Document:

exv10w1

 

Exhibit 10.1

Transaction

	 	 	 
	Date:

	 	15 August, 2007
	 
	 	 
	To:

	 	PetSmart, Inc.
	 

	 	9601 North 27th Avenue
	 

	 	Phoenix, AZ 85027
	 

	 	Attention:     Philip L. Francis, Chief Executive Officer
	 
	 	 
	From:

	 	Lehman Brothers, Inc acting as Agent
	 

	 	Lehman Brothers OTC Derivatives Inc., acting as Principal
	 

	 	Andrew Yare — Transaction Management Group
	 

	 	Facsimile:     646-885-9546 (United States of America)
	 

	 	Telephone:     212-526-9986
	 
	 	 
	Ref. Numbers:

	 	Global Deal ID: 3277243

Dear Sir or Madam:

The purpose of this communication (this “Confirmation”) is to confirm the terms and conditions of
the transaction (the “Transaction”) entered into between Lehman Brothers OTC Derivatives Inc.
(“Party A”) and PetSmart, Inc. (“Party B”) on the Trade Date specified below. This Confirmation
constitutes a “Confirmation” as referred to in the Agreement specified below. This Confirmation is
sent on behalf both Party A and Lehman Brothers Inc. (“LBI”). Lehman Brothers OTC Derivatives Inc.
is not a member of the Securities Investor Protection Corporation.

This Confirmation evidences a complete and binding agreement between Party A and Party B as to the
terms of the Transaction to which this Confirmation relates. This Confirmation shall supplement,
form a part of, and be subject to an agreement in the form of the 1992 ISDA Master Agreement (the
“Agreement”) as if we had executed an agreement in such form (but without any Schedule) on the
Trade Date of the Transaction. In the event of any inconsistency between the provisions of that
agreement, or the Agreement and this Confirmation, this Confirmation will prevail for the purpose
of the Transaction.

The definitions and provisions contained in the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”) and the 2000 ISDA Definitions (the “Swap Definitions”, and together with the
Equity Definitions, the “Definitions”), in each case as published by the International Swaps and
Derivatives Association, Inc. (“ISDA”) are incorporated into this Confirmation. References herein
to “Transaction” shall be deemed references to “Swap Transaction” for purposes of the Swap
Definitions. In the event of any inconsistency between the Equity Definitions and the Swap
Definitions, the Equity Definitions will govern. In the event of any inconsistency between either
set of Definitions and this Confirmation, this Confirmation will govern. The Transaction shall
constitute a Share Forward Transaction for the purposes of the Equity Definitions and shall be the
only Transaction under the Agreement.

The terms of the Transaction to which this Confirmation relates are as follows:

	 	 	 	 	 
	Agent:
	 	LBI is acting as agent on behalf of Party A and Party B for
the Transaction.  LBI has no obligations, by guarantee,
endorsement or otherwise, with respect to the performance of
the Transaction by either party.
	 
	 	 	 	 
	Trade Date:
	 	August 15, 2007

LEHMAN BROTHERS OTC DERIVATIVES INC.

745 SEVENTH AVE. NEW YORK, NY 10019

 

 

	 	 	 
	Buyer:

	 	Party B
	 
	 	 
	Seller:

	 	Party A
	 
	 	 
	Shares:

	 	Common stock, par value
USD 0.01 per share, of
PetSmart, Inc. (the
“Issuer”) Ticker Symbol:
	 

	 	(“PETM”)
	 
	 	 
	Prepayment:

	 	Applicable
	 
	 	 
	Prepayment Amount:

	 	As specified in Schedule A
	 
	 	 
	Prepayment Date:

	 	Three Exchange Business
Day following the Trade
Date.
	 
	 	 
	Initial Hedge Period:

	 	The period (the “Initial
Hedge Period”) commencing
on August 20, 2007 and
ending on the Exchange
Business Day on which
Party A completes the
purchase of a number of
Shares necessary to
establish its initial
hedge position with
respect to the Transaction
(such date, the “Hedge
Period End Date”). On the
1st Scheduled
Trading Day immediately
following the Hedge Period
End Date, Party A shall
provide written notice
(the “Confirmation Pricing
Supplement”) to Party B in
substantially the form
attached hereto as Exhibit
A, of the Hedging Price,
Maximum Shares, Minimum
Shares and first day of
the Trading Period. Upon
receipt of the
Confirmation Pricing
Supplement, Party B shall
promptly execute and
return the Confirmation
Pricing Supplement to
Party A; provided that
Party B’s failure to so
execute and return the
Confirmation Pricing
Supplement shall not
affect the binding nature
of the Confirmation
Pricing Supplement, and
the terms set forth
therein shall be binding
on Party B to the same
extent, and with the same
force and effect, as if
Party B had executed a
written version of the
Confirmation Pricing
Supplement.
	 
	 	 
	Hedging Price:

	 	The arithmetic average of
the 10b-18 VWAPs for all
Scheduled Trading Days in
the Initial Hedge Period.
	 
	 	 
	Exchange:

	 	NASDAQ Global Select Market
	 
	 	 
	Related Exchange:

	 	All Exchanges
	 
	 	 
	Valuation:
	 	 
	 
	Trading Period:

	 	The period of consecutive
Scheduled Trading Days
from and including the
first Scheduled Trading
Day following the Hedge
Period End Date to and
including the Maximum
Maturity Date, as
specified in Schedule A;
provided that, Party A may
designate any Scheduled
Trading Day on or after
the Minimum Maturity Date,
as specified in Schedule
A, as the last Scheduled
Trading Day of the Trading
Period. Party A shall
notify Party B of any
designation made pursuant

 Global Deal ID: 3277243

2

 

	 	 	 
	 

	 	to this provision on the
Scheduled Trading Day
immediately following such
designated day.
	 
	 	 
	Market Disruption Event:

	 	The first sentence of
Section 6.3(a) of the
Equity Definitions is
hereby amended by
replacing clause (ii) and
clause (iii) in their
entirety with “(ii) an
Exchange Disruption, which
in either case the
Calculation Agent
determines is material,
(iii) an Early Closure,
(iv) a Regulatory
Disruption or (v) a
Liquidity Event.”
	 
	 	 
	Regulatory Disruption:

	 	A “Regulatory Disruption”
shall occur if Party A
determines in its
reasonable discretion that
it is appropriate in light
of legal, regulatory or
self-regulatory
requirements or related
policies or procedures for
Party A to refrain from
all or any part of the
market activity in which
it would otherwise engage
in connection with the
Transaction.
	 
	 	 
	Liquidity Event:

	 	A “Liquidity Event” shall
occur if on any day the
trading volume or
liquidity of trading in
the Shares is materially
reduced from levels
prevailing on the Trade
Date and the Calculation
Agent determines in its
commercially reasonable
discretion that as a
result it would be
appropriate to treat such
day as a Disrupted Day or
a partially Disrupted Day.
	 
	 	 
	Consequence of Disrupted Days:

	 	Notwithstanding anything
to the contrary in the
Equity Definitions, to the
extent that a Disrupted
Day occurs during the
Initial Hedge Period or
the Trading Period, the
Calculation Agent may
postpone the Maximum
Maturity Date and the
Minimum Maturity Date. If
any Disrupted Day occurs
during the Initial Hedge
Period or the Trading
Period, the Calculation
Agent shall determine
whether (i) such Disrupted
Day is a Disrupted Day in
whole, in which case the
10b-18 VWAP for such
Disrupted Day shall not be
included for purposes of
determining the Hedging
Price, if such Disrupted
Date occurs during the
Initial Hedge Period, or
the Forward Price, if such
Disrupted Date occurs
during the Trading Period,
or (ii) such Disrupted Day
is a Disrupted Day only in
part, in which case the
10b-18 VWAP for such
Disrupted Day shall be
determined by the
Calculation Agent based on
Rule 10b-18 eligible
transactions in the Shares
on such Disrupted Day
effected before the
relevant Market Disruption
Event (if any) occurred
and/or after the relevant
Market Disruption Event
(if any) ended, and the
Hedging Price, if such
Disrupted Date occurs
during the Initial Hedge
Period, or the Forward
Price, if such Disrupted
Date occurs during the
Trading Period, shall be
determined by the
Calculation Agent using an
appropriately weighted
average of the 10b-18
VWAPs for all Scheduled
Trading Days in the
Initial Hedge

  Global Deal ID: 3277243

3

 

	 	 	 
	 

	 	Period or
the Trading Period, as the
case may be, instead of an
arithmetic average.
	 
	 	 
	Valuation Time:

	 	The close of trading on
the Exchange, without
regard to extended trading
hours.
	 
	 	 
	Valuation Date:

	 	The last Scheduled Trading
Day during the Trading
Period.
	 
	 	 
	Settlement Terms:
	 	 
	 
	 	 
	Settlement Method Election:

	 	Not Applicable
	 
	 	 
	Physical Settlement:

	 	Applicable
	 
	 	 
	Settlement Currency:

	 	USD
	 
	 	 
	Forward Price:

	 	The amount equal to (i)
the arithmetic average of
the 10b-18 VWAPs for all
Scheduled Trading Days in
the Trading Period minus
(ii) the Discount, as
specified in Schedule A.
	 
	 	 
	10b-18 VWAP:

	 	(A) For any Scheduled
Trading Day that is not a
Disrupted Day, the
volume-weighted average
price at which the Shares
trade as reported in the
composite transactions for
all United States
securities exchanges on
which such Shares are
traded (or, if applicable,
the successor Exchange),
excluding (i) trades that
do not settle regular way,
(ii) opening (regular way)
reported trades in the
consolidated system on
such Scheduled Trading
Day, (iii) trades that
occur in the last ten
minutes before the
scheduled close of trading
on the Exchange on such
Scheduled Trading Day and
ten minutes before the
scheduled close of the
primary trading in the
market where the trade is
effected, and (iv) trades
on such Scheduled Trading
Day that do not satisfy
the requirements of Rule
10b-18(b)(3), as
determined in good faith
by the Calculation Agent,
or (B) for any Scheduled
Trading Day that is a
Disrupted Day or that is
not a Disrupted Day but on
which a manifest error
occurs with respect to the
Bloomberg Page specified
below, an amount
determined in good faith
and in a commercially
reasonable manner by the
Calculation Agent as
10b-18 VWAP. Party B
acknowledges that the
Calculation Agent may
refer to the Bloomberg
Page “PETM <Equity>
AQR SEC” (or any successor
thereto) for any Scheduled
Trading Day to determine
the 10b-18 VWAP, absent
manifest error.
	 
	 	 
	Number of Shares to be Delivered:

	 	The number of Shares equal
to the Share Amount minus
the number of Minimum
Shares.
	 
	 	 
	Share Amount:

	 	The quotient of the
Prepayment Amount divided
by the Forward Price;
provided that if such
quotient is (i) greater
than the Maximum Shares,
the Share Amount

  Global Deal ID: 3277243

4

 

	 	 	 
	 

	 	shall
equal the Maximum Shares,
and (ii) less than the
Minimum Shares, the Share
Amount shall equal the
Minimum Shares.
	 
	 	 
	Settlement Date:

	 	Three Exchange Business
Days following the
Valuation Date.
	 
	 	 
	Initial Shares:

	 	As specified in Schedule A.
	 
	 	 
	Initial Share Delivery:

	 	Party A shall deliver a
number of Shares equal to
the Initial Shares to
Party B on the Initial
Share Delivery Date in
accordance with Section
9.4 of the Equity
Definitions, with the
Initial Share Delivery
Date being deemed to be a
“Settlement Date” for
purpose of such Section
9.4.
	 
	 	 
	Initial Share Delivery Date:

	 	One Exchange Business Day
following August 19, 2007
	 
	 	 
	Minimum Shares:

	 	As specified in Schedule A.
	 
	 	 
	Minimum Share Delivery:

	 	Party A shall deliver a
number of Shares equal to
(i) the Minimum Shares
minus (ii) the number of
Initial Shares on the
Minimum Share Delivery
Date in accordance with
Section 9.4 of the Equity
Definitions, with the
Minimum Share Delivery
Date being deemed to be a
“Settlement Date” for
purpose of such Section
9.4.
	 
	 	 
	Minimum Share Delivery Date:

	 	Three Scheduled Trading
Days following the Hedge
Period End Date
	 
	 	 
	Maximum Shares:

	 	As specified in Schedule A.
	 
	 	 
	Adjustment Payment:

	 	On the Prepayment Date Party B shall pay to Party A
as a price adjustment an amount equal to the
Adjustment Payment, as specified in Schedule A.
	 
	 	 
	Share Adjustments:
	 	 
	 
	Method of Adjustment:

	 	Calculation Agent Adjustment; provided clause (iii)
of Section 11.2(e) of the Equity Definitions shall
be deleted. For the avoidance of doubt, the
Calculation Agent shall not make any adjustments to
account for changes in cost of funding, expected
dividends or stock loan rate.
	 
	 	 
	Extraordinary Events:
	 	 
	 
	Announcement Date:

	 	The definition of “Announcement Date” in Section
12.1 of the Equity Definitions will be amended by
replacing the words “voting shares” in the fifth
line thereof with the word “Shares”.
	 
	 	 
	Consequences of Merger Events:
	 	 
	 
	Share-for-Share:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Share-for-Other:

	 	Cancellation and Payment

  Global Deal ID: 3277243

5

 

	 	 	 
	Share-for-Combined:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Tender Offer:

	 	Applicable
	 
	 	 
	 

	 	The definition of “Tender Offer” in Section 12.1 of
the Equity Definitions will be amended by replacing
the phrase “greater than 10% and less than 100% of
the outstanding voting shares of the Issuer” in the
third and fourth line thereof with “(a) greater
than 10% and less than 100% of the outstanding
Shares of the Issuer in the case of a Tender Offer
by Party B or any affiliate thereof or (b) greater
than 20% and less than 100% of the outstanding
Shares of the Issuer in the case of a Tender Offer
by any other entity”.
	 
	 	 
	 

	 	The definition of “Tender Offer Date” in Section
12.1 of the Equity Definitions will be amended by
replacing the words “voting shares” in the first
line thereof with the word “Shares”.
	 
	 	 
	Consequences of Tender Offers:
	 	 
	 
	 	 
	Share-for-Share:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Share-for-Other:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	Share-for-Combined:

	 	Modified Calculation Agent Adjustment
	 
	 	 
	New Shares:

	 	The definition of “New Shares” in Section 12.1 of
the Equity Definitions shall be amended by deleting
subsection (i) in its entirety and replacing it
with the following: “(i) publicly quoted, traded or
listed on the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Select Market or
the NASDAQ Global Market (or their respective
successors) and”.
	 
	 	 
	Modified Calculation Agent Adjustment:

	 	For greater certainty, the definition of “Modified
Calculation Adjustment” in Sections 12.2 and 12.3
of the Equity Definitions shall be amended by (i)
adding the following italicized language after the
stipulated parenthetical provision: “(including
adjustments to account for changes in volatility,
expected dividends, stock loan rate or liquidity
relevant to the Shares or to the Transaction) from
the Announcement Date to the Merger Date (Section
12.2) or Tender Offer Date (Section 12.3)” and (ii)
deleting the phrase “, expected dividends, stock
loan rate” from such stipulated parenthetical
provision.
	 
	 	 
	Announcement Event:

	 	If an Announcement Event occurs, the Calculation
Agent will determine the economic effect of the
Announcement Date on the theoretical value of the
Transaction (including without limitation any
change in volatility or liquidity relevant to the
Shares or to the Transaction) from the Announcement
Date to the

  Global Deal ID: 3277243

6

 

	 	 	 
	 

	 	Valuation Date. If such economic effect
is material, the Calculation Agent will adjust the
terms of the Transaction to reflect such economic
effect. “Announcement Event” shall mean the
occurrence of the Announcement Date of a Merger
Event or Tender Offer.
	 
	 	 
	Composition of Combined Consideration:

	 	Not Applicable
	 
	 	 
	Nationalization, Insolvency or Delisting:

	 	Cancellation and Payment
	 
	 	 
	Cancellation Amount:

	 	Section 12.8(d) of the Equity Definitions shall be
amended by deleting the second sentence thereof and
Section 12.8(e) of the Equity Definitions shall be
deleted.
	 
	 	 
	Delisting:

	 	The definition of “Delisting” in Section 12.6 of
the Equity Definitions shall be deleted in its
entirety and replaced with the following:
	 

	 	“‘Delisting’ means that the Exchange announces that
pursuant to the rules of such Exchange, the Shares
cease (or will cease) to be listed, traded or
publicly quoted on the Exchange for any reason
(other than a Merger Event or Tender Offer) and are
not immediately re-listed, re-traded or re-quoted
on the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Select Market or the
NASDAQ Global Market (or their respective
successors)”
	 
	 	 
	Additional Disruption Events:
	 	 
	 
	Change in Law:

	 	Applicable; provided that Section
12.9(a)(ii) of the Equity Definitions is hereby
amended by (i) replacing the phrase “the
interpretation” in the third line thereof with the
phrase “or public announcement of the formal or
informal interpretation” and (ii) immediately
following the word “Transaction” in clause (X)
thereof, adding the phrase “in the manner
contemplated by the Hedging Party on the Trade
Date.”
	 
	 	 
	Insolvency Filing:

	 	Applicable
	 
	 	 
	 

	 	The definition of “Insolvency Filing” in Section 12.9 of the Equity Definitions
shall be amended by deleting the clause “provided that such proceedings
instituted or petitions presented by creditors and not consented to by the
Issuer shall not be deemed an Insolvency Filing” at the end of such definition
and replacing it with the following: “; or it has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or any other relief
under any bankruptcy or insolvency law or other similar law affecting creditors’
rights, or a petition is presented for its winding-up or liquidation by a
creditor and such

  Global Deal ID: 3277243

7

 

	 	 	 
	 

	 	proceeding is not dismissed, discharged, stayed or restrained
in each case within thirty (30) days of the institution or presentation
thereof.”
	 
	 	 
	 

	 	Section 12.9(b)(i) of the Equity Definitions is hereby amended by adding the
following sentence at the end: “If neither party elects to terminate the
Transaction, the Calculation Agent may adjust the terms of the Transaction upon
the occurrence of such an event pursuant to Modified Calculation Agent
Adjustment (as if such event were a Tender Offer).”
	 
	 	 
	Hedging Disruption:

	 	Not Applicable
	 
	 	 
	Increased Cost of Hedging:

	 	Not Applicable
	 
	 	 
	Loss of Stock Borrow:

	 	Applicable; provided that if Party A gives notice that it elects to terminate
the Transaction pursuant to 12.9(b)(4) of the Equity Definitions, Party A in
calculating the Cancellation Amount payable in connection with such Loss of
Stock Borrow shall not consider the Stock Loan Rate or any changes thereto
whether prior to or post such Loss of Stock Borrow.
	 
	 	 
	 

	 	For purposes of Section 12.9 of the Equity Definitions, all references to
“Hedging Shares” shall be deemed to be references to Party A’s short position in
respect of the Transaction.
	 
	 	 
	Maximum Stock Loan Rate:

	 	25 basis points
	 
	 	 
	Increased Cost of Stock Borrow:

	 	Not Applicable
	 
	 	 
	Hedging Party:

	 	Party A shall be the Hedging Party in connection with all Extraordinary Events
	 
	 	 
	Determining Party:

	 	Party A shall be the Determining Party in connection with all Extraordinary

Events
	 
	 	 
	Acknowledgments:
	 	 
	 
	 	 
	Non-Reliance:

	 	Applicable
	 
	 	 
	Agreements and Acknowledgments Regarding
Hedging Activities:

	 	Applicable
	 
	 	 
	Additional Acknowledgments:

	 	Applicable
	 
	 	 
	Additional Representations, Warranties and Agreements of Party B:

	 	In addition to the representations, warranties and agreements set forth in the
Agreement and elsewhere in this Confirmation, Party B further represents,
warrants and agrees that:
	 
	 	 
	 

	 	(a) It is not entering into this Transaction on behalf of or for the account of
any other person or entity, and will not transfer or assign its obligations
under this Transaction or any portion of such obligations to any other person or
entity except in compliance with

  Global Deal ID: 3277243

8

 

	 	 	 
	 

	 	applicable laws and the terms of this
Transaction; (ii) it is authorized to enter into this Transaction and such
action does not violate any laws of its jurisdiction of organization or
residence (including, but not limited to, any applicable position or exercise
limits set by any self-regulatory organization, either acting alone or in
concert with others) or the terms of any agreement to which it is a party; and
(iii) it has concluded that this Transaction is suitable in light of its own
investment objectives, financial capabilities and expertise.
	 
	 	 
	 

	 	(b) It is an “eligible contract participant” as the term is defined in Section
1a(12) of the Commodity Exchange Act, as amended.
	 
	 	 
	 

	 	(c) Neither Party A nor any of its affiliates is acting as agent (other than LBI
as dual agent if specified above), or advisor for Party B in connection with the
Transaction.
	 
	 	 
	 

	 	(d) Party B is not in possession of any material non-public information
concerning the business, operations or prospects of the Issuer and was not in
possession of any such information at the time of placing any order with respect
to the Transaction.
	 
	 	 
	 

	 	“Material” information for these purposes is any information to which an
investor would reasonably attach importance in reaching a decision to buy, sell
or hold any securities of Party B.

	 
	 

	 	
(e) Each of its required filings under all applicable securities laws have been
filed, and, to the knowledge of Party B, Party B’s most recent annual report on
Form 10-K and all subsequent reports and other documents filed by Party B with
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, as amended, when considered as a whole (with the more recent such
reports and documents deemed to amend inconsistent statements contained in any
earlier such reports and documents) do 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 such statements were made, not misleading.
	 
	 	 
	 

	 	(f) Party B is not entering into the Transaction to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable
for Shares), to manipulate the price of the Shares (or any security convertible
into or exchangeable for Shares)

  Global Deal ID: 3277243

9

 

	 	 	 
	 

	 	or to facilitate a distribution of Shares (or
any security convertible into or exchangeable for Shares).
	 
	 	 
	 

	 	(g) If Party B purchases any Shares pursuant to this Transaction, such
purchase(s) will comply in all material respects with (i) all federal securities
laws and regulations, known by Party B to be applicable to such Transaction, and
(b) all material contractual obligations of Party B.
	 
	 	 
	 

	 	(h) It is not, and, after giving effect to the transactions contemplated hereby
will not an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.
	 
	 	 
	Additional Termination Events:

	 	Notwithstanding any other provision hereof, an “Additional Termination Event”
shall occur and Party B shall be the sole Affected Party pursuant to such
Additional Termination Event if on any day occurring after the Trade Date and on
or prior to the last Scheduled Trading Day in the Trading Period Party B
declares a distribution, issue or dividend to existing holders of the Shares of
(i) an extraordinary cash dividend, (ii) a regular quarterly dividend (A) in an
amount greater than USD 0.04 for 2007 and 2008 per Share per quarter (any
quarterly dividend in such amount for 2007 and 2008, a “Regular Quarterly
Dividend”) or (B) with an ex-dividend date in any quarter occurring prior to
October 23, 2007 or January 22, 2008, as the case may be, in such quarter, (iii)
securities or share capital of another issuer acquired or owned (directly or
indirectly) by Party B as a result of a spin-off or other similar transaction or
(iv) any other type of securities (other than Shares, which may constitute a
Potential Adjustment Event), rights or warrants or other assets, in any case for
payment (cash or other consideration) at less than the prevailing market price
as determined by the Calculation Agent; provided that in calculating the amounts
payable in connection with such Additional Termination Event, any such
distribution, issue or dividend shall not be considered a loss recoverable by
Party A. Party B agrees to furnish Party A with written notice at least 30 days
prior to the ex-dividend date corresponding to each of the foregoing
distributions, issues and dividends except those described in clause (ii) above.
	 
	 	 
	Regulatory Provisions:

	 	(a) Party B represents and warrants that it has received and read and
understands the Notice of Regulatory Treatment and the OTC Option Risk
Disclosure Statement.
	 
	 	 
	 

	 	(b) The Agent will furnish Party B upon written

  Global Deal ID: 3277243

10

 

	 	 	 
	 

	 	request a statement as to the
source and amount of any remuneration received or to be received by the Agent in
connection with the Transaction evidenced hereby.
	 
	 	 
	Solvency:

	 	As of the Trade Date and the Minimum Share Delivery Date, Party B represents,
warrants and agrees that Party B is not “insolvent” (as such term is defined
under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States
Code)) and Party B would be able to purchase the Maximum Shares in compliance
with the laws of the jurisdiction of Party B’s incorporation.
	 
	 	 
	Company Purchases:

	 	Without the prior written consent of Party A, which shall not be unreasonably
delayed or denied, and except for purchases which are not solicited by or behalf
of Party B or its affiliated purchasers (each as defined in Rule 10b-18), Party
B shall not purchase, and shall cause such affiliated purchasers not to directly
or indirectly purchase, any Shares (or any security convertible into or
exchangeable for Shares) during the Initial Hedge Period or the Trading Period.
	 
	 	 
	Regulation M:

	 	Party B represents that as of the Trade Date it is
not engaged in a distribution, as such term is used
in Regulation M under the Exchange Act (“Regulation
M”).
	 
	 	 
	No Collateral:

	 	Notwithstanding any provision of this Confirmation,
the Agreement or the Definitions, or any other
agreement between the parties, to the contrary, the
obligations of Party B hereunder are not secured by
any collateral.
	 
	 	 
	Set-Off and Netting:

	 	Obligations under the Transaction shall not be
netted, recouped or set off (including pursuant to
Section 6 of the Agreement) against any other
obligations of the parties, whether arising under
the Agreement, this Confirmation, under any other
agreement between the parties hereto, by operation
of law or otherwise, and no other obligations of
the parties shall be netted, recouped or set off
(including pursuant to Section 6 of the Agreement)
against obligations under the Transaction, whether
arising under the Agreement, this Confirmation,
under any other agreement between the parties
hereto, by operation of law or otherwise, and each
party hereby waives any such right of setoff,
netting or recoupment.
	 
	 	 
	Rule 10b-18:

	 	During the Initial Hedge Period, Party A agrees to
use commercially reasonable efforts to make all
purchases of Shares in connection with the
Transaction in a manner that would satisfy the
requirements set forth in clauses (b)(2), (b)(3),
(b)(4) and (c) of Rule10b-18

 Global Deal ID: 3277243

11

 

	 	 	 
	 

	 	under the Exchange Act
(“Rule 10b-18”), as if such rule was applicable to
such purchases.
	 
	 	 
	 

	 	Party B shall, at least one day prior to the first
day of the Initial Hedge Period, notify Party A in
writing of the total number of Shares purchased in
Rule 10b-18 purchases of blocks pursuant to the
once-a-week block exception set forth in clause
(b)(4) of Rule 10b-18 by Party B or any of its
affiliates during each of the four calendar weeks
preceding such day and during the calendar week in
which such day occurs (“Rule 10b-18 purchase” and
“blocks” each as defined in Rule 10b-18).
	 
	 	 
	Rule 10b5-1:

	 	It is the intent of the parties that the
Transaction comply with the requirements of Rule
10b5-1(c)(1)(i)(B) of the Exchange Act (“Rule
10b5-1”), and the parties agree that this
Confirmation shall be interpreted to comply with
the requirements of Rule 10b5-1(c), and Party B
shall take no action that results in this
transaction not so complying with such
requirements). Without limiting the generality of
the preceding sentence, Party B acknowledges and
agrees that (A) Party B does not have, and shall
not attempt to exercise, any influence over how,
when or whether Party A effects any purchases in
connection with the Transaction, (B) during the
Initial Hedge Period and the Trading Period neither
Party B nor its officers or employees shall,
directly or indirectly, communicate any information
regarding Party B or the Shares to any employee of
Party A or its affiliates who is directly involved
with the hedging of and trading with respect to the
Transaction and is identified as such in writing to
Party B, (C) Party B is entering into the
Transaction in good faith and not as part of a plan
or scheme to evade compliance with federal
securities laws including, without limitation, Rule
10b-5 and (D) Party B will not alter or deviate
from this Confirmation or enter into or alter a
corresponding hedging transaction with respect to
the Shares. Party B also acknowledges and agrees
that any amendment, modification, waiver or
termination of this Confirmation must be effected
in accordance with the requirements for the
amendment or termination of a “plan” as defined in
Rule 10b5-1(c). Without limiting the generality of
the foregoing, any such amendment, modification,
waiver or termination shall be made in good faith
and not as part of a plan or scheme to evade the
prohibitions of Rule 10b-5 and no such amendment,
modification, waiver or termination shall be made
at any time at which Party B or any officer or
director of Party B is aware of any material
non-public

  Global Deal ID: 3277243

12

 

	 	 	 
	 

	 	information regarding Party B or the
Shares.
	 
	 	 
	Certain Payments and Deliveries:

	 	Notwithstanding anything to the contrary herein,
or in the Equity Definitions, if at any time (i)
an Early Termination Date occurs and Party A would
be required to make a payment pursuant to Section 6
of the Agreement, (ii) an Extraordinary Event
occurs and Party A would be required to make a
payment pursuant to Article 12 of the Equity
Definitions or (iii) Party A is required to make a
payment pursuant to any other provision hereof, of
the Agreement or of the Definitions, then Party B
shall have the right, in its sole and absolute
discretion, to elect that, in lieu of such payment,
Party A shall deliver to Party B, at the time
such payment would have been due and in the
manner provided under “Physical Settlement” in
the Equity Definitions, a number of Shares equal
to the quotient obtained by dividing (A) the amount
that would have been so payable by (B) the fair
market value per Share of the Shares so delivered
at the time of such delivery, as determined by
the Calculation Agent in a commercially reasonable
manner.
	 
	 	 
	Payments on Early Termination:

	 	Party A and Party B agree that for this
Transaction, for the purposes of Section 6(e) of
the Agreement, Loss and the Second Method will
apply.
	 
	 	 
	Agreement Regarding Calculations:

	 	Notwithstanding any other provision of this
Confirmation, the Definitions or the Agreement to
the contrary, in calculating any adjustment
pursuant to Article 11 of the Equity Definitions or
any amount payable pursuant to Article 12 of the
Equity Definitions or Section 6 of the Agreement,
the Calculation Agent shall not take into account
(i) changes to costs of funding, stock loan rates
or any dividends since the Trade Date or (ii)
losses or costs incurred in connection with
terminating, liquidating or re-establishing any
hedge related to the Transaction (or any gain
resulting from any of them).
	 
	 	 
	Special Provisions for Party B Payments:

	 	Party A and Party B agree that, notwithstanding
anything to the contrary herein or in the
Agreement, in the event that (i) an Early
Termination Date (whether as a result of an Event
of Default or Termination Event) occurs or is
designated with respect to any Transaction and, as
a result, Party B owes to Party A an amount
calculated under Section 6(e) of the Agreement or
(ii) an Extraordinary Event occurs that results in
the termination or cancellation of any Transaction
pursuant to Article 12 of the Equity Definitions
and, as a result, Party B owes to Party A a
Cancellation Amount or any other amount in respect

  Global Deal ID: 3277243

13

 

	 	 	 
	 

	 	to the Transaction, such amount shall be deemed to
be zero. For the avoidance of doubt, the Party B
shall not be required to make any additional cash
payments (other than the Prepayment Amount) or
deliver or return any Shares pursuant to the terms
of the Transaction (including, without limitation,
any Shares delivered on the Initial Share Delivery
Date or the Minimum Share Delivery Date) under any
circumstances.
	 
	 	 
	Claim in Bankruptcy:

	 	Party A agrees that in the event of the bankruptcy of Party B, it shall not have
rights or assert a claim that is senior in priority to the rights and claims
available to the holders of the common stock of Party B.
	 
	 	 
	Transfer:

	 	Notwithstanding Section 7 of the Agreement, Party A may assign its rights and
obligations under the Transaction, in whole and not in part, to any Affiliate of
Lehman Brothers Holdings Inc. (“Holdings”) effective upon delivery to Party B of
the full unconditional guarantee by Holdings, in favor of Party B, of the
obligations of such Affiliate.
	 
	 	 
	Binding Contract:

	 	This Confirmation, as supplemented by the Confirmation Pricing Supplement, is a
“qualified financial contract”, as such term is defined in Section 5-701(b)(2)
of the General Obligations Law of New York (the “General Obligations Law”); (ii)
the Confirmation Pricing Supplement constitutes a “confirmation in writing
sufficient to indicate that a contract has been made between the parties”
hereto, as set forth in Section 5-701(b)(3)(b) of the General Obligations Law;
and (iii) this Confirmation constitutes a prior “written contract” as set forth
in Section 5-701(b)(1)(b) of the General Obligations Law, and each party hereto
intends and agrees to be bound by this Confirmation, as supplemented by the
Confirmation Pricing Supplement. Party A and Party B further agree and
acknowledge that this Confirmation, as supplemented by the Confirmation Pricing
Supplement, constitutes a contract “for the sale or purchase of a security”, as
set forth in Section 8-113 of the Uniform Commercial Code of New York.
	 
	 	 
	Governing Law:

	 	The laws of the State of New York, without reference to choice of law doctrine.
	 
	 	 
	Termination Currency:

	 	USD
	 
	 	 
	Waiver of Trial By Jury:

	 	Insofar as is permitted by law, each party
irrevocably waives any and all rights to
trial by jury in any legal proceeding in
connection with the Transaction, and
acknowledges that this waiver is a material
inducement

  Global Deal ID: 3277243

14

 

	 	 	 
	 

	 	to the other party’s entering
into the Transaction hereunder.
	 
	 	 
	Calculation Agent:

	 	Lehman Brothers Inc.

THE SECURITIES REPRESENTED BY THE CONFIRMATION HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR ANY OTHER UNITED STATES FEDERAL OR
STATE SECURITIES LAWS; SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
APPROPRIATE REGISTRATION UNDER SUCH SECURITIES LAWS OR EXCEPT IN A TRANSACTION EXEMPT FROM OR NOT
SUBJECT TO THE REGISTRATION REQUIREMENTS OF SUCH SECURITIES LAWS.

  Global Deal ID: 3277243

15

 

Please confirm your agreement with the foregoing by executing this Confirmation and returning such
Confirmation, in its entirety, to us at facsimile number 646-885-9546 (United States of America),
Attention: Documentation.

	 	 	 	 	 	 	 	 	 	 	 
	Yours sincerely,	 	 	 	Accepted and agreed to:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Lehman Brothers OTC Derivatives Inc.	 	 	 	PetSmart, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	/s/ Robert E. Guglielmo	 	 	 	By:	 	/s/ Philip L. Francis	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name: Robert E. Guglielmo	 	 	 	Name: Philip L. Francis	 	 
	Title:   Senior Vice
President	 	 	 	Title:   Chief Executive Officer	 	 

Execution time will be furnished upon Party B’s written request.

  Global Deal ID: 3277243

16

 

SCHEDULE A

 

EXHIBIT A

CONFIRMATION PRICING SUPPLEMENT

	 	 	 
	Global Deal Id:

	 	[   ]
	Effort Id:

	 	[   ]

This Confirmation Pricing Supplement is the Confirmation Pricing Supplement referred to in the
Confirmation dated as of [                     ___], 2007 between Lehman Brothers OTC Derivatives Inc. and
PetSmart, Inc.

For all purposes under the Confirmation, the following terms of the Confirmation shall be as
specified below:

	1.	 	Hedging Price:                               USD [                    ]
	 
	2.	 	Maximum Shares:
	 
	3.	 	Minimum Shares:
	 
	4.	 	First day of Trading Period:                                              [                     ___], 2007

	 	 	 	 	 	 	 	 	 	 	 
	Yours sincerely,	 	 	 	Accepted and agreed to:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Lehman Brothers OTC Derivatives Inc.	 	 	 	PetSmart, Inc.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 	 	 

Execution time will be furnished upon Party B’s written request.

 Global Deal ID: 3277243

17exv10w2

 

Exhibit 10.2

CREDIT AGREEMENT

dated as of

August 15, 2007

among

PETSMART, INC.

as Lead Borrower for:

PETSMART, INC.

PETSMART STORE SUPPORT GROUP, INC.

as Borrowers

The LENDERS Party Hereto

BANK OF AMERICA, N.A.

as Issuing Bank

BANK OF AMERICA, N.A.

as Administrative Agent and Collateral Agent

and

BANC OF AMERICA SECURITIES LLC

as Sole Arranger and Sole Bookrunner

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I Definitions
	 	 	1	 
	 
	 	 	 	 
	SECTION
1.01. Defined Terms
	 	 	1	 
	SECTION
1.02. Terms Generally
	 	 	26	 
	SECTION
1.03. Accounting Terms; GAAP
	 	 	26	 
	 
	 	 	 	 
	ARTICLE II Amount and Terms of Credit
	 	 	26	 
	 
	 	 	 	 
	SECTION
2.01. Commitment of the Lenders
	 	 	26	 
	SECTION
2.02. Increase in Total Commitment
	 	 	27	 
	SECTION
2.03. Reserves; Changes to Reserves
	 	 	28	 
	SECTION
2.04. Making of Loans
	 	 	29	 
	SECTION
2.05. Overadvances
	 	 	30	 
	SECTION
2.06. Swingline Loans
	 	 	30	 
	SECTION
2.07. Letters of Credit
	 	 	31	 
	SECTION
2.08. Settlements Amongst Lenders
	 	 	35	 
	SECTION
2.09. Notes; Repayment of Loans
	 	 	36	 
	SECTION
2.10. Interest on Loans
	 	 	37	 
	SECTION
2.11. Default Interest
	 	 	37	 
	SECTION
2.12. Certain Fees
	 	 	37	 
	SECTION
2.13. Commitment Fee
	 	 	37	 
	SECTION
2.14. Letter of Credit Fees
	 	 	38	 
	SECTION
2.15. Nature of Fees
	 	 	38	 
	SECTION
2.16. Termination or Reduction of Commitments
	 	 	38	 
	SECTION
2.17. Alternate Rate of Interest
	 	 	39	 
	SECTION
2.18. Conversion and Continuation of Loans
	 	 	39	 
	SECTION
2.19. Mandatory Prepayment; Commitment Termination; Cash Collateral
	 	 	40	 
	SECTION
2.20. Optional Prepayment of Loans; Reimbursement of Lenders
	 	 	41	 
	SECTION
2.21. Maintenance of Loan Account; Statements of Account
	 	 	43	 
	SECTION
2.22. Cash Receipts
	 	 	43	 
	SECTION
2.23. Application of Payments
	 	 	45	 
	SECTION
2.24. Increased Costs
	 	 	46	 
	SECTION
2.25. Change in Legality
	 	 	47	 
	SECTION
2.26. Payments; Sharing of Setoff
	 	 	48	 
	SECTION
2.27. Taxes
	 	 	49	 
	SECTION
2.28. Security Interests in Collateral
	 	 	51	 
	SECTION
2.29. Mitigation Obligations
	 	 	51	 
	SECTION
2.30. Acknowledgments Regarding L/C Facilities
	 	 	51	 
	 
	 	 	 	 
	ARTICLE III Representations and Warranties
	 	 	51	 
	 
	 	 	 	 
	SECTION
3.01. Organization; Powers
	 	 	52	 
	SECTION
3.02. Authorization; Enforceability
	 	 	52	 
	SECTION
3.03. Governmental Approvals; No Conflicts
	 	 	52	 
	SECTION
3.04. Financial Condition
	 	 	52	 

(i) 

 

	 	 	 	 	 
	 	 	Page	 
	SECTION 3.05. Properties
	 	 	52	 
	SECTION 3.06. Litigation and Environmental Matters
	 	 	53	 
	SECTION 3.07. Compliance with Laws and Agreements
	 	 	54	 
	SECTION 3.08. Investment and Holding Company Status
	 	 	54	 
	SECTION 3.09. Taxes
	 	 	54	 
	SECTION 3.10. ERISA
	 	 	54	 
	SECTION 3.11. Disclosure
	 	 	54	 
	SECTION 3.12. Subsidiaries
	 	 	54	 
	SECTION 3.13. Insurance
	 	 	55	 
	SECTION 3.14. Labor Matters
	 	 	55	 
	SECTION 3.15. Security Documents
	 	 	55	 
	SECTION 3.16. Federal Reserve Regulations
	 	 	55	 
	SECTION 3.17. Solvency
	 	 	56	 
	 
	 	 	 	 
	ARTICLE IV Conditions
	 	 	56	 
	 
	 	 	 	 
	SECTION 4.01. Closing Date
	 	 	56	 
	SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit
	 	 	57	 
	 
	 	 	 	 
	ARTICLE V Affirmative Covenants
	 	 	58	 
	 
	 	 	 	 
	SECTION 5.01. Financial Statements and Other Information
	 	 	58	 
	SECTION 5.02. Notices of Material Events
	 	 	60	 
	SECTION 5.03. Information Regarding Collateral
	 	 	61	 
	SECTION 5.04. Existence; Conduct of Business
	 	 	62	 
	SECTION 5.05. Payment of Obligations
	 	 	62	 
	SECTION 5.06. Maintenance of Properties
	 	 	62	 
	SECTION 5.07. Insurance
	 	 	62	 
	SECTION 5.08. Casualty and Condemnation
	 	 	63	 
	SECTION 5.09. Books and Records; Inspection and Audit Rights; Appraisals
	 	 	63	 
	SECTION 5.10. Compliance with Laws
	 	 	64	 
	SECTION 5.11. Use of Proceeds and Letters of Credit
	 	 	64	 
	SECTION 5.12. Additional Subsidiaries
	 	 	64	 
	SECTION 5.13. Further Assurances
	 	 	64	 
	 
	 	 	 	 
	ARTICLE VI Negative Covenants
	 	 	65	 
	 
	 	 	 	 
	SECTION 6.01. Indebtedness and Other Obligations
	 	 	65	 
	SECTION 6.02. Liens
	 	 	66	 
	SECTION 6.03. Fundamental Changes
	 	 	68	 
	SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions
	 	 	68	 
	SECTION 6.05. Asset Sales
	 	 	69	 
	SECTION 6.06. Restricted Payments; Certain Payments of Indebtedness
	 	 	70	 
	SECTION 6.07. Transactions with Affiliates
	 	 	71	 
	SECTION 6.08. Restrictive Agreements
	 	 	71	 
	SECTION 6.09. Amendment of Material Documents
	 	 	71	 
	SECTION 6.10. Additional Subsidiaries
	 	 	71	 
	SECTION 6.11. Minimum Excess Availability
	 	 	71	 

(ii) 

 

	 	 	 	 	 
	 	 	Page	 
	ARTICLE VII Events of Default
	 	 	72	 
	 
	 	 	 	 
	SECTION 7.01. Events of Default
	 	 	72	 
	SECTION 7.02. When Continuing
	 	 	75	 
	SECTION 7.03. Remedies on Default
	 	 	75	 
	SECTION 7.04. Application of Proceeds
	 	 	75	 
	 
	 	 	 	 
	ARTICLE VIII The Agents
	 	 	75	 
	 
	 	 	 	 
	SECTION 8.01. Administration by Administrative Agent
	 	 	75	 
	SECTION 8.02. The Collateral Agent
	 	 	76	 
	SECTION 8.03. Sharing of Excess Payments
	 	 	76	 
	SECTION 8.04. Agreement of Required Lenders
	 	 	77	 
	SECTION 8.05. Liability of Agents
	 	 	77	 
	SECTION 8.06. Reimbursement and Indemnification
	 	 	78	 
	SECTION 8.07. Rights of Agents
	 	 	78	 
	SECTION 8.08. Independent Lenders and Issuing Bank
	 	 	79	 
	SECTION 8.09. Notice of Transfer
	 	 	79	 
	SECTION 8.10. Successor Agent
	 	 	79	 
	SECTION 8.11. Reports and Financial Statements
	 	 	79	 
	SECTION 8.12. Co-Agent, Syndication Agent and Arranger
	 	 	79	 
	 
	 	 	 	 
	ARTICLE IX Miscellaneous
	 	 	80	 
	 
	 	 	 	 
	SECTION 9.01. Notices
	 	 	80	 
	SECTION 9.02. Waivers; Amendments
	 	 	80	 
	SECTION 9.03. Expenses; Indemnity; Damage Waiver
	 	 	82	 
	SECTION 9.04. Designation of Lead Borrower as Borrowers’ Agent
	 	 	84	 
	SECTION 9.05. Successors and Assigns
	 	 	85	 
	SECTION 9.06. Survival
	 	 	87	 
	SECTION 9.07. Counterparts; Integration; Effectiveness
	 	 	88	 
	SECTION 9.08. Severability
	 	 	88	 
	SECTION 9.09. Right of Setoff
	 	 	88	 
	SECTION 9.10. Replacement of Lenders
	 	 	88	 
	SECTION 9.11. Governing Law; Jurisdiction; Consent to Service of Process
	 	 	89	 
	SECTION 9.12. WAIVER OF JURY TRIAL
	 	 	90	 
	SECTION 9.13. Headings
	 	 	90	 
	SECTION 9.14. Interest Rate Limitation
	 	 	90	 
	SECTION 9.15. Additional Waivers
	 	 	90	 

(iii) 

 

EXHIBITS

	 	 	 
	A.

	 	Assignment and Acceptance
	B-1

	 	Notes
	B-2

	 	Swingline Note
	C

	 	Opinion of Counsel to Loan Parties
	D

	 	Borrowing Base Certificate

(iv) 

 

SCHEDULES

	 	 	 
	1.1

	 	Lenders and Commitments
	1.2

	 	Facility Guarantors
	1.3

	 	Investment Policy
	2.22(a)

	 	DDAs
	2.22(b)

	 	Credit Card Arrangements
	2.22(c)

	 	Blocked Accounts
	3.05(c)(i)

	 	Title to Properties; Real Estate Owned
	3.05(c)(ii)

	 	Leased Properties
	3.06

	 	Disclosed Matters
	3.12

	 	Subsidiaries
	3.13

	 	Insurance
	5.01(c)

	 	Monthly Board Report
	5.01(h)

	 	Financial Reporting Requirements
	6.01

	 	Indebtedness
	6.02

	 	Liens
	6.04

	 	Investments

(v) 

 

CREDIT AGREEMENT dated as of August 15, 2007 among

PETSMART, INC., a Delaware corporation, having a principal place of business at 19601 North
27th Avenue, Phoenix, Arizona 85027, as Lead Borrower for the Borrowers, being

said PETSMART, INC., and

PETSMART STORE SUPPORT GROUP, INC., a Delaware corporation, having a principal place
of business at 19601 North 27th Avenue, Phoenix, Arizona 85027;

the LENDERS party hereto; and

BANK OF AMERICA, N.A., a national banking association having a place of business at 100
Federal Street, Boston, Massachusetts 02110, as Issuing Bank; and

BANK OF AMERICA, N.A., a national banking association having its principal place of business
at 100 Federal Street, Boston, Massachusetts 02110, as Administrative Agent and Collateral
Agent for the Lenders; and

BANC OF AMERICA SECURITIES LLC, a Delaware limited liability company having its principal
place of business at 100 Federal Street, Boston, Massachusetts 02110, as Sole Arranger and
Sole Bookrunner.

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

ARTICLE I

Definitions

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

     “ACH” shall mean automated clearing house transfers.

     “Account” shall mean any right to payment for goods sold or leased or for services
rendered, whether or not earned by performance, or any right to payment for credit extended for
goods sold or leased or services rendered.

     “Additional Commitment Lender” has the meaning provided therefor in Section 2.02(a).

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

1

 

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

     “Affiliate” means, with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.

     “Agents” shall mean collectively, the Administrative Agent and the Collateral Agent.

     “Alternate Base Rate” shall mean, for any day, the higher of (a) the rate of interest
in effect for such day as publicly announced from time to time by Bank of America as its “prime
rate” and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% (0.50%) per
annum. The “prime rate” is a rate set by Bank of America based upon various factors including Bank
of America’s costs and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans, which may be priced at, above, or below such announced
rate. Any change in such rate announced by Bank of America shall take effect at the opening of
business on the day specified in the public announcement of such change. If for any reason the
Administrative Agent shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including
the inability or failure of the Administrative Agent to obtain sufficient quotations thereof in
accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, until the circumstances giving rise to such
inability no longer exist.

     “Applicable Margin” means initially, the rates for Base Rate Loans and Eurodollar
Loans, set forth in Level 2, below:

	 	 	 	 	 	 	 	 	 	 	 
	Level	 	Average Excess Availability	 	Base Rate Loans	 	Eurodollar Loans
	1	 	Greater than or
equal to 55% of the
Borrowing Base
	 	 	0	%	 	 	0.875	%
	 
	2	 	Greater than or
equal to 20% of the
Borrowing Base, but
less than 55% of the
Borrowing Base
	 	 	0	%	 	 	1.000	%
	 
	3	 	Less than or equal
to 20% of the
Borrowing Base
	 	 	0.250	%	 	 	1.250	%

     In no event shall the Applicable Margin be set at Level 3 prior to six months following
the Closing Date. On the first day of each February, May, August and November, commencing February
1, 2008, the Applicable Margin shall be adjusted based upon Average Excess

2

 

Availability. Upon the
occurrence of an Event of Default, the Applicable Margin shall be
immediately increased to the percentages set forth in Level 3 (even if the Excess Availability
requirements for another Level have been met) and interest shall be determined in the manner set
forth in Section 2.11.

     “Appraisal Percentage” shall mean ninety percent (90%).

     “Appraised Value” means the net appraised liquidation value of the Borrowers’ and
Canadian Operating Subsidiary’s Inventory as set forth in the Borrowers’ stock ledger (expressed as
a percentage of the Cost of such Inventory) as determined from time to time by the Administrative
Agent in accordance with its standard procedures and with the assistance of an independent
appraiser satisfactory to the Administrative Agent.

     “Arranger” means BAS.

     “Assignment and Acceptance” means an assignment and acceptance entered into by a
Lender and an assignee (with the consent of any party whose consent is required by Section 9.05),
and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by
the Administrative Agent.

     “Availability Reserves” means such reserves as the Administrative Agent from time to
time determines in the Administrative Agent’s reasonable discretion as being appropriate to reflect
the impediments to the Agents’ ability to realize upon the Collateral. Without limiting the
generality of the foregoing, Availability Reserves may include (but are not limited to) reserves
based on (i) Rent; (ii) Gift Certificates and Merchandise Credit Liability; (iii) Frequent Shopper
Programs; (iv) Layaways and Customer Deposits; (v) customs, duties, and other costs to release
Inventory which is being imported into the United States; and (vi) outstanding taxes and other
governmental charges, including, ad valorem, real estate, personal property, and other taxes which
might have priority over the interests of the Collateral Agent in the Collateral.

     “Average Excess Availability” shall mean the average daily Excess Availability for the
immediately preceding three month period.

     “BAS” means Banc of America Securities LLC, a Delaware limited liability company.

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

     “Bank Products” means any services or facilities provided to any Loan Party by any
Lender or any of its Affiliates (but excluding Cash Management Services) on account of (a) credit
cards, (b) Hedging Agreements, (c) purchase cards, (d) merchant services constituting a line of
credit, and/or (e) leasing.

     “Base Rate Loan” shall mean any Loan bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of Article II.

     “Blocked Account Agreements” has the meaning set forth in Section 2.22(c).

3

 

     “Blocked Account Banks” shall mean the banks with whom the Borrowers have entered into
Blocked Account Agreements.

     “Blocked Accounts” shall have the meaning set forth in Section 2.22(c).

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

     “Borrowers” means collectively, PETsMART, Inc., a Delaware corporation and PETsMART
Store Support Group, Inc., a Delaware corporation.

     “Borrowers Security Agreement” means the Security Agreement dated as of August ___,
2007 among the Borrowers and the Collateral Agent for the benefit of the Secured Parties, as
amended and in effect from time to time.

     “Borrowing” shall mean (a) the incurrence of Loans of a single Type, on a single date
and having, in the case of Eurodollar Loans, a single Interest Period, or (b) a Swingline Loan.

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

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

     (b) the lesser of (i) Appraisal Percentage of the Appraised Value of Eligible
Inventory, or (ii) the Inventory Advance Rate of (A) the Cost of Eligible Inventory
minus (B) Inventory Reserves; plus

     (c) 100% of all Eligible Cash on Hand, provided that Eligible Cash on Hand
included in the Borrowing Base may not be withdrawn from the deposit account at Bank of
America, thereby reducing the Borrowing Base, unless and until the Lead Borrower furnishes
the Administrative Agent with (i) notice of such intended withdrawal and (ii) a Borrowing
Base Certificate as of the date of such proposed withdrawal reflecting that, after giving
effect to such withdrawal, no Overadvance will result; minus

     (d) the then amount of all Availability Reserves.

     “Borrowing Base Certificate” has the meaning assigned to such term in Section 5.01(f).

     “Borrowing Request” means a request by the Lead Borrower on behalf of the Borrowers
for a Borrowing in accordance with Section 2.04.

     “Breakage Costs” shall have the meaning set forth in Section 2.20(b).

     “Business Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in Boston, Massachusetts are authorized or required by law to remain closed,
provided that, when used in connection with a Eurodollar Loan, the term “Business Day”
shall

4

 

also exclude any day on which banks are not open for dealings in dollar deposits in the
London interbank market.

     “Canadian Operating Subsidiary” means 3003300 Nova Scotia Company.

     “Capital Expenditures” means, for any period, the additions to property, plant and
equipment and other capital expenditures of the Borrowers that are (or would be) set forth in a
consolidated statement of cash flows of the Borrowers for such period prepared in accordance with
GAAP.

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

     “Cash Collateral Account” shall mean an interest-bearing account established by the
Borrowers with the Collateral Agent at Bank of America under the sole and exclusive dominion and
control of the Collateral Agent designated as the “PETsMART Cash Collateral Account”.

     “Cash Control Event” means that (a) an Event of Default has occurred and is
continuing, or (b) Excess Availability is less than the Threshold Amount. For purposes of Section
2.22 hereof, (i) for the period ending on the date that is six months after the Closing Date, the
term “Cash Control Event” shall mean that (a) an Event of Default has occurred and is continuing,
or (b) Excess Availability is less than ten percent (10%) of the Borrowing Base, and (ii) the
occurrence of a Cash Control Event shall be deemed continuing notwithstanding that Excess
Availability may thereafter exceed the Threshold Amount unless and until Excess Availability
exceeds the Threshold Amount for sixty (60) consecutive days, in which case a Cash Control Event
shall no longer be deemed to be continuing; provided that a Cash Control Event shall be deemed
continuing (even if Excess Availability exceeds the Threshold Amount for sixty consecutive days) if
a Cash Control Event has occurred and been discontinued on three (3) occasions in any twelve month
period.

     “Cash Management Services” means any one or more of the following types or services or
facilities provided to any Loan Party by any Lender or any of its Affiliates: (a) ACH transactions,
(b) cash management services, including, without limitation, controlled disbursement services,
treasury, depository, overdraft, and electronic funds transfer services, (c) foreign exchange
facilities, (d) credit or debit cards, or (e) merchant services not constituting a Bank Product.

     “Cash Receipts” has the meaning provided therefor in Section 2.22(c).

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

5

 

     “Change in Control” means, at any time, (a) occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Lead Borrower by Persons who were
neither (i) nominated by the board of directors of the Lead Borrower nor (ii) appointed by
directors so nominated; or (b) the acquisition of thirty-five percent (35%) or more of the capital
stock of the Lead Borrower by any Person or group of Persons, or (c) the failure of the Lead
Borrower to
own, directly or indirectly, 100% of the capital stock of the other Borrower and the Canadian
Operating Subsidiary.

     “Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change, after the date of this Agreement, in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority, or (c) compliance by
any Lender or the Issuing Bank (or, for purposes of Section 2.24(b), by any lending office of such
Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any Governmental Authority made
or issued after the date of this Agreement.

     “Charges” has the meaning provided therefor in Section 9.13.

     “Closing Date” means August ___, 2007.

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

     “Collateral” means any and all “Collateral” as defined in any applicable Security
Document.

     “Collateral Agent” means Bank of America, in its capacity as collateral agent under
the Security Documents.

     “Collateral Documents” means the Security Agreements and all other security
agreements, mortgages, pledge agreements, deeds of trust, and other instruments, documents or
agreements executed and delivered by any Loan Party to secure the Obligations or the Guaranteed
Obligations (as such term is defined in the Facility Guarantee), including, without limitation, the
Facility Guarantors Collateral Documents, any Control Agreements, Blocked Account Agreements, and
Pledge Agreement.

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

     “Commitment” shall mean, with respect to each Lender, the aggregate commitment of such
Lender hereunder in the amount set forth opposite its name on Schedule 1.1 hereto or as may
subsequently be set forth in the Register from time to time, as the same may be (i) reduced from
time to time pursuant to Section 2.16 or (ii) increased from time to time pursuant to Section 2.02
hereof.

     “Commitment Fee” has the meaning provided therefor in Section 2.13.

6

 

     “Commitment Increase” has the meaning provided therefor in Section 2.02(a).

     “Commitment Increase Date” has the meaning provided therefor in Section 2.02(c).

     “Commitment Percentage” shall mean, with respect to each Lender, that percentage
equivalent to such Lender’s Commitment divided by the Total Commitment hereunder; each
Lender’s Commitment Percentage shall be in the amount set forth opposite its name on Schedule
1.1 hereto or as may subsequently be set forth in the Register from time to time, as the same may
be increased from time to time pursuant to Section 2.02 hereof.

     “Concentration Account” shall have the meaning set forth in Section 2.22(c).

     “Consolidated EBITDA” means, with respect to any Person for any period, (i) the sum
(without duplication) of (a) Consolidated Net Income for such period, plus (b)
depreciation, amortization, and all other non-cash charges that were deducted in determining
Consolidated Net Income for such period, plus (c) provisions for Taxes based on income that
were deducted in determining Consolidated Net Income for such period, plus (d) Consolidated
Interest Expense that was deducted in determining Consolidated Net Income for such period,
minus (ii) the sum of (e) non-cash income that was included in determining Consolidated Net
Income for such period, plus (f) tax refunds or rebates included in determining
Consolidated Net Income for such period, plus (g) non-recurring or extraordinary gains,
revenues, or income, all as determined on a consolidated basis in accordance with GAAP

     “Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person for any
period, the ratio of (a) (i) Consolidated EBITDA for such period, minus (ii) Capital
Expenditures made during such period, minus (iii) Taxes paid in cash during such period
(net of any tax refunds or rebates received in cash during such period), to (b) Debt Service
Charges for such period, all as determined on a consolidated basis in accordance with GAAP.
“Consolidated Fixed Charge Coverage Ratio” shall be calculated on a trailing twelve month basis.

     “Consolidated Interest Expense” means, with respect to any Person for any period,
total interest expense of such Person on a consolidated basis with respect to all outstanding
Indebtedness of such Person, including, without limitation, the Obligations and all commissions,
discounts and other fees and charges owed with respect thereto and all net costs under Hedging
Agreements, but excluding any non-cash or deferred interest financing costs, all as determined on a
consolidated basis in accordance with GAAP.

     “Consolidated Net Income” means, with respect to any Person for any period, the net
income (or loss) of such Person on a consolidated basis for such period taken as a single
accounting period determined in accordance with GAAP; provided, however, that there
shall be excluded (i) the income (or loss) of such Person in which any other Person has a joint
interest, except to the extent of the amount of dividends or other distributions actually paid to
such Person during such period, (ii) unless otherwise agreed by the Administrative Agent in its
sole discretion, the income (or loss) of such Person accrued prior to the date it becomes a
Subsidiary of a Person or any of such Person’s Subsidiaries or is merged into or consolidated with
a Person or any of its
Subsidiaries or that Person’s assets are acquired by such Person or any of
its

7

 

Subsidiaries, and (iii) the income of any direct or indirect Subsidiary of a Person to the
extent that the declaration or payment of dividends or similar distributions by that Subsidiary of
that income is not at the time permitted by operation of the terms of its organizational documents
or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary.

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

     “Control Agreement” means an agreement, on terms and conditions acceptable to the
Collateral Agent in its reasonable discretion, by and among any Loan Party, the Collateral Agent,
and a third party depository institution with respect to one or more accounts of the Borrowers, and
which provides that after a Cash Dominion Event, the depository institution shall, without further
consent from the Borrowers, accept only the instructions of the Collateral Agent in respect of the
funds in those accounts, where such accounts and the investments contained therein constitute
Collateral, and in which such accounts and such investments the Collateral Agent has been granted a
first priority Lien. For the purposes of the definition of “Eligible Cash on Hand,” the term
“Control Agreement” shall not include any Blocked Account Agreements.

     “Cost” means the average cost of purchases, as reported on the Borrowers’ stock
ledger, based upon the Borrowers’ accounting practices which are in effect on the date of this
Agreement. “Cost” does not include inventory capitalization costs or other non-purchase price
charges (such as freight) used in the Borrowers’ calculation of cost of goods sold.

     “Coweta County Bond Financing Transaction” means collectively, (a) the sale of certain
equipment of the Lead Borrower to be used in connection with the Lead Borrower’s distribution
center in Coweta County, Georgia to the Coweta County, Georgia development authority, where
proceeds of such sale shall be subject to the Lien of the Collateral Agent, (b) the issuance of
taxable industrial development revenue bonds in the maximum principal amount of $20,000,000 by said
development authority payable to the Lead Borrower, as bondholder, (c) the leasing of the equipment
described in clause (a) above by the development authority to the Lead Borrower, and (d) the grant
of a security interest in the equipment and lease described herein to the bondholder.

     “Credit Card Notifications” has the meaning provided therefor in Section 2.22(c).

     “Credit Extensions” as of any day, shall be equal to the sum of (a) the principal
balance of all Loans then outstanding, and (b) the then amount of the Letter of Credit
Outstandings.

     “DDAs” means any checking or other demand deposit account maintained by any Borrower.

     “DDA Notification” has the meaning provided therefor in Section 2.22(c).

8

 

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

     “Debt Service Charges” means for any period, the sum of (i) Consolidated Interest
Expense required to be paid or paid in cash, plus (ii) scheduled and mandatory principal
payments required to be made in cash (whether or not in fact made) on account of Indebtedness
for such period, in each case determined in accordance with GAAP on a consolidated basis.

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

     “Disbursement Accounts” has the meaning provided therefor in Section 2.22(f).

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

     “Eligible Cash On Hand” means cash of a Borrower or the Canadian Operating Subsidiary
from time to time deposited in a DDA in the name of a Borrower or the Canadian Operating Subsidiary
(excluding any amounts on deposit in the Cash Collateral Account or in any other escrow, or special
purpose or restricted account, such as an account specifically designated for payroll or sales
taxes), which DDA is subject to a first perfected security interest in favor of the Collateral
Agent for the benefit of itself and the Secured Parties, either maintained at Bank of America or
maintained at another depository institution pursuant to a Control Agreement.

     “Eligible Credit Card Receivables” means Accounts due to a Borrower or the Canadian
Operating Subsidiary on a non-recourse basis from Visa, Mastercard, American Express Co.,
Discovercard, and other major credit card processors reasonably acceptable to the Administrative
Agent as arise in the ordinary course of business, which have been earned by performance and are
deemed by the Administrative Agent in its reasonable discretion to be eligible for inclusion in the
calculation of the Borrowing Base. Without limiting the foregoing, unless otherwise approved in
writing by the Administrative Agent, none of the following shall be deemed to be Eligible Credit
Card Receivables:

     (a) Accounts that have been outstanding for more than seven (7) Business Days from the
date of sale;

     (b) Accounts with respect to which a Borrower or the Canadian Operating Subsidiary does
not have good, valid and marketable title thereto, free and clear of any Lien (other than
Liens granted to the Collateral Agent, for its benefit and the ratable benefit of the
Secured Parties, pursuant to the Security Documents);

     (c) Accounts that are not subject to a first priority security interest in favor of the
Collateral Agent, for the benefit of itself and the Secured Parties.

9

 

     (d) Accounts which are disputed, are with recourse, or with respect to which a claim,
counterclaim, offset or chargeback has been asserted (to the extent of such claim,
counterclaim, offset or chargeback); or

     (e) Accounts which the Administrative Agent determines in its reasonable discretion to
be uncertain of collection.

     “Eligible Inventory” shall mean, as of the date of determination thereof, items of
Inventory of the Borrowers and the Canadian Operating Subsidiary that are finished goods,
merchantable and readily saleable to the public in the ordinary course deemed by the
Administrative Agent in its reasonable discretion to be eligible for inclusion in the calculation
of the Borrowing Base. Without limiting the foregoing, unless otherwise approved in writing by the
Administrative Agent, none of the following shall be deemed to be Eligible Inventory:

     (a) Inventory that is not owned solely by the Borrowers or the Canadian Operating
Subsidiary, or is leased or on consignment or the Borrowers or the Canadian Operating
Subsidiary do not have good and valid title thereto;

     (b) Inventory (including any portion thereof in transit from vendors) that is not
located at property that is owned or leased by the Borrowers or the Canadian Operating
Subsidiary;

     (c) Inventory that represents (i) goods damaged, defective or otherwise unmerchantable,
(ii) goods that do not conform in all material respects to the representations and
warranties contained in this Agreement or any of the Security Documents, or (iii) goods to
be returned to the vendor;

     (d) Inventory that is not located in the United States of America (excluding
territories and possessions thereof) or Canada;

     (e) Inventory that is not subject to a perfected first-priority security interest in
favor of the Collateral Agent for the benefit of itself and the Secured Parties;

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

     (g) Inventory as to which insurance in compliance with the provisions of Section 5.07
hereof is not in effect;

     (h) Inventory which has been sold but not yet delivered or as to which any Borrower or
the Canadian Operating Subsidiary has accepted a deposit;

     (i) Inventory consisting of live stock, animals, fish and other similar Inventory;

     (j) Inventory consisting of work-in-process; or

10

 

     (k) Inventory consigned by the Borrowers or the Canadian Operating Subsidiary to any
other Person[, including without limitation, Webvan Group, Inc.]

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

     “Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, natural resource damage, costs of environmental remediation, administrative
oversight costs, fines, penalties or indemnities), of any Borrower directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any
Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.

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

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

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

     “Eurodollar Borrowing” shall mean a Borrowing comprised of Eurodollar Loans.

11

 

     “Eurodollar Loan” shall mean any Loan bearing interest at a rate determined by
reference to the Adjusted LIBO Rate in accordance with the provisions of Article II.

     “Event of Default” has the meaning assigned to such term in Section 7.01.

     “Excess Availability” means, as of any date of determination, the excess, if any, of
(a) the lesser of the Borrowing Base or the Total Commitment, over (b) the outstanding Credit
Extensions.

     “Excluded Taxes” means, with respect to the Agents, any Lender, the Issuing Bank or
any other recipient of any payment to be made by or on account of any Obligation of the
Borrowers hereunder, (a) income or franchise taxes imposed on (or measured by) its gross or
net income by the United States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in the case of any Lender,
in which its applicable lending office is located, (b) any branch profits taxes imposed by the
United States of America or any similar tax imposed by any other jurisdiction in which any Borrower
is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by
a Borrower under Section 2.29(b), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a
new lending office) or is attributable to such Foreign Lender’s failure to comply with Section
2.27(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at
the time of designation of a new lending office (or assignment), to receive additional amounts from
the Borrowers with respect to such withholding tax pursuant to Section 2.27(a).

     “Existing Credit Agreement” shall mean that certain Amended and Restated Credit
Agreement dated as of November 21, 2003 (as amended, restated, supplemented or otherwise modified)
by and between, among others, the Borrowers, Bank of America, N.A. (f/k/a Fleet National Bank), as
Issuing Bank, Bank of America (f/k/a Fleet Retail Finance Inc.), as Administrative Agent and
Collateral Agent for the Lenders party thereto, and the Lenders party thereto.

     “Existing Letter of Credit Agreement” shall mean that certain Letter of Credit
Agreement dated as of June 30, 2006 (as the same may have been, or hereafter shall be, amended,
restated, supplemented, or otherwise modified from time to time), by and between the Lead Borrower
and Bank of America, N.A., as issuing bank.

     “Existing Letters of Credit” means each of the letters of credit issued under the
Existing Credit Agreement prior to the date hereof.

     “Facility Guarantee” means each Guaranty executed by any Facility Guarantor in favor
of the Agents, the Issuing Bank and the Lenders.

     “Facility Guarantors” means the Persons listed on Schedule 1.2 hereto and all other
Subsidiaries (other than Foreign Subsidiaries) of each Borrower now existing or hereafter created,
provided that PET WISE INC. shall cease to be a Facility Guarantor upon its dissolution or merger
in accordance with the provisions of Section 6.03.

12

 

     “Facility Guarantors Security Agreement” means the Security Agreement dated as of
August ___, 2007 among the Facility Guarantors and the Collateral Agent for the benefit of the
Secured Parties, as amended and in effect from time to time.

     “Facility Guarantors Collateral Documents” means the Facility Guarantors Security
Agreement and all other security agreements, mortgages, pledge agreements, deeds of trust, and
other instruments, documents or agreements executed and delivered by any Facility Guarantor to
secure the Facility Guarantee.

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

     “Fee Letter” means the letter entitled “Fee Letter” among the Lead Borrower, the
Administrative Agent, and BAS dated as of July 30, 2007, as such letter may from time to time be
amended.

     “Financial Officer” means, with respect to any Borrower, the chief financial officer,
vice president of treasury, chief accounting officer, vice president of finance, treasurer,
controller or assistant controller of such Borrower.

     “Foreign Lender” means any Lender that is organized under the laws of a jurisdiction
other than the United States of America, any State thereof or the District of Columbia.

     “Foreign Subsidiary” means any Subsidiary that is organized under the laws of a
jurisdiction other than the United States of America or any State thereof or the District of
Columbia.

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

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

     “Governmental Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising

13

 

executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

     “Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness
or other obligation or (d) as an account party in respect of any letter of credit or letter of
guaranty issued to support such Indebtedness or obligation, provided that the term
“Guarantee” shall not include endorsements for collection or deposit in the ordinary course of
business.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law, including any material listed as a hazardous substance under Section 101(14)
of CERCLA.

     “Hedging Agreement” means any interest rate protection agreement, foreign currency
exchange agreement, commodity price protection agreement, or other interest or currency exchange
rate or commodity price hedging arrangement.

     “Incremental Loan Commitment Requirements” means, with respect to any request for a
Commitment Increase made pursuant to Section 2.02 or any provision of a Commitment Increase on a
given Commitment Increase Date, the satisfaction of each of the following conditions: (i) no
Default or Event of Default then exists, and (ii) the Borrower has not theretofore reduced the
Commitments pursuant to Section 2.16 hereof.

     “Indebtedness” of any Person means, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property acquired by such
Person, (e) all obligations of such Person in respect of the deferred purchase price of property or
services (excluding current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, provided that if such
Indebtedness of others is non-recourse to the credit of such Person, then the amount of
Indebtedness ascribed to such Person shall not exceed the fair market

14

 

value of the property
securing such Indebtedness of others, (g) all Guarantees by such Person of Indebtedness of others
(including, without limitation, under any Synthetic Leases), (h) all Capital Lease Obligations of
such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit, (j) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances, (k) all Hedging Agreements, and (l) the principal and interest
portions of all rental obligations of such Person under any Synthetic Lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing where such
transaction is considered borrowed money indebtedness for tax purposes but is classified as an
operating lease in accordance with GAAP. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

     “Indemnified Taxes” means Taxes other than Excluded Taxes.

     “Indemnitee” has the meaning provided therefor in Section 9.03(b).

     “Interest Payment Date” means (a) with respect to any Base Rate Loan (including a
Swingline Loan), the last day of each calendar month, and (b) with respect to any Eurodollar Loan,
the last day of the Interest Period applicable to the Borrowing of which such Loan is a part,
provided that if any Interest Period for a Eurodollar Loan exceeds three (3) months, the Interest
Payment Date shall also mean the date which is three (3) months after the commencement of such
Interest Period.

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

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

     “Inventory Advance Rate” means (i) initially, seventy percent (70%), and (ii) from and
after the date which is forty-five (45) days following the Closing Date (so long as on or before
such date, the Administrative Agent has received an appraisal and a commercial finance examination
reasonably satisfactory to the Administrative Agent), one hundred percent (100%).

15

 

     “Inventory Reserves” means such reserves as may be established from time to time by
the Administrative Agent in the Administrative Agent’s reasonable discretion with respect to the
determination of the saleability, at retail, of the Eligible Inventory or which reflect such other
factors as affect the market value of the Eligible Inventory. Without limiting the generality of
the foregoing, Inventory Reserves may include (but are not limited to) reserves based on (i)
obsolescence; (ii) seasonality; (iii) Shrink; (iv) imbalance; (v) change in Inventory character;
(vi) change in Inventory composition; (vii) change in Inventory mix; (viii) markdowns (both
permanent and point of sale); (ix) retail markons and markups inconsistent with prior period
practice and performance; industry standards; current business plans; or advertising calendar and
planned advertising events.

     “Investment Policy” means the investment policy of the Lead Borrower adopted by the
board of directors of the Lead Borrower and annexed hereto as Schedule 1.3, as such policy may be
modified from time to time, with the prior written consent of the Administrative Agent.

     “Issuing Bank” means Bank of America, in its capacity as the issuer of Letters of
Credit hereunder, and any successor to Bank of America in such capacity as selected by the
Administrative Agent. The Issuing Bank may, in its discretion, arrange for one or more Letters of
Credit to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall
include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

     “L/C Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of
Credit.

     “L/C Facility” means one or more letter of credit facilities from time to time
established by any of the Borrowers with a financial institution providing for the issuance of
letters of credit (other than Letters of Credit issued under this Agreement).

     “L/C Facility Cash Collateral” means cash, cash equivalents, and/or marketable
securities of a Borrower from time to time deposited or maintained with the financial institution
party to an L/C Facility which are subject to a first perfected security interest in favor of such
financial institution to secure such Borrower’s obligations under such L/C Facility. The parties
acknowledge and agree that Cash and Cash Equivalents and Additional Collateral, each as defined in
the Existing Letter of Credit Agreement, constitute L/C Facility Cash Collateral under this
Agreement.

     “Lead Borrower” means PETsMART, Inc., a Delaware corporation.

     “Lenders” shall mean the Persons identified on Schedule 1.1 hereto as modified to
include any Additional Commitment Lender and each assignee that becomes a party to this Agreement
as set forth in Section 9.05(b).

     “Letter of Credit” shall mean a letter of credit, in form and substance reasonably
satisfactory to the Issuing Bank, that is issued pursuant to this Agreement for the account of any
Borrower, and shall include, without limitation, a Standby Letter of Credit or Commercial Letter of
Credit issued in connection with the purchase of Inventory by any Borrower, and for other

16

 

purposes
for which a Borrower has historically obtained letters of credit, or
for any other purpose that is
reasonably acceptable to the Administrative Agent.

     “Letter of Credit Fees” shall mean the fees payable in respect of Letters of Credit
pursuant to Section 2.14.

     “Letter of Credit Outstandings” shall mean, at any time, the sum of (a) with respect
to Letters of Credit outstanding at such time, the aggregate maximum amount that then is or at any
time thereafter may become available for drawing or payment thereunder plus (b) all amounts
theretofore drawn or paid under Letters of Credit for which the Issuing Bank has not then been
reimbursed.

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

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

     “Loan Documents” means this Agreement, the Notes, the Letters of Credit, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the DDA Notifications,
the Credit Card Notifications, the Security Documents, the Facility Guarantee, and any other
instrument or agreement executed and delivered in connection herewith or therewith.

     “Loan Party or Loan Parties” means the Borrowers and the Facility Guarantors.

     “Loans” shall mean all loans (including, without limitation, Swingline Loans) at any
time made to the Borrowers or for account of the Borrowers pursuant to this Agreement.

     “Margin Stock” has the meaning assigned to such term in Regulation U.

17

 

     “Material Adverse Effect” means a material adverse effect on (a) the business,
operations, property, assets, or financial condition of the Lead Borrower and its Subsidiaries
taken as a whole, or (b) the validity or enforceability of this Agreement or any of the other Loan
Documents or any of the material rights or remedies of the Administrative Agent, the Collateral
Agent or the Lenders hereunder or thereunder.

     “Material Indebtedness” means Indebtedness (other than the Loans, Letters of Credit,
or Indebtedness arising under the Coweta County Bond Financing Transaction) or obligations in
respect of one or more Hedging Agreements of any one or more of the Borrowers in an aggregate
principal amount exceeding $10,000,000. For purposes of determining the amount of Material
Indebtedness at any time, the “principal amount” of the obligations in respect of any Hedging
Agreement at such time shall be the maximum aggregate amount that a Borrower would be required to
pay if such Hedging Agreement were terminated at that time.

     “Maturity Date” means August 15, 2012.

     “Maximum Rate” has the meaning provided therefor in Section 9.13.

     “Minority Lenders” has the meaning provided therefor in Section 9.02(d).

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

     “Mortgages” means the Mortgages/Deeds of Trust, Security Agreements and Assignments
between the Loan Party owning any real estate encumbered thereby and the Collateral Agent for the
benefit of the Secured Parties.

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

     “Net Proceeds” means, with respect to any event, (a) the cash proceeds received in
respect of such event, including (i) any cash received in respect of any non-cash proceeds, but
only as and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the
case of a condemnation or similar event, condemnation awards and similar payments, in each case net
of (b) the sum of (i) all reasonable fees and out-of-pocket expenses (including appraisals, and
brokerage, legal, title and recording tax expenses and commissions) paid by any Borrower to third
parties (other than Affiliates) in connection with such event, and (ii) in the case of a sale or
other disposition of an asset (including pursuant to a casualty or condemnation), the amount of all
payments required to be made by any Borrower as a result of such event to repay (or to establish an
escrow for the repayment of) Indebtedness (other than Loans) which is secured by such asset and
constitutes a Permitted Encumbrance that is senior to the Lien of the Collateral Agent.

     “Non-Consenting Lender” has the meaning provided therefor in Section 9.02(e).

     “Noncompliance Notice” has the meaning provided therefor in Section 2.06(b).

18

 

     “Notes” shall mean (i) the promissory notes of the Borrowers substantially in the form
of Exhibit B-1, each payable to the order of a Lender, evidencing the Loans, and (ii) the
promissory note of the Borrowers substantially in the form of Exhibit B-2, payable to the Swingline
Lender, evidencing the Swingline Loans.

     “Obligations” means (a) all advances to, and debts (including principal, interest,
fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any
Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of
Credit (including payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral therefor), whether direct or indirect (including those
acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter
arising and including interest and fees that accrue after the commencement by or against any Loan
Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as
the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in
such proceeding, (b) each obligation to repay any loan, advance, indebtedness, note, obligation,
overdraft, or amount now or hereafter owing by the Loan Parties to any Agent or any Lender or any
Affiliate of any Agent or any Lender (including all future advances whether or not made pursuant to
a commitment by such Agent, such Lender, or such Affiliate), whether or not any of such are
liquidated, unliquidated, primary, secondary, secured, unsecured, direct, indirect, absolute,
contingent, or of any other type, nature, or description, or by reason of any cause of action which
any Agent or any Lender or any Affiliate of any Agent or any Lender may
hold against any Loan Party, (c) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Loan Parties under or pursuant to this Agreement and
the other Loan Documents, and (d) any Other Liabilities.

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

     “Other Taxes” means any and all current or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any payment made under any
Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any
Loan Document.

     “Overadvance” means, at any time of calculation, a circumstance in which the Credit
Extensions exceed the lesser of (a) the Total Commitment or (b) the Borrowing Base.

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

     “Payment Conditions” means, at the time of determination, that (a) no Default or Event
of Default then exists or would arise as a result of the making of the subject payment, and (b)
prior to, and immediately after giving effect to, the subject payment, and on a pro forma twelve
months basis thereafter, Excess Availability shall be equal to or greater than the Threshold
Amount.

19

 

     “Perfection Certificate” means a certificate in the form of Annex 1 to the Security
Agreements or any other form approved by the Collateral Agent.

     “Permitted Encumbrances” means:

     (a) Liens imposed by law for taxes that are not yet due or are being contested in
compliance with Section 5.05;

     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like
Liens imposed by law, arising in the ordinary course of business and securing obligations
that are not overdue by more than 60 days or are being contested in compliance with Section
5.05;

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

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

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

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

     (g) leases and subleases and licenses and sublicenses of property which do not
materially interfere with the ordinary conduct of the business of the Lead Borrower and its
Subsidiaries; and

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

provided that, except as provided in any one or more of clauses (a) through (f) above, the
term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

     “Permitted Investments” means each of the following:

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

20

 

States of
America), in each case maturing within one year from the date of acquisition thereof;

     (b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit rating
obtainable from S&P or from Moody’s;

     (c) investments in certificates of deposit, banker’s acceptances and time deposits
maturing within 180 days from the date of acquisition thereof issued or guaranteed by or
placed with, and demand deposit and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the United States of
America or any State thereof that has a combined capital and surplus and undivided profits
of not less than $500,000,000;

     (d) fully collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (a) above (without regard to the limitation on maturity
contained in such clause) and entered into with a financial institution satisfying the
criteria described in clause (c) above or with any primary dealer; and

     (e) Investments made pursuant to the Investment Policy.

     “Permitted Overadvance” means an Overadvance determined by the Administrative Agent,
in its reasonable discretion, (a) which is made to maintain, protect or preserve the Collateral
and/or the Lenders’ rights under the Loan Documents, or (b) which is otherwise in the Lenders’
interests; provided that Permitted Overadvances shall not (i) exceed five percent (5%) of
the then Borrowing Base in the aggregate outstanding at any time or (ii) remain outstanding for
more than forty-five (45) consecutive Business Days, unless in either case the Required
Supermajority Lenders otherwise agree; and provided further that the foregoing shall not
(1) modify or abrogate any of the provisions of Section 2.07(f) hereof regarding the Lender’s
obligations with respect to L/C Disbursements, or (2) result in any claim or liability against the
Administrative Agent (regardless of the amount of any Overadvance) for “inadvertent Overadvances”
(i.e. where an Overadvance results from changed circumstances beyond the control of the
Administrative Agent (such as a reduction in the collateral value)), and further provided
that in no event shall the Administrative Agent make an Overadvance, if after giving effect
thereto, the principal amount of the Credit Extensions would exceed the Total Commitment.

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

     “Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Lead Borrower or any ERISA Affiliate is (or, if such plan were
terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section
3(5) of ERISA.

21

 

     “Pledge Agreement” means the Pledge Agreement dated as of August ___, 2007 between,
among others, the Borrowers, certain Facility Guarantors, and the Collateral Agent for the benefit
of the Secured Parties, as amended and in effect from time to time.

     “Prepayment Event” means any of the following events:

     (a) any sale, transfer or other disposition (including pursuant to a sale and leaseback
transaction) of any property or asset of a Borrower;

     (b) any casualty or other insured damage to, or any taking under power of eminent
domain or by condemnation or similar proceeding of, any property or asset of a Borrower;

     (c) the issuance by a Borrower of any equity securities, other than any such issuance
of equity securities to another Borrower; or

     (d) the incurrence by a Borrower of any Indebtedness of the type described in clause
(a), (b) or (c) of the definition of the term “Indebtedness”.

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

     “Receivables Advance Rate” means ninety percent (90%).

     “Register” has the meaning set forth in Section 9.05(c).

     “Regulation U” means Regulation U of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof.

     “Regulation X” means Regulation X of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof.

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

     “Release” has the meaning set forth in Section 101(22) of CERCLA.

     “Required Lenders” shall mean, at any time, Lenders having Commitments at least equal
to 51% of the Total Commitment, or if the Commitments have been terminated, Lenders whose
percentage of the outstanding Obligations (after settlement and repayment of all Swingline Loans by
the Lenders) aggregate not less than 51% of all such Obligations.

     “Required Supermajority Lenders” shall mean, at any time, Lenders having Commitments
outstanding representing at least 66 2/3% of the Total Commitment or if the

22

 

Commitments have been
terminated, Lenders whose percentage of the outstanding Obligations (after settlement and repayment
of all Swingline Loans by the Lenders) aggregate not less than 66 2/3% of all such Obligations.

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

     “Responsible Officer” of any Person shall mean the chief executive officer or
president of such Person or any other officer having substantially the same authority and
responsibility as a chief executive officer or president, or a Financial Officer.

     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any shares of any class of capital stock or
membership interests of any Borrower or any Subsidiary, or any payment (whether in cash, securities
or other property), including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of (a) any such shares of capital
stock or membership interests of any Borrower or any Subsidiary or (b) any option, warrant or other
right to acquire any such shares of capital stock or membership interests of any Borrower or any
Subsidiary.

     “S&P” means Standard & Poor’s.

     “Secured Parties” has the meaning assigned to such term in the Security Agreements.

     “Security Agreements” means, collectively, the Borrowers Security Agreement and the
Facility Guarantors Security Agreement. The term “Security Agreement” shall mean either the
Borrowers Security Agreement or the Facility Guarantors Security Agreement, as the context may
require.

     “Security Documents” means the Security Agreements, the Pledge Agreement, the Facility
Guarantors Collateral Documents, the Mortgages, and each other security agreement or other
instrument or document executed and delivered pursuant to Section 5.12 to secure any of the
Obligations.

     “Settlement Date” has the meaning provided in Section 2.08(b) hereof.

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

     “Solvent” means, with respect to any Person on a particular date, that on such date
(a) at fair valuations, all of the properties and assets of such Person are greater than the sum of
the debts, including contingent liabilities, of such Person, (b) the present fair saleable value of
the properties and assets of such Person is not less than the amount that would be required to pay
the probable liability of such Person on its debts as they become absolute and matured, (c) such
Person is able to realize upon its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course of business, (d)
such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s
ability to pay as such debts mature, and (e) such Person is not engaged in a business or

23

 

a transaction, and is not about to engage in a business or transaction, for which such Person’s
properties and assets would constitute unreasonably small capital after giving due consideration to
the prevailing practices in the industry in which such Person is engaged.

     “Standby Letter of Credit” means any Letter of Credit other than a Commercial Letter
of Credit.

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

     “Stock Repurchase” shall mean the repurchase by the Lead Borrower of its own capital
stock pursuant to a Confirmation of Transaction dated August ___, 2007 among the Lead Borrower,
Lehman Brothers, Inc. and Lehman Brothers OTC Derivatives, Inc., in the form presented to the
Administrative Agent on the Closing Date.

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

     “Swingline Lender” means Bank of America, in its capacity as lender of Swingline Loans
hereunder.

     “Swingline Loan” shall mean a Loan made by the Swingline Lender to the Borrowers
pursuant to Section 2.06 hereof.

     “Synthetic Lease” means any lease or other agreement for the use or possession of
property creating obligations which do not appear as Indebtedness on the balance sheet of the
lessee thereunder but which, upon the insolvency or bankruptcy of such Person, may be characterized
as Indebtedness of such lessee without regard to the accounting treatment.

24

 

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

     “Termination Date” shall mean the earliest to occur of (i) the Maturity Date, or (ii)
the date on which the maturity of the Loans is accelerated and the Commitments are terminated, or
(iii) the date of the occurrence of any Event of Default pursuant to Section 7.01(h) or 7.01(i)
hereof.

     “Threshold Amount” shall mean, at any time of measurement, the lesser of fifteen
percent (15%) of (a) the Borrowing Base, or (b) the Total Commitment.

     “Total Commitment” shall mean, at any time, the sum of the Commitments at such time.

     “Transfer Notice” has the meaning set forth in Section 2.07(k).

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

     “Unused Commitment” shall mean, on any day, (a) the then Total Commitment
minus (b) the sum of (i) the principal amount of Loans then outstanding (including the
principal amount of Swingline Loans then outstanding) and (ii) the then Letter of Credit
Outstandings.

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

25

 

     SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The
word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the
context requires otherwise (a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, (c) the words “herein”,
“hereof” and “hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.

     SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly provided herein,
all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time.

ARTICLE II

Amount and Terms of Credit

     SECTION 2.01. Commitment of the Lenders.

     (a) Each Lender severally and not jointly with any other Lender, agrees, upon the terms and
subject to the conditions herein set forth, to extend credit to the Borrowers on a revolving basis,
in the form of Loans and Letters of Credit and in an amount not to exceed the lesser of such
Lender’s Commitment or such Lender’s Commitment Percentage of the Borrowing Base, subject to the
following limitations:

     (i) The aggregate outstanding amount of the Loans and Letters of Credit Outstandings
shall not at any time exceed the lower of (i) $350,000,000 or, in each case, any other
amount to which the Commitments have then been increased or reduced by the Borrowers
pursuant to Sections 2.02 or 2.16, and (ii) the then amount of the Borrowing Base.

     (ii) No Lender shall be obligated to issue any Letter of Credit, and Letters of Credit
shall be available from the Issuing Bank, subject to the ratable participation of all
Lenders, as set forth in Section 2.07. The Borrowers will not at any time permit the
aggregate Letter of Credit Outstandings to exceed $100,000,000.

26

 

     (iii) Subject to all of the other provisions of this Agreement, Loans that are repaid
may be reborrowed prior to the Termination Date. No new Credit Extension, however, shall be
made to the Borrowers after the Termination Date.

     (b) Each Borrowing of Loans (other than Swingline Loans) shall be made by the Lenders
pro rata in accordance with their respective Commitment Percentages. The failure of
any Lender to make any Loan shall neither relieve any other Lender of its obligation to fund its
Loan in accordance with the provisions of this Agreement nor increase the obligation of any such
other Lender.

     SECTION 2.02. Increase in Total Commitment.

     (a) So long as the Incremental Loan Commitment Requirements are satisfied, the Borrower shall
have the right at any time, and from time to time, to request an increase of the Total Commitment
to an amount not to exceed $425,000,000. Any such requested increase shall be first proposed in
writing to all existing Lenders on a pro rata basis. In the event that any existing Lender does not
notify the Administrative Agent within twenty-one (21) Business Days from the receipt of the
requested increase that the existing Lender will increase its Commitment and of the amount of its
increase, the existing Lender shall be deemed to have declined the requested increase of its
Commitment. To the extent that one or more existing Lenders decline to increase their respective
Commitments, or decline to increase their Commitments to the amount requested by the Borrower, the
Arranger may arrange for other Persons to become Lenders hereunder and to issue commitments in an
amount equal to the amount of the increase in the Total Commitment requested by the Borrower and
not accepted by the existing Lenders (each such increase by either a Lender or another Person, a
“Commitment Increase,” and each such Person issuing, or Lender increasing, its Commitment, an
“Additional Commitment Lender”); provided, however, that (i) no Lender shall be obligated to
provide a Commitment Increase as a result of any such request by the Borrower, and (ii) any
Additional Commitment Lender which is not an existing Lender shall be subject to the approval of
the Administrative Agent, the Issuing Bank, and the Swingline Lender (which approval shall not be
unreasonably withheld), and (iii) nothing contained herein shall constitute the unconditional
obligation of the Arranger to provide or obtain commitments for such requested Commitment Increase,
as the Arranger only is agreeing hereby to use its best efforts to arrange for Additional
Commitment Lenders. Each Commitment Increase shall be in a minimum aggregate amount of at least
$10,000,000 and in integral multiples of $10,000,000 in excess thereof.

     (b) No Commitment Increase shall become effective unless and until each of the following
conditions have been satisfied:

     (i) the Borrower, the Administrative Agent, and any Additional Commitment Lender shall
have executed and delivered a joinder to the Loan Documents in such form as the
Administrative Agent may reasonably require;

     (ii) the Incremental Loan Commitment Requirements shall have been satisfied;

27

 

     (iii) the Borrower shall have paid such fees and other compensation to the Additional
Commitment Lenders as the Borrower and each such Additional Commitment Lenders may agree;

     (iv) the Borrower shall have paid such arrangement fees to the Administrative Agent
and/or the Arranger as the Borrower and such Persons may agree;

     (v) the Borrower shall deliver to the Administrative Agent and the Lenders an opinion
or opinions, in form and substance reasonably satisfactory to the Administrative Agent, from
counsel to the Borrower reasonably satisfactory to the Administrative Agent and dated such
date of effectiveness;

     (vi) to the extent requested by any Additional Commitment Lender, a Note will be issued
at the Borrower’s expense, to each such Additional Commitment Lender, in conformity with
requirements of Section 2.09 hereof (with appropriate modification to the extent necessary
to reflect the new Commitment of such Additional Commitment Lender); and

     (vii) the Borrower and the Additional Commitment Lenders shall have delivered such
other instruments, documents and agreements as the Administrative Agent may reasonably have
requested.

     (c) The Administrative Agent shall promptly notify each Lender as to the effectiveness of each
Commitment Increase (with each date of such effectiveness being referred to herein as a “Commitment
Increase Date”), and at such time (i) the Total Commitment under, and for all purposes of, this
Agreement shall be increased by the aggregate amount of such Commitment Increases, (ii)
Schedule 1.1 shall be deemed modified, without further action, to reflect the revised
Commitments and Commitment Percentages of the Lenders, and (iii) this Agreement shall be deemed
amended, without further action, to the extent necessary to reflect such increased Total Commitment
(including, without limitation, Section 2.01(a)(i)).

     (d) In connection with Commitment Increases hereunder, the Lenders and the Borrower agree
that, notwithstanding anything to the contrary in this Agreement, (i) the Borrower shall, in
coordination with the Administrative Agent, (x) repay outstanding Loans of certain Lenders, and
obtain Loans from certain other Lenders (including the Additional Commitment Lenders), but in no
event in excess of each such Lender’s Commitment, or (y) take such other actions as reasonably may
be required by the Administrative Agent, in each case to the extent necessary so that all of the
Lenders have advanced Loans in an amount equal to their Commitment Percentages (determined after
giving effect to any increase in the Total Commitment pursuant to this Section 2.02) of the Loans
(other than Swingline Loans), and (ii) the Borrower shall pay to the Lenders any costs of the type
referred to in Section 2.20 in connection with any repayment and/or Loans required pursuant to
preceding clause (i).

     SECTION 2.03. Reserves; Changes to Reserves.

     (a) The initial Inventory and Availability Reserves as of the date of this Agreement are the
following:

28

 

     (i) Rent (an Availability Reserve): An amount equal to two months base rents for a
leased premises located in Canada, in the states of Washington, Virginia, Pennsylvania and
any other state which grants a landlord a priority lien for unpaid rent.

     (ii) Shrink (an Inventory Reserve): An amount equal to one percent (1%) of the gross
sales from each of the Borrowers’ and the Canadian Operating Subsidiary’s stores since the
date of the last physical inventory at each such store.

     (iii) Gift Certificate and Merchandise Credit Liability (an Availability Reserve): An
amount equal to fifty percent of the Borrowers’ and the Canadian Operating Subsidiary’s Gift
Certificate and Merchandise Credit Liability outstanding from time to time.

     (iv) Canadian Provincial and Governmental Sales Taxes (an Availability Reserve): An
amount equal to 100% of the outstanding amount accrued and unpaid for such taxes.

     (b) The Administrative Agent may hereafter establish additional Reserves or change any of the
foregoing Reserves, in the exercise of the reasonable judgment of the Administrative Agent.

     SECTION 2.04. Making of Loans.

     (a) Except as set forth in Sections 2.17 and 2.25, Loans (other than Swingline Loans) by the
Lenders shall be either Base Rate Loans or Eurodollar Loans as the Lead Borrower on behalf of the
Borrowers may request subject to and in accordance with this Section 2.04, provided that all
Swingline Loans shall be only Base Rate Loans. All Loans made pursuant to the same Borrowing shall,
unless otherwise specifically provided herein, be Loans of the same Type. Each Lender may fulfill
its Commitment with respect to any Loan by causing any lending office of such Lender to make such
Loan; but any such use of a lending office shall not affect the obligation of the Borrowers to
repay such Loan in accordance with the terms of the applicable Note. Each Lender shall, subject to
its overall policy considerations, use reasonable efforts (but shall not be obligated) to select a
lending office which will not result in the payment of increased costs by the Borrowers pursuant to
Section 2.24. Subject to the other provisions of this Section 2.04 and the provisions of Section
2.25, Borrowings of Loans of more than one Type may be incurred at the same time, but no more than
ten (10) Borrowings of Eurodollar Loans may be outstanding at any time.

     (b) The Lead Borrower shall give the Administrative Agent three Business Days’ prior
telephonic notice (thereafter confirmed in writing) of each Borrowing of Eurodollar Loans and one
Business Day’s prior notice of each Borrowing of Base Rate Loans. Any such notice, to be effective,
must be received by the Administrative Agent not later than 2:00 p.m., Boston time, on the third
Business Day in the case of Eurodollar Loans prior to, and on the first Business Day in the case of
Base Rate Loans prior to, the date on which such Borrowing is to be made. Such notice shall be
irrevocable and shall specify the amount of the proposed Borrowing (which shall be in an integral
multiple of $500,000, but not less than $3,000,000 in the case of Eurodollar

29

 

Loans) and the date thereof (which shall be a Business Day) and shall contain disbursement
instructions. Such notice shall specify whether the Borrowing then being requested is to be a
Borrowing of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period with
respect thereto. If no election of Interest Period is specified in any such notice for a Borrowing
of Eurodollar Loans, such notice shall be deemed a request for an Interest Period of one month. If
no election is made as to the Type of Loan, such notice shall be deemed a request for Borrowing of
Base Rate Loans. The Administrative Agent shall promptly notify each Lender of its proportionate
share of such Borrowing, the date of such Borrowing, the Type of Borrowing being requested and the
Interest Period or Interest Periods applicable thereto, as appropriate. On the borrowing date
specified in such notice, each Lender shall make its share of the Borrowing available at the office
of the Administrative Agent at 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, no later
than 1:00 p.m., Boston time, in immediately available funds. Unless the Administrative Agent shall
have received notice from a Lender prior to the proposed date of any Borrowing that such Lender
will not make available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available on such date in
accordance with this Section and may, in reliance upon such assumption, make available to the
Borrowers a corresponding amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable Lender and the
Borrowers severally agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such amount is made
available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (i)
in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules on interbank compensation or
(ii) in the case of the Borrowers, the interest rate applicable to Base Rate Loans. If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan
included in such Borrowing. Upon receipt of the funds made available by the Lenders to fund any
Borrowing, the Administrative Agent shall disburse such funds in the manner specified in the notice
of borrowing delivered by the Lead Borrower and shall use reasonable efforts to make the funds so
received from the Lenders available to the Borrowers no later than 4:00 p.m., Boston time.

     SECTION 2.05. Overadvances. The Agents and the Lenders have no obligation to make any
Loan or to provide any Letter of Credit if an Overadvance would result. The Administrative Agent
may, in its discretion, make Permitted Overadvances without the consent of the Lenders and each
Lender shall be bound thereby. Any Permitted Overadvances may constitute Swingline Loans. The
making of any Permitted Overadvance is for the benefit of the Borrowers; such Permitted
Overadvances constitute Loans and Obligations. The making of any such Permitted Overadvances on any
one occasion shall not obligate the Administrative Agent or any Lender to make or permit any
Permitted Overadvances on any other occasion or to permit such Permitted Overadvances to remain
outstanding.

     SECTION 2.06. Swingline Loans 

     (a) The Swingline Lender is authorized by the Lenders, but is not obligated, to make Swingline
Loans up to $35,000,000 plus the Permitted Overadvance in the aggregate outstanding at any time,
consisting only of Base Rate Loans, upon a notice of Borrowing received by the

30

 

Administrative Agent and the Swingline Lender (which notice, at the Swingline Lender’s
discretion, may be submitted prior to 2:00 p.m., Boston time, on the Business Day on which such
Swingline Loan is requested). Swingline Loans shall be subject to periodic settlement with the
Lenders under Section 2.08 below.

     (b) Swingline Loans may be made only in the following circumstances: (A) for administrative
convenience, the Swingline Lender may, but is not obligated to, make Swingline Loans in reliance
upon the Borrowers’ actual or deemed representations under Section 4.02, that the applicable
conditions for borrowing are satisfied or (B) for Permitted Overadvances, or (C) if the conditions
for borrowing under Section 4.02 cannot be fulfilled, the Lead Borrower shall give immediate notice
thereof to the Administrative Agent and the Swingline Lender (a “Noncompliance Notice”),
and the Administrative Agent shall promptly provide each Lender with a copy of the Noncompliance
Notice. If the conditions for borrowing under Section 4.02 cannot be fulfilled, the Required
Lenders may direct the Swingline Lender to, and the Swingline Lender thereupon shall, cease making
Swingline Loans (other than Permitted Overadvances) until such conditions can be satisfied or are
waived in accordance with Section 9.02 hereof. Unless the Required Lenders so direct the Swingline
Lender, the Swingline Lender may, but is not obligated to, continue to make Swingline Loans
beginning one Business Day after the Non-Compliance Notice is furnished to the Lenders.
Notwithstanding the foregoing, no Swingline Loans shall be made pursuant to this subsection (b)
(other than Permitted Overadvances) if the aggregate outstanding amount of the Loans and Letter of
Credit Outstandings would exceed the lower of (i) $350,000,000 or any other amount to which the
Commitments have then been increased or reduced by the Borrowers pursuant to Sections 2.02 or 2.16,
and (ii) the then amount of the Borrowing Base.

     SECTION 2.07. Letters of Credit.

     (a) Upon the terms and subject to the conditions herein set forth, the Lead Borrower on behalf
of the Borrowers may request the Issuing Bank, at any time and from time to time after the date
hereof and prior to the Termination Date, to issue, and subject to the terms and conditions
contained herein, the Issuing Bank shall issue, for the account of the Borrowers one or more
Letters of Credit; provided that no Letter of Credit shall be issued if after giving effect
to such issuance (i) the aggregate Letter of Credit Outstandings shall exceed $100,000,000, or (ii)
the aggregate Loans and Letter of Credit Outstandings would exceed the limitation set forth in
Section 2.01(a)(i); and provided, further, that no Letter of Credit shall be issued
if the Issuing Bank shall have received notice from the Administrative Agent or the Required
Lenders that the conditions to such issuance have not been met.

     (b) Each Standby Letter of Credit shall expire at or prior to the close of business on the
earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in
the case of any renewal or extension thereof, one year after such renewal or extension) and (ii)
the date that is five Business Days prior to the Maturity Date, provided that each Standby
Letter of Credit may, upon the request of the Lead Borrower, include a provision whereby such
Letter of Credit shall be renewed automatically for additional consecutive periods of 12 months or
less (but not beyond the date that is five Business Days prior to the Maturity Date) unless the
Issuing

31

 

Bank notifies the beneficiary thereof at least 30 days prior to the then-applicable
expiration date that such Letter of Credit will not be renewed.

     (c) Each Commercial Letter of Credit shall expire at or prior to the close of business on the
earlier of (i) the date 120 days after the date of the issuance of such Commercial Letter of Credit
and (ii) the date that is five Business Days prior to the Maturity Date.

     (d) Drafts drawn under each Letter of Credit shall be reimbursed by the Borrowers in dollars
by paying to the Administrative Agent an amount equal to such drawing not later than 2:00 p.m.,
Boston time, on (i) the date that the Borrowers shall have received notice of such payment, if such
notice is received prior to 10:00 a.m., Boston time, on such date, or (ii) the Business Day
immediately following the day that the Borrowers receive such notice, if such notice is received
after 10:00 a.m., Boston time on the day of receipt, provided that the Lead Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance with Section 2.04
that such payment be financed with a Base Rate Loan or Swingline Loan in an equivalent amount and,
to the extent so financed, the Borrowers’ obligation to make such payment shall be discharged and
replaced by the resulting Base Rate Loan or Swingline Loan. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a demand for payment
under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the
Borrowers by telephone (confirmed by telecopy, e-mail, .pdf or other electronic means) of such
demand for payment and whether the Issuing Bank has made or will make payment thereunder,
provided that any failure to give or delay in giving such notice shall not relieve the
Borrowers of their obligation to reimburse the Issuing Bank and the Lenders with respect to any
such payment.

     (e) If the Issuing Bank shall make any L/C Disbursement, then, unless the Borrowers shall
reimburse the Issuing Bank in full on the date such payment is made, the unpaid amount thereof
shall bear interest, for each day from and including the date such payment is made to but excluding
the date that the Borrowers reimburse the Issuing Bank therefor, at the rate per annum then
applicable to Base Rate Loans, provided that, if the Borrowers fail to reimburse such
Issuing Bank when due pursuant to paragraph (d) of this Section, then Section 2.11 shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except
that interest accrued on and after the date of payment by any Lender pursuant to paragraph (g) of
this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of
such payment.

     (f) Immediately upon the issuance of any Letter of Credit by the Issuing Bank (or the
amendment of a Letter of Credit increasing the amount thereof), and without any further action on
the part of the Issuing Bank, the Issuing Bank shall be deemed to have sold to each Lender, and
each such Lender shall be deemed unconditionally and irrevocably to have purchased from the Issuing
Bank, without recourse or warranty, an undivided interest and participation, to the extent of such
Lender’s Commitment Percentage, in such Letter of Credit, each drawing thereunder and the
obligations of the Borrowers under this Agreement and the other Loan Documents with respect
thereto. Upon any change in the Commitments pursuant to Section 9.05, it is hereby agreed that with
respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the
participations hereby created to reflect the new Commitment

32

 

Percentages of the assigning and
assignee Lenders. Any action taken or omitted by the Issuing Bank under or in connection with a
Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct,
shall not create for the Issuing Bank any resulting liability to any Lender.

     (g) In the event that the Issuing Bank makes any L/C Disbursement and the Borrowers shall not
have reimbursed such amount in full to the Issuing Bank pursuant to this Section 2.07, the Issuing
Bank shall promptly notify the Administrative Agent, which shall promptly notify each Lender of
such failure, and each Lender shall promptly and unconditionally pay to the Administrative Agent
for the account of the Issuing Bank the amount of such Lender’s Commitment Percentage of such
unreimbursed payment in dollars and in same day funds. If the Issuing Bank so notifies the
Administrative Agent, and the Administrative Agent so notifies the Lenders prior to 11:00 a.m.,
Boston time, on any Business Day, each such Lender shall make available to the Issuing Bank such
Lender’s Commitment Percentage of the amount of such payment on such Business Day in same day
funds. If and to the extent such Lender shall not have so made its Commitment Percentage of the
amount of such payment available to the Issuing Bank, such Lender agrees to pay to the Issuing
Bank, forthwith on demand such amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Administrative Agent for the account of the Issuing Bank
at the Federal Funds Effective Rate. Each Lender agrees to fund its Commitment Percentage of such
unreimbursed payment notwithstanding a failure to satisfy any applicable lending conditions or the
provisions of Sections 2.01 or 2.07, or the occurrence of the Termination Date. The failure of any
Lender to make available to the Issuing Bank its Commitment Percentage of any payment under any
Letter of Credit shall neither relieve any Lender of its obligation hereunder to make available to
the Issuing Bank its Commitment Percentage of any payment under any Letter of Credit on the date
required, as specified above, nor increase the obligation of such other Lender. Whenever any Lender
has made payments to the Issuing Bank in respect of any reimbursement obligation for any Letter of
Credit, such Lender shall be entitled to share ratably, based on its Commitment Percentage, in all
payments and collections thereafter received on account of such reimbursement obligation.

     (h) Whenever the Borrowers desire that the Issuing Bank issue a Letter of Credit (or the
amendment, renewal or extension of an outstanding Letter of Credit), the Lead Borrower shall give
to the Issuing Bank and the Administrative Agent at least two Business Days’ prior written
(including telegraphic, telex, facsimile or cable communication) notice (or such shorter period as
may be agreed upon in writing by the Issuing Bank and the Lead Borrower) specifying the date on
which the proposed Letter of Credit is to be issued, amended, renewed or extended (which shall be a
Business Day), the stated amount of the Letter of Credit so requested, the expiration date of such
Letter of Credit, the name and address of the beneficiary thereof, and the provisions thereof. If
requested by the Issuing Bank, the Borrowers shall also submit a letter of credit application on
the Issuing Bank’s standard form in connection with any request for the issuance, amendment,
renewal or extension of a Letter of Credit.

     (i) The obligations of the Borrowers to reimburse the Issuing Bank for any L/C Disbursement
shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of
this Agreement under all circumstances, including, without limitation (it being

33

 

understood that any such payment by the Borrowers shall be without prejudice to, and shall not constitute a waiver of,
any rights the Borrowers might have or might acquire as a result of the payment by the Issuing Bank
of any draft or the reimbursement by the Borrowers thereof): (i) any lack of validity or
enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other
right which the Borrowers may have at any time against a beneficiary of any Letter of Credit or
against any of the Lenders, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand,
certificate or other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (iv) payment by the Issuing Bank of any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not comply with the
terms of such Letter of Credit; (v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the Borrowers’ Obligations
hereunder; or (vi) the fact that any Event of Default shall have occurred and be continuing. None
of the Administrative Agent, the Lenders, the Issuing Bank or any of their Affiliates shall have
any liability or responsibility by reason of or in connection with the issuance or transfer of any
Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of
the circumstances referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a drawing thereunder),
any error in interpretation of technical terms or any consequence arising from causes beyond the
control of the Issuing Bank. Nothing in this Section 2.07(i) shall be construed to excuse the
Issuing Bank from liability to the Borrowers to the extent of any direct damages (as opposed to
consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent
permitted by applicable law) suffered by the Borrowers that are caused by the Issuing Bank’s
failure to exercise care when determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the
absence of gross negligence or willful misconduct on the part of the Issuing Bank, the Issuing Bank
shall be deemed to have exercised care in each such determination. In furtherance of the foregoing
and without limiting the generality thereof, the parties agree that, with respect to documents
presented that appear on their face to be in compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or information to the
contrary, or refuse to accept and make payment upon such documents if such documents are not in
strict compliance with the terms of such Letter of Credit.

     (j) If any Event of Default shall occur and be continuing, on the Business Day that the
Borrowers receive notice from the Administrative Agent or the Required Lenders demanding the
deposit of cash collateral pursuant to this paragraph, the Borrowers shall deposit in the Cash
Collateral Account an amount in cash equal to 103% of the Letter of Credit Outstandings as of such
date plus any accrued and unpaid interest thereon. Each such deposit shall be held by the
Collateral Agent as collateral for the payment and performance of the Obligations of the Borrowers
under this Agreement. The Collateral Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such Cash Collateral Account. Other than any interest earned on
the investment of such deposits, which investments shall be made at

34

 

the option and sole discretion
of the Collateral Agent at the request of the Borrowers and at the Borrowers’ risk and expense,
such deposits shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such Cash Collateral Account shall be applied by the
Collateral Agent to reimburse the Issuing Bank for payments on account of drawings under Letters of
Credit for which it has not been reimbursed and, to the extent not so applied, shall be held for
the satisfaction of the reimbursement obligations of the Borrowers for the Letter of Credit
Outstandings at such time or, if the Loans have matured or the maturity of
the Loans has been accelerated, be applied to satisfy other Obligations of the Borrowers under
this Agreement.

     (k) The Borrowers may, upon three (3) Business Days written notice (a “Transfer Notice”) to
the Issuing Bank and the Administrative Agent, request that any or all of the letters of credit
issued under any L/C Facility entered into with a Lender hereunder (or any of such Lender’s
Affiliates) be transferred to, and deemed issued by, the Issuing Bank under this Agreement. As
long as the issuance of such Letters of Credit would be permitted under this Agreement and all
conditions precedent to such issuance would be satisfied (as if such Letters of Credit were newly
issued on the date set forth in the Transfer Notice) and such issuance would not result in the
occurrence of a Default or Event of Default, the Issuing Bank and such Lender shall promptly take
such action, at the expense of the Borrowers, as may be reasonably required to cause such letters
of credit to become Letters of Credit hereunder.

     (l) The Borrowers, the Administrative Agent and the Lenders agree that the Existing Letters of
Credit shall be deemed Letters of Credit hereunder as if issued by the Issuing Bank under this
Agreement.

     SECTION 2.08. Settlements Amongst Lenders 

     (a) The Swingline Lender may (but shall not be obligated to), at any time, on behalf of the
Borrowers (which hereby authorize the Swingline Lender to act in their behalf in that regard)
request the Administrative Agent to cause the Lenders to make a Loan (which shall be an Base Rate
Loan) in an amount equal to such Lender’s Commitment Percentage of the outstanding amount of
Swingline Loans made in accordance with Section 2.06, which request may be made regardless of
whether the conditions set forth in Article IV have been satisfied. Upon such request, each Lender
shall make available to the Administrative Agent the proceeds of such Loan which proceeds shall be
paid to the Swingline Lender to be applied in reduction of the Swingline Loans. If the Swingline
Lender requires a Loan to be made by the Lenders and the request therefor is received prior to
12:00 Noon, Boston time, on a Business Day, such transfers shall be made in immediately available
funds no later than 3:00 p.m., Boston time, that day; and, if the request therefor is received
after 12:00 Noon, Boston time, then no later than 3:00 p.m., Boston time, on the next Business Day.
The obligation of each Lender to transfer such funds is irrevocable, unconditional and without
recourse to or warranty by the Administrative Agent or the Swingline Lender. If and to the extent
any Lender shall not have so made its transfer to the Administrative Agent, such Lender agrees to
pay to the Administrative Agent, forthwith on demand such amount, together with interest thereon,
for each day from such date until the date such amount is paid to the Administrative Agent at the
Federal Funds Effective Rate.

35

 

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

     (c) The Administrative Agent shall deliver to each of the Lenders promptly after the
Settlement Date a summary statement of the amount of outstanding Loans (excluding Swingline Loans)
for the period and the amount of repayments received for the period. As reflected on the summary
statement: (x) the Administrative Agent shall transfer to each Lender its applicable Commitment
Percentage of repayments, and (y) each Lender shall transfer to the Administrative Agent (as
provided below), or the Administrative Agent shall transfer to each Lender, such amounts as are
necessary to insure that, after giving effect to all such transfers, the amount of Loans made by
each Lender with respect to Loans (excluding Swingline Loans) shall be equal to such Lender’s
applicable Commitment Percentage of Loans (excluding Swingline Loans) outstanding as of such
Settlement Date. If the summary statement requires transfers to be made to the Administrative Agent
by the Lenders and is received prior to 12:00 Noon, Boston time, on a Business Day, such transfers
shall be made in immediately available funds no later than 4:00 p.m., Boston time, that day; and,
if received after 12:00 Noon, Boston time, then no later than 4:00 p.m., Boston time, on the next
Business Day. The obligation of each Lender to transfer such funds is irrevocable, unconditional
and without recourse to or warranty by the Administrative Agent. If and to the extent any Lender
shall not have so made its transfer to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent, forthwith on demand such amount, together with interest thereon, for each day
from such date until the date such amount is paid to the Administrative Agent at the Federal Funds
Effective Rate.

     SECTION 2.09. Notes; Repayment of Loans.

     (a) The Loans outstanding to each Lender (and to the Swingline Lender, with respect to
Swingline Loans) shall be evidenced by a Note duly executed on behalf of the Borrowers, dated the
Closing Date, in substantially the form attached hereto as Exhibit B-1 or B-2, as applicable,
payable to the order of each such Lender (or the Swingline Lender, as applicable) in an aggregate
principal amount equal to such Lender’s Commitment (or, in the case of the Note evidencing the
Swingline Loans, $35,000,000).

     (b) The outstanding principal balance of all Swingline Loans shall be repaid on the earlier of
the Termination Date or, on the date otherwise requested by the Swingline Lender in accordance with
the provisions of Section 2.08(a). The outstanding principal balance of all other Obligations shall
be payable on the Termination Date (subject to earlier repayment as provided below). Each Note
shall bear interest from the date thereof on the outstanding principal balance thereof as set forth
in this Article II. Each Lender is hereby authorized by the Borrowers to endorse on a schedule
attached to each Note delivered to such Lender (or on a continuation of such schedule attached to
such Note and made a part thereof), or otherwise to record in such Lender’s internal records, an
appropriate notation evidencing the date and amount of each Loan

36

 

from such Lender, each payment and
prepayment of principal of any such Loan, each payment of interest on any such Loan and the other
information provided for on such schedule; provided, however, that the failure of
any Lender to make such a notation or any error therein shall not affect the obligation of the
Borrowers to repay the Loans made by such Lender in accordance with the terms of this Agreement and
the applicable Notes.

     SECTION 2.10. Interest on Loans.

     (a) Subject to Section 2.11, each Base Rate Loan (including, without limitation, each
Swingline Loan) shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as applicable) at a rate per annum that shall be equal to the then
Alternate Base Rate, plus the Applicable Margin for Base Rate Loans.

     (b) Subject to Section 2.11, each Eurodollar Loan shall bear interest (computed on the basis
of the actual number of days elapsed over a year of 360 days) at a rate per annum equal, during
each Interest Period applicable thereto, to the Adjusted LIBO Rate for such Interest Period,
plus the Applicable Margin for Eurodollar Loans.

     (c) Accrued interest on all Loans shall be payable in arrears on each Interest Payment Date
applicable thereto, at maturity (whether by acceleration or otherwise), after such maturity on
demand and (with respect to Eurodollar Loans) upon any repayment or prepayment thereof (on the
amount prepaid).

     SECTION 2.11. Default Interest.

     Effective upon the occurrence of any Event of Default and at all times thereafter while such
Event of Default is continuing, at the option of the Administrative Agent or upon the direction of
the Required Lenders, interest shall accrue on all outstanding Loans (including Swingline Loans)
(after as well as before judgment, as and to the extent permitted by law) at a rate per annum equal
to the rate (including the Applicable Margin for Loans) in effect from time to time plus
2.00% per annum, and such interest shall be payable on demand.

     SECTION 2.12. Certain Fees.

     The Borrowers shall pay to the Administrative Agent, for the account of the Administrative
Agent, the fees set forth in the Fee Letter as and when payment of such fees is due as therein set
forth.

     SECTION 2.13. Commitment Fee.

     The Borrowers shall pay to the Administrative Agent for the account of the Lenders, a
commitment fee (the “Commitment Fee”) equal to 0.20% per annum (on the basis of actual days
elapsed in a year of 365 or 366 days, as applicable) of the average daily balance of the Unused
Commitment for each day commencing on and including the Closing Date and ending on but excluding
the Termination Date. The Commitment Fee so accrued in any calendar quarter shall be payable on the
first Business Day of the immediately succeeding calendar quarter, except that all Commitment Fees
so accrued as of the Termination Date shall be payable on the Termination

37

 

Date. The Administrative
Agent shall pay the Commitment Fee (and any amounts payable by the Swingline Lender hereunder) to
the Lenders based upon their pro rata share of the aggregate Commitment Fee due to all Lenders;
provided that for purposes of calculating the pro rata share of any Person which is both
the Swingline Lender and a Lender, such Person’s share shall be equal to the difference between (i)
the sum of such Person’s Commitment, and (ii) the sum of (A) such Person’s Commitment Percentage of
the principal amount of Loans then outstanding
(including the principal amount of Swingline Loans then outstanding), and (B) such Person’s
Commitment Percentage of the then Letter of Credit Outstandings.

     SECTION 2.14. Letter of Credit Fees.

     (a) The Borrowers shall pay the Administrative Agent, for the account of the Lenders, on the
last day of each calendar quarter, in arrears, a fee (each, a “Letter of Credit Fee”) equal
to the following per annum percentages of the average face amount of the following categories of
Letters of Credit outstanding during the subject quarter:

     (i) Standby Letters of Credit: The Applicable Margin for Eurodollar Loans.

     (ii) Commercial Letters of Credit: Fifty percent (50%) of the Applicable Margin for
Eurodollar Loans.

     (iii) After the occurrence and during the continuance of an Event of Default, at the
option of the Administrative Agent or upon the direction of the Required Lenders, the Letter
of Credit Fee shall be increased by an amount equal to two percent (2%) per annum.

     (b) The Borrowers shall pay to the Administrative Agent, for the account of the Issuing Bank,
and in addition to all Letter of Credit Fees otherwise provided for hereunder, such fronting fees
and other fees and charges in connection with the issuance, negotiation, settlement, amendment and
processing of each Letter of Credit issued by the Issuing Bank as are customarily imposed by the
Issuing Bank to account parties of comparable credit quality from time to time in connection with
letter of credit transactions.

     SECTION 2.15. Nature of Fees.

     All fees shall be paid on the dates due, in immediately available funds, to the Administrative
Agent, for the respective accounts of the Administrative Agent, the Issuing Bank, and the Lenders,
as provided herein. Once paid, all fees shall be fully earned (absent manifest error) and shall not
be refundable under any circumstances.

     SECTION 2.16. Termination or Reduction of Commitments.

     (a) Upon at least two Business Days’ prior written notice to the Administrative Agent, the
Borrowers may at any time in whole permanently terminate, or from time to time in part permanently
reduce, the Commitments. Each such reduction shall be in the amount of $5,000,000 or any integral
multiple thereof. Each such reduction or termination shall (i) be applied ratably to the
Commitments of each Lender, and (ii) be irrevocable when given. At the

38

 

effective time of each such
reduction or termination, the Borrowers shall pay to the Administrative Agent for application as
provided herein (i) all Commitment Fees accrued on the amount of the Commitments so terminated or
reduced through the date thereof, and (ii) any amount by which the Credit Extensions outstanding on
such date exceed the amount to which the Commitments are to be reduced effective on such date, in
each case pro rata based on the amount prepaid.

     SECTION 2.17. Alternate Rate of Interest.

     If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

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

     (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate
for such Interest Period will not adequately and fairly reflect the cost to such Lenders (or
Lender) of making or maintaining their Loans (or its Loan) included in such Borrowing for such
Interest Period;

then the Administrative Agent shall give notice thereof to the Borrowers and the Lenders by
telephone or telecopy (or by e-mail, .pdf or other electronic means) as promptly as practicable
thereafter and, until the Administrative Agent notifies the Borrowers and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Borrowing Request that requests
the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing
shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as a Borrowing of Base Rate Loans.

     SECTION 2.18. Conversion and Continuation of Loans.

     The Lead Borrower on behalf of the Borrowers shall have the right at any time, on three
Business Days’ prior irrevocable notice to the Administrative Agent (which notice, to be effective,
must be received by the Administrative Agent not later than 2:00 p.m., Boston time, on the third
Business Day preceding the date of any conversion), (x) to convert any outstanding Borrowings of
Loans (but in no event Swingline Loans) of one Type (or a portion thereof) to a Borrowing of Loans
of the other Type or (y) to continue an outstanding Borrowing of Eurodollar Loans for an additional
Interest Period, subject to the following:

     (a) no Borrowing of Loans may be converted into, or continued as, Eurodollar Loans at any time
when an Event of Default has occurred and is continuing (nothing contained herein being deemed to
obligate the Borrowers to incur Breakage Costs upon the occurrence of an Event of Default unless
the Obligations are accelerated);

     (b) if less than a full Borrowing of Loans is converted, such conversion shall be made
pro rata among the Lenders, as applicable, in accordance with the respective
principal amounts of the Loans comprising such Borrowing held by such Lenders immediately prior to
such refinancing;

39

 

     (c) the aggregate principal amount of Loans being converted into or continued as Eurodollar
Loans shall be in an integral of $500,000 and at least $3,000,000;

     (d) each Lender shall effect each conversion by applying the proceeds of its new Eurodollar
Loan or Base Rate Loan, as the case may be, to its Loan being so converted;

     (e) the Interest Period with respect to a Borrowing of Eurodollar Loans effected by a
conversion or in respect to the Borrowing of Eurodollar Loans being continued as Eurodollar Loans
shall commence on the date of conversion or the expiration of the current Interest Period
applicable to such continuing Borrowing, as the case may be;

     (f) a Borrowing of Eurodollar Loans may be converted only on the last day of an Interest
Period applicable thereto;

     (g) each request for a conversion or continuation of a Borrowing of Eurodollar Loans which
fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period
of one month; and

     (h) no more than ten (10) Borrowings of Eurodollar Loans may be outstanding at any time.

     If the Lead Borrower does not give notice to convert any Borrowing of Eurodollar Loans, or
does not give notice to continue, or does not have the right to continue, any Borrowing as
Eurodollar Loans, in each case as provided above, such Borrowing shall automatically be converted
to a Borrowing of Base Rate Loans at the expiration of the then-current Interest Period. The
Administrative Agent shall, after it receives notice from the Lead Borrower, promptly give each
Lender notice of any conversion, in whole or part, of any Loan made by such Lender.

     SECTION 2.19. Mandatory Prepayment; Commitment Termination; Cash Collateral.

     The outstanding Obligations shall be subject to mandatory prepayment as follows:

     (a) If at any time the amount of the Credit Extensions exceeds the lower of (i) the then
amount of the Total Commitment and (ii) the then amount of the Borrowing Base, the Borrowers will
immediately upon notice from the Administrative Agent (A) prepay the Loans in an amount necessary
to eliminate such excess, and (B) if, after giving effect to the prepayment in full of all
outstanding Loans such excess has not been eliminated, deposit cash into the Cash Collateral
Account in an amount equal to 103% of the Letters of Credit Outstanding.

     (b) The Loans shall be repaid daily in accordance with the provisions of Sections 2.22(h) and
2.23 hereof.

     (c) Subject to the foregoing, outstanding Base Rate Loans shall be prepaid before outstanding
Eurodollar Loans are prepaid. Each partial prepayment of Eurodollar Loans shall be in an integral
multiple of $500,000. No prepayment of Eurodollar Loans shall be permitted pursuant to this Section
2.19 other than on the last day of an Interest Period applicable thereto,

40

 

unless the Borrowers simultaneously reimburse the Lenders for all “Breakage Costs” (as defined
below) associated therewith. In order to avoid such Breakage Costs, as long as no Event of Default
has occurred and is continuing, at the request of the Lead Borrower, the Administrative Agent shall
hold all amounts required to be applied to Eurodollar Loans in the Cash Collateral Account and will
apply such funds to the applicable Eurodollar Loans at the end of the then pending Interest Period
therefor (provided that the foregoing shall in no way limit or restrict the Agents’ rights upon the
subsequent occurrence of an Event of Default). No partial prepayment of a Borrowing of Eurodollar
Loans shall result in the aggregate principal amount of the Eurodollar Loans remaining outstanding
pursuant to such Borrowing being less than $3,000,000. Any prepayment of the Loans shall not
permanently reduce the Commitments.

     (d) All amounts required to be applied to all Loans hereunder (other than Swingline Loans)
shall be applied ratably in accordance with each Lender’s Commitment Percentage.

     (e) Upon the Termination Date, the credit facility provided hereunder shall be terminated in
full and the Borrowers shall pay, in full and in cash, all outstanding Loans and all other
outstanding Obligations.

     SECTION 2.20. Optional Prepayment of Loans; Reimbursement of Lenders.

     (a) The Borrowers shall have the right at any time and from time to time to prepay outstanding
Loans in whole or in part, (x) with respect to Eurodollar Loans, upon at least two Business Days’
prior written, telex or facsimile notice to the Administrative Agent prior to 2:00 p.m., Boston
time, and (y) with respect to Base Rate Loans, on the same Business Day if written, telex or
facsimile notice is received by the Administrative Agent prior to 2:00 p.m., Boston time, subject
to the following limitations:

     (i) Subject to Section 2.19, all prepayments shall be paid to the Administrative Agent
for application, first, to the prepayment of outstanding Swingline Loans,
second, to the prepayment of other outstanding Loans ratably in accordance with each
Lender’s Commitment Percentage, and third, to the funding of a cash collateral
deposit in the Cash Collateral Account in an amount equal to 103% of all Letter of Credit
Outstandings.

     (ii) Subject to the foregoing, outstanding Base Rate Loans shall be prepaid before
outstanding Eurodollar Loans are prepaid. Each partial prepayment of Eurodollar Loans shall
be in an integral multiple of $500,000. No prepayment of Eurodollar Loans shall be permitted
pursuant to this Section 2.20 other than on the last day of an Interest Period applicable
thereto, unless the Borrowers simultaneously reimburse the Lenders for all “Breakage Costs”
(as defined below) associated therewith. No partial prepayment of a Borrowing of Eurodollar
Loans shall result in the aggregate principal amount of the Eurodollar Loans remaining
outstanding pursuant to such Borrowing being less than $3,000,000.

     (iii) Each notice of prepayment shall specify the prepayment date, the principal amount
and Type of the Loans to be prepaid and, in the case of Eurodollar Loans, the

41

 

Borrowing or Borrowings pursuant to which such Loans were made. Each notice of
prepayment shall be irrevocable and shall commit the Borrowers to prepay such Loan by
the amount and on the date stated therein. The Administrative Agent shall, promptly after
receiving notice from the Borrowers hereunder, notify each Lender of the principal amount
and Type of the Loans held by such Lender which are to be prepaid, the prepayment date and
the manner of application of the prepayment.

     (b) The Borrowers shall reimburse each Lender on demand for any loss incurred by it in the
reemployment of the funds released (i) resulting from any prepayment (for any reason whatsoever,
including, without limitation, conversion to Base Rate Loans or acceleration by virtue of, and
after, the occurrence of an Event of Default) of any Eurodollar Loan required or permitted under
this Agreement, if such Loan is prepaid other than on the last day of the Interest Period for such
Loan or (ii) in the event that after the Lead Borrower delivers a notice of borrowing under Section
2.04 in respect of Eurodollar Loans, such Loans are not made on the first day of the Interest
Period specified in such notice of borrowing for any reason other than a breach by such Lender of
its obligations hereunder or the delivery of any notice pursuant to Section 2.17. Such loss of any
Lender shall be reimbursed by the Borrowers in the amount as reasonably determined by such Lender
equal to the excess, if any, of (A) the amount of interest which would have accrued to such Lender
on the amount so paid or not borrowed at a rate of interest equal to the Adjusted LIBO Rate for
such Loan, for the period from the date of such payment or failure to borrow to and excluding the
last day (x) in the case of a payment or refinancing with Base Rate Loans other than on the last
day of the Interest Period for such Loan, of the then current Interest Period for such Loan or (y)
in the case of such failure to borrow, of the Interest Period for such Loan which would have
commenced on the date of such failure to borrow, over (B) the amount of interest which would have
accrued to such Lender on such amount by placing such amount on deposit for a comparable period
with leading banks in the London interbank market (collectively, “Breakage Costs”). Any
Lender demanding reimbursement for such loss shall deliver to the Borrowers from time to time one
or more certificates setting forth the amount of such loss as determined by such Lender and setting
forth in reasonable detail the manner in which such amount was determined.

     (c) In the event the Borrowers fail to prepay any Loan on the date specified in any prepayment
notice delivered pursuant to Section 2.20(a), the Borrowers on demand by any Lender shall pay to
the Administrative Agent for the account of such Lender any amounts required to compensate such
Lender for any loss incurred by such Lender as a result of such failure to prepay, including,
without limitation, any loss, cost or expenses incurred by reason of the acquisition of deposits or
other funds by such Lender to fulfill deposit obligations incurred in anticipation of such
prepayment. Any Lender demanding such payment shall deliver to the Borrowers from time to time one
or more certificates setting forth the amount of such loss as determined by such Lender and setting
forth in reasonable detail the manner in which such amount was determined.

     (d) Whenever any partial prepayment of Loans is to be applied to Eurodollar Loans, such
Eurodollar Loans shall be prepaid in the chronological order of their Interest Payment Dates.

42

 

     SECTION 2.21. Maintenance of Loan Account; Statements of Account.

     (a) The Administrative Agent shall maintain an account on its books in the name of the
Borrowers (the “Loan Account”) which will reflect (i) all Swingline Loans and all loans and
advances made by the Lenders to the Borrowers or for the Borrowers’ account, including the Loans,
(ii) all L/C Disbursements, fees and interest that have become payable as herein set forth, and
(iii) any and all other Obligations that have become payable.

     (b) The Loan Account will be credited with all amounts received by the Administrative Agent
from the Borrowers or from others for the Borrowers’ account, including all amounts received in the
Concentration Account from the Blocked Account Banks, and the amounts so credited shall be applied
as set forth in Sections 2.23(a) and (b). After the end of each month, the Administrative Agent
shall send to the Borrowers a statement accounting for the charges, loans, advances, prepayments,
and other transactions occurring among and between the Administrative Agent, the Lenders and the
Borrowers during that month. The monthly statements shall, absent manifest error, be an account
stated, which is final, conclusive and binding on the Borrowers.

     SECTION 2.22. Cash Receipts.

     (a) Annexed hereto as Schedule 2.22(a) is a list of all present DDAs, which Schedule
includes, with respect to each depository (i) the name and address of that depository; (ii) the
account number(s) maintained with such depository; and (iii) to the extent known, a contact person
at such depository.

     (b) Annexed hereto as Schedule 2.22(b) is a list describing all arrangements to which
any Borrower is a party with respect to the payment to any Borrower of the proceeds of all credit
card charges for sales by any Borrower.

     (c) The Borrowers shall (i) upon request of the Administrative Agent, deliver to the
Administrative Agent notifications executed on behalf of the Borrowers to each depository
institution with which any DDA is maintained in form satisfactory to the Administrative Agent, of
the Administrative Agent’s interest in such DDA (each, a “DDA Notification”), and (ii)
deliver to the Administrative Agent notifications executed on behalf of the Borrowers to each of
the Borrower’s credit card clearinghouses and processors of notice in form satisfactory to the
Administrative Agent, (each, a “Credit Card Notification”), and (iii) entered into agency
agreements with the banks maintaining the deposit accounts identified on Schedule 2.22(c)
(collectively, the “Blocked Accounts”), which agreements (the “Blocked Account
Agreements”) shall be in form and substance satisfactory to the Administrative Agent. The DDA
Notifications, Credit Card Notifications and Blocked Account Agreements shall require, after the
occurrence and during the continuance of a Cash Control Event, the sweep on each Business Day of
all available cash receipts from the sale of Inventory and other assets, all collections of
Accounts, and all other cash payments received by the Borrowers from any Person or from any source
or on account of any sale or other transaction or event, including, without limitation, any
Prepayment Event (all such cash receipts and collections, “Cash Receipts”), to a
concentration account maintained by the Collateral Agent at Bank of America (the “Concentration
Account”). In that

43

 

regard, after the occurrence, and during the continuance, of a Cash Control Event, the Borrowers
shall cause the ACH or wire transfer to a Blocked Account or to the Concentration Account, no
less frequently than daily (and whether or not there is then an outstanding balance in the Loan
Account) of (A) the then contents of each DDA, each such transfer to be net of any minimum balance,
not to exceed $50,000, as may be required to be maintained in the subject DDA by the bank at which
such DDA is maintained; and (B) the proceeds of all credit card charges not otherwise provided for
pursuant hereto, and (C) all other Cash Receipts. Further, after the occurrence and during the
continuance of a Cash Control Event, the Borrowers shall cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily, of the then entire ledger balance of each
Blocked Account, net of such minimum balance, not to exceed $50,000, as may be required to be
maintained in the subject Blocked Account by the bank at which such Blocked Account is maintained.
In the event that, notwithstanding the provisions of this Section 2.22, after the occurrence and
during the continuance of a Cash Control Event, the Borrowers receive or otherwise have dominion
and control of any such proceeds or collections, such proceeds and collections shall be held in
trust by the Borrowers for the Administrative Agent and shall not be commingled with any of the
Borrowers’ other funds or deposited in any account of any Borrower other than as instructed by the
Administrative Agent.

     (d) The Borrowers shall, after the occurrence and during the continuance of a Cash Control
Event, accurately report to the Administrative Agent all amounts deposited in the Blocked Accounts
to ensure the proper transfer of funds as set forth above. If at any time other than the times set
forth above any cash or cash equivalents owned by the Borrowers are deposited to any account, or
held or invested in any manner, otherwise than in a Blocked Account that is subject to a Blocked
Account Agreement, the Administrative Agent shall require the Borrowers to close such account and
have all funds therein transferred to an account maintained by the Administrative Agent at Bank of
America and all future deposits made to a Blocked Account which is subject to a Blocked Account
Agreement.

     (e) The Borrowers may (i) close DDAs or Blocked Accounts and/or open new DDAs or Blocked
Accounts, subject to the execution and delivery to the Administrative Agent of appropriate DDA
Notifications or Blocked Account Agreements (unless expressly waived by the Administrative Agent)
consistent with the provisions of this Section 2.22 and otherwise satisfactory to the
Administrative Agent, and (ii) enter into any agreements with credit card processors subject to the
execution and delivery to the Administrative Agent of appropriate Credit Card Notifications (unless
expressly waived by the Administrative Agent) consistent with the provisions of this Section 2.22
and otherwise satisfactory to the Administrative Agent. Unless the Lead Borrower shall have
notified the Administrative Agent and complied with the provisions of the immediately preceding
sentence, the Borrowers may not maintain any bank accounts or enter into any agreements with credit
card processors other than the ones expressly contemplated herein.

     (f) The Borrowers may also maintain with the Administrative Agent at Bank of America one or
more disbursement accounts (the “Disbursement Accounts”) to be used by the Borrowers for
disbursements and payments (including payroll) in the ordinary course of business or as otherwise
permitted hereunder.

44

 

     (g) The Concentration Account is, and shall remain, under the sole dominion and control of the
Collateral Agent. Each Borrower acknowledges and agrees that (i) such Borrower
has no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the
Concentration Account shall continue to be collateral security for all of the Obligations and (iii)
the funds on deposit in the Concentration Account shall be applied as provided in Section 2.23(a).

     (h) So long as no Cash Control Event has occurred and is continuing, daily, the Borrowers may
direct, and shall have sole control over, the manner of disposition of its funds in the DDA
Accounts and Blocked Accounts. Effective upon notice to the Lead Borrower from the Collateral Agent
in the event of a Cash Control Event and during the continuance thereof (which notice may be given
by telephone if promptly confirmed in writing), the Concentration Account will, without any further
action on the part of any Borrower or the Collateral Agent convert into a closed account under the
exclusive dominion and control of the Collateral Agent in which funds are held subject to the
rights of the Collateral Agent hereunder. In such event, all amounts in the Concentration Account
and all other Cash Receipts from time to time may be applied to the Obligations in such order and
manner as provided in Section 2.23 hereof, and the Administrative Agent may, in its discretion, but
shall not be obligated to, transfer any amounts in the Concentration Account to the Disbursement
Accounts.

     (i) Notwithstanding anything to the contrary in this Section 2.22, in the event that a Cash
Control Event has occurred but Excess Availability is greater than ten percent (10%) of the lesser
of the Borrowing Base or the Total Commitment, the Administrative Agent reserves the right,
confirmed upon delivery of written notice thereof to the Lead Borrower, to suspend the
implementation of the foregoing provisions of this Section 2.22, and such provisions shall not be
implemented. The Administrative Agent further reserves the right to thereafter cause the
implementation of the foregoing provisions as a result of the occurrence of the Cash Control Event,
confirmed upon delivery of written notice thereof to the Lead Borrower. For purposes of clarity,
the foregoing provisions of this Section 2.22 shall always be implemented automatically when a Cash
Control Event has occurred and Excess Availability is less than or equal to ten percent (10%) of
the lesser of the Borrowing Base or the Total Commitment.

     SECTION 2.23. Application of Payments.

     (a) Subject to the provisions of Section 2.22, all amounts received in the Concentration
Account from any source, including the Blocked Account Banks, shall be applied, on the day
immediately following receipt, in the following order: first, to pay interest due and
payable on Credit Extensions and to pay fees and expense reimbursements and indemnification then
due and payable to the Administrative Agent, BAS, the Issuing Bank, the Collateral Agent, and the
Lenders; second to repay outstanding Swingline Loans; third, to repay other
outstanding Loans that are Base Rate Loans and all outstanding reimbursement obligations under
Letters of Credit; fourth, to repay outstanding Loans that are Eurodollar Loans and all
Breakage Costs due in respect of such repayment pursuant to Section 2.20(b) or, at the Borrowers’
option (if no Event of Default has occurred and is then continuing), to fund a cash collateral
deposit to the Cash Collateral Account sufficient to pay, and with direction to pay, all such
outstanding Eurodollar Loans on the last day of the then-pending Interest Period therefor;
fifth if any Event

45

 

of Default has occurred and is continuing, to fund a cash collateral
deposit in the Cash Collateral Account in an amount equal to 103% of all Letter of Credit
Outstandings; sixth, to pay all other Obligations that are then outstanding and payable. If
all Obligations are paid, any excess
amounts shall be deposited in a separate cash collateral account, and as long as no Event of
Default then exists, shall be promptly released to the Borrowers and shall be utilized by the
Borrowers prior to any further Loans being made. Any other amounts received by the Administrative
Agent, the Issuing Bank, the Collateral Agent, or any Lender as contemplated by Section 2.22 shall
also be applied in the order set forth above in this Section 2.23.

     (b) All credits against the Obligations shall be conditioned upon final payment to the
Administrative Agent of the items giving rise to such credits and shall be subject to one (1)
Business Day’s clearance and collection. If any item deposited to the Concentration Account and
credited to the Loan Account is dishonored or returned unpaid for any reason, whether or not such
return is rightful or timely, the Administrative Agent shall have the right to reverse such credit
and charge the amount of such item to the Loan Account and the Borrowers shall indemnify the
Administrative Agent, the Collateral Agent, the Issuing Bank and the Lenders against all claims and
losses resulting from such dishonor or return.

     SECTION 2.24. Increased Costs.

     (a) If any Change in Law shall:

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

     (ii) impose on any Lender or the Issuing Bank or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of
Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining
any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or
the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrowers will
pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as
will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.

     (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such Lender’s or the
Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if
any, as a consequence of this Agreement or the Loans made by, or participations in Letters of
Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below
that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s

46

 

holding company
could have achieved but for such Change in Law (taking into consideration such Lender’s or the
Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company
with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or
the Issuing Bank, as the case may be, such additional amount or
amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company for any such reduction suffered.

     (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts
necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section and setting forth in reasonable detail the
manner in which such amount or amounts were determined shall be delivered to the Borrowers and
shall be conclusive absent manifest error. The Borrowers shall pay such Lender or the Issuing Bank,
as the case may be, the amount shown as due on any such certificate within ten (10) Business Days
after receipt thereof.

     (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right
to demand such compensation, provided that no Lender or Issuing Bank shall be entitled to such
compensation in connection with matters that arose more than 90 days prior to the date such Lender
or Issuing Bank notifies the Lead Borrower of such matters.

     SECTION 2.25. Change in Legality.

     (a) Notwithstanding anything to the contrary contained elsewhere in this Agreement, if (x) any
Change in Law shall make it unlawful for a Lender to make or maintain a Eurodollar Loan or to give
effect to its obligations as contemplated hereby with respect to a Eurodollar Loan or (y) at any
time any Lender determines that the making or continuance of any of its Eurodollar Loans has become
impracticable as a result of a contingency occurring after the date hereof which adversely affects
the London interbank market or the position of such Lender in the London interbank market, then, by
written notice to the Borrowers, such Lender may (i) declare that Eurodollar Loans will not
thereafter be made by such Lender hereunder, whereupon any request by the Borrowers for a
Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an Base Rate Loan
unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding
Eurodollar Loans made by it be converted to Base Rate Loans, in which event all such Eurodollar
Loans shall be automatically converted to Base Rate Loans as of the effective date of such notice
as provided in paragraph (b) below. In the event any Lender shall exercise its rights under clause
(i) or (ii) of this paragraph (a), all payments and prepayments of principal which would otherwise
have been applied to repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the Base Rate Loans
made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans.

     (b) For purposes of this Section 2.25, a notice to the Borrowers by any Lender pursuant to
paragraph (a) above shall be effective, if lawful, and if any Eurodollar Loans shall then be
outstanding, on the last day of the then-current Interest Period; and otherwise, if lawful, such
notice shall be effective on the date of receipt by the Borrowers.

47

 

     SECTION 2.26. Payments; Sharing of Setoff.

     (a) The Borrowers shall make each payment required to be made by it hereunder or under any
other Loan Document (whether of principal, interest, fees or reimbursement of
drawings under Letters of Credit, or of amounts payable under Sections 2.20(b), 2.24 or 2.25,
or otherwise) prior to 2:00 p.m., Boston time, on the date when due, in immediately available
funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments shall be made to the
Administrative Agent at its offices at 100 Federal Street, 9th Floor, Boston, Massachusetts, except
payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein
and except that payments pursuant to Sections 2.20(b), 2.24, 2.27 and 9.03 shall be made directly
to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the
Persons specified therein. The Administrative Agent shall distribute any such payments received by
it for the account of any other Person to the appropriate recipient promptly following receipt
thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day,
except with respect to Eurodollar Borrowings, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall
be payable for the period of such extension. All payments under each Loan Document shall be made in
dollars.

     (b) All funds received by and available to the Administrative Agent to pay principal,
unreimbursed drawings under Letters of Credit, interest and fees then due hereunder, shall be
applied in accordance with the provisions of Section 2.23(a) hereof or Section 6.02 of the Security
Agreements, as applicable, ratably among the parties entitled thereto in accordance with the
amounts of principal, unreimbursed drawings under Letters of Credit, interest, and fees then due to
such respective parties. If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed drawings under Letters of
Credit, interest and fees then due hereunder, such funds shall be applied (i) first, towards
payment of interest and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal and unreimbursed drawings under Letters of Credit then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of principal and unreimbursed
drawings under Letters of Credit then due to such parties.

     (c) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Loans or participations in
drawings under Letters of Credit or Swingline Loans resulting in such Lender’s receiving payment of
a greater proportion of the aggregate amount of its Loans and participations in drawings under
Letters of Credit and Swingline Loans and accrued interest thereon than the proportion received by
any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at
face value) participations in the Loans and participations in drawings under Letters of Credit and
Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and participations in drawings under Letters of Credit
and Swingline Loans, provided that (i) if any such

48

 

participations are purchased and all or
any portion of the payment giving rise thereto is recovered, such participations shall be rescinded
and the purchase price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made by the Borrowers
pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations in drawings
under Letters of Credit to any assignee or participant, other than to the Borrowers or any
Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrowers consent
to the foregoing and agree, to the extent they may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the
Borrowers rights of setoff and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of the Borrowers in the amount of such participation.

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

     (e) If any Lender shall fail to make any payment required to be made by it pursuant to this
Agreement, then the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender’s obligations under this Agreement until all such
unsatisfied obligations are fully paid.

     SECTION 2.27. Taxes.

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

49

 

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

     (c) The Borrowers shall indemnify the Administrative Agent, each Lender and the Issuing Bank,
within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes
or Other Taxes paid by the Administrative Agent, such Lender or the Issuing
Bank, as the case may be, on or with respect to any payment by or on account of any obligation
of the Borrowers hereunder or under any other Loan Document (including Indemnified Taxes or Other
Taxes imposed or asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment or liability
delivered to the Borrowers by a Lender or the Issuing Bank, or by the Administrative Agent on its
own behalf or on behalf of a Lender or the Issuing Bank setting forth in reasonable detail the
manner in which such amount was determined, shall be conclusive absent manifest error.

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

     (e) Any Foreign Lender that is entitled to an exemption from or reduction in withholding tax
shall deliver to the Borrowers and the Administrative Agent two copies of either United States
Internal Revenue Service Form W8-BEN, or, in the case of a Foreign Lender’s claiming exemption from
or reduction in U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of “portfolio interest”, a Form W-8ECI, or any subsequent versions thereof or
successors thereto (and, if such Foreign Lender delivers a Form W-8ECI, a certificate representing
that such Foreign Lender is not a bank for purposes of Section 881(c) of the Code, is not a
10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the Borrowers
and is not a controlled foreign corporation related to the Borrowers (within the meaning of Section
864(d)(4) of the Code)), properly completed and duly executed by such Foreign Lender claiming
complete exemption from or reduced rate of, U.S. Federal withholding tax on payments by the
Borrowers under this Agreement and the other Loan Documents. Such forms shall be delivered by each
Foreign Lender on or before the date it becomes a party to this Agreement (or, in the case of a
transferee that is a participation holder, on or before the date such participation holder becomes
a transferee hereunder) and on or before the date, if any, such Foreign Lender changes its
applicable lending office by designating a different lending office (a “New Lending Office”). In
addition, each Foreign Lender shall deliver such forms promptly upon the obsolescence or invalidity
of any form previously delivered by such Foreign Lender. Notwithstanding any other provision of
this Section 2.27(e), a Foreign Lender shall not be required to deliver any form pursuant to this
Section 2.27(e) that such Foreign Lender is not legally able to deliver.

     (f) The Borrowers shall not be required to indemnify any Foreign Lender or to pay any
additional amounts to any Foreign Lender in respect of U.S. Federal withholding tax

50

 

pursuant to
paragraph (a) or (c) above to the extent that the obligation to pay such additional amounts would
not have arisen but for a failure by such Foreign Lender to comply with the provisions of paragraph
(e) above. Should a Lender become subject to Taxes because of its failure to deliver a form
required hereunder, the Borrowers shall, at such Lender’s expense, take such steps as such Lender
shall reasonably request to assist such Lender to recover such Taxes.

     SECTION 2.28. Security Interests in Collateral.

     To secure their Obligations under this Agreement and the other Loan Documents, the Borrowers
shall grant to the Collateral Agent, for its benefit and the ratable benefit of the other Secured
Parties, a first-priority security interest in all of the Collateral pursuant hereto and to the
Security Documents (subject to Liens on L/C Facility Cash Collateral to secure Indebtedness
permitted by Section 6.01(g) and Permitted Encumbrances having priority over the Lien of the
Collateral Agent by operation of law).

     SECTION 2.29. Mitigation Obligations.

     If any Lender requests compensation under Section 2.24, or if the Borrowers are required to
pay any additional amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 2.27, then such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender,
such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section
2.24 or 2.27, as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment; provided, however, that the Borrowers shall not
be liable for such costs and expenses of a Lender requesting compensation if (i) such Lender
becomes a party to this Agreement on a date after the Closing Date and (ii) the relevant Change in
Law occurs on a date prior to the date such Lender becomes a party hereto.

     SECTION 2.30. Acknowledgments Regarding L/C Facilities.

     The parties acknowledge and agree that no obligation of any Loan Party under any L/C Facility
shall be deemed to be an obligation under this Agreement or any other Loan Document,
notwithstanding anything to the contrary herein or therein. The parties further acknowledge and
agree that the grant by any Loan Party of a first-priority security interest in L/C Facility Cash
Collateral to any financial institution party to an L/C Facility shall not constitute a Default or
Event or Default, or otherwise constitute a breach of this Agreement or any other Loan Document,
notwithstanding anything to the contrary herein or therein.

ARTICLE III

Representations and Warranties

     Each Loan Party represents and warrants to the Agents and the Lenders that:

51

 

     SECTION 3.01. Organization; Powers. Each Loan Party is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.

     SECTION 3.02. Authorization; Enforceability. The transactions contemplated hereby and
by the other Loan Documents to be entered into by each Loan Party are within such Loan Party’s
corporate powers and have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by each Loan Party that is
a party hereto and constitutes, and each other Loan Document to which any Loan Party is a party,
when executed and delivered by such Loan Party will constitute, a legal, valid and binding
obligation of such Loan Party (as the case may be), enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.

     SECTION 3.03. Governmental Approvals; No Conflicts. The transactions to be entered
into pursuant to the Loan Documents (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except for such as have been
obtained or made and are in full force and effect and except filings and recordings necessary to
perfect Liens created under the Loan Documents, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of any Loan Party or any order
of any Governmental Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon any Loan Party or its assets, or give rise to a right
thereunder to require any payment to be made by any Loan Party, and (d) will not result in the
creation or imposition of any Lien on any asset of any Loan Party, except Liens created under the
Loan Documents.

     SECTION 3.04. Financial Condition. The Lead Borrower has heretofore furnished to the
Lenders the financial statements for the Lead Borrower and its Subsidiaries pursuant to the
requirements of Section 5.01(a) and 5.01(c), certified by a Financial Officer of the Borrowers.
Such financial statements present fairly, in all material respects, the financial position, results
of operations and cash flows of the Lead Borrower and its Subsidiaries as of the dates and for the
periods specified in such Sections in accordance with GAAP, subject to year end audit adjustments
and the absence of footnotes. Since the date of such financial statements, there have been no
changes in the assets, liabilities, financial condition, or business of the Borrowers other than
changes in the ordinary course of business, the effect of which could not reasonably be expected to
have a Material Adverse Effect.

     SECTION 3.05. Properties. (a) Except as disclosed in Schedules 3.05(c)(i) and
3.05(c)(ii), each Loan Party has good title to, or valid leasehold interests in, all its real and
personal property material to its business, except for defects which could not reasonably be
expected to have a Material Adverse Effect.

52

 

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

     (c) Schedule 3.05(c)(i) sets forth the address (including county) of all Real Estate that is
owned by the Loan Parties as of the Closing Date, together with a list of the holders of any
mortgage or other Lien thereon. Schedule 3.05(c)(ii) sets forth the address (including county) of
all Real Estate that is leased by the Loan Parties as of the Closing Date, together with a list of
the holders of any mortgage or other Lien thereon. The information on such Schedule shall be
updated and supplemented from time to time as required pursuant to the provisions of Section 5.03
hereof.

     SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending against or, to the
knowledge of any Borrower, threatened against or affecting any Loan Party (i) which could
reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect
(other than those set forth on Schedule 3.06) or (ii) that involve any of the Loan Documents. The
information on such Schedule 3.06 shall be updated and supplemented from time to time as required
pursuant to the provisions of Section 5.02 hereof.

     (b) Except for the matters set forth on Schedule 3.06 and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect, no Loan Party (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.

     (c) Since the date of this Agreement, there has been no change in the status of the matters
set forth on Schedule 3.06 that, individually or in the aggregate, has resulted in, or could
reasonably be expected to result in, a Material Adverse Effect.

53

 

     SECTION 3.07. Compliance with Laws and Agreements. Each Loan Party is in compliance
with all laws, regulations and orders of any Governmental Authority applicable to it or its
property and all indentures, material agreements and other instruments binding upon it or its
property, and except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.

     SECTION 3.08. Investment and Holding Company Status. No Loan Party is (a) an
“investment company” as defined in, or subject to regulation under, the Investment Company Act of
1940 or (b) a “holding company” as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935.

     SECTION 3.09. Taxes. Each Loan Party has timely filed or caused to be filed all tax
returns and reports required to have been filed and has paid or caused to be paid all taxes
required to have been paid by it, except (a) taxes that are being contested in good faith by
appropriate proceedings, for which such Loan Party has set aside on its books adequate reserves,
and as to which no Lien has arisen, or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.

     SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present
value of all accumulated benefit obligations under each Plan (based on the assumptions used for
purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed by more than $2,000,000 the fair market
value of the assets of such Plan, and the present value of all accumulated benefit obligations of
all underfunded Plans (based on the assumptions used for purposes of Statement of Financial
Accounting Standards No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $2,000,000 the fair market value of the assets of all
such underfunded Plans.

     SECTION 3.11. Disclosure. The Borrowers have disclosed to the Lenders all agreements,
instruments and corporate or other restrictions to which any Loan Party is subject, and all other
matters known to any of them, that, individually or in the aggregate, could reasonably be expected
to result in a Material Adverse Effect. None of any of the reports, financial statements,
certificates or other information furnished by or on behalf of any Loan Party to the Administrative
Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document
or delivered hereunder or thereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which they were made, not
misleading.

     SECTION 3.12. Subsidiaries. Schedule 3.12 sets forth the name of, and the ownership
interest of each Loan Party in each Subsidiary as of the Closing Date. The Loan Parties are not
party to any joint venture, general or limited partners of a general or limited partnership, or
members of a limited liability company, or any other similar business ventures or entities. The

54

 

information on such Schedule shall be updated and supplemented from time to time as required
pursuant to the provisions of Section 5.12 hereof.

     SECTION 3.13. Insurance. Schedule 3.13 sets forth a description of all insurance
maintained by or on behalf of the Borrowers and their Subsidiaries as of the Closing Date. As of
the Closing Date, all premiums in respect of such insurance that are due and payable have been
paid. The information on such Schedule shall be updated and supplemented from time to time as
required pursuant to the provisions of Section 5.07 hereof.

     SECTION 3.14. Labor Matters. As of the Closing Date, there are no strikes, lockouts or
slowdowns against any Loan Party pending or, to the knowledge of the Borrowers, threatened. The
hours worked by and payments made to employees of the Loan Parties have not been in violation of
the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing
with such matters to the extent that any such violation could reasonably be expected to have a
Material Adverse Effect. All payments due from any Loan Party, or for which any claim may be made
against any Loan Party, on account of wages and employee health and welfare insurance and other
benefits, have been paid or accrued as a liability on the books of such member. The consummation of
the transactions contemplated by the Loan Documents will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective bargaining agreement to
which any Loan Party is bound. The representations set forth herein shall be updated and
supplemented from time to time as required pursuant to the provisions of Section 5.02 hereof.

     SECTION 3.15. Security Documents. The Security Documents create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid and enforceable
security interest in the Collateral, as applicable, and the Security Documents constitute the
creation of a fully perfected first priority Lien on, and security interest, in, all right, title
and interest of the Loan Parties thereunder in such Collateral, in each case prior and superior in
right to any other Person (subject to Liens on L/C Facility Cash Collateral to secure Indebtedness
permitted by Section 6.01(g) and Permitted Encumbrances having priority over the Lien of the
Collateral Agent by operation of law).

     SECTION 3.16. Federal Reserve Regulations. (a) No Loan Party is engaged principally,
or as one of its important activities, in the business of extending credit for the purpose of
buying or carrying Margin Stock.

     (b) No part of the proceeds of any Loan or any Letter of Credit will be used, whether directly
or indirectly, and whether immediately, incidentally or ultimately, (i) to buy or carry Margin
Stock or to extend credit to others for the purpose of buying or carrying Margin Stock or to refund
indebtedness originally incurred for such purpose or (ii) for any purpose that entails a violation
of, or that is inconsistent with, the provisions of the Regulations of the Board, including
Regulation U or X.

     (c) Less than 25% of the assets of the Borrowers on a consolidated basis consist of Margin
Stock.

55

 

     SECTION 3.17. Solvency. Each of the Loan Parties is Solvent. No transfer of property
is being made by any Loan Party and no obligation is being incurred by any Loan Party in connection
with the transactions contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of any Loan Party.

ARTICLE IV

Conditions

     SECTION 4.01. Closing Date. The obligation of the L/C Issuer and each Lender to make
its initial Credit Extension hereunder is subject to satisfaction (or waiver by the Administrative
Agent) of the following conditions precedent:

     (a) The Agents (or their counsel) shall have received from each party hereto other than the
Lenders either (i) a counterpart of this Agreement and all other Loan Documents signed on behalf of
such party or (ii) written evidence satisfactory to the Agents (which may include telecopy, e-mail
or .pdf transmission of a signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement and all other Loan Documents.

     (b) The Agents shall have received a favorable written opinion (addressed to each Agent and
the Lenders and dated the Closing Date) of Cooley Godward Kronish LLP, counsel for the Loan Parties
substantially in the form of Exhibit C, and covering such other matters relating to the Loan
Parties, the Loan Documents or the transactions contemplated thereby as the Required Lenders shall
reasonably request. The Borrowers hereby request such counsel to deliver such opinion.

     (c) The Agents shall have received such documents and certificates as the Agents or their
counsel may reasonably request relating to the organization, existence and good standing of each
Loan Party, the authorization of the transactions contemplated by the Loan Documents and any other
legal matters relating to the Borrowers, the Facility Guarantors, the Loan Documents or the
transactions contemplated thereby, all in form and substance satisfactory to the Agents and their
counsel.

     (d) The Agents shall have received a certificate, reasonably satisfactory in form and
substance to the Agents, with respect to the solvency of the Lead Borrower and its Subsidiaries on
a consolidated basis as of the Closing Date.

     (e) The consummation of the transactions contemplated hereby shall not (a) violate any
applicable law, statute, rule or regulation or (b) conflict with, or result in a default or event
of default under, and as defined in, any material agreement of any Loan Party.

     (f) All necessary consents and approvals to the transactions contemplated hereby shall have
been obtained and shall be satisfactory to the Agents.

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

56

 

     (h) There shall not have occurred any default of any material contract or agreement of any
Loan Party.

     (i) The Agents shall have completed satisfactory review of the terms and conditions of the
Stock Repurchase.

     (j) The Collateral Agent shall have received all documents and instruments, including Uniform
Commercial Code financing statements, required by law or reasonably requested by the Collateral
Agent to be filed, registered or recorded to create or perfect the first priority Liens intended to
be created under the Loan Documents (subject to Permitted Encumbrances having priority over the
Lien of the Collateral Agent pursuant to operation of law) and all such documents and instruments
shall have been so filed (or provision made therefor), registered or recorded to the satisfaction
of the Collateral Agent.

     (k) All fees due at or immediately after the Closing Date and all costs and expenses incurred
by the Agents in connection with the establishment of the credit facility contemplated hereby
(including the fees and expenses of counsel to the Agents) shall have been paid in full.

     (l) The Borrowers shall have Excess Availability, immediately after giving effect to (i) that
portion of the Stock Repurchase to be consummated on or about the Closing Date, and (ii) any Credit
Extensions made on the Closing Date, of at least $75,000,000.

     (m) There shall have been delivered to the Administrative Agent such additional instruments
and documents as the Agents or counsel to the Agents reasonably may require or request.

     The Administrative Agent shall notify the Borrowers and the Lenders of the Closing Date, and
such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 9.02)
at or prior to 12:00 noon, Boston time, on August ___, 2007, (and, in the event such conditions are
not so satisfied or waived, this Agreement shall terminate at such time).

     SECTION 4.02. Conditions Precedent to Each Loan and Each Letter of Credit.

     The obligation of the Lenders to make each Loan and of the Issuing Bank to issue each Letter
of Credit, is subject to the following conditions precedent:

     (a) Notice. The Administrative Agent shall have received a notice with respect to such
Borrowing or issuance, as the case may be, as required by Article II.

     (b) Representations and Warranties. All representations and warranties contained in
this Agreement and the other Loan Documents or otherwise made in writing in connection herewith or
therewith shall be true and correct in all material respects on and as of the date of
each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if

57

 

made on and as of such date, other than representations and warranties that relate solely to an
earlier date.

     (c) No Default. On the date of each Borrowing hereunder and the issuance of each
Letter of Credit, the Loan Parties shall be in compliance with all of the terms and provisions set
forth herein and in the other Loan Documents to be observed or performed and no Default or Event of
Default shall have occurred and be continuing.

     (d) Borrowing Base Certificate. The Administrative Agent shall have received the
timely delivery of the most recently required Borrowing Base Certificate, with each such Borrowing
Base Certificate including schedules as required herein by the Administrative Agent.

     The request by the Borrowers for, and the acceptance by the Borrowers of, each extension of
credit hereunder shall be deemed to be a representation and warranty by the Borrowers that the
conditions specified in this Section 4.02 have been satisfied at that time and that after giving
effect to such extension of credit the Borrowers shall continue to be in compliance with the
Borrowing Base. The conditions set forth in this Section 4.02 are for the sole benefit of the
Administrative Agent and each Lender and may be waived by the Administrative Agent in whole or in
part without prejudice to the Administrative Agent or any Lender.

ARTICLE V

Affirmative Covenants

     Until the Commitments have expired or been terminated and the principal of and interest on
each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit
shall have expired or terminated and all L/C Disbursements shall have been reimbursed, each Loan
Party covenants and agrees with the Agents and the Lenders that:

     SECTION 5.01. Financial Statements and Other Information. The Borrowers will furnish
to the Agents:

     (a) within ninety (90) days after the end of each fiscal year of the Lead Borrower, its
consolidated balance sheet and related statements of operations, stockholders’ equity and cash
flows as of the end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all audited (in the case only of such consolidated
statements) and reported on by independent public accountants of recognized national standing
(without a “going concern” or like qualification or exception and without a qualification or
exception as to the scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of operations of the
Lead Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;

     (b) within forty-five (45) days after the end of each of the first three fiscal quarters of
the Lead Borrower, (i) its consolidated balance sheet and related statements of operations and
cash flows as of the end of and for such fiscal quarter and the elapsed portion of the fiscal year,

58

 

all certified by one of its Financial Officers as presenting in all material respects the
financial condition and results of operations of the Lead Borrower and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to
normal year end audit adjustments and the absence of footnotes, and (ii) the separate balance sheet
and related statements of operations, stockholders’ equity and cash flows, and a summary of all
Capital Expenditures, as of the end of and for such fiscal quarter and the elapsed portion of the
fiscal year, for the Lead Borrower, all certified by one of its Financial Officers as presenting in
all material respects the financial condition and results of operations of such Persons in
accordance with GAAP consistently applied, subject to normal year end audit adjustments and the
absence of footnotes;

     (c) at any time that a Cash Control Event exists, within 30 days after the end of each fiscal
month of the Lead Borrower, (i) the financial report customarily delivered by the Lead Borrower to
its board of directors entitled “Monthly Board Report”, substantially in the form annexed hereto as
Schedule 5.01(c) and containing, at a minimum, a consolidated balance sheet and related statements
of operations, as of the end of and for such fiscal month and the elapsed portion of the fiscal
year, and (ii) a statement of cash flows for (A) the Lead Borrower and its consolidated
Subsidiaries, and (B) the Lead Borrower for such month and the elapsed portion of the fiscal year;

     (d) concurrently with any delivery of financial statements under clause (a), (b), or (c)
above, a certificate of a Financial Officer of the Lead Borrower (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, and (ii) setting forth reasonably detailed
calculations (A) with respect to the financial statements delivered pursuant to Section 5.01(c),
above, a calculation of the average Excess Availability for purposes of determining the “Applicable
Margin”, and (B) demonstrating compliance with Section 6.11, and (iii) stating whether any change
in GAAP or in the application thereof has occurred since the date of the Lead Borrower’s audited
financial statements referred to in Section 3.04 and, if any such change has occurred, specifying
the effect of such change on the financial statements accompanying such certificate;

     (e) within sixty (60) days after the commencement of each fiscal year of the Lead Borrower, a
consolidated budget by quarter for such fiscal year (including a projected consolidated balance
sheet and related statements of projected operations and cash flow as of the end of and for such
fiscal year) and, promptly when available, any significant revisions of such budget;
provided that if a Cash Control Event exists prior to delivery of such budget, such budget
shall be prepared by month;

     (f) within five (5) Business Days after the end of each fiscal month, a certificate in the
form of Exhibit D (a “Borrowing Base Certificate”) showing the Borrowing Base as of the
close of business on the last day of the immediately preceding fiscal month, each such Certificate
to be certified as complete and correct on behalf of the Borrowers by a Financial Officer of the
Lead Borrower, provided, however, that as long as no Loans are outstanding and the Letter of Credit
Outstandings are less than $100,000,000, such Borrowing Base Certificate shall be required to be
furnished within five (5) Business Days after the end of each fiscal quarter (unless

59

 

the Lead Borrower requests a Loan during such fiscal quarter, in which event a Borrowing Base
Certificate, as of the last day of the fiscal month immediately preceding such request shall be
furnished prior to such Loan being made); and provided, further however, if and so long as Excess
Availability is less than ten percent (10%) of the lesser of the Borrowing Base or the Total
Commitment, such Borrowing Base Certificate (showing the Borrowing Base as of the close of business
on the last day of the immediately preceding week) shall be furnished weekly on Wednesday of each
week;

     (g) promptly upon receipt thereof, copies of all reports submitted to any Loan Party by
independent certified public accountants in connection with each annual, interim or special audit
of the books of the Loan Parties or any of their Subsidiaries made by such accountants, including
any management letter commenting on the Loan Parties’ internal controls submitted by such
accountants to management in connection with their annual audit;

     (h) the financial and collateral reports described on Schedule 5.01(h) hereto, at the times
set forth in such Schedule;

     (i) notice of any intended sale or other disposition of assets of any Loan Party not in the
ordinary course of business or incurrence of any Indebtedness permitted hereunder, in either case,
to the extent the proceeds therefrom would exceed $20,000,000, at least fifteen (15) days prior to
the date of consummation such sale or disposition or incurrence of such Indebtedness; and

     (j) promptly following any request therefor, such other information regarding the operations,
business affairs and financial condition of any Loan Party, or compliance with the terms of any
Loan Document, as the Agents or any Lender may reasonably request.

     SECTION 5.02. Notices of Material Events. The Borrowers will furnish to the
Administrative Agent, the Issuing Bank, the Collateral Agent, and each Lender prompt written notice
of the following:

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

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

     (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, could reasonably be expected to result in a Material Adverse Effect; and

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

     (e) any change in any Borrower’s chief executive officer, president, or chief financial
officer.

60

 

     (f) any failure by any Loan Party to pay rent at any of such Loan Party’s locations, which
failure continues for more than ten (10) days following the day on which such rent first came due.

     (g) the discharge by any Borrower of its present independent accountants or any withdrawal or
resignation by such independent accountants.

     (h) any material change in the business, operations, or financial affairs of the Loan Parties
taken as a whole.

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

     SECTION 5.03. Information Regarding Collateral. (a) The Lead Borrower will furnish to
the Agents prompt written notice of any change (i) in any Loan Party’s corporate name or in any
trade name used to identify it in the conduct of its business or in the ownership of its
properties, (ii) in the location of any Loan Party’s chief executive office, its principal place of
business, any office in which it maintains books or records relating to Collateral owned by it or
any office or facility at which Collateral owned by it is located (including the establishment of
any such new office or facility), provided that, notwithstanding the foregoing, the Lead Borrower
shall only be obligated to furnish a store listing quarterly within 45 days of the end of each
fiscal quarter; (iii) in any Loan Party’s corporate structure or jurisdiction of incorporation or
formation, or (iv) in any Loan Party’s Federal Taxpayer Identification Number or organizational
identification number assigned to it by its state of organization. The Lead Borrower also agrees
promptly to notify the Agents if any material portion of the Collateral is damaged or destroyed.

     (b) Each year, at the time of delivery of annual financial statements with respect to the
preceding fiscal year pursuant to clause (a) of Section 5.01, the Lead Borrower shall deliver to
the Agents a certificate of a Financial Officer of the Lead Borrower setting forth the information
required pursuant to Section 2 of the Perfection Certificate or confirming that there has been no
change in such information since the date of the Perfection Certificate delivered on the Closing
Date or the date of the most recent certificate delivered pursuant to this Section.

61

 

     SECTION 5.04. Existence; Conduct of Business. Each Loan Party will, and will cause
each of the Subsidiaries to, do or cause to be done all things necessary to comply with its
respective charter, certificate of incorporation, articles of organization, and/or other
organizational documents, as applicable; and by-laws and/or other instruments which deal with
corporate governance, and to preserve, renew and keep in full force and effect its legal existence
and, except such as could not reasonably be expected to have a Material Adverse Effect, the rights,
licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material
to the conduct of its business, provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.

     SECTION 5.05. Payment of Obligations. Each Loan Party will, and will cause each of the
Subsidiaries to, pay its Indebtedness and other obligations, including tax liabilities, before the
same shall become delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) such Loan Party or such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such
contest effectively suspends collection of the contested obligation and enforcement of any Lien
securing such obligation and (d) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect. Nothing contained herein shall be
deemed to limit the rights of the Administrative Agent under Section 2.03(b) hereof.

     SECTION 5.06. Maintenance of Properties. Each Loan Party will, and will cause each of
the Subsidiaries to, keep and maintain all property material to the conduct of its business in good
working order and condition, ordinary wear and tear excepted and with the exception of storing
closings and asset dispositions permitted hereunder.

     SECTION 5.07. Insurance. (a) Each Loan Party shall (i) maintain insurance with
financially sound and reputable insurers reasonably acceptable to the Administrative Agent (or, to
the extent consistent with prudent business practice, a program of self-insurance approved by the
Administrative Agent) on such of its property and in at least such amounts and against at least
such risks as is customary with companies in the same or similar businesses operating in the same
or similar locations, including public liability insurance against claims for personal injury or
death occurring upon, in or about or in connection with the use of any properties owned, occupied
or controlled by it (including the insurance required pursuant to the Security Documents); (ii)
maintain such other insurance as may be required by law; and (iii) furnish to the Administrative
Agent, upon written request, full information as to the insurance carried.

     (b) Fire and extended coverage policies maintained with respect to any Collateral shall be
endorsed or otherwise amended to include (i) a non-contributing mortgage clause (regarding
improvements to real property) and lenders’ loss payable clause (regarding personal property), in
form and substance satisfactory to the Collateral Agent, which endorsements or amendments shall
provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties under the
policies directly to the Collateral Agent, (ii) a provision to the effect that none of the Loan
Parties, the Administrative Agent, the Collateral Agent, or any other party shall be a coinsurer
and (iii) such other provisions as the Collateral Agent may reasonably require from time to time to
protect the interests of the Lenders. Commercial general liability policies shall be

62

 

endorsed to
name the Collateral Agent as an additional insured. Business interruption policies
shall name the Collateral Agent as a loss payee and shall be  endorsed or amended to include
(i) a provision that, from and after the Closing Date, the insurer shall pay all proceeds otherwise
payable to the Loan Parties under the policies directly to the Administrative Agent or the
Collateral Agent, (ii) a provision to the effect that none of the Loan Parties, the Administrative
Agent, the Collateral Agent or any other party shall be a co-insurer and (iii) such other
provisions as the Collateral Agent may reasonably require from time to time to protect the
interests of the Lenders. Each such policy referred to in this paragraph also shall provide that it
shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium except upon
not less than 10 days’ prior written notice thereof by the insurer to the Collateral Agent (giving
the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other
reason except upon not less than 45 days’ prior written notice thereof by the insurer to the
Collateral Agent. The Borrowers shall deliver to the Collateral Agent, prior to the cancellation,
modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement
policy (or other evidence of renewal of a policy previously delivered to the Collateral Agent)
together with evidence satisfactory to the Collateral Agent of payment of the premium therefor.

     SECTION 5.08. Casualty and Condemnation. The Lead Borrower will furnish to the Agents
and the Lenders prompt written notice of any casualty or other insured damage to any material
portion of any Collateral or the commencement of any action or proceeding for the taking of any
material portion of the Collateral or any part thereof or interest therein under power of eminent
domain or by condemnation or similar proceeding.

     SECTION 5.09. Books and Records; Inspection and Audit Rights; Appraisals. (a) Each
Loan Party will, and will cause each of the Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. Each Loan Party will, and will cause each of the
Subsidiaries to, permit any representatives designated by any Agent, upon reasonable prior notice,
to visit and inspect its properties, to examine and make extracts from its books and records, and
to discuss its affairs, finances and condition with its officers and independent accountants, all
at such reasonable times during normal business hours and as often as reasonably requested.

     (b) Each Loan Party will, and will cause each of the Subsidiaries to, from time to time upon
the request of the Collateral Agent or the Required Lenders through the Administrative Agent,
permit any Agent or professionals (including investment bankers, consultants, accountants, lawyers
and appraisers) retained by the Agents, upon reasonable prior notice and during normal business
hours, to conduct appraisals, commercial finance examinations and other evaluations, including,
without limitation, of (i) the Borrowers’ practices in the computation of the Borrowing Base and
(ii) the assets included in the Borrowing Base and related financial information such as, but not
limited to, sales, gross margins, payables, accruals and reserves, and pay the reasonable fees and
expenses of the Agents or such professionals with respect to such evaluations and appraisals,
provided that (x) if at any time there are no Loans (exclusive of any Letters of Credit)
outstanding, the Borrowers shall not be required to pay for any such commercial finance
examinations and appraisals undertaken except as set forth below, (y) if at any time there are any
Loans outstanding, the Collateral Agent shall have the right, in its

63

 

discretion, to undertake one
(1) commercial finance examination and one (1) appraisal in any twelve (12) month period at the
Borrowers’ expense, and (z) after the occurrence and during the
continuance of a Cash Control Event, the Collateral Agent shall have
the right, in its discretion, to undertake two (2) commercial finance examinations and two (2) appraisals in any
twelve (12) month period at the Borrowers’ expense, and provided further that, as long as a Default
has occurred and is continuing, the Borrowers shall be required to pay for all commercial finance
examinations and appraisals undertaken. Notwithstanding the foregoing limitations on the Loan
Parties’ obligation to pay the expenses for appraisals and commercial finance examinations prior to
the occurrence and during the continuance of an Event of Default, any Agent may undertake such
additional appraisals and commercials finance examinations prior to the occurrence of an Event of
Default as it, in its reasonable discretion, deems necessary, at the expense of the Lenders.

     SECTION 5.10. Compliance with Laws. Each Loan Party will, and will cause each of the
Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority
applicable to it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse Effect.

     SECTION 5.11. Use of Proceeds and Letters of Credit. The proceeds of Loans made
hereunder and Letters of Credit issued hereunder will be used only (a) to refinance outstanding
Indebtedness, (b) to finance the acquisition of working capital assets of the Borrowers, including
the purchase of inventory and equipment, in each case in the ordinary course of business, (c) to
finance Capital Expenditures of the Borrowers, and (d) for general corporate purposes, including
the Stock Repurchase, other stock and bond repurchases and the issuance of Letters of Credit. No
part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that
entails a violation of any of the Regulations of the Board, including Regulations U and X.

     SECTION 5.12. Additional Subsidiaries. If any additional Subsidiary is formed or
acquired after the Closing Date, the Lead Borrower will notify the Agents and the Lenders thereof
and (a) if such Subsidiary is not a Foreign Subsidiary, the Borrowers will cause such Subsidiary to
become a Loan Party hereunder and under each applicable Security Document in the manner provided
therein within ten Business Days after such Subsidiary is formed or acquired and promptly take such
actions to create and perfect Liens on such Subsidiary’s assets to secure the Obligations as any
Agent or the Required Lenders shall reasonably request and (b) if any shares of capital stock or
Indebtedness of such Subsidiary are owned by or on behalf of any Loan Party, the Borrowers will
cause such shares and promissory notes evidencing such Indebtedness to be pledged within ten
Business Days after such Subsidiary is formed or acquired (except that, if such Subsidiary is a
Foreign Subsidiary, shares of stock of such Subsidiary to be pledged may be limited to 65% of the
outstanding shares of voting stock of such Subsidiary).

     SECTION 5.13. Further Assurances. (a) Each Loan Party will execute any and all
further documents, financing statements, agreements and instruments, and take all such further
actions (including the filing and recording of financing statements and other documents), that may
be required under any applicable law, or which any Agent or the Required Lenders may reasonably
request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve,
protect or perfect the Liens created or intended to be created by the Security

64

 

Documents or the
validity or priority of any such Lien, all at the expense of the Loan Parties. The Loan Parties
also agree to provide to the Agents, from time to time upon request, evidence
reasonably satisfactory to the Agents as to the perfection and priority of the Liens created
or intended to be created by the Security Documents.

     (b) If any material assets are acquired by any Loan Party after the Closing Date (other than
assets constituting Collateral under a Security Agreement that become subject to the Lien of a
Security Agreement upon acquisition thereof), the Lead Borrower will notify the Agents and the
Lenders thereof, and the Loan Parties will cause such assets to be subjected to a Lien securing the
Obligations and will take such actions as shall be necessary or reasonably requested by any Agent
or the Required Lenders to grant and perfect such Liens, including actions described in paragraph
(a) of this Section, all at the expense of the Loan Parties. Without limiting the foregoing, if a
Loan Party acquires title to any real property with, in whole or in part, the proceeds of any
Credit Extension hereunder, the Loan Party shall execute a Mortgage and such other documents as the
Collateral Agent may reasonably request in order to perfect the Lien of the Collateral Agent
therein and in the assets and rights associated therewith.

     (c) Upon the request of the Administrative Agent, the Borrowers shall cause each of its
customs brokers to deliver an agreement to the Administrative Agent covering such matters and in
such form as the Administrative Agent may reasonably require.

ARTICLE VI

Negative Covenants

     Until the Commitments have expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired
or terminated and all L/C Disbursements shall have been reimbursed, each Loan Party covenants and
agrees with the Agents and the Lenders that:

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

     (a) Indebtedness created under the Loan Documents;

     (b) Indebtedness set forth in Schedule 6.01;

     (c) Indebtedness of any Loan Party to any other Loan Party;

     (d) Guarantees by any Loan Party of Indebtedness of any other Loan Party or Subsidiary
provided that Guarantees by any Borrower of Indebtedness shall be subject to Section 6.04;

     (e) Indebtedness of any Loan Party to finance the acquisition, construction or improvement of
any fixed or capital assets or software, including Capital Lease Obligations and any Indebtedness
assumed in connection with the acquisition of any such assets or secured by a

65

 

Lien on any such
assets prior to the acquisition thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier
maturity date or decreased weighted average life thereof, provided 
that for purposes of this Section 6.01, no real estate lease shall be deemed a Capital
Lease, and provided further that the aggregate principal amount of Indebtedness permitted
by this clause (e) shall not exceed $100,000,000 at any time outstanding;

     (f) Indebtedness incurred to refinance any Real Estate owned by any Loan Party or incurred in
connection with sale-leaseback transactions permitted hereunder, provided that the terms of
such Indebtedness are reasonably acceptable to the Administrative Agent;

     (g) Indebtedness incurred under the Coweta County Bond Financing Transaction;

     (h) Indebtedness of Foreign Subsidiaries (other than the Canadian Operating Subsidiary) in an
aggregate principal amount not exceeding $25,000,000 at any time outstanding;

     (i) other unsecured Indebtedness or subordinated Indebtedness, provided that the terms of such
Indebtedness are customary for the applicable type of financing;

     (j) Indebtedness with respect to any L/C Facility, provided that the maximum principal
amount of all L/C Facilities shall not exceed $100,000,000 as may be permitted under such L/C
Facilities; and

     (k) any refinancing of the Indebtedness described in any of the foregoing clauses (b), (c),
(d), (e), (g), (h), (i), or (j) as long as the principal balance thereof is not increased, the
other limitations set forth in those clauses are fulfilled and no Default or Event of Default
exists or would arise after giving effect thereto.

     SECTION 6.02. Liens. The Loan Parties will not, and will not permit any Subsidiary
to, create, incur, assume or permit to exist any Lien on any property or asset now owned or
hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable)
or rights in respect of any thereof, except:

     (a) Liens created under the Loan Documents;

     (b) Permitted Encumbrances;

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

     (d) Liens on fixed or capital assets or software acquired, constructed or improved by any Loan
Party, provided that (i) such Liens secure Indebtedness permitted by Section 6.01(e), (ii)
such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (iii) the Indebtedness

66

 

secured
thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or
capital assets or software, and (iv) such Liens shall not apply to any other property or assets of
the Loan Parties;

     (e) Liens to secure Indebtedness permitted by Section 6.01(f) provided that such Liens
shall not apply to any property or assets of the Loan Parties other than the Real Estate so
refinanced or which is the subject of a sale-leaseback transaction;

     (f) Liens to secure leases held by any Lender or any of its Affiliates;

     (g) Liens to secure Indebtedness permitted by Section 6.01(h), provided that such
Liens shall attach only to the property and assets of the Foreign Subsidiary obligated on such
Indebtedness and not to the property of any Loan Party;

     (h) Liens existing on fixed or capital assets or software of a Person immediately prior to its
being consolidated with or merged into the Lead Borrower or a Subsidiary or its becoming a
Subsidiary, or a Lien existing on any fixed or capital assets or software acquired by the Lead
Borrower or any Subsidiary at the time such property is so acquired (whether or not the
Indebtedness secured thereby shall have been assumed);

     (i) Precautionary filings in respect of true leases;

     (j) Liens on L/C Facility Cash Collateral to secure Indebtedness permitted by Section 6.01(g);

     (k) Liens to secure Indebtedness permitted by Section 6.01(g) provided that such Liens
shall not apply to any property or assets of the Loan Parties other than the equipment which is the
subject of the Coweta County Bond Financing Transaction; and

     (l) Refinancings, renewals and replacements of Liens permitted under this Section 6.02
provided that (A) the amount of Indebtedness secured thereby is not increased, (B) such Liens do
not extend to any property or assets of the Loan Parties which immediately prior to such
refinancing, renewal or replacement were not subject to a Lien permitted hereunder, and (C) no
Default or Event of Default exists or would arise after giving effect thereto.

67

 

     SECTION 6.03. Fundamental Changes. (a) The Loan Parties will not merge into or
consolidate with any other Person, or permit any other Person to merge into or consolidate with it,
or liquidiate or dissolve, except that if at the time thereof and immediately after giving effect
thereto no Default shall have occurred and be continuing, (A) PET WISE INC. may be dissolved,
provided that (x) at the time of dissolution, PET WISE INC. shall have no substantial
assets and shall not conduct any material business, and (y) the Loan Parties provide written notice
to the Agents of such dissolution concurrently therewith; and (B) (i) any Subsidiary may merge into
a Borrower in a transaction in which a Borrower is the surviving corporation, and (ii) any
Subsidiary that is not a Borrower may merge into any Subsidiary that is not a Borrower,
provided that any such merger involving a Person that is not a wholly owned Subsidiary
immediately prior to such merger shall not be permitted unless also permitted by Section 6.04.

     (b) The Loan Parties will not engage to any material extent in any business other than
businesses of the type conducted by the Loan Parties on the date of execution of this Agreement and
businesses reasonably related thereto.

     SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Loan
Parties will not purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Subsidiary prior to such merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right to acquire any of
the foregoing) of, make or permit to exist any loans or advances (other than accounts receivable
created, and extensions of credit made, in the ordinary course of business) to, guarantee any
obligations of, or make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any
assets of any other Person constituting a business unit, except:

     (a) Permitted Investments;

     (b) investments existing on the Closing Date, and set forth on Schedule 6.04, to the extent
such investments would not be permitted under any other clause of this Section;

     (c) equity investments, loans or advances made by any Loan Party to any other Loan Party,
provided that any such loans and advances made by a Loan Party shall be evidenced by a
promissory note pledged pursuant to the Pledge Agreement;

     (d) Guarantees constituting Indebtedness permitted by Section 6.01, provided that such
Guarantees by the Borrowers, other than Guarantees of Indebtedness permitted under Section 6.01(g)
or 6.01(i), shall not exceed $20,000,000 in the aggregate at any time outstanding;

     (e) investments received in connection with the bankruptcy or reorganization of, or settlement
of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary
course of business;

     (f) loans or advances to employees for the purpose of travel, entertainment or relocation in
the ordinary course of business in an amount not to exceed $1,000,000 to any employee or $7,500,000
in the aggregate at any time outstanding;

68

 

     (g) acquisitions of the capital stock or assets of any other Person, provided that (i) no Cash
Control Event exists immediately prior to, or after giving effect to, the acquisition, and (ii) the
provisions of Section 5.12 are satisfied, or if the transaction is an asset acquisition, reasonably
promptly after such acquisition, the applicable Loan Parties shall have executed such documents and
agreements as the Collateral Agent shall have reasonably requested in order to create and perfect
the Collateral Agent’s Lien on the assets so acquired.

     (h) equity investments, loans or advances made by any Loan Party to any Foreign Subsidiary in
an aggregate amount not to exceed $10,000,000 outstanding at any time provided that (i) the
Borrowers shall be in compliance with the provisions of Section 6.11 hereof, immediately prior to,
and immediately after giving effect to, such investment, loan or advance, and on a twelve month pro
forma basis thereafter, and (ii) no Default or Event of Default exists immediately prior to, or
after giving effect, to any such investment, loan or advance;

     (i) working capital advances to veterinarians who are tenants of properties owned by or leased
by a Loan Party in an aggregate amount not to exceed $15,000,000 outstanding at any
time, provided that no Default or Event of Default exists immediately prior to, or after
giving effect, to any such advance;

     (j) loans to, or guarantees of obligations of, officers of any Loan Party to exercise
incentive stock options of the Lead Borrower, to purchase capital stock of the Lead Borrower or to
pay alternative minimum tax obligations of such officers, provided that no Default or Event of
Default exists immediately prior to, or after giving effect, to any such loan or guarantee, and
provided further that such loans or guarantees shall not exceed an amount equal to $7,500,000 in
the aggregate at any time outstanding;

     (k) Investments consisting of the purchase of industrial revenue development bonds in
connection with the Coweta County Bond Financing Transaction; and

     (l) investments in capital stock of PETsMART, Inc. or its Subsidiaries permitted under Section
6.06(a).

     SECTION 6.05. Asset Sales. The Loan Parties will not, and will not permit any of the
Subsidiaries to, sell, transfer, lease or otherwise dispose of any asset, including any capital
stock, nor will the Loan Parties permit any of the Subsidiaries to issue any additional shares of
their capital stock or other ownership interest in such Subsidiary, except:

     (a) (i) sales of Inventory and licensing of intellectual property in the ordinary course of
business, or (ii) sales or disposals of used or surplus equipment or software, or (iii) Permitted
Investments, in each case in the ordinary course of business;

     (b) sales, transfers and dispositions among the Loan Parties and their Subsidiaries,
provided that any such sales, transfers or dispositions involving a Subsidiary that is not
a Loan Party shall be made in compliance with Section 6.07;

     (c) sale-leaseback transactions (i) involving any Real Estate, and (ii) in connection with the
Coweta County Bond Financing Transaction; and

69

 

     (d) Provided that no Overadvance shall result after giving effect thereto, bulk sales or
dispositions of the Borrowers’ Inventory or Equipment not in the ordinary course of business in an
amount not to exceed, in the aggregate from and after the Closing Date, fifteen percent (15%) of
the Cost of the Borrowers’ Eligible Inventory or Equipment, as applicable, as of the Closing Date;

provided that all sales, transfers, leases and other dispositions permitted hereby (other
than sales, transfers and other dispositions permitted under clause (b)) shall be made at arm’s
length and for fair value; and further provided that the authority granted under clauses
(b) through (d) hereof may be terminated in whole or in part by the Agents upon the occurrence and
during the continuance of any Event of Default.

     SECTION 6.06. Restricted Payments; Certain Payments of Indebtedness. (a) The Loan
Parties will not, and will not permit any Subsidiary to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except as long as no Default or Event of Default
exists or would arise therefrom (i) the Loan Parties may declare and pay dividends with
respect to their capital stock payable solely in additional shares of their common stock, (ii)
the Subsidiaries of the Lead Borrower may declare and pay dividends ratably with respect to their
capital stock, (iii) the Lead Borrower may effect the initial Stock Repurchase on the Closing Date,
and (iv) the Lead Borrower may repurchase its capital stock (including any Stock Purchase occurring
after the Closing Date) or declare and pay cash dividends or other distributions if the Payment
Conditions are then satisfied.

     (b) The Loan Parties will not, and will not permit any Subsidiary to, make or agree to pay or
make, directly or indirectly, any payment or other distribution (whether in cash securities or
other property) of or in respect of principal of or interest on any Indebtedness, or any payment or
other distribution (whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any Indebtedness, except:

     (i) payment of regularly scheduled interest and principal payments as and when due in
respect of any permitted Indebtedness; and

     (ii) payments under any L/C Facility, as and when due; and

     (iii) refinancings of Indebtedness described in clause (i) or (ii), above, to the
extent permitted by Section 6.01.

70

 

     SECTION 6.07. Transactions with Affiliates. The Loan Parties will not, and will not
permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase,
lease or otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, any of its Affiliates, except (a) transactions in the ordinary course of
business that are at prices and on terms and conditions not less favorable to the Loan Parties or
such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b)
investments permitted under clauses (f), (j), or (k) of Section 6.04, and (c) transactions between
or among the Borrowers not involving any other Affiliate.

     SECTION 6.08. Restrictive Agreements. The Loan Parties will not, and will not permit
any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or
other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the
Loan Parties or any Subsidiary to create, incur or permit to exist any Lien upon any of its
property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its capital stock or to make or repay loans or advances to the Loan
Parties or any other Subsidiary or to guarantee Indebtedness of the Loan Parties or any other
Subsidiary, provided that (i) the foregoing shall not apply to restrictions and conditions imposed
by law or by any Loan Document, (ii) clause (a) of the foregoing shall not apply to restrictions or
conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if
such restrictions or conditions apply only to the property or assets securing such Indebtedness and
(iii) clause (b) shall not apply to customary restrictions set forth in agreements of Foreign
Subsidiaries or the Lead Borrower related to their Indebtedness or leases on the ability to pay
dividends, and (iv) clause (a) of the foregoing shall not apply to customary provisions in leases,
licenses and other agreement restricting the assignment, sublicensing, or subleasing thereof.

     SECTION 6.09. Amendment of Material Documents. The Loan Parties will not, and will not
permit any Subsidiary to, amend, modify or waive any of its rights under any leases or subleases
relating to real estate, including, without limitation, the Real Estate, or under the Coweta County
Bond Financing Transaction, to the extent that such amendment, modification or waiver would be
materially adverse to the interests of the Lenders.

     SECTION 6.10. Additional Subsidiaries. The Loan Parties will not, and will not permit
any Subsidiary to, create any additional Subsidiary unless the requirements of Section 5.12 are
satisfied contemporaneously therewith.

     SECTION 6.11. Minimum Excess Availability. If at any time, Excess Availability is less
than ten percent (10%) of the Total Commitment, the Loan Parties shall maintain a Consolidated
Fixed Charge Coverage Ratio, calculated on a monthly basis, equal to or greater than 1.1: 1.0.
Such Consolidated Fixed Charge Coverage Ratio shall be first tested as of the fiscal month ending
immediately prior to the date that Excess Availability is less than ten percent (10%) of the Total
Commitment for which financial statements have been delivered to the Administrative Agent.

71

 

ARTICLE VII

Events of Default

     SECTION 7.01. Events of Default. If any of the following events (“Events of Default”)
shall occur:

     (a) the Loan Parties shall fail to pay any principal of any Loan or any reimbursement
obligation in respect of any L/C Disbursement when and as the same shall become due and payable,
whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

     (b) the Loan Parties shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in clause (a) of this Article) payable under this Agreement or
any other Loan Document, within five (5) Business Days of the date when the same shall become due
and payable;

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

     (d) the Loan Parties shall fail to observe or perform any covenant, condition or agreement
contained in Section 2.22, in Sections 5.1, 5.4, 5.7, 5.9(b), 5.11 or 5.12, or in Article VI;

     (e) any Loan Party shall fail to observe or perform any covenant, condition or agreement
contained in any Loan Document (other than those specified in clause (a), (b), (c), or (d) of this
Article), and such failure shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent to the Lead Borrower (which notice will be given at the request of
any Lender);

     (f) any Loan Party shall fail to make any payment (whether of principal or interest and
regardless of amount) in respect of any Material Indebtedness when and as the same shall become due
and payable (after giving effect to the expiration of any grace or cure period set forth therein);

     (g) any event or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits (with or without the giving of notice, the
lapse of time or both) the holder or holders of any such Material Indebtedness or any trustee or
agent on its or their behalf to cause any such Material Indebtedness to become due, or to require
the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity;

     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of any Loan Party or its

72

 

debts,
or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for a
substantial part of its assets, and, in any such case, such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall
be entered;

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

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

     (k) one or more judgments for the payment of money to the extent not covered by insurance
(coverage for which has not been disaffirmed or reserved by the insurer) in an aggregate amount in
excess of $25,000,000 shall be rendered against any Loan Party or any combination thereof and the
same shall remain undischarged for a period of 30 consecutive days during which execution shall not
be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any material assets of any Loan Party to enforce any such judgment;

     (l) an ERISA Event shall have occurred that when taken together with all other ERISA Events
that have occurred, could reasonably be expected to result in liability of the Loan Parties in an
aggregate amount exceeding $5,000,000;

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

          (ii) any challenge by or on behalf of any other Person to the validity of any Loan Document or
the applicability or enforceability of any Loan Document strictly in accordance with the subject
Loan Document’s terms or which seeks to void, avoid, limit, or otherwise adversely affect any
security interest created by or in any Loan Document or any payment made pursuant thereto, in each
case, as to which an order or judgment has been entered adverse to the Agents and the Lenders.

73

 

          (iii) any Lien purported to be created under any Security Document shall cease to be, or shall
be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, with the
priority required by the applicable Security Document (subject to the first priority of Liens on
L/C Facility Cash Collateral to secure Indebtedness permitted by Section 6.01(g), notwithstanding
anything to the contrary in any Security Document), except as a result
of the sale or other disposition of the applicable Collateral in a transaction permitted under
the Loan Documents;

     (n) a Change in Control shall occur;

     (o) the occurrence of any uninsured loss to the Collateral in excess of $10,000,000;

     (p) the indictment of, or institution of any legal process or proceeding against, any Loan
Party, under any federal, state, municipal, and other civil or criminal statute, rule, regulation,
order, or other requirement having the force of law where the relief, penalties, or remedies sought
or available include the forfeiture of any property of any Loan Party with an aggregate value equal
to or greater than $5,000,000 and/or the imposition of any stay or other order, the effect of which
could reasonably be to restrain in any material way the conduct by the Loan Parties, taken as a
whole, of their business in the ordinary course;

     (q) any Loan Party shall fail to make any payment (whether of principal or interest and
regardless of amount) in respect of any L/C Facility when and as the same shall become due and
payable (after giving effect to the expiration of any grace or cure period set forth therein); or
any event or condition has occurred that has resulted in any Indebtedness with respect to any L/C
Facility becoming due prior to its scheduled maturity or that enables or permits (with or without
the giving of notice, the lapse of time or both) the holder or holders of any such Indebtedness to
cause any such Indebtedness to become due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity; or

     (r) except to the extent otherwise permitted in this Agreement, the determination by any
Borrower, whether by vote of such Borrower’s board of directors or otherwise to: suspend the
operation of such Borrower’s business in the ordinary course, liquidate all or a material portion
of such Borrower’s assets or store locations, or employ an agent or other third party to conduct
any so-called store closing, store liquidation or “Going-Out-Of-Business” sales;

then, and in every such event (other than an event with respect to any Loan Party described in
clause (h) or (i) of this Article), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to
the Lead Borrower, take either or both of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be due and payable),
and thereupon the principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall
become due and payable immediately, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Loan Parties;

74

 

and in case of any event with respect to
any Loan Party described in clause (h) or (i) of this Article, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued interest thereon
and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Loan Parties.

     SECTION 7.02. When Continuing.

     For all purposes under this Agreement, each Default and Event of Default that has occurred
shall be deemed to be continuing at all times thereafter unless it either (a) is cured or corrected
to the reasonable written satisfaction of the Lenders in accordance with Section 9.02, or (b) is
waived in writing by the Lenders in accordance with Section 9.02.

     SECTION 7.03. Remedies on Default

     In case any one or more of the Events of Default shall have occurred and be continuing, and
whether or not the maturity of the Loans shall have been accelerated pursuant hereto, the
Administrative Agent may proceed to protect and enforce its rights and remedies under this
Agreement, the Notes or any of the other Loan Documents by suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any covenant or agreement contained
in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations
are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of the Agents or the Lenders. No
remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or any other provision of law.

     SECTION 7.04. Application of Proceeds

     After the occurrence of an Event of Default and acceleration of the Obligations, all proceeds
realized from any Loan Party or on account of any Collateral or, without limiting the foregoing, on
account of any Prepayment Event shall be applied in the manner set forth in Section 6.02 of a
Security Agreement. All amounts required to be applied to Loans hereunder (other than Swingline
Loans) shall be applied ratably in accordance with each Lender’s Commitment Percentage.

ARTICLE VIII

The Agents

     SECTION 8.01. Administration by Administrative Agent.

     The general administration of the Loan Documents shall be by the Administrative Agent. The
Lenders, the Collateral Agent and the Issuing Bank each hereby irrevocably authorizes the
Administrative Agent (i) to enter into the Loan Documents to which it is a party and (ii) at its
discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or

75

 

refrain from exercising such powers under the Loan Documents and the Notes as are delegated by the
terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto.
The Administrative Agent shall have no duties or responsibilities except as set forth in this
Agreement and the remaining Loan Documents.

     SECTION 8.02. The Collateral Agent.

     Each Lender, the Administrative Agent and the Issuing Bank hereby irrevocably (i) designate
Bank of America as Collateral Agent under this Agreement and the other Loan Documents, (ii)
authorize the Collateral Agent to enter into the Collateral Documents and the other Loan Documents
to which it is a party and to perform its duties and obligations thereunder and (iii) agree and
consent to all of the provisions of the Security Documents. All Collateral shall be held or
administered by the Collateral Agent (or its duly-appointed agent) for its benefit and for the
ratable benefit of the other Secured Parties. Any proceeds received by the Collateral Agent from
the foreclosure, sale, lease or other disposition of any of the Collateral and any other proceeds
received pursuant to the terms of the Security Documents or the other Loan Documents shall be paid
over to the Administrative Agent for application as provided in Sections 2.19, 2.23, or 7.04, as
applicable.

     SECTION 8.03. Sharing of Excess Payments.

     Each of the Lenders, the Agents and the Issuing Bank agrees that if it shall, through the
exercise of a right of banker’s lien, setoff or counterclaim against the Loan Parties, including,
but not limited to, a secured claim under Section 506 of the Bankruptcy Code or other security or
interest arising from, or in lieu of, such secured claim and received by such Lender, any Agent or
the Issuing Bank under any applicable bankruptcy, insolvency or other similar law, or otherwise,
obtain payment in respect of the Obligations owed it (an “excess payment”) as a result of
which such Lender, such Agent or the Issuing Bank has received payment of any Loans or other
Obligations outstanding to it in excess of the amount that it would have received if all payments
at any time applied to the Loans and other Obligations had been applied in the order of priority
set forth in Section 2.23, then such Lender, Agent or the Issuing Bank shall promptly purchase at
par (and shall be deemed to have thereupon purchased) from the other Lenders, such Agent and the
Issuing Bank, as applicable, a participation in the Loans and Obligations outstanding to such other
Persons, in an amount determined by the Administrative Agent in good faith as the amount necessary
to ensure that the economic benefit of such excess payment is reallocated in such manner as to
cause such excess payment and all other payments at any time applied to the Loans and other
Obligations to be effectively applied in the order of priority set forth in Section 2.23
pro rata in proportion to its Commitment; provided, that if any such excess
payment is thereafter recovered or otherwise set aside such purchase of participations shall be
correspondingly rescinded (without interest), and provided further that the foregoing
provisions shall not apply to any L/C Facility Cash Collateral (which shall be retained by the
financial institution party to such L/C Facility). The Loan Parties expressly consent to the
foregoing arrangements and agree that any Lender, any Agent or the Issuing Bank holding (or deemed
to be holding) a participation in any Loan or other Obligation may exercise any and all rights of
banker’s lien, setoff or counterclaim with respect to any and all moneys owing by such Loan Party
to such Lender, such

76

 

Agent or the Issuing Bank as fully as if such Lender, Agent or the Issuing
Bank held a Note and was the original obligee thereon, in the amount of such participation.

     SECTION 8.04. Agreement of Required Lenders.

     (i) Upon any occasion requiring or permitting an approval, consent, waiver, election or other
action on the part of only the Required Lenders, action shall be taken by the Agents for
and on behalf or for the benefit of all Lenders upon the direction of the Required Lenders,
and any such action shall be binding on all Lenders, and (ii) upon any occasion requiring or
permitting an approval, consent, waiver, election or other action on the part of the Required
Supermajority Lenders, action shall be taken by the Agents for and on behalf or for the benefit of
all Lenders upon the direction of the Required Supermajority Lenders and any such action shall be
binding on all Lenders. No amendment, modification, consent, or waiver shall be effective except in
accordance with the provisions of Section 9.02.

     (ii) Upon the occurrence of an Event of Default, the Agents shall (A) within a reasonable time
after obtaining actual knowledge thereof, notify the Lenders thereof, and (B) (subject to the
provisions of Section 9.02) take such action with respect thereto as may be reasonably directed by
the Required Lenders; provided that unless and until the Agents shall have received such
directions, the Agents may (but shall not be obligated to) take such action as they shall deem
advisable in the best interests of the Lenders. In no event shall the Agents be required to comply
with any such directions to the extent that the Agents believe that the Agents’ compliance with
such directions would be unlawful or commercially unreasonable.

     SECTION 8.05. Liability of Agents.

     (i) Each of the Agents, when acting on behalf of the Lenders and the Issuing Bank, may execute
any of its respective duties under this Agreement by or through any of its respective officers,
agents and employees, and none of the Agents nor their respective directors, officers, agents or
employees shall be liable to any of the Lenders or the Issuing Bank for any action taken or omitted
to be taken in good faith, or be responsible to any of the Lenders or the Issuing Bank for the
consequences of any oversight or error of judgment, or for any loss, except to the extent of any
liability imposed by law by reason of such Agent’s own gross negligence or willful misconduct. The
Agents and their respective directors, officers, agents and employees shall in no event be liable
to any of the Lenders or the Issuing Bank for any action taken or omitted to be taken by them
pursuant to instructions received by them from the Required Lenders, or Required Supermajority
Lenders, as applicable, or in reliance upon the advice of counsel selected by the Agents. Without
limiting the foregoing, none of the Agents, nor any of their respective directors, officers,
employees, or agents shall be responsible to any Lender or the Issuing Bank for the due execution,
validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement,
warranty or representation in, this Agreement, any Loan Document or any related agreement, document
or order, or shall be required to ascertain or to make any inquiry concerning the performance or
observance by any Loan Party of any of the terms, conditions, covenants, or agreements of this
Agreement or any of the Loan Documents.

77

 

     (ii) None of the Agents nor any of their respective directors, officers, employees, or agents
shall have any responsibility to the Loan Parties on account of the failure or delay in performance
or breach by any Lender (other than by the Agent in its capacity as a Lender) or the Issuing Bank
of any of their respective obligations under this Agreement or the Notes or any of the Loan
Documents or in connection herewith or therewith.

     (iii) The Administrative Agent and the Collateral Agent, in such capacities hereunder, shall
be entitled to rely on any communication, instrument, or document reasonably believed by such Agent
to be genuine or correct and to have been signed or sent by a Person or Persons
believed by such Agent to be the proper Person or Persons, and, such Agent shall be entitled
to rely on advice of legal counsel, independent public accountants, and other professional advisers
and experts selected by such Agent.

     SECTION 8.06. Reimbursement and Indemnification.

     Each Lender agrees (i) to reimburse (x) each Agent for such Lender’s Commitment Percentage of
any expenses and fees incurred by such Agent for the benefit of the Lenders or the Issuing Bank
under this Agreement, the Notes and any of the Loan Documents, including, without limitation,
counsel fees and compensation of agents and employees paid for services rendered on behalf of the
Lenders or the Issuing Bank, and any other expense incurred in connection with the operations or
enforcement thereof not reimbursed by the Loan Parties and (y) each Agent for such Lender’s
Commitment Percentage of any expenses of such Agent incurred for the benefit of the Lenders or the
Issuing Bank that the Loan Parties have agreed to reimburse pursuant to Section 9.03 and has failed
to so reimburse and (ii) to indemnify and hold harmless the Agents and any of their directors,
officers, employees, or agents, on demand, in the amount of such Lender’s Commitment Percentage,
from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against it or any of them in any way relating to or arising
out of this Agreement, the Notes or any of the Loan Documents or any action taken or omitted by it
or any of them under this Agreement, the Notes or any of the Loan Documents to the extent not
reimbursed by the Loan Parties (except such as shall result from their respective gross negligence
or willful misconduct).

     SECTION 8.07. Rights of Agents.

     It is understood and agreed that Bank of America shall have the same rights and powers
hereunder (including the right to give such instructions) as the other Lenders and may exercise
such rights and powers, as well as its rights and powers under other agreements and instruments to
which it is or may be party, and engage in other transactions with the Borrowers, as though it were
not the Administrative Agent or the Collateral Agent, respectively, of the Lenders under this
Agreement.

78

 

     SECTION 8.08. Independent Lenders and Issuing Bank.

     The Lenders and the Issuing Bank each acknowledge that they have decided to enter into this
Agreement and to make the Loans or issue the Letters of Credit hereunder based on their own
analysis of the transactions contemplated hereby and of the creditworthiness of the Loan Parties
and agree that the Agents shall bear no responsibility therefor.

     SECTION 8.09. Notice of Transfer.

     The Agents may deem and treat a Lender party to this Agreement as the owner of such Lender’s
portion of the Loans for all purposes, unless and until, and except to the extent, an Assignment
and Acceptance shall have become effective as set forth in Section 9.05(b).

     SECTION 8.10. Successor Agent

     Any Agent may resign at any time by giving thirty (30) Business Days’ written notice thereof
to the Lenders, the Issuing Bank, the other Agent and the Lead Borrower. Upon any such resignation
of any Agent, the Required Lenders shall have the right to appoint a successor Agent, which so long
as there is no Default, or Event of Default, shall be reasonably satisfactory to the Lead Borrower
(whose consent shall not be unreasonably withheld or delayed). If no successor Agent shall have
been so appointed by the Required Lenders and shall have accepted such appointment, within 30 days
after the retiring Agent’s giving of notice of resignation, the retiring Agent may, on behalf of
the Lenders, the other Agent and the Issuing Bank, appoint a successor Agent which shall be (i) a
commercial bank (or affiliate thereof) organized under the laws of the United States of America or
of any State thereof and having a combined capital and surplus of a least $100,000,000, or (ii) a
Lender capable of complying with all of the duties of such Agent (and the Issuing Bank) hereunder
(in the opinion of the retiring Agent and as certified to the Lenders in writing by such successor
Agent) which, in the case of (i) and (ii) above, so long as there is no Default, or Event of
Default, shall be reasonably satisfactory to the Lead Borrower (whose consent shall not be
unreasonably withheld or delayed). Upon the acceptance of any appointment as Agent by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent and the retiring Agent shall be discharged from
its duties and obligations under this Agreement. After any retiring Agent’s resignation hereunder
as such Agent, the provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was such Agent under this Agreement.

     SECTION 8.11. Reports and Financial Statements.

     Promptly after receipt thereof from the Borrowers, the Administrative Agent shall remit to
each Lender and the Collateral Agent copies of all financial statements required to be delivered by
the Borrowers hereunder and all commercial finance examinations and appraisals of the Collateral
received by the Administrative Agent.

     SECTION 8.12. Co-Agent, Syndication Agent and Arranger. Notwithstanding the provisions
of this Agreement or any of the other Loan Documents, the Co-Agent, the Syndication Agent and,
except as provided in the commitment letter for this transaction, the

79

 

Arranger shall have no powers, rights, duties, responsibilities or
liabilities with respect to this Agreement and the other Loan Documents.

ARTICLE IX

Miscellaneous

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

     (a) if to any Loan Party, to it at 19601 North 27th Avenue, Phoenix, Arizona 85027,
Attention of Chief Financial Officer and General Counsel (Telecopy No.: (623) 580-6513; e-mail
address: scrozier@ssg.petsmart.com) with a copy to Cooley Godward Kronish LLP, 101 California
Street, 5th Floor, San Francisco, CA 94111 (Telecopy No.: (415) 693-2222; e-mail address:
jscherer@cooley.com), Attention of Joseph Scherer, Esquire;

     (b) if to the Administrative Agent or the Collateral Agent, or the Swingline Lender to Bank of
America, N.A., 100 Federal Street, 9th Floor, Boston, Massachusetts 02110, Attention of Stephen J.
Garvin (Telecopy No. (617) 434-4339; e-mail address stephen.garvin@bankofamerica.com), with a copy
to Riemer & Braunstein, LLP, Three Center Plaza, Boston, Massachusetts 02108, Attention: David S.
Berman, Esquire (Telecopy No.: (617) 880-3456; e-mail: dberman@riemerlaw.com);

     (c) if to any other Lender, to it at its address (or telecopy number or e-mail address) set
forth on the signature pages hereto or on any Assignment and Acceptance for such Lender.

     Any party hereto may change its address, telecopy number or e-mail address for notices and
other communications hereunder by notice to the other parties hereto. All notices and other
communications given to any party hereto in accordance with the provisions of this Agreement shall
be deemed to have been given on the date of receipt.

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

80

 

a waiver of any Default, regardless of whether
the Agents, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the
time.

     (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may
be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or
agreements in writing entered into by the Borrowers and the Required Lenders or, in the case of any
other Loan Document, pursuant to an agreement or agreements in writing entered into by the Agents
and the Loan Parties that are parties thereto, in each case with the consent of the Required
Lenders, provided that no such agreement shall (i) increase the Commitment of any Lender
without the written consent of such Lender, (ii) reduce the principal amount of any Loan or L/C
Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without
the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment
of the principal amount of any Loan or L/C Disbursement, or any interest thereon, or any fees
payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of the Commitments or the Maturity Date, without the written consent
of each Lender affected thereby, (iv) change Sections 2.19, 2.22, or 2.23 or Section 6.02 of a
Security Agreement, without the written consent of each Lender, (v) change any of the provisions of
this Section 9.02 or the definition of the term “Required Lenders” or “Required Supermajority
Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders
required to waive, amend or modify any rights thereunder or make any determination or grant any
consent thereunder, without the written consent of each Lender, (vi) release any Loan Party from
its obligations under any Loan Document, or limit its liability in respect of such Loan Document,
without the written consent of each Lender, (vii) except for sales described in Section 6.05 or as
permitted in the Security Documents, release any material portion of the Collateral from the Liens
of the Security Documents, without the written consent of each Lender, (viii) change the definition
of the term “Borrowing Base” or any component definition thereof if as a result thereof the amounts
available to be borrowed by the Borrowers would be increased, without the written consent of each
Lender, provided that the foregoing shall not limit the discretion of the Administrative Agent to
change, establish or eliminate any Reserves, (ix) increase the Permitted Overadvance, without the
written consent of each Lender, (x) subordinate the Obligations hereunder, or the Liens granted
hereunder or under the other Loan Documents, to any other Indebtedness or Lien, as the case may be
without the prior written consent of each Lender, and provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the Agents or the Issuing
Bank without the prior written consent of the Agents or the Issuing Bank, as the case may be.

     (c) Notwithstanding anything to the contrary contained herein, no modification, amendment or
waiver which increases the maximum amount of the Swingline Loans to an amount in excess of
$35,000,000 (or such greater amount to which such limit has been previously increased in accordance
with the provisions of this Section 9.02(c)) shall be made without the written consent of the
Required Supermajority Lenders.

     (d) Notwithstanding anything to the contrary contained in this Section 9.02, in the event that
the Borrowers request that this Agreement or any other Loan Document be modified, amended or waived
in a manner which would require the consent of the Lenders pursuant to

81

 

Sections 9.02(b) or 9.02(c) and such amendment is approved by the Required Lenders, but not by
the requisite percentage of the Lenders, the Borrowers and the Required Lenders shall be permitted
to amend this Agreement without the consent of the Lender or Lenders which did not agree to the
modification or amendment requested by the Borrowers (such Lender or Lenders, collectively the
“Minority Lenders”) to provide for (w) the termination of the Commitment of each of the
Minority Lenders, (x) the addition to this Agreement of one or more other financial institutions,
or an increase in the Commitment of one or more of the Required Lenders, so that the aggregate
Commitments after giving effect to such amendment shall be in the same amount as the aggregate
Commitments immediately before giving effect to such amendment, (y) if any Loans are outstanding at
the time of such amendment, the making of such additional Loans by such new or increasing Lender or
Lenders, as the case may be, as may be necessary to repay in full the outstanding Loans (including
principal, interest, and fees) of the Minority Lenders immediately before giving effect to such
amendment and (z) such other modifications to this Agreement or the Loan Documents as may be
appropriate and incidental to the foregoing.

     (e) If any Lender does not consent (a “Non-Consenting Lender”) to a proposed amendment,
waiver, consent or release with respect to any Loan Document that requires the consent of such
Lender pursuant to this Section 9.02 and that has been approved by the Required Lenders, the Lead
Borrower may replace such Non-Consenting Lender in accordance with Section 9.10; provided that such
amendment, waiver, consent or release can be effected as a result of the assignment contemplated by
such Section (together with all other such assignments required by the Lead Borrower to be made
pursuant to this paragraph).

     (f) No notice to or demand on any Loan Party shall entitle any Loan Party to any other or
further notice or demand in the same, similar or other circumstances. Each holder of a Note shall
be bound by any amendment, modification, waiver or consent authorized as provided herein, whether
or not a Note shall have been marked to indicate such amendment, modification, waiver or consent
and any consent by a Lender, or any holder of a Note, shall bind any Person subsequently acquiring
a Note, whether or not a Note is so marked. No amendment to this Agreement shall be effective
against the Borrowers unless signed by the Borrowers.

     SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Loan Parties shall, jointly
and severally, pay (i) all reasonable out-of-pocket expenses incurred by the Agents and their
Affiliates, including the reasonable fees, charges and disbursements of counsel for the Agents,
outside consultants for the Agents, appraisers, for commercial finance examinations and
environmental site assessments, in connection with the syndication of the credit facilities
provided for herein, the preparation and administration of the Loan Documents or any amendments,
modifications or waivers of the provisions thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the
Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of
Credit or any demand for payment thereunder and (iii) all reasonable out-of-pocket expenses
incurred by the Agents, the Issuing Bank or any Lender, including the reasonable fees, charges and
disbursements of any counsel and any outside consultants for the Agents, the Issuing Bank or any
Lender, for appraisers, commercial finance examinations, and environmental site assessments, in
connection with the enforcement or protection of its or their rights in connection with the Loan
Documents, including its or their rights under this Section, or

82

 

in connection with the Loans made or Letters of Credit issued
hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit; provided that the Lenders who are not
the Agents or the Issuing Bank shall be entitled to reimbursement for no more than one counsel
representing all such Lenders (absent a conflict of interest in which case the Lenders may engage
and be reimbursed for additional counsel).

     (b) The Loan Parties shall, jointly and severally, indemnify the Agents, the Issuing Bank and
each Lender, and each Related Party of any of the foregoing Persons (each such Person being called
an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses, including the reasonable and documented fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any
Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of
any Loan Document or any other agreement or instrument contemplated hereby, the performance by the
parties to the Loan Documents of their respective obligations thereunder or the consummation of the
transactions contemplated by the Loan Documents or any other transactions contemplated hereby, (ii)
any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the
Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii)
any actual or alleged presence or release of Hazardous Materials on or from any property currently
or formerly owned or operated by any Loan Party or any of the Subsidiaries, or any Environmental
Liability related in any way to any Loan Party or any of the Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto, provided that such indemnity shall not, as to any Indemnitee, be available
to the extent that such losses, claims, damages, liabilities or related expenses resulted from the
gross negligence or wilful misconduct of such Indemnitee or any Affiliate of such Indemnitee (or of
any officer, director, employee, advisor or agent of such Indemnitee or any such Indemnitee’s
Affiliates).

     (c) To the extent that any Loan Party fails to pay any amount required to be paid by it to the
Agents or the Issuing Bank under paragraph (a) or (b) of this Section, each Lender severally agrees
to pay to the Agents or the Issuing Bank, as the case may be, such Lender’s pro rata share
(determined as of the time that the applicable unreimbursed expense or indemnity payment is sought)
of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or asserted against the
Agents or the Issuing Bank. For purposes hereof, a Lender’s “pro rata share” shall be determined
based upon its share of the Total Commitment at the time.

     (d) To the extent permitted by applicable law, no Loan Party shall assert, and each hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or instrument contemplated
hereby, the transactions contemplated by the Loan Documents, any Loan or Letter of Credit or the
use of the proceeds thereof.

83

 

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

     SECTION 9.04. Designation of Lead Borrower as Borrowers’ Agent.

     (a) Each Borrower hereby irrevocably designates and appoints the Lead Borrower as that
Borrower’s agent to obtain Loans and Letters of Credit hereunder, the proceeds of which shall be
available to each Borrower for those uses set forth herein. As the disclosed principal for its
agent, each Borrower shall be obligated to the Agents and each Lender on account of Loans so made
and Letters of Credit so issued hereunder as if made directly by the Lenders to that Borrower,
notwithstanding the manner by which such Loans and Letters of Credit are recorded on the books and
records of the Lead Borrower and of any other Borrower.

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

     (c) The Lead Borrower shall act as a conduit for each Borrower (including itself, as a
“Borrower”) on whose behalf the Lead Borrower has requested a Loan.

     (i) The Lead Borrower shall cause the transfer of the proceeds of each Loan to the
(those) Borrower(s) on whose behalf such Loan was obtained. Neither the Agents nor any
Lender shall have any obligation to see to the application of such proceeds.

     (ii) If, for any reason, and at any time during the term of this Agreement,

     (A) any Borrower, including the Lead Borrower, as agent for the Borrowers,
shall be unable to, or prohibited from carrying out the terms and conditions of this
Agreement (as determined by the Administrative Agent in the Administrative Agent’s
sole and absolute discretion); or

     (B) the Administrative Agent deems it inexpedient (in the Administrative
Agent’s sole and absolute discretion) to continue making Loans and cause Letters of
Credit to be issued to or for the account of any particular Borrower, or to channel
such Loans and Letters of Credit through the Lead Borrower,

then the Lenders may make Loans directly to, and cause the issuance of Letters of Credit
directly for the account of such of the Borrowers as the Administrative Agent determines to
be expedient, which Loans may be made without regard to the procedures otherwise included
herein.

     (d) In the event that the Administrative Agent determines to forgo the procedures included
herein pursuant to which Loans and Letters of Credit are to be channeled through the Lead Borrower,
then the Administrative Agent may designate one or more of the Borrowers to

84

 

fulfill the financial and other reporting requirements otherwise imposed herein upon the Lead
Borrower.

     (e) Each of the Borrowers shall remain liable to the Agents and the Lenders for the payment
and performance of all Obligations (which payment and performance shall continue to be secured by
all Collateral granted by each of the Borrowers) notwithstanding any determination by the
Administrative Agent to cease making Loans or causing Letters of Credit to be issued to or for the
benefit of any Borrower.

     (f) The authority of the Lead Borrower to request Loans on behalf of, and to bind, the
Borrowers, shall continue unless and until the Administrative Agent acts as provided in
subparagraph (c), above, or the Administrative Agent actually receives

     (i) written notice of: (i) the termination of such authority, and (ii) the subsequent
appointment of a successor Lead Borrower, which notice is signed by the respective
Presidents of each Borrower (other than the President of the Lead Borrower being replaced)
then eligible for borrowing under this Agreement; and

     (ii) written notice from such successive Lead Borrower (i) accepting such appointment;
(ii) acknowledging that such removal and appointment has been effected by the respective
Presidents of such Borrowers eligible for borrowing under this Agreement; and (iii)
acknowledging that from and after the date of such appointment, the newly appointed Lead
Borrower shall be bound by the terms hereof, and that as used herein, the term “Lead
Borrower” shall mean the newly appointed Lead Borrower.

     SECTION 9.05. Successors and Assigns. (a) The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of
Credit), except that no Loan Party may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any such attempted
assignment or transfer without such consent shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby (including any Affiliate of the Issuing
Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the
Related Parties of each of the Agents, the Issuing Bank and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

     (b) Any Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it), provided that (i) except in the case of an assignment to a Lender or an
Affiliate of a Lender, each of the Lead Borrower (but only if no Default then exists), the Agents
and the Issuing Bank must give their prior written consent to such assignment (which consent shall
not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or
an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and

85

 

Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be
less than (A) $10,000,000 prior to the occurrence of an Event of Default and (B) $5,000,000 after
the occurrence and during the continuance of an Event of Default, unless in each case the
Administrative Agent and (only if no Event of Default has occurred and is continuing) the Lead
Borrower otherwise consent (in the case of the Borrowers, such consent not to be unreasonably
withheld or delayed), (iii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations, (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, and,
after completion of the syndication of the Loans, together with a processing and recordation fee of
$3,500. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section,
from and after the effective date specified in each Assignment and Acceptance the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance,
be released from its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of
Section 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale
by such Lender of a participation in such rights and obligations in accordance with paragraph (e)
of this Section.

     (c) The Administrative Agent, acting for this purpose as an agent of the Loan Parties, shall
maintain at one of its offices in Boston, Massachusetts a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses of the Lenders, and
the Commitment of, and principal amount of the Loans and L/C Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in the
Register shall be conclusive and the Loan Parties, the Administrative Agent, the Issuing Bank and
the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Lead Borrower, the Issuing Bank and
any Lender, at any reasonable time and from time to time upon reasonable prior notice.

     (d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning
Lender and an assignee, the processing and recordation fee referred to in paragraph (b) of this
Section and any written consent to such assignment required by paragraph (b) of this Section, the
Administrative Agent shall accept such Assignment and Acceptance and record the information
contained therein in the Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.

     (e) Any Lender may, without the consent of the Loan Parties, the Agents, and the Issuing Bank,
sell participations to one or more banks or other entities (a “Participant”) in all or a
portion of such Lender’s rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans owing to it), provided that (i) such Lender’s obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to
the

86

 

other parties hereto for the performance of such obligations and (iii) the Loan Parties, the
Agents, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement
or instrument pursuant to which a Lender sells such a participation in the Commitments, the Loans
and the Letters of Credit Outstandings shall provide that such Lender shall retain the sole right
to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision
of the Loan Documents, provided that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any amendment, modification or
waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to
paragraph (f) of this Section, the Loan Parties agree that each Participant shall be entitled to
the benefits of Sections 2.24, 2.26 and 2.27 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of Section 9.09 as though
it were a Lender, provided such Participant agrees to be subject to Section 2.26(c) as
though it were a Lender.

     (f) A Participant shall not be entitled to receive any greater payment under Section 2.24 or
2.27 than the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such Participant is
made with the Lead Borrower’s prior written consent. A Participant that would be a Foreign Lender
if it were a Lender shall not be entitled to the benefits of Section 2.27 unless (i) the Lead
Borrower is notified of the participation sold to such Participant and such Participant agrees, for
the benefit of the Borrowers, to comply with Section 2.27(f) as though it were a Lender and (ii)
such Participant is eligible for exemption from the withholding tax referred to therein, following
compliance with Section 2.27(f).

     (g) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest, provided that no such pledge or
assignment of a security interest shall release a Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

     SECTION 9.06. Survival. All covenants, agreements, representations and warranties made
by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the execution and delivery of
the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of
any investigation made by any such other party or on its behalf and notwithstanding that the
Agents, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and shall continue in full
force and effect as long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Commitments have not expired or terminated. The provisions of
Sections 2.24, 2.27 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the

87

 

transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the Commitments or the
termination of this Agreement or any provision hereof.

     SECTION 9.07. Counterparts; Integration; Effectiveness. This Agreement may be executed
in counterparts (and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement, the other Loan Documents and any separate letter agreements with respect to fees
payable to the Agents constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall
become effective when it shall have been executed by the Agents and the Lenders and when the
Administrative Agent shall have received counterparts hereof that, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy, e-mail, .pdf or other
electronic means shall be effective as delivery of a manually executed counterpart of this
Agreement.

     SECTION 9.08. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such invalidity, illegality or unenforceability without affecting the validity, legality
and enforceability of the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

     SECTION 9.09. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final, but not any L/C Facility Cash Collateral) at any
time held and other obligations at any time owing by such Lender or Affiliate to or for the credit
or the account of the Loan Parties against any of and all the obligations of the Loan Parties now
or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement and although such obligations may be
unmatured. The rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) that such Lender may have.

     SECTION 9.10. Replacement of Lenders. If any Lender requests compensation under
Section 2.24, or if the Borrowers are required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.27, or if any Lender
defaults in its obligation to fund the Loans, or if any Lender is a Non-Consenting Lender, then the
Lead Borrower may, at the Borrowers’ sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in, and consents required by, Section 9.05), all of its interests,
rights and obligations under this Agreement and the related Loan Documents to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender accepts such
assignment), provided that:

88

 

     (a) the Borrowers shall have paid to the Administrative Agent the assignment fee
specified in Section 9.05(b);

     (b) such Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all
other amounts payable to it hereunder and under the other Loan Documents (including any
amounts under Sections 2.20(b) or 2.20(c)) from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers (in the case of all
other amounts);

     (c) in the case of any such assignment resulting from a claim for compensation under
Section 2.24 or payments required to be made pursuant to Section 2.27, such assignment will
result in a reduction in such compensation or payments thereafter; and

     (d) such assignment does not conflict with applicable laws.

     SECTION 9.11. Governing Law; Jurisdiction; Consent to Service of Process. 

     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

     (b) Each Loan Party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the state courts of the State of New York sitting in
New York County and of the United States District Court, Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such state courts of the State of New York or, to the
extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that the Agents, the Issuing Bank or
any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any
other Loan Document against any Loan Party or their properties in the courts of any jurisdiction.

     (c) Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any court referred to in
paragraph (b) of this Section.

     (d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will
affect the right of any party to this Agreement to serve process in any other manner permitted by
law.

89

 

     SECTION 9.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES
HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

     SECTION 9.13. Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement and shall not affect
the construction of, or be taken into consideration in interpreting, this Agreement.

     SECTION 9.14. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges
and other amounts that are treated as interest on such Loan under applicable law (collectively the
“Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable
law, the rate of interest payable in respect of such Loan hereunder, together with all Charges
payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and Charges payable to
such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the Federal Funds
Effective Rate to the date of repayment, shall have been received by such Lender.

     SECTION 9.15. Additional Waivers. 

     (a) The Obligations are the joint and several obligations of each Loan Party. To the fullest
extent permitted by applicable law, the obligations of each Loan Party hereunder shall not be
affected by (i) the failure of any Agent or any other Secured Party to assert any claim or demand
or to enforce or exercise any right or remedy against any other Loan Party under the provisions of
this Agreement, any other Loan Document or otherwise, (ii) except for amendments and waivers entered
into in accordance with the provisions of Section 9.02 hereof,
any rescission, waiver, amendment or modification of, or any release from any of the terms or
provisions of, this Agreement or any other Loan Document, including with respect to any other
Borrower of the Obligations under this Agreement, or (iii) the failure to perfect any security
interest in, or the release of, any of the security held by or on behalf of the Collateral Agent or
any other Secured Party.

90

 

     (b) The obligations of each Loan Party hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason (other than the final payment in full in cash
of the Obligations or amendments and waivers entered into in accordance with the provisions of
Section 9.02 hereof), including any claim of waiver, release, surrender, alteration or compromise
of any of the Obligations, and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of
the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of
each Loan Party hereunder shall not be discharged or impaired or otherwise affected by the failure
of any Agent or any other Secured Party to assert any claim or demand or to enforce any remedy
under this Agreement, any other Loan Document or any other agreement, by any waiver or modification
of any provision of any thereof, by any default, failure or delay, wilful or otherwise, in the
performance of the Obligations, or by any other act or omission that may or might in any manner or
to any extent vary the risk of any Loan Party or that would otherwise operate as a discharge of any
Loan Party as a matter of law or equity (other than the final payment in full in cash of all the
Obligations).

     (c) To the fullest extent permitted by applicable law, each Loan Party waives any defense
based on or arising out of any defense of any other Loan Party or the unenforceability of the
Obligations or any part thereof from any cause, or the cessation from any cause of the liability of
any other Loan Party, other than the final payment in full in cash of all the Obligations. The
Collateral Agent and the other Secured Parties may, at their election, foreclose on any security
held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of
any such security in lieu of foreclosure, compromise or adjust any part of the Obligations, make
any other accommodation with any other Loan Party, or exercise any other right or remedy available
to them against any other Loan Party, without affecting or impairing in any way the liability of
any Loan Party hereunder except to the extent that all the Obligations have been finally paid in
full in cash. Pursuant to applicable law, each Loan Party waives any defense arising out of any
such election even though such election operates, pursuant to applicable law, to impair or to
extinguish any right of reimbursement or subrogation or other right or remedy of such Loan Party
against any other Loan Party, as the case may be, or any security.

     (d) Upon payment by any Loan Party of any Obligations, all rights of such Loan Party against
any other Loan Party arising as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and junior in right of
payment to the prior final payment in full in cash of all the Obligations, as more particularly set
forth in an Indemnity, Subrogation and Contribution Agreement to be entered into amongst the Loan
Parties. In addition, any indebtedness of any Loan Party now or hereafter held by any other Loan
Party is hereby subordinated in right of payment to the prior payment in full of the Obligations.
None of the Loan Parties will demand, sue for, or otherwise attempt to
collect any such indebtedness. If any amount shall erroneously be paid to any Loan Party on
account of (a) such subrogation, contribution, reimbursement, indemnity or similar right or (b) any
such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the
Secured Parties and shall forthwith be paid to the Collateral Agent to be credited against the
payment of the Obligations, whether matured or unmatured, in accordance with the terms of the Loan
Documents.

91

 

[signature pages follow]

92

 

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

	 	 	 	 	 	 	 
	 	 	PETSMART, INC., as Lead
Borrower and as a	 	 
	 	 	Borrower	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Philip L. Francis
 

Philip L. Francis
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	PETSMART STORE SUPPORT
GROUP, INC., as a	 	 
	 	 	Borrower	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Philip L. Francis
 

Philip L. Francis
	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 

Signature Page to Credit Agreement

 

 

	 	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.,	 	 
	 	 	as Administrative Agent, as Collateral Agent,	 	 
	 	 	as Swingline Lender, and as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Stephen J. Garvin	 	 
	 

	 	Name:
	 	 

Stephen J. Garvin
	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 	 	100 Federal Street, 9th Floor	 	 
	 	 	Boston, Massachusetts 02110	 	 
	 	 	Attn: Stephen J. Garvin	 	 
	 	 	Telephone: (617) 434-9399	 	 
	 	 	Telecopy: (617) 434-4339	 	 
	 	 	E-mail address:	 	 
	 	 	          stephen.garvin@bankofamerica.com	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.,	 	 
	 	 	as Issuing Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Stephen J. Garvin	 	 
	 

	 	Name:
	 	 

Stephen J. Garvin
	 	 
	 

	 	Title:
	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 	 	100 Federal Street, 9th Floor	 	 
	 	 	Boston, Massachusetts 02110	 	 
	 	 	Attention: Stephen J. Garvin	 	 
	 	 	Telephone: (617) 434-9399	 	 
	 	 	Telecopy: (617) 434-4339	 	 
	 	 	E-mail address:	 	 
	 	 	          stephen.garvin@bankofamerica.com	 	 

Signature Page to Credit Agreement

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00128-of-00352.parquet"}]]