Document:

exv10w1

Exhibit 10.1

EXECUTION COPY

$150,000,000

PROSPECT CAPITAL CORPORATION

6.25% Senior Convertible Notes due 2015

PURCHASE AGREEMENT

December 16, 2010

Barclays Capital Inc., 

As Representative of the several

  Initial Purchasers named in Schedule I attached hereto,

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

Ladies and Gentlemen:

     Prospect Capital Corporation, a corporation organized under the laws of Maryland (the
“Company”), Prospect Capital Management, LLC, a Delaware limited liability company registered as an
investment adviser (the “Adviser”) and Prospect Administration, LLC, a Delaware limited liability
company (the “Administrator”), confirm their agreement (this “Agreement”) with you as follows:

     The Company proposes, upon the terms and conditions set forth in this agreement (this
“Agreement”), to issue and sell to you, as the initial purchasers (the “Initial Purchasers”),
$150,000,000 in aggregate principal amount of its 6.25% Senior Convertible Note due 2015] (the
“Securities”). The Securities will (i) have terms and provisions that are summarized in the
Pricing Disclosure Package (as defined below) and Offering Memorandum (as defined below) and (ii)
are to be issued pursuant to an Indenture (the “Indenture”) to be entered into between the Company
and American Stock Transfer & Trust Company, LLC, as trustee (the “Trustee”). The Securities
will be convertible into shares of the Company’s common stock (par value $0.001 per share) (the
“Underlying Securities”). This is to confirm the agreement concerning the purchase of the
Securities from the Company by the Initial Purchasers.

     The Company has entered into an investment advisory and management agreement, dated as of June
24, 2004, as renewed on June 15, 2010 by the Board (the “Investment Advisory Agreement”), with the
Adviser under the Investment Advisers Act of 1940 (the “Advisers Act”). The Company has entered
into an administration agreement, dated as of June 24, 2004, as renewed on June 15, 2010 by the
Board (the “Administration Agreement”), with the Administrator.

 

 

     1. Purchase and Resale of the Securities. The Securities will be offered and sold to the
Initial Purchasers without registration under the Securities Act of 1933, as amended, and the rules
and regulations of the Commission (as defined below) thereunder (the “Securities Act”), in reliance
on an exemption pursuant to Section 4(2) under the Securities Act. The Company has prepared a
preliminary offering memorandum, dated December 14, 2010 (the “Preliminary Offering Memorandum”), a
pricing term sheet substantially in the form attached hereto as Schedule II (the “Pricing Term
Sheet”) setting forth the terms of the Securities omitted from the Preliminary Offering Memorandum
and an offering memorandum, dated December 16, 2010 (the “Offering Memorandum”), setting forth
information regarding the Company and the Securities (as defined herein). The Preliminary Offering
Memorandum, as supplemented and amended as of the Applicable Time (as defined below), together with
the Pricing Term Sheet and any of the documents listed on Schedule III hereto are collectively
referred to as the “Pricing Disclosure Package.” The Company hereby confirms that it has authorized
the use of the Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering
Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers.
“Applicable Time” means 9:30a.m. (New York City time) on the date of this Agreement.

     Any reference to the Preliminary Offering Memorandum, the Pricing Disclosure Package or the
Offering Memorandum shall be deemed to refer to and include the Company’s most recent Annual Report
on Form 10-K and all subsequent documents filed with the United States Securities and Exchange
Commission (the “Commission”) pursuant to Section 13(a) or 15(d) of the United States Securities
Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (the
“Exchange Act”), on or prior to the date of the Preliminary Offering Memorandum, the Pricing
Disclosure Package or the Offering Memorandum, as the case may be. Any reference to the
Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case
may be, as amended or supplemented, as of any specified date, shall be deemed to include (i) any
documents filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act after
the date of the Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering
Memorandum, as the case may be, and prior to such specified date. All documents filed under the
Exchange Act and so deemed to be included in the Preliminary Offering Memorandum, Pricing
Disclosure Package or the Offering Memorandum, as the case may be, or any amendment or supplement
thereto are hereinafter called the “Exchange Act Reports.” The Exchange Act Reports, when they
were or are filed with the Commission, conformed or will conform in all material respects to the
applicable requirements of the Exchange Act and the applicable rules and regulations of the
Commission thereunder.

     It is understood and acknowledged that upon original issuance thereof, and until such time as
the same is no longer required under the applicable requirements of the Securities Act, the
Securities (and all securities issued in exchange therefor or in substitution thereof) shall bear
the following legend (along with such other legends as the Initial Purchasers and their counsel
deem necessary):

THE SECURITIES AND THE UNDERLYING SECURITIES, IF ANY, ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR

2

 

ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN OR
THEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM,
AND NOT SUBJECT TO, REGISTRATION.

BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

	 	1.	 	REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A
“QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO
EACH SUCH ACCOUNT, AND

	 	2.	 	AGREES FOR THE BENEFIT OF PROSPECT CAPITAL CORPORATION (THE “COMPANY”)
THAT IT WILL NOT OFFER, SELL, ASSIGN, TRANSFER, PLEDGE, ENCUMBER OR OTHERWISE
DISPOSE OF THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT
IS THE LATER OF (X) ONE YEAR AFTER THE LAST ORIGINAL ISSUE DATE HEREOF OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY
SUCCESSOR PROVISION THEREUNDER, AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED
BY APPLICABLE LAW, EXCEPT: (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE UNDER THE
SECURITIES ACT, OR (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, OR (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH CLAUSE (2)(D) ABOVE, THE
COMPANY, AND THE TRANSFER AGENT, IN THE CASE OF ANY COMMON STOCK ISSUED UPON THE CONVERSION
OF THE NOTES, AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL
OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO
DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

NO AFFILIATE (AS DEFINED IN RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY OR PERSON THAT
HAS BEEN AN AFFILIATE (AS DEFINED IN

3

 

RULE 144 UNDER THE SECURITIES ACT) OF THE COMPANY DURING THE THREE IMMEDIATELY PRECEDING
MONTHS MAY PURCHASE OR OTHERWISE ACQUIRE THIS NOTE OR A BENEFICIAL INTEREST HEREIN.

     You have advised the Company that you will make offers (the “Exempt Resales”) of the
Securities purchased by you hereunder on the terms set forth in each of the Pricing Disclosure
Package and the Offering Memorandum, as amended or supplemented, solely to persons (the “Eligible
Purchasers”) whom you reasonably believe to be “qualified institutional buyers” as defined in Rule
144A under the Securities Act (“QIBs”). You will offer the Securities to Eligible Purchasers
initially at a price equal to 100% of the principal amount thereof plus accrued interest, if any.
Such price may be changed at any time without notice.

     2. Representations, Warranties and Agreements of the Company. The Company represents,
warrants and agrees, and the Adviser and the Administrator, jointly and severally, represent,
warrant and agree, as follows:

          (a) Rule 144A Eligibility. When the Securities are issued and delivered pursuant to this
Agreement, the Securities will not be of the same class (within the meaning of Rule 144A under the
Securities Act) as securities of the Company that are listed on a United States national securities
exchange registered under Section 6 of the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system. For so long as any of the Securities are “restricted
securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during
any period in which it is not subject to and in compliance with Section 13 or 15(d) of the Exchange
Act, provide to each holder of such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the request of such holder or
prospective purchaser, any information required to be provided by Rule 144A(d)(4) under the
Securities Act.

          (b) No Registration Required; No General Solicitation. Subject to the accuracy of the
representations and warranties of the Initial Purchasers and the compliance by the Initial
Purchasers with the procedures set forth in Section 4(b), it is not necessary, in connection with
the issuance and sale of the Securities to the Initial Purchasers and Exempt Resales of the
Securities by the Initial Purchasers in the manner contemplated by this Agreement, the Pricing
Disclosure Package and the Offering Memorandum, to register the Securities under the Securities Act
or to qualify the Indenture under the Trust Indenture Act. No form of general solicitation or
general advertising within the meaning of Regulation D (including, but not limited to,
advertisements, articles, notices or other communications published in any newspaper, magazine or
similar medium or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising) was used by the Company, any
of its affiliates or any other person acting on its or their behalf (other than you or any of your
affiliates or any other person acting on your behalf, as to whom the Company makes no
representation) in connection with the offer and sale of the Securities.

          (c) Accurate Disclosure. The Pricing Disclosure Package did not, as of the Applicable Time,
contain an untrue statement of a material fact or omit to state a material fact

4

 

necessary in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading; provided that no representation or warranty is made as
to information contained in or omitted from the Pricing Disclosure Package in reliance upon and in
conformity with written information furnished to the Company through the Representative by or on
behalf of any Initial Purchaser specifically for inclusion therein, which information is specified
in Section 9(e). The Offering Memorandum will not, as of its date and as of the Closing Date,
contain an untrue statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under which they were made,
not misleading; provided that no representation or warranty is made as to information contained in
or omitted from the Offering Memorandum in reliance upon and in conformity with written information
furnished to the Company through the Representative by or on behalf of any Initial Purchaser
specifically for inclusion therein, which information is specified in Section 9(e).

          (d) Free Writing Offering Document. The Company has not made any offer to sell or solicitation
of an offer to buy the Securities that would constitute (i) a “free writing prospectus” (as defined
in Rule 405 under the Securities Act) or (ii) an “advertisement” or “other sales material” (as
contemplated by Rule 482 of the Securities Act), in each case if the offering of the Securities was
made pursuant to a registered offering under the Securities Act (a “Free Writing Offering
Document”) without the prior consent of the Representative; any such Free Writing Offering Document
the use of which has been previously consented to by the Initial Purchasers is set forth
substantially in form and substance as attached hereto on Schedule III.

          (e) Exchange Act Reports. The Exchange Act Reports, when filed with the Commission, (i)
complied in all material respects with the requirements of the Exchange Act and (ii) did not
contain an untrue statement of material fact or omit to state a material fact necessary in order to
make the statements made therein, in the light of the circumstances under which they were made, not
misleading.

          (f) No Integration. Neither the Company, any of its affiliates nor any other person acting on
its or their behalf has sold or issued any securities that would be integrated with the offering of
the Securities contemplated by this Agreement pursuant to the Securities Act or the interpretations
thereof by the Commission. The Company will take reasonable precautions designed to insure that any
offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule
902 under the Securities Act), of any Securities or any substantially similar security issued by
the Company is made under restrictions and other circumstances reasonably designed not to affect
the status of the offer and sale of the Securities in the United States and to U.S. persons
contemplated by this Agreement as transactions exempt from the registration provisions of the
Securities Act, including any sales pursuant to Rule 144A under the Securities Act.

          (g) Use of Offering Memorandum. The Preliminary Offering Memorandum, the Pricing Disclosure
Package and the Offering Memorandum have been prepared by the Company for use by the Initial
Purchasers in connection with the Exempt Resales. No order or decree preventing the use of the
Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, or any
order asserting that the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act has been

5

 

issued, and no proceeding for that purpose has commenced or is pending or, to the knowledge of
the Company, is contemplated.

          (h) Independent Accountant. BDO USA, LLP, which has expressed its opinion with respect to
certain of the financial statements (which term as used in this Agreement includes the related
notes thereto) and supporting schedules filed with the Commission and included in the Pricing
Disclosure Package and Offering Memorandum, is an independent registered public accounting firm as
required by the Securities Act and Exchange Act.

          (i) Preparation of the Financial Statements. The financial statements (together with the
related schedules and notes) filed with the Commission and included in the Pricing Disclosure
Package and Offering Memorandum present fairly the consolidated financial position of the Company
as of and at the dates indicated and the results of its operations and cash flows for the periods
specified. Such financial statements have been prepared in conformity with accounting principles
generally accepted in the United States (“GAAP”) applied on a consistent basis throughout the
periods involved, except as may be expressly stated in the related notes thereto. The consolidated
selected financial data included in the Pricing Disclosure Package and Offering Memorandum presents
fairly in all material respects the information shown therein and has been compiled on a basis
consistent with the consolidated financial statements included or incorporated by reference in the
Pricing Disclosure Package and Offering Memorandum. All disclosures contained in the Pricing
Disclosure Package and the Offering Memorandum regarding “non-GAAP financial measures” (as such
term is defined by the rules and regulations of the Commission) comply in all material respects
with Regulation G under the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to
the extent applicable.

          (j) Internal Control Over Financial Reporting. The Company maintains a system of internal
control over financial reporting sufficient to provide reasonable assurances that financial
reporting is reliable and financial statements for external purposes are prepared in accordance
with GAAP and includes policies and procedures that (i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that receipts and
expenditures of the Company are being made only in accordance with the authorizations of management
and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a
material effect on the financial statements.

          (k) Disclosure Controls. The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-15 and 15d-15 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material information relating to the
Company, including material information pertaining to the Company’s operations and assets managed
by the Adviser, is made known to the Company’s Chief Executive Officer and Chief Financial Officer
by others within the Company and the Adviser, and such disclosure controls and procedures are
effective to perform the functions for which they were established.

6

 

          (l) No Material Adverse Change. Except as otherwise disclosed in the Pricing Disclosure
Package and/or the Offering Memorandum, subsequent to the respective dates as of which information
is given in the Pricing Disclosure Package and/or the Offering Memorandum: (i) there has been no
material adverse change, or any development that could reasonably be expected to result in a
material adverse change, in the condition, financial or otherwise, or in the earnings, net asset
value, prospects, business or operations, whether or not arising from transactions in the ordinary
course of business, of the Company and its subsidiaries, considered as one entity or a material
adverse effect on the performance by the Company of the performance of this Agreement, the
Indenture, the Securities or the consummation of any of the transactions contemplated hereby or
thereby (any such change or effect, where the context so requires is called a “Material Adverse
Change” or a “Material Adverse Effect”); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct or contingent, not
in the ordinary course of business or entered into any material transaction or agreement not in the
ordinary course of business; and (iii) except for regular periodic dividends on the Common Stock,
there has been no dividend or distribution of any kind declared, paid or made by the Company or,
except for dividends paid to the Company or other subsidiaries, any of its subsidiaries on any
class of capital stock or, except for any repurchases under the Company’s share repurchase program
which repurchases shall be made in compliance with applicable law, repurchase or redemption by the
Company or any of its subsidiaries of any class of capital stock.

          (m) Good Standing of the Company and its Subsidiaries. The Company and each subsidiary that
is a corporation have been duly incorporated and are validly existing as corporations in good
standing under the laws of the jurisdiction of their incorporation and have the corporate power and
authority to own, lease and operate their properties and to conduct their business as described in
the Pricing Disclosure Package and Offering Memorandum and, in the case of the Company, to enter
into and perform its obligations under this Agreement. Each of the Company and each subsidiary
that is a corporation is duly qualified as a foreign corporation to transact business and is in
good standing in each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except for such jurisdictions
where the failure to so qualify or to be in good standing would not, individually or in the
aggregate, result in a Material Adverse Change or a Material Adverse Effect. All of the issued and
outstanding capital stock of each subsidiary that is a corporation has been duly authorized and
validly issued, is fully paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or
claim.

          (n) Subsidiaries of the Company. The Company does not own, directly or indirectly, any shares
of stock or any other equity or long-term debt securities of any corporation or other entity other
than (i) 100% of the equity interests in Prospect Capital Funding, LLC and Patriot Capital Funding
LLC I and (ii) those corporations or other entities described in the Pricing Disclosure Package and
Offering Memorandum under the caption “Portfolio Companies” (each a “Portfolio Company” and
collectively, the “Portfolio Companies”). Except as otherwise disclosed in the Pricing Disclosure
Package and Offering Memorandum, the Company does not control (as such term is defined in Section
2(a)(9) of the Investment Company Act of 1940, as amended, and the rules and regulations of the
Commission thereunder (the “Investment Company Act”)) any of the Portfolio Companies. Except as
otherwise disclosed in the Pricing

7

 

Disclosure Package and Offering Memorandum, the Company is not required, in accordance with
Article 6 of Regulation S-X under the Securities Act, to consolidate the financial statements of
any corporation, association or other entity with the Company’s financial statements other than
Prospect Capital Funding, LLC.

          (o) Portfolio Companies. The Company has duly authorized, executed and delivered any
agreements pursuant to which it made the investments described in the Pricing Disclosure Package
and Offering Memorandum under the caption “Portfolio Companies” (each a “Portfolio Company
Agreement”). To the Company’s knowledge, except as otherwise disclosed in the Pricing Disclosure
Package and Offering Memorandum, each Portfolio Company is current, in all material respects, with
all its obligations under the applicable Portfolio Company Agreements, no event of default (or a
default which with the giving of notice or the passage of time would become an event of default)
has occurred under such agreements, except to the extent that any such failure to be current in its
obligations and any such default would not reasonably be expected to result in a Material Adverse
Change or a Material Adverse Effect.

          (p) BDC Election; Regulated Investment Company. The Company has elected to be regulated as a
business development company under the Investment Company Act and has filed with the Commission,
pursuant to Section 54(a) of the Investment Company Act, a duly completed and executed Form N-54A
(the “Company BDC Election”); the Company has not filed with the Commission any notice of
withdrawal of the BDC Election pursuant to Section 54(c) of the Investment Company Act; the
Company’s BDC Election remains in full force and effect, and, to the Company’s knowledge, no order
of suspension or revocation of such election under the Investment Company Act has been issued or
proceedings therefore initiated or threatened by the Commission. The operations of the Company are
in compliance in all material respects with the provisions of the Investment Company Act applicable
to business development companies and the rules and regulations of the Commission applicable to
business development companies.

          (q) Authorization and Description of Securities. The authorized, issued and outstanding
capital stock of the Company is as set forth in the Pricing Disclosure Package and Offering
Memorandum, in each case, of the date thereof under the caption “Capitalization” and “Selected
Condensed Financial Data.” The Securities and the Underlying Securities conform in all material
respects to the description thereof contained in the Pricing Disclosure Package and Offering
Memorandum. All issued and outstanding shares of common stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable, and have been offered and sold
or exchanged by the Company in compliance with all applicable laws (including, without limitation,
federal and state securities laws) in all material respects. None of the outstanding shares of
common stock of the Company was issued in violation of the preemptive or other similar rights of
any security holder of the Company. No shares of preferred stock of the Company have been
designated, offered, sold or issued and none of such shares of preferred stock are currently
outstanding.

          (r) Securities. The Company has all requisite corporate power and authority to execute, issue,
sell and perform its obligations under the Securities. The Securities have been duly authorized by
the Company and, when duly executed by the Company in accordance with the terms of the Indenture,
assuming due authentication of the Securities by the Trustee, upon

8

 

delivery to the Initial Purchasers against payment therefor in accordance with the terms
hereof, will be validly issued and delivered and will constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors’ rights generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

          (s) Indenture. The Company has all requisite corporate power and authority to execute, deliver
and perform its obligations under the Indenture. The Indenture has been duly and validly
authorized by the Company, and upon its execution and delivery and, assuming due authorization,
execution and delivery by the Trustee, will constitute the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors’ rights generally and by general
equitable principles (regardless of whether such enforceability is considered in a proceeding in
equity or at law); no qualification of the Indenture under the Trust Indenture Act of 1939 (the
“1939 Act”) is required in connection with the offer and sale of the Securities contemplated hereby
or in connection with the Exempt Resales. The Indenture will conform in all material respects to
the description thereof in each of the Pricing Disclosure Package and the Offering Memorandum.

          (t) Underlying Securities. The Company has all the requisite corporate power and authority to
issue the Underlying Securities issuable upon conversion of the Securities. The Underlying
Securities have been duly and validly authorized by the Company and, when issued upon conversion of
the Securities in accordance with the terms of the Securities, will be validly issued, fully paid
and non-assessable, and the issuance of the Underlying Securities will not be subject to any
preemptive or similar rights.

          (u) Disclosure. The statements set forth in each of the Pricing Disclosure Package and the
Offering Memorandum under the caption “Description of the Notes,” insofar as they purport to
constitute a summary of the terms of the Securities and under the captions “Material U.S. Federal
Income Tax Considerations,” and “Certain Relationships and Transactions,” insofar as they purport
to describe the provisions of the laws and documents referred to therein, are accurate in all
material respects.

          (v) Non-Contravention of Existing Instruments; No Further Authorizations or Approvals
Required. Neither the Company nor any subsidiary is in violation of or default under its (i)
charter, articles or certificate of incorporation, by-laws, or similar organizational documents;
(ii) under any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or
other instrument, including any Portfolio Company Agreement, the Investment Advisory Agreement and
the Administration Agreement, to which the Company or any of its subsidiaries is a party or bound
or to which any of the property or assets of the Company or any of its subsidiaries is subject; or
(iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body,
administrative agency, governmental body, arbitrator or other authority having jurisdiction over
the Company or such subsidiary or any of its properties, as applicable, except for such violations
or defaults as would not, individually or in

9

 

the aggregate, have a Material Adverse Effect. The Company’s execution, delivery and
performance of this Agreement, the Indenture, the issuance and sale of the Securities (including
the issuance of the Underlying Securities upon conversion thereof) and consummation of the
transactions contemplated hereby and thereby and by the Pricing Disclosure Package and Offering
Memorandum (i) have been duly authorized by all necessary corporate action, have been effected in
accordance with the Investment Company Act and will not result in any violation of the provisions
of the charter, articles or certificate of incorporation or by-laws of the Company or similar
organizational documents of any subsidiary, (ii) will not conflict with or constitute a breach of,
or default under, or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of its subsidiaries pursuant to, or require the
consent of any other party to, any existing instrument, except for such conflicts, breaches,
defaults, liens, charges or encumbrances as would not, individually or in the aggregate, result in
a Material Adverse Effect and (iii) will not result in any violation of any law, administrative
regulation or administrative or court decree applicable to the Company or any subsidiary. No
consent, approval, authorization or other order of, or registration or filing with, any court or
other governmental or regulatory authority or agency, is required for the Company’s execution,
delivery and performance of this Agreement, the Indenture, the issuance and sale of the Securities
(including the issuance of the Underlying Securities upon conversion thereof) or consummation of
the transactions contemplated hereby and thereby and by the Pricing Disclosure Package and the
Offering Memorandum, except such consents, approvals, authorizations, orders, filings,
registrations or qualifications as may be required under state securities or Blue Sky laws, the
NASDAQ Global Select Market or any Form D with the Commission in connection with the purchase and
distribution of the Securities by the Initial Purchasers.

          (w) Intellectual Property Rights. The Company and its subsidiaries own or possess sufficient
trademarks, trade names, patent rights, copyrights, domain names, licenses, approvals, trade
secrets and other similar rights (collectively, “Intellectual Property Rights”) reasonably
necessary to conduct their businesses as described in the Pricing Disclosure Package and the
Offering Memorandum; and the expected expiration of any of such Intellectual Property Rights would
not result in a Material Adverse Effect. Neither the Company nor any of its subsidiaries has
received any notice of infringement or conflict with asserted Intellectual Property Rights of
others, which infringement or conflict, if the subject of an unfavorable decision, would result in
a Material Adverse Effect. To the Company’s knowledge, none of the technology employed by the
Company has been obtained or is being used by the Company in violation of any contractual
obligation binding on the Company or any of its officers, directors or employees or otherwise in
violation of the rights of any persons.

          (x) Compliance with Environmental Law. To the knowledge of the Company, the Advisor and the
Administrator, the Company, its subsidiaries and each controlled Portfolio Company (i) are in
compliance with any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”); (ii) have received all
permits, licenses or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses; and (iii) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or

10

 

failure to comply with the terms and conditions of such permits, licenses or approvals would
not, singly or in the aggregate, have a Material Adverse Effect.

          (y) All Necessary Permits, etc. The Company and each subsidiary possess such valid and
current certificates, authorizations or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct their respective businesses, except where the
failure to possess such certificates, authorizations or permits would not result in a Material
Adverse Effect and the Company has not received any notice of proceedings relating to the
revocation or modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, could result in a Material Adverse Effect.

          (z) Investment Advisory Agreement. (i) The terms of the Investment Advisory Agreement,
including compensation terms, comply in all material respects with all applicable provisions of the
Investment Company Act and the Advisers Act and (ii) the approvals by the board of directors and
the initial stockholder of the Company of the Investment Advisory Agreement have been made in
accordance with the requirements of Section 15 of the Investment Company Act applicable to
companies that have elected to be regulated as business development companies under the Investment
Company Act.

          (aa) Absence of Proceedings. There is no action, suit, proceeding, inquiry or investigation
before or brought by any court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened, against the Company, which is required to be
disclosed in the Pricing Disclosure Package and/or the Offering Memorandum (other than as disclosed
therein), or which might reasonably be expected to result in a Material Adverse Effect, or which
might reasonably be expected to materially and adversely affect the consummation of the
transactions contemplated in this Agreement, the Indenture, the Securities or the performance by
the Company of its obligations hereunder and thereunder. The aggregate of all pending legal or
governmental proceedings to which the Company is a party or of which any of its property or assets
is the subject which are not described in the Pricing Disclosure Package or the Offering
Memorandum, including ordinary routine litigation incidental to the business, could not reasonably
be expected to result in a Material Adverse Effect.

          (bb) Subchapter M. During the past fiscal year, the Company has been organized and operated,
and is currently organized and operates, in compliance in all material respects with the
requirements to be taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (“Subchapter M of the Code” and the “Code,” respectively). The
Company intends to direct the investment of the proceeds of the offering described in the Pricing
Disclosure Package and Offering Memorandum in such a manner as to comply with the requirements of
Subchapter M of the Code.

          (cc) Tax Law Compliance. The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns and have paid all taxes required to be paid by
any of them and, if due and payable, any related or similar assessment, fine or penalty levied
against any of them, except for any taxes, assessments or penalties as may be contested in good
faith and by appropriate proceedings. The Company has made adequate

11

 

charges, accruals and reserves in the applicable financial statements referred to in the
Pricing Disclosure Package and Offering Memorandum in respect of all federal, state and foreign
income and franchise taxes for all periods as to which the tax liability of the Company or any of
its subsidiaries has not been finally determined. The Company is not aware of any tax deficiency
that has been or might be asserted or threatened against the Company or any subsidiary that could
result in a Material Adverse Effect.

          (dd) Distribution of Offering Materials. The Company has not distributed and will not
distribute any offering material in connection with the offering and sale of the Securities other
than the Pricing Disclosure Package, Offering Memorandum, any Free Writing Offering Document or
other materials, if any, permitted by the Securities Act or the Investment Company Act.

          (ee) Registration Rights. Except as otherwise described in the Pricing Disclosure Package and
Offering Memorandum, there are no persons with registration rights or other similar rights to have
any securities registered by the Company under the Securities Act.

          (ff) Nasdaq Global Select Market. The Company’s shares of common stock are registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and are listed for quotation on the Nasdaq
Global Select Market (“NASDAQ”). The Company has taken no action designed to, or likely to have
the effect of, terminating the registration of its common stock under the Exchange Act or delisting
its common stock from the NASDAQ, nor has the Company received any notification that the Commission
or the Financial Industry Regulatory Authority, Inc. (“FINRA”) is contemplating terminating such
registration or listing. The Company has continued to satisfy, in all material respects, all
requirements for listing its common stock for trading on the NASDAQ.

          (gg) No Price Stabilization or Manipulation. The Company has not taken and will not take,
directly or indirectly, any action designed to or that might be reasonably expected to cause or
result in stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities or the Underlying Securities; provided, however, that the
Initial Purchasers acknowledge the Company may from time to time repurchase shares of its common
stock pursuant to its share repurchase program, which repurchases shall be made in compliance with
applicable law.

          (hh) Compliance with the Exchange Act and the Investment Company Act; Reports Filed. The
documents filed by the Company with the Commission under the Exchange Act and the Investment
Company Act, complied, and will comply in all material respects, with the requirements of the
Exchange Act and the Investment Company Act, as applicable, and, with respect to the Exchange Act
documents, as of the date hereof, the Applicable Time, and as of the Closing Date, did not and will
not contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The Company has filed all reports required to be filed
pursuant to, the Investment Company Act and the Exchange Act except where the failure to file such
reports would not have a Material Adverse Effect.

12

 

          (ii) Interested Persons. Except as disclosed in the Pricing Disclosure Package and Offering
Memorandum (i) no person is serving or acting as an officer, director or investment adviser of the
Company, except in accordance with the provisions of the Investment Company Act and the Advisers
Act, and (ii) to the knowledge of the Company, no director of the Company is an “interested person”
(as defined in the Investment Company Act) of the Company or an “affiliated person” (as defined in
the Investment Company Act) of the Initial Purchasers except as otherwise disclosed in the Pricing
Disclosure Package and Offering Memorandum.

          (jj) No Unlawful Contributions or Other Payments. Neither the Company nor any of its
subsidiaries nor, to the Company’s knowledge, any employee or agent of the Company or any
subsidiary, has made any contribution or other payment to any official of, or candidate for, any
federal, state or foreign office in violation of any law or of the character required to be
disclosed in the Pricing Disclosure Package and the Offering Memorandum.

          (kk) No Outstanding Loans or Other Indebtedness. There are no outstanding loans, advances
(except normal advances for business expenses in the ordinary course of business) or guarantees or
indebtedness by the Company to or for the benefit of any of the officers or directors of the
Company or any of the members of any of them, except as disclosed in the Pricing Disclosure Package
and Offering Memorandum.

          (ll) Compliance with Laws. The Company has not been advised, and has no knowledge, that it
and each of its subsidiaries are not conducting business in compliance with all applicable laws,
rules and regulations of the jurisdictions in which it is conducting business, except where failure
to be so in compliance would not result, individually or in the aggregate, in a Material Adverse
Effect.

          (mm) Compliance with the Sarbanes-Oxley Act of 2002. The Company has complied in all material
respects with Sections 302 and 906 of the Sarbanes-Oxley Act and has made the evaluations of the
Company’s disclosure controls and procedures required under Rule 13a-15 under the Exchange Act.

          (nn) Foreign Corrupt Practices Act. Neither the Company nor any of its subsidiaries nor, to
the knowledge of the Company, any director, officer, agent, employee, affiliate or other person
acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action,
directly or indirectly, that has resulted or would result in a violation by such persons of the
Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder
(collectively, the “FCPA”), including, without limitation, making use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to
pay or authorization of the payment of any money, or other property, gift, promise to give, or
authorization of the giving of anything of value to any “foreign official” (as such term is defined
in the FCPA) or any foreign political party or official thereof or any candidate for foreign
political office, in contravention of the FCPA.

          (oo) Money Laundering Laws. The operations of the Company and its subsidiaries are and have
been conducted at all times in compliance with applicable financial recordkeeping and reporting
requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the
applicable money laundering statutes of all applicable jurisdictions,

13

 

the rules and regulations thereunder and any related or similar applicable rules, regulations
or guidelines, issued, administered or enforced by any governmental agency (collectively, “Money
Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company or any of its Subsidiaries with respect
to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

          (pp) OFAC. Neither the Company nor any of its subsidiaries nor, to the knowledge of the
Company, any director, officer, agent, employee, affiliate or person acting on behalf of the
Company or any of its subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Company will not
directly or indirectly use any of the proceeds received by the Company from the sale of Securities
or the Underlying Securities contemplated by this Agreement, or lend, contribute or otherwise make
available any such proceeds to any subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently subject to any U.S. sanctions
administered by OFAC.

     Any certificate signed by any officer of the Company and delivered to the Initial Purchasers
or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the
Company, to the Initial Purchasers as to the matters covered thereby.

     3. Representations and Warranties of the Adviser and the Administrator. The Adviser and the
Administrator, jointly and severally, represent, warrant and agree as follows:

          (a) No Material Adverse Change in Business. Since the respective dates as of which
information is given in the Pricing Disclosure Package and the Offering Memorandum, except as
otherwise stated therein, there has been no material adverse change in the financial condition, or
in the earnings, business affairs, operations or regulatory status of the Adviser or the
Administrator or any of their respective subsidiaries, whether or not arising in the ordinary
course of business, that would reasonably be expected to result in a Material Adverse Effect, or
would otherwise reasonably be expected to prevent the Adviser or the Administrator from carrying
out its obligations under the Investment Advisory Agreement (an “Adviser Material Adverse Change”
or an “Adviser Material Adverse Effect,” where the context so requires) or the Administration
Agreement (an “Administrator Material Adverse Change” or an “Administrator Material Adverse
Effect,” where the context so requires).

          (b) Good Standing. Each of the Adviser and the Administrator (and each of their subsidiaries)
has been duly organized and is validly existing and in good standing under the laws of the State of
Delaware, with full power and authority to own, lease and operate its properties and to conduct its
business as described in the Pricing Disclosure Package and the Offering Memorandum and to enter
into and perform its obligations under this Agreement; the Adviser has full power and authority to
execute and deliver and perform its obligations under the Investment Advisory Agreement; the
Administrator has full power and authority to execute and deliver the Administration Agreement; and
each of the Adviser and the Administrator is duly qualified to do business as a foreign entity and
is in good standing in each jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the failure to qualify or be in
good standing would not otherwise reasonably be

14

 

expected to result in an Adviser Material Adverse Effect or an Administrator Material Adverse
Effect, as applicable.

          (c) Registration Under Advisers Act. The Adviser is duly registered with the Commission as an
investment adviser under the Advisers Act and is not prohibited by the Advisers Act or the
Investment Company Act from acting under the Investment Advisory Agreement for the Company as
contemplated by the Pricing Disclosure Package and the Offering Memorandum. There does not exist
any proceeding or, to the Adviser’s knowledge, any facts or circumstances the existence of which
could lead to any proceeding, which might adversely affect the registration of the Adviser with the
Commission.

          (d) Absence of Proceedings. There is no action, suit or proceeding or, to the knowledge of
the Adviser or the Administrator, inquiry or investigation before or brought by any court or
governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Adviser
or the Administrator, threatened, against or affecting either the Adviser or the Administrator,
which is required to be disclosed in the Pricing Disclosure Package and the Offering Memorandum
(other than as disclosed therein), or which would reasonably be expected to result in an Adviser
Material Adverse Effect, or which would reasonably be expected to materially and adversely affect
the consummation of the transactions contemplated in this Agreement, the Investment Advisory
Agreement or the Administration Agreement; the aggregate of all pending legal or governmental
proceedings to which the Adviser or the Administrator is a party or of which any of its respective
property or assets is the subject which are not described in the Pricing Disclosure Package and the
Offering Memorandum, including ordinary routine litigation incidental to their business, would not
reasonably be expected to result in an Adviser Material Adverse Effect.

          (e) Absence of Defaults and Conflicts. Neither the Adviser nor the Administrator is in
violation of its certificate of formation or limited liability company operating agreement or in
default in the performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note,
lease or other agreement or instrument to which the Adviser or the Administrator is a party or by
which it or any of them may be bound, or to which any of the property or assets of the Adviser or
the Administrator is subject, or in violation of any law, statute, rule, regulation, judgment,
order or decree except for such violations or defaults that would not reasonably be expected to
result in an Adviser Material Adverse Effect or an Administrator Material Adverse Effect, as
applicable; and the execution, delivery and performance of this Agreement, the Investment Advisory
Agreement, the Administration Agreement, and the consummation of the transactions contemplated
herein and therein and in the Pricing Disclosure Package and the Offering Memorandum (including the
issuance and sale of the Securities and Underlying Securities and the use of the proceeds from the
sale of the Securities and Underlying Securities as described in the Pricing Disclosure Package and
the Offering Memorandum under the caption “Use of Proceeds”) and compliance by the Adviser with its
obligations hereunder and under the Investment Advisory Agreement and by the Administrator with
its obligations hereunder and under the Administration Agreement do not and will not, whether with
or without the giving of notice or passage of time or both, conflict with or constitute a breach
of, or default under, or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Adviser or the Administrator pursuant to such

15

 

Agreement except for such violations or defaults that would not reasonably be expected to
result in an Adviser Material Adverse Effect or an Administrator Material Adverse Effect, as
applicable, nor will such action result in any violation of the provisions of the limited liability
company operating agreement of the Adviser or Administrator, respectively; nor will such action
result in any violation of any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or foreign, having
jurisdiction over the Adviser, the Administrator, or any of their respective assets, properties or
operations except for such violations that would not reasonably be expected to result in an Adviser
Material Adverse Effect or an Administrator Material Adverse Effect, as applicable.

          (f) Authorization of Agreements. This Agreement has been duly authorized, executed and
delivered by the Adviser and the Administrator; the Investment Advisory Agreement has been duly
authorized, executed and delivered by the Adviser; and the Administration Agreement has been duly
authorized, executed and delivered by the Administrator; the Investment Advisory Agreement and the
Administration Agreement constitute valid and legally binding agreements of the Adviser and the
Administrator, respectively, except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency (including, without limitation, all laws relating to fraudulent transfers) or similar
laws affecting creditors’ rights generally and (ii) rights to indemnification and contribution may
be limited to equitable principles of general applicability or by state or federal securities laws
or the policies underlying such law.

          (g) Absence of Further Requirements. No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Adviser or the Administrator of its
obligations hereunder, in connection with the offering, issuance or sale of the Securities and
Underlying Securities hereunder or the consummation of the transactions contemplated by this
Agreement, the Investment Advisory Agreement, the Administration Agreement or the Pricing
Disclosure Package and the Offering Memorandum (including the use of the proceeds from the sale of
the Securities as described in the Pricing Disclosure Package and the Offering Memorandum under the
caption “Use of Proceeds”), except (i) such as have been already obtained under the Securities Act,
the Investment Company Act and the 1939 Act, (ii) such as may be required under state securities
laws and (iii) the filing of the Notification of Election under the Investment Company Act, which
has been effected.

          (h) Description of the Adviser and the Administrator. The description of the Adviser and the
Administrator contained in the Pricing Disclosure Package and the Offering Memorandum does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they were made, not misleading.

          (i) Possession of Licenses and Permits. Each of the Adviser and the Administrator possesses
such valid and current certificates, authorizations or permits issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct the business now
operated by it (collectively, “Governmental Licenses”), except where the failure so to possess
would not reasonably be expected to, singly or in the aggregate, result in an Adviser Material
Adverse Effect or an Administrator Material Adverse Effect, as applicable;

16

 

each of the Adviser and Administrator is in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would not, singly or in the
aggregate, result in an Adviser Material Adverse Effect or an Administrator Material Adverse
Effect, as applicable; all of the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the failure of such Governmental
Licenses to be in full force and effect would not, singly or in the aggregate, result in an Adviser
Material Adverse Effect or an Administrator Material Adverse Effect, as applicable; and neither the
Adviser nor the Administrator has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would reasonably be expected to result in an Adviser
Material Adverse Effect or an Administrator Material Adverse Effect, as applicable.

          (j) Employment Status. The Adviser is not aware that (i) any executive, key employee or
significant group of employees of the Company, if any, the Adviser or the Administrator, as
applicable, plans to terminate employment with the Company, the Adviser or the Administrator or
(ii) any such executive or key employee is subject to any non-compete, nondisclosure,
confidentiality, employment, consulting or similar agreement that would be violated by the present
or proposed business activities of the Company or the Adviser except where such termination or
violation would not reasonably be expected to have an Adviser Material Adverse Effect.

          Any certificate signed by any officer of the Adviser and delivered to the Representative or
counsel for the Initial Purchasers in connection with the offering of the Securities shall be
deemed a representation and warranty by the Adviser, as to matters covered thereby, to each Initial
Purchaser.

     4.
Purchase of the Securities by the Initial Purchasers, Agreements to Sell, Purchase and Resell.
(a) The Company hereby agrees, on the basis of the representations, warranties and agreements of
the Initial Purchasers contained herein and subject to all the terms and conditions set forth
herein, to issue and sell to the Initial Purchasers and, upon the basis of the representations,
warranties and agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Initial Purchaser agrees, severally and not jointly, to purchase
from the Company, at a purchase price of 97% of the principal amount thereof (the “Purchase
Price”), the total principal amount of Securities set forth opposite the name of such Initial
Purchaser in Schedule I hereto plus any additional principal amount of Securities which such
Initial Purchasers may become obligated to purchase pursuant to the provisions of Section 10 hereof
(subject to such adjustments to eliminate fractional Securities as you may determine). The Company
shall not be obligated to deliver any of the securities to be delivered hereunder except upon
payment for all of the securities to be purchased as provided herein.

          (b) Each of the Initial Purchasers, severally and not jointly hereby represents and warrants
to the Company that it will offer the Securities for sale upon the terms and conditions set forth
in this Agreement and in the Pricing Disclosure Package and Offering Memorandum. Each of the
Initial Purchasers hereby represents and warrants to, and agrees with,
the Company, on the basis of the representations, warranties and agreements of the Company,
that such Initial Purchaser:

17

 

               (i) is a QIB and an “accredited investor” (as defined by Rule 501(a) of Regulation D) with
such knowledge and experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Securities;

               (ii) is purchasing the Securities pursuant to a private sale exempt from registration
under the Securities Act;

               (iii) will solicit offers to buy the Securities only from, and will offer to sell and sell
the Securities only to, Eligible Purchasers whom each reasonably believes is a QIB in accordance
with this Agreement and on the terms contemplated by the Pricing Disclosure Package and Offering
Memorandum and will take reasonable steps to ensure that the purchasers of such Securities are
aware that such sale is being made in reliance on Rule 144A;

               (iv) including any person acting on its behalf will not offer or sell the Securities, nor
has it offered or sold the Securities by, or otherwise engaged in, any form of general solicitation
or general advertising (within the meaning of Regulation D, including, but not limited to,
advertisements, articles, notices or other communications published in any newspaper, magazine, or
similar medium or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising)

               (v) it has only communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it
in connection with the issue or sale of any Securities, in circumstances in which Section 21(1) of
the FSMA does not apply to the Company;

               (vi) it has complied and will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to the Securities in, from or otherwise involving the
United Kingdom; and

               (vii) in relation to each Member State of the European Economic Area which has implemented
the Prospectus Directive (each, a “Relevant Member State”), it has not made and will not make an
offer to the public of any Securities which are the subject of the offering contemplated by this
Agreement in that Relevant Member State, except that it may make an offer to the public in that
Relevant Member State of any Securities at any time under the following exemptions under the
Prospectus Directive, if they have been implemented in that Relevant Member State: (1) to legal
entities which are authorized or regulated to operate in the financial markets or, if not so
authorized or regulated, whose corporate purpose is solely to invest in securities; (2) to any
legal entity which has two or more of (a) an average of at least 250 employees during the last
financial year, (b) a total balance sheet of more than €43,000,000 and (c) an annual turnover of
more than €50,000,000, as shown in its last annual or consolidated accounts; (3) to fewer than 100
natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive)
subject to obtaining the prior written consent of the Initial Purchaser for any such offer; or (4)
in any other circumstances falling within Article 3(2) of the
Prospectus Directive ; provided that no such offer of Securities shall result in a requirement
for the publication by the Transaction Entities or the Initial Purchaser of a prospectus pursuant
to Article 3 of the Prospectus Directive.

18

 

     The Initial Purchasers have advised the Company that they will offer the Securities to
Eligible Purchasers at a price initially equal to 100% of the principal amount thereof, plus
accrued interest, if any, from the date of issuance of the Securities. Such price may be changed
by the Initial Purchasers at any time without notice.

          (c) Such Initial Purchaser has not nor, prior to the later to occur of (A) the Closing Date
and (B) completion of the distribution of the Securities, will not, use, authorize use of, refer to
or distribute any material in connection with the offering and sale of the Securities other than
(i) the Preliminary Offering Memorandum, the Pricing Disclosure Package, the Offering Memorandum,
(ii) any written communication that contains no “issuer information” (as defined in Rule 433(h)(2)
under the Act) that was not included (C) including through incorporation by reference) in the
Preliminary Offering Memorandum, (iii) the Free Writing Offering Documents listed on Schedule III
hereto, (iv) any written communication prepared by such Initial Purchaser and approved by the
Company in writing, or (v) any written communication relating to or that contains the terms of the
Securities and/or other information that was included (including through incorporation by
reference) in the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering
Memorandum.

          Each of the Initial Purchasers understands that the Company and, for purposes of the opinions
to be delivered to the Initial Purchasers pursuant to Sections 8(c) and 8(d) hereof, counsel to the
Company and counsel to the Initial Purchasers, will rely upon the accuracy and truth of the
foregoing representations, warranties and agreements, and the Initial Purchasers hereby consent to
such reliance.

     5. Delivery of the Securities and Payment Therefor. Delivery to the Initial Purchasers of and
payment for the Securities shall be made at the office of Skadden, Arps, Slate, Meagher & Flom LLP,
Four Times Square, New York, New York, at 9:00 A.M., New York City time, on December 21, 2010 (the
“Closing Date”). The place of closing for the Securities and the Closing Date may be varied by
agreement between the Initial Purchasers and the Company.

          The Securities will be delivered to the Initial Purchasers, or the Trustee as custodian for
The Depository Trust Company (“DTC”), against payment by or on behalf of the Initial Purchasers of
the purchase price therefor by wire transfer in immediately available funds, by causing DTC to
credit the applicable Securities to the account of the Initial Purchasers at DTC. The Securities
will be evidenced by one or more global securities in definitive form (the “Global Securities”) or
by additional definitive securities, and will be registered, in the case of the Global Securities,
in the name of Cede & Co. as nominee of DTC, and in the other cases, in such names and in such
denominations as the Initial Purchasers shall request prior to 9:30 A.M., New York City time, on
the second business day preceding the Closing Date or the Option Closing Date, as the case may be.
The Securities to be delivered to the Initial Purchasers shall be made available to the Initial
Purchasers in New York City for inspection and packaging not later than 9:30 A.M., New York City
time, on the business day next preceding the Closing Date or the Option Closing Date, as the case
may be.

     6. Agreements of the Company. The Company agrees with each of the Initial Purchasers as
follows:

19

 

          (a) The Company will furnish to the Initial Purchasers, without charge, within one business
day of the date of the Offering Memorandum, such number of copies of the Offering Memorandum (and
any documents incorporated by reference therein) as may then be amended or supplemented as they may
reasonably request.

          (b) The Company will not make any amendment or supplement to the Pricing Disclosure Package or
to the Offering Memorandum of which the Initial Purchasers shall not previously have been advised
or to which they shall reasonably object after being so advised.

          (c) The Company consents to the use of the Pricing Disclosure Package and the Offering
Memorandum in accordance with the securities or Blue Sky laws of the jurisdictions in which the
Securities are offered by the Initial Purchasers and by all dealers to whom Securities may be sold,
in connection with the offering and sale of the Securities.

          (d) If, at any time prior to completion of the distribution of the Securities by the Initial
Purchasers to Eligible Purchasers, any event occurs or information becomes known that, in the
judgment of the Company or in the opinion of counsel for the Initial Purchasers, should be set
forth in the Pricing Disclosure Package or the Offering Memorandum so that the Pricing Disclosure
Package or the Offering Memorandum, as then amended or supplemented, does not include any untrue
statement of material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading,
or if it is necessary to supplement or amend the Pricing Disclosure Package or the Offering
Memorandum in order to comply with any law, the Company will (i) give the Representative notice of
such event and (ii) prepare an appropriate supplement or amendment thereto, and will promptly
furnish to the Initial Purchasers and dealers a reasonable number of copies thereof, provided that
the Company not use or distribute any such amendment or supplement to which the Representative or
counsel for the Initial Purchasers shall reasonably object.

          (e) The Company will not make any offer to sell or solicitation of an offer to buy the
Securities that would constitute a Free Writing Offering Document without the prior consent of the
Representative, which consent shall not be unreasonably withheld or delayed; if at any time
following issuance of a Free Writing Offering Document any event occurred or occurs as a result of
which such Free Writing Offering Document conflicts with the information in the Preliminary
Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum or, when taken
together with the information in the Preliminary Offering Memorandum, the Pricing Disclosure
Package or the Offering Memorandum, includes an untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in the light of the
circumstances then prevailing, not misleading, as promptly as practicable after becoming aware
thereof, the Company will give notice thereof to the Initial Purchasers through the Representative
and, if requested by the Representative, will prepare and furnish without charge to each Initial
Purchaser a Free Writing Offering Document or other document which will correct such conflict,
statement or omission.

          (f) Promptly from time to time to take such action as the Initial Purchasers may reasonably
request to qualify the Securities for offering and sale under the securities or Blue Sky laws of
such jurisdictions as the Initial Purchasers may request and to comply with such

20

 

laws so as to permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Securities; provided that in
connection therewith the Company shall not be required to (i) qualify as a foreign corporation in
any jurisdiction in which it would not otherwise be required to so qualify, (ii) file a general
consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any
jurisdiction in which it would not otherwise be subject.

          (g) For a period commencing on the date hereof and ending on the 30th day after the date of
the Offering Memorandum, the Company agrees not to, directly or indirectly, (1) offer, pledge,
sell, or otherwise dispose of any shares of common stock or any securities convertible into or
exercisable or exchangeable for common stock, (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of ownership of the
common stock, whether any such transaction described in clause (1) or (2) above is to be settled by
delivery of common stock securities of the Company or other securities, in cash or otherwise, (3)
make any demand for, or exercise any right with respect to, the registration of any shares of
common stock or any security convertible into or exercisable or exchangeable for common stock; or
(4) publicly disclose the intention to do any of the contemplated transactions in clause (1), (2)
or (3), in each case without the prior written consent of Barclays Capital Inc., on behalf of the
Initial Purchasers. The foregoing restrictions shall not apply to (i) the issuance and sale by the
Company of the Securities offered hereby, (ii) the issuance of the Underlying Securities by the
Company upon conversion of Securities, if applicable, (iii) the grant of options or other
equity-based awards for common stock pursuant to employee benefit plans existing on the date
hereof, and (iv) the issuance by the Company of shares of common stock upon the exercise of an
option or warrant or the conversion of a security outstanding on the date hereof.

          (h) The Company will furnish to the holders of the Securities as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and statements of income,
stockholders’ equity and cash flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Memorandum), will make available to its securityholders consolidated summary financial
information of the Company and its subsidiaries for such quarter in reasonable detail; provided
that so long as the Company files periodic reports pursuant to Section 13 or 15(d) of the Exchange
Act for the foregoing periods, the Company shall be deemed to comply with this Section 6(h).

          (i) For a period of twelve months following the date hereof, the Company will furnish to the
Initial Purchasers (i) as soon as available, a copy of each report of the Company mailed to
stockholders generally unless such report is furnished to or filed with the Commission or any stock
exchange on which any class of securities of the Company is listed or regulatory body and (ii) from
time to time such other information concerning the business and financial condition of the Company
as the Initial Purchasers may reasonably request.

          (j) The Company will apply the net proceeds from the sale of the Securities to be sold by it
hereunder substantially in accordance with the description set forth in the Pricing Disclosure
Package and the Offering Memorandum under the caption “Use of Proceeds.”

21

 

          (k) The Company and its affiliates will not take, directly or indirectly, any action designed
to or that has constituted or that reasonably would be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company in connection with the
offering of the Securities; provided that the Company may conduct repurchases of its securities
under its share repurchase program provided such repurchases are made in accordance with applicable
law.

          (l) Until the completion of the distribution of the Securities by the Initial Purchasers, the
Company will file all documents required to be filed with the Commission pursuant to the Exchange
Act and the Investment Company Act within the time periods required by the Exchange Act and the
Investment Company Act. The Company will give the Representatives notice of its intention to make
any such filing from the Applicable Time to the Closing Date and will furnish the Representatives
with copies of any such documents a reasonable amount of time prior to such proposed filing, as the
case may be, and will not file or use any such document to which the Representatives or counsel for
the Initial Purchasers shall reasonably object.

          (m) The Company will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Securities that have been acquired by any of them,
except for Securities purchased by the Company or any of its affiliates and resold in a transaction
registered under the Securities Act.

          (n) The Company agrees not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Securities Act) that would be integrated
with the sale of the Securities in a manner that would require the registration under the
Securities Act of the sale to the Initial Purchasers or the Eligible Purchasers of the Securities.

          (o) The Company agrees to comply in all material respects with all the terms and conditions of
all agreements set forth in the representation letters of the Company to DTC relating to the
approval of the Securities by DTC for “book entry” transfer.

          (p) The Company will use its best efforts to effect and maintain the listing of its common
stock issuable upon conversion of the Securities on the Nasdaq Global Select Market.

          (q) The Company will not take any action or omit to take any action (such as issuing any press
release relating to the Securities without an appropriate legend) which may result in the loss by
any of the Initial Purchasers of the ability to rely on any stabilization safe harbor provided by
the Financial Services Authority under the Financial Services and Markets Act of 2000.

          (r) The Company will do and perform all things required or necessary to be done and performed
under this Agreement by it prior to the Closing Date, and to satisfy all conditions precedent to
the Initial Purchasers’ obligations hereunder to purchase the Securities.

     7. Expenses. Whether or not the transactions contemplated by this Agreement are consummated
or this Agreement becomes effective or is terminated, the Company agrees, to pay all costs,
expenses, fees and taxes incident to and in connection with: (i) the preparation,

22

 

printing, filing and distribution of the Preliminary Offering Memorandum, the Pricing
Disclosure Package and the Offering Memorandum (including, without limitation, financial statements
and exhibits) and all amendments and supplements thereto (including the fees, disbursements and
expenses of the Company’s accountants and counsel, but not, however, legal fees and expenses of the
Initial Purchasers’ counsel incurred in connection therewith); (ii) the preparation, printing
(including, without limitation, word processing and duplication costs) and delivery of this
Agreement, the Indenture, all Blue Sky memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in connection therewith and with the
Exempt Resales (but not, however, legal fees and expenses of the Initial Purchasers’ counsel
incurred in connection with any of the foregoing other than reasonable fees of such counsel plus
reasonable disbursements incurred in connection with the preparation, printing and delivery of such
Blue Sky memoranda); (iii) the issuance and delivery by the Company of the Securities and any taxes
payable in connection therewith; (iv) the qualification of the Securities for offer and sale under
the securities or Blue Sky laws of the several jurisdictions as provided in Section 6(f)
(including, without limitation, the reasonable fees and disbursements of the Initial Purchasers’
counsel relating to such registration or qualification); (v) the preparation, printing and
distribution of one or more versions of the Offering Memorandum for distribution in Canada, often
in the form of a Canadian “wrapper” (including related fees and expenses of Canadian counsel to the
Initial Purchasers); (vi) the furnishing of such copies of the Pricing Disclosure Package and the
Offering Memorandum, and all amendments and supplements thereto, as may be reasonably requested for
use in connection with the Exempt Resales; (vii) the preparation of certificates for the Securities
(including, without limitation, printing and engraving thereof); (viii) the approval of the
Securities by DTC for “book-entry” transfer (including fees and expenses of counsel); (ix) the
rating of the Securities; (x) the obligations of the Trustee, any agent of the Trustee and the
counsel for the Trustee in connection with the Indenture and the Securities; (xi) the performance
by the Company of their other obligations under this Agreement; and (xii) all reasonable travel
expenses (including expenses related to chartered aircraft) of each Initial Purchaser and the
Company’s officers and employees and any other reasonable expenses of each Initial Purchaser and
the Company in connection with attending or hosting meetings with prospective purchasers of the
Securities, and expenses associated with any electronic road show.

     8. Conditions to Initial Purchasers’ Obligations. The respective obligations of the Initial
Purchasers hereunder are subject to the accuracy, when made and on and as of the Closing Date, of
the representations and warranties of the Company, the Adviser and the Administrator contained
herein, to the performance by the Company of its obligations hereunder, and to each of the
following additional terms and conditions:

          (a) The Initial Purchasers shall not have discovered and disclosed to the Company on or prior
to the Closing Date that the Pricing Disclosure Package or the Offering Memorandum, or any
amendment or supplement thereto, contains an untrue statement of a fact which, in the opinion of
Troutman Sanders LLP, counsel to the Initial Purchasers, is material or omits to state a fact
which, in the opinion of such counsel, is material and is necessary to make the statements therein
not misleading.

          (b) All corporate proceedings and other legal matters incident to the authorization, form and
validity of this Agreement, the Securities, the Indenture, the Pricing Disclosure Package and the
Offering Memorandum, and all other legal matters relating to this

23

 

Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all
material respects to counsel for the Initial Purchasers, and the Company shall have furnished to
such counsel all documents and information that they may reasonably request to enable them to pass
upon such matters.

          (c) Skadden, Arps, Slate, Meagher & Flom LLP shall have furnished to the Initial Purchasers
its written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the
Closing Date, substantially in the form of Exhibit A hereto.

          (d) The Company’s general counsel shall have furnished to the Initial Purchasers its written
opinion, addressed to the Initial Purchasers and dated the Closing Date, substantially in the form
of Exhibit B hereto.

          (e) Venable LLP, shall have furnished to the Initial Purchasers its written opinion, as
Maryland counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date,
substantially in the form of Exhibit C hereto.

          (f) The Initial Purchasers shall have received from Troutman Sanders LLP, counsel for the
Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to the issuance
and sale of the Securities, the Pricing Disclosure Package, the Offering Memorandum and other
related matters as the Initial Purchasers may reasonably require, and the Company shall have
furnished to such counsel such documents and information as they reasonably request for the purpose
of enabling them to pass upon such matters.

          (g) At the time of execution of this Agreement, the Initial Purchasers shall have received
from BDO USA, LLP a letter, in form and substance satisfactory to the Initial Purchasers, addressed
to the Initial Purchasers and dated the date hereof (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and (ii) stating, as of the date hereof (or, with respect to matters involving changes
or developments since the respective dates as of which specified financial information is given in
the Pricing Disclosure Package, as of a date not more than three days prior to the date hereof),
the conclusions and findings of such firm with respect to the financial information and (iii)
covering such other matters as are ordinarily covered by accountants’ “comfort letters” to
underwriters in connection with registered public offerings.

          (h) With respect to the letter of BDO USA, LLP referred to in the preceding paragraph and
delivered to the Initial Purchasers concurrently with the execution of this Agreement (the “initial
letter”), the Company shall have furnished to the Initial Purchasers a letter (the “bring-down
letter”) of such accountants, addressed to the Initial Purchasers and dated the Closing Date (i)
confirming that they are independent public accountants within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the Closing Date (or, with
respect to matters involving changes or developments since the respective dates as of which
specified financial information is given in each of the Pricing Disclosure Package or the Offering
Memorandum, as of a date not more than three days prior to the date of the Closing Date), the
conclusions and findings of such firm with respect to

24

 

the financial information and other matters covered by the initial letter and (iii) confirming
in all material respects the conclusions and findings set forth in the initial letter.

          (i) Except as described in the Pricing Disclosure Package, (i) neither the Company nor any of
its subsidiaries shall have sustained, since the date of the latest audited financial statements
included in the Pricing Disclosure Package, any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree or (ii) since such date, there shall not have been
any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting the condition, financial
or otherwise, or in the earnings, net asset value, prospects, business or operations, whether or
not arising from transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity, the effect of which, in any such case described in clause
(i) or (ii), is, individually or in the aggregate, in the judgment of the Representatives, so
material and adverse as to make it impracticable or inadvisable to proceed with the offering or the
delivery of the Securities being delivered on the Closing Date on the terms and in the manner
contemplated in the Offering Memorandum.

          (j) The Company and the Adviser shall have furnished or caused to be furnished to the Initial
Purchasers on the Closing Date certificates of officers of the Company and the Adviser satisfactory
to the Initial Purchasers as to such matters as the Representative may reasonably request,
including, without limitation, a statement that:

     (i) The representations, warranties and agreements of the Company and the Adviser in
Section 2 and 3 are true and correct on and as of the Closing Date, and the Company and the
Adviser have complied with all its agreements contained herein and satisfied all the
conditions on its part to be performed or satisfied hereunder at or prior to the Closing
Date; and

     (ii) They have carefully examined the Pricing Disclosure Package and the Offering
Memorandum, and, in their opinion, (A) the Pricing Disclosure Package, as of the Applicable
Time and as of the Closing Date, and the Offering Memorandum, as of its date and as of the
Closing Date, did not and do not contain any untrue statement of a material fact and did not
and do not omit to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading and (B) since the date
of the Pricing Disclosure Package and the Offering Memorandum, no event has occurred which
should have been set forth in a supplement or amendment to the Pricing Disclosure Package of
the Offering Memorandum.

          (k) The Company and the Trustee shall have executed and delivered the Indenture, and the
Initial Purchasers shall have received an original copy thereof, duly executed by the Company and
the Trustee.

          (l) As of the Closing Date, the common stock issuable upon conversion of the Securities shall
have been approved for listing on the Nasdaq Global Select Market, subject only to official notice
of issuance.

25

 

          (m) The Representatives shall have received an agreement substantially in the form of
Exhibit D-1 hereto signed by the persons listed on Exhibit D-2 hereto.

          (n) Subsequent to the execution and delivery of this Agreement there shall not have occurred
any of the following: (i) trading in securities generally on the New York Stock Exchange or the
Nasdaq Global Select Market or in the over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market, shall have been suspended or materially
limited or the settlement of such trading generally shall have been materially disrupted or minimum
prices shall have been established on any such exchange or such market by the Commission, by such
exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by federal or state authorities, (iii) the United
States shall have become engaged in hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of a national emergency or war
by the United States or (iv) there shall have occurred such a material adverse change in general
economic, political or financial conditions, including, without limitation, as a result of
terrorist activities after the date hereof (or the effect of international conditions on the
financial markets in the United States shall be such), as to make it, in the judgment of the
Representative, impracticable or inadvisable to proceed with the offering or delivery of the
Securities being delivered on the Closing Date on the terms and in the manner contemplated in the
Offering Memorandum or that, in the judgment of the Representative, would materially and adversely
affect the financial markets or the markets for the Securities and other debt securities.

          All opinions, letters, evidence and certificates mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Initial Purchasers.

     9. Indemnification and Contribution.

          (a) The Company hereby agrees to indemnify and hold harmless each Initial Purchaser, its
directors, officers and employees and each person, if any, who controls any Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any loss, claim, damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action relating to purchases
and sales of the Securities), to which that Initial Purchaser, director, officer, employee or
controlling person may become subject, under the Securities Act, the Exchange Act, the Investment
Company Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of,
or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained
(A) in any Free Writing Offering Document, the Preliminary Offering Memorandum, the Pricing
Disclosure Package or the Offering Memorandum or in any amendment or supplement thereto prepared by
the Company, or (B) in any materials or information provided to investors by, or with the written
approval of, the Company in connection with the marketing of the offering of the Securities
(“Marketing Materials”), including any roadshow or investor presentations made to investors by the
Company (whether in person or electronically), or (ii) the omission or alleged omission to state in
any Free Writing Offering Document, the Preliminary Offering Memorandum, the Pricing Disclosure
Package or the Offering Memorandum, or in any amendment or supplement thereto, or in any Blue Sky

26

 

Application or in any Marketing Materials, any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not misleading,
and shall reimburse each Initial Purchaser and each such director, officer, employee or controlling
person promptly upon demand for any legal or other expenses reasonably incurred by that Initial
Purchaser, director, officer, employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged omission made in any
Preliminary Offering Memorandum, the Pricing Disclosure Package or Offering Memorandum, or in any
such amendment or supplement thereto, or in any Blue Sky Application or in any Marketing Materials,
in reliance upon and in conformity with written information concerning such Initial Purchaser
furnished to the Company through the Representative by or on behalf of any Initial Purchaser
specifically for inclusion therein, which information consists solely of the information specified
in Section 9(e). The foregoing indemnity agreement is in addition to any liability that the
Company may otherwise have to any Initial Purchaser or to any director, officer, employee or
controlling person of that Initial Purchaser. Any indemnification by the Company pursuant to this
Agreement shall be subject to the requirements and limitations of Section 17(i) of the 1940 Act.

          (b) Each Initial Purchaser, severally and not jointly, hereby agrees to indemnify and hold
harmless the Company, its officers and employees, each of its directors, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Company or any such director, officer, employee or
controlling person may become subject, under the Securities Act, the Exchange Act, the Investment
Company Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of,
or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained
(A) in any Free Writing Offering Document, Preliminary Offering Memorandum, the Pricing Disclosure
Package or the Offering Memorandum or in any amendment or supplement thereto or (B) in any
Marketing Materials or (ii) the omission or alleged omission to state in any Free Writing Offering
Document, Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering
Memorandum, or in any amendment or supplement thereto, or in any Blue Sky Application or in any
Marketing Materials any material fact necessary to make the statements therein not misleading, but
in each case only to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written information concerning
such Initial Purchaser furnished to the Company through the Representative by or on behalf of that
Initial Purchaser specifically for inclusion therein, which information is limited to the
information set forth in Section 9(e). The foregoing indemnity agreement is in addition to any
liability that any Initial Purchaser may otherwise have to the Company or any such director,
officer, employee or controlling person.

          (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim
or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under this Section 9, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, that

27

 

the failure to notify the indemnifying party shall not relieve it from any liability that it
may have under this Section 9 except to the extent it has been materially prejudiced by such
failure and; provided, further, that the failure to notify the indemnifying party shall not relieve
it from any liability that it may have to an indemnified party otherwise than under this Section 9.
If any such claim or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume the defense of such
claim or action, the indemnifying party shall not be liable to the indemnified party under this
Section 9 for any legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs of investigation; provided, that
the Initial Purchasers shall have the right to employ counsel to represent jointly the Initial
Purchasers and their respective directors, officers, employees and controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity may be sought by the
Initial Purchasers against the Company under this Section 9, if (i) the Company and the Initial
Purchasers shall have so mutually agreed; (ii) the Company has failed within a reasonable time to
retain counsel reasonably satisfactory to the Initial Purchasers; (iii) the Initial Purchasers and
their respective directors, officers, employees and controlling persons shall have reasonably
concluded, based on the advice of counsel, that there may be legal defenses available to them that
are different from or in addition to those available to the Company; or (iv) the named parties in
any such proceeding (including any impleaded parties) include both the Initial Purchasers or their
respective directors, officers, employees or controlling persons, on the one hand, and the Company,
on the other hand, and representation of both sets of parties by the same counsel would present a
material conflict due to actual or potential differing interests between them, and in any such
event the fees and expenses of such separate counsel shall be paid by the Company. No indemnifying
party shall (i) without the prior written consent of the indemnified parties (which consent shall
not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability arising out of such
claim, action, suit or proceeding, or (ii) be liable for any settlement of any such action effected
without its written consent (which consent shall not be unreasonably withheld), but if settled with
the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment.

          (d) If the indemnification provided for in this Section 9 shall for any reason be unavailable
to or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b) in respect of
any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then
each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the
other, from the offering of the Securities or (ii) if the allocation

28

 

provided by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company, on the one hand, and the Initial Purchasers, on the other, with
respect to the statements or omissions that resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company, on the one hand, and the Initial Purchasers, on the other, with
respect to such offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Securities purchased under this Agreement (before deducting expenses)
received by the Company, on the one hand, and the total underwriting discounts and commissions
received by the Initial Purchasers with respect to the Securities purchased under this Agreement,
on the other hand, bear to the total gross proceeds from the offering of the Securities under this
Agreement as set forth on the cover page of the Offering Memorandum. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information supplied by the
Company, or the Initial Purchasers, the intent of the parties and their relative knowledge, access
to information and opportunity to correct or prevent such statement or omission. The Company and
the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to
this Section 9(d) were to be determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation that does not take
into account the equitable considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 9(d) shall be deemed to include, for purposes of this
Section 9(d), any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9(d), no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the net proceeds from the sale to Eligible Purchasers of the
Securities initially purchased by it exceeds the amount of any damages that such Initial Purchaser
has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Initial Purchasers’ obligations to contribute
as provided in this Section 9(d) are several in proportion to their respective underwriting
obligations and not joint.

          (e) The Initial Purchasers severally confirm and the Company acknowledges and agrees that the
statements with respect to the offering of the Securities by the Initial Purchasers set forth in
the last paragraph on the front cover of the Offering Memorandum and in the sixth paragraph of the
section entitled “Plan of Distribution” in the Pricing Disclosure Package and the Offering
Memorandum are correct and constitute the only information concerning such Initial Purchasers
furnished in writing to the Company by or on behalf of the Initial Purchasers specifically for
inclusion in the Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering
Memorandum or in any amendment or supplement thereto.

     10. Defaulting Initial Purchasers. If on the Closing Date, or on an Option Closing Date, as
the case may be, any Initial Purchaser defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting Initial Purchasers shall be obligated to

29

 

purchase the Securities that the defaulting Initial Purchaser agreed but failed to purchase on
the Closing Date or the Option Closing Date, as the case may be, in the respective proportions that
the principal amount of Securities set opposite the name of each remaining non-defaulting Initial
Purchaser in Schedule I hereto bears to the total principal amount of Securities set opposite the
names of all the remaining non-defaulting Initial Purchasers in Schedule I hereto; provided, that
the remaining non-defaulting Initial Purchasers shall not be obligated to purchase any of the
Securities on the Closing Date or the Option Closing Date, as the case may be, if the aggregate
principal amount of Securities that the defaulting Initial Purchaser or Initial Purchasers agreed
but failed to purchase on such date exceeds 10% of the aggregate principal amount of Securities to
be purchased on the Closing Date, or on the Option Closing Date, as the case may be. If the
foregoing maximums are exceeded, the remaining non-defaulting Initial Purchasers, or those other
Initial Purchasers satisfactory to the Initial Purchasers who so agree, shall have the right, but
shall not be obligated, to purchase, in such proportion as may be agreed upon among them, all the
Securities to be purchased on the Closing Date, or on the Option Closing Date, as the case may be.

          If other Initial Purchasers are obligated or agree to purchase the Securities of a defaulting
or withdrawing Initial Purchaser, either the remaining Initial Purchasers or the Company may
postpone the Closing Date for up to five full business days in order to effect any changes that in
the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in
the Pricing Disclosure Package, the Offering Memorandum or in any other document or arrangement.

          If the remaining Initial Purchasers or other Initial Purchasers satisfactory to the Initial
Purchasers do not elect to purchase the Securities that the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase on the Closing Date, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchaser or the Company.

          As used in this Agreement, the term “Initial Purchaser” includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in Schedule I hereto that,
pursuant to this Section 10, purchases Securities that a defaulting Initial Purchaser agreed but
failed to purchase.

          Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may
have to the Company for damages caused by its default.

     11. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the
Initial Purchasers by notice given to and received by the Company prior to delivery of and payment
for the Securities if, prior to that time, any of the events described in Sections 8(i) or (o)
shall have occurred or if the Initial Purchasers shall decline to purchase the Securities for any
reason permitted under this Agreement.

     12. Reimbursement of Initial Purchasers’ Expenses. If (a) the Company fails to tender the
Securities for delivery to the Initial Purchasers or (b) the Initial Purchasers shall decline to
purchase the Securities for any reason permitted under this Agreement, the Company shall reimburse
the Initial Purchasers for all reasonable out-of-pocket expenses (including reasonable fees and
disbursements of counsel) incurred by the Initial Purchasers in connection

30

 

with this Agreement and the proposed purchase of the Securities, and upon demand the
Company shall pay the full amount thereof to the Initial Purchasers.

     13. Notices, etc. All statements, requests, notices and agreements hereunder shall be in
writing, and:

          (a) if to any Initial Purchaser, shall be delivered or sent by hand delivery, mail, telex,
overnight courier or facsimile transmission to Barclays Capital Inc., 745 Seventh Avenue, New York,
New York 10019, Attention: Syndicate Registration (Fax: 646-834-8133) with a copy to Troutman
Sanders LLP, Attention: David M. Carter (Fax: (804) 698-5196), and with a copy, in the case of any
notice pursuant to Section 9(c), to the Director of Litigation, Office of the General Counsel,
Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019;

          (b) if to the Company, shall be delivered or sent by mail, telex, overnight courier or
facsimile transmission to Prospect Capital Corporation, 10 East 40th Street, New York, New York
10016, Attention: Joseph Ferraro (Fax: (212) 448-9652), with a copy to Skadden, Arps, Slate,
Meagher & Flom LLP, Four Times Square, Attention: Richard T. Prins (Fax: (917) 777-2790);

provided, that any notice to an Initial Purchaser pursuant to Section 9(c) shall be delivered or
sent by hand delivery, mail, telex or facsimile transmission to such Initial Purchaser at its
address set forth in its acceptance telex to Barclays Capital Inc., which address will be supplied
to any other party hereto by Barclays Capital Inc. upon request. Any such statements, requests,
notices or agreements shall take effect at the time of receipt thereof. The Company shall be
entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of
the Initial Purchasers by Barclays Capital Inc.

     14. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Company, and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only those persons,
except that the representations, warranties, indemnities and agreements of the Company contained in
this Agreement shall also be deemed to be for the benefit of directors, officers and employees of
the Initial Purchasers and each person or persons, if any, controlling any Initial Purchaser within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the persons referred to
in this Section 14, any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.

     15. Survival. The respective indemnities, representations, warranties and agreements of the
Company and the Initial Purchasers contained in this Agreement or made by or on behalf on them,
respectively, pursuant to this Agreement, shall survive the delivery of and payment for the
Securities and shall remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.

     16. Definition of the Terms “Business Day,” “Affiliate” and “Subsidiary.” For purposes of
this Agreement, (a) “business day” means any day on which the New York Stock

31

 

Exchange, Inc. is open for trading and (b) “affiliate” and “subsidiary” have the meanings set
forth in Rule 405 under the Securities Act, unless otherwise indicated.

     17. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of New York, without regard to its choice of law provisions.

     18. No Fiduciary Duty. The Company acknowledges and agrees that in connection with this
offering, or any other services the Initial Purchasers may be deemed to be providing hereunder,
notwithstanding any preexisting relationship, advisory or otherwise, between the parties or any
oral representations or assurances previously or subsequently made by the Initial Purchasers: (i)
no fiduciary or agency relationship between the Company, and any other person, on the one hand, and
the Initial Purchasers, on the other, exists; (ii) the Initial Purchasers are not acting as
advisors, expert or otherwise, to the Company, including, without limitation, with respect to the
determination of the purchase price of the Securities, and such relationship between the Company,
and the Initial Purchasers is entirely and solely commercial, based on arms-length negotiations;
(iii) any duties and obligations that the Initial Purchasers may have to the Company shall be
limited to those duties and obligations specifically stated herein; and (iv) the Initial Purchasers
and their respective affiliates may have interests that differ from those of the Company. The
Company hereby waives any claims that the Company may have against the Initial Purchasers with
respect to any breach of fiduciary duty in connection with the Securities.

     19. Counterparts. This Agreement may be executed in one or more counterparts and, if executed
in more than one counterpart, the executed counterparts shall each be deemed to be an original but
all such counterparts shall together constitute one and the same instrument.

     20. Headings. The headings herein are inserted for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this Agreement.

[Signature page follows]

32

 

          If the foregoing correctly sets forth the agreement between the Company and the Initial
Purchasers, please indicate your acceptance in the space provided for that purpose below.

	 	 	 	 	 
	 	Very truly yours,

Prospect Capital Corporation 

 	 
	 	By  	

 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Prospect Capital Management, LLC

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	Prospect Administration, LLC

 	 
	 	By  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

Accepted:

Barclays Capital Inc.,

For itself and as Representative

of the several Initial Purchasers named

in Schedule I hereto

	 	 	 	 	 
	

 	 
	Name:  	 	 	 
	Title:  	 	 	 

33

 

SCHEDULE I

	 	 	 	 	 
	 	 	Principal	 
	 	 	Amount of	 
	 	 	Securities	 
	 	 	to be	 
	Initial Purchasers	 	Purchased	 
	Barclays Capital Inc.
	 	$	112,500,000	 
	RBC Capital Markets, LLC
	 	$	30,000,000	 
	Keefe, Bruyette & Woods, Inc.
	 	$	3,750,000	 
	Rabo Securities USA, Inc.
	 	$	3,750,000	 
	 
	 	 	 
	Total
	 	$	150,000,000	 
	 
	 	 	 

I-1

 

SCHEDULE II

Prospect Capital Corporation

    PRICING TERM
    SHEET

    DATED DECEMBER 16, 2010

    Prospect Capital Corporation

    $150,000,000

 

    6.25% Senior
    Convertible Notes due 2015

 

    The information
    in this pricing term sheet relates only to the offering of
    Prospect Capital Corporation’s 6.25% senior
    convertible notes due 2015 and should be read together with the
    preliminary offering memorandum dated December 14, 2010
    (the “Preliminary Offering Memorandum”) relating to
    such offering and supersedes the information in the Preliminary
    Offering Memorandum to the extent inconsistent with the
    information in the Preliminary Offering Memorandum. In all other
    respects, this term sheet is qualified in its entirety by
    reference to the Preliminary Offering Memorandum. Terms used
    herein but not defined herein shall have the respective meanings
    set forth in the Preliminary Offering Memorandum.

 

			
	
    Issuer		
    Prospect Capital Corporation (the “Company”)
	 
	
    Security		
    6.25% Senior Convertible Notes due 2015 (the
    “Notes”)
	 
	
    Principal Amount Offered		
    $150,000,000
	 
	
    Net Proceeds		
    $145,200,000, after deducting the fees and estimated expenses
    payable by the Company
	 
	
    Maturity		
    December 15, 2015, unless earlier converted or repurchased
	 
	
    Annual Interest Rate		
    6.25%
	 
	
    Interest Payment Dates		
    Interest will accrue from the Settlement Date (defined below)
    and will be payable in cash in arrears on June 15 and December
    15 of each year, beginning on June 15, 2011. Upon any
    conversion, holders will be entitled to a cash payment
    representing accrued and unpaid interest to, but not including,
    the conversion date, unless the Notes are converted after a
    record date for an interest payment but prior to the
    corresponding interest payment date. Any such payment will be
    made on the settlement date applicable to the relevant
    conversion.
	 
	
    Denomination		
    $1,000 and integral multiples thereof
	 
	
    Issue Price		
    100%, plus accrued interest, if any, from December 21, 2010
	 
	
    The NASDAQ Global Select Market Symbol of the Company’s
    Common Stock		
    PSEC
	 
	
    NASDAQ Global Select Market Closing Price on December 15,
    2010		
    $10.32
	 
	
    Conversion Premium		
    Approximately 10%
	 
	
    Initial Conversion Price		
    Approximately $11.35 per share of the Company’s common
    stock, par value $0.001 per share (the “Common Stock”)
	 
	
    Initial Conversion Rate		
    88.0902 shares per $1,000 principal amount of Notes
	 
	
    Limitation on Beneficial Ownership		
    No holder of Notes will be entitled to receive shares of Common
    Stock upon conversion to the extent (but only to the extent)
    that such receipt would cause such converting holder to become,
    directly or indirectly, a “beneficial owner” (within
    the meaning of Section 13(d) of the Securities Exchange Act 

II-1

 

			
	
		
    of 1934, as amended (the “Exchange Act”) and the rules
    and regulations promulgated thereunder) of more than 5.0% of the
    shares of Common Stock outstanding at such time (the
    “Limitation”). Any purported delivery of shares of
    Common Stock upon conversion of Notes shall be void and have no
    effect to the extent (but only to the extent) that such delivery
    would result in the converting holder becoming the beneficial
    owner of more than 5.0% of the shares of Common Stock
    outstanding at such time. If any delivery of shares of Common
    Stock owed to a holder upon conversion of Notes is not made, in
    whole or in part, as a result of this limitation, the
    Company’s obligation to make such delivery shall not be
    extinguished, and the Company will deliver such shares as
    promptly as practicable after any such converting holder gives
    notice to the Company that such delivery would not result in
    such converting holder being the beneficial owner of more than
    5.0% of the shares of the Common Stock outstanding at such time.
    The Limitation shall no longer apply following the effective
    date of any Fundamental Change.
	 
	
    Call Protection		
    Non-callable
	 
	
    Trade Date		
    December 16, 2010
	 
	
    Settlement Date		
    On or about December 21, 2010
	 
	
    Conversion Rate Cap		
    96.8992 per $1,000 principal amount of Notes, subject to
    adjustment in the circumstances set forth in the Preliminary
    Offering Memorandum
	 
	
    Initial Purchasers		
    Barclays Capital Inc., RBC Capital Markets, LLC, Keefe,
    Bruyette & Woods, Inc. and Rabo Securities USA, Inc.
	 
	
    Listing		
    None
	 
	
    CUSIP		
    74348T AA0
	 
	
    ISIN		
    US74348TAA07
	 
	
    Adjustment to Conversion Rate upon a Non-Stock Change of Control		
    The number of additional shares by which the conversion rate
    will be increased in the event of a “non-stock change of
    control” (as defined in the Preliminary Offering
    Memorandum) will be determined by reference to the table below
    (subject to the limitations described below), based on the date
    on which the non-stock change of control occurs or becomes
    effective (the “effective date”) and the price (the
    “stock price”) paid per share of Common Stock in the
    non-stock change of control.

II-2

 

    Make-Whole
    Table:

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
 
	
 
	
    Stock Price
	
 

	

    Effective Date

	
 
	
    $10.32
	
 
	
 
	
    $11.00
	
 
	
 
	
    $11.35
	
 
	
 
	
    $12.00
	
 
	
 
	
    $13.00
	
 
	
 
	
    $14.00
	
 
	
 
	
    $15.00
	
 
	
 
	
    $16.00
	
 
	
 
	
    $17.00
	
 
	
 
	
    $18.00
	
 
	
 
	
    $19.00
	
 
	
 
	
    $20.00
	
 

	 

	

    December 21, 2010

	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    8.6033
	
 
	
 
	
 
	
    7.7254
	
 
	
 
	
 
	
    6.8087
	
 
	
 
	
 
	
    5.8920
	
 
	
 
	
 
	
    4.9753
	
 
	
 
	
 
	
    4.0586
	
 
	
 
	
 
	
    3.1419
	
 
	
 
	
 
	
    2.2251
	
 
	
 
	
 
	
    1.3084
	
 
	
 
	
 
	
    0.3917
	
 

	

    December 15, 2011

	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    7.7666
	
 
	
 
	
 
	
    6.9449
	
 
	
 
	
 
	
    6.1150
	
 
	
 
	
 
	
    5.2850
	
 
	
 
	
 
	
    4.4550
	
 
	
 
	
 
	
    3.6250
	
 
	
 
	
 
	
    2.7950
	
 
	
 
	
 
	
    1.9650
	
 
	
 
	
 
	
    1.1350
	
 
	
 
	
 
	
    0.3050
	
 

	

    December 15, 2012

	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    8.4975
	
 
	
 
	
 
	
    6.9700
	
 
	
 
	
 
	
    6.2018
	
 
	
 
	
 
	
    5.4544
	
 
	
 
	
 
	
    4.7070
	
 
	
 
	
 
	
    3.9596
	
 
	
 
	
 
	
    3.2121
	
 
	
 
	
 
	
    2.4647
	
 
	
 
	
 
	
    1.7173
	
 
	
 
	
 
	
    0.9699
	
 
	
 
	
 
	
    0.2224
	
 

	

    December 15, 2013

	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    7.7744
	
 
	
 
	
 
	
    6.2524
	
 
	
 
	
 
	
    5.5325
	
 
	
 
	
 
	
    4.8594
	
 
	
 
	
 
	
    4.1864
	
 
	
 
	
 
	
    3.5133
	
 
	
 
	
 
	
    2.8403
	
 
	
 
	
 
	
    2.1672
	
 
	
 
	
 
	
    1.4942
	
 
	
 
	
 
	
    0.8211
	
 
	
 
	
 
	
    0.1481
	
 

	

    December 15, 2014

	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    6.6998
	
 
	
 
	
 
	
    5.1422
	
 
	
 
	
 
	
    4.4968
	
 
	
 
	
 
	
    3.9389
	
 
	
 
	
 
	
    3.3809
	
 
	
 
	
 
	
    2.8229
	
 
	
 
	
 
	
    2.2649
	
 
	
 
	
 
	
    1.7069
	
 
	
 
	
 
	
    1.1489
	
 
	
 
	
 
	
    0.5910
	
 
	
 
	
 
	
    0.0330
	
 

	

    December 15, 2015

	
 
	
 
	
    8.8090
	
 
	
 
	
 
	
    2.8188
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 
	
 
	
 
	
    0.0000
	
 

 

    The exact stock price and effective dates may not be set forth
    on the table, in which case, if the stock price is:

 

			
	 	    • 
	
    between two stock price amounts on the table or the effective
    date is between two dates on the table, the number of additional
    shares will be determined by straight-line interpolation between
    the number of additional shares set forth for the higher and
    lower stock price amounts and the two dates, as applicable,
    based on a
    360-day year;

	 
	 	    • 
	
    in excess of $20.00 per share (subject to adjustment), no
    additional shares will be issued upon conversion; and

	 
	 	    • 
	
    less than $10.32 per share (subject to adjustment), no
    additional shares will be issued upon conversion.

 

    Notwithstanding the foregoing, in no event will the total number
    of shares of Common Stock issuable upon conversion, as adjusted
    in the event of a non-stock change of control, exceed the
    Conversion Rate Cap.

 

    “References in “Description of the Notes —
    Change in the Conversion Rights upon Certain Reclassifications,
    Business Combinations, Asset Sales and Corporate Events” in
    the Preliminary Offering Memorandum to the “last reported
    sale price of a share of common stock on the date of pricing of
    the Notes” mean $10.32, the last reported sale price of a
    share of Common Stock on December 15, 2010.

 

    Use of
    Proceeds:

 

    The Company estimates that the net proceeds it receives from
    this offering will be approximately $145,200,000, after
    deducting estimated offering expenses payable by the Company of
    $300,000.

 

    The Company intends to use the net proceeds from the offering
    initially to maintain balance sheet liquidity, involving
    repayment of debt under its credit facility, investments in high
    quality short-term debt instruments or a combination thereof,
    and thereafter to make long-term investments in accordance with
    its investment objectives. The Company anticipates that
    substantially all of the net proceeds from this offering will be
    used for the above purposes within six months, depending on the
    availability of appropriate investment opportunities consistent
    with its investment objective and market conditions.

 

    This material is confidential and is for your information only
    and is not intended to be used by anyone other than you.

 

    The Notes and the shares of common stock issuable upon
    conversion have not been registered under the U.S. Securities
    Act of 1933, as amended (the “Securities Act”) or the
    securities laws of any other jurisdiction. Unless they are
    registered, the Notes and the shares of common stock issuable
    upon conversion may be offered only in transactions that are
    exempt from registration under the Securities Act or the
    securities laws of any other jurisdiction. Accordingly, the
    Company is offering the Notes only to qualified institutional
    buyers. For further details about eligible offerees and resale
    restrictions, see “Transfer Restrictions; Notice to
    Investors” in the offering memorandum for the offering.

II-3

 

    This communication shall not constitute an offer to sell or
    the solicitation of an offer to buy securities nor shall there
    be any sale of these securities in any jurisdiction in which
    such solicitation or sale would be unlawful prior to the
    registration or qualification of such securities under the laws
    of any such jurisdiction.

 

    A copy of the offering memorandum for the offering of the Notes
    may be obtained by contacting: Barclays Capital Inc., 745
    Seventh Avenue, New York, NY 10019,
    Attention:  Syndicate Registration.

 

    ANY DISCLAIMERS OR OTHER NOTICES THAT MAY APPEAR BELOW ARE NOT
    APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED. SUCH
    DISCLAIMERS OR OTHER NOTICES WERE AUTOMATICALLY GENERATED AS A
    RESULT OF THIS COMMUNICATION BEING SENT VIA BLOOMBERG OR ANOTHER
    EMAIL SYSTEM.

II-4

 

SCHEDULE III

	1.	 	Term sheet containing the terms of the securities, substantially in the form of Schedule II

D-2-1exv10w1

Exhibit 10.1

     EXECUTION
VERSION

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This Amended and Restated Employment Agreement (this “Agreement”), dated as of December 17,
2010 (the “Effective Date”), is made and entered by and between Robert Fisch (the “Executive”) and
rue 21, inc., a Delaware corporation (the “Company”).

RECITALS

     A. The Company is engaged primarily in the retail apparel business (the “Business”).

     B. The Company and the Executive entered into an Employment Agreement dated as of January 1,
2008 (the “Original Employment Agreement”), pursuant to which the Company has employed the
Executive as its President, Chief Executive Officer and Chairman of the Board.

     C. The Company and the Executive now desire to amend and restate the terms of the Original
Employment Agreement in order to assure the continued services of the Executive on the terms set
forth below.

     NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements set forth below, the parties hereto agree as follows:

     1. Employment. The Company shall continue to employ the Executive and the Executive
accepts employment by the Company for the period commencing on the Effective Date and ending at the
close of business on January 31, 2014, unless sooner terminated in accordance with the provisions
of this Agreement (the “Initial Term”). This Agreement may be renewed upon expiration of the
Initial Term for successive one year periods (each a “Renewal Period”), on terms and conditions
substantially similar hereto or as otherwise agreed to by the Company and the Executive if the
Company provides the Executive with a written notice of its intent to renew by July 31 of the last
year of the Initial Term (or July 31 of any Renewal Period) and the Executive provides to the
Company a written acceptance notice by the following September 30. The Initial Term as so extended
by each Renewal Period is hereinafter referred to as the “Term”. Upon expiration of the Term,
except as expressly set forth herein, this Agreement and all of its provisions shall terminate and
shall cease to have any force or effect. Subject to the Company’s obligation to provide severance
benefits as specified herein, the Executive and the Company acknowledge that this employment
relationship may be terminated at any time, upon written notice to the other party, with or without
Cause or Good Reason and for any or no cause or reason, at the option of either the Company or the
Executive.

     2. Duties.

          (a) During the Term, the Executive shall serve as the President, Chief Executive Officer and,
unless applicable law precludes the Chief Executive Officer from also serving as Chairman of the
Board, Chairman of the Board of the Company with responsibility for overseeing all aspects of the
day to day operations of the Company and with such other authority and duties as may be assigned to
him from time to time by the Board of Directors of the Company commensurate

 

 

with such roles of
President and Chief Executive Officer including cooperating with such advisors to the Company as
may be engaged by the Board of Directors from time to time.

          (b) During the Term, the Executive shall devote all his working time, attention, skill and
efforts to the business and affairs of the Company, will use his best efforts to promote the
success of the Company’s business, and shall not enter the employ of or serve as a consultant to,
or in any way perform any services, with or without compensation, for, any other person,
enterprise, business, company, corporation, partnership, firm, association or organization where
such conduct would be inconsistent with, in competition with, or prevent, hinder or restrict the
Executive from carrying out, his duties to the Company or which would be otherwise inconsistent
with this Section 2(b) or any other provision of this Agreement, in each case, without the prior
written consent of the Board of Directors of the Company.

          (c) Nothing in this Agreement shall preclude Executive from devoting time during business
hours to (i) personal matters and investments, (ii) professional, educational, philanthropic,
public interest, or civic activities, or (iii) serving as a director or member of an advisory
committee of any trade association or other entity not in competition with the Company, provided
that such activities do not interfere with Executive’s regular performance of his duties and
responsibilities hereunder.

          (d) The Company shall use its reasonable best efforts to cause the Executive to continue to be
elected as a member of its Board of Directors and, unless applicable law precludes the Chief
Executive Officer from also serving as Chairman of the Board, Chairman of the Board throughout the
Term.

     3. Compensation and Related Matters.

          (a) Salary. From the Effective Date through January 31, 2011 the Executive shall
receive a minimum salary at the rate of $950,000 per annum, payable in accordance with the
Company’s policies in effect from time to time, but in any event no less frequently than monthly.
For any portion of the period from September 1, 2010 through the Effective Date during which the
Executive was receiving a base salary of $875,000 per annum, the Executive shall be entitled to a
lump sum cash payment as retroactive base salary in an amount equal to $75,000 multiplied by a
fraction the numerator of which is the number of calendar days in the period from September 1, 2010
through the Effective Date during which the Executive was receiving a base salary of $875,000 per
annum, and the denominator of which is 365, payable within ten (10) days following the Effective
Date. Effective February 1, 2011, the Executive ‘s minimum base salary shall be increased to
$975,000 per annum. Thereafter, the Executive’s base salary shall be reviewed annually for
increases, but not decreases, by the Compensation Committee of the Board of Directors of the
Company (the “Committee”) in its sole discretion. The base salary as determined herein and
adjusted from time to time shall constitute “Base Salary” for purposes of this Agreement.

          (b) Bonus.

               (i) In addition to his Base Salary, provided the Executive remains employed by the Company on
the last day of the fiscal year for which such Performance Bonus is

Page 2

 

payable, the Executive shall be
entitled to receive an annual performance based bonus comprised of two components based on the
Company’s EBITDA performance during the Spring and Fall selling seasons using the same or a
substantially similar methodology as used in the past by the Committee (the “Performance Bonus”)
for each fiscal year during the Term. The Committee will determine the actual Performance Bonus
awarded to the Executive for any fiscal year, provided, however, that such Performance Bonus for
fiscal year 2011 shall be targeted at 100% of the Executive’s Base Salary for such fiscal year and
shall range from 0% to a maximum of 200% of the Executive’s Base Salary in such fiscal year. The
Performance Bonus for fiscal year 2011 will be based on the Company’s actual EBITDA relative to the
Company’s bonus plan for such fiscal year. The bonus plan for each fiscal year and season during
the Term will be determined by the Executive and the Committee. The Performance Bonus will be
payable based upon the respective year’s bonus plan and in accordance with and otherwise conform
to the EBITDA Bonus Program for the Corporate Office as adopted by the Committee.

               (ii) The Executive’s Performance Bonus for fiscal years 2012 and 2013 shall be determined by
the Committee, provided that the range of Performance Bonus for which the Executive is eligible in
such years, as a percentage of the Executive’s Base Salary, shall not be less than the range for
fiscal year 2011 (i.e., 0% to 200%).

          (c) Equity Participation.

               (i) On the Effective Date, pursuant to the 2009 Omnibus Incentive Plan (the “Incentive Plan”),
the Company shall grant to the Executive an award of time-based restricted stock units (A) to
become vested in three equal annual installments on each anniversary of the Effective Date, subject
to continued employment on each applicable vesting date, (B) to become fully vested upon a “Change
in Control” or upon a termination of the Executive’s employment by the Company without “Cause,” by
the Executive for “Good Reason” or as a result of death or “Disability” (each, as defined in
Section 4 hereof), (C) to be payable in shares of the Company’s common stock, (C) to have a grant
date fair market value of approximately $750,000, and (D) to be subject to such other terms and
conditions as are set forth in the Company’s standard form of restricted stock unit award
agreement.

               (ii) On the Effective Date, pursuant to the Incentive Plan, the Company shall grant to the
Executive a non-qualified stock option to purchase shares of common stock of the Company (A) to
become vested in three equal annual installments on each anniversary of the Effective Date, subject
to continued employment on each applicable vesting date, (B) to become fully vested and exercisable
upon a Change in Control or upon a termination of the Executive’s employment by the Company without
Cause, by the Executive for Good Reason or as a result of death or Disability, (C) to have a grant
date fair market value (based on a Black-Scholes valuation model) of approximately $750,000, and
(D) to be subject to such other terms and conditions as are set forth in the Company’s standard
form of non-qualified stock option award agreement.

               (iii) The Executive shall be eligible to participate in any long-term incentive plan offered
by the Company to the executive employees of the Company generally, and shall be eligible to
receive future equity awards under the Company’s equity plans as in effect from

Page 3

 

time to time. The
level of the Executive’s participation in any such plans shall be determined in the sole discretion
of the Committee from time to time.

          (d) Employee Benefits. During the Term, the Executive shall be entitled to
participate in or receive benefits under any employee health benefit plan or other arrangement made
available by the Company to its senior executives on a basis consistent with the terms, conditions
and overall administration of such plan. The Executive shall also be entitled to participate in or
receive benefits under any other employee benefit plans, on a basis consistent with the terms,
conditions and overall administration of such other employee benefit plans. During the Term, the
Company shall provide and pay the entire cost of additional term life insurance coverage for the
Executive. The amount of coverage under the additional term life insurance shall equal at least
three times the Executive’s Base Salary.

          (e) Expenses. The Company shall reimburse the Executive for all reasonable travel and
other reasonable out-of-pocket business expenses incurred by the Executive in the performance of
his duties under this Agreement upon evidence of payment and otherwise in accordance with the
Company’s procedures in effect from time to time. In addition, during the Term of this Agreement,
the Executive shall be provided or reimbursed for financial planning and tax preparation services
not to exceed $15,000 per calendar year.

          (f) Vacation; Automobile. The Executive shall be entitled to four weeks paid vacation
for each year during the Term in accordance with the Company’s vacation policies in effect for its
senior management. Vacation days that are not used within any fiscal year during the Term may not
be used in any subsequent fiscal year. The scheduling of such vacation days shall be subject to
the mutual agreement of the Board of Directors and the Executive. During the Term, the Company
will provide to the Executive an automobile mutually agreed upon by the Executive and the Board of
Directors and will pay directly or reimburse the Executive for all insurance and maintenance costs
relating to such automobile.

          (g) Certain Housing/Travel Expenses. During the Term, the Company will reimburse the
Executive for a mutually agreed upon apartment for a residence in Pittsburgh, Pennsylvania. In
addition, during the Term, the Company will reimburse the Executive for all roundtrip airfare
between either the greater New York City area (which shall include surrounding areas in the States
of New York, New Jersey and Connecticut) and Pittsburgh, Pennsylvania or Miami, Florida and
Pittsburgh, Pennsylvania, during the Term of the Agreement. During the Term, the Company also
shall reimburse the Executive’s spouse for all roundtrip airfare between either the greater New
York City area (which shall include surrounding areas in the States of New York, New Jersey and
Connecticut) and Pittsburgh, Pennsylvania or Miami, Florida and Pittsburgh, Pennsylvania, during
the Term of the Agreement.

          (h) Attorney’s Fees. The Company will reimburse the Executive for all reasonable,
documented attorney’s fees incurred by the Executive in connection with the negotiation and
execution by the Executive of this Agreement and the equity award agreements attached as exhibits
hereto.

Page 4

 

          (i) Deductions and Withholdings. All amounts payable or which become payable
hereunder shall be subject to all deductions and withholding required by law.

          (j) Clawback of Incentive-Based Compensation. Notwithstanding any other provision
herein to the contrary, any “incentive-based compensation” within the meaning of Section 10D of the
Securities Exchange Act of 1934, as amended, shall be subject to clawback by the Company in the
manner required by Section 10D(b)(2) of such act, as determined by the applicable rules and
regulations promulgated thereunder from time to time by the U.S. Securities and Exchange
Commission.

     4. Termination. This Agreement may be terminated under the following circumstances:

          (a) Death. The Executive’s services hereunder shall terminate upon his death. In the
case of the Executive’s death, the Company shall pay to the Executive’s beneficiaries or estate, as
appropriate, after his death, (i) his then current accrued and unpaid Base Salary, (ii) the pro
rata portion of the Executive’s Performance Bonus for the year in which the Executive’s death
occurs (based upon the Performance Bonus for which the Executive is eligible that year, with any
discretionary components deemed satisfied to the fullest extent), payable in accordance with
Section 3(b) hereof, (iii) the Executive’s unpaid Performance Bonus for the year preceding the year
in which the Executive’s death occurs if then due and owing, payable in accordance with Section
3(b) hereof, and (iv) other accrued and vested benefits and payments then due (including, without
limitation, life insurance payments and reimbursement of amounts under Sections 3(d) and 3(e)
hereof) to which the Executive is entitled hereunder. The Executive and his beneficiaries, shall
be entitled to no other compensation under this Agreement following, or as a result of, a
termination under these circumstances.

          (b) Disability

               (i) If a Disability (as defined below) of the Executive occurs during the Term, the Company
may give the Executive written notice of its intention to terminate his employment. In such event,
the Executive’s services with the Company shall terminate on the effective date specified in such
notice. In the case of a termination as a result of a Disability, the Company shall pay to the
Executive after his termination, (i) his then current accrued and unpaid Base Salary, (ii) the pro
rata portion of the Executive’s Performance Bonus for the year in which the Executive’s Disability
occurs (based upon the Performance Bonus for which the Executive is eligible that year, with any
discretionary components deemed satisfied to the fullest extent) payable in accordance with Section
3(b) hereof, (iii) the Executive’s unpaid Performance Bonus for the year preceding the year in
which the Executive’s Disability occurs if then due and owing, payable in accordance with Section
3(b) hereof, and (iv) other accrued and vested benefits and payments then due (including, without
limitation, long- or short-term disability benefits and reimbursement of amounts under Sections
3(d) and 3(e) hereof) to which the Executive is entitled hereunder. The Executive and his
beneficiaries, shall be entitled to no other compensation under this Agreement following, or as a
result of, a termination under these circumstances.

               (ii) For the purpose of this subsection 4(b), “Disability” shall mean the Executive’s
inability to perform his duties to the Company on a full-time basis, either with or

Page 5

 

without
reasonable accommodation, as defined in the Americans with Disabilities Act, for 120 consecutive
days or a total of 180 days in any twelve month period as reasonably determined by the Board of
Directors of the Company.

          (c) Termination by the Company for Cause. The Company may terminate the Executive’s
services hereunder for Cause (as defined below) at any time upon written notice to the Executive.
In such event, the Executive’s services shall terminate on the effective date specified in such
notice. In the case of the Executive’s termination for Cause, the Company shall promptly pay to
the Executive his then current accrued and unpaid Base Salary, reimbursement of amounts under
Sections 3(d) and 3(e) hereof to which the Executive is entitled hereunder and other accrued and
vested benefits then due hereunder. The Executive and his beneficiaries shall be entitled to no
other compensation under this Agreement following, or as a result of, a termination under these
circumstances. For purposes of this Agreement, the Company shall have “Cause” to terminate
Executive’s services hereunder in the event of (A) acts or omissions by the Executive which
constitute intentional misconduct or a knowing violation of a material written policy, of the
Company, (B) the Executive personally receiving a benefit in money, property or services from the
Company or from another person dealing with the Company, in knowing violation of applicable law or
a violation of material written Company policy, (C) an act of fraud, conversion, misappropriation,
or embezzlement by the Executive or his conviction of, or entering a guilty plea or plea of no
contest with respect to, a felony, the equivalent thereof, or any other crime with respect to which
imprisonment is a possible punishment, (D) an act of moral turpitude adversely affecting the
ability of the Executive to perform his duties hereunder, (E) alcohol or controlled substance
abuse, (F) reckless disregard in the performance of the Executive’s duties, (G) the commission in
bad faith by the Executive of any act which injures or could reasonably be expected to injure the
reputation, business or business relationships of the Company, (H) a material breach by the
Executive of any of the provisions of Section 7 or 8 hereof or (I) any other breach by the
Executive of this Agreement in any material respect, which continues uncured for thirty (30) days
after receipt by the Executive of written notice of breach from the Company, provided, however, the
Company shall not be permitted to terminate the Executive for Cause pursuant to subsections (B),
(E) or (H) of this Section 4(c) if the Company shall not have previously provided the Executive
with a one-time only written notice from the Company that the Executive committed any act set forth
in subsections (B), (E) or (H) which Executive failed to cure within thirty (30) days following
receipt of such notice.

          (d) Termination by the Executive Without Good Reason

               (i) The Executive may terminate his employment hereunder for other than Good Reason (as
defined below), provided that Executive first gives the Company a written notice of
termination at least 30 calendar days prior to the effective date of any such termination. In the
event the Executive terminates his employment for other than Good Reason, the Company shall pay to
the Executive his then current accrued and unpaid Base Salary and other accrued and vested benefits
and payments then due (including, without limitation, reimbursement of amounts under Sections 3(d)
and (e) hereof) to which the Executive is entitled hereunder and the Executive shall have 60 days
from the date of delivery of such notice to exercise any vested and exercisable options (but in no
event may such exercise occur beyond the original expiration date of such options) under the
Company’s equity plans then in effect. The Executive and his beneficiaries, shall be entitled to

Page 6

 

no other compensation under this Agreement following, or as a result of, a termination under these
circumstance.

               (ii) For purposes of this Agreement, “Good Reason” means, other than with the Executive’s
consent, (A) the removal of the Executive from, or the failure to reappoint Executive to, the
position the Executive held with the Company pursuant to this Agreement (other than for Cause,
death or Disability, or in the case of the Executive’s position as Chairman of the Board, as
required by applicable law), (B) any material decrease or other material adverse change in the
duties and responsibilities of the Executive below his duties and responsibilities contemplated in
Section 2(a) hereof; provided that the Company may appoint a Chief Operating Officer having such
duties as are customary for such position, which position shall report to the Executive, and such
appointment shall not constitute Good Reason hereunder, (C) the failure to continue to elect the
Executive to the Board of Directors or removal of the Executive from the Board of Directors at any
time during the Term (other than for Cause, death or Disability, or as required by applicable law),
(D) any other material breach by the Company of this Agreement, and which, with respect to clauses
(B) and (D) hereof, continues uncured for thirty (30) days after receipt by the Company of written
notice of breach from the Executive or (E) a Change in Control of the Company, provided,
however, that in the event of a Change in Control of the Company, the Executive shall be
required to remain with the Company for a period of six months following the Change in Control
prior to Executive having a right to terminate for Good Reason hereunder solely by reason of such
Change in Control and provided, further, that notwithstanding the occurrence of a
Change in Control, the Executive shall have Good Reason if, following such change in Control, any
of the circumstances set forth in clauses (A), (B), (C) or (D) exists and, which, with respect to
clauses (B) and (D) hereof, continues uncured for thirty (30) days after receipt by the Company of
written notice of breach from the Executive. For purposes of this Agreement, “Change in Control”
means, other than with the Executive’s consent, the occurrence of any of the following events:

               (A) the Company is merged, consolidated or reorganized into or with another Company or other
entity and, as a result of such merger, consolidation or reorganization, less than a majority of
the combined voting power of the then-outstanding securities entitled to vote generally in the
election of members of the Board of Directors (the “Voting Stock”) of such Company or other entity
immediately after such transaction is held in the aggregate by the holders of Voting Stock of the
Company immediately prior to such transaction; or

               (B) the Company sells or otherwise transfers all or substantially all of its assets or capital
stock to another company or other entity or person, and, as a result of such sale or transfer, less
than a majority of the combined voting power of the then-outstanding voting stock of such company
or other entity or person is held in the aggregate by the holders of the Voting Stock of the
Company immediately prior to such sale or transfer; or

               (C) “any “person” or “persons” (as such term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) other than APAX Partners LP and its
affiliates (“APAX”), becomes the “beneficial owner” (as determined pursuant to Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company’s then outstanding securities.

Page 7

 

          (e) Termination by the Company Without Cause. The Company may terminate the
Executive’s services hereunder without Cause at any time by giving the Executive not less than
ninety days’ prior written notice of termination. In such event, the Executive’s employment
hereunder shall terminate on the effective date specified in the notice. At any time during the
notice period, the Company may relieve the Executive, or the Executive may surrender and thereupon
be relieved of, his day-to-day duties as President, Chief Executive Officer and Chairman of the
Board of the Company, provided that the Executive’s compensation hereunder shall continue through
the effective date of termination. In the event the Executive’s services hereunder are terminated
by the Company without Cause, provided that the Executive enters into a Separation Agreement and
Release of the Company and related parties substantially similar to the form attached hereto as
Exhibit A (which shall be executed, delivered and no longer subject to revocation, if applicable,
within sixty (60) days following such termination), the Company shall: (i) pay the Executive an
amount equal to two (2) times his Base Salary in effect on the effective date of termination plus
two (2) times the greater of (x) his Performance Bonus target for the year in which such
termination occurs and (y) the average of his actual Performance Bonus earned for the two years
immediately preceding the year in which such termination occurs, and (ii) subject to the
Executive’s timely election pursuant to the Consolidated Omnibus Budget Reconciliation Act
(“COBRA”) and the Executive’s continued copayment of the applicable premiums at the active employee
rates, provide the benefits set forth in Section 3(d) hereof then provided to the Executive for a
period of twenty-four (24) months following the Executive’s termination pursuant to this Section
4(e), provided that, to the extent such continuation of one or more benefits is not permitted by
the Company’s benefit plans, the Company shall pay to the Executive a reasonably equivalent value
to such benefits in cash on the same schedule as such benefits otherwise would have been provided
had such continuation been permitted during the twenty-four (24)-month period following such
termination. The entire amount payable under subsection (i) above shall be paid to the
Executive in one lump sum payment on the sixtieth (60th) day after the effective date of
termination. In addition, the Executive shall be deemed fully vested, as of the effective date of
such termination, in all accrued benefits under all retirement plans for which the Executive is
eligible and has participated, and all such accrued benefits shall be calculated, for all purposes,
as if the Executive were credited, as of the effective date of termination, with two additional
years of age and/or service to the Company. Further, the Company shall reimburse the Executive for
any amounts then due pursuant to Section 3(e) hereof and shall pay the Executive’s unpaid
Performance Bonus for the year preceding the year in which the Executive’s termination occurs if
then due and owing in accordance with the provisions of Section 3(b) hereof, and the Executive
shall have 90 days from the date of delivery of such termination notice to exercise any vested and
exercisable options (but in no event may such exercise occur beyond the original expiration date of
such options) the Company’s equity plans then in effect. The Executive and his beneficiaries,
shall be entitled to no other compensation under this Agreement following, or as a result of, a
termination under these circumstances.

          (f) Termination by the Executive For Good Reason. The Executive may terminate his
employment hereunder for Good Reason by giving the Company not less than ninety days prior written
notice of termination. In such event, the Executive’s employment hereunder shall terminate on the
date specified in the notice. At any time during the notice period, the Company may relieve the
Executive, or the Executive may surrender and thereupon be relieved of, his day-to-day duties as
President, Chief Executive Officer and Chairman of the Board of the Company, provided that the
Executive’s compensation hereunder shall continue through the effective date of termination. In
the

Page 8

 

event the Executive terminates his employment for Good Reason, provided that the Executive
enters into a Separation Agreement and Release of the Company and related parties substantially
similar to the form attached hereto as Exhibit A (which shall be executed, delivered and no longer
subject to revocation, if applicable, within sixty (60) days following such termination), the
Company shall: (i) pay the Executive an amount equal to two (2) times his Base Salary in effect on
the effective date of termination plus two (2) times the greater of (x) his Performance Bonus
target for the year in which such termination occurs and (y) the average of his actual Performance
Bonus earned for the two years immediately preceding the year in which such termination occurs, and
(ii) subject to the Executive’s timely election pursuant to COBRA and the Executive’s continued
copayment of the applicable premiums at the active employee rates, provide the benefits set forth
in Section 3(d) hereof then provided to the Executive for a period of twenty-four (24) months
following the Executive’s termination pursuant to this Section 4(f), provided that, to the extent
such continuation of one or more benefits is not permitted by the Company’s benefit plans, the
Company shall pay to the Executive a reasonably equivalent value to such benefits in cash on the
same schedule as such benefits otherwise would have been provided had such continuation been
permitted during the twenty-four (24)-month period following such termination. The entire amount
payable under subsection (i) above shall be paid to the Executive in one lump sum payment on the
sixtieth (60th) day after the effective date of termination. In addition, the Executive shall be
deemed fully vested, as of the effective date of such termination, in all accrued benefits under
all retirement plans for which the Executive is eligible and has participated, and all such accrued
benefits shall be calculated, for all purposes, as if the Executive were credited, as of the
effective date of termination, with two additional years of age and/or service to the Company. The
Executive shall have 90 days from the date of delivery of such termination notice to exercise any
vested and exercisable options (but in no event may such exercise occur beyond the original
expiration date of such options) the Company’s equity plans then in effect. Further, the Company
shall reimburse the Executive for any amounts then due pursuant to Section 3(e) hereof and shall
pay the Executive’s unpaid Performance Bonus payment for the year preceding the year in which the
Executive terminates his employment for Good Reason if then due and owing in accordance with the
provisions of Section 3(b) hereof. The Executive and his beneficiaries, shall be entitled to no
other compensation under this Agreement following, or as a result of, a termination under these
circumstances.

          (g) Failure to Renew Agreement. The Executive and his beneficiaries, shall be entitled
to no compensation or benefits under this Agreement, following, or as a result of the failure by
the Executive to renew this Agreement pursuant to Section 1. In the event the Company elects not
to renew this Agreement pursuant to Section 1, provided that the Executive enters into a Separation
Agreement and Release of the Company and related parties substantially similar to the form attached
hereto as Exhibit A (which shall be executed, delivered and no longer subject to revocation, if
applicable, within sixty (60) days following such termination), the Company shall: (i) pay the
Executive an amount equal to twenty-four (24) months of his Base Salary in effect on the date of
the end of the Term in which the Company elected not to renew the Agreement pursuant to this
Section 4(g) and (ii) subject to the Executive’s timely election pursuant to COBRA and the
Executive’s continued copayment of the applicable premiums at the active employee rates, continue
to provide the benefits set forth in Section 3(d) hereof then provided to the Executive, for a
period of twenty-four (24) months following the end of the term in which the Company elected not to
renew this Agreement pursuant to this Section 4(g). The entire amount payable under subsection (i)
above shall be paid to the Executive in one lump sum payment on the sixtieth (60th) day after the
effective

Page 9

 

date of termination. In addition, the Company shall reimburse the Executive for any
amounts then due pursuant to Section 3(e) hereof. The Executive and his beneficiaries, shall be
entitled to no other compensation under this Agreement following, or as a result of, the Company’s
failure to renew this Agreement.

          (h) Certain Tax Consequences.

               (i) If payments or benefits received or to be received by the Executive in connection with or
contingent on a change in ownership or control of the Company, within the meaning of Section 280G
of the Code (or any successor provision thereto), whether or not in connection with the Executive’s
termination of employment, and whether or not pursuant to this Agreement (collectively, the
“Payments”) would (i) constitute “parachute payments” within the meaning of Section 280G of the
Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the
Code (the “Excise Tax”), then such Payments shall be reduced to the Reduced Amount (as defined
below). The “Reduced Amount” shall be either (x) the largest portion of the Payments that would
result in no portion of the Payments being subject to the Excise Tax or (y) the largest portion, up
to and including all, of the Payments, whichever amount, after taking into account all applicable
federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the
highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the
greater amount of the Payments notwithstanding that all or some portion of the Payments may be
subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute
payments” is necessary so that the Payments equal the Reduced Amount, such reduction shall occur in
the following order: reduction of cash payments; cancellation of accelerated vesting of stock
awards; reduction of employee benefits. In the event that acceleration of vesting of stock award
compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order
of the date of grant of Executive’s stock awards.

               (ii) The accounting firm engaged by the Company for general audit purposes as of the day prior
to the effective date of the change in ownership or control of the Company shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant
or auditor for the individual, entity or group effecting the change in ownership or control of the
Company resulting in the Payments, the Company shall appoint a nationally recognized accounting
firm to make the determinations required hereunder. The Company shall bear all expenses with
respect to the determinations by such accounting firm required to be made hereunder.

               (iii) The accounting firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to the Company and the Executive
within fifteen (15) calendar days after the date on which Executive’s right to the Payments is
triggered (if requested at that time by the Company or Executive) or such other time as requested
by the Company or the Executive. If the accounting firm determines that no Excise Tax is payable
with respect to the Payments, either before or after the application of the Reduced Amount, it
shall furnish to Company and the Executive with an opinion reasonably acceptable to the Executive
that no Excise Tax will be imposed with respect to such Payments. Any good faith determinations of
the accounting firm made hereunder shall be final, binding and conclusive upon the Company and the
Executive.

Page 10

 

          (i) Other Obligations. Upon any termination of the Executive’s employment with the
Company, the Executive shall promptly resign from the Board of Directors of the Company and any
other position as an officer, director or fiduciary of any Company-related entity.

     5. Inclusion of Executive’s Shares in Offering, “Piggy-Back” Registration Rights. If
at any time or times after the Effective Date, the Company proposes for any reason to register any
shares of its capital stock for public sale under the Securities Act of 1933, as amended (whether
in connection with a public offering of securities by the Company, a secondary offering of
securities by stockholders of the Company, or both), the Company will promptly give written notice
thereof to the Executive, such notice to include a brief description of the proposed registration
and offering including the total proposed size, other anticipated selling shareholders, identity of
the underwriter (if any), and anticipated range of offering prices. Within ten (10) days after
receipt of such notice, the Executive may elect in writing to include a portion of his Company
shares (including all vested options to purchase shares) for sale and registration in such proposed
offering, in which case the Company will effect the registration under the Securities Act of 1933
of all such shares (and options) requested by the Executive up to that number of the Executive’s
shares (including options) that bears the same proportion to the total number of shares (and
options) held by the Executive as the number of APAX shares included in such registration bears to
the total number of shares held by APAX; provided, however, that, notwithstanding
the number of the Executive’s shares included in such registration, in no event shall the number of
the Executive’s shares (and options) eligible for sale in such offering exceed one-third of the
total number of shares (and options) held by the Executive. Following completion of such
registration and offering, all of the Executive’s shares that were included in such registration,
but not eligible for sale in such offering, shall become eligible for sale (pursuant to such
registration) in two equal annual installments on each of the first and second anniversaries of the
completion of such registration and offering, in each case, subject to the other applicable
provisions of this Section 5. In the case of the registration of shares of the Company in
connection with an underwritten public offering, the Company shall not be required to include any
shares of the Executive unless the Executive accepts the standard and customary terms of the
underwriting as reasonably agreed upon by the Company, APAX and the managing underwriter(s) for
such offering. The Company will bear all costs associated with the inclusion of the Executive’s
shares in any such offering with the sole exception of any applicable underwriting commissions or
discounts. The provisions of this Section 5 shall survive any termination of this Agreement and
termination of the Executive’s employment with the Company. Notwithstanding any other provision of
this Section 5, at all times during the Term, the Executive agrees to hold shares of the Company
(including all vested options to purchase shares) having a fair market value of not less than two
(2) times the Executive’s Base Salary and Performance Bonus target.

     6. Internal Revenue Code Section 409A. The parties hereto intend that all payments
and benefits to be made or provided to the Executive hereunder and under any Plan (as identified in
clause (f) below) will be paid or provided in compliance with all applicable requirements of Code
Section 409A (as defined in clause (f) below), and the provisions of this Agreement and of each
Plan (to the extent they relate to the Executive’s entitlements under such Plan) shall be construed
and administered in accordance with such intent. In furtherance of the foregoing, the provisions
set forth below shall apply notwithstanding any other provision in this Agreement, or (where
applicable) any provision in any Plan, to the contrary.

Page 11

 

          (a) All payments to be made to the Executive hereunder or under any Plan, to the extent they
constitute a deferral of compensation subject to the requirements of Section 409A (after taking
into account all exclusions applicable to such payments under Section 409A), shall be made no
later, and shall not be made any earlier, than at the time or times specified herein or in any Plan
for such payments to be made, except as otherwise permitted or required under Section 409A.

          (b) The date of the Executive’s “separation from service”, as defined in Section 409A (and as
determined by applying the default presumptions in Treas. Reg. §1.409A-1(h)(1)(ii)), shall be
treated as of the date of Executive’s termination of employment for purposes of determining the
time of payment of any amount that becomes payable to the Executive hereunder and under any Plan
upon Executive’s termination of employment and that is properly treated as a deferral of
compensation subject to Section 409A after taking into account all exclusions applicable to such
payment under Section 409A.

          (c) To the extent any payment or delivery otherwise required to be made to the Executive
hereunder or under any plan on account of Executive’s separation from service is properly treated
as a deferral of compensation subject to Section 409A after taking into account all exclusions
applicable to such payment and delivery under Section 409A, and if the Executive is a “specified
employee” under Section 409A at the time of Executive’s separation from service, then such payment
and delivery shall not be made until the first business day after the earlier of (i) the expiration
of six months from the date of the Executive’s separation from service, or (ii) the date of his
death (such first business day, the “Delayed Payment Date”). On the Delayed Payment Date, there
shall be paid or delivered to the Executive or, if the Executive has died, to Executive’s estate,
in a single payment or delivery (as applicable) all entitlements so delayed, and in the case of
cash payments, in a single cash lump sum, an amount equal to aggregate amount of all payments
delayed pursuant to the preceding sentence.

          (d) In the case of any amounts payable to the Executive under this Agreement, or under any
plan, that may be treated as payable in the form of “a series of installment payments”, as defined
in Treas. Reg. §1.409A-2(b)(2)(iii), (A) the Executive’s right to receive such payments shall be
treated as a right to receive a series of separate payments for purposes of Treas. Reg.
§1.409A-2(b)(2)(iii), and (B) to the extent any such existing Plan does not already so provide, it
is hereby amended to so provide, with respect to amounts that may become payable to the Executive
thereunder.

          (e) The Company agrees that at all times during the Term, it will use its reasonable best
efforts to maintain each plan in documentary and operational compliance with all requirements under
Section 409A, in so far as such requirements are applicable to the payments or benefits to be made
or provided to the Executive under such plan. The Company further agrees that to the extent
permitted under Section 409A, this Agreement, and the terms of any Plan (to the extent they relate
to the Executive’s entitlements under such Plan) shall be modified, as reasonably requested by the
Executive, to the extent necessary to comply with all applicable requirements of, and to avoid the
imposition of any additional tax, interest and penalties under, Section 409A in connection with,
the benefits and payments to be provided or paid to the Executive hereunder or under such Plan.
Any such modification shall maintain the original intent and economic benefit to

Page 12

 

the Executive of
the applicable provision of this Agreement or such Plan, to the maximum extent possible without
violating any applicable requirement of Section 409A. Any such modification to the terms of any
Plan may be made by means of a separate written agreement between the Company and the Executive so
as to limit the applicability of each modification to just the payments or benefits to be provided
to the Executive under such Plan.

          (f) For purposes of the foregoing, the following terms shall have the following meanings:

               (i) “Plan” shall mean any plan, program, agreement (other than this Agreement, but including
the exhibits hereto) or other arrangement maintained by the Company or any of its affiliates that
is a “nonqualified deferred compensation plan” within the meaning of Section 409A and under which
any payments or benefits are to be made or provided to the Executive, to the extent they constitute
a deferral of compensation subject to the requirements of Section 409A after taking into account
all exclusions applicable to such payments under Section 409A.

               (ii) “Section 409A” shall mean Section 409A of the Code, the regulations issued thereunder and
all notices, rulings and other guidance issued by the Internal Revenue Service interpreting same.

          (g) To the extent that reimbursements or other in-kind benefits under this Agreement
constitute “nonqualified deferred compensation” for purposes of Section 409A, (i) all such expenses
or other reimbursements hereunder shall be made on or prior to March 15 of the taxable year
following the taxable year in which such expenses were incurred by the Executive, (ii) any right to
reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another
benefit, and (iii) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits
provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or
in-kind benefits to be provided, in any other taxable year.

          (h) The Executive acknowledges and agrees that, while this Agreement is intended to comply
with Section 409A, any tax liability incurred by the Executive under Section 409A is solely the
responsibility of the Executive provided that the Company complies with its obligations as set
forth herein. The Company shall be deemed to have complied with its obligations for purposes of
this Section 6(h) if it has made a good faith attempt to comply with Section 409A, and the Company
shall be deemed to have acted in good faith for such purpose if it reasonably relies upon the
advice of tax counsel.

     7. Confidential and Proprietary Information

          (a) The parties agree and acknowledge that during the course of the Executive’s employment,
the Executive has been given and will have access to and be exposed to trade secrets and
confidential information in written, oral, electronic and other form regarding the Company (which
includes but is not limited to all of its business units, divisions and subsidiaries) and its
business, including, without limitation, the Company’s business methods, practices, strategies,
forecasts, pricing, and marketing techniques; the amounts paid to the Company’s licensors, vendors

Page 13

 

and other suppliers; the identities of the Company’s key sales representatives and personnel and
other employees; advertising and sales materials; and other facts and financial and other business
information concerning or relating to the Company and its business, operations, financial
condition, results of operations and prospects. The Executive expressly agrees to use such trade
secrets and confidential information only for purposes of carrying out his duties for the Company,
and not for any other purpose, including, without limitation, not in any way or for any purpose
detrimental to the Company. The Executive shall not at any time, either during the course of his
employment hereunder or during the two years after the termination of such employment, use for
himself or others, directly or indirectly, any such trade secrets and confidential information,
and, except as required by law, the Executive shall not disclose such trade secrets and
confidential information, directly or indirectly, to any other person or entity. Trade secret and
confidential information hereunder shall not include any information which (i) is already in or
subsequently enters the public domain, other than as a result of any direct or indirect action or
inaction by the Executive, (ii) becomes available to the Executive on a non-confidential basis from
a source other than the Company, provided that such source is not subject to a confidentiality
agreement or other obligation of secrecy or confidentiality (whether pursuant to a contract, legal
or fiduciary obligation or duty or otherwise) to the Company or any other person or entity or (iii)
is approved for release by the Company or which the Company makes available to third parties
without an obligation of confidentiality.

          (b) All physical property and all notes, memoranda, files, records, writings, documents and
other materials of any and every nature, written or electronic, which the Executive shall prepare
or receive in the course of his employment with the Company and which relate to or are useful in
any manner to the business now or hereafter conducted by the Company are and shall remain the sole
and exclusive property of the Company, provided, however, nothing herein shall prohibit the
Executive from retaining, for his records only, a copy of any information relating to his
compensation and benefits, including copies of any benefit plans under which he is a participant.
The Executive shall not remove from the Company’s premises any such physical property, the original
or any reproduction of any such materials nor the information contained therein except for the
purposes of carrying out his duties to the Company and all such property (except for any items of
personal property not owned by the Company), materials and information in his possession or under
his custody or control upon the termination of his employment shall be immediately turned over to
the Company.

          (c) The provisions of this Section 7 shall survive any termination of this Agreement and
termination of the Executive’s employment with the Company.

     8. No Solicitation and Non-Competition.

          (a) The Executive acknowledges and agrees that he has gained and during the time of his
employment with the Company, will gain, valuable information about the identity, qualifications and
on-going performance of the employees of the Company. During the two-year period commencing on the
date of the termination of the Executive’s employment with the Company, the Executive shall not
directly or indirectly (i) hire, employ, offer employment to, or seek to hire, employ or offer
employment to, any of the Company’s (A) current employees or (B) former employees in
senior management or field organization positions who have been employed by

Page 14

 

the Company within one
year prior to any such hiring or solicitation thereof by the Executive, (ii) solicit or encourage
any such employee to seek or accept employment with any other person or entity or (iii) disclose
any information, except as required by law, about such employee to any prospective employer.

          (b) In addition, during the Executive’s employment hereunder and for a period of two years
thereafter, the Executive agrees that the Executive will not, directly or indirectly, own, manage,
operate, control, be employed by (whether as an employee, consultant, independent contractor or
otherwise, and whether or not for compensation) or render services to any person, firm, corporation
or other entity, in whatever form (a “Person”), engaged in competition with the Company or any of
its subsidiaries or affiliates or in any other material business in which the Company or any of its
subsidiaries or affiliates is engaged on the date of termination or in which they have actively
planned, on or prior to such date, to be engaged in on or after such date, in any locale of the
United States in which the Company conducts business. Notwithstanding the foregoing, nothing
herein shall prohibit the Executive from being a passive owner of not more than three percent (3%)
of the equity securities of a publicly traded corporation engaged in a business that is in
competition with the Company or any of its subsidiaries or affiliates, so long as the Executive has
no active participation in the business of such corporation. For purposes of this Section 8(b), a
Person engaged “in competition with” the Company or any of its subsidiaries or affiliates shall
mean any Person that is materially engaged in the business of teen specialty apparel retailing.

          (c) The provisions of this Section 8 shall survive any termination of this Agreement and the
termination of Executive’s employment with the Company.

     9. Injunctive Relief. The Executive and the Company (a) intend that the provisions of
Sections 7 and 8 be and become valid and enforceable, (b) acknowledge and agree that the provisions
of Sections 7 and 8 are reasonable and necessary to protect the legitimate interests of the Company
and its business and (c) agree that any violation of Sections 7 or 8 will result in irreparable
injury to the Company, the exact amount of which will be difficult to ascertain and the remedies at
law for which will not be reasonable or adequate compensation to the Company for such a violation.
Accordingly, the Executive agrees that if the Executive violates the provisions of Sections 7 or 8,
in addition to any other remedy which may be available at law or in equity, the Company shall be
entitled to seek specific performance and injunctive relief, without posting bond or other
security, and without the necessity of proving actual damages.

     10. Assignment; Successors and Assigns. The Executive agrees that he shall not
assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, any
rights or obligations under this Agreement, nor shall the Executive’s rights hereunder be subject
to encumbrance of the claims of creditors. Any purported assignment, transfer, delegation,
disposition or encumbrance in violation of this Section 10 shall be null and void and of no force
or effect. Nothing in this Agreement shall prevent the consolidation or merger of the Company with
or into any other entity, or the sale by the Company of all or any portion of its properties or
assets, or the assignment by the Company of this Agreement and the performance of its obligations
hereunder to any successor in interest or any affiliated entity and, subject to the Executive’s
right to terminate for Good Reason, the Executive hereby consents to any and all such assignments.
Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of
the parties and their

Page 15

 

respective heirs, legal representatives, successors, and permitted assigns,
and, except as expressly provided herein, no other person or entity shall have any right, benefit
or obligation under this Agreement as a third party beneficiary or otherwise.

     11. Governing Law, Jurisdiction and Venue. This Agreement shall be governed,
construed, interpreted and enforced in accordance with the substantive laws of the Commonwealth of
Pennsylvania without regard to the conflicts of law principles thereof. Suit to enforce this
Agreement or any provision or portion thereof may be brought in any court of competent
jurisdiction.

     12. Severability of Provisions. In the event that any provision or any portion
thereof should ever be adjudicated by a court of competent jurisdiction to exceed the time or other
limitations permitted by applicable law, as determined by such court in such action, then such
provisions shall be deemed reformed to the maximum time or other limitations permitted by
applicable law, the parties hereby acknowledging their desire that in such event such action be
taken. In addition to the above, the provisions of this Agreement are severable, and the invalidity
or unenforceability of any provision or provisions of this Agreement or portions thereof shall not
affect the validity or enforceability of any other provision, or portion of this Agreement, which
shall remain in full force and effect as if executed with the unenforceable or invalid provision or
portion thereof eliminated. Notwithstanding the foregoing, the parties hereto affirmatively
represent, acknowledge and agree that it is their intention that this Agreement and each of its
provisions are enforceable in accordance with their terms and expressly agree not to challenge the
validity or enforceability of this Agreement or any of its provisions, or portions or aspects
thereof, in the future.

     13. Warranty. As an inducement to the Company to enter into this Agreement, the
Executive represents and warrants that he is not a party to any other agreement or obligation for
personal services, and that there exists no impediment or restraint, contractual or otherwise, on
his power, right or ability to enter into this Agreement and to perform his duties and obligations
hereunder.

     14. Notices. All notices, requests, demands and other communications which are
required or may be given under this Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method upon receipt of telephonic or electronic confirmation;
the day after it is sent, if sent for next day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express); and upon receipt, if sent by certified or
registered mail, return receipt requested. In each case notice will be sent to:

          (a) if to the Company:

rue 21, inc.

800 Commonwealth Drive, Suite 100

Warrendale, PA 15086

Attention: Compensation Committee of the Board of Directors

c/o Corporate Secretary

Fax: (724) 776-9852

Page 16

 

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

Attn: Joshua N. Korff, Esq. and Howard M. Klein, Esq.

Fax: (212) 446-4900

          (b) if to the Executive. to:

203 Adams Pointe Blvd., Apt. #7

Mars, PA 16046

Attention: Robert Fisch

with a copy to:

Dinsmore & Shohl, LLP

255 E Fifth Street, Suite 1900

Cincinnati, OH 45202

Attention: Calvin D. Buford

Fax: (513) 977-8141

or to such other place and with such other copies as either party may designate as to itself or
himself by written notice to the others.

     15. Cumulative Remedies. All rights and remedies of either party hereto are
cumulative of each other and of every other right or remedy such party may otherwise have at law or
in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.

     16. Counterparts. This Agreement may be executed in several counterparts, each of
which will be deemed to be an original, but all of which together shall constitute one and the same
Agreement.

     17. Entire Agreement. The terms of this Agreement and the exhibits attached hereto
are intended by the parties to be the final expression of their agreement with respect to the
employment of the Executive by the Company and supersede, and may not be contradicted by, modified
or supplemented by, evidence of any prior or contemporaneous agreement (including, without
limitation, the Original Employment Agreement). The parties further intend that this Agreement
shall constitute the complete and exclusive statements of its terms and that no extrinsic evidence
whatsoever may be introduced in any judicial, administrative or other legal proceeding to vary the
terms of this Agreement.

     18. Amendments: Waivers. This Agreement may not be modified, amended, or terminated
except by an instrument in writing, approved by the Company and signed by the then existing parties
hereto. As an exception to the foregoing, the parties acknowledge and agree that the Company shall
have the right, in its sole discretion, to reduce the scope of any covenant or obligation

Page 17

 

of the
Executive set forth in Sections 7 or 8 of this Agreement or any portion thereof, effective
immediately upon receipt by the Executive of written notice thereof from the Company. No waiver of
any of the provisions of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed or be construed as a further, continuing or subsequent waiver of any
such provision or as a waiver of any other provision of this Agreement. No failure to exercise and
no delay in exercising any right, remedy or power hereunder shall preclude any other or further
exercise of any other right, remedy or power provided herein or by law or in equity.

     19. Representation
of Counsel; Mutual Negotiation. Each party has had the
opportunity to be represented by counsel of its choice in negotiating this Agreement. This
Agreement shall therefore be deemed to have been negotiated and prepared at the joint request,
direction and construction of the parties, at arm’s-length, with the advice and participation of
counsel, and shall be interpreted in accordance with its terms without favor to any party.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Page 18

 

     IN WITNESS WHEREOF, the parties have executed this Amended and Restated Employment Agreement
as of the date and year first above written.

	 	 	 	 	 
	 	rue 21, inc.

 	 
	 	By:  	/s/ Keith McDonough
 	 
	 	 	Name:  	Keith McDonough 	 
	 	 	Title:  	Senior Vice President and Chief
Financial Officer 	 
	 
	 	EXECUTIVE

 	 
	 	By:  	/s/ Robert Fisch
 	 
	 	 	Name:  	Robert Fisch 	 
	 	 	 	 
	 

Signature Page to Amended and Restated Employment Agreement

 

 

EXHIBIT A

SEPARATION AGREEMENT AND GENERAL RELEASE

     THIS SEPARATION AGREEMENT AND GENERAL RELEASE (“Release”) is entered into by Robert Fisch
(“Executive”) and rue 21, inc., a Pennsylvania corporation (the “Company”).

     Executive and the Company desire to settle fully any and all matters between them, including,
but not limited to, any matters relating to Executive’s employment with the Company, Executive’s
Amended and Restated Employment Agreement with the Company, dated as of December ____, 2010, a copy
of which is attached hereto and is hereby incorporated by reference herein (“Employment
Agreement”), and the termination of Executive’s employment. Therefore, in consideration of the
mutual promises set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, Executive and the Company agree as follows:

     1. Termination of Employment. Executive’s employment with the Company is terminated effective
___________ (“Termination Date”). Executive waives and releases any claim that he has or may
have to reemployment with the Company, or any of its parent companies, subsidiary companies,
affiliates, successors or assigns.

     2. Employment Agreement. The Company will provide termination payments and benefits as of the
Termination Date as provided in Section 4 of Executive’s Employment Agreement. Executive agrees to
comply with all of his or her continuing obligations under the Employment Agreement, including
without limitation Sections 7 and 8 of the Employment Agreement. Executive will not seek any
further compensation or benefits from the Company, or any of its parent companies, subsidiary
companies, affiliates, successors or assigns, except as expressly provided in the Employment
Agreement. Any rights Executive may have to equity compensation and/or stock options are governed
by the terms and conditions of the applicable equity compensation plan under which such equity
awards were granted and the applicable award documentation relating to such awards.

     3. No Authority. Executive understands and agrees that effective on the Termination Date,
Executive is no longer authorized to incur any expenses, obligations, or liabilities on behalf of
the Company.

     4. Release. As a material inducement to the Company to enter into the Employment Agreement
and to receive the termination payments provided in Section 4 thereof, Executive hereby forever
releases and discharges the Company, its parent, subsidiaries, owners, affiliates, divisions,
shareholders, directors, officers, members, partners, business associations, agents, current and
former employees, attorneys, related companies, predecessors, successors and assigns (collectively
“Released Parties”), and each of them, of and from any and all charges, complaints, claims, or
liabilities (including attorneys’ fees and costs actually incurred) of any nature whatsoever, known
or unknown, suspected or unsuspected, including, but not limited to, rights arising out of alleged
violations of any contracts, express or implied, or any state law tort claim, or any federal,
state, or other governmental statute, regulation, or ordinance, including, but not limited to,
claims under Title

A-1

 

VII of the Civil Rights Act of 1964 or the Age Discrimination in Employment Act,
29 U.S.C. §§ 62 1-634, which Executive now has or claims to have, or which Executive at any time
heretofore had or claimed to have, against each or any of the Released Parties; provided, however,
Executive specifically does not release (a) any rights under the Age Discrimination in Employment
Act arising after the Effective Date of this Release, (b) any claims to enforce this Release or any
claims which Executive is precluded from waiving by operation of law, (c) any entitlement executive
may have to indemnification from the Company for actions taken in his capacity as an employee,
officer or director of the Company for which indemnification is provided pursuant to the Company’s
Amended and Restated Certificate of Incorporation, the Bylaws of the Company currently in effect,
any applicable insurance policy of the Company or otherwise provided by law, and (e) [Describe any
reasonable non-employment related claim against the Company alleged by the Executive in good faith
to be outstanding on the date of this Release]. Notwithstanding the foregoing, the parties
acknowledge that any continuing obligations under the Employment Agreement remain in full force and
effect, including, without limitation, the Company’s and the Executive’s obligations described in
Section 2 of this Release and the Executive’s obligations set forth in Sections 7 and 8 of the
Employment Agreement.

     5. No Claims. Executive represents that Executive has not filed any complaints, charges, or
lawsuits with any local, state, or federal agency or court against the Company or any of the
Released Parties, that Executive will not do so at any time based upon any matter that he or she
released in Paragraph 4 hereof that arose on or before the execution of this Release, and that if
any such agency or court assumes jurisdiction of any such charge, complaint, or lawsuit against the
Company or any of the Released Parties on behalf of Executive, Executive will request such agency
or court to withdraw from the matter.

     6. Consultation with Counsel. Executive agrees that Executive fully understands Executive’s
right to discuss all aspects of this Release with Executive’s attorney, that the Company encourages
Executive to consult with legal counsel, that Executive has carefully read and fully understands
all the provisions of this Release, and that Executive is knowingly and voluntarily entering into
this Release.

     7. No Representations. Executive represents and acknowledges that, in signing this Release,
Executive does not rely, and has not relied, upon any representation or statement made by any of
the Released Parties or by any of the Released Parties’ agents, representatives, or attorneys with
regard to the subject matter, basis, or effect of this Release or otherwise.

     8. Acceptance and Revocation. Executive agrees that this Release was presented to Executive
for review and consideration on _______________ (“Review Date”). Executive understands
that Executive has [twenty-one (21)/forty-five (45)] days from the Review Date within which to
decide whether to execute this Release and return it to the Company. If Executive does not return
this Release to the Company fully executed within [twenty-one (21)/forty-five (45)] days of the
Review Date, any offer implied by the representation of this Release for Executive’s review and
consideration is withdrawn in its entirety at that time. Executive further understands that
Executive has seven (7) days after execution of this Release within which to provide the Company
with written notice of revocation of this Release (“Revocation Period”). If said written notice of
revocation is not received by the Company by the close of business on the seventh day following
Executive’s signing

A-2

 

of this Release, Executive agrees that this Release shall be final, binding,
and irrevocable. If Executive does exercise his or her right to revoke this Release, all of the
terms and conditions of the Release shall be of no force and effect and the Company shall not have
any obligation to make payments to Executive as set forth in this Release.

     9. Notices. The executed copy of this Release and/or any written notices should be provided
to:

rue 21, inc.

800 Commonwealth Drive, Suite 100

Warrendale, PA 15086

Attn: Secretary

     10. Effective Date. This Release shall not become effective in any respect until the
Revocation Period has expired without notice of revocation. In the absence of Executive’s
revocation of this Release, the eighth day after Executive’s signing of this Release shall be the
“Effective Date” of this Release.

     11. No Admissions. This Release shall not in any way be construed as an admission by the
Company that it has acted wrongfully or breached any Release with respect to Executive or any other
person, or an admission of any acts of discrimination whatsoever against Executive, and the Company
specifically disclaims any liability to or discrimination against Executive, on the part of itself,
its employees, its agents or its affiliates.

     12. Executive Breach. Executive agrees that, in the event Executive breaches any provision of
this Release, Executive agrees to indemnify the Company and the Released Parties against all
liability, costs and expenses, including reasonable attorney’s fees, and will reimburse the Company
for all benefits paid to-Executive pursuant to-this Release.

     13. Sole and Entire Agreement. The Release, including the Employment Agreement, constitutes
the entire agreement of the parties, and fully supersedes any and all prior and contemporaneous
agreements or understandings between the parties. This Release may be amended or modified only by
an agreement in writing and signed by both parties.

     14. Governing Law. The validity, interpretation, construction and performance of this
Agreement will be governed by and construed in accordance with the substantive laws of the
Commonwealth of Pennsylvania, without giving effect to its principles of conflict of laws.

     15. Severability. If any provision of this Release or the application of any provision hereof
to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder
of this Release and the application of such provision to any other person or circumstances will not
be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it valid, enforceable and legal.

     16. Survival of Provisions. Notwithstanding any other provision of this Release, the parties’
respective rights and obligations under Sections 4, 7 and 8 of the Employment Agreement

A-3

 

will
survive any termination or expiration of this Release or the termination of Executive’s employment
for any reason whatsoever.

     17. Counterparts. This Release may be executed in one or more counterparts, each of which
will be deemed to be an original but all of which together will constitute one and the same
agreement.

     PLEASE READ AND CONSIDER THIS RELEASE CAREFULLY BEFORE SIGNING IT. THIS SEPARATION AGREEMENT
AND GENERAL RELEASE INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

	 	 	 	 	 
	 	 	 
	 	Signature: 	
 	 
	 	 	Robert Fisch 	 
	 	 	Date: 	 	 
	 

	 	 	 	 	 	 
	Witnessed:  	
 	 	 
	 	Name:  	
 	 	 
	 	Date: 	
 	 	 
	 

	 	 	 	 	 
	 	rue 21, inc.

 	 
	 	By  	 	 
	 	 	Title 	 	 
	 	 	Date: 	 	 
	 

A-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00182-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00182-of-00352.parquet"}]]