iv) above shall be applied first,
        to payment of the Applicable Prepayment Premium, and then in accordance with
        Section 2.2(d).

         

        
        7

         

        
        

        

         

        
        (ii)        Each
        prepayment pursuant to subclauses (c)(ii)
        above and (c)(iii) with
        respect to insurance proceeds and condemnation awards related to a casualty or loss of
        Collateral shall be applied in the manner set forth in Section
        2.4(b)(i),
        provided,
        however, that, except during the continuation
        of a Default or an Event of Default, such proceeds shall not be required to be so applied
        to the extent that such proceeds are used to replace, repair, or restore the properties or
        assets in respect of which such proceeds were paid if (i) the amount of proceeds received
        in respect of such sales, dispositions, insurance policies, or condemnation awards are less
        than $5,000,000 in the aggregate during the term of this Agreement, (ii) Borrower
        delivers a certificate to Agent within 30 days after such sale or 30 days after the date of
        such loss, destruction, or taking, as the case may be, stating that such proceeds shall be
        used to replace, repair, or restore such properties or assets within a period specified in
        such certificate not to exceed the earlier of (x) 180 days after the receipt of such
        proceeds and (y) the Maturity Date (which certificate shall set forth estimates of the
        proceeds to be so expended), and (iii) such proceeds are immediately deposited in a
        Deposit Account subject to a Control Agreement. If all or any portion of such proceeds not
        so applied to the prepayment of the Obligations in accordance with this
        clause (ii) are not used in accordance with the
        preceding sentence within the period specified in the relevant certificate furnished
        pursuant hereto, such remaining portion shall be applied to the Obligations in accordance
        with this clause (ii) on the last
        day of such specified period. Each such prepayment of the Term Loan shall be applied in
        accordance with Section
        2.2(d).

        
        (e)       
        Optional Prepayment of Term Loan. Borrower
        shall have the right to make full or partial prepayments of the Term Loan, upon two (2)
        Business Days prior written notice to the Agent; provided that any such prepayment shall be
        accompanied by the Applicable Prepayment Premium as provided in the Fee Letter. Any
        optional prepayment of the Term Loan shall be in a minimum amount of the lesser of (x) the
        then remaining principal balance of the Term Loan and (y) $500,000. Each such prepayment of
        the Term Loan shall be applied against the remaining installments of principal of the Term
        Loan in the inverse order of maturity.

        
        2.5       Payment of
        Obligations. Borrower hereby promises to pay the Obligations (including principal,
        interest, fees, costs, and expenses) in Dollars in full as and when due and payable under
        the terms of this Agreement and the other Loan Documents.

        
        2.6       Interest: Rates,
        Payments, and Calculations.

        
        (a)       Interest
        Rate.Except as provided in clause (b) below, all Obligations that
        have been charged to the Loan Account pursuant to the terms hereof shall bear interest on
        the Daily Balance thereof at fifteen percent (15%) per annum.

        
        (b)       Default
        Rate.Upon the occurrence and during the continuation of an Event
        of Default (and at the election of Agent or the Required Lenders), all Obligations that
        have been charged to the Loan Account pursuant to the terms hereof shall bear interest on
        the Daily Balance thereof at a per annum rate equal to two and one half (2 1/2) percentage
        points above the per annum rate otherwise applicable hereunder.

        
        (c)       Payment.
        Except as provided to the contrary in Section
        2.11, interest and all fees payable hereunder shall be due and
        payable, in arrears, on the first day of each month at any time

         

        
        8

         

        
        

        

         

        that
        Obligations are outstanding. Borrower hereby authorizes Agent, from time to time, without
        prior notice to Borrower, to charge all fees (when due and payable), all Lender Group
        Expenses (as and when incurred), all fees and costs provided for in
        Section 2.11 (as and when accrued or incurred),
        and all other payments as and when due and payable under any Loan Document (including the
        amounts due and payable with respect to the Term Loan) and in each case (other than fees
        provided in Section 2 of the Fee Letter) which are not paid by Borrower within thirty (30)
        days of the date of Agent’s invoice therefor to Borrower's Loan Account, which
        amounts thereafter shall accrue interest at the rate then applicable to the Term Loan. Any
        interest not paid when due shall be compounded by being charged to Borrower's Loan Account
        and shall accrue interest at the rate then applicable to the applicable Loan.

        
        (d)       
        Computation.All interest
        and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day
        year for the actual number of days elapsed.

        
        (e)       Intent to Limit Charges to
        Maximum Lawful Rate.In no event shall the interest rate or rates
        payable under this Agreement, plus any other amounts paid in connection herewith, exceed
        the highest rate permissible under any law that a court of competent jurisdiction shall, in
        a final determination, deem applicable. Borrower and the Lender Group, in executing and
        delivering this Agreement, intend legally to agree upon the rate or rates of interest and
        manner of payment stated within it;
        provided,
        however, that, anything contained herein to the
        contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds
        the maximum allowable under applicable law, then, ipso
        facto, as of the date of this Agreement, Borrower is and shall be
        liable only for the payment of such maximum as allowed by law, and payment received from
        Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the
        principal balance of the Obligations to the extent of such excess.

        
        2.7       INTENTIONALLY
        OMITTED.

        
        2.8       Crediting
        Payments. The receipt of any payment item by Agent shall not be considered a
        payment on account unless such payment item is a wire transfer of immediately available
        federal funds made to the Agent's Account or unless and until such payment item is honored
        when presented for payment. Should any payment item not be honored when presented for
        payment, then Borrower shall be deemed not to have made such payment and interest shall be
        calculated accordingly. Anything to the contrary contained herein notwithstanding, any
        payment item shall be deemed received by Agent only if it is received into the Agent's
        Account on a Business Day on or before 11:00 a.m. (California time). If any payment item is
        received into the Agent's Account on a non-Business Day or after 11:00 a.m. (California
        time) on a Business Day, it shall be deemed to have been received by Agent as of the
        opening of business on the immediately following Business Day.

        
        2.9       Designated
        Account. Agent is authorized to make the Loans under this Agreement based upon
        telephonic or other instructions received from anyone purporting to be an Authorized Person
        or, without instructions, if pursuant to Section 2.6(c). Borrower agrees to establish and
        maintain the Designated Account with the Designated Account Bank for the purpose of
        receiving the proceeds of the Term Loan requested by Borrower and made by Agent or the
        Lenders hereunder. Unless otherwise agreed by Agent and Borrower, the proceeds of the Term
        Loan shall be made to the Designated Account.

         

        
        9

         

        
        

        

         

        
        2.10     Maintenance of Loan Account;
        Statements of Obligations. Agent shall maintain an account on its books in the name
        of Borrower (the "Loan Account") on which Borrower will be charged with the Term Loan, and
        with all other payment Obligations hereunder or under the other Loan Documents, including
        accrued interest, fees and expenses, and Lender Group Expenses. In accordance with Section
        2.8, the Loan Account will be credited with all payments received by Agent from Borrower or
        for Borrower's account. Agent shall render statements regarding the Loan Account to
        Borrower, including principal, interest, fees, and including an itemization of all charges
        and expenses constituting Lender Group Expenses owing, and such statements, absent manifest
        error, shall be rebuttably presumed to be correct and accurate.

        
        2.11     Fees. Borrower shall pay to
        Agent, as and when due and payable under the terms of the Fee Letter, the fees set forth in
        the Fee Letter.

        
        2.12     INTENTIONALLY OMITTED.

        
        2.13     INTENTIONALLY OMITTED.

        
        2.14     Registered Notes. Agent,
        acting solely for this purpose as a non-fiduciary agent on behalf of Borrower (or in the
        case of an assignment not recorded in the Register in accordance with Section 13.1(f), the
        assigning Lender) agrees to record the Commitments and Term Loan on the Register. The Term
        Loan recorded on the Register shall be evidenced only by the Registered Notes (as defined
        below). Upon the registration of the Term Loan, Borrower agrees to execute and deliver to
        each Lender a Subordinated Term Note, in the form of Exhibit B-1 hereto, and registered as
        provided in Section 13.1(f) (a "Registered Note"), payable to the order of such Lender or
        its registered assigns and otherwise duly completed. Once recorded on the Register, no
        Commitment or Term Loan may be removed from the Register so long as it or they remain
        outstanding, and a Registered Note may not be exchanged for a promissory note that is not a
        Registered Note.

        
        2.15     Issuance of Common Shares.
        Subject to the terms and conditions of this Agreement, on the Closing Date at the closing,
        the Agent shall purchase and the Borrower shall sell and issue to the Agent or its
        designees the Common Shares in the respective amounts set forth on Schedule E-1 hereto as
        additional consideration for the Agent entering into this Agreement and arranging the Term
        Loan.

        
            	
                        
                        3.

                    	
                        
                        CONDITIONS; TERM OF AGREEMENT.

                    

        

        
        3.1       Conditions Precedent to
        the Extension of Credit and Issuance of Common Shares. The obligation of each
        Lender to make its extension of credit provided for hereunder, is subject to the
        fulfillment, to the satisfaction of Agent and each Lender of each of the conditions
        precedent set forth on Schedule 3.1 (the making of such extension of credit by a Lender
        being conclusively deemed to be its satisfaction or waiver of the conditions precedent).
        The Borrower’s obligation to sell and issue the Notes and Common Shares and to accept
        the extension of credit at the closing is subject to the fulfillment to the satisfaction of
        the Borrower on or prior to the Closing Date of the conditions precedent set forth on
        Schedule 3.1A, any of which may be waived by the Borrower.

        
        3.2     INTENTIONALLY OMITTED.

         

        
        10

         

        
        

        

         

        
        3.3       Term. This
        Agreement shall continue in full force and effect for a term ending on February 1, 2011
        (the "Maturity Date"), unless terminated earlier in accordance with the terms of this
        Agreement. The foregoing notwithstanding, the Lender Group, upon the election of the
        Required Lenders, shall have the right to terminate its obligations under this Agreement
        pursuant to Section 8.1.

        
        3.4       Effect of
        Termination. On the date of termination of this Agreement, all Obligations
        immediately shall become due and payable without notice or demand. No termination of this
        Agreement, however, shall relieve or discharge Borrower of its duties, Obligations, or
        covenants hereunder or under any other Loan Document, and the Agent's Liens in the
        Collateral shall remain in effect until all Obligations have been paid in full and the
        Lender Group's obligations to provide additional credit hereunder have been terminated.
        When this Agreement has been terminated and all of the Obligations have been paid in full
        and the Lender Group's obligations to provide additional credit under the Loan Documents
        have been terminated irrevocably, Agent will, at Borrower's sole expense, execute and
        deliver any termination statements, lien releases, mortgage releases, re-assignments of
        trademarks, discharges of security interests, and other similar discharge or release
        documents (and, if applicable, in recordable form) as are reasonably necessary to release,
        as of record, the Agent's Liens and all notices of security interests and liens previously
        filed by Agent with respect to the Obligations.

        
        3.5       Early Termination by
        Borrower. Borrower has the option, at any time upon 2 Business Days prior written
        notice by Borrower to Agent, to terminate this Agreement by paying to Agent, in cash, the
        Obligations in full. If Borrower has sent a notice of termination pursuant to the
        provisions of this Section, then the Commitments shall terminate and Borrower shall be
        obligated to repay in cash the Obligations in full on the date set forth as the date of
        termination of this Agreement in such notice.

        
            	
                        
                        4.

                    	
                        
                        BORROWER’S REPRESENTATIONS AND
                        WARRANTIES.

                    

        

        
        In order to induce the Lender Group to enter into this Agreement, Borrower
        makes the following representations and warranties to the Lender Group which shall be true,
        correct, and complete as of the date hereof, and shall be true, correct, and complete as of
        the Closing Date, (except to the extent that such representations and warranties relate
        solely to an earlier date) and such representations and warranties shall survive the
        execution and delivery of this Agreement:

        
        4.1       No Encumbrances.
        Borrower has good and indefeasible title to, or a valid leasehold interest in, its personal
        property assets and good and marketable title to, or a valid leasehold interest in, its
        Real Property, in each case, free and clear of Liens except for Permitted Liens.

        
        4.2     INTENTIONALLY OMITTED.

        
        4.3     INTENTIONALLY OMITTED.

        
        4.4       Equipment. Each
        item of Equipment of Borrower and its Subsidiaries which is material to their business is
        in good working order, ordinary wear and tear and damage by casualty excepted.

         

        
        11

         

        
        

        

         

        
        4.5       Location of Inventory and
        Equipment. The Inventory and Equipment (other than vehicles or Equipment out for
        repair) of Borrower are not stored with a bailee, warehouseman, or similar party except as
        set forth in Schedule 4.5 and are located only at, or in-transit between, the locations
        identified on Schedule 4.5 (as such Schedule may be updated pursuant to Section
        5.9).

        
        4.6       Inventory
        Records. Borrower keeps correct and accurate records itemizing and describing the
        type, quality, and quantity of its Inventory and the book value thereof in all material
        respects.

        
        4.7       State of Incorporation;
        Location of Chief Executive Office; Organizational Identification Number; Commercial Tort
        Claims.

        
        (a)       The name and jurisdiction of
        organization of Borrower and each of its Subsidiaries is set forth on
        Schedule 4.7(a).

        
        (b)       The chief executive office of
        Borrower and, as of the Closing Date, each of its Subsidiaries, is located at the address
        indicated on Schedule 4.7(b).

        
        (c)       Borrower's and each of its
        Subsidiaries' organizational identification number, if any, is identified on
        Schedule 4.7(c).

        
        (d)       As of the Closing Date, to the
        best of Borrower’s knowledge, Borrower and its Subsidiaries do not hold any
        commercial tort claims, except as set forth on Schedule
        4.7(d).

        
        4.8       Due Organization and
        Qualification; Subsidiaries.

        
        (a)       Borrower is duly organized and
        existing and in good standing under the laws of the jurisdiction of its organization and
        qualified to do business in any state where the failure to be so qualified reasonably could
        be expected to result in a Material Adverse Change.

        
        (b)       Set forth on
        Schedule 4.8(b) is a complete and accurate
        description of the authorized capital stock of Borrower, by class, and, as of the Closing
        Date, a description of the number of shares of each such class that are issued and
        outstanding. Other than as described on Schedule
        4.8(b), there are no subscriptions, options, warrants, or calls
        relating to any shares of Borrower's capital stock, including any right of conversion or
        exchange under any outstanding security or other instrument. Borrower is not subject to any
        obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any
        shares of its capital stock or any security convertible into or exchangeable for any of its
        capital stock.

        
        (c)       Set forth on
        Schedule 4.8(c) is a complete and accurate list
        of Borrower's direct and indirect Subsidiaries, showing: (i) the jurisdiction of its
        organization, (ii) the number of shares of each class of common and preferred stock
        authorized for each of such Subsidiaries, and (iii) the number and the percentage of the
        outstanding shares of each such class owned directly or indirectly by Borrower. All of the
        outstanding capital stock of each such Subsidiary has been validly issued and is fully paid
        and non-assessable.

         

        
        12

         

        
        

        

         

        
        (d)       Except as set forth on
        Schedule 4.8(c), there are no subscriptions,
        options, warrants, or calls relating to any shares of Borrower's Subsidiaries' capital
        stock, including any right of conversion or exchange under any outstanding security or
        other instrument. Neither Borrower nor any of its Subsidiaries is subject to any obligation
        (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of
        Borrower's Subsidiaries' capital stock or any security convertible into or exchangeable for
        any such capital stock.

        
        4.9       Due Authorization; No
        Conflict.

        
        (a)       The execution, delivery, and
        performance by Borrower of this Agreement and the other Loan Documents to which it is a
        party have been duly authorized by all necessary action on the part of Borrower.

        
        (b)       Other than as identified
        on Schedule 4.9(b), the execution,
        delivery, and performance by Borrower of this Agreement and the other Loan Documents to
        which it is a party do not (i) violate any provision of federal, state, or local law or
        regulation applicable to Borrower, the Governing Documents of Borrower, or any order,
        judgment, or decree of any court or other Governmental Authority binding on Borrower, (ii)
        conflict with, result in a breach of, or constitute (with due notice or lapse of time or
        both) a default under any material contract to which Borrower is a party, (iii) result in
        or require the creation or imposition of any Lien of any nature whatsoever upon any of the
        material properties or assets of Borrower, other than Permitted Liens, or (iv) require any
        approval of Borrower's interest holders or any approval or consent of any Person under any
        material contract to which Borrower is a party, other than consents or approvals that have
        been obtained and that are still in force and effect.

        
        (c)       Other than the consents and
        filings identified on Schedule 4.9(c),
        the execution, delivery, and performance by Borrower of this Agreement and the other Loan
        Documents to which Borrower is a party do not and will not require any registration with,
        consent, or approval of, or notice to, or other action with or by, any Governmental
        Authority or other third Person, other than consents or approvals that have been obtained
        and that are still in force and effect.

        
        (d)       This Agreement and the other
        Loan Documents to which Borrower is a party, and all other documents contemplated hereby
        and thereby, when executed and delivered by Borrower will be the legally valid and binding
        obligations of Borrower, enforceable against Borrower in accordance with their respective
        terms, except as enforcement may be limited by equitable principles or by bankruptcy,
        insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors'
        rights generally.

        
        (e)       The Agent's Liens are validly
        created, perfected (to the extent perfected by filing of a UCC-1 financing statement) and
        first priority Liens, subject only to Permitted Liens.

        
        4.10     Litigation. Other than those
        matters disclosed on Schedule 4.10, there are no material actions, suits, or proceedings
        pending or, to the best knowledge of Borrower, threatened against Borrower or any of its
        Subsidiaries, as applicable, except for (a) matters that are fully covered by insurance
        (subject to customary deductibles) and (b) matters arising after the Closing

         

        
        13

         

        
        

        

         

        Date
        that, if decided adversely to Borrower or any of its Subsidiaries, as applicable,
        reasonably could not be expected to result in a Material Adverse Change.

        
        4.11     No Material Adverse Change.
        All financial statements of Borrower and its Subsidiaries that have been delivered by
        Borrower to the Lender Group have been prepared in accordance with GAAP (except, in the
        case of unaudited financial statements, for the lack of footnotes and being subject to
        year-end audit adjustments) and present fairly in all material respects, Borrower's and its
        Subsidiaries' financial condition in accordance with GAAP as of the date thereof and
        results of operations for the period then ended. There has not been a Material Adverse
        Change with respect to Borrower and its Subsidiaries since the date of the latest
        consolidated financial statements submitted to Agent on or before the Closing
        Date.

        
        4.12     Fraudulent
        Transfer.

        
        (a)       Borrower is Solvent.

        
        (b)       No transfer of property is
        being made by Borrower or any Subsidiary of Borrower and no obligation is being incurred by
        Borrower or any Subsidiary of Borrower in connection with the transactions contemplated by
        this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud
        either present or future creditors of Borrower or its Subsidiaries.

        
        4.13     Employee Benefits. None of
        Borrower, any of its Subsidiaries, or any of its ERISA Affiliates maintains or contributes
        to any Benefit Plan or Multiemployer Plan. No ERISA Event has occurred nor has any other
        event occurred that may result in an ERISA Event that reasonably could be expected to
        result in a Material Adverse Change.

        
        4.14     Environmental Condition.
        Except as set forth on Schedule 4.14, and except for other matters that, in the aggregate,
        could not reasonably be expected to result in a Material Adverse Change: (a) to Borrower's
        knowledge, none of Borrower's properties or assets has ever been used by Borrower or by
        previous owners or operators in the disposal of, or to produce, store, handle, treat,
        release, or transport, any Hazardous Materials, where such use, production, storage,
        handling, treatment, release or transport was in violation, in any material respect, of any
        applicable Environmental Law, (b) to Borrower's knowledge, none of Borrower's properties or
        assets has ever been designated or identified in any manner pursuant to any environmental
        protection statute as a Hazardous Materials disposal site, (c) Borrower has not received
        notice that a Lien arising under any Environmental Law has attached to any revenues or to
        any Real Property owned or operated by Borrower, and (d) Borrower has not received a
        summons, citation, notice, or directive from the United States Environmental Protection
        Agency or any other federal or state governmental agency concerning any action or omission
        by Borrower resulting in the releasing or disposing of Hazardous Materials into the
        environment.

        
        4.14     Intellectual
        Property.

        
        (a)       Borrower and each Subsidiary of
        Borrower owns or has a right to use all Patents, Copyrights, Trademarks and Licenses that
        are necessary to the conduct of its business as currently conducted. Attached hereto
        as Schedule 4.15 (as updated annually)
        is a true, correct, and complete listing of Patents, Copyrights and Trademarks as to which
        Borrower and each

         

        
        14

         

        
        

        

         

        
        Subsidiary of Borrower is the owner or is an exclusive licensee
        (collectively, the "Scheduled Intellectual Property
        Collateral") as of the date hereof.

        
        (b)       Except as set forth in
        Schedule 4.15:

        
        (i)        
        Borrower and each Subsidiary of Borrower is the sole owner or is an
        exclusive licensee of its Scheduled Intellectual Property Collateral, free and clear of any
        Lien (other than any Permitted Lien) without the payment of any monies or royalty except
        with respect to off-the-shelf software;

        
        (ii)       
        Borrower and each Subsidiary of Borrower has taken, and will continue to
        take, all actions which are reasonably necessary or advisable to acquire and protect its
        Scheduled Intellectual Property Collateral, including: (x) registering all Copyrights
        included within the Scheduled Intellectual Property Collateral which, in such Borrower's or
        Subsidiary's business judgment, are of sufficient value to merit such treatment, in the
        U.S. Copyright Office, and (y) registering all Patents and Trademarks included within the
        Scheduled Intellectual Property Collateral which, in such Borrower's or Subsidiary's
        business judgment, are of sufficient value to merit such treatment, in the United States
        Patent and Trademark Office;

        
        (iii)       Borrower's
        and each Subsidiary of Borrower's rights in the Scheduled Intellectual Property Collateral
        are valid and enforceable;

        
        (iv)       Neither
        Borrower nor any Subsidiary of Borrower has received any material demand, claim, notice or
        inquiry from any Person in respect of the Scheduled Intellectual Property Collateral which
        challenges, threatens to challenge or inquiries as to whether there is any basis to
        challenge, the validity of, the rights of Borrower and its Subsidiaries in or the right of
        Borrower and its Subsidiaries to use, any such Scheduled Intellectual Property Collateral,
        and Borrower and its Subsidiaries know of no basis for any such challenge;

        
        (v)        Borrower
        and its Subsidiaries have not received any written notice of any violation or infringement
        of any proprietary rights of any other Person that could reasonably be expected to result
        in a Material Adverse Change;

        
        (vi)       Borrower and
        its Subsidiaries have not granted any license with respect to any Scheduled Intellectual
        Property Collateral to any Person;

        
        (vii)      Borrower and its
        Subsidiaries are not pursuing any claims or causes of actions against any Person for
        infringement of the Scheduled Intellectual Property Collateral that could reasonably be
        expected to result in a Material Adverse Change; and

        
        (viii)     Notwithstanding any
        provision of the Loan Documents to the contrary, neither the Borrower nor any Subsidiary of
        Borrower shall be obligated to acquire, maintain, or protect any Scheduled Intellectual
        Property Collateral in the event Borrower or its Subsidiary determines, in its reasonable
        business judgment, that such collateral is no longer necessary or desirable in the conduct
        of its business.

        
        4.16     Leases. Borrower enjoys
        peaceful and undisturbed possession under all leases of Equipment and Real Property
        material to their business and to which they are parties or under

         

        
        15

         

        
        

        

         

        which
        they are operating, and all of such material leases are valid and subsisting and no
        material default by Borrower which has continued beyond any applicable notice and cure
        period exists under any of them. Borrower's Subsidiaries enjoy peaceful and undisturbed
        possession under all leases of Equipment and Real Property material to the business of the
        Borrower and its Subsidiaries, taken as a whole, and to which they are parties or under
        which they are operating, and all of such material leases are valid and subsisting and no
        default material to the business of the Borrower and its Subsidiaries, taken as a whole, by
        any of Borrower's Subsidiaries exists under any of them.

        
        4.17     Deposit Accounts and Securities
        Accounts. Set forth on Schedule 4.17 is a listing of all of Borrower's and its
        Subsidiaries' Deposit Accounts and Securities Accounts, including, with respect to each
        bank or securities intermediary (a) the name and address of such Person, and (b) the
        account numbers of the Deposit Accounts or Securities Accounts maintained with such
        Person.

        
        4.18     Complete Disclosure. All
        factual information (taken as a whole) furnished by or on behalf of Borrower or its
        Subsidiaries in writing to Agent or any Lender (including all information contained in the
        Schedules hereto or in the other Loan Documents, including the SEC Filings), for purposes
        of or in connection with this Agreement, the other Loan Documents, or any transaction
        contemplated herein or therein is, and all other such factual information (taken as a
        whole) hereafter furnished by or on behalf of Borrower or its Subsidiaries in writing to
        Agent or any Lender will be, true and accurate in all material respects on the date as of
        which such information is dated or certified and not incomplete by omitting to state any
        fact necessary to make such information not misleading at such time in light of the
        circumstances under which such information was provided. On the Closing Date, the Closing
        Date Projections represent, and as of the date on which any other Projections are delivered
        to Agent, such additional Projections represent Borrower's good faith estimate of its
        consolidated future performance for the periods covered thereby, taking into account the
        assumptions and qualifications discussed therein; provided, however, that the Closing Date
        Projections and additional Projections are not to be viewed as facts and that actual
        results during the period or periods covered by such Projections may differ from such
        Projections and that the differences may be material.

        
        4.19     Indebtedness. Set forth on
        Schedule 4.19 is a true and complete list of all Indebtedness of Borrower and each
        Subsidiary of Borrower outstanding immediately prior to the Closing Date that is to remain
        outstanding after the Closing Date, and such Schedule accurately reflects the aggregate
        principal amount of such Indebtedness as of the Closing Date.

        
        4.20     Regulation U. No action has
        been taken or is currently planned by Borrower or any of its Subsidiaries which would cause
        this Agreement or any of the other Loan Documents to violate Regulation U or any other
        regulation of the Board of Governors of the Federal Reserve System, or to violate the
        Exchange Act, in each case as in effect now or as the same may hereafter be in effect.
        Borrower is not engaged in the business of extending credit for the purpose of purchasing
        or carrying margin stock as one of its important activities and, except as may be expressly
        agreed to and documented between Borrower and Agent, none of the proceeds of the Term Loan
        will be used directly or indirectly for such purpose.

         

        
        16

         

        
        

        

         

        
        4A.      
        AGENT’S AND LENDERS’ REPRESENTATIONS AND
        WARRANTIES. Agent and each Lender hereby represent and warrant to
        the Borrower as follows:

        
        4A.1     Organization;
        Authorization. All action on the
        part of such Agent and each Lender necessary for the authorization, execution, delivery and
        performance of all its obligations under this Agreement has been (or will be) taken prior
        to the Closing Date. Such Agent and each Lender is a natural person or is an entity duly
        organized, validly existing and in good standing under the laws of the jurisdiction of its
        organization with requisite individual, corporate, or organizational power and authority to
        enter into and to consummate the transactions contemplated by the Loan Documents and to
        otherwise carry out its obligations hereunder. The Loan Documents, when executed and
        delivered by Agent and each Lender, shall constitute a valid and legally binding obligation
        of Agent and each Lender enforceable in accordance with its terms, except as such
        enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
        moratorium, liquidation or similar laws relating to, or affecting generally the enforcement
        of, creditors’ rights and remedies or by equitable principles of general
        application.

        
        4A.2     Brokers and
        Finders. No Person will have, as
        a result of the transactions contemplated by this Agreement, any valid right, interest or
        claim against or upon the Borrower or Agent or any Lender for any commission, fee or other
        compensation pursuant to any agreement, arrangement or understanding entered into by or on
        behalf of Agent or any Lender.

        
        4A.3     Prohibited
        Transactions. Since the time the Agent or any Lender was
        first contacted regarding an investment in the Borrower until the date hereof, neither
        Agent or any Lender nor any Affiliate of Agent or any Lender which (x) had knowledge of the
        transactions contemplated hereby, (y) has or shares discretion relating to Agent or such
        Lender’s investments or trading or information concerning Agent or such
        Lender’s investments, including in respect of the Securities, or (z) is subject to
        Agent or such Lender’s review or input concerning such Affiliate’s investments
        or trading (collectively, “Trading
        Affiliates”) has, directly or indirectly, effected or
        agreed to effect any transactions in the securities of the Borrower, including any short
        sale, whether or not against the box, established any “put equivalent position”
        (as defined in Rule 16a-1(h) under the Exchange Act) with respect to the Common Stock,
        granted any other right (including, without limitation, any put or call option) with
        respect to the Common Stock or with respect to any security that includes, relates to or
        derived any significant part of its value from the Common Stock or otherwise sought to
        hedge its position in the Securities (each, a “Prohibited
        Transaction”). Agent and each Lender shall not, and shall
        cause its Trading Affiliates not to, engage, directly or indirectly, in a Prohibited
        Transaction during the period from the date hereof until such time as (i) the transactions
        contemplated by this Agreement are first publicly announced or (ii) this Agreement is
        terminated.

        
        4A.4     Limited
        Ownership. The purchase by Agent and each Lender of the
        Securities issuable to it at the closing will not result in Agent nor each such Lender
        (individually or together with other Persons with whom Agent or such Lender has identified,
        or will have identified, itself as part of a “group” in a public filing made
        with the SEC involving the Borrower’s securities) acquiring, or obtaining the right
        to acquire, beneficial ownership in excess of 19.999% of the outstanding shares of Common
        Stock or the voting power of the Borrower on a post-transaction basis that assumes that
        such closing shall have occurred. Agent and each Lender does not presently intend to, alone
        or together with others, make a public filing with the

         

        
        17

         

        
        

        

         

        SEC to
        disclose that it has (or that it together with such other Persons have) acquired, or
        obtained the right to acquire, as a result of such closing (when added to any other
        securities of the Borrower that it or they then own or have the right to acquire),
        beneficial ownership in excess of 19.99% of the outstanding shares of Common Stock or the
        voting power of the Borrower on a post-transaction basis that assumes that the closing at
        issue shall have occurred.

        
        4A.5     Independent
        Investment Decision. Agent and each Lender has independently
        evaluated the merits of its decision to purchase Securities pursuant to the Loan Documents,
        and Agent and each Lender confirms that it has not relied on the advice of any other
        Person’s business, tax and/or legal counsel in making such decision. Agent and each
        Lender has not relied on the business, legal advice or tax advice of the Borrower or any of
        the Borrower’s agents, counsel or Affiliates in making its investment decision
        hereunder. Agent and each Lender acknowledges that the Borrower makes no representations or
        warranties regarding the tax consequences of the Securities to Agent and each
        Lender.

        
            	
                        
                         

                    	
                        
                        4A.6

                    	
                        
                        Investment
                        Representations.

                    

        

        
        (a)       This Agreement is made with the
        Agent and each Lender in reliance upon each of Agent’s and Lender’s
        representation to the Borrower, which by its acceptance hereof Agent and each Lender hereby
        confirms, that the Securities to be received by it will be acquired for investment purposes
        and for its own account (not as a nominee or agent, and not with a view to the sale or
        distribution of any part thereof), and that neither the Agent nor any Lender has the
        present intention of selling, granting participation in or otherwise distributing the same.
        By executing this Agreement, Agent and each Lender further represents that they do not have
        any contract, undertaking, agreement or arrangement with any person to sell, transfer or
        grant participation to such person or to any third person with respect to any of the
        Securities. Neither the Agent nor any Lender are registered broker dealers or an entity
        engaged in the business of being a broker dealer.

        
        (b)       Each of Agent and each Lender
        understands that the Securities are not registered under the Securities Act, on the ground
        that the sale provided for pursuant to this Agreement and the issuance of the Securities
        hereunder should be exempt from registration under the Securities Act and that the
        Borrower’s reliance on such exemption is predicated on such Agent’s and
        Lenders’ representations set forth herein. Agent and each Lender realize that the
        basis for the exemption may not be present if, notwithstanding such representations, such
        Agent or Lender has in mind merely acquiring the Securities for a fixed or determinable
        period in the future, or for a market rise or for sale if the market does not rise. Agent
        and each Lender confirm that it has no such intention.

        
        (c)       At the time such Agent or
        Lender was offered the Securities, it was, and at the date hereof it is, an
        “accredited investor” as defined in Rule 501(a) of Regulation D, as amended,
        under the Securities Act. Agent and each Lender represent that each is experienced in
        evaluating and investing in companies such as the Borrower, is able to fend for itself in
        the transactions contemplated by this Agreement, including the Notes and the Common Stock,
        has such knowledge and experience in financial and business matters as to be capable of
        evaluating the merits and risks of its investment and has the ability to bear the economic
        risks of its investment. Agent and each Lender acknowledge receipt of copies of and its
        satisfactory review

         

        
        18

         

        
        

        

         

        of the
        SEC Filings. Agent and each Lender further represent that it has had access, during the
        course of the transaction and prior to its purchase of the Securities, to the same kind of
        information that would be provided in a registration statement filed by the Borrower under
        the Securities Act and that it has had, during the course of the transaction and prior to
        its purchase of the Securities, the opportunity to ask questions of, and receive answers
        from, the Borrower concerning the terms and conditions of the offering and to obtain
        additional information necessary to verify the accuracy of any information furnished to it
        or to which it had access and that it has received such information that is necessary to
        make an informed investment decision with respect to the Securities. Neither Agent nor any
        Lender learned of the investment in the Securities as a result of any “general
        advertising” or “general solicitation” as those terms are contemplated in
        Regulation D, as amended, under the Securities Act. Each Lender is an Eligible Transferee
        and was not formed solely for the purpose of investing in the Securities.

        
        (d)       Agent and each Lender
        understand that the Securities may only be disposed of in compliance with state and federal
        securities laws. Agent and each Lender understand that the Securities are characterized as
        “restricted securities” under the U.S. federal securities laws inasmuch as they
        are being acquired from the Borrower in a transaction not involving a public offering.
        Agent and each Lender further understand that the Securities may not be sold, transferred
        or otherwise disposed of without registration under the Securities Act or an exemption
        therefrom, and that in the absence of an effective registration statement covering the
        Securities or an available exemption from registration under the Securities Act, the
        Securities must be held indefinitely. In particular, Agent and each Lender is aware that
        the Securities may not be sold pursuant to Rule 144 unless all of the conditions of Rule
        144 are met and that Agent or each Lender may be deemed to be an “affiliate”
        for purposes of the rule. Agent and each Lender represent that, in the absence of an
        effective registration statement covering the Securities, it will sell, transfer or
        otherwise dispose of the Securities only in a manner consistent with its representations
        set forth herein and in accordance with the terms and conditions of this
        Agreement.

        
        (e)       Agent and each Lender agrees
        that in no event will it make a transfer or disposition of any of the Securities (other
        than pursuant to an effective registration statement under the Securities Act) unless and
        until (i) such Agent or Lender shall have notified the Borrower of the proposed disposition
        and shall have furnished the Borrower with a statement of the circumstances surrounding the
        disposition and assurance that the proposed disposition is in compliance with all
        applicable laws and (ii) if reasonably requested by the Borrower, at the expense of such
        Agent or Lender or transferee, it shall have furnished to the Borrower an opinion of
        counsel, reasonably satisfactory to the Borrower, to the effect that such transfer may be
        made without registration under the Securities Act.

        
            	
                        
                         

                    	
                        
                        4A.7

                    	
                        
                        Legends.

                    

        

        
        (a)       All certificates for the
        Securities may bear the following or a substantially similar legend:

        THESE
        SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
        SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
        THE SECURITIES

         

        
        19

         

        
        

        

         

        ACT OF
        1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
        OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
        PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
        REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
        SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
        EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE [BORROWER].

        
        (b)       The certificates for the
        Securities may also bear any legend required by any applicable state securities or other
        law or any of the other agreements executed by Agent or any Lender in connection with its
        investment in the Borrower.

        
        4A.8     Securities Laws
        Disclosure; Publicity. The Borrower may issue a press release
        reasonably acceptable to the Agent disclosing the transactions contemplated hereby within
        four Business Days of the date of this Agreement and timely file a Current Report on Form
        8-K disclosing the material terms of the transactions contemplated hereby. In addition, the
        Borrower may make such other filings and notices in the manner and time required by the SEC
        and the Eligible Market on which the Common Stock is listed with respect to the
        transactions contemplated hereby.

        
            	
                        
                        5.

                    	
                        
                        AFFIRMATIVE COVENANTS.

                    

        

        
        Borrower covenants and agrees that, until termination of all of the
        Commitments and payment in full of the Obligations, Borrower shall and shall cause each of
        its Subsidiaries to do all of the following (provided, however, that only Borrower is
        required to comply with Section 5.2
        and Section
        5.3):

        
        5.1       
        Accounting System. Maintain a system of accounting that enables Borrower to
        produce financial statements in accordance with GAAP and maintain records pertaining to the
        Collateral that contain information as from time to time reasonably may be requested by
        Agent. Borrower also shall keep a reporting system that shows all additions, sales, claims,
        returns and allowances with respect to its sales.

        
        5.2       
        Collateral Reporting. Provide Agent with each of the reports set forth on
        Schedule 5.2 at the times specified therein.

        
        5.3       Financial
        Statements, Reports, Certificates. Deliver to Agent each of the financial
        statements, reports, or other items set forth on Schedule 5.3 at the time specified herein.
        In addition, Borrower agrees that no Subsidiary of Borrower will have a fiscal year end
        different from that of Borrower, other than as required by applicable law.

        
        5.4       
        Appraisal. Permit Agent to have the Inventory reappraised by an appraisal
        company selected by Agent from time to time after the Closing Date; provided, however, that
        Borrower may satisfy this covenant by delivery to Agent, no less frequently than annually,
        of a copy of the appraisal of Borrower's inventory obtained by Senior Lender.

         

        
        20

         

        
        

        

         

        
        5.5       
        Inspection. Permit Agent, each Lender, and each of their duly authorized
        representatives or agents to visit any of its properties and inspect any of its assets or
        books and records, to examine and make copies of its books and records, and to discuss its
        affairs, finances, and accounts with, its officers and employees at such reasonable times
        and intervals as Agent or any such Lender may designate and, so long as no Default or Event
        of Default exists and is continuing, with reasonable prior notice to Borrower.

        
        5.6       
        Maintenance of Properties. Maintain and preserve all of its properties which
        are necessary or useful in the proper conduct to its business in good working order and
        condition, ordinary wear, tear, and casualty excepted (and except where the failure to do
        so would not be reasonably expected to result in a Material Adverse Change), and comply in
        all material respects at all times with the provisions of all material leases to which it
        is a party as lessee, so as to prevent any material loss or forfeiture thereof or
        thereunder.

        
        5.7       
        Taxes. Cause all assessments and taxes, whether real, personal, or otherwise,
        due or payable by, or imposed, levied, or assessed against Borrower, its Subsidiaries, or
        any of their respective assets to be paid in full, before delinquency or before the
        expiration of any extension period, except to the extent that the validity of such
        assessment or tax shall be the subject of a Permitted Protest. Borrower will and will cause
        its Subsidiaries to make timely payment or deposit of all material tax payments and
        withholding taxes required of them by applicable laws, including those laws concerning
        F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will,
        upon request, furnish Agent with proof reasonably satisfactory to Agent indicating that
        Borrower or its Subsidiary has made such payments or deposits.

        
            	
                        
                         

                    	
                        
                        5.8

                    	
                        
                        Insurance.

                    

        

        
        (a)       At Borrower's expense, maintain
        insurance respecting its and its Subsidiaries' assets wherever located, covering loss or
        damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured
        against by other Persons engaged in the same or similar businesses. Borrower also shall
        maintain business interruption, public liability, and product liability insurance, as well
        as insurance against larceny and embezzlement. All such policies of insurance shall be in
        such amounts as are ordinarily maintained by Persons engaged in the same or similar
        businesses and with such insurance companies as are reasonably satisfactory to Agent. Other
        than business interruption insurance policies, Borrower shall deliver or has delivered
        certificates of insurance evidencing all required coverages to Agent with an endorsement
        naming Agent as loss payee (under a satisfactory lender's loss payable endorsement) or
        additional insured, as appropriate. Each certificate of insurance or endorsement shall
        contain a clause requiring the insurer to give not less than 30 days' prior written notice
        to Agent in the event of cancellation of the policy for any reason whatsoever. Agent
        stipulates and agrees that Borrower’s insurance as set forth on
        Schedule 5.8(a) is satisfactory to
        Agent.

        
        (b)       Borrower shall give Agent
        prompt notice of any loss of the Collateral exceeding $50,000 covered by such insurance.
        Borrower shall have the exclusive right to adjust any losses payable under any insurance
        policies.

        
        5.9       
        Location of Inventory and Equipment. Keep the Inventory and Equipment only at
        the locations identified on Schedule 4.5 or in transit from one such location to another;
        provided,

         

        
        21

         

        
        

        

         

        
        however, that Borrower may amend Schedule 4.5 so long as such amendment
        occurs by written notice to Agent not less than 5 days prior to the date on which such
        Inventory or Equipment is moved to such new location, so long as such new location is
        within the continental United States, and so long as, at the time of such written
        notification, if such location is not owned by Borrower, Borrower provides Agent a
        Collateral Access Agreement with respect thereto.

        
        5.10     Compliance
        with Laws. Comply with the requirements of all applicable laws, rules,
        regulations, and orders of any Governmental Authority, other than laws, rules, regulations,
        and orders the non-compliance with which, individually or in the aggregate, would not
        reasonably be expected to result in a Material Adverse Change.

        
        5.11     Leases.
        Pay, or cause to be paid, when due all rents and other amounts payable under any material
        leases to which Borrower or any Subsidiary of Borrower is a party or by which Borrower's or
        any of its Subsidiaries' properties and assets are bound.

        
        5.12     Existence.
        At all times preserve and keep in full force and effect Borrower's and its Subsidiaries'
        (a) valid existence and (b) good standing and any rights and franchises, in each case,
        material to the Borrower's business taken as a whole.

        
            	
                        
                         

                    	
                        
                        5.13

                    	
                        
                        Environmental.

                    

        

        
        (a)       Keep any property owned or
        operated by Borrower or any Subsidiary of Borrower free of any Environmental Liens or post
        bonds or other financial assurances sufficient to satisfy the obligations or liability
        evidenced by such Environmental Liens, (b) comply, in all material respects, with
        Environmental Laws and provide to Agent documentation of such compliance which Agent
        reasonably requests, (c) promptly notify Agent of any release of a Hazardous Material in
        any reportable quantity from or onto property owned or operated by Borrower or any
        Subsidiary of Borrower and take or cause to be taken any Remedial Actions reasonably
        required to abate said release or otherwise for Borrower to come into compliance with
        applicable Environmental Law, and (d) promptly, but in any event within 5 days of its
        receipt thereof, provide Agent with written notice of any of the following: (i) notice that
        an Environmental Lien has been filed against any of the real or personal property of
        Borrower that is not a Permitted Lien, (ii) commencement of any Environmental Action or
        notice that an Environmental Action will be filed against Borrower or any Subsidiary of
        Borrower which could reasonably be expected to cause a Material Adverse Change, and (iii)
        notice of a violation, citation, or other administrative order which reasonably would be
        expected to result in a Material Adverse Change.

        
        5.14     Disclosure
        Updates. Promptly and in no event later than 10 Business Days after any
        Authorized Officer obtains actual knowledge thereof, notify Agent if any written
        information, exhibit, or report (taken as a whole), including the contents of the SEC
        Filings, furnished to the Lender Group contained, at the time it was furnished, any untrue
        statement of a material fact or omitted to state any material fact necessary to make the
        statements contained therein not misleading in light of the facts and circumstances in
        which such statement was made or known by Borrower or any Subsidiary of Borrower to exist
        at the time such statement was made. Agent shall be deemed to have notice of updated
        disclosure regarding Borrower and its Subsidiaries to the extent set forth in the SEC
        Filings.

         

        
        22

         

        
        

        

         

        
        5.15     Control
        Agreements. Subject and pursuant to the Senior Subordination Agreement with
        respect to Borrower's Deposit Accounts maintained at Senior Lender, take all reasonable
        steps in order for Agent to obtain control in accordance with Sections 8-106, 9-104, 9-105,
        9-106, and 9-107 of the Code with respect to all Deposit Accounts maintained at Senior
        Lender, and with respect to (subject to the proviso contained in Section 6.12) all of its
        Securities Accounts and other Deposit Accounts (other than Store Deposit Accounts),
        electronic chattel paper, investment property, and letter of credit rights.

        
        5.16     Assignment
        of Proceeds. Execute and deliver to Agent any and all additional documents
        that Agent may reasonably request in its Permitted Discretion, in form and substance
        reasonably satisfactory to Agent, providing for the collateral assignment of all proceeds
        to Agent arising from any license or royalty agreement entered into by Borrower with
        respect to Borrower's General Intangibles. Such assignment shall provide that Borrower may
        retain such proceeds so long as no Event of Default shall have occurred and be
        continuing.

        
            	
                        
                         

                    	
                        
                        5.17

                    	
                        
                        Employee Benefits.

                    

        

        
        (a)       Deliver to Agent: (i) promptly,
        and in any event within 10 Business Days after Borrower or its Subsidiaries know or have
        reason to know that an ERISA Event has occurred that reasonably could be expected to result
        in a Material Adverse Change, a written statement of the chief financial officer of
        Borrower or such Subsidiary describing such ERISA Event and any action that is being taking
        with respect thereto by Borrower or its Subsidiaries or their ERISA Affiliates, and any
        action taken or threatened by the IRS, Department of Labor, or PBGC; Borrower and its
        Subsidiaries shall be deemed to know all facts known by the administrator of any Benefit
        Plan of which it is the plan sponsor, (ii) promptly, and in any event within three Business
        Days after the filing thereof with the IRS, a copy of each funding waiver request filed
        with respect to any Benefit Plan and all communications received by Borrower or its
        Subsidiaries or, to the knowledge of Borrower or its Subsidiaries, any ERISA Affiliate with
        respect to such request, and (iii) promptly, and in any event within three Business Days
        after receipt by Borrower or its Subsidiaries of the notice of the PBGC's intention to
        terminate a Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
        copies of each such notice.

        
        (b)       Cause to be delivered to Agent,
        upon Agent's request, each of the following: (i) a copy of each Plan (or, where any such
        plan is not in writing, complete description thereof) (and if applicable, related trust
        agreements or other funding instruments) and all amendments thereto, all material written
        interpretations thereof and material written descriptions thereof that have been
        distributed to employees or former employees of Borrower or its Subsidiaries; (ii) the most
        recent determination letter issued by the IRS with respect to each Benefit Plan; and (iii)
        the aggregate amount of the most recent annual payments made to former employees of
        Borrower or its Subsidiaries under any Retiree Health Plan.

        
        5.18     Formation
        of Subsidiaries. At the time that Borrower forms any direct or indirect
        Subsidiary or acquires any direct or indirect Subsidiary after the Closing Date, Borrower
        shall (a), if new Subsidiary is a Domestic Subsidiary, cause such new Subsidiary to provide
        to Agent a guaranty of the Obligations and a joinder to such security documents (including
        the Security Agreement and Mortgages with respect to any Real Property of such new
        Subsidiary), as well as

         

        
        23

         

        
        

        

         

        
        appropriate financing statements (and with respect to all property subject
        to a Mortgage, fixture filings), all in form and substance satisfactory to Agent (including
        being sufficient to grant Lender a first priority Lien (subject to Permitted Liens) in and
        to the assets of such newly formed or acquired Subsidiary), (b) provide to Agent a pledge
        agreement and appropriate certificates and powers or financing statements, hypothecating
        all of the direct or beneficial ownership interest in any such new Domestic Subsidiary, and
        if such new Foreign Subsidiary is owned by a Domestic Subsidiary, 66% of the direct or
        beneficial ownership interest in any such new Foreign Subsidiary, in each case in form and
        substance satisfactory to Agent, and (c) provide to Agent all other documentation,
        including one or more opinions of counsel reasonably satisfactory to Agent, which in its
        opinion is appropriate with respect to the execution and delivery of the applicable
        documentation referred to above (including policies of title insurance or other
        documentation with respect to all property subject to a Mortgage). Any document, agreement,
        or instrument executed or issued pursuant to this Section 5.18 shall be a Loan
        Document.

        
            	
                        
                        6.

                    	
                        
                        NEGATIVE COVENANTS.

                    

        

        
        Borrower covenants and agrees that, until termination of all of the
        Commitments and payment in full of the Obligations, Borrower will not and will not permit
        any of its Subsidiaries to do any of the following:

        
        6.1       
        Indebtedness. Create, incur, assume, suffer to exist, guarantee, or otherwise
        become or remain, directly or indirectly, liable with respect to any Indebtedness,
        except:

        
        (a)       Indebtedness evidenced by this Agreement and the other Loan
                        Documents,

        
        (b)       Indebtedness set forth on Schedule
                        4.19,

        
        (c)       Permitted Purchase Money Indebtedness,

        
        (d)       [INTENTIONALLY OMITTED]

        
        (e)       refinancings, renewals, or
        extensions of Indebtedness permitted under clauses (b) and (c) of this
        Section 6.1 or this
        Section 6.1(e) (and continuance or renewal of
        any Permitted Liens associated therewith) so long as: (i) such refinancings, renewals, or
        extensions do not result in an increase in the principal amount of, or interest rate with
        respect to, the Indebtedness so refinanced, renewed, or extended or add one or more
        obligors as liable with respect thereto if such additional obligors were not liable with
        respect to the original Indebtedness, (ii) such refinancings, renewals, or extensions do
        not result in a shortening of the average weighted maturity of the Indebtedness so
        refinanced, renewed, or extended, nor are they on terms or conditions, that, taken as a
        whole, are materially more burdensome or restrictive to Borrower, (iii) if the Indebtedness
        that is refinanced, renewed, or extended was subordinated in right of payment to the
        Obligations, then the terms and conditions of the refinancing, renewal, or extension
        Indebtedness must include subordination terms and conditions that are at least as favorable
        to the Lender Group as those that were applicable to the refinanced, renewed, or extended
        Indebtedness, and (iv) the Indebtedness that is refinanced, renewed, or extended is not
        recourse to any Person that is liable on account of the Obligations other than those
        Persons which were obligated with respect to the Indebtedness that was refinanced, renewed,
        or extended,

         

        
        24

         

        
        

        

        
        (f)       endorsement of instruments or other payment items for
                        deposit, and

        
        (g)       Indebtedness comprising Permitted Investments.

        
        6.2       
        Liens. Create, incur, assume, or suffer to exist, directly or indirectly, any
        Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter
        acquired, or any income or profits therefrom, except for Permitted Liens (including Liens
        that are continuations or replacements of Permitted Liens to the extent that the original
        Indebtedness is refinanced, renewed, or extended under Section 6.1(e) and so long as the
        replacement Liens only encumber those assets that secured the refinanced, renewed, or
        extended Indebtedness).

        
            	
                        
                         

                    	
                        
                        6.3

                    	
                        
                        Restrictions on Fundamental
                        Changes.

                    

        

        
        (a)       Enter into any Fundamental
        Transaction or other consolidation, reorganization or recapitalization (other than any
        merger (x) between any Domestic Subsidiary and Borrower in which Borrower is the surviving
        corporation or (y) between two Foreign Subsidiaries of Borrower) not otherwise permitted
        under the Loan Documents, or reclassify its capital stock other than pursuant to the terms
        of such capital stock (except for common stock dividends, splits, reverse splits or other
        similar transactions);

        
        (b)       Liquidate, wind up, or dissolve
        itself (or suffer any liquidation or dissolution),

        
        (c)       Convey, sell, lease, license,
        assign, transfer, or otherwise dispose of, in one transaction or a series of transactions,
        all or substantially all of its assets, or

        
        (d)       Other than Permitted
        Dispositions, suspend or go out of a substantial portion of its or their
        business.

        
        6.4       Disposal of Assets. Except as set forth on Schedule 6.4, other than
        Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise
        dispose of any of the assets of Borrower or any Subsidiary of Borrower.

        
        6.5       Change Name.  Change Borrower's or any its Subsidiaries' name, organizational
        identification number, state of organization, or organizational identity; provided,
        however, that Borrower or a Subsidiary of Borrower may change its name upon at least 30
        days' prior written notice by Borrower to Agent of such change and so long as, at the time
        of such written notification, such Borrower or Subsidiary provides any financing statements
        necessary to perfect and continue perfected the Agent's Liens.

        
        6.6       Nature of Business. Make any change in the principal nature of their
        business.

        
        6.7       Prepayments and Amendments. Except in connection with a refinancing permitted
        by Section 6.1(e):

        
        (a)       optionally prepay, redeem,
        defease, purchase, or otherwise acquire any Indebtedness of Borrower or a Subsidiary of
        Borrower, other than the Obligations in accordance

         

        
        25

         

        
        

        

         

        with
        this Agreement and the Indebtedness evidenced by the Senior Loan Documents in accordance
        with the terms thereof,

        
        (b)       make any payment on account of
        Indebtedness that has been contractually subordinated in right of payment if such payment
        is not permitted at such time under the subordination terms and conditions, or

        
        (c)       directly or indirectly,
        materially amend, modify, alter, increase, or change any of the terms or conditions of any
        agreement, instrument, document, indenture, or other writing evidencing or concerning
        Indebtedness permitted under Section
        6.1(b).

        
        6.8       Change of Control. Cause or permit, directly or indirectly, any Change of
        Control.

        
        6.9       Consignments. Consign any of their Inventory or sell any of their Inventory on
        bill and hold, sale or return, sale on approval, or other conditional terms of
        sale.

        
        6.10     Distributions.
        Other than distributions or declaration and payment of dividends by any Subsidiary of
        Borrower to Borrower, or by any Foreign Subsidiary of Borrower to any other Subsidiary of
        Borrower, make any distribution or declare or pay any dividends (in cash or other property,
        other than common stock) on, or purchase, acquire, redeem, or retire any of the capital
        stock of Borrower, of any class, whether now or hereafter outstanding except for cashless
        exercises (including by delivery of previously outstanding shares) or termination of
        options or warrants or similar transactions.

        
        6.11     Accounting
        Methods. Modify or change their fiscal year or materially modify or change
        their method of accounting (other than as may be required to conform to GAAP or to comply
        with SEC reporting requirements) or enter into, modify, or terminate any agreement
        currently existing or at any time hereafter entered into with any third party accounting
        firm or service bureau for the preparation or storage of Borrower's accounting records in a
        manner that would result in said accounting firm or service bureau declining to provide
        Agent information regarding Borrower's and its Subsidiaries' financial
        condition.

        
        6.12     Investments.
        Except for Permitted Investments, directly or indirectly, make or acquire any Investment,
        or incur any liabilities (including contingent obligations) other than Indebtedness
        permitted under Section 6.1 for or in connection with any Investment; provided, however,
        that Borrower shall not have Permitted Investments in Securities Accounts in an aggregate
        amount in excess of $50,000 at any one time unless Borrower and the applicable securities
        intermediary or bank have entered into Control Agreements governing such Permitted
        Investments in order to perfect (and further establish) the Agent's Liens in such Permitted
        Investments. Subject to the foregoing proviso, Borrower shall not establish or maintain any
        Securities Account or Deposit Account (other than Store Deposit Accounts) unless Agent
        shall have received a Control Agreement in respect of such Securities Account or Deposit
        Account.

        
        6.13     Transactions
        with Affiliates. Except as set forth on Schedule 6.13, directly or
        indirectly enter into or permit to exist any transaction with any Affiliate of Borrower
        except for transactions that (a) are upon fair and reasonable terms, and (b) are no less
        favorable to Borrower

         

        
        26

         

        
        

        

         

        or its
        Subsidiaries, as applicable, than would be obtained in an arm's length transaction with a
        non-Affiliate.

        
        6.14     Use of
        Proceeds. Use the proceeds of the Term Loan for any purpose other than
        (a) the partial repayment of the Indebtedness of Borrower due under the Senior Loan
        Documents, (b) working capital for business operations and (c) fees and expenses
        related to this Agreement.

        
        6.15     Inventory
        and Equipment with Bailees. Except as set forth on Schedule 4.5, store any
        Inventory or Equipment of Borrower at any time now or hereafter with a bailee,
        warehouseman, or similar party without Agent's prior written consent, which consent shall
        not be unreasonably withheld, conditioned or delayed.

        
            	
                        
                         

                    	
                        
                        6.16

                    	
                        
                        Financial Covenants.

                    

        

        
        (a)       Tangible Net Worth. Fail to
        achieve Tangible Net Worth, measured on a fiscal quarter-end basis, of not less than the
        required amount set forth in the following table on the date set forth opposite
        thereto:

        
            	
                        
                        Applicable Date

                        
                         

                    	
                        
                        Applicable Amount

                    
	
                        
                        May 3, 2008

                    	
                        
                        $10,369,508

                    
	
                        
                        August 2, 2008

                    	
                        
                        $8,010,428

                    
	
                        
                        November 1, 2008

                    	
                        
                        $2,791,630

                    
	
                        
                        January 31, 2009

                    	
                        
                        $8,298,878

                    
	
                        
                        May 2, 2009

                    	
                        
                        $5,341,871

                    
	
                        
                        August 1, 2009

                    	
                        
                        $2,751,000

                    
	
                        
                        October 31, 2009

                    	
                        
                        ($2,807,935)

                    
	
                        
                        January 30, 2010

                    	
                        
                        $1,663,997

                    
	
                        
                        May 1, 2010

                    	
                        
                        ($1,730,058)

                    
	
                        
                        July 31, 2010

                    	
                        
                        ($4,107,320)

                    
	
                        
                        October 30, 2010

                    	
                        
                        ($9,569,175)

                    

        

         

        
        (b)       Minimum EBITDA. Fail to achieve
        EBITDA, measured on a fiscal year to date basis, of not less than the required amount set
        forth in the following table for the applicable period set forth opposite
        thereto:

        
            	
                        
                        Applicable Period

                        
                         

                    	
                        
                        Applicable Amount

                    
	
                        
                        February 3, 2008 to May 3, 2008

                    	
                        
                        ($1,130,419)

                    
	
                        
                        February 3, 2008 to August 2, 2008

                    	
                        
                        ($1,058,178)

                    
	
                        
                        February 3, 2008 to November 1, 2008

                    	
                        
                        ($3,710,683)

                    

        

         

         

        
        27

         

        
        

        

         

         

        
            	
                        
                        February 3, 2008 to January 31, 2009

                    	
                        
                        $4,305,231

                    
	
                        
                        February 1, 2009 to May 2, 2009

                    	
                        
                        ($1,338,523)

                    
	
                        
                        February 1, 2009 to August 1, 2009

                    	
                        
                        ($1,266,327)

                    
	
                        
                        February 1, 2009 to October 31, 2009

                    	
                        
                        ($4,134,907)

                    
	
                        
                        February 1, 2009 to January 30, 2010

                    	
                        
                        $4,576,432

                    
	
                        
                        January 31, 2010 to May 1, 2010

                    	
                        
                        ($1,462,274)

                    
	
                        
                        January 31, 2010 to July 31, 2010

                    	
                        
                        ($1,326,164)

                    
	
                        
                        January 31, 2010 to October 30, 2010

                    	
                        
                        ($4,252,196)

                    

        

         

        
        (c)       Capital
        Expenditures.Make Capital Expenditures in a fiscal year of Borrower
        in excess of the amount set forth in the following table for the applicable year set forth
        opposite thereto.

        
            	
                        
                        Applicable Year

                    	
                        
                        Applicable Amount

                    
	
                        
                        2008

                    	
                        
                        $1,500,000

                    
	
                        
                        2009

                    	
                        
                        $2,000,000

                    
	
                        
                        2010

                    	
                        
                        $3,000,000

                    

        

         

        
            	
                        
                         

                    	
                        
                        6.17

                    	
                        
                        No Transactions Prohibited Under ERISA; Unfunded
                        Liability.

                    

        

        
        (a)       Directly or
        indirectly

        
        (i)        
        engage in any prohibited transaction which is reasonably likely to result in
        a civil penalty or excise tax described in Sections 406 of ERISA or 4975 of the
        IRC for which a statutory or class exemption is not available or a private exemption has
        not been previously obtained from the Department of Labor;

        
        (ii)        permit
        to exist with respect to any Benefit Plan any accumulated funding deficiency (as defined in
        Sections 302 of ERISA and 412 of the IRC), whether or not waived;

        
        (iii)       fail to pay
        timely required contributions or annual installments due with respect to any waived funding
        deficiency to any Benefit Plan;

        
        (iv)       terminate any
        Benefit Plan where such event would result in any liability of Borrower, any Subsidiary of
        Borrower or any of their ERISA Affiliates under Title IV of ERISA which was not paid
        in connection with such termination;

        
        (v)        fail to
        make any required contribution or payment to any Multiemployer Plan;

         

        
        28

         

        
        

        

         

        
        (vi)       fail to pay
        any required installment or any other payment required under Section 412 of the IRC on
        or before the due date for such installment or other payment;

        
        (vii)      amend a Plan
        resulting in an increase in current liability for the Plan year such that Borrower, any
        Subsidiary of Borrower or any of their ERISA Affiliates is required to provide security to
        such Plan under Section 401(a)(29) of the IRC; or

        
        (viii)     withdraw from any
        Multiemployer Plan where such withdrawal is reasonably likely to result in any liability of
        such entity under Title IV of ERISA;

        which,
        individually or in the aggregate, results in or reasonably would be expected to result in a
        claim against or liability of Borrower, any of its Subsidiaries or any of their ERISA
        Affiliates in excess of $1,000,000.

        
            	
                        
                        7.

                    	
                        
                        EVENTS OF DEFAULT.

                    

        

        
        Any one or more of the following events shall constitute an event of default
        (each, an "Event of Default") under this
        Agreement:

        
        7.1       If Borrower fails to pay when
        due and payable, or when declared due and payable, (a) all or any portion of the
        Obligations consisting of interest, fees, or charges due the Lender Group, reimbursement of
        Lender Group Expenses, or other amounts (other than any portion thereof constituting
        principal) constituting Obligations (including any portion thereof that accrues after the
        commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in
        whole or in part as a claim in any such Insolvency Proceeding), and such failure continues
        for a period of 3 Business Days after notice from Agent, or (b) all or any portion of the
        principal of the Obligations;

        
        7.2       If Borrower or any Subsidiary
        of Borrower

        
        (a)       fail to perform or observe any
        covenant or other agreement contained in any of Sections
        5.2,
        5.5,
        5.8,
        5.12(a),
        5.14,
        5.16, or
        6.1 through
        6.17 of this Agreement;

        
        (b)       fail to perform or observe any
        covenant or other agreement contained in any of Sections
        5.1,
        5.6,
        5.7,
        5.9, 5.10
        5.11,
        5.12(b), or
        5.15 of this Agreement and such failure
        continues for a period of 30 days after the earlier of (i) the date on which such failure
        shall first become known to any Authorized Officer or (ii) written notice thereof is given
        to Borrower by Agent;

        
        (c)       fail to perform any covenant or
        other agreement contained in Section 5.3,
        and such failure continues for a period of 5 Business Days after notice from
        Agent;

        
        (d)       fail to pay liquidated damages
        pursuant to Section 2(b) of the Registration Rights Agreement and such failure continues
        for a period of 10 Business Days after the earlier of (i) the date on which such failure
        shall first become known to any Authorized Officer or (ii) written notice thereof is given
        to Borrower by Agent; or

         

        
        29

         

        
        

        

         

        
        (e)       fail to perform or observe any
        covenant or other agreement contained in this Agreement, or in any of the other Loan
        Documents (excluding the Registration Rights Agreement, except as provided in Section
        7.2(d) of this Agreement); in each case, other than any such covenant or agreement that is
        the subject of another provision of this Section 7
        (in which event such other provision of this
        Section 7 shall govern), and such failure
        continues for a period of 30 days after the earlier of (i) the date on which such failure
        shall first become known to any Authorized Officer or (ii) written notice thereof is given
        to Borrower by Agent; provided,
        however, the failure to timely make any filings
        or notices, including Current Reports on Form 8-K, required by the Commission or the
        Trading Market on which the Common Stock is listed shall not constitute an Event of Default
        unless such required filing or notice is not made after a period of 30 Trading Days after
        the date that Agent submits written demand to Borrower to make such required filing or
        notice (regardless of whether any such filing shall remain late under rules of the
        Commission or such Trading Market).

        
        7.3       If any
        material portion of the assets of Borrower or any material portion of the assets of
        Borrower and its Subsidiaries, taken as a whole, is attached, seized, subjected to a writ
        or distress warrant, or is levied upon, or comes into the possession of any third Person
        and the same is not discharged before the earlier of 30 days after the date it first arises
        or 5 days prior to the date on which such property or asset is subject to forfeiture by
        Borrower or the applicable Subsidiary;

        
        7.4       If an
        Insolvency Proceeding is commenced by Borrower;

        
        7.5       If an
        Insolvency Proceeding is commenced against Borrower or any Subsidiary of Borrower and any
        of the following events occur: (a) Borrower or its applicable Subsidiary consents to the
        institution of such Insolvency Proceeding against it, (b) the petition commencing the
        Insolvency Proceeding is not timely controverted, (c) the petition commencing the
        Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing
        thereof, (d) an interim trustee is appointed to take possession of all or any substantial
        portion of the properties or assets of, or to operate all or any substantial portion of the
        business of, Borrower or any Subsidiary of Borrower, or (e) an order for relief shall have
        been issued or entered therein;

        
        7.6       If
        Borrower or any Subsidiary of Borrower is enjoined, restrained, or in any way prevented by
        court order from continuing to conduct all or any material part of its business
        affairs;

        
        7.7       If one or
        more judgments, orders, or awards involving an aggregate amount of $500,000 or more (except
        to the extent covered by insurance pursuant to which the insurer has accepted liability
        therefor in writing) shall be entered or filed against Borrower or any Subsidiary of
        Borrower or with respect to any of their respective assets, and the same is not released,
        discharged, bonded against, or stayed pending appeal before the earlier of 30 days after
        the date it first arises or 5 days prior to the date on which such asset is subject to
        being forfeited by Borrower or the applicable Subsidiary;

        
        7.8       If
        Borrower or any Subsidiary thereof (a) fails to pay when due any Material Debt Agreement or
        (b) fails to observe or perform any other obligation under any Material Debt

         

        
        30

         

        
        

        

         

        
        Agreement, and such failure results in the obligations thereunder becoming
        or being declared due and payable prior to the date on which they would otherwise become
        due and payable;

        
        7.9       If any
        material warranty, representation, statement, or Record made herein or in any other Loan
        Document or delivered to Lender in connection with this Agreement or any other Loan
        Document by Borrower or any officer, employee or director of Borrower, proves to have been
        untrue in any material respect when made;

        
        7.10     If Borrower shall breach
        its obligations in any material respect under any of the Senior Loan Documents or Debenture
        Documents and such breach shall continue beyond any applicable notice and cure
        period;

        
        7.11     If the Security Agreement or any other Loan Document that
        purports to create a Lien, shall, for any reason, fail or cease to create a valid and
        perfected Lien (which is subject only to Permitted Liens) on or security interest in any
        material portion of the Collateral covered hereby or thereby (taken as a whole), except as
        a result of a disposition of the applicable Collateral in a transaction permitted under
        this Agreement; or

        
        7.12     Any material provision of any Loan
        Document (except the Registration Rights Agreement) shall at any time for any reason be
        declared to be null and void, or the validity or enforceability thereof shall be contested
        by Borrower or any Subsidiary of Borrower, or a proceeding shall be commenced by Borrower
        or any Subsidiary of Borrower, or by any Governmental Authority having jurisdiction over
        Borrower or any Subsidiary of Borrower, seeking to establish the invalidity or
        unenforceability thereof.

        
            	
                        
                        8.

                    	
                        
                        THE LENDER GROUP'S RIGHTS AND REMEDIES.

                    

        

        
        8.1       
        Rights and Remedies. Upon the occurrence, and during the continuation, of an
        Event of Default, the Required Lenders (at their election but without notice of their
        election and without demand) may authorize and instruct Agent to do any one or more of the
        following on behalf of the Lender Group (and Agent, acting upon the instructions of the
        Required Lenders, shall do the same on behalf of the Lender Group), all of which are
        authorized by Borrower:

        
        (a)       Declare all or any portion of
        the Obligations, whether evidenced by this Agreement, by any of the other Loan Documents,
        or otherwise, immediately due and payable;

        
        (b)       Cease advancing money or
        extending credit to or for the benefit of Borrower under this Agreement, under any of the
        Loan Documents, or under any other agreement between Borrower and the Lender
        Group;

        
        (c)       Terminate this Agreement and
        any of the other Loan Documents as to any future liability or obligation of the Lender
        Group, but without affecting any of the Agent's Liens in the Collateral and without
        affecting the Obligations; and

        
        (d)       The Lender Group shall have all
        other rights and remedies available at law or in equity or pursuant to any other Loan
        Document.

        The
        foregoing to the contrary notwithstanding, upon the occurrence of any Event of Default
        described in Section 7.4 or
        Section 7.5, in addition to the remedies set
        forth above, without any notice to Borrower or any other Person or any act by the Lender
        Group, the Commitments shall

         

        
        31

         

        
        

        

         

        
        automatically terminate and the Obligations then outstanding, together with
        all accrued and unpaid interest thereon and all fees and all other amounts due under this
        Agreement and the other Loan Documents, shall automatically and immediately become due and
        payable, without presentment, demand, protest, or notice of any kind, all of which are
        expressly waived by Borrower.

        
        8.2       Remedies Cumulative. The rights and remedies of the Lender Group under this
        Agreement, the other Loan Documents, and all other agreements shall be cumulative. The
        Lender Group shall have all other rights and remedies not inconsistent herewith as provided
        under the Code, by law, or in equity. No exercise by the Lender Group of one right or
        remedy shall be deemed an election, and no waiver by the Lender Group of any Event of
        Default shall be deemed a continuing waiver. No delay by the Lender Group shall constitute
        a waiver, election, or acquiescence by it.

        
            	
                        
                        9.

                    	
                        
                        TAXES AND EXPENSES.

                    

        

        
        If Borrower fails to pay any monies (whether taxes, assessments, insurance
        premiums, or, in the case of leased properties or assets, rents or other amounts payable
        under such leases) due to third Persons, or fails to make any deposits or furnish any
        required proof of payment or deposit, all as and to the extent required under the terms of
        this Agreement, then, Agent, in its sole discretion and after prior written notice to
        Borrower, may do any or all of the following: (a) make payment of the same or any part
        thereof (except to the extent Borrower has advised Agent of a good faith dispute as to the
        amount, timing or propriety of such payment), or (b) in the case of the failure to comply
        with Section 5.8 hereof, obtain and
        maintain insurance policies of the type described in Section
        5.8 and take any action with respect to such policies as Agent
        deems prudent. Any such amounts paid by Agent shall constitute Lender Group Expenses and
        any such payments shall not constitute an agreement by the Lender Group to make similar
        payments in the future or a waiver by the Lender Group of any Event of Default under this
        Agreement. Agent need not inquire as to, or contest the validity of, any such expense, tax,
        or Lien and the receipt of the usual official notice for the payment thereof shall be
        conclusive evidence that the same was validly due and owing.

        
            	
                        
                        10.

                    	
                        
                        WAIVERS; INDEMNIFICATION.

                    

        

        
        10.1     Demand;
        Protest; etc. Borrower waives demand, protest, notice of protest, notice of
        default or dishonor (other than any notice required under this Agreement), notice of
        payment and nonpayment (other than any notice required under this Agreement), nonpayment at
        maturity, release, compromise, settlement, extension, or renewal of documents, instruments,
        chattel paper, and guarantees at any time held by the Lender Group on which Borrower may in
        any way be liable.

        
        10.2     The
        Lender Group's Liability for Collateral. Borrower hereby agrees that:
        (a) so long as the Lender Group complies with its obligations, if any, under the Code,
        the Lender Group shall not in any way or manner be liable or responsible for: (i) the
        safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any
        manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any
        act or default of any carrier,

        
        32

         

        
        

        

         

        
        warehouseman, bailee, forwarding agency, or other Person, and (b) all risk
        of loss, damage, or destruction of the Collateral shall be borne by Borrower.

        
        10.3     Indemnification.
        Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the
        Lender-Related Persons, and each Participant (each, an "Indemnified Person") harmless (to
        the fullest extent permitted by law) from and against any and all claims, demands, suits,
        actions, investigations, proceedings, and damages, and all reasonable attorneys fees and
        disbursements and other costs and expenses actually incurred in connection therewith or in
        connection with the enforcement of this indemnification (as and when they are incurred and
        irrespective of whether suit is brought), at any time asserted against, imposed upon, or
        incurred by any of them (a) in connection with or as a result of or related to the
        execution, delivery, enforcement, performance, or administration (including any
        restructuring or workout with respect hereto) of this Agreement, any of the other Loan
        Documents, or the transactions contemplated hereby or thereby or in connection with the
        monitoring of Borrower's or its Subsidiaries' compliance with the terms of the Loan
        Documents, and (b) with respect to any investigation, litigation, or proceeding related to
        this Agreement, any other Loan Document, or the use of the proceeds of the credit provided
        hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act,
        omission, event, or circumstance in any manner related thereto (all the foregoing,
        collectively, the "Indemnified Liabilities"). The foregoing to the contrary
        notwithstanding, Borrower shall have no obligation to any Indemnified Person under this
        Section 10.3 with respect to any Indemnified Liability that a court of competent
        jurisdiction finally determines to have resulted from the gross negligence or willful
        misconduct of such Indemnified Person. This provision shall survive the termination of this
        Agreement and the repayment of the Obligations. WITHOUT LIMITATION, THE FOREGOING INDEMNITY
        SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN
        WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH
        INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

        
        10.4      Special
        Damages. Each party hereto hereby irrevocably and
        unconditionally waives any right it may have to claim or recover any special, exemplary,
        punitive or consequential damages in any legal action, suit or proceeding with respect to
        Loan Documents.

        
            	
                        
                        11.

                    	
                        
                        NOTICES.

                    

        

        
        Unless otherwise provided in this Agreement, all notices or demands by
        Borrower or Agent to the other relating to this Agreement or any other Loan Document shall
        be in writing and (except for financial statements and other informational documents which
        may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by
        registered or certified mail (postage prepaid, return receipt requested), overnight
        courier, electronic mail (at such email addresses as Borrower or Agent, as applicable, may
        designate to each other in accordance herewith), or telefacsimile to Borrower or to Agent,
        as the case may be, at its address set forth below:

         

        
        33

         

        
        

        

         

         

        
            	
                        
                        If to Borrower:

                    	
                        
                        BAKERS FOOTWEAR GROUP, INC.

                        
                        2815 Scott Avenue

                        
                        St. Louis, Missouri 63103

                        
                        Attention: Peter A. Edison, Chief Executive
                        Officer

                        
                        Fax No.: (314) 641-0390

                        
                         

                    
	
                        
                        With a copy to:

                    	
                        
                        Bryan Cave LLP

                        
                        211 N. Broadway, Suite 3600

                        
                        St. Louis, Missouri 63102

                        
                        Attention: Harold R. Burroughs, Esq.

                        
                        Fax No.: (314) 552-8706

                        
                         

                    
	
                        
                        If to Agent:

                    	
                        
                        PRIVATE EQUITY MANAGEMENT GROUP, INC.

                        
                        1 Park Plaza, Suite 550

                        
                        Irvine, California 92614

                        
                        Attention: Peter Paul Mendel, Esq., General
                        Counsel

                        
                        Fax No.: (949) 757-0978

                        
                         

                    
	
                        
                        With a copy to:

                    	
                        
                        Jeffer, Mangels, Butler & Marmaro LLP

                        
                        1900 Avenue of the Stars, 7th Floor

                        
                        Los Angeles, California 90067

                        
                        Attn: Joel J. Berman, Esq.

                        
                        Fax No.: (310) 203-0567

                        
                         

                    

        

        
        Agent and Borrower may change the address at which they are to receive
        notices hereunder, by notice in writing in the foregoing manner given to the other party.
        All notices or demands sent in accordance with this Section
        11, other than notices by Agent in connection with enforcement
        rights against the Collateral under the provisions of the Code, shall be deemed received on
        the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in
        the mail. Borrower acknowledges and agrees that notices sent by the Lender Group in
        connection with the exercise of enforcement rights against Collateral under the provisions
        of the Code shall be deemed sent when deposited in the mail or personally delivered, or,
        where permitted by law, transmitted by telefacsimile or any other method set forth
        above.

        
            	
                        
                        12.

                    	
                        
                        CHOICE OF LAW AND VENUE; JURY TRIAL
                        WAIVER.

                    

        

        
        (a)        THE
        VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE
        CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE
        CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
        PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR
        RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
        ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO ITS CONFLICTS OF LAWS
        AND PRINCIPLES.

         

        
        34

         

        
        

        

         

        
        (b)        THE
        PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND
        THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND TO THE EXTENT
        PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
        CALIFORNIA,
        PROVIDED,
        HOWEVER, THAT ANY SUIT SEEKING
        ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN
        THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH
        COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND EACH MEMBER OF THE LENDER GROUP
        WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE
        DOCTRINE OF
        FORUMNON
        CONVENIENSOR TO OBJECT TO VENUE TO THE EXTENT ANY
        PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
        12(b).

        
        (c)       
        BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE, TO THE EXTENT
        PERMITTED UNDER APPLICABLE LAW, THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
        CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
        TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
        CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND EACH MEMBER OF THE
        LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
        VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
        EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
        BY THE COURT.

        
            	
                        
                        13.

                    	
                        
                        ASSIGNMENTS AND PARTICIPATIONS;
                        SUCCESSORS.

                    

        

        
            	
                        
                         

                    	
                        
                        13.1

                    	
                        
                        Assignments and
                        Participations.

                    

        

        
        (a)       Neither Agent nor any Lender
        may assign or transfer all, or any part, of the Obligations, the Commitments and any other
        rights and obligations of such Agent or such Lender hereunder and under the Loan Documents
        except as provided herein. The Obligations, Commitments and any other rights and
        obligations of Agent and each Lender hereunder and under the Loan Documents must be
        transferred pursuant to a registration statement filed under the Securities Act of 1933, as
        amended, or an exemption from such registration. The Borrower shall be entitled to advance
        notice of any transfer and reasonable assurance, including an opinion of counsel reasonably
        acceptable to the Borrower, that such transfer complies with applicable securities laws.
        Any Lender may assign and delegate to one or more assignees (each an
        "Assignee") that are Eligible
        Transferees all, or any ratable part of all, of the Obligations, the Commitments and the
        other rights and obligations of such Lender hereunder and under the other Loan Documents,
        in a minimum amount of $5,000,000 (except such minimum amount shall not apply to an
        assignment and delegation by a Lender to (x) any other Lender or an Affiliate of such
        Lender or a Related Fund of such Lender, (y) a group of new Lenders, each of which is an
        Affiliate or Related Fund of each other so long as the aggregate amount to be assigned to
        such

         

        
        35

         

        
        

        

         

        group
        is at least $5,000,000 or (z) if as a result of such assignment such Lender shall cease to
        be a party hereto); provided,
        however, that, Borrower and Agent may continue
        to deal solely and directly with such Lender in connection with the interest so assigned to
        an Assignee until (i) written notice of such assignment, together with payment
        instructions, addresses, and related information with respect to the Assignee, have been
        given to Agent by such Lender and the Assignee, (ii) such Lender and its Assignee have
        delivered to Agent an Assignment and Acceptance, and (iii) the assigning Lender or Assignee
        has paid to Agent for Agent's separate account a processing fee in the amount of $5,000.
        Notwithstanding the preceding sentence, the payment of any fees shall not be required and
        the Assignee need not be an Eligible Transferee if (x) such assignment is in connection
        with any merger, consolidation, sale, transfer, or other disposition of all or any
        substantial portion of the business or loan portfolio of the assigning Lender or (y) the
        assignee is a Lender or an Affiliate of a Lender or a Related Fund of a Lender; provided
        that any such assignment must otherwise comply with applicable securities laws and the
        other provisions of this Section
        13.1(a).

        
        (b)       From and after the date that
        Agent notifies the assigning Lender (with a copy to Borrower) that it has received an
        executed Assignment and Acceptance and payment of the above-referenced processing fee (if
        required), (i) the Assignee thereunder shall be a party hereto and, to the extent that
        rights and obligations hereunder have been assigned to it pursuant to such Assignment and
        Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and
        (ii) the assigning Lender shall, to the extent that rights and obligations hereunder
        and under the other Loan Documents have been assigned by it pursuant to such Assignment and
        Acceptance, relinquish its rights (except with respect to Section
        10.3 hereof) and be released from any future obligations under
        this Agreement (and in the case of an Assignment and Acceptance covering all or the
        remaining portion of an assigning Lender's rights and obligations under this Agreement and
        the other Loan Documents, such Lender shall cease to be a party hereto and thereto), and
        such assignment shall effect a novation between Borrower and the Assignee;
        provided,
        however, that nothing contained herein shall
        release any assigning Lender from obligations that survive the termination of this
        Agreement, including such assigning Lender's obligations under
        Article 15 and Section
        16.7 of this Agreement.

        
        (c)       By executing and delivering an
        Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder
        confirm to and agree with each other and the other parties hereto as follows: (1) other
        than as provided in such Assignment and Acceptance, such assigning Lender makes no
        representation or warranty and assumes no responsibility with respect to any statements,
        warranties or representations made in or in connection with this Agreement or the
        execution, legality, validity, enforceability, genuineness, sufficiency or value of this
        Agreement or any other Loan Document furnished pursuant hereto, (2) such assigning Lender
        makes no representation or warranty and assumes no responsibility with respect to the
        financial condition of Borrower or the performance or observance by Borrower of any of its
        obligations under this Agreement or any other Loan Document furnished pursuant hereto, (3)
        such Assignee confirms that it has received a copy of this Agreement, together with such
        other documents and information as it has deemed appropriate to make its own credit
        analysis and decision to enter into such Assignment and Acceptance, (4) such Assignee will,
        independently and without reliance upon Agent, such assigning Lender or any other Lender,
        and based on such documents and information as it shall deem appropriate at the time,
        continue to make its own credit decisions in taking or not taking action under this
        Agreement, (5) such Assignee appoints

         

        
        36

         

        
        

        

         

        and
        authorizes Agent to take such actions and to exercise such powers under this Agreement as
        are delegated to Agent, by the terms hereof, together with such powers as are reasonably
        incidental thereto, and (6) such Assignee agrees that it will perform all of the
        obligations which by the terms of this Agreement are required to be performed by it as a
        Lender.

        
        (d)       Immediately upon Agent's
        receipt of any processing fee payment (if required) and the fully executed Assignment and
        Acceptance this Agreement shall be deemed to be amended to the extent, but only to the
        extent, necessary to reflect the addition of the Assignee and the resulting adjustment of
        the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce
        such Commitments of the assigning Lender pro
        tanto.

        
        (e)       In connection with any such
        assignment or proposed assignment, a Lender may, subject to the provisions of
        Section 16.7, disclose all documents and
        information which it now or hereafter may have relating to Borrower and its Subsidiaries
        and their respective businesses.

        
        (f)        Agent shall, acting
        solely for this purpose as a non-fiduciary agent of Borrower, maintain, or cause to be
        maintained, a register (the "Register")
        on which it shall enter the names and addresses of the Lenders and the Commitments of, and
        the principal amount of the Term Loan (and stated interest thereon) owing to, each Lender
        from time to time. Subject to the last sentence of this Section
        13.1(f), the entries in the Register shall be conclusive and
        binding for all purposes, absent manifest error, and Borrower, Agent and Lenders may treat
        each Person whose name is recorded in the Register as a Lender hereunder for all purposes
        of this Agreement. The Register shall be available for inspection by Borrower and any
        Lender at any reasonable time and from time to time upon reasonable notice.

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

        
        13.2     Successors.
        This Agreement shall bind and inure to the benefit of the respective successors and assigns
        of each of the parties; provided, however, that Borrower may not assign this Agreement or
        any rights or duties hereunder without the Lenders' prior written consent and any
        prohibited assignment shall be absolutely void ab
        initio. No consent to assignment by the Lenders shall release
        Borrower from its Obligations. A Lender may assign this Agreement and the other Loan
        Documents and its rights and duties hereunder and thereunder pursuant to Section

         

        
        37

         

        
        

        

         

        13.1
        hereof and, except as expressly required pursuant to Section 13.1 hereof, no consent or
        approval by Borrower is required in connection with any such assignment.

        
            	
                        
                        14.

                    	
                        
                        AMENDMENTS; WAIVERS.

                    

        

        
        14.1     Amendments
        and Waivers. No amendment or waiver of any provision of this Agreement or any
        other Loan Document, and no consent with respect to any departure by Borrower therefrom,
        shall be effective unless the same shall be in writing and signed by the Required Lenders
        (or by Agent at the written request of the Required Lenders) and Borrower and then any such
        waiver or consent shall be effective, but only in the specific instance and for the
        specific purpose for which given; provided, however, that no such waiver, amendment, or
        consent shall, unless in writing and signed by all of the Lenders and Borrower, do any of
        the following:

        
        (a)       increase or extend any
        Commitment of any Lender,

        
        (b)       postpone or delay any date
        fixed by this Agreement or any other Loan Document for any payment of principal, interest,
        fees, or other amounts due hereunder or under any other Loan Document,

        
        (c)       reduce the principal of, or the
        rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or
        other amounts payable hereunder or under any other Loan Document,

        
        (d)       change the Pro Rata Share that
        is required to take any action hereunder,

        
        (e)       amend or modify this Section or
        any provision of this Agreement providing for consent or other action by all
        Lenders,

        
        (f)        other than as permitted
        by Section 15.12, release Agent's Lien
        in and to any of the Collateral,

        
        (g)       change the definition of
        "Required Lenders" or
        "Pro Rata Share",

        
        (h)       contractually subordinate any
        of the Agent's Liens,

        
        (i)       release Borrower from any
        obligation for the payment of money, or

        
        (j)       amend any of the provisions
        of Sections 2.2,
        2.4(b), or
        15

        
        and, provided
        further,
        however, that no amendment, waiver or consent
        shall, unless in writing and signed by Agent, affect the rights or duties of Agent under
        this Agreement or any other Loan Document. The foregoing notwithstanding, any amendment,
        modification, waiver, consent, termination, or release of, or with respect to, any
        provision of this Agreement or any other Loan Document that relates only to the
        relationship of the Lender Group among themselves, and that does not affect the rights or
        obligations of Borrower, shall not require consent by or the agreement of
        Borrower.

         

        
        38

         

        
        

        

         

        
            	
                        
                         

                    	
                        
                        14.2

                    	
                        
                        Replacement of Holdout Lender.

                    

        

        
        (a)       If any action to be taken by
        the Lender Group or Agent hereunder requires the unanimous consent, authorization, or
        agreement of all Lenders, and a Lender ("Holdout
        Lender") fails to give its consent, authorization, or agreement,
        then Agent, upon at least 5 Business Days prior irrevocable notice to the Holdout Lender,
        may permanently replace the Holdout Lender with one or more substitute Lenders (each, a
        "Replacement Lender"), and the Holdout
        Lender shall have no right to refuse to be replaced hereunder. Such notice to replace the
        Holdout Lender shall specify an effective date for such replacement, which date shall not
        be later than 15 Business Days after the date such notice is given.

        
        (b)       Prior to the effective date of
        such replacement, the Holdout Lender and each Replacement Lender shall execute and deliver
        an Assignment and Acceptance, subject only to the Holdout Lender being repaid its share of
        the outstanding Obligations without any premium or penalty of any kind whatsoever. If the
        Holdout Lender shall refuse or fail to execute and deliver any such Assignment and
        Acceptance prior to the effective date of such replacement, the Holdout Lender shall be
        deemed to have executed and delivered such Assignment and Acceptance. The replacement of
        any Holdout Lender shall be made in accordance with the terms of
        Section 13.1. Until such time as the
        Replacement Lenders shall have acquired all of the Obligations, the Commitment, and the
        other rights and obligations of the Holdout Lender hereunder and under the other Loan
        Documents, the Holdout Lender shall remain obligated to make the Holdout Lender's Pro Rata
        Share of the Term Loan.

        
        14.3     No
        Waivers; Cumulative Remedies. No failure by Agent or any Lender to exercise
        any right, remedy, or option under this Agreement or any other Loan Document, or delay by
        Agent or any Lender in exercising the same, will operate as a waiver thereof. No waiver by
        Agent or any Lender will be effective unless it is in writing, and then only to the extent
        specifically stated. No waiver by Agent or any Lender on any occasion shall affect or
        diminish Agent's and each Lender's rights thereafter to require strict performance by
        Borrower of any provision of this Agreement. Agent's and each Lender's rights under this
        Agreement and the other Loan Documents will be cumulative and not exclusive of any other
        right or remedy that Agent or any Lender may have.

        
            	
                        
                        15.

                    	
                        
                        AGENT; THE LENDER GROUP.

                    

        

        
        15.1     Appointment
        and Authorization of Agent. Each Lender hereby designates and appoints PEMG as
        its representative under this Agreement and the other Loan Documents and each Lender hereby
        irrevocably authorizes Agent to execute and deliver each of the other Loan Documents on its
        behalf and to take such other action on its behalf under the provisions of this Agreement
        and each other Loan Document and to exercise such powers and perform such duties as are
        expressly delegated to Agent by the terms of this Agreement or any other Loan Document,
        together with such powers as are reasonably incidental thereto. Agent agrees to act as such
        on the express conditions contained in this Section 15. The provisions of this Section 15
        (other than the proviso to Section 15.11(a)) are solely for the benefit of Agent, and the
        Lenders, and Borrower and its Subsidiaries shall have no rights as a third party
        beneficiary of any of the provisions contained herein. Any provision to the contrary
        contained elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
        shall not have any duties or

         

        
        39

         

        
        

        

         

        
        responsibilities, except those expressly set forth herein, nor shall Agent
        have or be deemed to have any fiduciary relationship with any Lender, and no implied
        covenants, functions, responsibilities, duties, obligations or liabilities shall be read
        into this Agreement or any other Loan Document or otherwise exist against Agent; it being
        expressly understood and agreed that the use of the word "Agent" is for convenience only,
        that PEMG is merely the representative of the Lenders, and only has the contractual duties
        set forth herein. Except as expressly otherwise provided in this Agreement, Agent shall
        have and may use its sole discretion with respect to exercising or refraining from
        exercising any discretionary rights or taking or refraining from taking any actions that
        Agent expressly is entitled to take or assert under or pursuant to this Agreement and the
        other Loan Documents. Without limiting the generality of the foregoing, or of any other
        provision of the Loan Documents that provides rights or powers to Agent, Lenders agree that
        Agent shall have the right to exercise the following powers as long as this Agreement
        remains in effect: (a) maintain, in accordance with its customary business practices,
        ledgers and records reflecting the status of the Obligations, the Collateral, the
        Collections of Borrower and its Subsidiaries, and related matters, (b) execute or file any
        and all financing or similar statements or notices, amendments, renewals, supplements,
        documents, instruments, proofs of claim, notices and other written agreements with respect
        to the Loan Documents, (c) make portions of the Loans, for itself or on behalf of Lenders
        as provided in the Loan Documents, (d) exclusively receive, apply, and distribute the
        Collections of Borrower and its Subsidiaries as provided in the Loan Documents, (e) open
        and maintain such bank accounts and cash management accounts as Agent deems necessary and
        appropriate in accordance with the Loan Documents for the foregoing purposes with respect
        to the Collateral and the Collections of Borrower and its Subsidiaries, (f) perform,
        exercise, and enforce any and all other rights and remedies of the Lender Group with
        respect to Borrower, the Obligations, the Collateral, the Collections of Borrower and its
        Subsidiaries, or otherwise related to any of same as provided in the Loan Documents, and
        (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for
        the performance and fulfillment of its functions and powers pursuant to the Loan
        Documents.

        
        15.2     Delegation
        of Duties. Agent may execute any of its duties under this Agreement or any
        other Loan Document by or through agents, employees or attorneys in fact and shall be
        entitled to advice of counsel concerning all matters pertaining to such duties. Agent shall
        not be responsible for the negligence or misconduct of any agent or attorney in fact that
        it selects as long as such selection was made without gross negligence or willful
        misconduct.

        
        15.3     Liability
        of Agent. None of the Agent Related Persons shall (a) be liable for any action
        taken or omitted to be taken by any of them under or in connection with this Agreement or
        any other Loan Document or the transactions contemplated hereby (except for its own gross
        negligence or willful misconduct), or (b) be responsible in any manner to any of the
        Lenders for any recital, statement, representation or warranty made by Borrower or any
        Affiliate of Borrower, or any officer or director thereof, contained in this Agreement or
        in any other Loan Document, or in any certificate, report, statement or other document
        referred to or provided for in, or received by Agent under or in connection with, this
        Agreement or any other Loan Document, or the validity, effectiveness, genuineness,
        enforceability or sufficiency of this Agreement or any other Loan Document, or for any
        failure of Borrower or any other party to any Loan Document to perform its obligations
        hereunder or thereunder. No Agent Related Person shall be under any obligation to any
        Lender to ascertain or to inquire as to the observance or

         

        
        40

         

        
        

        

         

        
        performance of any of the agreements contained in, or conditions of, this
        Agreement or any other Loan Document, or to inspect the books and records or properties of
        Borrower or the books or records or properties of Borrower's Subsidiaries or
        Affiliates.

        
        15.4     Reliance
        by Agent. Agent shall be entitled to rely, and shall be fully protected in
        relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter,
        telegram, telefacsimile or other electronic method of transmission, telex or telephone
        message, statement or other document or conversation believed by it to be genuine and
        correct and to have been signed, sent, or made by the proper Person or Persons, and upon
        advice and statements of legal counsel (including counsel to Borrower or counsel to any
        Lender), independent accountants and other experts selected by Agent. Agent shall be fully
        justified in failing or refusing to take any action under this Agreement or any other Loan
        Document unless Agent shall first receive such advice or concurrence of the requisite
        Lenders as it deems appropriate and until such instructions are received, Agent shall
        refrain from acting as it deems advisable. If Agent so requests, it shall first be
        indemnified to its reasonable satisfaction by the Lenders against any and all liability and
        expense that may be incurred by it by reason of taking or continuing to take any such
        action. Agent shall in all cases be fully protected in acting, or in refraining from
        acting, under this Agreement or any other Loan Document in accordance with a request or
        consent of the requisite Lenders and such request and any action taken or failure to act
        pursuant thereto shall be binding upon all of the Lenders.

        
        15.5     Notice of
        Default or Event of Default. Agent shall not be deemed to have knowledge or
        notice of the occurrence of any Default or Event of Default, except with respect to
        defaults in the payment of principal, interest, fees, and expenses required to be paid to
        Agent for the account of the Lenders and except with respect to Events of Default of which
        Agent has actual knowledge, unless Agent shall have received written notice from a Lender
        or Borrower referring to this Agreement, describing such Default or Event of Default, and
        stating that such notice is a "notice of default." Agent promptly will notify the Lenders
        of its receipt of any such notice or of any Event of Default of which Agent has actual
        knowledge. If any Lender obtains actual knowledge of any Event of Default, such Lender
        promptly shall notify the other Lenders and Agent of such Event of Default. Each Lender
        shall be solely responsible for giving any notices to its Participants, if any. Subject to
        Section 15.4, Agent shall take such action with respect to such Default or Event of Default
        as may be requested by the Required Lenders in accordance with Section 8; provided,
        however, that unless and until Agent has received any such request, Agent may refrain from
        taking such action with respect to such Default or Event of Default as it shall deem
        advisable.

        
        15.6     Credit
        Decision. Each Lender acknowledges that none of the Agent-Related Persons has
        made any representation or warranty to it, and that no act by Agent hereinafter taken,
        including any review of the affairs of Borrower and its Subsidiaries or Affiliates, shall
        be deemed to constitute any representation or warranty by any Agent-Related Person to any
        Lender. Each Lender represents to Agent that it has, independently and without reliance
        upon any Agent-Related Person and based on such documents and information as it has deemed
        appropriate, made its own appraisal of and investigation into the business, prospects,
        operations, property, financial and other condition and creditworthiness of Borrower and
        any other Person party to a Loan Document, and all applicable bank regulatory laws relating
        to the transactions contemplated hereby, and made its own decision to enter into this
        Agreement and to extend

         

        
        41

         

        
        

        

         

        credit
        to Borrower. Each Lender also represents that it will, independently and without reliance
        upon any Agent-Related Person and based on such documents and information as it shall deem
        appropriate at the time, continue to make its own credit analysis, appraisals and decisions
        in taking or not taking action under this Agreement and the other Loan Documents, and to
        make such investigations as it deems necessary to inform itself as to the business,
        prospects, operations, property, financial and other condition and creditworthiness of
        Borrower and any other Person party to a Loan Document. Except for notices, reports, and
        other documents expressly herein required to be furnished to the Lenders by Agent, Agent
        shall not have any duty or responsibility to provide any Lender with any credit or other
        information concerning the business, prospects, operations, property, financial and other
        condition or creditworthiness of Borrower and any other Person party to a Loan Document
        that may come into the possession of any of the Agent-Related Persons.

        
        15.7     Costs and
        Expenses; Indemnification. Agent may incur and pay Lender Group Expenses to
        the extent Agent reasonably deems necessary or appropriate for the performance and
        fulfillment of its functions, powers, and obligations pursuant to the Loan Documents,
        including court costs, reasonable attorneys fees and expenses, fees and expenses of
        financial accountants, advisors, consultants, and appraisers, costs of collection by
        outside collection agencies, auctioneer fees and expenses, and costs of security guards or
        insurance premiums paid to maintain the Collateral, whether or not Borrower is obligated to
        reimburse Agent or Lenders for such expenses pursuant to this Agreement or otherwise. Agent
        is authorized and directed to deduct and retain sufficient amounts from the Collections of
        Borrower and its Subsidiaries received by Agent to reimburse Agent for such out-of-pocket
        costs and expenses prior to the distribution of any amounts to Lenders. In the event Agent
        is not reimbursed for such costs and expenses from the Collections of Borrower and its
        Subsidiaries received by Agent, each Lender hereby agrees that it is and shall be obligated
        to pay to or reimburse Agent for the amount of such Lender's Pro Rata Share thereof.
        Whether or not the transactions contemplated hereby are consummated, the Lenders shall
        indemnify upon demand the Agent Related Persons (to the extent not reimbursed by or on
        behalf of Borrower and without limiting the obligation of Borrower to do so), according to
        their Pro Rata Shares, from and against any and all Indemnified Liabilities; provided,
        however, that no Lender shall be liable for the payment to any Agent Related Person of any
        portion of such Indemnified Liabilities resulting solely from such Person's gross
        negligence or willful misconduct nor shall any Lender be liable for the obligations of any
        Defaulting Lender in failing to make any portion of the Term Loan or any other extension of
        credit hereunder. Without limitation of the foregoing, each Lender shall reimburse Agent
        upon demand for such Lender's Pro Rata Share of any costs or out of pocket expenses
        (including reasonable fees and expenses of attorneys, accountants, advisors, and
        consultants fees and expenses) incurred by Agent in connection with the preparation,
        execution, delivery, administration, modification, amendment, or enforcement (whether
        through negotiations, legal proceedings or otherwise) of, or legal advice in respect of
        rights or responsibilities under, this Agreement, any other Loan Document, or any document
        contemplated by or referred to herein, to the extent that Agent is not reimbursed for such
        expenses by or on behalf of Borrower. The undertaking in this Section shall survive the
        payment of all Obligations hereunder and the resignation or replacement of
        Agent.

        
        15.8     Agent in
        Individual Capacity. PEMG and its Affiliates may make loans to, issue letters
        of credit for the account of, accept deposits from, acquire equity interests in, and
        generally

         

        
        42

         

        
        

        

         

        engage
        in any kind of banking, trust, financial advisory, underwriting, or other business with
        Borrower and its Subsidiaries and Affiliates and any other Person party to any Loan
        Documents as though PEMG were not Agent hereunder, and, in each case, without notice to or
        consent of the other members of the Lender Group. The other members of the Lender Group
        acknowledge that, pursuant to such activities, PEMG or its Affiliates may receive
        information regarding Borrower or its Affiliates and any other Person party to any Loan
        Documents that is subject to confidentiality obligations in favor of Borrower or such other
        Person and that prohibit the disclosure of such information to the Lenders, and the Lenders
        acknowledge that, in such circumstances (and in the absence of a waiver of such
        confidentiality obligations, which waiver Agent will use its reasonable best efforts to
        obtain), Agent shall not be under any obligation to provide such information to them. The
        terms "Lender" and "Lenders" include PEMG in its individual capacity.

        
        15.9     Successor
        Agent. Agent may resign as Agent upon 45 days notice to the Lenders (or such
        shorter period agreed to by the Agent and the Required Lenders). If Agent resigns under
        this Agreement, the Required Lenders (with Borrower’s approval which shall not be
        unreasonably withheld, as long as an Event of Default shall not have occurred and then be
        continuing) shall appoint a successor Agent for the Lenders. If no successor Agent is
        appointed prior to the effective date of the resignation of Agent, Agent may appoint, after
        consulting with the Lenders, a successor Agent. If Agent has materially breached or failed
        to perform any material provision of this Agreement or of applicable law, the Required
        Lenders may agree in writing to remove and replace Agent with a successor Agent from among
        the Lenders. In any such event, upon the acceptance of its appointment as successor Agent
        hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the
        retiring Agent and the term "Agent" shall mean such successor Agent and the retiring
        Agent's appointment, powers, and duties as Agent shall be terminated. After any retiring
        Agent's resignation hereunder as Agent, the provisions of this Section 15 shall inure to
        its benefit as to any actions taken or omitted to be taken by it while it was Agent under
        this Agreement. If no successor Agent has accepted appointment as Agent by the effective
        date of a retiring Agent's notice of resignation, the retiring Agent's resignation shall
        nevertheless thereupon become effective and the Lenders shall perform all of the duties of
        Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as
        provided for above.

        
        15.10   Lender in Individual
        Capacity. Any Lender and its respective Affiliates may make loans to, issue
        letters of credit for the account of, accept deposits from, acquire equity interests in and
        generally engage in any kind of banking, trust, financial advisory, underwriting or other
        business with Borrower and its Subsidiaries and Affiliates and any other Person party to
        any Loan Documents as though such Lender were not a Lender hereunder without notice to or
        consent of the other members of the Lender Group. The other members of the Lender Group
        acknowledge that, pursuant to such activities, such Lender and its respective Affiliates
        may receive information regarding Borrower or its Affiliates and any other Person party to
        any Loan Documents that is subject to confidentiality obligations in favor of Borrower or
        such other Person and that prohibit the disclosure of such information to the Lenders, and
        the Lenders acknowledge that, in such circumstances (and in the absence of a waiver of such
        confidentiality obligations, which waiver such Lender will use its reasonable best efforts
        to obtain), such Lender shall not be under any obligation to provide such information to
        them.

         

        
        43

         

        
        

        

         

        
            	
                        
                         

                    	
                        
                        15.11

                    	
                        
                        Withholding Taxes.

                    

        

        
        (a)       All payments made by Borrower
        hereunder or under any note or other Loan Document will be made without setoff,
        counterclaim, or other defense. In addition, all such payments will be made free and clear
        of, and without deduction or withholding for, any present or future Taxes, and in the event
        any deduction or withholding of Taxes is required, Borrower shall comply with the
        penultimate sentence of this Section
        15.11(a), subject to receipt of the necessary forms from the
        Lenders. "Taxes" shall mean, any taxes,
        levies, imposts, duties, fees, assessments or other charges of whatever nature now or
        hereafter imposed by any jurisdiction or by any political subdivision or taxing authority
        thereof or therein with respect to such payments (but excluding any tax imposed by any
        jurisdiction or by any political subdivision or taxing authority thereof or therein
        measured by or based on the net income or net profits of Lender) and all interest,
        penalties or similar liabilities with respect thereto. If any Taxes are so levied or
        imposed, Borrower agrees to pay the full amount of such Taxes and such additional amounts
        as may be necessary so that every payment of all amounts due under this Agreement, any
        note, or Loan Document, including any amount paid pursuant to this
        Section 15.11(a) after withholding or deduction
        for or on account of any Taxes, will not be less than the amount provided for
        herein; provided,
        however, that Borrower shall not be required to
        increase any such amounts if the increase in such amount payable results from Agent's or
        such Lender's own willful misconduct or gross negligence (as finally determined by a court
        of competent jurisdiction). Borrower will furnish to Lender as promptly as possible after
        the date the payment of any Tax is due pursuant to applicable law certified copies of tax
        receipts evidencing such payment by any Borrower.

        
        (b)       (i)        If
        a Lender claims an exemption from United States withholding tax, such Lender shall deliver
        to Agent (or, in the case of an assignee of a Lender which is (x) a Qualified Affiliate or
        Qualified Related Fund of such Lender, and (y) for which an Assignment and Acceptance is
        not delivered to the Agent pursuant to Section
        13.1(c), to the assigning Lender only, and in the case of a
        participant, to the Lender granting the participation only) the following:

        
        (A)      if such Lender claims an exemption
        from, or a reduction of, withholding tax under a United States tax treaty, properly
        completed and executed IRS Form W-8BEN before receiving its first payment under this
        Agreement and at any other time reasonably requested in writing by Agent or the assigning
        Lender, as applicable;

        
        (B)      if such Lender claims that interest
        paid under this Agreement is exempt from United States withholding tax because it is
        effectively connected with a United States trade or business of such Lender, two properly
        completed and executed copies of IRS Form W-8ECI before receiving its first payment under
        this Agreement and at any other time reasonably requested in writing by Agent or the
        assigning Lender, as applicable; or

        
        (C)      such other form or forms, including
        IRS Form W-9, as may be required under the IRC or other laws of the United States as a
        condition to exemption from, or reduction of, United States withholding or backup
        withholding tax before receiving its first payment under this Agreement and at any other
        time reasonably requested in writing by Agent or the assigning Lender, as
        applicable.

         

        
        44

         

        
        

        

         

        
        (ii)        If a
        Lender claims an exemption from United States withholding tax pursuant to the portfolio
        interest exception, such Lender represents that such Lender (v) is not a
        "bank" as described in Section
        881(c)(3)(A) of the IRC, (w) is not a 10% shareholder of Borrower within the meaning of
        Sections 871(h)(3)(B) or 881(c)(3)(B) of the IRC, (x) is not a controlled foreign
        corporation related to Borrower within the meaning of Sections 864(d)(4) and 881(c)(3)(C)
        of the IRC, (y) has no arrangement with Borrower that would cause the interest to be
        "contingent" within the meaning of
        Sections 871(h)(4) and 881(c)(4) of the IRC, and (z) does not reside in a foreign
        country described in Sections 871(h)(6) or 881(c)(6) of the IRC. Each such Lender shall
        deliver to Agent (or, in the case of an assignment to a Qualified Affiliate or Qualified
        Related Fund that is made pursuant to Section
        13.1(c), to the assigning Lender) a properly completed IRS Form
        W-8BEN, before receiving its first payment under this Agreement and at any other time
        reasonably requested in writing by Agent or the assigning Lender, as applicable.

        
        Notwithstanding the foregoing, such Lender may provide a form W-8IMY, where
        applicable, with appropriate forms attached thereto.

        
        Each Lender agrees promptly to notify Agent or the assigning Lender, as
        applicable, of any change in circumstances which would modify or render invalid any claimed
        exemption or reduction. Notwithstanding any other provision of this
        Section 15.11, no Lender shall be required to
        deliver any form that such Lender is not legally able to deliver.

        
        (c)       If a Lender claims an exemption
        from, or reduction of, withholding tax in a jurisdiction other than the United States, such
        Lender shall deliver to Agent (or, in the case of an assignee of a Lender which is (x) a
        Qualified Affiliate or Qualified Related Fund of such Lender, and (y) for which an
        Assignment and Acceptance is not delivered to the Agent pursuant to
        Section 13.1(c), to the assigning Lender only,
        and in the case of a participant, to the Lender granting the participation only) any such
        form or forms, as may be required under the laws of such jurisdiction as a condition to
        exemption from, or reduction of, foreign withholding or backup withholding tax before
        receiving its first payment under this Agreement and at any other time reasonably requested
        in writing by Agent or the assigning Lender, as applicable.

        
        Each Lender agrees promptly to notify Agent or the assigning Lender, as
        applicable, of any change in circumstances which would modify or render invalid any claimed
        exemption or reduction.

        
        (d)       If any Lender is entitled to a
        reduction in the applicable withholding tax, Agent may withhold from any interest payment
        to such Lender an amount equivalent to the applicable withholding tax after taking into
        account such reduction. If the forms or other documentation required by subsection (b) or
        (c) of this Section 15.11 are not
        delivered in accordance with such subsections, then Agent or the assigning Lender, as
        applicable, may withhold from any interest payment to such Lender not providing such forms
        or other documentation an amount equivalent to the applicable withholding tax.

        
        (e)       If the IRS or any other
        Governmental Authority of the United States or other jurisdiction asserts a claim that
        Agent or the assigning Lender, as applicable, did not properly withhold tax from amounts
        paid to or for the account of any Lender due to a failure on

         

        
        45

         

        
        

        

         

        the
        part of the Lender (because the appropriate form was not delivered, was not properly
        executed, or because such Lender failed to notify the proper Person of a change in
        circumstances which rendered the exemption from, or reduction of, withholding tax
        ineffective, or for any other reason) such Lender shall indemnify and hold Agent or the
        assigning Lender, as applicable, harmless for all amounts paid, directly or indirectly, by
        Agent or the assigning Lender, as applicable, as tax or otherwise, including penalties and
        interest, and including any taxes imposed by any jurisdiction on the amounts payable by
        Agent or the assigning Lender, as applicable, under this Section
        15.11, together with all costs and expenses (including attorneys
        fees and expenses). The obligation of the Lenders under this subsection shall survive the
        payment of all Obligations and the resignation or replacement of Agent.

        
            	
                        
                         

                    	
                        
                        15.12

                    	
                        
                        Collateral Matters.

                    

        

        
        (a)       The Lenders hereby irrevocably
        authorize Agent, at its option and in its sole discretion, to release any Lien on any
        Collateral (i) upon the termination of the Commitments and payment and satisfaction in full
        by Borrower of all Obligations, (ii) constituting property being sold or disposed of
        if a release is required or desirable in connection therewith and if Borrower certifies to
        Agent that the sale or disposition is permitted under Section
        6.4 of this Agreement or the other Loan Documents (and Agent may
        rely conclusively on any such certificate, without further inquiry), (iii) constituting
        property in which neither Borrower nor any of its Subsidiaries owned any interest at the
        time the Agent's Lien was granted nor at any time thereafter, or (iv) constituting property
        leased to Borrower or its Subsidiaries under a lease that has expired or is terminated in a
        transaction permitted under this Agreement. Except as provided above, Agent will not
        execute and deliver a release of any Lien on any Collateral without the prior written
        authorization of (y) if the release is of all or substantially all of the Collateral, all
        of the Lenders, or (z) otherwise, the Required Lenders. Upon request by Agent or Borrower
        at any time, the Lenders will confirm in writing Agent's authority to release any such
        Liens on particular types or items of Collateral pursuant to this
        Section 15.12;
        provided,
        however, that (1) Agent shall not be required
        to execute any document necessary to evidence such release on terms that, in Agent's
        opinion, would expose Agent to liability or create any obligation or entail any consequence
        other than the release of such Lien without recourse, representation, or warranty, and (2)
        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 Borrower in
        respect of) all interests retained by Borrower, including, the proceeds of any sale, all of
        which shall continue to constitute part of the Collateral.

        
        (b)       Agent shall have no obligation
        whatsoever to any of the Lenders to assure that the Collateral exists or is owned by
        Borrower or is cared for, protected, or insured or has been encumbered, or that the Agent's
        Liens have been properly or sufficiently or lawfully created, perfected, protected, or
        enforced or are entitled to any particular priority, or to exercise at all or in any
        particular manner or under any duty of care, disclosure or fidelity, or to continue
        exercising, any of the rights, authorities and powers granted or available to Agent
        pursuant to any of the Loan Documents, it being understood and agreed that in respect of
        the Collateral, or any act, omission, or event related thereto, subject to the terms and
        conditions contained herein, Agent may act in any manner it may deem appropriate, in its
        sole discretion given Agent's own interest in the Collateral in its capacity as one of the
        Lenders and that Agent shall have no other

         

        
        46

         

        
        

        

         

        duty or
        liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided
        herein.

        
            	
                        
                         

                    	
                        
                        15.13

                    	
                        
                        Restrictions on Actions by Lenders; Sharing of
                        Payments.

                    

        

        
        (a)       Each of the Lenders agrees that
        it shall not, without the express written consent of Agent, and that it shall, to the
        extent it is lawfully entitled to do so, upon the written request of Agent, set off against
        the Obligations, any amounts owing by such Lender to Borrower or any Deposit Accounts of
        Borrower now or hereafter maintained with such Lender. Each of the Lenders further agrees
        that it shall not, unless specifically requested to do so in writing by Agent, take or
        cause to be taken any action, including, the commencement of any legal or equitable
        proceedings, to foreclose any Lien on, or otherwise enforce any security interest in, any
        of the Collateral.

        
        (b)       If, at any time or times any
        Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of
        Collateral or any payments with respect to the Obligations, except for any such proceeds or
        payments received by such Lender from Agent pursuant to the terms of this Agreement, or
        (ii) payments from Agent in excess of such Lender's ratable portion of all such
        distributions by Agent, such Lender promptly shall (1) turn the same over to Agent, in
        kind, and with such endorsements as may be required to negotiate the same to Agent, or in
        immediately available funds, as applicable, for the account of all of the Lenders and for
        application to the Obligations in accordance with the applicable provisions of this
        Agreement, or (2) purchase, without recourse or warranty, an undivided interest and
        participation in the Obligations owed to the other Lenders so that such excess payment
        received shall be applied ratably as among the Lenders in accordance with their Pro Rata
        Shares; provided, however, that to the extent that such excess payment received by the
        purchasing party is thereafter recovered from it, those purchases of participations shall
        be rescinded in whole or in part, as applicable, and the applicable portion of the purchase
        price paid therefor shall be returned to such purchasing party, but without interest except
        to the extent that such purchasing party is required to pay interest in connection with the
        recovery of the excess payment.

        
        15.14   Agency for
        Perfection. Agent hereby appoints each other Lender as its agent (and each
        Lender hereby accepts such appointment) for the purpose of perfecting the Agent's Liens in
        assets which, in accordance with Division 8 or Division 9, as applicable, of the Code can
        be perfected only by possession or control. Should any Lender obtain possession or control
        of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
        request therefor shall deliver possession or control of such Collateral to Agent or in
        accordance with Agent's instructions.

        
        15.15   Payments by Agent to
        the Lenders. All payments to be made by Agent to the Lenders shall be made by
        bank wire transfer of immediately available funds pursuant to such wire transfer
        instructions as each party may designate for itself by written notice to Agent.
        Concurrently with each such payment, Agent shall identify whether such payment (or any
        portion thereof) represents principal, premium, fees, or interest of the
        Obligations.

        
        15.16   Concerning the
        Collateral and Related Loan Documents. Each member of the Lender Group
        authorizes and directs Agent to enter into this Agreement and the other Loan

         

        
        47

         

        
        

        

         

        
        Documents. Each member of the Lender Group agrees that any action taken by
        Agent in accordance with the terms of this Agreement or the other Loan Documents relating
        to the Collateral and the exercise by Agent of its powers set forth therein or herein,
        together with such other powers that are reasonably incidental thereto, shall be binding
        upon all of the Lenders.

        
        15.17   Field Audits and
        Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and
        Information. By becoming a party to this Agreement, each Lender:

        
        (a)       is deemed to have requested
        that Agent furnish such Lender, promptly after it becomes available, a copy of each field
        audit or examination report (each a
        "Report" and collectively,
        "Reports") prepared by or at the request
        of Agent, and Agent shall so furnish each Lender with such Reports,

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

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

        
        (d)       agrees to keep all Reports and
        other material, non-public information regarding Borrower and its Subsidiaries and their
        operations, assets, and existing and contemplated business plans in a confidential manner
        in accordance with Section 16.7,
        and

        
        (e)       without limiting the generality
        of any other indemnification provision contained in this Agreement, agrees: (i) to hold
        Agent and any such other Lender preparing a Report harmless from any action the
        indemnifying Lender may take or fail to take or any conclusion the indemnifying Lender may
        reach or draw from any Report in connection with any loans or other credit accommodations
        that the indemnifying Lender has made or may make to Borrower, or the indemnifying Lender's
        participation in, or the indemnifying Lender's purchase of, a loan or loans of Borrower;
        and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other
        Lender preparing a Report harmless from and against, the claims, actions, proceedings,
        damages, costs, expenses, and other amounts (including, attorneys fees and costs) incurred
        by Agent and any such other Lender preparing a Report as the direct or indirect result of
        any third parties who might obtain all or part of any Report through the indemnifying
        Lender.

        In
        addition to the foregoing: (x) any Lender may from time to time request of Agent in writing
        that Agent provide to such Lender a copy of any report or document provided by Borrower to
        Agent that has not been contemporaneously provided by Borrower to such Lender, and, upon
        receipt of such request, Agent promptly shall provide a copy of same to such Lender, (y) to
        the extent that Agent is entitled, under any provision of the Loan Documents, to request
        additional reports or information from Borrower, any Lender may, from time to time,
        reasonably request Agent to exercise such right as specified in such Lender's notice to
        Agent, whereupon Agent

         

        
        48

         

        
        

        

         

        
        promptly shall request of Borrower the additional reports or information
        reasonably specified by such Lender, and, upon receipt thereof from Borrower, Agent
        promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders
        to Borrower a statement regarding the Loan Account, Agent shall send a copy of such
        statement to each Lender.

        
        15.18   Several Obligations;
        No Liability. Notwithstanding that certain of the Loan Documents now or
        hereafter may have been or will be executed only by or in favor of Agent in its capacity as
        such, and not by or in favor of the Lenders, any and all obligations on the part of Agent
        (if any) to make any credit available hereunder shall constitute the several (and not
        joint) obligations of the respective Lenders on a ratable basis, according to their
        respective Commitments, to make an amount of such credit not to exceed, in principal
        amount, at any one time outstanding, the amount of their respective Commitments. Nothing
        contained herein shall confer upon any Lender any interest in, or subject any Lender to any
        liability for, or in respect of, the business, assets, profits, losses, or liabilities of
        any other Lender. Each Lender shall be solely responsible for notifying its Participants of
        any matters relating to the Loan Documents to the extent any such notice may be required,
        and no Lender shall have any obligation, duty, or liability to any Participant of any other
        Lender. Except as provided in Section 16.7, no member of the Lender Group shall have any
        liability for the acts of any other member of the Lender Group. No Lender shall be
        responsible to Borrower or any other Person for any failure by any other Lender to fulfill
        its obligations to make credit available hereunder, nor to advance for it or on its behalf
        in connection with its Commitment, nor to take any other action on its behalf hereunder or
        in connection with the financing contemplated herein.

        
            	
                        
                        16.

                    	
                        
                        GENERAL PROVISIONS.

                    

        

        
        16.1     Effectiveness.
        This Agreement shall be binding and deemed effective when executed by Borrower, Agent, and
        each Lender whose signature is provided for on the signature pages hereof.

        
        16.2     Section
        Headings. Headings and numbers have been set forth herein for convenience
        only. Unless the contrary is compelled by the context, everything contained in each Section
        applies equally to this entire Agreement.

        
        16.3     Interpretation.
        Neither this Agreement or any of the other Loan Documents nor any uncertainty or ambiguity
        herein or therein shall be construed or resolved against the Lender Group or Borrower,
        whether under any rule of construction or otherwise. On the contrary, this Agreement and
        the other Loan Documents have been reviewed by all parties and shall be construed and
        interpreted according to the ordinary meaning of the words used so as to accomplish fairly
        the purposes and intentions of all parties hereto and thereto. Time is of the essence in
        Borrower's payment and performance of the Obligations.

        
        16.4     Severability
        of Provisions. Each provision of this Agreement shall be severable from every
        other provision of this Agreement for the purpose of determining the legal enforceability
        of any specific provision.

        
        16.5     Counterparts;
        Electronic Execution. This Agreement may be executed in any number of
        counterparts and by different parties on separate counterparts, each of which,
        when

         

        
        49

         

        
        

        

         

        
        executed and delivered, shall be deemed to be an original, and all of which,
        when taken together, shall constitute but one and the same Agreement. Delivery of an
        executed counterpart of this Agreement by telefacsimile or other electronic method of
        transmission shall be equally as effective as delivery of an original executed counterpart
        of this Agreement. Any party delivering an executed counterpart of this Agreement by
        telefacsimile or other electronic method of transmission also shall deliver an original
        executed counterpart of this Agreement but the failure to deliver an original executed
        counterpart shall not affect the validity, enforceability, and binding effect of this
        Agreement. The foregoing shall apply to each other Loan Document
        mutatis mutandis.

        
        16.6     Revival
        and Reinstatement of Obligations. If the incurrence or payment of the
        Obligations by Borrower or the transfer to the Lender Group of any property should for any
        reason subsequently be declared to be void or voidable under any state or federal law
        relating to creditors' rights, including provisions of the Bankruptcy Code relating to
        fraudulent conveyances, preferences, or other voidable or recoverable payments of money or
        transfers of property (collectively, a "Voidable Transfer"), and if the Lender Group is
        required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to
        do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or
        the amount thereof that the Lender Group is required or elects to repay or restore, and as
        to all reasonable costs, expenses, and attorneys fees of the Lender Group related thereto,
        the liability of Borrower automatically shall be revived, reinstated, and restored and
        shall exist as though such Voidable Transfer had never been made.

        
        16.7     Confidentiality.
        Agent and Lenders each individually (and not jointly or jointly and severally) agree that,
        non-public information regarding Borrower and its Subsidiaries, their operations, assets,
        and existing and contemplated business plans shall be treated by Agent and the Lenders in a
        confidential manner, and shall not be disclosed by Agent and the Lenders to Persons who are
        not parties to this Agreement, except: (a) to attorneys for and other advisors,
        accountants, auditors, and consultants to any member of the Lender Group, (b) to
        Subsidiaries and Affiliates of any member of the Lender Group, provided that any such
        Subsidiary or Affiliate shall have agreed to receive such information hereunder subject to
        the terms of this Section 16.7, (c) as may be required by statute, decision, or judicial or
        administrative order, rule, or regulation, (d) as may be agreed to in advance by Borrower
        or its Subsidiaries or as requested or required by any Governmental Authority pursuant to
        any subpoena or other legal process, (e) as to any such information that is or becomes
        generally available to the public (other than as a result of prohibited disclosure by Agent
        or the Lenders), (f) in connection with any assignment, prospective assignment, sale,
        prospective sale, participation or prospective participations, or pledge or prospective
        pledge of any Lender's interest under this Agreement, provided that any such assignee,
        prospective assignee, purchaser, prospective purchaser, participant, prospective
        participant, pledgee, or prospective pledgee shall have agreed in writing to receive such
        information hereunder subject to the terms of this Section 16.7, and (g) in connection with
        any litigation or other adversary proceeding involving parties hereto which such litigation
        or adversary proceeding involves claims related to the rights or duties of such parties
        under this Agreement or the other Loan Documents; provided, however, that, unless
        prohibited by applicable law, statute, regulation, or court order, such Lender or Agent
        shall: (y) notify Borrower of any request by any court, governmental or administrative
        agency, or pursuant to any subpoena or other legal process for disclosure of any such
        non-public material information

         

        
        50

         

        
        

        

         

        
        concurrent with, or where practicable, prior to the disclosure thereof, and
        (z) notify all other Persons described in clause (a) above that they are bound by, the
        provisions of this Section 16.7. The provisions of this Section 16.7 shall survive the
        payment in full of the Obligations.

        
        16.8     Integration.
        This Agreement, together with the other Loan Documents, reflects the entire understanding
        of the parties with respect to the transactions contemplated hereby and shall not be
        contradicted or qualified by any other agreement, oral or written, before the date
        hereof.

        
            	
                        
                         

                    	
                        
                        16.9

                    	
                        
                        INTENTIONALLY OMITTED

                    

        

        
        16.10   Compliance With USA
        Patriot Act. Agent is subject to the USA Patriot Act and hereby notifies
        Borrower that pursuant to the requirements of the USA Patriot Act Agent is required to
        obtain, verify and record information that identifies Borrower and certain of its
        Affiliates, which information includes the name and address of Borrower and these
        Affiliates and other information that will allow Agent to identify Borrower and these
        Affiliates in accordance with the USA Patriot Act.

        
        16.11   Subordination
        Agreements. All undertakings and obligations of Borrower hereunder and all
        rights, privileges, undertakings and obligations of the Lender Group hereunder are subject
        to the terms, conditions and covenants set forth in the Subordination
        Agreements.

        
        16.12   Public
        Announcements. Nothing contained in this Agreement will prohibit Borrower,
        Agent or any Lender or any of their respective advisors after the Closing Date from issuing
        or causing publication of any "tombstone" or similar advertisement in customary form,
        provided that no such "tombstone" or similar advertisement issued or caused to be published
        by or on behalf of Borrower, Agent or any Lender or any of their respective advisors shall
        contain information regarding (a) financial information concerning Borrower, Agent of any
        Lender or (b) the financial terms of this Agreement or the transactions contemplated hereby
        other than the amount of the Term Loan; provided further, that any such tombstones shall
        comply with applicable securities laws and Borrower and Agent shall have the right to
        approve any such tombstone or advertisement prior to publication, which approval shall not
        be unreasonably withheld.

         

        
        51

         

        
        

        

         

        
        IN WITNESS WHEREOF, the parties hereto have
        caused this Agreement to be executed and delivered as of the date first above
        written.

        
         

        
            	
                        
                         

                    	
                        
                        BAKERS FOOTWEAR GROUP, INC.

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        By:

                    	
                        
                        /s/ Peter A. Edison

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                        Peter A. Edison, Chief Executive Officer

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        PRIVATE EQUITY MANAGEMENT GROUP,
                        INC.,

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        By:

                    	
                        /s/ Danny Pang

                    
	
                        
                         

                    	
                        
                        Title:

                    	
                        Chairman, CEO

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        GVECR II 2007 E Trust dated December 17,
                        2007,

                    
	
                        
                         

                    	
                        
                        as a Lender

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        By:

                    	
                        /s/ Wilbur Quon

                    
	
                        
                         

                    	
                        
                        Title:

                    	
                        CFO

                    

        

        
         

         

         

         

         

         

         

        
        [Signature Page to the Second Lien Credit Agreement]

         

        
        

        

         

        
        EXHIBIT A-1

        FORM
        OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

        
        This ASSIGNMENT AND ACCEPTANCE AGREEMENT
        (“Assignment
        Agreement”) is entered into as of _______________ between
        ________________________
        (“Assignor”) and
        ____________________
        (“Assignee”). Reference is
        made to the agreement described in Item 2 of Annex I
        annexed hereto (the “Credit
        Agreement”). Capitalized terms used herein and not
        otherwise defined shall have the meanings ascribed to them in the Credit
        Agreement.

        
        1.         In accordance with
        the terms and conditions of Section 13
        of the Credit Agreement, the Assignor hereby sells and assigns to the
        Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in
        and to the Assignor's rights and obligations under the Loan Documents [excluding the
        Registration Rights Agreement to the extent not transferred] as of the date hereof with
        respect to the Obligations owing to the Assignor, Assignor’s portion of the Term
        Loan, all as specified on Annex 1 and
        Assignor’s obligations owing to the Borrower.

        
        2.         Assignee represents
        and warrants that it is an “accredited investor” as defined in Rule 501(a) of
        Regulation D, as amended under the Securities Act, and hereby agrees to be bound by the
        terms and conditions of the Loan Documents. Assignee agrees to be bound by the terms and
        conditions of the Loan Documents and agrees that it will not dispose of the Securities
        except in compliance with the applicable requirements of the Securities Act.

        
        3.         Assignee hereby
        confirms that, as of the date hereof: (1) including the shares of Common Stock to be
        acquired, the undersigned, together with its Affiliates, does not beneficially own more
        than 19.99% of the outstanding Common Stock as determined pursuant to Section 5 of the
        Notes; and (2) that, upon receipt, the shares of Common Stock will not be disposed of
        except in compliance with applicable federal and state securities laws.

        
        4.         The Assignor (a)
        represents and warrants that (i) it is the legal and beneficial owner of the interest being
        assigned by it hereunder and that such interest is free and clear of any adverse claim and
        (ii) it has full power and authority, and has taken all action necessary, to execute and
        deliver this Assignment Agreement and to consummate the transactions contemplated hereby;
        (b) makes no representation or warranty and assumes no responsibility with respect to (i)
        any statements, warranties or representations made in or in connection with the Loan
        Documents, or (ii) the execution, legality, validity, enforceability, genuineness,
        sufficiency or value of the Loan Documents or any other instrument or document furnished
        pursuant thereto; (c) makes no representation or warranty and assumes no responsibility
        with respect to the financial condition of Borrower or the performance or observance by
        Borrower of any of its obligations under the Loan Documents or any other instrument or
        document furnished pursuant thereto, and (d) represents and warrants that the amount set
        forth as the Purchase Price on Annex I
        represents the amount owed by Borrower to Assignor with respect to
        Assignor's share of the Term Loan assigned hereunder, as reflected by the
        Register.

         

        EXHIBIT
        A-1 - 1

         

        
        

        

         

        
        5.         The Assignee (a)
        confirms that it has received copies of the Credit Agreement and the other Loan Documents,
        together with copies of the financial statements referred to therein and such other
        documents and information (including documents filed by Borrower with the SEC) as it has
        deemed appropriate to make its own credit analysis and decision to enter into this
        Assignment Agreement; (b) agrees that it will, independently and without reliance upon
        Agent, Assignor, or any other Lender, based on such documents and information as it shall
        deem appropriate at the time, continue to make its own credit decisions in taking or not
        taking action under the Loan Documents; (c) confirms that it is an Eligible Transferee; (d)
        appoints and authorizes the Agent to take such action as agent on its behalf and to
        exercise such powers under the Loan Documents as are delegated to Agent by the terms
        thereof, together with such powers as are reasonably incidental thereto; (e) agrees that it
        will perform in accordance with their terms all of the obligations which by the terms of
        the Loan Documents are required to be performed by it as a Lender; and (f) attaches the
        forms prescribed by the IRS certifying as to the Assignee's status for purposes of
        determining exemption from United States withholding taxes with respect to all payments to
        be made to the Assignee under the Loan Documents [excluding the Registration Rights
        Agreement to the extent not transferred] or such other documents as are necessary to
        indicate that all such payments are subject to such rates at a rate reduced by an
        applicable tax treaty.

        
        6.         Following the
        execution of this Assignment Agreement by the Assignor and Assignee, it will be delivered
        by the Assignor (if required by the Credit Agreement) to the Agent (with a copy to the
        Borrower) for recording by the Agent. The effective date of this Assignment (the
        “Settlement Date”) shall be
        the latest to occur of (a) the date of the execution hereof by the Assignor and the
        Assignee, the payment by Assignor or Assignee to Agent for Agent's sole and separate
        account of a processing fee in the amount of $5,000 (if required by the Credit Agreement),
        and the receipt of any required consent of the Borrower and Agent, (b) the Settlement Date
        specified on Annex I, and (c) the
        receipt by Assignor of the Purchase Price specified in Annex
        I.

        
        7.         Upon recording by
        the Agent, as of the Settlement Date (a) the Assignee shall be a party to the Credit
        Agreement and, to the extent of the interest assigned pursuant to this Assignment
        Agreement, have the rights and obligations of a Lender thereunder and under the other Loan
        Documents [excluding the Registration Rights Agreement to the extent not transferred], and
        (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment
        Agreement, relinquish its rights and be released from its obligations under the Credit
        Agreement and the other Loan Documents,
        provided,
        however, that nothing contained herein shall
        release any assigning Lender from obligations that survive the termination of this
        Agreement, including such assigning Lender's obligations under
        Article 15 and Section
        16.7 of the Credit Agreement.

        
        8.         Upon recording by
        the Agent, from and after the Settlement Date, the Agent shall make all payments under the
        Credit Agreement and the other Loan Documents [excluding the Registration Rights Agreement
        to the extent not transferred] in respect of the interest assigned hereby (including,
        without limitation, all payments of principal, interest and commitment fees (if applicable)
        with respect thereto) to the Assignee. Upon the Settlement Date, the Assignee shall pay to
        the Assignor the Purchase Price (as set forth on Annex
        I) of the principal amount of any outstanding loans under the
        Credit Agreement and the other Loan Documents [excluding the Registration Rights Agreement
        to the extent not transferred]. The

         

        EXHIBIT
        A-1 - 2

         

        
        

        

         

        Assignor
        and Assignee shall make all appropriate adjustments in payments under the Credit Agreement
        and the other Loan Documents [excluding the Registration Rights Agreement to the extent not
        transferred] for periods prior to the Settlement Date directly between themselves on the
        Settlement Date.

        
        9.         This Assignment
        Agreement may be executed in counterparts and by the parties hereto in separate
        counterparts, each of which when so executed and delivered shall be an original, but all of
        which shall together constitute one and the same instrument. This Assignment Agreement may
        be executed and delivered by telecopier or other facsimile transmission all with the same
        force and effect as if the same were a fully executed and delivered original manual
        counterpart.

        
        10.       THIS ASSIGNMENT AGREEMENT SHALL
        BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
        CALIFORNIA WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.

        
        IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement
        and Annex I hereto to be executed by
        their respective officers, as of the first date written above.

        
            	
                        
                         

                    	
                        
                        [NAME OF ASSIGNOR]

                        
                         

                    
	
                        
                         

                    	
                        
                        as Assignor

                        
                         

                    
	
                        
                         

                    	
                        
                        By:_____________________________

                               Name:________________________

                               Title:_________________________

                        
                         

                    
	
                        
                         

                    	
                        
                        [NAME OF ASSIGNEE]

                        
                         

                    
	
                        
                         

                    	
                        
                        as Assignee

                        
                         

                    
	
                        
                         

                    	
                        
                        By:_____________________________

                               Name:________________________

                               Title:_________________________

                        
                         

                    
	
                        
                        ACCEPTED THIS ____ DAY OF

                        
                        _______________, 200__

                        
                         

                    	
                        
                         

                    
	
                        
                        PRIVATE EQUITY MANAGEMENT GROUP, INC.,
                        as Agent

                        
                         

                    	
                        
                         

                    
	
                        
                        By:_____________________________

                              Name:________________________

                              Title:_________________________

                    	
                        
                         

                    

        

         

         

        EXHIBIT
        A-1 - 3

         

        
        

        

         

        ANNEX
        FOR ASSIGNMENT AND ACCEPTANCE

        ANNEX
        I

        
            	
                        
                        1.

                    	
                        
                        Borrower: BAKERS FOOTWEAR GROUP, INC.

                    

        

        
            	
                        
                        2.

                    	
                        
                        Name and Date of Credit Agreement:

                    

        

        
        Second Lien Credit Agreement, dated as of February 1, 2008, by and among
        Borrower, the lenders from time to time a party thereto (the "Lenders"), and Private Equity
        Management Group, Inc., a Nevada corporation, as the arranger and administrative agent for
        the Lenders

        
            	
                        
                        3.

                    	
                        
                        Date of Assignment Agreement:

                    	
                        
                        ____________

                    

        

        
            	
                        
                        4.

                    	
                        
                        Assigned Amount of Term Loan

                    	
                        
                        $___________

                    

        

        
            	
                        
                        5.

                    	
                        
                        Settlement Date:

                    	
                        
                        ____________

                    

        

        
            	
                        
                        6.

                    	
                        
                        Purchase Price

                    	
                        
                        $___________

                    

        

        
            	
                        
                        7.

                    	
                        
                        Notice and Payment Instructions, etc.

                    

        

         

        
            	
                        
                        Assignee:

                    	
                        
                        Assignor:

                    
	
                        
                        ___________________________

                    	
                        
                        _________________________

                    
	
                        
                        ___________________________

                    	
                        
                        _________________________

                    
	
                        
                        ___________________________

                    	
                        
                        _________________________

                    

        

         

         

        EXHIBIT
        A-1 - 4

         

        
        

        

         

        
        EXHIBIT B-1

        
        FORM OF SUBORDINATED TERM NOTE

        
         

        
        SUBORDINATED TERM NOTE

        THIS
        SUBORDINATED TERM NOTE (“NOTE”) AND THE INDEBTEDNESS EVIDENCED HEREBY ARE
        SUBORDINATE, IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT SUBORDINATION AGREEMENT (AS
        AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
        “SENIOR LOAN SUBORDINATION
        AGREEMENT”) DATED AS OF FEBRUARY 1, 2008 BETWEEN AND AMONG
        BAKERS FOOTWEAR GROUP, INC., A MISSOURI CORPORATION (THE
        “COMPANY”), EACH OF THE
        SUBORDINATED CREDITORS SET FORTH ON THE SIGNATURE PAGES THERETO AND BANK OF AMERICA, N.A.
        (“SENIOR LENDER”), TO ALL INDEBTEDNESS OWED BY THE MAKER OF THIS NOTE TO THE
        SENIOR LENDER, AND THE LENDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE
        PROVISIONS OF THE SENIOR LOAN SUBORDINATION AGREEMENT.

        THIS
        NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
        COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
        SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
        MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
        SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
        TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
        STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
        EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

        
         

        
            	
                        
                        No.
                        STN-1:

                    	
                        
                        $7,500,000

                    
	
                        
                         

                    	
                        
                        February 1, 2008

                    

        

         

        BAKERS
        FOOTWEAR GROUP, INC.

        
        SUBORDINATED TERM NOTE

        
        THIS SUBORDINATED TERM NOTE (this
        “Note”) is being issued
        pursuant to the terms of that certain Second Lien Credit Agreement (as amended,
        supplemented or otherwise modified from time to time, the
        “Credit Agreement”), dated
        as of February 1, 2008, by and among Bakers Footwear Group, Inc., a Missouri corporation
        (the “Company”), the lenders
        party thereto as “Lenders”
        (“Lenders”) and Private
        Equity Management Group, Inc., a Nevada corporation, in its capacity as administrative
        agent for the Lender Group (together with its successors,
        “Agent”)

        
        FOR VALUE RECEIVED, the Company promises to pay to the order of GVECR II
        2007 E Trust dated December 17, 2007 or its registered assigns (the
        “Lender”), the principal sum
        of SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 Dollars ($7,500,000), or such lesser
        principal amount as may then be outstanding hereunder, on February 1, 2011 or such earlier
        date as this Note is required to be repaid as provided hereunder (the
        “Maturity Date”), and to pay
        interest to the Lender in accordance with the provisions of the Credit Agreement. This Note
        is subject to the following additional provisions:

         

        EXHIBIT
        B-1 - 1

         

        
        

        

         

        
        1.         
        Definitions. In addition to the terms defined
        elsewhere in this Note, capitalized terms that are used but not otherwise defined herein
        have the meanings given to such terms in the Credit Agreement.

        
        2.         
        Payments. The Company shall pay principal and
        interest to the Lender pursuant to the terms of the Credit Agreement. This Note also may
        and must be prepaid as provided in the Credit Agreement, together with any premiums set
        forth herein, under the circumstances therein described. Payment of principal hereof and
        interest and premium hereon shall be made in lawful money of the United States of
        America.

        
        3.         
        Transfers. This Note may be transferred only
        pursuant to a registration statement filed under the Securities Act of 1933, as amended, or
        an exemption from such registration. Subject to such restrictions, the Company shall
        register (or allow the registration of) the transfer of any portion of this Note upon
        surrender of this Note to the Company, properly endorsed, at its address for notice set
        forth herein together with delivery of the duly executed Note assignment form attached
        hereto as Exhibit A and in compliance
        with Section 7(a). Any transfer shall also comply with the provisions on transfer in the
        Credit Agreement. Upon any such registration or transfer, a new Note, in substantially the
        form of this Note (any such new note, a “New
        Note”), evidencing the portion of this Note so transferred
        shall be issued to the transferee and a New Note evidencing the remaining portion of this
        Note not so transferred, if any, shall be issued to the transferring Lender. The acceptance
        of the New Note by the transferee thereof shall be deemed the acceptance by such transferee
        of all of the rights and obligations of a holder of a Note. The Company agrees that its
        prior consent is not required for the transfer of any portion of this Note;
        provided,
        however, that the Company shall be entitled to
        reasonable assurance, including an opinion of counsel reasonably acceptable to Company,
        that such transfer complies with applicable securities laws. No service charge or other fee
        will be imposed in connection with any such registration of transfer or
        exchange.

        
        4.         
        Ranking. This Note ranks pari passu with all
        other Notes now or hereafter issued pursuant to the Loan Documents and is subject to the
        terms and conditions of the Credit Agreement, including those in respect of any additional
        indebtedness. Notwithstanding anything to the contrary herein, the Company and Lender agree
        that the payment of all amounts hereunder is subject to the Subordination
        Agreement.

        
        5.         
        Charges, Taxes and Expenses. The Lender shall
        be responsible for all tax liability that may arise as a result of holding or transferring
        this Note.

        
        6.         
        Notices. Any and all notices or other
        communications or deliveries hereunder shall be made in accordance with Section 11 of the
        Credit Agreement.

        
        7.         
        Miscellaneous.

        
        (a)        Lender may transfer or
        assign, in whole or from time to time in part, to one or more persons, which shall be (A)
        an “accredited investor” as defined in Rule 501(a) of Regulation D, as amended
        under the Securities Act; (B) shall be an Affiliate of Private Equity Management Group,
        Inc.; (C) shall not be a direct competitor of the Company to such Lender; and (D) which
        shall agree in writing to be bound by the terms and conditions of this Note, its rights
        hereunder in connection with the transfer of the Note by Lender to such person, provided
        that the Lender complies with all

         

        EXHIBIT
        B-1 - 2

         

        
        

        

         

        laws
        applicable thereto and provides written notice of assignment in the form attached hereto
        as Exhibit A to the Company promptly
        after such assignment is effected. The provisions of this Agreement shall inure to the
        benefit of and be binding upon the respective permitted successors and assigns of the
        parties.

        
        (b)       Subject to Section 8(a), above,
        nothing in this Note shall be construed to give to any person or corporation other than the
        Company and the Lender any legal or equitable right, remedy or cause under this Note. This
        Note shall inure to the sole and exclusive benefit of the Company and the
        Lender.

        
        (c)        
        EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
        PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
        PROCEEDING.

        
        (d)       The prevailing party in a
        proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees
        and other costs and expenses incurred with the investigation, preparation and prosecution
        of such proceeding.

        
        (e)        The headings herein are
        for convenience only, do not constitute a part of this Note and shall not be deemed to
        limit or affect any of the provisions hereof.

        
        (f)        In case any one or more
        of the provisions of this Note shall be invalid or unenforceable in any respect, the
        validity and enforceability of the remaining terms and provisions of this Note shall not in
        any way be affected or impaired thereby and the parties will attempt in good faith to agree
        upon a valid and enforceable provision which shall be a commercially reasonable substitute
        therefor, and upon so agreeing, shall incorporate such substitute provision in this
        Note.

        
        (g)       No provision of this Note may
        be waived, amended or otherwise modified except in accordance with the requirements set
        forth in the Credit Agreement. No waiver of any default with respect to any provision,
        condition or requirement of this Note shall be deemed to be a continuing waiver in the
        future or a waiver of any subsequent default or a waiver of any other provision, condition
        or requirement hereof, nor shall any delay or omission of either party to exercise any
        right hereunder in any manner impair the exercise of any such right.

        
        (h)       To the extent it may lawfully
        do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever
        claim, and will resist any and all efforts to be compelled to take the benefit or advantage
        of, usury laws wherever enacted, now or at any time hereafter in force, in connection with
        any claim, action or proceeding that may be brought by any Lender in order to enforce any
        right or remedy under the Notes. Notwithstanding any provision to the contrary contained in
        the Notes, it is expressly agreed and provided that the total liability of the Company
        under the Notes for payments in the nature of interest shall not exceed the maximum lawful
        rate authorized under applicable law (the “Maximum
        Rate”), and, without limiting the foregoing, in no event
        shall any rate of interest or default interest, or both of them, when aggregated with any
        other sums in the nature of interest that the Company may be obligated to pay under the
        Notes exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest
        allowed by law and applicable to the Notes is increased or decreased by statute or any
        official governmental action subsequent to the date hereof, the new maximum contract rate
        of interest allowed by law will be the Maximum Rate of interest applicable to the Notes
        from the effective date forward, unless such

         

        EXHIBIT
        B-1 - 3

         

        
        

        

         

        
        application is precluded by applicable law. If under any circumstances
        whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Lender
        with respect to indebtedness evidenced by the Notes, such excess shall be applied by such
        Lender to the unpaid principal balance of any such indebtedness or be refunded to the
        Company, the manner of handling such excess to be at such Lender’s
        election.

        
        (i)        This note is one of the
        Notes referred to in the Credit Agreement. The Credit Agreement and the other Loan
        Documents referred to therein contain additional rights of the holder of, and the security
        for, this Note.

        
        (j)        This Note shall be
        governed by, and construed in accordance with, the laws of the State of California in all
        respects, including all matters of construction, validity and performance, without regard
        to the choice of law provisions thereof.

        
        (k)       In the event of a conflict
        between the provisions of this Note and the provisions of the Credit Agreement, the latter
        shall control.

        
        **********

         

        EXHIBIT
        B-1 - 4

        
        

        

         

        
        IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by
        a duly authorized officer as of this ___ day of February, 2008.

         

        
            	
                        
                         

                    	
                        
                        BAKERS FOOTWEAR GROUP, INC.

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                         

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        By:

                    	
                        
                         

                    
	
                        
                         

                    	
                        
                        Name:

                    	
                        
                        Peter A. Edison

                    
	
                        
                         

                    	
                        
                        Title:

                    	
                        
                        Chairman, Chief Executive Officer and

                        President

                    

        

        
         

        
         

        
         

        
         

        
         

        
        [Signature Page to the Subordinated Term Note]

        EXHIBIT
        B-1 - 5

        
        

        

         

        
        EXHIBIT A

        NOTE
        ASSIGNMENT FORM

         

        FOR
        VALUE RECEIVED, ______________________________ hereby sells, assigns and transfers to the
        transferee named below, this Note together with all right, title and interest therein. The
        transferee agrees to be bound by the terms and conditions of this Note and agrees that it
        will not dispose of the Note except in compliance with the applicable requirements of the
        Securities Act of 1933, as amended.

         

        
        Date:_______________________________

         

        
        [Name of Note
        holder]

         

        
        By:_____________________________

        
        Name:___________________________

        
        Title:____________________________

        
        Address:_________________________

        
        ______________________________

         

         

        
        [Name of
        Transferee]

         

        
        By:_____________________________

        
        Name:___________________________

        
        Title:____________________________

        
        Address:_________________________

        
        ______________________________

         

         

        EXHIBIT
        B-1 - 6

         

        
        

        

         

        
        EXHIBIT C-1

        FORM
        OF COMPLIANCE CERTIFICATE

        [on
        Borrower’s letterhead]

        
            	
                        
                        To:

                    	
                        
                        Private Equity Management Group, Inc., as Agent
under the below referenced Credit Agreement
1 Park Plaza, Suite 550
Irvine, California 92614
Attention: Peter Paul Mendel, Esq., General Counsel

                    

        

        
            	
                        
                         

                    	
                        
                        Re:

                    	
                        
                        Compliance Certificate dated

                    

        

        Ladies
        and Gentlemen:

        
        Reference is made to that certain Second Lien Credit Agreement (the
        "Credit Agreement") dated as of February
        1, 2008, by and among the lenders identified on the signature pages thereof (such lenders,
        together with their respective successors and permitted assigns, are referred to
        hereinafter each individually as a
        "Lender" and collectively as the
        "Lenders"), PRIVATE EQUITY MANAGEMENT
        GROUP, INC.,a Nevada corporation, as the arranger and administrative
        agent for the Lenders ("Agent"), and
        BAKERS FOOTWEAR GROUP, INC., a Missouri corporation
        ("Borrower"). Capitalized terms used in
        this Compliance Certificate have the meanings set forth in the Credit Agreement unless
        specifically defined herein.

        
        Pursuant to Schedule 5.3
        of the Credit Agreement, the undersigned officer of Parent hereby certifies
        that:

        
        1.         The consolidated
        financial information of Borrower and its Subsidiaries furnished in
        Schedule 1 attached hereto has been prepared in
        accordance with GAAP (except for year-end adjustments and the lack of footnotes or as set
        forth on Schedule 1), and fairly
        presents in all material respects in accordance with GAAP the financial condition of
        Borrower and its Subsidiaries.

        
        2.         Such officer has
        reviewed the terms of the Credit Agreement and has made, or caused to be made under his/her
        supervision, a review in reasonable detail of the transactions and condition of Borrower
        and its Subsidiaries during the accounting period covered by the financial statements
        delivered pursuant to Schedule 5.3 of
        the Credit Agreement.

        
        3.         Such review has not
        disclosed the existence on and as of the date hereof, and the undersigned does not have
        knowledge of the existence as of the date hereof, of any event or condition that
        constitutes a Default or Event of Default, except for such conditions or events listed
        on Schedule 2 attached hereto,
        specifying the nature and period of existence thereof and what action Borrower has taken,
        is taking, or proposes to take with respect thereto.

        
        4.         The representations
        and warranties of Borrower set forth in the Credit Agreement and the other Loan Documents
        are true and correct in all material respects on and as

         

        EXHIBIT
        C-1 - 1

         

        
        

        

         

        of the
        date hereof (except to the extent they relate to a specified date), except as set forth
        on Schedule 3 attached
        hereto.

        
        5.         Borrower is in
        compliance with the applicable covenants contained in Section
        6.16 of the Credit Agreement as demonstrated on
        Schedule 4 hereof and as calculated on
        Schedule 5 hereof.

        
        IN WITNESS WHEREOF, this Compliance Certificate is executed by the
        undersigned this _____ day of _______________, ________.

        
            	
                        
                         

                    	
                        
                        BAKERS FOOTWEAR GROUP, INC.

                        
                         

                        
                         

                        
                         

                    
	
                        
                         

                    	
                        
                        By:_____________________________

                        
                        Name:___________________________

                        
                        Title:____________________________

                    

        

         

         

        EXHIBIT
        C-1 - 2

         

        
        

        

         

        
        SCHEDULE 1

        
        Financial Information

         

        EXHIBIT
        C-1

        SCHEDULE
        1

         

        
        

        

         

        
        SCHEDULE 2

        
        Default or Event of Default

         

        EXHIBIT
        C-1

        SCHEDULE
        2

         

        
        

        

         

        
        SCHEDULE 3

        
        Representations and Warranties

         

        EXHIBIT
        C-1

        SCHEDULE
        3

         

        
        

        

         

        
        SCHEDULE 4

        
        Financial Covenants

        
            	
                        
                        1.

                    	
                        
                        Minimum Tangible Net
                        Worth.

                    

        

        
        Borrower's Tangible Net Worth, measured on a quarter-end basis, on the
        following date _________, ________ is $______________, which amount
        [is/is not] greater than or equal to the amount
        set forth in Section 6.16(a) of the
        Credit Agreement on the date of measurement.

        
            	
                        
                        2.

                    	
                        
                        Minimum
                        EBITDA.

                    

        

        
        Borrower's EBITDA, measured on a fiscal year to date basis, for the period
        of ____________, ______ to ____________, ______ is $__________, which amount
        [is/is not] greater than or equal to the amount
        set forth in Section 6.16(b) of the
        Credit Agreement on the date of measurement.

        
            	
                        
                        3.

                    	
                        
                        Capital
                        Expenditures.

                    

        

        
        Borrower's consolidated Capital Expenditures during the fiscal year of
        ______ is ____________, which [is/is
        not] less than or equal to the amount set forth in
        Section 6.16(c) of the Credit Agreement for the
        corresponding year.

         

        EXHIBIT
        C-1

        SCHEDULE
        4

         

        
        

        

         

        
        SCHEDULE 5

        
        Financial Covenant Calculation Sheet

        
         

        EXHIBIT
        C-1

        SCHEDULE
        5

         

        
        

        

         

        
        [Schedule A-1 — Agent’s Account;
        Schedule B-1 – Commitments; Schedule C-1 – Designated Account have been
        omitted. The registrant undertakes to furnish supplementally a copy of such exhibits upon
        request.]

         

        
        6

         

        
        

        

         

        
        Schedule D-1

        
        Registration Rights Agreement

         

 

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of the 1st day of February, 2008, by and among Bakers Footwear Group, Inc., a Missouri corporation (the “Company”), and each of the holders of the Shares (as defined below) set forth on Exhibit A hereto (each a “Securityholder” and, collectively, the “Securityholders”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Second Lien Credit Agreement, dated as of  February 1, 2008 (the “Credit Agreement”), by and among the Securityholders and the Company, the Securityholders have been issued Subordinated Term Notes of the Company in the aggregate principal amount of $7,500,000; 

WHEREAS, in connection with the transactions contemplated by the Credit Agreement, the Securityholders or their designees have received an aggregate of 350,000 shares of the Company’s Common Stock (the "Shares"); and  

WHEREAS, as a condition to closing the transactions contemplated by the Credit Agreement, the parties agreed to execute and deliver this Agreement setting forth certain rights of the Securityholders with respect to registration under the Securities Act of 1933, as amended, of the shares of Common Stock issued to the Securityholders.

NOW, THEREFORE, in consideration of these premises, the covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

The Company and the Securityholders hereby agree as follows: 

1.         Definitions.  As used in this Agreement, the following terms shall have the following meanings:

“Credit Agreement” is defined in the recitals to this Agreement.

“Commission” means the U.S. Securities and Exchange Commission, or any other Federal agency then administering the Securities Act.

“Common Stock” means shares of the Company’s common stock, par value $0.0001 per share, and any stock or securities issued with respect to such Common Stock by reason of a stock dividend, stock split, combination of shares, recapitalization, reclassification, merger, consolidation, corporate reorganization or otherwise.

“Discontinuation Event” means (i) any request by the Commission or any other Federal or state governmental authority for amendments or supplements to be made to such Registration Statement or Prospectus; (ii) the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding 

 

1

 

 

for such purpose; (iv) the occurrence of any event or passage of time that makes the financial statements included in such Registration Statement ineligible for inclusion therein; (v) upon discovery that, or upon the happening of an event or the passage of time as a result of which any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference is untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus, Free Writing Prospectus or other documents so that, in the case of such Registration Statement, Prospectus, or Free Writing Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not
misleading; and/or (vi) the Company in good faith determines that any such Registration Statement, Prospectus or Free Writing Prospectus, or the use thereof, would materially and adversely affect any material corporate event as would otherwise require disclosure of non-public information which the Company determines, in its reasonable discretion, is not in the best interests of the Company at such time.

“Effectiveness Date” means a date no later than one hundred twenty (120) days following the date hereof.

“Effectiveness Period” shall have the meaning set forth in Section 2(a). 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute, and the rules and regulations of the Commission issued thereunder.

“Filing Date” means a date no later than the earlier of (i) ninety (90) days following the date hereof and (ii) five business days after the Company files its Form 10-K for fiscal year 2007 with the Commission.

“Free Writing Prospectus” shall have the meaning ascribed to such term in Rule 405 of the Securities Act.

“Holder” or “Holders” means (a) the Securityholder, (b) any employee, director, officer or affiliate of the Securityholder to the extent that any of them hold Registrable Securities. 

“Person” means any individual, corporation, partnership, limited liability company, trust or any other incorporated or unincorporated entity or organization of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. 

“Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. 

 

2

 

 

“Registration Expenses” shall mean all reasonable and customary expenses of the Company incident to performance of or compliance with this Agreement, including, without limitation: (i) all Commission, stock exchange or registration and filing fees; (ii) filings pursuant to the policy of the National Association of Securities Dealers, Inc. with respect to the review of corporate financing; (iii) all fees and expenses incurred in connection with compliance with state securities or “blue sky” laws (including reasonable fees and disbursements of counsel in connection with “blue sky” qualification of any of the Registrable Securities and the preparation of a Blue Sky Memorandum); (iv) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any
Registration Statement, Prospectus, certificates and other documents relating to the performance of and compliance with this Agreement; (v) all fees and expenses incurred in connection with the listing, if any, of any of the Registrable Securities on any securities exchange or exchanges or automated quotation system; and (vi) the fees and disbursements of counsel for the Company, the independent public accountants of the Company and one counsel for the Holders of the Registrable Securities included in such registration.  Registration Expenses shall specifically exclude underwriting discounts and commissions or fees of underwriters, selling brokers, dealers, managers or similar securities industry professionals relating to the sale or disposition of Registrable Securities by the Holders and transfer and income taxes, if any, relating to the sale or disposition of Registrable Securities by the Holders.

“Registrable Securities” means the Shares (and any securities issued with respect to the Shares as a result of any stock splits, combinations, reorganization or recapitalization); provided that a security shall cease to be a Registrable Security upon (i) a sale pursuant to a Registration Statement or Rule 144 under the Securities Act, or similar rule, which results in the Shares sold no longer being deemed "restricted securities" or (ii) such security becoming eligible for sale under Rule 144 without volume limitation, manner of sale or current information requirements, but only to the extent that the Company has caused (or offered to cause) the certificates representing such shares of Common Stock to be reissued to the Holder without restrictive legend.

 “Registrable Securities Value” means the aggregate value of all then currently Registrable Securities which shall be deemed to equal to $2.74 per share.

“Registration Statement” means each registration statement required to be filed hereunder in respect of the Registrable Securities, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Required Holders” means the Holders then holding a majority in interest of the Registrable Securities.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

3

 

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations of the Commission issued thereunder.

“Trading Market” means any of the NASD OTC Bulletin Board, NASDAQ Capital Market, the NASDAQ Global Market, The NASDAQ Global Select Market, the American Stock Exchange or the New York Stock Exchange.

	
             
 	
            2.
 	
            Registration.
 

 

 (a)        On or prior to the Filing Date the Company shall prepare and file with the Commission a Registration Statement covering all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415.  The Registration Statement shall be on Form S-3 (except if the Company is not eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on Form S-1 or such other appropriate form for which the Company then qualifies or that counsel for the Company shall deem appropriate, which form shall be available for the sale of the Registrable Securities in accordance with the methods of distribution thereof intended by the Holders, which methods shall be communicated in writing as a plan of distribution in advance to the Company and shall be subject to comments of the staff of the
Commission).  Such Registration Statement may also include additional shares of Common Stock pursuant to “piggyback” or similar registration rights previously granted by the Company, but only to the extent that the Company in good faith determines that it is required by the terms of such “piggy back” or similar rights to include additional shares in such Registration Statement.  Notwithstanding anything to the contrary contained herein, the Company shall not be required to register any Registrable Securities, taking into account the nature of the securities and manner of disposition proposed by such Holders, to the extent that the Commission or its staff advises the Company in writing that the Registrable Securities may not be registered for sale as proposed, or objects to such registration in writing, or to the extent that such registration is not allowed by law or applicable regulation.  If any Registrable Securities otherwise required to be registered hereunder
are not able to be registered pursuant to the prior sentence, then such securities shall not be required to be registered until the later to occur of both(a) such securities becoming registrable (taking into account the nature of securities and the method of distribution proposed) under applicable law, regulation or Commission comment, as applicable, and (b) written notice to the Company requesting such registration.  

The Company shall use reasonable best efforts to cause the Registration Statement to become effective and remain effective as provided herein.  The Company shall use its reasonable best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event no later than the Effectiveness Date.  The Company shall use its reasonable best efforts to keep the Registration Statement continuously effective under the Securities Act, except as provided herein, until the date which is the earlier date of when (i) all Registrable Securities have been sold, (ii) the date on which all of the Shares are no longer Registrable Securities, or (iii) two years from the date hereof (the “Effectiveness Period”).

 

4

 

 

 (b)       If: (i) the Registration Statement is not filed on or prior to the Filing Date; (ii) the Registration Statement is not declared effective by the Commission by the Effectiveness Date; (iii) after the Registration Statement is filed with and declared effective by the Commission, the Registration Statement ceases to be effective (by suspension or otherwise) or cannot, by virtue of the provisions of Section 9(d) hereof, be used by the Holders due to any Discontinuation Event, as to all Registrable Securities to which it is required to relate at any time prior to the expiration of the Effectiveness Period (without being succeeded immediately by an additional registration statement filed and declared effective) for a period of time which shall exceed 60 days in the aggregate per year or more than 30 consecutive calendar days (defined as a period of 365
days commencing on the date the Registration Statement is declared effective); or (iv) the Common Stock is not listed or quoted, or is suspended from trading on any Trading Market for a period of five (5) consecutive Trading Days (provided the Company shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the Common Stock on another Trading Market); (any such failure or breach being referred to as an “Event,” and for purposes of clause (i) or (ii) the date on which such Event occurs, or for purposes of clause (iii) the date which such 60 day or 30 consecutive day period (as the case may be) is exceeded or for purposes of clause (iv) the date on which such five (5) Trading Day period is exceeded, being referred to as “Event Date”), then:

until the applicable Event is cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and not as a penalty, equal to two percent (2.0%) of the Registrable Securities Value held by such Holder for each thirty (30) day period (prorated for partial periods and computed on a daily basis; provided that if the Registration Statement is not filed on or prior to the Filing Date, then for any liquidated damages with respect to such failure to file, liquidated damages shall be calculated as if the Filing Date was sixty (60) days after the date hereof.  While such Event continues, such liquidated damages shall be paid not less often than each thirty (30) days.  Any unpaid liquidated damages as of the date when an Event has been cured by the Company shall be paid within three (3) business days following the date on which such Event has been cured by the Company. 

 (c)        Within five business days of the Effectiveness Date, the Company shall cause its counsel to issue a blanket opinion, in such form as is reasonably requested by the Securityholders, to the transfer agent stating that the applicable shares are subject to an effective registration statement and can be reissued free of restrictive legend upon notice of a sale by the Holder and confirmation by the Holder that it has complied with the prospectus delivery requirements, provided that the Company has not advised the transfer agent orally or in writing that the opinion has been withdrawn. Copies of the blanket opinion required by this Section 2(c) shall be delivered to the Holder within the five business day time frame set forth above. 

 

3.         Registration Procedures.  If and whenever the Company is required by the provisions hereof to effect the registration of any Registrable Securities under the Securities Act (including the registration required to be filed before the Filing Date pursuant to Section 2 above), the Company will, as soon as reasonably possible:

 

 (a)        prepare and file with the Commission the Registration Statement with respect to such Registrable Securities, respond as promptly as reasonably possible to any comments received from the Commission, and use its reasonable best efforts to cause the Registration Statement to become and remain effective for the Effectiveness Period with respect thereto, and 

 

5

 

 

promptly provide to the Holders copies of all filings and Commission letters of comment relating thereto;

 (b)       prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus used in connection therewith as may be reasonably necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by the Registration Statement and to keep such Registration Statement effective until the expiration of the Effectiveness Period;

 (c)        furnish to the Holders such number of copies of the Registration Statement and the Prospectus included therein (including each preliminary Prospectus) as each Holder reasonably may request to facilitate the public sale or disposition of the Registrable Securities covered by the Registration Statement;

 (d)       use its reasonable best efforts to register or qualify for unsolicited purchase and sale the Registrable Securities covered by the Registration Statement under the securities or “blue sky” laws of such jurisdictions within the United States as any Holder may reasonably request, provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified;

 (e)        list the Registrable Securities covered by the Registration Statement with any Trading Market on which the Common Stock of the Company is then listed; 

 (f)        immediately notify the Holders at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the Prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

 (g)       make available for inspection by the Holders and any attorney, accountant or other agent retained by the Holders or any agent for the Holders designated in the Credit Agreement, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and cause the Company’s officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the attorney, accountant or agent of the Holders;

 (h)       to the extent reasonably requested by the Holders, enter into an underwriting agreement in customary form and participate in “road shows” and similar presentations reasonably requested by any underwriters; and

 (i)        cause the Company’s counsel and independent accountants to deliver to any underwriters and/or the Holders opinions and comfort letters in customary form as reasonably requested by the Holders or by any underwriting agreement entered into by the Holders and the Company. 

4.         Registration Expenses.  The Company shall be responsible for and shall promptly pay all Registration Expenses relating to the Company’s compliance with Sections 2 and 3 of this Agreement.

 

6

 

 

5.         Rule 144 Reporting.  With a view toward making available to the Holders the benefits of certain rules and regulations of the Commission that may permit the sale of the Common Stock to the public without registration, the Company agrees to use its reasonable best efforts to:

(a)        make and keep current public information available, within the meaning of Rule 144 or any similar or analogous rule promulgated under the Securities Act until the earlier of: (i) six months after such date as all of the Registrable Securities may be resold pursuant to Rule 144 or any other rule of similar effect without volume limitations or current information requirements, or (ii) such date as all of the Registrable Securities shall have been resold;

(b)       file with the Commission, in a timely manner, all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c)        so long as any party hereto owns any Registrable Securities, furnish to such party forthwith upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the Securities Act and the Exchange Act; a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as such party may reasonably request in availing itself of any rule or regulation of the Commission allowing it to sell any such securities without registration.

	
             
 	
            6.  
 	
            Obligations of the Holders.
 

(a)        Each Holder shall furnish in writing to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it, as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may be reasonably required to effect such registration.  At least seven (7) business days prior to the first anticipated filing date of any Registration Statement, the Company shall notify each Holder of the information the Company requires from such Holder if such Holder elects to have any of the Registrable Securities included in the Registration Statement.  Each Holder shall provide such information to the Company at least two (2) business days prior to the first
anticipated filing date of such Registration Statement if such Holder elects to have any of the Registrable Securities included in the Registration Statement.  The Company shall not be required to include the Registrable Securities of a Holder in a Registration Statement and shall not be required to pay any liquidated damages or other damages under this Agreement to  a Holder resulting from any delay in registration caused by the failure of such Holder to furnish to the Company such information at least two (2) business days prior to such filing date.

 (b)       Each Holder, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of a Registration Statement hereunder, unless such Holder has notified the Company in writing of its election to exclude all of its Registrable Securities from such Registration Statement.

 (c)        Each Holder agrees that, upon receipt of any notice (which may be oral as long as written notice is provided by the next day) from the Company of the happening of a Discontinuation Event (which notice shall contain an explanation of the nature of the Discontinuation Event without providing material non-public information), such Holder will 

 

7

 

 

immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities, until otherwise notified in writing by the Company or until such Holder’s receipt of the copies of the supplemented or amended prospectus filed with the SEC and until any related post-effective amendment is declared effective.

 (d)       The Holder acknowledges and agrees that, as described in Schedule 6(d) hereto, other security holders of the Company have the right to include such securities, in addition to the Registrable Securities, in any Registration Statement filed or maintained by the Company pursuant to this Agreement.  

 (e)        No Holder may use any confidential information received by it pursuant to this Agreement in violation of the Exchange Act, or other applicable state or federal securities law or reproduce, disclose, or disseminate such information to any other person (other than his or her attorneys, agents and representatives having a need to know, and then only if they expressly agree to be bound hereby), unless such information has been made available to the public generally (other than by such recipient in violation hereof) or such recipient is required to disclose such information by a governmental body or regulatory agency or by law in connection with a transaction that is not otherwise prohibited hereby, and then only after reasonable notice to the Company and it has been provided a reasonable opportunity to object to such disclosure, with the
reasonable cooperation and assistance of such Holder.  Each Holder agrees to comply in all material respects with the Securities Act and other applicable laws in connection with the offer or sale of any Registrable Securities; provided, however, that any failure to comply that is due to any breach by the Company of its obligations hereunder or under applicable securities laws (including any misstatements or omission of material facts by the Company in its public disclosure documents) shall not constitute a breach of this Section 6(e) by the Holder. The obligations in this Section 6(e) shall survive the expiration or termination of this Agreement.

Notwithstanding any of the foregoing, nothing herein shall obligate the Company to provide to the Holders, or any advisors or representatives or underwriters any material nonpublic information.  The Company shall not disclose material nonpublic information to the Holders, or to advisors to or representatives of the Holders, pursuant to this Agreement unless prior to disclosure of such information the Company identifies such information as being material nonpublic information and provides the Holders, such advisors and representatives with the opportunity to accept or refuse to accept such material nonpublic information for review and any Holder wishing to obtain such information enters into an appropriate confidentiality agreement with the Company with respect thereto.

	
             
 	
            7.
 	
            Indemnification.  
 

(a)        In connection with any registration or qualification of the Registrable Securities under this Agreement, (i) the Company shall indemnify and hold harmless each of the Holders, including but not limited to each Person, if any, who controls a Holder within the meaning of Section 15 of the Securities Act, against all losses, claims, damages, liabilities and expenses (including but not limited to reasonable expenses incurred in investigating, preparing and defending against any claim) to which a Holder or such controlling person may become subject under the Securities Act, the Exchange Act or otherwise, insofar as the same arise out of or are based upon or are caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus (as amended or supplemented if the Company shall have 

 

8

 

 

furnished any amendments or supplements thereto) or Free Writing Prospectus furnished by the Company pursuant to this Agreement or insofar as the same arise out of or are based upon or are caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are ultimately determined to have arisen out of or were based upon or were caused by any untrue statement or alleged untrue statement or omission or alleged omission made in conformity with written information furnished to the Company by or on behalf of any Holder or such control person specifically for inclusion in any Registration Statement, Prospectus (and any amendments or supplements thereto) or Free Writing Prospectus (it being understood that the Holders have approved the plan of
distribution included in the Registration Statement for this purpose and shall be deemed to have been specifically furnished by such Holders), or in the case of an occurrence of a Discontinuation Event, the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of an amended or supplemented Prospectus, but only if and to the extent that following the receipt of such amended or supplemented Prospectus the misstatement or omission giving rise to such liability would have been corrected, (ii) each Holder, severally and not jointly, shall indemnify the Company, its affiliates, any person who signed any Registration Statement, and their respective officers, directors and control persons against all such losses, claims, damages, liabilities and expenses (including but not limited to reasonable expenses incurred in investigating, preparing and
defending against any claim) insofar as the same are ultimately determined to have arisen out of or were based upon or were caused by any such untrue statement or alleged untrue statement or any such omission or alleged omission based upon written information furnished to the Company by or on behalf of such Holder or any such control person specifically for the inclusion in any Registration Statement, Prospectus (and any amendments or supplements thereto) or Free Writing Prospectus, (it being understood that the Holders have approved the plan of distribution included in the Registration Statement for this purpose and shall be deemed to have been specifically furnished by such Holders), or in the case of an occurrence of a Discontinuation Event, the use by such Holder of an outdated or defective Prospectus after the Company has notified such Holder in writing that the Prospectus is outdated or defective and prior to the receipt by such Holder of an amended or supplemented Prospectus,
but only if and to the extent that following the receipt of such amended or supplemented Prospectus the misstatement or omission giving rise to such liability would have been corrected.

 (b)       Notice of, and Procedures for, Collecting Indemnification.  Promptly upon receipt by a party indemnified under this Agreement of notice of the commencement of any action against such indemnified party in respect of which indemnity or reimbursement may be sought against any indemnifying party under this Agreement, such indemnified party shall notify the indemnifying party in writing of the commencement of such action, but the failure so to notify the indemnifying party shall not relieve it of any liability which it may have to any indemnified party under this Agreement unless such failure shall materially and adversely affect the defense of such action.  In case notice of commencement of any such action shall be given to the indemnifying party as above provided, the indemnifying party shall be entitled
to participate in and, to the extent it may wish, jointly with any other indemnifying party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such indemnified party.  The indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel (other than reasonable expenses incurred in investigating, preparing and defending against any claim) shall be paid by the indemnified party unless (i) the indemnifying party agrees to pay the same, (ii) the indemnifying 

 

9

 

 

party fails to assume the defense of such action with counsel reasonably satisfactory to the indemnified party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party), or (iii) the named parties to any such action (including any impleaded parties) have been advised by such counsel that representation of such indemnified party and the indemnifying party by the same counsel would be inappropriate under applicable standards of professional conduct (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party).  In the event that either of the circumstances described in clauses (ii) and (iii) of the sentence immediately preceding shall occur, the indemnified party shall have the right to select a separate counsel and to assume such legal defense and
otherwise to participate in the defense of any such action, with the reasonable expenses and fees of such separate counsel and other reasonable expenses related to such participation to be reimbursed by the indemnifying party as incurred.  No indemnifying party shall be liable for any settlement entered into without its consent, which consent shall not be unreasonably withheld or delayed.  Notwithstanding the provisions of this Section 7, no Holder shall be required to indemnify any person or entity in excess of the amount of the aggregate net proceeds received by such Holder in respect of Registrable Securities in connection with any such registration under the Securities Act.

 (c)        Contribution.  If the indemnification provided for in this Section 7 is unavailable to an indemnified party under paragraphs (a) and (b) hereof, other than as expressly set forth above, in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims or damages (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Holder(s) on the other hand from the offering of the Registrable Securities, and any other securities included in the Registration Statement which gave rise to such losses, claims, damages, liabilities or
expenses, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Holder(s) on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and the Holder(s) on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bears to the total net proceeds from the offering (before deducting expenses) received by the Holders, in each case as set forth in the table on the cover page of the prospectus.  The relative fault of the Company on the one hand and the Holder(s) on the other hand shall be determined
by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Holder(s) and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission

8.         Representations and Warranties.  The Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and the Company has filed all reports required to be filed under the Exchange Act for the twelve months preceding the date hereof on a timely basis or has timely filed a valid extension of such time of filing and has filed such reports prior to the expiration of any such extension.  The Company has filed (i) its Annual Report on Form 10-K for its fiscal year ended February 3, 2007 and (ii) its Quarterly Reports on Form 10-Q for each of its first three fiscal quarters after February 3, 2007 (collectively, the “SEC Reports”).  Each SEC 

 

10

 

 

Report was, at the time of its filing, in substantial compliance with the requirements of its respective form and none of the SEC Reports, nor the financial statements (and the notes thereto) included in the SEC Reports, as of their respective filing dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations as in effect at the time of filing.  Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a
consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed) and fairly present in all material respects the financial condition, the results of operations and the cash flows of the Company and its subsidiaries, on a consolidated basis, as of, and for, the periods presented in each such SEC Report, subject, in the case of unaudited statement, to normal, immaterial, year-end audit adjustments and the absence of complete footnotes.

	
             
  	
            9.
 	
            Miscellaneous.
 

(a)        Remedies.  In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. 

 (b)       No Piggyback on Registrations.  Except as and to the extent specified in Schedule 6(d) hereto, neither the Company nor any of its security holders (other than the Holders in such capacity pursuant hereto) may include securities of the Company in any Registration Statement other than the Registrable Securities, and the Company shall not after the date hereof enter into any agreement providing any such right for inclusion of shares in the Registration Statement relating to the Registrable Securities to any of its security holders. Except as and to the extent specified in Schedule 6(d) hereto, the Company has not previously entered into any agreement granting any registration rights with respect to any of its
securities to any Person that have not been fully satisfied. 

 (c)        Compliance.  Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement.

 (d)       Discontinued Disposition.  Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Company of the occurrence of a Discontinuation Event, such Holder will forthwith discontinue disposition of such Registrable Securities under the applicable Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this paragraph.  The Company agrees to use its reasonable best efforts to immediately cure any such Discontinuation 

 

11

 

 

Event and to use its reasonable best efforts to immediately provide copies of any such supplement or amendment or use its reasonable best efforts to immediately deliver the Advice to each Holder.

 (e)        Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Required Holders.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of certain Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance
with the provisions of the immediately preceding sentence.

 (f)        Notices.  Any notice or request hereunder may be given to the Company or the Securityholders at the respective addresses set forth below or as may hereafter be specified in a notice designated as a change of address under this Section 9(f).  Any notice or request hereunder shall be given by registered or certified mail, return receipt requested, hand delivery, overnight mail, Federal Express or other national overnight next day carrier (collectively, “Courier”) or telecopy or electronic mail.  Notices and requests shall be, in the case of those by hand delivery, deemed to have been given when delivered to any party to whom it is addressed, in the case of those by mail, deemed to have been given three (3) business days after the date when deposited in the mail, in the case of a Courier,
the next business day following timely delivery of the package with the Courier, and, in the case of a telecopy or electronic mail, when confirmed.  The address for such notices and communications shall be as follows:

	
            If to the Company:
 	
            Bakers Footwear Group, Inc.

2815 Scott Avenue

St. Louis, MO  63103

Attention: Peter A. Edison, Chief Executive Officer

Fax Number:  (314) 641-0390

Email Address: pedison@bfgstl.com
 
	
             
 	
             
 
	
            With a Copy to:
 	
            Bryan Cave LLP

William L. Cole, Esq.

211 N. Broadway, Suite 3800

St. Louis, MO  63102

Fax Number: (314) 259-2020

Email Address: wlcole@bryancave.com

 
 
	
            If to a Securityholder:
 	
            To the address set forth under such Securityholder’s name on the signature pages hereto.
 
	
             
 	
             
 
	
            If to any other Person who is then the registered Holder:
 	
             

To the address of such Holder as it appears in the stock transfer books of the Company
 

 

 

12

 

 

or such other address as may be designated in writing hereafter in accordance with this Section 9(f) by such Person.

 

	
             
  	
            (g)
 	
            Successors and Assigns.  
 

(i) Assignments and Transfers by Holders.  The provisions of this Agreement shall be binding upon and inure to the benefit of the Holders and their respective successors and assigns.  Each Holder may transfer or assign, in whole or from time to time in part, to one or more persons, which shall be (A) an “accredited investor” as defined in Rule 501(a) of Regulation D, as amended under the Securities Act, (B) shall be an employee, director, officer or Affiliate of Private Equity Management Group, LLC, (C) shall not be a direct competitor of the Company, and (D) which shall agree in writing to be bound by the terms and conditions of this Agreement, an executed counterpart of which shall be furnished to the Company, its rights hereunder in connection with the transfer of Registrable Securities by Holder to such person, provided that the
Holder complies with all laws applicable thereto and provides written notice of assignment to the Company promptly after such assignment is effected.

 (ii) Assignments and Transfers by the Company.  This Agreement may not be assigned by the Company (whether by operation of law or otherwise) without the prior written consent of the Required Holders, provided, however, that the Company may assign its rights and delegate its duties hereunder to any surviving or successor corporation in connection with a merger or consolidation of the Company with another corporation, or a sale, transfer or other disposition of all or substantially all of the Company’s assets to another corporation, without the prior written consent of the Required Holders, after notice duly given by the Company to each Holder. 

 (h)       Execution and Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

 (i)        Governing Law.  All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement shall be commenced exclusively in the state and federal courts sitting in Los Angeles, California. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in Los Angeles, California for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such Proceeding is improper.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall 

 

13

 

 

constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. 

 (j)        Cumulative Remedies.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 (k)       Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.

 (l)        Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 (m)      Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter.

*********

*

14

 

 

SIGNATURE PAGE

TO

REGISTRATION RIGHTS AGREEMENT

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

BAKERS FOOTWEAR GROUP, INC.

 

	
             
 	
            By:
 	
             
 

	
             
 	
            Name:
 	
            Peter A. Edison
 

	
             
 	
            Title:
 	
            Chairman, Chief Executive Officer
 

	
             
 	
            and President
 

	
             
 	
            Address:
 	
            2815 Scott Avenue
 

	
             
 	
            St. Louis, Missouri 63103
 

	
             
 	
            Fax Number:
 	
            (314) 641-0390
 

	
             
 	
            Email Address:
 	
            pedison@bfgstl.com
 

 

 

 

SIGNATURE PAGE

TO

REGISTRATION RIGHTS AGREEMENT

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

SECURITYHOLDER:

 

 

	
             
 	
            By:
 	
             
 

	
             
 	
            Name:
 	
            ____________________
 

	
             
 	
            Title:
 	
            _______________________
 

	
             
 	
            Address:
 	
            ______________________
 

	
             
 	
            ____________________
 

 

 

 

EXHIBIT A

 

Securityholders

 

Private Equity Management Group, Inc.

1 Park Plaza, Suite 550

Irvine, California 92614

Attention:  Peter Paul Mendel, Esq., General Counsel

Fax No.: (949) 757-0978

 

17

 

 

Schedules

 

[Schedules to the Registration Rights Agreement have been omitted.  The registrant undertakes to furnish supplementally a copy of the schedules upon request.]

 

 

 

18

 

 

         

         

         

        
        

        

         

        
        Schedule E-1

         

        
        Allocation of Common Shares

         

        
            	
                        
                        Company

                    	
                        
                        Shares Allocated

                    
	
                        
                        Private Equity Management Group, Inc.

                    	
                        
                        350,000

                    

        

         

         

        
        

        

         

        
        [Schedule P-1 — Permitted Liens has been
        omitted. The registrant undertakes to furnish supplementally a copy of such schedule upon
        request.]

         

         

        
        

        

         

        
        Schedule 1.1

        As used
        in the Agreement, the following terms shall have the following definitions:

        
        "Account" means an
        account (as that term is defined in the Code).

        
        "Account Debtor" means
        any Person who is obligated on an Account, chattel paper, or a general
        intangible.

        
        “Acquisition”
        means the (i) purchase or acquisition of (x) all or substantially all of the assets of
        another Person or (y) Control of a Person, or (ii) merger or consolidation of any Person
        with or into any other Person, in each case in one transaction or a group of transactions
        which are part of a common plan.

        
        "Affiliate" means, as
        applied to any Person, any other Person who controls, is controlled by, or is under common
        control with, such Person. For purposes of this definition,
        "control" means the possession, directly
        or indirectly through one or more intermediaries, of the power to direct the management and
        policies of a Person, whether through the ownership of common stock, by contract, or
        otherwise; provided, however, that, for
        purposes of Section 6.13 hereof: (a) any
        Person which owns directly or indirectly 25% or more of the common stock having ordinary
        voting power for the election of directors or other members of the governing body of a
        Person or 25% or more of the partnership or other ownership interests of a Person (other
        than as a limited partner of such Person) shall be deemed to be an Affiliate of such
        Person, (b) each director (or comparable manager) of a Person shall be deemed to be an
        Affiliate of such Person, and (c) each partnership or joint venture in which a Person is a
        partner or joint venturer shall be deemed an Affiliate of such Person.

        
        "Agent" has the meaning
        specified therefor in the preamble to the Agreement.

        
        "Agent-Related Persons"
        means Agent, together with its Affiliates, officers, directors, employees, attorneys, and
        agents.

        
        "Agent's Account" means
        the Deposit Account of Agent identified on Schedule
        A-1.

        
        "Agent's Liens" means the
        Liens granted by Borrower or its Subsidiaries to Agent under the Loan Documents.

        
        “Aggregate Term Loan
        Exposure” means, as of any date of determination, the sum
        of the aggregate outstanding principal amount of the Term Loan.

        
        "Agreement" means the
        Credit Agreement to which this Schedule 1.1
        is attached.

        
        "Applicable Prepayment
        Premium" has the meaning specified therefor in the Fee
        Letter.

        
        "Assignee" has the
        meaning specified therefor in Section
        13.1(a).

        
        "Assignment and
        Acceptance" means an Assignment and Acceptance Agreement
        substantially in the form of Exhibit
        A-1.

         

        SCHEDULE
        1.1 - 1

         

        
        

        

         

        
        "Authorized Officer"
        means any of the Chief Executive Officer, the President or the Chief Financial Officer of
        the Borrower.

        
        "Authorized Person" means
        any of the Chief Executive Officer, President, Chief Financial Officer, Chief Accounting
        Officer or Controller of Borrower.

        
        "Bankruptcy Code" means
        title 11 of the United States Code, as in effect from time to time.

        
        "Benefit Plan" means a
        "defined benefit plan" (as defined in
        Section 3(35) of ERISA) for which Borrower or ERISA Affiliate of Borrower has been an
        "employer" (as defined in Section 3(5)
        of ERISA) within the past six years.

        
        "Board of Directors"
        means the board of directors (or comparable managers) of Borrower or any committee thereof
        duly authorized to act on behalf of the board of directors (or comparable
        managers).

        
        "Borrower" has the
        meaning specified therefor in the preamble to the Agreement.

        
        "Borrowing" means the
        borrowing hereunder consisting of the Term Loan.

        
        "Business Day" means any
        day that is not a Saturday, Sunday, or other day on which banks are authorized or required
        to close in the state of California.

        
        "Capital Expenditures"
        means, with respect to any Person for any period, the aggregate of all expenditures by such
        Person and its Subsidiaries during such period that are capital expenditures as determined
        in accordance with GAAP (excluding (a) normal replacements and maintenance which are
        properly charged to current operations; (b) expenditures to the extent reimbursed or
        financed from insurance proceeds paid on account of the loss or the damage to the assets
        being replaced or restored, or from awards of compensation arising from the taking by
        condemnation or eminent domain or such assets being replaced; or (c) expenditures made from
        the proceeds of landlord construction allowances).

        
        "Capitalized Lease
        Obligation" means that portion of the obligations under a Capital
        Lease that is required to be capitalized in accordance with GAAP.

        
        "Capital Lease" means a
        lease that is required to be capitalized for financial reporting purposes in accordance
        with GAAP.

        
        "Capital Stock" means
        shares of common stock, preferred stock or any other class of equity securities of the
        Borrower including, without limitation, any debt or other obligation of the Borrower
        convertible by its terms into shares of common stock, preferred stock or any other class of
        equity securities of the Borrower.

        
        "Cash Equivalents" means
        (a) marketable direct obligations issued or unconditionally guaranteed by the United States
        or issued by any agency thereof and backed by the full faith and credit of the United
        States, in each case maturing within 1 year from the date of acquisition thereof, (b)
        marketable direct obligations issued by any state of the United States or any
        political

         

        SCHEDULE
        1.1 - 2

         

        
        

        

         

        
        subdivision of any such state or any public instrumentality thereof maturing
        within 1 year from the date of acquisition thereof and, at the time of acquisition, having
        the highest rating obtainable from either S&P or Moody's, (c) commercial paper or other
        money market instruments maturing no more than 1 year from the date of acquisition thereof
        and, at the time of acquisition, having a short-term debt rating of A-1 or P-1, or better,
        or a long-term debt rating of BBB or better, from S&P or Moody's, (d) certificates of
        deposit or bankers' acceptances maturing within 1 year from the date of acquisition thereof
        either (i) issued by any bank which has a rating of A or A2, or better, from S&P or
        Moody's, or (ii) constituting certificates of deposit less than or equal to $100,000 in the
        aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation,
        and (e) shares of any money market mutual fund that has substantially all of its assets
        invested in the types of investments referred to in clauses (a) – (d)
        above.

        
        "Change of Control" means
        the occurrence of any of the following in one or a series of related transactions: (i) an
        acquisition after the date hereof by a Person or “group” (as described in Rule
        13d-5(b)(1) under the Exchange Act but excluding Agent or its Affiliates) of more than 50%
        of the voting rights or equity interests of Borrower; (ii) a majority of the members of the
        Board of Directors of Borrower does not constitute Continuing Directors; (iii) a
        Fundamental Transaction, a merger or consolidation of Borrower or any Subsidiary thereof or
        a sale of substantially all of the assets of Borrower in one or a series of related
        transactions, unless following such transaction or series of transactions, the holders of
        the Borrower's voting rights or equity interests prior to the first such transaction
        continue to hold at least a majority of the voting rights or equity interests in the
        surviving entity or acquirer of such assets; (iv) a recapitalization, reorganization or
        other transaction involving a Person or any Subsidiary thereof that constitutes or results
        in a transfer of more than 50% of the voting rights or equity interests in Borrower, unless
        following such transaction or series of transactions, the holders of Borrower’s
        voting rights or equity interests prior to the first such transaction continue to hold at
        least a majority of the voting rights and Stock in the surviving entity or acquirer of such
        assets; (v) consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3
        under the Exchange Act with respect to Borrower; or (vi) the execution by Borrower or its
        Controlling shareholders of an agreement providing for or reasonably likely to result in
        any of the foregoing events.

        
        "Closing Date" means the
        date on which each of the conditions precedent set forth in
        Section 3.1 with respect to the Term Loan
        either has been satisfied or has been waived.

        
        Closing Date Projections" means the set of
        Projections of Borrower through Borrower's fiscal year ending in 2011 (on a quarter by
        quarter basis), in form and substance (including as to scope and underlying assumptions)
        reasonably satisfactory to Agent.

        
        "Code" means the
        California Uniform Commercial Code, as in effect from time to time.

        
        "Collateral" means all
        assets and interests in assets and proceeds thereof now owned or hereafter acquired by
        Borrower or any of its Subsidiaries in or upon which a Lien is granted under any of the
        Loan Documents.

        
        "Collateral Access
        Agreement" means a landlord waiver, bailee letter, or
        acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other
        Person in possession of, having a Lien upon, or having rights or interests in any of
        Borrower's or any of

         

        SCHEDULE
        1.1 - 3

         

        
        

        

         

        its
        Subsidiaries books and records, Equipment or Inventory, in each case, in form and substance
        satisfactory to Agent.

        
        "Collections"
        means all cash (including insurance
        proceeds, proceeds of cash sales, rental proceeds, and tax refunds, and checks, notes,
        instruments, and other items of payment reduced to cash) of Borrower or any of its
        Subsidiaries.

        
        "Commitment" means, with
        respect to each Lender, its Commitment, and, with respect to all Lenders, their
        Commitments, in each case as such Dollar amounts are set forth beside such Lender's name
        under the applicable heading on Schedule
        B-1.

        
        “Common
        Stock” means the common stock of the Borrower, $0.0001 par
        value per share, and any securities into which such common stock may hereafter be
        reclassified.

        
        "Common Shares" means the
        Common Stock issued pursuant to section
        2.15.

        
        "Compliance Certificate"
        means a certificate substantially in the form of Exhibit
        C-1 delivered by the chief executive officer and the chief
        financial officer or the chief accounting officer of Borrower to Agent.

        
        "Continuing Director"
        means (a) any member of the Board of Directors who was a director (or comparable manager)
        of Borrower on the Closing Date, and (b) any individual who becomes a member of the Board
        of Directors after the Closing Date if such individual was appointed or nominated for
        election to the Board of Directors by a majority of the Continuing Directors, but excluding
        any such individual originally proposed for election in opposition to the Board of
        Directors in office at the Closing Date in an actual or threatened election contest
        relating to the election of the directors (or comparable managers) of Borrower and whose
        initial assumption of office resulted from such contest or the settlement
        thereof.

        
        “Control”
        means the possession, direct or indirect, of the power to cause the direction of the
        management and policies of a Person whether through the ownership of Stock, by contract or
        otherwise. A Person shall be deemed to have control of another Person if it is a
        “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 of the
        Exchange Act) or a member of a “group” that is the beneficial owner, directly
        or indirectly, of 50% or more of the voting rights or equity interests in such Person. A
        Person shall be deemed to direct the management and policies of a Person if it, without
        limitation, obtains the power (whether or not exercised) to elect a majority of the Board
        of Directors of such Person. The terms “Controlled” and
        “Controlling” as used herein are intended to have the same meaning as
        “Control.”

        
        "Control Agreement" means
        a control agreement, in form and substance reasonably satisfactory to Agent, executed and
        delivered by Borrower or one of its Subsidiaries, Agent, and the applicable securities
        intermediary (with respect to a Securities Account) or bank (with respect to a Deposit
        Account).

        
        "Copyright" has the
        meaning specified therefor in the Security Agreement.

        
        "Copyright Security
        Agreement" has the meaning specified therefor in the Security
        Agreement.

         

        SCHEDULE
        1.1 - 4

         

        
        

        

         

        
        "Daily Balance" means, as
        of any date of determination and with respect to any Obligation, the amount of such
        Obligation owed at the end of such day.

        
        "Debenture Documents"
        means (i) the Debenture Purchase Agreement and (ii) the Transaction Documents (as defined
        in the Debenture Purchase Agreement).

        
        "Debenture Purchase
        Agreement" means the Subordinated Convertible Debenture Purchase
        Agreement, dated June 13, 2007, by and among Borrower and the Investors.

        
        "Debenture Subordination
        Agreement" means a subordination agreement, in form and substance
        satisfactory to Agent, executed and delivered by the Investors to Agent.

        
        "Default" means an event,
        condition, or default that, with the giving of notice, the passage of time, or both, would
        be an Event of Default.

        
        "Defaulting Lender" means
        any Lender that fails to make any portion of the Term Loan that it is required to make
        hereunder on the date that it is required to do so hereunder.

        
        "Defaulting Lender Rate"
        means the interest rate applicable to the Term Loan.

        
        "Department of Labor"
        means the United States Department of Labor.

        
        "Deposit Account" means
        any deposit account (as that term is defined in the Code).

        
        "Designated Account"
        means the Deposit Account of Borrower identified on Schedule
        C-1.

        
        "Designated Account Bank"
        has the meaning specified therefor in Schedule
        C-1.

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

        
        "Dollars" or
        "$" means United States
        dollars.

        
        "Domestic Subsidiary"
        means any Subsidiary of Borrower which is not a Foreign Subsidiary of Borrower.

        
        "EBITDA" means, with
        respect to any fiscal period, Borrower's and its Subsidiaries' consolidated net income (or
        loss), minus interest income, decreases in the recorded value of outstanding warrants,
        extraordinary items, and gains on sale of property and equipment plus interest expense,
        increases in the recorded value of outstanding warrants, income tax expense, depreciation
        and amortization, impairment of long-lived assets, losses on disposal of property and
        equipment, and stock-based compensation expense in each case, as determined in accordance
        with GAAP.

         

        SCHEDULE
        1.1 - 5

         

        
        

        

         

        
        “Eligible
        Market” means any of the New York Stock Exchange, the
        American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the
        NASDAQ Capital Market.

        
        Eligible Transferee" means (a) an Affiliate of
        Agent or Related Fund, (b) who in any event is not a direct competitor of Borrower and (c)
        who is an “accredited investor” as defined in Rule 501(a) of Regulation D, as
        amended, under the Securities Act.

        
        "Environmental Actions"
        means any complaint, summons, citation, notice, directive, order, claim, litigation,
        investigation, judicial or administrative proceeding, judgment, letter, or other
        communication from any Governmental Authority, or any third party involving violations of
        Environmental Laws or releases of Hazardous Materials (a) from any assets, properties, or
        businesses of Borrower or any of its predecessors in interest, (b) from any assets,
        properties, or businesses of any Subsidiary of Borrower (or any predecessor in interest of
        such Subsidiary) material to the business of Borrower and its Subsidiaries, taken as a
        whole, (c) from adjoining properties or businesses, or (d) from or onto any facilities
        which received Hazardous Materials generated by Borrower, any Subsidiary of Borrower or any
        of their predecessors in interest.

        
        "Environmental Law" means
        any applicable federal, state, provincial, foreign or local statute, law, rule, regulation,
        ordinance, code, binding and enforceable guideline, binding and enforceable written policy
        or rule of common law now or hereafter in effect and in each case as amended, or any
        judicial or administrative interpretation thereof, including any judicial or administrative
        order, consent decree or judgment, in each case, to the extent binding on Borrower or any
        Subsidiary of Borrower, relating to the environment, the effect of the environment on
        employee health, or Hazardous Materials, in each case as amended from time to
        time.

        
        "Environmental
        Liabilities" means all liabilities, monetary obligations, losses,
        damages, punitive damages, consequential damages, treble damages, costs and expenses
        (including all reasonable fees, disbursements and expenses of counsel, experts, or
        consultants, and costs of investigation and feasibility studies), fines, penalties,
        sanctions, and interest incurred as a result of any claim or demand, or Remedial Action
        required, by any Governmental Authority or any third party, and which relate to any
        Environmental Action.

        
        "Environmental Lien"
        means any Lien in favor of any Governmental Authority for Environmental
        Liabilities.

        
        "Equipment" means
        equipment (as that term is defined in the Code).

        
        "ERISA" means the
        Employee Retirement Income Security Act of 1974, as amended, and any successor statute
        thereto.

        
        "ERISA Affiliate" means
        (a) any Person subject to ERISA whose employees are treated as employed by the same
        employer as the employees of Borrower or a Subsidiary of Borrower under IRC Section 414(b),
        (b) any trade or business subject to ERISA whose employees are treated as employed by the
        same employer as the employees of Borrower or a Subsidiary of Borrower under IRC Section
        414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any
        organization subject to ERISA that is a member of an affiliated

         

        SCHEDULE
        1.1 - 6

         

        
        

        

         

        service
        group of which Borrower or a Subsidiary of Borrower is a member under IRC Section 414(m),
        or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person
        subject to ERISA that is a party to an arrangement with Borrower or a Subsidiary of
        Borrower and whose employees are aggregated with the employees of Borrower or a Subsidiary
        of Borrower under IRC Section 414(o).

        
        "ERISA Event" means (a) a
        Reportable Event with respect to any Benefit Plan or Multiemployer Plan, (b) the withdrawal
        of Borrower or ERISA Affiliates from a Benefit Plan during a Plan year in which it was a
        "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c) the providing of
        notice of intent to terminate a Benefit Plan in a distress termination (as described in
        Section 4041(c) of ERISA), (d) the institution by the PBGC of proceedings to terminate a
        Benefit Plan or Multiemployer Plan, (e) any event or condition (i) that provides a basis
        under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the appointment
        of a trustee to administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result
        in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the partial
        or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of Borrower
        or its Subsidiaries or any of their ERISA Affiliates from a Multiemployer Plan, or (g)
        providing any security to any plan under Section 401(a)(29) of the IRC by Borrower or its
        Subsidiaries or any of their ERISA Affiliates.

        
        "Event of Default" has
        the meaning specified therefor in Section
        7.

        
        "Exchange Act" means the
        Securities Exchange Act of 1934, as in effect from time to time.

        
        "Extraordinary Receipts"
        means any Collections received by Borrower or any of its Subsidiaries not in the ordinary
        course of business (and not consisting of proceeds described in
        Section 2.4(c)(ii) hereof), including (a)
        pension plan reversions, (b) proceeds of insurance (including proceeds of the key man life
        insurance policies), (c) judgments, proceeds of settlements or other consideration of any
        kind in connection with any cause of action, (d) condemnation awards (and payments in lieu
        thereof), (e) indemnity payments and (f) any purchase price adjustment received in
        connection with any purchase agreement.

        
        "Fee Letter" means that
        certain fee letter between Borrower and Agent, in form and substance satisfactory to
        Agent.

        
        "Foreign Subsidiary"
        means any Subsidiary of Borrower which is organized under the laws of a jurisdiction other
        than the United States of America or any state or Governmental Authority
        thereof.

        
        "Fundamental Transaction"
        means (a) Borrower effects any merger or consolidation of Borrower with or into another
        Person and Borrower is not the survivor, (b) Borrower effects any sale of all or
        substantially all of its assets in one or a series of related transactions, (c) any tender
        offer or exchange offer (whether by Borrower or another Person) is completed which results
        in a Change of Control and pursuant to which holders of Common Stock tender or exchange
        their shares for other securities, cash or property, or (d) Borrower effects any
        reclassification of the

         

        SCHEDULE
        1.1 - 7

         

        
        

        

         

        Common
        Stock or any compulsory share exchange pursuant to which the Common Stock is effectively
        converted into or exchanged for other Stock, cash or property.

        
        "Funding Date" means the
        date on which the Borrowing occurs.

        
        "GAAP" means generally
        accepted accounting principles as in effect from time to time in the United States,
        consistently applied.

        
        "Governing Documents"
        means, with respect to any Person, the certificate or articles of incorporation, by-laws,
        or other organizational documents of such Person.

        
        "Governmental Authority"
        means any federal, state, local, or other governmental or administrative body,
        instrumentality, board, department, or agency or any court, tribunal, administrative
        hearing body, arbitration panel, commission, or other similar dispute-resolving panel or
        body.

        
        "Hazardous Materials"
        means (a) substances that are defined or listed in, or otherwise classified pursuant to,
        any applicable laws or regulations as "hazardous
        substances," "hazardous
        materials," "hazardous
        wastes," "toxic
        substances," or any other formulation intended to define, list,
        or classify substances by reason of deleterious properties such as ignitability,
        corrosivity, reactivity, carcinogenicity, reproductive toxicity, or
        "EP toxicity", (b) oil, petroleum, or
        petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling
        fluids, produced waters, and other wastes associated with the exploration, development, or
        production of crude oil, natural gas, or geothermal resources, (c) any flammable substances
        or explosives or any radioactive materials, and (d) asbestos in any form or electrical
        equipment that contains any oil or dielectric fluid containing levels of polychlorinated
        biphenyls in excess of 50 parts per million.

        
        "Holdout Lender" has the
        meaning specified therefor in Section
        14.2(a).

        
        "Indebtedness" means (a)
        all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures,
        notes, or other similar instruments and all reimbursement or other obligations in respect
        of letters of credit, bankers acceptances, interest rate swaps, or other financial
        products, (c) all obligations as a lessee under Capital Leases, (d) all obligations or
        liabilities of others secured by a Lien on any asset of such Person, irrespective of
        whether such obligation or liability is assumed, (e) all obligations to pay the deferred
        purchase price of assets (other than debt incurred in the ordinary course of business, such
        as wages payable, trade credit and other customary accruals, and repayable in accordance
        with customary trade practices), and (f) any obligation guaranteeing or intended to
        guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or
        sold with recourse) any obligation of any other Person that constitutes Indebtedness under
        any of clauses (a) through (e) above.

        
        "Indemnified Liabilities"
        has the meaning specified therefor in Section
        10.3.

        
        "Indemnified Person" has
        the meaning specified therefor in Section
        10.3.

         

        SCHEDULE
        1.1 - 8

         

        
        

        

         

        
        “Individual Lender Term Loan
        Exposure” means, for a particular Lender, as of any date of
        determination, the aggregate outstanding principal amount of such Lender’s portions
        of the Term Loan.

        
        "Insolvency Proceeding"
        means any proceeding commenced by or against any Person under any provision of the
        Bankruptcy Code or under any other state or federal bankruptcy or insolvency law,
        assignments for the benefit of creditors, formal or informal moratoria, compositions,
        extensions generally with creditors, or proceedings seeking reorganization, arrangement, or
        other similar relief.

        
        "Intellectual Property
        Collateral" has the meaning specified therefor in the Security
        Agreement.

        
        "Interest Expense" means,
        for any period, the aggregate of the interest expense of Borrower and its Subsidiaries for
        such period, determined on a consolidated basis in accordance with GAAP.

        
        "Inventory" means
        inventory (as that term is defined in the Code).

        
        "Investment" means, with
        respect to any Person, any investment by such Person in any other Person (including
        Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding
        (a) commission, travel, relocation and similar advances to officers and employees of such
        Person made in the ordinary course of business, and (b) bona fide Accounts arising in the
        ordinary course of business consistent with past practice), purchases or other acquisitions
        of Indebtedness, securities (excluding cashless exercises, including by delivery of
        previously outstanding shares, or terminations of options or warrants or similar
        transactions), or all or substantially all of the assets of such other Person (or of any
        division or business line of such other Person), and any other items that are or would be
        classified as investments on a balance sheet prepared in accordance with GAAP.

        
        "Investors" means,
        collectively, Mississippi Valley Capital, LLC, Julian I. Edison, Beatrice C. Edison
        Irrevocable Trust, Andrew N. Baur Revocable Trust, Scott C. Schnuck, Louis N. Goldring
        Revocable Trust dated April 15, 1997, and Linn H. Bealke Revocable Trust.

        
        "IRC" means the Internal
        Revenue Code of 1986, as in effect from time to time.

        
        "IRS"
                        means the Internal Revenue Service.

        
        "Lender" and
        "Lenders" have the respective meanings
        set forth in the preamble to the Agreement, and shall include any other Person made a party
        to the Agreement in accordance with the provisions of Section
        13.1.

        
        "Lender Group" means,
        individually and collectively, each of the Lenders (including the Issuing Lender) and
        Agent.

        
        "Lender Group Expenses"
        means all (a) costs or expenses (including taxes, and insurance premiums) required to be
        paid by Borrower under any of the Loan Documents that are paid, advanced, or incurred by
        the Lender Group, (b) fees or charges reasonably paid or incurred by

         

        SCHEDULE
        1.1 - 9

         

        
        

        

         

        Agent
        in connection with the Lender Group's transactions with Borrower, including, fees or
        charges for photocopying, notarization, couriers and messengers, telecommunication, public
        record searches (including tax lien, litigation, and UCC searches and including searches
        with the patent and trademark office, the copyright office, or the department of motor
        vehicles), filing, recording, publication and appraisal (including periodic collateral
        appraisals or business valuations), including the cost of real estate surveys, real estate
        title policies and endorsements, and environmental audits, in each case to the extent of
        the fees and charges (and up to the amount of any limitation) authorized in the Agreement,
        (c) charges paid or incurred by Agent resulting from the dishonor of checks, (d) reasonable
        costs and expenses paid or incurred by the Lender Group to correct any default or enforce
        any provision of the Loan Documents, or in gaining possession of, maintaining, handling,
        preserving, storing, shipping, selling, preparing for sale, or advertising to sell the
        Collateral, or any portion thereof, irrespective of whether a sale is consummated, (e)
        reasonable audit fees and expenses of Agent related to any inspections or audits to the
        extent of the fees and charges (and up to the amount of any limitation) authorized in the
        Agreement, (f) reasonable costs and expenses of third party claims or any other suit paid
        or incurred by the Lender Group in enforcing or defending the Loan Documents or in
        connection with the transactions contemplated by the Loan Documents or the Lender Group's
        relationship with Borrower arising under the Loan Documents, (g) Agent's reasonable
        costs and expenses (including reasonable attorneys fees) incurred in structuring and
        drafting the Loan Documents in an aggregate amount not to exceed $200,000, (h) following
        the Closing Date, Agent's reasonable costs and expenses (including reasonable attorneys fee
        and costs) incurred in reviewing, administering, or amending the Loan Documents, and (i)
        Agent's and each Lender's reasonable costs and expenses (including reasonable attorneys,
        accountants, consultants, and other advisors fees and expenses) incurred in terminating,
        enforcing (including reasonable fees and expenses of attorneys, accountants, consultants,
        and other advisors incurred in connection with a
        "workout," a
        "restructuring," or an Insolvency
        Proceeding concerning Borrower or in exercising rights or remedies under the Loan
        Documents), or defending the Loan Documents, irrespective of whether suit is brought, or in
        taking any Remedial Action concerning the Collateral.

        
        "Lender-Related Person"
        means, with respect to any Lender, such Lender, together with such Lender's Affiliates,
        officers, directors, employees, attorneys, and agents.

        
        "Lien" means any interest
        in an asset securing an obligation owed to, or a claim by, any Person other than the owner
        of the asset, irrespective of whether (a) such interest is based on the common law,
        statute, or contract, (b) such interest is recorded or perfected, and (c) such interest is
        contingent upon the occurrence of some future event or events or the existence of some
        future circumstance or circumstances. Without limiting the generality of the foregoing, the
        term "Lien" includes the lien or
        security interest arising from a mortgage, deed of trust, encumbrance, pledge,
        hypothecation, assignment, deposit arrangement, security agreement, conditional sale or
        trust receipt, or from a lease, consignment, or bailment for security purposes and also
        includes reservations, exceptions, encroachments, easements, rights-of-way, covenants,
        conditions, restrictions, leases, and other title exceptions and encumbrances affecting
        Real Property.

        
        "Loan Account" has the
        meaning specified therefor in Section
        2.10.

        
        "Loan Documents" means
        the Agreement, the Control Agreements, the Copyright Security Agreement, the Fee Letter,
        the Mortgages, the Notes, the Patent Security Agreement,

         

        SCHEDULE
        1.1 - 10

         

        
        

        

         

        the
        Registration Rights Agreement, the Security Agreement, the Subordination Agreements, the
        Trademark Security Agreement, the Intellectual Property Security Agreement, any other note
        or notes executed by a Borrower in connection with the Agreement and payable to a member of
        the Lender Group, and any other agreement entered into, now or in the future, by any
        Borrower and the Lender Group in connection with the Agreement excluding, however, any
        nondisclosure agreements executed by some or all of the parties hereto prior to the date
        hereof and the letter of intent dated November 7, 2007 between Agent and
        Borrower.

        
        "Material Adverse Change"
        means (a) a material adverse change in the business, operations, results of operations,
        assets, liabilities or condition (financial or otherwise) of Borrower or any of its
        Subsidiaries (taken as a whole), (b) a material impairment of Borrower's or a Subsidiary's
        ability to perform its obligations under the Loan Documents to which it is a party or of
        the Lender Group's ability to enforce the Obligations or realize upon the Collateral, or
        (c) a material impairment of the enforceability or priority of the Agent's Liens with
        respect to the Collateral as a result of an action or failure to act on the part of
        Borrower or a Subsidiary of Borrower; provided, however, that none of the following shall
        constitute a "Material Adverse Change": any decline in the market price of Borrower's Stock
        reasonably determined to arise as a result of:  (x) the transactions
        contemplated by the Loan Documents or the public announcement thereof, or
        (y) Borrower's sales or earnings results for Borrower's third quarter of its fiscal
        year ended on November 3, 2007 or the public announcement thereof.

        
        "Material Debt Agreement"
        means monetary obligation (regardless of amount) under any currently existing or hereafter
        arising debenture or note (other than pursuant to the Loan Documents) or any mortgage,
        credit agreement or other facility, indenture agreement, factoring agreement or other
        instrument under which there may be issued, or by which there may be secured or evidenced,
        any Indebtedness or under any long term leasing or factoring arrangement, if the aggregate
        amount of any such obligations and liabilities of Borrower and the Subsidiaries thereof
        exceed $1,000,000 (exclusive of (x) any monetary obligations of Borrower or any Subsidiary
        thereof with respect to defaults or terminations of less than ten percent (10%) of
        Borrower’s real property leases or other agreements or arrangements pursuant to which
        Borrower is entitled to the use or occupancy of any space, and (y) any failure to pay when
        due any monetary obligations under any real property leases or other agreements or
        arrangements pursuant to which Borrower is entitled to the use or occupancy of any space,
        vendor payables or factoring arrangements, which obligations are not more than 30 days past
        due).

        
        "Maturity Date" has the
        meaning specified therefor in Section
        3.3(a).

        
        "Mortgages" means,
        individually and collectively, one or more mortgages, deeds of trust, or deeds to secure
        debt, executed and delivered by a Subsidiary of Borrower in favor of Agent, in form and
        substance satisfactory to Agent, that encumber the Real Property.

        
        "Multiemployer Plan"
        means a "multiemployer plan" (as defined in Section 3(37) of ERISA) to which Borrower or
        any ERISA Affiliate is making, is obligated to make, has made or has been obligated to
        make, contributions on behalf of participants who are or were employed by any of them,
        other than a plan described in Section 4(b)(4) of ERISA.

         

        SCHEDULE
        1.1 - 11

         

        
        

        

         

        
        “Nasdaq” or
        “NASDAQ” means the Nasdaq
        Stock Market LLC, including the Nasdaq Global Market (formerly known as the Nasdaq National
        Market) and the Nasdaq Capital Market and the Nasdaq Global Select Market.

        
        "Net Cash Proceeds"
        means, with respect to any sale or disposition by any Person or any Subsidiary thereof of
        property or assets, the amount of Collections received (directly or indirectly) from time
        to time (whether as initial consideration or through the payment of deferred consideration)
        by or on behalf of such Person or such Subsidiary, in connection therewith after deducting
        therefrom only (i) the amount of any Indebtedness secured by any Permitted Lien on any
        asset (other than (A) Indebtedness owing to Agent or any Lender under this Agreement or the
        other Loan Documents and (B) Indebtedness assumed by the purchaser of such asset) which is
        required to be, and is, repaid in connection with such disposition, (ii) reasonable
        expenses related thereto incurred by such Person or such Subsidiary in connection
        therewith, and (iii) taxes paid or payable to any taxing authorities by such Person or such
        Subsidiary in connection therewith, in each case to the extent, but only to the extent,
        that the amounts so deducted are, at the time of receipt of such cash, actually paid or
        payable to a Person that is not an Affiliate and are properly attributable to such
        transaction.

        
        "Notes" means the
        Registered Notes.

        
        "Obligations" means all
        loans (including the Term Loan), debts, principal, interest (including any interest that
        accrues after the commencement of an Insolvency Proceeding regardless of whether allowed or
        allowable in whole or in part as a claim in any such Insolvency Proceeding), premiums,
        liabilities (including all amounts charged to Borrower's Loan Account pursuant hereto),
        obligations (including indemnification obligations), fees (including the fees provided for
        in the Fee Letter), charges, costs, Lender Group Expenses (including any fees or expenses
        that accrue after the commencement of an Insolvency Proceeding, regardless of whether
        allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding),
        lease payments, guaranties, covenants, and duties of any kind and description owing by
        Borrower to the Lender Group pursuant to or evidenced by the Loan Documents and
        irrespective of whether for the payment of money, whether direct or indirect, absolute or
        contingent, due or to become due, now existing or hereafter arising, and including all
        interest not paid when due and all Lender Group Expenses that Borrower is required to pay
        or reimburse by the Loan Documents, by law, or otherwise, but in any event excluding the
        Borrower’s obligations under the Registration Rights Agreement other than the
        Borrower's obligation to pay liquidated damages pursuant to
        Section 2(b) thereof. Any reference in the
        Agreement or in the other Loan Documents to the Obligations shall include all or any
        portion thereof and any extensions, modifications, renewals, or alterations thereof, both
        prior and subsequent to any Insolvency Proceeding.

        
        "Originating Lender" has
        the meaning specified therefor in Section
        13.1(e).

        
        "Patent" has the meaning
        specified therefor in the Security Agreement.

        
        "Patent Security
        Agreement" has the meaning specified therefor in the Security
        Agreement.

         

        SCHEDULE
        1.1 - 12

         

        
        

        

         

        
        "PBGC" means Pension
        Benefit Guaranty Corporation as defined in Title IV of ERISA, or any successor
        entity.

        
        "PEMG" means Private
        Equity Management Group, Inc., a Nevada corporation.

        
        "Permitted Acquisition"
        means an Acquisition in which all of the following conditions is satisfied:

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

        
        (b) the Borrower shall have furnished the Agent with: (i) at least ten (10)
        days’ prior written notice of such intended Acquisition; (ii) a current draft of the
        acquisition agreement and other acquisition documents; (iii) a summary of any due diligence
        undertaken by the Borrower in connection with such Acquisition; (iv) financial statements
        of the Person which is the subject of such Acquisition, to the extent available; (v) with
        respect to Acquisitions in excess of $2,000,000, (x) pro forma projected financial
        statements of the Borrower for the twelve (12) month period following such Acquisition
        after giving effect to such Acquisition and (y) the results of appraisals of the assets of
        the Person to be acquired in such Acquisition; and (vi) such other information as the Agent
        may reasonably require;

        
        (c) if the Acquisition is of voting securities or equity interests, after
        consummation of such Acquisition the Borrower shall own, directly or indirectly, a majority
        of the voting securities or equity interests in the Person being acquired and the Person
        being acquired shall be Controlled by Borrower; and

        
        (d) any assets acquired shall be utilized in, and if the Acquisition
        involves a merger, consolidation or stock acquisition, the Person which is the subject of
        such Acquisition shall be engaged in, only those businesses in which Borrower is engaged on
        the Closing Date. If the Person which is the subject of such Acquisition will be maintained
        as a Subsidiary of the Borrower, such Subsidiary shall have complied with the obligations
        set forth in Section 5.18
        hereof.

        
        "Permitted Discretion"
        means a determination made honestly in fact and in the exercise of reasonable (from the
        perspective of a secured asset-based lender) business judgment.

        
        "Permitted Dispositions"
        means (a) sales or other dispositions of Equipment, Inventory and other fixed assets (other
        than Real Property) that are substantially worn, damaged, or obsolete in the ordinary
        course of business, (b) sales of Inventory to buyers in the ordinary course of business,
        (c) the use or transfer of money or Cash Equivalents in a manner that is not prohibited by
        the terms of the Agreement or the other Loan Documents, and (d) the licensing, on a
        non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property
        rights in the ordinary course of business.

        
        "Permitted Investments"
        means (a) Investments in cash and Cash Equivalents, (b) Investments in negotiable
        instruments for collection, (c) advances made in connection with purchases of goods or
        services in the ordinary course of business, (d) Investments received in settlement of
        amounts due to Borrower or its Subsidiaries effected in the ordinary course of

         

        SCHEDULE
        1.1 - 13

         

        
        

        

         

        
        business or owing to Borrower or its Subsidiaries as a result of Insolvency
        Proceedings involving an Account Debtor or upon the foreclosure or enforcement of any Lien
        in favor of a Borrower or its Subsidiaries, (e) Investments by any Foreign Subsidiary in a
        Parent or Domestic Subsidiary, (f) Investments by any Foreign Subsidiary in another Foreign
        Subsidiary, and (g) Permitted Acquisitions.

        
        "Permitted Liens" means
        (a) Liens held by Agent to secure the Obligations, (b) Liens for unpaid taxes, assessments,
        or other governmental charges or levies that either (i) are not yet delinquent, or (ii) do
        not constitute an Event of Default hereunder and are the subject of Permitted Protests, (c)
        judgment Liens with respect to judgments not in excess of $500,000, (d) Liens set
        forth on Schedule P-1, (e) the interests
        of lessors under operating leases, (f) purchase money Liens or the interests of lessors
        under Capital Leases to the extent that such Liens or interests secure Permitted Purchase
        Money Indebtedness and so long as such Lien attaches only to the asset purchased or
        acquired and the proceeds thereof, (g) Liens arising by operation of law in favor of
        warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred
        in the ordinary course of Borrower's business and not in connection with the borrowing of
        money, and which Liens either (i) are for sums not yet delinquent, or (ii) are the subject
        of Permitted Protests, (h) Liens on amounts deposited in connection with obtaining worker's
        compensation or other unemployment insurance, (i) Liens on amounts deposited in connection
        with the making or entering into of bids, tenders, or leases in the ordinary course of
        business and not in connection with the borrowing of money, (j) Liens on amounts deposited
        as security for surety or appeal bonds in connection with obtaining such bonds in the
        ordinary course of business, and (k) with respect to any Real Property, easements, rights
        of way, and zoning restrictions that do not materially interfere with or impair the use or
        operation thereof.

        
        "Permitted Protest" means
        the right of Borrower or any of its Subsidiaries to protest any Lien (other than any Lien
        that secures the Obligations), taxes (other than payroll taxes or taxes that are the
        subject of a United States federal tax lien), or rental payment, provided that (a) a
        reserve with respect to such obligation is established on Borrower's or any of its
        Subsidiaries' books and records in such amount as is required under GAAP, (b) any such
        protest is instituted promptly and prosecuted diligently by Borrower or any of its
        Subsidiaries, as applicable, in good faith, and (c) Agent is satisfied in its reasonable
        judgment that, while any such protest is pending, there will be no impairment of the
        enforceability, validity, or priority of any of the Agent's Liens.

        
        "Permitted Purchase Money
        Indebtedness" means, as of any date of determination, Purchase
        Money Indebtedness incurred after the Closing Date in an aggregate principal amount
        outstanding at any one time not in excess of $2,500,000.

        
        "Person" means natural
        persons, corporations, limited liability companies, limited partnerships, general
        partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business
        trusts, or other organizations, irrespective of whether they are legal entities, and
        governments and agencies and political subdivisions thereof.

        
        "Plan" means any employee
        benefit plan, program, or arrangement maintained or contributed to by Borrower or with
        respect to which it may incur liability.

         

        SCHEDULE
        1.1 - 14

         

        
        

        

         

        
        “Prohibited
        Transaction” has the meaning specified therefor in
        Section 4A.3.

        
        "Projections" means
        Borrower's forecasted (a) balance sheets, (b) profit and loss statements and (c) cash flow
        statements, all prepared on a basis consistent with Borrower's historical financial
        statements, in reasonable detail and accompanied by a statement of underlying
        assumptions.

        
        "Pro Rata Share" means
        the percentage obtained by dividing (x) such Lender's Individual Lender Term Loan
        Exposure by (y) the Aggregate Term Loan Exposure.

        
        "Purchase Money
        Indebtedness" means Indebtedness (other than the Obligations, but
        including Capitalized Lease Obligations), incurred at the time of, or within 20 days after,
        the acquisition of any fixed assets for the purpose of financing all or any part of the
        acquisition cost thereof.

        
        "Qualified Affiliate" is
        an Affiliate that is exempt from United States withholding taxes in respect of interest
        paid or accrued on the Obligations.

        
        "Qualified Related Fund"
        is a Related Fund that is exempt from United States withholding taxes in respect of
        interest paid or accrued on the Obligations.

        
        "Rating Agencies" has the
        meaning specified therefor in Section
        2.15.

        
        "Real Property" means any
        real property hereafter acquired by Borrower or any of its Subsidiaries and the
        improvements thereto.

        
        "Record" means
        information that is inscribed on a tangible medium or which is stored in an electronic or
        other medium and is retrievable in perceivable form.

        
        "Register" has the
        meaning specified therefor in Section
        13.1.

        
        "Registered Loan" means
        the Term Loan as recorded on the Register pursuant to Section
        13.1.

        
        "Registered Note" has the
        meaning specified therefor in Section
        2.14.

        
        "Registration Rights
        Agreement" means a registration rights agreement, in
        substantially the form attached hereto as Exhibit D-1 and executed and delivered by
        Borrower to Agent.

        
        "Related Fund" means a
        fund or account managed by Agent or an Affiliate of Agent or its investment
        manager.

        
        "Remedial Action" means
        all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess,
        evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment,
        (b) prevent or minimize a release or threatened release of Hazardous Materials so they do
        not migrate or endanger or threaten to endanger public health or welfare or the indoor or
        outdoor environment, (c) perform any pre-remedial studies, investigations, or
        post-

         

        SCHEDULE
        1.1 - 15

         

        
        

        

         

        
        remedial operation and maintenance activities, or (d) conduct any other
        actions with respect to Hazardous Materials authorized by Environmental Laws.

        
        "Replacement Lender" has
        the meaning specified therefor in Section
        14.2(a).

        
        "Report" has the meaning
        specified therefor in Section
        15.17.

        
        "Reportable Event" means
        any of the events described in Section 4043(c) of ERISA or the regulations thereunder other
        than a Reportable Event as to which the provision of 30 days notice to the PBGC is waived
        under applicable regulations.

        
        "Required Lenders" means,
        at any time, Lenders whose Pro Rata Share aggregate 50.1% or more, as determined pursuant
        to clause (c) of the definition of "Pro Rata Share."

        
        "Retiree Health Plan"
        means an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA that
        provides benefits to individuals after termination of their employment, other than as
        required by Section 601 of ERISA.

        
        "Scheduled Intellectual Property
        Collateral" has the meaning set forth in
        Section 4.15.

        
        "SEC" means the United
        States Securities and Exchange Commission and any successor thereto.

        
        “SEC Filings”
        means Borrower’s periodic reports publicly filed with SEC pursuant to Section 13(a)
        or 15(d) of the Exchange Act, including Annual Reports on Form 10-K, Quarterly Reports on
        Form 10-Q and Current Reports on Form 8-K.

        
        "Securities" means the Common Shares and the Notes.

        
        "Securities Account"
        means a "securities account" (as that
        term is defined in the Code).

        
        “Securities
        Act” means the Securities Act of 1933, as
        amended.

        
        "Security Agreement"
        means a security agreement, in form and substance satisfactory to Agent, executed and
        delivered by Borrower and its Subsidiaries to Agent.

        
        "Senior Lender" means
        Bank of America, N.A.

        
        "Senior Loan Agreement"
        means the Second Amended and Restated Loan and Security Agreement, dated as of August 31,
        2006, by and between Senior Lender and Borrower.

        
        "Senior Loan Documents"
        means: (i) the Senior Loan Agreement, and (ii) all of the other Loan Documents
        (as defined in the Senior Loan Documents).

        
        "Senior Loan Subordination
        Agreement" means a subordination agreement, in form and substance
        satisfactory to Agent, executed and delivered by Senior Lender to Agent.

        
        "Solvent" means, with
        respect to any Person on a particular date, that, at fair valuations, the sum of such
        Person's assets is greater than all of such Person's debts.

         

        SCHEDULE
        1.1 - 16

         

        
        

        

         

        
        "Stock" means all shares,
        options, warrants, interests, participations, or other equivalents (regardless of how
        designated) of or in a Person, whether voting or nonvoting, including common stock,
        preferred stock, or any other "equity
        security" (as such term is defined in Rule 3a11-1 of the General
        Rules and Regulations promulgated by the SEC under the Exchange Act).

        
        "Store Deposit Account"
        means a Deposit Account established for one store owned by Borrower or one of its
        Subsidiaries which is maintained as a "zero balance account," in that all collected funds
        therein are swept each Business Day into a blocked or concentration Deposit Account
        maintained at Senior Lender.

        
        "Subordinated Debt" shall
        mean any Indebtedness of Borrower as to which the subordinated creditor has agreed in
        writing on terms acceptable to the Required Lenders in their sole discretion to be
        subordinate and junior in right of payment to the rights of the Lender Group with respect
        to the Obligations under this Agreement.

        
        "Subordination
        Agreements" means the Senior Loan Subordination Agreement and the
        Debenture Subordination Agreement.

        
        "Subsidiary" of a Person
        means a corporation, partnership, limited liability company, or other entity in which that
        Person directly or indirectly owns or controls the shares of voting rights or equity
        interests having ordinary voting power to elect a majority of the board of directors (or
        appoint other comparable managers) of such corporation, partnership, limited liability
        company, or other entity.

        
        "Tangible Net Worth"
        means as of any date, (a) the total assets of Borrower minus (b)(i) the total liabilities
        of Borrower calculated in conformity with GAAP and (ii) all amounts due from
        Borrower’s Affiliates and the amount of all intangible items reflected therein,
        including all unamortized debt discount and expense, unamortized research and development
        expense, unamortized deferred charges, goodwill, intellectual property, unamortized excess
        cost of investments in subsidiaries over equity at dates of acquisition, and all similar
        items which should properly be treated as intangibles in accordance with GAAP, plus (c) any
        charge or other expense related to impairment of long-lived intangible or fixed assets
        recognized during the period from February 3, 2008 through the date of
        measurement.

        
        "Taxes" has the meaning
        specified therefor in Section
        15.11.

        
        "Term Loan" has the
        meaning specified therefor in Section
        2.2(a).

        
        "Trademark" has the
        meaning specified therefor in the Security Agreement.

        
        "Trademark Security
        Agreement" has the meaning specified therefor in the Security
        Agreement.

        
        “Trading
        Affiliates” has the meaning specified therefor in
        Section 4A.3.

        
        "Trading Day" means (i) a
        day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin
        Board), or (ii) if the Common Stock is not traded on a Trading Market (other than the OTC
        Bulletin Board), a day on which the Common Stock is

         

        
        

        

         

        traded
        in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
        Common Stock is not traded on any Trading Market and not quoted on the OTC Bulletin Board,
        a day on which the Common Stock is quoted in the over the counter market as reported by the
        National Quotation Bureau Incorporated (or any similar organization or agency succeeding to
        its functions of reporting prices); provided, that in the event that the Common Stock is
        not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall
        mean a Business Day.

        
        "Trading Market" means
        Nasdaq Global Market or any Eligible Market on which the Common Stock is then listed or
        quoted.

        
        "USA Patriot Act" means
        the USA Patriot Act, Title III of Pub.L. 107-56, signed into law October 26,
        2001.

        
        "United States" means the
        United States of America.

        
        "Voidable Transfer" has
        the meaning specified therefor in Section
        16.6.

         

        
        

        

Schedule 3.1

CONDITIONS PRECEDENT TO EXTENSION OF CREDIT

The obligation of each Lender to make its portion of the Term Loan provided for in the Agreement is subject to the fulfillment, to the satisfaction of Agent and each Lender (the making of such portion of the Term Loan by any Lender being conclusively deemed to be its satisfaction or waiver of the following), of each of the following conditions precedent:

 (a)       the Closing Date shall occur on or before February 1, 2008;

 (b)       Agent shall have received a letter duly executed by Borrower authorizing Agent to file appropriate financing statements in such office or offices as may be necessary or, in the opinion of Agent, desirable to perfect the security interests to be created by the Loan Documents;

(c)       Agent shall have received evidence that appropriate financing statements have been duly filed in such office or offices as may be necessary or, in the opinion of Agent, desirable to perfect the Agent's Liens in and to the Collateral;

(d)       Agent shall have received each of the following documents, in form and substance satisfactory to Agent, duly executed, and each such document shall be in full force and effect:

 (i)       the Control Agreements,

 (ii)       the Copyright Security Agreement,

 (iii)       a disbursement letter executed and delivered by Borrower to Agent regarding the extension of credit to be made on the Closing Date, the form and substance of which is satisfactory to Agent,

 (iv)       the Fee Letter,

 (v)       the Notes,

 (vi)       the Patent Security Agreement,

 (vii)       the Registration Rights Agreement,

 (viii)       the Security Agreement,

 (ix)       the Stock Pledge Agreement,

 (x)       the Subordination Agreements, and

 (xi)       the Trademark Security Agreement.

 

 

(e)       Agent shall have received a certificate from the Secretary of Borrower (i) attesting to the resolutions of Borrower's Board of Directors authorizing its execution, delivery, and performance of this Agreement and the other Loan Documents to which Borrower is a party, (ii) authorizing specific officers of Borrower to execute the same, and (iii) attesting to the incumbency and signatures of such specific officers of Borrower;

(f)        Agent shall have received copies of Borrower's Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Borrower;

(g)       Agent shall have received a certificate of status with respect to Borrower, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of Borrower, which certificate shall indicate that such Borrower is in good standing in such jurisdiction;

(h)       Agent shall have received certificates of status with respect to Borrower, each dated within 6 months of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of Borrower) in which its failure to be duly qualified or licensed would constitute a Material Adverse Change, which certificates shall indicate that Borrower is in good standing in such jurisdictions;

(i)        Agent shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 5.8, the form and substance of which shall be reasonably satisfactory to Agent;

(j)        Agent shall have received opinions of Borrower's counsel in form and substance reasonably satisfactory to Agent;

(k)       Agent shall have received the valuation report on Borrower's inventory, in form and substance satisfactory to Agent; provided, however, that Borrower may satisfy this condition by delivery to Agent of a copy of a recent appraisal of Borrower's inventory obtained by Senior Lender.

(l)        Agent shall have received the due diligence report on Borrower completed by Stonefield Josephson, Inc., in form and substance satisfactory to Agent;

(m)       Agent shall have received the Closing Date Projections;  

(n)       Borrower shall have paid all Lender Group Expenses incurred in connection with the transactions evidenced by this Agreement; 

(o)       Borrower shall have received all licenses, approvals or evidence of other actions required by NASDAQ, any Governmental Authority or any third Person in connection with the execution and delivery by Borrower of the Loan Documents or with the consummation of the transactions contemplated thereby; 

(p)       all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance reasonably satisfactory to Agent;

 

 

(q)       the representations and warranties contained in Section 4 of this Agreement or in the other Loan Documents shall be true and correct in all material respects on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

(r)        no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof; 

(s)       no injunction, writ, restraining order, or other order of any nature restricting or prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any Governmental Authority against Borrower, Agent, any Lender, or any of their Affiliates; and

(t)        no Material Adverse Change shall have occurred.

 

 

Schedule 3.1A

CONDITIONS PRECEDENT TO BORROWER’S OBLIGATIONS

The obligation of Borrower to sell and issue the Notes and the Common Shares and to accept the extensions of credit at closing is subject to the fulfillment, to the satisfaction of Borrower of each of the following conditions precedent:

	
             
 	
            (a)
 	
            The Closing Date shall occur on or before February 1, 2008;
 

 (b)       Borrower shall have received each of the following documents, in form and substance satisfactory to Borrower, duly executed and each such document shall be in full force and effect:

	
             
 	
            (i)
 	
            the Registration Rights Agreement; and
 

	
             
 	
            (ii)
 	
            the Subordination Agreements.
 

 (c)       The representations and warranties contained in Section 4A of this Agreement shall be true and correct in all material respects on and as of the Closing Date as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date); 

(d)       Borrower shall have received all approvals identified by Borrower as necessary in connection with the consummation of the transactions contemplated hereby, including, without limitation, the consent of Bank of America, N.A. in its capacity as the Senior Lender and the Investors;

(e)       The Borrower shall have received the proceeds of the Term Loan in an amount not less than $7,500,000;

(f)        No injunction, writ, restraining order or other order of any nature restricting or prohibiting, directly or indirectly, the issuance of the Notes and the Common Shares or the consummation of the transactions contemplated by this Agreement shall have been issued and remain in force by any Governmental Authority against Borrower, Agent, any Lender or any of their Affiliates; and

	
             
 	
            (g)
 	
            No Material Adverse Change shall have occurred.
 

 

 

 

         

        
        

        

         

        
        [Schedules 4.5 to 4.19 have been omitted. The registrant undertakes to furnish supplementally a copy of such schedules
        upon request.]

 

 

 

 

Schedule 5.2

Provide Agent, upon Agent's request within 10 business days, but no more frequently than monthly, with each of the documents set forth below in form reasonably satisfactory to Agent:

	
             
 	
            (a) A current "Stock Ledger Inventory Report" (including a "Department on hand" (Cost/Retail Inventory) concerning the Borrower’s Inventory;

(b) a current aging of Borrower’s accounts payable;

(c) a current aging of Borrower’s credit card accounts receivable;

(d) a current reconciliation of the Accounts to the general ledger;
and
 
	
             
 	
            (e) such other reports as to the Collateral or the financial condition of Borrower as Agent may reasonably request.
 

 

 

Schedule 5.3

Deliver to Agent, each of the financial statements, reports, or other items set forth set forth below at the following times in forms reasonably satisfactory to Agent:

	
            as soon as available, but in any event within 45 days after the end of each fiscal quarter during each of Borrower's fiscal years

 
 	
            (a) an original counterpart of a management prepared financial statement of the Borrower for the period from the beginning of Borrower’s then current fiscal year through the end of the subject quarter, with comparative information for the same period of the previous fiscal year, which statement shall include, at a minimum, a balance sheet, income statement (on a store specific and on a “consolidated” basis), statement of changes in shareholders’ equity, and cash flows and comparisons for the corresponding quarter of the then immediately previous year as well as to Borrower’s business plan.

(b) a Compliance
Certificate.
  
	
            as soon as available, but in any event within 120 days after the end of each of Borrower's fiscal years
 	
            (c) An original signed counterpart of the Borrower’s annual financial statement, which statement shall have been prepared by, and bear the unqualified opinion of, the Borrower’s independent certified public accountants (i.e. said statement shall be “certified” by such accountants) and shall include, at a minimum (with comparative information for the then prior fiscal year) a balance sheet, income statement, statement of changes in shareholders’ equity, and cash flows.

(d) a Compliance Certificate.
  
	
            if and when filed by Borrower, within 5 Business Days of filing
 	
            (e) Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports,

(f) any other filings made by Borrower with the SEC, and

(g) any other information that is provided by Borrower to its shareholders generally.
 
	
            promptly, but in any event within 5 Business Days after Borrower has knowledge of any event or condition that constitutes a Default or an Event of Default,
 	
            (h) notice of such event or condition and a statement of the curative action that Borrower proposes to take with respect thereto.
 

 

 

 

 

	
            promptly after the commencement thereof, but in any event within 5 Business Days after the service of process with respect thereto on Borrower,
 	
            (i) notice of all actions, suits, or proceedings brought by or against Borrower before any Governmental Authority which reasonably would be expected to result in a Material Adverse Change.
 
	
            upon the request of Agent within 10 Business Days but no more frequently than annually
 	
            (j) copies of Borrower's Projections, either (i) in the form most recently delivered to the Senior Lender or (ii) in form and substance (including as to scope and underlying assumptions) satisfactory to Agent, in its Permitted Discretion, in any event for a period through and including the Maturity Date, year by year, and for the forthcoming fiscal year, quarter by quarter, certified by the chief executive officer of Borrower as being such officer's good faith estimate of the financial performance of Borrower during the period covered thereby, and subject to the qualifications set forth in Section 4.18, and

(k) copies of Borrower's federal income tax returns, and any amendments thereto, filed with the IRS.
 
	
            upon the request of Agent
 	
            (l) any other information reasonably requested relating to the financial condition of Borrower or its Subsidiaries.
 

 

 

 

 

 

[Schedules 5.8(a) through Schedule 6.4 have been omitted. The registrant undertakes to furnish supplementally a copy of such schedules
        upon request.]

 

 

SCHEDULE 6.13

 

Transactions with Affiliates

	
             
 	
            1.
 	
            The Borrower issued subordinated convertible debentures on June 26, 2007.  Certain affiliates of the Borrower, including directors and advisory directors, are holders of these debentures.  The debentures contain a weighted average conversion price adjustment (and other adjustments) that can be affected by future corporate transactions and will be impacted by this transaction. 
 

	
             
 	
            2.
 	
            The Borrower may enter into any of the following transactions with its affiliates: (a) a transaction that is contemplated and in compliance with any of Borrower’s existing cash bonus plans, bonus letters, directors fee arrangements, employment agreements, stock option plans, equity incentive plans, or any such future plans or arrangements approved by the Borrower’s Board of Directors, Compensation Committee or shareholders, (b) payment of salaries and bonuses approved by the Borrower’s Board of Directors or Compensation Committee in the ordinary course of business, and (c) payment of severance benefits pursuant to severance arrangements that the Borrower may enter from time to time with its employees, officers and directors.
 

 

 

[Table of Contents and Index to Exhibits and Schedules have been omitted. The registrant undertakes to furnish supplementally a copy of such documents upon request.]Exhibit 4.2

 

SUBORDINATED TERM NOTE

THIS SUBORDINATED TERM NOTE (“NOTE”) AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE, IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT SUBORDINATION AGREEMENT (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE “SENIOR LOAN SUBORDINATION AGREEMENT”) DATED AS OF FEBRUARY 1, 2008 BETWEEN AND AMONG BAKERS FOOTWEAR GROUP, INC., A MISSOURI CORPORATION (THE “COMPANY”), EACH OF THE SUBORDINATED CREDITORS SET FORTH ON THE SIGNATURE PAGES THERETO AND BANK OF AMERICA, N.A. (“SENIOR LENDER”), TO ALL INDEBTEDNESS OWED BY THE MAKER OF THIS NOTE TO THE SENIOR LENDER, AND THE LENDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SENIOR LOAN SUBORDINATION AGREEMENT.

THIS NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

	
            No. STN-1:
 	
            $7,500,000
 
	
             
 	
            February 1, 2008
 

 

BAKERS FOOTWEAR GROUP, INC.

SUBORDINATED TERM NOTE

THIS SUBORDINATED TERM NOTE (this “Note”) is being issued pursuant to the terms of that certain Second Lien Credit Agreement (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), dated as of February 1, 2008, by and among Bakers Footwear Group, Inc., a Missouri corporation (the “Company”), the lenders party thereto as “Lenders” (“Lenders”) and Private Equity Management Group, Inc., a Nevada corporation, in its capacity as administrative agent for the Lender Group (together with its successors, “Agent”)

FOR VALUE RECEIVED, the Company promises to pay to the order of GVECR II 2007 E Trust dated December 17, 2007 or its registered assigns (the “Lender”), the principal sum of SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 Dollars ($7,500,000), or such lesser principal amount as may then be outstanding hereunder, on February 1, 2011 or such earlier date as this Note is required to be repaid as provided hereunder (the “Maturity Date”), and to pay interest to the Lender in accordance with the provisions of the Credit Agreement. This Note is subject to the following additional provisions:

 

1

 

 

1.         Definitions. In addition to the terms defined elsewhere in this Note, capitalized terms that are used but not otherwise defined herein have the meanings given to such terms in the Credit Agreement.

2.         Payments.  The Company shall pay principal and interest to the Lender pursuant to the terms of the Credit Agreement.  This Note also may and must be prepaid as provided in the Credit Agreement, together with any premiums set forth herein, under the circumstances therein described.  Payment of principal hereof and interest and premium hereon shall be made in lawful money of the United States of America.

3.         Transfers.  This Note may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended, or an exemption from such registration.  Subject to such restrictions, the Company shall register (or allow the registration of) the transfer of any portion of this Note upon surrender of this Note to the Company, properly endorsed, at its address for notice set forth herein together with delivery of the duly executed Note assignment form attached hereto as Exhibit A and in compliance with Section 7(a).  Any transfer shall also comply with the provisions on transfer in the Credit Agreement.  Upon any such registration or transfer, a new Note, in substantially the form of this Note (any such new note, a
“New Note”), evidencing the portion of this Note so transferred shall be issued to the transferee and a New Note evidencing the remaining portion of this Note not so transferred, if any, shall be issued to the transferring Lender. The acceptance of the New Note by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Note.  The Company agrees that its prior consent is not required for the transfer of any portion of this Note; provided, however, that the Company shall be entitled to reasonable assurance, including an opinion of counsel reasonably acceptable to Company, that such transfer complies with applicable securities laws.  No service charge or other fee will be imposed in connection with any such registration of transfer or exchange.

4.         Ranking.  This Note ranks pari passu with all other Notes now or hereafter issued pursuant to the Loan Documents and is subject to the terms and conditions of the Credit Agreement, including those in respect of any additional indebtedness. Notwithstanding anything to the contrary herein, the Company and Lender agree that the payment of all amounts hereunder is subject to the Subordination Agreement.

5.         Charges, Taxes and Expenses.  The Lender shall be responsible for all tax liability that may arise as a result of holding or transferring this Note.

6.         Notices. Any and all notices or other communications or deliveries hereunder shall be made in accordance with Section 11 of the Credit Agreement.

7.         Miscellaneous.

 (a)        Lender may transfer or assign, in whole or from time to time in part, to one or more persons, which shall be (A) an “accredited investor” as defined in Rule 501(a) of Regulation D, as amended under the Securities Act; (B) shall be an Affiliate of Private Equity Management Group, Inc.; (C) shall not be a direct competitor of the Company to such Lender; and (D) which shall agree in writing to be bound by the terms and conditions of this Note, its rights hereunder in connection with the transfer of the Note by Lender to such person, provided that the Lender complies with all 

 

2

 

 

laws applicable thereto and provides written notice of assignment in the form attached hereto as Exhibit A to the Company promptly after such assignment is effected.  The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties.

(b)       Subject to Section 8(a), above, nothing in this Note shall be construed to give to any person or corporation other than the Company and the Lender any legal or equitable right, remedy or cause under this Note.  This Note shall inure to the sole and exclusive benefit of the Company and the Lender.

(c)        EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING. 

(d)       The prevailing party in a proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such proceeding.

(e)        The headings herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

(f)        In case any one or more of the provisions of this Note shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Note shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Note.

(g)       No provision of this Note may be waived, amended or otherwise modified except in accordance with the requirements set forth in the Credit Agreement. No waiver of any default with respect to any provision, condition or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

(h)       To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Lender in order to enforce any right or remedy under the Notes. Notwithstanding any provision to the contrary contained in the Notes, it is expressly agreed and provided that the total liability of the Company under the Notes for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall any rate of interest
or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Notes exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Notes is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate of interest applicable to the Notes from the effective date forward, unless such 

 

3

 

 

application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Lender with respect to indebtedness evidenced by the Notes, such excess shall be applied by such Lender to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Lender’s election.

(i)        This note is one of the Notes referred to in the Credit Agreement.  The Credit Agreement and the other Loan Documents referred to therein contain additional rights of the holder of, and the security for, this Note.  

(j)        This Note shall be governed by, and construed in accordance with, the laws of the State of California in all respects, including all matters of construction, validity and performance, without regard to the choice of law provisions thereof.

(k)       In the event of a conflict between the provisions of this Note and the provisions of the Credit Agreement, the latter shall control.

**********

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of this 1st day of February, 2008.

 

	
             
 	
            BAKERS FOOTWEAR GROUP, INC.
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
            By:
 	
            /s/ Peter A. Edison
 
	
             
 	
            Name:
 	
            Peter A. Edison
 
	
             
 	
            Title:
 	
            Chairman, Chief Executive Officer and
 President
 

 

 

 

 

 

[Signature Page to the Subordinated Term Note]

 

EXHIBIT A

NOTE ASSIGNMENT FORM

 

FOR VALUE RECEIVED, ______________________________ hereby sells, assigns and transfers to the transferee named below, this Note together with all right, title and interest therein.  The transferee agrees to be bound by the terms and conditions of this Note and agrees that it will not dispose of the Note except in compliance with the applicable requirements of the Securities Act of 1933, as amended.

 

Date:_______________________________

 

[Name of Note holder]

 

By:_____________________________

Name:___________________________

Title:____________________________

Address:_________________________

______________________________

 

 

[Name of Transferee]

 

By:_____________________________

Name:___________________________

Title:____________________________

Address:_________________________

______________________________

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}]]