Document:

Exhibit 10.1

CREDIT AGREEMENT

Dated as of August 27, 2009

among

Syms
Corp,

as the Lead Borrower

For

The Borrowers Named Herein

The Facility Guarantors

Bank
of America, N.A.

as Administrative Agent and Collateral Agent

and

The Other Lenders Party Hereto

TABLE OF CONTENTS

	
 

	
 

	
 

	
 

	
 

	
 

	
Section

	
 

	
 

	
Page

	
 

	
 

	
 

	
 

	
ARTICLE I
 DEFINITIONS AND ACCOUNTING TERMS

	
 

	
1

	
 

	
 

	
 

	
 

	
1.01

	
 

	
Defined
 Terms

	
 

	
1

	
 

	
1.02

	
 

	
Other
 Interpretive Provisions

	
 

	
42

	
 

	
1.03

	
 

	
Accounting
 Terms

	
 

	
43

	
 

	
1.04

	
 

	
Rounding

	
 

	
43

	
 

	
1.05

	
 

	
Times of Day

	
 

	
44

	
 

	
1.06

	
 

	
Letter of Credit
 Amounts

	
 

	
44

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE II
 THE COMMITMENTS AND CREDIT EXTENSIONS

	
 

	
44

	
 

	
 

	
 

	
 

	
2.01

	
 

	
Committed
 Loans; Reserves

	
 

	
44

	
 

	
2.02

	
 

	
Committed
 Borrowings, Conversions and Continuations of Committed Loans

	
 

	
45

	
 

	
2.03

	
 

	
Letters of
 Credit

	
 

	
47

	
 

	
2.04

	
 

	
Intentionally
 Omitted

	
 

	
54

	
 

	
2.05

	
 

	
Prepayments

	
 

	
54

	
 

	
2.06

	
 

	
Termination
 or Reduction of Commitments

	
 

	
55

	
 

	
2.07

	
 

	
Repayment of
 Committed Loans

	
 

	
56

	
 

	
2.08

	
 

	
Interest

	
 

	
56

	
 

	
2.09

	
 

	
Fees

	
 

	
56

	
 

	
2.10

	
 

	
Computation
 of Interest and Fees

	
 

	
57

	
 

	
2.11

	
 

	
Evidence of
 Debt

	
 

	
57

	
 

	
2.12

	
 

	
Payments
 Generally; Administrative Agent’s Clawback

	
 

	
57

	
 

	
2.13

	
 

	
Sharing of
 Payments by Lenders

	
 

	
59

	
 

	
2.14

	
 

	
Settlement
 Amongst Lenders

	
 

	
59

	
 

	
 

	
 

	
 

	
 

	
 

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

	
 

	
60

	
 

	
 

	
 

	
 

	
3.01

	
 

	
Taxes

	
 

	
60

	
 

	
3.02

	
 

	
Illegality

	
 

	
62

	
 

	
3.03

	
 

	
Inability to
 Determine Rates

	
 

	
62

	
 

	
3.04

	
 

	
Increased
 Costs; Reserves on LIBO Rate Loans

	
 

	
62

	
 

	
3.05

	
 

	
Compensation
 for Losses

	
 

	
64

	
 

	
3.06

	
 

	
Mitigation
 Obligations; Replacement of Lenders

	
 

	
64

	
 

	
3.07

	
 

	
Survival

	
 

	
65

	
 

	
3.08

	
 

	
Designation
 of Lead Borrower as Borrowers’ Agent

	
 

	
65

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE IV
 CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

	
 

	
65

	
 

	
 

	
 

	
 

	
4.01

	
 

	
Conditions
 of Initial Credit Extension

	
 

	
65

	
 

	
4.02

	
 

	
Conditions
 to all Credit Extensions

	
 

	
69

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE V
 REPRESENTATIONS AND WARRANTIES

	
 

	
70

	
 

	
 

	
 

	
 

	
5.01

	
 

	
Existence,
 Qualification and Power

	
 

	
70

	
 

	
5.02

	
 

	
Authorization;
 No Contravention

	
 

	
70

	
 

	
5.03

	
 

	
Governmental
 Authorization; Other Consents

	
 

	
70

	
 

	
5.04

	
 

	
Binding
 Effect

	
 

	
70

	
 

	
5.05

	
 

	
Financial
 Statements; No Material Adverse Effect

	
 

	
71

	
 

	
5.06

	
 

	
Litigation

	
 

	
71

(i)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
5.07

	
 

	
No Default

	
 

	
71

	
 

	
5.08

	
 

	
Ownership of
 Property; Liens

	
 

	
72

	
 

	
5.09

	
 

	
Environmental
 Compliance

	
 

	
72

	
 

	
5.10

	
 

	
Insurance

	
 

	
73

	
 

	
5.11

	
 

	
Taxes

	
 

	
73

	
 

	
5.12

	
 

	
ERISA
 Compliance

	
 

	
73

	
 

	
5.13

	
 

	
Subsidiaries;
 Equity Interests

	
 

	
74

	
 

	
5.14

	
 

	
Margin
 Regulations; Investment Company Act

	
 

	
74

	
 

	
5.15

	
 

	
Disclosure

	
 

	
74

	
 

	
5.16

	
 

	
Compliance
 with Laws

	
 

	
75

	
 

	
5.17

	
 

	
Intellectual
 Property; Licenses, Etc.

	
 

	
75

	
 

	
5.18

	
 

	
Labor
 Matters

	
 

	
75

	
 

	
5.19

	
 

	
Security
 Documents

	
 

	
75

	
 

	
5.20

	
 

	
Solvency

	
 

	
76

	
 

	
5.21

	
 

	
Deposit
 Accounts; Credit Card Arrangements

	
 

	
76

	
 

	
5.22

	
 

	
Brokers

	
 

	
77

	
 

	
5.23

	
 

	
Customer and
 Trade Relations

	
 

	
77

	
 

	
5.24

	
 

	
Material
 Contracts

	
 

	
77

	
 

	
5.25

	
 

	
Casualty

	
 

	
77

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VI
 AFFIRMATIVE COVENANTS

	
 

	
77

	
 

	
 

	
 

	
 

	
6.01

	
 

	
Financial
 Statements

	
 

	
77

	
 

	
6.02

	
 

	
Certificates;
 Other Information

	
 

	
78

	
 

	
6.03

	
 

	
Notices

	
 

	
81

	
 

	
6.04

	
 

	
Payment of
 Obligations

	
 

	
82

	
 

	
6.05

	
 

	
Preservation
 of Existence, Etc.

	
 

	
82

	
 

	
6.06

	
 

	
Maintenance
 of Properties

	
 

	
82

	
 

	
6.07

	
 

	
Maintenance
 of Insurance

	
 

	
82

	
 

	
6.08

	
 

	
Compliance
 with Laws

	
 

	
83

	
 

	
6.09

	
 

	
Books and
 Records; Accountants

	
 

	
84

	
 

	
6.10

	
 

	
Inspection
 Rights

	
 

	
84

	
 

	
6.11

	
 

	
Use of
 Proceeds

	
 

	
85

	
 

	
6.12

	
 

	
Additional
 Loan Parties

	
 

	
85

	
 

	
6.13

	
 

	
Cash
 Management

	
 

	
85

	
 

	
6.14

	
 

	
Information
 Regarding the Collateral

	
 

	
87

	
 

	
6.15

	
 

	
Physical
 Inventories

	
 

	
87

	
 

	
6.16

	
 

	
Environmental
 Laws

	
 

	
88

	
 

	
6.17

	
 

	
Further
 Assurances

	
 

	
88

	
 

	
 

	
 

	
Compliance
 with Terms of Leaseholds

	
 

	
88

	
 

	
6.19

	
 

	
Material
 Contracts

	
 

	
89

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VII
 NEGATIVE COVENANTS

	
 

	
89

	
 

	
 

	
 

	
 

	
7.01

	
 

	
Liens

	
 

	
89

	
 

	
7.02

	
 

	
Investments

	
 

	
89

	
 

	
7.03

	
 

	
Indebtedness;
 Disqualified Stock

	
 

	
89

	
 

	
7.04

	
 

	
Fundamental
 Changes

	
 

	
89

	
 

	
7.05

	
 

	
Dispositions

	
 

	
90

	
 

	
7.06

	
 

	
Restricted
 Payments

	
 

	
90

	
 

	
7.07

	
 

	
Prepayments
 of Indebtedness

	
 

	
90

	
 

	
7.08

	
 

	
Change in
 Nature of Business

	
 

	
90

	
 

	
7.09

	
 

	
Transactions
 with Affiliates

	
 

	
90

(ii)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
7.10

	
 

	
Burdensome
 Agreements

	
 

	
91

	
 

	
7.11

	
 

	
Use of
 Proceeds

	
 

	
91

	
 

	
7.12

	
 

	
Amendment of
 Material Documents

	
 

	
91

	
 

	
7.13

	
 

	
Fiscal Year

	
 

	
91

	
 

	
7.14

	
 

	
Deposit
 Accounts; Credit Card Processors

	
 

	
91

	
 

	
7.15

	
 

	
Financial
 Covenant

	
 

	
91

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE VIII
 EVENTS OF DEFAULT AND REMEDIES

	
 

	
91

	
 

	
 

	
 

	
 

	
8.01

	
 

	
Events of
 Default

	
 

	
91

	
 

	
8.02

	
 

	
Remedies
 Upon Event of Default

	
 

	
94

	
 

	
8.03

	
 

	
Application
 of Funds

	
 

	
95

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE IX
 ADMINISTRATIVE AGENT

	
 

	
96

	
 

	
 

	
 

	
 

	
9.01

	
 

	
Appointment
 and Authority

	
 

	
96

	
 

	
9.02

	
 

	
Rights as a
 Lender

	
 

	
96

	
 

	
9.03

	
 

	
Exculpatory
 Provisions

	
 

	
97

	
 

	
9.04

	
 

	
Reliance by
 Agents

	
 

	
98

	
 

	
9.05

	
 

	
Delegation
 of Duties

	
 

	
98

	
 

	
9.06

	
 

	
Resignation
 of Agents

	
 

	
98

	
 

	
9.07

	
 

	
Non-Reliance
 on Administrative Agent and Other Lenders

	
 

	
99

	
 

	
9.08

	
 

	
Intentionally
 Omitted

	
 

	
99

	
 

	
9.09

	
 

	
Administrative
 Agent May File Proofs of Claim

	
 

	
99

	
 

	
9.10

	
 

	
Collateral
 and Guaranty Matters

	
 

	
100

	
 

	
9.11

	
 

	
Notice of
 Transfer

	
 

	
100

	
 

	
9.12

	
 

	
Reports and
 Financial Statements

	
 

	
100

	
 

	
9.13

	
 

	
Agency for
 Perfection

	
 

	
101

	
 

	
9.14

	
 

	
Indemnification
 of Agents

	
 

	
101

	
 

	
9.15

	
 

	
Relation
 among Lenders

	
 

	
102

	
 

	
9.16

	
 

	
Defaulting
 Lender

	
 

	
102

	
 

	
 

	
 

	
 

	
 

	
 

	
ARTICLE X
 MISCELLANEOUS

	
 

	
103

	
 

	
 

	
 

	
 

	
10.01

	
 

	
Amendments,
 Etc.

	
 

	
103

	
 

	
10.02

	
 

	
Notices;
 Effectiveness; Electronic Communications

	
 

	
104

	
 

	
10.03

	
 

	
No Waiver;
 Cumulative Remedies

	
 

	
106

	
 

	
10.04

	
 

	
Expenses;
 Indemnity; Damage Waiver

	
 

	
106

	
 

	
10.05

	
 

	
Payments Set
 Aside

	
 

	
107

	
 

	
10.06

	
 

	
Successors
 and Assigns

	
 

	
108

	
 

	
10.07

	
 

	
Treatment of
 Certain Information; Confidentiality

	
 

	
111

	
 

	
10.08

	
 

	
Right of
 Setoff

	
 

	
112

	
 

	
10.09

	
 

	
Interest Rate Limitation

	
 

	
112

	
 

	
10.10

	
 

	
Counterparts;
 Integration; Effectiveness

	
 

	
112

	
 

	
10.11

	
 

	
Survival

	
 

	
112

	
 

	
10.12

	
 

	
Severability

	
 

	
113

	
 

	
10.13

	
 

	
Replacement
 of Lenders

	
 

	
113

	
 

	
10.14

	
 

	
Governing
 Law; Jurisdiction; Etc.

	
 

	
113

	
 

	
10.15

	
 

	
Waiver of
 Jury Trial

	
 

	
114

	
 

	
10.16

	
 

	
No Advisory
 or Fiduciary Responsibility

	
 

	
115

	
 

	
10.17

	
 

	
USA PATRIOT
 Act Notice

	
 

	
115

	
 

	
10.18

	
 

	
Foreign
 Asset Control Regulations

	
 

	
115

	
 

	
10.19

	
 

	
Time of the
 Essence

	
 

	
116

	
 

	
10.20

	
 

	
Intentionally
 Omitted

	
 

	
116

(iii)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
10.21

	
 

	
Press
 Releases

	
 

	
116

	
 

	
10.22

	
 

	
Additional
 Waivers

	
 

	
116

	
 

	
10.23

	
 

	
No Strict
 Construction

	
 

	
118

	
 

	
10.24

	
 

	
Attachments

	
 

	
118

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
SIGNATURES

	
 

	
S-119

(iv)

SCHEDULES

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 1.01

 	
 Borrowers

 
	
  

 	
 1.02

 	
 Guarantors

 
	
  

 	
 2.01

 	
 Commitments
 and Applicable Percentages

 
	
  

 	
 5.01

 	
 Loan Parties
 Organizational Information

 
	
  

 	
 5.05

 	
 Supplement
 to Interim Financial Statements

 
	
  

 	
 5.08(b)(1)

 	
 Owned Real
 Estate

 
	
  

 	
 5.08(b)(2)

 	
 Leased Real
 Estate

 
	
  

 	
 5.09

 	
 Environmental
 Matters

 
	
  

 	
 5.10

 	
 Insurance

 
	
  

 	
 5.13

 	
 Subsidiaries;
 Other Equity Investments

 
	
  

 	
 5.18

 	
 Collective
 Bargaining Agreements

 
	
  

 	
 5.21(a)

 	
 DDAs

 
	
  

 	
 5.21(b)

 	
 Credit Card
 Arrangements

 
	
  

 	
 5.24

 	
 Material
 Contracts

 
	
  

 	
 6.02

 	
 Financial
 and Collateral Reporting

 
	
  

 	
 7.01

 	
 Existing
 Liens

 
	
  

 	
 7.02

 	
 Existing
 Investments

 
	
  

 	
 7.03

 	
 Existing
 Indebtedness

 
	
  

 	
 10.02

 	
 Administrative
 Agent’s Office; Certain Addresses for Notices

 
	
  

 	
  

 	
  

 
	
 EXHIBITS

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 Form of

 
	
  

 	
  

 	
  

 
	
  

 	
 A

 	
 Committed
 Loan Notice

 
	
  

 	
 B

 	
 Note

 
	
  

 	
 C

 	
 Compliance
 Certificate

 
	
  

 	
 D

 	
 Assignment
 and Assumption

 
	
  

 	
 E

 	
 Borrowing
 Base Certificate

 
	
  

 	
 F

 	
 Credit Card
 Notification

 

(v)

CREDIT AGREEMENT

          This
CREDIT AGREEMENT (“Agreement”) is entered into as of August 27, 2009 among 

          Syms
Corp, a New Jersey corporation (the “Lead Borrower”), 

          the
Persons named on Schedule 1.01 hereto (collectively, the “Borrowers”),

          the
Facility Guarantors;

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

          Bank
of America, N.A., as Administrative Agent and Collateral Agent. 

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

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

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

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

          “Accelerated
Borrowing Base Delivery Event” means either (i) the occurrence and continuance
of any Event of Default, or (ii) the failure of the Borrowers to maintain
Availability at least equal to twenty percent (20%) of the Loan Cap. For
purposes of this Agreement, the occurrence of an Accelerated Borrowing Base
Delivery Event shall be deemed continuing at the Administrative Agent’s option
(i) so long as such Event of Default has not been waived, and/or (ii) if the
Accelerated Borrowing Base Delivery Event arises as a result of the Borrowers’
failure to achieve Availability as required hereunder, until Availability has
exceeded twenty percent (20%) of the Loan Cap for sixty (60) consecutive
calendar days, in which case an Accelerated Borrowing Base Delivery Event shall
no longer be deemed to be continuing for purposes of this Agreement.

          “Acceptable
Document of Title” means, with respect to any Inventory, a tangible, negotiable
bill of lading, airway bill or other Document (as defined in the UCC) that (a)
is issued by a common carrier (i) which is not an Affiliate of the Approved
Foreign Vendor or any Loan Party and (ii) which is in actual possession of such
Inventory, (b) is issued to the order of the Borrower or, if so requested by
the Collateral Agent, to the order of the Collateral Agent, (c) names the
Collateral Agent as a notify party and bears a conspicuous notation on its face
of the Collateral Agent’s security interest therein, (d) is not subject to any
Lien (other than in favor of the Collateral Agent), and (e) is on terms
otherwise reasonably acceptable to the Collateral Agent.

          “ACH”
means automated clearing house transfers.

          “Accommodation
Payment” as defined in Section 10.22(d). 

-1-

          “Account”
means “accounts” as defined in the UCC, and also means a right to payment of a
monetary obligation, whether or not earned by performance, (a) for property
that has been or is to be sold, leased, licensed, assigned, or otherwise
disposed of, (b) for services rendered or to be rendered, (c) for a secondary
obligation incurred or to be incurred, or (d) arising out of the use of a credit
or charge card or information contained on or for use with the card.

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

          “Act”
shall have the meaning provided in Section 10.17.

          “Adjusted
LIBO Rate” means, with respect to any LIBO Borrowing for any Interest Period,
an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of
one percent (1%)) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate. The Adjusted LIBO Rate will be
adjusted automatically as to all LIBO Borrowings then outstanding as of the
effective date of any change in the Statutory Reserve Rate.

          “Adjustment
Date” means the first day of each Fiscal Quarter, commencing November 29, 2009.

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

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

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

          “Affiliate”
means, with respect to any Person, (i) another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified, (ii) any director, officer,
managing member, partner, trustee, or beneficiary of that Person, (iii) any
other Person directly or indirectly holding 10% or more of any class of the
Equity Interests of that Person, and (iv) any other Person 10% or more of any
class of whose Equity Interests is held directly or indirectly by that Person.

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

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

          “Aggregate
Commitments” means the Commitments of all the Lenders which, on the Closing
Date, is an aggregate of $75,000,000.

          “Agreement”
means this Credit Agreement.

-2-

          “Allocable
Amount” has the meaning specified in Section 10.22(d).

          “Applicable
Lenders” means the Required Lenders, all affected Lenders, or all Lenders, as
the context may require.

          “Applicable
Margin” means:

	
  

 	
  

 
	
  

 	
  

 
	
  

 	
           (a)
 From and after the Closing Date until the first Adjustment Date, the
 percentages set forth in Level II of the pricing grid below; and

 
	
  

 	
  

 
	
  

 	
           (b)
 From and after the first Adjustment Date and on each Adjustment Date
 thereafter, the Applicable Margin shall be determined from the following
 pricing grid based upon the Average Daily Availability during the Fiscal
 Quarter ended immediately preceding such Adjustment Date; provided,
 however, that notwithstanding anything to the contrary set forth herein, if
 Availability is at any time less than the amount calculated pursuant to
 clause (e) of the Borrowing Base, then the Applicable Margin otherwise in
 effect shall immediately increase by 0.50% and shall remain increased until
 the subsequent Adjustment Date; provided, further that upon the
 occurrence of an Event of Default, interest shall accrue at the Default Rate;
 provided further if any financial statement required to be delivered
 pursuant to Section 6.01 or any Borrowing Base Certificate is at any time
 restated or otherwise revised (including as a result of an audit) or if the
 information set forth in any such financial statement or Borrowing Base
 Certificate otherwise proves to be false or incorrect such that the
 Applicable Margin would have been higher than was in effect during any
 period, without constituting a waiver of any Default or Event of Default
 arising as a result thereof, interest due under this Agreement shall be
 immediately recalculated at such higher rate for any applicable periods and
 shall be due and payable on demand.

 

	
  

 	
  

 	
  

 	
  

 
	
 Level

 	
 Average Daily 

 Availability

 	
 LIBOR

 Margin

 	
 Base Rate Margin

 
	
 I

 	
 Less than $25,000,000

 	
 3.50%

 	
 2.50%

 
	
 II

 	
 Equal to or greater than $25,000,000 but less than or equal to
 $50,000,000

 	
 3.25%

 	
 2.25%

 
	
 III

 	
 Greater than $50,000,000

 	
 3.00%

 	
 2.00%

 

          “Applicable
Percentage” means with respect to any Lender at any time, the percentage
(carried out to the ninth decimal place) of the Aggregate Commitments
represented by such Lender’s Commitment at such time. If the commitment of each
Lender to make Committed Loans and the obligation of the L/C Issuer to make L/C
Credit Extensions have been terminated pursuant to Section 2.06 or Section 8.02
or if the Aggregate Commitments have expired, then the Applicable Percentage of
each Lender shall be determined based on the Applicable Percentage of such
Lender most recently in effect, giving effect to any subsequent assignments.
The initial Applicable Percentage of each Lender is set forth opposite the name
of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to
which such Lender becomes a party hereto, as applicable.

-3-

          “Applicable
Rate” means, at any time of calculation, (a) with respect to Commercial Letters
of Credit, a per annum rate equal to the Applicable Margin for Committed Loans
which are LIBOR Rate Loans minus 0.75%, and (b) with respect to Standby
Letters of Credit, a per annum rate equal to the Applicable Margin for
Committed Loans which are LIBOR Rate Loans.

          “Appraisal
Percentage” means 85%.

          “Appraised
Value” means at any time (a) with respect to the Borrowers’ Eligible Inventory,
the appraised orderly liquidation value, net of costs and expenses to be
incurred in connection with any such liquidation, which value is expressed as a
percentage of Cost of the Borrowers’ Eligible Inventory as set forth in the
Borrowers’ inventory stock ledger, which value shall be determined from time to
time by the most recent appraisal undertaken by an independent appraiser
engaged by the Administrative Agent, or (b) with respect to the Borrowers’
Eligible Real Estate, the fair market value of the Borrowers’ Eligible Real
Estate as set forth in the most recent appraisal of the Borrowers’ Eligible
Real Estate by an independent appraiser engaged by the Administrative Agent,
which appraisal shall assume, among other things, a marketing time of not
greater than twelve (12) months or less than three (3) months; provided that
the Appraised Value of Eligible Real Estate shall in no event exceed the
maximum amount of the Obligations at any time specified to be secured by a
Mortgage thereon.

          “Approved
Foreign Vendor” means a foreign vendor of a Loan Party which (a) is located in
any country acceptable to the Collateral Agent in its discretion, (b) has
received timely payment or performance of all obligations owed to it by the
Loan Parties, (c) has not asserted and has no right to assert any reclamation,
repossession, diversion, stoppage in transit, Lien or title retention rights in
respect of such Inventory, and (d), if so requested by the Collateral Agent,
has entered into and is in full compliance with the terms of an agreement with
the Collateral Agent in form and substance satisfactory to the Collateral
Agent.

          “Approved
Fund” means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender (c) an entity or an Affiliate of an entity that
administers or manages a Lender, or (d) the same investment advisor or an
advisor under common control with such Lender, Affiliate or advisor, as
applicable.

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

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

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

          “Audited
Financial Statements” means the audited consolidated balance sheet of the Lead
Borrower and its Subsidiaries for the fiscal year ended February 28, 2009, and
the related consolidated statements of income or operations, Shareholders’
Equity and cash flows for such fiscal year of the Lead Borrower and its
Subsidiaries, including the notes thereto.

-4-

          “Auto-Extension
Letter of Credit” shall have the meaning specified in Section 2.03(b)(iii).

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

                    (a)
The Loan Cap

                              Minus 

                    (b)
The aggregate unpaid balance of the Committed Loans and the L/C Obligations to,
or for the account of, the Borrowers.

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

          “Availability
Period” means the period from and including the Closing Date to the earliest of
(a) the Maturity Date, (b) the date of termination of the Aggregate Commitments
pursuant to Section 2.06, and (c) the date of termination of the commitment of
each Lender to make Committed Loans and of the obligation of the L/C Issuer to
make L/C Credit Extensions pursuant to Section 8.02.

          “Availability
Reserves” means, without duplication of any other Reserves or items that are
otherwise addressed or excluded through eligibility criteria, such reserves as
the Administrative Agent from time to time determines in its reasonable discretion
as being appropriate (a) to reflect the impediments to the Agents’ ability to
realize upon the Collateral, (b) to reflect claims and liabilities that the
Administrative Agent determines will need to be satisfied in connection with
the realization upon the Collateral, (c) to reflect criteria, events,
conditions, contingencies or risks which adversely affect any component of the
Borrowing Base, or the assets, business, financial performance or financial
condition of any Loan Party, or (d) to reflect that a Default or an Event of
Default then exists. Without limiting the generality of the foregoing,
Availability Reserves may include, in the Administrative Agent’s reasonable
discretion, (but are not limited to) reserves based on: (i) rent; (ii) customs
duties, and other costs to release Inventory which is being imported into the
United States; (iii) outstanding Taxes and other governmental charges,
including, without limitation, ad valorem, real estate, personal property,
sales, claims of the PBGC and other Taxes which may have priority over the
interests of the Collateral Agent in the Collateral; (iv) salaries, wages and
benefits due to employees of any Borrower, (v) Customer Credit Liabilities,
(vi) reserves for reasonably anticipated changes in the Appraised Value of
Eligible Inventory between appraisals, (vii) amounts due to vendors on account
of consigned goods, (ix) warehousemen’s or bailee’s charges and other Permitted
Encumbrances which may have priority over the interests of the Collateral Agent
in the Collateral, (x) Cash Management Reserves, (xi) Bank Products Reserves,
(xii) Realty Reserves, and (xiiii) royalties payable in respect of licensed
merchandise.

          “Average
Daily Availability” shall mean the average daily Availability for the immediately
preceding Fiscal Quarter (based on Availability at the close of business on
each day during such Fiscal Quarter).

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

          “Bank
Products” means any services or facilities provided to any Loan Party by the
Administrative Agent, any Lender, or any of their respective Affiliates,
including, without limitation, on account of (a) Swap Contracts and (b)
leasing, but excluding Cash Management Services.

-5-

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

          “Banker’s
Acceptance” means a time draft or bill of exchange or other deferred payment
obligation relating to a Commercial Letter of Credit which has been accepted by
the Issuing Lender.

          “Base
Rate” means for any day a fluctuating rate per annum equal to the highest of
(a) the rate of interest in effect for such day as publicly announced from time
to time by Bank of America as its “prime rate”; (b) the Federal Funds Rate for
such day, plus 0.50%; and (c) the LIBO Rate for a one-month interest period as
determined on such day, plus 1.0%. The “prime rate” is a rate set by Bank of
America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in the Base Rate due to a change in Bank of
America’s “prime rate”, the Federal Funds Rate or the LIBO Rate shall be
effective on the effective date of such change in Bank of America’s prime rate,
the Federal Funds Rate or the LIBO Rate, respectively.

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

          “Blocked
Account” has the meaning provided in Section 6.13(a)(ii).

          “Blocked
Account Agreement” means with respect to an account established by a Loan
Party, an agreement, in form and substance satisfactory to the Collateral
Agent, establishing control (as defined in Section 9-104 of the UCC) of such
account by the Collateral Agent and whereby the bank maintaining such account
agrees, upon the occurrence and during the continuance of a Cash Dominion
Event, to comply only with the instructions originated by the Collateral Agent
without the further consent of any Loan Party.

          “Blocked
Account Bank” means each bank with whom deposit accounts are maintained in
which any funds of any of the Loan Parties from one or more DDAs are
concentrated and with whom a Blocked Account Agreement has been, or is required
to be, executed in accordance with the terms hereof.

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

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

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

	
  

 	
  

 
	
  

 	
           (a)
 the face amount of Eligible Credit Card Receivables multiplied by 85%;

 
	
  

 	
  

 
	
  

 	
           plus

 
	
  

 	
  

 
	
  

 	
           (b)
 the Cost of Eligible Inventory, net of Inventory Reserves, multiplied by the
 Appraisal Percentage of the Appraised Value of Eligible Inventory;

 
	
  

 	
  

 
	
  

 	
           plus

 
	
  

 	
  

 
	
  

 	
           (c)
 with respect to any Eligible Letter of Credit, the Appraisal Percentage of
 the Appraised Value of the Inventory supported by such Eligible Letter of
 Credit, multiplied by the Cost of such Inventory when completed, net of
 Inventory Reserves;

 

-6-

	
  

 	
  

 
	
  

 	
           plus

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           plus

 
	
  

 	
  

 
	
  

 	
           (e)
 the least of (i) $18,750,000, (ii) the Real Estate Advance Rate multiplied by
 the Appraised Value of Eligible Real Estate, and (iii) the Real Estate Cap;

 
	
  

 	
  

 
	
  

 	
           minus

 
	
  

 	
  

 
	
  

 	
           (f)
 the then amount of all Availability Reserves.

 

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

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

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

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

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

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

-7-

          “Cash
Dominion Event” means either (i) the occurrence and continuance of any Event of
Default, or (ii) the failure of the Borrowers to maintain Availability of at
least twenty percent (20%) of the Loan Cap. For purposes of this Agreement, the
occurrence of a Cash Dominion Event shall be deemed continuing (i) so long as
such Event of Default has not been waived, and/or (ii) if the Cash Dominion
Event arises as a result of the Borrowers’ failure to achieve Availability as
required hereunder, until Availability has exceeded twenty percent (20%) of the
Loan Cap for sixty (60) consecutive days, in which case a Cash Dominion Event
shall no longer be deemed to be continuing for purposes of this Agreement; provided that a Cash Dominion Event shall
be deemed continuing (even if an Event of Default is no longer continuing
and/or Availability exceeds the required amount for sixty (60) consecutive
days) at all times after a Cash Dominion Event has occurred and been
discontinued on two (2) occasions after the Closing Date. The termination of a
Cash Dominion Event as provided herein shall in no way limit, waive or delay
the occurrence of a subsequent Cash Dominion Event in the event that the
conditions set forth in this definition again arise. 

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

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

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

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

          “CFC”
means a Person that is a controlled foreign corporation under Section 957 of
the Code. 

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

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

	
 

	
 

	
 

	
          (a)
any “person” or “group” (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, but excluding any employee benefit
plan of such person or its subsidiaries, and any person or entity acting in
its capacity as trustee, agent or other fiduciary or administrator of any
such plan) other than Marcy Syms becomes the “beneficial owner” (as defined
in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except
that a person or group shall be deemed to have “beneficial ownership” of all
securities that such person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time (such
right, an “option right”)), directly or indirectly, of 25% or more of the
Equity Interests of the Lead Borrower entitled to vote for members of the
board of directors or equivalent governing body of the Lead Borrower on a
fully-diluted basis (and taking into account  

-8-

	
 

	
 

	
 

	
all such
 Equity Interests that such “person” or “group” has the right to acquire
 pursuant to any option right); or 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (c)
 any Person or two or more Persons acting in concert (other than Marcy Syms)
 shall have acquired by contract or otherwise, or shall have entered into a
 contract or arrangement that, upon consummation thereof, will result in its
 or their acquisition of the power to exercise, directly or indirectly, a
 controlling influence over the management or policies of the Lead Borrower,
 or control over the Equity Interests of the Lead Borrower entitled to vote
 for members of the board of directors or equivalent governing body of the
 Lead Borrower on a fully-diluted basis (and taking into account all such
 securities that such Person or Persons have the right to acquire pursuant to
 any option right) representing 25% or more of the combined voting power of
 such securities; or 

	
 

	
 

	
 

	
          (d)
 any “change in control” or “sale” or “disposition” or similar event as
 defined in any Organizational Document of any Loan Party, or any document
 governing Material Indebtedness of any Loan Party; or 

	
 

	
 

	
 

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

	
 

	
 

	
          
 “Closing Date” means the first date all the conditions precedent in Section
 4.01 are satisfied or waived in accordance with Section 10.01. 

          “Code”
means the Internal Revenue Code of 1986 and the regulations promulgated
thereunder, each as amended and in effect from time to time.

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

          “Collateral
Access Agreement” means an agreement reasonably satisfactory in form and
substance to the Agents executed by (a) a bailee or other Person in possession
of Collateral, and (b) any landlord of Real Estate leased by any Loan Party,
pursuant to which such Person (i) acknowledges the Collateral Agent’s Lien on
the Collateral, (ii) releases such Person’s Liens on the Collateral held by
such

-9-

Person or
located on such Real Estate, (iii) provides the Collateral Agent with access to
the Collateral held by such bailee or other Person or located in or on such Real
Estate, (iv) as to any landlord, provides the Collateral Agent with a
reasonable time to sell and dispose of the Collateral from such Real Estate,
and (v) makes such other agreements with the Collateral Agent as the Agents may
reasonably require. 

          “Collateral
Agent” means Bank of America, acting in such capacity for its own benefit and
the ratable benefit of the other Credit Parties. 

          “Commercial
Letter of Credit” means any letter of credit or similar instrument (including,
without limitation, banker’s acceptances) issued for the purpose of providing
the primary payment mechanism in connection with the purchase of any materials,
goods or services by a Borrower in the ordinary course of business of such
Borrower. 

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

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

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

          “Committed
Loan Notice” means a notice of (a) a Committed Borrowing, (b) a Conversion of
Committed Loans from one Type to the other, or (c) a continuation of LIBO Rate
Loans, pursuant to 2.01(a), which, if in writing, shall be substantially in the
form of Exhibit A. 

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

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

          “Consent”
means actual consent given by a Lender from whom such consent is sought; or the
passage of seven (7) Business Days from receipt of written notice to a Lender
from the Administrative Agent of a proposed course of action to be followed by
the Administrative Agent without such Lender’s giving the Administrative Agent
written notice of that Lender’s objection to such course of action. 

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

          “Consolidated
EBITDA” means, at any date of determination, an amount equal to Consolidated
Net Income of the Lead Borrower and its Subsidiaries on a Consolidated basis
for the most recently completed Measurement Period, plus (a) the following to
the extent deducted in calculating such Consolidated Net Income: (i)
Consolidated Interest Charges, (ii) the provision for Federal, state, local and
foreign income Taxes, (iii) depreciation and amortization expense and (iv)
other non-recurring expenses reducing such Consolidated Net Income which do not
represent a cash item in such period or any future period (in each case of or
by the Lead Borrower and its Subsidiaries for such Measurement Period), minus 

-10-

(b) the
following to the extent included in calculating such Consolidated Net Income:
(i) Federal, state, local and foreign income tax credits and (ii) all non-cash
items increasing Consolidated Net Income (in each case of or by the Lead
Borrower and its Subsidiaries for such Measurement Period), all as determined
on a Consolidated basis in accordance with GAAP. 

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

          “Consolidated
Interest Charges” means, for any Measurement Period, the sum of (a) all
interest, premium payments, debt discount, fees, charges and related expenses
in connection with borrowed money (including capitalized interest) or in
connection with the deferred purchase price of assets, in each case to the
extent treated as interest in accordance with GAAP, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing and net costs
under Swap Contracts, but excluding any non-cash or deferred interest financing
costs, (b) all interest paid or payable with respect to discontinued operations
and (c) the portion of rent expense with respect to such period under Capital
Lease Obligations that is treated as interest in accordance with GAAP minus (d)
interest income during such period (excluding any portion of interest income
representing accruals of amounts received in a previous period), in each case
of or by the Lead Borrower and its Subsidiaries for the most recently completed
Measurement Period, all as determined on a Consolidated basis in accordance
with GAAP. 

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

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

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

          “Convert”,
“Conversion” and “Converted” each refer to a conversion of
Committed Loans of one Type into Committed Loans of the other Type. 

-11-

          “Cost”
means the lower of cost or market value of Inventory on a first-in, first-out
basis based on the inventory retail method, based upon the Borrowers’
accounting practices, known to the Administrative Agent, which practices are in
effect on the Closing Date, as such calculated cost is determined from invoices
received by the Borrowers, the Borrowers’ purchase journals and/or the
Borrowers’ stock ledger. 

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

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

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

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

          “Credit
Party Expenses” means, without limitation, (a) all reasonable out-of-pocket
expenses incurred by the Agents and their respective Affiliates, in connection
with this Agreement and the other Loan Documents, including without limitation
(i) the reasonable fees, charges and disbursements of (A) one primary counsel
for the Agents and one local counsel in each applicable jurisdiction, (B)
outside consultants for the Agents, (C) appraisers, (D) commercial finance
examinations, and (E) all such reasonable out-of-pocket expenses incurred
during any workout, restructuring or negotiations in respect of the
Obligations, (ii) in connection with (A) the syndication of the credit
facilities provided for herein, (B) the preparation, negotiation,
administration, management, execution and delivery of this Agreement and the
other Loan Documents or any amendments, modifications or waivers of the
provisions thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (C) the enforcement or protection of their
rights in connection with this Agreement or the Loan Documents or efforts to
preserve, protect, collect, or enforce the Collateral, or (D) any workout,
restructuring or negotiations in respect of any Obligations, and (b) with
respect to the L/C Issuer, and its Affiliates, all reasonable out-of-pocket
expenses incurred in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder; and (c)
all reasonable out-of-pocket expenses incurred by the Credit Parties who are
not the Agents, the L/C Issuer or any Affiliate of any of them, after the
occurrence and during the continuance of an Event of Default in connection with
the enforcement or protection of its rights under the Loan Documents, or in
connection with the Credit Extensions made hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Credit Extensions, provided that such Credit
Parties shall be entitled to reimbursement for no more than one primary counsel
and one local counsel in each applicable jurisdiction (absent a conflict of
interest in which case the Credit Parties may engage and be reimbursed for
additional counsel), one outside consultant and one financial advisor, in each
case representing or advising all such Credit Parties.  

          “Customer
Credit Liabilities” means at any time, the aggregate remaining value at such
time of (a) outstanding gift certificates and gift cards of the Borrowers
entitling the holder thereof to use all or a 

-12-

portion of the
certificate or gift card to pay all or a portion of the purchase price for any
Inventory, and (b) outstanding merchandise credits of the Borrowers. 

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

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

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

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

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

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

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

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

          “Disposition”
or “Dispose” means the sale, transfer, license, lease or other disposition
(including any sale and leaseback transaction and any sale, transfer, license
or other disposition of (whether in one 

-13-

transaction or
in a series of transactions) of any property (including, without limitation,
any Equity Interests) by any Person (or the granting of any option or other
right to do any of the foregoing), including any sale, assignment, transfer or
other disposal, with or without recourse, of any notes or accounts receivable
or any rights and claims associated therewith (other than an assignment for
purposes of collection). 

          “Disqualified
Stock” means any Equity Interest that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in each
case at the option of the holder thereof), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the
Committed Loans mature; provided, however, that (i) only the portion of such
Equity Interests which so matures or is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder thereof
prior to such date shall be deemed to be Disqualified Stock and (ii) with
respect to any Equity Interests issued to any employee or to any plan for the
benefit of employees of the Lead Borrower or its Subsidiaries or by any such
plan to such employees, such Equity Interest shall not constitute Disqualified
Stock solely because it may be required to be repurchased by the Lead Borrower
or one of its Subsidiaries in order to satisfy applicable statutory or
regulatory obligations or as a result of such employee’s termination,
resignation, death or disability and if any class of Equity Interest of such
Person that by its terms authorizes such Person to satisfy its obligations
thereunder by delivery of an Equity Interest that is not Disqualified Stock,
such Equity Interests shall not be deemed to be Disqualified Stock.
Notwithstanding the preceding sentence, any Equity Interest that would
constitute Disqualified Stock solely because the holders thereof have the right
to require a Loan Party to repurchase such Equity Interest upon the occurrence
of a change of control or an asset sale shall not constitute Disqualified
Stock. The amount of Disqualified Stock deemed to be outstanding at any time
for purposes of this Agreement will be the maximum amount that the Lead
Borrower and its Subsidiaries may become obligated to pay upon maturity of, or
pursuant to any mandatory redemption provisions of, such Disqualified Stock or
portion thereof, plus accrued dividends. 

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

          “Domestic
Subsidiary” means any Subsidiary that is organized under the laws of the United
States of America, any State thereof or the District of Columbia (excluding,
for the avoidance of doubt, any Subsidiary organized under the laws of Puerto
Rico or any other territory). 

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

          “Eligible
Cash on Hand” means cash of a Borrower from time to time deposited in a DDA or
investment or securities account in the name of a Loan Party maintained with
Bank of America 

-14-

(excluding any
amounts on deposit in the Cash Collateral Account or in any other escrow,
special purpose or restricted account, such as an account specifically designated
for payroll or sales taxes), which DDA is subject to a first priority perfected
security interest in favor of the Collateral Agent. 

          “Eligible
Credit Card Receivables” means at the time of any determination thereof, each
Credit Card Receivable that satisfies the following criteria at the time of
creation and continues to meet the same at the time of such determination: such
Credit Card Receivable (i) has been earned by performance and represents the
bona fide amounts due to a Borrower from a credit card payment processor and/or
credit card issuer, and in each case originated in the ordinary course of
business of such Borrower, and (ii) in each case is not ineligible for
inclusion in the calculation of the Borrowing Base pursuant to any of clauses
(a) through (k) below. Without limiting the foregoing, to qualify as an
Eligible Credit Card Receivable, an Account shall indicate no Person other than
a Borrower as payee or remittance party. In determining the amount to be so
included, the face amount of an Account shall be reduced by, without
duplication, to the extent not reflected in such face amount, (i) the amount of
all accrued and actual discounts, claims, credits or credits pending,
promotional program allowances, price adjustments, finance charges or other
allowances (including any amount that a Borrower may be obligated to rebate to
a customer, a credit card payment processor, or credit card issuer pursuant to
the terms of any agreement or understanding (written or oral)) and (ii) the
aggregate amount of all cash received in respect of such Account but not yet
applied by the Loan Parties to reduce the amount of such Credit Card
Receivable. Except as otherwise agreed by the Administrative Agent, any Credit
Card Receivable included within any of the following categories shall not
constitute an Eligible Credit Card Receivable: 

	
 

	
 

	
 

	
          (a)
 any Credit Card Receivable which does not constitute an “Account” (as defined
 in the UCC); 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (g)
 Credit Card Receivables due from an issuer or payment processor of the
 applicable credit card which is the subject of any bankruptcy or insolvency
 proceedings; 

	
 

	
 

	
 

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

-15-

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (j)
 Credit Card Receivables which are evidenced by “chattel paper” or an
 “instrument” of any kind unless such “chattel paper” or “instrument” is in
 the possession of the Collateral Agent, and to the extent necessary or
 appropriate, endorsed to the Collateral Agent; or 

	
 

	
 

	
 

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

          “Eligible
Inventory” means, as of the date of determination thereof, without duplication,
items of Inventory of a Borrower that are finished goods, merchantable and
readily saleable to the public in the ordinary course, that in each case,
except as otherwise agreed by the Administrative Agent, comply with each of the
representations and warranties respecting Inventory made by the Borrowers in
the Loan Documents, and that are not excluded as ineligible by virtue of one or
more of the criteria set forth below. Except as otherwise agreed by the
Administrative Agent, the following items of Inventory shall not be included in
Eligible Inventory: 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (c)
 Inventory that is not located in the United States of America (excluding
 territories or possessions of the United States) at a location that is owned
 or leased by a Borrower, except (i) Inventory in transit between such owned
 or leased locations, or (ii) Inventory with respect to which the Borrowers
 have furnished to the Administrative Agent (A) any UCC financing statements
 or other documents that the Administrative Agent may determine to be necessary
 to perfect its security interest in such Inventory at such location, and (B)
 a Collateral Access Agreement executed by the Person owning any such location
 on terms reasonably acceptable to the Administrative Agent; 

	
 

	
 

	
 

	
          (d)
 Inventory that is located in a distribution center leased by a Borrower
 unless the applicable lessor has delivered to the Collateral Agent a
 Collateral Access Agreement; 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (f)
 Inventory that is not subject to a perfected first-priority security interest
 in favor of the Collateral Agent; 

	
 

	
 

	
 

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

-16-

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (j)
 Inventory that is subject to any licensing, patent, royalty, trademark, trade
 name or copyright agreement with any third party from which any Borrower or
 any of its Subsidiaries has received notice of a dispute in respect of any
 such agreement; or 

	
 

	
 

	
 

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

          “Eligible
Letter of Credit” means, as of any date of determination thereof, a Commercial
Letter of Credit which supports the purchase of Inventory, (i) for which
Inventory no documents of title have then been issued; (ii) which Inventory
otherwise would constitute Eligible Inventory, (iii) which Commercial Letter of
Credit has an expiry within sixty (60) days of the date of initial issuance of
such Commercial Letter of Credit, and (iv) which Commercial Letter of Credit
provides that it may be drawn only after the Inventory is completed and after an
Acceptable Document of Title has been issued for such Inventory reflecting a
Borrower or the Collateral Agent as consignee of such Inventory; provided that
the Administrative Agent may, in its discretion, exclude any particular
Inventory from the definition of “Eligible Letter of Credit” in the event the
Administrative Agent determines that such Inventory is subject to any Person’s
right or claim which is (or is capable of being) senior to, or pari passu with,
the Lien of the Collateral Agent (such as, without limitation, a right of
stoppage in transit) or may otherwise adversely impact the ability of the
Collateral Agent to realize upon such Inventory. 

          “Eligible
Real Estate” means Real Estate which, except as otherwise agreed by the
Administrative Agent, satisfies all of the following conditions: 

	
 

	
 

	
 

	
          (a)
 A Loan Party owns such Real Estate in fee simple absolute; 

	
 

	
 

	
 

	
          (b)
 The Administrative Agent shall have received evidence that all actions that
 the Administrative Agent may reasonably deem necessary or appropriate in
 order to create valid first and subsisting Liens (subject only to those Liens
 permitted by Section 6.02 hereof which have priority over the Lien of the
 Collateral Agent by operation of Law or otherwise reasonably acceptable to
 the Administrative Agent) on the property described in the Mortgages have
 been taken. 

	
 

	
 

	
 

	
          (c)
 The Administrative Agent shall have received an appraisal (based upon
 Appraised Value) of such Real Estate complying with the requirements of
 FIRREA by a third- party appraiser reasonably acceptable to the
 Administrative Agent and otherwise in form and substance reasonably
 satisfactory to the Administrative Agent; and 

	
 

	
 

	
 

	
          (d)
 The Real Estate Eligibility Requirements have been satisfied. 

          “Environmental
Compliance Reserve” means, with respect to Eligible Real Estate, any reserve
which the Agents, from time to time in their discretion establish as estimates
of amounts that are 

-17-

reasonably
likely to be expended by any Loan Party in order for such Loan Party and its
operations and property (a) to comply with any notice from a Governmental
Authority asserting non-compliance with Environmental Laws, or (b) to correct
any such non-compliance with Environmental Laws or to provide for any
Environmental Liability. 

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

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

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

          “Equity
Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the
warrants, options or other rights for the purchase or acquisition from such
Person of shares of capital stock of (or other ownership or profit interests
in) such Person, all of the securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or acquisition from such
Person of such shares (or such other interests), and all of the other ownership
or profit interests in such Person (including partnership, member or trust
interests therein), whether voting or nonvoting, and whether or not such
shares, warrants, options, rights or other interests are outstanding on any
date of determination. 

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

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

          “ERISA
Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations
that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a
complete or partial withdrawal by the Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under 

-18-

Section 4007
of ERISA and other than periodic contribution requirements, upon the Borrower
or any ERISA Affiliate. 

          “Event
of Default” has the meaning specified in Section 8.01. An Event of Default
shall be deemed to be continuing unless and until that Event of Default has
been duly waived as provided in Section 10.03 hereof. 

          “Excluded
Taxes” means, with respect to the Agents, any Lender, the L/C Issuer or any
other recipient of any payment to be made by or on account of any obligation of
the Borrowers hereunder, (a) taxes imposed on or measured by its overall net
income (however denominated), and franchise taxes imposed on it (in lieu of net
income taxes), by the jurisdiction (or any political subdivision thereof) under
the laws of which such recipient is organized or in which its principal office
is located or, in the case of any Lender, in which its applicable Lending
Office is located, (b) any branch profits taxes imposed by the United States or
any similar tax imposed by any other jurisdiction in which any Borrower is
located and (c) in the case of a Foreign Lender (other than an assignee
pursuant to a request by the Lead Borrower under Section 10.13), any
withholding tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party hereto (or designates a new
Lending Office) or is attributable to such Foreign Lender’s failure or
inability (other than as a result of a Change in Law) to comply with Section
3.01(e), except to the extent that such Foreign Lender (or its assignor, if
any) was entitled, at the time of designation of a new Lending Office (or
assignment), to receive additional amounts from the Borrowers with respect to
such withholding tax pursuant to Section 3.01(a). 

          “Executive
Order” has the meaning set forth in Section 10.18. 

          “Existing
Credit Agreement” means that certain Amended and Restated Loan and Security
Agreement dated as of June 5, 2009, as amended and in effect, among the Lead
Borrower, SYL, LLC and Israel Discount Bank of New York, as lender. 

          “Extraordinary
Receipt” means any cash received by or paid to or for the account of any Person
not in the ordinary course of business, including tax refunds, pension plan reversions,
proceeds of insurance (other than proceeds of business interruption insurance
to the extent such proceeds constitute compensation for lost earnings),
condemnation awards (and payments in lieu thereof), indemnity payments and any
purchase price adjustments. 

          “Facility
Guaranty” means the Guaranty made by the Guarantors in favor of the Agents and
the other Credit Parties, in form reasonably satisfactory to the Administrative
Agent. 

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

          “Fee
Letter” means the letter agreement dated as of the Closing Date among the
Borrowers and the Administrative Agent. 

-19-

          “FIRREA”
means the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
as amended from time to time. 

          “Fiscal
Month” means any fiscal month of any Fiscal Year, which month shall generally
end on the Saturday closest to the last day of each calendar month in
accordance with the fiscal accounting calendar of the Loan Parties. 

          “Fiscal
Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall
generally end on the Saturday closest to the last day of each May, August,
November and February of such Fiscal Year in accordance with the fiscal
accounting calendar of the Loan Parties. 

          “Fiscal
Year” means any period of twelve consecutive months ending on the Saturday
closest to the last day of February of any fiscal year. 

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

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

          “Fronting
Fee” has the meaning assigned to such term in Section 2.03(j). 

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

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

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

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

          “Guarantee”
means, as to any Person, any (a) any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or services
for the purpose of assuring the obligee in respect of such Indebtedness or
other obligation of the payment or performance of such Indebtedness or other
obligation, (iii) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation, or (iv) entered into for the purpose of assuring
in any other manner the 

-20-

obligee in
respect of such Indebtedness or other obligation of the payment or performance
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), or (b) any Lien on any assets of such Person securing any
Indebtedness or other obligation of any other Person, whether or not such
Indebtedness or other obligation is assumed by such Person (or any right,
contingent or otherwise, of any holder of such Indebtedness to obtain any such
Lien); provided, however, that the term “Guarantee shall not include the
endorsement of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee shall be deemed to be an amount equal to
the stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
as determined by the guaranteeing Person in good faith. The term “Guarantee” as
a verb has a corresponding meaning.  

          “Guarantor”
means each Subsidiary of the Lead Borrower (other than any CFC) set forth on
Schedule 1.02 hereto and each other Subsidiary of the Lead Borrower that shall
be required to execute and deliver a Facility Guaranty pursuant to Section
6.12. 

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

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

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (d)
 all obligations of such Person to pay the deferred purchase price of property
 or services (other than trade accounts payable in the ordinary course of
 business and, in each case, not past due for more than 60 days); 

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (f)
 All Attributable Indebtedness of such Person; 

 
	
  

 	
  

 
	
  

 	
           (g)
all obligations of such Person to purchase, redeem, retire, defease or
otherwise make any payment in respect of any Equity Interest in such Person
or any other Person (including, without limitation, Disqualified Stock), or
any warrant, right or option to acquire such Equity Interest, valued, in the
case of a redeemable preferred interest,  at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends; and  

 

-21-

	
  

 	
  

 
	
  

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

 

          For
all purposes hereof, the Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, unless such Indebtedness is expressly
made non-recourse to such Person. The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date. 

          “Indemnified
Taxes” means Taxes other than Excluded Taxes.

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

          “Information”
has the meaning specified in Section 10.07. 

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

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

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

	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

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

 

-22-

	
  

 	
  

 
	
  

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

 

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

          “Internal
Control Event” means a material weakness in, or fraud that involves management
or other employees who have a significant role in, the Lead Borrower’s and/or
its Subsidiaries’ internal controls over financial reporting, in each case as
described in the Securities Laws. 

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

          “Inventory Reserves”
means such reserves as may be established from time to time by the
Administrative Agent in the Administrative Agent’s discretion with respect to
the determination of the salability, at retail, of the Eligible Inventory or
which reflect such other factors as affect the market value of the Eligible
Inventory. Without limiting the generality of the foregoing, Inventory Reserves
may, in the Administrative Agent’s discretion, include (but are not limited to)
reserves based on: 

	
  

 	
  

 
	
  

 	
           (a)
 Obsolescence;

 
	
  

 	
  

 
	
  

 	
           (b)
 Seasonality;

 
	
  

 	
  

 
	
  

 	
           (c)
 Shrink;

 
	
  

 	
  

 
	
  

 	
           (d)
 Imbalance; 

 
	
  

 	
  

 
	
  

 	
           (e)
 Change in Inventory character;

 
	
  

 	
  

 
	
  

 	
           (f)
 Change in Inventory composition;

 
	
  

 	
  

 
	
  

 	
           (g)
 Change in Inventory mix; 

 
	
  

 	
  

 
	
  

 	
           (h)
 Mark-downs (both permanent and point of sale); 

 
	
  

 	
  

 
	
  

 	
           (i)
 Retail mark-ons and mark-ups inconsistent with prior period practice and
 performance, industry standards, current business plans or advertising
 calendar and planned advertising events; and 

 
	
  

 	
  

 
	
  

 	
           (j)
 Out-of-date and/or expired Inventory.

 

          “Investment”
means, as to any Person, any direct or indirect acquisition or investment by
such Person, whether by means of (a) the purchase or other acquisition of
Equity Interests of another Person, (b) a loan, advance or capital contribution
to, Guarantee or assumption of debt of, or purchase or other acquisition of any
other debt or interest in, another Person, or (c) any Acquisition, or (d) any
other 

-23-

investment of
money or capital in order to obtain a profitable return. For purposes of
covenant compliance, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment. 

          “IRS”
means the United States Internal Revenue Service. 

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

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

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

          “Landlord
Lien State” means such state(s) in which a landlord’s claim for rent may have
priority over the lien of the Collateral Agent in any of the Collateral. 

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

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

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

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

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

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

-24-

          “Lease”
means any agreement, whether written or oral, no matter how styled or
structured, pursuant to which a Loan Party is entitled to the use or occupancy
of any real property not owned by it for any period of time. 

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

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

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

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

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

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

          “Letter
of Credit Sublimit” means an amount equal to $10,000,000. The Letter of Credit
Sublimit is part of, and not in addition to, the Aggregate Commitments. A
permanent reduction of the Aggregate Commitments shall not require a
corresponding pro rata reduction in the Letter of Credit Sublimit; provided,
however, that if the Aggregate Commitments are reduced to an amount less than
the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be
reduced to an amount equal to (or, at Lead Borrower’s option, less than) the
Aggregate Commitments. 

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

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

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

          “Lien”
means (a) any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement in
the nature of a security interest of any kind or nature whatsoever (including
any conditional sale, Capital Lease Obligation, Synthetic Lease Obligation, or
other title 

-25-

retention
agreement, any easement, right of way or other encumbrance on title to real
property, and any financing lease having substantially the same economic effect
as any of the foregoing) and (b) in the case of securities, any purchase
option, call or similar right of a third party with respect to such securities.

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

          “Loan
Account” has the meaning assigned to such term in Section 2.11(a). 

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

          “Loan
Documents” means this Agreement, each Note, each Issuer Document, the Fee
Letter, all Borrowing Base Certificates, the Blocked Account Agreements, the
Credit Card Notifications, the Security Documents, the Facility Guaranty, and
any other instrument or agreement now or hereafter executed and delivered in
connection herewith, or in connection with any transaction arising out of any
Cash Management Services and Bank Products provided by any Lender or any of its
Affiliates, each as amended and in effect from time to time. 

          “Loan
Parties” means, collectively, each Borrower and each Guarantor. 

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

          “Material
Contract” means, with respect to any Person, each contract to which such Person
is a party material to the business, condition (financial or otherwise),
operations, performance or properties of such Person. 

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

          “Maturity
Date” means August 27, 2012. 

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

-26-

          “Measurement
Period” means, at any date of determination, the most recently completed twelve
(12) Fiscal Months of the Lead Borrower. 

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

          “Mortgages”
means each and every fee mortgage or deed of trust, security agreement and
assignment by and between the Loan Party owning the Real Estate encumbered
thereby in favor of the Collateral Agent. 

          “Mortgage
Policy” has the meaning specified in the definition of Real Estate Eligibility
Requirements. 

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

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

          (b)
with respect to the sale or issuance of any Equity Interest by any Loan Party
or any of its Subsidiaries, or the incurrence or issuance of any Indebtedness
by any Loan Party or any of its Subsidiaries, the excess of (i) the sum of the
cash and cash equivalents received in connection with such transaction over
(ii) the underwriting fees, discounts and commissions, legal fees and expenses
and other reasonable and customary out-of-pocket expenses, incurred by such
Loan Party or such Subsidiary in connection therewith. 

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

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

          “Note”
means a promissory note made by the Borrower in favor of a Lender evidencing
Committed Loans made by such Lender, substantially in the form of Exhibit B, as
each may be amended, supplemented or modified from time to time. 

          “NPL”
means the National Priorities List under CERCLA. 

          “Obligations”
means (a) all advances to, and debts (including principal, interest, fees,
costs, and expenses), liabilities, obligations, covenants, indemnities, and
duties of, any Loan Party arising under any Loan Document or otherwise with
respect to any Committed Loan or Letter of Credit (including payments in
respect of reimbursement of disbursements, interest thereon and obligations to
provide cash collateral therefor), whether direct or indirect (including those
acquired by assumption), absolute or 

-27-

contingent,
due or to become due, now existing or hereafter arising and including interest,
fees, costs, expenses and indemnities that accrue after the commencement by or
against any Loan Party or any Affiliate thereof of any proceeding under any
Debtor Relief Laws naming such Person as the debtor in such proceeding,
regardless of whether such interest, fees, costs, expenses and indemnities are
allowed claims in such proceeding, and (b) any Other Liabilities. 

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

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

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

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

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

          “Participant”
has the meaning specified in Section 10.06(d). 

          “Payment
Conditions” means, at the time of determination with respect to any specified
transaction or payment, that (a) no Default or Event of Default then exists or
would arise as a result of entering into such transaction or the making such
payment, and (b) after giving effect to such transaction or payment, the Pro
Forma Availability Condition has been satisfied and the Consolidated Fixed
Charge Coverage Ratio, on a pro-forma basis for the twelve months preceding
such transaction or payment, will be equal to or greater than 1.2:1.0. Prior to
undertaking any transaction or payment which is subject to the Payment
Conditions, the Loan Parties shall deliver to the Administrative Agent evidence
of satisfaction of the conditions contained in clause (b) above on a basis
(including, without limitation, giving due consideration to results for prior
periods) reasonably satisfactory to the Administrative Agent. 

          “PBGC”
means the Pension Benefit Guaranty Corporation. 

-28-

          “PCAOB”
means the Public Company Accounting Oversight Board. 

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

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (b)
 Such Acquisition shall have been approved by the Board of Directors of the
 Person (or similar governing body if such Person is not a corporation) which
 is the subject of such Acquisition and such Person shall neither have
 announced that it will oppose such Acquisition nor commenced any action which
 alleges that such Acquisition shall violate applicable Law; 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (d)
 Either (i) the legal structure of the Acquisition shall be acceptable to the
 Administrative Agent in its discretion, or (ii) the Loan Parties shall have provided
 the Administrative Agent with a solvency opinion from an unaffiliated third
 party valuation firm reasonably satisfactory to the Administrative Agent; 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (h)
 If the Person which is the subject of such Acquisition will be maintained as
 a Subsidiary of a Loan Party, or if the assets acquired in an Acquisition
 will be transferred to a Subsidiary which is not then a Loan Party, such
 Subsidiary shall have been joined as a “Borrower” hereunder or as a Facility
 Guarantor, as the Administrative Agent shall determine, 

-29-

	
 

	
 

	
 

	
and the
 Collateral Agent shall have received a first priority security and/or
 mortgage interest in such Subsidiary’s property of the same nature as
 constitutes Collateral under the Security Documents; and 

	
 

	
 

	
 

	
          (i)
 The Loan Parties shall have satisfied the Payment Conditions.

 “Permitted
 Disposition” means any of the following:

	
 

	
 

	
 

	
          (a)
 dispositions of inventory in the ordinary course of business; 

	
 

	
 

	
 

	
          (b)
 bulk sales or other dispositions of the Inventory of a Loan Party not in the
 ordinary course of business in connection with Store closings, at arm’s
 length, provided, that such Store closures and related Inventory
 dispositions shall not exceed (i) in any Fiscal Year of the Lead Borrower and
 its Subsidiaries, ten percent (10%) of the number of the Loan Parties’ Stores
 as of the beginning of such Fiscal Year (net of new Store openings) and (ii)
 in the aggregate from and after the Closing Date, twenty-five percent (25%)
 of the number of the Loan Parties’ Stores in existence as of the Closing Date
 (net of new Store openings), provided, that all sales of Inventory in
 connection with Store closings (in a single or series of related
 transactions) shall be in accordance with liquidation agreements and with
 professional liquidators reasonably acceptable to the Agents; provided,
 further that all Net Proceeds received in connection therewith are
 applied to the Obligations if then required in accordance with Section
 2.05 hereof; 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (e)
 dispositions of Equipment in the ordinary course of business that is
 substantially worn, damaged, obsolete or, in the judgment of a Loan Party, no
 longer useful or necessary in its business or that of any Subsidiary and is
 replaced with similar property having at least equivalent utility; 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (h)
 as long as no Default then exists or would arise therefrom, sales of Real
 Estate of any Loan Party (or sales of any Person or Persons created to hold
 such Real Estate or the equity interests in such Person or Persons),
 including sale-leaseback transactions involving any such Real Estate pursuant
 to leases on market terms, as long as, (A) such sale is made for fair market
 value, (B) with respect to any Eligible Real Estate, the Net Proceeds paid in
 cash are in an amount at least equal to the greater of the amounts advanced
 or available to be advanced against such Eligible Real Estate under the
 Borrowing Base, (C) the Net Proceeds of such sale are utilized to repay the
 Obligations, and (D) in the case of any sale-leaseback transaction permitted
 hereunder, the Agents shall have received from such each purchaser or transferee
 a Collateral Access Agreement on terms and conditions reasonably satisfactory
 to the Agents. 

-30-

	
 

	
 

	
 

	
 “Permitted Encumbrances” means: 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (g)
 Liens existing on the date hereof and listed on Schedule 7.01 and any
 renewals or extensions thereof, provided that (i) the property covered
 thereby is not changed, (ii) the amount secured or benefited thereby is not
 increased, (iii) the direct or any contingent obligor with respect thereto is
 not changed, and (iv) any renewal or extension of the obligations secured or
 benefited thereby is otherwise permitted hereunder); 

	
 

	
 

	
 

	
          (h)
 Liens on fixed or capital assets acquired by any Loan Party which are
 permitted under clause (c) of the definition of Permitted Indebtedness so
 long as (i) such Liens and the Indebtedness secured thereby are incurred
 prior to or within ninety (90) days after such acquisition, (ii) the
 Indebtedness secured thereby does not exceed the cost of acquisition of such
 fixed or capital assets and (iii) such Liens shall not extend to any other
 property or assets of the Loan Parties; 

	
 

	
 

	
 

	
          (i)
 Liens in favor of the Collateral Agent; 

	
 

	
 

	
 

	
          (j)
 Landlords’ and lessors’ Liens in respect of rent not in default; 

	
 

	
 

	
 

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

-31-

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (p)
 encumbrances referred to in Schedule B of the Mortgage Policies insuring the
 Mortgages. 

          “Permitted Indebtedness” means each of the
following as long as no Default or Event of Default exists or would arise from
the incurrence thereof: 

	
 

	
 

	
 

	
          (a)
 Indebtedness outstanding on the date hereof and listed on Schedule 7.03
 and any refinancings, refundings, renewals or extensions thereof; provided
 that (i) the amount of such Indebtedness is not increased at the time of such
 refinancing, refunding, renewal or extension except by an amount equal to a
 reasonable premium or other reasonable amount paid, and fees and expenses
 reasonably incurred, in connection with such refinancing and by an amount
 equal to any existing commitments unutilized thereunder, and the direct or
 contingent obligor with respect thereto is not changed as a result of or in
 connection with such refinancing, refunding, renewal or extension, (ii) the
 result of such extension, renewal or replacement shall not be an earlier
 maturity date or decreased weighted average life of such Indebtedness, and
 (iii) the terms relating to principal amount, amortization, maturity,
 collateral (if any), subordination (if any), and other material terms taken
 as a whole, of any such refinancing, refunding, renewing or extending
 Indebtedness, and of any agreement entered into and of any instrument issued
 in connection therewith, are no less favorable in any material respect to the
 Loan Parties or the Lenders than the terms of any agreement or instrument
 governing the Indebtedness being refinanced, refunded, renewed or extended
 and the interest rate applicable to any such refinancing, refunding, renewing
 or extending Indebtedness does not exceed the then applicable market interest
 rate; 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (c)
 Without duplication of Indebtedness described in clause (f) of this
 definition, purchase money Indebtedness of any Loan Party to finance the
 acquisition of any fixed or capital assets, including Capital Lease
 Obligations and Synthetic Lease Obligations, and any 

-32-

	
 

	
 

	
 

	
Indebtedness
 assumed in connection with the acquisition of any such assets or secured by a
 Lien on any such assets prior to the acquisition thereof, and extensions,
 renewals and replacements of any such Indebtedness that do not increase the
 outstanding principal amount thereof or result in an earlier maturity date or
 decreased weighted average life thereof provided that the terms relating to
 principal amount, amortization, maturity, collateral (if any), subordination
 (if any), and other material terms taken as a whole, of any such refinancing,
 refunding, renewing or extending Indebtedness, and of any agreement entered
 into and of any instrument issued in connection therewith, are no less
 favorable in any material respect to the Loan Parties or the Lenders than the
 terms of any agreement or instrument governing the Indebtedness being
 refinanced, refunded, renewed or extended and the interest rate applicable to
 any such refinancing, refunding, renewing or extending Indebtedness does not exceed
 the then applicable market interest rate, provided, however, that the
 aggregate principal amount of Indebtedness permitted by this clause (b) shall
 not exceed $5,000,000 at any time outstanding and further provided
 that, if requested by the Collateral Agent, the Loan Parties shall cause the
 holders of such Indebtedness to enter into an agreement with respect to the
 use of such fixed or capital assets in connection with the realization on any
 Collateral by the Collateral Agent, on terms reasonably satisfactory to the
 Collateral Agent; 

	
 

	
 

	
 

	
          (d)
 obligations (contingent or otherwise) of any Loan Party or any Subsidiary
 thereof existing or arising under any Swap Contract, provided that
 such obligations are (or were) entered into by such Person in the ordinary
 course of business for the purpose of directly mitigating risks associated
 with fluctuations in interest rates or foreign exchange rates, and not for
 purposes of speculation or taking a “market view;” 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (f)
 Indebtedness incurred for the construction or acquisition or improvement of,
 or to finance or to refinance, any Real Estate owned or to be acquired by any
 Loan Party (including therein any Indebtedness incurred in connection with
 sale-leaseback transactions permitted hereunder), provided that, (A)
 with respect to any Eligible Real Estate, the Net Proceeds paid in cash are
 in an amount at least equal to the greater of the amounts advanced or
 available to be advanced against such Eligible Real Estate under the
 Borrowing Base and (B) all Net Proceeds received in connection with any such
 Indebtedness are applied to the Obligations, and (C) in the case of a
 sale-leaseback transaction, the Loan Parties shall cause the holders of such
 Indebtedness to enter into a Collateral Access Agreement on terms reasonably
 satisfactory to the Collateral Agent; 

	
 

	
 

	
 

	
          (g)
 Indebtedness with respect to the deferred purchase price for any Permitted
 Acquisition, provided that such Indebtedness does not require the
 payment in cash of principal (other than in respect of working capital
 adjustments) prior to the Maturity Date, has a maturity which extends beyond
 the Maturity Date, and is subordinated to the Obligations on terms reasonably
 acceptable to the Agents; 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (i)
 Indebtedness of the Lead Borrower consisting of Guarantees executed by the
 Lead Borrower in favor of (i) suppliers of Inventory to SYL, LLC in support
 of trade credit 

-33-

	
 

	
 

	
 

	
extended to
 SYL, LLC relating to such Inventory and/or (ii) factors extending credit to suppliers
 of Inventory to SYL, LLC in order to induce such factors to permit such
 suppliers to extend trade credit to SYL, LLC and/or to accept assignments
 from such suppliers of accounts receivable with respect to which SYL, LLC is
 the account debtor; and 

	
 

	
 

	
 

	
          (j)
 The Obligations. 

          “Permitted
Investments” means each of the following as long as no Default or Event of
Default would arise from the making of such Investment: 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (c)
 time deposits with, or insured certificates of deposit or bankers’
 acceptances of, any commercial bank that (i) (A) is a Lender or (B) is
 organized under the laws of the United States of America, any state thereof
 or the District of Columbia or is the principal banking subsidiary of a bank
 holding company organized under the laws of the United States of America, any
 state thereof or the District of Columbia, and is a member of the Federal
 Reserve System, (ii) issues (or the parent of which issues) commercial paper
 rated as described in clause (b) of this definition and (iii) has combined
 capital and surplus of at least $1,000,000,000, in each case with maturities
 of not more than 180 days from the date of acquisition thereof; 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (f)
 Investments existing on the Closing Date, and set forth on Schedule 7.02,
 but not any increase in the amount thereof or any other modification of the
 terms thereof; 

	
 

	
 

	
 

	
          (g)
 (i) Investments by any Loan Party and its Subsidiaries in their respective
 Subsidiaries outstanding on the date hereof, (ii) additional Investments by
 any Loan Party and its Subsidiaries in Loan Parties, and (iii) additional
 Investments by Subsidiaries of the Loan Parties that are not Loan Parties in
 other Subsidiaries that are not Loan Parties; 

-34-

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (i)
 Guarantees constituting Permitted Indebtedness; 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (l)
 advances to officers, directors and employees of the Loan Parties and
 Subsidiaries in the ordinary course of business in an amount not to exceed
 $5,000 to any individual at any time or in an aggregate amount not to exceed
 $50,000 at any time outstanding, for travel, entertainment, relocation and
 analogous ordinary business purposes; 

	
 

	
 

	
 

	
          (m)
 Investments constituting Permitted Acquisitions; and 

	
 

	
 

	
 

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

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

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (d)
 Together with all other Permitted Overadvances then outstanding, shall not
 (i) exceed five percent (5%) of the Borrowing Base at any time or (ii) unless
 a Liquidation is occurring, remain outstanding for more than forty-five (45)
 consecutive Business Days, unless in each case, the Required Lenders
 otherwise agree.

provided however, that the foregoing
shall not (i) modify or abrogate any of the provisions of Section 2.03
regarding the Lenders’ obligations with respect to Letters of Credit, or (ii)
result in any claim or liability against the Administrative Agent (regardless
of the amount of any Overadvance) for “inadvertent Overadvances” (i.e. where an
Overadvance results from changed circumstances beyond the control of the
Administrative Agent (such as a reduction in the collateral value)), and such
“inadvertent Overadvances” 

-35-

shall not
reduce the amount of Permitted Overadvances allowed hereunder, and further
provided that in no event shall the Administrative Agent make an
Overadvance, if after giving effect thereto, the principal amount of the Credit
Extensions would exceed the Aggregate Commitments (as in effect prior to any
termination of the Commitments pursuant to Section 2.06 hereof). 

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

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

	
 

	
 

	
 

	
“Platform”
 has the meaning specified in Section 6.02. 

	
 

	
 

	
 

	
“Prepayment
 Event” means: 

	
 

	
 

	
 

	
          (a)
 Any Disposition (including pursuant to a sale and leaseback transaction) of
 any property or asset of a Loan Party; 

	
 

	
 

	
 

	
          (b)
 Any casualty or other insured damage to, or any taking under power of eminent
 domain or by condemnation or similar proceeding of, any property or asset of
 a Loan Party, unless the proceeds therefrom are required to be paid to the
 holder of a Lien on such property or asset having priority over the Lien of
 the Collateral Agent; 

	
 

	
 

	
 

	
          (c)
 The issuance by a Loan Party of any Equity Interests, other than any such
 issuance of Equity Interests (i) to a Loan Party, (ii) as consideration for a
 Permitted Acquisition or (iii) as a compensatory issuance to any employee,
 director, or consultant (including under any option plan); 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (e)
 The receipt by any Loan Party of any Extraordinary Receipts. 

          “Pro
Forma Availability Condition” shall mean, for any date of calculation with
respect to any transaction or payment, the Pro Forma Excess Availability
following, and after giving effect to, such transaction or payment, will be
equal to or greater than thirty percent (30%) of the Loan Cap. 

          
“Pro Forma Excess Availability” shall mean, for any date of calculation, after
giving pro forma effect to the transaction then to be consummated, the
projected Average Daily Availability for each Fiscal Month during the
subsequent projected twelve (12) Fiscal Months. 

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

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

          “Real
Estate Advance Rate” means the following percentages during each of the
following three- month periods: 

-36-

	
 

	
 

	
 

	
Period

	
 

	
Real Estate
 Advance Rate

	
 
	
 
	
 

	
Closing Date through November 9, 2009

	
 

	
50%

	
 

	
 

	
 

	
 
	
 
	
 

	
November 10, 2009 through February 9, 2010

	
 

	
45%

	
 

	
 

	
 

	
 
	
 
	
 

	
February 10, 2010 through May 9, 2010

	
 

	
40%

	
 

	
 

	
 

	
 
	
 
	
 

	
May 10, 2010 through August 9, 2010

	
 

	
35%

	
 

	
 

	
 

	
 
	
 
	
 

	
August 10, 2010 through November 9, 2010

	
 

	
30%

	
 

	
 

	
 

	
 
	
 
	
 

	
November 10, 2010 through February 9, 2011

	
 

	
25%

	
 

	
 

	
 

	
 
	
 
	
 

	
February 10, 2011 through May 9, 2011

	
 

	
20%

	
 

	
 

	
 

	
 
	
 
	
 

	
May 10, 2011 through August 9, 2011

	
 

	
15%

	
 

	
 

	
 

	
 
	
 
	
 

	
August 10, 2011 through November 9, 2011

	
 

	
10%

	
 

	
 

	
 

	
 
	
 
	
 

	
November 10, 2011 through February 9, 2012

	
 

	
5%

	
 

	
 

	
 

	
 
	
 
	
 

	
Thereafter

	
 

	
0%

          “Real
Estate Cap” means, at any time of calculation, twenty-five percent (25%) of the
Loan Cap after giving effect to any advances made based on the amounts
available to be borrowed under clause (e) of the Borrowing Base. 

          “Real
Estate Eligibility Requirements: means collectively, each of the following: 

	
 

	
 

	
 

	
          (a)
 The applicable Loan Party has executed and delivered to the Collateral Agent
 a Mortgage with respect to any Real Estate intended, by such Loan Party, to
 be included in Eligible Real Estate; 

	
 

	
 

	
 

	
          (b)
 Such Real Estate is used by a Loan Party for offices or as a store or
 distribution center; 

	
 

	
 

	
 

	
          (c)
 As to any particular property, the Loan Party is in compliance in all
 material respects with the representations, warranties and covenants set
 forth in the Mortgage relating to such Real Estate; 

-37-

	
 

	
 

	
 

	
          (d)
 The Collateral Agent shall have received fully paid American Land Title
 Association Lender’s Extended Coverage title insurance policies or marked-up
 title insurance commitments having the effect of a policy of title insurance)
 (the “Mortgage Policies”) in form and substance, with the endorsements
 reasonably required by the Agents (to the extent available at commercially
 reasonable rates) and in amounts reasonably acceptable to the Collateral
 Agent (provided that such amounts shall not exceed the Appraised Value of the
 applicable Mortgaged Property), issued, coinsured and reinsured (to the
 extent required by the Collateral Agent) by title insurers reasonably
 acceptable to the Collateral Agent, insuring the Mortgages to be valid first
 and subsisting Liens on the property or leasehold interests described
 therein, free and clear of all defects (including, but not limited to,
 mechanics’ and materialmen’s Liens) and encumbrances, excepting only those
 Liens permitted by Section 7.01 having priority over the Lien of the
 Collateral Agent under Law or otherwise reasonably acceptable to the
 Collateral Agent; 

	
 

	
 

	
 

	
          (e)
 With respect to any Real Estate intended by any Borrower or other Loan Party
 to be included in Eligible Real Estate, the Collateral Agent shall have
 received (i) a Phase I Environmental Site Assessment in accordance with ASTM
 Standard E1527-05, in form and substance reasonably satisfactory to the
 Collateral Agent, from an environmental consulting firm reasonably acceptable
 to the Collateral Agent, which report shall identify recognized environmental
 conditions and shall to the extent possible quantify any related costs and
 liabilities, associated with such conditions and the Collateral Agent shall
 be satisfied with the nature and amount of any such matters, and (ii) if
 required by the Collateral Agent, further environmental assessments or
 reports to the extent such further assessments or reports are recommended in
 the Phase I Environmental Site Assessment; 

	
 

	
 

	
 

	
          (f)
 With respect to Real Estate located in an area identified by the Secretary of
 Housing and Urban Development as an area having special flood hazards, the
 applicable Loan Party shall have delivered to the Collateral Agent evidence
 of flood insurance naming the Collateral Agent as mortgagee as required by
 the National Flood Insurance Program as set forth in the Flood Disaster
 Protection Act of 1973, as amended and in effect, which shall be reasonably
 satisfactory in form and substance to the Collateral Agent; and 

	
 

	
 

	
 

	
          (g)
 The applicable Loan Party shall have delivered such other information and
 documents as may be reasonably requested by the Agents, including, without
 limitation, such as may be necessary to comply with FIRREA. 

          “Realty
Reserves” means such reserves as the Administrative Agent from time to time
determines in the Administrative Agent’s discretion as being appropriate to
reflect the impediments to the Agents’ ability to realize upon any Eligible
Real Estate. Without limiting the generality of the foregoing, Realty Reserves
may include (but are not limited to) (i) Environmental Compliance Reserves,
(ii) reserves for (A) municipal taxes and assessments, (B) repairs and (C)
remediation of title defects, and (iii) reserves for Indebtedness secured by
Liens having priority over the Lien of the Collateral Agent. 

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

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

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

-38-

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

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

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

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

          “Required
Supermajority Lenders” means, as of any date of determination, Lenders
holding more than 66 2/3% of the Aggregate Commitments or, if the commitment of
each Lender to make Loans and the obligation of the L/C Issuer to make L/C
Credit Extensions have been terminated pursuant to Section 8.02, Lenders
holding in the aggregate more than 66 2/3% of the Total Outstandings (with the
aggregate amount of each Lender’s risk participation and funded participation
in L/C Obligations being deemed “held” by such Lender for purposes of this
definition); provided that the Commitment of, and the portion of the
Total Outstandings held or deemed held by, any Defaulting Lender and any
Deteriorating Lender shall be excluded for purposes of making a determination
of Required Supermajority Lenders. 

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

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

          “Restricted
Payment” means any dividend or other distribution (whether in cash, securities
or other property) with respect to any capital stock or other Equity Interest
of any Person, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, defeasance, acquisition, cancellation or termination of
any such capital stock or other Equity Interest, or on account of any return of
capital to such Person’s stockholders, partners or members (or the equivalent
of any thereof), or any option, warrant or other right to acquire any such
dividend or other distribution or payment. Without limiting the foregoing,
“Restricted Payments” with respect to any Person shall also include all
payments made by such Person with any proceeds of a dissolution or liquidation
of such Person. 

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

          “Sarbanes-Oxley”
means the Sarbanes-Oxley Act of 2002. 

-39-

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

          “Securities
Laws” means the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, Sarbanes-Oxley, and the applicable accounting and auditing
principles, rules, standards and practices promulgated, approved or
incorporated by the SEC or the PCAOB, all as in effect from time to time. 

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

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

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

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

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

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

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

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

          “Statutory
Reserve Rate” means a fraction (expressed as a decimal), the numerator of which
is the number one and the denominator of which is the number one minus the
aggregate of the maximum 

-40-

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

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

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

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

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

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

          “Synthetic
Lease Obligation” means the monetary obligations of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property (including sale and leaseback
transactions), in each case, creating obligations that do not appear on the
balance sheet of such Person but which, upon the application of any Debtor
Relief Laws to such 

-41-

Person, would
be characterized as the indebtedness of such Person (without regard to
accounting treatment). 

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

          “Termination
Date” means the earliest to occur of (i) the Maturity Date, (ii) the date on
which the maturity of the Obligations is accelerated (or deemed accelerated)
and the Commitments are irrevocably terminated (or deemed terminated) in
accordance with Article VIII, and (iii) the termination of the Commitments in
accordance with the provisions of Section 2.06 hereof. 

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

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

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

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

          “UFCA”
has the meaning specified in Section 10.22(d). 

          “UFTA”
has the meaning specified in Section 10.22(d). 

          “Unfunded
Pension Liability” means the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan’s assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year. 

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

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

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

	
 

	
 

	
 

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

-42-

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (c)
 Section headings herein and in the other Loan Documents are included for
 convenience of reference only and shall not affect the interpretation of this
 Agreement or any other Loan Document. 

	
 

	
 

	
 

	
1.03 Accounting Terms 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
          1.04 Rounding. Any financial
ratios
 required to be maintained by the Borrowers pursuant to this Agreement shall
 be calculated by dividing the appropriate component by the other component,
 carrying the result to one place more than the number of places by which such
 ratio is expressed herein 

-43-

and rounding
the result up or down to the nearest number (with a rounding-up if there is no
nearest number). 

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

          1.06 Letter of Credit Amounts.
Unless
otherwise specified, all references herein to the amount of a Letter of Credit
at any time shall be deemed to be the Stated Amount of such Letter of Credit in
effect at such time; provided, however, that with respect to any Letter of
Credit that, by its terms of any Issuer Documents related thereto, provides for
one or more automatic increases in the Stated Amount thereof, the amount of
such Letter of Credit shall be deemed to be the maximum Stated Amount of such
Letter of Credit after giving effect to all such increases, whether or not such
maximum Stated Amount is in effect at such time. With respect to the
computation of the Letter of Credit Fee pursuant to Sections 2.03(i) and (j),
the Stated Amount for any day shall be determined based on the average amount
of all Letters of Credit for such day. 

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	

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

	
 

	
 

	
 

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

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

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

	
 

	
 

	
 

	
                    (i)
 Shrink (an Inventory Reserve): An amount equal to one-half of one percent
 (0.50%) of the Inventory of SYL, LLC; 

	
 

	
 

	
 

	
                    (ii)
 Damages/Return to Vendor (an Inventory Reserve): An amount equal to one
 percent (1.0%) of the Inventory of the Borrowers; 

-44-

	
 

	
 

	
 

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

	
 

	
 

	
 

	
                    (iv)
 Customer Credit Liabilities (an Availability Reserve): An amount equal to
 fifty percent (50%) of the Customer Credit Liabilities as reflected in the
 Borrowers’ books and records; 

	
 

	
 

	
 

	
                    (v)
 Rent (an Availability Reserve): An amount equal to two (2) months’ rent for
 all of the Borrowers’ leased locations in each Landlord Lien State (which, as
 of the Closing Date consists solely of the Syms Corp location in Falls
 Church, Virginia), other than leased locations with respect to which the
 Collateral Agent has received a Collateral Access Agreement in form
 reasonably satisfactory to the Collateral Agent; and 

	
 

	
 

	
 

	
                    (vi)
 Taxes (an Availability Reserve): An amount equal to the ad valorem taxes then
 due and owing by the Borrowers to any Texas taxing authority. 

                    (c)
The Administrative Agent shall have the right, at any time and from time to
time after the Closing Date in its discretion to establish, modify or eliminate
Reserves and shall provide the Lead Borrower with notice of same. 

          2.02
Committed Borrowings, Conversions and Continuations of Committed Loans.

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

                    (b)
Each Committed Borrowing, each Conversion of Committed Loans from one Type to
the other, and each continuation of LIBO Rate Loans shall be made upon the Lead
Borrower’s irrevocable notice to the Administrative Agent, which may be given
by telephone. Each such notice must be received by the Administrative Agent not
later than 11:00 a.m. (i) three Business Days prior to the requested date of
any Committed Borrowing of, Conversion to or continuation of LIBO Rate Loans,
and (ii) on the Business Day of the requested date of any Committed Borrowing
of Base Rate Loans. Each telephonic notice by the Lead Borrower pursuant to
this Section 2.02(b) must be confirmed promptly by delivery to the
Administrative Agent of a written Committed Loan Notice, appropriately
completed and signed by a Responsible Officer of the Lead Borrower. Each
Committed Borrowing of, Conversion to or continuation of LIBO Rate Loans shall
be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in
excess thereof. Except as provided in Section 2.03(c), each Committed
Borrowing of or Conversion to Base Rate Loans shall be in a principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan
Notice (whether telephonic or written) shall specify (i) whether the Lead
Borrower is requesting a Committed Borrowing, a Conversion of Committed Loans
from one Type to the other, or a continuation of LIBO Rate Loans, (ii) the
requested date of the Committed Borrowing, Conversion or continuation, as the
case may be (which shall be a Business Day), (iii) the principal amount of
Committed Loans to be borrowed, Converted or continued, (iv) the Type of
Committed Loans to be borrowed or to which existing Committed Loans are to be
Converted, and (v) if applicable, the duration of the Interest Period with
respect thereto. If the Lead Borrower fails to specify a Type of Committed Loan
in a Committed Loan Notice or if the Lead Borrower fails to give a timely
notice requesting a Conversion or continuation, then the applicable Committed
Loans shall be made as, or Converted to, Base Rate Loans. Any such automatic
Conversion to Base Rate Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable LIBO Rate Loans.
If the 

-45-

Lead Borrower
requests a Committed Borrowing of, Conversion to, or continuation of LIBO Rate
Loans in any such Committed Loan Notice, but fails to specify an Interest
Period, it will be deemed to have specified an Interest Period of one month. 

                    (c)
Following receipt of a Committed Loan Notice, the Administrative Agent shall
promptly notify each Lender of the amount of its Applicable Percentage of the
applicable Committed Loans, and if no timely notice of a Conversion or
continuation is provided by the Lead Borrower, the Administrative Agent shall
notify each Lender of the details of any automatic Conversion to Base Rate
Loans described in Section 2.02(b). In the case of a Committed
Borrowing, each Lender shall make the amount of its Committed Loan available to
the Administrative Agent in immediately available funds at the Administrative
Agent’s Office not later than 1:00 p.m. on the Business Day specified in the
applicable Committed Loan Notice. Upon satisfaction of the applicable
conditions set forth in Section 4.02 (and, if such Committed Borrowing
is the initial Credit Extension, Section 4.01), the Administrative Agent
shall use reasonable efforts to make all funds so received available to the
Borrowers in like funds by no later than 4:00 p.m. on the day of receipt by the
Administrative Agent either by (i) crediting the account of the Lead Borrower
on the books of Bank of America with the amount of such funds or (ii) wire
transfer of such funds, in each case in accordance with instructions provided
to (and reasonably acceptable to) the Administrative Agent by the Lead
Borrower; provided, however, that if, on the date the Committed
Loan Notice with respect to such Committed Borrowing is given by the Lead
Borrower, there are L/C Borrowings outstanding, then the proceeds of such
Committed Borrowing, first, shall be applied to the payment in full of
any such L/C Borrowings, and second, shall be made available to the
Borrowers as provided above. 

                    (d)
The Administrative Agent, without the request of the Lead Borrower, may advance
any interest, fee, service charge, expenses, or other payment then due and
payable and to which any Credit Party is entitled from the Loan Parties
pursuant hereto or any other Loan Document and may charge the same to the Loan
Account notwithstanding that an Overadvance may result thereby. The
Administrative Agent shall advise the Lead Borrower of any such advance or
charge promptly after the making thereof. Such action on the part of the
Administrative Agent shall not constitute a waiver of the Administrative
Agent’s rights and the Borrowers’ obligations under Section 2.05(b). Any
amount which is added to the principal balance of the Loan Account as provided
in this Section 2.02(d) shall bear interest at the interest rate then
and thereafter applicable to Base Rate Loans. 

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

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

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

                    (h)
The Administrative Agent, the Lenders, and the L/C Issuer shall have no
obligation to make any Committed Loan or to provide any Letter of Credit if an
Overadvance would result. The Administrative Agent may, in its discretion, make
Permitted Overadvances without the 

-46-

consent of the
Lenders and the L/C Issuer and each Lender shall be bound thereby. A Permitted
Overadvance is for the account of the Borrowers and shall constitute a Base
Rate Loan and an Obligation and shall be repaid by the Borrowers in accordance
with the provisions of Section 2.05(b). The making of any such Permitted
Overadvance on any one occasion shall not obligate the Administrative Agent or
any Lender to make or permit any Permitted Overadvance on any other occasion or
to permit such Permitted Overadvances to remain outstanding. The making by the
Administrative Agent of a Permitted Overadvance shall not modify or abrogate
any of the provisions of Section 2.03 regarding the Lenders’ obligations
to purchase participations with respect to Letter of Credits. The
Administrative Agent shall have no liability for, and no Loan Party or Credit
Party shall have the right to, or shall, bring any claim of any kind whatsoever
against the Administrative Agent with respect to “inadvertent Overadvances”
(i.e. where an Overadvance results from changed circumstances beyond the
control of the Administrative Agent (such as a reduction in the collateral
value)) regardless of the amount of any such Overadvance(s). 

          2.03 Letters of
Credit.

                    (a)
The Letter of Credit Commitment. 

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

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
                              (C)
 the expiry date of such requested Letter of Credit would occur after the
 Letter of Credit Expiration Date, unless either such Letter of Credit is Cash
 Collateralized on or prior to the date of issuance of such Letter of Credit
 (or such later date as the L/C Issuer and the Administrative Agent may agree)
 or all the Lenders have approved such expiry date. 

-47-

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

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

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

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

                              (i)
Each Letter of Credit shall be issued or amended, as the case may be, upon the
request of the Lead Borrower delivered to the L/C Issuer (with a copy to the
Administrative Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Responsible Officer of the Lead
Borrower. Such Letter of Credit Application must be received by the L/C Issuer
and the Administrative Agent not later than 11:00 a.m. at least two Business
Days (or such other date and time as the Administrative Agent and the L/C
Issuer may agree in a particular instance in their sole discretion) prior to
the proposed issuance date or date of amendment, as the case may be. In the 

-48-

case of a
request for an initial issuance of a Letter of Credit, such Letter of Credit
Application shall specify in form and detail satisfactory to the L/C Issuer:
(A) the proposed issuance date of the requested Letter of Credit (which shall
be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D)
the name and address of the beneficiary thereof; (E) the documents to be
presented by such beneficiary in case of any drawing thereunder; (F) the full
text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; and (G) such other matters as the L/C Issuer may require.
In the case of a request for an amendment of any outstanding Letter of Credit,
such Letter of Credit Application shall specify in form and detail satisfactory
to the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date
of amendment thereof (which shall be a Business Day); (C) the nature of the
proposed amendment; and (D) such other matters as the L/C Issuer may require.
Additionally, the Lead Borrower shall furnish to the L/C Issuer and the
Administrative Agent such other documents and information pertaining to such
requested Letter of Credit issuance or amendment, including any Issuer
Documents, as the L/C Issuer or the Administrative Agent may require. 

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

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

-49-

Borrower that
one or more of the applicable conditions specified in Section 4.02 is
not then satisfied, and in each such case directing the L/C Issuer not to
permit such extension. 

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

                    (c)
Drawings and Reimbursements; Funding of Participations. 

                              (i)
Upon receipt from the beneficiary of any Letter of Credit of any notice of a
drawing under such Letter of Credit, the L/C Issuer shall notify the Lead
Borrower and the Administrative Agent thereof not less than two (2) Business
Days prior to the Honor Date (as defined below); provided, however,
that any failure to give or delay in giving such notice shall not relieve the
Borrowers of their obligation to reimburse the L/C Issuer and the Lenders with
respect to any such payment. On the date of any payment by the L/C Issuer under
a Letter of Credit (each such date, an “Honor Date”), the Borrowers
shall be deemed to have requested a Committed Borrowing of Base Rate Loans to
be disbursed on the Honor Date in an amount equal to the amount of such
payment, without regard to the minimum and multiples specified in Section
2.02 for the principal amount of Base Rate Loans, but subject to the amount
of the unutilized portion of the Aggregate Commitments and the conditions set
forth in Section 4.02 (other than the delivery of a Committed Loan
Notice). In the event that such Committed Borrowing cannot be made pursuant to
the terms hereof, then not later than 11:00 a.m. on such Honor Date, the
Borrowers shall reimburse the L/C Issuer through the Administrative Agent in an
amount equal to the amount of such drawing. If the Borrowers fail to so
reimburse the L/C Issuer by such time, the Administrative Agent shall promptly
notify each Lender of the Honor Date, the amount of the unreimbursed drawing
(the “Unreimbursed Amount”), and the amount of such Lender’s Applicable
Percentage thereof. Any notice given by the L/C Issuer or the Administrative
Agent pursuant to this Section 2.03(c)(i) may be given by telephone or
electronic means if immediately confirmed in writing; provided that the lack of
such an immediate confirmation shall not affect the conclusiveness or binding
effect of such notice. 

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

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

                              (iv)
Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section
2.03(c) to reimburse the L/C Issuer for any amount drawn under any Letter
of Credit, interest 

-50-

in respect of
such Lender’s Applicable Percentage of such amount shall be solely for the
account of the L/C Issuer. 

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

                              (vi)
If any Lender fails to make available to the Administrative Agent for the
account of the L/C Issuer any amount required to be paid by such Lender
pursuant to the foregoing provisions of this Section 2.03(c) by the time
specified in Section 2.03(c)(ii), the L/C Issuer shall be entitled to
recover from such Lender (acting through the Administrative Agent), on demand,
such amount with interest thereon for the period from the date such payment is
required to the date on which such payment is immediately available to the L/C
Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a
rate determined by the L/C Issuer in accordance with banking industry rules on
interbank compensation plus any administrative, processing or similar fees
customarily charged by the L/C Issuer in connection with the foregoing. If such
Lender pays such amount (with interest and fees as aforesaid), the amount so
paid shall constitute such Lender’s Committed Loan included in the relevant
Committed Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as
the case may be. A certificate of the L/C Issuer submitted to any Lender
(through the Administrative Agent) with respect to any amounts owing under this
clause (vi) shall be conclusive absent manifest error. 

                    (d)
Repayment of Participations. 

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

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

                    (e)
Obligations Absolute. The obligation of the Borrowers to reimburse the
L/C Issuer for each drawing under each Letter of Credit and to repay each L/C
Borrowing shall be absolute, 

-51-

unconditional
and irrevocable, and shall be paid strictly in accordance with the terms of
this Agreement under all circumstances, including the following: 

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

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

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

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

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

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

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

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

-52-

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

                    (g)
Cash Collateral. Upon the request of the Administrative Agent, if, as of
the Letter of Credit Expiration Date, any L/C Obligation for any reason remains
outstanding, the Borrowers shall, in each case, immediately Cash Collateralize
the then Outstanding Amount of all L/C Obligations. Sections 2.05 and 8.02(c)
set forth certain additional requirements to deliver Cash Collateral hereunder.
For purposes of this Section 2.03, Section 2.05 and Section
8.02(c), “Cash Collateralize” means to pledge and deposit with or
deliver to the Administrative Agent, for the benefit of the L/C Issuer and the
Lenders, as collateral for the L/C Obligations, cash or deposit account
balances in an amount equal to 105% of the Outstanding Amount of all L/C
Obligations, pursuant to documentation in form and substance satisfactory to
the Administrative Agent and the L/C Issuer (which documents are hereby
Consented to by the Lenders). Derivatives of such term have corresponding
meanings. The Borrowers hereby grant to the Collateral Agent a security
interest in all such cash, deposit accounts and all balances therein and all
proceeds of the foregoing. Cash Collateral shall be maintained in blocked,
non-interest bearing deposit accounts at Bank of America except that Permitted
Investments of the type listed in clauses (a) through (f) of the definition
thereof may be made at the request of the Lead Borrower at the option and in the
sole discretion of the Collateral Agent (and at the Borrowers’ risk and
expense); interest or profits, if any, on such investments shall accumulate in
such account. If at any time the Administrative Agent determines that any funds
held as Cash Collateral are subject to any right or claim of any Person other
than the Administrative Agent or that the total amount of such funds is less
than the aggregate Outstanding Amount of all L/C Obligations, the Borrowers
will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited as Cash Collateral,
an amount equal to the excess of (x) such aggregate Outstanding Amount over (y)
the total amount of funds, if any, then held as Cash Collateral that the Administrative
Agent determines to be free and clear of any such right and claim. Upon the
drawing of any Letter of Credit for which funds are on deposit as Cash
Collateral, such funds shall be applied to reimburse the L/C Issuer and, to the
extent not so applied, shall thereafter be applied to satisfy other
Obligations. 

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

-53-

                    (i)
Letter of Credit Fees. The Borrowers shall pay to the Administrative
Agent for the account of each Lender in accordance with its Applicable
Percentage a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter
of Credit equal to the Applicable Rate times the daily Stated Amount
under each such Letter of Credit (whether or not such maximum amount is then in
effect under such Letter of Credit). For purposes of computing the daily amount
available to be drawn under any Letter of Credit, the amount of the Letter of
Credit shall be determined in accordance with Section 1.06. Letter of
Credit Fees shall be (i) due and payable on the first Business Day after the
end of each calendar quarter, commencing with the first such date to occur
after the issuance of such Letter of Credit, on the Letter of Credit Expiration
Date and thereafter on demand, and (ii) computed on a quarterly basis in
arrears. If there is any change in the Applicable Rate during any quarter, the
daily amount available to be drawn under of each Letter of Credit shall be
computed and multiplied by the Applicable Rate separately for each period
during such quarter that such Applicable Rate was in effect. Notwithstanding
anything to the contrary contained herein, while any Event of Default exists,
all Letter of Credit Fees shall accrue at the Default Rate as provided in
Section 2.12(b) hereof. 

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

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

          2.04
Intentionally Omitted.

          2.05
Prepayments.

                    (a)
The Borrowers may, upon irrevocable notice from the Lead Borrower to the
Administrative Agent, at any time or from time to time voluntarily prepay
Committed Loans in whole or in part without premium or penalty; provided
that (i) such notice must be received by the Administrative Agent not later
than 11:00 a.m. (A) three Business Days prior to any date of prepayment of LIBO
Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any
prepayment of LIBO Rate Loans shall be in a principal amount of $5,000,000 or a
whole multiple of $1,000,000 in excess thereof; and (iii) any prepayment of
Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple
of $100,000 in excess thereof or, in each case, if less, the entire principal
amount thereof then outstanding. Each such notice shall specify the date and
amount of such prepayment and the Type(s) of Committed Loans to be prepaid and,
if LIBO Rate Loans, the Interest Period(s) of such Committed Loans. The
Administrative Agent will promptly notify each Lender of its receipt of each
such notice, and of the amount of such Lender’s Applicable Percentage of such
prepayment. If such notice is given by the Lead Borrower, the Borrowers shall
make such prepayment and the payment amount specified in such notice shall be
due and payable on the date specified therein. Any prepayment of a LIBO Rate
Loan shall be 

-54-

accompanied by
all accrued interest on the amount prepaid, together with any additional
amounts required pursuant to Section 3.05. Each such prepayment shall be
applied to the Committed Loans of the Lenders in accordance with their
respective Applicable Percentages. 

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

                    (c)
The Borrower shall prepay the Committed Loans and Cash Collateralize the L/C
Obligations in accordance with the provisions of Section 6.13 hereof. 

                    (d)
The Borrowers shall prepay the Loans and Cash Collateralize the L/C Obligations
in an amount equal to the Net Proceeds received by a Loan Party on account of
any Permitted Disposition arising under clause (b) of the definition thereof in
excess of the sale of five percent (5%) of the number of the Loan Parties’
Stores in any Fiscal Year. 

                    (e)
Prepayments made pursuant to Section 2.05(b), (c) and (d) above, first,
shall be applied ratably to the L/C Borrowings, second, shall be applied
ratably to the outstanding Committed Loans which are Base Rate Loans, third,
shall be applied ratably to the outstanding Committed Loans which are LIBO Rate
Loans, fourth, shall be used to Cash Collateralize the remaining L/C
Obligations; and, fifth, the amount remaining, if any, after the
prepayment in full of all L/C Borrowings and Committed Loans outstanding at
such time and the Cash Collateralization of the remaining L/C Obligations in
full may be retained by the Borrowers for use in the ordinary course of its
business. Upon the drawing of any Letter of Credit that has been Cash
Collateralized, the funds held as Cash Collateral shall be applied (without any
further action by or notice to or from the Borrowers or any other Loan Party)
to reimburse the L/C Issuer or the Lenders, as applicable. 

	
 

	
 

	
 

	
2.06 Termination or Reduction of Commitments.
 (a) The Borrowers may, upon irrevocable notice from the Lead Borrower to the
 Administrative Agent, terminate the Aggregate Commitments or the Letter of
 Credit Sublimit or from time to time permanently reduce the Aggregate
 Commitments or the Letter of Credit Sublimit; provided that (i) any
 such notice shall be received by the Administrative Agent not later than
 11:00 a.m. five Business Days prior to the date of termination or reduction,
 (ii) any such partial reduction shall be in an aggregate amount of
 $10,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the
 Borrowers shall not terminate or reduce (A) the Aggregate Commitments if,
 after giving effect thereto and to any concurrent prepayments hereunder, the
 Total Outstandings would exceed the Aggregate Commitments, and (B) the Letter
 of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of
 L/C Obligations not fully Cash Collateralized hereunder would exceed the
 Letter of Credit Sublimit as so reduced. 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (c)
 The Administrative Agent will promptly notify the Lenders of any termination
 or reduction of the Letter of Credit Sublimit or the Aggregate Commitments
 under this Section 2.06. Upon any reduction of the Aggregate
 Commitments, the Commitment of each Lender shall be reduced by such Lender’s
 Applicable Percentage of such reduction amount. All fees (including, 

-55-

	
 

	
 

	
 

	
without
 limitation, commitment fees and Letter of Credit Fees) and interest in
 respect of the Aggregate Commitments accrued until the effective date of any
 termination of the Aggregate Commitments shall be paid on the effective date
 of such termination. 

          2.07
Repayment of Committed Loans.

          The
Borrower shall repay to the Lenders on the Termination Date the aggregate
principal amount of Committed Loans outstanding on such date. 

          2.08
Interest.

                    (a)
Subject to the provisions of Section 2.08(b) below, (i) each LIBO Rate Loan
shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to the LIBO Rate for such Interest
Period plus the Applicable Margin; and (ii) each Base Rate Loan shall
bear interest on the outstanding principal amount thereof from the applicable
borrowing date at a rate per annum equal to the Base Rate plus the
Applicable Margin. 

                    (b)      (i)
If any amount payable under any Loan Document is not paid when due (without
regard to any applicable grace periods), whether at stated maturity, by
acceleration or otherwise, such amount shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by Laws. 

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

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

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

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

                    (a)
Commitment Fee. The Borrowers shall pay to the Administrative Agent for
the account of each Lender in accordance with its Applicable Percentage, a
commitment fee equal to the 0.50% times the actual daily amount by which
the Aggregate Commitments exceed the sum of (i) the Outstanding Amount of
Committed Loans and (ii) the Outstanding Amount of L/C Obligations. The
commitment fee shall accrue at all times during the Availability Period,
including at any time during which one or more of the conditions in Article
IV is not met, and shall be due and payable quarterly on the first Business
Day after the end of each calendar quarter, commencing with the first such date
to occur after the Closing Date, and on the last day of the Availability
Period. The commitment fee shall be calculated quarterly in arrears. 

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

-56-

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

          2.11
Evidence of Debt. 

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

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

          2.12
Payments Generally; Administrative Agent’s Clawback.

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

-57-

wire transfer
to such Lender’s Lending Office. All payments received by the Administrative
Agent after 2:00 p.m. shall, at the option of the Administrative Agent, be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue. If any payment (other than with respect to
payment of a LIBO Rate Loan) to be made by the Borrowers shall come due on a
day other than a Business Day, payment shall be made on the next following
Business Day, and such extension of time shall be reflected in computing
interest or fees, as the case may be. 

                    (b)     (i)
Funding by Lenders; Presumption by Administrative Agent. Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Committed Borrowing of LIBO Rate Loans (or in the case of
any Committed Borrowing of Base Rate Loans, prior to 12:00 noon on the date of
such Committed Borrowing) that such Lender will not make available to the
Administrative Agent such Lender’s share of such Committed Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with Section 2.02 (or in the case of a
Committed Borrowing of Base Rate Loans, that such Lender has made such share
available in accordance with and at the time required by Section 2.02) and may,
in reliance upon such assumption, make available to the Borrowers a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Committed Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrowers severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount in
immediately available funds with interest thereon, for each day from and
including the date such amount is made available to the Borrowers to but
excluding the date of payment to the Administrative Agent, at (A) in the case
of a payment to be made by such Lender, the greater of the Federal Funds Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation plus any administrative processing or
similar fees customarily charged by the Administrative Agent in connection with
the foregoing, and (B) in the case of a payment to be made by the Borrowers,
the interest rate applicable to Base Rate Loans. If the Borrowers and such Lender
shall pay such interest to the Administrative Agent for the same or an
overlapping period, the Administrative Agent shall promptly remit to the
Borrowers the amount of such interest paid by the Borrowers for such period. If
such Lender pays its share of the applicable Committed Borrowing to the
Administrative Agent, then the amount so paid shall constitute such Lender’s
Committed Loan included in such Committed Borrowing. Any payment by the
Borrowers shall be without prejudice to any claim the Borrowers may have
against a Lender that shall have failed to make such payment to the
Administrative Agent. 

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

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

                    (c)
Failure to Satisfy Conditions Precedent. If any Lender makes available
to the Administrative Agent funds for any Committed Loan to be made by such
Lender as provided in the 

-58-

foregoing
provisions of this Article II, and such funds are not made available to
the Borrowers by the Administrative Agent because the conditions to the
applicable Credit Extension set forth in Article IV are not satisfied or
waived in accordance with the terms hereof (subject to the provisions of the
last paragraph of Section 4.02 hereof), the Administrative Agent shall
return such funds (in like funds as received from such Lender) to such Lender,
without interest. 

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

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

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (ii)
 the provisions of this Section shall not be construed to apply to (x) any
 payment made by the Loan Parties pursuant to and in accordance with the
 express terms of this Agreement or (y) any payment obtained by a Lender as
 consideration for the assignment of or sale of a participation in any of its
 Committed Loans or subparticipations in L/C Obligations to any assignee or
 participant, other than to the Borrowers or any Subsidiary thereof (as to
 which the provisions of this Section shall apply). 

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

          2.14
Settlement Amongst Lenders 

	
 

	
 

	
 

	
          (a)
 The amount of each Lender’s Applicable Percentage of outstanding Committed
 Loans shall be computed weekly (or more frequently in the Administrative
 Agent’s discretion) and shall be adjusted upward or downward based on all
 Committed Loans and repayments of 

-59-

	
 

	
 

	
 

	
Committed
 Loans received by the Administrative Agent as of 3:00 p.m. on the first
 Business Day (such date, the “Settlement Date”) following the end of
 the period specified by the Administrative Agent. 

	
 

	
 

	
 

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

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY; 

APPOINTMENT OF LEAD BORROWER 

          3.01
Taxes. 

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

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

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

-60-

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

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

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

          Without
limiting the generality of the foregoing, in the event that any Borrower is
resident for tax purposes in the United States, any Foreign Lender shall
deliver to the Lead Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the request of the Lead Borrower or the Administrative
Agent, but only if such Foreign Lender is legally entitled to do so), whichever
of the following is applicable: 

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

                    (f)
Treatment of Certain Refunds. If the Administrative Agent, any Lender or
the L/C Issuer determines, in its sole discretion, that it has received a
refund of any Taxes or Other Taxes as to which it has been indemnified by the
Borrowers or with respect to which the Borrowers have paid 

-61-

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

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

          3.03
Inability to Determine Rates. If the Required Lenders
determine that for any reason in connection with any request for a LIBO Rate
Loan or a Conversion to or continuation thereof that (a) Dollar deposits are
not being offered to banks in the London interbank market for the applicable
amount and Interest Period of such LIBO Rate Loan, (b) adequate and reasonable
means do not exist for determining the LIBO Rate for any requested Interest
Period with respect to a proposed LIBO Rate Loan, or (c) the LIBO Rate for any
requested Interest Period with respect to a proposed LIBO Rate Loan does not
adequately and fairly reflect the cost to such Lenders of funding such
Committed Loan, the Administrative Agent will promptly so notify the Lead
Borrower and each Lender. Thereafter, the obligation of the Lenders to make or
maintain LIBO Rate Loans shall be suspended until the Administrative Agent
(upon the instruction of the Required Lenders) revokes such notice (which
revocation shall be made promptly upon the cessation of the circumstances which
gave rise to such notice). Upon receipt of such notice, the Lead Borrower may
revoke any pending request for a Committed Borrowing of, Conversion to or
continuation of LIBO Rate Loans (without incurring costs pursuant to Section
3.05(b)) or, failing that, will be deemed to have Converted such request into a
request for a Committed Borrowing of Base Rate Loans in the amount specified
therein. 

          3.04
Increased Costs; Reserves on LIBO Rate Loans. 

-62-

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	

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

	
 

	
 

	
 

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

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

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

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

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

-63-

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

                    (e)
Reserves on LIBO Rate Loans. Without duplication of any additional
amounts payable under the definition of “Adjusted LIBO Rate”, the Borrowers
shall pay to each Lender, as long as such Lender shall be required to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”),
additional interest on the unpaid principal amount of each LIBO Rate Loan equal
to the actual costs of such reserves allocated to such Committed Loan by such
Lender (as determined by such Lender in good faith, which determination shall
be conclusive), which shall be due and payable on each date on which interest
is payable on such Committed Loan, provided the Lead Borrower shall have
received at least 10 days’ prior notice (with a copy to the Administrative
Agent) of such additional interest from such Lender. If a Lender fails to give
notice 10 days prior to the relevant Interest Payment Date, such additional
interest shall be due and payable 10 days from receipt of such notice.  

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

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

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

          3.06
Mitigation Obligations; Replacement of Lenders. 

-64-

                    (a)
Designation of a Different Lending Office. If any Lender requests compensation
under Section 3.04, or the Borrowers are required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section
3.02, then such Lender shall use reasonable efforts to designate a different
Lending Office for funding or booking its Committed Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section
3.01 or 3.04, as the case may be, in the future, or eliminate the need for the
notice pursuant to Section 3.02, as applicable, and (ii) in each case, would
not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrowers hereby agree to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.  

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

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

          3.08
Designation of Lead Borrower as Borrowers’ Agent. 

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

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

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

ARTICLE IV 

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

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

-65-

	
 

	
 

	
 

	
          (a) The
 Administrative Agent’s receipt of the following, each of which shall be
 originals, telecopies, or documents transmitted by electronic mail (followed
 promptly by originals) unless otherwise specified, each properly executed by
 a Responsible Officer of the signing Loan Party, each dated the Closing Date
 (or, in the case of certificates of governmental officials, a recent date
 before the Closing Date) and each in form and substance satisfactory to the
 Administrative Agent: 

	
 

	
 

	
 

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

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

	
                    (v)
 a favorable opinion of Lowenstein Sandler PC, counsel to the Loan Parties,
 addressed to the Administrative Agent and each Lender, as to such matters
 concerning the Loan Parties and the Loan Documents as the Administrative
 Agent may reasonably request; 

	
 

	
 

	
 

	

                    (vi)
a certificate signed by a Responsible Officer of the Lead Borrower certifying
(A) that the conditions specified in Sections 4.02(a) and (b) have been
satisfied, (B) that there has been no event or circumstance since the date of
the Audited Financial Statements that has had or could reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect,
(C) to the Solvency of the Loan Parties as of the Closing Date after giving
effect to the transactions contemplated hereby, and (D) either that (1) no consents,
licenses or approvals are required in connection with the execution, delivery
and performance by such Loan Party and the validity against such Loan Party
of the Loan Documents to which it is a party, or (2) that all such consents,
licenses and approvals have been obtained and are in full force and effect; 

	
 

	
 

	
 

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

-66-

	
 

	
 

	
 

	
                    (viii)
 a payoff letter from Israel Discount Bank of New York, as lender under the
 Existing Credit Agreement satisfactory in form and substance to the
 Administrative Agent evidencing that the Existing Credit Agreement has been
 or concurrently with the Closing Date is being terminated, all obligations
 thereunder are being paid in full, and all Liens securing obligations under
 the Existing Credit Agreement have been or concurrently with the Closing Date
 are being released;

	
 

	
 

	
 

	
                    (ix)
 the Security Documents (including, without limitation, the Mortgages and
 certificates evidencing any stock being pledged thereunder, together with
 undated stock powers executed in blank, each duly executed by the applicable
 Loan Parties;

	
 

	
 

	
 

	
                    (x)
 all other Loan Documents, each duly executed by the applicable Loan Parties;

	
 

	
 

	
 

	
                    (xi)
 (A) appraisals (based on net liquidation value) by a third party appraiser
 acceptable to the Collateral Agent of all Inventory of the Borrowers, the
 results of which are satisfactory to the Collateral Agent and (B) a written
 report regarding the results of a commercial finance examination of the Loan
 Parties, the results of which shall be satisfactory to the Collateral Agent; 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
                    (xiii)
 (A) all documents and instruments, including Uniform Commercial Code
 financing statements, required by law or reasonably requested by the
 Collateral Agent to be filed, registered or recorded to create or perfect the
 first priority Liens intended to be created under the Loan Documents and all
 such documents and instruments shall have been so filed, registered or
 recorded to the satisfaction of the Collateral Agent, (B) the Credit Card
 Notifications, and Blocked Account Agreements required pursuant to Section
 6.13 hereof, and (C) control agreements with respect to the Loan Parties’
 securities and investment accounts;

	
 

	
 

	
 

	
                    (xiv)
 evidence that all other actions that the Collateral Agent may deem necessary
 or desirable in order to create valid first and subsisting Liens on the
 property described in the Mortgages has been taken;

	
 

	
 

	
 

	
                    (xv)
 an appraisal of each of the properties described in the Mortgages complying
 with the requirements of FIRREA by a third-party appraiser acceptable to the
 Collateral Agent and otherwise in form and substance satisfactory to the
 Collateral Agent; and

	
 

	
 

	
 

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

-67-

	
 

	
 

	
 

	
          (b)
 After giving effect to (i) the first funding under the Committed Loans and
 (ii) all Letters of Credit to be issued at, or immediately subsequent to,
 such establishment, Availability shall be not less than $20,000,000. 

	
 

	
 

	
 

	
          (c)
 The Administrative Agent shall have received a Borrowing Base Certificate
 dated the Closing Date, relating to the month ended on August 1, 2009, and
 executed by a Responsible Officer of the Lead Borrower, which Borrowing Base
 Certificate shall be acceptable to the Administrative Agent in all respects. 

	
 

	
 

	
 

	
          (d)
 The Administrative Agent shall be reasonably satisfied that any financial
 statements delivered to it fairly present the business and financial
 condition of the Loan Parties and that there has not occurred since February
 28, 2009 (i) any event or condition that has had or could be reasonably
 expected, either individually or in the aggregate, to have a Material Adverse
 Effect or (ii) any action, suit, investigation or proceeding pending or, to
 the knowledge of the Borrowers, threatened in any court or before any
 arbitrator or governmental authority that could reasonably be expected to
 have a Material Adverse Effect. 

	
 

	
 

	
 

	
          (e)
 The Administrative Agent shall be reasonably satisfied that the Real Estate
 Eligibility Conditions have been satisfied. 

	
 

	
 

	
 

	
          (f)
 The Administrative Agent shall have received and be satisfied with (i) a
 detailed forecast (x) on a monthly basis for the twelve-month period
 following the Closing Date and (y) on an annual basis, for each Fiscal Year
 thereafter through the Maturity Date, including, in each case, an
 Availability model, Consolidated income statement, balance sheet, and
 statement of cash flow, by month, each prepared in conformity with GAAP and
 consistent with the Loan Parties’ then current practices and (ii) such other
 information (financial or otherwise) reasonably requested by the
 Administrative Agent. 

	
 

	
 

	
 

	
          (g)
 All of the information (other than any projections delivered to the
 Administrative Agent) shall be complete and correct in all material respects and no changes or developments shall
 have occurred, and no new or additional information, shall have been received
 or discovered by the Administrative Agent regarding the Lead Borrower or its
 Subsidiaries or the transactions contemplated hereby that, individually or in
 the aggregate, could reasonably be expected to have a Material Adverse
 Effect. All Projections prepared by the Lead Borrower or at its direction and
 delivered to the Administrative Agent will represent, at the time of delivery
 to the Administrative Agent, the Lead Borrower’s good-faith estimate of the
 future financial performance of the Lead Borrower and its Subsidiaries and
 will be based upon assumptions which are believed by the Lead Borrower to be
 reasonable in light of the past performance of the Lead Borrower and its
 Subsidiaries and then current business conditions. 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (i)
 The consummation of the transactions contemplated hereby shall not violate
 any Law or any Organization Document. 

	
 

	
 

	
 

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

-68-

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (l)
 The Administrative Agent shall have received all documentation and other
 information required by regulatory authorities under applicable “know your
 customer” and anti-money laundering rules and regulations, including without
 limitation the USA Patriot Act. 

	
 

	
 

	
 

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

	
 

	
 

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

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

	
 

	
 

	
 

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

Each Request
for Credit Extension (other than a Committed Loan Notice requesting only a
Conversion of Committed Loans to the other Type or a continuation of LIBO Rate
Loans) submitted by the Lead Borrower shall be deemed to be a representation
and warranty by the Borrowers that the conditions specified in Sections
4.02(a) and (b) have been satisfied on and as of the date of the
applicable Credit Extension. The conditions set forth in this Section 4.02 are
for the sole benefit of the Credit Parties but until the Required Lenders
otherwise direct the Administrative Agent to cease making Committed Loans, the
Lenders will fund their Applicable Percentage of all Committed Loans and L/C
Advances and participate in Letters of Credit whenever made or issued, which
are requested by the Lead Borrower and which, notwithstanding the failure of
the Loan Parties to comply with the provisions of this Article IV, agreed to by
the Administrative Agent, provided, however, the making of any such Committed
Loans or 

-69-

the issuance
of any Letters of Credit shall not be deemed a modification or waiver by any
Credit Party of the provisions of this Article IV on any future occasion or a
waiver of any rights or the Credit Parties as a result of any such failure to
comply. 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

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

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

          5.02 Authorization; No Contravention. The
execution, delivery and performance by each Loan Party of each Loan Document to
which such Person is or is to be a party, has been duly authorized by all
necessary corporate or other organizational action, and does not and will not
(a) contravene the terms of any of such Person’s Organization Documents; (b)
conflict with or result in any breach, termination, or contravention of, or
constitute a default under, or require any payment to be made under (i) any
Material Contract or any Material Indebtedness to which such Person is a party
or affecting such Person or the properties of such Person or any of its
Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental
Authority or any arbitral award to which such Person or its property is
subject; (c) result in or require the creation of any Lien upon any asset of
any Loan Party (other than Liens in favor of the Collateral Agent under the
Security Documents); or (d) violate any Law. 

          5.03 Governmental Authorization; Other Consents. No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, any Loan Party of this Agreement or any other Loan
Document, except for (a) the perfection or maintenance of the Liens created
under the Security Documents (including the first priority nature thereof) or
(b) such as have been obtained or
made and are in full force and effect. 

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

-70-

          5.05 Financial Statements; No Material Adverse Effect.

                    (a)
The Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; (ii) fairly present the financial condition of the
Lead Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly
noted therein; and (iii) show all Material Indebtedness and other liabilities,
direct or contingent, of the Lead Borrower and its Subsidiaries as of the date
thereof, including liabilities for taxes, material commitments and
Indebtedness. 

                    (b)
The unaudited Consolidated balance sheet of the Lead Borrower and its
Subsidiaries dated May 30, 2009, and the related Consolidated statements of
income or operations, Shareholders’ Equity and cash flows for the Fiscal
Quarter ended on that date (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, and (ii) fairly present the financial condition of the
Lead Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby, subject, in the case of clauses (i)
and (ii), to the absence of footnotes and to normal year-end audit adjustments.
Schedule 5.05 sets forth all Material Indebtedness and other
liabilities, direct or contingent, of the Loan Parties and their Consolidated
Subsidiaries as of the date of such financial statements, including liabilities
for taxes and material commitments. 

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

                    (d)
To the best knowledge of the Lead Borrower, no Internal Control Event exists or
has occurred since the date of the Audited Financial Statements that has
resulted in or could reasonably be expected to result in a misstatement in any
material respect, in any financial information delivered or to be delivered to
the Administrative Agent or the Lenders, of (i) covenant compliance
calculations provided hereunder or (ii) the assets, liabilities, financial
condition or results of operations of the Lead Borrower and its Subsidiaries on
a Consolidated basis. 

                    (e)
The Consolidated forecasted balance sheet and statements of income and cash
flows of the Lead Borrower and its Subsidiaries delivered pursuant to Section
6.01(d) were prepared in good faith on the basis of the assumptions stated
therein, which assumptions were fair in light of the conditions existing at the
time of delivery of such forecasts, and represented, at the time of delivery,
the Loan Parties’ best estimate of its future financial performance. 

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

          5.07 No Default. No Loan Party or
Subsidiary is in default under or with respect to any Material Contract or any
Material Indebtedness. No Default has occurred and is continuing or would
result from the consummation of the transactions contemplated by this Agreement
or any other Loan Document. 

-71-

          5.08 Ownership of Property; Liens. Each of
the Loan Parties and each Subsidiary thereof has good record and marketable
title in fee simple to or valid leasehold interests in, all real property
necessary or used in the ordinary conduct of its business, except for such
defects in title as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each of the Loan Parties and each
Subsidiary has good and marketable title to, valid leasehold interests in, or
valid licenses to use all personal property and assets material to the ordinary
conduct of its business. 

                    (b)
Schedule 5.08(b)(1) sets forth the address (including street address,
county and state) of all Real Estate that is owned by the Loan Parties,
together with a list of the holders of any mortgage or other Lien thereon as of
the Closing Date. Each Loan Party and each of its Subsidiaries has good,
marketable and insurable fee simple title to the real property owned by such
Loan Party or such Subsidiary, free and clear of all Liens, other than
Permitted Encumbrances. Schedule 5.08(b)(2) sets forth the address
(including street address, county and state) of all Leases of the Loan Parties,
together with a list of the lessor and its contact information with respect to
each such Lease as of the Closing Date. Each of such Leases is in full force
and effect and the Loan Parties are not in default of the terms thereof. 

                    (c)
Schedule 7.01 sets forth a complete and accurate list of all Liens on
the property or assets of each Loan Party and each of its Subsidiaries, showing
as of the Closing Date the lienholder thereof, the principal amount of the
obligations secured thereby and the property or assets of such Loan Party or
such Subsidiary subject thereto. The property of each Loan Party and each of
its Subsidiaries is subject to no Liens, other than Permitted Encumbrances. 

                    (d)
Schedule 7.02 sets forth a complete and accurate list of all Investments
held by any Loan Party or any Subsidiary of a Loan Party on the Closing Date,
showing as of the date hereof the amount, obligor or issuer and maturity, if
any, thereof. 

                    (e)
Schedule 7.03 sets forth a complete and accurate list of all
Indebtedness of each Loan Party or any Subsidiary of a Loan Party on the
Closing Date, showing as of the date hereof the amount, obligor or issuer and
maturity thereof. 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (b)
Except as otherwise set forth in Schedule 5.09, to the knowledge of
the Loan Parties, none of the properties currently or formerly owned or
operated by any Loan Party or any Subsidiary thereof is listed or proposed
for listing on the NPL or on the CERCLIS or any analogous foreign, state or
local list or, to the knowledge of any Loan Party, is adjacent to any such
property; except for underground storage tanks currently in use and operated
in compliance with Environmental Laws, there are no underground or
above-ground storage tanks or surface impoundments, septic tanks, pits, sumps
or lagoons in which Hazardous Materials are being or have been treated, stored
or disposed on any property currently owned or operated by any Loan Party or
any Subsidiary thereof or, to the best of the knowledge of the Loan Parties,
on any property formerly owned or operated by any Loan Party or Subsidiary
thereof except such as have been decommissioned in accordance with
Environmental Laws in effect at the time of such decommissioning; there is no
asbestos or asbestos-containing material on any property currently owned or
operated by any Loan Party or Subsidiary thereof; and Hazardous Materials
have not 

-72-

	
 

	
 

	
 

	
been
released, discharged or disposed of on any property currently or formerly
owned or operated by any Loan Party or any Subsidiary thereof. 

	
 

	
 

	
 

	
          (c)
Except as otherwise set forth on Schedule 5,09, no Loan Party or any
Subsidiary thereof is undertaking, and no Loan Party or any Subsidiary
thereof has completed, either individually or together with other potentially
responsible parties, any investigation or assessment or remedial or response
action relating to any actual or threatened release, discharge or disposal of
Hazardous Materials at any site, location or operation, either voluntarily or
pursuant to the order of any Governmental Authority or the requirements of
any Environmental Law; and all Hazardous Materials generated, used, treated,
handled or stored at, or transported to or from, any property currently or
formerly owned or operated by any Loan Party or any Subsidiary thereof have
been disposed of in a manner not reasonably expected to result in material
liability to any Loan Party or any Subsidiary thereof. 

          5.10 Insurance. The properties of the Loan
Parties and their Subsidiaries are insured with financially sound and reputable
insurance companies which are not Affiliates of the Loan Parties, in such
amounts, with such deductibles and covering such risks (including, without
limitation, workers’ compensation, public liability, business interruption and
property damage insurance) as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the Loan
Parties or the applicable Subsidiary operates. Schedule 5.10 sets forth
a description of all insurance maintained by or on behalf of the Loan Parties
as of the Closing Date. Each insurance policy listed on Schedule 5.10 is in
full force and effect and all premiums in respect thereof that are due and
payable have been paid.  

          5.11 Taxes. The Loan Parties and their
Subsidiaries have filed all Federal, state and other material tax returns and
reports required to be filed, and have paid all Federal, state and other
material taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by appropriate
proceedings being diligently conducted, for which adequate reserves have been
provided in accordance with GAAP, as to which Taxes no Lien has been filed and
which contest effectively suspends the collection of the contested obligation
and the enforcement of any Lien securing such obligation. There is no proposed
tax assessment against any Loan Party or any Subsidiary that would, if made,
have a Material Adverse Effect. No Loan Party or any Subsidiary thereof is a
party to any tax sharing agreement. 

          5.12 ERISA Compliance.

                    (a)
Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or state Laws. Each Plan that
is intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS or an application for such a letter
is currently being processed by the IRS with respect thereto and, to the best
knowledge of the Lead Borrower, nothing has occurred which would prevent, or
cause the loss of, such qualification. The Loan Parties and each ERISA
Affiliate have made all required contributions to each Plan subject to Section
412 of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan. No Lien imposed under the Code or ERISA exists or is
likely to arise on account of any Plan. 

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

-73-

violation of
the fiduciary responsibility rules with respect to any Plan that has resulted
or could reasonably be expected to result in a Material Adverse Effect. 

                    (c)
(i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no
Pension Plan has any Unfunded Pension Liability; (iii) neither any Loan Party
nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability under Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA and other than
periodic contribution requirements); (iv) neither any Loan Party nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA
with respect to a Multiemployer Plan; and (v) neither any Loan Party nor any
ERISA Affiliate has engaged in a transaction that could be subject to Sections
4069 or 4212(c) of ERISA, which in each case could reasonably be expected to
have a Material Adverse Effect. 

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

          5.14 Margin Regulations; Investment Company Act.

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

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

          5.15 Disclosure. Each Loan Party has
disclosed to the Administrative Agent and the Lenders all material agreements,
instruments and corporate or other restrictions to which it or any of its
Subsidiaries is subject, and all other matters known to it, that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. No report, financial statement, certificate or other
information furnished (whether in writing or orally) by or on behalf of any
Loan Party to the Administrative Agent or any Lender in connection with the
transactions contemplated hereby and the 

-74-

negotiation of
this Agreement or delivered hereunder or under any other Loan Document (in each
case, as modified or supplemented by other information so furnished) contains
any material misstatement of fact or omits to state any material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided that, with respect to projected
financial information, the Loan Parties represent only that such information
was prepared in good faith based upon assumptions believed to be reasonable at
the time.  

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

          5.17 Intellectual Property; Licenses, Etc. The
Loan Parties and their Subsidiaries own, or possess the right to use, all of
the Intellectual Property, licenses, permits and other authorizations that are
reasonably necessary for the operation of their respective businesses, without
conflict with the rights of any other Person. To the best knowledge of the Lead
Borrower, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by any Loan Party or any Subsidiary infringes upon any rights held by
any other Person. No claim or litigation regarding any of the foregoing is
pending or, to the best knowledge of the Lead Borrower, threatened, which,
either individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. 

          5.18 Labor Matters.

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

          5.19 Security Documents.

-75-

	
 

	
 

	
 

	
          (a)
The Security Agreement creates in favor of the Collateral Agent, for the
benefit of the Secured Parties referred to therein, a legal, valid and
enforceable security interest in the Collateral (as defined in the Security
Agreement), the enforceability of which is subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law. Upon the filing of
financing statements and/or the obtaining of “control”, in each case with
respect to the relevant Collateral as required under the applicable UCC, the
Collateral Agent will have a perfected Lien on, and security interest in, to
and under all right, title and interest of the grantors thereunder in all
Collateral that may be perfected by filing, recording or registering a
financing statement or analogous document (including without limitation the
proceeds of such Collateral subject to the limitations relating to such
proceeds in the UCC) or by obtaining control, under the UCC (in effect on the
date this representation is made), in each case prior and superior in right
to any other Person, except for Permitted Encumbrances having priority under
applicable Law. 

	
 

	
 

	
 

	
          (b)
When appropriate documentation is recorded in the United States Patent and
Trademark Office and the United States Copyright Office and when financing
statements in appropriate form are filed in the appropriate office in the
jurisdiction of formation of the appropriate Loan Party, the Collateral Agent
will have a fully perfected Lien on, and security interest in, all right,
title and interest of the applicable Loan Parties in the Intellectual
Property (as defined in the Security Agreement) in which a security interest
may be perfected by filing, recording or registering a security agreement,
financing statement or analogous document in the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, in
each case prior and superior in right to any other Person (it being
understood that subsequent recordings in the United States Patent and
Trademark Office and the United States Copyright Office may be necessary to
perfect a Lien on registered trademarks, trademark applications and
copyrights acquired by the Loan Parties after the date hereof). 

	
 

	
 

	
 

	
          (c)
The Mortgages create in favor of the Collateral Agent, for the benefit of the
Secured Parties referred to therein, a legal, valid, continuing and
enforceable Lien on the Mortgaged Property (as defined in the Mortgages), the
enforceability of which is subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law. Upon the recording of each
Mortgage with the appropriate Governmental Authority, the Collateral Agent
will have a valid mortgage Lien on, and security interest in, to and under
all right, title and interest of the grantor thereunder in all Mortgaged
Property covered by such Mortgage, having the priority and subject to the
exceptions set forth in the Mortgage Policy relating to such Mortgage. 

          5.20 Solvency. 

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

          5.21 Deposit Accounts; Credit Card Arrangements.

                    (a)
Annexed hereto as Schedule 5.21(a) is a list of all DDAs maintained by the Loan
Parties as of the Closing Date, which Schedule includes, with respect to each
DDA (i) the name and  

-76-

address of the
depository; (ii) the account number(s) maintained with such depository; (iii) a
contact person at such depository, and (iv) the identification of each Blocked
Account Bank.

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

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

          5.23 Customer and Trade Relations. There
exists no actual or, to the knowledge of any Loan Party, threatened,
termination or cancellation of, or any material adverse modification or change
in the business relationship of any Loan Party with any supplier material to
its operations. 

          5.24 Material Contracts. Schedule 5.24
sets forth all Material Contracts to which any Loan Party is a party or is
bound as of the Closing Date. The Loan Parties have delivered true, correct and
complete copies of such Material Contracts to the Administrative Agent on or
before the date hereof. The Loan Parties are not in breach or in default in any
material respect of or under any Material Contract and have not received any
notice of the intention of any other party thereto to terminate any Material
Contract. 

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

ARTICLE VI

AFFIRMATIVE COVENANTS

          So
long as any Lender shall have any Commitment hereunder, any Committed Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, the Loan Parties shall, and shall (except in
the case of the covenants set forth in Sections 6.01, 6.02, and 6.03) cause
each Subsidiary to: 

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

	
 

	
 

	
 

	
          (a)
as soon as available, but in any event within 90 days after the end of each
Fiscal Year of the Lead Borrower (or, in the event the Lead Borrower timely
files a Form 12b-25 under the Exchange Act, such longer period allowed under
Rule 12b-25 of the rules and regulations promulgated under the Exchange Act),
a Consolidated balance sheet of the Lead Borrower and its Subsidiaries as at
the end of such Fiscal Year, and the related consolidated statements of
income or operations, Shareholders’ Equity and cash flows for such Fiscal
Year, setting forth in each case in comparative form the figures for the
previous Fiscal Year, all in reasonable detail and prepared in accordance with
GAAP, audited and accompanied by (i) a report and unqualified opinion of a
Registered Public Accounting Firm of nationally recognized standing
reasonably acceptable to the Administrative Agent (and the Administrative
Agent hereby agrees that BDO Seidman, LLP is reasonably acceptable to the
Administrative Agent), which report and opinion shall be prepared 

-77-

	
 

	
 

	
 

	
in
accordance with generally accepted auditing standards and shall not be
subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit and (ii) an opinion
of such Registered Public Accounting Firm independently assessing Loan
Parties’ internal controls over financial reporting in accordance with Item
308 of SEC Regulation S-K, PCAOB Auditing Standard No. 2, and Section 404 of
Sarbanes-Oxley expressing a conclusion that contains no statement that there
is a material weakness in such internal controls, except for such material
weaknesses as to which the Required Lenders do not object; 

	
 

	
 

	
 

	
          (b)
as soon as available, but in any event within 45 days after the end of each
Fiscal Quarter of each Fiscal Year of the Lead Borrower (or, in the event the
Lead Borrower timely files a Form 12b-25 under the Exchange Act, such longer
period allowed under Rule 12b-25 of the rules and regulations promulgated
under the Exchange Act), a Consolidated balance sheet of the Lead Borrower
and its Subsidiaries as at the end of such Fiscal Quarter, and the related
consolidated statements of income or operations, Shareholders’ Equity and
cash flows for such Fiscal Quarter and for the portion of the Lead Borrower’s
Fiscal Year then ended, setting forth in each case in comparative form the
figures for (A) such period set forth in the projections delivered pursuant
to Section 6.01(d) hereof, (B) the corresponding Fiscal Quarter of the
previous Fiscal Year and (C) the corresponding portion of the previous Fiscal
Year, all in reasonable detail, certified by a Responsible Officer of the
Lead Borrower as fairly presenting the financial condition, results of
operations, Shareholders’ Equity and cash flows of the Lead Borrower and its
Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP,
subject only to normal year-end audit adjustments and the absence of
footnotes; 

	
 

	
 

	
 

	
          (c)
as soon as available, but in any event within 30 days after the end of each
Fiscal Month of each Fiscal Year of the Lead Borrower, a Consolidated balance
sheet of the Lead Borrower and its Subsidiaries as at the end of such Fiscal
Month, and the related consolidated statements of income or operations,
Shareholders’ Equity and cash flows for such Fiscal Month, and for the
portion of the Lead Borrower’s Fiscal Year then ended, setting forth in each
case in comparative form the figures for (A) such period set forth in the
projections delivered pursuant to Section 6.01(d) hereof, (B) the
corresponding Fiscal Month of the previous Fiscal Year and (C) the
corresponding portion of the previous fiscal year, all in reasonable detail,
certified by a Responsible Officer of the Lead Borrower as fairly presenting
the financial condition, results of operations, Shareholders’ Equity and cash
flows of the Lead Borrower and its Subsidiaries as of the end of such Fiscal
Month in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes; 

	
 

	
 

	
 

	
          (d)
as soon as available, but in any event at least 30 days before the end of
each Fiscal Year of the Lead Borrower, forecasts prepared by management of
the Lead Borrower, in form satisfactory to the Administrative Agent, which
shall include an Availability model, Consolidated balance sheets and
statements of income or operations and cash flows of the Lead Borrower and
its Subsidiaries on a monthly basis for the immediately following Fiscal Year
(including the fiscal year in which the Maturity Date occurs), and as soon as
available, any significant revisions to such forecast with respect to such
Fiscal Year. 

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

	
 

	
 

	
 

	
          (a)
concurrently with the delivery of the financial statements referred to in Section
6.01(a), a certificate of its Registered Public Accounting Firm
certifying such financial statements and stating that in making the
examination necessary for their certification of such financial 

-78-

	
 

	
 

	
 

	
statements,
such Registered Public Accounting Firm has not obtained any knowledge of the
existence of any Default or, if any such Default shall exist, stating the
nature and status of such event; 

	
 

	
 

	
 

	
          (b)
concurrently with the delivery of the financial statements referred to in Sections
6.01(a), (b) and (c), (i) a duly completed Compliance Certificate signed
by a Responsible Officer of the Lead Borrower, and in the event of any change
in generally accepted accounting principles used in the preparation of such
financial statements, the Lead Borrower shall also provide a statement of reconciliation
conforming such financial statements to GAAP and (ii) a copy of management’s
discussion and analysis with respect to such financial statements; 

	
 

	
 

	
 

	
          (c)
on the tenth (10th) day of each Fiscal Month (or, if such day is
not a Business Day, on the next succeeding Business Day), a certificate in
the form of Exhibit E (a “Borrowing Base Certificate”) showing
the Borrowing Base as of the close of business as of the last day of the
immediately preceding Fiscal Month, each Borrowing Base Certificate to be
certified as complete and correct by a Responsible Officer of the Lead
Borrower; provided that at any time that an Accelerated Borrowing Base
Delivery Event has occurred and is continuing, such Borrowing Base
Certificate shall be delivered on Wednesday of each week (or, if Wednesday is
not a Business Day, on the next succeeding Business Day), showing the
Borrowing Base as of the close of business on the immediately preceding
Saturday, and no additional Borrowing Base Certificate need be provided on
the tenth (10th) day of any Fiscal Month with respect to which a
Borrowing Base Certificate has been delivered weekly; 

	
 

	
 

	
 

	
          (d)
promptly upon receipt, copies of any detailed audit reports, management
letters or recommendations submitted to the board of directors (or the audit
committee of the board of directors) of any Loan Party by its Registered
Public Accounting Firm in connection with the accounts or books of the Loan
Parties or any Subsidiary, or any audit of any of them, including, without
limitation, specifying any Internal Control Event; 

	
 

	
 

	
 

	
          (e)
promptly after the same are available, copies of each annual report, proxy or
financial statement or other report or communication sent to the stockholders
of the Loan Parties, and copies of all annual, regular, periodic and special
reports and registration statements which any Loan Party may file or be
required to file with the SEC under Section 13 or 15(d) of the Securities
Exchange Act of 1934 or with any national securities exchange, and in any
case not otherwise required to be delivered to the Administrative Agent
pursuant hereto; 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
          (g)
promptly after the furnishing thereof, copies of any statement or report
furnished to any holder of debt securities of any Loan Party or any
Subsidiary thereof pursuant to the terms of any indenture, loan or credit or
similar agreement and not otherwise required to be furnished to the Lenders
pursuant to Section 6.01 or any other clause of this Section 6.02; 

	
 

	
 

	
 

	
          (h)
as soon as available, but in any event within 30 days after the end of each
Fiscal Year of the Loan Parties, a report summarizing the insurance coverage
(specifying type, amount and carrier) in effect for each Loan Party and its
Subsidiaries and containing such additional information as the Administrative
Agent, or any Lender through the Administrative Agent, may reasonably specify;

-79-

	
 

	
 

	
 

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

	
 

	
 

	
 

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

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

          The
Loan Parties hereby acknowledge that (a) the Administrative Agent will make
available to the Lenders and the L/C Issuer materials and/or information
provided by or on behalf of the Loan Parties hereunder (collectively, “Borrower
Materials”) by posting the Borrower Materials on IntraLinks or another
similar electronic system (the “Platform”) and (b) certain of the
Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to
receive material non-public information with respect to the Loan Parties or
their securities) (each, a “Public Lender”). The Loan Parties hereby
agree that so long as any Loan Party (i) has outstanding any securities
registered pursuant to the Securities Act of 1933, as amended (the “Securities
Act”), and/or subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or (ii) is
actively contemplating issuing any such securities they will use commercially
reasonable efforts to identify that portion of the Borrower Materials that may
be distributed to the Public Lenders and that (w) all such Borrower Materials
(other than any Borrower Materials consisting of reports or registration
statements filed with the SEC pursuant to the Securities Act or the Exchange
Act) shall be clearly and conspicuously marked “PUBLIC” which, at a minimum,
shall mean that the word “PUBLIC” shall appear prominently on the first page
thereof; (x) by marking Borrower Materials “PUBLIC,” the Loan Parties shall be
deemed to have authorized the Administrative Agent, the L/C Issuer and the
Lenders to treat such Borrower Materials as not containing any material
non-public information (although it may be sensitive and proprietary) with
respect to the Loan Parties or their securities for purposes of United States
Federal and state securities laws (provided, 

-80-

however, that to the extent such Borrower
Materials constitute Information, they shall be treated as set forth in Section
10.07); (y) all Borrower Materials marked “PUBLIC” and all Borrower
Materials consisting of reports or registration statements filed with the SEC
pursuant to the Securities Act or the Exchange Act are permitted to be made
available through a portion of the Platform designated “Public Investor”; and
(z) the Administrative Agent shall be entitled to treat any Borrower Materials
that are not marked “PUBLIC” as being suitable only for posting on a portion of
the Platform not designated “Public Investor.” 

          6.03
Notices. Promptly notify the Administrative Agent: 

          (a)
of the occurrence of any Default; 

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

          (c)
of the occurrence of any ERISA Event; 

          (d)
of any material change in accounting policies or financial reporting practices
by any Loan Party or any Subsidiary thereof; 

          (e)
of any change in any Loan Party’s senior executive officers; 

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

          (g)
of any collective bargaining agreement or other labor contract to which a Loan
Party becomes a party, or the application for the certification of a collective
bargaining agent to represent employees of any Loan Party; 

          (h)
of the filing of any Lien for unpaid Taxes against any Loan Party; 

          (i)
of any casualty or other insured damage to any material portion of the
Collateral or the commencement of any action or proceeding for the taking of
any interest in a material portion of the Collateral under power of eminent
domain or by condemnation or similar proceeding or if any material portion of
the Collateral is damaged or destroyed; and 

          (j)
of any failure by any Loan Party to pay rent at (i) five (5%) or more of such
Loan Party’s locations or (ii) any of such Loan Party’s locations if such
failure continues for more than ten (10) days following the day on which such
rent first came due and such failure would be reasonably likely to result in a
Material Adverse Effect. 

Each notice
pursuant to this Section shall be accompanied by a statement of a Responsible
Officer of the Lead Borrower setting forth details of the occurrence referred
to therein and stating what action the Lead Borrower has taken and proposes to
take with respect thereto. Each notice pursuant to Section 6.03(a)

-81-

shall describe
with particularity any and all provisions of this Agreement and any other Loan
Document that have been breached. 

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

          6.05 Preservation of Existence,
Etc. (a) Preserve, renew and maintain in full force
and effect its legal existence and good standing under the Laws of the
jurisdiction of its organization or formation except in a transaction permitted
by Section 7.04 or 7.05; (b) take all reasonable action to
maintain all rights, privileges, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect; and (c) preserve or renew all of its Intellectual Property, except to
the extent such Intellectual Property is no longer used or useful in the
conduct of the business of the Loan Parties. 

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

          6.07 Maintenance of Insurance.

                    (a)
Maintain with financially sound and reputable insurance companies reasonably
acceptable to the Administrative Agent and not Affiliates of the Loan Parties,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the same or similar
business and operating in the same or similar locations or as is required by
Law, of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons and as are reasonably acceptable to the
Administrative Agent. 

                    (b)
Fire and extended coverage policies maintained with respect to any Collateral
shall be endorsed or otherwise amended to include (i) a non-contributing
mortgage clause (regarding improvements to real property) and lenders’ loss payable
clause (regarding personal property), in form and substance satisfactory to the
Collateral Agent, which endorsements or amendments shall provide that the
insurer shall pay all proceeds otherwise payable to the Loan Parties under the
policies directly to the Collateral Agent, (ii) a provision to the effect that
none of the Loan Parties, Credit Parties or any other Person shall be a
co-insurer and (iii) such other provisions as the Collateral Agent may
reasonably require from time to time to protect the interests of the Credit
Parties. Commercial general liability policies shall be endorsed to name the
Collateral Agent as an additional insured. Business interruption policies shall
name the Collateral Agent as a loss payee and shall be endorsed or amended to
include (i) a provision that, from and after the Closing Date, the insurer
shall pay (x) prior to a Cash Dominion Event, all 

-82-

proceeds in
excess of $1,000,000, and (y) upon the occurrence and during the continuance of
a Cash Dominion Event, all proceeds otherwise payable to the Loan Parties under
the policies directly to the Collateral Agent, (ii) a provision to the effect
that none of the Loan Parties, the Administrative Agent, the Collateral Agent
or any other party shall be a co-insurer and (iii) such other provisions as the
Collateral Agent may reasonably require from time to time to protect the
interests of the Credit Parties. Each such policy referred to in this Section
6.07(c) shall also provide that it shall not be canceled, modified or not
renewed (i) by reason of nonpayment of premium except upon not less than thirty
(30) days’ prior written notice thereof by the insurer to the Collateral Agent
(giving the Collateral Agent the right to cure defaults in the payment of
premiums) or (ii) for any other reason except upon not less than thirty (30)
days’ prior written notice thereof by the insurer to the Collateral Agent. The
Lead Borrower shall deliver to the Collateral Agent, prior to the cancellation,
modification or non-renewal of any such policy of insurance, a copy of a
renewal or replacement policy (or other evidence of renewal of a policy
previously delivered to the Collateral Agent, including an insurance binder)
together with evidence satisfactory to the Collateral Agent of payment of the
premium therefor. 

                    (c)
If at any time the area in which any Eligible Real Estate is located is
designated (i) a “flood hazard area” in any Flood Insurance Rate Map published
by the Federal Emergency Management Agency (or any successor agency), obtain
flood insurance in such total amount as is reasonable and customary for
companies engaged in the business of operating supermarkets, and otherwise
comply with the National Flood Insurance Program as set forth in the Flood
Disaster Protection Act of 1973, as amended from time to time, or (ii) a “Zone
1” area, obtain earthquake insurance in such total amount as is reasonable and
customary for companies engaged in the Business. 

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

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

                    (f)
Permit any representatives that are designated by the Collateral Agent to
inspect the insurance policies maintained by or on behalf of the Loan Parties
and to inspect books and records related thereto and any properties covered
thereby. 

          6.08 Compliance with Laws.
Comply in all
material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property, except
in such instances in which (a) such requirement of Law or order, writ,
injunction or decree is being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been set aside and maintained by the Loan Parties in accordance with GAAP;
(b) 

-83-

such contest
effectively suspends enforcement of the contested Laws, and (c) the failure to
comply therewith could not reasonably be expected to have a Material Adverse
Effect. 

	
 

	
 

	
 

	
6.09 Books and Records; Accountants. (a) (i)
 Maintain proper books of record and account, in which full, true and correct
 entries in conformity with GAAP consistently applied shall be made of all
 financial transactions and matters involving the assets and business of the
 Loan Parties or such Subsidiary, as the case may be; and (ii) maintain such
 books of record and account in material conformity with all applicable
 requirements of any Governmental Authority having regulatory jurisdiction
 over the Loan Parties or such Subsidiary, as the case may be. 

	
 

	
 

	
 

	
          (b)
 at all times retain a Registered Public Accounting Firm which is are
 reasonably satisfactory to the Administrative Agent and shall instruct such
 Registered Public Accounting Firm to cooperate with, and be available to, the
 Administrative Agent or its representatives to discuss the Loan Parties’
 financial performance, financial condition, operating results, controls, and
 such other matters, within the scope of the retention of such Registered
 Public Accounting Firm, as may be raised by the Administrative Agent. 

	
 

	
 

	
 

	
6.10 Inspection Rights. (a) Permit
representatives and independent contractors of the Administrative Agent to
visit and inspect any of its properties, to examine its corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss its affairs, finances and accounts with its directors, officers, and
Registered Public Accounting Firm, all at the expense of the Loan Parties and
at such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Lead Borrower;
provided, however, that when an Event of Default exists the Administrative
Agent (or any of its representatives or independent contractors) may do any
of the foregoing at the expense of the Loan Parties at any time during normal
business hours and without advance notice.  

	
 

	
 

	
 

	
          (b)
 Upon the request of the Administrative Agent after reasonable prior notice,
 permit the Administrative Agent or professionals (including investment
 bankers, consultants, accountants, lawyers and appraisers) retained by the
 Administrative Agent to conduct appraisals, commercial finance examinations
 and other evaluations, including, without limitation, of (i) the Lead
 Borrower’s practices in the computation of the Borrowing Base and (ii) the
 assets included in the Borrowing Base and related financial information such
 as, but not limited to, sales, gross margins, payables, accruals and reserves.
 The Loan Parties shall pay the fees and expenses of the Administrative Agent
 and such professionals with respect to any real estate appraisals performed
 and up to two (2) Inventory appraisals and two (2) commercial finance
 examinations in any twelve-month period; provided that, if
 Availability is at any time less than twenty-five percent (25%) of the Loan
 Cap, the Loan Parties shall pay the fees and expenses of the Administrative
 Agent and such professionals with respect to up to three (3) Inventory appraisals
 and three (3) commercial finance examinations in any twelve month period. In
 addition to the foregoing, the Loan Parties shall pay the fees and expenses
 of the Administrative Agent and such professionals with respect to (i) one
 (1) additional Inventory appraisal, one (1) additional commercial finance
 examination, and two (2) additional desktop Inventory appraisals during 2009,
 and (ii) one (1) additional Inventory appraisal and one (1) additional
 commercial finance examination during 2010. Notwithstanding any of the
 foregoing, the Administrative Agent may cause additional appraisals and
 commercial finance examinations to be undertaken (i) as it in its discretion
 deems necessary or appropriate, at its own expense or, (ii) if required by
 Law or if a Default shall have occurred and be continuing, at the expense of
 the Loan Parties. 

	
 

	
 

	
 

	
          (c)
 Permit the Administrative Agent, from time to time, engage a geohydrologist,
 an independent engineer or other qualified consultant or expert, reasonably
 acceptable to the 

-84-

	
 

	
 

	
 

	
Administrative
 Agent, at the expense of the Loan Parties, to undertake Phase I environmental
 site assessments during the term of this Agreement of the Eligible Real
 Estate, provided that such assessments may only be undertaken (i) during the
 continuance of an Event of Default or (ii) if a Loan Party receives any
 notice or obtains knowledge of (A) any potential or known release of any
 Hazardous Materials at or from any Eligible Real Estate, notification of
 which must be given to any Governmental Authority under any Environmental
 Law, or notification of which has, in fact, been given to any Governmental
 Authority, or (B) any complaint, order, citation or notice with regard to air
 emissions, water discharges, or any other environmental health or safety
 matter affecting any Loan Party or any Eligible Real Estate from any
 Governmental Authority (including, without limitation, the Environmental
 Protection Agency). Environmental assessments may include detailed visual
 inspections of the Real Estate, including, without limitation, any and all
 storage areas, storage tanks, drains, dry wells and leaching areas, and the
 taking of soil samples, surface water samples and ground water samples, as
 well as such other investigations or analyses as are reasonably necessary for
 a determination of the compliance of the Real Estate and the use and
 operation thereof with all applicable Environmental Laws. The Borrowers will,
 and will cause each of their Subsidiaries to, cooperate in all respects with
 the Administrative Agent and such third parties to enable such assessment and
 evaluation to be timely completed in a manner reasonably satisfactory to the
 Administrative Agent. 

          6.11 Use of Proceeds. Use the
proceeds of
the Credit Extensions (a) to repay outstanding Indebtedness under the Existing
Credit Agreement, (b) to finance the working capital needs of the Borrowers,
including the purchase of inventory and equipment, in each case in the ordinary
course of business, (c) to finance Capital Expenditures of the Borrowers, and
(d) for general corporate purposes of the Loan Parties, in each case to the
extent expressly permitted under Law and the Loan Documents. 

          6.12 Additional Loan Parties.
Notify the
Administrative Agent at the time that any Person becomes a Subsidiary, and
promptly thereafter (and in any event within fifteen (15) days), cause any such
Person (a) which is not a CFC, to (i) become a Loan Party by executing and
delivering to the Administrative Agent a Joinder to this Agreement or a
counterpart of the Facility Guaranty or such other document as the
Administrative Agent shall deem appropriate for such purpose, (ii) grant a Lien
to the Collateral Agent on such Person’s assets to secure the Obligations, and
(iii deliver to the Administrative Agent documents of the types referred to in
clauses (iii) and (iv) of Section 4.01(a) and favorable opinions of
counsel to such Person (which shall cover, among other things, the legality,
validity, binding effect and enforceability of the documentation referred to in
clause (a)), and (b) if any Equity Interests or Indebtedness of such Person are
owned by or on behalf of any Loan Party, to pledge such Equity Interests and
promissory notes evidencing such Indebtedness (except that, if such Subsidiary
is a CFC, the Equity Interests of such Subsidiary to be pledged may be limited
to 65% of the outstanding voting Equity Interests of such Subsidiary and 100%
of the non-voting Equity Interests of such Subsidiary and such time period may
be extended based on local law or practice), in each case in form, content and
scope reasonably satisfactory to the Administrative Agent. In no event shall
compliance with this Section 6.12 waive or be deemed a waiver of or Consent to
any transaction giving rise to the need to comply with this Section 6.12 if
such transaction was not otherwise expressly permitted by this Agreement or
constitute or be deemed to constitute, with respect to any Subsidiary, an
approval of such Person as a Borrower or permit the inclusion of any acquired
assets in the computation of the Borrowing Base. 

          6.13 Cash
Management.

                    (a)
On or prior to the Closing Date: 

	
 

	
 

	
 

	
                    (i)
 deliver to the Administrative Agent copies of notifications (each, a “Credit
 Card Notification”) substantially in the form attached hereto as Exhibit
 F which have 

-85-

	
 

	
 

	
 

	
been
 executed on behalf of such Loan Party and delivered to such Loan Party’s
 credit card clearinghouses and processors listed on Schedule 5.21(b);
 and 

	
 

	
 

	
 

	
                    (ii)
 enter into a Blocked Account Agreement satisfactory in form and substance to
 the Agents with each Blocked Account Bank (collectively, the “Blocked
 Accounts”). 

                    (b)
The Loan Parties shall ACH or wire transfer (i) prior to the occurrence and
continuance of an Event of Default, periodically in accordance with past
practices of the Loan Parties, but in no event less frequently than every fifth
Business Day, and (ii) upon the occurrence and during the continuance of an
Event of Default, as frequently as requested by the Administrative Agent (and
in each case whether or not there are then any outstanding Obligations) to a
Blocked Account all amounts on deposit in each such DDA. The Loan Parties shall
ACH or wire transfer no less frequently than daily (and whether or not there
are then any outstanding Obligations) to a Blocked Account all payments
received from credit card processors. 

                    (c)
Each Blocked Account Agreement shall require after the occurrence and during
the continuance of a Cash Dominion Event the ACH or wire transfer no less
frequently than daily (and whether or not there are then any outstanding
Obligations) to the concentration account maintained by the Collateral Agent at
Bank of America (the “Concentration Account”), of all cash receipts and
collections, including, without limitation, the following: 

	
 

	
 

	
 

	
                    (i)
 all available cash receipts from the sale of Inventory and other assets; 

	
 

	
 

	
 

	
                    (ii)
 all proceeds of collections of Accounts; 

	
 

	
 

	
 

	
                    (iii)
 all Net Proceeds, and all other cash payments received by a Loan Party from
 any Person or from any source or on account of any sale or other transaction
 or event, including, without limitation, any Prepayment Event; 

	
 

	
 

	
 

	
                    (iv)
 the then contents of each DDA (net of any minimum balance, not to exceed
 $2,500.00, as may be required to be kept in the subject DDA by the depository
 institution at which such DDA is maintained); 

	
 

	
 

	
 

	
                    (v)
 the then entire ledger balance of each Blocked Account (net of any minimum
 balance, not to exceed $2,500.00, as may be required to be kept in the
 subject Blocked Account by the Blocked Account Bank); and 

	
 

	
 

	
 

	
                    (vi)
 the proceeds of all credit card charges. 

                    (d)
The Concentration Account shall at all times be under the sole dominion and
control of the Collateral Agent. The Loan Parties hereby acknowledge and agree
that (i) the Loan Parties have no right of withdrawal from the Concentration
Account, (ii) the funds on deposit in the Concentration Account shall at all
times be collateral security for all of the Obligations and (iii) the funds on
deposit in the Concentration Account shall be applied as provided in this
Agreement. In the event that, notwithstanding the provisions of this Section
6.13, any Loan Party receives or otherwise has dominion and control of any such
proceeds or collections, such proceeds and collections shall be held in trust
by such Loan Party for the Collateral Agent, shall not be commingled with any
of such Loan Party’s other funds or deposited in any account of such Loan Party
and shall, not later than the Business Day after receipt thereof, be deposited
into the Concentration Account or dealt with in such other fashion as such Loan
Party may be instructed by the Collateral Agent. 

-86-

                    (e)
Upon the request of the Administrative Agent, the Loan Parties
shall cause bank statements and/or other reports to be delivered to the
Administrative Agent not less often than monthly, accurately setting forth all
amounts deposited in each Blocked Account to ensure the proper transfer of
funds as set forth above. 

          6.14
Information Regarding the Collateral.

                    (a)
Furnish to the Administrative Agent at least thirty (30) days
prior written notice of any change in: (i) any Loan Party’s name or in any
trade name used to identify it in the conduct of its business or in the
ownership of its properties; (ii) the location of any Loan Party’s chief
executive office, its principal place of business, any office in which it
maintains books or records relating to Collateral owned by it or any office or
facility at which Collateral owned by it is located (including the
establishment of any such new office or facility); (iii) any Loan Party’s
organizational structure or jurisdiction of incorporation or formation; or (iv)
any Loan Party’s Federal Taxpayer Identification Number or organizational
identification number assigned to it by its state of organization. The Loan
Parties agree not to effect or permit any change referred to in the preceding
sentence unless all filings have been made under the UCC or otherwise that are
required in order for the Collateral Agent to continue at all times following
such change to have a valid, legal and perfected first priority security interest
in all the Collateral for its own benefit and the benefit of the other Credit
Parties. 

                    (b)
Should any of the information on any of the Schedules hereto
become inaccurate or misleading in any material respect as a result of changes
after the Closing Date, the Lead Borrower shall advise the Administrative Agent
in writing of such revisions or updates as may be necessary or appropriate to
update or correct the same. From time to time as may be reasonably requested by
the Administrative Agent, the Lead Borrower shall supplement each Schedule
hereto, or any representation herein or in any other Loan Document, with
respect to any matter arising after the Closing Date that, if existing or
occurring on the Closing Date, would have been required to be set forth or
described in such Schedule or as an exception to such representation or that is
necessary to correct any information in such Schedule or representation which
has been rendered inaccurate thereby (and, in the case of any supplements to
any Schedule, such Schedule shall be appropriately marked to show the changes
made therein). Notwithstanding the foregoing, no supplement or revision to any
Schedule or representation shall be deemed the Credit Parties’ consent to the
matters reflected in such updated Schedules or revised representations nor
permit the Loan Parties to undertake any actions otherwise prohibited hereunder
or fail to undertake any action required hereunder from the restrictions and
requirements in existence prior to the delivery of such updated Schedules or
such revision of a representation; nor shall any such supplement or revision to
any Schedule or representation be deemed the Credit Parties’ waiver of any
Default resulting from the matters disclosed therein. 

          6.15
Physical Inventories.

                    (a)
Cause not less than one (1) physical inventory to be undertaken,
at the expense of the Loan Parties, in each twelve (12) month period and
periodic cycle counts, in each case consistent with past practices, conducted
by such inventory takers as are satisfactory to the Collateral Agent and
following such methodology as is consistent with the methodology used in the
immediately preceding inventory or as otherwise may be satisfactory to the
Collateral Agent. The Collateral Agent, at the expense of the Loan Parties, may
participate in and/or observe each scheduled physical count of Inventory which
is undertaken on behalf of any Loan Party. The Lead Borrower, within 30 days
following the completion of such inventory, shall provide the Collateral Agent
with a reconciliation of the results of such inventory (as well as of any other
physical inventory or cycle counts undertaken by a Loan Party) and shall post
such results to the Loan Parties’ stock ledgers and general ledgers, as
applicable. 

-87-

                    (b)
The Collateral Agent, in its discretion, if any Default or Event
of Default exists, may cause additional such inventories to be taken as the
Collateral Agent determines (each, at the expense of the Loan Parties). 

          6.16
Environmental Laws.

          Conduct
its operations and keep and maintain its Real Estate in material compliance
with all Environmental Laws; (b) obtain and renew all environmental permits
necessary for its operations and properties; and (c) implement any and all
investigation, remediation, removal and response actions that are appropriate
or necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws pertaining to the presence,
generation, treatment, storage, use, disposal, transportation or release of any
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate, provided, however, that neither a Loan Party nor any of
its Subsidiaries shall be required to undertake any such cleanup, removal,
remedial or other action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and adequate reserves have
been set aside and are being maintained by the Loan Parties with respect to
such circumstances in accordance with GAAP. 

          6.17
Further Assurances. 

                    (a)
Execute any and all further documents, financing statements,
agreements and instruments, and take all such further actions (including the
filing and recording of financing statements and other documents), that may be
required under any Law, or which any Agent may request, to effectuate the
transactions contemplated by the Loan Documents or to grant, preserve, protect
or perfect the Liens created or intended to be created by the Security
Documents or the validity or priority of any such Lien, all at the expense of
the Loan Parties. The Loan Parties also agree to provide to the Agents, from
time to time upon request, evidence satisfactory to the Agents as to the
perfection and priority of the Liens created or intended to be created by the
Security Documents. 

                    (b)
If any material assets are acquired by any Loan Party after the
Closing Date (other than (i) Real Estate and (ii) assets constituting
Collateral under the Security Documents that become subject to the Lien of the
Security Documents upon acquisition thereof), notify the Agents thereof, and
the Loan Parties will cause such assets to be subjected to a Lien securing the
Obligations and will take such actions as shall be necessary or shall be
requested by any Agent to grant and perfect such Liens, including actions
described in paragraph (a) of this Section 6.17, all at the expense of
the Loan Parties. In no event shall compliance with this Section 6.17(b)
waive or be deemed a waiver or Consent to any transaction giving rise to the
need to comply with this Section 6.17(b) if such transaction was not
otherwise expressly permitted by this Agreement or constitute or be deemed to
constitute Consent to the inclusion of any acquired assets in the computation
of the Borrowing Base. 

                    (c)
Upon the request of the Collateral Agent, cause each of its
customs brokers to deliver a Customs Broker Agreement to the Collateral Agent. 

          6.18
Compliance with Terms of Leaseholds. Except as
otherwise expressly permitted hereunder, make all payments and otherwise
perform all obligations in respect of all Leases of real property to which any
Loan Party or any of its Subsidiaries is a party, keep such Leases in full
force and effect and not allow such Leases to lapse or be terminated or any
rights to renew such leases to be forfeited or cancelled, notify the
Administrative Agent of any default by any party with respect to such Leases
and cooperate with the Administrative Agent in all respects to cure any such
default, and cause each of its Subsidiaries to do so, except, in any case,
where the failure to do so, either individually or in the aggregate, could not be
reasonably likely to have a Material Adverse Effect. 

-88-

          6.19
Material Contracts. Perform and observe all the terms
and provisions of each Material Contract to be performed or observed by it,
maintain each such Material Contract in full force and effect, enforce each
such Material Contract in accordance with its terms, take all such action to
such end as may be from time to time requested by the Administrative Agent and,
upon request of the Administrative Agent, make to each other party to each such
Material Contract such demands and requests for information and reports or for
action as any Loan Party or any of its Subsidiaries is entitled to make under
such Material Contract, and cause each of its Subsidiaries to do so, except, in
any case, where the failure to do so, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect. 

ARTICLE VII 

NEGATIVE COVENANTS

          So
long as any Lender shall have any Commitment hereunder, any Committed Loan or
other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of
Credit shall remain outstanding, no Loan Party shall, nor shall it permit any
Subsidiary to, directly or indirectly: 

          7.01
Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired or sign or file or suffer to exist under the UCC or any
similar Law or statute of any jurisdiction a financing statement that names any
Loan Party or any Subsidiary thereof as debtor; sign or suffer to exist any
security agreement authorizing any Person thereunder to file such financing
statement; sell any of its property or assets subject to an understanding or
agreement (contingent or otherwise) to repurchase such property or assets with
recourse to it or any of its Subsidiaries; or assign or otherwise transfer any
accounts or other rights to receive income, other than, as to all of the above,
Permitted Encumbrances. 

          7.02
Investments. Make any Investments, except Permitted
Investments. 

          7.03
Indebtedness; Disqualified Stock 

                    (a)
Create, incur, assume, guarantee, suffer to exist or otherwise become or remain
liable with respect to, any Indebtedness, except Permitted Indebtedness or (b)
issue Disqualified Stock. 

          7.04
Fundamental Changes. Merge, dissolve, liquidate,
consolidate with or into another Person, (or agree to do any of the foregoing),
except that, so long as no Default or Event of Default shall have occurred and
be continuing prior to or immediately after giving effect to any action
described below or would result therefrom: 

	
 

	
 

	
 

	
          (a)
 any Subsidiary which is not a Loan Party may merge with any one or more other
 Subsidiaries provided that (i) in any merger involving a Loan Party,
 the Loan Party shall be the continuing or surviving Person, and (ii) in any
 merger involving a wholly-owned Subsidiary, the continuing or surviving
 Person shall be wholly-owned Subsidiary; 

	
 

	
 

	
 

	
          (b)
 any Loan Party may merge into any other Loan Party, provided that in
 any merger involving the Borrower, the Borrower shall be the continuing or
 surviving Person; 

	
 

	
 

	
 

	
          (c)
 in connection with a Permitted Acquisition, any Subsidiary of a Loan Party
 may merge with or into or consolidate with any other Person or permit any
 other Person to merge with or into or consolidate with it; provided
 that (i) the Person surviving such merger shall be a wholly-owned Subsidiary
 of a Loan Party and (ii) in the case of any such merger to which any Loan
 Party is a party, such Loan Party is the surviving Person; and 

-89-

	
 

	
 

	
 

	
          (d)
 any CFC that is not a Loan Party may merge into any CFC that is not a Loan
 Party. 

          7.05
Dispositions. Make any Disposition or enter into any
agreement to make any Disposition, except Permitted Dispositions. 

          7.06
Restricted Payments. Declare or make, directly or
indirectly, any Restricted Payment, or incur any obligation (contingent or
otherwise) to do so, except that, so long as no Default or Event of Default
shall have occurred and be continuing prior to or immediately after giving
effect to any action described below or would result therefrom: 

	
 

	
 

	
 

	
          (a)
 each Subsidiary of a Loan Party may make Restricted Payments to any Loan
 Party; 

	
 

	
 

	
 

	
          (b)
 the Loan Parties and each Subsidiary may declare and make dividend payments
 or other distributions payable solely in the common stock or other common
 Equity Interests of such Person; 

	
 

	
 

	
 

	
          (c)
 if the Payment Conditions are satisfied, the Loan Parties and each Subsidiary
 may purchase, redeem or otherwise acquire Equity Interests issued by it; 

	
 

	
 

	
 

	
          (d)
 if the Payments Conditions are satisfied, the Lead Borrower may declare or
 pay cash dividends to its stockholders; and 

	
 

	
 

	
 

	
          (e)
 the Loan Parties may issue and sell Equity Interests provided that (i) (A)
 all dividends and other payments in respect thereof shall be paid in
 additional shares of such Equity Interests, in lieu of cash, (B) such Equity
 Interests shall not be subject to redemption other than redemption at the
 option of the Loan Party issuing such Equity Interests, and (C) all payments
 in respect of such Equity Interests shall be expressly subordinated to the
 Obligations, and (ii) no Loan Party shall issue any additional Equity
 Interests in a Subsidiary.

          7.07
Prepayments of Indebtedness. Prepay, redeem, purchase,
defease or otherwise satisfy prior to the scheduled maturity thereof in any
manner any Indebtedness, or make any payment in violation of any subordination
terms of any Subordinated Indebtedness, except (a) as long as no Event of
Default then exists, regularly scheduled or mandatory (i) repayments, (ii)
repurchases, (iii) redemptions or (iv) defeasances of Permitted Indebtedness
(other than Subordinated Indebtedness), (b) as long as no Event of Default then
exists, repayments and prepayments of Subordinated Indebtedness in accordance
with the subordination terms thereof, and (c) voluntary prepayments, repurchases,
redemptions or defeasances of Permitted Indebtedness (other than Subordinated
Indebtedness) as long as the Payment Conditions are satisfied. 

          7.08
Change in Nature of Business 

          Engage
in any line of business substantially different from the business conducted by
the Loan Parties and their Subsidiaries on the date hereof or any business
substantially related or incidental thereto, or cause or permit Syms
Advertising Inc. to own any assets or engage in any business. 

          7.09
Transactions with Affiliates. Enter into, renew,
extend or be a party to any transaction of any kind with any Affiliate of any
Loan Party, whether or not in the ordinary course of business, other than on
fair and reasonable terms substantially as favorable to the Loan Parties or
such Subsidiary as would be obtainable by the Loan Parties or such Subsidiary
at the time in a comparable arm’s length 

-90-

transaction
with a Person other than an Affiliate, provided that the foregoing
restriction shall not apply to a transaction between or among the Loan Parties.

          7.10
Burdensome Agreements. Enter into or permit to exist
any Contractual Obligation (other than this Agreement or any other Loan
Document) that (a) limits the ability (i) of any Subsidiary to make Restricted
Payments or other distributions to any Loan Party or to otherwise transfer
property to or invest in a Loan Party, (ii) of any Subsidiary to Guarantee the
Obligations, (iii) of any Subsidiary to make or repay loans to a Loan Party, or
(iv) of the Loan Parties or any Subsidiary to create, incur, assume or suffer
to exist Liens on property of such Person in favor of the Collateral Agent; provided,
however, that this clause (iv) shall not prohibit (A) any negative
pledge incurred or provided in favor of any holder of Indebtedness permitted
under clauses (c) or (f) of the definition of Permitted Indebtedness solely to
the extent any such negative pledge relates to the property financed by or the
subject of such Indebtedness or (B) customary provisions in leases restricting
the assignment thereof; or (b) requires the grant of a Lien to secure an
obligation of such Person if a Lien is granted to secure another obligation of
such Person. 

          7.11
Use of Proceeds. Use the proceeds of any Credit Extension,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, to purchase or carry margin stock (within the meaning of Regulation
U of the FRB) or to extend credit to others for the purpose of purchasing or
carrying margin stock or to refund Indebtedness originally incurred for such
purpose. 

          7.12
Amendment of Material Documents.

          Amend,
modify or waive any of a Loan Party’s rights under (a) its Organization
Documents in a manner materially adverse to the Credit Parties, or (b) any
Material Contract or Material Indebtedness (other than on account of any
refinancing thereof otherwise permitted hereunder), in each case to the extent
that such amendment, modification or waiver would be reasonably likely to have
a Material Adverse Effect or would constitute a breach of any terms of the Loan
Documents. 

          7.13
Fiscal Year.

          Change
the Fiscal Year of any Loan Party, or the accounting policies or reporting
practices of the Loan Parties, except as required by GAAP. 

          7.14
Deposit Accounts; Credit Card Processors.

          Open
new DDAs or Blocked Accounts unless the Loan Parties shall have delivered to
the Collateral Agent appropriate Blocked Account Agreements consistent with the
provisions of Section 6.13 and otherwise satisfactory to the Collateral Agent.
No Loan Party shall maintain any bank accounts or enter into any agreements
with credit card processors other than the ones expressly contemplated herein
or in Section 6.13 hereof. 

          7.15
Financial Covenant. 

          Permit
Availability at any time to be less than twelve and one-half percent (12.5%) of
the Loan Cap. 

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES 

          8.01
Events of Default. Any of the following shall constitute
an Event of Default: 

-91-

	
 

	
 

	
 

	
          (a)
 Non-Payment. The Borrowers or any other Loan Party fails to pay when
 and as required to be paid herein, (i) any amount of principal of any
 Committed Loan or any L/C Obligation, or fails to deposit any funds as Cash
 Collateral in respect of L/C Obligations, or (ii) any interest on any
 Committed Loan or on any L/C Obligation, or any fee due hereunder, or (iii)
 any other amount payable hereunder or under any other Loan Document; or 

	
 

	
 

	
 

	
          (b)
 Specific Covenants. (i) Any Loan Party fails to perform or observe any
 term, covenant or agreement contained in any of Section 6.01, 6.02,
 6.03(a), (b), (c), (h) or (i), 6.05, 6.07, 6.10, 6.11,
 6.12, 6.13 or 6.14 or Article VII; or 

	
 

	
 

	
 

	
          (c)
 Other Defaults. Any Loan Party fails to perform or observe any other
 covenant or agreement (not specified in subsection (a) or (b) above)
 contained in any Loan Document on its part to be performed or observed and
 such failure continues for 30 days; or 

	
 

	
 

	
 

	
          (d)
 Representations and Warranties. Any representation, warranty,
 certification or statement of fact made or deemed made by or on behalf of any
 Borrower or any other Loan Party herein, in any other Loan Document, or in
 any document delivered in connection herewith or therewith (including,
 without limitation, any Borrowing Base Certificate) shall be incorrect or
 misleading in any material respect when made or deemed made; or 

	
 

	
 

	
 

	
          (e)
 Cross-Default. (i) Any Loan Party or any Subsidiary thereof (A) fails
 to make any payment when due (whether by scheduled maturity, required
 prepayment, acceleration, demand, or otherwise) in respect of any Material
 Indebtedness (including undrawn committed or available amounts and including
 amounts owing to all creditors under any combined or syndicated credit
 arrangement), or (B) fails to observe or perform any other agreement or
 condition relating to any such Material Indebtedness or contained in any
 instrument or agreement evidencing, securing or relating thereto, or any
 other event occurs, the effect of which default or other event is to cause,
 or to permit the holder or holders of such Material Indebtedness or the
 beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent
 on behalf of such holder or holders or beneficiary or beneficiaries) to
 cause, with the giving of notice if required, such Indebtedness to be
 demanded or to become due or to be repurchased, prepaid, defeased or redeemed
 (automatically or otherwise), or an offer to repurchase, prepay, defease or
 redeem such Indebtedness to be made, prior to its stated maturity, or such
 Guarantee to become payable or cash collateral in respect thereof to be
 demanded; or (ii) there occurs under any Swap Contract an Early Termination
 Date (as defined in such Swap Contract) resulting from (A) any event of
 default under such Swap Contract as to which a Loan Party or any Subsidiary
 thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any
 Termination Event (as so defined) under such Swap Contract as to which a Loan
 Party or any Subsidiary thereof is an Affected Party (as so defined) and, in
 either event, the Swap Termination Value owed by the Loan Party or such
 Subsidiary as a result thereof is greater than $1,000,000; or 

	
 

	
 

	
 

	
          (f)
 Insolvency Proceedings, Etc. Any Loan Party or any of its Subsidiaries
 institutes or consents to the institution of any proceeding under any Debtor
 Relief Law, or makes an assignment for the benefit of creditors; or applies
 for or consents to the appointment of any receiver, trustee, custodian,
 conservator, liquidator, rehabilitator or similar officer for it or for all
 or any material part of its property; or a proceeding shall be commenced or a
 petition filed, without the application or consent of such Person, seeking or
 requesting the appointment of any receiver, trustee, custodian, conservator,
 liquidator, rehabilitator or similar officer and the appointment continues
 undischarged, undismissed or unstayed for 60 calendar days or an order or decree
 approving or ordering any of the foregoing shall be entered; or any
 proceeding under any Debtor Relief Law relating to any such Person or to all
 or any material part of its property is 

-92-

	
 

	
 

	
 

	
instituted
 without the consent of such Person and continues undismissed or unstayed for
 60 calendar days, or an order for relief is entered in any such proceeding;
 or 

	
 

	
 

	
 

	
          (g)
 Inability to Pay Debts; Attachment. (i) Any Loan Party or any
 Subsidiary thereof becomes unable or admits in writing its inability or fails
 generally to pay its debts as they become due in the ordinary course of
 business, or (ii) any writ or warrant of attachment or execution or similar
 process is issued or levied against all or any material part of the property
 of any such Person and is not released, vacated or fully bonded within 30
 days after its issuance or levy; or 

	
 

	
 

	
 

	
          (h)
 Judgments. There is entered against any Loan Party or any Subsidiary
 thereof (i) one or more judgments or orders for the payment of money in an
 aggregate amount (as to all such judgments and orders) exceeding $2,000,000
 (to the extent not covered by independent third-party insurance as to which
 the insurer is rated at least “A” by A.M. Best Company, has been notified of
 the potential claim and does not dispute coverage), or (ii) any one or more
 non-monetary judgments that have, or could reasonably be expected to have,
 individually or in the aggregate, a Material Adverse Effect and, in either
 case, (A) enforcement proceedings are commenced by any creditor upon such
 judgment or order, or (B) there is a period of 30 consecutive days during
 which a stay of enforcement of such judgment or order, by reason of a pending
 appeal or otherwise, is not in effect; or 

	
 

	
 

	
 

	
          (i)
 ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or
 Multiemployer Plan which has resulted or could reasonably be expected to
 result in liability of any Loan Party under Title IV of ERISA to the Pension
 Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
 $2,000,000 or which would reasonably likely result in a Material Adverse
 Effect, or (ii) a Loan Party or any ERISA Affiliate fails to pay when due,
 after the expiration of any applicable grace period, any installment payment
 with respect to its withdrawal liability under Section 4201 of ERISA under a
 Multiemployer Plan in an aggregate amount in excess of $2,000,000 or which
 would reasonably likely result in a Material Adverse Effect; or 

	
 

	
 

	
 

	
          (j)
 Invalidity of Loan Documents. (i) Any provision of any Loan Document,
 at any time after its execution and delivery and for any reason other than as
 expressly permitted hereunder or thereunder or satisfaction in full of all
 the Obligations, ceases to be in full force and effect; or any Loan Party or
 any other Person contests in any manner the validity or enforceability of any
 provision of any Loan Document; or any Loan Party denies that it has any or
 further liability or obligation under any provision of any Loan Document, or
 purports to revoke, terminate or rescind any provision of any Loan Document
 or seeks to avoid, limit or otherwise adversely affect any Lien purported to
 be created under any Security Document; or (ii) any Lien purported to be
 created under any Security Document shall cease to be (except as permitted
 pursuant to the terms thereof or of this Agreement), or shall be asserted by
 any Loan Party or any other Person not to be, a valid and perfected Lien on
 any Collateral, with the priority required by the applicable Security Document;
 or 

	
 

	
 

	
 

	
          (k)
 Change of Control. There occurs any Change of Control; or 

	
 

	
 

	
 

	
          (l)
 Cessation of Business. Except as otherwise expressly permitted
 hereunder, any Loan Party shall take any action to suspend the operation of
 its business in the ordinary course (other than for the taking of a physical
 inventory in the ordinary course or at the request of the Agents), liquidate
 all or a material portion of its assets or Store locations, or employ an
 agent or other third party to conduct a program of closings, liquidations or
 “Going-Out-Of-Business” sales of any material portion of its business; or 

-93-

	
 

	
 

	
 

	
          (m)
 Loss of Collateral. There occurs any uninsured loss to any material
 portion of the Collateral; or 

	
 

	
 

	
 

	
          (n)
 Breach of Contractual Obligation. Any Loan Party or any Subsidiary
 thereof fails to make any payment when due (whether by scheduled maturity,
 required prepayment, acceleration, demand, or otherwise) in respect of any
 Material Contract or fails to observe or perform any other agreement or
 condition relating to any such Material Contract or contained in any
 instrument or agreement evidencing, securing or relating thereto, or any
 other event occurs, the effect of which default or other event is to cause,
 or to permit the counterparty to such Material Contract to terminate such
 Material Contract; or 

	
 

	
 

	
 

	
          (o)
 Indictment. The indictment or institution of any legal process or
 proceeding against, any Loan Party or any Subsidiary thereof, under any
 federal, state, municipal, and other criminal statute, rule, regulation,
 order, or other requirement having the force of law for a felony; 

	
 

	
 

	
 

	
          (p)
 Guaranty. The termination or attempted termination of any Facility
 Guaranty except as expressly permitted hereunder or under any other Loan
 Document; 

	
 

	
 

	
 

	
          (q)
 Subordination. (i) The subordination provisions of the documents
 evidencing or governing any Subordinated Indebtedness (the “Subordinated
 Provisions”) shall, in whole or in part, terminate, cease to be effective
 or cease to be legally valid, binding and enforceable against any holder of
 the applicable Subordinated Indebtedness; or (ii) any Borrower or any other
 Loan Party shall, directly or indirectly, disavow or contest in any manner
 (A) the effectiveness, validity or enforceability of any of the Subordination
 Provisions, (B) that the Subordination Provisions exist for the benefit of
 the Credit Parties, or (C) that all payments of principal of or premium and
 interest on the applicable Subordinated Indebtedness, or realized from the
 liquidation of any property of any Loan Party, shall be subject to any of the
 Subordination Provisions. 

	
 

	
 

	
          8.02
 Remedies Upon Event of Default. If any Event of
 Default occurs and is continuing, the Administrative Agent may, or, at the
 request of the Required Lenders shall, take any or all of the following
 actions:

	
 

	
 

	
 

	
          (a)
 declare the Commitments of each Lender to make Committed Loans and any
 obligation of the L/C Issuer to make L/C Credit Extensions to be terminated,
 whereupon such Commitments and obligation shall be terminated; 

	
 

	
 

	
 

	
          (b)
 declare the unpaid principal amount of all outstanding Committed Loans, all
 interest accrued and unpaid thereon, and all other amounts owing or payable
 hereunder or under any other Loan Document to be immediately due and payable,
 without presentment, demand, protest or other notice of any kind, all of
 which are hereby expressly waived by the Loan Parties; 

	
 

	
 

	
 

	
          (c)
 require that the Loan Parties Cash Collateralize the L/C Obligations; and 

	
 

	
 

	
 

	
          (d)
 whether or not the maturity of the Obligations shall have been accelerated
 pursuant hereto, proceed to protect, enforce and exercise all rights and
 remedies of the Credit Parties under this Agreement, any of the other Loan
 Documents or Law, including, but not limited to, by suit in equity, action at
 law or other appropriate proceeding, whether for the specific performance of
 any covenant or agreement contained in this Agreement and the other Loan
 Documents or any instrument pursuant to which the Obligations are evidenced,
 and, if such amount shall have become due, by declaration or otherwise,
 proceed to enforce the payment thereof or any other legal or equitable right
 of the Credit Parties; 

-94-

provided, however, that upon the entry
of an order for relief with respect to any Loan Party or any Subsidiary thereof
under the Bankruptcy Code of the United States of America, the obligation of
each Lender to make Committed Loans and any obligation of the L/C Issuer to
make L/C Credit Extensions shall automatically terminate, the unpaid principal
amount of all outstanding Committed Loans and all interest and other amounts as
aforesaid shall automatically become due and payable, and the obligation of the
Loan Parties to Cash Collateralize the L/C Obligations as aforesaid shall
automatically become effective, in each case without further act of the
Administrative Agent or any Lender. 

          No
remedy herein is intended to be exclusive of any other remedy and each and
every remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or any other provision of Law. 

          8.03
Application of Funds. After the exercise of remedies
provided for in Section 8.02 (or after the Committed Loans have
automatically become immediately due and payable and the L/C Obligations have
automatically been required to be Cash Collateralized as set forth in the
proviso to Section 8.02), any amounts received on account of the
Obligations shall be applied by the Administrative Agent in the following
order: 

	
  

 	
  

 
	
  

 	
           First,
 to payment of that portion of the Obligations (excluding the Other
 Liabilities) constituting fees, indemnities, Credit Party Expenses and other
 amounts (including fees, charges and disbursements of counsel to the
 Administrative Agent and the Collateral Agent and amounts payable under Article
 III) payable to the Administrative Agent and the Collateral Agent, each
 in its capacity as such;

 
	
  

 	
  

 
	
  

 	
           Second,
 to payment of that portion of the Obligations (excluding the Other
 Liabilities) constituting indemnities, Credit Party Expenses, and other
 amounts (other than principal, interest and fees) payable to the Lenders and
 the L/C Issuer (including fees, charges and disbursements of counsel to the
 respective Lenders and the L/C Issuer and amounts payable under Article
 III), ratably among them in proportion to the amounts described in this
 clause Second payable to them;

 
	
  

 	
  

 
	
  

 	
           Third,
 to the extent not previously reimbursed by the Lenders, to payment to the
 Lenders of that portion of the Obligations constituting principal and accrued
 and unpaid interest on any Permitted Overadvances, ratably among the Lenders
 in proportion to the amounts described in this clause Third payable to
 them;

 
	
  

 	
  

 
	
  

 	
           Fourth,
 to payment of that portion of the Obligations constituting accrued and unpaid
 interest on the Committed Loans L/C Borrowings and other Obligations, and
 fees (including Letter of Credit Fees), ratably among the Lenders and the L/C
 Issuer in proportion to the respective amounts described in this clause Fourth
 payable to them;

 
	
  

 	
  

 
	
  

 	
           Fifth,
 to payment of that portion of the Obligations constituting unpaid principal
 of the Committed Loans and L/C Borrowings, ratably among the Lenders and the
 L/C Issuer in proportion to the respective amounts described in this clause Fifth
 held by them;

 
	
  

 	
  

 
	
  

 	
           Sixth,
 to the Administrative Agent for the account of the L/C Issuer, to Cash
 Collateralize that portion of L/C Obligations comprised of the aggregate
 undrawn amount of Letters of Credit;

 
	
  

 	
  

 
	
  

 	
           Seventh,
 to payment of all other Obligations (including without limitation the cash
 collateralization of indemnification obligations as to which a claim has been
 made as provided in Section 10.04(g), but which is unliquidated as to
 amount, but excluding any Other Liabilities), 

 

-95-

	
  

 	
  

 
	
  

 	
 ratably
among the Credit Parties in proportion to the respective amounts described in
this clause Seventh held by them; 

 
	
  

 	
  

 
	
  

 	
           Eighth, to
payment of that portion of the Obligations arising from Cash Management
Services to the extent secured under the Security Documents, ratably among
the Credit Parties in proportion to the respective amounts described in this
clause Eighth held by them; 

 
	
  

 	
  

 
	
  

 	
           Ninth, to
payment of all other Obligations arising from Bank Products to the extent
secured under the Security Documents, ratably among the Credit Parties in
proportion to the respective amounts described in this clause Ninth
held by them; and 

 
	
  

 	
  

 
	
  

 	
           Last, the
balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Loan Parties or as otherwise required by Law. 

 

Subject to Section
2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of
Letters of Credit pursuant to clause Sixth above shall be applied to
satisfy drawings under such Letters of Credit as they occur. If any amount
remains on deposit as Cash Collateral after all Letters of Credit have either
been fully drawn or expired, such remaining amount shall be applied to the
other Obligations, if any, in the order set forth above. 

ARTICLE IX 

ADMINISTRATIVE AGENT

          9.01
Appointment and Authority. 

	
  

 	
  

 
	
  

 	
           (a)
 Each of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of
 America to act on its behalf as the Administrative Agent hereunder and under
 the other Loan Documents and authorizes the Administrative Agent to take such
 actions on its behalf and to exercise such powers as are delegated to the
 Administrative Agent by the terms hereof or thereof, together with such
 actions and powers as are reasonably incidental thereto. The provisions of
 this Article are solely for the benefit of the Administrative Agent, the
 Lenders and the L/C Issuer, and no Loan Party or any Subsidiary thereof shall
 have rights as a third party beneficiary of any of such provisions.

 
	
  

 	
  

 
	
  

 	
           (b)
 Each of the Lenders (in its capacity as a Lender), and the L/C Issuer hereby
 irrevocably appoints Bank of America as Collateral Agent and authorizes the
 Collateral Agent to act as the agent of such Lender and the L/C Issuer for
 purposes of acquiring, holding and enforcing any and all Liens on Collateral
 granted by any of the Loan Parties to secure any of the Obligations, together
 with such powers and discretion as are reasonably incidental thereto. In this
 connection, the Collateral Agent, as “collateral agent” and any co-agents,
 sub-agents and attorneys-in-fact appointed by the Collateral Agent pursuant
 to Section 9.05 for purposes of holding or enforcing any Lien on the
 Collateral (or any portion thereof) granted under the Collateral Documents,
 or for exercising any rights and remedies thereunder at the direction of the
 Collateral Agent), shall be entitled to the benefits of all provisions of
 this Article IX and Article X (including Section 10.04(c)),
 as though such co-agents, sub-agents and attorneys-in-fact were the
 “collateral agent” under the Loan Documents, as if set forth in full herein
 with respect thereto.

 

          9.02
Rights as a Lender. The Persons serving as the Agents
hereunder shall have the same rights and powers in their capacity as a Lender
as any other Lender and may exercise the same as though they were not the
Administrative Agent or the Collateral Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise
requires, include the Person serving 

-96-

as the
Administrative Agent or the Collateral Agent hereunder in its individual
capacity. Such Person and its Affiliates may accept deposits from, lend money
to, act as the financial advisor or in any other advisory capacity for and
generally engage in any kind of business with the Loan Parties or any
Subsidiary or other Affiliate thereof as if such Person were not the
Administrative Agent or the Collateral Agent hereunder and without any duty to
account therefor to the Lenders. 

          9.03
Exculpatory Provisions. The Agents shall not have any
duties or obligations except those expressly set forth herein and in the other
Loan Documents. Without limiting the generality of the foregoing, the Agents: 

	
  

 	
  

 
	
  

 	
           (a)
 shall not be subject to any fiduciary or other implied duties, regardless of
 whether a Default has occurred and is continuing;

 
	
  

 	
  

 
	
  

 	
           (b)
 shall not have any duty to take any discretionary action or exercise any
 discretionary powers, except discretionary rights and powers expressly
 contemplated hereby or by the other Loan Documents that the Administrative
 Agent or the Collateral Agent, as applicable, is required to exercise as
 directed in writing by the Required Lenders (or such other number or
 percentage of the Lenders as shall be expressly provided for herein or in the
 other Loan Documents), provided that no Agent shall be required to
 take any action that, in its respective opinion or the opinion of its
 counsel, may expose such Agent to liability or that is contrary to any Loan
 Document or Law; and 

 
	
  

 	
  

 
	
  

 	
           (c)
 shall not, except as expressly set forth herein and in the other Loan
 Documents, have any duty to disclose, and shall not be liable for the failure
 to disclose, any information relating to the Loan Parties or any of its
 Affiliates that is communicated to or obtained by the Person serving as the Administrative
 Agent, the Collateral Agent or any of its Affiliates in any capacity. 

 

No Agent shall
be liable for any action taken or not taken by it (i) with the Consent or at
the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as such Agent shall believe in good faith
shall be necessary, under the circumstances as provided in Sections 10.01
and 8.02) or (ii) in the absence of its own gross negligence or willful
misconduct as determined by a final and non-appealable judgment of a court of
competent jurisdiction. 

          No
Agent shall be deemed to have knowledge of any Default unless and until notice
describing such Default is given to such Agent by the Loan Parties, a Lender or
the L/C Issuer. In the event that an Agent obtains such actual knowledge or
receives such a notice, such Agent shall give prompt notice thereof to each of
the other Credit Parties. Upon the occurrence of an Event of Default, the
Agents shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Applicable Lenders. Unless and until the
Agents shall have received such direction, the Agents may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to any such Default or Event of Default as it shall deem advisable in
the best interest of the Credit Parties. In no event shall the Agents be
required to comply with any such directions to the extent that any Agent
believes that its compliance with such directions would be unlawful. 

          The
Agents shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection
with this Agreement or any other Loan Document, (ii) the contents of any
certificate, report or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of any of
the covenants, agreements or other terms or conditions set forth herein or
therein or the occurrence of any Default, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement, any other Loan Document or 

-97-

any other
agreement, instrument or document or the creation, perfection or priority of any
Lien purported to be created by the Security Documents, (v) the value or the
sufficiency of any Collateral, or (vi) the satisfaction of any condition set
forth in Article IV or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Agents. 

          9.04
Reliance by Agents. 

          Each
Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument,
document or other writing (including, but not limited to, any electronic
message, Internet or intranet website posting or other distribution) believed
by it to be genuine and to have been signed, sent or otherwise authenticated by
the proper Person. Each Agent also may rely upon any statement made to it
orally or by telephone and believed by it to have been made by the proper
Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Committed Loan, or
the issuance of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or the L/C Issuer, the Administrative Agent may
presume that such condition is satisfactory to such Lender or the L/C Issuer
unless the Administrative Agent shall have received written notice to the
contrary from such Lender or the L/C Issuer prior to the making of such
Committed Loan or the issuance of such Letter of Credit. Each Agent may consult
with legal counsel (who may be counsel for any Loan Party), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts. 

          9.05
Delegation of Duties. Each Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub-agents appointed by such
Agent. Each Agent and any such sub-agent may perform any and all of its duties
and exercise its rights and powers by or through their respective Related
Parties. The exculpatory provisions of this Article shall apply to any such
sub-agent and to the Related Parties of the Agents and any such sub-agent, and
shall apply to their respective activities in connection with the syndication
of the credit facilities provided for herein as well as activities as such
Agent. 

          9.06
Resignation of Agents. Either Agent may at any time
give written notice of its resignation to the Lenders, the L/C Issuer and the
Lead Borrower. Upon receipt of any such notice of resignation, the Required
Lenders shall have the right, in consultation with the Lead Borrower, to
appoint a successor, which shall be a bank with an office in the United States,
or an Affiliate of any such bank with an office in the United States. If no
such successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Agent gives
notice of its resignation, then the retiring Agent may on behalf of the Lenders
and the L/C Issuer, appoint a successor Administrative Agent or Collateral
Agent, as applicable, meeting the qualifications set forth above; provided
that if the Administrative Agent or the Collateral Agent shall notify the Lead
Borrower and the Lenders that no qualifying Person has accepted such
appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (1) the retiring Agent shall be discharged from
its duties and obligations hereunder and under the other Loan Documents (except
that in the case of any Collateral held by the Collateral Agent on behalf of
the Lenders or the L/C Issuer under any of the Loan Documents, the retiring
Collateral Agent shall continue to hold such collateral security until such
time as a successor Collateral Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender and the L/C
Issuer directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this Section. Upon the acceptance
of a successor’s appointment as Administrative Agent or Collateral Agent, as
applicable, hereunder, such successor shall succeed to and become vested with
all of the rights, powers, privileges and duties of the retiring (or retired)
Agent, and the retiring Agent shall be discharged from all of its duties and
obligations hereunder 

-98-

or under the
other Loan Documents (if not already discharged therefrom as provided above in
this Section). The fees payable by the Borrowers to a successor Administrative
Agent shall be the same as those payable to its predecessor unless otherwise
agreed between the Lead Borrower and such successor. After the retiring Agent’s
resignation hereunder and under the other Loan Documents, the provisions of
this Article and Section 10.04 shall continue in effect for the benefit
of such retiring Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while the
retiring Agent was acting as Administrative Agent or Collateral Agent
hereunder. 

          Any
resignation by Bank of America as Administrative Agent pursuant to this Section
shall also constitute its resignation as L/C Issuer. Upon the acceptance of a
successor’s appointment as Administrative Agent hereunder, (a) such successor
shall succeed to and become vested with all of the rights, powers, privileges
and duties of the retiring L/C Issuer, (b) the retiring L/C Issuer shall be
discharged from all of its duties and obligations hereunder or under the other
Loan Documents, and (c) the successor L/C Issuer shall issue letters of credit
in substitution for the Letters of Credit, if any, outstanding at the time of
such succession or make other arrangements satisfactory to the retiring L/C
Issuer to effectively assume the obligations of the retiring L/C Issuer with
respect to such Letters of Credit. 

          9.07
Non-Reliance on Administrative Agent and Other Lenders. Each
Lender and the L/C Issuer acknowledges that it has, independently and without
reliance upon the Agents or any other Lender or any of their Related Parties
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Lender
and the L/C Issuer also acknowledges that it will, independently and without
reliance upon the Agents or any other Lender or any of their Related Parties
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or any related
agreement or any document furnished hereunder or thereunder. Except as provided
in Section 9.12, the Agents shall not have any duty or responsibility to
provide any Credit Party with any other credit or other information concerning
the affairs, financial condition or business of any Loan Party that may come
into the possession of the Agents. 

          9.08
Intentionally Omitted. 

          9.09
Administrative Agent May File Proofs of Claim. In case
of the pendency of any proceeding under any Debtor Relief Law or any other
judicial proceeding relative to any Loan Party, the Administrative Agent
(irrespective of whether the principal of any Committed Loan or L/C Obligation
shall then be due and payable as herein expressed or by declaration or otherwise
and irrespective of whether the Administrative Agent shall have made any demand
on the Loan Parties) shall be entitled and empowered, by intervention in such
proceeding or otherwise, 

	
  

 	
  

 
	
  

 	
           (a)
 to file and prove a claim for the whole amount of the principal and interest
 owing and unpaid in respect of the Committed Loans, L/C Obligations and all
 other Obligations that are owing and unpaid and to file such other documents
 as may be necessary or advisable in order to have the claims of the Lenders, the
 L/C Issuer, the Administrative Agent and the other Credit Parties (including
 any claim for the reasonable compensation, expenses, disbursements and
 advances of the Lenders, the L/C Issuer, the Administrative Agent, such
 Credit Parties and their respective agents and counsel and all other amounts
 due the Lenders, the L/C Issuer the Administrative Agent and such Credit
 Parties under Sections 2.03(i), 2.03(j), 2.09 and 10.04)
 allowed in such judicial proceeding; and 

 

-99-

	
  

 	
  

 
	
  

 	
           (b)
 to collect and receive any monies or other property payable or deliverable on
 any such claims and to distribute the same;

 

and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Lender and the L/C Issuer to make such payments to the Administrative Agent
and, if the Administrative Agent shall consent to the making of such payments
directly to the Lenders and the L/C Issuer, to pay to the Administrative Agent
any amount due for the reasonable compensation, expenses, disbursements and
advances of the Administrative Agent and its agents and counsel, and any other
amounts due the Administrative Agent under Sections 2.09 and 10.04.

          Nothing
contained herein shall be deemed to authorize the Administrative Agent to
authorize or consent to or accept or adopt on behalf of any Lender or the L/C
Issuer any plan of reorganization, arrangement, adjustment or composition
affecting the Obligations or the rights of any Lender or the L/C Issuer or to
authorize the Administrative Agent to vote in respect of the claim of any
Lender or the L/C Issuer in any such proceeding. 

          9.10
Collateral and Guaranty Matters. The Credit Parties
irrevocably authorize the Agents, at their option and in their discretion, 

	
  

 	
  

 
	
  

 	
           (a)
 to release any Lien on any property granted to or held by the Collateral
 Agent under any Loan Document (i) upon termination of the Aggregate
 Commitments and payment in full of all Obligations (other than contingent
 indemnification obligations for which no claim has been asserted) and the
 expiration or termination of all Letters of Credit, (ii) that is sold or to
 be sold as part of or in connection with any sale permitted hereunder or
 under any other Loan Document, or (iii) if approved, authorized or ratified
 in writing by the Applicable Lenders in accordance with Section 10.01;
 

 
	
  

 	
  

 
	
  

 	
           (b)
 to subordinate any Lien on any property granted to or held by the Collateral
 Agent under any Loan Document to the holder of any Lien on such property that
 is permitted by clause (h) of the definition of Permitted Encumbrances; and 

 
	
  

 	
  

 
	
  

 	
           (c)
 to release any Guarantor from its obligations under the Facility Guaranty if
 such Person ceases to be a Subsidiary as a result of a transaction permitted
 hereunder. 

 

Upon request
by any Agent at any time, the Applicable Lenders will confirm in writing such
Agent’s authority to release or subordinate its interest in particular types or
items of property, or to release any Guarantor from its obligations under the
Facility Guaranty pursuant to this Section 9.10. In each case as
specified in this Section 9.10, the Agents will, at the Loan Parties’
expense, execute and deliver to the applicable Loan Party such documents as
such Loan Party may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the Security
Documents or to subordinate its interest in such item, or to release such
Guarantor from its obligations under the Facility Guaranty, in each case in
accordance with the terms of the Loan Documents and this Section 9.10. 

          9.11
Notice of Transfer.

          The
Agents may deem and treat a Lender party to this Agreement as the owner of such
Lender’s portion of the Obligations for all purposes, unless and until, and
except to the extent, an Assignment and Acceptance shall have become effective
as set forth in Section 10.06. 

          9.12
Reports and Financial Statements.

-100-

          By signing this
Agreement, each Lender: 

	
  

 	
  

 
	
  

 	
           (a)
 agrees to furnish the Administrative Agent after the occurrence and during
 the continuance of a Cash Dominion Event (and thereafter at such frequency as
 the Administrative Agent may reasonably request) with a summary of all Other
 Liabilities due or to become due to such Lender. In connection with any
 distributions to be made hereunder, the Administrative Agent shall be
 entitled to assume that no amounts are due to any Lender on account of Other
 Liabilities unless the Administrative Agent has received written notice
 thereof from such Lender;

 
	
  

 	
  

 
	
  

 	
           (b)
 is deemed to have requested that the Administrative Agent furnish such
 Lender, promptly after they become available, copies of all financial
 statements required to be delivered by the Lead Borrower hereunder and all
 commercial finance examinations and appraisals of the Collateral received by
 the Agents (collectively, the “Reports”);

 
	
  

 	
  

 
	
  

 	
           (c)
 expressly agrees and acknowledges that the Administrative Agent makes no
 representation or warranty as to the accuracy of the Reports, and shall not
 be liable for any information contained in any Report;

 
	
  

 	
  

 
	
  

 	
           (d)
 expressly agrees and acknowledges that the Reports are not comprehensive
 audits or examinations, that the Agents or any other party performing any
 audit or examination will inspect only specific information regarding the
 Loan Parties and will rely significantly upon the Loan Parties’ books and
 records, as well as on representations of the Loan Parties’ personnel;

 
	
  

 	
  

 
	
  

 	
           (e)
 agrees to keep all Reports confidential in accordance with the provisions of Section
 10.07 hereof; and 

 
	
  

 	
  

 
	
  

 	
           (f)
 without limiting the generality of any other indemnification provision
 contained in this Agreement, agrees: (i) to hold the Agents and any such
 other Lender preparing a Report harmless from any action the indemnifying
 Lender may take or conclusion the indemnifying Lender may reach or draw from
 any Report in connection with any Credit Extensions that the indemnifying
 Lender has made or may make to the Borrowers, or the indemnifying Lender’s
 participation in, or the indemnifying Lender’s purchase of, a Committed Loan
 or Committed Loans; and (ii) to pay and protect, and indemnify, defend, and
 hold the Agents and any such other Lender preparing a Report harmless from
 and against, the claims, actions, proceedings, damages, costs, expenses, and
 other amounts (including attorney costs) incurred by the Agents and any such
 other Lender preparing a Report as the direct or indirect result of any third
 parties who might obtain all or part of any Report through the indemnifying
 Lender. 

 

          9.13
Agency for Perfection.

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

          9.14
Indemnification of Agents. The Lenders shall indemnify
the Agents (to the extent not reimbursed by the Loan Parties and without
limiting the obligations of Loan Parties hereunder), ratably according to their
Applicable Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature 

-101-

whatsoever
that may be imposed on, incurred by, or asserted against any Agent in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted to be taken by any Agent in connection therewith;
provided, that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent’s gross negligence or
willful misconduct as determined by a final and nonappealable judgment of a
court of competent jurisdiction.  

          9.15 Relation among Lenders. The Lenders
are not partners or co-venturers, and no Lender shall be liable for the acts or
omissions of, or (except as otherwise set forth herein in case of the Agents)
authorized to act for, any other Lender. 

          9.16
Defaulting Lender. 

	
  

 	
  

 
	
  

 	
           (a)
 If for any reason any Lender shall fail or refuse to abide by its obligations
 under this Agreement, including without limitation its obligation to make
 available to Administrative Agent its Applicable Percentage of any Committed
 Loans, expenses or setoff or purchase its Applicable Percentage of a
 participation interest in the L/C Borrowings and such failure is not cured
 within two (2) days of receipt from the Administrative Agent of written
 notice thereof, then, in addition to the rights and remedies that may be
 available to the other Credit Parties, the Loan Parties or any other party at
 law or in equity, and not at limitation thereof, (i) such Defaulting Lender’s
 right to participate in the administration of, or decision-making rights
 related to, the Obligations, this Agreement or the other Loan Documents shall
 be suspended during the pendency of such failure or refusal, and (ii) a
 Defaulting Lender shall be deemed to have assigned any and all payments due
 to it from the Loan Parties, whether on account of outstanding Committed
 Loans, interest, fees or otherwise, to the remaining non-Defaulting Lenders
 for application to, and reduction of, their proportionate shares of all
 outstanding Obligations until, as a result of application of such assigned
 payments the Lenders’ respective Applicable Percentages of all outstanding
 Obligations shall have returned to those in effect immediately prior to such delinquency
 and without giving effect to the nonpayment causing such delinquency, and
 (iii) at the option of the Administrative Agent, any amount payable to such
 Defaulting Lender hereunder (whether on account of principal, interest, fees
 or otherwise) shall, in lieu of being distributed to such Defaulting Lender,
 be retained by the Administrative Agent as cash collateral for future funding
 obligations of the Defaulting Lender in respect of any Committed Loan or
 existing or future participating interest in any Letter of Credit. The
 Defaulting Lender’s decision-making and participation rights and rights to
 payments as set forth in clauses (i) and (ii) hereinabove shall be restored
 only upon the payment by the Defaulting Lender of its Applicable Percentage of
 any Obligations, any participation obligation, or expenses as to which it is
 delinquent, together with interest thereon at the rate set forth in Section
 2.14(b) hereof from the date when originally due until the date upon which
 any such amounts are actually paid. 

 
	
  

 	
  

 
	
  

 	
           (b)
The non-Defaulting Lenders shall also have the right, but not the obligation,
in their respective, sole and absolute discretion, to cause the termination
and assignment, without any further action by the Defaulting Lender for no
cash consideration (pro rata, based on the respective Commitments of those
Lenders electing to exercise such right), of the Defaulting Lender’s
Commitment to fund future Committed Loans. Upon any such purchase of the
Applicable Percentage of any Defaulting Lender, the Defaulting Lender’s share
in future Credit Extensions and its rights under the Loan Documents with
respect thereto shall terminate on the date of purchase, and the Defaulting
Lender shall promptly execute all documents reasonably requested to surrender
and transfer such interest, including, if so requested, an Assignment and
Acceptance.  

 

-102-

	
  

 	
  

 
	
  

 	
           (c)
 Each Defaulting Lender shall indemnify the Administrative Agent and each
 non-Defaulting Lender from and against any and all loss, damage or expenses,
 including but not limited to reasonable attorneys’ fees and funds advanced by
 the Administrative Agent or by any non-Defaulting Lender, on account of a
 Defaulting Lender’s failure to timely fund its Applicable Percentage of a
 Committed Loan or to otherwise perform its obligations under the Loan
 Documents. 

 

ARTICLE X 

MISCELLANEOUS

          10.01 Amendments, Etc. No amendment or
waiver of any provision of this Agreement or any other Loan Document, and no
Consent to any departure by any Loan Party therefrom, shall be effective unless
in writing signed by the Administrative Agent, with the Consent of the Required
Lenders, and the Lead Borrower or the applicable Loan Party, as the case may
be, and acknowledged by the Administrative Agent, and each such waiver or
Consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such
amendment, waiver or consent shall: 

	
  

 	
  

 
	
  

 	
           (a)
 extend or, increase the Commitment of any Lender (or reinstate any Commitment
 terminated pursuant to Section 8.02) without the written Consent of
 such Lender; 

 
	
  

 	
  

 
	
  

 	
           (b)
 postpone any date fixed by this Agreement or any other Loan Document for (i)
 any payment or mandatory prepayment of principal, interest, fees or other
 amounts due to the applicable Lenders (or any of them) hereunder or under any
 of the other Loan Documents without the written Consent of each Lender
 entitled to such payment, or (ii) any scheduled or mandatory reduction of the
 Aggregate Commitments hereunder or under any other Loan Document without the
 written Consent of each applicable Lender; 

 
	
  

 	
  

 
	
  

 	
           (c)
 reduce the principal of, or the rate of interest specified herein on, any
 Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to
 this Section 10.01) any fees or other amounts payable hereunder or
 under any other Loan Document, without the written Consent of each Lender
 entitled to such amount; provided, however, that only the
 Consent of the Required Lenders shall be necessary to amend the definition of
 “Default Rate” or to waive any obligation of the Borrowers to pay interest or
 Letter of Credit Fees at the Default Rate; 

 
	
  

 	
  

 
	
  

 	
           (d)
 change Section 2.13 or Section 8.03 in a manner that would alter
 the pro rata sharing of payments required thereby without the written Consent
 of each Lender; 

 
	
  

 	
  

 
	
  

 	
           (e)
 change any provision of this Section or the definition of “Required Lenders”
 or any other provision hereof specifying the number or percentage of Lenders
 required to amend, waive or otherwise modify any rights hereunder or make any
 determination or grant any consent hereunder, without the written Consent of
 each Lender; 

 
	
  

 	
  

 
	
  

 	
           (f)
 except as expressly permitted hereunder or under any other Loan Document,
 release, or limit the liability of, any Loan Party without the written
 Consent of each Lender; 

 
	
  

 	
  

 
	
  

 	
           (g)
 except for Permitted Dispositions, release all or substantially all of the
 Collateral from the Liens of the Security Documents without the written
 Consent of each Lender; 

 
	
  

 	
  

 
	
  

 	
           (h)
 increase the Aggregate Commitments without the written Consent of each
 Lender; 

 

-103-

	
  

 	
  

 
	
  

 	
           (i)
 increase any advance rates set forth in the term “Borrowing Base” without the
 written Consent of each Lender, or otherwise change the definition of the
 term “Borrowing Base” or any component definition thereof if as a result
 thereof the amounts available to be borrowed by the Borrowers would be
 increased without the written Consent of the Required Supermajority Lenders, provided that the foregoing shall not
 limit the discretion of the Administrative Agent to change, establish or
 eliminate any Reserves; 

 
	
  

 	
  

 
	
  

 	
           (j)
 modify the definition of Permitted Overadvance so as to increase the amount
 thereof or, except as provided in such definition, the time period for a
 Permitted Overadvance without the written Consent of each Lender; and 

 
	
  

 	
  

 
	
  

 	
           (k)
 except as expressly permitted herein or in any other Loan Document, subordinate
 the Obligations hereunder or the Liens granted hereunder or under the other
 Loan Documents, to any other Indebtedness or Lien, as the case may be without
 the written Consent of each Lender; 

 

and, provided
further, that (i) no amendment, waiver or Consent shall, unless in writing
and signed by the L/C Issuer in addition to the Lenders required above, affect
the rights or duties of the L/C Issuer under this Agreement or any Issuer
Document relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or Consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above, affect the
rights or duties of the Administrative Agent under this Agreement or any other
Loan Document; (iii) no amendment, waiver or Consent shall, unless in writing
and signed by the Collateral Agent in addition to the Lenders required above,
affect the rights or duties of the Collateral Agent under this Agreement or any
other Loan Document; and (iv) the Fee Letter may be amended, or rights or
privileges thereunder waived, in a writing executed only by the parties
thereto. Notwithstanding anything to the contrary herein, no Defaulting Lender
shall have any right to approve or disapprove any amendment, waiver or Consent
hereunder, except that the Commitment of such Lender may not be increased or
extended without the consent of such Lender. 

          If
any Lender does not Consent (a “Non-Consenting Lender”) to a proposed
amendment, waiver, consent or release with respect to any Loan Document that
requires the Consent of each Lender and that has been approved by the Required
Lenders, the Lead Borrower may replace such Non-Consenting Lender in accordance
with Section 10.13; provided that such amendment, waiver, consent or release
can be effected as a result of the assignment contemplated by such Section
(together with all other such assignments required by the Lead Borrower to be
made pursuant to this paragraph).  

          10.02 Notices; Effectiveness; Electronic Communications.

	
  

 	
  

 
	
  

 	
           (a)
 Notices Generally. Except in the case of notices and other
 communications expressly permitted to be given by telephone (and except as
 provided in subsection (b) below), all notices and other communications
 provided for herein shall be in writing and shall be delivered by hand or
 overnight courier service, mailed by certified or registered mail or sent by
 telecopier or electronic mail as follows, and all notices and other
 communications expressly permitted hereunder to be given by telephone shall
 be made to the applicable telephone number, as follows: 

 
	
  

 	
  

 
	
  

 	
                     (i)
 if to the Loan Parties, the Agents or the L/C Issuer, to the address,
 telecopier number, electronic mail address or telephone number specified for
 such Person on Schedule 10.02; and 

 
	
  

 	
  

 
	
  

 	
                     (ii)
 if to any other Lender, to the address, telecopier number, electronic mail
 address or telephone number specified in its Administrative Questionnaire. 

 

-104-

Notices sent
by hand or overnight courier service, or mailed by certified or registered
mail, shall be deemed to have been given when received; notices sent by
telecopier shall be deemed to have been given when received. Notices delivered
through electronic communications to the extent provided in subsection (b)
below, shall be effective as provided in such subsection (b). 

	
  

 	
  

 
	
  

 	
           (b)
 Electronic Communications. Notices and other communications to the
 Lenders and the L/C Issuer hereunder may be delivered or furnished by
 electronic communication (including e-mail and Internet or intranet websites)
 pursuant to procedures approved by the Administrative Agent, provided
 that the foregoing shall not apply to notices to any Lender or the L/C Issuer
 pursuant to Article II if such Lender or the L/C Issuer, as
 applicable, has notified the Administrative Agent that it is incapable of
 receiving notices under such Article by electronic communication. The
 Administrative Agent or the Lead Borrower may, in its discretion, agree to
 accept notices and other communications to it hereunder by electronic
 communications pursuant to procedures approved by it, provided that
 approval of such procedures may be limited to particular notices or
 communications.

 

          Unless
the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication
is not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor. 

	
  

 	
  

 
	
  

 	
           (c)
 The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE
 AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS
 OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY
 DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO
 WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY
 OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF
 THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY
 ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In
 no event shall the Agents or any of their Related Parties (collectively, the
 “Agent Parties”) have any liability to any Loan Party, any Lender, the
 L/C Issuer or any other Person for losses, claims, damages, liabilities or
 expenses of any kind (whether in tort, contract or otherwise) arising out of
 the Loan Parties’ or the Administrative Agent’s transmission of Borrower
 Materials through the Internet, except to the extent that such losses,
 claims, damages, liabilities or expenses are determined by a court of
 competent jurisdiction by a final and nonappealable judgment to have resulted
 from the gross negligence or willful misconduct of such Agent Party; provided,
 however, that in no event shall any Agent Party have any liability to
 any Loan Party, any Lender, the L/C Issuer or any other Person for indirect,
 special, incidental, consequential or punitive damages (as opposed to direct
 or actual damages). 

 
	
  

 	
  

 
	
  

 	
           (d)
 Change of Address, Etc. Each of the Loan Parties, the Agents and the
 L/C Issuer may change its mailing or electronic mail address, telecopier or
 telephone number for notices and other communications hereunder by notice to
 the other parties hereto. Each other Lender may change its mailing or
 electronic mail address, telecopier or telephone number for notices and 

 

-105-

	
  

 	
  

 
	
  

 	
 other
 communications hereunder by notice to the Lead Borrower, the Agents and the
 L/C Issuer. In addition, each Lender agrees to notify the Administrative
 Agent from time to time to ensure that the Administrative Agent has on record
 (i) an effective address, contact name, telephone number, telecopier number
 and electronic mail address to which notices and other communications may be
 sent and (ii) accurate wire instructions for such Lender. 

 
	
  

 	
  

 
	
  

 	
           (e)
 Reliance by Agents, L/C Issuer and Lenders. The Agents, the L/C Issuer
 and the Lenders shall be entitled to rely and act upon any notices (including
 telephonic Committed Loan Notices) purportedly given by or on behalf of the
 Loan Parties even if (i) such notices were not made in a manner specified
 herein, were incomplete or were not preceded or followed by any other form of
 notice specified herein, or (ii) the terms thereof, as understood by the
 recipient, varied from any confirmation thereof. The Loan Parties shall
 indemnify the Agents, the L/C Issuer, each Lender and the Related Parties of
 each of them from all losses, costs, expenses and liabilities resulting from
 the reliance by such Person on each notice purportedly given by or on behalf
 of the Loan Parties. All telephonic notices to and other telephonic
 communications with the Agents may be recorded by the Agents, and each of the
 parties hereto hereby consents to such recording. 

 

          10.03
No Waiver; Cumulative Remedies. No failure by any
Credit Party to exercise, and no delay by any such Person in exercising, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or under any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided herein and in
the other Loan Documents are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law. Without limiting the
generality of the foregoing, the making of a Committed Loan or issuance of a
Letter of Credit shall not be construed as a waiver of any Default, regardless
of whether any Credit Party may have had notice or knowledge of such Default at
the time. 

          10.04
Expenses; Indemnity; Damage Waiver. 

	
  

 	
  

 
	
  

 	
           (a)
 Costs and Expenses. The Borrowers shall pay all Credit Party Expenses.
 

 
	
  

 	
  

 
	
  

 	
           (b)
 Indemnification by the Loan Parties. The Loan Parties shall indemnify
 the Agents (and any sub-agent thereof), each other Credit Party, and each
 Related Party of any of the foregoing Persons (each such Person being called
 an “Indemnitee”) against, and hold each Indemnitee harmless (on an
 after tax basis) from, any and all losses, claims, causes of action, damages,
 liabilities, settlement payments, costs, and related expenses (including the
 fees, charges and disbursements of any counsel for any Indemnitee), incurred
 by any Indemnitee or asserted against any Indemnitee by any third party or by
 any Borrower or any other Loan Party arising out of, in connection with, or
 as a result of (i) the execution or delivery of this Agreement, any other
 Loan Document or any agreement or instrument contemplated hereby or thereby,
 the performance by the parties hereto of their respective obligations
 hereunder or thereunder or the consummation of the transactions contemplated
 hereby or thereby, or, in the case of the Agents (and any sub-agents thereof)
 and their Related Parties only, the administration of this Agreement and the
 other Loan Documents, (ii) any Committed Loan or Letter of Credit or the use
 or proposed use of the proceeds therefrom (including any refusal by the L/C
 Issuer to honor a demand for payment under a Letter of Credit if the
 documents presented in connection with such demand do not strictly comply
 with the terms of such Letter of Credit), (iii) any actual or alleged
 presence or release of Hazardous Materials on or from any property owned or
 operated by any Loan Party or any of its Subsidiaries, or any Environmental
 Liability related in any way to any Loan Party or any of its Subsidiaries,
 (iv) any claims of, or amounts paid by any Credit Party to, a Blocked 

 

-106-

	
  

 	
  

 
	
  

 	
 Account Bank
 or other Person which has entered into a control agreement with any Credit
 Party hereunder, or (v) any actual or prospective claim, litigation,
 investigation or proceeding relating to any of the foregoing, whether based
 on contract, tort or any other theory, whether brought by a third party or by
 any Borrower or any other Loan Party or any of the Loan Parties’ directors,
 shareholders or creditors, and regardless of whether any Indemnitee is a
 party thereto, in all cases, whether or not caused by or arising, in whole or
 in part, out of the comparative, contributory or sole negligence of the
 Indemnitee; provided that such indemnity shall not, as to any
 Indemnitee, be available to the extent that such losses, claims, damages,
 liabilities or related expenses are determined by a court of competent
 jurisdiction by final and nonappealable judgment to have resulted from the
 gross negligence or willful misconduct of such Indemnitee. 

 
	
  

 	
  

 
	
  

 	
           (c)
Reimbursement by Lenders. Without limiting their obligations under
Section 9.14 hereof, to the extent that the Loan Parties for any reason fail
to indefeasibly pay any amount required under subsection (a) or (b) of this
Section to be paid by it, each Lender severally agrees to pay to the Agents
(or any such sub-agent), the L/C Issuer or such Related Party, as the case
may be, such Lender’s Applicable Percentage (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount, provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred
by or asserted against the Agents (or any such sub-agent) or the L/C Issuer
in its capacity as such, or against any Related Party of any of the foregoing
acting for the Agents (or any such sub-agent) or L/C Issuer in connection
with such capacity. The obligations of the Lenders under this subsection (c)
are subject to the provisions of Section 2.12(d).  

 
	
  

 	
  

 
	
  

 	
           (d)
 Waiver of Consequential Damages, Etc. To the fullest extent permitted
 by Law, the Loan Parties shall not assert, and hereby waive, any claim
 against any Indemnitee, on any theory of liability, for special, indirect,
 consequential or punitive damages (as opposed to direct or actual damages)
 arising out of, in connection with, or as a result of, this Agreement, any
 other Loan Document or any agreement or instrument contemplated hereby, the
 transactions contemplated hereby or thereby, any Committed Loan or Letter of
 Credit or the use of the proceeds thereof. No Indemnitee shall be liable for
 any damages arising from the use by unintended recipients of any information
 or other materials distributed to such unintended recipients by such
 Indemnitee through telecommunications, electronic or other information
 transmission systems in connection with this Agreement or the other Loan
 Documents or the transactions contemplated hereby or thereby other than for
 direct or actual damages resulting from the gross negligence or willful
 misconduct of such Indemnitee as determined by a final and nonappealable
 judgment of a court of competent jurisdiction. 

 
	
  

 	
  

 
	
  

 	
           (e)
 Payments. All amounts due under this Section shall be payable on
 demand therefor. 

 
	
  

 	
  

 
	
  

 	
           (f)
 Survival. The agreements in this Section shall survive the resignation
 of any Agent and the L/C Issuer, the assignment of any Commitment or
 Committed Loan by any Lender, the replacement of any Lender, the termination
 of the Aggregate Commitments and the repayment, satisfaction or discharge of
 all the other Obligations. 

 

          10.05 Payments Set Aside. To the extent
that any payment by or on behalf of the Loan Parties is made to any Credit
Party, or any Credit Party exercises its right of setoff, and such payment or
the proceeds of such setoff or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by such Credit Party in its discretion)
to be repaid to a trustee, receiver or any other party, in connection with any
proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of
such recovery, the obligation or part 

-107-

thereof
originally intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such setoff had not
occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to the
Agents upon demand its Applicable Percentage (without duplication) of any
amount so recovered from or repaid by the Agents, plus interest thereon from
the date of such demand to the date such payment is made at a rate per annum
equal to the Federal Funds Rate from time to time in effect. The obligations of
the Lenders and the L/C Issuer under clause (b) of the preceding sentence shall
survive the payment in full of the Obligations and the termination of this
Agreement. 

          10.06 Successors and Assigns.

                    (a)
Successors and Assigns Generally. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that no Loan Party
may assign or otherwise transfer any of its rights or obligations hereunder or
under any other Loan Document without the prior written Consent of the
Administrative Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of Section 10.06(b), (ii) by way of
participation in accordance with the provisions of subsection Section 10.06(d),
or (iii) by way of pledge or assignment of a security interest subject to the
restrictions of Section 10.06(f) (and any other attempted assignment or
transfer by any party hereto shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in subsection (d) of this
Section and, to the extent expressly contemplated hereby, the Related Parties
of each of the Credit Parties) any legal or equitable right, remedy or claim
under or by reason of this Agreement. 

                    (b)
Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment(s) and the Committed
Loans (including for purposes of this Section 10.06(b), participations in L/C
Obligations) at the time owing to it); provided that any such assignment shall
be subject to the following conditions:  

                              (i)
Minimum Amounts. 

	
  

 	
  

 
	
  

 	
                               (A)
 in the case of an assignment of the entire remaining amount of the assigning Lender’s
 Commitment and the Committed Loans at the time owing to it or in the case of
 an assignment to a Lender or an Affiliate of a Lender or an Approved Fund
 with respect to a Lender, no minimum amount need be assigned; and 

 
	
  

 	
  

 
	
  

 	
                               (B)
in any case not described in subsection (b)(i)(A)of this Section, the
aggregate amount of the Commitment (which for this purpose includes Committed
Loans outstanding thereunder) or, if the Commitment is not then in effect,
the principal outstanding balance of the Committed Loans of the assigning
Lender subject to each such assignment, determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent or, if “Trade Date” is specified in the Assignment and
Assumption, as of the Trade Date, shall not be less than $5,000,000 unless
each of the Administrative Agent and, so long as no Default has occurred and
is continuing, the Lead Borrower otherwise consents (each such consent not to
be unreasonably withheld or delayed); provided, however, that concurrent
assignments to members of an Assignee Group and concurrent assignments from
members of an Assignee Group to a single Eligible Assignee (or to an Eligible
Assignee and members of its Assignee Group) will be treated as a single
assignment for purposes of determining whether such minimum amount has been
met;  

 

-108-

	
  

 	
  

 
	
  

 	
                     (ii)
 Proportionate Amounts. Each partial assignment shall be made as an
 assignment of a proportionate part of all the assigning Lender’s rights and
 obligations under this Agreement with respect to the Committed Loans or the
 Commitment assigned; 

 
	
  

 	
  

 
	
  

 	
                     (iii)
 Required Consents. No consent shall be required for any assignment
 except to the extent required by subsection (b)(i)(B) of this Section and, in
 addition: 

 
	
  

 	
  

 
	
  

 	
                               (A)
 the consent of the Lead Borrower (such consent not to be unreasonably withheld
 or delayed) shall be required unless (1) a Default has occurred and is
 continuing at the time of such assignment or (2) such assignment is to a
 Lender, an Affiliate of a Lender or an Approved Fund; and 

 
	
  

 	
  

 
	
  

 	
                               (B)
 the consent of the Administrative Agent (such consent not to be unreasonably
 withheld or delayed) shall be required for assignments in respect of any
 Commitment if such assignment is to a Person that is not a Lender, an
 Affiliate of such Lender or an Approved Fund with respect to such Lender. 

 
	
  

 	
  

 
	
  

 	
                     (iv)
 Assignment and Assumption. The parties to each assignment shall
 execute and deliver to the Administrative Agent an Assignment and Assumption,
 together with a processing and recordation fee of $3,500, provided, however,
 that the Administrative Agent may, in its sole discretion, elect to waive
 such processing and recordation fee in the case of any assignment. The
 assignee, if it shall not be a Lender, shall deliver to the Administrative
 Agent an Administrative Questionnaire. 

 

Subject to
acceptance and recording thereof by the Administrative Agent pursuant to
subsection (c) of this Section, from and after the effective date specified in
each Assignment and Assumption, the Eligible Assignee thereunder shall be a
party to this Agreement and, to the extent of the interest assigned by such
Assignment and Assumption, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall
continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05,
and 10.04 with respect to facts and circumstances occurring prior to the
effective date of such assignment. Upon request, the Borrowers (at their
expense) shall execute and deliver a Note to the assignee Lender and, in the
event of an assignment by the assignor Lender of less than its entire
Commitment, a new Note to the assignor Lender reflecting its reduced
Commitment, provided that in any case the assignor Lender shall have returned
to the Borrower any Note payable to the assignor Lender or its order in the
amount of its Commitment prior to such assignment. Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this subsection shall be treated for purposes of this Agreement as a sale
by such Lender of a participation in such rights and obligations in accordance
with Section 10.06(d). 

                    (c)
Register. The Administrative Agent, acting solely for this purpose as an
agent of the Borrowers, shall maintain at the Administrative Agent’s Office a
copy of each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amounts of the Committed Loans and L/C Obligations owing to, each
Lender pursuant to the terms hereof from time to time (the “Register”).
The entries in the Register shall be conclusive, absent manifest error, and the
Loan Parties, the Administrative Agent and the Lenders may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall 

-109-

be available
for inspection by the Lead Borrower and any Lender at any reasonable time and
from time to time upon reasonable prior notice. 

                    (d)
Participations. Any Lender may at any time, without the consent of, or
notice to, the Loan Parties or the Administrative Agent, sell participations to
any Person (other than (i) a natural person, (ii) the Loan Parties or any of
the Loan Parties’ Affiliates or Subsidiaries or (iii) any time prior to the
occurrence of an Event of Default pursuant to Section 8.01(a) or (f), a
competitor of a Loan Party or any of its Subsidiaries) (each, a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Committed
Loans (including such Lender’s participations in L/C Obligations owing to it); provided
that (i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations and (iii) the Loan Parties, the Agents,
the Lenders and the L/C Issuer shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement. Any Participant shall agree in writing to comply with all
confidentiality obligations set forth in Section 10.07 as if such Participant
was a Lender hereunder. 

          Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, waiver or other modification described in the first proviso to
Section 10.01 that affects such Participant. Subject to subsection (e) of this
Section, the Loan Parties agree that each Participant shall be entitled to the benefits
of Sections 3.01, 3.04 and 3.05 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 10.06(b). To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided such
Participant agrees to be subject to Section 2.13 as though it were a Lender. 

                    (e)
Limitations upon Participant Rights. A Participant shall not be entitled
to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have
been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Lead Borrower’s prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of Section
3.01 unless the Lead Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Loan Parties,
to comply with Section 3.01(e) as though it were a Lender. 

                    (f)
Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement (including
under its Note, if any) to secure obligations of such Lender, including any
pledge or assignment to secure obligations to a Federal Reserve Bank; provided that
no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.  

                    (g)
Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any Law, including the Federal Electronic Signatures in Global and National
Commerce Act, the New York State Electronic Signatures and Records Act, or any
other similar state laws based on the Uniform Electronic Transactions Act. 

-110-

                    (h)
Resignation as L/C Issuer after Assignment. Notwithstanding anything to
the contrary contained herein, if at any time Bank of America assigns all of
its Commitment and Committed Loans pursuant to subsection (b) above, Bank of
America may resign as L/C Issuer. In the event of any such resignation as L/C
Issuer, the Lead Borrower shall be entitled to appoint from among the Lenders a
successor L/C Issuer hereunder; provided, however, that no
failure by the Lead Borrower to appoint any such successor shall affect the
resignation of Bank of America as L/C Issuer. If Bank of America resigns as L/C
Issuer, it shall retain all the rights, powers, privileges and duties of the
L/C Issuer hereunder with respect to all Letters of Credit outstanding as of
the effective date of its resignation as L/C Issuer and all L/C Obligations
with respect thereto (including the right to require the Lenders to make Base
Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section
2.03(c)). Upon the appointment of a successor L/C Issuer, (a) such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring L/C Issuer, and (b) the successor L/C
Issuer shall issue letters of credit in substitution for the Letters of Credit,
if any, outstanding at the time of such succession or make other arrangements
satisfactory to Bank of America to effectively assume the obligations of Bank
of America with respect to such Letters of Credit or indemnify Bank of America
with respect to such Letters of Credit. 

          10.07 Treatment
of Certain Information; Confidentiality. Each of the
Credit Parties agrees to maintain the confidentiality of the Information (as
defined below), except that Information may be disclosed (a) to its Affiliates
and to its and its Affiliates’ respective partners, directors, officers,
employees, agents, funding sources, attorneys, advisors and representatives (it
being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority purporting to have jurisdiction over it (including any
self-regulatory authority, such as the National Association of Insurance
Commissioners), (c) to the extent required by Laws or regulations or by any
subpoena or similar legal process, (d) to any other party hereto, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to this Agreement or any other
Loan Document or the enforcement of rights hereunder or thereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to (i) any assignee of or Participant in, or any prospective assignee
of or Participant in, any of its rights or obligations under this Agreement or
(ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to any Loan Party and its obligations, (g) with
the consent of the Lead Borrower or (h) to the extent such Information (x)
becomes publicly available other than as a result of a breach of this Section
or (y) becomes available to any Credit Party or any of their respective
Affiliates on a non-confidential basis from a source other than the Loan
Parties. 

          For
purposes of this Section, “Information” means all information received from the
Loan Parties or any Subsidiary thereof relating to the Loan Parties or any
Subsidiary thereof or their respective businesses, other than any such
information that is available to any Credit Party on a non-confidential basis
prior to disclosure by the Loan Parties or any Subsidiary thereof, provided
that, in the case of information received from any Loan Party or any Subsidiary
after the date hereof, such information is clearly identified at the time of
delivery as confidential or as being suitable only for posting on a portion of
the Platform not designated “Public Investor”. Any Person required to maintain
the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information. 

          Each
of the Credit Parties acknowledges that (a) the Information may include
material non-public information concerning the Loan Parties or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use
of material non-public information and (c) it will handle such material
non-public information in accordance with Law, including Federal and state
securities Laws. 

-111-

          10.08 Right of
Setoff. If an Event of Default shall have occurred and
be continuing or if any Lender shall have been served with a trustee process or
similar attachment relating to property of a Loan Party, each Lender, the L/C
Issuer and each of their respective Affiliates is hereby authorized at any time
and from time to time, after obtaining the prior written consent of the
Administrative Agent or the Required Lenders, to the fullest extent permitted
by Law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender, the L/C
Issuer or any such Affiliate to or for the credit or the account of the Borrowers
or any other Loan Party against any and all of the Obligations now or hereafter
existing under this Agreement or any other Loan Document to such Lender or the
L/C Issuer, regardless of the adequacy of the Collateral, and irrespective of
whether or not such Lender or the L/C Issuer shall have made any demand under
this Agreement or any other Loan Document and although such obligations of the
Borrowers or such Loan Party may be contingent or unmatured or are owed to a
branch or office of such Lender or the L/C Issuer different from the branch or
office holding such deposit or obligated on such indebtedness. The rights of
each Lender, the L/C Issuer and their respective Affiliates under this Section
are in addition to other rights and remedies (including other rights of setoff)
that such Lender, the L/C Issuer or their respective Affiliates may have. Each
Lender and the L/C Issuer agrees to notify the Lead Borrower and the
Administrative Agent promptly after any such setoff and application, provided that
the failure to give such notice shall not affect the validity of such setoff
and application.  

          10.09 Interest
Rate Limitation. Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by Law (the “Maximum Rate”). If the Administrative
Agent or any Lender shall receive interest in an amount that exceeds the
Maximum Rate, the excess interest shall be applied to the principal of the
Committed Loans or, if it exceeds such unpaid principal, refunded to the
Borrowers. In determining whether the interest contracted for, charged, or
received by the Administrative Agent or a Lender exceeds the Maximum Rate, such
Person may, to the extent permitted by Law, (a) characterize any payment that
is not principal as an expense, fee, or premium rather than interest, (b)
exclude voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate, and spread in equal or unequal parts the total amount of
interest throughout the contemplated term of the Obligations hereunder. 

          10.10
Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement
and the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof that, when
taken together, bear the signatures of each of the other parties hereto.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy or electronic mail shall be as effective as delivery of a manually
executed counterpart of this Agreement. 

          10.11 Survival.
All representations and warranties made hereunder and
in any other Loan Document or other document delivered pursuant hereto or
thereto or in connection herewith or therewith shall survive the execution and
delivery hereof and thereof. Such representations and warranties have been or
will be relied upon by the Credit Parties, regardless of any investigation made
by any Credit Party or on their behalf and notwithstanding that any Credit
Party may have had notice or knowledge of any Default at the time of any Credit
Extension, and shall continue in full force and effect as long as any Committed
Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or
any Letter of Credit shall remain outstanding. Further, the provisions of
Sections 3.01, 3.04, 3.05 and 10.04 and  

-112-

Article IX
shall survive and remain in full force and effect regardless of the repayment
of the Obligations, the expiration or termination of the Letters of Credit and
the Commitments or the termination of this Agreement or any provision hereof.
In connection with the termination of this Agreement and the release and
termination of the security interests in the Collateral, the Agents may require
such indemnities and collateral security as they shall reasonably deem
necessary or appropriate to protect the Credit Parties against (x) loss on
account of credits previously applied to the Obligations that may subsequently
be reversed or revoked, (y) any obligations that may thereafter arise with
respect to the Other Liabilities, and (z) any Obligations that may thereafter
arise under Section 10.04 hereof (other than any contingent indemnification
claims for which a claim has not then been asserted). 

          10.12
Severability. If any provision of this Agreement or
the other Loan Documents is held to be illegal, invalid or unenforceable, (a)
the legality, validity and enforceability of the remaining provisions of this
Agreement and the other Loan Documents shall not be affected or impaired
thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions. The invalidity of a provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. 

          10.13 Replacement
of Lenders. If any Lender requests compensation under Section
3.04, or if the Borrowers are required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to Section
3.01, or if any Lender is a Defaulting Lender or a Non-Consenting Lender,
then the Borrowers may, at their sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 10.06), all of its
interests, rights and obligations under this Agreement and the related Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that:  

	
 

	
 

	
 

	
          (a)
 the Borrowers or such assignee shall have paid to the Administrative Agent
 the assignment fee specified in Section 10.06(b); 

	
 

	
 

	
 

	
          (b)
 such Lender shall have received payment of an amount equal to the outstanding
 principal of its Committed Loans and L/C Advances, accrued interest thereon,
 accrued fees and all other amounts payable to it hereunder and under the
 other Loan Documents (including any amounts under Section 3.05) from
 the assignee (to the extent of such outstanding principal and accrued
 interest and fees) or the Borrowers (in the case of all other amounts); 

	
 

	
 

	
 

	
          (c)
 in the case of any such assignment resulting from a claim for compensation
 under Section 3.04 or payments required to be made pursuant to Section
 3.01, such assignment will result in a reduction in such compensation or
 payments thereafter; and 

	
 

	
 

	
 

	
          (d)
 such assignment does not conflict with Laws. 

A Lender shall
not be required to make any such assignment or delegation if, prior thereto, as
a result of a waiver by such Lender or otherwise, the circumstances entitling
the Borrowers to require such assignment and delegation cease to apply. 

          10.14 Governing
Law; Jurisdiction; Etc. 

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

-113-

                    (b)
SUBMISSION TO JURISDICTION. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE LOAN PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE LOAN
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR
IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS
OF ANY JURISDICTION. 

                    (c)
WAIVER OF VENUE. EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT
REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE LOAN PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT. 

                    (d)
SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN ANY SUIT, ACTION OR PROCEEDING BY SENDING THE SAME BY FIRST CLASS
MAIL, RETURN RECEIPT REQUESTED OR BY OVERNIGHT COURIER SERVICE, TO THE ADDRESS
OF SUCH PARTY SET FORTH IN SECTION 10.02 OF THIS AGREEMENT. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW. 

                    (e)
ACTIONS COMMENCED BY LOAN PARTIES. EACH LOAN PARTY AGREES THAT ANY
ACTION COMMENCED BY ANY LOAN PARTY ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
BROUGHT SOLELY IN A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
OR ANY FEDERAL COURT SITTING THEREIN AS THE ADMINISTRATIVE AGENT MAY ELECT IN
ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS
WITH RESPECT TO ANY SUCH ACTION. 

          10.15 Waiver of
Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT 

-114-

NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION. 

          10.16 No
Advisory or Fiduciary Responsibility. In connection
with all aspects of each transaction contemplated hereby, the Loan Parties each
acknowledge and agree that: (i) the credit facility provided for hereunder and
any related arranging or other services in connection therewith (including in
connection with any amendment, waiver or other modification hereof or of any
other Loan Document) are an arm’s-length commercial transaction between the
Loan Parties, on the one hand, and the Credit Parties, on the other hand, and each
of the Loan Parties is capable of evaluating and understanding and understands
and accepts the terms, risks and conditions of the transactions contemplated
hereby and by the other Loan Documents (including any amendment, waiver or
other modification hereof or thereof); (ii) in connection with the process
leading to such transaction, that each Credit Party is and has been acting
solely as a principal and is not the financial advisor, agent or fiduciary, for
the Loan Parties or any of their respective Affiliates, stockholders, creditors
or employees or any other Person; (iii) none of the Credit Parties has assumed
or will assume an advisory, agency or fiduciary responsibility in favor of the
Loan Parties with respect to any of the transactions contemplated hereby or the
process leading hereto, including with respect to any amendment, waiver or
other modification hereof or of any other Loan Document (irrespective of
whether any of the Credit Parties has advised or is currently advising any Loan
Party or any of its Affiliates on other matters) and none of the Credit Parties
has any obligation to any Loan Party or any of its Affiliates with respect to
the transactions contemplated hereby except those obligations expressly set
forth herein and in the other Loan Documents; (iv) the Credit Parties and their
respective Affiliates may be engaged in a broad range of transactions that
involve interests that differ from those of the Loan Parties and their
respective Affiliates, and none of the Credit Parties has any obligation to
disclose any of such interests by virtue of any advisory, agency or fiduciary
relationship; and (v) the Credit Parties have not provided and will not provide
any legal, accounting, regulatory or tax advice with respect to any of the
transactions contemplated hereby (including any amendment, waiver or other
modification hereof or of any other Loan Document) and each of the Loan Parties
has consulted its own legal, accounting, regulatory and tax advisors to the
extent it has deemed appropriate. Each of the Loan Parties hereby waives and
releases, to the fullest extent permitted by law, any claims that it may have
against each of the Credit Parties with respect to any breach or alleged breach
of agency or fiduciary duty. 

          10.17 USA
PATRIOT Act Notice. Each Lender that is subject to the
Act (as hereinafter defined) and the Administrative Agent (for itself and not
on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and
record information that identifies each Loan Party, which information includes
the name and address of each Loan Party and other information that will allow
such Lender or the Administrative Agent, as applicable, to identify each Loan
Party in accordance with the Act. Each Loan Party is in compliance, in all
material respects, with the Patriot Act. No part of the proceeds of the
Committed Loans will be used by the Loan Parties, directly or indirectly, for
any payments to any governmental official or employee, political party,
official of a political party, candidate for political office, or anyone else
acting in an official capacity, in order to obtain, retain or direct business
or obtain any improper advantage, in violation of the United States Foreign
Corrupt Practices Act of 1977, as amended. 

          10.18 Foreign
Asset Control Regulations. Neither of the advance of
the Committed Loans nor the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 U.S.C. § 1 et 

-115-

seq., as
amended) (the “Trading With the Enemy Act”)
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) (the “Foreign Assets
Control Regulations”) or any enabling legislation or executive
order relating thereto (which for the avoidance of doubt shall include, but
shall not be limited to (a) Executive Order 13224 of September 21, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive
Order”) and (b) the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Public Law 107-56)). Furthermore, none of the Borrowers or their Affiliates
(a) is or will become a “blocked person” as described in the Executive Order,
the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b)
engages or will engage in any dealings or transactions, or be otherwise
associated, with any such “blocked person” or in any manner violative of any
such order. 

          10.19 Time of
the Essence. Time is of the essence of the Loan
Documents with respect to each provision of the Loan Documents for which a
specific time period is prescribed. 

          10.20
Intentionally Omitted. 

          10.21 Press
Releases.

	
 

	
 

	
 

	
          (a)
 Each Credit Party executing this Agreement agrees that neither it nor its Affiliates
 will in the future issue any press releases or other public disclosure using
 the name of Administrative Agent or its Affiliates or referring to this
 Agreement or the other Loan Documents without at least two (2) Business Days’
 prior notice to Administrative Agent and without the prior written consent of
 Administrative Agent unless (and only to the extent that) such Credit Party
 or Affiliate is required to do so under Law and then, in any event, such
 Credit Party or Affiliate will consult with Administrative Agent before
 issuing such press release or other public disclosure. 

	
 

	
 

	
 

	
          (b)
 At any time after the Loan Parties shall have complied with the reporting
 requirements of the Securities Exchange Act of 1934 and all applicable
 regulations promulgated thereunder with respect to the financing transactions
 contemplated by this Agreement (including reporting requirements relating to
 any amendment to this Agreement or any other Loan Document), the
 Administrative Agent or any Lender shall be permitted to publish advertising
 material relating to the financing transactions contemplated by this
 Agreement using any Loan Party’s name, product photographs, logo or
 trademark, provided that, except with respect to advertising material
 consisting of a tombstone or league table measurement, reasonably in advance
 of the publication of such advertising material, the Administrative Agent or
 such Lender shall provide a draft thereof to the Lead Borrower for review and
 comment. Neither the Administrative Agent nor any Lender shall distribute any
 material non-public information relating to the Loan Parties without the
 prior consent of the Lead Borrower, which consent may be withheld by the Lead
 Borrower in its sole and absolute discretion. 

          10.22
Additional Waivers.

                    (a)
The Obligations are the joint and several obligation of each Loan Party. To the
fullest extent permitted by Law, the obligations of each Loan Party shall not
be affected by (i) the failure of any Credit Party to assert any claim or
demand or to enforce or exercise any right or remedy against any other Loan
Party under the provisions of this Agreement, any other Loan Document or
otherwise, (ii) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, this Agreement or any other
Loan Document, or (iii) the failure to perfect any security interest in, or the
release of, any of the Collateral or other security held by or on behalf of the
Collateral Agent or any other Credit Party. 

-116-

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

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

                    (d)
Each Borrower is obligated to repay the Obligations as joint and several
obligors under this Agreement. Upon payment by any Loan Party of any
Obligations, all rights of such Loan Party against any other Loan Party arising
as a result thereof by way of right of subrogation, contribution,
reimbursement, indemnity or otherwise shall in all respects be subordinate and
junior in right of payment to the prior indefeasible payment in full in cash of
all the Obligations and the termination of the Commitments. In addition, any
indebtedness of any Loan Party now or hereafter held by any other Loan Party is
hereby subordinated in right of payment to the prior indefeasible payment in
full of the Obligations and no Loan Party will demand, sue for or otherwise
attempt to collect any such indebtedness. If any amount shall erroneously be
paid to any Loan Party on account of (i) such subrogation, contribution,
reimbursement, indemnity or similar right or (ii) any such indebtedness of any
Loan Party, such amount shall be held in trust for the benefit of the Credit
Parties and shall forthwith be paid to the Administrative Agent to be credited
against the payment of the Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement and the other Loan Documents.
Subject to the foregoing, to the extent that any Borrower shall, under this
Agreement as a joint and several obligor, repay any of the Obligations
constituting Committed Loans made to another Borrower hereunder or other Obligations
incurred directly and primarily by any other Borrower (an “Accommodation
Payment”), then the Borrower making such Accommodation Payment shall be
entitled to contribution and indemnification from, and be reimbursed by, each
of the other Borrowers in an amount, for each of such other Borrowers, equal to
a fraction of such Accommodation Payment, the numerator of which fraction is
such other Borrower’s Allocable Amount and the denominator of which is the sum
of the Allocable Amounts of all of the Borrowers. As of any date of
determination, the “Allocable Amount” of each Borrower shall be 

-117-

equal to the
maximum amount of liability for Accommodation Payments which could be asserted
against such Borrower hereunder without (a) rendering such Borrower “insolvent”
within the meaning of Section 101 (31) of the Bankruptcy Code, Section 2 of the
Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform
Fraudulent Conveyance Act (“UFCA”), (b) leaving such Borrower with
unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c)
leaving such Borrower unable to pay its debts as they become due within the
meaning of Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or
Section 5 of the UFCA. 

          10.23 No Strict
Construction. 

          The
parties hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement. 

          10.24
Attachments. 

          The
exhibits, schedules and annexes attached to this Agreement are incorporated
herein and shall be considered a part of this Agreement for the purposes stated
herein, except that in the event of any conflict between any of the provisions
of such exhibits and the provisions of this Agreement, the provisions of this
Agreement shall prevail. 

-118-

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

	
 

	
 

	
 

	
 

	
BORROWERS:

	
 

	
 

	
 

	
SYMS CORP

	
 

	
 

	
 

	
By: 

	
/s/ Philip A. Piscopo

	
 

	
 

	
 

	
Name: Philip A. Piscopo

	
 

	
 

	
 

	
Title: Vice President
 & Chief Financial Officer

	
 

	
 

	
 

	
SYL, LLC

	
 

	
By: Syms Corp, sole member

	
 

	
 

	
 

	
By: 

	
/s/ Philip A. Piscopo

	
 

	
 

	
 

	
Name: Philip A. Piscopo

	
 

	
 

	
 

	
Title: Vice President
 & Chief Financial Officer

-119-

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

	
 

	
 

	
 

	
 

	
By: 

	
/s/ Andrew Cerussi

	
 

	
 

	
 

	
Name: Andrew Cerussi

	
 

	
 

	
 

	
Title: Senior Vice
 President - Director

-120-

	
 

	
 

	
 

	
 

	
BANK OF AMERICA, N.A., as a Lender and 

 as L/C Issuer

	
 

	
 

	
 

	
By: 

	
/s/ Andrew Cerussi

	
 

	
 

	
 

	
Name: Andrew Cerussi

	
 

	
 

	
 

	
Title:
 Senior Vice President - Director

-121-EXHIBIT 10.1 

	
 

	

	
 

	
CREDIT AGREEMENT

Dated as of August 31, 2009 

among

SOTHEBY’S, 

a Delaware corporation 

SOTHEBY’S, INC.,

SOTHEBY’S FINANCIAL SERVICES, INC., 

SOTHEBY’S FINANCIAL SERVICES CALIFORNIA, INC., 

OBERON, INC.,
THETA, INC., 

SOTHEBY’S VENTURES, LLC, 

OATSHARE LIMITED, 

SOTHEBY’S, 

a company registered in England, and 

SOTHEBY’S FINANCIAL SERVICES LIMITED, 

as Borrowers, 

THE OTHER CREDIT PARTIES SIGNATORY HERETO, 

as Credit Parties,

THE LENDERS SIGNATORY HERETO 

FROM TIME TO TIME, 

as Lenders,

GENERAL ELECTRIC CAPITAL CORPORATION, 

as Agent and a Lender

and

GE CAPITAL MARKETS, INC. and HSBC BANK PLC, 

as Joint Lead Arrangers and Joint Bookrunners

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
TABLE OF CONTENTS

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Page

	
 

	
 

	
 

	

	
 

	
 

	
 

	
1.

	
AMOUNT AND
 TERMS OF CREDIT

	
1

	
 

	
 

	
 

	
 

	
 

	
1.1

	
Credit
 Facilities

	
1

	
 

	
1.2

	
Letters of
 Credit

	
7

	
 

	
1.3

	
Prepayments;
 Commitment Reductions

	
7

	
 

	
1.4

	
Use of
 Proceeds

	
11

	
 

	
1.5

	
Interest and
 Applicable Margins

	
11

	
 

	
1.6

	
Eligible Art
 Loans

	
14

	
 

	
1.7

	
Eligible Art
 Inventory

	
16

	
 

	
1.8

	
Cash
 Management Systems

	
18

	
 

	
1.9

	
Fees

	
18

	
 

	
1.10

	
Receipt of
 Payments

	
18

	
 

	
1.11

	
Application
 and Allocation of Payments

	
19

	
 

	
1.12

	
Loan Account
 and Accounting

	
20

	
 

	
1.13

	
Indemnity

	
20

	
 

	
1.14

	
Access

	
21

	
 

	
1.15

	
Taxes

	
22

	
 

	
1.16

	
Capital
 Adequacy; Increased Costs; Illegality

	
26

	
 

	
1.17

	
Credit
 Support

	
28

	
 

	
1.18

	
Conversion
 to Dollars and Sterling

	
28

	
 

	
1.19

	
Judgment
 Currency; Contractual Currency

	
29

	
 

	
1.20

	
Currency of
 Account

	
30

	
 

	
 

	
 

	
 

	
2.

	
CONDITIONS
 PRECEDENT

	
30

	
 

	
 

	
 

	
 

	
2.1

	
Conditions
 to the Initial Loans

	
30

	
 

	
2.2

	
Further
 Conditions to Each Loan

	
32

	
 

	
 

	
 

	
 

	
3.

	
REPRESENTATIONS
 AND WARRANTIES

	
33

	
 

	
 

	
 

	
 

	
3.1

	
Corporate
 Existence; Compliance with Law

	
33

	
 

	
3.2

	
Executive
 Offices, Collateral Locations, FEIN

	
33

	
 

	
3.3

	
Corporate
 Power, Authorization, Enforceable Obligations

	
34

	
 

	
3.4

	
Financial
 Disclosures

	
34

	
 

	
3.5

	
Material
 Adverse Effect

	
35

	
 

	
3.6

	
Ownership of
 Property; Liens

	
36

	
 

	
3.7

	
Labor
 Matters

	
36

	
 

	
3.8

	
Ventures,
 Subsidiaries and Affiliates; Outstanding Stock and Indebtedness

	
36

	
 

	
3.9

	
Government
 Regulation

	
37

	
 

	
3.10

	
Margin
 Regulations

	
37

	
 

	
3.11

	
Taxes

	
37

	
 

	
3.12

	
ERISA

	
38

i

	
 

	
 

	
 

	
 

	
 

	
3.13

	
Litigation

	
39

	
 

	
3.14

	
Brokers

	
39

	
 

	
3.15

	
Intellectual
 Property

	
39

	
 

	
3.16

	
Full
 Disclosure

	
40

	
 

	
3.17

	
Environmental
 Matters

	
40

	
 

	
3.18

	
Insurance

	
41

	
 

	
3.19

	
Deposit

	
41

	
 

	
3.20

	
[Reserved]

	
41

	
 

	
3.21

	
Bonding;
 Licenses

	
41

	
 

	
3.22

	
Solvency

	
41

	
 

	
3.23

	
Sale-Leasebacks

	
42

	
 

	
3.24

	
U.S.
 Money-Laundering and Terrorism Regulatory Matters

	
42

	
 

	
3.25

	
Lending and
 Auction Regulatory Matters

	
43

	
 

	
 

	
 

	
4.

	
FINANCIAL
 STATEMENTS AND INFORMATION

	
43

	
 

	
 

	
 

	
 

	
4.1

	
Reports and
 Notices

	
43

	
 

	
4.2

	
Communication
 with Accountants

	
43

	
 

	
 

	
 

	
 

	
5.

	
AFFIRMATIVE
 COVENANTS

	
44

	
 

	
 

	
 

	
 

	
5.1

	
Maintenance
 of Existence and Conduct of Business

	
44

	
 

	
5.2

	
Payment of
 Charges

	
44

	
 

	
5.3

	
Books and
 Records

	
44

	
 

	
5.4

	
Insurance;
 Damage to or Destruction of Collateral

	
45

	
 

	
5.5

	
Compliance
 with Laws

	
46

	
 

	
5.6

	
Supplemental
 Disclosure

	
46

	
 

	
5.7

	
Intellectual
 Property

	
46

	
 

	
5.8

	
Environmental
 Matters

	
47

	
 

	
5.9

	
Landlords’
 Agreements, Bailee Letters and Real Estate Purchases

	
47

	
 

	
5.10

	
Lending and
 Auction Regulatory Matters

	
48

	
 

	
5.11

	
Further
 Assurances

	
48

	
 

	
5.12

	
Art Loans
 and Art Inventory

	
48

	
 

	
5.13

	
Money-Laundering
 and Terrorism Regulatory Matters

	
49

	
 

	
5.14

	
New
 Subsidiaries

	
50

	
 

	
5.15

	
Immaterial
 Subsidiaries

	
50

	
 

	
5.16

	
York Avenue
 Transactions

	
50

	
 

	
5.17

	
Auction
 Guaranties

	
50

	
 

	
5.18

	
Data
 Protection Matters

	
50

	
 

	
 

	
 

	
6.

	
NEGATIVE
 COVENANTS

	
51

	
 

	
 

	
 

	
 

	
6.1

	
Mergers,
 Subsidiaries, Etc

	
51

	
 

	
6.2

	
Investments;
 Loans and Revolving Credit Advances

	
51

	
 

	
6.3

	
Indebtedness

	
52

	
 

	
6.4

	
Employee
 Loans and Affiliate Transactions

	
54

	
 

	
6.5

	
Capital
 Structure and Business

	
54

ii

	
 

	
 

	
 

	
 

	
 

	
6.6

	
Guaranteed Indebtedness

	
55

	
 

	
6.7

	
Liens

	
55

	
 

	
6.8

	
Sale of
 Stock and Assets

	
56

	
 

	
6.9

	
ERISA

	
56

	
 

	
6.10

	
Financial
 Covenants

	
56

	
 

	
6.11

	
Hazardous
 Materials

	
56

	
 

	
6.12

	
Sale
 Leasebacks

	
56

	
 

	
6.13

	
Restricted
 Payments

	
56

	
 

	
6.14

	
Change of
 Corporate Name, State of Incorporation or Location; Change of Fiscal Year

	
57

	
 

	
6.15

	
No
 Impairment of Intercompany Transfers

	
58

	
 

	
6.16

	
Real Estate
 Purchases

	
58

	
 

	
6.17

	
Changes
 Relating to Material Contracts

	
58

	
 

	
 

	
 

	
7.

	
TERM

	
58

	
 

	
 

	
 

	
 

	
7.1

	
Termination

	
58

	
 

	
7.2

	
Survival of
 Obligations Upon Termination of Financing Arrangements

	
59

	
 

	
 

	
 

	
8.

	
EVENTS OF
 DEFAULT; RIGHTS AND REMEDIES

	
59

	
 

	
 

	
 

	
 

	
8.1

	
Events of
 Default

	
59

	
 

	
8.2

	
Remedies

	
61

	
 

	
8.3

	
Waivers by
 Credit Parties

	
61

	
 

	
 

	
 

	
9.

	
ASSIGNMENT
 AND PARTICIPATIONS; APPOINTMENT OF AGENT

	
62

	
 

	
 

	
 

	
 

	
9.1

	
Assignment
 and Participations

	
62

	
 

	
9.2

	
Appointment
 of Agent

	
65

	
 

	
9.3

	
Agent’s
 Reliance, Etc

	
65

	
 

	
9.4

	
GE Capital
 and Affiliates

	
66

	
 

	
9.5

	
Lender
 Credit Decision

	
66

	
 

	
9.6

	
Indemnification

	
67

	
 

	
9.7

	
Successor
 Agent and Fronting Lender

	
67

	
 

	
9.8

	
Setoff and
 Sharing of Payments

	
68

	
 

	
9.9

	
Advances;
 Payments; Non-Funding Lenders; Information; Actions in Concert

	
69

	
 

	
 

	
 

	
 

	
10.

	
SUCCESSORS
 AND ASSIGNS

	
74

	
 

	
 

	
 

	
 

	
10.1

	
Successors
 and Assigns

	
74

	
 

	
 

	
 

	
 

	
11.

	
MISCELLANEOUS

	
75

	
 

	
 

	
 

	
 

	
 

	
11.1

	
Complete
 Agreement; Modification of Agreement

	
75

	
 

	
11.2

	
Amendments
 and Waivers

	
75

	
 

	
11.3

	
Fees and
 Expenses

	
77

	
 

	
11.4

	
No Waiver

	
78

iii

	
 

	
 

	
 

	
 

	
 

	
11.5

	
Remedies

	
78

	
 

	
11.6

	
Severability

	
78

	
 

	
11.7

	
Conflict of
 Terms

	
79

	
 

	
11.8

	
Confidentiality

	
79

	
 

	
11.9

	
GOVERNING
 LAW

	
79

	
 

	
11.10

	
Notices

	
80

	
 

	
11.11

	
Section
 Titles

	
81

	
 

	
11.12

	
Counterparts

	
81

	
 

	
11.13

	
WAIVER OF
 JURY TRIAL

	
81

	
 

	
11.14

	
Press
 Releases and Related Matters

	
81

	
 

	
11.15

	
Reinstatement

	
82

	
 

	
11.16

	
Advice of
 Counsel

	
82

	
 

	
11.17

	
No Strict
 Construction

	
82

	
 

	
11.18

	
PATRIOT Act

	
82

	
 

	
 

	
 

	
12.

	
CROSS-GUARANTY

	
82

	
 

	
 

	
 

	
 

	
12.1

	
Cross-Guaranty

	
83

	
 

	
12.2

	
Waivers by
 Borrowers

	
83

	
 

	
12.3

	
Benefit of
 Guaranty

	
84

	
 

	
12.4

	
Waiver of
 Subrogation, Etc

	
84

	
 

	
12.5

	
Subordination
 by U.K. Borrowers

	
84

	
 

	
12.6

	
Election of
 Remedies

	
85

	
 

	
12.7

	
Liability
 Cumulative

	
86

iv

	
 

	
 

	
 

	
 

	
INDEX OF APPENDICES

	
 

	
 

	
 

	
 

	
Annex A
 (Recitals)

	
-

	
Definitions

	
 

	
Annex B
(Section 1.2) 

	
-

	
Letters of
 Credit

	
 

	
Annex C
(Section 1.8) 

	
-

	
Cash
 Management System

	
 

	
Annex D
(Section 2.1(a)) 

	
-

	
Closing
 Checklist

	
 

	
Annex E
(Section 4.1(a)) 

	
-

	
Financial
 Statements and Projections — Reporting

	
 

	
Annex F
(Section 4.1(b)) 

	
-

	
Collateral
 Reports

	
 

	
Annex G
(Section 6.10) 

	
-

	
Financial
 Covenants

	
 

	
Annex H
(Section 9.9(a)) 

	
-

	
Lenders’
 Wire Transfer Information

	
 

	
Annex I
(Section 11.10) 

	
-

	
Notice
 Addresses

	
 

	
Annex J
 (from Annex A -

	
-

	
 

	
 

	
Commitments definition)

	
 

	
Commitments
 as of Closing Date

	
 

	
 

	
 

	
 

	
 

	
Exhibit
 1.1(a)(i)

	
-

	
Form of
 Notice of Revolving Credit Advance

	
 

	
Exhibit
 1.1(a)(ii)-A

	
-

	
Form of
 Revolving Note (U.S. Borrowers)

	
 

	
Exhibit
 1.1(a)(ii)-B

	
-

	
Form of
 Revolving Note (U.K. Borrowers)

	
 

	
Exhibit
 1.1(a)(ii)-C

	
-

	
Form of
 Fronting Lender Note

	
 

	
Exhibit
 1.1(b)(ii)-A

	
-

	
Form of
 Swing Line Note (U.S. Borrowers)

	
 

	
Exhibit
 1.1(b)(ii)-B

	
-

	
Form of
 Swing Line Note (U.K. Borrowers)

	
 

	
Exhibit
 1.5(e)

	
-

	
Form of
 Notice of Conversion/Continuation

	
 

	
Exhibit 4.1(A)

	
-

	
Form of
 Borrowing Base Certificate

	
 

	
Exhibit
 4.1(B)

	
-

	
Form of Art
 Loan Receivables Report

	
 

	
Exhibit
 4.1(C)

	
-

	
Form of Art
 Inventory Report

	
 

	
Exhibit
 9.1(a)

	
-

	
Form of
 Assignment Agreement

	
 

	
Exhibit B

	
-

	
Application
 for Standby Letter of Credit

	
 

	
Exhibit C

	
-

	
Form of
 Compliance Certificate

	
 

	
Schedule 1.1

	
-

	
Agent’s
 Representatives

	
 

	
Schedule 1.5

	
-

	
Mandatory
 Cost

	
 

	
Disclosure
 Schedule 1.4

	
-

	
Sources and
 Uses; Funds Flow Memorandum

	
 

	
Disclosure
 Schedule 3.1

	
-

	
Type of
 Entity; State of Organization

	
 

	
Disclosure
 Schedule 3.2

	
-

	
Executive
 Offices, Collateral Locations, FEIN

	
 

	
Disclosure
 Schedule 3.4(a)

	
-

	
Financial
 Statements

	
 

	
Disclosure
 Schedule 3.4(b)

	
-

	
Projections

	
 

	
Disclosure
 Schedule 3.6

	
-

	
Real Estate
 and Leases

	
 

	
Disclosure
 Schedule 3.7

	
-

	
Labor Matters

	
 

	
Disclosure
 Schedule 3.8

	
-

	
Ventures,
 Subsidiaries and Affiliates; Outstanding Stock

	
 

	
Disclosure
 Schedule 3.11

	
-

	
Tax Matters

	
 

	
Disclosure
 Schedule 3.12(a)

	
-

	
ERISA Plans

	
 

	
Disclosure
 Schedule 3.12(c)

	
-

	
U.K. Pension
 Plans

	
 

	
Disclosure
 Schedule 3.13(a)

	
-

	
Litigation

	
 

	
Disclosure
 Schedule 3.14

	
-

	
Brokers

	
 

	
Disclosure
 Schedule 3.15

	
-

	
Intellectual
 Property

	
 

	
Disclosure
 Schedule 3.17

	
-

	
Hazardous
 Materials

	
 

v

	
 

	
 

	
 

	
 

	
Disclosure
 Schedule 3.18

	
-

	
Insurance

	
 

	
Disclosure
 Schedule 3.19

	
-

	
Deposit and
 Disbursement Accounts

	
 

	
Disclosure
 Schedule 3.21

	
-

	
Bonds;
 Patent, Trademark Licenses

	
 

	
Disclosure
 Schedule 5.15

	
-

	
Immaterial
 Subsidiaries

	
 

	
Disclosure
 Schedule 5.16

	
-

	
York Avenue
 Lender Recourse

	
 

	
Disclosure
 Schedule 6.3

	
-

	
Indebtedness

	
 

	
Disclosure
 Schedule 6.4(a)

	
-

	
Transactions
 with Affiliates

	
 

	
Disclosure
 Schedule 6.7

	
-

	
Existing
 Liens

	
 

vi

                    This
CREDIT AGREEMENT (this “Agreement”), dated as of August 31, 2009, among
Sotheby’s, a Delaware corporation (“Parent”), Sotheby’s, Inc., a New
York corporation (“Sotheby’s, Inc.”), Sotheby’s Financial Services,
Inc., a Nevada corporation (“SFS Inc.”), Sotheby’s Financial Services
California, Inc., a Nevada corporation (“SFS California”), Oberon, Inc.,
a Delaware corporation (“Oberon”), Theta, Inc., a Delaware corporation
(“Theta”), Sotheby’s Ventures, LLC, a New York limited liability company
(“Ventures LLC” and, collectively with Parent, Sotheby’s, Inc., SFS
Inc., SFS California, Oberon and Theta, the “U.S. Borrowers”), Oatshare
Limited, a company registered in England (“Oatshare”), Sotheby’s, a
company registered in England (“Sotheby’s U.K.”), and Sotheby’s
Financial Services Limited, a company registered in England (“SFS Ltd.”
and, collectively with Oatshare and Sotheby’s U.K., the “U.K. Borrowers”
and, collectively with the U.S. Borrowers, the “Borrowers”); the other
Credit Parties signatory hereto; General Electric Capital Corporation, a
Delaware corporation (in its individual capacity, “GE Capital”), for
itself, as a Lender and as Fronting Lender, and as Agent for the Lenders and
the Fronting Lender (in such capacity, “Agent”), and the other Lenders
signatory hereto from time to time. 

RECITALS

                    WHEREAS,
Borrowers have requested that Lenders extend revolving credit facilities to
Borrowers of up to Two Hundred Million Dollars ($200,000,000) in the aggregate
to provide (a) working capital financing for Borrowers, (b) funds for other
general corporate purposes of Borrowers and (c) funds for other purposes
permitted hereunder; and for these purposes, Lenders are willing to make
certain loans and other extensions of credit to Borrowers of up to such amount
upon the terms and conditions set forth herein; and 

                    WHEREAS,
Borrowers have agreed to secure all of the Secured Obligations by granting to
Agent, for the benefit of Agent and the other Secured Parties, a security
interest in and lien upon all of their existing and after-acquired personal
property; and 

                    WHEREAS,
capitalized terms used in this Agreement shall have the meanings ascribed to
them in Annex A and, for purposes of this Agreement and the other Loan
Documents, the rules of construction set forth in Annex A shall govern.
All Annexes, Disclosure Schedules, Exhibits and other attachments
(collectively, “Appendices”) hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, shall constitute but a single agreement. These Recitals shall be
construed as part of the Agreement. 

                    NOW,
THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows: 

1. AMOUNT AND TERMS OF CREDIT 

                    1.1
Credit Facilities. 

                    (a)
Revolving Credit Facility. 

                              (i)
Subject to the terms and conditions hereof, (a) each Lender agrees to make
available, from time to time until the Commitment Termination Date, its Pro
Rata Share 

1

of advances
(each, a “Dollar Revolving Credit Advance”) in Dollars to U.S. Borrowers
and (b) except as otherwise provided in the last sentence of this paragraph,
each of the Sterling Lenders and the Fronting Lender agrees to make available,
from time to time until the Commitment Termination Date, its Pro Rata Share
(or, in the case of the Fronting Lender, the Fronted Percentage) of advances
(each a “Sterling Revolving Credit Advance”) in Sterling to the U.K.
Borrowers. Each Non-Sterling Lender shall purchase an undivided participation
interest in each such Sterling Revolving Credit Advance from the Fronting
Lender in accordance with Section 9.9(e)(i). The Fronting Lender shall
not be required to, and shall not, fund its share of any Sterling Revolving
Credit Advance at any time that any condition precedent set forth in Section
2.2 is not satisfied if the Fronting Lender shall have received at least
one Business Day’s prior written notice from Non-Sterling Lenders having
Commitments equal to or greater than 66 2/3% of the Fronted Percentage
instructing it not to fund its share of a Sterling Revolving Credit Advance.
The Pro Rata Share of the aggregate Revolving Loan of any Lender shall not at
any time exceed its separate Commitment. The obligations of each Lender to make
Loans or purchase participation interests therein under this Agreement shall be
several and not joint. Until the Commitment Termination Date, Borrowers may
borrow, repay and reborrow under this Section 1.1(a); provided, that
(i) the amount of any Revolving Credit Advance to be made at any time to a U.S.
Borrower shall not exceed U.S. Borrowing Availability at such time and (ii) the
Dollar Equivalent of the amount of any Revolving Credit Advance to be made at
any time to a U.K. Borrower shall not exceed U.K. Borrowing Availability at
such time. The Dollar Equivalent of each outstanding Revolving Credit Advance,
Swing Line Advance and Letter of Credit Obligation shall be recalculated
hereunder on each date on which it shall be necessary to determine the
Revolving Loan Outstandings, as determined by Agent in its sole discretion; provided,
that Agent shall recalculate the Dollar Equivalent of the Revolving Loan
Outstandings at least one time each calendar month and otherwise in accordance
with Section 1.18. U.S. Borrowing Availability or U.K. Borrowing
Availability, or both, may be reduced by Reserves imposed by Agent in its sole
reasonable credit judgment. Each Revolving Credit Advance shall be made on
notice by Borrower Representative to one of the representatives of Agent
identified in Schedule 1.1 at the address specified therein. Any such
notice must be given no later than (x) 11:00 a.m. (New York time) on the
Business Day of the proposed Revolving Credit Advance, in the case of an Index
Rate Loan in Dollars or (y) 11:00 a.m. (New York time) on the date which is
three (3) Business Days prior to the proposed Revolving Credit Advance, in the
case of a LIBOR Loan. Each such notice (a “Notice of Revolving Credit
Advance”) must be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(a)(i), and shall include the
information required in such Exhibit and such other information as may be
required by Agent. If any Borrower desires to have any Revolving Credit Advance
be made as a LIBOR Loan, Borrower Representative must comply with Section
1.5(e). A Revolving Credit Advance may not be drawn in Sterling if Agent
determines at any time prior to 12:00 p.m. (New York time) on the date of such
proposed Revolving Credit Advance that by reason of any change in currency
availability, unusual instability in currency exchange rates or exchange
controls it is, or will be, impracticable for such Revolving Credit Advance to
be made in the Sterling. In such event, the proposed Revolving Credit Advance
shall be made in Dollars. 

                              (ii)
Except as provided in Section 1.12, each Borrower shall execute and
deliver to each Lender a note to evidence the Commitment of, and Revolving
Credit Advances made by, that Lender. Each note shall be in the principal
amount of the Commitment of the applicable Lender, dated the Closing Date (or
such later date as such Lender becomes 

2

party to this
Agreement pursuant to Section 9.1(a) or modifies its Commitment pursuant
to Section 9.1(a)) and substantially in the form of Exhibit
1.1(a)(ii)-A (in the case of the U.S. Borrowers) or Exhibit 1.1(a)(ii)-B
(in the case of the U.K. Borrowers) (each a “Revolving Note” and,
collectively, the “Revolving Notes”). Each Revolving Note shall
represent the joint and several obligation of the applicable Borrowers to pay
the amount of the applicable Lender’s Commitment or, if less, such Lender’s Pro
Rata Share of the aggregate unpaid principal amount of all Revolving Credit Advances
made to the U.S. Borrowers or the U.K. Borrowers, as applicable, together with
interest thereon as prescribed in Section 1.5. In addition, each U.K.
Borrower shall execute and deliver to the Fronting Lender a note to evidence
the obligation of, and Sterling Revolving Credit Advances made by, the Fronting
Lender. Such note shall be in the principal amount of the Sterling Subfacility
Limit dated the Closing Date (or such later date as such Person shall become
the Fronting Lender pursuant to Section 9.7(b)) and substantially in the
form of Exhibit 1.1(a)(ii)-C (the “Fronting Lender Note”). The
Fronting Lender Note shall represent the joint and several obligation of the
U.K. Borrowers to pay the Fronted Percentage of the aggregate unpaid principal
amount of all Sterling Revolving Credit Advances made to the U.K. Borrowers,
together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the aggregate Revolving Loan and all other non-contingent
Obligations shall be immediately due and payable in full in immediately
available funds on the Commitment Termination Date. 

                              (iii)
Anything in this Agreement to the contrary notwithstanding, at the request of
Borrower Representative, in its discretion Agent may (but shall have absolutely
no obligation to), make Revolving Credit Advances (i) to U.S. Borrowers on
behalf of Lenders in Dollars in amounts that cause the sum of (a) the aggregate
outstanding balance of the Revolving Credit Advances and Swing Line Advances
outstanding to the U.S. Borrowers plus (b) the Dollar Equivalent of the
outstanding amount of Letter of Credit Obligations incurred for the benefit of
the U.S. Borrowers to exceed the U.S. Borrowing Base or (ii) to U.K. Borrowers
on behalf of the Sterling Lenders and the Fronting Lender in Sterling in
amounts that cause the sum of (a) the Dollar Equivalent of the aggregate
outstanding balance of the Revolving Credit Advances and Swing Line Advances
outstanding to the U.K. Borrowers plus (b) the Dollar Equivalent of the
outstanding amount of Letter of Credit Obligations incurred for the benefit of
the U.K. Borrowers to exceed the U.K. Borrowing Base (any such excess Revolving
Credit Advances are herein referred to collectively as “Overadvances”); provided,
that (A) no such event or occurrence shall cause or constitute a waiver of
Agent’s, Swing Line Lender’s, Fronting Lender’s or Lenders’ right to refuse to
make any further Overadvances, Swing Line Advances or Revolving Credit
Advances, or incur any Letter of Credit Obligations, as the case may be, at any
time that an Overadvance exists and (B) no Overadvance shall result in a
Default or Event of Default based on Borrowers’ failure to comply with Section
1.3(b)(ii) for so long as Agent permits such Overadvance to be outstanding,
but solely with respect to the amount of such Overadvance. In addition,
Overadvances may be made even if the conditions to lending set forth in Section
2 have not been met. All Overadvances shall constitute Index Rate Loans (in
the case of Overadvances denominated in Dollars) or LIBOR Loans having a
one-month LIBOR Period (in the case of Overadvances denominated in Sterling),
shall bear interest at the Default Rate and shall be payable on the earlier of
demand or the Commitment Termination Date. Except as otherwise provided in Section
1.11(b), the authority of Agent to make Overadvances is limited to an
aggregate amount not to exceed a Dollar Equivalent of $15,000,000 at any time,
shall not cause the Dollar Equivalent of the aggregate Revolving Loan to exceed
the Maximum Amount, 

3

and may be
revoked prospectively by a written notice to Agent signed by the Requisite
Lenders; provided, that Overadvances made other than for the purpose of
protecting or preserving the Collateral shall not remain outstanding for more
than sixty (60) days without the written consent of Requisite Lenders. Agent
shall use commercially reasonable efforts to provide notice to Lenders
following the making of an Overadvance (unless one or more Overadvances are already
outstanding as of the date of such Overadvance). 

                    (b)
Swing Line Facility. 

                              (i)
Agent shall notify the Swing Line Lender upon Agent’s receipt of any Notice of
Revolving Credit Advance in respect of a Revolving Credit Advance (a) to be
denominated in Dollars and to bear interest by reference to the Dollar Index
Rate or (b) to be denominated in Sterling and to bear interest by reference to
the Sterling Index Rate. Subject to the terms and conditions hereof, the Swing
Line Lender may, but shall have no duty to, in accordance with any such notice,
make available from time to time until the Commitment Termination Date advances
(each, a “Swing Line Advance”) (a) in Dollars to the U.S. Borrowers or
(b) in Sterling to the U.K. Borrowers. The provisions of this Section 1.1(b)
shall not relieve Lenders or the Fronting Lender of their obligations to make
Revolving Credit Advances under Section 1.1(a); provided, that if
the Swing Line Lender makes a Swing Line Advance pursuant to any such notice,
such Swing Line Advance shall be in lieu of any Revolving Credit Advance that
otherwise may be made by the Lenders or the Fronting Lender pursuant to such
notice. The aggregate amount of Swing Line Advances outstanding shall not
exceed at any time the Swing Line Availability as of such time. Until the
Commitment Termination Date, the Borrowers may from time to time borrow, repay
and reborrow under this Section 1.1(b). Each Swing Line Advance shall be
made pursuant to a Notice of Revolving Credit Advance delivered to Agent by
Borrower Representative on behalf of the applicable Borrower in accordance with
Section 1.1(a). Any such notice must be given no later than (x) 3:00
p.m. (New York time) on the Business Day of the proposed Swing Line Advance, in
the case of a Swing Line Advance in Dollars or (y) 10:00 a.m. (New York time)
on the date which is two (2) Business Days prior to the proposed Swing Line
Advance, in the case of a Swing Line Advance in Sterling. Unless the Swing Line
Lender has received at least one Business Day’s prior written notice from
Requisite Lenders instructing it not to make a Swing Line Advance, the Swing
Line Lender shall, notwithstanding the failure of any condition precedent set
forth in Sections 2.2, be entitled to fund that Swing Line Advance, and
to have each Lender make Revolving Credit Advances in accordance with Section
1.1(b)(iii) or 1.1(b)(iv), as applicable, or purchase participating
interests in accordance with Section 1.1(b)(v). If any Lender shall fail
to make available to Agent its Pro Rata Share (or, in the case of any Swing
Line Advance in Sterling, the Fronting Lender shall fail to make available the
Fronted Percentage) of any Revolving Credit Advance in accordance with Section
1.1(b)(iii) or 1.1(b)(iv), as applicable, Borrowers shall repay the
outstanding principal amount of the portion of the Swing Line Loan then
outstanding due to such failure upon demand therefor by Agent. 

                              (ii)
Each Borrower shall execute and deliver to the Swing Line Lender a promissory
note to evidence the Swing Line Commitment. Such note shall be in the principal
amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing
Date and substantially in the form of Exhibit 1.1(b)(ii)-A (in the case
of the U.S. Borrowers) or Exhibit 1.1(b)(ii)-B (in the case of the U.K.
Borrowers) (each, a “Swing Line Note” and, collectively, the 

4

“Swing Line
Notes”). Each Swing Line Note shall represent the joint and several
obligation of the applicable Borrowers to pay the amount of the Swing Line
Commitment or, if less, the aggregate unpaid principal amount of all Swing Line
Advances made to the U.S. Borrowers or the U.K. Borrowers, as applicable,
together with interest thereon as prescribed in Section 1.5. The entire
unpaid balance of the Swing Line Loan and all other noncontingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date if not sooner paid in full. 

                              (iii)
The Swing Line Lender, at any time and from time to time no less frequently
than once weekly, shall on behalf of the Borrower Representative (and the
Borrower Representative hereby irrevocably authorizes the Swing Line Lender to
so act on its behalf) request each Lender (including the Swing Line Lender) to
make available to the U.S. Borrowers its Pro Rata Share of a Revolving Credit
Advance in Dollars equal to the principal amount of the portion of the Swing
Line Loan denominated in Dollars and outstanding on the date such notice is
given (the “Refunded Dollar Swing Line Loan”). Unless any of the events
described in Sections 8.1(g) or 8.1(h) has occurred (in which
event the procedures of Section 1.1(b)(v) shall apply) and regardless of
whether the conditions precedent set forth in this Agreement to the making of a
Revolving Credit Advance are then satisfied, each Lender shall disburse
directly to Agent its Pro Rata Share of such Revolving Credit Advance on behalf
of the Swing Line Lender prior to 3:00 p.m. (New York time) in immediately
available funds in Dollars on the Business Day next succeeding the date that
notice is given. The proceeds of each such Revolving Credit Advance shall be
immediately paid to the Swing Line Lender and applied to repay the Refunded
Dollar Swing Line Loan. 

                              (iv)
The Swing Line Lender, at any time and from time to time no less frequently
than once weekly, shall on behalf of the Borrower Representative (and the
Borrower Representative hereby irrevocably authorizes the Swing Line Lender to
so act on its behalf) request each Sterling Lender (including the Swing Line
Lender, as applicable) and the Fronting Lender to make available to the U.K.
Borrowers its Pro Rata Share (or, in the case of the Fronting Lender, the
Fronted Percentage) of a Revolving Credit Advance in Sterling equal to the
principal amount of the portion of the Swing Line Loan denominated in Sterling
and outstanding on the date such notice is given (the “Refunded Sterling
Swing Line Loan”). Unless any of the events described in Sections 8.1(g)
or 8.1(h) has occurred (in which event the procedures of Section
1.1(b)(v) shall apply) and regardless of whether the conditions precedent
set forth in this Agreement to the making of a Revolving Credit Advance are
then satisfied, each Sterling Lender and the Fronting Lender shall disburse
directly to Agent its Pro Rata Share (or, in the case of the Fronting Lender,
the Fronted Percentage) of such Revolving Credit Advance on behalf of the Swing
Line Lender prior to 3:00 p.m. (New York time) in immediately available funds
in Sterling on the second Business Day next succeeding the date that notice is
given. The proceeds of each such Revolving Credit Advance shall be immediately paid
to the Swing Line Lender and applied to repay the Refunded Sterling Swing Line
Loan. Each Non-Sterling Lender shall purchase an undivided participation
interest in each such Sterling Revolving Credit Advance from the Fronting
Lender in accordance with Section 9.9(e)(i). 

                              (v)
If, prior to refunding a portion of the Swing Line Loan with a Revolving Credit
Advance pursuant to Section 1.1(b)(iii) or 1.1(b)(iv), one of the
events 

5

described in Sections
8.1(g) or 8.1(h) has occurred, then, subject to the provisions of Section
1.1(b)(vi) below: 

	
 

	
 

	
 

	
          (A)
 in the case of any portion of the Swing Line Loan denominated in Dollars,
 each Lender shall, on the date such Revolving Credit Advance was to have been
 made pursuant to Section 1.1(b)(iii), purchase from the Swing Line
 Lender an undivided participation interest in the Swing Line Loan in an
 amount equal to its Pro Rata Share of such portion of the Swing Line Loan.
 Upon request, each Lender shall promptly transfer to the Swing Line Lender,
 in immediately available funds in Dollars, the amount of each such
 participation interest; or 

	
 

	
 

	
 

	
          (B)
 in the case of any portion of the Swing Line Loan denominated in Sterling,
 each Sterling Lender and the Fronting Lender shall, on the date such
 Revolving Credit Advance was to have been made pursuant to Section
 1.1(b)(iv), purchase from the Swing Line Lender an undivided
 participation interest in the Swing Line Loan in an amount equal to its Pro
 Rata Share (or, in the case of the Fronting Lender, the Fronted Percentage)
 of such portion of the Swing Line Loan. Upon request, each Sterling Lender
 and the Fronting Lender shall promptly transfer to the Swing Line Lender, in
 immediately available funds in Sterling, the amount of each such
 participation interest. Each Non-Sterling Lender shall purchase an undivided
 participation interest in each such participation interest purchased by the
 Fronting Lender in accordance with Section 9.9(e)(i). 

                              (vi)
Each Lender’s and the Fronting Lender’s obligation to make Revolving Credit
Advances in accordance with Sections 1.1(b)(iii) and 1.1(b)(iv)
and to purchase participation interests in accordance with Section 1.1(b)(v)
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right that such Lender or the Fronting Lender may have against the Swing
Line Lender, any Borrower or any other Person for any reason whatsoever; (B) the
occurrence or continuance of any Default or Event of Default; (C) any inability
of any Borrower to satisfy the conditions precedent to borrowing set forth in
this Agreement at any time or (D) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing. If any Lender or
the Fronting Lender does not make available to Agent or the Swing Line Lender,
as applicable, the amount required pursuant to Sections 1.1(b)(iii),
1.1(b)(iv) or 1.1(b)(v), as the case may be, the Swing Line Lender shall be
entitled to recover such amount on demand from such Lender or the Fronting
Lender, as applicable, together with interest thereon for each day from the
date of non-payment until such amount is paid in full (x) in the case of any portion
of the Swing Line Loan denominated in Dollars, at the Federal Funds Rate for
the first two Business Days and at the Dollar Index Rate thereafter or (y) in
the case of any portion of the Swing Line Loan denominated in Sterling, at the
Sterling Index Rate. 

                    (c)
Reliance on Notices; Appointment of Borrower Representative. Agent shall
be entitled to rely upon, and shall be fully protected in relying upon, any
Notice of Revolving Credit Advance, Notice of Conversion/Continuation or similar
notice believed by Agent to be genuine. Agent may assume that each Person
executing and delivering any notice in accordance herewith was duly authorized,
unless the responsible individual acting thereon for 

6

Agent has
actual knowledge to the contrary. Each Borrower hereby designates Parent as its
representative and agent on its behalf for the purposes of issuing Notices of
Revolving Credit Advances and Notices of Conversion/Continuation, giving
instructions with respect to the disbursement of the proceeds of the Loans,
selecting interest rate options, requesting Letters of Credit, giving and
receiving all other notices and consents hereunder or under any of the other
Loan Documents and taking all other actions (including in respect of compliance
with covenants) on behalf of any Borrower or Borrowers under the Loan
Documents. Borrower Representative hereby accepts such appointment. Agent and
each Lender may regard any notice or other communication pursuant to any Loan
Document from Borrower Representative as a notice or communication from all
Borrowers, and may give any notice or communication required or permitted to be
given to any Borrower or Borrowers hereunder to Borrower Representative on
behalf of such Borrower or Borrowers. Each Borrower agrees that each notice,
election, representation and warranty, covenant, agreement and undertaking made
on its behalf by Borrower Representative shall be deemed for all purposes to
have been made by such Borrower and shall be binding upon and enforceable against
such Borrower to the same extent as if the same had been made directly by such
Borrower. 

                    1.2
Letters of Credit. 

                    Subject
to and in accordance with the terms and conditions contained herein and in
Annex B, Borrower Representative, on behalf of the applicable Borrower (and any
Subsidiary thereof that may be a co-applicant on any applicable Letter of
Credit), shall have the right to request, and Lenders agree to incur, or
purchase participations in, Letter of Credit Obligations.  

                    1.3
Prepayments; Commitment Reductions. 

                    (a)
Voluntary Prepayments; Reductions in Commitments. 

                              (i)
Borrower Representative shall notify Agent (and, in the case of prepayment of a
Swing Line Loan, the Swing Line Lender) by telephone confirmed in writing of
any prepayment of a Loan hereunder (i) in the case of a LIBOR Loan, not later
than 4:00 p.m. (New York time) on the date which is three (3) Business Days
before the date of such prepayment, and (ii) in the case of an Index Rate Loan,
not later than 11:00 a.m. (New York time) on the date of such prepayment. Each
such notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Loan or portion thereof to be prepaid. Promptly
following receipt of any such notice, Agent shall provide notice to Lenders
thereof. Each partial prepayment of any Loan shall be in a minimum amount of
(i) if denominated in Dollars, $5,000,000 or an integral multiple of $1,000,000
in excess of such amount or (ii) if denominated in Sterling, £3,000,000 or an
integral multiple of £500,000 in excess of such amount. 

                              (ii)
Borrowers may at any time, on at least five
(5) days’ prior written notice by Borrower Representative to Agent of the
intent of the Borrowers to effect such a reduction and at least two (2) days’
prior written notice by Borrower Representative to Agent of the exact date on
which such reduction shall occur, permanently reduce (but not terminate) the
Commitment; provided, that (A) any such reduction shall be in a minimum
amount of $5,000,000 and integral multiples of $1,000,000 in excess of such
amount, (B) the Commitment 

7

shall not be
reduced to an amount less than the greater of (i) $75,000,000, and (ii) the sum
of (x) the Dollar Equivalent of the amount of the aggregate Revolving Loan then
outstanding and (y) the Dollar Equivalent of the Swing Line Loan then
outstanding, and (C) after giving effect to such reductions, Borrowers shall
comply with Sections 1.3(b)(i) and (ii). In addition, Borrowers may at
any time, on at least ten (10) days’ prior written notice by Borrower
Representative to Agent of the intent of the Borrowers to effect such a
termination and at least two (2) days’ prior written notice by Borrower
Representative to Agent of the exact date on which such termination shall
occur, terminate the Commitment; provided, that upon such termination,
all Loans and other Obligations shall be immediately due and payable in full
and all Letter of Credit Obligations shall be cash collateralized or otherwise
satisfied in accordance with Annex B hereto. Any reduction or termination of
the Commitment must be accompanied by payment of the Fee required by Section
1.9(c), if any, plus the payment of any LIBOR funding breakage costs in
accordance with Section 1.13(b). Upon any such reduction or termination
of the Commitment, each Borrower’s right to request Revolving Credit Advances,
or request that Letter of Credit Obligations be incurred on its behalf, or
request Swing Line Advances, shall simultaneously be permanently reduced or
terminated, as the case may be; provided, that a permanent reduction of
the Commitment below $100,000,000 shall require a corresponding pro rata
reduction in the Sterling Subfacility Limit and the L/C Sublimit to the extent
of such reduction below $100,000,000.  

                    (b)
Mandatory Prepayments. 

                              (i)
If at any time the aggregate outstanding balance of the Revolving Loan and the
Swing Line Loan exceeds the Maximum Amount, Borrowers shall immediately repay
the aggregate outstanding Revolving Credit Advances and Swing Line Advances to
the extent required to eliminate such excess. If any such excess remains after
repayment in full of the aggregate outstanding Revolving Credit Advances and
Swing Line Advances, Borrowers shall provide cash collateral for the Letter of
Credit Obligations in the manner set forth in Annex B to the extent of
such remaining excess. If at any time the Dollar Equivalent of the aggregate
outstanding principal balance of Revolving Credit Advances and Swing Line
Advances outstanding to the U.K. Borrowers and the Dollar Equivalent of the
outstanding Letter of Credit Obligations incurred on behalf of the U.K.
Borrowers, in the aggregate, exceed the Sterling Subfacility Limit, the U.K.
Borrowers shall, at Agent’s request, immediately repay such Revolving Credit
Advances and Swing Line Advances to the extent required to eliminate such
excess. If any such excess remains after repayment in full of the aggregate
outstanding principal balance of such Revolving Credit Advances and Swing Line
Advances, the U.K. Borrowers shall, at Agent’s request, provide cash collateral
for such Letter of Credit Obligations in the manner set forth in Annex B
to the extent of such remaining excess. 

                              (ii)
If at any time the aggregate outstanding balance of the Revolving Credit
Advances and Swing Line Advances outstanding to the U.S. Borrowers and the
Dollar Equivalent of the Letter of Credit Obligations incurred on behalf of the
U.S. Borrowers, in the aggregate, exceed the U.S. Borrowing Base, the U.S.
Borrowers shall immediately repay such outstanding Revolving Credit Advances
and Swing Line Advances to the extent required to eliminate such excess. If any
such excess remains after repayment in full of such outstanding Revolving
Credit Advances and Swing Line Advances, the U.S. Borrowers shall provide cash
collateral for such Letter of Credit Obligations in the manner set forth in Annex
B to the extent 

8

of such
remaining excess. If at any time the Dollar Equivalent of the aggregate
outstanding balance of the Revolving Credit Advances and Swing Line Advances
outstanding to the U.K. Borrowers and the Dollar Equivalent of the Letter of
Credit Obligations incurred on behalf of the U.K. Borrowers, in the aggregate,
exceed the U.K. Borrowing Base, the U.K. Borrowers shall immediately repay such
outstanding Revolving Credit Advances and Swing Line Advances to the extent
required to eliminate such excess. If any such excess remains after repayment
in full of the aggregate outstanding principal balance of such Revolving Credit
Advances and Swing Line Advances, the U.K. Borrowers shall, at Agent’s request,
provide cash collateral for such Letter of Credit Obligations in the manner set
forth in Annex B to the extent of such remaining excess. Notwithstanding the
foregoing, any Overadvance made pursuant to Section 1.1(a)(iii) shall be
repaid in accordance with Section 1.1(a)(iii).  

                              (iii)
Subject to Section 1.3(c), immediately upon receipt by any Sotheby
Entity of any cash proceeds of any asset disposition, the applicable Borrower
(which is the Borrower that received such cash proceeds or, if such cash
proceeds are received by a Sotheby Entity other than a Borrower, which is the
Borrower that is the most direct holder of Stock of such Sotheby Entity) shall
prepay the Secured Obligations (and cash collateralize the Letter of Credit Obligations,
as applicable) in an amount equal to all of such proceeds, net of (A)
commissions and other reasonable and customary transaction costs, fees and
expenses properly attributable to such transaction and payable by Sotheby
Entities in connection therewith (in each case, paid to non-Affiliates), (B)
transfer taxes, (C) amounts payable to holders of senior Liens on such asset
(to the extent such Liens constitute Permitted Encumbrances hereunder), if any,
and (D) an appropriate reserve for income taxes in accordance with GAAP in
connection therewith. Any such prepayment shall be applied in accordance with Section
1.3(d) or (e), as applicable. The following shall not be subject to
mandatory prepayment under this clause (iii): (1) proceeds of sales of
Inventory in the ordinary course of business; (2) asset dispositions giving
rise to proceeds having a Dollar Equivalent of less than $1,000,000 in the
aggregate for any Fiscal Year; and (3) asset disposition proceeds with respect
to Equipment or Fixtures that are reinvested in Equipment or Fixtures within
one hundred and eighty (180) days of receipt thereof; provided, that the
Borrower Representative notifies Agent of its intent to reinvest at the time
such proceeds are received and when such reinvestment occurs. 

                              (iv)
Subject to Section 1.3(c), if any Sotheby Entity issues Stock to any
entity other than another Sotheby Entity, no later than the Business Day
following the date of receipt of any cash proceeds thereof, the applicable Borrower
(which is the Borrower that received such cash proceeds or, if such cash
proceeds are received by a Sotheby Entity other than a Borrower, which is the
Borrower that is the most direct holder of Stock of such Sotheby Entity) shall
prepay the Secured Obligations (and cash collateralize Letter of Credit
Obligations, as applicable) in an amount equal to all such proceeds, net of
underwriting discounts and commissions and other reasonable costs paid to
non-Affiliates in connection therewith. Any such prepayment shall be applied in
accordance with Section 1.3(d) or (e), as applicable. The
following shall not be subject to prepayment under this clause (iv) up
to a Dollar Equivalent of $1,000,000 in the aggregate for any Fiscal Year: (1)
proceeds of Stock issuances to employees of any Sotheby Entity and (2) proceeds
of Stock issuances to Persons that hold Stock of Parent as of the Closing Date.

9

                    (c)
Adjustments to Mandatory Prepayment Amounts. The Borrowers shall be
required to make any prepayment otherwise payable pursuant to Sections
1.3(b)(iii), 1.3(b)(iv) or 5.4 only to the extent that the amount of such
prepayment exceeds (i) in the case of the U.S. Borrowers, the U.S. Borrowing
Availability as of the date of such required prepayment or (ii) in the case of
the U.K. Borrowers, the U.K. Borrowing Availability as of the date of such
required prepayment, in each case as set forth in a Borrowing Base Certificate
delivered as of the date of such required prepayment. In addition, if, after
giving effect to the previous sentence, any U.K. Borrower shall be required to
make a prepayment pursuant to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4 in
excess of the outstanding principal balance of the Revolving Credit Advances
and Swing Line Advances outstanding to the U.K. Borrowers and the Letter of
Credit Obligations incurred on behalf of the U.K. Borrowers, in the aggregate,
as of such date, then the U.S. Borrowers shall be jointly and severally liable
to make a prepayment of the Loans (and cash collateralize the Letter of Credit
Obligations) (in addition to any prepayment made by such U.K. Borrower pursuant
to Sections 1.3(b)(iii), 1.3(b)(iv) or 5.4, as applicable) in an amount
equal to (i) the amount of such excess minus (ii) the U.S. Borrowing
Availability as of the date of such required prepayment as set forth in a
Borrowing Base Certificate delivered to Agent. 

                    (d)
Application of Mandatory Prepayments by U.S. Borrowers. Subject to the
terms of the Collateral Documents, any prepayments made by any U.S. Borrower
pursuant to Sections 1.3(b)(iii) or (iv) or Section 5.4 shall be applied
as follows: first, to Fees and reimbursable expenses of Agent then due
and payable pursuant to any of the Loan Documents; second, to interest
then due and payable on Swing Line Advances outstanding to the U.S. Borrowers; third,
to the principal balance of Swing Line Advances outstanding to the U.S.
Borrowers until the same have been paid in full; fourth, to interest
then due and payable on Revolving Credit Advances outstanding to the U.S.
Borrowers; fifth, to the principal balance of Revolving Credit Advances
outstanding to the U.S. Borrowers until the same have been paid in full; sixth,
to any Letter of Credit Obligations incurred on behalf of the U.S. Borrowers to
provide cash collateral therefor in the manner set forth in Annex B,
until all such Letter of Credit Obligations have been fully cash collateralized
in the manner set forth in Annex B; seventh, to any other
Obligations owing by the U.S. Credit Parties; eighth, to interest then
due and payable on Swing Line Advances outstanding to the U.K. Borrowers; ninth,
to the principal balance of Swing Line Advances outstanding to the U.K.
Borrowers until the same have been paid in full; tenth, to interest then
due and payable on the Revolving Credit Advances outstanding to the U.K.
Borrowers; eleventh, to the principal balance of the Revolving Credit
Advances outstanding to the U.K. Borrowers until the same have been paid in
full; twelfth, to any Letter of Credit Obligations incurred on behalf of
the U.K. Borrowers to provide cash collateral therefor in the manner set forth
in Annex B, until all such Letter of Credit Obligations have been fully
cash collateralized in the manner set forth in Annex B; thirteenth,
to any other Obligations owing by the U.K. Credit Parties; and, last, to
any amounts then due and payable by the Credit Parties in respect of Bank
Product and Hedging Obligations. The Commitment shall not be permanently
reduced by the amount of any such prepayments.  

                    (e)
Application of Mandatory Prepayments by U.K. Borrowers. Subject to the
terms of the Collateral Documents, any prepayments made by any U.K. Borrower
pursuant to Sections 1.3(b)(iii) or (iv) or Section 5.4 above shall
be applied as follows: first, to Fees and reimbursable expenses of Agent
then due and payable pursuant to any of the Loan Documents in respect of the
Revolving Loans made to the U.K. Borrowers; second, to interest then due
and 

10

payable on
Swing Line Advances outstanding to the U.K. Borrowers; third, to the
principal balance of Swing Line Advances outstanding to the U.K. Borrowers
until the same have been paid in full; fourth, to interest then due and
payable on Revolving Credit Advances outstanding to the U.K. Borrowers; fifth,
to the principal balance of Revolving Credit Advances outstanding to the U.K.
Borrowers until the same have been paid in full; sixth, to any Letter of
Credit Obligations incurred on behalf of the U.K. Borrowers to provide cash
collateral therefor in the manner set forth in Annex B, until all such
Letter of Credit Obligations have been fully cash collateralized in the manner
set forth in Annex B; seventh, to any other Obligations owing by
the U.K. Credit Parties; and, last, to any amounts then due and payable
by the U.K. Credit Parties in respect of Bank Product and Hedging Obligations.
Neither the Commitment nor the Sterling Subfacility Limit shall be permanently
reduced by the amount of any such prepayments. 

                    (f)
No Implied Consent. Nothing in this Section 1.3 shall be
construed to constitute Agent’s or any Lender’s consent to any transaction that
is not permitted by other provisions of this Agreement or the other Loan
Documents. 

                    (g)
Application to Revolving Credit Advances. Any prepayment made on any
outstanding Revolving Credit Advances pursuant to Sections 1.1(a)(i), 1.3(b)
or 5.4 shall be applied as follows: first, to such Revolving Credit
Advances that are Index Rate Loans; and second, to such Revolving Credit
Advances that are LIBOR Loans, in the order of the LIBOR Loans with the
shortest LIBOR Periods to the LIBOR Loans with the longest LIBOR Periods.
Application to specific Advances pursuant to this Section 1.3(g) shall
not affect the calculation of the indemnities, if any, owing to the Lenders
pursuant to Section 1.13(b). 

                    1.4
Use of Proceeds. 

                    Borrowers
shall utilize the proceeds of the Loans solely for the financing of Borrowers’
ordinary working capital and general corporate needs. Disclosure Schedule
(1.4) contains a description of Borrowers’ sources and uses of funds as of
the Closing Date, including any Loans and Letter of Credit Obligations to be
made or incurred on that date, and a funds flow memorandum detailing how funds
from each source are to be transferred to particular uses. 

                    1.5
Interest and Applicable Margins. 

                    (a) Borrowers
shall pay interest to Agent, for the ratable benefit of Lenders and the
Fronting Lender in accordance with the various Loans being made by each Lender
and the Fronting Lender, in arrears on each applicable Interest Payment Date,
at the following rates: (i) with respect to the Dollar Revolving Credit
Advances, the Dollar Index Rate plus the Applicable Dollar Revolver Index
Margin per annum or, at the election of Borrower Representative, the applicable
Dollar LIBOR Rate plus the Applicable Dollar Revolver LIBOR Margin per annum,
(ii) with respect to the Sterling Revolving Credit Advances, the applicable
Sterling LIBOR Rate plus the Applicable Sterling Revolver LIBOR Margin per
annum plus the Mandatory Cost, (iii) with respect to Swing Line Advances
denominated in Dollars, the Dollar Index Rate plus the Applicable Dollar
Revolver Index Margin per annum and (iv) with respect to Swing Line Advances
denominated in Sterling, the Sterling Index Rate plus the Applicable Sterling
Revolver Index Margin per annum. 

11

                    As
of the Closing Date, the Applicable Margins are as follows: 

	
 

	
 

	
 

	
 

	
 

	
Applicable
 Dollar Revolver Index Margin

	
 

	
 

	
3.00

	
%

	
Applicable
 Dollar Revolver LIBOR Margin

	
 

	
 

	
4.00

	
%

	
Applicable
 Sterling Revolver Index Margin

	
 

	
 

	
3.00

	
%

	
Applicable
 Sterling Revolver LIBOR Margin

	
 

	
 

	
4.00

	
%

	
Applicable
 L/C Margin

	
 

	
 

	
4.00

	
%

	
Applicable
 Unused Line Fee Margin

	
 

	
 

	
1.00

	
%

                    The
Applicable Margins shall be adjusted by reference to the following grids: 

	
 

	
 

	
 

	
 

	
 

	
If the Usage for such Business Day

 is:

	
 

	
Level of

 Applicable Margins:

	
 

	
 

	
 

	

	
 

	
<25%

	
 

	
 

	
Level I

	
 

	
>25% but < 75%

	
 

	
 

	
Level II

	
 

	
>75%

	
 

	
 

	
Level III

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Applicable Margins

	
 

	
 

	
 

	

	
 

	
 

	
 

	
Level I

	
 

	
Level II

	
 

	
Level III

	
 

	
 

	
 

	

	
 

	

	
 

	

	
 

	
Applicable
 Dollar Revolver Index Margin

	
 

	
 

	
3.00%

	
 

	
 

	
3.25%

	
 

	
 

	
3.50%

	
 

	
Applicable
 Dollar Revolver LIBOR Margin

	
 

	
 

	
4.00%

	
 

	
 

	
4.25%

	
 

	
 

	
4.50%

	
 

	
Applicable
 Sterling Revolver Index Margin

	
 

	
 

	
3.00%

	
 

	
 

	
3.25%

	
 

	
 

	
3.50%

	
 

	
Applicable
 Sterling Revolver LIBOR Margin

	
 

	
 

	
4.00%

	
 

	
 

	
4.25%

	
 

	
 

	
4.50%

	
 

	
Applicable
 L/C Margin

	
 

	
 

	
4.00%

	
 

	
 

	
4.25%

	
 

	
 

	
4.50%

	
 

                    Adjustments
in the Applicable Margins shall be implemented each Business Day. If an Event
of Default has occurred and is continuing at the time any reduction in such
Applicable Margins is to be implemented, that reduction shall be deferred until
the first Business Day following the date on which such Event of Default is
waived or cured. 

                    (b)
If any payment on any Loan becomes due and payable on a day other than a
Business Day, the maturity thereof will be extended to the next succeeding
Business Day (except as set forth in the definition of LIBOR Period) and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. 

                    (c)
All computations of Fees calculated on a per annum basis and interest on all
Loans denominated in Dollars shall be made by Agent on the basis of a 360-day
year, in each case for the actual number of days occurring in the period for
which such interest and Fees are payable. All computations of interest on all
Loans denominated in Sterling shall be made by Agent on the basis of a 365-day
year for the actual number of days occurring in the period for which such
interest is payable. The Dollar Index Rate and the Sterling Index Rate are
floating 

12

rates
determined for each day. Each determination by Agent of an interest rate and
Fees hereunder shall be presumptive evidence of the correctness of such rates
and Fees. 

                    (d)
So long as an Event of Default has occurred and is continuing under Section
8.1(a), (g) or (h) or so long as any other Event of Default has occurred
and is continuing and at the election of Agent (or upon the written request of
Requisite Lenders) confirmed by written notice from Agent to Borrower
Representative, the interest rates applicable to the Loans and the Letter of
Credit Fees shall be increased by two percentage points (2%) per annum above
the rates of interest or the rate of such Fees otherwise applicable hereunder
(the “Default Rate”), and all outstanding Obligations shall bear
interest at the Default Rate applicable to such Obligations. Interest and
Letter of Credit Fees at the Default Rate shall accrue from the initial date of
such Event of Default until that Event of Default is cured or waived and shall
be payable upon demand. 

                    (e)
Subject to the conditions precedent set forth in Section 2.2, Borrower
Representative shall have the option to (i) request that any Revolving Credit
Advance denominated in Dollars be made as a LIBOR Loan, (ii) convert at any
time all or any portion of the outstanding Revolving Loan denominated in
Dollars from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan
denominated in Dollars to an Index Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.13(b) if such conversion is
made prior to the expiration of the LIBOR Period applicable thereto, or (iv)
continue all or any portion of the outstanding Revolving Loan as a LIBOR Loan upon
the expiration of the applicable LIBOR Period and the succeeding LIBOR Period
of that continued portion of the outstanding Revolving Loan shall commence on
the first day after the last day of the LIBOR Period of the portion of the
outstanding Revolving Loan to be continued. Any portion of the outstanding
Revolving Loan to be made or continued as, or converted into, a LIBOR Loan must
be in a minimum amount of (i) if denominated in Dollars, $5,000,000 or an
integral multiple of $1,000,000 in excess of such amount or (ii) if denominated
in Sterling, £3,000,000 or an integral multiple of £500,000 in excess of such
amount. Any such election must be made by 11:00 a.m. (New York time) on the
third Business Day prior to (1) the date of any proposed Revolving Credit
Advance which is to be made as a LIBOR Loan, (2) the end of each LIBOR Period
with respect to any LIBOR Loans to be continued as such, or (3) the date on
which Borrower Representative wishes to convert any Index Rate Loan to a LIBOR
Loan for a LIBOR Period designated by Borrower Representative in such election.
If no election is received with respect to a LIBOR Loan by 11:00 a.m. (New York
time) on the third Business Day prior to the end of the LIBOR Period with
respect thereto (or if a Default or an Event of Default has occurred and is
continuing or if the additional conditions precedent set forth in Section
2.2 shall not have been satisfied), (i) if such LIBOR Loan is denominated
in Dollars, such LIBOR Loan shall be converted to an Index Rate Loan at the end
of its LIBOR Period and (ii) if such LIBOR Loan is denominated in Sterling,
such LIBOR Loan shall be continued as a LIBOR Loan having a LIBOR Period of one
month. Borrower Representative must make such election by notice to Agent in
writing, by telecopy or overnight courier. In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a “Notice
of Conversion/Continuation”) in the form of Exhibit 1.5(e).
Notwithstanding anything in this Section 1.5(e) or Agreement to the
contrary, conversions and continuations of Index Rate Loans and LIBOR Loans
hereunder shall not result in refinancings or repayments of such portions of 

13

the
outstanding Revolving Loan, but only repricings of such continuously
outstanding portions of the outstanding Revolving Loan. 

                    (f)
Notwithstanding anything to the contrary set forth in this Section 1.5, if a
court of competent jurisdiction determines in a final order that the rate of
interest payable hereunder exceeds the highest rate of interest permissible
under law (the “Maximum Lawful Rate”), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any
time thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. In no event shall the total interest received by
any Lender pursuant to the terms hereof exceed the amount that such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate.  

                    1.6
Eligible Art Loans. 

                    All
of the Art Loans owned by each Borrower and reflected in the most recent
Borrowing Base Certificate delivered by the Borrower Representative to Agent
shall be “Eligible Art Loans” for purposes of this Agreement, except any
Art Loans to which any of the exclusionary criteria set forth below applies.
Agent shall have the right to establish, modify or eliminate Reserves against
Eligible Art Loans from time to time in its sole reasonable credit judgment. In
addition, Agent reserves the right, at any time and from time to time after the
Closing Date, to adjust any of the criteria set forth below and to establish
new criteria, and to adjust advance rates with respect to Eligible Art Loans,
in its reasonable credit judgment, reflecting changes in the collectibility or
realization values of such Art Loans arising or discovered by Agent after the
Closing Date subject to the approval of Supermajority Lenders in the case of
adjustments or new criteria or changes in advance rates which have the effect
of making more credit available; provided that, for purposes of clarity,
Agent will not be required at any time to obtain any approval from any Lenders
or any other Person(s) for the establishment, modification or elimination of
any Reserves against Eligible Art Loans. Eligible Art Loans shall not include
any Art Loan of any Borrower: 

                    (a)
with respect to which (i) such Borrower shall not have conducted (x)
appropriate UCC, tax lien and judgment searches (or applicable equivalent)
against the applicable Art Loan Debtor or (y) in the case of any Art Loan
Debtor located in the United Kingdom, appropriate bankruptcy, winding up and
company searches against the applicable Art Loan Debtor or (ii) the results of
such searches shall have indicated any material risk with respect to the
applicable Art Loan Debtor or the Works of Art securing repayment of such Art
Loan; 

                    (b)
with respect to which (i) such Art Loan and the related security interest are
not governed by a loan and security agreement reasonably acceptable to Agent in
form and substance, or (ii) any material terms of the related loan and security
agreement and/or any other related documentation are not binding and
enforceable; 

14

                    (c)
with respect to which any payment under the related loan agreement (or any
other Art Loan outstanding to such related Art Loan Debtor) has been deemed by
such Borrower to be non-accrual; 

                    (d)
that is subject to any litigation challenging the validity or enforceability of
such Art Loan or any related documentation, unless (i) such Borrower has
notified Agent of such litigation, and (ii) Agent has determined in its
reasonable judgment, pursuant to a written notice to such Borrower (not to be
unreasonably withheld or delayed), that such litigation does not constitute
good faith litigation; 

                    (e)
(i) that is not denominated in Dollars, Canadian Dollars, Sterling, Euros,
Swiss Francs or an Alternative Art Loan Currency or (ii) if such Art Loan is
denominated in an Alternative Art Loan Currency, unless Agent shall have
otherwise agreed, a Credit Party (in the case of any U.K. Borrower) or a U.S.
Credit Party (in the case of any U.S. Borrower) shall have not entered into a
Rate Management Transaction reasonably acceptable to Agent (x) having a
notional amount substantially equal to the outstanding principal balance of
such Art Loan at all times until the maturity of such Art Loan and (y) directly
mitigating the risk associated with changes in the exchange rate between the
currency in which such Art Loan is denominated and Dollars (in the case of any
Art Loan owned by a U.S. Borrower) or Sterling (in the case of any Art Loan
owned by a U.K. Borrower) at all times until the maturity of such Art Loan; 

                    (f)
that was not generated in the ordinary course of the applicable Borrower’s
business; 

                    (g)
unless Agent shall have otherwise agreed, that by its terms is not due and
payable within 18 months; 

                    (h)
to the extent that any defense, counterclaim, setoff or dispute (other than any
dispute described in clause (d) above or in clauses (h) or (i) of the
definition of “Eligible Art Loan Collateral”) is asserted as to repayment by
the relevant Art Loan Debtor of such Art Loan or as to any failure by any
Sotheby Entity to fund any unfunded commitment of such Sotheby Entity to make
future Art Loans to the relevant Art Loan Debtor, unless (i) such Borrower has
notified Agent of such defense, counterclaim, setoff or dispute, and (ii) Agent
has determined in its reasonable judgment, pursuant to a written notice to such
Borrower (not to be unreasonably withheld or delayed), that such defense,
counterclaim, setoff or dispute is not asserted in good faith; 

                    (i)
that (i) is not subject to a first priority lien in favor of Agent, on behalf
of the Secured Parties, or (ii) is subject to any Lien of any Person other than
Agent, except Permitted Encumbrances; 

                    (j)
with respect to which the Art Loan Debtor is a director, officer, other
employee or Affiliate of any Sotheby Entity, unless Agent shall have
determined, in its sole discretion, that such Art Loan shall constitute an
Eligible Art Loan notwithstanding the provisions of this clause (j);  

15

                    (k)
that is the obligation of an Art Loan Debtor that is the United States
government or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof; 

                    (l)
to the extent by which the outstanding principal balance of such Art Loan
exceeds fifty percent (50%) of the aggregate Estimated Value of the Works of
Art securing repayment of such Art Loan that constitute Eligible Art Loan
Collateral; 

                    (m)
in the case of an Art Loan Debtor that is not an individual, such Borrower has
not obtained confirmation of authorization of the incurrence of such Art Loan
by such Person and the individuals executing documents on its behalf; 

                    (n)
with respect to which (i) a petition is filed by or against the related Art
Loan Debtor under any bankruptcy law or any other federal, state or foreign
(including any provincial) receivership, insolvency relief or other law or laws
for the relief of debtors or (ii) the related Art Loan Debtor makes a general
assignment for the benefit of creditors; 

                    (o)
to the extent any Sotheby Entity is liable for goods sold or services rendered
by the applicable Art Loan Debtor to such Sotheby Entity, but only to the
extent of the potential offset; 

                    (p)
with respect to which (i) any of the documentation evidencing such Art Loan is
not in the possession of such Borrower or Agent or (ii) any of the
representations or warranties in this Agreement and the other Loan Documents
pertaining to such Art Loan is untrue; 

                    (q)
to the extent such Art Loan exceeds any credit limit with respect to any Art
Loan Debtor established by Agent, in its reasonable credit judgment, taking
into account the nature and value of the Works of Art securing such Art Loan
and after consultation with the Borrower Representative; or 

                    (r)
with respect to which the initial outstanding principal amount, if owned by a
U.S. Borrower, is less than $25,000. 

                    1.7
Eligible Art Inventory. 

                    All
of the Art Inventory owned by the Borrowers and reflected in the most recent
Borrowing Base Certificate delivered by each Borrower to Agent shall be “Eligible
Art Inventory” for purposes of this Agreement, except any Art Inventory to
which any of the exclusionary criteria set forth below applies. Agent shall
have the right to establish, modify or eliminate Reserves against Eligible Art
Inventory from time to time in its sole reasonable credit judgment. In
addition, Agent reserves the right, at any time and from time to time after the
Closing Date, to adjust of the criteria set forth below and to establish new criteria
and to adjust advance rates with respect to Eligible Art Inventory, in its
reasonable credit judgment reflecting changes in the salability or realization
values of Art Inventory arising or discovered by Agent after the Closing Date,
subject to the approval of Supermajority Lenders in the case of adjustments or
new criteria or changes in advance rates which have the effect of making more
credit available; provided that, for purposes of clarity, Agent will not be
required at any time to  

16

obtain any
approval from any Lenders or any other Person(s) for the establishment,
modification or elimination of any Reserves against Eligible Art Inventory.
Eligible Art Inventory shall not include any Art Inventory of any Borrower
that: 

                    (a)
is owned by such Borrower as part of a joint venture or profit/loss sharing
arrangement or otherwise is not owned solely by such Borrower, unless (i) Agent
shall have otherwise agreed, or (ii) such Borrower has ultimate control of the
disposition of such Art Inventory, in which case such Art Inventory shall be
eligible to constitute Eligible Art Inventory to the extent of such Borrower’s
ownership interest therein; 

                    (b)
other than as permitted by clause (a) above, is not owned by such Borrower
free and clear of all Liens and rights of any other Person, except the Liens in
favor of Agent, on behalf of the Secured Parties, and Permitted Encumbrances as
set forth in clause (e) of the definition thereof (subject to Reserves
satisfactory to Agent); 

                    (c)
(i) if such Art Inventory is not (x) located in a Permitted Inventory Country
or (y) in transport between such countries or (ii) if such Art Inventory is
located in a Permitted Inventory Country, such Borrower shall not have taken
each action reasonably required by Agent with respect to such Work of Art
located in such Permitted Inventory Country in order to protect the interests
of Agent therein under the laws of such Permitted Inventory Country; 

                    (d)
is not held by such Borrower (i) at a location owned by a Sotheby Entity, or
(ii) unless Reserves satisfactory to Agent have been established (A) at a
location in which a Sotheby Entity has obtained a leasehold interest with
respect to which, unless otherwise agreed by Agent, the lessor has executed a
landlord waiver, in form and substance reasonably acceptable to Agent, or (B)
at a warehouse, storage facility or other third-party location (including,
without limitation, the Geneva free port) with respect to which, unless
otherwise agreed by Agent, such third party has executed a bailee letter in
form and substance reasonably acceptable to Agent; 

                    (e)
is subject to any litigation challenging the rights of such Borrower in such
Art Inventory, unless (i) such Borrower has notified Agent of such litigation,
and (ii) Agent has determined in its reasonable judgment, pursuant to a written
notice to such Borrower (not to be unreasonably withheld or delayed), that such
litigation does not constitute good faith litigation; 

                    (f)
is placed on consignment with any Person, unless (i) such consignment
constitutes a Permitted Consignment with respect to such Art Inventory, or
(ii)(x) such Borrower has notified Agent of such consignment and (y) Agent has
determined in its reasonable judgment, pursuant to a written notice to such
Borrower (not to be unreasonably withheld or delayed), that such Borrower has
taken all actions reasonably required by Agent with respect to such Art
Inventory in order to protect the interests of Agent therein under all
applicable laws; 

                    (g)
is not subject to a first priority lien in favor of Agent on behalf of the
Secured Parties, subject to Permitted Encumbrances as set forth in clause
(e) of the definition thereof (subject to Reserves satisfactory to Agent); 

                    (h)
if the value of such Art Inventory exceeds $250,000, has not been the subject
of a search by such Borrower in the Art Loss Register; or 

17

                    (i)
breaches any of the representations or warranties pertaining to Art Inventory
set forth in the Loan Documents. 

                    1.8
Cash Management Systems. 

                    Within
90 days after the Closing Date (or such later date as Agent shall consent to in
writing), the Credit Parties will establish and will maintain until the
Termination Date the cash management systems described in Annex C (the “Cash
Management Systems”). 

                    1.9
Fees. 

                    (a)
Borrowers shall pay to GE Capital an annual collateral monitoring fee equal to
$150,000 per year payable on the Closing Date and annually in advance on each
anniversary thereof prior to the Termination Date. 

                    (b)
As additional compensation for the Lenders, Borrowers shall pay to Agent, for
the ratable benefit of the Lenders, in arrears, on the first Business Day of
each month prior to the Commitment Termination Date and on the Commitment
Termination Date, a Fee for Borrowers’ non use of available funds in an amount
in Dollars equal to the Applicable Unused Line Fee Margin per annum (calculated
on the basis of a 360 day year for actual days elapsed) multiplied by the
difference between (x) the Maximum Amount (as it may be increased or reduced
from time to time) and (y) the average for the period of the daily closing
balances of the aggregate Revolving Loan and the Swing Line Loan outstanding
during the period for which such Fee is due. 

                    (c)
If Borrowers reduce or terminate the Commitment prior to the second anniversary
of the Closing Date, whether voluntarily or involuntarily and whether before or
after acceleration of the Obligations, Borrowers shall pay to Agent, for the
benefit of Lenders as liquidated damages and compensation for the costs of
being prepared to make funds available hereunder, an amount in Dollars equal to
(i) if such reduction or termination occurs prior to the first anniversary of
the Closing Date, 1.0% multiplied by the amount of such reduction of the
Commitment or (ii) if such reduction or termination occurs after the first
anniversary of the Closing Date and prior to the second anniversary of the
Closing Date, 0.50% multiplied by the amount of such reduction of the
Commitment. The Borrowers agree that such fee is a reasonable calculation of
Lenders’ lost profits in view of the difficulties and impracticality of
determining actual damages resulting from an early termination of the
Commitment. 

                    (d)
Borrowers shall pay to Agent, for the ratable benefit of Lenders, the Letter of
Credit Fee as provided in Annex B. 

                    1.10
Receipt of Payments. 

                    Borrowers
shall make each payment under this Agreement not later than 2:00 p.m. (New York
time) on the day when due in immediately available funds in Dollars or
Sterling, as applicable, to the applicable Collection Account. For purposes of
computing interest and Fees and determining Borrowing Availability as of any
date, all payments shall be deemed received on the Business Day on which
immediately available funds therefore are received in the Collection Account
prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New 

18

York time on
any Business Day or on a day that is not a Business Day shall be deemed to have
been received on the following Business Day. 

                    1.11
Application and Allocation of Payments. 

                    (a)
So long as no Event of Default has occurred and is continuing, (i) payments
matching specific scheduled payments then due shall be applied to those
scheduled payments; (ii) voluntary prepayments shall be applied in accordance
with the provisions of Section 1.3(a); and (iii) mandatory prepayments
shall be applied as set forth in Section 1.3(d) or 1.3(e), as
applicable. All payments and prepayments applied to the Revolving Loan shall be
applied ratably to the portion thereof held by each Lender as determined by its
Pro Rata Share. As to (x) any other payment, (y) all payments made when an
Event of Default has occurred and is continuing or following the Commitment
Termination Date and (z) all proceeds of Collateral, each Borrower hereby
irrevocably waives the right to direct the application of any and all such
payments received from or on behalf of such Borrower and proceeds of
Collateral, and all such payments and proceeds of Collateral shall be applied
to amounts then due and payable in the following order, subject to the terms of
the Collateral Documents: (1) to Fees and reimbursable expenses of Agent
hereunder; (2) to interest on the Swing Line Loan; (3) to principal payments on
the Swing Line Loan; (4) to interest on the Revolving Loan; (5) to principal
payments on the Revolving Loan and to provide cash collateral for Letter of
Credit Obligations in the manner described in Annex B; (6) to all other
Obligations owing by the Credit Parties, including expenses of Lenders to the
extent reimbursable under Section 11.3; and (7) to amounts owing in
respect of Bank Product and Hedging Obligations; provided, that any
payment by a U.K. Credit Party shall be applied only to the Secured Obligations
of the U.K. Credit Parties according to the preceding order of priority. 

                    (b)
Agent is authorized to, and at its sole election may, charge to the Revolving
Loan balance on behalf of each Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with Section
5.4(a)) and interest and principal, other than principal of the Revolving
Loan, owing by Borrowers under this Agreement or any of the other Loan
Documents if and to the extent Borrowers fail to pay promptly any such amounts
as and when due, even if the Dollar Equivalent of the amount of such charges
would exceed the applicable Borrowing Availability at such time; provided,
such action shall not cause the Dollar Equivalent of the aggregate Revolving
Loan to exceed the Maximum Amount. At Agent’s option and to the extent
permitted by law, any charges so made shall constitute a Revolving Credit
Advance made in the applicable currency and part of the Revolving Loan
hereunder. 

                    (c)
Notwithstanding any contrary provision herein, if, at the time of the receipt
of any prepayment or payment on the Obligations, (i) any Non-Sterling Lender
shall have failed to make available to the Fronting Lender any amount required
pursuant to Section 9.9(e)(i) upon demand therefor by the Fronting
Lender and (ii) the Borrowers shall have failed to repay, pursuant to Section
9.9(e)(ii), the outstanding principal amount of the portion of the
Revolving Loan or Letter of Credit Obligation then outstanding to the Fronting
Lender in which such Non-Sterling Lender was required to purchase a
participation interest, then such prepayment or payment shall be applied first
to the portion of the Revolving Loan or Letter of Credit Obligations then
outstanding to the Fronting Lender in which such Non-Sterling Lender was 

19

required to
purchase such participation interest, until the same (together with any
interest due and payable thereon) shall have been paid in full. 

                    1.12
Loan Account and Accounting. 

                    Agent shall
maintain a loan account (the “Loan Account”) on its books to record: all
Revolving Credit Advances and Swing Line Advances, all payments made by
Borrowers, and all other debits and credits as provided in this Agreement with
respect to the Loans or any other Obligations. All entries in the Loan Account
shall be made in accordance with Agent’s customary accounting practices as in
effect from time to time. The balance in the Loan Account, as recorded on
Agent’s most recent printout or other written statement, shall, absent manifest
error, be presumptive evidence of the amounts due and owing to Agent and
Lenders by each Borrower; provided that any failure to so record or any
error in so recording shall not limit or otherwise affect any Borrower’s duty
to pay the Obligations. Agent shall render to Borrower Representative a monthly
accounting of transactions with respect to the Loans setting forth the balance
of the Loan Account as to each Borrower for the immediately preceding month.
Unless Borrower Representative notifies Agent in writing of any objection to
any such accounting (specifically describing the basis for such objection),
within thirty (30) days after the date thereof, each and every such accounting
shall be presumptive evidence of all matters reflected therein. Only those
items expressly objected to in such notice shall be deemed to be disputed by
Borrowers. Notwithstanding any provision herein contained to the contrary, any
Lender may elect (which election may be revoked) to dispense with the issuance
of Notes to that Lender and may rely on the Loan Account as evidence of the
amount of Obligations from time to time owing to it. 

                    1.13
Indemnity. 

                    (a)
Each Credit Party shall jointly and severally indemnify and hold harmless each
of Agent, Lenders, the Fronting Lender and their respective Affiliates, and
each such Person’s respective officers, directors, employees, attorneys, agents
and representatives (each, an “Indemnified Person”), from and against
any and all suits, actions, proceedings, claims, damages, losses, liabilities
and expenses (including reasonable attorneys’ fees and disbursements and other
costs of investigation or defense, including those incurred upon any appeal)
that may be instituted or asserted against or incurred by any such Indemnified
Person as the result of credit having been extended, suspended or terminated
under this Agreement and the other Loan Documents and the administration of
such credit, and in connection with or arising out of the transactions
contemplated hereunder and thereunder and any actions or failures to act in
connection therewith, including any and all Environmental Liabilities and legal
costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively, “Indemnified
Liabilities”); provided, that no such Credit Party shall be liable
for any indemnification to an Indemnified Person to the extent that any such
suit, action, proceeding, claim, damage, loss, liability or expense results
from that Indemnified Person’s gross negligence or willful misconduct as
determined in a final, non-appealable judgment by a court of competent
jurisdiction. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY 

20

THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR  CONSEQUENTIAL
DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED,
SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. It is understood and agreed
that, notwithstanding anything to the contrary set forth in this Section
1.13(a), no U.K. Credit Party shall have any obligation to any Indemnified
Person with respect to Indemnified Liabilities relating to Obligations of any
U.S. Credit Party. 

                    (b)
To induce Lenders to provide the LIBOR Loan option on the terms provided
herein, if (i) any LIBOR Loans are repaid in whole or in part prior to the last
day of any applicable LIBOR Period (whether that repayment is made pursuant to
any provision of this Agreement or any other Loan Document or occurs as a
result of acceleration, by operation of law or otherwise); (ii) any Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) any Borrower shall refuse to accept any borrowing of, or
shall request a termination of, any borrowing of, conversion into or
continuation of, LIBOR Loans after Borrower Representative has given notice
requesting the same in accordance herewith; (iv) any Borrower shall fail to
make any prepayment of a LIBOR Loan after Borrower Representative has given a
notice thereof in accordance herewith; or (v) any assignment shall occur
pursuant to Section 1.16(d), then Borrowers shall jointly and severally
indemnify and hold harmless each Lender from and against all losses, costs and
expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (excluding loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender
shall be deemed to have actually funded its portion of the relevant LIBOR Loan
(or its participation interest in such LIBOR Loan) through the purchase of a
deposit bearing interest at the Dollar LIBOR Rate or the Sterling LIBOR Rate,
as applicable, in an amount equal to the amount of such portion of such LIBOR Loan
(or such participation, as applicable) and having a maturity comparable to the
relevant LIBOR Period; provided, that each Lender may fund each of its
interests in LIBOR Loans (or its participations in LIBOR Loans) in any manner
it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 1.13(b),
and such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail. 

                    1.14
Access. 

                    Each
Credit Party shall, during normal business hours, from time to time upon three
(3) Business Days’ prior notice as frequently as Agent reasonably determines to
be appropriate (except as otherwise provided): (a) provide Agent and any of its
officers, employees and agents access to its properties, facilities, advisors,
officers and employees and to the Collateral (including, without limitation, in
order to prepare an appraisal or similar report), (b) permit Agent, and any of
its officers, employees and agents, to inspect, audit and make extracts 

21

from any
Sotheby Entity’s books and records, and (c) permit Agent, and its officers,
employees and agents, not more than two (2) times during any twelve-month
period beginning on the date hereof or any anniversary thereof (unless an Event
of Default has occurred and is continuing, in which case such limitation shall
not apply), to inspect, review, evaluate, and make test verifications and
counts of the Collateral of any Credit Party; provided, that (i) Agent
shall conduct at least one (1) field exam described in the foregoing clause
(c) during each twelvemonth period and (ii) unless an Event of Default has
occurred and is continuing, not more than two such field exams during any
twelve-month period shall be at the cost and expense of the Credit Parties. If
an Event of Default has occurred and is continuing, each such Credit Party
shall provide such access to Agent and to each Lender at all times and without
advance notice. Furthermore, so long as any Event of Default has occurred and
is continuing, each Credit Party shall provide Agent and each Lender with
access to their suppliers and customers to the extent such access is within the
rights and powers of such Credit Party. Each Credit Party shall make available
to Agent and its counsel reasonably promptly originals or copies of all books
and records that Agent may reasonably request. Each Credit Party shall deliver
any document or instrument necessary for Agent, as it may from time to time
reasonably request, to obtain records from any service bureau or other Person
that maintains records for such Credit Party, and shall maintain duplicate
records or supporting documentation on media, including computer tapes and
discs owned by such Credit Party. Agent will give Lenders at least five (5)
days’ prior written notice of regularly scheduled audits. Representatives of
other Lenders may accompany Agent’s representatives on regularly scheduled
audits at no charge to Borrowers. 

                    1.15
Taxes. 

                    (a)
Tax gross-up.  

                              (i)
Each Credit Party shall make all payments to be made by it under the Loan
Documents without any Tax Deduction, unless a Tax Deduction is required by law.

                              (ii)
The Borrower Representative shall promptly upon becoming aware that a Credit Party
must make a Tax Deduction (or that there is any change in the rate or the basis
of a Tax Deduction) notify Agent accordingly. Similarly, a Lender shall notify
Agent promptly on becoming so aware in respect of any payment to that Lender
pursuant to any Loan Document. If Agent receives such notification from a
Lender it shall promptly notify the Borrower Representative. 

                              (iii)
Subject to paragraph (iv) below, if a Tax Deduction is required by law
to be made by any Credit Party, the amount of the payment due from such Credit
Party shall be increased to an amount which (after making any Tax Deduction)
leaves an amount equal to the payment which would have been due if no Tax
Deduction had been required. 

22

                              (iv)
A Credit Party is not required to make an increased payment to a Lender under
paragraph (iii) above for a Tax Deduction in respect of tax imposed by the
United Kingdom or the United States of America (as the case may be) on a
payment of interest on a Loan, if on the date on which the payment falls due:  

	
 

	
 

	
 

	
          (A)
 the payment could have been made to the relevant Lender without a Tax
 Deduction if the Lender had been a Qualifying Lender, but on that date that
 Lender is not or has ceased to be a Qualifying Lender other than as a result
 of any change after the date it became a Lender under this Agreement in (or
 in the interpretation, administration, or application of) any law or Treaty,
 or any published practice or concession of any relevant taxing authority; 

	
 

	
 

	
 

	
          (B)
 with respect to any payment to be made by a U.K. Credit Party, (i) the
 relevant Lender is a Qualifying Lender solely by virtue of paragraph
 (i)(B) of the definition of Qualifying Lender, (ii) an officer of H.M.
 Revenue & Customs has given (and not revoked) a direction (a “Direction”)
 under section 931 of the Income Tax Act 2007 which relates to that payment
 and that Lender has received from the Credit Party making the payment a
 certified copy of that Direction, and (iii) the payment could have been made
 to the relevant Lender without a Tax Deduction in the absence of that
 Direction; 

	
 

	
 

	
 

	
          (C)
 with respect to any payment to be made by a U.K. Credit Party, the relevant
 Lender is a Treaty Lender and the Credit Party making the payment is able to
 demonstrate that the payment could have been made to the Lender without the
 Tax Deduction had that Lender complied with its obligations under paragraph
 (vii) below; 

	
 

	
 

	
 

	
          (D)
 the relevant Lender is a Qualifying Lender solely by virtue of paragraph
 (i)(B) of the definition of Qualifying Lender and: 

	
 

	
 

	
 

	
 

	
(i)

	
the relevant
 Lender has not given a Tax Confirmation to the Borrower Representative (on
 behalf of the U.K. Credit Parties); and 

	
 

	
 

	
 

	
 

	
(ii)

	
the payment
 could have been made to the Lender without any Tax Deduction if the Lender
 had given a Tax Confirmation to the Borrower Representative (on behalf of the
 U.K. Credit Parties), on the basis that the Tax Confirmation would have
 enabled the U.K. Credit Parties to have formed a reasonable belief that the
 payment was an “excepted payment” for the purpose of section 930 of the
 Income Tax Act 2007; or 

	
 

	
 

	
 

	
          (E)
 with respect to any payments to be made by a U.S. Credit Party, the Tax is
 (i) assessed on a Lender under (x) the law of the jurisdiction in which that
 Lender is incorporated or, if different, the jurisdiction (or jurisdictions)
 in which that Lender is treated as resident for tax purposes or (y) under the
 law of

23

	
 

	
 

	
 

	
the
 jurisdiction in which that Lender’s facility office is located in respect of
 amounts received or receivable in that jurisdiction and (ii) imposed on or
 calculated by reference to the net income received or receivable (but not any
 sum deemed to be received or receivable) by that Lender. 

                              (v)
If any Credit Party is required to make a Tax Deduction, such Credit Party
shall make such Tax Deduction and any payment required in connection with such
Tax Deduction within the time allowed and in the minimum amount required by
law. 

                              (vi)
Within thirty days of making either a Tax Deduction or any payment required in
connection with a Tax Deduction, the Credit Party making such Tax Deduction
shall deliver to Agent for the applicable Lender either a statement under
section 975 of the Income Tax Act 2007 or other evidence reasonably
satisfactory to such Lender that such Tax Deduction has been made or (as
applicable) any appropriate payment paid to the relevant taxing authority. 

                              (vii)
A Treaty Lender shall, if so requested by Borrower Representative (on behalf of
the U.K. Credit Parties), as soon as reasonably practicable, complete and file
with the appropriate tax authority an application for authorization by that tax
authority to make that payment without a Tax Deduction. The Borrower
Representative (on behalf of the U.K. Credit Parties) shall, thereafter, be
responsible for dealing with such authority in relation to the processing of
such application (and the Treaty Lender shall provide such cooperation as is
reasonably necessary to complete any further procedural formalities required to
obtain authorization). 

                              (viii)
A U.K. Non-Bank Lender shall promptly notify Agent who shall notify the U.K.
Credit Parties if there is any change in the position from that set out in the
Tax Confirmation. 

                              (ix)
Each Lender which becomes a party to this Agreement after the date of this Agreement
(such Lender, a “New Lender”) shall indicate, in the Assignment
Agreement which it executes on becoming a party, and for the benefit of Agent
and without liability to any Credit Party, which of the following categories it
falls in: 

                              (A)
not a Qualifying Lender; 

                              (B)
a Qualifying Lender (other than a Treaty Lender); or 

                              (C)
a Treaty Lender. 

If a New
Lender fails to indicate its status in accordance with this paragraph (ix),
then such New Lender shall be treated for the purposes of this Agreement
(including by each U.K. Credit Party) as if it is not a Qualifying Lender until
such time as it notifies Agent which category applies (and Agent, upon receipt
of such notification, shall inform the Borrower Representative on behalf of the
U.K. Credit Parties). For the avoidance of doubt, an Assignment Agreement shall
not be invalidated by any failure of a Lender to comply with this paragraph
(ix). 

24

                    (b)
Tax indemnity. 

                              (i)
The Credit Parties shall (within three Business Days of demand by Agent) pay
(or procure payment) to a Protected Party an amount equal to the loss,
liability or cost which that Protected Party determines will be or has been
(directly or indirectly) suffered for or on account of Tax by that Protected
Party in respect of any Loan Document. 

                              (ii)
Paragraph (b)(i) above shall not apply: 

	
 

	
 

	
 

	
          (A) with
 respect to any Tax (i) assessed on a Lender under (x) the law of the
 jurisdiction in which that Lender is incorporated or, if different, the
 jurisdiction (or jurisdictions) in which that Lender is treated as resident
 for tax purposes or (y) under the law of the jurisdiction in which that
 Lender’s facility office is located in respect of amounts received or
 receivable in that jurisdiction and (ii) imposed on or calculated by
 reference to the net income received or receivable (but not any sum deemed to
 be received or receivable) by that Lender; and 

	
 

	
 

	
 

	
          (B) to the
 extent a loss, liability or cost (i) is compensated for by an increased
 payment under Section 1.15(a) or (ii) would have been
 compensated for by an increased payment under Section 1.15(a) but was
 not so compensated solely because one of the exclusions in Section
 1.15(a)(iv) applied. 

                              (iii)
A Protected Party making, or intending to make, a claim under paragraph (i)
above shall promptly notify Agent of the event which will give, or has given,
rise to the claim, following which Agent shall notify the Borrower
Representative. 

                              (iv)
A Protected Party shall, on receiving a payment from a Credit Party under this Section
1.15(b), notify Agent. 

                    (c)
Tax Credit. If a Credit Party makes a Tax Payment and the relevant
Lender determines that: 

                              (i)
a Tax Credit is attributable either to an increased payment of which that Tax
Payment forms part, or to that Tax Payment; and 

                              (ii)
that Lender has obtained, utilized and retained that Tax Credit, 

the Lender
shall pay an amount to the applicable Credit Party which that Lender determines
will leave it (after that payment) in the same after-Tax position as it would
have been in had the Tax Payment not been required to be made by such Credit
Party. 

                    (d)
Stamp Taxes. The Credit Parties shall pay, and within three Business
Days of demand, indemnify each Lender against any cost, loss, or liability that
a Lender incurs in relation to all stamp duty, registration and other similar
Taxes payable in respect of the Loan Documents. 

25

                    (e)
Value Added Tax. 

                              (i)
All amounts expressed in the Loan Documents to be payable by any Credit Party
to a Lender or Agent which (in whole or in part) constitute the consideration
for a supply or supplies for VAT purposes shall be deemed to be exclusive of
VAT. If VAT is or becomes chargeable on any supply made by any Lender or Agent
to any Credit Party in connection with any Loan Document, such Credit Party
shall pay to such Lender or Agent, as applicable, (in addition to and at the
same time as paying the consideration for such supply) an amount equal to the
amount of such VAT (and such Lender shall promptly provide an appropriate VAT
invoice to the relevant Credit Party). 

                              (ii)
Where any Loan Document requires any Credit Party to reimburse or indemnify a
Lender or Agent for any cost or expense, such Credit Party shall reimburse or
indemnify (as the case may be) such Lender or Agent, as applicable, for the
full amount of such cost or expense, including such part thereof as represents
VAT, except to the extent that such Lender or Agent, as applicable, reasonably
determines that it is entitled to credit or repayment in respect of such VAT. 

                              (iii)
Any reference in this Section 1.15(e) to any Credit Party shall, at any
time when such Credit Party is treated as a member of a group for VAT purposes,
include (where appropriate and unless the context otherwise requires) a
reference to the representative member of such group at such time (the term
“representative member” to have the same meaning as in the Value Added Tax Act
1994). 

                    1.16
Capital Adequacy; Increased Costs; Illegality. 

                    (a)
If any law, treaty, governmental (or quasi governmental) rule, regulation,
guideline or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender (including, as applicable, as L/C
Issuer) with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law),
in each case, adopted after the Closing Date, from any central bank or other
Governmental Authority increases or would have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such
Lender and thereby reducing the rate of return on such Lender’s capital as a
consequence of its obligations hereunder, then Borrowers shall from time to
time upon demand by such Lender (with a copy of such demand to Agent) pay to
Agent, for the account of such Lender, additional amounts sufficient to compensate
such Lender for such reduction. A certificate as to the amount of that
reduction and showing the basis of the computation thereof submitted by such
Lender to Borrower Representative and to Agent shall be presumptive evidence of
the matters set forth therein. 

                    (b)
If, due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (ii) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), in each case adopted after
the Closing Date, there shall be any increase in the cost to any Lender
(including, as applicable, as L/C Issuer) of agreeing to make or making,
funding or maintaining any Loan or Letter of Credit (or any participation in
any Loan or Letter of Credit purchased pursuant to Section 9.9(e)(i)),
then Borrowers shall from time to time, upon demand 

26

by such Lender
(with a copy of such demand to Agent), pay to Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost,
submitted to Borrower Representative and to Agent by such Lender, shall be
presumptive evidence of the matters set forth therein. Each Lender agrees that,
as promptly as practicable after it becomes aware of any circumstances referred
to above which would result in any such increased cost, the affected Lender
shall, to the extent not inconsistent with such Lender’s internal policies of
general application, use reasonable commercial efforts to minimize costs and
expenses incurred by it and payable to it by Borrowers pursuant to this Section
1.16(b). For the avoidance of doubt, Sections 1.16(a) and 1.16(b)
shall not apply to Taxes which shall be exclusively governed by Section 1.15.

                    (c)
(i) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to
agree to make or to make or to continue to fund or maintain any LIBOR Loan (or
a participation interest in any LIBOR Loan), then, unless that Lender is able
to make or to continue to fund or to maintain such LIBOR Loan (or participation
interest, as applicable) at another branch or office of that Lender without, in
that Lender’s reasonable opinion, materially adversely affecting it, its Loans
or its participation interests in Loans or the income obtained therefrom, on
notice thereof and demand therefor by such Lender to Borrower Representative
through Agent, (i) the obligation of such Lender to agree to make or to make or
to continue to fund or maintain LIBOR Loans (or participation interests in
LIBOR Loans) shall terminate and (ii) each Borrower shall forthwith prepay in
full all outstanding LIBOR Loans owing by such Borrower to such Lender (or to
the Fronting Lender, to the extent of the participation interests in LIBOR
Loans of the Fronting Lender held by such Lender, and the Fronting Lender shall
pay such amounts to such Lender in respect of such participation interests),
together with interest accrued thereon, unless Borrower Representative on
behalf of such Borrower, within five (5) Business Days after the delivery of
such notice and demand, converts all LIBOR Loans into Index Rate Loans. 

                              (ii)
If Agent shall have determined in good faith that for any reason adequate and
reasonable means do not exist for ascertaining the Dollar LIBOR Rate or the
Sterling LIBOR Rate, as applicable, for any requested LIBOR Period with respect
to a proposed LIBOR Loan or that the Dollar LIBOR Rate or the Sterling LIBOR
Rate, as applicable, applicable pursuant to Section 1.5(a) for any
requested LIBOR Period with respect to a proposed LIBOR Loan does not
adequately and fairly reflect the cost to the Lenders of funding such Loan,
Agent will forthwith give notice of such determination to Borrower
Representative and each Lender. Thereafter, the obligation of the Lenders to
make or maintain LIBOR Loans hereunder shall be suspended until Agent revokes
such notice in writing. Upon receipt of such notice, Borrower Representative
may revoke any Notice of Revolving Credit Advance or Notice of
Conversion/Continuation then submitted by it. If Borrower Representative does
not revoke such notice, Lenders shall make, convert or continue the Loans, as
proposed by Borrower Representative, in the amount specified in the applicable
notice submitted by Borrower Representative, but such Loans shall be made,
converted or continued as Index Rate Loans. 

                    (d)
Within thirty (30) days after receipt by Borrower Representative of written
notice and demand from any Lender (an “Affected Lender”) for payment of
additional amounts 

27

or increased
costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b), Borrower
Representative may, at its option, notify Agent and such Affected Lender of its
intention to replace the Affected Lender. So long as no Default or Event of
Default has occurred and is continuing, Borrower Representative, with the
consent of Agent, may obtain, at Borrowers’ expense, a replacement Lender (“Replacement
Lender”) for the Affected Lender, which Replacement Lender must be
reasonably satisfactory to Agent. If Borrowers obtain a Replacement Lender
within ninety (90) days following notice of their intention to do so, the
Affected Lender must sell and assign its outstanding Loans, Letter of Credit
Obligations and Commitments to such Replacement Lender for an amount equal to
the outstanding principal balance of all Loans held by the Affected Lender and
all accrued interest and Fees with respect thereto through the date of such
sale and such assignment shall not require the payment of an assignment fee to
Agent; provided, that Borrowers shall have reimbursed such Affected
Lender for the additional amounts or increased costs that it is entitled to
receive under this Agreement through the date of such sale and assignment.
Notwithstanding the foregoing, Borrowers shall not have the right to obtain a
Replacement Lender if the Affected Lender rescinds its demand for increased
costs or additional amounts within 15 days following its receipt of Borrowers’
notice of intention to replace such Affected Lender. Furthermore, if Borrowers
give a notice of intention to replace and do not so replace such Affected
Lender within ninety (90) days thereafter, Borrowers’ rights under this Section
1.16(d) shall terminate with respect to such Affected Lender and Borrowers
shall promptly pay all increased costs or additional amounts demanded by such
Affected Lender pursuant to Sections 1.15(a), 1.16(a) and 1.16(b). 

                    1.17
Credit Support. 

                    All
Loans to each U.S. Borrower and all of the other Obligations of the each U.S.
Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of the U.S. Borrowers secured, until the
Termination Date, by all of the Collateral covered under the U.S. Collateral
Documents. All Loans to each U.K. Borrower and all of the other Obligations of
each U.K. Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of the U.K. Borrowers secured, until the
Termination Date, by all of the Collateral covered under the U.K. Collateral
Documents. 

                    1.18
Conversion to Dollars and Sterling. 

                    (a)
Except as expressly set forth herein, all valuations or computations of
monetary amounts set forth in this Agreement shall include the Dollar
Equivalent of Sterling or any other applicable currency. All currency
conversions to be made under this Agreement shall be made in accordance with
the following procedure: 

                              (i)
Conversions to Dollars shall occur in accordance with prevailing exchange
rates, as determined by Agent or the Fronting Lender, as applicable, in its
reasonable discretion, on the applicable date. 

                              (ii)
Conversions to Sterling shall occur in accordance with prevailing exchange
rates, as determined by Agent or the Fronting Lender, as applicable, in its
reasonable discretion, on the applicable date. 

28

                              (iii)
The Dollar Equivalent of each of the Revolving Credit Advances, Swing Line
Advances and Letter of Credit Obligations denominated in currencies other than
Dollars shall be re-calculated on (a) so long as the Aggregate Borrowing
Availability equals or exceeds $5,000,000, the first Business Day of each month
and (b) otherwise, the first Business Day of each week. 

                    (b)
All valuations or computations of monetary amounts set forth in any Borrowing
Base Certificate, any Art Inventory Report, any Art Loan Receivables Report or
any other report, certificate, Financial Statement or other document delivered
by any Credit Party to Agent hereunder shall be made in accordance with GAAP
and the ordinary business practices of the Credit Parties as of the Closing
Date; provided, that any such report or document shall set forth the
conversion factors used with respect to any foreign currencies. 

                    1.19
Judgment Currency; Contractual Currency. 

                    (a)
If, for the purpose of obtaining or enforcing judgment against any Credit Party
in any court in any jurisdiction, it becomes necessary to convert into any
other currency (such other currency being hereinafter in this Section 1.19
referred to as the “Judgment Currency”) an amount due under any Loan
Document in any currency (the “Obligation Currency”) other than the
Judgment Currency, the conversion shall be made at the rate of exchange
prevailing on the Business Day immediately preceding (i) the date of actual
payment of the amount due, in the case of any proceeding in the courts of any
jurisdiction that will give effect to such conversion being made on such date,
or (ii) the date on which the judgment is given, in the case of any proceeding
in the courts of any other jurisdiction (the applicable date as of which such
conversion is made pursuant to this Section 1.19 being hereinafter
referred to as the “Judgment Conversion Date”). 

                    (b)
If, in the case of any proceeding in the court of any jurisdiction referred to
in Section 1.19(a), there is a change in the rate of exchange prevailing
between the Judgment Conversion Date and the date of actual receipt for value
of the amount due, the applicable Credit Party shall pay such additional amount
(if any, but in any event not a lesser amount) as may be necessary to ensure
that the amount actually received in the Judgment Currency, when converted at
the rate of exchange prevailing on the date of payment, will produce the amount
of the Obligation Currency which could have been purchased with the amount of
the Judgment Currency stipulated in the judgment or judicial order at the rate
of exchange prevailing on the Judgment Conversion Date. Any amount due from a
Credit Party under this Section 1.19(b) shall be due as a separate debt
and shall not be affected by judgment being obtained for any other amounts due
under or in respect of any of the Loan Documents. 

                    (c)
The term “rate of exchange” in this Section 1.19 means the rate of
exchange at which Agent would, on the relevant date at or about noon (New York
City time), be able to sell the Obligation Currency against the Judgment
Currency to prime banks. 

                    (d)
Any amount received or recovered by Agent in respect of any sum expressed to be
due to them (whether for itself or on behalf of any other person) from any
Credit Party under this Agreement or under any of the other Loan Documents in a
currency other than the currency (the “contractual currency”) in which such sum
is so expressed to be due (whether 

29

as a result
of, or from the enforcement of, any judgment or order of a court or tribunal of
any jurisdiction, the winding-up of a Borrower or otherwise) shall only
constitute a discharge of such Borrower to the extent of the amount of the
contractual currency that Agent is able, in accordance with its usual practice,
to purchase with the amount of the currency so received or recovered on the
date of receipt or recovery (or, if later, the first date on which such
purchase is practicable). If the amount of the contractual currency so
purchased is less than the amount of the contractual currency so expressed to
be due, such Borrower shall indemnify Agent against any loss sustained by it as
a result, including the cost of making any such purchase other than losses
resulting from the gross negligence or willful misconduct of the Person seeking
such indemnification. 

                    1.20
Currency of Account. 

                    Dollars
are the currency of account and payment for each and every sum at any time due
from the Borrowers hereunder; provided, that:  

                              (i)
unless expressly provided elsewhere in this Agreement, each repayment of a
Revolving Credit Advance or a part thereof advanced in Sterling shall be made
in Sterling; 

                              (ii)
each payment of interest in respect of principal, or any other sum, denominated
in Sterling shall be made in Sterling; 

                              (iii)
each payment in respect of costs and expenses incurred in Sterling shall be
made in Sterling; and 

                              (iv)
any other amount expressed to be payable in Sterling shall be paid in Sterling.

2. CONDITIONS PRECEDENT 

                    2.1
Conditions to the Initial Loans. 

                    Neither
any Lender nor the Fronting Lender shall be obligated to make any Loan or incur
any Letter of Credit Obligations on the Closing Date, or to take, fulfill, or
perform any other action hereunder, until the following conditions have been
satisfied or provided for in a manner reasonably satisfactory to Agent, or
waived in writing by Agent: 

                    (a)
Credit Agreement; Loan Documents. Each Loan Document delivered on the
date hereof or counterparts thereof shall have been duly executed and delivered
by Borrowers, each other Credit Party, Agent and Lenders party thereto; and
Agent shall have received such documents, instruments, agreements and legal
opinions as Agent shall reasonably request in connection with the transactions
contemplated by this Agreement and the other Loan Documents, including all
those listed in the Closing Checklist attached hereto as Annex D, each
in form and substance reasonably satisfactory to Agent. 

                    (b)
Repayment of Prior Lender Obligations; Satisfaction of Outstanding L/Cs.
(i) Agent shall have received evidence satisfactory to Agent that all of the
Prior Lender 

30

Obligations
have been repaid in full by the Borrowers and all Liens upon any of the
property of Borrowers or any of their Subsidiaries in favor of the Prior Agent
have been terminated; and (ii) all letters of credit issued or guaranteed under
the Prior Credit Agreement shall have been terminated, cash collateralized, or
supported by a Letter of Credit issued pursuant to Annex B, as mutually agreed
upon by Agent, Borrowers and Prior Agent. 

                    (c)
Approvals. Agent shall have received (i) satisfactory evidence that the
Sotheby Entities have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents or (ii)
an officer’s certificate in form and substance reasonably satisfactory to Agent
affirming that no such consents or approvals are required (other than those
that have been obtained). 

                    (d)
Opening Availability. After giving effect to any Reserves to be
established on the Closing Date and any initial Revolving Credit Advances made
to Borrowers and the incurrence of any initial Letter of Credit Obligations,
Borrowers shall have Aggregate Borrowing Availability of at least $90,000,000
as of the Closing Date. 

                    (e)
Payment of Fees. Borrowers shall have paid the Fees required to be paid
on the Closing Date (including, without limitation, those specified in Section
1.9) and shall have reimbursed Agent for all fees, costs and expenses of
closing presented as of the Closing Date. 

                    (f)
Capital Structure: Other Indebtedness. The capital structure of each
Sotheby Entity and the terms and conditions of all Indebtedness of each Sotheby
Entity shall be acceptable to Agent in its sole discretion. 

                    (g)
Due Diligence. Agent shall have completed its business and legal due
diligence with results reasonably satisfactory to Agent. 

                    (h)
Other Indebtedness. All Obligations and all Liens granted under the Loan
Documents shall constitute permitted indebtedness and permitted Liens, as
applicable, under the Senior Note Indenture and the Convertible Note Indenture.

                    (i)
No Material Adverse Change. Since December 31, 2008, (i) no material
adverse change has occurred in the business, financial or other condition of
Parent and its Subsidiaries taken as a whole, the industry in which Parent and
its Subsidiaries operates, or the collateral which will be subject to the
security interest granted to Agent and Lenders or in the prospects of Parent and
its Subsidiaries taken as a whole, (ii) no litigation has commenced that, in
the reasonable judgment of Agent, has a material risk of being determined
adversely to the applicable Sotheby Entity and that, if so determined, would
have a material adverse impact on Parent and its Subsidiaries taken as a whole,
their business, or their ability to repay the Loans, (iii) no litigation has
commenced that would challenge the transactions under consideration and (iv)
there has occurred no material increase in the liabilities, liquidated or
contingent, of Parent and its Subsidiaries taken as a whole, or a material
decrease in the assets of Parent and its Subsidiaries taken as a whole. 

31

                    2.2
Further Conditions to Each Loan. 

                    Except
as otherwise expressly provided herein, neither any Lender nor the Fronting
Lender shall be obligated to fund any Advance, convert or continue any portion
of the outstanding Revolving Loan as a LIBOR Loan or incur any Letter of Credit
Obligation, if, as of the date thereof: 

                    (a)
any representation or warranty by any Credit Party contained herein or in any
other Loan Document is untrue or incorrect as of such date as determined by
Agent or Requisite Lenders (or in the case of a representation or warranty that
is expressly made as of an earlier date, is untrue or incorrect as of such
earlier date), except for changes therein expressly permitted or expressly
contemplated by this Agreement, and Agent or Requisite Lenders have determined
not to make such Advance, convert or continue any portion of the outstanding
Revolving Loan as LIBOR Loan or incur such Letter of Credit Obligation as a
result of the fact that such warranty or representation is untrue or incorrect;

                    (b)
any Default or Event of Default has occurred and is continuing or would result
after giving effect to any Advance, the incurrence of any Letter of Credit
Obligation, or the conversion or continuation of any portion of the outstanding
Revolving Loan into, or as, a LIBOR Loan, and Agent or Requisite Lenders shall
have determined not to make any Advance, convert or continue any portion of the
outstanding Revolving Loan as a LIBOR Loan or incur any Letter of Credit
Obligation as a result of that Default or Event of Default; 

                    (c)
after giving effect to any Advance (or the incurrence of any Letter of Credit
Obligations), (i) the Dollar Equivalent of the outstanding principal amount of
the aggregate Revolving Loan would exceed the Maximum Amount less the then
outstanding principal amount of the Swing Line Loan, (ii) the aggregate
outstanding principal balance of Revolving Credit Advances and Swing Line
Advances made to U.S. Borrowers and the Dollar Equivalent of the Letter of
Credit Obligations incurred for the benefit of the U.S. Borrowers would, in the
aggregate, exceed the U.S. Borrowing Base, (iii) the Dollar Equivalent of the
outstanding amount of the Letter of Credit Obligations would exceed the L/C
Sublimit, (iv) the aggregate outstanding principal amount of the Swing Line
Loan would exceed Swing Line Availability or (v) the Dollar Equivalent of the
aggregate outstanding principal balance of Revolving Credit Advances made to
U.K. Borrowers and the Dollar Equivalent of the outstanding amount of the
Letter of Credit Obligations incurred for the benefit of the U.K. Borrowers
would, in the aggregate, exceed either the Sterling Subfacility Limit or the
U.K. Borrowing Base; or 

                    (d)
notwithstanding the provisions of Annex F, the Borrowers shall not have
delivered to Agent a Borrowing Base Certificate, Art Inventory Report and Art
Loan Receivables Report (accompanied in each case by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion), in
each case prepared as of (i) with respect to any Advance to be made or Letter
of Credit Obligation to be incurred during the first thirteen days of any
Fiscal Month, the last of day of the second preceding Fiscal Month or (ii) with
respect to any Advance to be made or Letter of Credit Obligation to be incurred
during the remainder of any Fiscal Month, the last day of the preceding Fiscal
Month. 

32

The request
and acceptance by any Borrower of the proceeds of any Advance, the incurrence
of any Letter of Credit Obligations or the conversion or continuation of any
portion of the outstanding Revolving Loan into, or as, a LIBOR Loan shall be
deemed to constitute, as of the date thereof, (i) a representation and warranty
by Borrowers that the conditions in this Section 2.2 have been satisfied
and (ii) a reaffirmation by Borrowers of the cross-guaranty provisions set
forth in Section 12 and of the granting and continuance of Agent’s
Liens, on behalf of itself and the other Secured Parties, pursuant to the
Collateral Documents. 

3. REPRESENTATIONS AND WARRANTIES 

                    To
induce Lenders and the Fronting Lender to make the Loans and to incur Letter of
Credit Obligations (and to purchase participation interests in the Loans and
Letter of Credit Obligations hereunder), the Credit Parties, jointly and
severally, make the following representations and warranties to Agent and each
Lender with respect to all Sotheby Entities, each and all of which shall
survive the execution and delivery of this Agreement. 

                    3.1
Corporate Existence; Compliance with Law. 

                    (a)
Each Credit Party (i) is a corporation, limited liability company or limited
partnership (or, in the case of Sotheby’s U.K., an unlimited liability company)
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization set forth in Disclosure
Schedule (3.1); (ii) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not result in exposure to losses or
liabilities which could reasonably be expected to have a Material Adverse
Effect; (iii) has the requisite power and authority and the legal right to own,
pledge, mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease and to conduct its business as now conducted or
proposed to be conducted; and (iv) is in compliance with its charter and bylaws
or partnership or operating agreement, as applicable. 

                    (b)
Each Sotheby Entity (i) subject to specific representations regarding
Environmental Laws, has and will maintain in full force and effect all material
licenses (including, for the avoidance of doubt, a license under the Consumer
Credit Act 1974 and the Consumer Credit Act 2006 (collectively, as each may be
amended, extended or re-enacted from time to time, the “CCA”)), permits,
consents, permissions, registrations, or approvals from or by, and has made all
material filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership, operation
and conduct; and (ii) subject to specific representations set forth herein
regarding ERISA, Environmental Laws, tax and other laws, is in compliance with
all applicable provisions of law, rule, regulation or guidance, except where
the failure to comply, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. 

                    3.2
Executive Offices, Collateral Locations, FEIN. 

                    As
of the Closing Date, each U.S. Credit Party’s name as it appears in official
filings in its jurisdiction of incorporation or organization, jurisdiction of
incorporation or 

33

organization,
organization type, organization number, if any, issued by its jurisdiction
incorporation or organization, and the current location of each U.S. Credit
Party’s chief executive office and the warehouses and premises at which any
Collateral is located are set forth in Disclosure Schedule (3.2), none
of such locations has changed within the four (4) months preceding the Closing
Date and each U.S. Credit Party has only one jurisdiction of incorporation or
organization. In addition, Disclosure Schedule (3.2) lists the federal
employer identification number of each U.S. Credit Party. 

                    3.3
Corporate Power, Authorization, Enforceable Obligations. 

                    The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person’s power; (b) have been duly authorized by all necessary
corporate, limited liability company, limited partnership or unlimited
liability company action; (c) do not contravene any provision of any Sotheby
Entity’s charter, bylaws or partnership or operating agreement as applicable;
(d) do not violate any law or regulation, or any order or decree of any court
or Governmental Authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which any Sotheby Entity is a
party or by which any Sotheby Entity or any of its property is bound,
including, without limitation, the Senior Note Indenture, the Convertible Note
Indenture or the York Avenue Lease Documents; (f) do not result in the creation
or imposition of any Lien upon any of the property of any Sotheby Entity other
than those in favor of Agent, on behalf of itself and the other Secured
Parties, pursuant to the Loan Documents; and (g) do not require the consent or
approval of any Governmental Authority or any other Person. Each of the Loan
Documents shall be duly executed and delivered by each Credit Party and each
such Loan Document shall constitute a legal, valid and binding obligation of
such Credit Party enforceable against it in accordance with its terms. 

                    3.4
Financial Disclosures. 

                    Except
for the Projections, all Financial Statements concerning the Borrowers and
their Subsidiaries that are referred to below (i) in the case of all Financial
Statements concerning Parent and its Subsidiaries on a consolidated basis, have
been prepared in accordance with GAAP consistently applied throughout the
periods covered (except as disclosed therein and except, with respect to
unaudited Financial Statements, for the absence of footnotes and normal
year-end audit adjustments) and (ii) present fairly in all material respects
the financial position of the Persons covered thereby as at the dates thereof
and the results of their operations and cash flows for the periods then ended. 

                    (a)
Financial Statements. The following Financial Statements attached hereto
as Disclosure Schedule (3.4(a)) have been delivered on the date hereof: 

                              (i)
The audited consolidated (with respect to Parent and its Subsidiaries) balance
sheets at December 31, 2007 and 2008 and the related consolidated statements of
income and cash flows for the Fiscal Years then ended, which consolidated
Financial Statements shall have been certified by Deloitte & Touche LLP,
and the unaudited 

34

consolidating
balance sheets and related consolidating statements of income of Parent and the
Borrowers for such Fiscal Years. 

                              (ii)
The unaudited consolidated balance sheet at June 30, 2009, and the related
statement(s) of income and cash flows of Parent and its Subsidiaries for the
Fiscal Quarter then ended, and the unaudited consolidating balance sheets and
related consolidating statement of income of Parent and the Borrowers for such
Fiscal Quarter. 

                              (iii)
The unaudited consolidated balance sheet at June 30, 2009, and the related
statement of income of Parent and its Subsidiaries for the Fiscal Month then
ended and the portion of the Fiscal Year then ended, and the unaudited
consolidating balance sheets and related consolidating statement of income of
Parent and the Borrowers for such Fiscal Month and such portion of such Fiscal
Year. 

                    (b)
Projections. The Projections delivered on the date hereof and attached
hereto as Disclosure Schedule (3.4(b)) have been prepared by the
Borrowers in light of the past operations of their businesses and reflect
projections for the three-year period beginning on January 1, 2009 on a
quarterly basis for the years 2009 and 2010 and on a year-by-year basis
thereafter. The Projections are based upon the same accounting principles as
those used in the preparation of the financial statements described above and
the estimates and assumptions stated therein, all of which the Borrowers
believe to be reasonable and fair in light of current conditions and current
facts known to the Borrowers and, as of the Closing Date, reflect the
Borrowers’ good faith and reasonable estimates of the future financial
performance of Parent and its Subsidiaries for the period set forth therein.
The Projections are not a guaranty of future performance, and actual results may
differ from the Projections. 

                    (c)
Debt Disclosure. As of the Closing Date, after giving effect to the
Refinancing, no Sotheby Entity is liable on any “Credit Facilities” (as defined
in the Senior Note Indenture) other than pursuant to this Agreement. 

                    3.5
Material Adverse Effect. 

                    Between
December 31, 2008 and the Closing Date: (a) except as reflected on the
unaudited Financial Statements described in Section 3.4(a)(ii), no
Sotheby Entity has incurred any obligations, contingent or noncontingent
liabilities, liabilities for Charges, long-term leases or unusual forward or
long-term commitments that, alone or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, (b) no contract, lease or other
agreement or instrument has been entered into by any Sotheby Entity or has
become binding upon any Sotheby Entity’s assets and no law or regulation
applicable to any Sotheby Entity has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect, and (c) no Sotheby
Entity is in default and to the best of Borrowers’ knowledge no third party is
in default under any material contract, lease or other agreement or instrument,
that alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect. Since December 31, 2008 no event has occurred, that alone or
together with other events, could reasonably be expected to have a Material
Adverse Effect. 

35

                    3.6
Ownership of Property; Liens. 

                    As
of the Closing Date, Disclosure Schedule (3.6) lists all of the real
property owned, leased, subleased, occupied, or used by any Credit Party (the “Real
Estate”) and discloses which Credit Party is the owner, lessee, licensee or
occupier of such Real Estate. Except as a result of Permitted Encumbrances,
each Credit Party owns good and marketable freehold or fee simple title to all
of its owned Real Estate, and valid and marketable leasehold interests in all
of its leased Real Estate. Copies of all such leases or a summary of terms
thereof reasonably satisfactory to Agent have been made available to Agent. Disclosure
Schedule (3.6) further describes any Real Estate with respect to which any
Credit Party is a lessor, sublessor or assignor as of the Closing Date. Except
as a result of Permitted Encumbrances, each Credit Party also has title to, or
valid leasehold interests in, all of its personal property and assets. As of
the Closing Date, none of the properties and assets of any Sotheby Entity are
subject to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Sotheby Entity that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Disclosure Schedule (3.6) also describes any purchase
options, rights of first refusal or other similar contractual rights pertaining
to any Real Estate. 

                    3.7
Labor Matters. 

                    Except
as set forth on Disclosure Schedule 3.7, as of the Closing Date (a)
there are no strikes, lockouts or slowdowns against any Credit Party pending
or, to the knowledge of any Credit Party, threatened; (b) the hours worked by
and payments made to employees of each Credit Party have not been in violation
of the Fair Labor Standards Act or any other applicable Federal, state, local
or foreign law dealing with such matters except where such violation could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect; (c) all material payments due from any Credit Party,
or for which any claim may be made against any Credit Party, on account of
wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of such Credit Party; and (d) there
are no complaints, charges, claims or other causes of action against any Credit
Party pending or, to the knowledge of any Credit Party, threatened to be filed
with any Governmental Authority or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual, which if adversely determined
could reasonably be expected to have a Material Adverse Effect. 

                    3.8
Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.

                    Except
as set forth in Disclosure Schedule (3.8), as of the Closing Date, no
Sotheby Entity has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person (other than Art Loan/Inventory Joint
Ventures), or is an Affiliate of any other Person. All of the issued and
outstanding Stock of each Sotheby Entity is owned by each of the Stockholders
and in the amounts set forth in Disclosure Schedule (3.8). Except as set
forth in Disclosure Schedule (3.8), there are no outstanding rights to
purchase, options, warrants or similar rights or agreements pursuant to which
any Sotheby Entity may be required to issue, sell, repurchase or redeem any of
its Stock or other equity securities or any Stock or other equity securities of
its Subsidiaries. All outstanding Indebtedness and Guaranteed Indebtedness of
each 

36

Credit Party
as of the Closing Date (except for the Obligations) is described in Section
6.3 (including Disclosure Schedule (6.3)). 

                    3.9
Government Regulation. 

                    No
Sotheby Entity is an “investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for, an “investment company,” as such
terms are defined in the Investment Company Act of 1940. The making of the
Loans by Lenders to Borrowers, the incurrence of the Letter of Credit
Obligations on behalf of Borrowers and the application of the proceeds thereof
and repayment thereof will not violate any provision of any such statute or any
rule, regulation or order issued by the Securities and Exchange Commission. 

                    3.10
Margin Regulations. 

                    No
Sotheby Entity is engaged, nor will it engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” as such terms are defined in
Regulation U of the Federal Reserve Board as now and from time to time
hereafter in effect (such securities being referred to herein as “Margin
Stock”). No Sotheby Entity owns any Margin Stock (other than Stock of
Parent in an amount that does not exceed 25% of the assets of Parent and its
Subsidiaries), and none of the proceeds of the Loans or other extensions of
credit under this Agreement will be used, directly or indirectly, for the
purpose of purchasing or carrying any Margin Stock (other than Stock of Parent
repurchased in accordance with Section 6.13), for the purpose of
reducing or retiring any Indebtedness that was originally incurred to purchase
or carry any Margin Stock or for any other purpose that might cause any of the
Loans or other extensions of credit under this Agreement to be considered a
“purpose credit” within the meaning of Regulations T, U or X of the Federal
Reserve Board. No Sotheby Entity will take or permit to be taken any action
that might cause any Loan Document to violate any regulation of the Federal
Reserve Board. 

                    3.11
Taxes. 

                    All
Federal and other material tax returns, reports and statements, including
information returns, required by any Governmental Authority to be filed by any
Sotheby Entity have been filed, or will be timely filed, with the appropriate
Governmental Authority, and all Charges have been paid excluding Charges or
other amounts being contested in accordance with Section 5.2(b) and
unless the failure to so file or pay could not reasonably be expected to result
in a Material Adverse Effect. Disclosure Schedule (3.11) sets forth as
of the Closing Date those taxable years for which any Sotheby Entity’s tax
returns are currently being audited by the IRS or any other applicable
Governmental Authority, and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding where the amount
of such assessments, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect. Except as described in Disclosure
Schedule (3.11), as of the Closing Date, no Sotheby Entity has executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for
assessment or collection of any material Charges. None of the Sotheby Entities
and their respective predecessors are liable for any Charges: (a) under any
agreement (including any tax sharing agreements) or (b) to each Sotheby
Entity’s knowledge, as a transferee. As of the 

37

Closing Date,
no Sotheby Entity has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would reasonably be expected to have a Material Adverse Effect. 

                    3.12
ERISA. 

                    (a)
Disclosure Schedule (3.12(a)) lists, as of the Closing Date, all Plans
subject to Section 412 of the IRC or Section 302 of ERISA, including all Title
IV Plans, all Multiemployer Plans, and all Retiree Welfare Plans. Copies of all
such listed Plans, together with a copy of the latest form IRS/DOL 5500-series
and related actuarial reports, as applicable, for each such Plan, have been
made available to Agent. Except with respect to Multiemployer Plans, each
Qualified Plan has been determined by the IRS to qualify under Section 401(a)
of the IRC, the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501(a) of the IRC, and nothing has
occurred that would cause the loss of such qualification or tax exempt status.
Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the IRC and its terms, including the timely filing of all
reports required under the IRC or ERISA. Neither any Sotheby Entity nor ERISA
Affiliate has failed to make any material contribution or pay any material
amount due as required by either Section 412 of the IRC or Section 302 of ERISA
or the terms of any such Plan. Neither any Sotheby Entity nor ERISA Affiliate
has failed to make a contribution payment on or before the applicable due date
which could result in the imposition of a lien under Section 430(k) of the IRC
or Section 303(k) of ERISA. No “prohibited transaction,” as defined in Section
406 of ERISA and Section 4975 of the IRC, has occurred with respect to any
Plan, that would subject any Sotheby Entity to a material tax on prohibited
transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC. 

                    (b)
Except as set forth in Disclosure Schedule (3.12(a)): (i) no Title IV
Plan has any material Unfunded Pension Liability; (ii) no ERISA Event has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Sotheby Entity, threatened material claims (other than
claims for benefits in the normal course), sanctions, actions or lawsuits,
asserted or instituted against any Plan or any Person as fiduciary or sponsor
of any Plan; (iv) no Sotheby Entity or ERISA Affiliate has incurred or
reasonably expects to incur any material liability as a result of a complete or
partial withdrawal from a Multiemployer Plan; (v) within the last five years no
Title IV Plan of any Sotheby Entity or ERISA Affiliate has been terminated,
whether or not in a “standard termination” as that term is used in Section 4041
of ERISA, nor has any Title IV Plan of any Sotheby Entity or any ERISA
Affiliate (determined at any time within the last five years) with material
Unfunded Pension Liabilities been transferred outside of the “controlled group”
(within the meaning of Section 4001(a)(14) of ERISA) of any Sotheby Entity or
ERISA Affiliate (determined at such time), (vi) except in the case of any ESOP,
Stock of all Credit Parties and their ERISA Affiliates makes up, in the
aggregate, no more than 10% of fair market value of the assets of any Plan
measured on the basis of fair market value as of the latest valuation date of
any Plan; and (vii) no liability under any Title IV Plan has been satisfied
with the purchase of a contract from an insurance company that is not rated AAA
by Standard & Poor’s Ratings Group or an equivalent rating by another
nationally recognized rating agency. 

38

                    (c)
Disclosure Schedule (3.12(c)) lists, as of the Closing Date, all pension
plans or arrangements operating in the United Kingdom through which any Sotheby
Entity currently contributes or could be required to contribute (the “U.K.
Pension Plans”). There are no amounts which are treated under Section 75 of
the United Kingdom Pensions Act 1995 as due to any other pension scheme
operated in the United Kingdom in which any Sotheby Entity has been a
participating employer. Disclosure Schedule (3.12(c)) separately
identifies which of the U.K. Pension Plans is a defined benefit plan and which
is a defined contribution plan. All of the U.K. Pension Plans are registered
pension schemes as defined in chapter 2 of part 4 of the United Kingdom Finance
Act 2004. There is no plan of any U.K. Credit Party (or, to the knowledge of
the U.K. Credit Parties, of any other Person having the power to amend or
terminate any U.K. Pension Plan) to amend or terminate any U.K. Pension Plan or
otherwise do any act or omission so as to give rise to any claim by the
trustees of that plan whether under the related trust deed or rules of that
plan or under Section 75 of the United Kingdom Pensions Act 1995. Contributions
have been made to the U.K. Pension Plans as required under their relevant
schedule of contributions and recovery plan (if any) in force from time to time
as those terms are defined in Part 3 of the United Kingdom Pensions Act 2004 in
all material respects. There are no facts or circumstances which may give rise
to the Pensions Regulator issuing, or to the knowledge of any Sotheby Entity
threatening to issue, a Financial Support Directive or a Contribution Notice
with respect to any U.K. Pension Plans. 

                    3.13
Litigation. 

                    No
action, claim, lawsuit, demand, investigation or proceeding is now pending or,
to the knowledge of any Sotheby Entity, threatened against any Sotheby Entity,
before any Governmental Authority or before any court or any arbitrator or
panel of arbitrators (collectively, “Litigation”), (a) that challenges
any Credit Party’s right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b) that
has a reasonable risk of being determined adversely to any Sotheby Entity and
that, if so determined, could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Disclosure Schedule (3.13(a)), as of the
Closing Date there is no Litigation pending or, to any Sotheby Entity’s
knowledge, threatened, that seeks damages in excess of $2,500,000 or injunctive
relief against, or alleges criminal misconduct of, any Sotheby Entity. 

                    3.14
Brokers. 

                    Except
as set forth on Disclosure Schedule 3.14, no broker or finder brought
about the obtaining, making or closing of the Loans, and no Sotheby Entity or
Affiliate thereof has any obligation to any Person in respect of any finder’s
or brokerage fees in connection therewith. 

                    3.15
Intellectual Property. 

                    As
of the Closing Date, each Sotheby Entity owns or has rights to use all
Intellectual Property necessary to continue to conduct its business as now
conducted by it or presently proposed to be conducted by it, and each Patent,
Trademark, registered Copyright and License owned by the Credit Parties is
listed, together with the related application or registration 

39

number, as
applicable, and the owner thereof, in Disclosure Schedule (3.15). Each
Sotheby Entity conducts its business and affairs without infringement of or
interference with any Intellectual Property of any other Person in any material
respect. Except as set forth in Disclosure Schedule (3.15), no Credit
Party is aware of any material infringement claim by any other Person with
respect to any Intellectual Property owned by the Credit Parties.

                    3.16
Full Disclosure.

                    No
information contained in this Agreement, any of the other Loan Documents,
Financial Statements or Collateral Reports or other written reports from time
to time prepared by any Sotheby Entity and delivered hereunder or any written
statement prepared by any Sotheby Entity and furnished by or on behalf of any
Sotheby Entity to Agent or any Lender pursuant to the terms of this Agreement
contains or will, at the time of delivery thereof, contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Projections delivered hereunder
are based upon the estimates and assumptions stated therein, all of which
Borrowers believed at the time of delivery to be reasonable and fair in light
of current conditions and current facts known to Borrowers as of such delivery
date, and reflect Borrowers’ good faith and reasonable estimates of the future
financial performance of Borrowers and of the other information projected
therein for the period set forth therein. The Projections are not a guaranty of
future performance and actual results may differ from those set forth in the
Projections. The Liens granted to Agent, on behalf of itself and the other
Secured Parties, pursuant to the Collateral Documents will at all times be
valid, fully perfected first priority security interests in the Collateral
described therein (except as otherwise set forth in the Collateral Documents),
subject, as to priority, only to Permitted Encumbrances that would be prior to
Liens in favor of Agent as a matter of law.

                    3.17
Environmental Matters.

                    (a)
Except as set forth in Disclosure Schedule (3.17), as of the Closing
Date: (i) the owned Real Estate is, and, to the knowledge of the Credit
Parties, the leased Real Estate is, in each case, free of contamination from
any Hazardous Material except for such contamination that would not adversely
impact the value or marketability of such Real Estate and that would not result
in Environmental Liabilities that could reasonably be expected to have a
Material Adverse Effect; (ii) no Sotheby Entity has caused or suffered to occur
any material Release of Hazardous Materials on, at, in, under, above, to, from
or about any of its Real Estate; (iii) the Sotheby Entities are and have been
in compliance with all Environmental Laws, except for such noncompliance that
would not result in Environmental Liabilities which could reasonably be
expected to have a Material Adverse Effect; (iv) the Sotheby Entities have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits would not result in
Environmental Liabilities that could reasonably be expected to have a Material
Adverse Effect; (v) no Sotheby Entity is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of such
Sotheby Entity which could reasonably be expected to have a Material Adverse
Effect; (vi) there is no Litigation arising under or related to any
Environmental

40

Laws,
Environmental Permits or Hazardous Material that seeks damages, penalties,
fines, costs or expenses that could reasonably be expected to have a Material
Adverse Effect or injunctive relief against, or that alleges criminal
misconduct by, any Sotheby Entity; (vii) no notice has been received by any
Sotheby Entity identifying it as a “potentially responsible party” or
requesting information under CERCLA or analogous state statutes, and to the
knowledge of the Sotheby Entities, there are no facts, circumstances or
conditions that may result in any Sotheby Entity being identified as a
“potentially responsible party” under CERCLA or analogous state statutes; and
(viii) the Sotheby Entities have made available to Agent copies of all existing
environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to any Sotheby Entity.

                    (b)
Each Credit Party hereby acknowledges and agrees that Agent (i) is not now, and
has not ever been, in control of any of the Real Estate or any Credit Party’s
affairs, and (ii) does not have the capacity through the provisions of the Loan
Documents or otherwise to influence any Credit Party’s conduct with respect to
the ownership, operation or management of any of its Real Estate or compliance
with Environmental Laws or Environmental Permits.

                    3.18
Insurance.

                    Disclosure
Schedule (3.18) lists all insurance policies of any nature maintained, as
of the Closing Date, for current occurrences by each Credit Party, as well as a
summary of the terms of each such policy.

                    3.19
Deposit. 

                    Disclosure
Schedule (3.19) lists all banks and other financial institutions at which
any Credit Party maintains deposit or other accounts as of the Closing Date,
and such Schedule correctly identifies the name, address and telephone number
of each depository, the name in which the account is held, a description of the
purpose of the account, the complete account number therefor and whether such
account contains amounts payable to consignors representing proceeds of the
sale of consigned Works of Art.

                    3.20
[Reserved].

                    3.21
Bonding; Licenses.

                    Except
as set forth on Disclosure Schedule (3.21) or entered into in the
ordinary course of business, as of the Closing Date, no Sotheby Entity is a
party to or bound by any surety bond agreement or bonding requirement with
respect to products or services sold by it or any trademark or patent license
agreement with respect to products sold by it.

                    3.22
Solvency.

                    Both
before and after giving effect to (a) the Loans and Letter of Credit
Obligations to be made or incurred on the Closing Date or such other date as
Loans and Letter of Credit Obligations requested hereunder are made or
incurred, (b) the disbursement of the proceeds of such Loans pursuant to the
instructions of Borrower Representative; (c) the Refinancing; and (d) the
payment and accrual of all transaction costs in connection with the

41

foregoing, (i)
each Credit Party is and will be Solvent and (ii) Parent and its Subsidiaries,
on a consolidated basis, are and will be Solvent.

                    3.23
Sale-Leasebacks.

                    No
Sotheby Entity is a party to any sale-leaseback, synthetic lease or similar
transaction involving any of its assets.

                    3.24
U.S. Money-Laundering and Terrorism Regulatory Matters.

                    (a)
No Sotheby Entity or any Affiliate of any Sotheby Entity, nor any of their
respective officers or directors or any of their respective brokers, investors
or other agents acting or benefiting in any capacity in connection with Loans,
is a Prohibited Person.

                    (b)
No Sotheby Entity or any Affiliate of any Sotheby Entity, nor any of their
respective officers or directors (i) to such Sotheby Entity’s knowledge after
due inquiry, has conducted or will conduct any business or has engaged or will
engage in any transaction or dealing with any Prohibited Person, including
making or receiving any contribution of funds, goods or services to or for the
benefit of any Prohibited Person, (ii) to such Sotheby Entity’s knowledge after
due inquiry, has dealt or will deal in, or otherwise has engaged or will engage
in any transaction relating to, any Prohibited Person or any property or interests
in property blocked pursuant to the Executive Order or (iii) has engaged or
will engage in or has conspired or will conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the requirements or prohibitions set forth in the Executive
Order or the PATRIOT Act.

                    (c)
Each Sotheby Entity and its Affiliates, and their respective officers and
directors are in full compliance with all applicable orders, rules and regulations
issued by, and recommendations of, the U.S. Department of the Treasury and OFAC
pursuant to IEEPA, the PATRIOT Act, other legal requirements relating to
sanctions, money laundering or terrorism and any executive orders related
thereto.

                    (d)
Each Borrower has established an anti-money laundering and/or economic
sanctions program and/or procedures in accordance with all applicable laws,
rules and regulations of its own jurisdiction including, without limitation,
where applicable, the PATRIOT Act. Each Borrower applies its anti-money
laundering program and/or procedures to all Art Loan Debtors.

                    (e)
Each Borrower has taken appropriate due diligence efforts to know each Art Loan
Debtor to which it has advanced, or committed to advance, Art Loans, including
whether such Art Loan Debtor is a Prohibited Person. Each Borrower has taken
appropriate due diligence efforts to know if any such Art Loan Debtor is a
“Senior Foreign Political Figure” (as defined in the PATRIOT Act) and, to the
extent that any Art Loan Debtor is a Senior Foreign Political Figure, has
disclosed such information to Agent.

                    (f)
Each Borrower does not believe, and after appropriate due diligence, has no
reason to believe, that any of its Art Loan Debtors is a “Prohibited Foreign
Shell Bank” (as defined in the PATRIOT Act), or is named on any available lists
of known or suspected

42

 terrorists, terrorist
organizations or of other sanctioned person issued by the United States government
and/or the government(s) of any jurisdiction(s) in which such Borrower is doing
business.

                    (g)
Each Sotheby Entity has adopted reasonable procedures in accordance with
applicable law as of the Closing Date to elicit information that substantiates
the statements contained in this Section 3.25.

                    3.25
Lending and Auction Regulatory Matters.

                    (a)
Except as set forth in Disclosure Schedule (3.13(a)), each Credit Party
that makes or owns Art Loans is in material compliance with, and each Art Loan
has been made and remains in material compliance with, all applicable
provisions of federal, state, local and foreign laws imposed upon lenders with
respect to consumer or commercial lending, usury or other limitations on
interest, finance charges, or other charges, finance company or other lender
licensing, consumer or commercial credit disclosure, consumer or commercial
credit collection practices, and similar laws and regulations. 

                    (b)
Sotheby’s, Inc. and each other Credit Party that conducts auctions in the City
of New York is in material compliance with, and each employee thereof who
conducts auction in New York City maintains a valid license under, the City of
New York’s Auctioneer Rules (Title 20, Chapter 2, Subchapter 13) and any
applicable similar laws of other jurisdictions. Sotheby’s U.K. and each other
Credit Party which conducts auctions in the United Kingdom is in material
compliance with, and maintains valid licenses (if required) under, all laws,
regulations and auctioneer’s licensing requirements applicable in the United
Kingdom, if any.

4. FINANCIAL STATEMENTS AND INFORMATION

                    4.1
Reports and Notices. 

                    (a)
Each Credit Party hereby agrees that from and after the Closing Date and until
the Termination Date, it shall deliver to Agent or to Agent and Lenders, as
required, the Financial Statements, notices, Projections and other information
at the times, to the Persons and in the manner set forth in Annex E.

                    (b)
Each Credit Party hereby agrees that, from and after the Closing Date and until
the Termination Date, it shall deliver to Agent or to Agent and Lenders, as
required, the various Collateral Reports (including Borrowing Base Certificates
in the form of Exhibit 4.1(A), Art Loan Receivables Reports in the form
of Exhibit 4.1(B), and Art Inventory Reports in the form of Exhibit
4.1(C)) at the times, to the Persons and in the manner set forth in Annex
F and Section 2.2(d).

                    4.2
Communication with Accountants.

                    Each
Credit Party authorizes (a) Agent and (b) so long as an Event of Default has
occurred and is continuing, each Lender, to communicate directly with its
independent certified public accountants, including Deloitte & Touche LLP,
and authorizes such accountants and advisors to (and, upon Agent’s request
therefor, shall request that such accountants and advisors)

43

communicate to
Agent and each Lender information relating to any Sotheby Entity with respect
to the business, results of operations and financial condition of any Sotheby
Entity.

5. AFFIRMATIVE COVENANTS

                    Each
Credit Party jointly and severally agrees as to all Sotheby Entities that from
and after the date hereof and until the Termination Date:

                    5.1
Maintenance of Existence and Conduct of Business.

                    Each
Sotheby Entity shall: do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate, partnership, limited liability
company or unlimited liability company existence and its material rights and
franchises, except as otherwise permitted under Section 6.1; continue to
conduct its business substantially as now conducted or as otherwise permitted
hereunder; at all times maintain, preserve and protect all of its assets and
properties used or useful in the conduct of its business, and keep the same in
good repair, working order and condition in all material respects (taking into
consideration ordinary wear and tear) and from time to time make, or cause to
be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices.

                    5.2
Payment of Charges. 

                    (a)
Subject to Section 5.2(b), each Sotheby Entity shall pay and discharge
or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, (ii)
lawful claims for labor, materials, supplies and services or otherwise, and
(iii) all storage or rental charges payable to warehousemen or bailees, in each
case, before any thereof shall become past due, in each case, except where the
failure to pay or discharge such Charges would not result in aggregate
liabilities in excess of $2,500,000.

                    (b)
Each Sotheby Entity may in good faith contest, by appropriate proceedings, the
validity or amount of any Charges or claims described in Section 5.2(a);
provided, that (i) adequate reserves with respect to such contest are
maintained on the books of such Sotheby Entity, in accordance with GAAP; (ii)
no Lien shall be imposed to secure payment of such Charges (other than payments
to warehousemen and/or bailees) that is superior to any of the Liens securing
the Obligations and such contest is maintained and prosecuted continuously and
with diligence and operates to suspend collection or enforcement of such
Charges; (iii) none of the Collateral becomes subject to forfeiture or loss as
a result of such contest; and (iv) such Sotheby Entity shall promptly pay or
discharge such contested Charges or claims and all additional charges,
interest, penalties and expenses, if any, if such contest is terminated or
discontinued adversely to such Sotheby Entity.

                    5.3
Books and Records.

                    Each
Sotheby Entity shall keep adequate books and records with respect to its
business activities in which proper entries, reflecting all financial
transactions, are made. Parent shall keep adequate books and records with
respect to the business activities of Parent and its

44

Subsidiaries
on a consolidated basis in which proper entries, reflecting all financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financial Statements attached as Disclosure Schedule (3.4(a)).

                    5.4
Insurance; Damage to or Destruction of Collateral.

                    (a)
The Sotheby Entities shall, at their sole cost and expense, maintain policies
of insurance with financially sound and reputable insurance companies in such
amounts, and covering such risks, as is consistent with sound business practice
and customary for their industry. In the case of the Credit Parties, such
policies of insurance (or the loss payable and additional insured endorsements
delivered to Agent) shall contain provisions pursuant to which the insurer
agrees to provide thirty (30) days prior written notice to Agent in the event
of any non-renewal, cancellation or amendment of any such insurance policy. If
any Sotheby Entity at any time or times hereafter shall fail to obtain or
maintain any of the policies of insurance required above, or to pay all
premiums relating thereto, Agent may at any time or times thereafter obtain and
maintain such policies of insurance and pay such premiums and take any other
action with respect thereto that Agent deems advisable. Agent shall have no
obligation to obtain insurance for any Sotheby Entity or pay any premiums
therefor. By doing so, Agent shall not be deemed to have waived any Default or
Event of Default arising from any Sotheby Entity’s failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including
reasonable attorneys’ fees, court costs and other charges related thereto,
shall be payable on demand by Borrowers to Agent and shall be additional
Obligations hereunder secured by the Collateral.

                    (b)
If reasonably requested by Agent, each Sotheby Entity shall deliver to Agent
from time to time a report of a reputable insurance broker, reasonably
satisfactory to Agent, with respect to its insurance policies.

                    (c)
Each Credit Party shall deliver to Agent, in form and substance reasonably
satisfactory to Agent, endorsements to (i) all “All Risk,” Lender Single
Interest (“LSI”) and Fine Arts property policies of insurance (including, to
the extent permitted under the York Avenue Lease Documents and York Avenue Loan
Documents, the business interruption insurance of such Credit Party), in each
case, naming Agent, on behalf of itself and the other Secured Parties, as a
loss payee, and (ii) all general, automotive, and umbrella liability policies
of insurance, in each case, naming Agent, on behalf of itself and the other
Secured Parties, as additional insured. Each Credit Party irrevocably makes,
constitutes and appoints Agent (and all officers, employees or agents
designated by Agent), so long as any Default or Event of Default has occurred
and is continuing or the anticipated insurance proceeds exceed the Dollar
Equivalent of $1,000,000, as such Credit Party’s true and lawful agent and
attorney in fact for the purpose of making, settling and adjusting claims under
such “All Risk” property policies of insurance, endorsing the name of such
Credit Party on any check or other item of payment for the proceeds of such
“All Risk” policies of insurance and for making all determinations and
decisions with respect to such “All Risk” policies of insurance. Agent shall
have no duty to exercise any rights or powers granted to it pursuant to the
foregoing power-of-attorney. Borrower Representative shall promptly notify
Agent of any loss, damage, or destruction to the Collateral in the amount of
$1,000,000 or more, whether or not covered by insurance. After deducting from
such proceeds (i) the expenses incurred by Agent in the collection or handling
thereof, and (ii) amounts required to be paid to

45

creditors
(other than Lenders) having Permitted Encumbrances, Agent (A) may, except to
the extent such proceeds are not required to be applied to prepay the Secured
Obligations pursuant to Section 1.3(c), at its option, (x) apply any
such proceeds to the reduction of the Secured Obligations in accordance with Section
1.3(d) or (e), as applicable, or (y) permit or require the applicable
Credit Party to use such money, or any part thereof, to replace, repair,
restore or rebuild the Collateral in a diligent and expeditious manner with
materials and workmanship of substantially the same quality as existed before
the loss, damage or destruction and (B) shall, to the extent such proceeds are
not required to be applied to prepay the Secured Obligations pursuant to Section
1.3(c), remit such proceeds to the applicable Credit Party.

                    5.5
Compliance with Laws.

                    Each
Sotheby Entity shall comply with all federal, state, local and foreign laws,
rules and regulations applicable to it, including those relating to ERISA,
labor, money laundering, counter-terrorist financing, consumer or commercial
lending (including, for the avoidance of doubt, the CCA and the rules and
regulations from time to time in effect thereunder or in connection therewith),
usury, limitations on interest, finance charges or other charges, finance
company licensing, consumer or commercial credit disclosure, debt collection,
auctioneers, Environmental Laws and Environmental Permits, except to the extent
that the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.

                    5.6
Supplemental Disclosure.

                    From
time to time as may be reasonably requested by Agent (which request will not be
made more frequently than once each year absent the occurrence and continuance
of an Event of Default) or at Credit Parties’ election, the Credit Parties
shall supplement each Disclosure Schedule hereto, or any representation herein
or in any other Loan Document, with respect to any matter hereafter arising
that, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or as an
exception to such representation or that is necessary to correct any
information in such Disclosure Schedule or representation which has been
rendered inaccurate thereby (and, in the case of any supplements to any
Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to
show the changes made therein); provided that (a) no such supplement to
any such Disclosure Schedule or representation shall amend, supplement or
otherwise modify any Disclosure Schedule or representation, or be or be deemed
a waiver of any Default or Event of Default resulting from the matters
disclosed therein, except as consented to by Agent and Requisite Lenders in
writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.

                    5.7
Intellectual Property.

                    Each
Sotheby Entity will conduct its business and affairs without infringement of or
interference with any Intellectual Property of any other Person in any material
respect and shall comply in all material respects with the terms of its
Licenses.

46

                    5.8
Environmental Matters.

                    Each
Sotheby Entity shall and shall cause each Person within its control to: (a)
conduct its operations and keep and maintain its Real Estate in compliance with
all Environmental Laws and Environmental Permits other than noncompliance that
could not reasonably be expected to have a Material Adverse Effect; (b)
implement any and all investigation, remediation, removal and response actions
that are appropriate or necessary to maintain the value and marketability of
the Real Estate or to otherwise comply with Environmental Laws and
Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to or from any of its Real Estate in all material
respects; (c) notify Agent promptly after such Sotheby Entity becomes aware of
any violation of Environmental Laws or Environmental Permits or any Release on,
at, in, under, above, to or from any Real Estate that is reasonably likely to
result in Environmental Liabilities that could reasonably be expected to have a
Material Adverse Effect; and (d) promptly forward to Agent a copy of any order,
notice, request for information or any communication or report received by such
Sotheby Entity in connection with any such violation or Release or any other
matter relating to any Environmental Laws or Environmental Permits that could
reasonably be expected to result in Environmental Liabilities that could
reasonably be expected to have a Material Adverse Effect, in each case whether
or not the Environmental Protection Agency or any Governmental Authority has
taken or threatened any action in connection with any such violation, Release
or other matter. If Agent at any time has a reasonable basis to believe that
there may be a violation of any Environmental Laws or Environmental Permits by
any Sotheby Entity or any Environmental Liability arising thereunder, or a
Release of Hazardous Materials on, at, in, under, above, to or from any of its
Real Estate, that, in each case, could reasonably be expected to have a
Material Adverse Effect, then each Sotheby Entity shall, upon Agent’s written
request (i) cause the performance of such environmental audits including
subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrowers’ expense, as Agent may from time to time
reasonably request, subject to any leases, which shall be conducted by
reputable environmental consulting firms reasonably acceptable to Agent and
shall be in form and substance reasonably acceptable to Agent, and (ii) permit
Agent or its representatives to have access to all Real Estate for the purpose
of conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrowers shall
reimburse Agent for the costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.

                    5.9
Landlords’ Agreements, Bailee Letters and Real Estate Purchases.

                    Within
ninety (90) days of the Closing Date (or such later date as Agent shall consent
to in writing), with respect to each leased property indicated on Disclosure
Schedule (3.6), each Credit Party shall use commercially reasonable efforts
to obtain a landlord’s agreement, in form and substance reasonably satisfactory
to Agent, from the applicable lessor with respect to each such indicated
locations. After the Closing Date, if any Credit Party proposes to lease during
any Fiscal Year any real property locations or warehouse spaces (or renew an
existing lease of any real property locations or warehouse spaces, or alter the
use of any leased location to materially increase the Collateral stored or
located at such location) where Collateral having a book value the Dollar
Equivalent of which is greater than $1,000,000 in the

47

aggregate will
be stored or located, such Credit Party shall first notify Agent thereof and,
upon request of Agent, provide to Agent a landlord agreement or bailee letter,
as appropriate, with respect to such location, in form and substance reasonably
satisfactory to Agent. Each Credit Party shall timely and fully pay and perform
its obligations under all leases and other agreements with respect to each
leased location or public warehouse where any Collateral is or may be located.
To the extent otherwise permitted hereunder, if any Credit Party proposes to
acquire a fee ownership interest in Real Estate after the Closing Date, such
Credit Party shall first notify Agent thereof and, upon request of Agent,
provide to Agent a mortgage or deed of trust granting Agent a first priority
security interest on such Real Estate, together with environmental audits,
mortgage title insurance commitment, real property survey, local counsel
opinion(s), supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Agent, in each
case, in form and substance reasonably satisfactory to Agent.

                    5.10
Lending and Auction Regulatory Matters. 

                    (a)
Each Credit Party remains in material compliance with all applicable provisions
of federal, state, local and foreign laws imposed upon lenders with respect to
consumer or commercial lending, usury or other limitations on interest, finance
charges or other charges, finance companies, finance company or other lender
licensing, consumer or commercial credit disclosure, consumer or commercial
credit collection practices, and similar laws and regulations. 

                    (b)
Sotheby’s, Inc. and each other Credit Party that conducts auctions in the City
of New York shall remain in material compliance with, and maintain a valid
license under, the City of New York’s Auctioneer Rules (Title 20, Chapter 2,
Subchapter 13) and any applicable similar laws of other jurisdictions.
Sotheby’s U.K. and each other Credit Party that conducts auctions in the United
Kingdom shall remain in material compliance with, and maintain valid licenses
under, all laws, regulations and auctioneer’s licensing requirements applicable
in the United Kingdom, if any. 

                    5.11
Further Assurances.

                    Each
Credit Party agrees that it shall and shall cause each other Sotheby Entity to,
at such Credit Party’s expense and upon the reasonable request of Agent, duly
execute and deliver, or cause to be duly executed and delivered, to Agent such
further instruments and do and cause to be done such further acts as may be
necessary or proper in the reasonable opinion of Agent to carry out more
effectively the provisions and purposes of this Agreement and each Loan
Document.

                    5.12
Art Loans and Art Inventory.

                    Each
Borrower shall (a) in connection with the acquisition of each Work of Art as
Art Inventory, conduct appropriate diligence with respect to such Work of Art (including,
as applicable, searches of such Work of Art in the Art Loss Register)
consistent with past practices, and (b) in connection with each Art Loan made
or to be made by it, (i) apply credit standards and loan to collateral value
requirements, (ii) conduct appropriate diligence with respect to the

48

applicable
Work(s) of Art (including, as applicable, searches of such Work(s) of Art in
the Art Loss Register), (iii) follow practices with respect to documentation,
perfection and protection of security interests and (iv) follow practices with
respect to classification of Art Loans as non-accrual, as such standards,
requirements and practices are generally applied and followed in the Borrowers’
art lending business prior to the Closing Date.

                    5.13
Money-Laundering and Terrorism Regulatory Matters. 

                    (a)
Each Sotheby Entity shall remain in compliance in all material respects with
all applicable orders, rules and regulations applicable to it, including those
issued by the U.S. Department of the Treasury and OFAC pursuant to IEEPA, the
PATRIOT Act, other legal requirements relating to sanctions, money laundering
or terrorism and any executive orders related thereto.

                    (b)
Each Sotheby Entity is advised that, by law, Agent and the Lenders may be
obligated to “freeze its account”, either by prohibiting additional Revolving
Credit Advances or Letter of Credit Obligations, declining any withdrawal,
redemption or transfer request(s) with respect to any deposit account under the
control of Agent or the Lenders and/or segregating assets, in compliance with
government regulations, and Agent and the Lenders may also be required to
report such action to governmental or regulatory authorities, including OFAC.

                    (c)
Each Borrower shall maintain an anti-money laundering, counter-terrorist
financing and/or economic sanctions program and/or procedures in accordance
with all applicable laws, rules and regulations of its own jurisdiction
including, without limitation, where applicable, the PATRIOT Act and the Money
Laundering Regulations 2007. Each Borrower shall apply its anti-money
laundering and counter-terrorist financing program and/or procedures to all Art
Loan Debtors and shall take appropriate steps in accordance with the laws of
its own jurisdiction to ensure that all required relevant documentation is
retained, including identification related to such Art Loan Debtors in
accordance with its anti-money laundering, counter-terrorist financing and/or
economic sanctions program. Each Borrower shall adopt appropriate policies,
procedures and internal controls to be compliant in all material respects with
any additional laws, rules or regulations relating to money laundering and/or
counter-terrorist financing, including the PATRIOT Act, to which it may become
subject.

                    (d)
Each Borrower shall take appropriate due diligence efforts to know each Art
Loan Debtor to which it shall advance, or commit to advance, Art Loans,
including whether such Art Loan Debtor is a Prohibited Person. Each Borrower
shall take appropriate due diligence efforts to know if any such Art Loan
Debtor is a “Senior Foreign Political Figure” (as defined in the PATRIOT Act)
and, to the extent that any investor is a Senior Foreign Political Figure,
shall disclose such information to Agent.

                    (e)
Each Sotheby Entity will notify or report unusual or suspicious activity to the
extent required by the laws or requirements of its own jurisdiction including,
where applicable, the PATRIOT Act.

                    (f)
Each Sotheby Entity shall deliver to Agent any certification or other evidence
requested from time to time by Agent in its sole discretion, confirming such
Sotheby

49

Entity’s
compliance with this Section 5.13 and the representations and warranties
made by such Sotheby Entity pursuant to Section 3.25. 

                    5.14
New Subsidiaries.

                    Upon
(i) any Person becoming a Subsidiary of any Credit Party or (ii) any Subsidiary
of any Credit Party becoming a Domestic Subsidiary or a Foreign Subsidiary
organized under the laws of England, (a) if such Person is a Domestic
Subsidiary, such Person shall become party to the Domestic Subsidiary Guaranty,
the U.S. Security Agreement, the U.S. Pledge Agreement and such further
Collateral Documents as Agent shall reasonably request; (b) if such Person is a
Foreign Subsidiary organized under the laws of England, such Person shall
become party to a Guaranty with respect to the Obligations of the U.K.
Borrowers and such Collateral Documents as Agent shall reasonably request; and
(c) the outstanding Stock of such Person shall be pledged to Agent, for the
benefit of the Secured Parties, pursuant to such Collateral Documents as Agent
shall reasonably request; provided, that, (i) so long as SPTC Delaware
shall not create, incur, assume or permit to exist any Indebtedness or
Guaranteed Indebtedness or any Lien on or with respect to any of its properties
or assets (whether now owned or hereafter acquired), SPTC Delaware shall not be
required to execute or become a party to any Loan Documents, and (ii) the York
Avenue Owner shall not be required to execute or become a party to any Loan
Documents.

                    5.15
Immaterial Subsidiaries.

                    Each
Immaterial Subsidiary (i) as of the Closing Date, owns assets having a book
value of which the Dollar Equivalent is less than $100,000 and (ii) had
earnings during the 2008 Fiscal Year of which the Dollar Equivalent was less
than $100,000.

                    5.16
York Avenue Transactions.

                    Except
as set forth on Disclosure Schedule (5.16), the York Avenue Lender has
no recourse to Parent or any of its Subsidiaries or any assets of Parent or any
of its Subsidiaries pursuant to the York Avenue Loan Agreement or any other
York Avenue Loan Document.

                    5.17
Auction Guaranties.

                    Each
Sotheby Entity shall comply with the provisions of the Auction Guaranty Side
Letter.

                    5.18
Data Protection Matters.

                    To
the extent and at all times that any Data Protection Laws will be applicable as
a result of any Credit Party’s performance hereunder, such Credit Party will be
in compliance in all material respects with all such Data Protection Laws
including, without limitation, having obtained valid consents where necessary
from any Persons whose Personal Data is provided in performance of this
Agreement for (a) such Personal Data to be processed for the purposes required
by each Credit Party in performance of this Agreement; (b) such Personal Data
to be disclosed to Agent or any Lender, or any agent or subcontrator of Agent
or any Lender, and to be processed by Agent or any Lender for the purposes
required in performance of this Agreement;

50

and (c) the transfer of such Personal Data to Agent
or any Lender in a country outside of the European Economic Area. The form of
any data protection consent shall be subject to prior approval of Agent, who
may require such amendments as it may consider necessary in order to comply
with Data Protection Laws and who may require, upon reasonable prior notice,
such other reasonable actions be taken by each Credit Party, including entering
into the European Union’s standard contractual clauses for the transfer of
personal data to third countries, to ensure compliance with Data Protection
Laws. Each Credit Party shall not, by any act or omission, place Agent or any
Lender in breach of any Data Protection Laws.

6. NEGATIVE COVENANTS

                    Each
Credit Party jointly and severally agrees as to all Sotheby Entities that from
and after the date hereof until the Termination Date:

                    6.1
Mergers, Subsidiaries, Etc.

                    No
Sotheby Entity shall directly or indirectly, by operation of law or otherwise,
(a) acquire, liquidate or dissolve any Subsidiary or (b) merge with,
consolidate with, acquire all or substantially all of the assets or Stock of,
or otherwise combine with or acquire, any Person, except that any Sotheby
Entity may merge with another Sotheby Entity; provided, that (i)
Borrower Representative shall be the survivor of any such merger to which it is
a party, (ii) any Borrower shall be the survivor of any such merger with any
Sotheby Entity that is not a Borrower and (iii) any Guarantor shall be the
survivor of any such merger with any Sotheby Entity that is not a Credit Party;
provided, further, that any Sotheby Entity may dissolve or
liquidate any Subsidiary thereof that is not a Borrower.

                    6.2
Investments; Loans and Revolving Credit Advances.

                    Except
as otherwise expressly permitted by this Section 6, no Sotheby Entity
shall make or permit to exist any investment in, or make, accrue or permit to
exist loans or advances of money to, any Person, through the direct or indirect
lending of money, holding of securities or otherwise, except that: 

	
 

	
 

	
 

	
          (a)
 Borrowers may hold investments comprised of notes payable, or stock or other
 securities issued by Account Debtors to any Borrower pursuant to negotiated
 agreements with respect to settlement of such Account Debtor’s Accounts in
 the ordinary course of business consistent with past practices; 

	
 

	
 

	
 

	
          (b)
 each Sotheby Entity may (i) maintain its existing investments in its
 Subsidiaries and joint ventures as of the Closing Date, (ii) make investments
 after the Closing Date in any Credit Party, or (iii) if such Sotheby Entity
 is not a Credit Party, make investments after the Closing Date in any other Sotheby
 Entity (other than any Immaterial Subsidiary); 

	
 

	
 

	
 

	
          (c)
 (i) any Borrower may enter into Art Loan/Inventory Joint Ventures and (ii)
 the Sotheby Entities may make investments after the Closing Date not to
 exceed a Dollar Equivalent of $5,000,000 in the aggregate in joint ventures
 (other than Art Loan/Inventory Joint Ventures) and other Sotheby Entities
 (other than any Immaterial

51

	
 

	
 

	
 

	
Subsidiary)
 to the extent investments in such other Sotheby Entities are not permitted
 pursuant to the foregoing clause (b) or Section 6.3(a)(vii)); 

	
 

	
 

	
 

	
          (d)
 so long as Agent has not delivered an Activation Notice with respect to any
 Blocked Account of a Sotheby Entity and no Default or Event of Default has
 occurred and is continuing, such Sotheby Entity may make investments in Cash
 Equivalent Investments; 

	
 

	
 

	
 

	
          (e)
 subject to applicable regulatory authorizations, any Borrower may make, or
 commit to make, Art Loans; 

	
 

	
 

	
 

	
          (f)
 the Sotheby Entities may make investments in York Avenue Owner in an
 aggregate amount in any Fiscal Year not in excess of the amount of Capital
 Expenditures permitted under paragraph (a) of Annex G for such
 Fiscal Year, less the aggregate amount of any Capital Expenditures made by
 Parent and its Subsidiaries during such Fiscal Year;

	
 

	
 

	
 

	
          (g)
 the trustee of the grantor trust established for purposes of setting aside
 assets to meet obligations of Sotheby’s, Inc. under the Sotheby’s Deferred
 Benefits Compensation Plan may make investments in connection with such plan;
 

	
 

	
 

	
 

	
          (h)
 in connection with the Australia Sale, Sotheby’s Asia, Inc. and Sotheby’s
 Asia Ltd. may contribute their respective ownership interests in Sotheby’s
 Australia Pty. Ltd. to a newly-formed Dutch Subsidiary; and

	
 

	
 

	
 

	
          (h)
 the Sotheby Entities may make other investments (other than in any Immaterial
 Subsidiary or the York Avenue Owner) not exceeding $7,500,000 in the aggregate at any time
 outstanding.

                    6.3
Indebtedness. 

                    (a)
No Sotheby Entity shall create, incur, assume or permit to exist any
Indebtedness, except (without duplication):

                              (i)
the Senior Notes;

                              (ii)
the Convertible Notes;

                              (iii)
obligations (contingent or otherwise) under the Convertible Note Hedge
Agreements and the York Avenue Loan Documents;

                              (iv)
Indebtedness secured by purchase money security interests and Capital Leases
permitted in Section 6.7(e);

                              (v)
the Loans and the other Obligations;

                              (vi)
existing Indebtedness described in Disclosure Schedule (6.3) and
refinancings thereof or amendments or modifications thereto that do not have
the effect of

52

increasing the
principal amount thereof or reducing the average life thereof and that are
otherwise on terms and conditions no less favorable to any Sotheby Entity,
Agent or any Lender, as determined by Agent, than the terms of the Indebtedness
being refinanced, amended or modified;

                              (vii)
Indebtedness consisting of intercompany loans and advances made by any Sotheby
Entity to any other Sotheby Entity (other than any Immaterial Subsidiary); provided,
that: (A) in the case of any intercompany loan or advance owing to any Credit
Party, from and after the date 120 days after the Closing Date, any Sotheby
Entity receiving the proceeds of such loan or advance shall have executed and
delivered to the applicable Credit Party a demand note (collectively, the “Intercompany
Notes”) to evidence any such intercompany Indebtedness owing at any time by
such Sotheby Entity, which Intercompany Notes shall be in form and substance
reasonably satisfactory to Agent and shall be pledged and delivered to Agent
pursuant to the applicable Collateral Document as additional collateral
security for the applicable Secured Obligations; (B) each Sotheby Entity shall
record all intercompany transactions on its books and records in a manner
reasonably satisfactory to Agent; (C) the obligations of each Credit Party
under any such intercompany loans and advances shall be subordinated to the
Obligations of such Credit Party hereunder and under the other Loan Documents
in a manner reasonably satisfactory to Agent; (D) with respect to any
intercompany loan or advance made after the Closing Date, at the time any such
intercompany loan or advance is made by any Sotheby Entity to any other Sotheby
Entity and after giving effect thereto, (i) each such Sotheby Entity shall be
Solvent or (ii)(x) such intercompany loan or advance shall be made in the ordinary
course of business, (y) if the Sotheby Entity making such intercompany loan or
advance is a Credit Party, such Credit Party shall be Solvent and (z) the
Sotheby Entity receiving such intercompany loan or advance shall have no Funded
Debt (except as permitted hereby) other than intercompany loans or advances
outstanding to other Sotheby Entities; and (E) no Default or Event of Default
would occur and be continuing after giving effect to any such proposed
intercompany loan or advance;

                              (viii)
Indebtedness arising in respect of surety bonds, guaranties and letters of
credit with respect to obligations of the Foreign Subsidiaries incurred in the
ordinary course of business that are not Funded Debt;

                              (ix)
Indebtedness arising under Rate Management Transactions; provided, that
such Rate Management Transactions are (or were) entered into in the ordinary
course of such Sotheby Entity’s business for the purpose of mitigating risks
associated with liabilities, commitments, investments, assets, earnings or
properties held or reasonably anticipated by such Sotheby Entity and not for
purposes of speculation;

                              (x)
Indebtedness arising under overdraft credit lines extended to various Sotheby
Entities in the ordinary course of business, which indebtedness arising under
overdraft credit lines extended to the Credit Parties shall not at any time
exceed, in the aggregate at any one time outstanding, the lesser of (A)
$15,000,000 and (B) the aggregate amount of overdraft credit lines extended to
the Credit Parties at such time; and

                              (xi)
Other unsecured Indebtedness in an aggregate principal amount not exceeding
$10,000,000 at any one time outstanding.

53

                    (b)
No Sotheby Entity shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness prior to its scheduled maturity, other
than (i) the Obligations; (ii) Indebtedness secured by a Permitted Encumbrance
if the asset securing such Indebtedness has been sold or otherwise disposed of
in accordance with Sections 6.8; (iii) Indebtedness permitted by Section
6.3(a)(vi) upon any refinancing thereof in accordance with Section
6.3(a)(vi); (iv) Indebtedness incurred pursuant to repayment by any Sotheby
Entity of intercompany loans and advances outstanding to any Sotheby Entity,
(v) so long as (x) no Default or Event of Default has occurred and is
continuing or would occur as a result thereof, and (y) Parent shall have
provided to Agent prior to the date thereof pro forma financial statements
demonstrating that the Fixed Charge Coverage Ratio, as of the end of the most
recently completed Fiscal Quarter for which Agent and Lenders have received
Financial Statements pursuant hereto, shall be equal to or greater than 1.15 to
1.00 (calculated on a pro forma basis as if such purchase had occurred during
such Fiscal Quarter), Indebtedness incurred pursuant to Permitted Convertible
Note Transactions or purchases, redemptions, defeasances or prepayments of
Senior Notes by Parent; and (vi) so long as no Revolving Loans are outstanding
hereunder as of the date of any such transaction, Indebtedness in an aggregate
cash amount not to exceed $10,000,000.

                    6.4
Employee Loans and Affiliate Transactions. 

                    (a)
Except as disclosed in Disclosure Schedule 6.4(a), no Sotheby Entity
shall enter into or be a party to any transaction with any other Sotheby Entity
or any Affiliate thereof except in the ordinary course of and pursuant to the
reasonable requirements of such Sotheby Entity’s business and, in the case of
any transaction with any Affiliate thereof (other than another Sotheby Entity),
upon fair and reasonable terms that are no less favorable to such Sotheby
Entity than would be obtained in a comparable arm’s length transaction with a
Person not an Affiliate of such Sotheby Entity.

                    (b)
No Sotheby Entity shall enter into any lending or borrowing transaction with
any employees of any Sotheby Entity, except (i) loans to its respective
employees in the ordinary course of business consistent with past practices for
travel and entertainment expenses, relocation costs and similar purposes and
stock option financing, up to a maximum of a Dollar Equivalent of $1,500,000 in
the aggregate at any one time outstanding, and (ii) other loans to its
respective employees, up to a maximum of a Dollar Equivalent of $1,500,000 in
the aggregate at any one time outstanding. 

                    6.5
Capital Structure and Business.

                    If
all or part of a Sotheby Entity’s Stock is pledged to Agent, that Sotheby
Entity shall not issue additional Stock unless, upon issuance thereof, such
Stock is immediately pledged (and any related security certificates delivered)
by the holder thereof to Agent pursuant to the applicable Collateral Documents.
No Sotheby Entity shall amend its charter or bylaws in a manner that would
adversely affect Agent or Lenders or such Sotheby Entity’s duty or ability to
repay the Obligations. No Sotheby Entity shall engage in any business other
than the businesses currently engaged in by it or businesses reasonably related
thereto.

54

                    6.6
Guaranteed Indebtedness. 

                    No
Sotheby Entity shall create, incur, assume or permit to exist any Guaranteed
Indebtedness except (a) by endorsement of instruments or items of payment for
deposit to the general account of any Sotheby Entity, and (b) for Guaranteed
Indebtedness incurred for the benefit of any other Sotheby Entity if the
primary obligation with respect thereto is not prohibited by this Agreement. 

                    6.7
Liens. 

                    No
Sotheby Entity shall create, incur, assume or permit to exist any Lien on or
with respect to its Accounts or any of its other properties or assets (whether
now owned or hereafter acquired) except for: 

	
 

	
 

	
 

	
         (a)
 Permitted Encumbrances;

	
 

	
 

	
 

	
         (b)
 Liens created pursuant to the York Avenue Loan Documents;

	
 

	
 

	
 

	
         (c)
 Liens (i) in existence on the date hereof, (ii) if such property or assets
 are owned by a Credit Party, summarized on Disclosure Schedule (6.7)
 and (iii) securing the Indebtedness described on Disclosure Schedule (6.3)
 and refinancings, extensions and renewals thereof, including extensions or
 renewals of any such Liens; provided, that the principal amount of the
 Indebtedness so secured is not increased and the Lien does not attach to any
 other property; 

	
 

	
 

	
 

	
         (d)
Liens securing payment of obligations described in Section 6.3(a)(iv);
provided, that such Liens shall not attach to any property other than cash on
deposit with, or under the control of, the holder of such Indebtedness; and  

	
 

	
 

	
 

	
         (e)
 Liens created after the date hereof by conditional sale or other title
 retention agreements (including Capital Leases) or in connection with
 purchase money Indebtedness with respect to Equipment and Fixtures acquired
 by any Sotheby Entity in the ordinary course of business, involving the
 incurrence of an aggregate amount of purchase money Indebtedness and Capital
 Lease Obligations of not more than a Dollar Equivalent of $1,500,000
 outstanding at any one time for all such Liens (provided that such
 Liens attach only to the assets subject to such purchase money debt and such
 Indebtedness is incurred within forty-five (45) days following such purchase
 and does not exceed 100% of the purchase price of the subject assets); 

provided, that no U.K. Credit Party shall
create, incur, assume or permit to exist any Lien on or with respect to its
Real Estate other than Permitted Encumbrances described in clauses (a), (g)
or (h) of the definition thereof. In addition, no Credit Party shall
become a party to any agreement, note, indenture or instrument, or take any
other action after the Closing Date that would prohibit the creation of a Lien
on any of its properties or other assets in favor of Agent, on behalf of itself
and the other Secured Parties, as additional collateral for the applicable
Secured Obligations, except operating leases, Capital Leases, Licenses or
agreements relating to purchase money Indebtedness which prohibit Liens upon
the assets that are subject thereto. 

55

                    6.8
Sale of Stock and Assets. 

                    No
Sotheby Entity shall sell, transfer, convey, assign or otherwise dispose of any
of its properties or other assets, including the Stock of any of its
Subsidiaries (whether in a public or a private offering or otherwise) or any of
its Accounts, other than (a) the sale of Inventory in the ordinary course of
business, (b) the sale or other disposition by a Sotheby Entity of Equipment or
Fixtures that are obsolete or no longer used or useful in such Sotheby Entity’s
business and having a book value not exceeding the Dollar Equivalent of
$1,000,000 in the aggregate in any Fiscal Year; (c) the sale or other
disposition of other Equipment and Fixtures having a book value not exceeding
the Dollar Equivalent of $2,500,000 in the aggregate in any Fiscal Year; (d)
the sale or other disposition of any asset by a Credit Party to any other
Credit Party; (e) the sale or other disposition of any asset by any Sotheby
Entity that is not a Credit Party to any other Sotheby Entity; and (f) subject
to Agent’s prior written approval of the sale documentation thereof and the
completion of such sale on or prior to March 31, 2010, the sale of all or
substantially all of the assets or Stock of Sotheby’s Australia Pty. Ltd. for
an aggregate cash amount not less than the Dollar Equivalent of $1,500,000 (the
“Australia Sale”). 

                    6.9
ERISA. 

                    No
Sotheby Entity shall, or shall cause or permit any ERISA Affiliate to, cause or
permit to occur (i) an event that could result in the imposition of a Lien
under Section 430 of the IRC or Section 303 or 4068 of ERISA or (ii) an ERISA
Event to the extent such ERISA Event would reasonably be expected to result in
taxes, penalties and other liabilities in an aggregate amount in excess of
$2,500,000 in the aggregate. 

                    6.10
Financial Covenants. 

                    Borrowers
shall not breach or fail to comply with any of the Financial Covenants. 

                    6.11
Hazardous Materials. 

                    No
Sotheby Entity shall cause or permit a Release of any Hazardous Material on,
at, in, under, above, to or from any of the Real Estate where such Release
would (a) violate in any respect, or form the basis for any Environmental
Liabilities under, any Environmental Laws or Environmental Permits, except as
could not reasonably be expected to have a Material Adverse Effect or (b)
otherwise materially adversely impact the value or marketability of any of the
Real Estate or any of the Collateral. 

                    6.12
Sale Leasebacks. 

                    No
Sotheby Entity shall engage in any sale leaseback, synthetic lease or similar
transaction involving any of its assets. 

                    6.13
Restricted Payments. 

                    No
Sotheby Entity shall make any Restricted Payment, except: 

56

	
 

	
 

	
 

	
          (a)
 intercompany loans and advances between Sotheby Entities to the extent
 permitted by Sections 6.2 and 6.3; 

	
 

	
 

	
 

	
          (b)
 dividends and distributions by Subsidiaries of any Sotheby Entity paid to
 such Sotheby Entity; 

	
 

	
 

	
 

	
          (c)
 employee loans permitted under Section 6.4(b); 

	
 

	
 

	
 

	
          (d)
 payments of principal and interest of intercompany loans and advances made in
 accordance with Section 6.3; 

	
 

	
 

	
 

	
          (e)
 Permitted Convertible Note Transactions; 

	
 

	
 

	
 

	
          (f)
 if (i) no Event of Default has occurred and is continuing or would occur as a
 result thereof, (ii) Parent shall have provided to Agent prior to the date
 thereof pro forma financial statements demonstrating that the Fixed Charge
 Coverage Ratio, as of the end of the most recently completed Fiscal Quarter
 for which Agent and Lenders have received Financial Statements pursuant
 hereto, shall be equal to or greater than 1.15 to 1.00 (calculated on a pro
 forma basis as if such purchase had occurred during such Fiscal Quarter), and
 (iii) after giving effect to such repurchase, Margin Stock shall not
 constitute more than 25% of the assets of Parent and its Subsidiaries, Parent
 may repurchase Stock of Parent; and 

	
 

	
 

	
 

	
          (g)
 if no Event of Default has occurred and is continuing or would occur as a
 result thereof, Parent may make dividends or distributions on its Stock in an
 aggregate amount (the “Maximum Distribution Amount”) not to exceed, in
 any Fiscal Quarter, the lesser of (i) $0.05 per share of Stock and (ii)
 $4,000,000; provided that, if Parent shall have provided to Agent
 prior to the date thereof pro forma financial statements demonstrating that
 the Fixed Charge Coverage Ratio, as of the end of the most recently completed
 Fiscal Quarter for which Agent and Lenders have received Financial Statements
 pursuant hereto, shall be equal to or greater than the level specified in paragraph
 (b) of Annex G with respect to such Fiscal Quarter (calculated on
 a pro forma basis as if such dividend or distribution had occurred during
 such Fiscal Quarter; provided that to the extent such pro forma
 calculation would otherwise include dividends or distributions made by Parent
 in five Fiscal Quarters, such pro forma calculation shall only include
 dividends or distributions made by Parent in the four Fiscal Quarters in
 which the highest aggregate amount of dividends or distributions were made),
 Parent may make dividends or distributions on its Stock in excess of the
 Maximum Distribution Amount. 

                    6.14
Change of Corporate Name, State of Incorporation or Location; Change of
Fiscal Year. 

                    No
U.S. Credit Party shall (a) change its name as it appears in official filings
in the state of its incorporation or other organization, (b) change its chief
executive office or principal place of business or the location of its records
concerning the Collateral, (c) change the type of entity that it is, (d) change
its organization identification number, if any, issued by its state of
incorporation or other organization, or (e) change its jurisdiction of
incorporation or 

57

organization
or incorporate or organize in any additional jurisdictions, in each case
without at least thirty (30) days prior written notice to Agent and after
Agent’s written acknowledgment that any reasonable action requested by Agent in
connection therewith, including to continue the perfection of any Liens in
favor of Agent, on behalf of Lenders, in any Collateral, has been completed or
taken; provided, that any such new location shall be in the continental
United States. No Sotheby Entity shall change its Fiscal Year. 

                    6.15
No Impairment of Intercompany Transfers. 

                    No
Sotheby Entity shall directly or indirectly enter into or become bound by any
agreement, instrument, indenture or other obligation (other than this Agreement
and the other Loan Documents) that could directly or indirectly restrict,
prohibit or require the consent of any Person with respect to the payment of
dividends or distributions or the making or repayment of intercompany loans by
a Subsidiary of any Sotheby Entity to any Sotheby Entity or between Sotheby
Entities. 

                    6.16
Real Estate Purchases. 

                    No
Credit Party shall purchase or acquire or commit to purchase or acquire (a) a
fee simple or freehold ownership interest in real estate (x) with an aggregate
purchase price in excess of the Dollar Equivalent of $5,000,000, or (y) that
would cause the purchase prices of all such purchases by all Credit Parties
since the Closing Date to exceed, in aggregate, the Dollar Equivalent of
$25,000,000, or (b) a leasehold interest in real estate that would cause the
aggregate premium or rent of all such purchases of all Credit Parties since the
Closing Date for the terms of all such leasehold interests to exceed, in
aggregate, the Dollar Equivalent of $25,000,000. 

                    6.17
Changes Relating to Material Contracts. 

                    No
Sotheby Entity shall (a) change or amend the terms of the Senior Note Indenture
or the Senior Notes, (b) change or amend the terms of the Convertible Note
Indenture, the Convertible Notes, any Convertible Note Hedge Agreement or any Convertible
Note Warrant, (c) change or amend any York Avenue Lease Document in a manner
adverse to the interests of Agent and Lenders in any material respect or (d)
except as set forth on Schedule 5.23, permit the York Avenue Lender to
have recourse to Parent or any of its Subsidiaries, or any assets of Parent or
any of its Subsidiaries, pursuant to the York Avenue Loan Agreement or any
other York Avenue Loan Document. 

7. TERM 

                    7.1
Termination. 

                    The
financing arrangements contemplated hereby shall be in effect until the
Commitment Termination Date, and the Loans and all other Obligations shall be
automatically due and payable in full on such date. 

58

                    7.2
Survival of Obligations Upon Termination of Financing Arrangements. 

                    Except
as otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Credit Parties or the rights of Agent, the Lenders and
the Fronting Lender relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent,
each Lender and the Fronting Lender, all as contained in the Loan Documents,
shall not terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the Termination
Date; provided, that the provisions of Section 11, the payment
obligations under Sections 1.15 and 1.16, and the indemnities contained
in the Loan Documents shall survive the Termination Date. 

8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES 

                    8.1
Events of Default. 

                    The
occurrence of any one or more of the following events (regardless of the reason
therefor) shall constitute an “Event of Default” hereunder: 

                    (a)
Any Borrower (i) fails to make any payment of principal of, or interest on, or
Fees owing in respect of, the Loans or any of the other Obligations when due
and payable, or (ii) fails to pay or reimburse Agent or Lenders for any expense
reimbursable hereunder or under any other Loan Document within ten (10) days
following Agent’s demand for such reimbursement or payment of expenses. 

                    (b)
Any Sotheby Entity fails or neglects to perform, keep or observe any of the
provisions of Sections 1.4, 1.8, 1.14, 5.4(a), 5.17 or 6, or any of the
provisions set forth in Annexes C or H, respectively. 

                    (c)
Any Borrower fails or neglects to perform, keep or observe any of the
provisions of Section 4.1 or any provisions set forth in Annexes E or
F, respectively, and the same shall remain unremedied for five (5) Business
Days or more. 

                    (d)
Any Sotheby Entity fails or neglects to perform, keep or observe any other
provision of this Agreement or of any of the other Loan Documents (other than
any provision embodied in or covered by any other clause of this Section 8.1)
and the same shall remain unremedied for twenty (20) days or more. 

                    (e)
A default or breach occurs under any Material Indebtedness Contract that is not
cured within any applicable grace period therefor, and such default or breach
(i) involves the failure to make any payment when due in respect of any
Indebtedness or Guaranteed Indebtedness evidenced by such Material Indebtedness
Contract, or (ii) causes, or permits any holder of Indebtedness or Guaranteed
Indebtedness evidenced by such Material Indebtedness 

59

Contract or a
trustee to cause, Indebtedness or Guaranteed Indebtedness evidenced by such
Material Indebtedness Contract to become due prior to its stated maturity or
prior to its regularly scheduled dates of payment, or cash collateral in
respect thereof to be demanded, in each case, regardless of whether such right
is exercised, by such holder or trustee. 

                    (f)
Any information contained in any Borrowing Base Certificate is untrue or
incorrect in any respect (other than (i) inadvertent, immaterial errors not
exceeding $1,000,000 (or, if such inaccuracy results from a single error with
respect to an individual Art Loan or individual item of Art Inventory,
$5,000,000) in the aggregate in any Borrowing Base Certificate, (ii) errors
understating either Borrowing Base or (iii) inadvertent errors occurring when
Aggregate Borrowing Availability continues to exceed $15,000,000 after giving
effect to the correction of such errors), or any representation or warranty
herein or in any Loan Document or in any written statement, report, Financial
Statement or certificate (other than a Borrowing Base Certificate) made or
delivered to Agent or any Lender by any Credit Party is untrue or incorrect in
any material respect as of the date when made or deemed made. 

                    (g)
A case or proceeding is commenced against any Sotheby Entity seeking a decree
or order in respect of such Sotheby Entity (i) under the Bankruptcy Code, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, administrator, liquidator, assignee,
trustee or sequestrator (or similar official) for such Sotheby Entity or for
any substantial part of any such Sotheby Entity’s assets, or (iii) ordering the
winding up or liquidation of the affairs of such Sotheby Entity, and such case
or proceeding shall remain undismissed or unstayed for sixty (60) days or more
or a decree or order granting the relief sought in such case or proceeding is
granted by a court of competent jurisdiction. 

                    (h)
Any Sotheby Entity (i) files a petition seeking relief under the Bankruptcy
Code, or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) consents to or fails to contest in a timely and appropriate
manner the institution of proceedings thereunder or the filing of any such
petition or the appointment of or taking possession by a custodian, receiver,
administrator, liquidator, assignee, trustee or sequestrator (or similar
official) for such Sotheby Entity or for any substantial part of any such
Sotheby Entity’s assets, (iii) makes an assignment for the benefit of
creditors, (iv) takes any action in furtherance of any of the foregoing; or (v)
admits in writing its inability to, or is generally unable to, pay its debts as
such debts become due. 

                    (i)
A final judgment or judgments for the payment of money in excess of a Dollar
Equivalent of $10,000,000 in the aggregate at any time are outstanding against
one or more of the Sotheby Entities (which judgments are not covered by
insurance policies as to which liability has been accepted by the insurance
carrier), and the same are not, within thirty (30) days (or, in the case of any
Sotheby Entity that is not Parent, a Domestic Subsidiary or a Foreign
Subsidiary organized under the laws of England, sixty (60) days) after the
entry thereof, discharged or execution thereof stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any such stay. 

                    (j)
Any material provision of any Loan Document for any reason ceases to be valid,
binding and enforceable in accordance with its terms (or any Sotheby Entity
shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any 

60

action or
inaction based on any such assertion, that any provision of any of the Loan
Documents has ceased to be or otherwise is not valid, binding and enforceable
in accordance with its terms), or any Lien created under any Loan Document
ceases to be a valid and perfected first priority Lien (except as otherwise
permitted herein or therein) in any of the Collateral purported to be covered
thereby. 

                    (k)
Any Change of Control occurs. 

                    (l)
Any Sotheby Entity or the York Avenue Owner violates any of the covenants
contained in the York Avenue Loan Documents relating to the single purpose
entity status of the York Avenue Owner or its corporate separateness from
Parent and its Subsidiaries and such violation results in recourse liability to
Parent or any Subsidiary thereof. 

                    8.2
Remedies. 

                    (a)
If any Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Lenders shall), without notice, (i) suspend
the Revolving Loan facility with respect to additional Advances and/or the
incurrence of additional Letter of Credit Obligations, whereupon any additional
Advances and additional Letter of Credit Obligations shall be made or incurred
in Agent’s sole discretion (or in the sole discretion of the Requisite Lenders,
if such suspension occurred at their direction) so long as such Default or
Event of Default is continuing; or (ii) reduce the Commitment from time to
time. 

                    (b)
If any Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Lenders shall), without notice: (i) terminate
the Revolving Loan facility with respect to further Advances or the incurrence
of further Letter of Credit Obligations; (ii) reduce the Commitment from time
to time; (iii) declare all or any portion of the Obligations, including all or
any portion of any Loan, to be forthwith due and payable, and require that the
Letter of Credit Obligations be cash collateralized in the manner set forth in Annex
B, all without presentment, demand, protest or further notice of any kind,
all of which are expressly waived by Borrowers and each other Credit Party; or
(iv) exercise any rights and remedies provided to Agent under the Loan
Documents or at law or equity, including all remedies provided under the Code; provided,
that upon the occurrence of an Event of Default specified in Sections 8.1(g)
or (h), the Commitments shall be immediately terminated and all of the
Obligations, including the aggregate Revolving Loan, shall become immediately
due and payable without declaration, notice or demand by any Person. 

                    8.3
Waivers by Credit Parties. 

                    Except
as otherwise provided for in this Agreement or by applicable law, each Credit
Party waives (including for purposes of Section 12): (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all Loan
Documents, (b) all rights to notice and a hearing prior to Agent’s taking
possession or control of, or to Agent’s replevy, attachment or levy upon, the
Collateral or any bond or security that might be required by any court prior to
allowing Agent to exercise any of its remedies, 

61

except as may
be required by applicable law, and (c) the benefit of all valuation, appraisal,
marshaling and exemption laws. 

9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT
OF AGENT 

                    9.1
Assignment and Participations. 

                    (a)
Subject to the terms of this Section 9.1, any Lender may make an
assignment to an assignee of, or sell participations in, at any time or times,
the Loan Documents, the Loans, the Letter of Credit Obligations and any
Commitment or any portion thereof or interest therein, including any Lender’s
rights, title, interests, remedies, powers or duties thereunder. Any assignment
by a Lender shall: (i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an “Assignment Agreement”)
substantially in the form attached hereto as Exhibit 9.1(a) and
otherwise in form and substance reasonably satisfactory to, and acknowledged
by, Agent; (ii) be conditioned on such assignee Lender representing to the
assigning Lender and Agent that it is purchasing the applicable Loans or
interests therein to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof; (iii) after giving
effect to any such partial assignment, the assignee Lender shall have
Commitments in an amount at least equal to $5,000,000 and the assigning Lender
shall have retained Commitments in an amount at least equal to $5,000,000; (iv)
include a payment to Agent of an assignment fee of $3,500; and (v) so long as
no Event of Default has occurred and is continuing, require the consent of
Borrower Representative, which shall not be unreasonably withheld or delayed; provided
that no such consent shall be required for an assignment to a Qualified
Assignee. In the case of an assignment by a Lender under this Section 9.1,
the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as all other Lenders hereunder. The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitments
or assigned portion thereof from and after the date of such assignment. Each
Borrower hereby acknowledges and agrees that any assignment shall give rise to
a direct obligation of Borrowers to the assignee and that the assignee shall be
considered to be a “Lender”. In all instances, each Lender’s liability to make
Loans or purchase participation interests therein hereunder shall be several
and not joint and shall be limited to such Lender’s Pro Rata Share of the
applicable Commitment. In the event Agent or any Lender assigns or otherwise
transfers all or any part of its interest in the Obligations, Agent or any such
Lender shall so notify Borrowers and Borrowers shall, upon the request of Agent
or such Lender, execute new Notes in exchange for the Notes, if any, being
assigned. Notwithstanding the foregoing provisions of this Section 9.1(a),
any Lender may at any time pledge its interest in the Obligations and such
Lender’s rights under this Agreement and the other Loan Documents to a Federal
Reserve Bank, and any Lender that is an investment fund may assign its interest
in the Obligations and such Lender’s rights under this Agreement and the other
Loan Documents to another investment fund managed by the same investment
advisor; provided, that no such pledge to a Federal Reserve Bank shall
release such Lender from such Lender’s obligations hereunder or under any other
Loan Document. 

                    (b)
Any participation by a Lender of all or any part of its Commitments shall be
made with the understanding that all amounts payable by Borrowers hereunder
shall be determined as if that Lender had not sold such participation, and that
the holder of any such 

62

participation
shall not be entitled to require such Lender to take or omit to take any action
hereunder except actions directly affecting (i) any reduction in the principal
amount of, or interest rate or Fees payable with respect to, any Loan in which
such holder participates, (ii) any extension of the scheduled amortization of
the principal amount of any Loan in which such holder participates or the final
maturity date thereof, and (iii) any release of Agent’s Lien on all or
substantially all of the Collateral (other than in accordance with the terms of
this Agreement, the Collateral Documents or the other Loan Documents). Solely
for purposes of Sections 1.13, 1.15, 1.16 and 9.8, each Borrower
acknowledges and agrees that a participation shall give rise to a direct
obligation of Borrowers to the participant and the participant shall be
considered to be a “Lender”. Except as set forth in the preceding sentence no
Credit Party shall have any obligation or duty to any participant. Neither
Agent nor any Lender (other than the Lender selling a participation) shall have
any duty to any participant and may continue to deal solely with the Lender
selling a participation as if no such sale had occurred. 

                    (c)
Except as expressly provided in this Section 9.1, no Lender shall, as
between Borrowers and that Lender, or Agent and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender. 

                    (d)
Each Credit Party shall assist any Lender permitted to sell assignments or
participations under this Section 9.1 as reasonably required to enable
the assigning or selling Lender to effect any such assignment or participation,
including the execution and delivery of any and all agreements, notes and other
documents and instruments as shall be requested and, if requested by Agent, the
preparation of informational materials for, and the participation of management
in meetings with, potential assignees or participants. Each Credit Party shall
certify the correctness, completeness and accuracy of all descriptions of the
Sotheby Entities and their respective affairs contained in any selling
materials provided by them and all other information provided by them and
included in such materials, except that the Projections shall only be certified
by Borrowers as having been prepared by Borrowers in compliance with the
representations contained in Section 3.4(b). 

                    (e)
Any Lender may furnish any information concerning Sotheby Entities in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such
Lender shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in Section 11.8. 

                    (f)
So long as no Event of Default has occurred and is continuing, no Lender shall
assign or sell participations in any portion of its Loans or Commitment to a
potential Lender or participant, if, as of the date of the proposed assignment
or sale, the assignee Lender or participant would be subject to capital
adequacy or similar requirements under Section 1.16(a), increased costs
under Section 1.16(b), an inability to fund LIBOR Loans under Section
1.16(c), or withholding taxes in accordance with Section 1.15(a). 

                    (g)
Notwithstanding anything to the contrary contained herein, any Lender (a “Granting
Lender”), may grant to a special purpose funding vehicle (an “SPC”),
identified as such in writing by the Granting Lender to Agent and Borrowers, the
option to provide to Borrowers all or any part of any Loans that such Granting
Lender would otherwise be obligated 

63

to make to
Borrowers pursuant to this Agreement; provided that (i) nothing herein
shall constitute a commitment by any SPC to make any Loan; and (ii) if an SPC
elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Granting Lender shall be obligated to make such Loan
pursuant to the terms hereof. The making of a Loan by an SPC hereunder shall
utilize the Commitment of the Granting Lender to the same extent, and as if
such Loan were made by such Granting Lender. No SPC shall be liable for any
indemnity or similar payment obligation under this Agreement (all liability for
which shall remain with the Granting Lender). Any SPC may (i) with notice to,
but without the prior written consent of, Borrowers and Agent and without
paying any processing fee therefor assign all or a portion of its interests in
any Loans to the Granting Lender or to any financial institutions (consented to
by Borrowers and Agent) providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans and (ii)
disclose on a confidential basis any non-public information relating to its
Loans to any rating agency, commercial paper dealer or provider of any surety,
guarantee or credit or liquidity enhancement to such SPC. This Section
9.1(g) may not be amended without the prior written consent of each
Granting Lender, all or any of whose Loans are being funded by an SPC at the
time of such amendment. For the avoidance of doubt, the Granting Lender shall
for all purposes, including without limitation, the approval of any amendment
or waiver of any provision of any Loan Document or the obligation to pay any
amount otherwise payable by the Granting Lender under the Loan Documents,
continue to be the Lender of record hereunder. 

                    (h)
In the case of an assignment by a Non-Sterling Lender to a Sterling Lender of
any interest in the Revolving Loan Outstandings, such Sterling Lender shall
purchase the portion of the Revolving Loan outstanding to the Fronting Lender
to the extent of the participation interest therein of such Non-Sterling Lender
making such assignment for a purchase price, in Sterling, equal to such
outstanding amount, and the Fronting Lender shall pay the Dollar Equivalent as
of such date of such amount to such Non-Sterling Lender in payment of such
participation interest. In the case of an assignment by a Sterling Lender to a
Non-Sterling Lender of any interest in the Revolving Loan Outstandings, the
Fronting Lender shall purchase the portion of the Revolving Loan outstanding to
such Sterling Lender which is subject to such assignment, and such Non-Sterling
Lender shall purchase an undivided participation interest in the Revolving Loan
Outstandings from the Fronting Lender for a purchase price in Dollars equal to
the Dollar Equivalent as of such date of such portion assigned. 

                    (i)
Any Non-Sterling Lender may become a Sterling Lender hereunder upon delivery of
notice to Agent, the Fronting Lender and the Borrower Representative. Upon
delivery of such notice by such Lender, without any further action whatsoever
(i) such Lender shall be deemed to have purchased from the Fronting Lender a
portion of the Revolving Loan Outstandings held by the Fronting Lender equal to
such Lender’s participation interests therein, (ii) the Fronting Lender shall
be deemed to have repaid such participation interests to such Lender and shall
have no further obligations to such Lender hereunder, (iii) such Lender shall
constitute a Sterling Lender for all purposes hereunder, including, without
limitation, the Commitment to make Sterling Revolving Credit Advances pursuant
to Section 1.1(a)(i) and (iv) the Fronted Percentage, and the obligation
of the Fronting Lender to make Sterling Revolving Credit Advances pursuant to Section
1.1(a)(i), shall be reduced accordingly. 

64

                    9.2
Appointment of Agent.

                    GE
Capital is hereby appointed to act on behalf of all Lenders and the Fronting
Lender as Agent under this Agreement and the other Loan Documents. The
provisions of this Section 9.2 are solely for the benefit of Agent, Lenders and
the Fronting Lender and no Sotheby Entity nor any other Person shall have any
rights as a third party beneficiary of any of the provisions hereof. Except as
expressly set forth in the U.K. Collateral Documents, in performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and the Fronting Lender and does not assume
and shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for any Sotheby Entity or any other Person. Agent
shall have no duties or responsibilities except for those expressly set forth
in this Agreement and the other Loan Documents. Except as expressly set forth
in the U.K. Collateral Documents, the duties of Agent shall be mechanical and
administrative in nature and Agent shall not have, or be deemed to have, by
reason of this Agreement, any other Loan Document or otherwise a fiduciary
relationship in respect of any Lender or the Fronting Lender. Except as
expressly set forth in this Agreement and the other Loan Documents, Agent shall
not have any duty to disclose, and shall not be liable for failure to disclose,
any information relating to any Sotheby Entity or any of their respective
Subsidiaries or any Account Debtor that is communicated to or obtained by GE
Capital or any of its Affiliates in any capacity. Neither Agent nor any of its
Affiliates nor any of their respective officers, directors, employees, agents
or representatives shall be liable to any Lender or the Fronting Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages caused by
its or their own gross negligence or willful misconduct as determined in a
final, non-appealable judgment by a court of competent jurisdiction.  

                    If
Agent shall request instructions from Requisite Lenders, Supermajority Lenders
or all affected Lenders with respect to any act or action (including failure to
act) in connection with this Agreement or any other Loan Document, then Agent
shall be entitled to refrain from such act or taking such action unless and
until Agent shall have received instructions from Requisite Lenders,
Supermajority Lenders or all affected Lenders, as the case may be, and Agent
shall not incur liability to any Person by reason of so refraining. Agent shall
be fully justified in failing or refusing to take any action hereunder or under
any other Loan Document (a) if such action would, in the opinion of Agent, be
contrary to law or the terms of this Agreement or any other Loan Document, (b)
if such action would, in the opinion of Agent, expose Agent to Environmental
Liabilities or (c) if Agent shall not first be indemnified to its satisfaction
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. Without limiting the
foregoing, no Lender or the Fronting Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders, Supermajority Lenders or all affected Lenders, as
applicable. 

                    9.3
Agent’s Reliance, Etc. 

                    Neither
Agent nor any of its Affiliates nor any of their respective directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this Agreement or the
other Loan Documents, except for 

65

damages caused
by its or their own gross negligence or willful misconduct as determined in a
final, non-appealable judgment by a court of competent jurisdiction. Without
limiting the generality of the foregoing, Agent: (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form reasonably
satisfactory to Agent; (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the other Loan Documents on the
part of any Credit Party or to inspect the Collateral (including the books and
records) of any Credit Party; (e) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto; and (f) shall incur no
liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopy, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties. 

                    9.4
GE Capital and Affiliates.

                    With
respect to its Commitments hereunder, GE Capital shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender
and may exercise the same as though it were not Agent; and the term “Lender” or
“Lenders” shall, unless otherwise expressly indicated, include GE Capital in
its individual capacity. GE Capital and its Affiliates may lend money to,
invest in, and generally engage in any kind of business with, any Sotheby
Entity, any of their Affiliates and any Person who may do business with or own
securities of any Sotheby Entity or any such Affiliate, all as if GE Capital
were not Agent and without any duty to account therefor to Lenders. GE Capital
and its Affiliates may accept fees and other consideration from any Sotheby
Entity for services in connection with this Agreement or otherwise without
having to account for the same to Lenders. Each Lender acknowledges the
potential conflict of interest between GE Capital as a Lender holding
disproportionate interests in the Loans and GE Capital as Agent. 

                    9.5
Lender Credit Decision. 

                    Each
Lender acknowledges that it has, independently and without reliance upon Agent
or any other Lender and based on the Financial Statements referred to in
Section 3.4(a) and such other documents and information as it has deemed
appropriate, made its own credit and financial analysis of the Sotheby Entities
and its own decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement. Each Lender acknowledges the potential
conflict of interest of each other Lender as a result of Lenders holding
disproportionate interests in the Loans, and expressly consents to, and waives
any claim based upon, such conflict of interest.  

66

                    9.6
Indemnification.

                    Lenders agree
to indemnify Agent (to the extent not reimbursed by Credit Parties and without
limiting the obligations of Credit Parties hereunder), ratably according to
their respective Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against Agent in any way relating to or arising
out of this Agreement or any other Loan Document or any action taken or omitted
to be taken by Agent in connection therewith; provided, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent’s gross negligence or willful misconduct as determined in
a final, non-appealable judgment by a court of competent jurisdiction. Without
limiting the foregoing, each Lender agrees to reimburse Agent promptly upon
demand for its ratable share of any out-of-pocket expenses (including
reasonable counsel fees) incurred by Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal advice
in respect of rights or responsibilities under, this Agreement and each other
Loan Document, to the extent that Agent is not reimbursed for such expenses by
Credit Parties. 

                    9.7
Successor Agent and Fronting Lender. 

                    
(a) Agent may resign at any time by giving not less than thirty (30) days’
prior written notice thereof to Lenders and Borrower Representative. Upon any
such resignation, the Requisite Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within thirty (30)
days after the resigning Agent’s giving notice of resignation, then the
resigning Agent may, on behalf of Lenders, appoint a successor Agent, which
shall be a Lender, if a Lender is willing to accept such appointment, or
otherwise shall be a commercial bank or financial institution or a subsidiary
of a commercial bank or financial institution if such commercial bank or financial
institution is organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$300,000,000. If no successor Agent has been appointed pursuant to the
foregoing, within thirty (30) days after the date such notice of resignation
was given by the resigning Agent, such resignation shall become effective and
the Requisite Lenders shall thereafter perform all the duties of Agent
hereunder until such time, if any, as the Requisite Lenders appoint a successor
Agent as provided above. Any successor Agent appointed by Requisite Lenders
hereunder shall be subject to the approval of Borrower Representative, such
approval not to be unreasonably withheld or delayed; provided that such
approval shall not be required if a Default or an Event of Default has occurred
and is continuing. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent’s resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent’s
resignation hereunder, the provisions of this Section 9 shall inure to
its benefit as to any actions taken or 

67

omitted to be
taken by it while it was acting as Agent under this Agreement and the other
Loan Documents. 

                    (b)
The Fronting Lender may resign at any time by giving sixty (60) days prior
written notice thereof to Agent, the Non-Sterling Lenders and the Borrowers;
provided, such resignation shall not become effective until the date upon which
a replacement Fronting Lender reasonably acceptable to Agent and Non-Sterling
Lenders having aggregate Commitments equal to greater than 50% of the Fronted
Percentage and, so long as no Default or Event of Default has occurred and is
continuing, to the Borrowers, has been selected and has assumed the rights and
obligations of a Fronting Lender hereunder. If no successor Fronting Lender
shall have been so appointed and shall have accepted such appointment within
thirty (30) days after the resigning Fronting Lender’s giving of notice of
resignation, then the resigning Fronting Lender may, on behalf of the Non-Sterling
Lenders, appoint a successor Fronting Lender, which shall be a financial
institution having a rating of not less than A or its equivalent by Standard
& Poor’s, and having otherwise the ability to fund the Sterling Revolving
Credit Advances (and the parties hereto agree to use reasonable efforts to
appoint a successor Fronting Lender which will not cause an increase in the tax
withholding liability for the Borrowers). Upon the acceptance of any
appointment as Fronting Lender hereunder by a successor Fronting Lender, such
successor Fronting Lender shall thereupon succeed to and become vested with all
the rights, powers, privileges, duties and obligations of the resigning
Fronting Lender, and the resigning Fronting Lender shall be discharged from its
duties and obligations hereunder. After any resigning Fronting Lender’s
resignation, the provisions of this Agreement and the other Loan Documents
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Fronting Lender.  

                    9.8
Setoff and Sharing of Payments. 

                    In
addition to any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default and subject to Section 9.9(f), each
Lender is hereby authorized at any time or from time to time, without prior
notice to any Credit Party or to any Person other than Agent, any such notice
being hereby expressly waived, to offset and to appropriate and to apply any
and all balances held by it at any of its offices for the account of any Credit
Party (regardless of whether such balances are then due to such Credit Party)
and any other properties or assets at any time held or owing by that Lender or
that holder to or for the credit or for the account of any Credit Party against
and on account of any of the Obligations that are not paid when due; provided,
that (i) the Lender exercising such offset rights shall give notice thereof to
the affected Credit Party promptly after exercising such rights, and (ii) any
balances, properties or assets of a U.K. Credit Party shall be offset,
appropriated or applied only to or against the Obligations of the U.K. Credit
Parties. Any Lender exercising a right of setoff or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender’s or holder’s Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
offset or otherwise received with each other Lender or holder in accordance
with their respective Pro Rata Shares (other than offset rights exercised by
any Lender with respect to Sections 1.13, 1.15 or 1.16). Each Lender’s
obligation under this Section 9.8 shall be in addition to and not in
limitation of its obligations to purchase a participation in an amount equal to
its Pro Rata Share 

68

of the Swing
Line Loan under Section 1.1. Each Credit Party agrees, to the fullest extent
permitted by law, that (a) any Lender may exercise its right to offset with
respect to amounts in excess of its Pro Rata Share of the Obligations and may
sell participations in such amounts so offset to other Lenders and holders and
(b) any Lender so purchasing a participation in the Loans made or other
Obligations held by other Lenders or holders may exercise all rights of offset,
bankers’ lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender or holder were a direct holder of the
Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the offset amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of offset, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without interest.  

                    9.9
Advances; Payments; Non-Funding Lenders; Information; Actions in Concert.

                    (a)
Revolving Credit Advances; Payments. 

                              (i)
Lenders shall refund or participate in the Swing Line Loan in accordance with clauses
(iii), (iv) and (v) of Section 1.1(b). If (i) the Swing Line Lender
declines to make a Swing Line Advance, (ii) Swing Line Availability is zero or
(iii) Agent shall receive a Notice of Revolving Credit Advance in respect of a
Revolving Credit Advance to be made as a LIBOR Loan, Agent shall notify
Lenders, promptly after receipt of a Notice of Revolving Credit Advance and in
any event prior to 1:00 p.m. (New York time) on the date such Notice of
Revolving Credit Advance is received, by telecopy, telephone or other similar form
of transmission. 

                              (ii)
In the case of any Revolving Credit Advance to be denominated in Dollars, each
Lender shall make the amount of such Lender’s Pro Rata Share of such Revolving
Credit Advance available to Agent in same day funds in Dollars by wire transfer
to Agent’s account as set forth in Annex H not later than 3:00 p.m. (New
York time) on the requested funding date, in the case of an Index Rate Loan,
and not later than 11:00 a.m. (New York time) on the requested funding date, in
the case of a LIBOR Loan. In the case of any Revolving Credit Advance to be
denominated in Sterling, each Sterling Lender and the Fronting Lender shall
make the amount of such Lender’s Pro Rata Share (or, in the case of the
Fronting Lender, the Fronted Percentage) of such Revolving Credit Advance
available to Agent in same day funds in Sterling by wire transfer to Agent’s
account as set forth in Annex H not later than 3:00 p.m. (New York time)
on the requested funding date, in the case of an Index Rate Loan, and not later
than 11:00 a.m. (New York time) on the requested funding date, in the case of a
LIBOR Loan. After receipt of such wire transfers (or, in Agent’s sole
discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance to Borrower.
All payments by each Lender pursuant to this Section 9.9(a) shall be
made without setoff, counterclaim or deduction of any kind. 

                              (iii)
On each Business Day (each, a “Settlement Date”), Agent shall advise
each Lender and the Fronting Lender by telephone or telecopy of the amount to
be disbursed to such Person in accordance with this Section 9.9(a)(iii).
Provided that each Lender has funded all payments or Advances required to be
made by it and has purchased all 

69

participations
required to be purchased by it under this Agreement and the other Loan Documents as
of such Settlement Date, Agent shall pay to each Lender and the Fronting Lender
(i) in the case of any Sterling Lender, such Lender’s Pro Rata Share of
principal, interest and Fees received by Agent from the Borrowers on such
Settlement Date (or, in the case of amounts denominated in Sterling, (x) with
respect to principal, on the date one Business Day prior to such Settlement
Date and (y) with respect to all other amounts, on the date two Business Days
prior to such Settlement Date) (as determined in accordance with Section
1.10) for the benefit of Lenders with respect to each applicable Loan, (ii)
in the case of any Non-Sterling Lender, (A) such Lender’s Pro Rata Share of
principal and interest received by Agent from the Borrowers on such Settlement
Date (as determined in accordance with Section 1.10) for the benefit of
Lenders with respect to the portion of the Revolving Loan Outstanding
denominated in Dollars, (B) its Pro Rata Share of Fees (other than Letter of
Credit Fees denominated in Sterling) received by Agent from the Borrowers on
such Settlement Date (as determined in accordance with Section 1.10) for
the benefit of Lenders and (C) an amount in Dollars equal to the Dollar
Equivalent (calculated as of such Settlement Date) of its Pro Rata Share of
Letter of Credit Fees denominated in Sterling received by Agent from the
Borrowers on the second Business Day preceding such Settlement Date; and (iii)
in the case of the Fronting Lender, the Fronted Percentage of principal and
interest received by Agent from the Borrowers (A) with respect to principal, on
the date one Business Day prior to such Settlement Date and (B) with respect to
all other amounts, on the date two Business Days prior to such Settlement Date
(as determined in accordance with Section 1.10) for the benefit of the Lenders
and the Fronting Lender with respect to the portion of the Revolving Loan Outstandings
denominated in Sterling. To the extent that any Lender or the Fronting Lender
(a “Non-Funding Lender”) has failed to fund any payment or Advance
required to be made by it hereunder or failed to make any purchase of a
participation interest required to be purchased hereunder, Agent shall be
entitled to set off any such funding short fall (other than any short-fall
arising from a failure to purchase any participation interest required to be
purchased by it pursuant to Section 9.9(e)(i), if any amount shall be
outstanding to the Fronting Lender in respect of the Revolving Loan
Outstandings related to such participation interest) against that Non-Funding
Lender’s share of all payments received from Borrowers. Such payments shall be
made by wire transfer to such Lender’s or the Fronting Lender’s account (as
specified by such Lender in Annex H or the applicable Assignment
Agreement) not later than 5:00 p.m. (New York time) on each Settlement Date.  

                    (b)
Availability of Lender’s Pro Rata Share. Agent may assume that each
Lender and the Fronting Lender will make its Pro Rata Share or the Fronted
Percentage, as applicable, of each Revolving Credit Advance available to Agent
on each funding date. If such Pro Rata Share or the Fronted Percentage, as
applicable, is not, in fact, paid to Agent by such Lender when due, Agent will
be entitled to recover such amount on demand from such Lender or the Fronting
Lender, as applicable, without setoff, counterclaim or deduction of any kind.
If any Lender or the Fronting Lender fails to pay the amount of its Pro Rata
Share or the Fronted Percentage forthwith upon Agent’s demand, Agent shall
promptly notify Borrower Representative and Borrowers shall immediately repay
such amount to Agent. Nothing in this Section 9.9(b) or elsewhere in
this Agreement or the other Loan Documents shall be deemed to require Agent to
advance funds on behalf of any Lender or the Fronting Lender or to relieve any
Lender or the Fronting Lender from its obligation to fulfill its Commitments or
obligations hereunder or to prejudice any rights that Borrowers may have
against any Lender or the Fronting Lender as a result of any default by such
Lender or the Fronting Lender hereunder. To the extent 

70

that Agent
advances funds to any Borrower on behalf of any Lender or the Fronting Lender
and is not reimbursed therefor on the same Business Day as such Advance is
made, Agent shall be entitled to retain for its account all interest accrued on
such Advance until reimbursed by the applicable Lender or the Fronting Lender,
as applicable. 

                    (c)
Return of Payments. 

                              (i)
If Agent pays an amount to a Lender or the Fronting Lender under this Agreement
in the belief or expectation that a related payment has been or will be
received by Agent from Borrowers and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender or
the Fronting Lender, as applicable, on demand without setoff, counterclaim or deduction
of any kind. 

                              (ii)
If Agent determines at any time that any amount received by Agent under this
Agreement must be returned to any Borrower or paid to any other Person pursuant
to any insolvency law or otherwise, then, notwithstanding any other term or
condition of this Agreement or any other Loan Document, Agent will not be
required to distribute any portion thereof to any Lender or the Fronting
Lender. In addition, each Lender and the Fronting Lender will repay to Agent on
demand any portion of such amount that Agent has distributed to such Lender or
the Fronting Lender, together with interest at such rate, if any, as Agent is
required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind. 

                              (iii)
If the Fronting Lender pays an amount to a Non-Sterling Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by the Fronting Lender from Agent and such related payment is not
received by the Fronting Lender, then the Fronting Lender will be entitled to
recover such amount from such Non-Sterling Lender on demand without setoff,
counterclaim or deduction of any kind. 

                              (iv)
If the Fronting Lender determines at any time that any amount received by the
Fronting Lender under this Agreement must be returned to any Borrower or paid
to any other Person pursuant to any insolvency law or otherwise (or paid to
Agent pursuant to paragraph (ii) above), then, notwithstanding any other term
or condition of this Agreement or any other Loan Document, the Fronting Lender
will not be required to distribute any portion thereof to any Non-Sterling
Lender. In addition, each Non-Sterling Lender will repay to the Fronting Lender
on demand any portion of such amount that the Fronting Lender has distributed
to such Non-Sterling Lender, together with interest at such rate, if any, as
the Fronting Lender is required to pay to any Borrower, any such other Person
or Agent, without setoff, counterclaim or deduction of any kind.  

                    (d)
Non-Funding Lenders. The failure of any Non-Funding Lender to make any
Revolving Credit Advance or any payment required by it hereunder or to purchase
any participation to be made or purchased by it on the date specified therefor
shall not relieve any other Lender (each such other Lender, an “Other Lender”)
of its obligations to make such Revolving Credit Advance or purchase such
participation on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make a Revolving
Credit Advance, purchase a participation or make any other payment required
hereunder. Notwithstanding anything set forth herein to the contrary, a
Non-Funding Lender 

71

shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a “Lender” or a “Lender” (or be included in the calculation of
“Requisite Lenders” or “Supermajority Lenders” hereunder) for any voting or
consent rights under or with respect to any Loan Document until such time as
such Lender no longer constitutes a Non-Funding Lender. At Borrower
Representative’s request, Agent or a Person reasonably acceptable to Agent
shall have the right with Agent’s consent and in Agent’s sole discretion (but
shall have no obligation) to purchase from any Non-Funding Lender, and each
Non-Funding Lender agrees that it shall, at Agent’s request, sell and assign to
Agent or such Person, all of its interests in the Obligations and the
Commitments held by that Non-Funding Lender for an amount equal to the
principal balance of all Loans and participations held by such Non-Funding
Lender and all accrued interest and fees with respect thereto through the date
of sale, such purchase and sale to be consummated pursuant to an executed
Assignment Agreement. 

                    (e)
Non-Sterling Lenders. 

                              (i)
Participation Interests. On any date upon which the Fronting Lender
shall be required to (i) make available the Fronted Percentage of any Sterling
Revolving Credit Advance pursuant to Section 1.1(a), Section
1.1(b)(iv) or pursuant to paragraph (b)(ii) of Annex B or (ii)
purchase a participation interest in a Swing Line Advance denominated in
Sterling pursuant to Section 1.1(b)(v), each Non-Sterling Lender shall
on such date be deemed to have irrevocably and unconditionally purchased from
the Fronting Lender an undivided participation interest in such Advance in an
amount equal to its Pro Rata Share of such Advance. The purchase price of any
such participation interest shall be an amount, in Dollars, equal to the Dollar
Equivalent of such Pro Rata Share as of the date payment by such Non-Sterling
Lenders of such purchase price is required hereunder; provided, however,
that such purchase price need not be funded by any Non-Sterling Lender unless
and until the Fronting Lender, in its discretion, shall have made a demand
therefor in writing to Agent (which Agent shall promptly forward to each
Non-Sterling Lender) with respect to each such participation interest following
the occurrence of any Default or Event of Default or a good faith determination
by the Fronting Lender that the portion of the interest it receives and retains
on such Sterling Revolving Credit Advances and Swing Line Loans does not
adequately and fairly reflect the cost to the Fronting Lender of funding such
amounts. Payment of such purchase price in respect of any such participation
interest shall be made by each Non-Sterling Lender in immediately available
funds by wire transfer to the Fronting Lender’s account as set forth in Annex
H not later than 2:00 p.m. (New York time) on the Business Day immediately
following the date such demand is delivered to Agent with respect to then
outstanding Advances and on each applicable purchase date thereafter with
respect to any subsequent Advances, in the case of Advances made as Index Rate
Loans, and not later than 10:00 a.m. (New York time) on the Business Day
immediately following the date such demand is delivered to Agent with respect
to then outstanding Advances and on each applicable purchase date thereafter
with respect to any subsequent Advances, in the case of Advances made as LIBOR
Loans. On any date upon which the Fronting Lender shall be required to purchase
an undivided interest and participation in any Letter of Credit Obligation in
respect of a Letter of Credit issued for the benefit of a U.K. Borrower
pursuant to paragraph (b)(v) of Annex B, immediately and without
further action whatsoever, each Non-Sterling Lender shall be deemed to have
irrevocably and unconditionally purchased from the Fronting Lender an undivided
interest and participation in such participation interest. Each Non-Sterling
Lender shall fund its participation in all payments made under such Letters of
Credit in the same  

72

manner as
provided in the first sentence of this Section 9.9(e)(i) with respect to
Sterling Revolving Credit Advances, each of which Sterling Revolving Credit
Advances shall be in an amount equal to the Sterling Equivalent of such payment
as of the date thereof.  

                              (ii)
Obligation of Non-Sterling Lenders. Each Non-Sterling Lender’s
obligation to purchase participation interests (and to fund the purchase price
thereof) in accordance with Section 9.9(e)(i) shall be absolute and
unconditional and shall not be affected by any circumstance, including (A) any
setoff, counterclaim, recoupment, defense or other right that such Non-Sterling
Lender may have against the Fronting Lender, Agent, any Borrower or any other
Person for any reason whatsoever; (B) the occurrence or continuance of any
Default or Event of Default; (C) any inability of any Borrower to satisfy the
conditions precedent to borrowing set forth in this Agreement at any time or
(D) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.  

                              (iii)
Payments to Non-Sterling Lenders. On each Settlement Date (or, if the Fronting
Lender shall not be acting as Agent, on the Business Day following each
Settlement Date), the Fronting Lender shall advise each Non-Sterling Lender by
telephone or telecopy of the amount to be disbursed to such Person in
accordance with this Section 9.9(e)(iii). Except with respect to any
Non-Sterling Lender that is a Non-Funding Lender, (a) prior to the funding of
the purchase price of the participation interests of the Non-Sterling Lenders
in Advances made by the Fronting Lender in accordance with Section 9.9(e)(i),
the Fronting Lender shall pay to each Non-Sterling Lender the Dollar Equivalent
(calculated as of the date of such payment by the Fronting Lender) of such
Lender’s Pro Rata Share of the Applicable Margin paid by the Borrowers on the
second Business Day preceding such Settlement Date for the benefit of the
Lenders and the Fronting Lender with respect to interest on the portion of the
Revolving Loan Outstandings denominated in Sterling (to the extent such amounts
have actually been received by the Fronting Lender) less a portion of such
Applicable Margin equal to one-half of one percent (0.50%) per annum (or such
other amount as the Fronting Lender and such Non-Sterling Lender shall agree)
of such Non-Sterling Lender’s Pro Rata Share of the Revolving Loan Outstandings
denominated in Sterling, the latter amount being retained by the Fronting
Lender for its own account in compensation for the Fronting Lender’s
willingness to bear the foreign exchange rate fluctuation risk with respect to
such Revolving Loan Outstandings and (b) at all times after the funding of the
purchase price of the participation interests of the Non-Sterling Lenders in
Advances made by the Fronting Lender in accordance with Section 9.9(e)(i),
the Fronting Lender shall pay to each Non-Sterling Lender the Dollar Equivalent
(calculated as of the date of such payment by the Fronting Lender) of such
Lender’s Pro Rata Share of interest and principal paid by the Borrowers on the
second Business Day preceding such Settlement Date for the benefit of the
Lenders and the Fronting Lender with respect to the portion of the Revolving
Loan Outstandings denominated in Sterling (to the extent such amounts have
actually been received by the Fronting Lender). To the extent that any
Non-Sterling Lender has failed to pay the purchase price, when due, of any
participation interest required to be purchased by pursuant to Section
9.9(e)(i), the Fronting Lender shall be entitled to set off the funding
short fall against that Non-Sterling Lender’s share of all payments received by
the Fronting Lender. Such payments shall be made by wire transfer to such
Non-Sterling Lender’s account (as specified by such Lender in Annex H or
the applicable Assignment Agreement) not later than 5:00 p.m. (New York time)
on each applicable Settlement Date (or, if the Fronting Lender shall not be
acting as Agent, on the Business day following each Settlement Date).  

73

                              (iv)
Availability of Non-Sterling Lender’s Pro Rata Share. The Fronting
Lender may assume that each Non-Sterling Lender will make its Pro Rata Share of
each Sterling Revolving Credit Advance available to the Fronting Lender on each
date on which such Non-Sterling Lender is required to pay the purchase price of
its participation interests therein pursuant to the terms hereof. If any
Non-Sterling Lender does not make available to the Fronting Lender any amount
required pursuant to Section 9.9(e)(i), the Fronting Lender shall be
entitled to recover such amount on demand from such Non-Sterling Lender,
together with interest thereon for each day from the date of non-payment until
such amount is paid in full at the Federal Funds Rate for the first two
Business Days and at the Dollar Index Rate thereafter. If any Non-Sterling
Lender shall fail to make available to the Fronting Lender any amount required
pursuant to Section 9.9(e)(i), Borrowers shall immediately repay the
outstanding principal amount of the portion of the Revolving Loan or Letter of
Credit Obligation then outstanding to the Fronting Lender in which such
Non-Sterling Lender was required to purchase a participation interest, upon
demand therefor by the Fronting Lender. 

                    (f)
Dissemination of Information. Agent shall use reasonable efforts to
provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any
Event of Default of which Agent has actually become aware and with notice of
any action taken by Agent following any Event of Default; provided, that
Agent shall not be liable to any Lender for any failure to do so, except to the
extent that such failure is attributable to Agent’s gross negligence or willful
misconduct as determined in a final, non-appealable judgment by a court of
competent jurisdiction. Lenders acknowledge that Borrowers are required to
provide Financial Statements and Collateral Reports to Lenders in accordance
with Annexes E and F hereto and agree that Agent shall have no duty to
provide the same to Lenders. 

                    (g)
Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no
Lender shall take any action to protect or enforce its rights arising out of
this Agreement or the Notes (including exercising any rights of setoff) without
first obtaining the prior written consent of Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent or Requisite Lenders. 

10. SUCCESSORS AND ASSIGNS 

                    10.1
Successors and Assigns. 

                    This
Agreement and the other Loan Documents shall be binding on and shall inure to
the benefit of each Credit Party, Agent, Lenders and their respective
successors and assigns (including, in the case of any Credit Party, a
debtor-in-possession on behalf of such Credit Party), except as otherwise
provided herein or therein. No Credit Party may assign, transfer, hypothecate
or otherwise convey its rights, benefits, obligations or duties hereunder or
under any of the other Loan Documents without the prior express written consent
of Agent and Lenders. Any such purported assignment, transfer, hypothecation or
other conveyance by any Credit Party without the prior express written consent
of Agent and Lenders shall be void. The terms and provisions of this Agreement
are for the purpose of defining the relative rights and 

74

obligations of
each Credit Party, Agent and Lenders with respect to the transactions
contemplated hereby and no Person shall be a third party beneficiary of any of
the terms and provisions of this Agreement or any of the other Loan Documents. 

11. MISCELLANEOUS 

                    11.1
Complete Agreement; Modification of Agreement. 

                    The
Loan Documents constitute the complete agreement between the parties with
respect to the subject matter thereof and may not be modified, altered or
amended except as set forth in Section 11.2. Any letter of interest,
commitment letter, fee letter or confidentiality agreement, if any, between any
Credit Party and Agent or any Lender or any of their respective Affiliates,
predating this Agreement and relating to a financing of substantially similar
form, purpose or effect shall be superseded by this Agreement. 

                    11.2
Amendments and Waivers. 

                    (a)
Except for actions expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any
other Loan Document, or any consent to any departure by any Credit Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent and Borrowers, and by Requisite Lenders, Supermajority
Lenders or all affected Lenders, as applicable. Except as set forth in clauses
(b) and (c) below, all such amendments, modifications, terminations or
waivers requiring the consent of any Lenders shall require the written consent
of Requisite Lenders. 

                    (b)
No amendment, modification, termination or waiver of or consent with respect to
any provision of this Agreement or any other Loan Document shall, unless in
writing and signed by Agent and Supermajority Lenders: (i) increase the
percentage advance rates set forth in the definition of either Borrowing Base,
(ii) modify any criteria set forth in Section 1.6 or 1.7 in a
manner that would have the effect of making more credit available or (iii)
increase the Sterling Subfacility Limit. 

                    (c)
No amendment, modification, termination or waiver with respect to any provision
of this Agreement or any other Loan Document shall, unless in writing and
signed by Agent and each Lender directly affected thereby: (i) increase the
principal amount of any Lender’s Commitment (which action shall be deemed to
directly affect all Lenders); (ii) reduce the principal of, rate of interest on
or Fees payable with respect to any Loan or Letter of Credit Obligations of any
affected Lender; (iii) extend any scheduled payment date (other than payment
dates of mandatory prepayments under Sections 1.3(b)(iii) and (iv))
or final maturity date of the principal amount of any Loan of any affected
Lender; (iv) waive, forgive, defer, extend or postpone any payment of interest
or Fees as to any affected Lender; (v) release any Guaranty (other than in
connection with any sale of assets by a Sotheby Entity permitted pursuant to Section
6.8 or consented to by Requisite Lenders or Supermajority Lenders, as
applicable, pursuant to this Section 11.2) or, except as otherwise
permitted herein or in the other Loan Documents, release, or permit any Credit
Party to sell or otherwise dispose of, all or substantially all of the
Collateral (which action shall be deemed to directly affect all Lenders and the
L/C Issuer); (vi) change the percentage of the Commitments or of the aggregate
unpaid principal 

75

amount of the
Loans that shall be required for Lenders or any of them to take any action
hereunder; (vii) amend or waive Section 1.11(a); and (viii) amend or
waive this Section 11.2 or the definitions of the terms “Requisite
Lenders” or “Supermajority Lenders” insofar as such definitions affect the
substance of this Section 11.2. Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent, the Fronting
Lender or L/C Issuer under this Agreement or any other Loan Document, including
any release of any Guaranty or Collateral requiring a writing signed by all
Lenders and, in the case of the L/C Issuer, any increase in the L/C Sublimit,
shall be effective unless in writing and signed by Agent, the Fronting Lender
or L/C Issuer, as the case may be, in addition to Lenders required hereinabove
to take such action. Each amendment, modification, termination or waiver shall
be effective only in the specific instance and for the specific purpose for
which it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
No amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on any Sotheby Entity in any case shall entitle such
Sotheby Entity or any other Sotheby Entity to any other or further notice or
demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 11.2
shall be binding upon each holder of the Notes at the time outstanding and each
future holder of the Notes. 

                    (d)
If, in connection with any proposed amendment, modification, waiver or
termination (a “Proposed Change”): 

                              (i)
requiring the consent of all affected Lenders, the consent of Requisite Lenders
is obtained, but the consent of other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained as described in this clause
(i) and in clause (ii) below being referred to as a “Non-Consenting
Lender”); or 

                              (ii)
requiring the consent of Supermajority Lenders, the consent of Requisite
Lenders is obtained, but the consent of Supermajority Lenders is not obtained; 

then, so long
as Agent is not a Non-Consenting Lender, at Borrower Representative’s request,
Agent or a Person reasonably acceptable to Agent shall have the right with
Agent’s consent and in Agent’s sole discretion (but shall have no obligation)
to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders
agree that they shall, upon Agent’s request, sell and assign to Agent or such
Person, all of the Loans and Commitments of such Non-Consenting Lenders for an
amount equal to the principal balance of all Loans held by the Non-Consenting
Lenders and all accrued interest and Fees with respect thereto through the date
of sale, such purchase and sale to be consummated pursuant to an executed
Assignment Agreement. 

                    (e)
Upon payment in full in cash and performance of all of the Obligations (other
than indemnification Obligations), termination of the Commitments and a release
of all claims against Agent and Lenders, and so long as no suits, actions,
proceedings or claims are pending or threatened against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Agent shall deliver to Borrowers termination statements, mortgage releases and
other documents necessary or appropriate to evidence the termination of the
Liens securing payment of the Obligations. 

76

                    11.3
Fees and Expenses. 

                    Borrowers
shall reimburse (i) Agent for all fees, costs and expenses (including the
reasonable fees and expenses of all of its counsel, advisors, consultants and
auditors) and (ii) Agent (and, with respect to clauses (b), (c)
and (d) below, all Lenders and the Fronting Lender) for all fees, costs
and expenses, including the reasonable fees, costs and expenses of counsel or
other advisors (including environmental and management consultants and
appraisers), incurred in connection with the negotiation, preparation and
filing and/or recordation of the Loan Documents and incurred in connection
with: 

                    (a)
any amendment, modification or waiver of, consent with respect to, or
termination of, any of the Loan Documents or advice in connection with the
syndication and administration of the Loans made pursuant hereto or its rights
hereunder or thereunder; 

                    (b)
any litigation, contest, dispute, suit, proceeding or action (whether
instituted by Agent, any Lender, the Fronting Lender, any Sotheby Entity or any
other Person and whether as a party, witness or otherwise) in any way relating
to the Collateral, any of the Loan Documents or any other agreement to be
executed or delivered in connection herewith or therewith, including any
litigation, contest, dispute, suit, case, proceeding or action, and any appeal
or review thereof, in connection with a case commenced by or against any or all
of the Sotheby Entities or any other Person that may be obligated to Agent, any
Lender or the Fronting Lender by virtue of the Loan Documents; including any
such litigation, contest, dispute, suit, proceeding or action arising in
connection with any work-out or restructuring of the Loans during the pendency
of one or more Events of Default; provided, that in the case of
reimbursement of counsel for Lenders or the Fronting Lender other than Agent,
such reimbursement shall be limited to one counsel for all such Lenders and the
Fronting Lender; provided, further, that no Person shall be entitled to
reimbursement under this clause (b) in respect of any litigation,
contest, dispute, suit, proceeding or action to the extent any of the foregoing
results from such Person’s gross negligence or willful misconduct as determined
in a final, non-appealable judgment by a court of competent jurisdiction; 

                    (c)
any attempt to enforce any remedies of Agent against any or all of the Credit
Parties or any other Person that may be obligated to Agent, any Lender or the
Fronting Lender by virtue of any of the Loan Documents, including any such
attempt to enforce any such remedies in the course of any work-out or
restructuring of the Loans during the pendency of one or more Events of
Default; provided, that in the case of reimbursement of counsel for
Lenders and the Fronting Lender other than Agent, such reimbursement shall be
limited to one counsel for all such Lenders and the Fronting Lender; 

                    (d)
any workout or restructuring of the Loans during the pendency of one or more Events
of Default; provided, that in the case of reimbursement of counsel for
Lenders and the Fronting Lender other than Agent, such reimbursement shall be
limited to one counsel for all such Lenders and the Fronting Lender; and 

                    (e)
efforts to (i) monitor the Loans or any of the other Obligations, (ii)
evaluate, observe or assess any of the Sotheby Entities or their respective
affairs, and (iii) verify, 

77

protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of
any of the Collateral; 

including, as
to each of clauses (a) through (e) above, all reasonable attorneys’ and
other professional and service providers’ fees arising from such services and
other advice, assistance or other representation, including those in connection
with any appellate proceedings, and all expenses, costs, charges and other fees
incurred by such counsel and others in connection with or relating to any of
the events or actions described in this Section 11.3, all of which shall
be payable, on demand, by Borrowers to Agent. Without limiting the generality
of the foregoing, such expenses, costs, charges and fees may include: fees,
costs and expenses of accountants, environmental advisors, appraisers,
investment bankers, management and other consultants and paralegals; court
costs and expenses; photocopying and duplication expenses; court reporter fees,
costs and expenses; long distance telephone charges; air express charges;
telegram or telecopy charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal or other advisory services. 

                    11.4
No Waiver. 

                    Agent’s
or any Lender’s failure, at any time or times, to require strict performance by
the Sotheby Entities of any provision of this Agreement or any other Loan
Document shall not waive, affect or diminish any right of Agent or such Lender
thereafter to demand strict compliance and performance herewith or therewith.
Any suspension or waiver of an Event of Default shall not suspend, waive or
affect any other Event of Default whether the same is prior or subsequent
thereto and whether the same or of a different type. Subject to the provisions
of Section 11.2, none of the undertakings, agreements, warranties,
covenants and representations of any Sotheby Entity contained in this Agreement
or any of the other Loan Documents and no Default or Event of Default by any
Sotheby Entity shall be deemed to have been suspended or waived by Agent or any
Lender, unless such waiver or suspension is by an instrument in writing signed
by an officer of or other authorized employee of Agent and the applicable
required Lenders, and directed to Borrowers specifying such suspension or
waiver. 

                    11.5
Remedies. 

                    Agent’s
and Lenders’ rights and remedies under this Agreement shall be cumulative and
nonexclusive of any other rights and remedies that Agent or any Lender may have
under any other agreement, including the other Loan Documents, by operation of
law or otherwise. Recourse to the Collateral shall not be required. 

                    11.6
Severability. 

                    Wherever
possible, each provision of this Agreement and the other Loan Documents shall
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement or any other Loan Document shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement or such other Loan Document. 

78

                    11.7
Conflict of Terms. 

                    Except
as otherwise provided in this Agreement or any of the other Loan Documents by
specific reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement conflicts with any provision in any of
the other Loan Documents, the provision contained in this Agreement shall
govern and control. 

                    11.8
Confidentiality. 

                    Agent
and each Lender agree to use commercially reasonable efforts (equivalent to the
efforts Agent or such Lender applies to maintaining the confidentiality of its
own confidential information) to maintain as confidential all confidential
information provided to them by the Sotheby Entities and designated as
confidential for a period of two (2) years following receipt thereof, except that
Agent and any Lender may disclose such information (a) to Persons employed or
engaged by Agent or such Lender; (b) to any bona fide assignee or participant
or potential assignee or participant that has agreed to comply with the
covenant contained in this Section 11.8 (and any such bona fide assignee
or participant or potential assignee or participant may disclose such
information to Persons employed or engaged by them as described in clause
(a) above); (c) as required or requested by any Governmental Authority or
reasonably believed by Agent or such Lender to be compelled by any court
decree, subpoena or legal or administrative order or process; (d) as, on the
advice of Agent’s or such Lender’s counsel, is required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which Agent or such Lender is a party; or
(f) that ceases to be confidential through no fault of Agent or any Lender. 

                    11.9
GOVERNING LAW. 

                    EXCEPT
AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN
DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE
STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK, NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT,
LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY; PROVIDED
FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO REALIZE 

79

ON THE COLLATERAL OR ANY OTHER SECURITY FOR
THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT
PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED UPON
LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS
SET FORTH IN ANNEX H OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY’S ACTUAL RECEIPT THEREOF OR
FIVE (5) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

                    11.10
Notices. 

                    (a)
Addresses. All notices, demands, requests, directions and other
communications required or expressly authorized to be made by this Agreement
shall, whether or not specified to be in writing but unless otherwise expressly
specified to be given by any other means, be given in writing and (i) addressed
to (A) the party to be notified and sent to the address or facsimile number
indicated in Annex I, or (B) otherwise to the party to be notified at
its address specified on the signature page of any applicable Assignment
Agreement, (ii) posted to Intralinks® (to the extent such system is
available and set up by or at the direction of Agent prior to posting) in an
appropriate location by uploading such notice, demand, request, direction or
other communication to www.intralinks.com, faxing it to 866-545-6600 with an
appropriate bar-coded fax coversheet or using such other means of posting to
Intralinks® as may be available and reasonably acceptable to Agent
prior to such posting, (iii) posted to any other E-System set up by or at the
direction of Agent in an appropriate location or (iv) addressed to such other
address as shall be notified in writing (A) in the case of Borrower
Representative, Agent and Swing Line Lender, to the other parties hereto and (B)
in the case of all other parties, to Borrower Representative and Agent.
Transmission by electronic mail (including E-Fax, even if transmitted to the
fax numbers set forth in clause (i) above) shall not be sufficient or
effective to transmit any such notice under this clause (a) unless such
transmission is an available means to post to any E-System. 

                    (b)
Effectiveness. All communications described in clause (a) above and all
other notices, demands, requests and other communications made in connection
with this Agreement shall be effective and be deemed to have been received (i)
if delivered by hand, upon personal delivery, (ii) if delivered by overnight
courier service, one Business Day after delivery to such courier service, (iii)
if delivered by mail, when deposited in the mails, (iv) if delivered by
facsimile (other than to post to an E-System pursuant to clause (a)(ii)
or (a)(iii) above), upon sender’s receipt of confirmation of proper
transmission, and (v) if delivered by posting to any E-

80

System, on the
later of the date of such posting in an appropriate location and the date
access to such posting is given to the recipient thereof in accordance with the
standard procedures applicable to such E-System. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower Representative or Agent)
designated in Annex I to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such notice. 

                    11.11
Section Titles. 

                    The
Section titles and Table of Contents contained in this Agreement are and shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto. 

                    11.12
Counterparts. 

                    This
Agreement may be executed in any number of separate counterparts, each of which
shall collectively and separately constitute one agreement. 

                    11.13
WAIVER OF JURY TRIAL. 

                    BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH,
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO. 

                    11.14
Press Releases and Related Matters. 

                    Each
Credit Party executing this Agreement agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure using
the name of GE Capital or its affiliates or referring to this Agreement or the
other Loan Documents without the prior written consent of GE Capital (not to be
unreasonably withheld) unless (and only to the extent that) such Credit Party
or Affiliate is required to do so under law and then, in any event, such Credit
Party or Affiliate will consult with GE Capital before issuing such press
release or other public disclosure. Each Credit Party consents to the
publication by Agent or any Lender of advertising material relating to the
financing transactions contemplated by this Agreement using 

81

Borrower’s
name, product photographs, logo or trademark. Agent consents to the disclosure
by the Credit Parties in their public securities filings and Financial
Statements of the identity and role of Agent under this Agreement. Agent
reserves the right to provide to industry trade organizations information
necessary and customary for inclusion in league table measurements. 

                    11.15
Reinstatement. 

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

                    11.16
Advice of Counsel. 

                    Each
of the parties represents to each other party hereto that it has discussed this
Agreement and, specifically, the provisions of Sections 11.9 and 11.13,
with its counsel. 

                    11.17
No Strict Construction. 

                    The
parties hereto have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement. 

                    11.18
PATRIOT Act. 

                    Each
Lender that is subject to the PATRIOT Act and Agent (for itself and not on
behalf of any Lender) hereby notifies Borrowers that pursuant to the
requirements of the PATRIOT Act, it is required to obtain, verify and record
information that identifies Borrowers, which information includes the name and
address of each Borrower and other information that will allow such Lender or
Agent, as applicable, to identify such Borrower in accordance with the PATRIOT
Act. Each Borrower shall, promptly following a request by Agent or any Lender,
provide all documentation and other information that Agent or such Lender
requests in order to comply with its ongoing obligations under applicable “know
your customer” and anti-money laundering rules and regulations, including the
PATRIOT Act. 

12. CROSS-GUARANTY 

82

                    12.1
Cross-Guaranty. 

                    Each
U.S. Borrower hereby agrees that such U.S. Borrower is jointly and severally
liable for, and hereby absolutely and unconditionally guarantees to Agent and
Lenders and their respective successors and assigns, the full and prompt
payment (whether at stated maturity, by acceleration or otherwise) and
performance of, all Secured Obligations owed or hereafter owing to Agent and
Lenders by each other U.S. Borrower and each U.K. Borrower. Each U.K. Borrower
hereby agrees that such U.K. Borrower is jointly and severally liable for, and
hereby absolutely and unconditionally guarantees to Agent and Lenders and their
respective successors and assigns, the full and prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of, all Secured
Obligations owed or hereafter owing to Agent and Lenders by each other U.K.
Borrower; it being understood that the U.K. Borrowers shall have no liability,
direct or indirect, for the Secured Obligations of the U.S. Borrowers or the
other U.S. Credit Parties hereunder or under any of the Loan Documents. Each
Borrower agrees that its guaranty obligation hereunder is a continuing guaranty
of payment and performance and not of collection, that its obligations under
this Section 12 shall not be discharged until payment and performance, in
full, of the Secured Obligations (in the case of any U.S. Borrower) or the
Secured Obligations of the U.K. Borrowers (in the case of any U.K. Borrower)
has occurred, and that its obligations under this Section 12 shall be
absolute and unconditional, irrespective of, and unaffected by, 

                    (a)
the genuineness, validity, regularity, enforceability or any future amendment
of, or change in, this Agreement, any other Loan Document or any other
agreement, document or instrument to which any Borrower is or may become a
party; 

                    (b)
the absence of any action to enforce this Agreement (including this Section
12) or any other Loan Document or the waiver or consent by Agent and
Lenders with respect to any of the provisions thereof; 

                    (c)
the existence, value or condition of, or failure to perfect its Lien against,
any security for the Secured Obligations or any action, or the absence of any
action, by Agent and Lenders in respect thereof (including the release of any
such security); 

                    (d)
the insolvency of any Sotheby Entity; or 

                    (e)
any other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor. 

Each U.S. Borrower
shall be regarded, and shall be in the same position, as principal debtor with
respect to the Secured Obligations guaranteed hereunder. Each U.K. Borrower
shall be regarded, and shall be in the same position, as principal debtor with
respect to the Secured Obligations of the other U.K. Borrower guaranteed
hereunder. 

                    12.2
Waivers by Borrowers. 

                    Each
Borrower expressly waives all rights it may have now or in the future under any
statute, or at common law, or at law or in equity, or otherwise, to compel
Agent or Lenders to marshal assets or to proceed in respect of the Secured
Obligations guaranteed hereunder by 

83

such Borrower
against any other Credit Party, any other party or against any security for the
payment and performance of such Secured Obligations before proceeding against,
or as a condition to proceeding against, such Borrower. It is agreed among each
Borrower, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by this Agreement and the other Loan Documents and
that, but for the provisions of this Section 12 and such waivers, Agent
and Lenders would decline to enter into this Agreement. 

                    12.3
Benefit of Guaranty. 

                    Each
Borrower agrees that the provisions of this Section 12 are for the
benefit of Agent and Lenders and their respective successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
any other Borrower and Agent or Lenders, the obligations of such other Borrower
under the Loan Documents. 

                    12.4
Waiver of Subrogation, Etc. 

                    Notwithstanding
anything to the contrary in this Agreement or in any other Loan Document, and
except as set forth in the Contribution Agreement, each Borrower hereby expressly
and irrevocably waives any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any
and all defenses available to a surety, guarantor or accommodation co-obligor. Each
Borrower acknowledges and agrees that this waiver is intended to benefit Agent
and Lenders and shall not limit or otherwise affect such Borrower’s liability
hereunder or the enforceability of this Section 12, and that Agent,
Lenders and their respective successors and assigns are intended third party
beneficiaries of the waivers and agreements set forth in this Section 12.4.

                    12.5
Subordination by U.K. Borrowers. 

                    Each
U.K. Borrower agrees that any and all claims of such U.K. Borrower against any
other Borrower or any Guarantor (each an “Obligor”) with respect to any “Intercompany
Indebtedness” (as hereinafter defined), any endorser, obligor or any other
guarantor of all or any part of the Secured Obligations, or against any of its
properties shall be subordinate and subject in right of payment to the prior
payment, in full and in cash, of all Secured Obligations of such Obligor. Notwithstanding
any right of any U.K. Borrower to ask, demand, sue for, take or receive any
payment from any Obligor, all rights, liens and security interests of such U.K.
Borrower, whether now or hereafter arising and howsoever existing, in any
assets of any other Obligor shall be and are subordinated to the rights of
Agent and the Lenders in those assets. No U.K. Borrower shall have any right to
possession of any such asset or to foreclose upon any such asset, whether by
judicial action or otherwise, until the Termination Date (in the case of the
assets of any Obligor that is a U.S. Credit Party) or the U.K. Termination Date
(in the case of the assets of any Obligor that is a U.K. Credit Party). If all
or any part of the assets of any Obligor, or the proceeds thereof, are subject
to any distribution, division or application to the creditors of such Obligor,
whether partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any analogous procedure or step in any jurisdiction or any
other action or proceeding, or if the business of any such Obligor is dissolved
or if substantially all of the assets of any such Obligor are sold, then, and
in any such event (such events being herein referred to as an “Insolvency 

84

Event”), any payment or distribution of any
kind or character, either in cash, securities or other property, which shall be
payable or deliverable upon or with respect to any indebtedness of any Obligor
to any U.K. Borrower (“Intercompany Indebtedness”) shall be paid or
delivered directly to Agent for application to the Secured Obligations in
accordance with the Loan Documents. Should any payment, distribution, security
or instrument or proceeds thereof be received by the applicable U.K. Borrower
upon or with respect to such Intercompany Indebtedness after any Insolvency
Event and prior to the Termination Date (in the case of any Intercompany
Indebtedness of a U.S. Credit Party) or the U.K. Termination Date (in the case
of any Intercompany Indebtedness of a U.K. Credit Party), such U.K. Borrower
shall receive and hold the same in trust, as trustee, for the benefit of Agent
and the Lenders and shall forthwith deliver the same to Agent in precisely the
form received (except for the endorsement or assignment of such U.K. Borrower
where necessary), for application to the Secured Obligations in accordance with
the Loan Documents, and, until so delivered, the same shall be held in trust by
such U.K. Borrower as the property of Agent and the Lenders. If any such U.K.
Borrower fails to make any such endorsement or assignment to Agent, Agent or
any of its officers or employees is irrevocably authorized to make the same. Each
U.K. Borrower agrees that until the Termination Date (in the case of any claim
against an Obligor that is a U.S. Credit Party) or the U.K. Termination Date
(in the case of any claim against an Obligor that is a U.K. Credit Party), such
U.K. Borrower will not assign or transfer to any Person (other than Agent, a
Borrower or another Guarantor in accordance with the terms of the Loan
Documents) any claim such U.K. Borrower has or may have against any Obligor. 

                    12.6
Election of Remedies. 

                    If
Agent or any Lender may, under applicable law, proceed to realize its benefits
under any of the Loan Documents giving Agent or such Lender a Lien upon any
Collateral, whether owned by any Borrower or by any other Person, either by
judicial foreclosure or by non judicial sale or enforcement, Agent or any
Lender may, at its sole option, determine which of its remedies or rights it
may pursue without affecting any of its rights and remedies under this Section
12. If, in the exercise of any of its rights and remedies, Agent or any
Lender shall forfeit any of its rights or remedies, including its right to
enter a deficiency judgment against any Borrower or any other Person, whether
because of any applicable laws pertaining to “election of remedies” or the
like, each Borrower hereby consents to such action by Agent or such Lender and
waives any claim based upon such action, even if such action by Agent or such
Lender shall result in a full or partial loss of any rights of subrogation that
each Borrower might otherwise have had but for such action by Agent or such
Lender. Any election of remedies that results in the denial or impairment of
the right of Agent or any Lender to seek a deficiency judgment against any
Borrower shall not impair any other Borrower’s obligation to pay the full
amount of the Secured Obligations guaranteed hereunder by such Borrower. In the
event Agent or any Lender shall bid at any foreclosure or trustee’s sale or at
any private sale permitted by law or the Loan Documents, Agent or such Lender
may bid all or less than the amount of the Secured Obligations and the amount
of such bid need not be paid by Agent or such Lender but shall be credited
against the Secured Obligations. The amount of the successful bid at any such
sale, whether Agent, Lender or any other party is the successful bidder, shall
be conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Secured
Obligations shall be conclusively deemed to be the amount of the Secured
Obligations guaranteed by the applicable Borrowers under this Section 12,

85

notwithstanding
that any present or future law or court decision or ruling may have the effect
of reducing the amount of any deficiency claim to which Agent or any Lender
might otherwise be entitled but for such bidding at any such sale. 

                    12.7
Liability Cumulative. 

                    The
liability of Borrowers under this Section 12 is in addition to and shall
be cumulative with all liabilities of each Borrower to Agent and Lenders under
this Agreement and the other Loan Documents to which such Borrower is a party
or in respect of any Secured Obligations or obligation of the other Borrowers,
without any limitation as to amount, unless the instrument or agreement
evidencing or creating such other liability specifically provides to the
contrary. 

[Remainder of page
intentionally left blank.]

86

                    IN
WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above. 

	
 

	
 

	
SOTHEBY’S,

	
a Delaware
 corporation

	
 

	
 

	
By:

	
/s/ Michael L. Gillis

	
 

	

	
Name: Michael L. Gillis

	
Title:
 Senior Vice President and Treasurer

	
 

	
 

	
SOTHEBY’S, INC.

	
 

	
 

	
By:

	
/s/ Michael L. Gillis

	
 

	

	
Name: Michael L. Gillis

	
Title:
 Senior Vice President and Treasurer

	
 

	
 

	
SOTHEBY’S FINANCIAL SERVICES, INC.

	
SOTHEBY’S FINANCIAL SERVICES
 CALIFORNIA, INC.

	
OBERON, INC.

	
THETA, INC.

	
SOTHEBY’S VENTURES, LLC

	
 

	
 

	
OATSHARE LIMITED

	
 

	
 

	
 

	
 

	
By:

	
/s/ William
 S. Sheridan

	
 

	

	
Name: William
 S. Sheridan

	
Title: Executive
 Vice President and Chief
 Financial Officer

	
 

	
 

	
SOTHEBY’S,

	
a company
 registered in England

	
 

	
 

	
 

	
 

	
By:

	
/s/ William
 S. Sheridan

	
 

	

	
Name: William
 S. Sheridan

	
Title: Executive
 Vice President and Chief
 Financial Officer

	
 

	
 

	
SOTHEBY’S FINANCIAL SERVICES LIMITED

	
 

	
 

	
By:

	
/s/ William
 S. Sheridan

	
 

	

	
Name: William
 S. Sheridan

	
Title: Executive
 Vice President and Chief Financial Officer

	
 

	
 

	
 

	
By:

	
/s/ Michael L. Gillis

	
 

	

	
Name: Michael L. Gillis

	
Title:
 Senior Vice President and Treasurer

Signature Page to 

Credit Agreement

	
 

	
 

	
 

	
 

	
GENERAL ELECTRIC CAPITAL

	
 

	
CORPORATION, as Agent, Lender and

	
 

	
Fronting
 Lender

	
 

	
 

	
 

	
 

	
By:

	
     /s/ Daniel T. Eubanks

	
 

	
 

	

	
 

	
 

	
     Daniel T. Eubanks

	
 

	
 

	
     Duly
 Authorized Signatory

	
 

	
 

	
 

Signature Page to 

Credit Agreement

	
 

	
 

	
 

	
 

	
HSBC BANK, PLC, as
 Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Richard Simmons

	
 

	
 

	

	
 

	
Name:
 Richard Simmons

	
 

	
Title:
 Global Relationship Manager

	
 

	
 

	
 

	
HSBC BANK USA, NATIONAL ASSOCIATION,
 as Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Brian Gingue

	
 

	
 

	

	
 

	
Name: Brian
 Gingue

	
 

	
Title:
 Assistant Vice President

	
 

	
 

	
 

	
JP MORGAN CHASE BANK, N.A.,
 as Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Kathleen C. Maggi

	
 

	
 

	

	
 

	
Name:
 Kathleen C. Maggi

	
 

	
Title:
 Senior Vice President

	
 

	
 

	
 

	
THE PRIVATE BANK AND TRUST COMPANY, as
 Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Mitchell B. Rasky

	
 

	
 

	

	
 

	
Name:
 Mitchell Rasky

	
 

	
Title:
 Managing Director

	
 

	
 

	
 

	
TD BANK, N.A., as
 Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Stephen A. Caffrey

	
 

	
 

	

	
 

	
Name:
 Stephen A. Caffrey

	
 

	
Title: Vice
 President

	
 

	
 

	
 

	
BANK OF AMERICA, N.A., as
 Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Edwin B. Cox, Jr.

	
 

	
 

	

	
 

	
Name: Edwin
 B. Cox, Jr.

	
 

	
Title:
 Senior Vice President

	
 

	
 

	
 

	
COMMERCE BANK, N.A., as
 Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Mark Skreynski

	
 

	
 

	

	
 

	
Name: Mark
 Skreynski

	
 

	
Title:
 Corporate Banking Officer

	
 

	
 

	
 

	
ISRAEL DISCOUNT BANK OF NEW YORK, as
 Lender

	
 

	
 

	
 

	
By: 

	
    /s/
 Richard Tripaldi

	
 

	
 

	

	
 

	
Name:
 Richard Tripaldi

	
 

	
Title: Vice
 President

	
 

	
 

	
 

	
By: 

	
    /s/
 Michael Paul

	
 

	
 

	

	
 

	
Name:
 Michael Paul

	
 

	
Title: Vice
 President

          The
following Persons are signatories to this Agreement in their capacity as Credit
Parties and not as Borrowers.

	
 

	
 

	
 

	
 

	
SOTHEBY’S FINE ART HOLDINGS, INC.

	
 

	
SOTHEBY’S ASIA, INC.

	
 

	
YORK WAREHOUSE, INC.

	
 

	
SPTC, INC.

	
 

	
SOTHEBY PARKE BERNET, INC.

	
 

	
YORK AVENUE DEVELOPMENT, INC.

	
 

	
SOTHEBY’S THAILAND, INC.

	
 

	
SOTHEBY’S HOLDINGS INTERNATIONAL, INC.

	
 

	
SOTHEBY’S NEVADA, INC.

	
 

	
SOTHEBYS.COM LLC

	
 

	
SOTHEBYS.COM AUCTIONS, INC.

	
 

	
SIBS, LLC

	
 

	
 

	
 

	
By: 

	
    /s/
 Michael L. Gillis

	
 

	
 

	

	
 

	
Name: 

	
 

	
Title: 

	
 

	
 

	
 

	
SUNRISE LIQUORS & WINES, INC

	
 

	
 

	
 

	
By: 

	
    /s/
 William S. Sheridan

	
 

	
 

	

	
 

	
Name: 

	
 

	
Title: 

	
 

	
 

	
 

	
CATALOGUE DISTRIBUTION COMPANY LIMITED

	
 

	
 

	
 

	
By: 

	
    /s/
 William S. Sheridan

	
 

	
 

	

	
 

	
Name: 

	
 

	
Title: 

ANNEX A (Recitals)

to

CREDIT
AGREEMENT

DEFINITIONS

                    Capitalized
terms used in the Loan Documents shall have (unless otherwise provided
elsewhere in the Loan Documents) the following respective meanings, and all
references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to
the Agreement:

                    “Acceptable
Cash Equivalents” has the meaning ascribed to it in Annex B.

                    “Account
Debtor” means any Person who may become obligated to any Sotheby Entity
under, with respect to, or on account of, an Account, Chattel Paper (including,
without limitation, an Art Loan) or General Intangibles (including a payment
intangible).

                    “Accounting
Changes” has the meaning ascribed thereto in Annex G.

                    “Accounts”
means all “accounts,” as such term is defined in the Code, now owned or
hereafter acquired by any Sotheby Entity, including (a) all accounts receivable,
other receivables, book debts and other forms of obligations (other than forms
of obligations evidenced by Chattel Paper or Instruments), (including any such
obligations that may be characterized as an account under the Code), (b) all of
each Sotheby Entity’s rights in, to and under all purchase orders or receipts
for goods or services, (c) all of each Sotheby Entity’s rights to any goods
represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all rights to payment due to any
Sotheby Entity for property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Sotheby Entity or in connection with any other transaction
(whether or not yet earned by performance on the part of such Sotheby Entity),
(e) all health care insurance receivables and (f) all collateral security of
any kind, given by any Account Debtor or any other Person with respect to any
of the foregoing.

                    “Activation
Event” shall mean, as of any date when the aggregate Revolving Loan then
outstanding and the aggregate Swing Line Loan then outstanding, in the
aggregate, shall be greater than zero, the occurrence of either of the
following: (i) an Event of Default shall have occurred and shall have been
continuing for at least three (3) Business Days as of such date or (ii) the
Liquidity Amount shall be less than $25,000,000 as of such date.

                    “Activation
Notice” means a notice from Agent given to a Relationship Bank on or after
the occurrence of an Activation Event pursuant to a Blocked Account Agreement,
under which Blocked Account Agreement such Relationship Bank shall have agreed
to honor instructions solely received from Agent concerning the related Blocked
Account(s) upon the receipt of such notice.

A-1

                    “Advance”
means any Revolving Credit Advance or Swing Line Advance, as the context may require.

                    “Affiliate”
means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian
or other fiduciary, 5% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each of such
Person’s executive officers (as such term is defined in the rules of the
Securities and Exchange Commission), directors, joint venturers and partners
and (d) in the case of Borrowers, the immediate family members, spouses and
lineal descendants of individuals who are Affiliates of any Borrower. For the
purposes of this definition, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise; provided, however,
that the term “Affiliate” shall specifically exclude Agent and each
Lender.

                    “Agent”
means GE Capital, in its capacity as Agent for Lenders, or its successor
appointed pursuant to Section 9.7(a).

                    “Agreement”
means the Credit Agreement dated as of the Closing Date by and among Borrowers,
the other Sotheby Entities party thereto, GE Capital, as Agent and a Lender,
and the other Lenders from time to time party thereto, as the same may be
amended, supplemented, restated or otherwise modified from time to time.

                    “Aggregate
Borrowing Availability” means, as of any date of determination, the lesser
of (a) an amount equal to (i) the Maximum Amount minus (ii) the
aggregate Revolving Loan then outstanding minus (iii) the aggregate Swing Line
Loan then outstanding and (b) an amount equal to the sum of (i) the U.S.
Borrowing Availability as of such date and (ii) the U.K. Borrowing Availability
as of such date.

                    “Alternative
Art Loan Currency” means Hong Kong Dollars and any other currency approved
by Agent (other than Dollars, Canadian Dollars, Sterling, Euros or Swiss
Francs); provided, that no currency shall be an Alternative Art Loan
Currency if it is not freely transferable and freely convertible into Dollars
and Sterling in the London foreign exchange market as determined by Agent.

                    “Alternative
L/C Currency” means any currency approved by the L/C Issuer with respect to
the incurrence of Letter of Credit Obligations in such currency (other than
Dollars, Sterling, Euros or Swiss Francs); provided, that no currency
shall be an Alternative L/C Currency if it is not freely transferable and
freely convertible into Dollars and Sterling in the London foreign exchange
market as determined by the L/C Issuer.

                    “Appendices”
has the meaning ascribed to it in the recitals to the Agreement. 

                    “Applicable
Dollar Revolver Index Margin” means the per annum interest rate margin from
time to time in effect and payable in addition to the Dollar Index Rate
applicable to the Revolving Loan, as determined by reference to Section
1.5(a).

A-2

                    “Applicable
Dollar Revolver LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the Dollar LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.5(a).

                    “Applicable
L/C Margin” means the per annum fee from time to time in effect and payable
with respect to outstanding Letter of Credit Obligations, as determined by
reference to Section 1.5(a).

                    “Applicable
Margins” means collectively the Applicable L/C Margin, the Applicable
Unused Line Fee Margin, the Applicable Dollar Revolver Index Margin, the
Applicable Dollar Revolver LIBOR Margin, the Applicable Sterling Revolver Index
Margin, and the Applicable Sterling Revolver LIBOR Margin.

                    “Applicable
Sterling Revolver Index Margin” means the per annum interest rate margin
from time to time in effect and payable in addition to the Sterling Index Rate
applicable to Swing Line Loans, as determined by reference to Section 1.5(a).

                    “Applicable
Sterling Revolver LIBOR Margin” means the per annum interest rate from time
to time in effect and payable in addition to the Sterling LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.5(a).

                    “Applicable
Unused Line Fee Margin” means 1.00%. 

                    “Art
Inventory” shall mean all Inventory of Borrowers consisting of Works of
Art.

                    “Art
Inventory Report” means a report to be delivered from time to time by
Borrowers in the form attached to the Agreement as Exhibit 4.1(C).

                    “Art
Loan Debtor” means an Account Debtor liable on an Art Loan.

                    “Art
Loan/Inventory Joint Ventures” means any joint ventures, profit/loss
sharing arrangements, or similar contractual arrangements entered into by any
Borrower in the ordinary course of business in connection with any Art
Inventory or Art Loan.

                    “Art
Loan Receivables Report” means a report to be delivered from time to time
by the Borrowers in the form attached to the Agreement as Exhibit 4.1(B).

                    “Art
Loans” shall mean loans made by the Borrowers to customers of Parent and
its Subsidiaries to finance the purchase or carrying of, or in anticipation of
the potential sale of, or secured by, Works of Art.

                    “Assignment
Agreement” has the meaning ascribed to it in Section 9.1(a).

                    “Auction
Guaranty Side Letter” shall mean that certain letter agreement, by and
among Agent and the Credit Parties, dated as of the Closing Date, relating to
auction guaranties, as the same may be amended, restated, supplemented or
otherwise modified from time to time.

A-3

                    “Australia
Sale” has the meaning ascribed to it in Section 6.8.

                    “Available
U.K. Art Loan Balance” means the Dollar Equivalent of the aggregate
outstanding principal balance of all Eligible Art Loans owned by U.K. Borrowers
minus (a) the amount, if any, by which the Dollar Equivalent of the aggregate
outstanding principal balance of all Eligible Venture Loans owned by U.K.
Borrowers exceeds an amount equal to $10,000,000 less the Dollar Equivalent of
the outstanding principal balance of Eligible Venture Loans included in the
Available U.S. Art Loan Balance minus (b) the amount, if any, by which the
Dollar Equivalent of the outstanding principal balance of Unhedged U.K. Art
Loans exceeds 25% of the Dollar Equivalent of the aggregate outstanding
principal balance of all Eligible Art Loans owned by the U.K. Borrowers.

                    “Available
U.S. Art Loan Balance” means the Dollar Equivalent of the aggregate
outstanding principal balance of all Eligible Art Loans owned by U.S. Borrowers
minus (a) the amount, if any, by which the Dollar Equivalent of the
aggregate outstanding principal balance of all Eligible Venture Loans owned by
U.S. Borrowers exceeds $10,000,000 minus (b) the amount, if any, by
which the Dollar Equivalent of the outstanding principal balance of Unhedged
U.S. Art Loans exceeds 25% of the Dollar Equivalent of the aggregate
outstanding principal balance of all Eligible Art Loans owned by the U.S.
Borrowers.

                    “Bank
Product and Hedging Obligations” means any and all obligations of any
Sotheby Entity, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), to any Lender or any
affiliate of any Lender under or in respect of (i) any and all Rate Management
Transactions, (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Management Transactions and (iii) any
and all Bank Products.

                    “Bank
Products” means any of the following services provided to any Sotheby
Entity: (i) commercial credit card services, (ii) cash management and other
treasury management services (including, without limitation, controlled
disbursements, automated clearinghouse transactions, return items, and
interstate depository network services) and (iii) foreign exchange related
services.

                    “Bankruptcy
Code” means the provisions of Title 11 of the United States Code, 11 U.S.C.
§§101 et seq. 

                    “Blocked
Accounts” has the meaning ascribed to it in Annex C.

                    “Blocked
Account Agreement” has the meaning ascribed to it in Annex C.

                    “Borrower
Representative” means Parent, in its capacity as Borrower Representative
pursuant to the provisions of Sections 1.1(c) and 1.2. 

                    “Borrowers”
has the meaning ascribed thereto in the preamble to the Agreement.

                    “Borrowing
Availability” means either the U.S. Borrowing Availability or the U.K.
Borrowing Availability, as the context may require.

A-4

                    “Borrowing
Base” means either the U.S. Borrowing Base or the U.K. Borrowing Base, as
the context may require.

                    “Borrowing
Base Certificate” means a certificate to be executed and delivered from
time to time by the Borrowers in the form attached to the Agreement as Exhibit
4.1(A).

                    “Business
Day” means any day that is not a Saturday, a Sunday or a day on which banks
are required or permitted to be closed in the State of New York and in
reference to LIBOR Loans shall mean any such day that is also a LIBOR Business
Day. 

                    “Canadian
Dollars” means the lawful currency of Canada.

                    “Capital
Expenditures” means, with respect to any Person, all expenditures (by the
expenditure of cash or the incurrence of Indebtedness) by such Person during
any measuring period for any fixed assets or improvements or for replacements,
substitutions or additions thereto that have a useful life of more than one
year and that are required to be capitalized under GAAP.

                    “Capital
Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.

                    “Capital
Lease Obligation” means, with respect to any Capital Lease of any Person,
the amount of the obligation of the lessee thereunder that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease.

                    “Cash
Collateral Account” has the meaning ascribed to it Annex B.

                    “Cash
Equivalent Investments” means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof or, in the case of any Foreign Subsidiary, guaranteed by any other
member country of O.E.C.D. or any agency thereof, in each case maturing within
one year from the date of acquisition thereof, (ii) commercial paper or other
marketable debt securities maturing no more than one year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., (iii)
certificates of deposit maturing no more than one year from the date of
creation thereof issued by commercial banks incorporated under the laws of the
United States of America or, in the case of any Foreign Subsidiary, under the
laws of any other member country of O.E.C.D., each having combined capital,
surplus and undivided profits of not less than $300,000,000 and having a senior
unsecured rating of “A” or better by an internationally recognized rating
agency or an equivalent rating from a nationally recognized rating agency of
the country in which such commercial bank is incorporated (an “A Rated Bank”),
(iv) time deposits maturing no more than thirty (30) days from the date of
creation thereof with A Rated Banks and (v) mutual funds that invest primarily
in one or more of the investments described in clauses (i) through (iv)
above and currently have an investment grade rating from either Standard &
Poor’s Ratings Group or Moody’s Investors Service, Inc.

                    “Cash
Management Systems” has the meaning ascribed to it in Section 1.8.

A-5

                    “CCA”
has the meaning ascribed to it in Section 3.1(b).

                    “CFC”
means a Person that is a controlled foreign corporation under Section 957 of
the IRC.

                    “Change
of Control” means either of the following: (a) any person or group of
persons (within the meaning of the Securities Exchange Act of 1934) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934) of 30% or more of the aggregate ordinary voting power represented by all
of the issued and outstanding shares of capital Stock of Parent; or (b) during
any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of Parent (together
with any new directors whose election by the board of directors of Parent or
whose nomination for election by the Stockholders of Parent was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason other than death
or disability to constitute a majority of the directors then in office.

                    “Charges”
means all federal, state, county, city, municipal, local, foreign or other
governmental taxes (including taxes owed to the PBGC at the time due and
payable), levies, assessments, charges, liens, claims or encumbrances upon or relating
to (a) the Collateral, (b) the Obligations, (c) the employees, payroll, income
or gross receipts of any Sotheby Entity, (d) any Sotheby Entity’s ownership or
use of any properties or other assets, or (e) any other aspect of any Sotheby
Entity’s business.

                    “Chattel
Paper” means any “chattel paper,” as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Sotheby Entity.

                    “Closing
Checklist” means the schedule, including all appendices, exhibits or
schedules thereto, listing certain documents and information to be delivered in
connection with the Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached hereto as Annex
D.

                    “Closing
Date” means August 31, 2009.

                    “Code”
means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of New York, the term “Code”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.

A-6

                    “Collateral”
means the property covered by the U.S. Collateral Documents and the U.K.
Collateral Documents and any other property, real or personal, tangible or
intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Agent, on the Secured
Parties, to secure the Secured Obligations.

                    “Collateral
Documents” means the U.S. Collateral Documents and the U.K. Collateral
Documents.

                    “Collateral
Reports” means the reports with respect to the Collateral referred to in Annex
F.

                    “Collection
Account” means (i) with respect to payments in Dollars, that certain
account of Agent, account number 50279513 in the name of Agent at Deutsche Bank
Trust Company Americas in New York, New York ABA No. 021 001 033 or (ii) with
respect to payments in Sterling, account number 00282596 in the
name of Agent at Barclays Bank in London, or in each case such other account as
may be specified in writing by Agent as the “Collection Account” for the
applicable payments.

                    “Commitment
Termination Date” means the earliest of (a) August 31, 2012, (b) the date
of termination of Lenders’ obligations to make Advances and to incur Letter of
Credit Obligations or permit existing Advances and Letter of Credit Obligations
to remain outstanding pursuant to Section 8.2(b), and (c) the date of
(i) indefeasible prepayment in full by Borrowers of the Loans and all other
outstanding Obligations and the cancellation and return (or stand-by guarantee)
of all Letters of Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B and (ii) the permanent reduction of all
Commitments to zero dollars ($0).

                    “Commitments”
means (a) as to any Lender, the commitment of such Lender to make Revolving
Credit Advances, incur Letter of Credit Obligations or purchase participations
therein as set forth on Annex J to the Agreement or in the most recent
Assignment Agreement executed by such Lender (including without duplication the
Swing Line Lender’s Swing Line Commitment as a subset of its Commitment) and
(b) as to all Lenders, the aggregate commitment of all Lenders to make
Revolving Credit Advances, incur Letter of Credit Obligations or purchase
participations therein (including without duplication the Swing Line Lender’s
Swing Line Commitment as a subset of its Commitment), which aggregate
commitment shall be Two Hundred Million Dollars ($200,000,000) on the Closing
Date, as such amount may be reduced or adjusted from time to time in accordance
with the Agreement.

                    “Compliance
Certificate” has the meaning ascribed to it in Annex E.

                    “Consolidated
Net Tangible Assets” means, at any date of determination, the aggregate
amount of assets (less applicable reserves and other properly deductible items)
after deducting therefrom (a) total liabilities, (b) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, and (c) the aggregate principal amount of all Eligible Art Loans
and the value of all Eligible Art Inventory included in a Borrowing Base, all
as set forth on the books and records of Parent and its consolidated
Subsidiaries and computed in accordance with GAAP at such date.

A-7

                    “Contingency
Reserve” means any contingency reserve established by Parent and its
Subsidiaries, on a consolidated basis, in accordance with GAAP, except any
contingency reserve established in respect of expenses incurred in the ordinary
course of business.

                    “Contracts”
means all “contracts,” as such term is defined in the Code, now owned or
hereafter acquired by any Sotheby Entity, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Sotheby Entity may now
or hereafter have any right, title or interest, including any agreement
relating to the terms of payment or the terms of performance of any Account.

                    “Contribution
Agreement” means the Contribution, Indemnification and Subordination
Agreement, dated as of the Closing Date, among the U.S. Credit Parties and
Agent.

                    “Contribution
Notice” means a notice issued by the Pensions Regulator in accordance with
section 38 of the Pensions Act 2004 (as amended) of the United Kingdom.

                    “Control
Letter” means a letter agreement between Agent and (i) the issuer of
uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (ii) a securities intermediary with respect to securities,
whether certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any Credit Party,
(iii) a futures commission merchant or clearing house, as applicable, with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant limits any security interest in the applicable financial
assets in a manner reasonably satisfactory to Agent, acknowledges the security
interest of Agent, on behalf of itself and the other Secured Parties, on such
financial assets, and agrees to follow the instructions or entitlement orders
of Agent without further consent by the affected Credit Party.

                    “Convertible
Note Hedge Agreements” means those certain agreements and confirmations
relating to the hedge transactions entered into among Parent and the
Convertible Note Hedge Counterparties in connection with the issuance of the
Convertible Notes.

                    “Convertible
Note Hedge Counterparties” means those Persons, other than Parent, that are
parties to Convertible Note Hedge Agreements.

                    “Convertible
Note Indenture” means that certain Indenture, dated as of June 17, 2008,
governing the Convertible Notes, as amended, restated, supplemented or
otherwise modified from time to time.

                    “Convertible
Notes” means Parent’s 3.125% Convertible Senior Notes due 2013, in an
aggregate principal amount outstanding on the date hereof of $200,000,000,
issued pursuant to the Convertible Note Indenture.

                    “Convertible
Note Warrants” means those certain warrants for common stock of Parent
issued by Parent to the Convertible Note Hedge Counterparties in connection
with the Convertible Note Hedge Agreements.

A-8

                    “Copyright
License” means any and all rights now owned or hereafter acquired by any
Sotheby Entity under any written agreement granting any right to use any
Copyright or Copyright registration.

                    “Copyright
Security Agreements” means the Copyright Security Agreements made in favor
of Agent, on behalf of itself and the other Secured Parties, by each applicable
Credit Party.

                    “Copyrights”
means all of the following now owned or hereafter adopted or acquired by any
Sotheby Entity: (a) all copyrights and General Intangibles of like nature
(whether registered or unregistered), all registrations and recordings thereof,
and all applications in connection therewith, including all registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any state or territory thereof,
or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.

                    “Credit
Party” means any Borrower or any Guarantor, and “Credit Parties”
shall mean all such Persons, collectively.

                    “Current
Fiscal Year” has the meaning ascribed to it in Annex G.

                    “Data
Protection Laws” means any applicable data protection or privacy laws or
regulations including all laws and regulations implementing in the United
Kingdom the European Union’s Data Protection Directive 95/46/EC and the
European Union’s Privacy and Electronic Communications Directive 2002/58/EC.

                    “Default”
means any event that, with the passage of time or notice or both, would, unless
cured or waived, become an Event of Default.

                    “Default
Rate” has the meaning ascribed to it in Section 1.5(d).

                    “Deposit
Accounts” means all “deposit accounts” as such term is defined in the Code,
now or hereafter held in the name of any Credit Party.

                    “Direction”
has the meaning ascribed to it in Section 1.15(a).

                    “Disclosure
Schedules” means the Schedules prepared by Borrowers and denominated as Disclosure
Schedules (1.4) through (6.7) in the table of contents to the Agreement.

                    “Documents”
means all “documents,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located.

                    “Dollar
Equivalent” means, with respect to any amount denominated in Dollars, such amount
of Dollars, and with respect to any amount denominated in a currency other than
Dollars, the amount of Dollars, as of any date of determination, into which
such other currency (as the context may require) can be converted in accordance
with Section 1.18.

A-9

                    “Dollar
Index Rate” means, for any day, a rate per annum equal to the highest of
(a) the rate last quoted by The Wall Street Journal as the “Prime Rate”
in the United States or, if The Wall Street Journal ceases to quote such
rate, the highest per annum interest rate published by the Federal Reserve
Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest
Rates) as the “bank prime loan” rate or, if such rate is no longer quoted
therein, any similar rate quoted therein (as determined by Agent) or in any
similar release by the Federal Reserve Board (as determined by Agent), (b) the
sum of 3.0% per annum and the Federal Funds Rate, and (c) the sum of (x) the
Dollar LIBOR Rate, as defined herein, calculated for each such day based on a
LIBOR Period of three months determined two (2) Business Days prior to such day
(which Dollar LIBOR Rate shall not be less than 2.00% per annum) plus (y) the
excess of the Applicable Dollar Revolver LIBOR Margin over the Applicable Dollar
Revolver Index Margin, in each instance, as of such day. Any change in the
Dollar Index Rate due to a change in any of the foregoing shall be effective on
the effective date of such change in the “bank prime loan” rate, the Federal
Funds Rate or the Dollar LIBOR Rate for a LIBOR Period of three months.

                    “Dollar
LIBOR Rate” means for each LIBOR Period with respect to a LIBOR Loan
denominated in Dollars, the highest of (a) the offered rate per annum for
deposits of Dollars for such LIBOR Period that appears on Reuters Screen
LIBOR01 Page as of 11:00 A.M. (London, England time) two (2) Business Days
prior to the first day in such LIBOR Period, (b) if such LIBOR Period is for a
duration less than three months, the offered rate per annum for deposits of
Dollars for a three-month LIBOR Period commencing on the first day in such
LIBOR Period that appears on Reuters Screen LIBOR01 Page as of 11:00 A.M.
(London, England time) two (2) Business Days prior to the first day in such
LIBOR Period and (c) 2.00% per annum. If any offered rate described in the
foregoing clause (a) or (b) does not exist, such rate will be the
rate of interest per annum, as determined by Agent (rounded upwards, if
necessary, to the nearest 1/100 of 1%) at which deposits of Dollars in
immediately available funds are offered at 11:00 A.M. (London, England time)
two (2) Business Days prior to the first day in such LIBOR Period by major
financial institutions reasonably satisfactory to Agent in the London interbank
market for a LIBOR Period of the applicable duration for the applicable
principal amount on such date of determination.

                    “Dollar
Revolving Credit Advance” has the meaning ascribed to it in Section
1.1(a)(i).

                    “Dollars”
or “$” means lawful currency of the United States of America.

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

                    “Domestic
Subsidiary Guarantor” means a Domestic Subsidiary that does not constitute
a U.S. Borrower or an Immaterial Subsidiary.

                    “Domestic
Subsidiary Guaranty” means that certain Guaranty, dated as of the Closing
Date, executed by each Domestic Subsidiary Guarantor in favor of Agent, for the
benefit of Agent and the Lenders.

A-10

                    “Due-to-Consignor
Amount” means, on any date of determination, the aggregate amount of cash
received and held by all Sotheby Entities that is payable to consignors as of
such day as a result of the sale of such consignors’ Works of Art by a Sotheby
Entity (net of the aggregate outstanding amount of all principal, accrued
interest and other related amounts as of such day with respect to any Art Loans
secured by such Works of Art).

                    “Due-to-Consignor
Disbursement Account” means such account as Borrower Representative and
Agent may agree upon from time to time pursuant to a written agreement.

                    “Due-to-Consignor
Reserve” means, at any time, a reserve equal to the positive difference, if
any, of (a) 100% of the amounts payable to consignors in respect of consigned
items sold to third parties by the Sotheby Entities at such time minus
(b) an amount equal to (i) the aggregate balance of accounts receivable of the
Sotheby Entities (determined in accordance with GAAP) at such time plus
(ii) the aggregate amount of cash of the Sotheby Entities (as determined in
accordance with GAAP) at such time minus (c) the amount of such cash
subject to a Lien (or held in a deposit or securities account subject to a
Lien) in favor of any Person other than (i) Agent or a (ii) consignor to whom
such cash is due to be paid in respect of the sale of a Work of Art consigned by
such Person to the Sotheby Entities for sale minus (d) without
duplication of the foregoing clause (c), the amount of such cash subject
to any restriction on withdrawal from the deposit or securities account in
which such cash is held.

                    “Due-to-Consignor
Statement” has the meaning ascribed to it in Annex E.

                    “EBITDA”
means, with respect to Parent and its Subsidiaries, on a consolidated basis,
for any fiscal period, without duplication, an amount equal to (a) consolidated
net income of such Persons for such period determined in accordance with GAAP, minus
(b) the sum of (i) income tax credits, (ii) gain from extraordinary items for
such period and (iii) any non-recurring non-cash gains, in each case, to the
extent included in the calculation of consolidated net income of such Persons
for such period in accordance with GAAP, but without duplication, plus
(c) the sum of (i) the provision for income taxes with respect to such fiscal
period, (ii) Interest Expense with respect to such period, (iii) loss from
extraordinary items for such period, (iv) for the Fiscal Quarter ended December
31, 2008, auction guaranty losses as previously described to Agent not to
exceed $11,000,000 in the aggregate, (v) depreciation and amortization for such
period, (vi) the amount of any deduction to consolidated net income as a result
of any grant of any Stock (including restricted stock and stock options) and
(vii) other non-recurring expenses which either (A) do not represent a cash
item in such fiscal period or any future period (in each case, of or by Parent
and its Subsidiaries for such fiscal period) or (B) do not exceed $25,000,000
in the aggregate (when added to all other amounts determined under this subclause
(B)), in each case, to the extent included in the calculation of
consolidated net income of such Persons for such period in accordance with
GAAP, but without duplication. For purposes of this definition, the following
items shall be excluded in determining consolidated net income of such Persons:
(1) the income (or deficit) of any other Person accrued prior to the date it
became a Subsidiary of, or was merged or consolidated into, any such Person or
any of such Persons’ Subsidiaries; (2) the income (or deficit) of any other
Person (other than a Subsidiary) in which any such Person has an ownership
interest, except to the extent any such income has actually been received by
such Person in the form of cash dividends or distributions; (3) the
undistributed earnings of any Subsidiary of any such Person to the extent that
the declaration or payment of dividends or 

A-11

similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such Subsidiary;
(4) any net gain from the collection of the proceeds of life insurance
policies; (5) any net gain arising from the acquisition of any securities, or
the extinguishment, under GAAP, of any Indebtedness, of any such Person; (6) in
the case of a successor to any such Person by consolidation or merger or as a
transferee of its assets, any earnings of such successor prior to such
consolidation, merger or transfer of assets; and (7) any deferred credit
representing the excess of equity in any Subsidiary of any such Person at the
date of acquisition of such Subsidiary over the cost to such Person of the
investment in such Subsidiary.

                    “E-Fax”
means any system used to receive or transmit faxes electronically.

                    “Eligible
Art Loan” has the meaning ascribed to it in Section 1.6.

                    “Eligible
Art Loan Collateral” shall mean, with respect to any Art Loan of any
Borrower, a Work of Art:

	
 

	
 

	
 

	
          (a)
 in which such Borrower has a first priority security interest securing
 repayment of such Art Loan that is perfected in each applicable jurisdiction
 (i) by the filing of a financing statement pursuant to the UCC or (ii) by
 physical possession of such Work of Art by such Borrower or its agent at all
 times;

	
 

	
 

	
 

	
          (b)
 unless otherwise agreed by Agent, with respect to which, if such Borrower has
 a security interest in such Work of Art that is perfected by physical
 possession by a Person acting as an agent of such Borrower (which Person may
 be another Sotheby Entity) or otherwise in the physical possession of any
 Person other than such Borrower, (i) such Person has executed a bailee
 letter, (ii) Reserves satisfactory to Agent have been established, or (iii)
 other arrangements have been entered into, in form and substance reasonably
 acceptable to Agent;

	
 

	
 

	
 

	
          (c)
 that is (i) (x) located in a Permitted Art Loan Country or (y) in transport
 between such countries and (ii) if located in a Permitted Art Loan Country,
 such Borrower shall have taken all actions reasonably required by Agent with
 respect to such Work of Art in order to protect the interests of such
 Borrower and Agent therein under the laws of such Permitted Art Loan Country;

	
 

	
 

	
 

	
          (d)
 that, if held by such Borrower, is held (i) at a location owned by a Sotheby
 Entity, or (ii) unless Reserves satisfactory to Agent have been established
 (A) at a location in which a Sotheby Entity has obtained a leasehold interest
 with respect to which, unless otherwise agreed by Agent, the lessor has
 executed a landlord waiver, in form and substance reasonably acceptable to
 Agent, or (B) at a warehouse, storage facility or other third-party location
 (including, without limitation, the Geneva free port, but not including the
 location of any agent described in paragraph (b) of this definition)
 with respect to which, unless otherwise agreed by Agent, such third party has
 executed a bailee letter in form and substance reasonably acceptable to
 Agent;

	
 

	
 

	
 

	
          (e)
 that is (i) in the physical possession of such Borrower, (ii) in the physical
 possession of an agent described in paragraph (b) of this definition
 or (iii) unless 

A-12

	
 

	
 

	
 

	
Reserves
 satisfactory to Agent have been established, in the actual physical
 possession of the applicable Art Loan Debtor at a location owned by such Art
 Loan Debtor;

	
 

	
 

	
 

	
          (f)
 that is (i) adequately insured by such Borrower or the applicable Art Loan
 Debtor and (ii) if such Work of Art is insured by the applicable Art Loan
 Debtor, subject to a valid loss payable endorsement in favor of such Borrower
 with respect to such Work of Art;

	
 

	
 

	
 

	
          (g)
 with respect to which the applicable Art Loan Debtor is not the original
 artist or creator;

	
 

	
 

	
 

	
          (h)
 with respect to which the validity, enforceability, perfection or priority of
 such Borrower’s security interest in such Work of Art is not subject to any
 litigation, other than litigation with respect to which (i) such Borrower has
 notified Agent of such litigation, and (ii) Agent has determined in its
 reasonable judgment, pursuant to a written notice to such Borrower (not to be
 unreasonably withheld or delayed), that such litigation does not
 constitute good faith litigation;

	
 

	
 

	
 

	
          (i)
 with respect to which the rights of the related Art Loan Debtor in such Work
 of Art are not subject to litigation, unless (i) such Borrower notifies Agent
 of such litigation, and (ii) Agent has determined in its reasonable judgment,
 pursuant to a written notice to such Borrower (not to be
 unreasonably withheld or delayed), that such litigation does not have
 a material risk of being determined adversely to such Borrower; and

	
 

	
 

	
 

	
          (j)
 if the value of such Work of Art exceeds $250,000, has been the subject of a
 search by such Borrower in the Art Loss Register.

                    “Eligible
Art Inventory” has the meaning ascribed to it in Section 1.7. 

                    “Eligible
Venture Loan” means a Venture Loan that is an Eligible Art Loan.

                    “Environmental
Laws” means all applicable federal, state, local and foreign laws,
statutes, ordinances, codes, rules, standards and regulations, now or hereafter
in effect, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for or
relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§
9601 et seq.) (“CERCLA”); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.);
the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic
Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air Act (42
U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control Act (33
U.S.C. §§ 1251 et seq.); the Occupational Safety and Health Act (29
U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et
seq.), and any and all regulations promulgated thereunder, and all analogous
state, local and foreign counterparts or equivalents and any transfer of
ownership notification or approval statutes.

A-13

                    “Environmental
Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law, arising under or
related to any Environmental Laws, Environmental Permits, or in connection with
any Release or threatened Release or presence of a Hazardous Material whether
on, at, in, under or from any real or personal property.

                    “Environmental
Permits” means all permits, licenses, authorizations, certificates,
approvals or registrations required for the operations of any Sotheby Entity by
any Governmental Authority under any Environmental Laws.

                    “Equipment”
means all “equipment,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located and, in any event,
including all such Credit Party’s machinery and equipment, including processing
equipment, conveyors, machine tools, data processing and computer equipment,
including embedded software and peripheral equipment and all engineering,
processing and manufacturing equipment, office machinery, furniture, materials
handling equipment, tools, attachments, accessories, automotive equipment,
trailers, trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock
and other equipment of every kind and nature, trade fixtures and fixtures not
forming a part of real property, together with all additions and accessions
thereto, replacements therefor, all parts therefor, all substitutes for any of
the foregoing, fuel therefor, and all manuals, drawings, instructions,
warranties and rights with respect thereto, and all products and proceeds
thereof and condemnation awards and insurance proceeds with respect thereto.

                    “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and any regulations promulgated thereunder.

                    “ERISA
Affiliate” means, with respect to any Sotheby Entity, any trade or business
(whether or not incorporated) that, together with such Sotheby Entity, are
treated as a single employer within the meaning of Sections 414(b), (c), (m) or
(o) of the IRC.

                    “ERISA
Event” means, with respect to any Sotheby Entity or any ERISA Affiliate,
(a) any event described in Section 4043(c) of ERISA with respect to a Title IV
Plan; (b) the withdrawal of any Sotheby Entity or ERISA Affiliate from a Title
IV Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Sotheby Entity or any ERISA Affiliate
from any Multiemployer Plan; (d) the filing of a notice of intent to terminate
a Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Sotheby
Entity or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within thirty
(30) days; (g) any other event or condition that would reasonably be expected
to 

A-14

constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA; or (i) the loss of a Qualified Plan’s qualification or tax exempt
status; or (j) the termination of a Plan described in Section 4064 of ERISA.

                    “ESOP”
means a Plan that is intended to satisfy the requirements of Section 4975(e)(7)
of the IRC. 

                    “Estimated
Value” means, as of any date of determination, with respect to any Work of
Art, the most recent estimate of value of such Work of Art, as determined from
time to time by the applicable Borrower in accordance with Section 5.12.

                    “E-System”
means any electronic system, including Intralinks® and any other Internet or
extranet-based site, whether such electronic system is owned, operated or
hosted by Agent, any of its Affiliates, or any of such Person’s respective
officers, directors, employees, attorneys, agents and representatives or any
other Person, providing for access to data protected by passcodes or other
security system. 

                    “Euro”
means the single currency of Participating Member States.

                    “Event
of Default” has the meaning ascribed to it in Section 8.1.

                    “Executive
Order” means Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001, and relating to Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism.

                    “Fair
Labor Standards Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et seq. 

                    “Federal
Funds Rate” means, for any day, a floating rate equal to the weighted
average of the rates on overnight Federal funds transactions among members of
the Federal Reserve System, as determined by Agent in its sole discretion,
which determination shall be final, binding and conclusive (absent manifest
error).

                    “Federal
Reserve Board” means the Board of Governors of the Federal Reserve System.

                    “Fees” means
any and all fees payable to Agent or any Lender pursuant to the Agreement or
any of the other Loan Documents.

                    “Financial
Covenant Compliance Period” means each period (i) commencing on any date on
or after December 31, 2009 on which (a) average daily Aggregate Borrowing
Availability shall be less than $50,000,000 for a period of 30 consecutive
Business Days, (b) Aggregate Borrowing Availability shall be less than
$30,000,000 on such date, or (c) the average daily outstanding principal
balance of the Revolving Loan shall exceed $90,000,000 for a period of 30
consecutive Business Days and (ii) continuing until the date on which (x)
average daily 

A-15

Aggregate
Borrowing Availability shall have been equal to or greater than $50,000,000 for
a period of 30 consecutive Business Days following the commencement of such
Financial Covenant Compliance Period, and (y) the average daily outstanding
principal balance of the Revolving Loan shall have been equal to or less than
$90,000,000 for a period of 30 consecutive Business Days following the
commencement of such Financial Covenant Compliance Period.

                    “Financial
Covenants” means the financial covenants set forth in Annex G.

                    “Financial
Officer” means, with respect to any Person, the Chief Financial Officer,
Treasurer or Controller thereof or another officer thereof of similar seniority
and responsibility.

                    “Financial
Statements” means the consolidated and consolidating income statements,
statements of cash flows and balance sheets of Borrowers delivered in
accordance with Section 3.4 and Annex E.

                    “Financial
Support Direction” means a direction issued by the Pensions Regulator in
accordance with section 43 of the Pensions Act 2004 (as amended) of the United
Kingdom.

                    “Fiscal
Month” means any of the monthly accounting periods of Parent.

                    “Fiscal
Quarter” means any of the quarterly accounting periods of Parent ending on
March 31, June 30, September 30 or December 31 of each year.

                    “Fiscal
Year” means any of the annual accounting periods of Parent ending on
December 31 of each year.

                    “Fixed
Charges” means, with respect to Parent and its Subsidiaries, on a
consolidated basis, for any fiscal period, an amount equal to (a) the aggregate
of all Interest Expense with respect to such period plus (b) scheduled payments
of principal with respect to Indebtedness during such period plus (c)
dividends and distributions on the Stock of Parent paid in cash during such
period (but not to exceed $3,300,000 for the Fiscal Quarter ended March 31,
2009) plus (d) payments with respect to purchases of any Senior Notes or
repurchases of any Stock of Parent, in each case, during such period minus
(e) discounts on the Senior Notes, the Convertible Notes, and the amounts owed
under the York Avenue Loan Agreement, in each case, to the extent included as
Interest Expense during such period on a non-cash basis minus (f)
amounts included in Interest Expense for such period in respect of amortization
of (i) closing fees incurred in conjunction with this Agreement and any fees
related to amendments or termination of the Prior Credit Agreement and (ii)
interest accrued on amounts payable on the unfunded senior management benefit
plan of Parent and its Subsidiaries, in each case, of or by Parent and its
Subsidiaries on a consolidated basis for such period.

                    “Fixed
Charge Coverage Ratio” means, with respect to Parent and its Subsidiaries,
on a consolidated basis, for any four Fiscal Quarter period, the ratio of (I)
the sum of (a) EBITDA for each of such four Fiscal Quarters minus (b)
Capital Expenditures during such four Fiscal Quarters (excluding $85,000,000
expended pursuant to the York Avenue Loan Documents during the Fiscal Quarter
ended March 31, 2009) minus (c) cash income taxes paid 

A-16

during such
Fiscal Quarters net of income tax refunds to (II) the aggregate Fixed Charges
for such four Fiscal Quarters.

                    “Fixtures”
means all “fixtures” as such term is defined in the Code, now owned or
hereafter acquired by any Sotheby Entity.

                    “Foreign
Subsidiary” means any Subsidiary of Parent that is not a Domestic
Subsidiary.

                    “Fronted
Percentage” means, as of any date of determination, the percentage obtained
by dividing (i) the aggregate Commitments of the Non-Sterling Lenders as of
such date by (ii) aggregate Commitments of all Lenders as of such date.

                    “Fronting
Lender” means GE Capital, in its capacity as Fronting Lender, or its
successor appointed pursuant to Section 9.7(b).

                    “Fronting
Lender Note” has the meaning ascribed to it in Section 1.1(a)(ii).

                    “Funded
Debt” means, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long term debt, revolving credit and short term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Borrowers, the Obligations and, without duplication, Guaranteed Indebtedness
consisting of guaranties of Funded Debt of other Persons.

                    “GAAP”
means generally accepted accounting principles in the United States of America
consistently applied, as such term is further defined in Annex G to the
Agreement.

                    “GE
Capital” means General Electric Capital Corporation, a Delaware
corporation.

                    “General
Intangibles” means all “general intangibles,” as such term is defined in
the Code, now owned or hereafter acquired by any Sotheby Entity, including all
right, title and interest that such Sotheby Entity may now or hereafter have in
or under any Contract, all payment intangibles, customer lists, Licenses,
Copyrights, Trademarks, Patents, and all applications therefor and reissues,
extensions or renewals thereof, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License),
all rights and claims in or under insurance policies (including insurance for
fire, damage, loss and casualty, whether covering personal property, real
property, tangible rights or intangible rights, all liability, life, key man
and business interruption insurance, and all unearned premiums), uncertificated
securities, choses in action, deposit, checking and other bank accounts, 

A-17

rights to
receive tax refunds and other payments, rights to receive dividends,
distributions, cash, Instruments and other property in respect of or in
exchange for pledged Stock and Investment Property, rights of indemnification,
all books and records, correspondence, credit files, invoices and other papers,
including without limitation all tapes, cards, computer runs and other papers
and documents in the possession or under the control of such Sotheby Entity or
any computer bureau or service company from time to time acting for such
Sotheby Entity.

                    “Goods”
means all “goods” as defined in the Code, now owned or hereafter acquired by
any Sotheby Entity, wherever located, including embedded software to the extent
included in “goods” as defined in the Code, manufactured homes, standing timber
that is cut and removed for sale and unborn young of animals.

                    “Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any agency, department or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

                    “Guaranteed
Indebtedness” means as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness,
lease, dividend, or other obligation (including, without limitation, any
obligation described in Section 6.3(a)(vii)) (the “primary obligation”)
of any other Person (the “primary obligor”) in any manner, including any
obligation or arrangement of such Person to (a) purchase or repurchase any such
primary obligation, (b) advance or supply funds (i) for the purchase or payment
of any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor to
make payment of such primary obligation, (d) protect the beneficiary of such
arrangement from loss (other than product warranties given in the ordinary
course of business) or (e) indemnify the owner of such primary obligation
against loss in respect thereof. The amount of any Guaranteed Indebtedness at
any time shall be deemed to be an amount equal to the lesser at such time of
(x) the stated or determinable amount of the primary obligation in respect of
which such Guaranteed Indebtedness is incurred and (y) the maximum amount for
which such Person may be liable pursuant to the terms of the instrument
embodying such Guaranteed Indebtedness, or, if not stated or determinable, the
maximum reasonably anticipated liability (assuming full performance) in respect
thereof.

                    “Guaranties”
means, collectively, the Domestic Subsidiary Guaranty and any other guaranty
executed by any Guarantor in favor of Agent, for the benefit of Agent and
Lenders, in respect of all or a portion of the Obligations.

                    “Guarantors”
means the Domestic Subsidiary Guarantors, the U.K. Subsidiary Guarantors and
each other Person, if any, that executes a guaranty or other similar agreement
in favor of Agent, for the benefit of Agent and Lenders, in connection with the
transactions contemplated by the Agreement and the other Loan Documents.

                    “Hazardous
Material” means any substance, material or waste that is regulated by, or
forms the basis of liability now or hereafter under, any Environmental Laws,
including any 

A-18

material or
substance that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “pollutant,” “contaminant,” “hazardous constituent,” “special
waste,” “toxic substance” or other similar term or phrase under any
Environmental Laws, or (b) petroleum or any fraction or by product thereof,
asbestos, polychlorinated biphenyls (PCB’s), or any radioactive substance.

                    “Hong
Kong Dollars” means the lawful currency of Hong Kong. 

                    “IEEPA”
means the International Emergency Economic Power Act, 50 U.S.C. § 1701 et. seq.

                    “Immaterial
Subsidiary” means any Domestic Subsidiary or any Foreign Subsidiary
organized under the laws of England, in each case listed on Disclosure
Schedule (5.15), unless such entity shall have executed a Guaranty and such
Collateral Documents as Agent shall reasonably request.

                    “Indebtedness”
means, with respect to any Person, without duplication, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property
payment for which is deferred 6 months or more, but excluding obligations to
trade creditors incurred in the ordinary course of business that are unsecured
and not overdue by more than 6 months unless being contested in good faith, (b)
all reimbursement and other obligations with respect to letters of credit,
bankers’ acceptances and surety bonds, whether or not matured, (c) all
obligations evidenced by notes, bonds, debentures or similar instruments, (d)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Dollar
Index Rate as in effect on the Closing Date) of future rental payments under
all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement
designed to alter the risks of that Person arising from fluctuations in
currency values or interest rates, in each case whether contingent or matured,
(h) all Indebtedness referred to above secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon or in property or other assets (including accounts and
contract rights) owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness, and (i) the Obligations.

                    “Indemnified
Liabilities” has the meaning ascribed to it in Section 1.13.

                    “Indemnified
Person” has the meaning ascribed to in Section 1.13.

                    “Index
Rate Loan” means the Swing Line Loan or any portion of the Revolving Loan
bearing interest by reference to the Dollar Index Rate or the Sterling Index
Rate, as applicable.

                    “Insolvency
Event” has the meaning ascribed to in Section 12.5.

A-19

                    “Instruments”
means all “instruments,” as such term is defined in the Code, now owned or
hereafter acquired by any Sotheby Entity, wherever located, and, in any event,
including all certificated securities, all certificates of deposit, and all
promissory notes and other evidences of indebtedness, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel
Paper.

                    “Intellectual
Property” means any and all Licenses, Patents, Copyrights, Trademarks, and
the goodwill associated with such Trademarks.

                    “Intercompany
Indebtedness” has the meaning ascribed to in Section 12.5.

                    “Interest
Expense” means, with respect to any Person for any fiscal period, the sum
of (a) all interest, premium payments, debt discount, fees, charges and related
expenses in connection with borrowed money (excluding capitalized interest) or
in connection with the deferred purchase price of the assets, in each case, to
the extent treated as interest in accordance with GAAP and (b) the portion of
rent expense under Capital Leases that is treated as interest in accordance with
GAAP, in each case, of or by Parent and its Subsidiaries for such fiscal
period.

                    “Interest
Income” means, with respect to Parent and its Subsidiaries, on a consolidated
basis, for any fiscal period, an amount equal to the consolidated interest
income of such Persons for such period, determined in accordance with GAAP.

                    “Interest
Payment Date” means (a) as to any Index Rate Loan, the first Business Day of
each month to occur while such Loan is outstanding, and (b) as to any LIBOR
Loan, the last day of the applicable LIBOR Period; provided, that in the
case of any LIBOR Period greater than three months in duration, interest shall
be payable at three-month intervals and on the last day of such LIBOR Period; provided,
further, that, in addition to the foregoing, each of (x) the date upon
which all of the Commitments have been terminated and the Loans have been paid
in full and (y) the Commitment Termination Date shall be deemed to be an
“Interest Payment Date” with respect to any interest that has then accrued under
the Agreement; provided, further, that with respect to any
Revolving Credit Advance denominated in Sterling, (i) the first Interest
Payment Date to occur after the Closing Date with respect thereto shall be
March 1, 2010 (or such earlier date as Agent shall specify upon prior written
notice to Borrowers and Lenders) and (ii) any interest that would have been
payable on any day prior to such date without giving effect to clause (i)
of this proviso shall be added to the outstanding principal balance of the Loan
on which such interest accrued and shall thereafter accrue interest in
accordance with Section 1.5.

                    “Inventory”
means all “inventory,” as such term is defined in the Code, now owned or
hereafter acquired by any Sotheby Entity, wherever located, and in any event
including inventory, merchandise, goods and other personal property that are
held by or on behalf of any Sotheby Entity for sale or lease or are furnished
or are to be furnished under a contract of service, or that constitute raw
materials, work in process, finished goods, returned goods, or materials or
supplies of any kind, nature or description used or consumed or to be used or
consumed in such Sotheby Entity’s business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.

A-20

                    “Investment
Property” means all “investment property” as such term is defined in the
Code now owned or hereafter acquired by any Sotheby Entity, wherever located,
including (i) all securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of any Sotheby Entity, including the rights of any
Sotheby Entity to any securities account and the financial assets held by a
securities intermediary in such securities account and any free credit balance
or other money owing by any securities intermediary with respect to that
account; (iii) all securities accounts of any Sotheby Entity; (iv) all
commodity contracts of any Sotheby Entity; and (v) all commodity accounts held
by any Sotheby Entity.

                    “IRC”
means the Internal Revenue Code of 1986 and all regulations promulgated
thereunder.

                    “IRS”
means the Internal Revenue Service.

                    “Judgement
Conversion Date” has the meaning ascribed to it in Section 1.19(a).

                    “Judgement
Currency” has the meaning ascribed to it in Section 1.19(a).

                    “L/C
Issuer” has the meaning ascribed to it in Annex B.

                    “L/C
Sublimit” has the meaning ascribed to it in Annex B.

                    “Lenders”
means GE Capital, the other Lenders named on the signature pages of the
Agreement and, if any such Lender shall decide to assign all or any portion of
the Obligations, such term shall include any assignee of such Lender.

                    “Letter
of Credit Fee” has the meaning ascribed to it in Annex B.

                    “Letter
of Credit Obligations” means all outstanding obligations incurred by Agent
and Lenders at the request of Borrower Representative, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by GE Capital or another L/C Issuer or the
purchase of a participation as set forth in Annex B with respect to any
Letter of Credit. The amount of such Letter of Credit Obligations shall equal
the maximum amount that may be payable at such time or at any time thereafter
by the Lenders thereupon or pursuant thereto.

                    
“Letters of Credit” means standby letters of credit issued for the
account of any Borrower (and any Subsidiary thereof that may be a co-applicant
on any such Letter of Credit) by any L/C Issuer, and bankers’ acceptances
issued by any Borrower, for which Agent and Lenders have incurred Letter of
Credit Obligations. 

                    “Letter-of-Credit
Rights” means “letter-of-credit rights” as such term is defined in the
Code, now owned or hereafter acquired by any Sotheby Entity, including rights
to payment or performance under a letter of credit, whether or not such Sotheby
Entity, as beneficiary, has demanded or is entitled to demand payment or
performance.

A-21

                    “LIBOR
Business Day” means a Business Day on which banks in the City of London are
generally open for interbank or foreign exchange transactions.

                    “LIBOR
Loan” means any portion of the Revolving Loan bearing interest by reference
to a Dollar LIBOR Rate or a Sterling LIBOR Rate, as applicable.

                    
“LIBOR Period” means, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower Representative pursuant
to the Agreement and ending one, two or three months thereafter, as selected by
Borrower Representative’s irrevocable notice to Agent as set forth in Section
1.5(e); provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:

	
  

 	
  

 
	
  

 	
           (a)
 if any LIBOR Period would otherwise end on a day that is not a LIBOR Business
 Day, such LIBOR Period shall be extended to the next succeeding LIBOR
 Business Day unless the result of such extension would be to carry such LIBOR
 Period into another calendar month in which event such LIBOR Period shall end
 on the immediately preceding LIBOR Business Day;

 
	
  

 	
  

 
	
  

 	
           (b)
 any LIBOR Period that would otherwise extend beyond the Commitment
 Termination Date shall end two (2) LIBOR Business Days prior to such date;

 
	
  

 	
  

 
	
  

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

 
	
  

 	
  

 
	
  

 	
           (d)
 Borrower Representative shall select LIBOR Periods so that there shall be no
 more than 5 separate LIBOR Loans in existence at any one time.

 

                    “License”
means any Copyright License, Patent License, Trademark License or other license
of rights or interests now held or hereafter acquired by any Sotheby Entity.

                    “Lien”
means any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance,
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any lease or title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the Code or comparable law of
any jurisdiction).

                    “Liquidity
Amount” means, as of any date of determination, the sum of (a) the
Aggregate Borrowing Availability as of such date and (b) the Unrestricted Cash
Amount as of such date.

                    “Litigation”
has the meaning ascribed to it in Section 3.13(a).

                    “Loan
Account” has the meaning ascribed to it in Section 1.12.

A-22

                    “Loan
Documents” means the Agreement, the Notes, the Collateral Documents, the
Contribution Agreement, the Master Standby Agreement, the Auction Guaranty
Side Letter, and all other agreements, instruments, documents and
certificates identified in the Closing Checklist executed and delivered to, or
in favor of, Agent or any Lenders and including all other fee letters, pledges,
powers of attorney, consents, assignments, contracts, notices, letter of credit
agreements and all other written matter whether heretofore, now or hereafter
executed by or on behalf of any Credit Party, or any employee of any Credit
Party, and delivered to Agent or any Lender in connection with the Agreement or
the transactions contemplated thereby. Any reference in the Agreement or any
other Loan Document to a Loan Document shall include all appendices, exhibits
or schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to the Agreement or such Loan Document
as the same may be in effect at any and all times such reference becomes
operative.

                    “Loans”
means the Revolving Loan and the Swing Line Loan.

                    “Mandatory
Cost” is described in Schedule 1.5.

                    “Margin
Stock” has the meaning ascribed to in Section 3.10.

                    “Master
Standby Agreement” means the Master Agreement for Standby Letters of Credit
dated as of the Closing Date among Borrowers, as Applicant(s), and GE Capital,
as issuer.

                    “Material
Adverse Effect” means a material adverse effect on (a) the business,
assets, operations, prospects or financial or other condition of the Sotheby
Entities considered as a whole, (b) any Borrower’s ability to pay any of the
Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Collateral (including Works of Art securing repayment of Art
Loans) or Agent’s Liens, on behalf of itself and the other Secured Parties, on
the Collateral or the priority of such Liens, or (d) Agent’s or any Lender’s
rights and remedies under the Agreement and the other Loan Documents.

                    “Material
Indebtedness Contracts” means, collectively, (a) the Senior Note Indenture
and the Senior Notes, (b) the Convertible Note Indenture and the Convertible
Notes, (c) the York Avenue Loan Agreement, and (d) any other contract,
agreement or other instrument to which any Sotheby Entity is a party evidencing
any Indebtedness or Guaranteed Indebtedness (other than the Obligations) of
such Sotheby Entity having a Dollar Equivalent in excess of $10,000,000 in the
aggregate (including (x) undrawn committed or available amounts and (y) amounts
owing to all creditors under any combined or syndicated credit arrangements).

                    “Maximum
Amount” means, as of any date of determination, an amount equal to the
Commitment of all Lenders as of such date.

                    “Maximum
Distribution Amount” has the meaning assigned to it in Section 6.13(g).

                    “Maximum
Lawful Rate” has the meaning assigned to it in Section 1.5(f).

                    “Multiemployer
Plan” means a “multiemployer plan” as defined in Sections 3(37) or
4001(a)(3) of ERISA, and to which any Sotheby Entity or ERISA Affiliate is
making, is 

A-23

obligated to
make or has made or been obligated to make, contributions on behalf of
participants who are or were employed by any of them.

                    “New
Lender” has the meaning ascribed to it in Section 1.15(a)(ix).

                    “Non-Consignor
Art Loan” means any Art Loan made by a Borrower with respect to which the
related Art Loan Debtor has not consigned any of the Works of Art securing
repayment of such Art Loan to the Borrower for sale.

                    “Non-Funding
Lender” has the meaning ascribed to it in Section 9.9(a)(iii).

                    “Non-Sterling
Lender” shall mean each Lender designated in Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Lender as
a “Non-Sterling Lender”, unless such Lender shall have become a Sterling Lender
pursuant to Section 9.1(i).

                    “Notes”
means, collectively, the Revolving Notes, the Fronting Lender Note and the
Swing Line Notes.

                    “Notice
of Conversion/Continuation” has the meaning ascribed to it in Section
1.5(e).

                    “Notice
of Revolving Credit Advance” has the meaning ascribed to it in Section
1.1(a).

                    “Oatshare”
has the meaning ascribed to it in the preamble to the Agreement.

                    “Oberon”
has the meaning ascribed to it in the preamble to the Agreement.

                    “Obligation
Currency” has the meaning ascribed to it in Section 1.19(a).

                    “Obligations”
means all loans, advances, debts, liabilities and obligations for the
performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such
amounts are liquidated or determinable) owing by any Credit Party to Agent, any
Lender or any L/C Issuer, and all covenants and duties regarding such amounts,
of any kind or nature, present or future, whether or not evidenced by any note,
agreement, letter of credit agreement or other instrument, arising under the
Agreement or any of the other Loan Documents. This term includes all principal,
interest (including all interest that accrues after the commencement of any
case or proceeding by or against any Credit Party in bankruptcy, whether or not
allowed in such case or proceeding), Fees, expenses, attorneys’ fees and any
other sum chargeable to any Credit Party under the Agreement or any of the
other Loan Documents. This term does not include any Bank Product and Hedging
Obligations.

                    “Obligor”
has the meaning ascribed to it in Section 12.5.

A-24

                    “O.E.C.D.”
means the Organisation for Economic Co-operation and Development as
contemplated by the Convention on the Organisation for Economic Co-operation and
Development of December 14, 1960, as amended from time to time.

                    “OFAC”
means the U.S. Department of Treasury’s Office of Foreign Asset Control.

                    “Overadvance”
has the meaning ascribed to it in Section 1.1(a)(iii).

                    “Parent”
has the meaning ascribed to it in the preamble to the Agreement.

                    “Participating
Member State” means any member state which adopts the euro unit of the
single currency pursuant to the Treaty of Rome.

                    “Patent
License” means rights under any written agreement now owned or hereafter
acquired by any Sotheby Entity granting any right with respect to any invention
on which a Patent is in existence.

                    “Patents”
means all of the following in which any Sotheby Entity now holds or hereafter
acquires any interest: (a) all letters patent of the United States or of any
other country, all registrations and recordings thereof, and all applications
for letters patent of the United States or of any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State, or any other country, and (b) all reissues, continuations, continuations
in part or extensions thereof.

                    “PATRIOT
Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law
107-56) (The USA PATRIOT Act).

                    “PBGC”
means the Pension Benefit Guaranty Corporation.

                    “Pension
Plan” means a Plan described in Section 3(2) of ERISA.

                    “Permitted
Art Loan Country” means (a) the United States of America, (b) England, (c)
Wales, and (d) any other country with respect to which Agent, in its sole
discretion in consultation with Lenders, shall have determined (and notified
the Borrowers in writing) that Works of Art securing repayment of an Art Loan
may be located in such country without causing such Works of Art to fail to
constitute Eligible Art Loan Collateral pursuant to clause (c) of the
definition thereof, it being understood that Agent may withdraw such
determination at any time in its sole discretion with respect to any country
(other than the United States of America, England, and Wales) and thereafter
such country shall not constitute a Permitted Art Loan Country.

A-25

                    “Permitted
Consignment” means a “consignment” (as defined in Section 9-102(a)(20) of
the UCC) governed under the laws of the United States of America (or any State
thereof) of Art Inventory by a Borrower to a Person, with respect to which
consignment, such Borrower has taken all of the following actions:

                    (a)
conducted UCC searches against such Person in all applicable jurisdictions;

                    (b)
filed a UCC-1 financing statement in the applicable jurisdiction, naming such
Borrower as consignor and such Person as consignee, and providing an adequate description
of such Art Inventory for the collateral description;

                    (c)
if applicable, taken all actions required pursuant to, and otherwise satisfied
the requirements set forth in, Section 9-324(b) of the UCC in order to maintain
a security interest in such Art Inventory that has priority over all
conflicting security interests in such Art Inventory;

                    (d)
provided evidence to Agent, in form and substance reasonably satisfactory to
Agent, of such Borrower’s completion of the actions described in clauses (a)
through (c), as applicable, of this definition; and

                    (e)
taken any additional actions reasonably requested by Agent from time to time
with respect to such Art Inventory within ten (10) Business Days (or such later
date as Agent shall consent to in writing) of Agent’s request therefor in order
to protect the interests of Agent therein under all applicable laws.

                    “Permitted
Convertible Note Transactions” means any of the following:

                    (a)
upon the conversion of any Convertible Notes in accordance with their terms,
(i) the issuance by Parent of common stock solely to the extent required by the
Convertible Notes Indenture, or (ii) the issuance by Parent of common stock and
payment by Parent of cash to the holders of such Convertible Notes in an
aggregate amount not in excess of the applicable conversion obligation; provided,
that the amount of cash payable under the foregoing clause (ii) shall
not exceed an amount equal to the aggregate outstanding principal amount of
such Convertible Notes plus the amount received by Parent from the
Convertible Note Hedge Counterparties upon such conversion;

	
  

 	
  

 
	
  

 	
           (b)
 the issuance by Parent of common stock to the Convertible Note Hedge
 Counterparties (i) pursuant to the terms of the Convertible Note Warrants and
 (ii) to the extent required by the Convertible Note Hedge Agreements; and

 
	
  

 	
  

 
	
  

 	
           (c)
 (i) cash payments by Parent to the Convertible Note Hedge Counterparties upon
 any termination of the Convertible Note Warrants in an amount not in excess
 of that required by the Convertible Note Warrants and (ii) cash payments by
 Parent to the Convertible Note Hedge Counterparties upon termination of the
 Convertible Note Hedge Agreements.

 

A-26

                    “Permitted
Encumbrances” means the following encumbrances: (a) Liens for taxes or
assessments or other governmental Charges not yet due and payable or which are
being contested in accordance with Section 5.2(b); (b) pledges or
deposits of money securing statutory obligations under workmen’s compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Sotheby Entity is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers’, mechanics’
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of a Dollar Equivalent of $2,500,000 at any time, so long
as such Liens attach only to Inventory; (f) deposits securing, or in lieu of,
surety, appeal or customs bonds in proceedings to which any Sotheby Entity is a
party; (g) any attachment or judgment lien not constituting an Event of Default
under Section 8.1(i); (h) zoning restrictions, easements, licenses, or
other restrictions on the use of any Real Estate or other minor irregularities
in title (including leasehold title) thereto, so long as the same do not
materially impair the use, value, or marketability of such Real Estate; (i) any
Lien in favor of a consignor on a segregated deposit account established for
the benefit of such consignor and into which only proceeds of Works of Art
consigned by such consignor to a Sotheby Entity for sale (including such
Sotheby’s Entity’s commissions on such sales) are deposited; provided,
that if such consignor is an Art Loan Debtor, such Lien shall constitute a
“Permitted Encumbrance” only if an agreement among the applicable Borrower,
such consignor and the applicable account bank expressly states that amounts
received in such deposit account shall be transferred first, without any
further consent of any Person, to the applicable Borrower until the related Art
Loan is repaid in full prior to any such amounts being transferred to such
consignor; (j) presently existing or hereafter created Liens in favor of Agent,
on behalf of Secured Parties, pursuant to the Loan Documents; (k) other than
with respect to any Blocked Account or Cash Collateral Account, any lien or
banker’s right of set-off or combination of accounts arising by operation of
law or in accordance with standard terms of banking; (l) Liens expressly
permitted under clauses (c) and (d) of Section 6.7 of the
Agreement, and (m) Liens arising in the ordinary course of business in favor of
consignors securing Works of Art of such consignors that are consigned to a
Sotheby Entity for sale.

                    “Permitted
Inventory Country” means (a) the United States of America, (b) England, (c)
Wales, and (d) any other country with respect to which Agent, in its sole
discretion in consultation with Lenders, shall have determined (and notified
the Borrowers in writing) that Art Inventory may be located in such country
without causing such Art Inventory to fail to constitute Eligible Art Inventory
pursuant to Section 1.7(c), it being understood that Agent may withdraw
such determination at any time in its sole discretion with respect to any
country (other than the United States, England and Wales) and thereafter such
country shall not constitute a Permitted Inventory Country.

                    “Person”
means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, limited liability
company, institution, public benefit corporation, other entity or government
(whether federal, state, county, city, municipal, local, foreign, or otherwise,
including any instrumentality, division, agency, body or department thereof).

A-27

                    “Personal
Data” shall have the same meaning set forth in the Data Protection Laws. 

                    “Plan”
means, at any time, an “employee benefit plan”, as defined in Section 3(3) of
ERISA, that any Sotheby Entity or ERISA Affiliate maintains, contributes to or
has an obligation to contribute to or has maintained, contributed to or had an
obligation to contribute to at any time within the past 7 years on behalf of
participants who are or were employed by any Sotheby Entity or ERISA Affiliate.
“Plan” shall not include any pension or retirement plan or arrangement
operating in the United Kingdom.

                    “Prior
Agent” means Bank of America, N.A., in its capacity as administrative agent
under the Prior Credit Agreement.

                    “Prior
Credit Agreement” means that certain Amended and Restated Credit Agreement,
dated as of November 14, 2005, among Parent, the Company, Oatshare, Sotheby’s
U.K., the Prior Lenders and the Prior Agent, as amended from time to time.

                    “Prior
Lender Obligations” means the obligations of Parent and its Subsidiaries
arising under or in connection with the Prior Credit Agreement.

                    “Prior
Lenders” shall mean the financial institutions party to the Prior Credit
Agreement as lenders or as issuing bank.

                    “Proceeds”
means “proceeds,” as such term is defined in the Code, including (a) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable to any
Sotheby Entity from time to time with respect to any of the Collateral, (b) any
and all payments (in any form whatsoever) made or due and payable to any
Sotheby Entity from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral by any
Governmental Authority (or any Person acting under color of governmental
authority), (c) any claim of any Sotheby Entity against third parties (i) for
past, present or future infringement of any Patent or Patent License, or (ii)
for past, present or future infringement or dilution of any Copyright,
Copyright License, Trademark or Trademark License, or for injury to the
goodwill associated with any Trademark or Trademark License, (d) any recoveries
by any Sotheby Entity against third parties with respect to any litigation or
dispute concerning any of the Collateral including claims arising out of the
loss or nonconformity of, interference with the use of, defects in, or infringement
of rights in, or damage to, Collateral, (e) all amounts collected on, or
distributed on account of, other Collateral, including dividends, interest,
distributions and Instruments with respect to Investment Property and pledged
Stock, and (f) any and all other amounts, rights to payment or other property
acquired upon the sale, lease, license, exchange or other disposition of
Collateral and all rights arising out of Collateral.

                    “Prohibited
Person” means any Person:

	
  

 	
  

 
	
  

 	
           (a)
 listed in the Annex to, or otherwise subject to the provisions of, the
 Executive Order;

 

A-28

	
  

 	
  

 
	
  

 	
           (b)
 that is owned or controlled by, or acting for or on behalf of, any person or
 entity that is listed in the Annex to, or is otherwise subject to the
 provisions of, the Executive Order; 

 
	
  

 	
  

 
	
  

 	
           (c)
 with whom Agent or any Lender is prohibited from dealing or otherwise
 engaging in any transaction by any terrorism or money laundering legal
 requirements, including the PATRIOT Act and the Executive Order;

 
	
  

 	
  

 
	
  

 	
           (d)
 that commits, threatens or conspires to commit or supports “terrorism” as
 defined in the Executive Order;

 
	
  

 	
  

 
	
  

 	
           (e)
 that is named as a “specifically designated national (SDN)” on the most
 current list published by OFAC at its official website
 (http://www.treas.gov.ofac/t11sdn.pdf) or at any replacement website or other
 replacement official publication of such list or is named on any other U.S.
 or foreign government or regulatory list issued after September 11, 2001;

 
	
  

 	
  

 
	
  

 	
           (f)
 that is covered by IEEPA, OFAC or any other law, regulation or executive
 order relating to the imposition of economic sanctions against any country,
 region or individual pursuant to United States law or United Nations
 resolution; or

 
	
  

 	
  

 
	
  

 	
           (g)
 that is an affiliate (including any principal, officer, immediate family
 member or close associate) of a person or entity described in one or more of clauses
 (a) – (f) of this definition.

 

                    “Projections”
means Parent’s forecasted consolidated: (a) balance sheets; (b) profit and loss
statements; and (c) cash flow statements, in each case prepared on a basis
consistent with the historical Financial Statements of Parent, together with
appropriate supporting details and a statement of underlying assumptions.

                    “Pro
Rata Share” means with respect to all matters relating to any Lender, (A)
the percentage obtained by dividing (i) the Commitment of that Lender by (ii)
the aggregate Commitments of all Lenders, and (B) on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the sum of (a) Dollar
Equivalent of the aggregate outstanding principal balance of the Loans held by
that Lender and (b) in the case of a Non-Sterling Lender, the Dollar Equivalent
of the aggregate outstanding principal balance of the participation interests
purchased by such Lender from the Fronting Lender by (ii) the sum of (a) the
Dollar Equivalent of the outstanding principal balance of the Loans held by all
Lenders and (b) the Dollar Equivalent of the aggregate outstanding principal
balance of the participation interests purchased by all Non-Sterling Lenders
from the Fronting Lender, in each case as any such percentages may be adjusted
by assignments permitted pursuant to Section 9.1 or other adjustments to
the Commitments pursuant to the Agreement.

                    “Protected
Party” means a Lender which is or will be, for or on account of Tax,
subject to any liability or required to make any payment in relation to a sum
received or receivable (or any sum deemed for the purposes of Tax to be
received or receivable) under any Loan Document.

A-29

                    “Qualified
Assignee” means (a) any Lender, any Affiliate of any Lender and, with
respect to any Lender that is an investment fund that invests in commercial
loans, any other investment fund that invests in commercial loans and that is
managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, and (b) any commercial bank, savings and
loan association or savings bank or any other entity which is an “accredited
investor” (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to
Borrowers without the imposition of any withholding or similar taxes; provided,
that, except as otherwise agreed by Agent, no Person proposed to become a
Lender after the Closing Date and determined by Agent to be acting in the
capacity of a vulture fund or distressed debt purchaser shall be a Qualified
Assignee, and, unless otherwise agreed by Agent, no Person or Affiliate of such
Person proposed to become a Lender after the Closing Date and that holds Senior
Notes, Convertible Notes, or Stock issued by any Sotheby Entity shall be a
Qualified Assignee.

                    “Qualifying
Lender” means:

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (i)

 	
 in respect
 of a payment made by a U.K. Credit Party, a Lender which is beneficially
 entitled to interest or other amounts payable to that Lender in respect of an
 advance under this Agreement or the other Loan Documents and is:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (A)

 	
 a Lender:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (1)

 	
 which is a
 bank (as defined for the purpose of section 879 of the Income Tax Act 2007)
 making an advance under this Agreement or the other Loan Documents; or

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (2)

 	
 in respect
 of an advance made under this Agreement by a person that was a bank (as
 defined for the purpose of section 879 of the Income Tax Act 2007) at the
 time that that advance was made,

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 and which is
 within the charge to United Kingdom corporation tax as respects any payments
 of interest made in respect of that advance; or

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (B)

 	
 a Lender
 which is:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (1)

 	
 a company
 resident in the United Kingdom for United Kingdom tax purposes;

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (2)

 	
 a
 partnership each member of which is:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 (a)

 	
 a company
 resident in the United Kingdom for United Kingdom tax purposes; or

 

A-30

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
  

 	
 (b)

 	
 a company
 not so resident in the United Kingdom which carries on a trade in the United
 Kingdom through a permanent establishment and which brings into account in
 computing its chargeable profits (within the meaning of section 19 of the
 Corporation Tax Act 2009) the whole of any share of interest (or other amounts)
 payable in respect of that advance that falls to it by reason of Part 17 of
 the Corporation Tax Act 2009;

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 (3)

 	
 a company
 not so resident in the United Kingdom which carries on a trade in the United
 Kingdom through a permanent establishment and which brings into account
 interest payable in respect of that advance in computing its chargeable
 profits (within the meaning of section 19 of the Corporation Tax Act 2009);
 or

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (C)

 	
 a Treaty
 Lender.

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 (ii)

 	
 in respect
 of a payment made by a U.S. Credit Party which would be required under the
 Code to pay United States source interest in connection with this Agreement
 or the other Loan Documents, a Lender which is:

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (A)

 	
 created or
 organized under the laws of the United States of America or of any state
 (including the District of Columbia) thereof; provided, that such
 Lender has delivered (in a timely fashion and without undue delay) to
 Borrower Representative and Agent two original copies of IRS Form W-9 (or
 successor form) properly prepared and executed;

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (B)

 	
 a Treaty
 Lender with respect to the United States of America that is entitled to
 receive payments under any Loan Document without deduction or withholding of
 any United States federal income Taxes, provided such Lender has delivered
 (in a timely fashion and without undue delay) to Borrower Representative and
 Agent two duly completed original copies of IRS Form W-8BEN (or any successor
 form) providing that it is a resident of a foreign country with which the
 United States of America has an income tax treaty and claiming eligibility
 for benefits of an income tax treaty to which the United States of America is
 a party and a complete exemption from U.S. withholding tax under such treaty;
 or

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 (C)

 	
 entitled to
 receive payments under any Loan Document without deduction or withholding of
 any United States federal income Taxes as a result of such payments being
 effectively connected with the conduct by such Lender of a trade or business
 within the United States of America, provided such Lender has delivered (in a
 

 

A-31

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
  

 	
 timely
 fashion and without undue delay) to the Credit Party Representative and Agent
 two original copies of either (1) IRS Form W-8ECI (or any successor form)
 certifying that the payments made pursuant to any Loan Document are
 effectively connected with the conduct by that Lender of a trade or business
 within the United States of America or (2) such other applicable form
 prescribed by the IRS certifying as to such Lender’s entitlement to exemption
 from United States withholding tax with respect to all payments to be made to
 such Lender under any Loan Document.

 

                    “Qualified
Plan” means a Pension Plan that is intended to be tax qualified under
Section 401(a) of the IRC.

                    “Rate
Management Transaction” means any transaction (including an agreement with
respect thereto) now existing or hereafter entered by a Sotheby Entity that is
a rate swap, basis swap, forward rate transaction, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, or equity
prices.

                    “Real
Estate” has the meaning ascribed to it in Section 3.6.

                    “Refinancing”
means the repayment in full by Parent and the applicable Subsidiaries of Parent
of the Prior Lender Obligations on the Closing Date.

                    “Refunded
Dollar Swing Line Loan” has the meaning ascribed to it in Section
1.1(b)(iii).

                    “Refunded
Sterling Swing Line Loan” has the meaning ascribed to it in Section
1.1(b)(iv).

                    “Related
Person” has the meaning ascribed to it in Annex C.

                    “Relationship
Bank” has the meaning ascribed to it in Annex C.

                    “Release”
means any release, threatened release, spill, emission, leaking, pumping,
pouring, emitting, emptying, escape, injection, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Material in the indoor
or outdoor environment.

                    “Replacement
Lender” has the meaning ascribed to it in Section 1.16(d).

                    “Requisite
Lenders” means Lenders having, in the aggregate, (a) more than 50% of the
Commitments of all Lenders, or (b) if the Commitments have been terminated,
interests in the Outstandings constituting greater than 50% of (i) the
aggregate outstanding amount of all Loans held by the Lenders and (ii) the aggregate
outstanding amount of all participation interests purchased by all Non-Sterling
Lenders from the Fronting Lender.

A-32

                    “Reserves”
means the Due-to-Consignor Reserve and
such other reserves against Eligible Art Loans, Eligible Art Inventory, U.S.
Borrowing Availability or U.K. Borrowing Availability that Agent may, in its
sole reasonable credit judgment, establish from time to time. Without limiting
the generality of the foregoing, Reserves established to ensure the payment of
accrued Interest Expenses, Indebtedness, Bank Product and Hedging Obligations
or other scheduled liabilities shall be deemed to be a reasonable exercise of
Agent’s credit judgment. For purposes of clarity, Agent will not be required at
any time to obtain any approval from any Sotheby Entity, any Lenders or any
other Person(s) for the establishment, modification or elimination of any Reserves
(other than the Due-to-Consignor Reserve).

                    “Restricted
Payment” means, with respect to any
Sotheby Entity (a) the declaration or payment of any dividend or the incurrence
of any liability to make any other payment or distribution of cash or other
property or assets in respect of Stock; (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of such
Sotheby Entity’s Stock or any other payment or distribution made in respect
thereof, either directly or indirectly; (c) any payment made to redeem,
purchase, repurchase or retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire Stock of such Sotheby Entity now
or hereafter outstanding; (d) any payment of a claim for the rescission of the
purchase or sale of, or for material damages arising from the purchase or sale
of, any shares of such Sotheby Entity’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (e) any payment, loan, contribution, or other transfer
of funds or other property to any Stockholder of Parent other than (i) payments
of compensation in the ordinary course of business to Stockholders who are employees
of such Person and (ii) payments made in connection with the consignment of
property for sale in the ordinary course of business; and (f) any payment of
management fees (or other fees of a similar nature) by a Borrower or Guarantor
to any Stockholder of such Person or its Affiliates that is not a Borrower or
Guarantor unless (i) such fees are paid in the ordinary course of business of
such Borrower or Guarantor, as applicable, and (ii) such payment is not made
following the occurrence and during the continuance of an Event of Default.

                    “Retiree
Welfare Plan” means, at any time, a
welfare plan (within the meaning of Section 3(1) of ERISA) that provides for
continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant’s termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC or other
similar state law and at the sole expense of the participant or the beneficiary
of the participant.

                    “Revolving
Credit Advance” means either a Dollar
Revolving Credit Advance or a Sterling Revolving Credit Advance.

                    “Revolving
Loan” and “Revolving
Loan Outstandings” mean, at any time, the sum of (i) the Dollar
Equivalent of the aggregate amount of Revolving Credit Advances outstanding to
the Borrowers plus (ii) the Dollar
Equivalent of the aggregate Letter of Credit Obligations incurred on behalf of
the Borrowers. Unless the context otherwise requires, references to the outstanding
principal balance of the Revolving Loan shall include the outstanding balance
of Letter of Credit Obligations.

                    “Revolving
Note” has the meaning ascribed to it in
Section 1.1(a)(ii).

A-33

                    “Secured
Obligations” means, collectively, (i) the
Obligations and (ii) the Bank Product and Hedging Obligations.

                    “Secured
Parties” means the holders of the Secured
Obligations from time to time.

                    “Senior
Note Indenture” means that certain
Indenture, dated as of June 17, 2008, governing the Senior Notes, as amended,
restated, supplemented or otherwise modified from time to time.

                    “Senior
Notes” means Parent’s 7.75% Senior Notes
due 2015, in an aggregate principal amount outstanding on the date hereof of
$128,250,000, issued pursuant to the Senior Note Indenture.

                    “SFS
California” has the meaning ascribed to it in
the preamble to the Agreement.

                    “SFS
Inc.” has the meaning ascribed to it in the
preamble to the Agreement.

                    “SFS
Ltd.” has the meaning ascribed to it in the
preamble to the Agreement.

                    “Software”
means all “software” as such term is
defined in the Code, now owned or hereafter acquired by any Sotheby Entity,
other than software embedded in any category of Goods, including all computer
programs and all supporting information provided in connection with a
transaction related to any program.

                    “Solvent”
means (i) with respect to any Person
other than a Foreign Subsidiary organized under the laws of England, on a
particular date, that on such date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person; (b) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay as such debts
and liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person’s property would constitute an unreasonably small capital and (ii)
with respect to any Foreign Subsidiary organized under the laws of England, on
a particular date, (a) such Foreign Subsidiary is unable, or has admitted its
inability, to pay its debts as they fall due, has suspended making payments on
any of its debts or, by reason of actual or anticipated financial difficulties,
has commenced negotiations with one or more of its creditors with a view to
rescheduling any of its indebtedness, (b) the value of the assets of such
Foreign Subsidiary is less than its liabilities (taking into account contingent
and prospective liabilities) or (c) a moratorium has been declared in respect
of any indebtedness of such Foreign Subsidiary. The amount of contingent
liabilities (such as litigation, guaranties and pension plan liabilities) at
any time shall be computed as the amount that, in light of all the facts and
circumstances existing at the time, represents the amount that can be reasonably
be expected to become an actual or matured liability.

                    “Sotheby
Entity” means any Borrower or any
Subsidiary of any Borrower, and “Sotheby Entities”
shall mean all such Persons, collectively.

A-34

                    “Sotheby’s
Deferred Benefits Compensation Plan” means the Sotheby’s Deferred Benefits
Compensation Plan, dated as of January 1, 2007.

                    “Sotheby’s,
Inc.” has the meaning ascribed to it
in the preamble to the Agreement.

                    “Sotheby’s
U.K.” has the meaning ascribed to it in
the preamble to the Agreement.

                    “SPTC
Delaware” means SPTC Delaware LLC, a Delaware limited liability company,
and each other “Eligible SPV” (as such term is defined in the SPTC Delaware
Trademark License Agreement).

                    “SPTC
Delaware Trademark License Agreement” means the Trademark License Agreement
dated as of February 17, 2004 and entered into by and among SPTC, Inc., as
licensor, Parent, as guarantor, Monticello Licensee Corporation, as licensee,
and Cendant Corporation, as guarantor.

                    “Sterling”
or “£”
means the lawful currency of Great Britain and Northern Ireland.

                    “Sterling
Equivalent” means, with respect to any
amount denominated in Sterling, such amount of Sterling, and with respect to
any amount denominated in a currency other than Sterling, the amount of
Sterling, as of any date of determination, into which such other currency (as
the context may require) can be converted in accordance with Section 1.18.

                    “Sterling
Index Rate” means, for any day, the
higher of (a) a floating rate equal to the rate publicly quoted from time to
time by The Wall Street Journal as the
“prime rate” for Britain (or, if The Wall Street Journal
ceases quoting a rate of the type described, the prime rate for Sterling
generally posted by Britain’s largest banks) and (b) 3.00% per annum. Each
change in any interest rate provided for in the Agreement based upon the
Sterling Index Rate shall take effect at the time of such change in the
Sterling Index Rate.

                    “Sterling
Lender” shall mean each Lender (i)
designated in Annex J to the Agreement or
in the most recent Assignment Agreement executed by such Lender as a “Sterling
Lender” or (ii) that shall have become a Sterling Lender pursuant to Section 9.1(i).

                    “Sterling
LIBOR Rate” means for each LIBOR Period with respect to a LIBOR Loan
denominated in Sterling, the highest of (a) the offered rate per annum for deposits
of Sterling for such LIBOR Period that appears on Reuters Screen LIBOR01 Page
as of 11:00 A.M. (London, England time) two (2) Business Days prior to the
first day in such LIBOR Period, (b) if such LIBOR Period is for a duration less
than three months, the offered rate per annum for deposits of Sterling for a
three-month LIBOR Period commencing on the first day in such LIBOR Period that
appears on Reuters Screen LIBOR01 Page as of 11:00 A.M. (London, England time)
two (2) Business Days prior to the first day in such LIBOR Period and (c) 2.00%
per annum. If any offered rate described in the foregoing clause (a) or (b)
does not exist, such rate will be the rate of interest per annum, as determined
by Agent (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which
deposits of Sterling in immediately available funds are offered at 11:00 A.M.
(London, England time) two (2) Business Days prior to the first

A-35

day in such
LIBOR Period by major financial institutions reasonably satisfactory to Agent
in the London interbank market for a LIBOR Period of the applicable duration
for the applicable principal amount on such date of determination.

                    “Sterling
Revolving Credit Advance” has the
meaning ascribed to it in Section 1.1(a)(i).

                    “Sterling
Subfacility Limit” means $50,000,000, as
such amount may be reduced pursuant to Section 1.3(a).

                    “Stock”
means all shares, options, warrants,
general or limited partnership interests, membership interests or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other “equity security” (as such
term is defined in Rule 3a11 1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934).

                    “Stockholder”
means, with respect to any Person,
each holder of Stock of such Person.

                    “Subsidiary”
means, with respect to any Person,
(a) any corporation of which an aggregate of more than 50% of the outstanding
Stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly
or indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of 50% or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than 50% or of which
any such Person is a general partner or may exercise the powers of a general
partner. Unless the context otherwise requires, each reference to a Subsidiary
shall be a reference to a Subsidiary of a Borrower. Notwithstanding the
foregoing, the York Avenue Owner shall not be deemed to be a Subsidiary of
Parent or any of its Subsidiaries for purposes of this Agreement other than
with respect to Section 4, Section 6.10, Sections 8.1(e), (g),
(h) and (i) and Annex E and Annex G.

                    “Supermajority
Lenders” means Lenders having (a)
75.0% or more of the Commitments of all Lenders, or (b) if the Commitments have
been terminated, interests in the Outstandings constituting 75.0% or more of
(i) the aggregate outstanding amount of the Loans held by the Lenders and (ii)
the aggregate outstanding amount of all participation interests purchased by
all Non-Sterling Lenders from the Fronting Lender.

                    “Supporting
Obligations” means all “supporting
obligations” as such term is defined in the Code, including letters of credit
and guaranties issued in support of Accounts, Chattel Paper, Documents, General
Intangibles, Instruments, or Investment Property.

                    “Swing
Line Advance” has the meaning ascribed to
it in Section 1.1(b)(i).

A-36

                    “Swing
Line Availability” means, as of any date of
determination, the least of (a) the Swing Line Commitment, (b) the Maximum
Amount minus the aggregate Revolving Loan
then outstanding and (c) an amount equal to (i) the U.S. Borrowing Base as of
such date minus (ii) the aggregate
outstanding principal balance of the Revolving Credit Advances made to the U.S.
Borrowers as of such date minus (iii) the
Dollar Equivalent of the aggregate Letter of Credit Obligations incurred on
behalf of the U.S. Borrowers as of such date.

                    “Swing
Line Commitment” means, as to the Swing
Line Lender, the commitment of the Swing Line Lender to make Swing Line
Advances as set forth on Annex J to the
Agreement, which commitment constitutes a subfacility of the Commitment of the
Swing Line Lender.

                    “Swing
Line Lender” means GE Capital.

                    “Swing
Line Loan” means, as the context may
require, at any time, the aggregate amount of Swing Line Advances outstanding
to any Borrower or to all Borrowers.

                    “Swing
Line Note” has the meaning ascribed to it
in Section 1.1(b)(ii).

                    “Swiss
Franc” means the lawful currency of
Switzerland.

                    “Tax”
means taxes, levies, imposts, deductions,
Charges or withholdings imposed by any Governmental Authority, and all
liabilities with respect thereto.

                    “Tax
Confirmation” means a confirmation by a
Lender that the person beneficially entitled to interest or other amounts
payable to that Lender under this Agreement or the other Loan Documents is:

	
 

	
 

	
 

	
          (a)
 a company resident in the United Kingdom for United Kingdom tax purposes;

	
 

	
 

	
 

	
          (b)
 a partnership each member of which is (i) a company so resident in the United
 Kingdom or (ii) a company not so resident in the United Kingdom which carries
 on a trade in the United Kingdom through a permanent establishment and which
 brings into account in computing its chargeable profits (within the meaning
 of section 19 of the Corporation Tax Act 2009) the whole of any share of that
 interest or other amount payable that falls to it by reason of Part 17 of the
 Corporation Tax Act 2009; or

	
 

	
 

	
 

	
          (c)
 a company not so resident in the United Kingdom which carries on a trade in
 the United Kingdom through a permanent establishment and which brings into
 account that interest or other amount payable in computing the chargeable
 profits (within the meaning of section 19 of the Corporation Tax Act 2009) of
 that company.

                    “Tax
Credit” means a credit against, relief or
remission for, or repayment of, any Tax.

                    “Tax
Deduction” means a deduction or withholding
for or on account of Tax from a payment under any Loan Document.

A-37

                    “Tax
Payment” means either the increase in a
payment made by a Credit Party to a Lender under Section
1.15(a) or a payment under Section 1.15(b).

                    “Termination
Date” means the date on which (a) the
Loans have been indefeasibly repaid in full, (b) all other Obligations under
the Agreement and the other Loan Documents have been completely discharged, (c)
all Letter of Credit Obligations have been cash collateralized, canceled or
backed by standby letters of credit in accordance with Annex
B, and (d) the Commitment Termination Date shall have occurred.

                    “Theta”
has the meaning ascribed to it in the
preamble to the Agreement.

                    “Title
IV Plan” means a Pension Plan (other than a
Multiemployer Plan), that is subject to Title IV of ERISA or Section 412 of the
IRC, and that any Sotheby Entity or ERISA Affiliate maintains, contributes to
or has an obligation to contribute to on behalf of participants who are or were
employed by any of them.

                    “Trademark
License” means rights under any written
agreement now owned or hereafter acquired by any Sotheby Entity granting any
right to use any Trademark.

                    “Trademark
Security Agreements” means the
Trademark Security Agreements made in favor of Agent, on behalf of Lenders, by
each applicable Credit Party.

                    “Trademarks”
means all of the following now owned
or hereafter existing or adopted or acquired by any Sotheby Entity: (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles
of like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.

                    “Transfer
Account” has the meaning ascribed thereto in Annex
C.

                    “Treaty”
has the meaning ascribed to it in the
definition of “Treaty State”.

                    “Treaty
Lender” means a Lender which:

	
 

	
 

	
 

	
          (a)
 is treated as a resident of a Treaty State for the purposes of a Treaty;

	
 

	
 

	
 

	
          (b)
 in the case of a U.S. source interest payment made by a U.S. Credit Party, is
 the beneficial owner of the payment within the meaning of the income tax
 treaty between the United States and the country of the Lender’s residence
 referred to in clause (a) above and meets the requirement of the
 provisions dealing with limitation on benefits if such treaty contains such a
 provision; and

A-38

	
 

	
 

	
 

	
          (c)
 does not carry on a business in the jurisdiction in which the applicable
 Credit Party is resident through a permanent establishment with which that
 Lender’s participation in the Loans is effectively connected.

                    “Treaty
of Rome” means the treaty establishing the
European Community being the Treaty of Rome as amended from time to time.

                    “Treaty
State” means a jurisdiction having a
double taxation agreement (a “Treaty”) with
the United Kingdom or the United States of America (as the case may be) which
makes provision for full exemption from tax imposed by the United Kingdom or,
as the case may be, the United States of America, on interest.

                    “UCC”
means the Uniform Commercial Code as in
effect from time to time in each applicable jurisdiction.

                    “U.K.
Borrowers” has the meaning ascribed to it in
the preamble to the Agreement.

                    “U.K.
Borrowing Availability” means, as of any
date of determination, the lesser of (a) an amount equal to (i) the Maximum
Amount minus (ii) the aggregate Revolving
Loan then outstanding minus (iii) the
aggregate Swing Line Loan then outstanding and (b)(i) the lesser of (x) the
Sterling Subfacility Limit and (y) the U.K. Borrowing Base as of such date minus (ii) the Dollar Equivalent of the aggregate
outstanding principal balance of the Revolving Credit Advances and Swing Line
Advances made to U.K. Borrowers as of such date minus
(iii) the Dollar Equivalent of the aggregate Letter of Credit Obligations
incurred for the benefit of the U.K. Borrowers as of such date.

                    “U.K.
Borrowing Base” means, as of any date of
determination, an amount equal to (a) 85% of the Available U.K. Art Loan
Balance as of such date plus (b) the U.K. Eligible Art Inventory
Component as of such date plus (c) the U.K. CNTA Component as of such
date minus (d) Reserves established by Agent at such time.

                    “U.K.
CNTA Component” means, as of any date of determination, an amount equal to
the lesser of (i) 15% of Consolidated Net Tangible Assets as of the end of the
Fiscal Month preceding the last Fiscal Month for which Financial Statements
were required to be delivered, and (ii) $20,000,000, or such lower amount as
shall be specified by the Borrower Representative in the most recent Borrowing
Base Certificate.

                    “U.K.
Collateral Documents” means the deeds of
charge and charges over shares executed by the U.K. Credit Parties on the
Closing Date, all Local Law Collateral Documents in respect of the Stock of
First-Tier Foreign CFC Subsidiaries that are U.K. Subsidiaries, and all similar
agreements entered into by the U.K. Credit Parties guaranteeing payment of the
Obligations of the U.K. Borrowers, or granting a Lien upon property as security
for payment of the Secured Obligations of the U.K. Credit Parties.

                    “U.K.
Credit Parties” means the U.K. Borrowers and
the U.K. Subsidiary Guarantors.

A-39

                    “U.K.
Eligible Art Inventory Component” means, as of any date of determination,
an amount equal to the lesser of (i) 30% of the value of Eligible Art Inventory
of the U.K. Borrowers as of such date, valued at the lower of cost and market
value (determined in accordance with GAAP), and (ii) $50,000,000, or such lower
amount as shall be specified by the Borrower Representative in the most recent
Borrowing Base Certificate.

                    “U.K.
Non-Bank Lender” means where a Lender
becomes a party to this Agreement after the Closing Date, a Lender that gives a
Tax Confirmation in the Assignment Agreement that it executes on becoming a
party to this Agreement.

                    “U.K.
Pension Plans” has the meaning ascribed to
it in Section 3.12(c).

                    “U.K.
Subsidiary Guarantors” means each subsidiary
of Oatshare organized under the laws of England that is not a U.K. Borrower or
an Immaterial Subsidiary.

                    “U.K.
Termination Date” means the date on which
(i) all Loans to the U.K. Borrowers have been indefeasibly repaid in full, (b)
all other Obligations of the U.K. Borrowers have been completely discharged,
(c) all Letter of Credit Obligations incurred on behalf of the U.K. Borrowers
have been cash collateralized, canceled or backed by standby letters of credit
in accordance with Annex B and (d) the
Commitment Termination Date shall have occurred.

                    “Unfunded
Pension Liability” means, at any time,
the aggregate amount, if any, of the sum of (a) the amount by which the present
value of all accrued benefits under each Title IV Plan exceeds the fair market
value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of
five (5) years following a transaction which might reasonably be expected to be
covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Sotheby Entity or any ERISA Affiliate as a result of
such transaction.

                    
“Unhedged U.K. Art Loan” means an Eligible
Art Loan owned by a U.K. Borrower (i) that is denominated in Dollars, Canadian
Dollars, Euros or Swiss Francs and (ii) unless Agent shall otherwise agree,
with respect to which such U.K. Borrower shall not have entered into a Rate
Management Transaction reasonably acceptable to Agent (x) having a notional
amount substantially equal to the outstanding principal balance of such Art
Loan at all times until the maturity of such Art Loan and (y) directly
mitigating the risk associated with changes in the exchange rate between the
currency in which such Art Loan is denominated and Sterling at all times until
the maturity of such Art Loan.

                    “Unhedged
U.S. Art Loan” means an Eligible Art
Loan owned by a U.S. Borrower (i) that is denominated in Sterling, Canadian
Dollars, Euros or Swiss Francs and (ii) unless Agent shall otherwise agree,
with respect to which such U.S. Borrower shall not have entered into a Rate
Management Transaction reasonably acceptable to Agent (x) having a notional
amount substantially equal to the outstanding principal balance of such Art
Loan at all times until the maturity of such Art Loan and (y) directly
mitigating the risk associated with changes in the exchange rate between the
currency in which such Art Loan is denominated and Dollars at all times until
the maturity of such Art Loan.

A-40

                    “Unrestricted
Cash Amount” means, as of any date
of determination, the greater of (a) zero and (b) the aggregate amount of cash
of the Credit Parties as of such date (determined in accordance with GAAP),
excluding (without duplication) any cash (i) owing to consignors in respect of
Works of Art consigned by such Persons to the Credit Parties for sale, (ii)
subject to a Lien (or held in a deposit or securities account subject to a
Lien) in favor of any Person other than Agent and (iii) subject to any
restriction on withdrawal from the deposit or securities account in which such
cash is being held.

                    “Usage”
means, as of any date, an amount (stated as a percentage) equal to (a) the
outstanding principal balance of the Revolving Loan and Swing Line Loan as of
the end of the preceding Business Day (after giving effect to Advances funded
or Letters of Credit incurred, or any payments made, on such preceding Business
Day) divided by (b) the Maximum Amount.

                    
“U.S. Borrowers” has the meaning ascribed
to it in the preamble to the Agreement.

                    “U.S.
Borrowing Availability” means, as of any
date of determination, the lesser of (a) an amount equal to (i) the Maximum
Amount minus (ii) the aggregate Revolving
Loan then outstanding minus (iii) the
aggregate Swing Line Loan then outstanding and (b) an amount equal to (i) the
U.S. Borrowing Base as of such date minus
(ii) the aggregate outstanding principal balance of the Revolving Credit
Advances and Swing Line Advances made to U.S. Borrowers as of such date minus (iii) the Dollar Equivalent of the aggregate
Letter of Credit Obligations incurred for the benefit of the U.S. Borrowers as
of such date.

                    “U.S.
Borrowing Base” means, as of any date of
determination, an amount equal to (a) 85% of the Available U.S. Art Loan
Balance as of such date plus (b) the U.S. Eligible Art Inventory
Component as of such date plus (c) the U.S. CNTA Component as of such
date minus (d) Reserves established by Agent at such time

                    “U.S.
Eligible Art Inventory Component” means, as of any date of determination,
an amount equal to the lesser of (a) 30% of the value of Eligible Art Inventory
of the U.S. Borrowers as of such date, valued at the lower of cost and market
value (determined in accordance with GAAP), and (b)(i) $50,000,000 minus
(ii) the U.K. Eligible Art Inventory Component as of such date.

                    “U.S.
CNTA Component” means, as of any date of determination, an amount equal to
(a) the lesser of (i) 15% of Consolidated Net Tangible Assets as of the end of
the Fiscal Month preceding the last Fiscal Month for which Financial Statements
were required to be delivered, and (ii) $20,000,000 minus (b) the U.K.
CNTA Component as of such date.

                    “U.S.
Collateral Documents” means the Domestic
Subsidiary Guaranty, the U.S. Security Agreement, the U.S. Pledge Agreement,
the Trademark Security Agreements, the Copyright Security Agreements, all Local
Law Collateral Documents and all similar agreements entered into by the U.S.
Credit Parties or First-Tier Foreign CFC Subsidiaries guaranteeing payment of
the Obligations or granting a Lien upon property as security for payment of the
Secured Obligations.

A-41

                    “U.S.
Credit Parties” means each U.S. Borrower and
each Domestic Subsidiary Guarantor.

                    “U.S.
Pledge Agreement” means that certain Pledge
Agreement, dated as of the Closing Date, executed by each U.S. Credit Party in
favor of Agent, for the benefit of Agent and the Lenders.

                    “U.S.
Security Agreement” means that certain
Security Agreement, dated as of the Closing Date, executed by each U.S. Credit
Party in favor of Agent, for the benefit of Agent and the Lenders

                    “VAT”
means the Tax imposed by the Value Added Tax
1994 together with any similar sales or turnover taxes whether in the United
Kingdom or elsewhere.

                    “Venture
Loan” means an Art Loan made to finance
the purchase of a Work of Art in conjunction with a dealer, which art is being
purchased for resale pursuant to a profit and loss sharing agreement with the
dealer.

                    “Ventures
LLC” has the meaning ascribed to it in
the preamble to the Agreement.

                    “Welfare
Plan” means a Plan described in Section 3(1) of ERISA.

                    “Work
of Art” shall mean any item of Goods of a
type purchased, sold, taken as collateral for an Art Loan, or consigned to the
Credit Parties for sale, in each case in the ordinary course of the Credit
Parties’ business.

                    “Working
Time Regulations” means the Working Time Regulations 1998 (as amended) of
the United Kingdom implementing the Council Directive 93/104/EC and Council
Directive 94/33/EC of the European Union.

                    “York
Avenue Lease” means that certain Lease, dated February 7, 2003, between
York Avenue Owner (as successor to 1334 York Avenue L.P.), as landlord, and
Sotheby’s, Inc., as tenant, as amended, restated, supplemented or otherwise
modified from time to time.

                    “York
Avenue Lease Documents” means the York Avenue Lease, the York Avenue
Guaranty and each document executed in connection therewith or otherwise
related thereto.

                    “York
Avenue Lease Guaranty” means that certain Guaranty of Lease, dated as of
February 7, 2003, between Parent and York Avenue Owner (as successor to 1334
York Avenue L.P.), as amended, restated, supplemented or otherwise modified
from time to time.

                    “York
Avenue Lender” means the “Lender” as defined in the York Avenue Loan
Agreement.

                    “York
Avenue Loan Agreement” means that certain Loan Agreement, dated as of June
22, 2005, between the York Avenue Owner (as successor to 1334 York Avenue L.P.)
and

A-42

Bank of
America, N.A., as amended, restated, supplemented or otherwise modified from
time to time.

                    “York
Avenue Loan Documents” means the York Avenue Loan Agreement and all
documents executed in connection therewith or otherwise related thereto.

                    “York
Avenue Owner” means 1334 York Avenue L.L.C.

                    Rules
of construction with respect to accounting terms used in the Agreement or the
other Loan Documents shall be as set forth in Annex G.
All other undefined terms contained in any of the Loan Documents shall, unless
the context indicates otherwise, have the meanings provided for by the Code to
the extent the same are used or defined therein; in the event that any term is
defined differently in different Articles or Divisions of the Code, the
definition contained in Article or Division 9 shall control. Unless otherwise
specified, references in the Agreement or any of the Appendices to a Section,
subsection or clause refer to such Section, subsection or clause as contained
in the Agreement. The words “herein,” “hereof” and “hereunder” and other words
of similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or clause
contained in the Agreement or any such Annex, Exhibit or Schedule.

                    Wherever
from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and the plural, and pronouns
stated in the masculine, feminine or neuter gender shall include the masculine,
feminine and neuter genders. The words “including”, “includes” and “include”
shall be deemed to be followed by the words “without limitation”; the word “or”
is not exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations. Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Sotheby Entity, such words are
intended to signify that such Sotheby Entity has actual knowledge or awareness
of a particular fact or circumstance or that such Sotheby Entity, if it had
exercised reasonable diligence, would have known or been aware of such fact or
circumstance. Unless otherwise set forth therein, for purposes of Section 1.15 (and the definitions of the
capitalized terms used therein), a reference to “determines” or “determined”
shall mean a determination made in the absolute discretion of the person making
the determination.

A-43

ANNEX B (Section 1.2)

to

CREDIT
AGREEMENT

LETTERS OF
CREDIT

                    (a)
Issuance. Subject to the terms and conditions of the Agreement, Agent
and Lenders agree to incur, from time to time prior to the Commitment
Termination Date, upon the request of Borrower Representative on behalf of the
applicable Borrower (and any Subsidiary that may be a co-applicant therewith)
and for such Borrower’s (and such Subsidiary’s, as applicable) account, Letter
of Credit Obligations by causing Letters of Credit denominated in Dollars,
Sterling, Euros, Swiss Francs or any Alternative L/C Currency to be issued by
GE Capital or a Subsidiary thereof or a bank or other legally authorized Person
selected by or acceptable to Agent in its sole discretion (each, an “L/C Issuer”)
for such U.S. Borrower’s account and guaranteed by Agent; provided, that
if the L/C Issuer is a Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Lender shall, subject to the terms and
conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph (b)(ii) below.
The Dollar Equivalent of the aggregate amount of all such Letter of Credit
Obligations shall not at any time exceed the lesser of (i) an amount equal to
Ten Million Dollars ($10,000,000) (the “L/C Sublimit”) and (ii) the
Maximum Amount less the Dollar Equivalent of the aggregate outstanding
principal balance of the Revolving Credit Advances and the Swing Line Loan. The
Dollar Equivalent of the aggregate amount of all such Letter of Credit
Obligations incurred for the benefit of the U.S. Borrowers shall not at any
time exceed the U.S. Borrowing Base less the aggregate outstanding principal
balance of the Revolving Credit Advances and Swing Line Advances made to U.S.
Borrowers. The Dollar Equivalent of the aggregate amount of all such Letter of
Credit Obligations incurred for the benefit of the U.K. Borrowers shall not at any
time exceed an amount equal to (i) the lesser of (x) the Sterling Subfacility
Limit and (y) the U.K. Borrowing Base less (ii) the Dollar Equivalent of
the outstanding principal balance of the Revolving Credit Advances made to the
U.K. Borrowers. No such Letter of Credit shall have an expiry date that is more
than one year following the date of issuance thereof, unless otherwise
determined by Agent, in its sole discretion (including with respect to
customary evergreen provisions), and neither Agent nor Lenders shall be under
any obligation to incur Letter of Credit Obligations in respect of, or purchase
risk participations in, any Letter of Credit having an expiry date that is
later than the Commitment Termination Date.

                    (b)
Revolving Credit Advances Automatic; Participations. 

                              (i)
In the event that Agent or any Lender shall make any payment on or pursuant to
any Letter of Credit Obligation incurred for the benefit of a U.S. Borrower,
regardless of whether a Default or Event of Default has occurred and is
continuing and notwithstanding any Borrower’s failure to satisfy the conditions
precedent set forth in Section 2, such payment shall then be deemed
automatically to constitute a Revolving Credit Advance to the applicable U.S.
Borrower under Section 1.1(a) of the Agreement in Dollars in an amount
equal to the Dollar Equivalent of such payment as of the date thereof, and each
Lender shall be obligated to pay its Pro Rata Share thereof in accordance with
the Agreement. 

B-1

                              (ii)
In the event that Agent, any Lender or the Fronting Lender shall make any
payment on or pursuant to any Letter of Credit Obligation incurred for the
benefit of a U.K. Borrower, regardless of whether a Default or Event of Default
has occurred and is continuing and notwithstanding any Borrower’s failure to
satisfy the conditions precedent set forth in Section 2, such payment shall
then be deemed automatically to constitute a Revolving Credit Advance to the applicable
U.K. Borrower under Section 1.1(a) of the Agreement in Sterling in an
amount equal to the Sterling Equivalent of such payment as of the date thereof,
and each Sterling Lender and the Fronting Lender shall be obligated to pay its
Pro Rata Share (or, in the case of the Fronting Lender, the Fronted Percentage)
thereof in accordance with the Agreement. 

                              (iii)
The failure of any Lender or the Fronting Lender to make available to Agent for
Agent’s own account its Pro Rata Share (or, in the case of the Fronting Lender,
the Fronted Percentage) of any such Revolving Credit Advance or payment by
Agent under or in respect of a Letter of Credit shall not relieve any other
Lender or the Fronting Lender of its obligation hereunder to make available to
Agent its Pro Rata Share or the Fronted Percentage thereof, but neither any
Lender nor the Fronting Lender shall be responsible for the failure of any
other Lender or the Fronting Lender to make available such Person’s share of
any such payment.

                              (iv)
If it shall be illegal or unlawful for any U.S. Borrower to incur Revolving
Credit Advances as contemplated by paragraph (b)(i) above because of an
Event of Default described in Sections 8.1(g) or (h) or otherwise or if
it shall be illegal or unlawful for any Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Lender, then (A) immediately and without further action
whatsoever, each Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation equal to such Lender’s Pro Rata Share (based on the
Commitments) of the Letter of Credit Obligations in respect of all Letters of
Credit then outstanding for the benefit of the U.S. Borrowers and (B)
thereafter, immediately upon issuance of any Letter of Credit for the benefit
of a U.S. Borrower, each Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be)
an undivided interest and participation equal to such Lender’s Pro Rata Share
(based on the Commitments) of the Letter of Credit Obligations with respect to
such Letter of Credit on the date of such issuance. Each Lender shall fund its
participation in all payments made under any Letters of Credit issued for the
benefit of a U.S. Borrower, in the same manner as provided in the Agreement
with respect to Dollar Revolving Credit Advances, each of which Dollar
Revolving Credit Advances shall be in an amount equal to the Dollar Equivalent
of such payment as of the date thereof.

                              (v)
If it shall be illegal or unlawful for any U.K. Borrower to incur Revolving
Credit Advances as contemplated by paragraph (b)(ii) above because of an
Event of Default described in Sections 8.1(g) or (h) or otherwise
or if it shall be illegal or unlawful for any Lender to be deemed to have
assumed a ratable share of the reimbursement obligations owed to an L/C Issuer,
or if the L/C Issuer is a Lender, then (A) immediately and without further
action whatsoever, each Sterling Lender and the Fronting Lender shall be deemed
to have irrevocably and unconditionally purchased from Agent (or such L/C
Issuer, as the case may be) an undivided interest and participation equal to
such Lender’s Pro Rata Share (based on the Commitments) (or, in the case of the
Fronting Lender, equal to the Fronted Percentage) of the Letter of Credit

B-2

Obligations in respect of all Letters of Credit then outstanding for the
benefit of the U.K. Borrowers and (B) thereafter, immediately upon issuance of
any Letter of Credit for the benefit of a U.K. Borrower, each Sterling Lender
and the Fronting Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation equal to such Lender’s Pro Rata Share (based on the
Commitments) (or, in the case of the Fronting Lender, equal to the Fronted
Percentage) of the Letter of Credit Obligations with respect to such Letter of
Credit on the date of such issuance. Each Sterling Lender and the Fronting
Lender shall fund its participation in all payments made under any Letters of
Credit issued for the benefit of a U.K. Borrower, in the same manner as
provided in the Agreement with respect to Sterling Revolving Credit Advances,
each of which Sterling Revolving Credit Advances shall be in an amount equal to
the Sterling Equivalent of such payment as of the date thereof.

                    (c)
Cash Collateral.

                              (i)
If Borrowers are required to provide cash collateral for any Letter of Credit
Obligations pursuant to the Agreement, including Section 8.2 of the
Agreement, prior to the Commitment Termination Date, each Borrower will pay to
Agent for the ratable benefit of itself and Lenders, with respect to each
Letter of Credit outstanding for the benefit of such Borrower, cash or cash
equivalents acceptable to Agent (“Acceptable Cash Equivalents”) in the
currency in which such Letter of Credit is denominated in an amount equal to
105% of the maximum amount then available to be drawn under such Letter of
Credit. Such funds or Acceptable Cash Equivalents shall be held by Agent in a
cash collateral account (each, a “Cash Collateral Account”) maintained
at a bank or financial institution acceptable to Agent. Each Cash Collateral
Account shall be in the name of the applicable Borrower(s) and shall be pledged
to, and subject to the control of, Agent, on behalf of itself and the other
Secured Parties, in a manner satisfactory to Agent. Each U.S. Borrower hereby
pledges and grants to Agent, on behalf of itself and the other Secured Parties,
a security interest in all such funds and Acceptable Cash Equivalents held from
time to time in any Cash Collateral Account established in the name of such
U.S. Borrower and all proceeds thereof, as security for the payment of all
amounts due in respect of the Letter of Credit Obligations and Secured
Obligations, whether or not then due. The Agreement, including this Annex B,
shall constitute a security agreement under applicable law. 

                              (ii)
If any Letter of Credit Obligations, whether or not then due and payable, shall
for any reason be outstanding on the Commitment Termination Date, Borrowers
shall either (A) provide cash collateral therefor in the manner described
above, or (B) cause all such Letters of Credit and guaranties thereof, if any,
to be canceled and returned, or (C) deliver a stand-by letter (or letters) of
credit in guaranty of such Letter of Credit Obligations, which stand-by letter
(or letters) of credit shall be of like tenor, currency and duration (plus
thirty (30) additional days) as, and in an amount equal to 105% of, the
aggregate maximum amount then available to be drawn under, the Letters of
Credit to which such outstanding Letter of Credit Obligations relate and shall
be issued by a Person, and shall be subject to such terms and conditions, as are
be satisfactory to Agent in its sole discretion.

                              (iii)
From time to time after funds are deposited in the Cash Collateral Account by
any Borrower, whether before or after the Commitment Termination Date, Agent 

B-3

may apply such
funds or Acceptable Cash Equivalents then held in the Cash Collateral Account
to the payment of any amounts, and in such order as Agent may elect, as shall
be or shall become due and payable by such Borrower to Agent and Lenders with
respect to such Letter of Credit Obligations of such Borrower and, upon the
satisfaction in full of all Letter of Credit Obligations of such Borrower, to
any other Secured Obligations then due and payable.

                              (iv)
No Borrower nor any Person claiming on behalf of or through any Borrower shall
have any right to withdraw any of the funds or Acceptable Cash Equivalents held
in the Cash Collateral Account, except that upon the termination of all Letter
of Credit Obligations and the payment of all amounts payable by Borrowers to
Agent and Lenders in respect thereof, any funds remaining in the Cash
Collateral Account shall be applied to other Secured Obligations then due and
owing and upon payment in full of such Secured Obligations, any remaining amount
shall be paid to Borrowers or as otherwise required by law. Interest earned on
deposits in the Cash Collateral Account shall be held as additional collateral.

                    (d)
Fees and Expenses. U.S. Borrowers agree to pay to Agent for the benefit
of Lenders, as compensation to such Lenders for Letter of Credit Obligations
incurred hereunder for the benefit of U.S. Borrowers, (i) all costs and
expenses incurred by Agent or any Lender on account of such Letter of Credit
Obligations, and (ii) for each month during which any such Letter of Credit
Obligation shall remain outstanding, a fee in Dollars in an amount equal to the
Applicable L/C Margin from time to time in effect multiplied by the Dollar
Equivalent of the maximum amount available from time to time to be drawn under
each applicable Letter of Credit. U.K. Borrowers agree to pay to Agent for the
benefit of Lenders, as compensation to such Lenders for Letter of Credit
Obligations incurred hereunder for the benefit of the U.K. Borrowers, (i) all costs
and expenses incurred by Agent or any Lender on account of such Letter of
Credit Obligations, and (ii) for each month during which any such Letter of
Credit Obligation shall remain outstanding, a fee in Sterling in an amount
equal to the Applicable L/C Margin from time to time in effect multiplied by
the Sterling Equivalent of the maximum amount available from time to time to be
drawn under each applicable Letter of Credit. The foregoing fees (collectively,
the “Letter of Credit Fee”) shall be paid to Agent for the benefit of
the Lenders in arrears, on the first Business Day of each month and on the
Commitment Termination Date. In addition, Borrowers shall pay to any L/C
Issuer, on demand, such fees, charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.

                    (e)
Request for Incurrence of Letter of Credit Obligations. Borrower
Representative shall give Agent at least two (2) Business Days’ prior written
notice requesting the incurrence of any Letter of Credit Obligation. The notice
shall be accompanied by the form of the Letter of Credit (which shall be
acceptable to the L/C Issuer) and a completed Application for Standby Letter of
Credit in the form of Exhibit B. Notwithstanding anything contained
herein to the contrary, Letter of Credit applications by Borrower
Representative and approvals by Agent and the L/C Issuer may be made and
transmitted pursuant to electronic codes and security measures mutually agreed
upon and established by and among Borrower Representative, Agent and the L/C
Issuer. 

B-4

                    (f)
Obligation Absolute. The obligation of Borrowers to reimburse Agent and
Lenders for payments made with respect to any Letter of Credit Obligation shall
be absolute, unconditional and irrevocable, without necessity of presentment,
demand, protest or other formalities, and the obligations of each Lender to
make payments to Agent with respect to Letters of Credit shall be unconditional
and irrevocable. Such obligations of Borrowers and Lenders shall be paid
strictly in accordance with the terms hereof under all circumstances including
the following:

                              (i)
any lack of validity or enforceability of any Letter of Credit or the Agreement
or the other Loan Documents or any other agreement;

                              (ii)
the existence of any claim, setoff, defense or other right that any Borrower or
any of their respective Affiliates or any Lender may at any time have against a
beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such transferee may be acting), Agent, any Lender, or any
other Person, whether in connection with the Agreement, the Letter of Credit,
the transactions contemplated herein or therein or any unrelated transaction
(including any underlying transaction between any Borrower or any of their
respective Affiliates and the beneficiary for which the Letter of Credit was
procured);

                              (iii)
any draft, demand, certificate or any other document presented under any Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

                              (iv)
payment by Agent (except as otherwise expressly provided in paragraph
(g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or guaranty
thereof against presentation of a demand, draft or certificate or other
document that does not comply with the terms of such Letter of Credit or such
guaranty;

                              (v)
any other circumstance or event whatsoever, that is similar to any of the
foregoing; or

                              (vi)
the fact that a Default or an Event of Default has occurred and is continuing.

                    (g)
Indemnification; Nature of Lenders’ Duties.

                              (i)
In addition to amounts payable as elsewhere provided in the Agreement,
Borrowers hereby agree to pay and to protect, indemnify, and save harmless
Agent and each Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys’ fees and allocated costs of internal counsel) that Agent or any
Lender may incur or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit or guaranty thereof, or (B) the failure of
Agent or any Lender seeking indemnification or of any L/C Issuer to honor a
demand for payment under any Letter of Credit or guaranty thereof as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or Governmental Authority, in each case other
than to the extent solely as a result of the gross negligence or willful
misconduct of Agent or such Lender (as determined by a court of competent
jurisdiction in a final, non-appealable judgment). It is understood and agreed
that, notwithstanding anything to the contrary 

B-5

herein, no
U.K. Credit Party shall have any obligation hereunder with respect to any
indemnification liabilities that are Obligations of any U.S. Credit Party.

                              (ii)
As between Agent and any Lender and Borrowers, Borrowers assume all risks of
the acts and omissions of, or misuse of any Letter of Credit by beneficiaries,
of any Letter of Credit. In furtherance and not in limitation of the foregoing,
to the fullest extent permitted by law, neither Agent nor any Lender shall be
responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document issued by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (C) failure
of the beneficiary of any Letter of Credit to comply fully with conditions
required in order to demand payment under such Letter of Credit; provided,
that in the case of any payment by Agent under any Letter of Credit or guaranty
thereof, Agent shall be liable to the extent such payment was made solely as a
result of its gross negligence or willful misconduct (as determined by a court
of competent jurisdiction in a final, non-appealable judgment) in determining
that the demand for payment under such Letter of Credit or guaranty thereof
complies on its face with any applicable requirements for a demand for payment
under such Letter of Credit or guaranty thereof; (D) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they may be in cipher; (E)
errors in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a payment
under any Letter of Credit or guaranty thereof or of the proceeds thereof; (G)
the credit of the proceeds of any drawing under any Letter of Credit or
guaranty thereof; and (H) any consequences arising from causes beyond the
control of Agent or any Lender. None of the above shall affect, impair, or
prevent the vesting of any of Agent’s or any Lender’s rights or powers
hereunder or under the Agreement.

                              (iii)
Nothing contained herein shall be deemed to limit or to expand any waivers,
covenants or indemnities made by Borrowers in favor of any L/C Issuer in any
letter of credit application, reimbursement agreement or similar document,
instrument or agreement between or among Borrowers and such L/C Issuer,
including a Master Standby Agreement entered into with Agent.

B-6

ANNEX C (Section 1.8)

to

CREDIT AGREEMENT

CASH MANAGEMENT SYSTEM  

                    Each
Sotheby Entity shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:

                    (a)
Within 90 days of the Closing Date (or such later date as Agent shall consent
to in writing) and until the Termination Date, each Credit Party shall (i)
cause each of its Deposit Accounts (other than the Due-to-Consignor
Disbursement Accounts) to be subject to a tri-party blocked account agreement
(each such tri-party blocked account agreement, a “Blocked Account Agreement”,
and each such Deposit Account subject to a Blocked Account Agreement, a “Blocked
Account”) among the financial institution at which such Deposit Account is
maintained (each, a “Relationship Bank”), such Credit Party, and Agent,
for the benefit of itself and the Secured Parties, which Blocked Account
Agreement shall be in form and substance reasonably acceptable to Agent, and
(ii) deposit or cause to be deposited, and cause the other Sotheby Entities to
deposit or cause to be deposited, promptly, and in any event no later than the
first Business Day after the date of receipt thereof, all cash, checks, drafts
or other similar items of payment relating to or constituting Collateral into
one or more Blocked Accounts.

                    (b)
Following the occurrence of any Activation Event, Agent may (and, at the
direction of Required Lenders, shall) deliver an Activation Notice to any or
all Relationship Banks with respect to any or all Blocked Accounts, and each
Relationship Bank that has received an Activation Notice shall be instructed to
transfer, on each Business Day, all amounts on deposit in all applicable
Blocked Accounts to one or more accounts specified by Agent (such accounts,
collectively, the “Transfer Account”). 

                    (c)
Following the transfer of funds to the Transfer Account on each Business Day
pursuant to clause (b) above, Agent shall (unless Agent decides
otherwise in its sole discretion) transfer, on each Business Day, from the
Transfer Account (i) to the applicable Collection Account (or such other
Blocked Account as Agent shall agree), all amounts in the Transfer Account
other than such amounts as may be identified by Agent, in its reasonable estimation,
that represent any portion of the Due-to-Consignor Amount as of such Business
Day, and (ii) to the applicable Due-to-Consignor Disbursement Account, all
amounts in the Transfer Account as may be identified by Agent, in its
reasonable estimation, that represent any portion of the Due-to-Consignor
Amount as of such Business Day.

                    (d)
So long as no Default or Event of Default has occurred and is continuing or
Agent shall have otherwise agreed, the Borrowers may amend Disclosure
Schedule (3.19) to add or replace a Relationship Bank or Blocked Account; provided,
that (i) Agent shall have consented in writing in advance to the opening of
such account with the relevant bank and (ii) prior to the time of the opening
of such account, the applicable Borrower and such bank shall have executed and
delivered to Agent a Blocked Account Agreement with respect to such account. 

C-1

                    (e)
The Borrowers shall close any of their Blocked Accounts (and establish
replacement accounts in accordance with clause (d) above) promptly and
in any event within thirty (30) days following notice from Agent that the
creditworthiness of any Relationship Bank holding such an account is no longer
acceptable in Agent’s reasonable judgment, or as promptly as practicable and in
any event within sixty (60) days following notice from Agent that the operating
performance, funds transfer or availability procedures or performance with
respect to accounts of the Relationship Bank holding such accounts or Agent’s liability
under any Blocked Account Agreement with respect to such Relationship Bank is
no longer acceptable in Agent’s reasonable judgment.

                    (f)
The Blocked Accounts shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of some or
all of the Loans and other Secured Obligations in accordance with the
applicable Collateral Document, and in which each applicable Borrower shall
have granted a security interest to Agent, on behalf of itself and the other
Secured Parties, pursuant to the applicable Collateral Document.

                    (g)
All amounts deposited in any Collection Account shall be deemed received by
Agent in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11. In no event shall
any amount be so applied unless and until such amount shall have been credited
in immediately available funds to the applicable Collection Account.

                    (h)
Each Borrower shall and shall cause its Affiliates, officers, employees,
agents, directors or other Persons acting for or in concert with such Borrower
(each a “Related Person”) to (i) hold in trust for Agent, for the
benefit of itself and the other Secured Parties, all checks, cash and other
items of payment delivered by the applicable Art Loan Debtor (other than
pursuant to the sale of Works of Art securing repayment of such Art Loan) and
received by such Borrower or any such Related Person in respect of any Art Loan
or delivered by the applicable purchaser and received by such Borrower or any
such Related Person in respect of the sale or disposition of any Art Inventory
and (ii) within one (1) Business Day after receipt by such Borrower or any such
Related Person of any such checks, cash or other items of payment, deposit the
same into a Blocked Account of such Borrower. Each Borrower on behalf of itself
and each Related Person thereof acknowledges and agrees that all cash, checks
or other items of payment constituting proceeds of Art Loans or Art Inventory
are part of the Collateral. Following delivery of an Activation Notice,
proceeds of the sale or other disposition of any Art Loans or Art Inventory
shall be deposited directly to the applicable Blocked Account within two (2)
Business Days after the receipt thereof by any Sotheby Entity.

C-2

ANNEX D (Section 2.1(a))

to

CREDIT
AGREEMENT

See attached.

D-1

ANNEX E (Section 4.1(a))

to

CREDIT
AGREEMENT

FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING

                    Borrowers
shall deliver or cause to be delivered to Agent or to Agent and Lenders, as
indicated, the following:

                    (a)
Monthly Financials. To Agent and Lenders, within thirty (30) days after
the end of each Fiscal Month beginning with the Fiscal Month ending August 31,
2009 (or within forty-five (45) days (or sixty-five (65) days for December)
after the end of each Fiscal Month ending on or about the last day of each
June, September, December, January and March thereafter), financial information
regarding Borrowers and their Subsidiaries, certified by a Financial Officer of
Borrower Representative, consisting of consolidated (with respect to Parent and
its Subsidiaries) and consolidating (i) unaudited balance sheets as of the close
of such Fiscal Month and the related statements of income and (consolidated)
cash flows (relating solely to depreciation, amortization and capital
expenditures) for that portion of the Fiscal Year ending as of the close of
such Fiscal Month; (ii) unaudited statements of income, if available, on a
consolidated basis for such Fiscal Month, setting forth in comparative form the
figures for the corresponding period in the prior year, all prepared in
accordance with GAAP (subject to normal year-end adjustments); (iii) a
calculation of the Due-to-Consignor Amount as of the last day of that Fiscal
Month, which calculation shall separately identify (A) the aggregate amount of
cash received and held by all Sotheby Entities that is payable to consignors as
of such day as a result of the sale of such consignors’ Works of Art by a
Sotheby Entity, and (B) the aggregate outstanding amount of all principal,
accrued interest, and other related amounts as of such day with respect to any
Art Loans secured by such Works of Art, and (iv) a calculation of the aggregate
unfunded commitment of the Borrowers to make future Art Loans as of the last
day of that Fiscal Month. Such financial information shall be accompanied by
the certification of a Financial Officer of Borrower Representative that (i)
such financial information presents fairly (in the case of the consolidated
Financial Statements with respect to Parent and its Subsidiaries, in accordance
with GAAP (subject to normal year-end adjustments)) the financial position and
results of operations of Borrowers and their Subsidiaries, on a consolidated
(with respect to Parent and its Subsidiaries) and consolidating basis, in each
case as at the end of such Fiscal Month and for that portion of the Fiscal Year
then ended and (ii) any other information presented is true, correct and
complete in all material respects and that there was no Default or Event of
Default in existence as of such time or, if a Default or Event of Default has
occurred and is continuing, describing the nature thereof and all efforts
undertaken to cure such Default or Event of Default. 

                    (b)
Quarterly Financials. To Agent and Lenders, within forty-five (45) days
after the end of each Fiscal Quarter, consolidated (with respect to Parent and
its Subsidiaries) and consolidating financial information, certified by a
Financial Officer of Borrower Representative, including (i) unaudited balance
sheets as of the close of such Fiscal Quarter and the related statements of
income and (consolidated) cash flow for that portion of the Fiscal Year ending
as of the close of such Fiscal Quarter and (ii) unaudited statements of income
for such Fiscal Quarter, in each case setting forth in comparative form the
figures for the corresponding period 

E-1

in the prior
year. All such consolidated Financial Statements shall be prepared in
accordance with GAAP (subject to normal year-end adjustments). Such financial
information shall be accompanied by (A) during any Financial Covenant
Compliance Period, a statement substantially in the form of Exhibit C
(each, a “Compliance Certificate”) showing the calculations used in
determining compliance with each of the Financial Covenants that is tested on a
quarterly basis and (B) the certification of a Financial Officer of Borrower
Representative that (i) such financial information presents fairly (in the case
of the consolidated Financial Statements with respect to Parent and its
Subsidiaries, in accordance with GAAP (subject to normal year-end adjustments))
the financial position, results of operations and statements of cash flows of
Borrowers and their Subsidiaries, on both a consolidated (with respect to
Parent and its Subsidiaries) and consolidating basis, as at the end of such
Fiscal Quarter and for that portion of the Fiscal Year then ended and (ii) any
other information presented is true, correct and complete in all material
respects and that there was no Default or Event of Default in existence as of
such time or, if a Default or Event of Default has occurred and is continuing,
describing the nature thereof and all efforts undertaken to cure such Default
or Event of Default.

                    (c)
Operating Plan. To Agent and Lenders, as soon as available, but not
later than forty-five (45) days after the end of each Fiscal Year, an annual
operating plan for Parent and its Subsidiaries on a consolidated basis for the
following Fiscal Year, which (i) includes a statement of all of the material
assumptions on which such plan is based, (ii) includes quarterly balance
sheets, income statements and statements of cash flows for the following year
and (iii) integrates sales, gross profits, operating expenses, operating
profit, cash flow projections, U.S. Borrowing Availability and U.K. Borrowing
Availability projections, all prepared on the same basis and in similar detail
as that on which operating results are reported (and in the case of cash flow
projections, representing management’s good faith estimates of future financial
performance based on historical performance), and including plans for
personnel, Capital Expenditures and facilities. The income statements contained
in such annual operating plan shall be approved by the Board of Directors of
Parent.

                    (d)
Annual Audited Financials. To Agent and Lenders, within ninety (90) days
after the end of each Fiscal Year, audited consolidated (with respect to Parent
and its Subsidiaries) and unaudited consolidating Financial Statements,
consisting of balance sheets, statements of income and (consolidated)
statements of retained earnings and cash flows, setting forth in comparative
form in each case the figures for the previous Fiscal Year, which Financial
Statements shall be prepared in accordance with GAAP and certified without
qualification, by an independent certified public accounting firm of national
standing or otherwise acceptable to Agent. Such Financial Statements shall be
accompanied by (i) a statement prepared in reasonable detail showing the
calculations used in determining compliance with each of the Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred with
respect to the Financial Covenants (or specifying those Defaults and Events of
Default that they became aware of), it being understood that such audit
examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, and (iii) the certification of a Financial Officer of Borrowers that
(x) such financial information presents fairly (in the case of the consolidated
Financial Statements with respect to Parent and its Subsidiaries, in accordance
with GAAP) the financial position, results of operations and statements of cash
flows of 

E-2

Borrowers and
their Subsidiaries, on both a consolidated (with respect to Parent and its
Subsidiaries) and consolidating basis, as at the end of such Fiscal Year and
for the period then ended, and (y) there was no Default or Event of Default in
existence as of such time or, if a Default or Event of Default has occurred and
is continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.

                    (e)
Initial Compliance Certificate. To Agent and Lenders, within two (2)
Business Days of the commencement of any Financial Covenant Compliance Period,
to the extent a Compliance Certificate has not already been delivered with
respect to such Financial Covenant Compliance Period pursuant to clause (b)
above, a Compliance Certificate, certified by a Financial Officer of Borrower
Representative, showing the calculations used in determining compliance with
each of the Financial Covenants that is tested on a quarterly basis.

                    (e)
Management Letters. To Agent, within five (5) Business Days after
receipt thereof by Parent, copies of all management letters, exception reports
or similar letters or reports received by Parent from its independent certified
public accountants, except to the extent such accountants shall restrict the
ability of Parent to deliver such documents to Agent.

                    (f)
Default Notices. To Agent and Lenders, as soon as practicable, and in
any event within five (5) Business Days after an executive officer of any
Borrower has actual knowledge of the existence of any Default, Event of Default
or other event that has had a Material Adverse Effect, telephonic or telecopied
notice specifying the nature of such Default or Event of Default or other
event, including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business
Day.

                    (g)
Due-to-Consignor Statements. To Agent, (i) on a bi-weekly basis at any
time the Liquidity Amount shall be less than $50,000,000 and (ii) on each
Business Day on which a Default or Event of Default has occurred and is
continuing or on which the Liquidity Amount shall be less than $25,000,000, a
statement (such statement, a “Due-to-Consignor Statement”) certified by
a Financial Officer of Borrower Representative, providing a calculation of the
Due-to-Consignor Amount as of the date on which such statement is delivered,
which calculation shall separately identify (i) the aggregate amount of cash
received and held by all Sotheby Entities that is payable to consignors as of
such Business Day as a result of the sale of such consignors’ Works of Art by a
Sotheby Entity, and (ii) the aggregate outstanding amount of all principal,
accrued interest, and other related amounts as of such Business Day with
respect to any Art Loans secured by such Works of Art. 

                    (h)
SEC Filings and Press Releases. To Agent and Lenders, promptly upon
their becoming available, copies of: (i) all Financial Statements, reports,
notices and proxy statements made publicly available by Parent to its security
holders; (ii) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Parent with any securities exchange or with
the Securities and Exchange Commission or any governmental or private
regulatory authority in any jurisdiction; and (iii) all press releases and
other statements made available by Parent to the public concerning material
changes or developments in the business of any such Person.

E-3

                    (i)
Debt and Equity Notices. To Agent, as soon as practicable, copies of all
material written notices given or received by any Sotheby Entity or the York
Avenue Owner with respect to the Senior Notes, the Convertible Notes, the
Convertible Note Hedge Agreements, the Convertible Note Warrants, the York
Avenue Lease or the York Avenue Loan Agreement, and, within two (2) Business
Days after any Sotheby Entity obtains knowledge of any matured or unmatured
event of default with respect to the Senior Notes, the Convertible Notes, the
Convertible Note Hedge Agreements, the Convertible Note Warrants, the York
Avenue Lease or the York Avenue Loan Agreement, notice of such event of
default.

                    (j)
Supplemental Schedules. To Agent, supplemental disclosures, if any,
required by Section 5.6.

                    (k)
Litigation. To Agent in writing, as soon as practicable upon learning
thereof, notice of any Litigation commenced or threatened against any Sotheby
Entity that (i) seeks damages in excess of $2,500,000, (ii) seeks injunctive
relief, (iii) is asserted or instituted against any Plan, its fiduciaries or
its assets or against any Sotheby Entity or ERISA Affiliate in connection with
any Plan, (iv) alleges criminal misconduct by any Sotheby Entity, (v) alleges
the violation of any law regarding, or seeks remedies in connection with, any
Environmental Liabilities, (vi) involves any product recall or (vii) alleges,
or seeks remedies in connection with, any violation of any antitrust law or
similar law of any jurisdiction.

                    (l)
Insurance Notices. To Agent, disclosure of losses or casualties required
by Section 5.4. 

                    (m)
Lease Default Notices. To Agent, (i) within two (2) Business Days after
receipt thereof, copies of any and all default notices received under or with
respect to any leased location or public warehouse where Collateral (including
any Work of Art securing repayment of any Art Loan) is located, and (ii) such
other notices or documents as Agent may reasonably request.

                    (n)
Hedging Agreements. To Agent, within five (5) Business Days after its
request therefor, copies of any interest rate, commodity or currency hedging
agreements or amendments thereto entered into by any Sotheby Entity.

                    (o)
U.K. Pension Plans. To Agent in writing, promptly upon learning thereof,
notice of (i) any Litigation commenced or threatened against any Sotheby Entity
in relation to the U.K. Pensions Plans or (ii) any requirement to materially
increase funding levels of the U.K. Pension Plans.

                    (p)
Unfunded Commitments. To Agent in writing, promptly upon the occurrence
thereof, (i) any failure by any Sotheby Entity to fund any unfunded commitment
to make future Art Loans upon satisfaction of the conditions precedent to such
funding obligation or (ii) any dispute between any Sotheby Entity and any Art
Loan Debtor regarding the obligation of any Sotheby Entity to make an Art Loan
pursuant to any such unfunded commitment.

                    (q)
Other Documents. To Agent and Lenders, such other financial and other
information respecting any Sotheby Entity’s business or financial condition as
Agent or any Lender shall from time to time reasonably request.

E-4

ANNEX F (Section 4.1(b))

to

CREDIT AGREEMENT

COLLATERAL REPORTS

                    Borrowers
shall deliver or cause to be delivered the following:

                    (a)
To Agent, upon its request, and in any event no less frequently than fourteen
(14) days (or if the 14th day of any Fiscal Month is not a Business
Day, the next succeeding Business Day) after the end of (i) if the Revolving
Loan Outstandings and the outstanding balance of the Swing Line Loan, in the
aggregate, are greater than zero as of the last day of such Fiscal Month, each
Fiscal Month or (ii) otherwise, each Fiscal Quarter, each of the following
reports, each of which shall be prepared by the Borrowers as of the last day of
the immediately preceding Fiscal Month or Fiscal Quarter, as applicable, or the
date two (2) days prior to the date of any such request:

	
  

 	
  

 
	
  

 	
                     (i)
 a Borrowing Base Certificate, accompanied by such supporting detail and
 documentation as shall be requested by Agent in its reasonable discretion; 

 
	
  

 	
  

 
	
  

 	
                     (ii)
 an Art Inventory Report, accompanied by such supporting detail and
 documentation as shall be requested by Agent in its reasonable discretion;
 and

 
	
  

 	
  

 
	
  

 	
                     (iii)
 an Art Loan Receivables Report, accompanied by such supporting detail and
 documentation as shall be requested by Agent in its reasonable discretion.

 

                    (b)
To Agent, in connection with any inspection or audit pursuant to Section
1.14 of the Agreement and, otherwise, within five (5) Business Days (or
such later date as Agent shall consent to in writing) of its request:

	
  

 	
  

 
	
  

 	
                     (i)
 a reconciliation of the Art Inventory Report and Art Loans Receivables Report
 to the most recent Borrowing Base Certificate, general ledger and monthly Financial
 Statements delivered pursuant to Annex E, in each case accompanied by
 such supporting detail and documentation as shall be requested by Agent in
 its reasonable discretion;

 
	
  

 	
  

 
	
  

 	
                     (ii)
 a reconciliation of the outstanding Loans as set forth in the monthly Loan
 Account statement provided by Agent to each Borrower’s general ledger and
 monthly Financial Statements delivered pursuant to Annex E, in each
 case accompanied by such supporting detail and documentation as shall be
 requested by Agent in its reasonable discretion;

 

                    (c)
To Agent, at the time of delivery of each of the quarterly Financial Statements
delivered pursuant to Annex E, a list of any applications for the
registration of any Patent, Trademark or Copyright filed by any Sotheby Entity
with the United States Patent and Trademark Office, the United States Copyright
Office or any similar office or agency in the prior Fiscal Quarter, except any
Trademark registered by a Sotheby Entity at the direction of the

F-1

purchaser of
Sotheby’s International Realty, Inc., a Michigan corporation, as contemplated
by Disclosure Schedule (3.15).

                    (d)
Each Borrower, at its own expense, shall deliver to Agent the results of each
physical verification, if any, that such Borrower or any of its Subsidiaries
may in their discretion have made, or caused any other Person to have made on
their behalf, of all or any portion of the Collateral (including, without
limitation, any Works of Art securing repayment of Art Loans and any Art
Inventory) (and, if a Default or an Event of Default has occurred and is
continuing, each Borrower shall, upon the request of Agent, conduct, and
deliver the results of, such physical verifications as Agent may require).

                    (e)
Such other reports, statements and reconciliations with respect to the
Borrowing Bases, Collateral or Obligations of any or all of the Credit Parties
as Agent shall from time to time request in its reasonable discretion.

F-2

ANNEX G (Section 6.10)

to

CREDIT AGREEMENT

FINANCIAL COVENANTS

                    Borrowers
shall not breach or fail to comply with any of the following financial
covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

                    (a)
Maximum Capital Expenditures. Parent and its Subsidiaries on a consolidated
basis shall not make Capital Expenditures (other than portions of such Capital
Expenditures financed by the Lenders hereunder) in excess of $17,000,000 during
any Fiscal Year; provided that, to the extent that Parent and its
Subsidiaries on a consolidated basis make Capital Expenditures of less than
$17,000,000 during any Fiscal Year (the “Current Fiscal Year”), the
aggregate amount available for Parent and its Subsidiaries to make Capital
Expenditures during the immediately subsequent Fiscal Year pursuant to this clause
(a) shall be increased by an amount equal to the lesser of (i) the excess
of $17,000,000 over the amount of Capital Expenditures made by Parent and its
Subsidiaries on a consolidated basis during the Current Fiscal Year, and (ii)
$8,500,000.

                    (b)
Minimum Fixed Charge Coverage Ratio. During each Financial Covenant Compliance
Period, Parent and its Subsidiaries shall have on a consolidated basis at the
end of the most recently ended Fiscal Quarter for which Financial Statements
are required to be delivered to Agent and Lenders pursuant to Annex E, a
Fixed Charge Coverage Ratio for the four Fiscal-Quarter period then ended of
not less than the ratio set forth below opposite such Fiscal Quarter:

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Fiscal Quarter Ended

 	
  

 	
 Minimum Fixed Charge

 Coverage Ratio

 	
  

 
	

 

 	
  

 	

 

 	
  

 
	
 December 31, 2009

 	
  

 	
  

 	
 1.00:1.00

 	
  

 
	
 March 31, 2010

 	
  

 	
  

 	
 1.05:1.00

 	
  

 
	
 Any subsequent Fiscal Quarter

 	
  

 	
  

 	
 1.15:1.00

 	
  

 

G-1

                    (c)
Minimum EBITDA. During each Financial Covenant Compliance Period, Parent
and its Subsidiaries shall have on a consolidated basis at the end of the most
recently ended Fiscal Quarter for which Financial Statements are required to be
delivered to Agent and Lenders pursuant to Annex E, EBITDA for the
12-month period then ended of not less than the amount set forth below opposite
such Fiscal Quarter:

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Fiscal Quarter Ended

 	
  

 	
 Minimum EBITDA

 	
  

 
	

 

 	
  

 	

 

 	
  

 
	
 December 31, 2009

 	
  

 	
  

 	
 $60,000,000

 	
  

 
	
 March 31, 2010

 	
  

 	
  

 	
 $65,000,000

 	
  

 
	
 June 30, 2010

 	
  

 	
  

 	
 $75,000,000

 	
  

 
	
 September 30, 2010

 	
  

 	
  

 	
 $75,000,000

 	
  

 
	
 December 31, 2010

 	
  

 	
  

 	
 $80,000,000

 	
  

 
	
 Any subsequent Fiscal Quarter

 	
  

 	
  

 	
 $100,000,000

 	
  

 

                    Unless
otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied. That certain items or computations are
explicitly modified by the phrase “in accordance with GAAP” shall in no way be
construed to limit the foregoing. If any “Accounting Changes” (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrowers, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating Borrowers’
and their Subsidiaries’ financial condition shall be the same after such
Accounting Changes as if such Accounting Changes had not been made; provided,
however, that the agreement of Requisite Lenders to any required amendments of
such provisions shall be sufficient to bind all Lenders. “Accounting Changes”
means (i) changes in accounting principles required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants (or
successor thereto or any agency with similar functions), (ii) changes in
accounting principles concurred in by any Borrower’s certified public
accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and EITF
88-16, and the application of the accounting principles set forth in FASB 109,
including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (iv) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If
Agent, Borrowers and Requisite Lenders agree upon the required amendments, then
after appropriate amendments have been executed and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in the Agreement or in any other Loan Document shall, only to the
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If Agent,
Borrowers and Requisite Lenders cannot agree upon the required amendments
within thirty (30) days following the date of implementation of any Accounting
Change, then all Financial Statements delivered and all calculations of
financial covenants and other standards

G-2

and terms in
accordance with the Agreement and the other Loan Documents shall be prepared,
delivered and made without regard to the underlying Accounting Change. For
purposes of Section 8.1, a breach of a Financial Covenant contained in this
Annex G shall be deemed to have occurred as of any date of determination by
Agent or as of the last day of any specified measurement period, regardless of
when the Financial Statements reflecting such breach are delivered to Agent.

G-3

ANNEX H (Section 9.9(a))

to

CREDIT
AGREEMENT

WIRE TRANSFER INFORMATION

	
  

 	
  

 
	
 Dollars

 	
  

 
	

 

 	
  

 
	
 Name:

 	
 General
 Electric Capital Corporation

 
	
 Bank:

 	
 Deutsche
 Bank Trust Company Americas

 
	
  

 	
 New York,
 New York

 
	
 ABA #:

 	
 021001033

 
	
 Account #:

 	
 50279513

 
	
 Account
 Name:

 	
 GECC CFS CIF
 Collection Account

 
	
 Reference:

 	
 CFK 1731 /
 Sotheby’s Inc.

 
	
  

 	
  

 
	
 Sterling

 	
  

 
	

 

 	
  

 
	
 Name:

 	
 General
 Electric Capital Corporation

 
	
 Bank:

 	
 Barclays
 Bank

 
	
  

 	
 London,
 England

 
	
 Account #:

 	
 00282596

 
	
 Reference:

 	
 CFK 1731 /
 Sotheby’s Inc.

 

H-1

ANNEX I (Section 11.10)

to

CREDIT AGREEMENT

NOTICE ADDRESSES

	
  

 	
  

 
	
 (A)

 	
 If to Agent
 or GE Capital, at

 
	
  

 	
  

 
	
  

 	
 General
 Electric Capital Corporation

 
	
  

 	
 10 Riverview
 Drive

 
	
  

 	
 Danbury, CT
 06810

 
	
  

 	
 Attention:
 Sotheby’s Account Manager

 
	
  

 	
 Telecopier
 No.: (203) 749-4307

 
	
  

 	
 Telephone
 No.: (203) 749-6231

 
	
  

 	
  

 
	
  

 	
 with a copy
 to:

 
	
  

 	
  

 
	
  

 	
 General
 Electric Capital Corporation

 
	
  

 	
 201 Merritt
 Seven

 
	
  

 	
 Norwalk,
 Connecticut 06856

 
	
  

 	
 Attention:
 Corporate Counsel - Commercial Finance

 
	
  

 	
 Telecopier
 No.: (203) 229-5810

 
	
  

 	
 Telephone
 No.: (203) 956-4379

 
	
  

 	
  

 
	
 (B)

 	
 If to any
 Borrower, to Borrower Representative, at

 
	
  

 	
  

 
	
  

 	
 Sotheby’s 

 
	
  

 	
 1334 York
 Avenue

 
	
  

 	
 New York, NY
 10021

 
	
  

 	
 Attention:
 Chief Financial Officer

 
	
  

 	
 Telecopier
 No.: (212) 606-7372

 
	
  

 	
 Telephone
 No.: (212) 606-7107

 
	
  

 	
  

 
	
  

 	
 with a copy
 to:

 
	
  

 	
  

 
	
  

 	
 Sotheby’s 

 
	
  

 	
 1334 York
 Avenue

 
	
  

 	
 New York, NY
 10021

 
	
  

 	
 Attention:
 General Counsel

 
	
  

 	
 Telecopier
 No.: (212) 606-7574

 
	
  

 	
 Telephone
 No.: (212) 894-1439

 

I-1

ANNEX J (from Annex A - Commitments definition)

to

CREDIT AGREEMENT

	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Commitment

 	
  

 	
 Sterling/Non-Sterling Lender

 	
  

 	
 Lender(s)

 
	

 

 	
  

 	

 

 	
  

 	

 

 
	
 $50,000,000

 	
  

 	
 Sterling Lender

 	
  

 	
 General Electric Capital Corporation

 
	
 $40,000,000

 	
  

 	
 Sterling Lender

 	
  

 	
 HSBC Bank plc

 
	
 $10,000,000

 	
  

 	
 Sterling Lender

 	
  

 	
 HSBC Bank USA, National Association

 
	
 $25,000,000

 	
  

 	
 Sterling Lender

 	
  

 	
 JPMorgan Chase Bank, N.A.

 
	
 $25,000,000

 	
  

 	
 Non-Sterling Lender

 	
  

 	
 The PrivateBank and Trust Company

 
	
 $20,000,000

 	
  

 	
 Non-Sterling Lender

 	
  

 	
 TD Bank, N.A.

 
	
 $10,000,000

 	
  

 	
 Sterling Lender

 	
  

 	
 Bank of America, N.A.

 
	
 $10,000,000

 	
  

 	
 Sterling Lender

 	
  

 	
 Comerica Bank

 
	
 $10,000,000

 	
  

 	
 Sterling Lender

 	
  

 	
 Israel Discount Bank of New York

 
	

 

 	

 

 	

 

 	

 

 	

 

 
	
 $200,000,000

 	
  

 	
  

 	
  

 	
 Total

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Swing Line Commitment

 	
  

 	
  

 	
  

 	
 Lender

 
	

 

 	
  

 	
  

 	
  

 	

 

 
	
 $15,000,000

 	
  

 	
  

 	
  

 	
 General Electric Capital Corporation

 

J-1

SCHEDULE
1.5

MANDATORY
COST

	
  

 	
  

 
	
 1.

 	
 The
 Mandatory Cost is an addition to the interest rate to compensate Sterling
 Lenders for the cost of compliance with (a) the requirements of the Bank of
 England and/or the Financial Services Authority (or, in either case, any
 other authority which replaces all or any of its functions) or (b) the requirements
 of the European Central Bank. Each reference herein shall, at the option of
 the Fronting Lender, include the Fronting Lender.

 
	
  

 	
  

 
	
 2.

 	
 On the first
 day of each LIBOR Period for each Sterling Revolving Credit Advance (or as
 soon as possible thereafter) Agent shall calculate, as a percentage rate, a
 rate (the “Associated Costs Rate”) for each Sterling Lender, in
 accordance with the paragraphs set out below. The Mandatory Cost will be
 calculated by Agent as a weighted average of the Sterling Lenders’ Associated
 Costs Rates (weighted in proportion to the percentage participation of each
 Sterling Lender in the relevant Sterling Revolving Credit Advance) and will
 be expressed as a percentage rate per annum.

 
	
  

 	
  

 
	
 3.

 	
 The
 Associated Costs Rate for any Sterling Lender lending from a Facility Office
 in a Participating Member State will be the percentage notified by that
 Sterling Lender to Agent. This percentage will be certified by that Sterling
 Lender in its notice to Agent to be its reasonable determination of the cost
 (expressed as a percentage of that Sterling Lender’s participation in all
 Sterling Revolving Credit Advances made from that Facility Office) of
 complying with the minimum reserve requirements of the European Central Bank
 in respect of Sterling Revolving Credit Advances made from that Facility
 Office.

 
	
  

 	
  

 
	
 4.

 	
 The
 Associated Costs Rate for any Sterling Lender lending from a Facility Office
 in the United Kingdom will be calculated by Agent as follows:

 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 AB + C (B – D) + E ×  0.01

 	
   per cent.
 per annum

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 100 – (A + C) 

 
	
  

 	
  

 	
  

 
	
  

 	
 Where:

 
	
  

 	
  

 	
  

 
	
  

 	
 A

 	
 is the
 percentage of Eligible Liabilities (assuming these to be in excess of any
 stated minimum) which that Sterling Lender is from time to time required to
 maintain as an interest free cash ratio deposit with the Bank of England to
 comply with cash ratio requirements.

 
	
  

 	
  

 	
  

 
	
  

 	
 B

 	
 is the
 percentage rate of interest (excluding the Applicable Sterling Revolver LIBOR
 Margin and the Mandatory Cost and, if the Sterling Revolving Credit Advance
 is an Unpaid Sum, the additional rate of interest specified in Section
 1.5(d)) payable for the relevant LIBOR Period on the Sterling Revolving
 Credit Advance.

 

	
  

 	
  

 	
  

 
	
  

 	
 C

 	
 is the
 percentage (if any) of Eligible Liabilities which that Sterling Lender is
 required from time to time to maintain as interest bearing Special Deposits
 with the Bank of England.

 
	
  

 	
  

 	
  

 
	
  

 	
 D

 	
is the
 percentage rate per annum payable by the Bank of England to Agent on interest
 bearing Special Deposits.

 
	
  

 	
  

 	
  

 
	
  

 	
 E

 	
 is designed
 to compensate Sterling Lenders for amounts payable under the Fees Rules and
 is calculated by Agent as being the average of the most recent rates of
 charge supplied by the Reference Banks to Agent pursuant to paragraph 7
 below and expressed in pounds per £1,000,000.

 

	
  

 	
  

 
	
 5.

 	
 For the
 purposes of this Schedule:

 

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 “Eligible
 Liabilities” and “Special Deposits” have the meanings given to
 them from time to time under or pursuant to the Bank of England Act 1998 of
 the United Kingdom or (as may be appropriate) by the Bank of England.

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 “Facility
 Office” means the office or offices notified by a Sterling Lender to
 Agent in writing on or before the date it becomes a Sterling Lender (or,
 following that date, by not less than five Business Days’ written notice) as
 the office or offices through which it will perform its obligations under
 this Agreement.

 
	
  

 	
  

 	
  

 
	
  

 	
 (c)

 	
 “Fees
 Rules” means the rules on periodic fees contained in the Financial
 Services Authority Supervision Manual or such other law or regulation as may
 be in force from time to time in respect of the payment of fees for the
 acceptance of deposits.

 
	
  

 	
  

 	
  

 
	
  

 	
 (d)

 	
 “Fee
 Tariffs” means the fee tariffs specified in the Fees Rules under the
 activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated
 fee required pursuant to the Fees Rules but taking into account any
 applicable discount rate).

 
	
  

 	
  

 	
  

 
	
  

 	
 (e)

 	
 “Participating
 Member State” means any member state of the European Union that adopts or
 has adopted the euro as its lawful currency in accordance with legislation of
 the European Union relating to economic and monetary union.

 
	
  

 	
  

 	
  

 
	
  

 	
 (f)

 	
 “Reference
 Banks” means, in relation to Mandatory Cost, the principal London offices
 of HSBC Bank plc and/or such other bank or banks as may be designated by
 Agent in its reasonable discretion.

 
	
  

 	
  

 	
  

 
	
  

 	
 (g)

 	
 “Tariff
 Base” has the meaning given to it in, and will be calculated in
 accordance with, the Fees Rules.

 
	
  

 	
  

 	
  

 
	
  

 	
 (h)

 	
 “Unpaid
 Sum” means any sum due and payable but unpaid by any Borrower under the
 Sterling Revolving Credit Advance Documents.

 

	
  

 	
  

 
	
 6.

 	
 In
 application of the above formulae, A, B, C and D will be included in the
 formulae as percentages (i.e. 5 per cent. will be included in the formula as
 5 and not as 0.05). A

 

	
  

 	
  

 
	
  

 	
 negative
 result obtained by subtracting D from B shall be taken as zero. The resulting
 figures shall be rounded to four decimal places.

 
	
  

 	
  

 
	
 7.

 	
 If requested
 by Agent, each Reference Bank shall, as soon as practicable after publication
 by the Financial Services Authority, supply to Agent, the rate of charge
 payable by that Reference Bank to the Financial Services Authority pursuant
 to the Fees Rules in respect of the relevant financial year of the Financial
 Services Authority (calculated for this purpose by that Reference Bank as
 being the average of the Fee Tariffs applicable to that Reference Bank for
 that financial year) and expressed in pounds per £1,000,000 of the Tariff
 Base of that Reference Bank.

 
	
  

 	
  

 
	
 8.

 	
 Each
 Sterling Lender shall supply any information required by Agent for the
 purpose of calculating its Associated Costs Rate. In particular, but without
 limitation, each Sterling Lender shall supply the following information on or
 prior to the date on which it becomes a Sterling Lender:

 

	
  

 	
  

 	
  

 
	
  

 	
 (a)

 	
 the
 jurisdiction of its Facility Office; and

 
	
  

 	
  

 	
  

 
	
  

 	
 (b)

 	
 any other
 information that Agent may reasonably require for such purpose.

 
	
  

 	
  

 	
  

 
	
  

 	
 Each
 Sterling Lender shall promptly notify Agent of any change to the information
 provided by it pursuant to this paragraph.

 

	
  

 	
  

 
	
 9.

 	
 The
 percentages of each Sterling Lender for the purpose of A and C above and the
 rates of charge of each Reference Bank for the purpose of E above shall be
 determined by Agent based upon the information supplied to it pursuant to paragraphs
 7 and 8 above and on the assumption that, unless a Sterling Lender
 notifies Agent to the contrary, each Sterling Lender’s obligations in
 relation to cash ratio deposits and Special Deposits are the same as those of
 a typical bank from its jurisdiction of incorporation with a Facility Office
 in the same jurisdiction as its Facility Office.

 
	
  

 	
  

 
	
 10.

 	
 Agent shall
 have no liability to any person if such determination results in an
 Associated Costs Rate which over or under compensates any Sterling Lender and
 shall be entitled to assume that the information provided by any Sterling
 Lender or Reference Bank pursuant to paragraphs 3, 7 and 8
 above is true and correct in all respects. 

 
	
  

 	
  

 
	
 11.

 	
 Agent shall
 distribute the additional amounts received as a result of the Mandatory Cost
 to the Sterling Lenders on the basis of the Associated Costs Rate for each
 Sterling Lender based on the information provided by each Sterling Lender and
 each Reference Bank pursuant to paragraphs 3, 7 and 8
 above.

 
	
  

 	
  

 
	
 12.

 	
 Any
 determination by Agent pursuant to this Schedule in relation to a formula,
 the Mandatory Cost, an Associated Costs Rate or any amount payable to a
 Sterling Lender shall, in the absence of manifest error, be conclusive and
 binding on all parties hereto.

 
	
  

 	
  

 
	
 13.

 	
 Agent may
 from time to time, after consultation with the Company and the relevant
 Sterling Lenders, determine and notify to all parties hereto any amendments
 which are required to be made to this Schedule in order to comply with any
 change in law, regulation

 

	
  

 	
  

 
	
  

 	
 or any requirements from time to time imposed by
 the Bank of England, the Financial Services Authority or the European Central
 Bank (or, in any case, any other authority which replaces all or any of its
 functions) and any such determination shall, in the absence of manifest
 error, be conclusive and binding on all parties.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00162-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00162-of-00352.parquet"}]]