8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): January 15, 2015

THE WET SEAL, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	001-35634	33-0415940
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

26972 Burbank

Foothill Ranch, CA 92610

(Address of principal executive offices; zip code)

Registrant’s telephone number, including area code: (949) 699-3900

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

The information set forth below in Item 1.03 of this Current Report on Form 8-K (this “Form 8-K”) regarding the DIP Financing Agreement (as defined below), the DIP LC Agreement (as defined below) and the Plan Sponsorship Agreement (as defined below) is incorporated herein by reference.

Item 1.03. Bankruptcy or Receivership.

On January 15, 2015 (the “Petition Date”), The Wet Seal, Inc. (the “Company”) and its three subsidiaries (collectively with the Company, the “Debtors”) filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Chapter 11 cases are being administered under the caption “In re The Wet Seal, Inc., et al.”, Case Nos. 15-10081-10084 (the “Chapter 11 Cases”). The Debtors continue to operate their businesses and manage their properties as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

DIP Financing Agreement

In connection with the Chapter 11 Cases, the Debtors filed motions seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in that certain Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement, dated as of January 15, 2015 (the “DIP Financing Agreement”), by and among the Debtors and B. Riley Financial, Inc., as Lender. The DIP Financing Agreement provides for a senior secured, super-priority credit facility (the “DIP Financing”) of up to $20.0 million on the closing date of the DIP Financing, and the availability of which is reduced by an $5.0 million availability block (the “Availability Block”), which Availability Block is subject to reduction at the sole discretion of the Lender. Loans under the DIP Financing will be capped at the lesser of this commitment and a borrowing base (which is subject to reserves) and prior to the later of the entry of a final borrowing order by the Bankruptcy Court and approval of an initial budget by the Lender, availability under the DIP Financing will be limited to $1.0 million. The DIP Financing will become available upon the satisfaction of customary conditions precedent thereto, including the entry of an order of the Bankruptcy Court approving the DIP Financing on an interim basis.

The Debtors anticipate using the proceeds of the DIP Financing primarily for (i) for purposes permitted by orders of the Bankruptcy Court, including ongoing debtor-in-possession working capital purposes, (ii) the payment of fees, costs and expenses, and (iii) other general corporate purposes, in each case, only to the extent permitted under applicable law, the DIP Financing Agreement, the orders of the Bankruptcy Court, and in accordance with the approved budget, and further subject to certain exceptions as set forth in the DIP Financing Agreement.

The maturity date of the DIP Financing is the earlier of (a) February 16, 2015, unless the final borrowing order shall have been entered by the Bankruptcy Court on or before such date, in which case such maturity date shall mean May 15, 2015 unless otherwise extended by the Lender in its discretion, and (b) the date on which the Plan Sponsor (as defined below) terminates the Plan Sponsorship Agreement.

Interest on the outstanding principal amount of loans under the DIP Financing shall be payable monthly in arrears and on the maturity date at a per annum rate equal to 10.25%. Debtors shall pay to the Lender a commitment fee equal to (i) on January 24, 2015, (a) 2.50% multiplied by (b) an amount equal to the remainder of $20.0 million minus the Availability Block then in effect, and (ii) on any date on which the Lender reduces the Availability Block, (a) 2.50% multiplied by (b) the amount of such reduction. Upon an event of default, all obligations under the DIP Financing Agreement shall bear interest at a rate equal to the then current rate plus an additional 2% per annum.

Pursuant to the terms of the DIP Financing Agreement, the domestic subsidiaries of the Company which are not borrowers under the DIP Financing will guarantee the obligations of the borrowers under the DIP Financing. Subject to certain exceptions, the DIP Financing will be secured by a first priority perfected security interest in substantially all of the assets of the Debtors, including control over certain of the Debtors’ deposit accounts. The security interests and liens are subject only to certain carve outs and permitted liens, as set forth in the DIP Financing Agreement. The DIP Financing is subject to certain covenants, including, without limitation, related to the incurrence of additional debt, liens, the making of restricted payments and the deposit of the Company’s cash into a blocked account if the Company’s liquidity is below $5.0 million, the Company’s failure to comply with the approved budget and certain bankruptcy related covenants, in each case as set forth in the DIP Financing Agreement. The DIP Financing is subject to certain prepayment events, including, without limitation, upon the sale of certain assets, and certain events of default, including, without limitation, payment defaults, cross-defaults to other indebtedness, certain bankruptcy related defaults and the failure of Edmond S. Thomas to continue to serve as the chief executive officer of the Company, in each case as set forth in the DIP Financing Agreement.

The foregoing description of the DIP Financing does not purport to be complete and is qualified in its entirety by reference to the DIP Financing Agreement filed as Exhibit 10.1 hereto and incorporated herein by reference.

DIP LC Agreement

In addition, in connection with the Chapter 11 Cases, the Debtors filed motions seeking Bankruptcy Court approval of debtor-in-possession financing on the terms set forth in that certain Senior Secured, Super-Priority Debtor-in-Possession Letter of Credit Agreement, dated as of January 15, 2015 (the “DIP LC Agreement”), by and among the Debtors and Bank of America, N.A., as L/C Issuer. The DIP LC Agreement provides for a senior secured, super-priority debtor-in-possession letter of credit facility (the “DIP LC Financing”) of up to approximately $18.3 million on the closing date of the DIP LC Financing. The DIP LC Financing will become available upon the satisfaction of customary conditions precedent thereto, including the entry of an order of the Bankruptcy Court approving the DIP LC Financing on an interim basis.

The DIP LC Financing will be comprised of approximately $10.8 million of letters of credit outstanding under the Prepetition Credit Agreement (as defined below) and up to $7.5 million of additional letters of credit that may be issued under the DIP LC Agreement. Additional letters of credit will be available to the Debtors under the DIP LC Agreement until the earliest of (i) April 30, 2015, (ii) the date on which the maturity of the obligations under the DIP LC Agreement are accelerated and the commitment and the L/C Issuer’s obligation to issue letters of credit thereunder is terminated, (iii) the date on which a sale of substantially all of the assets or equity of the Debtors is consummated, or (iv) the effective date of a plan of reorganization of the Debtors.

A letter of credit fee on the outstanding stated amount of letters of credit under the DIP LC Financing shall be payable monthly in arrears at a per annum rate equal to 2.50%. The Debtors shall also pay to the L/C Issuer a closing fee. The Debtors shall pay to the L/C Issuer a commitment fee equal to 0.50% multiplied by the actual daily amount by which the commitment under the DIP LC Agreement exceeds the outstanding amount of obligations thereunder and shall be payable monthly in arrears. Upon an event of default, all obligations under the DIP LC Agreement shall bear interest at a rate equal to the then current rate plus an additional 2% per annum.

The cash collateral on deposit under the Prepetition Credit Agreement shall be deemed held under the DIP LC Agreement, each additional letter of credit issued under the DIP LC Agreement will be cash collateralized in an amount equal to 103% of the face amount of such letter of credit and the DIP LC Financing will be secured by a first priority perfected security interest in such cash collateral securing the repayment of all letters of credit issued, or deemed issued, under the DIP LC Agreement, which cash collateral will be subject to release upon the satisfaction of the conditions set forth in the DIP LC Agreement. The DIP LC Financing is subject to certain covenants, including, without limitation, related to liens and certain bankruptcy related covenants, as set forth in a DIP LC Agreement. The DIP LC Financing is subject to certain events of default, including, without limitation, payment defaults, cross-defaults to other indebtedness and certain bankruptcy related defaults, in each case as set forth in the DIP LC Agreement.

In connection with the DIP LC Financing, the Debtors entered into a Pledge and Security Agreement with Bank of America, N.A., as L/C Issuer and Pre-Petition Agent (the “Pledge and Security Agreement”).

The foregoing description of the DIP LC Financing does not purport to be complete and is qualified in its entirety by reference to the DIP LC Agreement and Pledge and Security Agreement filed as Exhibits 10.2 and 10.3, respectively, hereto and incorporated herein by reference.

Plan Sponsorship Agreement

On January 15, 2015 the Debtors entered into a Plan Sponsorship Agreement (the “Plan Sponsorship Agreement”) with B. Riley Financial, Inc. (the “Plan Sponsor”). Pursuant to the Plan Sponsorship Agreement, the Plan Sponsor will sponsor the Debtors in a plan of reorganization to be filed by the Company with support of the Plan Sponsor. Subject to the terms and conditions of the Plan Sponsorship Agreement, on the effective date of the plan, the Plan Sponsor will purchase 80.0% of the newly issued common stock of the reorganized Company in exchange for an aggregate amount of $20 million, consisting of the conversion of the outstanding principal amount under the DIP Financing and the remainder in cash. In addition, the unsecured claims not otherwise settled or resolved under the terms of the Plan will be entitled to the remaining 20.0% of the newly issued common stock of the reorganized Company or a cash payment, in an amount to be further agreed between the Debtors and Plan Sponsor.

The Plan Sponsorship Agreement provides that the Debtors and the Plan Sponsor will take certain specified actions and make certain specified filings with the Bankruptcy Court with respect to the confirmation and consummation of the Plan. The Plan is subject to certain conditions precedent, including the entry by the Bankruptcy Court of a confirmation order not subject to any stay on enforcement and reasonably satisfactory to the Plan Sponsor and all actions, documents and agreements necessary to implement the Plan shall have been effected or executed and delivered as required by the Plan. On the effective date of the Plan, all previously outstanding equity securities of the Company and all rights to convert, exchange or receive Company equity securities shall be deemed canceled and of no further force and effect.

The Plan Sponsor has the right to terminate the Plan Sponsorship Agreement following the occurrence of certain termination events set forth in the Plan Sponsorship Agreement, including (i) the Company fails to perform its obligations under the Plan Sponsorship Agreement or an event or occurrence required by the Plan Sponsorship Agreement does not occur, in each case by the applicable deadlines in the Plan Sponsorship Agreement, (ii) the reorganized Company fails to obtain a revolving credit facility to fund its operations on and after the effective date, (iii) material modifications are made to the Plan that are inconsistent with the Plan Sponsorship Agreement, (iv) the occurrence of an event of default under the DIP Financing that remains uncured, (v) the filing of a motion by the Company or the entry of an order by the Bankruptcy Court to appoint a trustee, receiver or examiner for the Company or to convert any Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code, (vi) a material breach of the Plan Sponsorship Agreement by the Company which is not cured within 10 business days following receipt of notice from the Plan Sponsor, (vii) the occurrence of an event or condition that results or would be reasonably expected to result, individually or in the aggregate, in a material adverse effect on the business, financial condition or results of operation of the Company or on the ability of the Company to consummate the transactions contemplated by the Plan Sponsorship Agreement and the Plan, subject to certain exceptions, (viii) a court or regulatory authority having jurisdiction over the Company issues an order that restricts, prevents or prohibits the Plan in a manner that cannot reasonably be remedied or enters a final, non-appealable judgment or order declaring any material provision of the Plan Sponsorship Agreement to be illegal, invalid or unenforceable, and (ix) Edmond S. Thomas or a replacement acceptable to the Plan Sponsor ceases to be the chief executive officer of the Company.

The Company has agreed that it will not solicit inquiries or proposals or engage in negotiations or have discussions regarding an alternative transaction, except as expressly permitted in the Plan Sponsorship Agreement. Subject to the terms and conditions of the Plan Sponsorship Agreement, the Company may terminate the Plan Sponsorship Agreement in order to enter into a definitive agreement in respect of a superior proposal, or following a specified intervening event, if the board of directors of the Company determines in good faith, after consultation with its outside legal counsel, that failure to take such action would be inconsistent with the fiduciary obligations of the board of directors of the Company under applicable law, and after the Company has provided notice to the Plan Sponsor and provided such Plan Sponsor the opportunity to negotiate with the Company to improve the terms of the Plan Sponsorship Agreement. In the event the Company terminates the Plan Sponsorship Agreement in connection with such a superior proposal or intervening event, it has agreed to pay to the Plan Sponsor a break-up fee equal to $1 million plus the Plan Sponsor’s reasonable out-of-pocket fees and expenses (i) via wire transfer of immediately available funds upon the closing of a superior proposal or (ii) upon payment of other allowed administrative expenses of the Company under section 503 of the Bankruptcy Code in the event such superior proposal does not close or if such termination is in connection with an intervening event.

The foregoing description of the Plan Sponsorship Agreement does not purport to be complete and is qualified in its entirety by reference to the Plan Sponsorship Agreement filed as Exhibit 10.4 hereto and incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation or Obligation under an Off Balance Sheet Arrangement of a Registrant.

The items set forth above in Item 1.03 of this Form 8-K regarding the DIP Financing and DIP LC Financing is hereby incorporated herein by reference.

Item 2.04. Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off Balance Sheet Arrangement.

The commencement of the Chapter 11 Cases described above constitutes an event of default under the Company’s Amended and Restated Credit Agreement dated as of February 3, 2011 (as amended, the “Prepetition Credit Agreement”) with the Debtors, Bank of America, N.A., as the administrative agent, collateral agent, L/C issuer and swing line lender, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner, and the other lenders party thereto. As a result of the filing of the Chapter 11 Cases, all commitments under the Prepetition Credit Agreement were terminated and all loans (with accrued interest thereon) and all other amounts outstanding under the Prepetition Credit Agreement (including, without limitation, all amounts under any letters of credit) became immediately due and payable. As of January 12, 2015, there were no outstanding borrowings under the Prepetition Credit Agreement and approximately $10.8 million outstanding letters of credit. The letters of credit outstanding, and cash collateral related thereto, under the Prepetition Credit Agreement shall be deemed to be transferred to and made under the DIP LC Agreement. The remaining contingent obligations under the Prepetition Credit Agreement will be cash collateralized in an amount equal to $1.5 million, which cash collateral will be subject to release upon the satisfaction of the conditions.

In addition, the commencement of the Chapter 11 Cases described above constitutes an event of default under the Company’s Senior Convertible Note (the “Note”) dated September 3, 2014 issued by the Company to Hudson Bay Master Fund Ltd. (the “Holder”) in the original principal amount of $27,000,000. As of January 15, 2015, the outstanding principal balance of the Note was approximately $24.9 million. As a result of the filing of the Chapter 11 Cases, under the terms of the Note, the Holder may seek immediate payment of the default redemption price under the Note of approximately $28.9 million, plus costs of collection, including attorneys’ fees and disbursements.

As a result of the filing of the Chapter 11 Cases, the Company believes that the ability of the Debtors’ creditors to seek remedies to enforce their respective rights against the Debtors under these and other agreements are stayed and creditor rights of enforcement against the Debtors are subject to the applicable provisions of the Bankruptcy Code.

Item 7.01. Regulation FD Disclosure.

Additional information on the Chapter 11 Cases, including access to documents filed with the Bankruptcy Court and other general information about the Chapter 11 Cases, is available at http://www.donlinrecano.com/Clients/wsi/Index.

A copy of the press release dated January 16, 2015 announcing that the Company had filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in Item 7.01 of this Form 8-K is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in Item 7.01 of this Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing.

Item 8.01. Other Events.

The Company cautions that trading in the Company’s securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual recovery, if any, by holders of the Company’s securities in the Chapter 11 Cases. If the plan of reorganization contemplated by the Plan Sponsorship Agreement is consummated, the Company’s outstanding Class A common stock will be extinguished and the holders of the Company’s outstanding Class A common stock will not receive any consideration.

Cautionary Statement Regarding Forward-Looking Statements

This Current Report on Form 8-K contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those involving future events and future results that are based on current expectations, estimates, forecasts, and projections as well as the current beliefs and assumptions of the Company’s management. Forward-looking statements may be identified by words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “predict,” “will,” “would,” “could,” “should,” “target” and similar expressions. All statements contained in this Current Report that are not statements of historical fact and other estimates, projections, future trends and the outcome of events that have not yet occurred referenced in this Form 8-K should be considered forward-looking statements. All forward-looking statements made by the Company are predictions and not guarantees of future performance, involve material risks and uncertainties and are subject to change based on factors that are difficult to predict and that may be beyond the Company’s control. Such factors include, but are not limited to: those described under the “Risk Factors” section and elsewhere in the Company’s most recent Quarterly Report on Form 10-Q filed with the Securities Exchange Commission on December 10, 2014, as well as in other past filings with the Securities and Exchange Commission; the risk that the Company may not be able to successfully execute its strategic steps; the transactions contemplated by the DIP Financing Agreement, the DIP LC Agreement and Plan Sponsorship Agreement are subject to closing conditions, which conditions may not be satisfied for various reasons, including for reasons outside of the Company’s control; risks and uncertainties relating to the bankruptcy filing by the Company, including but not limited to, (i) the Company’s ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 Cases, (ii) the ability of the Company and its subsidiaries to prosecute, develop and consummate the transactions contemplated by the Plan Sponsorship Agreement with respect to the Chapter 11 Cases, (iii) the effects of the Company’s bankruptcy filing on the Company and on the interests of various constituents, (iv) Bankruptcy Court rulings in the Chapter 11 Cases and the outcome of the cases in general, (v) the length of time the Company will operate under the Chapter 11 Cases, (vi) risks associated with third party motions in the Chapter 11 Cases, which may interfere with the Company’s ability to develop and consummate the transactions contemplated by the Plan Sponsorship Agreement, (vii) the potential adverse effects of the Chapter 11 Cases on the Company’s liquidity or results of operations, (viii) the ability to execute the Company’s business and transactions contemplated by the Plan Sponsorship Agreement, and (ix) increased legal costs to execute the Company’s reorganization, and other risks and uncertainties. Accordingly, the Company’s future performance and financial results may differ materially and/or adversely from those expressed or implied in any such forward-looking statements. You should not place undue reliance on forward-looking statements. The Company will not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

The Exhibit Index appearing after the signature page to this Current Report on Form 8-K is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

		THE WET SEAL, INC. (Registrant)
Date: January 16, 2015	By:	/s/ Thomas R. Hillebrandt
	Name:	Thomas R. Hillebrandt
	Title:	Interim Chief Financial Officer

EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
10.1	Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement, dated as of January 15, 2015, between B. Riley Financial, Inc. and The Wet Seal, Inc. and its subsidiaries
10.2	Senior Secured, Super-Priority Debtor-in-Possession Letter of Credit Agreement, dated as of January 15, 2015, between Bank of America, N.A. and The Wet Seal, Inc. and its subsidiaries
10.3	Pledge and Security Agreement, dated as of January 15, 2015, between Bank of America, N.A., and The Wet Seal, Inc. and its subsidiaries
10.4	Plan Sponsorship Agreement, dated as of January 15, 2015, between B. Riley Financial, Inc. and The Wet Seal, Inc.
99.1	Press release, dated January 16, 2015, issued by the Company

EX-10.1

Exhibit 10.1

SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT

dated as of

January 15, 2015

among

B. RILEY FINANCIAL, INC.

as Lender

THE WET SEAL, INC.

as Lead Borrower for

THE WET SEAL, INC.

THE WET SEAL RETAIL, INC.

WET SEAL CATALOG, INC.

as the Borrowers and Debtors-in-Possession

The GUARANTORS Party Hereto

TABLE OF CONTENTS

Section		Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS			1
1.01	Defined Terms		1
1.02	Other Interpretive Provisions		26
1.03	Accounting Terms		27
1.04	Rounding		27
1.05	Times of Day		27
1.06	Reserved		27
ARTICLE II THE COMMITMENT AND CREDIT EXTENSIONS			27
2.01	Loans		27
2.02	Borrowings		27
2.03	Reserved		28
2.04	Reserved		28
2.05	Prepayments		28
2.06	Termination or Reduction of Commitment		28
2.07	Repayment of Loans		29
2.08	Interest		29
2.09	Fees		29
2.10	Computation of Interest and Fees		29
2.11	Evidence of Debt		29
2.12	Payments Generally; Funding Source		30
2.13	Priority; Liens		30
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER			30
3.01	Taxes		30
3.02	Reserved		31
3.03	Reserved		31
3.04	Increased Costs		32
3.05	Reserved		32
3.06	Reserved		32
3.07	Survival		32
3.08	Designation of Lead Borrower as Borrowers’ Agent		32
ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS			33
4.01	Conditions of Initial Borrowing		33
4.02	Reserved		35
4.03	Conditions to all Borrowings		35
ARTICLE V REPRESENTATIONS AND WARRANTIES			36
5.01	Existence, Qualification and Power		36
5.02	Authorization; No Contravention		36
5.03	Governmental Authorization; Other Consents		36
5.04	Binding Effect		36
5.05	Budget; No Material Adverse Effect		36
5.06	Litigation		36

i

5.07	No Default	37
5.08	Ownership of Property; Liens	37
5.09	Environmental Compliance	37
5.10	Insurance	38
5.11	Taxes	38
5.12	ERISA Compliance	38
5.13	Subsidiaries; Equity Interests	38
5.14	Margin Regulations; Investment Company Act	39
5.15	Disclosure	39
5.16	Compliance with Laws	39
5.17	Intellectual Property; Licenses	39
5.18	Labor Matters	40
5.19	Security Documents	40
5.20	Reserved	40
5.21	Reserved	40
5.22	Brokers	40
5.23	Customer and Trade Relations	40
5.24	Casualty	40
ARTICLE VI AFFIRMATIVE COVENANTS		40
6.01	Financial Statements	41
6.02	Notices	42
6.03	Payment of Obligations	42
6.04	Preservation of Existence	42
6.05	Maintenance of Properties	43
6.06	Maintenance of Insurance	43
6.07	Compliance with Laws	43
6.08	Books and Records; Accountants	44
6.09	Inspection Rights	44
6.10	Additional Loan Parties	44
6.11	Reserved	45
6.12	Information Regarding the Collateral	46
6.13	Physical Inventories	46
6.14	Environmental Laws	47
6.15	Further Assurances	47
6.16	Compliance with Terms of Leaseholds	47
6.17	Depository Account	47
6.18	Retention of Independent Consultant	48
6.19	Performance Within Approved Budget	48
6.20	Reserved	49
6.21	Additional Bankruptcy Related Affirmative Covenant	49
ARTICLE VII NEGATIVE COVENANTS		49
7.01	Liens	49
7.02	Investments	50
7.03	Indebtedness; Disqualified Stock	50
7.04	Fundamental Changes	50
7.05	Asset Sales	50
7.06	Restricted Payments	50

ii

7.07	Prepayments of Indebtedness	50
7.08	Change in Nature of Business	51
7.09	Transactions with Affiliates	51
7.10	Burdensome Agreements	51
7.11	Use of Proceeds	51
7.12	Amendment of Material Documents	52
7.13	Fiscal Year	52
7.14	Reserved	52
7.15	Bankruptcy Related Negative Covenants	52
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES		53
8.01	Events of Default	53
8.02	Remedies Upon Event of Default	56
8.03	Application of Funds	57
ARTICLE IX MISCELLANEOUS		58
9.01	Amendments	58
9.02	Notices; Effectiveness; Electronic Communications	58
9.03	No Waiver; Cumulative Remedies	59
9.04	Expenses; Indemnity; Damage Waiver	59
9.05	Payments Set Aside	60
9.06	Successors and Assigns	61
9.07	Treatment of Certain Information; Confidentiality	62
9.08	Right of Setoff	63
9.09	Interest Rate Limitation	63
9.10	Counterparts; Integration; Effectiveness	63
9.11	Survival	64
9.12	Severability	64
9.13	Governing Law; Jurisdiction	64
9.14	Waiver of Jury Trial	65
9.15	No Advisory or Fiduciary Responsibility	65
9.16	Patriot Act Notice	66
9.17	Foreign Asset Control Regulations	66
9.18	Time of the Essence	66
9.19	Press Releases	66
9.20	Additional Waivers	67
9.21	No Strict Construction	68
9.22	Attachments	68
9.23	Reserved	68
9.24	Relationship with DIP Orders	68
ARTICLE X GUARANTEE		68
10.01	The Facility Guaranty	68
10.02	Guaranteed Obligations Not Affected	68
10.03	Security	69
10.04	Guarantee of Payment	69
10.05	No Discharge or Diminishment of Guarantee	69
10.06	Defenses of Loan Parties Waived	70
10.07	Agreement to Pay; Subordination	70
10.08	Limitation on Guarantee of Guaranteed Obligations	70
SIGNATURES		S-1

iii

SCHEDULES

1.01	Borrowers
5.08(b)(1)	Owned Real Estate
5.08(b)(2)	Leased Real Estate
5.10	Insurance
5.13	Subsidiaries; Other Equity Investments
7.01	Existing Liens
7.03	Existing Indebtedness
9.02	Lender’s Office; Certain Addresses for Notices

EXHIBITS

	Form of
A	Loan Notice
B	Note
C	Interim Borrowing Order

iv

SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT

This SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT (“Agreement”) is entered into as of January 15, 2015 among

The Wet Seal, Inc., a Delaware corporation, as Debtor-in-Possession (the “Lead Borrower”),

the Persons (as defined below) named on Schedule 1.01 hereto, as Debtors-in-Possession (collectively, the “Borrowers” and individually, a “Borrower”),

the Guarantors, as Debtors-in-Possession (as defined below), and

B. RILEY FINANCIAL, INC., as lender (in such capacity, the “Lender”).

RECITALS

WHEREAS, on January 15, 2015, the Borrowers and the Guarantors commenced Chapter 11 Case Nos. 15-10081, 15-10082, 15-10083, and 15-10084 (collectively, (the “Chapter 11 Case”) by filing a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code, in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Borrowers continue to operate their business and manage their properties as debtors and debtors-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code; and

WHEREAS, the Borrowers have requested that the Lender provide a senior secured, super-priority term credit facility to the Borrowers on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the Lender and the Borrowers hereby 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:

“ACH” means automated clearing house transfers.

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

“Agreement” means this Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement.

“Applicable Rate” means ten and one-quarter percent (10.25%).

“Approved Budget” has the meaning specified in Section 6.19.

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

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“Assignment and Assumption” means an assignment and assumption agreement, in form and substance reasonably satisfactory to the Lender, pursuant to which an assignee lender shall have agreed to become a party hereto as a lender.

“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.

“Available Amount” means, as of any date of determination thereof by the Lender, the result, if a positive number, of:

(a) Loan Cap, provided, however, that the amount of the Loan Cap, for purposes of determining the Available Amount, shall not exceed $1,000,000 prior to the later of (x) entry of the Final Borrowing Order and (y) the date on which the Lender shall have received, reviewed and approved the initial Variance Report;

minus

(b) The total of all Borrowings made hereunder (without regard to any repayment of Loans).

“Availability Block” means $5,000,000, subject to reduction at the sole discretion of the Lender.

“Availability Period” means the period beginning on (and including) the Closing Date and ending on (and excluding) the Termination Date.

“Availability Reserves” means such reserves as the Lender from time to time determines in the Lender’s Permitted Discretion as being appropriate, including, without limitation, (a) to reflect the impediments to the Lender’s ability to realize upon the Collateral, (b) to reflect claims and liabilities that the Lender 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 (but are not limited to) reserves based on (i) post-petition rent for any Lease not rejected in the Chapter 11 Case; (ii) Gift Certificates and Merchandise Credit Liability; (iii) customs, duties, and other costs to release Inventory which is being imported into the United States; (iv) outstanding customer deposits; (v) outstanding Taxes and other governmental charges, including, ad valorem, real estate, personal property, sales, claims of the PBGC, and other Taxes which would reasonably be expected to have priority over the interests of the Lender in the Collateral; (vi) Other DIP Obligations Reserve; (vii) salaries, wages and benefits due to employees of any Loan Party; (vii) reserves for reasonably anticipated changes in the Appraised Value of Eligible Inventory between appraisals; (ix) warehousemen’s or bailee’s charges and other Liens which would reasonably be expected to have priority over the interests of the Lender in the Collateral; and (x) the Professional Fee Carve Out Reserve.

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“Bank” means any bank organized under the laws of the United States having combined capital and surplus of not less than $250,000,000.

“Bankruptcy Code” means Title 11, U.S.C. §101, et seq., as now or hereafter in effect, or any successor statute thereto.

“Bankruptcy Court” has the meaning provided in the recitals to this Agreement.

“Bankruptcy Events” means, the commencement of the Chapter 11 Case and any events that lead up to, and typically result from, the commencement of a case under Chapter 11 of the Bankruptcy Code.

“Bankruptcy Recoveries” means any claims and causes of action to which any Loan Party may be entitled to assert by reason of any avoidance or other power vested in or on behalf of any Loan Party or the estate of any Loan Party under Chapter 5 of the Bankruptcy Code and any and all recoveries and settlements thereof.

“Blocked Account” has the meaning provided in Section 6.11(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 Lender, establishing control (as defined in the UCC) of such account by the Lender and whereby the bank maintaining such account agrees to comply only with the instructions originated by the Lender 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.

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

“Borrowing” means a borrowing of Loans made by the Lender pursuant to Section 2.01.

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

(a) the Tranche A Borrowing Base;

plus

(b) the Tranche B Borrowing Base;

plus

(c) the Cash Collateral Amount.

“Borrowing Base Certificate” means a certificate in form and substance satisfactory to the Lender (with such changes therein as may be reasonably required by the Lender 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, and supporting documentation as reasonably requested by the Lender.

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“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 Lender’s Office is located.

“Capital Expenditures” means, with respect to any Person for any period, (a) the additions, improvements, refurbishments, redesigns, remodels, and build-outs to property (including leasehold interests), plant and equipment and other capital expenditures of the Loan Parties that are (or would be) set forth in a Consolidated statement of cash flows of the Loan Parties for such period prepared in accordance with GAAP and (b) any assets acquired by a Capital Lease Obligation during such period.

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

“Carve Out Trigger Notice” means written notice from the Lender to the Lead Borrower, its lead counsel, the U.S. Trustee and lead counsel to the Creditors’ Committee notifying such Persons of the occurrence and continuance of an Event of Default.

“Case Professionals” means Persons or firms retained by the Loan Parties or the Creditors’ Committee or other statutory committee appointed in the Chapter 11 Case pursuant to §§327 and 1103 of the Bankruptcy Code.

“Cash Collateral Account” has the meaning set forth in Section 6.17.

“Cash Collateral Amount” means, at any time of calculation, the amount of cash then on deposit in the Cash Collateral Account.

“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 Closing Date, of any of the following as applicable to any of the Loan Parties or Credit Parties: (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, implementation, 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; provided however, for purposes of this Agreement, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued and shall be deemed to have gone into effect and been adopted after the Closing Date.

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“Change of Control” means, at any time, (a) during any period of twelve months, individuals who at the beginning of such period constituted the board of directors of the Lead Borrower (together with any new directors whose election or appointment by such board of directors, or whose nomination for election by shareholders of the Lead Borrower, as the case may be, was approved by a vote of a majority of the directors still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than by reason of death or disability to constitute a majority of the board of directors then in office; (b) any person or group (within the meaning of the Securities and Exchange Act of 1934, as amended) is or becomes the beneficial owner (within the meaning of Rule 13d-3 and 13d-5 of the Securities and Exchange Act of 1934, as amended, except that such person shall be deemed to have “beneficial ownership” of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) directly or indirectly of more than fifty percent (50%) of the total then outstanding voting power of the Voting Stock of the Lead Borrower on a fully diluted basis, whether as a result of the issuance of securities of the Lead Borrower, any merger, consolidation, liquidation or dissolution of the Lead Borrower, any direct or indirect transfers of securities or otherwise, or has the right or ability to Control the Lead Borrower; (c) the Lead Borrower fails to own one hundred percent (100%) of the Equity Interests of the other Loan Parties; or (d) any “change in control” or similar event as defined in any document governing Material Indebtedness of any Loan Party incurred on or after the Petition Date.

“Chapter 11 Case” has the meaning provided in the recitals to this Agreement.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 9.01.

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

“Collateral” means collectively, all property upon which a Lien is granted pursuant to any Security Document (including, without limitation, the DIP Orders). Notwithstanding anything to the contrary contained in this definition, the term “Collateral” shall not, except as expressly provided in the DIP Orders, include Bankruptcy Recoveries.

“Commitment” means the maximum principal amount of the Lender’s obligation to make Loans to the Borrowers pursuant to Section 2.01. As of the Closing Date, the Commitment is $20,000,000.

“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.

“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 (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of a Person, or (b) to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.

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“Credit Card Holdback Amount” means the aggregate amount of holdbacks issued with respect to Credit Card Receivables, to the extent complying with all criteria of Eligible Credit Card Receivables other than clause (a) thereof.

“Credit Card Receivables” means each “payment intangible” (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 Lender) 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 Party” or “Credit Parties” means (a) individually, (i) the Lender and its Affiliates, (ii) any other Person to whom Obligations under this Agreement and other Loan Documents are owing, and (iii) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

“Credit Party Expenses” means: all reasonable and documented out-of-pocket expenses incurred by the Lender and its Affiliates, in connection with this Agreement and the other Loan Documents, including, without limitation, (i) the reasonable and documented fees, charges and disbursements of (A) counsel for the Lender and its Affiliates (limited to not more than one primary counsel, and necessary local counsel (limited to one local counsel for each other jurisdiction)), (B) outside consultants for the Lender, (C) appraisers, and (D) commercial finance examinations, and (ii) all reasonable and documented out-of-pocket expenses incurred in connection with (A) 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), or (B) the enforcement or protection of their rights in connection with this Agreement or the other Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral or in connection with the Chapter 11 Case or any successor case.

“Creditors’ Committee” means any official committee of creditors formed, appointed or approved in the Chapter 11 Case pursuant to the Bankruptcy Code.

“Customs Broker Agreement” means an agreement in form and substance satisfactory to the Lender among a Loan Party, a customs broker or other carrier, and the Lender, 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 Lender and agrees, upon notice from the Lender, to hold and dispose of the subject Inventory solely as directed by the Lender.

“Data Center Servers” means the data servers and related equipment located in the Borrowers’ Las Vegas, Nevada data center.

“DDA” means each checking, savings or other demand deposit account maintained by any of the Loan Parties (other than any blocked account securing Other DIP Obligations). All funds in each DDA shall be conclusively presumed to be Collateral and proceeds of Collateral and the Lender shall have no duty to inquire as to the source of the amounts on deposit in any DDA.

“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.

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

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“Default Rate” means an interest rate equal to twelve and one-quarter percent (12.25%).

“DIP L/C Obligations” means obligations of the Loan Parties in respect of DIP Letters of Credit (as in the Other DIP Order) approved as administrative claims pursuant to the Other DIP Order.

“DIP Orders” means and refers to the Interim Borrowing Order and the Final Borrowing Order.

“Disclosure Statement” means a disclosure statement filed in the Chapter 11 Case in connection with a Plan of Reorganization.

“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 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.

“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. 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.

“Dominion Period” means the period from and after any date on which the Liquidity Amount of the Loan Parties is less than $5,000,000.

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

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

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(b) Credit Card Receivables with respect to which a Borrower does not have good, valid and marketable title, free and clear of any Lien (other than Permitted Liens);

(c) Credit Card Receivables that are not subject to a first priority security interest in favor of the Lender, for the benefit of itself and the Credit Parties (it being the intent that chargebacks in the ordinary course by the credit card processors shall not be deemed violative of this clause);

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

(e) Credit Card Receivables which the Lender determines in its Permitted Discretion to be uncertain of collection; and

(f) Any portion of any Credit Card Receivables subject to holdback.

“Eligible In-Transit Inventory” shall mean, as of the date of determination thereof, without duplication of other Eligible Inventory, Inventory (a) which has been shipped from a foreign location for receipt by a Borrower within fourteen (14) days of the date of shipment, but which has not yet been delivered to a Borrower, (b) for which payment has been made by a Borrower and title has passed to a Borrower, (c) for which the document of title reflects a Borrower or the Lender as consignee (along with delivery to such Borrower of the documents of title with respect thereto), (d) as to which the Lender has control over the documents of title which evidence ownership of the subject Inventory (such as, if requested by the Lender, by the delivery of a Customs Broker Agreement), and (e) which otherwise would constitute Eligible Inventory; provided that the Lender may, in its discretion, exclude any particular Inventory from the definition of “Eligible In-Transit Inventory” in the event the Lender reasonably 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 Lender (such as, without limitation, a right of stoppage in transit), may not be received by the commencement of any Liquidation, or may otherwise adversely impact the ability of the Lender to realize upon such Inventory.

“Eligible Inventory” shall mean, as of the date of determination thereof, (a) Eligible In-Transit Inventory, and (b) items of Inventory of the Borrowers that are finished goods, merchantable and readily saleable to the public in the ordinary course deemed by the Lender in its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base. Without limiting the foregoing, unless otherwise approved in writing by the Lender, none of the following shall be deemed to be Eligible Inventory:

(a) Inventory that is not owned solely by a Borrower, or is leased or on consignment or a Borrower does not have good and valid title thereto;

(b) Inventory (other than Eligible In-Transit Inventory) that is not located at a distribution center used by a Borrower in the ordinary course or at a property that is owned or leased by a Borrower;

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

(d) Inventory that is not located in the United States of America (excluding territories and possessions thereof) other than Eligible In-Transit Inventory;

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(e) Inventory that is not subject to a perfected first priority security interest in favor of the Lender for the benefit of the Credit Parties;

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

(g) Inventory as to which insurance in compliance with the provisions of Section 6.07 hereof is not in effect; or

(h) Inventory which has been sold but not yet delivered or as to which the Borrower has accepted a deposit.

“Eligible PP&E” shall mean, as of the date of determination thereof, PP&E of the Borrowers that is deemed by the Lender in its Permitted Discretion to be eligible for inclusion in the calculation of the Borrowing Base. Without limiting the foregoing, unless otherwise approved in writing by the Lender, Eligible PP&E shall not include:

(a) PP&E that is not owned solely by a Borrower, or is leased or to which a Borrower does not have good and marketable title thereto;

(b) PP&E that is not located in the United States of America (excluding territories and possessions thereof);

(c) PP&E that is not subject to a perfected first priority security interest in favor of the Lender for the benefit of the Credit Parties;

(d) PP&E as to which insurance in compliance with the provisions of Section 6.07 hereof is not in effect; or

(e) PP&E that is not in saleable condition and usuable for its intended purpose.

“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 UCC.

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“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 non-voting, 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; (f) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (g) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, 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 9.01 hereof.

“Excluded Taxes” means, with respect to the Lender or any other recipient of any payment to be made by or on account of any obligation of the Loan Parties 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 the Lender, in which its Lender’s 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 Loan Party is located, and (c) any U.S. federal withholding tax imposed under FATCA.

“Executive Order” has the meaning set forth in Section 9.17.

“Facility Guaranty” means the Guarantee of the Obligations set forth in Article X hereof.

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

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“Final Borrowing Order” means an order of the Bankruptcy Court, which order is a Final Order and shall be in form, scope and substance reasonably acceptable to the Lender, which, among other matters but not by way of limitation, (i) authorizes the Loan Parties to obtain credit, incur (or guaranty) Obligations, grant Liens under this Agreement, the other Loan Documents, and the DIP Orders and otherwise perform their obligations under this Agreement and the other Loan Documents and (ii) provides for the super priority of the Lender’s claims (subject to the Professional Fee Carve Out).

“Final Order” means an order or judgment of the Bankruptcy Court, as entered on the docket of the Clerk of the Bankruptcy Court, that has not been reversed, stayed, modified or amended and as to which the time to appeal or seek leave to appeal, petition for certiorari, reargue or seek rehearing has expired and no proceeding for certiorari, reargument or rehearing is pending or if an appeal, petition for certiorari, reargument, or rehearing has been sought, the order or judgment of the Bankruptcy Court has been affirmed by the highest court to which the order was appealed, from which the reargument or rehearing was sought, or certiorari has been denied and the time to take any further appeal or to seek certiorari or further reargument or rehearing has expired.

“Financial Officer” means a chief financial officer or vice president corporate controller.

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally end on the Saturday nearest to the last day of each January, April, July or October of such Fiscal Year in accordance with the fiscal accounting calendar of the Borrowers.

“Fiscal Year” means any period of twelve consecutive months ending on the Saturday nearest to the last day of January of any calendar year.

“Foreign Assets Control Regulations” has the meaning set forth in Section 9.17.

“Foreign Vendor” means a Person that sells In-Transit Inventory to a Borrower.

“Foreign Vendor Agreement” means an agreement between a Foreign Vendor and the Lender in form and substance satisfactory to the Lender and pursuant to which, among other things, the parties shall agree upon their relative rights with respect to In-Transit Inventory of a Borrower purchased from such Foreign Vendor.

“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 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 as set forth in accounting rules and standards promulgated by the Financial Accounting Standards Board or any organization succeeding to any of its principal functions.

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

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“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 supra-national bodies such as the European Union or the European Central Bank).

“Guarantee” means, as to any Person, (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 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). 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.

“Guaranteed Obligations” has the meaning specified in Section 10.01.

“Guarantor” means each of the Subsidiaries of the Lead Borrower (other than any Borrower), now existing or hereafter created, other than any CFC and the Borrowers.

“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.

“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), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

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

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(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

(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 (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Indemnitee” has the meaning specified in Section 9.04(b).

“Independent Consultant” means FTI Consulting, Inc., (or another independent third party consultant reasonably acceptable to the Lender).

“Information” has the meaning specified in Section 9.07.

“Intellectual Property” means the following: (a) trademarks, service marks, logos, trade dress, copyrights, copyrightable works, including registrations and applications therefor: (b) patent and patent applications, including all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof; (c) inventions, processes, trade secrets, know-how, and confidential information; and (d) licenses of rights in any of the above.

“Interest Payment Date” means the first Business Day of each calendar month and the Maturity Date.

“In-Transit Inventory” means Inventory of a Borrower which is in the possession of a common carrier and is in transit from a Foreign Vendor of a Borrower from a location outside of the continental United States to a location of a Borrower that is within the continental United States.

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“Interim Borrowing Order” means an order entered by the Bankruptcy Court, substantially in the form of, and containing the provisions set forth in, Exhibit C (or such other form and provisions as may be reasonably acceptable to the Lender), approving, on an interim basis, the Loan Parties’ obtaining credit and incurring (or guarantying) Obligations, granting Liens to secure the Obligations, and providing for the super priority of the Lender’s claims (subject to the Professional Fee Carve Out), and entering into and performing their obligations under this Agreement and the other Loan Documents.

“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 Lender in the Lender’s reasonable discretion with respect to the status, condition, saleability, or value of the Eligible Inventory. Without limiting the generality of the foregoing, Inventory Reserves may include (but are not limited to) reserves based on obsolescence or Shrink, reserves based on ad valorem or other taxes, or reserves reasonably required by the Lender to protect Collateral value based upon changes to the ordinary course business of the Borrowers.

“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 or assets 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 other investment of money or capital (including Capital Expenditures) 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.

“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. Without limiting the foregoing, “Laws” shall include the Bankruptcy Code.

“L/C Recovery Amount” means, the excess (if any) of (i) the cash collateral deposited by the Borrowers to secure obligations in respect of letters of credit issued to CIT, Rosenthal and other third-parties approved by the Lender in its sole discretion to secure delivery of certain Inventory over (ii) the sum of (x) the maximum payment obligation of Loan Parties upon delivery of such Inventory and (y) amounts drawn under such letters of credit and not reimbursed by a Loan Party.

“Lead Borrower” has the meaning specified in the introductory paragraph hereto.

“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 for any period of time.

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

“Lender Parties” shall have the meaning specified in Section 9.02(c).

“Lender’s Office” means the Lender’s address and, as appropriate, account as set forth on Schedule 9.02, or such other address or account as the Lender may from time to time notify the Lead Borrower.

“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 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 Lender of those rights and remedies accorded to the Lender 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 Lender, 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.

“Liquidity Amount” shall mean the amount measured as the sum of (x) unrestricted cash and cash equivalents of the Loan parties (excluding, for the avoidance of doubt, amounts deposited as cash collateral) plus (y) the maximum amount that is available for borrowing hereunder), provided that, if borrowing is unavailable solely due to a Default (that has not become an Event of Default), then such Default shall be deemed not to exist solely for purposes of the foregoing clause (y),

“Loan” means an extension of credit by the Lender to the Borrower under Article II.

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

“Loan Cap” means, at any time of determination, the lesser of (a) the Commitment (after giving effect to any reductions in the Commitment pursuant to Section 2.06) minus the Availability Block or (b) the Borrowing Base.

“Loan Documents” means this Agreement, each Note, each Issuer Document, the DIP Orders, the Security Documents, and any other instrument or agreement now or hereafter executed and delivered in connection herewith.

“Loan Notice” means a notice of Borrowing of Loans, pursuant to Section 2.02(b), which, if in writing, shall be substantially in the form of Exhibit A.

“Loan Parties” means, collectively, the Borrowers and the Guarantors.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property, assets, or condition, financial or otherwise, of the Lead Borrower and its Subsidiaries taken as a whole, (b) the ability of the Loan Parties to perform any Obligations under this Agreement or any of the

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other Loan Documents, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or any of the material rights or remedies of the Lender hereunder or thereunder. 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. Notwithstanding anything to the contrary, a “Material Adverse Effect” shall not be deemed to exist as a result of the effect of the Bankruptcy Events and the Permitted Store Closings.

“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, properties or prospects of such Person.

“Material Indebtedness” means Indebtedness incurred after the Petition Date (other than the Obligations) of the Loan Parties in an aggregate principal amount exceeding $1,000,000. For purposes of determining the amount of Material Indebtedness at any time, (a) the amount of the obligations in respect of any Swap Contract at such time shall be calculated at the Swap Termination Value thereof, (b) undrawn committed or available amounts shall be included, and (c) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included.

“Maturity Date” means the earlier of (a) February 16, 2015 unless the Final Borrowing Order shall have been entered on or before such date, in which case the Maturity Date shall mean May 15, 2015, unless otherwise extended by the Lender in its sole and exclusive discretion, and (b) the date on which the Sponsor terminates the Sponsor Support Agreement.

“Maximum Rate” has the meaning provided therefor in Section 9.09.

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

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Lead 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.

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

“NOLV” means the net orderly liquidation value of any asset as determined from time to time by the Lender in its Permitted Discretion (it being understood the Lender intends to re-evaluate and adjust NOLVs for the various components of the Borrowing Base on a bi-weekly basis). Unless the Lender otherwise notifies the Lead Borrower, (i) the NOLV of any Eligible Inventory shall be deemed to be 35% of the Cost thereof, (ii) the NOLV of the Borrowers’ Eligible PP&E shall be deemed to be $1,000,000 minus the net sale proceeds of any sale of any portion thereof, (iii) the NOLV of the Borrowers’ Intellectual Property shall be deemed to be $1,500,000, and (iv) the NOLV of the Data Center Servers shall be $600,000.

“NPL” means the National Priorities List under CERCLA.

“Obligations” means 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 with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising.

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“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 DIP Obligations” means (i) the DIP L/C Obligations, (ii) the Pre-Petition Indemnity Obligations, and (iii) the Treasury Management Obligations.

“Other DIP Obligation Reserves” means such reserves as the Lender, from time to time, determines in its reasonable discretion as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Loan Parties with respect to Other DIP Obligations in excess of the cash collateral posted in respect thereof.

“Other DIP Order” means an order entered by the Bankruptcy Court in form, scope and substance reasonably acceptable to the Lender, approving the Loan Parties’ obtaining credit and incurring (or guarantying), and granting Liens to secure, (i) the DIP L/C Obligations, (ii) the Pre-Petition Indemnity Obligations, and (iii) the Treasury Management Obligations.

“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, excluding, however, any such amounts imposed as a result of an assignment by the Lender of its Loan or Commitment.

“Outstanding Amount” means the aggregate outstanding principal amount of Loans after giving effect to any Borrowings and prepayments or repayments of Loans, as the case may be, occurring on such date

“Parent” means the Lead Borrower.

“Participant” has the meaning specified in Section 9.06(c).

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“PBGC” means the Pension Benefit Guaranty Corporation.

“PCAOB” means the Public Company Accounting Oversight Board.

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“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 Lead Borrower or any ERISA Affiliate or to which the Lead 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 Discretion” means the exercise of the Lender’s good faith discretion, based on its commercially reasonable business judgment, taking into consideration all factors the Lender deems relevant, including, without limitation, facts, factors, risks or circumstances, that: (i) would reasonably be expected to adversely affect the value of the Collateral, the enforceability or priority of the Lender’s Liens thereon in favor of the Credit Parties or the amount which the Lender and the Credit Parties would likely receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of such Collateral; (ii) would reasonably suggest that any collateral report or financial information delivered to the Lender by or on behalf of the Loan Parties is incomplete, inaccurate or misleading in any material respect; (iii) would reasonably create or be expected to create a Default or Event of Default, of (iv) may increase the risk that the Obligations would not be paid or performed in a timely manner. In exercising such judgment, the Lender may consider such factors or circumstances already included in or tested by the definitions of Eligible Credit Card Receivables, Eligible in-Transit Inventory or Eligible Inventory, as well as any of the following: (A) the financial and business climate and prospects of any member of the Loan Parties’ industry and general macroeconomic conditions; (B) changes in demand for and pricing of Inventory; (C) changes in any concentration of risk with respect to Inventory; (D) any other factors or circumstances that will or would reasonably be expected to have a Material Adverse Effect; (E) audits of books and records by third parties, history of chargebacks or other credit adjustments; and (F) any other factors that change or would reasonably be expected to change the credit risk of lending to the Borrowers on the security of the Collateral.

“Permitted Encumbrances” means:

(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 6.03;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 6.03;

(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, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under Section 8.01(h);

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

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(g) Liens created under the Loan Documents;

(h) Liens existing on the Petition Date listed on Schedule 7.01 ; and

(i) Liens approved pursuant to the Other DIP Order, securing Other DIP Obligations.

“Permitted Indebtedness” means each of the following:

(a) Indebtedness incurred prior to the Petition Date and listed on Schedule 7.03;

(b) Indebtedness created under the Loan Documents;

(c) Indebtedness of any Loan Party to any other Loan Party, all of which Indebtedness shall be reflected in the Loan Parties’ books and records in accordance with GAAP;

(d) unsecured Indebtedness of the kind described in clause (d) of the definition of such term (and any Guaranty of any such Indebtedness of a Loan Party);

(e) Other DIP Obligations;

(f) Indebtedness of a Loan Party owing to another Loan Party; and

(g) Permitted Refinancings of the Indebtedness described in clauses (a) through (g).

“Permitted Investments” means each of the following:

(a) as long as no Loans are outstanding:

(i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), and municipal securities with an “AA” long-term credit rating obtainable from S&P and/or from Moody’s, including pre-funded municipal bonds escrowed to maturity and guaranteed by the securities issued by the United States of America (or by any agency thereof);

(ii) Investments in commercial paper (taxable and tax-exempt);

(iii) Investments in (i) securities issued by a corporation (other than a Loan Party or an Affiliate of a Loan Party) and denominated in U.S. Dollars maturing within three (3) years from the date of acquisition thereof and having, at such date of acquisition, the long-term credit rating of “A/A” or the short-term credit rating of “A1/P1 SP1/MIG-1” or better obtainable from S&P and/or from Moody’s, (ii) securities issued by the Lender or another banking institution with total assets in excess of $250,000,000 maturing within three (3) years from the date of acquisition thereof; and (iii) auction rate preferred stock or bonds having, at such date of acquisition, the long-term credit rating of “AA” with a reset and maturing within 180 days from the date of acquisition thereof;

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(iv) Investments in certificates of deposit, bankers’ acceptances and time deposits (including Eurodollar denominated issues) maturing within three (3) years from the date of acquisition thereof issued or guaranteed by or placed with, and demand deposit and money market deposit accounts issued or offered by, the Lender or another banking institution with total assets in excess of $250,000,000;

(v) fully collateralized repurchase agreements for securities described in clause (a) above (without regard to the limitation on maturity contained in such clause) and entered into 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;

(vi) short-term Tax exempt securities (including municipal notes, auction rate floaters and floating rate notes); and

(vii) Shares of investment companies that are registered under the Investment Company Act of 1940, as amended, and invest solely in one or more of the types of securities described in clauses (i) through (vi) above.

(b) reserved;

(c) loans or advances made by any Loan Party to any other Loan Party;

(d) Guarantees constituting Indebtedness permitted as Permitted Indebtedness;

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

(f) loans or advances to employees for the purpose of travel, entertainment or relocation in the ordinary course of business in an amount not to exceed $50,000 in the aggregate at any time outstanding;

provided that, notwithstanding the foregoing, no such Investments described in clauses (a) through (f) shall be permitted unless such Investments are pledged to the Lender as additional collateral for the Obligations pursuant to such agreements or the DIP Orders as may be reasonably required by the Lender.

“Permitted Refinancing” means, with respect to any Person, any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting a Permitted Refinancing); provided, that such Refinancing has been approved by Lender.

“Permitted Sales” means (i) the Disposition of any furniture, fixture or equipment that is no longer used or useful in the business of the Lead Borrower and its Subsidiaries, to the extent expressly provided for in the Approved Budget; or (ii) the Disposition of Inventory and furniture, fixtures or equipment in connection with Permitted Store Closings.

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“Permitted Store Closings” means the Store closures effectuated prior to the commencement of the Chapter 11 Case, or thereafter with Lender’s approval.

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

“Petition Date” means January 15, 2015.

“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.

“Plan Effective Date” means the effective date of a Plan of Reorganization.

“Plan of Reorganization” means a plan filed in the Chapter 11 Case pursuant to Chapter 11 of the Bankruptcy Code.

“PP&E” means (i) fixtures located at the Borrowers’ retail stores and (ii) equipment located at the Borrowers’ distribution centers (excluding, for the avoidance of doubt, Data Center Servers), and any furniture, fixture or equipment located in retail stores or distribution centers.

“Pre-Petition Credit Agreement” means that certain Amended and Restated Credit Agreement dated as of February 3, 2011 entered into among the Borrowers, the Guarantors, the Agents and the Lenders (as each of those terms is defined therein), together with all instruments, documents and agreements executed or delivered in connection therewith, in each case, as amended, modified or supplemented to the date hereof.

“Pre-Petition Indemnity Obligations” has the meaning ascribed to such term in the Other DIP Order.

“Pre-Petition Liabilities” means the “Secured Obligations” as defined in the security agreement executed and delivered in connection with the Pre-Petition Credit Agreement.

“Pre-Petition Loan Documents” means the “Loan Documents” as defined in the Pre-Petition Credit Agreement.

“Professional Fee Carve Out” means a carve out for the following expenses: (i) all fees required to be paid to the Clerk of the Bankruptcy Court; (ii) all statutory fees payable to the U.S. Trustee pursuant to 28 U.S.C. § 1930(a)(6) and 28 U.S.C. § 156(c); (iii) all Reported Fee Accruals, whether allowed by the Bankruptcy Court prior to or after delivery of a Carve Out Trigger Notice less the amount of the Case Professionals’ pre-petition retainers received but not previously applied to their Professional Fees and Expenses; and (iv) all accrued and unpaid Professional Fees and Expenses incurred after the date of service of a Carve Out Trigger Notice, to the extent allowed at any time, in an aggregate amount not to exceed $300,000 less, without duplication, the amount of such Case Professionals’ pre-petition retainers received but not previously applied to their Professional Fees and Expenses as set forth in clause (iii) herein; provided that the amount set forth in this clause (iv) shall be reduced on a dollar-for-dollar basis for the Professional Fees and Expenses incurred and paid by the Loan Parties after the date of service of a Carve Out Trigger Notice.

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“Professional Fee Carve Out Reserve” means an Availability Reserve equal to the Professional Fee Carve Out.

“Professional Fees and Expenses” means, subject to any limitations contained in the DIP Orders, (a) allowed administrative expenses payable pursuant to 28 U.S.C. § 1930(a)(6), and (b) professional fees of, and costs and expenses incurred by, Case Professionals.

“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.

“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.

“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.

“Reported Fee Accruals” means the amount of Professional Fees and Expenses which have been incurred, accrued or invoiced (but remain unpaid) prior to such time as the Lender delivers the Carve Out Trigger Notice. For purposes of determining the amount of the Professional Fee Carve Out, “Reported Fee Accruals” shall be equal to the aggregate amounts under the heading “Professional Fees Incurred” in the Approved Budget (reflected on an accrual basis and not on a cash basis) for the line item in the relevant time period for each such Case Professional (or if less, the actual Professional Fees and Expenses incurred to such time) minus any payments received on account thereof. Any Professional Fees and Expenses which have been incurred, accrued or invoiced (and remain unpaid) but are in excess of the amounts reflected in the Approved Budget in the line item for the relevant time period for each such Case Professional shall not constitute “Reported Fee Accruals.”

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

“Responsible Officer” means the chief executive officer, president, chief financial officer, vice-president, corporate controller, treasurer or assistant treasurer of a Loan Party or any of the other individuals designated in writing to the Lender 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 shares of any class of Equity Interests of any Loan Party or any Subsidiary of any Loan Party, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests of any Loan Party or any such Subsidiary or any option, warrant or other right to acquire any such Equity Interests of any Loan Party or any such Subsidiary. Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans and all proceeds of a dissolution or liquidation of such Person payable to the shareholders of such Person.

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“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.

“Satisfaction of Obligations” (or words to similar effect) means all the Obligations have been indefeasibly paid in full in cash, a reserve account has been established with Lender for all indemnification obligations hereunder, and the Commitment hereunder has been terminated.

“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, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.

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

“Security Documents” means (a) the Security Agreement and each other security agreement or other instrument or document executed and delivered to the Lender pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations, and (b) the DIP Orders.

“Sponsor” means B. Riley Financial, Inc. and/or its permitted designees under the Sponsor Support Agreement.

“Sponsor Support Agreement” means that certain Plan Sponsorship Agreement, dated as of January 15, 2015, entered into by the Borrowers and the Sponsor.

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

“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 Lender.

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

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“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 the Lender or any Affiliate of the Lender).

“Synthetic Lease Obligation” means the monetary obligation 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 the Bankruptcy Code or any other debtor relief laws to such 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 Commitment is terminated (or deemed terminated) in accordance with Article VIII, (iii) the termination of the Commitment hereunder in accordance with the provisions of Section 2.06 hereof, or a Plan Effective Date.

“Trading With the Enemy Act” has the meaning set forth in Section 9.17.

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

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

plus

(b) the product of (i) the NOLV of Eligible Inventory, net of Eligible In-Transit Inventory and net of applicable Inventory Reserves, multiplied by (ii) 90%;

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plus

(c) the product of (i) the NOLV of Eligible In-Transit Inventory, net of applicable Inventory Reserves, multiplied by (ii) 80%;

plus

(d) the product of (i) NOLV of the Eligible PP&E multiplied by (ii) 50%;

plus

the product of (i) the NOLV of the Data Center Servers multiplied by (ii) 50%;

minus

(e) the then amount of all Reserves (other than Inventory Reserves) allocated to the Tranche A Borrowing Base by the Lender.

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

(a) the NOLV of Intellectual Property;

plus

(b) the product of (i) L/C Recovery Amount multiplied by (ii) 70%;

plus

(c) the product of (i) Credit Card Holdback Amount multiplied by (ii) 85%;

plus

(d) the product of (i) the then amount of cash collateral posted in respect of Treasury Management Obligations multiplied by (ii) 85%;

minus

(e) the then amount of all other Reserves (other than Inventory Reserves) allocated to the Tranche B Borrowing Base by the Lender.

“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.

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“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 set forth in Section 2.03(c).

“Variance Report” means a report prepared by the Lead Borrower’s management reflecting on a line-item basis the Loan Parties’ actual performance compared to the Approved Budget for the immediately preceding four week period and on a cumulative basis for the period after the Petition Date and the percentage variance of the Loan Parties’ actual results from those reflected in the then existing Approved Budget, along with management’s explanation of such variance.

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 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.

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(d) Any provision hereof requiring consent, agreement or approval of Lender shall be deemed to require such consent, agreement or approval to be in writing and signed by the Lender.

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 financial statements delivered to the Lender prior to the Closing Date, 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, the Lender 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; 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 Lender 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 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).

ARTICLE II

THE COMMITMENT AND CREDIT EXTENSIONS

2.01 Loans. Subject to the terms and conditions set forth herein, the Lender agrees to make Loans to the Borrowers no more than one (1) time per week on or after the Closing Date, on any Business Day during the Availability Period, in an aggregate amount not to exceed the Available Amount. Any portion of Loans repaid may not be reborrowed.

2.02 Borrowings.

(a) Reserved.

(b) Each Loan shall be made upon the Lead Borrower’s irrevocable written notice to the Lender. Each such notice must be received by the Lender not later than 1:00 p.m. three (3) Business Days prior to the requested date of any Borrowing. Each telephonic notice by the Lead Borrower pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the Lender of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Lead Borrower. Each borrowing of Loans shall be in a principal amount of $500,000 or a whole multiple of $500,000 in excess thereof. Each Loan Notice shall specify (i) the requested date of the Borrowing, which shall be a Business Day, (ii) the principal amount of Loans to be borrowed, and (iii) certify as to the calculations set forth in Section 4.03(e).

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(c) Upon satisfaction of the applicable conditions set forth in Section 4.03 (and, if such Borrowing is the initial Borrowing, Section 4.01), the Lender shall use reasonable efforts to make the proceeds of the Borrowing available to the Lead Borrower by no later than 4:00 p.m. on the requested funding date by wire transfer of such funds to the account of the Lead Borrower in accordance with instructions provided to (and reasonably acceptable to) the Lender by the Lead Borrower.]

(d) The Lender shall have no obligation to make any Loan in excess of the Available Amount.

2.03 Reserved.

2.04 Reserved.

2.05 Prepayments.

(a) The Borrowers may, upon irrevocable notice from the Lead Borrower to the Lender, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Lender not later than 1:00 p.m. on the date of prepayment of such Loans; (ii) any prepayment shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 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. 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 Loan shall be accompanied by all accrued interest on the amount prepaid.

(b) Amounts of Loans repaid may not be reborrowed and do not increase the Commitment.

(c) The Borrowers shall prepay the Loans with the net proceeds of any sale or disposition of any PP&E promptly upon receipt of such proceeds.

(d) At any time that the Outstanding Amount shall exceed the Loan Cap, the Borrowers shall immediately prepay Loans to eliminate such excess.

2.06 Termination or Reduction of Commitment.

(a) The Borrowers may, upon irrevocable notice from the Lead Borrower to the Lender, terminate the Commitment or from time to time permanently reduce the Commitment; provided that (i) any such notice shall be received by the Lender not later than 1:00 p.m. three Business Days prior to the date of termination or reduction and (ii) any such partial reduction of the Commitment shall be in an aggregate amount of $1,000,000 or any whole multiple of $100,000 in excess thereof.

(b) Reserved.

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(c) All fees (including, without limitation, commitment fees) and interest in respect of the Obligations accrued until the effective date of any termination of the Commitment shall be paid on the effective date of such termination.

2.07 Repayment of Loans.

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

2.08 Interest.

(a) Subject to the provisions of Section 2.08(b) below, each Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to the Applicable Rate.

(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 the Default Rate to the fullest extent permitted by Law.

(ii) If any Event of Default exists, then the Lender may notify the Lead Borrower that all Obligations shall thereafter bear interest at the Default Rate and thereafter outstanding Obligations shall bear interest at the Default Rate to the fullest extent permitted by Law.

(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 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.

2.09 Fees. The Borrowers shall pay to the Lender commitment fees (a) on January 24, 2015, in an amount equal to 2.50% times the amount by which the Commitment exceeds the Availability Block then in effect, and (b) on any subsequent date on which the Lender decreases the Availability Block, in an amount equal to 2.50% times the amount of such reduction. The commitment fees shall be fully earned on the Closing Date, and shall not be subject to refund or rebate for any reason.

2.10 Computation of Interest and Fees. All computations of fees and interest shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any 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 Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

2.11 Evidence of Debt.

The Loans made by the Lender shall be evidenced by one or more accounts or records maintained by the Lender (the “Loan Account”) in the ordinary course of business, which shall include the date and amount of each Loan from the Lender, each payment and prepayment of principal of any such Loan, and each payment of interest, fees and other amounts due in connection with the Obligations due to the Lender. The accounts or records maintained by the Lender shall be conclusive absent manifest error of

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the amount of the Loans made by the Lender 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. Upon the request of the Lender, the Borrowers shall execute and deliver to the Lender a Note in the amount of the Commitment, which shall evidence the Lender’s Loans in addition to such accounts or records. The Lender may attach schedules to its Note and endorse thereon the date amount and maturity of its Loans and payments with respect thereto. Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lender’s Note together with an indemnity from the Lender related thereto in form and substance reasonably acceptable to the Borrowers, and upon cancellation of such Note, the Borrowers will issue, in lieu thereof, a replacement Note in favor of the Lender, in the same principal amount thereof and otherwise of like tenor.

2.12 Payments Generally; Funding Source.

(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 Lender at the Lender’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. All payments received by the Lender after 2:00 p.m. shall, at the option of the Lender, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment 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) Funding Source. Nothing herein shall be deemed to obligate the Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by the Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

2.13 Priority; Liens. All of the Obligations are secured by Liens on substantially all the assets of the Borrowers and, at all times, shall constitute administrative expenses of the Borrowers in the Bankruptcy Case with priority under Section 364(c)(1) of the Bankruptcy Code over any and all other administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code, subject and subordinate only to the Professional Fee Carve Out. No other claims, except for the aforementioned, having a priority superior or pari passu to that granted to or on behalf of the Lender shall be granted or approved while any of the Obligations or the Commitment remain outstanding.

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 Lender 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.

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(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 Lender, 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 Lender, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Lead Borrower by the Lender 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 Lender 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 Lender.

(e) Treatment of Certain Refunds. If the Lender reasonably determines, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Loan Parties or with respect to which the Borrowers have paid additional amounts pursuant to this Section, it shall pay to the Lead Borrower, with reasonable promptness following the date upon which it actually realizes such benefit, 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 Lender, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Loan Parties, upon the request of the Lender, agree to repay the amount paid over to the Lead Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender in the event that the Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Loan Parties or any other Person.

(f) FATCA. If a payment made to the Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if the Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), the Lender shall deliver to the withholding agent (i.e., any Loan Party), at the time or times prescribed by law and at such time or times reasonably requested by such withholding agent, such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by such withholding agent as may be necessary for the withholding agent to comply with its obligations under FATCA, to determine that the Lender has complied with the Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

3.02 Reserved.

3.03 Reserved.

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3.04 Increased Costs.

(a) Reserved.

(b) Capital Requirements. If the Lender determines that any Change in Law affecting the Lender or any Lending Office of the Lender or the Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on the Lender’s capital or liquidity or on the capital or liquidity of the Lender’s holding company, if any, as a consequence of this Agreement, the Commitment of the Lender or the Loans made by the Lender, to a level below at which the Lender or the Lender’s holding company could have achieved but for such Change in Law (taking into consideration the Lender’s policies and the policies of the Lender’s holding company with respect to capital adequacy), then from time to time the Loan Parties will pay to the Lender such additional amount or amounts as will compensate the Lender or the Lender’s holding company for any such reduction suffered.

(c) Certificates for Reimbursement. A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in subsection (b) of this Section and delivered to the Lead Borrower shall be conclusive absent manifest error. The Loan Parties shall pay such the Lender 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 the Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of the Lender’s right to demand such compensation, provided that the Loan Parties shall not be required to compensate the Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than 120 days prior to the date that the Lender notifies the Lead Borrower of the Change in Law giving rise to such increased costs or reductions and of the Lender’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 120 day period referred to above shall be extended to include the period of retroactive effect thereof).

(e) Reserved.

3.05 Reserved.

3.06 Reserved.

3.07 Survival. All of the Borrowers’ obligations under this Article III shall survive termination of the Commitment hereunder 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 Loans, 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 Loans so made as if made directly by the applicable Credit Party to such Borrower, notwithstanding the manner by which such Loans 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.

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(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 Borrowing. Neither the Lender 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 Borrowing. The obligation of the Lender to make its initial Loan hereunder is subject to satisfaction of the following conditions precedent:

(a) The Lender’s receipt of the following, each of which shall be originals, telecopies or other electronic image scan transmission (e.g., “pdf” or “tif “ via e-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 Lender:

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

(ii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Lender 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 become 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 become a party;

(iii) copies of each Loan Party’s Organization Documents and such other documents and certifications as the Lender 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 would not reasonably be expected to have a Material Adverse Effect;

(iv) a certification to the Lender by Klee, Tuchin, Bogdanoff & Stern LLP, counsel to the Loan Parties, that such counsel has reviewed the docket in the Chapter 11 Case and confirmed that there was no notice filed or motion pending with the Bankruptcy Court to appeal, reverse, stay or vacate the Interim Borrowing Order;

(v) a certificate signed by a Responsible Officer of the Lead Borrower certifying that the conditions specified in Sections 4.03(a) and 4.03(b) have been satisfied;

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

(vii) the Security Documents, each duly executed by the applicable Loan Parties;

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

(ix) all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Lender 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 Lender.

(b) Reserved.

(c) The Lender shall have received and reviewed all material so-called “first day” motions and the related declarations and pleadings to be filed in the Chapter 11 Case, each of which shall be in form and substance satisfactory to the Lender.

(d) The Lender shall have received and reviewed the thirteen week cash flow of the Loan Parties which shall be in form and substance satisfactory to the Lender and shall constitute the initial Approved Budget.

(e) All motions and other documents to be filed with and submitted to the Bankruptcy Court in connection with the DIP Orders and this Agreement shall be in form and substance reasonably satisfactory to the Lender. The Interim Borrowing Order shall have been entered, shall be in full force and effect, and shall not have been reversed, vacated or stayed, or modified without the prior written consent of the Lender.

(f) The Bankruptcy Court shall have entered the Interim Borrowing Order, which order shall be in form and substance reasonably acceptable to the Lender hereunder.

(g) Other than Bankruptcy Events, there, there shall not be pending (or, to the knowledge of Borrower, threatened), in writing, any action, suit, investigation or proceeding in any court or before any arbitrator or Governmental Authority that would reasonably be expected to have a Material Adverse Effect and is not stayed by the filing of the Chapter 11 Case.

(h) reserved

(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 Lender on or before the Closing Date shall have been paid in full.

(k) The Borrowers shall have paid all reasonable fees, charges and disbursements of counsel to the Lender (including, without limitation, local bankruptcy counsel) to the extent

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invoiced prior to or on the Closing Date (including any estimated fees, charges and disbursements through the Chapter 11 Case; provided that such estimate shall not thereafter preclude a final settling of accounts for all reasonable fees, charges and disbursements between the Borrowers and the Lender) and the Borrowers shall pay such additional amounts of such reasonable fees, charges and disbursements incurred or to be incurred by the Lender through the Chapter 11 Case, in each case, as provided in Section 9.04(a) and the DIP Orders.

(l) The Lender 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.

4.02 Reserved.

4.03 Conditions to all Borrowings. The obligation of the Lender to honor any Loan Notice is subject to the following conditions precedent:

(a) The representations and warranties of each other 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 in all material respects on and as of the date of such Borrowing, except (i) 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, (ii) in the case of any representation and warranty qualified by materiality, they shall be true and correct in all respects and (iii) for purposes of this Section 4.03, the representations and warranties contained in Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to Sections 6.01 and 6.19.

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

(c) The Lender and shall have received a Loan Notice in accordance with the requirements hereof.

(d) After giving effect to the Borrowing requested to be made on any such date and the use of proceeds thereof, the Commitment shall be greater than or equal to zero.

(e) The Borrowers shall have provided evidence satisfactory to the Lender that after giving effect to (i) such request (and the funding of the proceeds thereof) and (ii) the payment of obligations of the Borrowers reflected in the Approved Budget to be paid during the seven-day period beginning with the requested funding date, the sum of cash and cash equivalents of the Loan Parties will not exceed $1,500,000.

(f) The requested Borrowing shall not exceed the Available Amount.

(g) Prior to, and after giving effect to, the making of any Loan, the Borrowers shall be in compliance with the provisions of Section 6.19 hereof.

Each Loan Notice submitted by the Borrower shall be deemed to be a representation and warranty by the Borrowers that the conditions specified in Sections 4.01 and 4.03 have been satisfied on and as of the date of the applicable Borrowing.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES

To induce the Credit Parties to enter into this Agreement and to make Loans hereunder, each Loan Party represents and warrants to the Lender and the other Credit Parties that:

5.01 Existence, Qualification and Power. Each Loan Party (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) subject to the entry of the DIP Orders, has all requisite power and authority to carry on its business as now conducted, and (iii) except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party, subject to the entry of the DIP Orders, has been duly authorized by all necessary corporate or other organizational action, and does 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 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 Lender under the Security Documents); or (d) violate any Law.

5.03 Governmental Authorization; Other Consents. Except for the entry of the DIP Orders, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority 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 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, subject to the entry of the DIP Orders, enforceable against each Loan Party that is party thereto in accordance with its terms.

5.05 Budget; No Material Adverse Effect. Each Approved Budget delivered to the Lender was prepared by the Loan Parties 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, that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

5.06 Litigation. Other than the Bankruptcy Events, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties after reasonable inquiry, threatened in writing, 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, would reasonably be expected to have a Material Adverse Effect except, in each case, any such actions, suits or proceedings which are stayed by virtue of the filing of the Chapter 11 Case.

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5.07 No Default. Other than as a result of the Bankruptcy Events, no Loan Party or any Subsidiary is in default under or with respect to, or party to, 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.

5.08 Ownership of Property; Liens

(a) Except as disclosed on Schedule 5.08(a), each of the Loan Parties 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 (i) as a result of the Bankruptcy Events and the Permitted Store Closings, or (ii) for such defects in title as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as disclosed on Schedule 5.08(a) or as a result of the Bankruptcy Events and the Permitted Store Closings, each of the Loan Parties 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 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 (except for Leases which are the subject of Permitted Store Closings), together with the name of each lessor and its contact information with respect to each such Lease as of the Closing Date.

(c) Schedule 7.01 sets forth a complete and accurate list of all Liens on the property or assets of each Loan Party, 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 is subject to no Liens, other than Permitted Encumbrances.

(d) reserved.

(e) Schedule 7.03 sets forth a complete and accurate list of all Indebtedness of each 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 (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received written notice of any claim with respect to any unresolved Environmental Liability or (iv) has knowledge of any basis for any Environmental Liability, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b) None of the properties currently or operated by any Loan Party is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list; to the knowledge of Loan Parties, there are no and never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials

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are being or have been treated, stored or disposed on any property currently operated by any Loan Party or, to the best of the knowledge of the Loan Parties, on any property formerly operated by any Loan Party; to the knowledge of Loan Parties, there is no asbestos or asbestos-containing material on any property currently operated by any Loan Party; and to the knowledge of Loan Parties, Hazardous Materials have not been released, discharged or disposed of on any property currently operated by any Loan Party.

(c) No Loan Party 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 that would be reasonably expected to result in a Material Adverse Effect; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently operated by any Loan Party have been disposed of in a manner not reasonably expected to result in a Material Adverse Effect to any Loan Party.

5.10 Insurance. The properties of the Loan Parties are insured with insurance companies having an A.M. Best Rating of at least A-, which are not Affiliates of the Loan Parties, in such amounts, with such deductibles and covering such risks (including, without limitation, workmen’s 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 operates. Each insurance policy of the Loan Parties necessary to the truth of the foregoing representation is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

5.11 Taxes. Except as set forth on Schedule 5.11 hereto, each Loan Party has timely filed or caused to be filed all federal and state Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings, for which such Loan Party has set aside on its books adequate reserves, and as to which no Lien has been filed, or (b) to the extent that the failure to do so would not reasonably be expected to result in a Material Adverse Effect.

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

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 Liens created under the Security

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Documents, and (ii) Permitted Liens. 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. The copies of the Organization Documents of each Loan Party and each amendment thereto, if any, provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

5.14 Margin Regulations; Investment Company Act.

(a) No Loan Party is 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 Loans 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 Loans 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.

5.15 Disclosure. Each Loan Party has disclosed to the Lender all 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, would reasonably be expected to result in a Material Adverse Effect. No report, financial statement (including, without limitation, any Approved Budget), certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Lender in connection with the transactions contemplated hereby and the 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 materially misleading; provided that, with respect to projected financial information and the Approved Budget, 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 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, would not reasonably be expected to have a Material Adverse Effect or the enforcement of which is stayed by virtue of the filing of the Chapter 11 Case, or (c) the failure to comply therewith is as a result of a Bankruptcy Event.

5.17 Intellectual Property; Licenses. The Loan Parties own, or possess the right to use, all of the Intellectual Property that is material to the operation of their respective businesses as currently conducted (“Company IP”), and to the knowledge of the Loan Parties, the use of the Company IP in connection with their respective businesses as currently conducted does not infringe the valid Intellectual Property rights of any other Person. To the knowledge of the Lead Borrower, no claim or litigation regarding any of the Company IP is pending or threatened in writing, which, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect or which claim or litigation would not be stayed by virtue of the filing of the Chapter 11 Case.

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5.18 Labor Matters. There are no strikes, lockouts or slowdowns against any Loan Party pending or, to the knowledge of the Lead Borrower, threatened. The hours worked by and payments made to employees of the Loan Parties have not been adjudged by any court of competent jurisdiction to be in violation of the Fair Labor Standards Act or any other applicable federal, state, or local law dealing with such matters to the extent that any such violation would reasonably be expected to have a Material Adverse Effect. All payments due from any Loan Party, or for which any claim may be made against any Loan Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of such member. The consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which any Loan Party is bound.

5.19 Security Documents. Upon entry of the DIP Orders, the Security Documents (including, without limitation, the DIP Orders), will create in favor of the Lender, for the benefit of the Credit Parties, a legal, valid, continuing and enforceable perfected first priority security interest and liens in the Collateral, subject to the Professional Fee Carve Out, the enforceability of which is subject to the DIP Orders and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. The financing statements, releases and other filings are in appropriate form and have been or will be filed in the offices specified in Schedule I of the Security Agreement.

5.20 Reserved.

5.21 Reserved.

5.22 Brokers. No broker or finder brought about the obtaining, making or closing of the 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, except as a result of the Bankruptcy Events or the Permitted Store Closings.

5.24 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, would reasonably be expected to have a Material Adverse Effect.

ARTICLE VI

AFFIRMATIVE COVENANTS

So long as the Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), the Loan Parties shall, and shall cause each Subsidiary to:

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6.01 Financial Statements and Other Information. The Lead Borrower will furnish to the Lender:

(a) its Consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all audited and reported on by independent public accountants of recognized national standing, only if such audited financial statements are finalized and delivered to the Lead Borrower during the term of this Agreement

(b) within thirty (30) days after the end of each fiscal month of the Lead Borrower, its Consolidated statements of operations and cash flows, as of the end of and for such fiscal month, all certified by one of its Financial Officers as presenting in all material respects the results of operations of the Lead Borrower and its Subsidiaries on a Consolidated basis;

(c) reserved;

(d) no later than Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day), (i) a statement of Reported Fee Accruals, (ii) a rolling 13-week cash flow forecast for the Borrowers and their Subsidiaries, reflecting actual results from the prior period compared to budget and projected results for the subsequent 13 week period, and (iii) if such date occurs on or after February 18, 2015, a Variance Report, in each case in form and substance reasonably acceptable to the Lender and certified as complete and correct by the Independent Consultant;

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

(f) the financial and collateral reports requested by the Lender in writing, at the times determined by the Lender in its Permitted Discretion;

(g) notice of any intended sale or other disposition of any material portion of the assets of any Loan Party permitted hereunder or incurrence of any material amount of Indebtedness permitted hereunder at least thirty (30) Business Days prior to the date of consummation of such sale or disposition (except as otherwise provided in Section 6.20) or the incurrence of such Indebtedness;

(h) as soon as practicable prior to the furnishing or filing thereof, copies of any statement, report or pleading proposed to be furnished to or filed with the Bankruptcy Court in connection with the Chapter 11 Case;

(i) concurrently with the delivery to Sponsor, any statement, report, document or information required to be provided to the Sponsor pursuant to the Sponsor Support Agreement; and

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

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6.02 Notices. The Lead Borrower will furnish to the Lender prompt written notice of the following:

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

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

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

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

(e) any change in any Loan Party’s chief executive officer, chief financial officer or chairman;

(f) the discharge by any Loan Party of the Independent Consultant or its present independent accountants or any withdrawal or resignation by the Independent Consultant or such independent accountants;

(g) any failure by any Loan Party to pay rent at any of such Loan Party’s locations when such rent first came due following the Petition Date, unless related to a Permitted Store Closing or such non-payment was permitted under the Bankruptcy Code or pursuant to an order of the Bankruptcy Court;

(h) 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; and

(i) the filing of any Lien for due and unpaid Taxes after the Petition Date against any Loan Party exceeding $50,000.

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

6.03 Payment of Obligations. To the extent required by the Bankruptcy Code, pay its Indebtedness and other obligations, including Tax liabilities, and claims for labor, materials, or supplies, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Loan Party or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, (d) no Lien has been filed with respect thereto, and (e) the failure to make payment pending such contest would not reasonably be expected to result in a Material Adverse Effect. Nothing contained herein shall be deemed to limit the rights of the Lender with respect to determining Reserves pursuant to this Agreement.

6.04 Preservation of Existence. (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 in connection with Permitted Store Closings or to the extent that failure to do so would 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, and except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect.

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6.05 Maintenance of Properties. Keep and maintain all property material to the conduct of its business in good working order and condition, except (a) ordinary wear and tear, (b) asset Dispositions permitted by Section 7.05, and (c) assets located at a Store following a Permitted Store Closing with respect to such Store.

6.06 Maintenance of Insurance.

(a) (i) Maintain insurance with insurers reasonably acceptable to the Lender, having an A.M. Best Rating of at least A- (or, to the extent consistent with prudent business practice, a program of self-insurance) on such of its property and in at least such amounts and against at least such risks as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death occurring upon, in or about or in connection with the use of any properties owned, occupied or controlled by it (including the insurance required pursuant to the Security Documents); (ii) maintain such other insurance as may be required by applicable Law; and (iii) furnish to the Lender, upon written request, full information as to the insurance carried.

(b) Fire and extended coverage policies maintained with respect to any Collateral shall be endorsed or otherwise amended to include (i) a non-contributing mortgage clause (regarding improvements to real property) and lenders loss payable clause (regarding personal property), in form and substance reasonably satisfactory to the Lender, 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 Lender, (ii) a provision to the effect that none of the Loan Parties, the Lender or any other party shall be a coinsurer and (iii) such other provisions as the Lender 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 Lender as an additional insured. Business interruption policies shall name the Lender as a loss payee and shall be endorsed or amended to include (i) a provision that, from and after the Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Lender, (ii) a provision to the effect that none of the Loan Parties, the Lender or any other party shall be a co-insurer and (iii) such other provisions as the Lender may reasonably require from time to time to protect the interests of the Credit Parties. Each such policy referred to in this paragraph also shall provide that it shall not be canceled, modified or not renewed for any reason except upon not less than 30 days’ prior written notice thereof by the insurer to the Lender. The Lead Borrower shall deliver to the Lender, prior to the cancellation, modification or nonrenewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Lender, including an insurance binder) together with evidence reasonably satisfactory to the Lender of payment of the premium therefor.

(c) Furnish to the Lender prompt written notice 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.

6.07 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 and with respect to which adequate reserves have been

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set aside and maintained by the Loan Parties in accordance with GAAP; (b) such contest effectively suspends enforcement of the contested Laws; (c) the failure to comply therewith would not reasonably be expected to have a Material Adverse Effect; or (d) the failure to comply therewith is otherwise permitted under the Bankruptcy Code or the DIP Orders.

6.08 Books and Records; Accountants.

(a) 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 reasonably satisfactory to the Lender.

6.09 Inspection Rights.

(a) Subject to the terms of Section 9.07, permit representatives and independent contractors of the Lender to visit and inspect any of its properties, provided that the Lender shall use reasonable efforts to minimize any disruption to the business of the Loan Parties, 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, at any time during normal business hours and with reasonable advance notice (unless an Event of Default has occurred and is continuing, in which event no such advance notice shall be required).

(b) From time to time upon the request of the Lender and after reasonable prior notice, permit the Lender or professionals (including investment bankers, consultants, accountants, lawyers and appraisers) retained by the Lender to conduct appraisals, commercial finance examinations and other evaluations.

(c) Pay the reasonable out-of-pocket expenses of the Lender (including reasonable fees of such professionals) with respect to the activities described in this Section 6.09.

6.10 Additional Loan Parties. Notify the Lender 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 Lender a joinder to this Agreement and such other documents as the Lender shall reasonably deem appropriate for such purpose, (ii) grant a Lien to the Lender on such Person’s assets to secure the Obligations, and (iii) deliver to the Lender documents of the types referred to in Section 4.01(a) (including, without limitation, entry of such orders order by the Bankruptcy Court as the Lender may reasonably deem appropriate) and 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, in each case in form, content and scope reasonably satisfactory to the Lender. In no event shall compliance with this Section 6.10 waive or be deemed a waiver or consent to any transaction giving rise to the need to comply with this Section 6.10 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.

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6.11 Cash Dominion.

(a) Upon the occurrence and during the continuation of any Dominion Period:

(i) Promptly deliver written notice (together with a copy of the Interim Order or the Final Order, as applicable) to each of its credit card clearinghouses, setting forth the Credit Parties’ rights in, and each such institution’s obligations with respect to, all credit card proceeds (each, a “Credit Card Notification”), and take any other steps necessary to cause each of its credit card clearinghouses to pay into the Cash Collateral Account.

(ii) As soon as practicable, but in any event within ten (10) Business Days of the beginning of such Dominion Period, enter into and maintain a Blocked Account Agreement satisfactory in form and substance to the Lender with each Blocked Account Bank (collectively, the “Blocked Accounts”), provided, that Each Blocked Account Agreement shall require, and the Loan Parties shall cause, the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to the Cash Collateral Account, of all cash receipts and collections, including, without limitation, the following;

(A) all available cash receipts from the sale of Inventory (including without limitation, proceeds of credit card charges) and other assets (whether or not constituting Collateral)

(B) all proceeds of collections of Accounts;

(C) 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;

(D) the then contents of each DDA (net of any minimum balance, not to exceed $5,000.00, as may be required to be kept in the subject DDA by the depository institution at which such DDA is maintained);

(E) the then entire ledger balance of each Blocked Account (net of any minimum balance, not to exceed $5,000.00, as may be required to be kept in the subject Blocked Account by the Blocked Account Bank), provided that the aggregate amount of all balances maintained in all DDAs and Blocked Accounts shall not exceed $500,000; and

(F) cause bank statements and/or other reports to be delivered to the Lender not less often than monthly (or more frequently upon the request of the Lender), accurately setting forth all amounts deposited in each Blocked Account to ensure the proper transfer of funds as set forth above.

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(ii) Notwithstanding anything in Section 6.01(a) to the contrary, until the establishment of the Blocked Account Agreements, the Borrowers shall cause any and all amounts that would be required to be deposited to the Cash Collateral Account pursuant to Section 6.01(a) to be deposited in the Cash Collateral Account in the manner provided in Section 6.01(a).

(b) In the event that, notwithstanding the provisions of this Section 6.11, 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 Lender, 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 Cash Collateral Account or dealt with in such other fashion as such Loan Party may be instructed by the Lender.

6.12 Information Regarding the Collateral. Furnish to the Lender at least fifteen (15) days prior written notice of any change in: (i) any Loan Party’s corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties; (ii) 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 identity or type of organization or organizational structure; (iv) any Loan Party’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its jurisdiction of organization; or (v) any Loan Party’s jurisdiction of organization (in each case, including, without limitation, by merging with or into any other entity, reorganizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction). Each Loan Party agrees to take all action, if any, reasonably satisfactory to the Lender to maintain the perfection and priority of the security interest of the Lender for the benefit of the Credit Parties in the Collateral intended to be granted hereunder. Each Loan Party agrees to promptly provide the Lender with certified Organization Documents reflecting any of the changes described in the preceding sentence.

6.13 Physical Inventories.

(a) Permit the Lender, at the expense of the Loan Parties, to conduct (directly or through a third party of the Lender’s choice), participate in and/or observe each physical count and/or inventory of so much of the Collateral as consists of Inventory which is undertaken on behalf of the Borrowers, reasonably cooperating with the Lead Borrower’s efforts to ensure that such participation does not unreasonably disrupt the normal inventory schedule or process, provided, that the Borrowers shall permit the Lender to conduct (directly or through a third party of the Lender’s choice) at least one (1) physical count and/or inventory of so much of the Collateral as consists of Inventory within the first fourteen (14) days after entry of the Initial Order at times and dates chosen by the Lender in its sole discretion.

(b) At the Borrowers’ own expense, cause, upon the request of the Lender, no more than two (2) physical inventories of the Borrowers’ Inventory to be conducted by nationally recognized inventory takers and using practices consistent with practices in effect on the date hereof (it being agreed that the physical inventory in progress as of the date of this Agreement shall be deemed to constitute the first of the two).

(c) The Lead Borrower shall provide the Lender with the preliminary Inventory levels at each of each Borrower’s Stores within ten (10) days following the completion of such inventory.

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(d) The Lead Borrower, within forty-five (45) days following the completion of such inventory, shall provide the Lender with a reconciliation of the results of each such inventory (as well as of any other physical inventory undertaken by the Borrowers) and shall post such results to the Borrowers’ stock ledger and general ledger, as applicable.

(e) Permit the Lender, in its reasonable discretion, if any Event of Default exists, to cause such additional inventories to be taken as the Lender reasonably determines (each, at the expense of the Borrowers).

6.14 Environmental Laws.

(a) 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 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.

6.15 Further Assurances.

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, the delivery of control agreements with respect to deposit accounts, and other documents), that may be required under any Law, or which the Lender may request in its reasonable discretion, 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 Lender, from time to time upon reasonable request, evidence satisfactory to the Lender as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

6.16 Compliance with Terms of Leaseholds.

Except with respect to the Permitted Store Closings and as otherwise expressly permitted hereunder, to the extent required under the Bankruptcy Code or the DIP Orders, 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 Lender of any default by any party with respect to such Leases and cooperate with the Lender 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, would not be reasonably likely to have a Material Adverse Effect.

6.17 Depository Account. In order to facilitate the administration of the Loans and Lender’s security interest in the Loan Parties’ assets, the Borrowers shall work with the Lender (at the sole expense of the Borrowers) to open and maintain a depository bank account (the “Cash Collateral Account”) in the name of the Lender and under the sole and exclusive dominion and control of the Lender) for deposits of cash collateral. The Borrowers may deliver amounts to Lender for deposit in such Cash Collateral

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Account from time to time (it being understood that the Borrowers are under no obligation to do so, except as required pursuant to Section 6.11). It is hereby agreed and acknowledged that the Lender may apply any amounts of cash collateral deposited in the Cash Collateral Account to the payment of Obligations due and payable hereunder without the consent of or prior notice to the Borrowers. The Lead Borrower may request that the Lender release amounts from the Cash Collateral Account, subject to the following conditions: (i) no more than one (1) request for release shall be sent per week, (ii) on each of the date of such request and the date of the requested disbursement, there shall be no Default or Event of Default that has occurred and is continuing or would occur as a result of the requested disbursement, (iii) after giving effect to the release of such amounts, the Outstanding Amount shall not exceed the Loan Cap.

6.18 Retention of Independent Consultant.

(a) Until Satisfaction of the Obligations, the Borrowers shall continue to retain the Independent Consultant, pursuant to terms reasonably acceptable to the Lender, for the purpose of (i) assisting in the preparation of each 13-week cash flow forecast and the other financial and collateral reporting required to be delivered to the Lender pursuant to this Agreement, (ii) advising the Loan Parties with regard to their financial performance and affairs and operational initiatives, including, but not limited to, liquidity and working capital management, operational efficiencies, budgets and forecasts, and interactions with the Lender; (iii) being available to the Lender to discuss in detail the 13-week cash flow forecasts, the Loan Parties’ operating and financial performance, and the reports and other materials and matters as set forth above, and (iv) assisting in the consummation of any Permitted Sales, and to perform financial and restructuring services on terms reasonably satisfactory to the Lender. In the event that an Independent Consultant resigns or is otherwise no longer engaged by the Borrowers, the Borrowers shall, subject to Bankruptcy Court approval, engage a replacement Independent Consultant reasonably acceptable to the Lender within ten (10) Business Days.

(b) The Lead Borrower authorizes the Lender to communicate directly with its independent certified public accountants, financial advisors, investment bankers and consultants (including the Independent Consultant), which have been engaged from time to time by the Borrowers, and authorizes and shall instruct those accountants, financial advisors, investment bankers and consultants to communicate to the Lender such information relating to each Loan Party with respect to the business, results of operations, prospects and financial condition of such Loan Party and other matters as the Lender may reasonably request.

6.19 Performance Within Approved Budget.

(a) The Borrowers and their Subsidiaries shall not pay any expenses other than those set forth in the budget approved by the Lender on the date of this Agreement (such budget, together with any subsequent budget which the Lender may, in its sole discretion, approve, the “Approved Budget”), provided that (1) the Borrowers and their Subsidiaries may pay expenses under an Approved Budget line item for any given four-week period up to and through the Saturday of the most recent week then ended (a “Cumulative Four Week Period”) that are no more than 120% of the operating disbursements projected for such line item for such Cumulative Four Week Period in the Approved Budget; (2) no amounts allocated to a particular line item in the Approved Budget (including line items denominated “Miscellaneous” or “Other”, or words of similar import) shall be used to pay any expenses under any other line item(s) in the Approved Budget without the prior express written consent of the Lender, in the Lender’s sole and exclusive discretion; (3) the Borrowers and their Subsidiaries may expend any unused amounts contained in a line item for a given week (without giving effect to the 120% variance set forth in (1), above)

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for the same line item in any of the four successive weekly periods; (4) payments to the Lender shall not be subject to the limitations set forth above and shall not be included in determining compliance with the covenants set forth in this Section 6.19; and (6) the actual aggregate disbursements made for any Cumulative Four Week Period shall not exceed 110% of those projected in the Approved Budget for such Cumulative Four Week Period;

(b) the Borrower and its Subsidiaries shall not make any payment that, at the time made, based on the going-forward cash-flow projections in the Approved Budget, would result in a failure to comply with clause (d) or (e) hereof on the next test date;

(c) the Borrowers and their Subsidiaries shall achieve cash receipts for any Cumulative Four Week Period of at least 90% of those projected in the Approved Budget for such Cumulative Four Week Period;

(d) the Liquidity Amount shall be at least 90% of that projected in the Approved Budget for the applicable test date; and

(e) the Liquidity Amount shall not be less than $3,000,000 at any time.

Compliance with the covenants set forth in this Section 6.19 shall be tested on the close of business on Wednesday of each week after Lender’s approval of the initial Approved Budget and shall be reflected in the Variance Report delivered pursuant to Section 6.01.

6.20 Collateral and Diligence Review. Cause, at the Borrowers’ own cost and expense, a review of the Collateral and a diligence audit to be completed by one or more third parties of the Lender’s choosing within two weeks after the Petition Date, and a report thereon to be prepared by such parties in form, scope and substance satisfactory to the Lender, and any supplements to or additional reviews of the Collateral and diligence audit to be completed by one or more third parties of the Lender’s choosing as the Lender may request in writing thereafter.

6.21 Additional Bankruptcy Related Affirmative Covenant.

On or before ninety (90) days following the Petition Date, obtain an order of the Bankruptcy Court extending the time period of the Borrowers to assume or reject Leases to not less than two hundred ten (210) days from the Petition Date.

ARTICLE VII

NEGATIVE COVENANTS

So long as the Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), 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, other than those Liens set forth on Schedule 7.01, 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.

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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 in connection with a Permitted Sale or a Plan of Reorganization.

7.05 Asset Sales. Sell, transfer, lease or otherwise Dispose of any asset, including any Equity Interests, nor permit any of the Subsidiaries to issue any additional shares of its Equity Interests in such Subsidiary, except:

(a) (i) sales of Inventory in the ordinary course of business, or (ii) sales of used or surplus equipment in the ordinary course of business, or (iii) sales of Permitted Investments;l

(b) Dispositions among the Loan Parties;

(c) reserved;

(d) rejection, disclaimer and termination of Leases otherwise permitted or required herein or in connection with Permitted Store Closings;

(e) Asset sales pursuant to an order approved by the Bankruptcy Court and the Lender;

(f) Permitted Sales; and

(g) pursuant to a Plan of Reorganization;

provided that all Dispositions permitted hereby (other than Dispositions permitted under clause (b)) shall be made at arm’s length and for fair value and solely for cash consideration.

7.06 Restricted Payments. Declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except that:

(i) any Loan Party may pay dividends to the Lead Borrower, and

(ii) 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.

7.07 Prepayments of Indebtedness. Prepay, redeem, purchase, defease or otherwise satisfy any Indebtedness, except (a) as long as no Event of Default then exists or would arise therefrom, regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of Permitted Indebtedness incurred after the Petition Date, (b) other payments reflected in the Approved Budget or approved by the Lender, (c) Permitted Refinancings of any such Indebtedness and (d) payments of Obligations or Other DIP Obligations.

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7.08 Change in Nature of Business.

(a) In the case of the Parent, engage in any business or activity other than (i) the direct or indirect ownership of all outstanding Equity Interests in the other Loan Parties, (ii) maintaining its corporate existence, (iii) participating in tax, accounting and other administrative activities as the parent of the consolidated group of companies, including the Loan Parties, (iv) the execution and delivery of the Loan Documents to which it is a party and the performance of its obligations thereunder, and (v) activities incidental to the businesses or activities described in this Section 7.08(a)(i)-(iv).

(b) In the case of each of the Loan Parties, 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.

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 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 Lender; 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 Loan, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) (i) 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, (ii) except as expressly provided in the DIP Orders, to (w) finance in any way any action, suit, arbitration, proceeding, application, motion or other litigation of any type adverse to the interests of the Credit Parties or their rights and remedies under this Agreement and the other Loan Documents, including, without limitation, for the payment of any services rendered by the professionals retained by the Borrowers or the Creditors’ Committee in connection with the assertion of or joinder in any claim, counterclaim, action, proceeding, application, motion, objection, defense or other contested matter, the purpose of which is to seek, or the result of which would be to obtain, any order, judgment determination, declaration or similar relief (1) invalidating, setting aside, avoiding or subordinating, in whole or in part, the Obligations or the Liens securing same, (2) for monetary, injunctive or other affirmative relief against any Credit Party or the Collateral, or (3) preventing, hindering or otherwise delaying the exercise by any Credit Party of any rights and remedies under the Loan Documents or applicable Law, or the enforcement or realization (whether by foreclosure, credit bid, further order of the court or otherwise) by any or all of the Credit Parties upon any of the Collateral, (x) make any distribution under a Plan of Reorganization in the Chapter 11 Case; (y) make any payment in settlement of any claim, action or proceeding, before any court, arbitrator or other Governmental Authority without the prior written consent of the Lender; (z) to

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pay any fees or similar amounts to any Person who has proposed or may propose to purchase interests in any Borrower without the prior written consent of the Lender; or (b) for any purposes other than (i) to pay fees, costs and expenses in connection with the transactions contemplated hereby, and to the extent approved by the Bankruptcy Court and as set forth in the DIP Orders and in connection with the Chapter 11 Case, (ii) for other payments permitted to be made by the DIP Orders and any other order of the Bankruptcy Court, and (iii) for general corporate purposes, in each case to the extent expressly permitted under applicable Law, the Loan Documents, the DIP Orders, and in accordance with the Approved Budget, subject to Section 6.19.

7.12 Amendment of Material Documents.

Amend, modify or waive (a) any of a Loan Party’s rights under its Organization Documents in a manner materially adverse to the Credit Parties, or (b) any other Material Indebtedness to the extent that such amendment, modification or waiver would result in a Default or Event of Default under any of the Loan Documents, would be materially adverse to the Credit Parties or otherwise would be reasonably likely to have a Material Adverse Effect.

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 or by prior written consent of the Lender which consent shall not be unreasonably withheld.

7.14 Inventory.

At any time permit the cost of Eligible Inventory to be less than $7,000,000.

7.15 Bankruptcy Related Negative Covenants. Seek, consent to, or permit to exist any of the following:

(a) Any order which authorizes the rejection or assumption of any Leases of any Loan Party (other than rejection of Leases related to Permitted Store Closings) without the Lender’s prior consent, whose consent shall not be unreasonably withheld or delayed;

(b) Any modification, stay, vacation or amendment to the DIP Orders to which the Lender has not consented in writing;

(c) A priority claim or administrative expense or claim against any Loan Party (now existing or hereafter arising or any kind or nature whatsoever, including, without limitation, any administrative expense of the kind specified in Sections 105, 326, 328, 330, 331, 364(c), 503(a), 503(b), 506(c), 507(a), 507(b), 546(c), 546(d), 726 or 1114 of the Bankruptcy Code) equal or superior to the priority claim of the Lender in respect of the Obligations, except with respect to the Professional Fee Carve Out and the Other DIP Obligations (and except to the extent any pre-petition liability may have priority solely by virtue of pre-petition Permitted Liens);

(d) Any Lien on any Collateral having a priority equal or superior to the Lien securing the Obligations, other than with respect to (i) the Professional Fee Carve Out, (ii) Permitted Encumbrances described in clause (i) of the definition of such term, and (iii) Permitted Encumbrances described in clause (h) of the definition of such term having priority by operation of applicable Law;

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(e) Any order which authorizes the return of any of the Loan Parties’ property pursuant to Section 546(h) of the Bankruptcy Code;

(f) Any order which authorizes the payment of any Indebtedness (other than payments of Indebtedness reflected in the Approved Budget and permitted to be paid under this Agreement, and other payments of Indebtedness approved by the Lender) incurred prior to the Petition Date or the grant of “adequate protection” (whether payment in cash or transfer of property) with respect to any such Indebtedness which is secured by a Lien (other than as provided in the DIP Order with respect to Pre-Petition Liabilities becoming Other DIP Obligations); or

(g) Any order seeking authority to take any action that is prohibited by the terms of this Agreement or the other Loan Documents or refrain from taking any action that is required to be taken by the terms of this Agreement or any of the other Loan Documents.

7.16 Chief Executive Officer.

In the event that, for any reason, Edmund Thomas shall cease to serve as the chief executive officer of the Lead Borrower with substantially the same authority and duties as exist prior to the date of this Agreement, the Lead Borrower shall fail to appoint a successor to such role acceptable to the Lender in its sole discretion within five (5) Business Days,

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

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

(a) the Loan Parties shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) (i) the Loan Parties shall fail to pay any interest on any Loan payable under this Agreement, when and as the same shall become due and payable, or (ii) the Loan Parties shall fail to pay any fee or any other amount (other than an amount referred to in clause (a) or (b) of this Section 8.01) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable and such failure continues for five (5) days;

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

(d) the Loan Parties shall fail to observe or perform any covenant, condition or agreement contained in Sections 6.01(d), 6.01(h), 6.06 (with respect to insurance covering the Collateral), 6.09, 6.18, 6.19, 6.20, 6.21 or in Article VII;

(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b), (c), or (d) of this Section 8.01), and such failure shall continue unremedied for a period of fifteen (15) days after notice thereof from the Lender to the Lead Borrower;

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(f) except as a result of the commencement of the Chapter 11 Case or unless payment is stayed by the Bankruptcy Court, any Loan Party shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness when and as the same shall become due and payable (after giving effect to the expiration of any grace or cure period set forth therein);

(g) except as a result of the commencement of the Chapter 11 Case or unless payment is stayed by the Bankruptcy Court, any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (after giving effect to the expiration of any grace or cure period set forth therein) the holder or holders of any such Material Indebtedness or any trustee or agent on its or their behalf to cause any such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity;

(h) following the Petition Date, one or more judgments for the payment of money in an aggregate amount in excess of $1,000,000 shall be rendered against any Loan Party or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any material assets of any Loan Party to enforce any such judgment;

(i) following the Petition Date, an ERISA Event shall have occurred that when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in liability of the Loan Parties in an aggregate amount exceeding $500,000;

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

(k) any judicial proceeding by or on behalf of any other Person seeking to challenge the validity of any Loan Document (including, without limitation, any DIP Order) or the applicability or enforceability of any Loan Document strictly in accordance with the subject Loan Document’s terms or which seeks to void, avoid, limit, or otherwise adversely affect any security interest created by or in any Loan Document or any payment made pursuant thereto, and the Lender, in its reasonable discretion, has determined in good faith that there is appreciable risk of a Material Adverse Effect on the Credit Parties’ ability to receive payment in full of the Obligations, or otherwise would be reasonably likely to have a Material Adverse Effect;

(l) any Lien purported to be created under any Security Document (including, without limitation, any DIP Order) shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document, except as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents;

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(m) the occurrence of any uninsured loss to any portion of the Collateral which would reasonably be expected to have a Material Adverse Effect;

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

(o) the determination by the Borrowers, whether by vote of the Borrowers’ board of directors or otherwise to: (i) suspend the operation of any Borrower’s business in the ordinary course, (ii) liquidate all or a material portion of the Borrowers’ assets or Stores, or (iii) employ an agent or other third party to conduct any so-called Store closing, Store liquidation or “Going-Out-Of-Business” sales, except in connection with a Permitted Sale or a Plan of Reorganization;

(p) the occurrence of any Change of Control;

(q) The entry of an order in the Chapter 11 Case which stays, modifies or reverses any DIP Order or which otherwise materially adversely affects the effectiveness of any DIP Order without the express written consent of the Lender;

(r) either (i) the appointment in the Chapter 11 Case of a trustee or of any examiner having expanded powers to operate all or any part of any Loan Party’s business, or (ii) the conversion of the Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code;

(s) the failure of the Bankruptcy Court to enter a Final Borrowing Order, in form and substance satisfactory to the Lender, within thirty (30) days after the Petition Date;

(t) the entry of any order which provides relief from the automatic stay otherwise imposed pursuant to Section 362 of the Bankruptcy Code which permits any creditor to (i) realize upon, or to exercise any right or remedy with respect to any Collateral, where either the amount of the value of such Collateral exceeds $100,000, or (ii) to terminate any license, franchise, or similar agreement, where such termination would reasonably be likely to have a Material Adverse Effect;

(u) the filing of any application by any Loan Party without the express prior written consent of the Lender for the approval of any super-priority claim in the Chapter 11 Case which is pari passu with or senior to the priority of the claims of the Lender and other Credit Parties for the Obligations, or there shall arise any such super-priority claim under the Bankruptcy Code;

(v) the payment or other discharge by any Loan Party of any pre-petition Indebtedness, except as expressly permitted hereunder, under any DIP Order, or in the Approved Budget or by order in the Chapter 11 Case to which order the Lender has provided its written consent;

(w) the entry of any order in the Chapter 11 Case which provides adequate protection, or the granting by any Loan Party of similar relief in favor of any one or more of a Loan Party’s pre-petition creditors, contrary to the terms and conditions of any DIP Order or the terms hereof;

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(x) the failure of any Loan Party to (i) comply with each and all of the terms and conditions of any DIP Order or (ii) comply in all material respects with any other order entered in the Chapter 11 Case;

(y) the filing of any motion by any Loan Party seeking, or the entry of any order in the Chapter 11 Case: (i) (A) permitting working capital or other financing (other than ordinary course trade credit, unsecured debt) for any Loan Party from any Person other than the Lender (unless the proceeds of such financing are used to pay all Obligations in full, and the establishment of a reserve account for all indemnification obligations hereunder), (B) granting a Lien on, or security interest in (other than a Permitted Encumbrance) any of the Collateral, other than with respect to this Agreement (unless such Liens are granted in connection with a financing, the proceeds of which are applied to the payment in full of all Obligations and indemnification obligations hereunder), (C) except as permitted by this Agreement, the DIP Orders, permitting the use of any of the Collateral pursuant to Section 363(c) of the Bankruptcy Code without the prior written consent of the Lender, (D) permitting recovery from any portion of the Collateral any costs or expenses of preserving or disposing of such Collateral under Section 506(c) of the Bankruptcy Code, or (E) dismissing the Chapter 11 Case or converting the Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code or (ii) the filing of any motion by any party in interest or any Creditors’ Committee appointed in the Chapter 11 Case) (x) seeking any of the matters specified in the foregoing clause (i) that is not dismissed or denied within thirty (30) days of the date of the filing of such motion (or such later date agreed to in writing by the Lender) or (y) seeking the reconsideration of any DIP Order; or

(z) the filing of a motion by any Loan Party seeking approval of a Disclosure Statement and a Plan of Reorganization, or the entry of an order confirming a Bankruptcy Plan, in each case, that does not require repayment in full in cash of all Obligations.

8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, subject to the terms of the DIP Orders, the Lender may take any or all of the following actions:

(a) declare the Commitment of the Lender to make Loans to be terminated, whereupon such Commitment and obligation shall be terminated;

(b) declare the unpaid principal amount of all outstanding 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; and

(c) 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, the DIP Orders, 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.

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In addition to the exercise by the Lender of any or all of its rights and remedies after the occurrence and during the continuance of an Event of Default, the Lender may require, and upon request by the Lender the Borrowers shall, undertake to Liquidate the Collateral on behalf of the Lender in such manner as the Lender may require. Such Liquidation may be effected through a partial or chain-wide store closing sale in a manner consistent with the foregoing enumeration of the Lender’s rights and remedies, and as otherwise permitted by the Bankruptcy Court. The Lender and the Borrowers shall endeavor to implement such a Liquidation on mutually acceptable terms and conditions. However, the Lender may by written notice to the Lead Borrower require the Borrowers to:

(h) File a motion seeking to retain one or more nationally recognized professional retail inventory liquidation agents reasonably acceptable to the Lender to sell, lease, or otherwise dispose of the Collateral on terms acceptable to the Lender.

(d) File a motion or motions seeking to sell or otherwise dispose of any or all of the Real Estate pursuant to Section 363 of the Bankruptcy Code, on terms acceptable to the Lender.

(e) File a motion or motions seeking to sell, assume, assign, or otherwise dispose of any or all of the Leases pursuant to Sections 363 and 365 of the Bankruptcy Code, on terms acceptable to the Lender.

The Borrowers shall file such motion(s) within five (5) Business Days of the Lender’s request and shall diligently prosecute such motion(s). If the Borrowers fail to so file or diligently prosecute the motion(s), the Lender may file and prosecute such motion(s) in the name of the Borrowers.

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, any amounts received on account of the Obligations shall be applied by the Lender in the following order:

First, to payment of accrued and unpaid Professional Fees and Expenses up to an aggregate amount not to exceed the Professional Fee Carve Out;

Second, to payment of that portion of the Obligations constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Lender and amounts payable under Article III) payable to the Lender;

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and other Obligations, and fees, ratably between the Lender in proportion to the respective amounts described in this clause Third payable to them;

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably between the Lender in proportion to the respective amounts described in this clause Fourth held by them;

Fifth, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations as provided in Section 9.04(b)), ratably among the Credit Parties in proportion to the respective amounts described in this clause Fifth held by them;

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Sixth, to be retained by the Lender as a reserve account for all indemnification obligations hereunder; and

Last, the balance, if any, after Satisfaction of the Obligations, to the Loan Parties or as otherwise required by Law.

ARTICLE IX

MISCELLANEOUS

9.01 Amendments. 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 Lender and the Lead Borrower or the applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

9.02 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 as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 9.02.

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 sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). 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 Lender hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Lender. The Lender 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 Lender 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.

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(c) Change of Address. Each of the Loan Parties, the Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.

(d) Reliance by Lender. The Lender shall be entitled to rely and act upon any notices (including telephonic 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 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 Lender may be recorded by the Lender, and each of the parties hereto hereby consents to such recording.

9.03 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 Loan 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.

9.04 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Borrowers shall pay all reasonable documented out-of-pocket expenses incurred by the Lender and its Affiliates, in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable fees, charges and disbursements of (A) counsel for the Lender, (B) outside consultants for the Lender, (C) appraisers, (D) commercial finance examiners, and (E) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations, (ii) in connection with (A) 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), (B) 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 in connection with the Chapter 11 Case or any successor case, or (C) any workout, restructuring or negotiations in respect of any Obligations.

(b) Indemnification by the Loan Parties. The Loan Parties shall indemnify the Lender (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 Lender (and any sub-agents thereof) and their Related Parties only, the administration of

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this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (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 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 (x) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by a Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrowers or such Loan Party has obtained a final and non-appealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

(c) Waiver of Consequential Damages. 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 Loan 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 non-appealable judgment of a court of competent jurisdiction.

(d) Payments. All amounts due under this Section shall be payable on demand therefor.

(e) Survival. The agreements in this Section shall survive the assignment of any Commitment or Loan by the Lender, the termination of the Commitment hereunder and the repayment, satisfaction or discharge of all the other Obligations.

9.05 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 reasonable discretion) to be repaid to a trustee, receiver or any other party, in connection with the Chapter 11 Case or any successor case or otherwise, then to the extent of such recovery, the obligation or part 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.

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9.06 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 Lender. 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 (c) 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 Lender. The Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans with the prior consent of the Lead Borrower, such consent not be unreasonably withheld or delayed (provided that no such consent will be required after the occurrence and continuation of an Event of Default). From and after the effective date specified in each Assignment and Assumption, the 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, and 9.04 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.

(c) Participations. The Lender may at any time, without the consent of, or notice to, the Loan Parties, sell participations to any Person (other than a natural person or the Loan Parties or any of the Loan Parties’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of the Lender’s rights and/or obligations under this Agreement owing to it); provided that (i) the Lender’s obligations under this Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Loan Parties, the Lender 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 9.07 as if such Participant was the Lender hereunder. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.04, and 3.01 (subject to the requirements and limitations therein, to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant shall not be entitled to receive any greater payment under Sections 3.04 or 3.01, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender. If the Lender sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that the Lender shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the

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extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

(d) Certain Pledges. The 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 the Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release the Lender from any of its obligations hereunder or substitute any such pledgee or assignee for the Lender as a party hereto.

(e) 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.

9.07 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, Approved Funds, and to its and its Affiliates’ and Approved Funds’ 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. 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.

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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.

9.08 Right of Setoff. If an Event of Default shall have occurred and be continuing or if the Lender shall have been served with a trustee process or similar attachment relating to property of a Loan Party, the Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) or other property at any time held and other obligations (in whatever currency) at any time owing by the Lender 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 the Lender, regardless of the adequacy of the Collateral, and irrespective of whether or not the Lender 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 the Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of the Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that the Lender or its Affiliates may have. The Lender agrees to notify the Lead Borrower 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.

9.09 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 Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrowers. In determining whether the interest contracted for, charged, or received by the 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.

9.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in any number of 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 Lender and when the Lender shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. This Agreement and all other documents (including, without limitation, the Loan Documents) which have been or may be hereinafter furnished by the Loan Parties to any of the Credit Parties may be reproduced by the Credit Parties by any photographic, microfilm, xerographic, digital imaging, or other process. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). Delivery of an executed counterpart of a signature page of this Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

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9.11 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 Borrowing, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied. Further, the provisions of Sections 3.01, 3.04 and 9.04 shall survive and remain in full force and effect regardless of the repayment of the Obligations, and the Commitment 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 Lender may require such indemnities and collateral security as it 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, and (y) any Obligations that may thereafter arise under Section 9.04 hereof.

9.12 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.

9.13 Governing Law; Jurisdiction.

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

(a) SUBMISSION TO JURISDICTION. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THE BANKRUPTCY COURT AND OF ANY COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN THE BANKRUPTCY COURT, SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. SUBJECT TO SECTION 9.13(e), NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

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(b) WAIVER OF VENUE. EACH 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 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.

(c) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

(d) 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 THE BANKRUPTCY COURT, A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

9.14 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT). EACH PARTY HERETO (A) CERTIFIES THAT 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.

9.15 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, the 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 thereto,

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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.

9.16 Patriot Act Notice. The Lender hereby notifies the Loan Parties that pursuant to the requirements of the Patriot 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 the Lender to identify each Loan Party in accordance with the Patriot Act. Each Loan Party is in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the 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. The Loan Parties shall, promptly following a request by the Lender, provide all documentation and other information that the 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.

9.17 Foreign Asset Control Regulations. Neither of the advance of the Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et 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 Patriot Act. 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.

9.18 Time of the Essence. Time is of the essence of the Loan Documents.

9.19 Press Releases. Each Loan Party consents to the publication by the Lender of advertising material relating to the financing transactions contemplated by this Agreement using any Loan Party’s name, product photographs, logo or trademark. The Lender shall provide a draft reasonably in advance of any advertising material to the Lead Borrower for review and comment prior to the publication thereof. The Lender reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

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9.20 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 Lender or any other Credit Party.

(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 Commitment hereunder), 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 the Lender 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 Commitment hereunder).

(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 Commitment hereunder. The Lender may, at its election, foreclose on any security held by it by one or more judicial or 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 it against any other Loan Party, without affecting or impairing in any way the liability of any Loan Party hereunder (except if such results in Satisfaction of the Obligations) and the Commitment hereunder has 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 Loan Party 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 Commitment hereunder. 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

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Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Lender 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 Loan Party shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Loans made to another Borrower hereunder or other Obligations incurred directly and primarily by any other Borrower, then the Loan Party making such payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Borrowers.

9.21 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.

9.22 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.

9.23 Reserved.

9.24 Relationship with DIP Orders.

In the event of any inconsistency between the terms of the DIP Orders and the Loan Documents, the terms of the DIP Orders shall control and the representations, warranties, covenants, agreements or events of default made herein and in the other Loan Documents shall be subject to any express, contrary terms of the DIP Orders.

ARTICLE X

GUARANTEE

10.01 The Facility Guaranty.

Each Guarantor irrevocably and unconditionally guaranties, jointly with the other Guarantors and severally, as a primary obligor and not merely as a surety, the due and punctual payment when due (whether at the stated maturity, by required prepayment, by acceleration or otherwise) and performance by the Borrowers of all Obligations (collectively, the “Guaranteed Obligations”), including all such Guaranteed Obligations which shall become due but for the operation of any Debtor Relief Law. Each Guarantor further agrees that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice to or further assent from it, and that it will remain bound upon this Facility Guaranty notwithstanding any extension or renewal of any Guaranteed Obligation.

10.02 Guaranteed Obligations Not Affected.

To the fullest extent permitted by applicable Law, each Guarantor waives presentment to, demand of payment from, and protest to, any Loan Party of any of the Guaranteed Obligations, and also waives notice of acceptance of this Facility Guaranty, notice of protest for nonpayment and all other notices of

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any kind. To the fullest extent permitted by applicable Law, the obligations of each Guarantor hereunder shall not be affected by (a) the failure of any Credit Party to assert any claim or demand or to enforce or exercise any right or remedy against any Loan Party under the provisions of this Agreement, any other Loan Document or otherwise or against any other party with respect to any of the Guaranteed Obligations, (b) any rescission, waiver, amendment or modification of, or any release from, any of the terms or provisions of this Facility Guaranty, any other Loan Document or any other agreement, with respect to any Loan Party or with respect to the Guaranteed Obligations, (c) the failure to perfect any security interest in, or the release of, any of the Collateral held by or on behalf of any Credit Party, or (d) the lack of legal existence of any Loan Party or legal obligation to discharge any of the Guaranteed Obligations by any Loan Party for any reason whatsoever, including, without limitation, in connection with any Debtor Relief Laws.

10.03 Security.

Each Guarantor hereby acknowledges and agrees that each of Credit Parties may (a) take and hold security for the payment of this Facility Guaranty and the Guaranteed Obligations and exchange, enforce, waive and release any such security, (b) apply such security and direct the order or manner of sale thereof as they in their sole discretion may determine, and (c) release or substitute any one or more endorsees, the Borrowers, other Loan Parties or other obligors, in each case without affecting or impairing in any way the liability of any Guarantor hereunder.

10.04 Guarantee of Payment.

Each Guarantor further agrees that this Facility Guaranty constitutes a guarantee of payment and performance when due of all Guaranteed Obligations and not of collection and, to the fullest extent permitted by applicable Law, waives any right to require that any resort be had by any Credit Party to any of the Collateral or other security held for payment of the Guaranteed Obligations or to any balance of any deposit account or credit on the books of any Credit Party in favor of any Loan Party or any other Person or to any other guarantor of all or part of the Guaranteed Obligations. Any payment required to be made by any Guarantor hereunder may be required by any Credit Party on any number of occasions and shall be payable to the Lender, for the benefit of any Credit Party, in the manner provided in this Agreement.

10.05 No Discharge or Diminishment of Guarantee.

The obligations of each Guarantor hereunder 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 Guaranteed Obligations), including any claim of waiver, release, surrender, alteration or compromise of any of the Guaranteed Obligations, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of the foregoing, the Guaranteed Obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by the failure of any Credit Party to assert any claim or demand or to enforce any remedy under this Facility Guaranty, this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, by any default, failure or delay, willful or otherwise, in the performance of any of the Guaranteed Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of any Guarantor or that would otherwise operate as a discharge of any Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of the Guaranteed Obligations).

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10.06 Defenses of Loan Parties Waived.

To the fullest extent permitted by applicable Law, each Guarantor waives any defense based on or arising out of any defense of any Loan Party or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any Loan Party, other than the indefeasible payment in full in cash of the Guaranteed Obligations. Each Guarantor hereby acknowledges that the Credit Parties may, at their election, foreclose on any security held by one or more of them by one or more judicial or nonjudicial sales, accept an assignment of any such security in lieu of foreclosure, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any Loan Party, or exercise any other right or remedy available to them against any Loan Party, without affecting or impairing in any way the liability of each such Guarantor hereunder (except if such results in Satisfaction of the Obligations). Pursuant to, and to the extent permitted by, applicable Law, each Guarantor waives any defense arising out of any such election and waives any benefit of and right to participate in any such foreclosure action, even though such election operates, pursuant to applicable Law, to impair or to extinguish any right of reimbursement, indemnity, contribution or subrogation or other right or remedy of such Guarantor against any Loan Party, as the case may be, or any security. Each Guarantor agrees that it shall not assert any claim in competition with any Credit Party in respect of any payment made hereunder in connection with any proceedings under any Debtor Relief Laws.

10.07 Agreement to Pay; Subordination.

In furtherance of the foregoing and not in limitation of any other right that any Credit Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of any Loan Party to pay any Guaranteed Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to any Credit Party as designated thereby in cash the amount of such unpaid Guaranteed Obligations. Upon payment by any Guarantor of any sums to any Agent or any other Credit Party as provided above, all rights of such Guarantor 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 Guaranteed Obligations. In addition, any indebtedness of any Borrower or any other Loan Party now or hereafter held by any Guarantor is hereby subordinated in right of payment to the prior payment in full of all of the Guaranteed Obligations. Notwithstanding the foregoing, prior to the occurrence of an Event of Default, any Borrower or any other Loan Party may make payments to any Guarantor on account of any such indebtedness. After the occurrence and during the continuance of an Event of Default, no Guarantor will demand, sue for, or otherwise attempt to collect any such indebtedness until Satisfaction of the Obligations. If any amount shall erroneously be paid to any Guarantor on account of (a) such subrogation, contribution, reimbursement, indemnity or similar right or (b) any such indebtedness of any Loan Party, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Credit Party to be credited against the payment of the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of this Agreement.

10.08 Limitation on Guarantee of Guaranteed Obligations.

In any action or proceeding with respect to any Guarantor involving any state corporate law, the Bankruptcy Code of the United States or any other Debtor Relief Law, if the obligations of such Guarantor under Section 10.01 hereof would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under said Section 10.01, then, notwithstanding any other provision hereof to the contrary, the

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amount of such liability shall, without any further action by such Guarantor, any Credit Party, or any other Person, be automatically limited and reduced to the highest amount which is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

[signature pages follow]

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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.

THE WET SEAL, INC., as Lead Borrower, as a Borrower and as a Debtor-in-Possession
By:	/s/ Edmond S. Thomas
Name:	Edmond S. Thomas
Title:	CEO
THE WET SEAL RETAIL, INC., as a Borrower and as a Debtor-in-Possession
By:	/s/ Edmond S. Thomas
Name:	Edmond S. Thomas
Title:	CEO
WET SEAL CATALOG, INC., as a Borrower and as a Debtor-in-Possession
By:	/s/ Edmond S. Thomas
Name:	Edmond S. Thomas
Title:	CEO
WET SEAL GC, LLC, as a Guarantor and as a Debtor-in-Possession
By:	The Wet Seal, Inc., its Sole Member
By:	/s/ Edmond S. Thomas
Name:	Edmond S. Thomas
Title:	CEO

B. RILEY FINANCIAL, INC., as the Lender
By:	/s/ Phillip J. Ahn
Name:	Phillip J. Ahn
Title:	CFO & COO

EX-10.2

Exhibit 10.2

EXECUTION VERSION

SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION

LETTER OF CREDIT AGREEMENT

dated as of

January 15, 2015

among

BANK OF AMERICA, N.A.

as L/C Issuer

THE WET SEAL, INC.

as Applicant Representative for

THE WET SEAL, INC.

THE WET SEAL RETAIL, INC.

WET SEAL CATALOG, INC.

as the Applicants and Debtors-in-Possession

TABLE OF CONTENTS

Section		Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS			1
1.01	Defined Terms		1
1.02	Other Interpretive Provisions		14
1.03	Accounting Terms		15
1.04	Times of Day		15
1.05	Letter of Credit Amounts		15
ARTICLE II THE COMMITMENT AND L/C CREDIT EXTENSIONS			15
2.01	Letters of Credit		15
2.02	Termination or Reduction of Commitment		20
2.03	Interest		20
2.04	Fees		20
2.05	Computation of Interest and Fees		20
2.06	Evidence of Debt		21
2.07	Payments Generally		21
2.08	Priority; Liens		21
ARTICLE III TAXES, YIELD PROTECTION AND APPOINTMENT OF APPLICANT REPRESENTATIVE			21
3.01	Taxes		21
3.02	Increased Costs; Reserves on LIBOR Rate Loans		22
3.03	Mitigation Obligations		23
3.04	Survival		24
3.05	Designation of Applicant Representative as Applicants’ Agent		24
ARTICLE IV CONDITIONS PRECEDENT TO L/C CREDIT EXTENSIONS			24
4.01	Conditions of Initial L/C Credit Extension		24
4.02	Conditions to all L/C Credit Extensions		26
ARTICLE V REPRESENTATIONS AND WARRANTIES			27
5.01	Existence, Qualification and Power		27
5.02	Authorization; No Contravention		27
5.03	Governmental Authorization; Other Consents		27
5.04	Binding Effect		27
5.05	Reserved		27
5.06	Litigation		27
5.07	No Default		27
5.08	Taxes		28
5.09	Subsidiaries; Equity Interests		28
5.10	Margin Regulations; Investment Company Act		28
5.11	Disclosure		28
5.12	Compliance with Laws		28
5.13	Security Documents		28
5.14	Brokers		29

(i)

ARTICLE VI AFFIRMATIVE COVENANTS		29
6.01	Financial Statements and Other Information	29
6.02	Notices	30
6.03	Payment of Obligations	30
6.04	Preservation of Existence	30
6.05	Compliance with Laws	30
6.06	Books and Records; Accountants	30
6.07	Additional Applicants	30
6.08	Information Regarding the Cash Collateral	31
6.09	Further Assurances	31
6.10	Depository Account	31
ARTICLE VII NEGATIVE COVENANTS		31
7.01	Liens	31
7.02	Fundamental Changes	32
7.03	Change in Nature of Business	32
7.04	Reserved	32
7.05	Use of L/C Credit Extensions	32
7.06	Amendment of Material Documents	32
7.07	Bankruptcy Related Negative Covenants	32
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES		33
8.01	Events of Default	33
8.02	Remedies Upon Event of Default	35
8.03	Application of Funds	36
ARTICLE IX MISCELLANEOUS		37
9.01	Amendments	37
9.02	Notices; Effectiveness; Electronic Communications	37
9.03	No Waiver; Cumulative Remedies	38
9.04	Expenses; Indemnity; Damage Waiver	38
9.05	Payments Set Aside	39
9.06	Successors and Assigns	39
9.07	Treatment of Certain Information; Confidentiality	40
9.08	Right of Setoff	41
9.09	Interest Rate Limitation	41
9.10	Counterparts; Integration; Effectiveness	41
9.11	Survival	42
9.12	Severability	42
9.13	Governing Law; Jurisdiction	42
9.14	Waiver of Jury Trial	43
9.15	No Advisory or Fiduciary Responsibility	43
9.16	Patriot Act Notice	44
9.17	Foreign Asset Control Regulations	44
9.18	Time of the Essence	45
9.19	Press Releases	45
9.20	Additional Waivers	45
9.21	No Strict Construction	46
9.22	Attachments	46
9.23	Keepwell	46
9.24	Relationship with DIP Orders	47
SIGNATURES		S-1

(ii)

SCHEDULES
1.01	Applicants
1.02	Pre-Petition Letters of Credit
1.03	L/C Cash Collateral Accounts
5.09	Subsidiaries
9.02	L/C Issuer’s Office; Certain Addresses for Notices
EXHIBITS
	Form of
A	Interim Borrowing Order

(iii)

SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION LETTER OF CREDIT AGREEMENT

This SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION LETTER OF CREDIT AGREEMENT (“Agreement”) is entered into as of January 15, 2015 among

The Wet Seal, Inc., a Delaware corporation, as Debtor-in-Possession (the “Applicant Representative”),

the Persons (as defined below) named on Schedule 1.01 hereto, as Debtors-in-Possession (collectively, the “Applicants” and individually, a “Applicant “), and

BANK OF AMERICA, N.A., as L/C Issuer.

RECITALS

WHEREAS, on January 15, 2015, the Applicants commenced Chapter 11 Case No. [            ] (the “Chapter 11 Case”) by filing a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code, with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Applicants continue to operate their business and manage their properties as debtors and debtors-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code; and

WHEREAS, the Applicants have requested that the L/C Issuer provide a senior secured, super-priority letter of credit facility to the Applicants on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the L/C Issuer and the Applicants hereby 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:

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

“Agreement” means this Senior Secured, Super-Priority Debtor-in-Possession Letter of Credit Agreement.

“Applicable Rate” means two and one-half percent (2.50%).

“Applicant Representative” has the meaning specified in the introductory paragraph hereto.

“Applicant” or “Applicants” has the meaning specified in the introductory paragraph hereto.

“Approved Budget” means the budget approved by the DIP Lender prior to the Closing Date (together with any subsequent budget which the DIP Lender may approve).

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

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“Bank Products” means any services or facilities provided to any Applicant by the L/C Issuer or any of its Affiliates, including, without limitation, on account of (a) Swap Contracts, (b) supply chain finance services (including, without limitation, trade payable services and supplier accounts receivable purchases), and (c) leasing, but excluding Cash Management Services.

“Bankruptcy Code” means Title 11, U.S.C. §101, et seq., as now or hereafter in effect, or any successor statute thereto.

“Bankruptcy Court” has the meaning provided in the recitals to this Agreement.

“Bankruptcy Events” means, the commencement of the Chapter 11 Case and any events that lead up to, and typically result from, the commencement of a case under Chapter 11 of the Bankruptcy Code.

“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 LIBOR Rate for a one month interest period as determined on such day, plus 1.00%. 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 Bank of America’s prime rate, the Federal Funds Rate or the LIBOR Rate, respectively, shall take effect at the opening of business on the day specified in the public announcement of such change.

“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 L/C Issuer’s Office is located.

“Cash Collateral” means cash contained in the Cash Collateral Accounts which secures the Obligations and certain Pre-Petition Liabilities, including all Bank Products and Cash Management Services, whether entered into prior to, or after, the Petition Date.

“Cash Collateral Account(s)” means individually, each L/C Cash Collateral Account and the Cash Management/Indemnity Account and collectively, means both of them.

“Cash Collateralize” has the meaning specified in Section 2.01(f). Derivatives of such term have corresponding meanings.

“Cash Management/Indemnity Account” means a non-interest bearing account established by one or more of the Applicants with Bank of America or any of its Affiliates, and in the name of, the L/C Issuer and the Pre-Petition Agent (or as the L/C Issuer and the Pre-Petition Agent shall otherwise direct) and under the sole and exclusive dominion and control of the L/C Issuer and the Pre-Petition Agent, in which an amount of $1,500,000 shall be deposited, as security for the mutual benefit of (i) the Pre-Petition Credit Parties, in respect of the Applicants’ indemnification obligations arising under the Pre-Petition Loan Documents, and (ii) Bank of America and its Affiliates, in respect of its provision of pre-petition and post-petition Cash Management Services to the Applicants.

“Cash Management Order” means an order entered by the Bankruptcy Court, in form and substance reasonably satisfactory to the L/C Issuer, authorizing the Applicants to, among other things, continue their cash management systems and to otherwise comply with the terms of this Agreement and the other Loan Documents.

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“Cash Management Services” means any cash management services or facilities provided to any Applicant by the L/C Issuer or any of its Affiliates, including, without limitation: (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.

“Change in Law” means the occurrence, after the Closing Date, of any of the following as applicable to any of the Applicants or Credit Parties: (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, implementation, 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; provided however, for purposes of this Agreement, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued and shall be deemed to have gone into effect and been adopted after the Closing Date.

“Change of Control” means, at any time, (a) during any period of twelve months, individuals who at the beginning of such period constituted the board of directors of the Applicant Representative (together with any new directors whose election or appointment by such board of directors, or whose nomination for election by shareholders of the Applicant Representative, as the case may be, was approved by a vote of a majority of the directors still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than by reason of death or disability to constitute a majority of the board of directors then in office; or (b) any person or group (within the meaning of the Securities and Exchange Act of 1934, as amended) is or becomes the beneficial owner (within the meaning of Rule 13d-3 and 13d-5 of the Securities and Exchange Act of 1934, as amended, except that such person shall be deemed to have “beneficial ownership” of all shares that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time) directly or indirectly of more than fifty percent (50%) of the total then outstanding voting power of the Voting Stock of the Applicant Representative on a fully diluted basis, whether as a result of the issuance of securities of the Applicant Representative, any merger, consolidation, liquidation or dissolution of the Applicant Representative, any direct or indirect transfers of securities or otherwise, or has the right or ability to Control the Applicant Representative; (c) the Applicant Representative fails to own one hundred percent (100%) of the Equity Interests of the other Applicants, or (d) any “change in control” or similar event as defined in any document governing Material Indebtedness of any Applicant incurred on or after the Petition Date.

“Chapter 11 Case” has the meaning provided in the recitals to this Agreement.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 9.01.

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

“Commercial Letter of Credit” means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of any Inventory or Equipment (each as defined in the UCC) by an Applicant in the ordinary course of business of such Applicant.

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“Commitment” means the L/C Issuer’s obligation to issue Letters of Credit, as such amount may be adjusted from time to time in accordance with this Agreement. As of the Closing Date, the Commitment is $18,328,777 (inclusive of the amount of Pre-Petition Letters of Credit which are deemed issued hereunder).

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

“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 (a) to vote more than 50% of the securities having ordinary voting power for the election of directors of a Person, or (b) to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.

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

“Credit Party Expenses” means: (a) all reasonable and documented out-of-pocket expenses incurred by the L/C Issuer and its Affiliates, in connection with this Agreement and the other Loan Documents, including, without limitation, (i) the reasonable and documented fees, charges and disbursements of (A) counsel for the L/C Issuer and its Affiliates (limited to not more than one primary counsel, and necessary local counsel (limited to one local counsel for each other jurisdiction)), and (B) outside consultants for the L/C Issuer, and (ii) all reasonable and documented out-of-pocket expenses incurred in connection with (A) 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), or (B) the enforcement or protection of their rights in connection with this Agreement or the other Loan Documents or efforts to preserve, protect, collect, or enforce the Cash Collateral or in connection with the Chapter 11 Case or any successor case; and (b) all reasonable and documented 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.

“Creditors’ Committee” means any official committee of creditors formed, appointed or approved in the Chapter 11 Case pursuant to the Bankruptcy Code.

“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 Rate, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Rate plus 2% per annum.

“DIP Orders” means and refers to the Interim Borrowing Order and the Final Borrowing Order.

“DIP Lender” means the lender (together with its successors and assigns) under the DIP Lending Agreement.

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“DIP Lending Agreement” means that certain Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement dated as of January 15, 2015 establishing a credit facility provided to the Applicants, as debtors in possession, by B. Riley Financial, Inc., as DIP Lender and secured by a first priority Lien on the Applicants’ assets (other than the Cash Collateral).

“DIP Loan Obligations” means the “Obligations” as defined under the DIP Lending Agreement.

“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).

“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 non-voting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“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 9.01 hereof.

“Excluded Swap Obligation” means, with respect to any Applicant, any Swap Obligation if, and to the extent that the grant under a Loan Document by such Applicant of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act (or the application or official interpretation thereof) by virtue of such Applicant’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to Section 9.23 hereof and any and all guarantees of such Applicant’s Swap Obligations by other Applicants) at the time the guaranty of such Applicant, or grant by such Applicant of a security interest, becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a Master Agreement governing more than one Swap Contract, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to Swap Contracts for which such guaranty or security interest becomes illegal.

“Excluded Taxes” means, with respect to the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Applicants 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 the L/C Issuer, in which its L/C Issuer’s 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 Applicant is located, and (c) any U.S. federal withholding tax imposed under FATCA.

“Executive Order” has the meaning set forth in Section 9.17.

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“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

“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 L/C Issuer.

“Final Borrowing Order” means an order of the Bankruptcy Court, which order is a Final Order and shall be in form, scope and substance reasonably acceptable to the L/C Issuer, which, among other matters but not by way of limitation, (i) authorizes the Applicants to obtain credit, incur (or guaranty) Obligations, grant Liens under this Agreement, the other Loan Documents and the DIP Orders and otherwise perform their obligations under this Agreement and the other Loan Documents, (ii) provides for the super priority of the L/C Issuer’s claims, and (iii) grants the credit parties under the Pre-Petition Credit Agreement adequate protection of their interests as further set forth therein.

“Final Order” means an order or judgment of the Bankruptcy Court, as entered on the docket of the Clerk of the Bankruptcy Court, that has not been reversed, stayed, modified or amended and as to which the time to appeal or seek leave to appeal, petition for certiorari, reargue or seek rehearing has expired and no proceeding for certiorari, reargument or rehearing is pending or if an appeal, petition for certiorari, reargument, or rehearing has been sought, the order or judgment of the Bankruptcy Court has been affirmed by the highest court to which the order was appealed, from which the reargument or rehearing was sought, or certiorari has been denied and the time to take any further appeal or to seek certiorari or further reargument or rehearing has expired.

“Financial Officer” means a chief financial officer or vice president corporate controller.

“Fiscal Year” means any period of twelve consecutive months ending on the Saturday nearest to the last day of January of any calendar year.

“Foreign Assets Control Regulations” has the meaning set forth in Section 9.17.

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

“GAAP” means generally accepted accounting principles in the United States as set forth in accounting rules and standards promulgated by the Financial Accounting Standards Board or any organization succeeding to any of its principal functions.

“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 supra-national bodies such as the European Union or the European Central Bank).

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“Honor Date” has the meaning specified in Section 2.01(c).

“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), bankers’ 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, capital lease, synthetic lease, or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f) 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, 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

(g) 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 (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Applicant under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Indemnitee” has the meaning specified in Section 9.04(b).

“Information” has the meaning specified in Section 9.07.

“Interim Borrowing Order” means an order entered by the Bankruptcy Court, substantially in the form of, and containing the provisions set forth in, Exhibit A (or such other form and provisions as may be reasonably acceptable to the L/C Issuer), approving, on an interim basis, the Applicants’ obtaining credit and incurring (or guarantying) Obligations, granting Liens to secure the Obligations, and providing for the super priority of the L/C Issuer’s claims and granting the credit parties under the Pre-Petition Credit Agreement adequate protection of their interests (as provided therein), and entering into and performing their obligations under this Agreement and the other Loan Documents, as further set forth herein.

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“IRS” means the United States Internal Revenue Service.

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

“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. Without limiting the foregoing, “Laws” shall include the Bankruptcy Code.

“L/C Availability” means an amount equal to the lesser of (a) the Commitment, or (b) an amount equal to the excess of the amounts then on deposit in the L/C Cash Collateral Accounts over 103% of the L/C Obligations.

“L/C Cash Collateral Account(s)” means one or more non-interest bearing accounts established by one or more of the Applicants with Bank of America or any of its Affiliates, and in the name of, the L/C Issuer (or as the L/C Issuer shall otherwise direct) and under the sole and exclusive dominion and control of the L/C Issuer in which deposits are required to be made in accordance with Section 2.01(f). As of the Closing Date, the L/C Cash Collateral Accounts are those set forth on Schedule 1.03.

“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. 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 1.05. 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 applicable Law, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

“L/C Issuer” has the meaning specified in the introductory paragraph hereto.

“L/C Issuer’s Office” means the L/C Issuer’s address and, as appropriate, account as set forth on Schedule 9.02, or such other address or account as the L/C Issuer may from time to time notify the Applicant Representative.

“Letter of Credit” means each Commercial Letter of Credit issued under this Agreement and each Pre-Petition Letter of Credit.

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“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 Availability Period” means the date commencing on the Closing Date and ending on the earliest of (i) April 30, 2015, (ii) the date on which the maturity of the Obligations is accelerated and the Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder is irrevocably terminated in accordance with Article VIII, (iii) the termination of the Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder in accordance with the provisions of Section 2.02 hereof, (iv) the date on which a Sale is consummated, or (v) a Plan Effective Date.

“Letter of Credit Fee” has the meaning specified in Section 2.01(h).

“LIBOR Rate” means, for any interest calculation with respect to determination of the Base Rate on any date, (i) the rate per annum equal to the London interbank offered rate administered by ICE Benchmark Administration Limited (“ICE LIBOR”), as published by Reuters (or other commercially available source providing quotations of ICE LIBOR as designated by the L/C Issuer from time to time) at approximately 11:00 a.m., London time, determined two London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by the L/C Issuer to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Obligation being made or maintained and with a term equal to one month would be offered by Bank of America’s London Branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination.

“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, synthetic lease, or other title 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.

“Loan Documents” means this Agreement, each Issuer Document, the DIP Orders, the Security Documents, 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 the L/C Issuer or any of its Affiliates, each as amended and in effect from time to time.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property, assets, or condition, financial or otherwise, of the Applicant Representative and its Subsidiaries taken as a whole, (b) the ability of the Applicants to perform any Obligations under this Agreement or any of the other Loan Documents, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or any of the material rights or remedies of the L/C Issuer hereunder or thereunder. 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. Notwithstanding anything to the contrary, a “Material Adverse Effect” shall not be deemed to exist as a result of the effect of the Bankruptcy Events and the Permitted Store Closings.

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“Material Indebtedness” means Indebtedness incurred after the Petition Date (other than the Obligations) of the Applicants in an aggregate principal amount exceeding $10,000,000. For purposes of determining the amount of Material Indebtedness at any time, (a) the amount of the obligations in respect of any Swap Contract at such time shall be calculated at the Swap Termination Value thereof, (b) undrawn committed or available amounts shall be included, and (c) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included.

“Maturity Date” means February 13, 2015 unless the Final Borrowing Order shall have been entered on or before such date, in which case the Maturity Date shall mean May 15, 2015, in each case, unless otherwise extended by the L/C Issuer in its sole and exclusive discretion.

“Maximum Rate” has the meaning provided therefor in Section 9.09.

“Obligations” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Applicant arising under any Loan Document with respect to any Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide Cash Collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising, and (b) any Other Liabilities; provided that Obligations of an Applicant shall exclude any Excluded Swap Obligations with respect to such Applicant.

“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 Applicants or any of their Subsidiaries and/or (b) any Bank Product furnished to any of the Applicants 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, excluding, however, any such amounts imposed as a result of an assignment by the L/C Issuer of its Commitment.

“Outstanding Amount” means 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 Applicants of Unreimbursed Amounts.

“Parent” means the Applicant Representative.

“Participant” has the meaning specified in Section 9.06(b).

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“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“Permitted Store Closings” means the Applicants’ store closures effectuated prior to the commencement of the Chapter 11 Case, and thereafter with the DIP Lender’s approval.

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

“Petition Date” means January 15, 2015.

“Plan Effective Date” means the effective date of a Plan of Reorganization.

“Plan of Reorganization” means a plan filed in the Chapter 11 Case pursuant to Chapter 11 of the Bankruptcy Code.

“Pledge Agreement” means the Pledge and Security Agreement dated as of the Closing Date among the Applicants, the L/C Issuer and the Pre-Petition Agent.

“Pre-Petition Agent” means the “Agents” as defined in the Pre-Petition Credit Agreement.

“Pre-Petition Credit Agreement” means that certain Amended and Restated Credit Agreement dated as of February 3, 2011 entered into among the Applicants, the Agents and the L/C Issuers (as each of those terms is defined therein), together with all instruments, documents and agreements executed or delivered in connection therewith, in each case, as amended, modified or supplemented to the date hereof.

“Pre-Petition Credit Parties” means the “Credit Parties” as defined in the Pre-Petition Credit Agreement.

“Pre-Petition Letters of Credit” means those letter of credit issued by Bank of America prior to the Petition Date and deemed issued pursuant to Section 2.01(a) of this Agreement, as further described on Schedule 1.02.

“Pre-Petition Liabilities” means the “Secured Obligations” as defined in the security agreement executed and delivered in connection with the Pre-Petition Credit Agreement.

“Pre-Petition Loan Documents” means the “Loan Documents” as defined in the Pre-Petition Credit Agreement.

“Qualified ECP Guarantor” means, at any time, each Applicant with total assets exceeding $10,000,000 or that qualifies at such time as an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” at such time under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“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.

“Responsible Officer” means the chief executive officer, president, chief financial officer, vice-president, corporate controller, treasurer or assistant treasurer of an Applicant or any of the other individuals designated in writing to the L/C Issuer by an existing Responsible Officer of an Applicant as

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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 an Applicant shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Applicant and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Applicant.

“Sale” means the sale of all substantially all of the Applicants’ assets or Equity Interests pursuant to Section 363 of the Bankruptcy Code, whereby the proceeds of such sale shall be used to indefeasibly pay in full in cash the outstanding Obligations and the Pre-Petition Liabilities.

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

“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, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the Public Company Accounting Oversight Board.

“Security Documents” means (a) the Pledge Agreement and each other security agreement or other instrument or document executed and delivered to the L/C Issuer pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations, and (b) the DIP Orders.

“Specified Applicant” means any Applicant that is not then an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 9.23).

“Standby Letter of Credit” means any Letter of Credit that is not a Commercial Letter of Credit. For the avoidance of doubt, no Letter of Credit issued after the Closing Date shall be a Standby Letter of Credit.

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

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

“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

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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 Obligations” means with respect to any Applicant any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

“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 the L/C Issuer or any Affiliate of the L/C Issuer).

“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.

“Trading With the Enemy Act” has the meaning set forth in Section 9.17.

“UCP 600” means, with respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce (“ICC”) Publication No. 600 (or such later version thereof as may be in effect at the time of issuance).

“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 Cash 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.

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

“Unreimbursed Amount” has the meaning set forth in Section 2.01(c).

“Variance Report” means a report prepared by the Applicant Representative’s management reflecting on a line-item basis the Applicants’ actual performance compared to the Approved Budget for the immediately preceding four week period and on a cumulative basis for the period after the Petition Date.

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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 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.

(d) Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean (i) the repayment in Dollars in full in cash or immediately available funds (or, in the case of contingent reimbursement obligations with respect to Letters of Credit and Bank Products (other than Swap Contracts), providing Cash Collateralization) of all of the Obligations (including the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Swap Contracts) other than (A) unasserted contingent indemnification Obligations, (B) any Obligations relating to Bank Products (including Swap Contracts) that, at such time, are allowed by the applicable Bank Product provider to remain outstanding without being required to be repaid or Cash Collateralized, and (C) any Obligations relating to Cash Management Services that, at such time, are allowed by the applicable provider of such Cash Management Services to remain outstanding without being required to be repaid, (ii) the termination of the Commitment and of the L/C Issuer’s obligation to issue Letters of Credit hereunder, and (iii) fifteen (15) days after the expiration or return undrawn of all Letters of Credit (or providing Cash Collateralization therefor).

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1.03 Accounting Terms

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 financial statements delivered to the L/C Issuer prior to the Closing Date, except as otherwise specifically prescribed herein.

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

1.05 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.

ARTICLE II

THE COMMITMENT AND L/C CREDIT EXTENSIONS

2.01 Letters of Credit.

(a) The Letter of Credit Commitment.

(i) Subject to the terms and conditions set forth herein, the L/C Issuer agrees, (1) from time to time on any Business Day during the Letter of Credit Availability Period, to issue Letters of Credit for the account of the Applicants, and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.01(b) below, (2) concurrently with the satisfaction (or waiver by the L/C Issuer) of the conditions set forth in Sections 4.01 and 4.02, each outstanding Pre-Petition Letter of Credit shall be deemed issued and outstanding pursuant to this Agreement and shall be subject to the terms, conditions and other provisions of this Agreement, and (3) to honor drawings under the Letters of Credit; provided that the L/C Issuer shall have no obligation to issue a Letter of Credit if, after giving effect to the requested issuance, (i) the Outstanding Amount of the L/C Obligations exceeds the Commitment, or (ii) the Outstanding Amount of the L/C Obligations exceeds L/C Availability. Each request by the Applicant Representative for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Applicants 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 Applicants’ ability to obtain Letters of Credit shall be fully revolving, and accordingly the Applicants 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) such requested Letter of Credit is a Standby Letter of Credit;

(B) the expiry date of such requested Commercial Letter of Credit would occur more than 60 days after the date of issuance or last extension, unless the L/C Issuer has approved such expiry date;

(C) such Letter of Credit is not Cash Collateralized on or prior to the date of issuance of such Letter of Credit.

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(iii) The L/C Issuer shall not be obligated to issue any Letter of Credit 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; or

(D) such Letter of Credit contains any provisions for automatic reinstatement of the Stated Amount after any drawing thereunder or for the automatic extension of the expiry thereof.

(iv) The L/C Issuer shall not be obligated to amend, renew, amend or extend any Pre-Petition Letter of Credit.

(v) 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.

(b) Procedures for Issuance and Amendment of Letters of Credit.

(i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Applicant Representative delivered to the L/C Issuer in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Applicant Representative. Such Letter of Credit Application must be received by the L/C Issuer not later than 1:00 p.m. at least two Business Days (or such other date and time as the L/C Issuer may agree in a particular instance in its sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the 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 Applicant Representative shall furnish to the L/C Issuer such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as the L/C Issuer may require.

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(ii) 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 Applicant Representative a true and complete copy of such Letter of Credit or amendment.

(c) Drawings and Reimbursements. 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 endeavor to promptly notify the Applicant Representative thereof; provided, however, that any failure to give or delay in giving such notice shall not (i) relieve the Applicants of their obligation to reimburse the L/C Issuer with respect to any such payment or (ii) derogate from the L/C Issuer’s right to apply Cash Collateral pursuant to this Section 2.01 or any other rights of the Credit Parties hereunder. On the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Applicants shall be deemed to have authorized the L/C Issuer to apply Cash Collateral in an amount equal to the amount of such payment to reimburse such drawing. If the L/C Issuer is unable to apply such Cash Collateral or if such Cash Collateral is insufficient to reimburse the L/C Issuer with respect to any such payment (the “Unreimbursed Amount”), the Applicants shall reimburse the L/C Issuer on demand for the Unreimbursed Amount. Any notice given by the L/C Issuer pursuant to this Section 2.01(c) may be given by telephone 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.

(d) Obligations Absolute. The obligation of the Applicants to reimburse the L/C Issuer for each drawing under each Letter of Credit shall be absolute, 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 Applicants 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) waiver by the L/C Issuer of any requirement that exists for the L/C Issuer’s protection and not the protection of the Applicants or any waiver by the L/C Issuer which does not in fact materially prejudice the Applicants;

(v) any honor of a demand for payment presented electronically even if such Letter of Credit requires that demand be in the form of a draft;

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(vi) any payment made by the L/C Issuer in respect of an otherwise complying item presented after the date specified as the expiration date of, or the date by which documents must be received under, such Letter of Credit if presentation after such date is authorized by the UCC or the UCP, as applicable;

(vii) 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 the Bankruptcy Code or any other debtor relief law;

(viii) 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 Applicants or any of their Subsidiaries; or

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

The Applicant Representative 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 non-compliance with the Applicant Representative’s instructions or other irregularity, the Applicant Representative will immediately notify the L/C Issuer. The Applicants 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.

(e) Role of L/C Issuer. The Applicants 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. The Applicants 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, preclude the Applicants’ pursuing such rights and remedies as they may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuer, any of its 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 (ix) of Section 2.01(d); provided, however, that anything in such clauses to the contrary notwithstanding, the Applicants may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Applicants, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Applicants which the Applicants 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. The L/C Issuer may send a Letter of Credit or conduct any communication to or from the beneficiary via the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) message or overnight courier, or any other commercially reasonable means of communicating with a beneficiary.

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(f) Cash Collateral. On or prior to the date of issuance of any Letter of Credit, the Applicants shall Cash Collateralize the then Outstanding Amount of all L/C Obligations with respect to such Letter of Credit. For purposes of this Section 2.01, “Cash Collateralize” means to deposit in an L/C Cash Collateral Account or to pledge and deposit with or deliver to the L/C Issuer, for the benefit of the L/C Issuer, as Cash Collateral for the L/C Obligations, cash or deposit account balances in an amount equal to 103% of the Outstanding Amount of all L/C Obligations, pursuant to documentation in form and substance satisfactory to the L/C Issuer. The Applicants hereby grant to the L/C Issuer a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing to secure all Obligations. Such Cash Collateral shall be maintained in the L/C Cash Collateral Accounts. If at any time the L/C Issuer determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the L/C Issuer or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Applicants will, forthwith upon demand by the L/C Issuer, pay to the L/C Issuer, 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 L/C Issuer determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit, such funds shall be applied, without any further notice or consent, to reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be applied to satisfy other Obligations. In the event that a Letter of Credit has not been drawn and is returned to the L/C Issuer or fifteen (15) days after the expiration date thereof and no drawing or presentation has been made, as long as no Event of Default under any of Sections 8.01(a), (b), (h), (i), (n) or (v) then exists, the L/C Issuer shall, within five (5) Business Days turn over to the Applicant Representative (as directed thereby) 103% of the face amount of any such Letter of Credit and any Lien in the Cash Collateral represented thereby shall be deemed automatically released without any further action by the L/C Issuer or any Applicant.

(g) Applicability of Uniform Customs and Practice. Unless otherwise expressly agreed by the L/C Issuer and the Applicant Representative when a Letter of Credit is issued, the rules of the UCP shall apply to each Commercial Letter of Credit. Notwithstanding the foregoing, the L/C Issuer shall not be responsible to the Applicants for, and the L/C Issuer’s rights and remedies against the Applicants shall not be impaired by, any action or inaction of the L/C Issuer required or permitted under any law, order, or practice that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where the L/C Issuer or the beneficiary is located, the practice stated in the UCP, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade—International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.

(h) Letter of Credit Fees. The Applicants shall pay to the L/C Issuer 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 1.05. Letter of Credit Fees shall be (i) due and payable on the first day of each calendar month, commencing with the first such date to occur after the issuance of such Letter of Credit, on the last day of the Letter of Credit Availability Period and thereafter on demand, and (ii) computed on a monthly basis in arrears. Notwithstanding anything to the contrary contained herein, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

(i) Documentary and Processing Charges Payable to L/C Issuer. The Applicants 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 non-refundable.

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(j) 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.

2.02 Termination or Reduction of Commitment.

(a) The Applicants may, upon irrevocable notice from the Applicant Representative to the L/C Issuer, terminate the Commitment or from time to time permanently reduce the Commitment; provided that (i) any such notice shall be received by the L/C Issuer not later than 1:00 p.m. three Business Days prior to the date of termination or reduction, (ii) any such partial reduction of the Commitment shall be in an aggregate amount of $5,000,000 or any whole multiple of $1,000,000 in excess thereof, (iii) the Applicants shall not terminate or reduce the Commitment if, after giving effect thereto, the Outstanding Amount of L/C Obligations would exceed the Commitment.

(b) All fees (including, without limitation, commitment fees, and Letter of Credit Fees) and interest in respect of the Obligations accrued until the effective date of any termination of the Commitment shall be paid on the effective date of such termination.

2.03 Interest.

If any Event of Default exists, then the L/C Issuer may notify the Applicant Representative 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 Law. Accrued and unpaid interest (including interest on past due interest) shall be due and payable upon demand.

2.04 Fees. In addition to certain fees described in subsections (h) and (i) of Section 2.01:

(a) Closing Fee. The Applicants shall pay to the L/C Issuer a closing fee equal to 0.75% multiplied by the Commitment as of the Closing Date. The closing fee shall be fully earned and due and payable on the Closing Date and shall not be subject to refund or rebate for any reason.

(b) Commitment Fee. The Applicants shall pay to the L/C Issuer a commitment fee equal to 0.50% multiplied by the actual daily amount by which the Commitment exceeds the Outstanding Amount of L/C Obligations. The commitment fee shall accrue at all times during the Letter of Credit 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 monthly in arrears on the first Business Day of each month, commencing with the first such date to occur after the Closing Date, and on the last day of the Letter of Credit Availability Period. The commitment fee shall be calculated monthly in arrears.

2.05 Computation of Interest and Fees. All computations of the Base Rate 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. Interest shall not accrue on any amount for the day on which such amount is paid. Each determination by the L/C Issuer of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

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2.06 Evidence of Debt.

The L/C Credit Extensions shall be evidenced by one or more accounts or records maintained by the L/C Issuer in the ordinary course of business, which shall include the date and amount of each Letter of Credit issued by the L/C Issuer, each payment of any drawing under such Letter of Credit, and each payment of interest, fees and other amounts due in connection with the Obligations due to the L/C Issuer. The accounts or records maintained by the L/C Issuer shall be conclusive absent manifest error. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Applicants hereunder to pay any amount owing with respect to the Obligations.

2.07 Payments Generally. All payments to be made by the Applicants shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Applicants hereunder shall be made to the L/C Issuer at the L/C Issuer’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. All payments received by the L/C Issuer after 2:00 p.m. shall, at the option of the L/C Issuer, be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Applicants 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.

2.08 Priority; Liens. All of the Obligations are secured by Liens on the Cash Collateral and, at all times, shall constitute first priority Liens under Section 364(d) of the Bankruptcy Code. No other claims secured by the Cash Collateral having a priority superior or pari passu to that granted to or on behalf of the L/C Issuer shall be granted or approved while any of the Obligations or the Commitment remains outstanding. All of the Obligations shall constitute administrative expenses of the Applicants in the Bankruptcy Case with priority under Section 364(c)(1) of the Bankruptcy Code over any and all other administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code. No other claims having a priority superior or pari passu to that granted to or on behalf of the L/C Issuer shall be granted or approved while any of the Obligations or the Commitment remains outstanding.

ARTICLE III

TAXES, YIELD PROTECTION AND

APPOINTMENT OF APPLICANT REPRESENTATIVE

3.01 Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Applicants 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 Applicants 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 L/C Issuer receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Applicants shall make such deductions and (iii) the Applicants shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Law.

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

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(c) Indemnification by the Applicants. The Applicants shall indemnify 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 L/C Issuer and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Applicant Representative by 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 Applicants to a Governmental Authority, the Applicant Representative shall deliver to the L/C Issuer 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 L/C Issuer.

(e) Treatment of Certain Refunds. If the L/C Issuer reasonably determines, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Applicants or with respect to which the Applicants have paid additional amounts pursuant to this Section, it shall pay to the Applicant Representative, with reasonable promptness following the date upon which it actually realizes such benefit, an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Applicants 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 L/C Issuer and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Applicants, upon the request of the L/C Issuer, agree to repay the amount paid over to the Applicant Representative (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the L/C Issuer in the event that the L/C Issuer is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Applicants or any other Person.

(f) FATCA. If a payment made to the L/C Issuer under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if the L/C Issuer were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), the L/C Issuer shall deliver to the withholding agent (i.e., any Applicant), at the time or times prescribed by law and at such time or times reasonably requested by such withholding agent, such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by such withholding agent as may be necessary for the withholding agent to comply with its obligations under FATCA, to determine that the L/C Issuer has complied with the L/C Issuer’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

3.02 Increased Costs; Reserves on LIBOR Rate Loans.

(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 by, the L/C Issuer;

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(ii) subject the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement or any Letter of Credit issued by it, or change the basis of taxation of payments to 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 the L/C Issuer); or

(iii) impose on the L/C Issuer any other condition, cost or expense affecting this Agreement or any Letter of Credit;

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

(b) Capital Requirements. If the L/C Issuer determines that any Change in Law affecting the L/C Issuer or any Lending Office of the L/C Issuer 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 the L/C Issuer’s capital or liquidity or on the capital or liquidity of the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitment of the L/C Issuer or the Letters of Credit issued by the L/C Issuer, to a level below that which the L/C Issuer or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration the L/C Issuer’s policies and the policies of the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Applicants will pay to the L/C Issuer, such additional amount or amounts as will compensate the L/C Issuer or the L/C Issuer’s holding company for any such reduction suffered.

(c) Certificates for Reimbursement. A certificate of the L/C Issuer setting forth the amount or amounts necessary to compensate 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 Applicant Representative shall be conclusive absent manifest error. The Applicants shall pay such the L/C Issuer 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 the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of the L/C Issuer’s right to demand such compensation, provided that the Applicants shall not be required to compensate the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than 120 days prior to the date that the L/C Issuer notifies the Applicant Representative of the Change in Law giving rise to such increased costs or reductions and of 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 120 day period referred to above shall be extended to include the period of retroactive effect thereof).

3.03 Mitigation Obligations. If the Applicants are required to pay any additional amount to the L/C Issuer or any Governmental Authority for the account of the L/C Issuer pursuant to Section 3.01, or if the L/C Issuer gives a notice pursuant to Section 3.02, then the L/C Issuer shall use commercially reasonable efforts to designate a different L/C Issuer’s Office for issuance of Letters of Credit hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of the L/C Issuer, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 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 the L/C Issuer to any unreimbursed cost or expense and would not otherwise be disadvantageous to the L/C Issuer. The Applicants hereby agree to pay all reasonable costs and expenses incurred by the L/C Issuer in connection with any such designation or assignment.

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3.04 Survival. All of the Applicants’ obligations under this Article III shall survive termination of the Commitment and repayment of all other Obligations hereunder.

3.05 Designation of Applicant Representative as Applicants’ Agent.

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

(b) Each Applicant 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 Applicants. Consequently, each Applicant hereby assumes and agrees to discharge all Obligations of each of the other Applicants.

(c) The Applicant Representative shall act as a conduit for each Applicant (including itself, as an “Applicant”) on whose behalf the Applicant Representative has requested an L/C Credit Extension. Neither the L/C Issuer nor any other Credit Party shall have any obligation to see to the application of such proceeds therefrom.

ARTICLE IV

CONDITIONS PRECEDENT TO L/C CREDIT EXTENSIONS

4.01 Conditions of Initial L/C Credit Extension. The obligation of the L/C Issuer to make its initial L/C Credit Extension hereunder is subject to satisfaction (or waiver by the L/C Issuer) of the following conditions precedent:

(a) The L/C Issuer’s receipt of the following, each of which shall be originals, telecopies or other electronic image scan transmission (e.g., “pdf” or “tif “ via e-mail) (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Applicant, 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 L/C Issuer:

(i) executed counterparts of this Agreement sufficient in number for distribution to the L/C Issuer and the Applicant Representative;

(ii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Applicant as the L/C Issuer may require evidencing (A) the authority of each Applicant to enter into this Agreement and the other Loan Documents to which such Applicant is a party or is to become 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 Applicant is a party or is to become a party;

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(iii) copies of each Applicant’s Organization Documents and such other documents and certifications as the L/C Issuer may reasonably require to evidence that each Applicant is duly organized or formed, and that each Applicant 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 would not reasonably be expected to have a Material Adverse Effect;

(iv) a certification to the L/C Issuer by Young Conaway Stargatt & Taylor LLP, local counsel to the Applicants, that such counsel has reviewed the docket in the Chapter 11 Case and confirmed that there was no notice filed or motion pending with the Bankruptcy Court to appeal, reverse, stay or vacate the Interim Borrowing Order;

(v) a certificate signed by a Responsible Officer of the Applicant Representative certifying that the conditions specified in Sections 4.01 and 4.02 have been satisfied;

(vi) the Security Documents, each duly executed by the applicable Applicants;

(vii) all other Loan Documents, each duly executed by the applicable Applicants; and

(viii) all documents and instruments required by law or reasonably requested by the L/C Issuer to be filed, registered or recorded to create or perfect the first priority Liens in the Cash Collateral shall have been so filed, registered or recorded to the satisfaction of the L/C Issuer;

(b) The L/C Issuer shall have received and reviewed all material so-called “first day” motions and the related declarations and pleadings to be filed in the Chapter 11 Case, each of which shall be in form and substance satisfactory to the L/C Issuer;

(c) Reserved.

(d) All motions and other documents to be filed with and submitted to the Bankruptcy Court in connection with the DIP Orders and this Agreement shall be in form and substance reasonably satisfactory to the L/C Issuer. The Interim Borrowing Order and the Cash Management Order shall have been entered, shall be in full force and effect, and shall not have been reversed, vacated or stayed, or modified without the prior written consent of the L/C Issuer.

(e) The Bankruptcy Court shall have entered the Interim Borrowing Order granting the L/C Issuers under the Pre-Petition Credit Agreement adequate protection of their interests, which order shall be in form and substance reasonably acceptable to the agents under the Pre-Petition Credit Agreement and to the L/C Issuer hereunder.

(f) Other than Bankruptcy Events, there, there shall not be pending (or, to the knowledge of any Applicant, threatened), in writing, any action, suit, investigation or proceeding in any court or before any arbitrator or Governmental Authority that would reasonably be expected to have a Material Adverse Effect and is not stayed by the filing of the Chapter 11 Case.

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

(h) All fees required to be paid to the L/C Issuer on or before the Closing Date shall have been paid in full.

(i) The Applicants shall have paid all reasonable fees, charges and disbursements of counsel to the L/C Issuer (including, without limitation, local bankruptcy counsel) to the extent invoiced prior to or on the Closing Date (including any estimated fees, charges and disbursements through the Chapter 11 Case; provided that such estimate shall not thereafter preclude a final settling of accounts for all reasonable fees, charges and disbursements between the Applicants and the L/C Issuer) and the Applicants shall pay such additional amounts of such reasonable fees, charges and disbursements incurred or to be incurred by the L/C Issuer through the Chapter 11 Case, in each case, as provided in Section 9.04(a) and the DIP Orders.

(j) The Applicants shall have paid all fees, charges, disbursements and other amounts due under the Pre-Petition Credit Agreement (including reasonable fees, charges, disbursements of counsel to the Pre-Petition Credit Parties and all appraisal fees, commitment fees, and letter of credit fees). All Pre-Petition Letters of Credit shall have been Cash Collateralized in an amount equal to 103% of the Stated Amount thereof.

(k) The L/C Issuer 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.

4.02 Conditions to all L/C Credit Extensions. The obligation of the L/C Issuer to issue each Letter of Credit is subject to the following conditions precedent:

(a) The representations and warranties of each other Applicant 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 in all material respects on and as of the date of such L/C Credit Extension, except (i) 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 (ii) in the case of any representation and warranty qualified by materiality, they shall be true and correct in all respects.

(b) No Default shall exist, or would result from such proposed L/C Credit Extension.

(c) There shall not have been filed any pleading by any Applicant or any Person granted standing by the Bankruptcy Court challenging the validity, priority, perfection, or enforceability of the Pre-Petition Loan Documents, the Pre-Petition Liabilities, or any Lien granted pursuant to the Pre-Petition Loan Documents, and (b) no Lien granted pursuant to the Pre-Petition Loan Documents shall have been determined to be null and void, invalid or unenforceable by the Bankruptcy Court or another court of competent jurisdiction in any action commenced or asserted by any other party in interest in the Chapter 11 Case, including, without limitation, the Creditors’ Committee.

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Each request for an L/C Credit Extension submitted by the Applicant shall be deemed to be a representation and warranty by the Applicants that the conditions specified in Sections 4.01 and 4.02 have been satisfied on and as of the date of the applicable L/C Credit Extension.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

To induce the Credit Parties to enter into this Agreement and to issue Letters of Credit hereunder, each Applicant represents and warrants to the L/C Issuer and the other Credit Parties that:

5.01 Existence, Qualification and Power. Each Applicant (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) subject to the entry of the DIP Orders, has all requisite power and authority to carry on its business as now conducted, and (iii) except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

5.02 Authorization; No Contravention. The execution, delivery and performance by each Applicant of each Loan Document to which such Person is a party, subject to the entry of the DIP Orders, has been duly authorized by all necessary corporate or other organizational action, and does 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 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 Applicant (other than Liens in favor of the L/C Issuer under the Security Documents); or (d) violate any Law.

5.03 Governmental Authorization; Other Consents. Except for the entry of the DIP Orders, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Applicant of this Agreement or any other Loan Document, except for 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 Applicant 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 Applicant, subject to the entry of the DIP Orders, enforceable against each Applicant that is party thereto in accordance with its terms.

5.05 Reserved

5.06 Litigation. Other than the Bankruptcy Events, there are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Applicants after reasonable inquiry, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against any Applicant 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, would reasonably be expected to have a Material Adverse Effect except, in each case, any such actions, suits or proceedings which are stayed by virtue of the filing of the Chapter 11 Case.

5.07 No Default. Other than as a result of the Bankruptcy Events, no Applicant or any Subsidiary is in default under or with respect to, or party to, 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.

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

5.09 Subsidiaries; Equity Interests. The Applicants have no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.09, which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary and are owned in the amounts specified on Part (c) of Schedule 5.09. All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable The Applicants have no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.09. The copies of the Organization Documents of each Applicant and each amendment thereto, if any, provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

5.10 Margin Regulations; Investment Company Act.

(a) No Applicant is 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 L/C Credit Extensions shall be used for any purpose that might cause any of the L/C 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 Applicants, any Person Controlling any Applicant, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

5.11 Disclosure. Each Applicant has disclosed to the L/C Issuer all 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, would 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 Applicant to the L/C Issuer in connection with the transactions contemplated hereby and the 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.

5.12 Compliance with Laws. Each of the Applicants 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, would not reasonably be expected to have a Material Adverse Effect or the enforcement of which is stayed by virtue of the filing of the Chapter 11 Case, or (c) the failure to comply therewith is as a result of a Bankruptcy Event.

5.13 Security Documents. Upon entry of the DIP Orders, the Security Documents (including, without limitation, the DIP Orders), will create in favor of the L/C Issuer, for the benefit of the Credit Parties, a legal, valid, continuing and enforceable perfected first priority security interest and Lien in the Cash Collateral.

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5.14 Brokers. No broker or finder brought about the obtaining, making or closing of the 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.

ARTICLE VI

AFFIRMATIVE COVENANTS

So long as the L/C Issuer shall have any Commitment hereunder, any Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), or any Letter of Credit shall remain outstanding, the Applicants shall, and shall cause each Subsidiary to:

6.01 Financial Statements and Other Information.The Applicant Representative will furnish to the L/C Issuer:

(a) its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all audited and reported on by independent public accountants of recognized national standing, only if such audited financial statements are finalized and delivered to the Applicant Representative during the term of this Agreement

(b) within thirty (30) days after the end of each fiscal month of the Applicant Representative, its consolidated statements of operations and cash flows, as of the end of and for such fiscal month, all certified by one of its Financial Officers as presenting in all material respects the results of operations of the Applicant Representative and its Subsidiaries on a consolidated basis;

(c) promptly after delivery to the DIP Lender, (i) a copy of the Approved Budget, and (ii) a copy of each Variance Report;

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

(e) as soon as practicable prior to the furnishing or filing thereof, copies of any statement, report or pleading proposed to be furnished to or filed with the Bankruptcy Court in connection with the Chapter 11 Case; and

(f) promptly following any request therefor, such other information regarding the operations, business affairs, financial condition and properties of any Applicant, or compliance with the terms of any Loan Document, as the L/C Issuer may reasonably request.

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6.02 Notices. The Applicant Representative will furnish to the L/C Issuer prompt written notice of the following:

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

(b) any development that results in, or would reasonably be expected to result in, a Material Adverse Effect;

(c) any change in any Applicant’s chief executive officer, chief financial officer or chairman; and

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

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

6.03 Payment of Obligations. To the extent required by the Bankruptcy Code, pay its Indebtedness and other obligations, including Tax liabilities, and claims for labor, materials, or supplies, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Applicant or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, (d) no Lien has been filed with respect thereto, and (e) the failure to make payment pending such contest would not reasonably be expected to result in a Material Adverse Effect.

6.04 Preservation of Existence. (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 7.02; and (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, in each case, to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect.

6.05 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 and with respect to which adequate reserves have been set aside and maintained by the Applicants in accordance with GAAP; (b) such contest effectively suspends enforcement of the contested Laws; (c) the failure to comply therewith would not reasonably be expected to have a Material Adverse Effect; or (d) the failure to comply therewith is otherwise permitted under the Bankruptcy Code or the DIP Orders.

6.06 Books and Records; Accountants.

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 Applicants 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 Applicants or such Subsidiary, as the case may be.

6.07 Additional Applicants. Notify the L/C Issuer at the time that any Person becomes a Domestic Subsidiary, and promptly thereafter (and in any event within fifteen (15) days), cause any such Person become an Applicant by executing and delivering to the L/C Issuer a joinder to this Agreement or

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such other document as the L/C Issuer shall reasonably deem appropriate for such purpose, and (ii) deliver to the L/C Issuer documents of the types referred to in Section 4.01(a) and 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)). In no event shall compliance with this Section 6.07 waive or be deemed a waiver or consent to any transaction giving rise to the need to comply with this Section 6.07 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 an Applicant.

6.08 Information Regarding the Cash Collateral. Furnish to the L/C Issuer at least fifteen (15) days prior written notice of any change in: (i) any Applicant’s corporate name; (ii) the location of any Applicant’s chief executive office, its principal place of business, any office in which it maintains books or records (including the establishment of any such new office or facility); (iii) any Applicant’s identity or type of organization or organizational structure; (iv) any Applicant’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its jurisdiction of organization; or (v) any Applicant’s jurisdiction of organization (in each case, including, without limitation, by merging with or into any other entity, reorganizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction). Each Applicant agrees to take all action, if any, reasonably satisfactory to the L/C Issuer to maintain the perfection and priority of the security interest of the L/C Issuer for the benefit of the Credit Parties in the Cash Collateral intended to be granted hereunder. Each Applicant agrees to promptly provide the L/C Issuer with certified Organization Documents reflecting any of the changes described in the preceding sentence.

6.09 Further Assurances.

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 the L/C Issuer may request in its reasonable discretion, 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 Applicants.

6.10 Depository Account. In order to facilitate the administration of this Agreement, the Applicants may, at their option, maintain Bank of America or its Affiliates as each Applicant’s principal depository bank, including for the maintenance of operating, administrative, cash management, collection activity and other local store deposit accounts, where practical, for the conduct of such Applicant’s business.

ARTICLE VII

NEGATIVE COVENANTS

So long as the L/C Issuer shall have any Commitment hereunder, any Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification claims for which a claim has not been asserted), or any Letter of Credit shall remain outstanding, no Applicant shall, nor shall it permit any Subsidiary to, directly or indirectly:

7.01 Liens. Create, incur, assume or suffer to exist any Lien upon the Cash Collateral other than the Liens granted hereunder and under the other Loan Documents.

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7.02 Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, (or agree to do any of the foregoing), except in connection with a Sale or a Plan of Reorganization.

7.03 Change in Nature of Business.

(a) In the case of the Parent, engage in any business or activity other than (i) the direct or indirect ownership of all outstanding Equity Interests in the other Applicants, (ii) maintaining its corporate existence, (iii) participating in tax, accounting and other administrative activities as the parent of the consolidated group of companies, including the Applicants, (iv) the execution and delivery of the Loan Documents to which it is a party and the performance of its obligations thereunder, and (v) activities incidental to the businesses or activities described in this Section 7.03(a)(i)-(iv).

(b) In the case of each of the Applicants, engage in any line of business substantially different from the Business conducted by the Applicants and their Subsidiaries on the date hereof or any business substantially related or incidental thereto.

7.04 Reserved.

7.05 Use of L/C Credit Extensions.

Use any L/C Credit Extension (other than the Pre-Petition Letters of Credit which are deemed issued hereunder), whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purposes other than in connection with the purchase of Inventory or Equipment (each as defined in the UCC) by an Applicant in the ordinary course of business.

7.06 Amendment of Material Documents.

Amend, modify or waive (a) any of an Applicant’s rights under its Organization Documents in a manner materially adverse to the Credit Parties, or (b) any other Material Indebtedness to the extent that such amendment, modification or waiver would result in an Event of Default under any of the Loan Documents, would be materially adverse to the Credit Parties or otherwise would be reasonably likely to have a Material Adverse Effect.

7.07 Bankruptcy Related Negative Covenants. Seek, consent to, or permit to exist any of the following:

(a) Any modification, stay, vacation or amendment to the DIP Orders to which the L/C Issuer has not consented in writing;

(b) Except as provided in the DIP Orders, a priority claim or administrative expense or unsecured claim against any Applicant (now existing or hereafter arising or any kind or nature whatsoever, including, without limitation, any administrative expense of the kind specified in Sections 105, 326, 328, 330, 331, 364(c), 503(a), 503(b), 506(c), 507(a), 507(b), 546(c), 546(d), 726 or 1114 of the Bankruptcy Code) equal or superior to the priority claim of the L/C Issuer in respect of the Obligations and the Pre-Petition Liabilities;

(c) Any Lien on any Cash Collateral having a priority equal or superior to the Lien securing the Obligations; or

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(d) Any order seeking authority to take any action that is prohibited by the terms of this Agreement or the other Loan Documents or refrain from taking any action that is required to be taken by the terms of this Agreement or any of the other Loan Documents.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

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

(a) the Applicants shall fail to pay any L/C Obligation, or deposit any funds as Cash Collateral in respect of L/C Obligations, when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) the Applicants shall fail to pay any fee or any other amount (other than an amount referred to in clause (a) of this Section 8.01) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable and such failure continues for five (5) days;

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

(d) the Applicants shall fail to observe or perform any covenant, condition or agreement contained in Sections 6.02(a), 6.02(b), or in Article VII;

(e) any Applicant shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b), (c), or (d) of this Section 8.01), and such failure shall continue unremedied for a period of fifteen (15) days after notice thereof from the L/C Issuer to the Applicant Representative;

(f) except as a result of the commencement of the Chapter 11 Case or unless payment is stayed by the Bankruptcy Court, any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (after giving effect to the expiration of any grace or cure period set forth therein) the holder or holders of any such Material Indebtedness or any trustee or agent on its or their behalf to cause any such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity;

(g) following the Petition Date, one or more judgments for the payment of money in an aggregate amount in excess of $1,000,000 shall be rendered against any Applicant or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any material assets of any Applicant to enforce any such judgment;

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

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(i) any judicial proceeding by or on behalf of any other Person seeking to challenge the validity of any Loan Document (including, without limitation, any DIP Order) or the applicability or enforceability of any Loan Document strictly in accordance with the subject Loan Document’s terms or which seeks to void, avoid, limit, or otherwise adversely affect any security interest created by or in any Loan Document or any payment made pursuant thereto, and the L/C Issuer, in its reasonable discretion, has determined in good faith that there is appreciable risk of a Material Adverse Effect on the Credit Parties’ ability to receive payment in full of the Obligations, or otherwise would be reasonably likely to have a Material Adverse Effect;

(j) any Lien in the Cash Collateral purported to be created under any Security Document (including, without limitation, any DIP Order) shall cease to be, or shall be asserted by any Applicant not to be, a valid, perfected and first-priority Lien on any Cash Collateral;

(k) the indictment of, or institution of any legal process or proceeding against, any Applicant, under any federal, state, municipal, and other civil or criminal statute, rule, regulation, order, or other requirement having the force of law where the relief, penalties, or remedies sought or available include the forfeiture of any material property of any Applicant and/or the imposition of any stay or other order, the effect of which could reasonably be to restrain in any material way the conduct by the Applicants, taken as a whole, of their business in the ordinary course;

(l) the determination by the Applicants, whether by vote of the Applicants’ board of directors or otherwise to: (i) suspend the operation of any Applicant’s business in the ordinary course, or (ii) liquidate all or a material portion of the Applicants’ assets or stores;

(m) the occurrence of any Change of Control;

(n) The entry of an order in the Chapter 11 Case which stays, modifies or reverses any DIP Order or which otherwise materially adversely affects the effectiveness of any DIP Order without the express written consent of the L/C Issuer;

(o) either (i) the appointment in the Chapter 11 Case of a trustee or of any examiner having expanded powers to operate all or any part of any Applicant’s business, or (ii) the conversion of the Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code;

(p) the failure of the Bankruptcy Court to enter a Final Borrowing Order, in form and substance satisfactory to the L/C Issuer, within thirty (30) days after the Petition Date;

(q) the filing of any application by any Applicant without the express prior written consent of the L/C Issuer for the approval of any super-priority claim in the Chapter 11 Case which is pari passu with or senior to the priority of the claims of the L/C Issuer and other Credit Parties for the Obligations, or there shall arise any such super-priority claim under the Bankruptcy Code;

(r) the entry of any order in the Chapter 11 Case which provides adequate protection, or the granting by any Applicant of similar relief in favor of any one or more of an Applicant’s pre-petition creditors, contrary to the terms and conditions of any DIP Order;

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(s) the failure of any Applicant to (i) comply with each and all of the terms and conditions of any DIP Order or (ii) comply in all material respects with the Cash Management Order, or any other order entered in the Chapter 11 Case;

(t) the filing of any motion by any Applicant seeking, or the entry of any order in the Chapter 11 Case: (i) (A) permitting working capital or other financing (other than ordinary course trade credit, unsecured debt) for any Applicant from any Person where such working capital or other financing includes a provision for the issuance of letters of credit (unless the Commitment is terminated on the effective date of such working capital or financing), (B) granting a Lien on, or security interest in any of the Cash Collateral, other than with respect to this Agreement, (C) permitting the use of any of the Cash Collateral pursuant to Section 363(c) of the Bankruptcy Code without the prior written consent of the L/C Issuer, (D) permitting recovery from any portion of the Cash Collateral any costs or expenses of preserving or disposing of such Cash Collateral under Section 506(c) of the Bankruptcy Code, or (E) dismissing the Chapter 11 Case or (ii) the filing of any motion by any party in interest or any Creditors’ Committee appointed in the Chapter 11 Case) (x) seeking any of the matters specified in the foregoing clause (i) that is not dismissed or denied within thirty (30) days of the date of the filing of such motion (or such later date agreed to in writing by the L/C Issuer) or (y) seeking the reconsideration of any DIP Order;

(u) the filing of a motion by any Applicant seeking approval of a Disclosure Statement and a Plan of Reorganization, or the entry of an order confirming a Plan of Reorganization, in each case, that does not provide for the termination of the Commitment on the Plan Effective Date; or

(v) (i) the filing of any pleading by any Applicant or any other party granted standing by the Bankruptcy Court in the Chapter 11 Case (including but not limited to, any Creditors’ Committee) challenging the validity, priority, perfection, or enforceability of the Pre-Petition Loan Documents, the Pre-Petition Liabilities, or any Lien granted pursuant to the Pre-Petition Loan Documents, or (ii) the validity, priority, perfection, or enforceability of the Pre-Petition Loan Documents, the Pre-Petition Liabilities, or any Lien granted pursuant to the Pre-Petition Loan Documents is determined to be null and void, invalid or unenforceable by the Bankruptcy Court or another court of competent jurisdiction in any action commenced or asserted by any other party granted standing by the Bankruptcy Court in the Chapter 11 Case, including, without limitation, the Creditors’ Committee.

8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, subject to the terms of the DIP Orders, the L/C Issuer may take any or all of the following actions:

(a) declare the Commitment of the L/C Issuer to be terminated, whereupon such Commitment shall be terminated;

(b) declare all 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 Applicants; and

(c) 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, the DIP Orders, 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.

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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, any amounts received on account of the Obligations shall be applied by the L/C Issuer 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 L/C Issuer and amounts payable under Article III) payable to the L/C Issuer;

Second, to payment of that portion of the Obligations constituting accrued and unpaid interest and fees (including Letter of Credit Fees);

Third, to payment of any Unreimbursed Amounts and to Cash Collateralize that portion of L/C Obligations not then Cash Collateralized;

Fourth, to payment of all other Obligations (including without limitation the Cash Collateralization of unliquidated indemnification obligations as provided in Section 9.04(b), but excluding any Other Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Fourth held by them;

Fifth, to payment of that portion of the Obligations arising from Cash Management Services and Pre-Petition Liabilities relating to Cash Management Services, ratably among the Credit Parties in proportion to the respective amounts described in this clause Fifth held by them;

Sixth, to payment of all other Obligations arising from Bank Products and Pre-Petition Liabilities relating to Bank Products, ratably among the Credit Parties in proportion to the respective amounts described in this clause Sixth held by them; and

Last, the balance, if any, after all of the Obligations and Pre-Petition Liabilities have been indefeasibly paid in full, to the Applicants or as otherwise required by Law.

Amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit hereunder 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 fifteen (15) days after they have expired with no drawing or presentation being made thereon, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

Excluded Swap Obligations with respect to any Applicant shall not be paid with amounts received from such Applicant, but appropriate adjustments shall be made with respect to payments from other Applicants to preserve the allocation to the Obligations otherwise set forth above in this Section.

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ARTICLE IX

MISCELLANEOUS

9.01 Amendments. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Applicant therefrom, shall be effective unless in writing signed by the L/C Issuer and the Applicant Representative or the applicable Applicant, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

9.02 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 as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 9.02.

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 sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). 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 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 L/C Issuer. The L/C Issuer or the Applicant Representative 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 L/C Issuer 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) Change of Address. Each of the Applicants and the L/C Issuer may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.

(d) Reliance by L/C Issuer. The L/C Issuer shall be entitled to rely and act upon any notices purportedly given by or on behalf of the Applicants 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

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thereof. The Applicants shall indemnify the L/C Issuer 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 Applicants. All telephonic notices to and other telephonic communications with the L/C Issuer may be recorded by the L/C Issuer, and each of the parties hereto hereby consents to such recording.

9.03 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 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.

9.04 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Applicants shall pay (a) all reasonable documented out-of-pocket expenses incurred by the L/C Issuer and its Affiliates, in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable fees, charges and disbursements of (A) counsel for the L/C Issuer, (B) outside consultants for the L/C Issuer, and (C) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations, (ii) in connection with (A) 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), (B) 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 Cash Collateral or in connection with the Chapter 11 Case or any successor case, or (C) any workout, restructuring or negotiations in respect of any Obligations, and (b) 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.

(b) Indemnification by the Applicants. The Applicants shall indemnify the L/C Issuer (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 Applicant or any other Applicant 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 the administration of this Agreement and the other Loan Documents, (ii) any 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 Applicant or any of its Subsidiaries, or any environmental liability related in any way to any Applicant or any of its Subsidiaries, (iv) any claims of, or amounts paid by any Credit Party to, any Person which has entered into a control agreement with any Credit Party hereunder, or (v) any actual or prospective claim, litigation, investigation

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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 Applicant or any other Applicant or any of the Applicants’ 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 (x) are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by an Applicant or any other Applicant against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Applicants or such Applicant has obtained a final and non-appealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

(c) Waiver of Consequential Damages. To the fullest extent permitted by Law, the Applicants 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 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 non-appealable judgment of a court of competent jurisdiction.

(d) Payments. All amounts due under this Section shall be payable on demand therefor.

(e) Survival. The agreements in this Section shall survive the termination of the Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder and the repayment, satisfaction or discharge of all the other Obligations.

9.05 Payments Set Aside. To the extent that any payment by or on behalf of the Applicants 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 reasonable discretion) to be repaid to a trustee, receiver or any other party, in connection with the Chapter 11 Case or any successor case or otherwise, then to the extent of such recovery, the obligation or part 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.

9.06 Successors and Assigns.

(a) Assignments 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 Applicant 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 L/C Issuer. 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 (b) 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.

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(b) Participations. The L/C Issuer may at any time, without the consent of, or notice to, the Applicants, sell participations to any Person (other than a natural person or the Applicants or any of the Applicants’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of the L/C Issuer’s rights and/or obligations under this Agreement (including all or a portion of its Commitment); provided that (i) the L/C Issuer’s obligations under this Agreement shall remain unchanged, (ii) the L/C Issuer shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Applicants and the L/C Issuer shall continue to deal solely and directly with such L/C Issuer in connection with such L/C Issuer’s rights and obligations under this Agreement. Any Participant shall agree in writing to comply with all confidentiality obligations set forth in Section 9.07 as if such Participant was the L/C Issuer hereunder.

(c) Certain Pledges. The L/C Issuer may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of the L/C Issuer, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release the L/C Issuer from any of its obligations hereunder or substitute any such pledgee or assignee for the L/C Issuer as a party hereto.

(d) Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any assignment agreement 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.

9.07 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 Applicant and its obligations, (g) with the consent of the Applicant Representative 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 Applicants.

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For purposes of this Section, “Information” means all information received from the Applicants or any Subsidiary thereof relating to the Applicants 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 Applicants or any Subsidiary thereof, provided that, in the case of information received from any Applicant or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such 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 Applicants 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.

9.08 Right of Setoff. If an Event of Default shall have occurred and be continuing or if the L/C Issuer shall have been served with a trustee process or similar attachment relating to property of an Applicant, the L/C Issuer and its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) or other property at any time held and other obligations (in whatever currency) at any time owing by the L/C Issuer or any such Affiliate to or for the credit or the account of the Applicants or any other Applicant against any and all of the Obligations now or hereafter existing under this Agreement or any other Loan Document to the L/C Issuer or the L/C Issuer, regardless of the adequacy of the Cash Collateral, and irrespective of whether or not the L/C Issuer or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Applicants or such Applicant may be contingent or unmatured or are owed to a branch or office of the L/C Issuer or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness. The rights of the L/C Issuer and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that the L/C Issuer or its Affiliates may have. The L/C Issuer agrees to notify the Applicant Representative 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.

9.09 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 L/C Issuer shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Applicants. In determining whether the interest contracted for, charged, or received by the L/C Issuer 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.

9.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in any number of 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 L/C Issuer and when the L/C Issuer shall have received

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counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. This Agreement and all other documents (including, without limitation, the Loan Documents) which have been or may be hereinafter furnished by the Applicants to any of the Credit Parties may be reproduced by the Credit Parties by any photographic, microfilm, xerographic, digital imaging, or other process. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). Delivery of an executed counterpart of a signature page of this Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

9.11 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 L/C Credit Extension, and shall continue in full force and effect as long as any Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding. Further, the provisions of Sections 3.01, 3.02, and 9.04 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 Commitment 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 Cash Collateral, the L/C Issuer may require such indemnities and Cash Collateral security as it 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 9.04 hereof.

9.12 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.

9.13 Governing Law; Jurisdiction.

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

(b) SUBMISSION TO JURISDICTION. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THE BANKRUPTCY COURT AND OF ANY COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN THE BANKRUPTCY COURT, SUCH

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NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. SUBJECT TO SECTION 9.13(e), NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c) WAIVER OF VENUE. EACH 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 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 THE MANNER PROVIDED FOR NOTICES IN SECTION 9.02. 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 APPLICANTS. EACH APPLICANT AGREES THAT ANY ACTION COMMENCED BY ANY APPLICANT ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN THE BANKRUPTCY COURT, A COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY OR ANY FEDERAL COURT SITTING THEREIN AS THE L/C ISSUER MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

9.14 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT). EACH PARTY HERETO (A) CERTIFIES THAT 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.

9.15 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Applicants each acknowledge and agree that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in

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connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Applicants, on the one hand, and the Credit Parties, on the other hand, and each of the Applicants 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, the each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Applicants 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 Applicants with respect to any of the transactions contemplated hereby or the process leading thereto, 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 Applicant or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to any Applicant 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 Applicants 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 Applicants has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. Each of the Applicants 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.

9.16 Patriot Act Notice. The L/C Issuer hereby notifies the Applicants that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies each Applicant, which information includes the name and address of each Applicant and other information that will allow the L/C Issuer to identify each Applicant in accordance with the Patriot Act. Each Applicant is in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the Loans will be used by the Applicants, 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. The Applicants shall, promptly following a request by the L/C Issuer, provide all documentation and other information that the L/C Issuer 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.

9.17 Foreign Asset Control Regulations. Neither of the advance of the Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et 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 Patriot Act. Furthermore, none of the Applicants 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.

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9.18 Time of the Essence. Time is of the essence of the Loan Documents.

9.19 Press Releases. Each Applicant consents to the publication by the L/C Issuer of advertising material relating to the financing transactions contemplated by this Agreement using any Applicant’s name, product photographs, logo or trademark. The L/C Issuer shall provide a draft reasonably in advance of any advertising material to the Applicant Representative for review and comment prior to the publication thereof. The L/C Issuer reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.

9.20 Additional Waivers.

(a) The Obligations are the joint and several obligation of each Applicant. To the fullest extent permitted by Law, the obligations of each Applicant 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 Applicant 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 Cash Collateral or other security held by or on behalf of the L/C Issuer or any other Credit Party.

(b) The Obligations of each Applicant 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 Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder), 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 Applicant hereunder shall not be discharged or impaired or otherwise affected by the failure of the L/C Issuer 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 Applicant or that would otherwise operate as a discharge of any Applicant 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 Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder).

(c) To the fullest extent permitted by Law, each Applicant waives any defense based on or arising out of any defense of any other Applicant 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 Applicant, other than the indefeasible payment in full in cash of all the Obligations and the termination of the Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder. The L/C Issuer may, at its election, foreclose on any security held by it by one or more judicial or 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 Applicant, or exercise any other right or remedy available to it against any other Applicant, without affecting or impairing in any way the liability of any Applicant hereunder except to the extent that all the Obligations have been indefeasibly paid in full in cash and the Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder has been terminated. Each Applicant 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 Applicant against any other Applicant, as the case may be, or any security.

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(d) Each Applicant is obligated to repay the Obligations as joint and several obligors under this Agreement. Upon payment by any Applicant of any Obligations, all rights of such Applicant against any other Applicant 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 Commitment and the L/C Issuer’s obligation to issue Letters of Credit hereunder. In addition, any indebtedness of any Applicant now or hereafter held by any other Applicant is hereby subordinated in right of payment to the prior indefeasible payment in full of the Obligations and no Applicant will demand, sue for or otherwise attempt to collect any such indebtedness. If any amount shall erroneously be paid to any Applicant on account of (i) such subrogation, contribution, reimbursement, indemnity or similar right or (ii) any such indebtedness of any Applicant, such amount shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the L/C Issuer 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 Applicant shall, under this Agreement as a joint and several obligor, repay any of the Obligations constituting Revolving Loans made to another Applicant hereunder or other Obligations incurred directly and primarily by any other Applicant, then the Applicant making such payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Applicants.

9.21 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.

9.22 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.

9.23 Keepwell.

Each Applicant that is a Qualified ECP Guarantor at the time the grant of a security interest under the Loan Documents, in each case, by any Specified Applicant becomes effective with respect to any Swap Obligation, hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide such funds or other support to each Specified Applicant with respect to such Swap Obligation as may be needed by such Specified Applicant from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP Guarantor’s obligations and undertakings hereunder voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations and undertakings of each Qualified ECP Guarantor under this Section shall remain in full force and effect until Payment in Full of the Obligations have been indefeasibly paid and performed in full. Each Applicant intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support, or other agreement” for the benefit of, each Specified Applicant for all purposes of the Commodity Exchange Act.

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9.24 Relationship with DIP Orders.

In the event of any inconsistency between the terms of the DIP Orders and the Loan Documents, the terms of the DIP Orders shall control and the representations, warranties, covenants, agreements or events of default made herein and in the other Loan Documents shall be subject to the terms of the DIP Orders.

[signature pages follow]

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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.

THE WET SEAL, INC., as Applicant Representative, as an Applicant and as a Debtor-in-Possession
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer
THE WET SEAL RETAIL, INC., as an Applicant and as a Debtor-in-Possession
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer
WET SEAL CATALOG, INC., as an Applicant and as a Debtor-in-Possession
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer
WET SEAL GC, LLC, as an Applicant and as a Debtor-in-Possession
By:	The Wet Seal, Inc., its Sole Member
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer

Signature Page to Senior Secured, Super-Priority Debtor-in-Possession Letter of Credit Agreement

BANK OF AMERICA, N.A., as a L/C Issuer
By:	/s/ Brian Lindblom
Name:	Brian Lindblom
Title:	Vice President

Signature Page to Senior Secured, Super-Priority Debtor-in-Possession Letter of Credit Agreement

EX-10.3

Exhibit 10.3

EXECUTION VERSION

PLEDGE AND SECURITY AGREEMENT

This PLEDGE AND SECURITY AGREEMENT (this “Agreement”) is made as of this 15th day of January, 2015, by and among (i) THE WET SEAL, INC., a Delaware corporation, and the other Persons identified as Pledgors on the signature pages hereto, each as debtor-in-possession (individually, a “Pledgor”, and collectively, the “Pledgors”), (ii) BANK OF AMERICA, N.A., a national banking association, as L/C Issuer (in such capacity, the “L/C Issuer”), pursuant to the Letter of Credit Agreement referred to below, and (iii) BANK OF AMERICA, N.A., a national banking association, as administrative agent and collateral agent (in such capacities, the “Pre-Petition Agent”, and together with the L/C Issuer, individually, a “Pledgee”, and collectively, the “Pledgees”) for itself and the other Credit Parties (as defined in the Pre-Petition Credit Agreement referred to below, the “Pre-Petition Credit Parties”).

W I T N E S S E T H

WHEREAS, reference is made to that that certain Senior Secured, Super-Priority Debtor-In-Possession Letter of Credit Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Letter of Credit Agreement”) among the Pledgors and the L/C Issuer;

WHEREAS, pursuant to the Letter of Credit Agreement, (i) the L/C Issuer has agreed to issue Letters of Credit for the account of the Pledgors, and (ii) the Pre-Petition Letters of Credit (as defined in the Letter of Credit Agreement) are deemed issued under the Letter of Credit Agreement, and the Pledgors’ obligations with respect to such Letters of Credit (including, without limitation, the Pre-Petition Letters of Credit) will be secured by Cash Collateral as provided herein;

WHEREAS, the L/C Issuer and its Affiliates have agreed to provide certain Cash Management Services to the Pledgors (the Obligations in respect of such Cash Management Services being hereinafter referred to as the “Post-Petition Cash Management Obligations”);

WHEREAS, the Pledgors wish to grant pledges, assignments and security interests in favor of the L/C Issuer to secure (i) the L/C Obligations (as defined in the Letter of Credit Agreement), and (ii) the other Obligations (including, without limitation, the Post-Petition Cash Management Obligations);

WHEREAS, reference is further made to that certain Amended and Restated Credit Agreement dated as of February 3, 2011 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Pre-Petition Credit Agreement”) by, among others, the Pre-Petition Agent and the Pledgors;

WHEREAS, in connection with the Pre-Petition Credit Agreement, (i) the Pledgors have certain indemnification obligations under the Pre-Petition Loan Documents (such obligations being hereinafter referred to as the “Pre-Petition Indemnity Obligations”), and (ii) the Pre-Petition Agent and its Affiliates provided certain Cash Management Services (as defined in the Pre-Petition Credit Agreement) to the Pledgors (the Obligations in respect of such Cash Management Services being hereinafter referred to as the “Pre-Petition Cash Management Obligations”, and together with the Post-Petition Cash Management Obligations, collectively, the “Cash Management Obligations”);

WHEREAS, the Pledgors wish to grant pledges, assignments and security interests in favor of the Pre-Petition Agent, for the ratable benefit of the Pre-Petition Credit Parties, to secure the Pre-Petition Indemnity Obligations and the Pre-Petition Cash Management Obligations; and

WHEREAS, it is a condition precedent to (i) the L/C Issuer’s entering into the Letter of Credit Agreement, and (ii) the Pre-Petition Credit Parties’ maintenance of certain Cash Management Services for the Pledgors, that the Pledgors execute and deliver to the L/C Issuer and the Pre-Petition Agent a pledge and security agreement in substantially the form hereof;

NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgors and the Pledgees agree as follows:

1. Definitions. All capitalized terms used herein without definition shall have the respective meanings provided therefor in the Letter of Credit Agreement. In addition, as used herein, the following additional terms shall have the following meanings:

“Cash Collateral” shall mean the Cash Collateral Accounts, the Pledged Cash and any other property at any time assigned or pledged to the L/C Issuer or the Pre-Petition Agent hereunder (whether described herein or not), all substitutions, additions, interest, and other distributions arising out of or in respect thereof, and all products and proceeds arising out of or in respect of any of the foregoing.

“Payment in Full” shall mean the occurrence of all of the following events: (i) the Commitment has expired or been terminated, (ii) all Obligations have been paid in full in cash in accordance with Section 1.02(d) of the Letter of Credit Agreement and all Pre-Petition Liabilities have been paid in full in cash in accordance with Section 1.02(d) of the Pre-Petition Credit Agreement, (iii) all Letters of Credit (including, without limitation, all Pre-Petition Letters of Credit) have terminated and have been reduced to zero and fifteen days have elapsed after the expiry date with no drawing or other presentment having been made, and (iv) all Unreimbursed Amounts shall have been paid in full in cash.

“Pledged Cash” shall mean all cash and cash equivalents of the Pledgors in the Cash Collateral Accounts.

2. Pledge of Cash Collateral. Each Pledgor hereby pledges, assigns, and grants a security interest to each Pledgee in all of such Pledgor’s right, title and interest in the Cash Collateral. This Agreement and the security interest in and assignment and pledge of the Cash Collateral hereunder are made with and granted to (i) the L/C Issuer, for the benefit of the Credit Parties, as security for the payment and performance in full of all of the Obligations (including, without limitation, the L/C Obligations and the Post-Petition Cash Management Obligations), and (ii) the Pre-Petition Agent, for the benefit of the Pre-Petition Credit Parties, as security for the payment and performance in full of all of the Pre-Petition Liabilities (including, without limitation, the Pre-Petition Indemnity Obligations and the Pre-Petition Cash Management Obligations). Notwithstanding the foregoing, no Cash Collateral provided with respect to Letters of Credit issued following the Effective Date shall be deemed to secure any Pre-Petition Liabilities (other than to the extent relating to Pre-Petition Letters of Credit).

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3. Limitations on Right of Withdrawal. The Pledgors shall have no right to withdraw sums from any Cash Collateral Account or to receive any of the Pledged Cash or other Cash Collateral, except as provided in Section 12. The L/C Issuer and the Pre-Petition Agent shall be entitled to apply the Cash Collateral to pay the Obligations and the Pre-Petition Liabilities, respectively, as set forth herein and in the DIP Orders.

4. Application of Cash Collateral.

4.1 Charges. The Pledgors shall pay upon demand therefor, or, at the applicable Pledgee’s option, there shall be deducted from the Cash Collateral Accounts and the Pledged Cash all regular service fees, maintenance fees and transaction charges related to the maintenance of the Cash Collateral Accounts.

4.2 Application of Cash Collateral to Reduce Obligations.

(a) The L/C Issuer, on behalf of the Credit Parties, may in its sole discretion from time to time make payment of sums out of the Cash Collateral Accounts, to the extent that collected funds are available therefor, to reduce the Obligations (including, without limitation, in respect of Letter of Credit Fees, Unreimbursed Amounts and Post-Petition Cash Management Obligations) in such order and manner as the L/C Issuer shall determine in its sole discretion, without further notice to or consent from the Pledgors, any Committee (as defined in the Interim Borrowing Order) or any other parties in interest and without further order of the Bankruptcy Court. The Pledgors shall remain liable to the L/C Issuer and the other Credit Parties for all unpaid Obligations to the extent that the Pledged Cash is insufficient to satisfy them in full.

(b) The Pre-Petition Agent, on behalf of the Pre-Petition Credit Parties, may apply (i) against the Pre-Petition Indemnity Obligations and Pre-Petition Cash Management Obligations, (x) amounts in the Cash Management/Indemnity Account, and (y) any excess amounts in the L/C Cash Collateral Accounts following satisfaction in full of all L/C Obligations (as defined in the Pre-Petition Credit Agreement) with respect to Pre-Petition Letters of Credit, and (ii) against the L/C Obligations (as defined in the Pre-Petition Credit Agreement) with respect to Pre-Petition Letters of Credit, amounts in the L/C Cash Collateral Accounts, in each case of clauses (i) and (ii) as and when they arise, without further notice to or consent from the Pledgors, any Committee (as defined in the Interim Borrowing Order) or any other parties in interest and without further order of the Bankruptcy Court. Notwithstanding the foregoing, the Pre-Petition Agent shall not apply any amounts in the L/C Cash Collateral Accounts provided with respect to Letters of Credit issued following the Effective Date against any Pre-Petition Indemnity Obligations or Pre-Petition Cash Management Obligations. The Pledgors shall remain liable to the Pre-Petition Credit Parties for all unpaid Pre-Petition Indemnity Obligations and Pre-Petition Cash Management Obligations to the extent that the Pledged Cash is insufficient to satisfy them in full.

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5. Warranty of Title; Authority. Each Pledgor hereby represents and warrants that: (a) such Pledgor has good and marketable title to the Cash Collateral, subject to no pledges, liens, security interests, charges, options, restrictions or other encumbrances or other adverse claims except the pledge, assignment and security interest created by this Agreement, (b) other than the entry of the DIP Orders, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, such Pledgor of this Agreement or any other Loan Document, except for such as have been obtained or made and are in full force and effect, (c) this Agreement has been duly executed and delivered by each Pledgor, constitutes a legal, valid and binding obligation of such Pledgor, and is enforceable against Pledgor in accordance with its terms, and (d) execution, delivery and performance by each Pledgor of this Agreement has been duly authorized by all necessary corporate or other organizational action, and does not (i) contravene the terms of any of such Pledgor’s Organization Documents; (ii) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (A) any Material Indebtedness to which such Pledgor is a party or affecting such Pledgor or the properties of such Pledgor or any of its Subsidiaries or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Pledgor or its property is subject; (iii) result in or require the creation of any Lien upon any asset of any Pledgor (other than Liens in favor of the Pledgees hereunder or under the DIP Orders); or (iv) violate any Law. Each Pledgor covenants that such Pledgor will defend each Pledgee’s rights and security interest in the Cash Collateral against the claims and demands of all persons whomsoever. Each Pledgor further covenants that such Pledgor will have the like title to and right to pledge and assign and grant a Lien in the Cash Collateral hereafter pledged or assigned or in which a Lien is granted to each Pledgee hereunder and will likewise defend each Pledgee’s rights, pledge, assignment and Lien thereof and therein.

6. Transfer, Etc. by Pledgor. Without the prior written consent of each Pledgee, no Pledgor will sell, assign, transfer or otherwise dispose of, or pledge or grant any security interest in or otherwise encumber or restrict any of the Cash Collateral or any interest therein, except for the pledge and assignment thereof and security interest therein provided for in this Agreement.

7. Further Assurances. Each Pledgee’s security interest in the Cash Collateral (including, without limitation, the Cash Collateral Accounts) is a valid, perfected first-priority security interest pursuant to the DIP Orders. Without limiting the foregoing, each Pledgor will execute any and all further documents, financing statements, agreements and instruments, and take all such further actions that may be required under any applicable Law, or which any Pledgee may reasonably request (including, without limitation, entering into control agreements upon any Pledgee’s request to further evidence the Pledgees’ perfected first priority security interest in the Cash Collateral Accounts), to effectuate the transactions contemplated by this Agreement or the other Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created hereby or the validity or priority of any such Lien, all at the expense of such Pledgor.

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8. Exoneration. Under no circumstances shall any Pledgee be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Cash Collateral or any nature or kind or any matter or proceedings arising out of or relating thereto. No Pledgee shall be required to take any action of any kind to collect, preserve or protect such Pledgee’s or any Pledgor’s rights in any of the Cash Collateral or against other parties thereto. Any Pledgee’s prior recourse to any part or all of the Cash Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of any of the Obligations or any Pre-Petition Liabilities (including, without limitation, the Pre-Petition Indemnity Obligations or any Cash Management Obligations).

9. No Waiver, Etc. (a) No failure or delay by any Pledgee in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude or impair any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Pledgees hereunder and under the other Loan Documents and the Pre-Petition Loan Documents, as applicable, are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or Pre-Petition Loan Document, as applicable, or consent to any departure by Pledgor or any Subsidiary therefrom shall in any event be effective unless the same shall be permitted by paragraph (c) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

(b) The obligations of the Pledgors hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any exercise or non-exercise, or any waiver, by any Pledgee of any right, remedy, power or privilege under or in respect of any of the Obligations or any collateral security therefor (including this Agreement); (b) any amendment to or modification of the Letter of Credit Agreement or the Pre-Petition Credit Agreement or any of the other documents, agreements or instruments now existing or hereafter arising relating thereto or any of the Obligations or the Pre-Petition Liabilities; (c) any amendment to or modification of any instrument (other than this Agreement) securing any of the Obligations or the Pre-Petition Liabilities; or (d) the taking of additional security for, or any other assurances of payment of, any of the Obligations or the Pre-Petition Liabilities or the release or discharge or termination of any security or other assurances of payment or performance for any of the Obligations or the Pre-Petition Liabilities; whether or not the Pledgors shall have notice or knowledge of any of the foregoing.

(c) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by each Pledgor and each Pledgee. Each Pledgor hereby waives acceptance and notice of acceptance of this Agreement and presentment, notice of dishonor and protest of all instruments, included in or evidencing any of the Obligations or any of the Cash Collateral, and any and all other notices and demands whatsoever.

10. Notice, Etc. All notices, requests and other communications hereunder shall be given as provided for in the Letter of Credit Agreement or the Pre-Petition Credit Agreement, as applicable.

11. Expenses. All Credit Party Expenses (as defined in each of the Pre-Petition Credit Agreement and the Letter of Credit Agreement) and all other Obligations (including, without limitation, in respect of (i) indemnities arising pursuant to Section 9.04 of the Letter of Credit Agreement, (ii) Pre-Petition Indemnity Obligations, and (iii) Cash Management Obligations) shall be payable by the Pledgors and shall be secured hereby.

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12. Termination; Release.

(a) Subject to clauses (b), (c) and (d) of this Section 12, (i) this Agreement, the Liens in favor of each Pledgee (for the benefit of the Credit Parties or the Pre-Petition Credit Parties, as applicable) and all other security interests granted hereby shall terminate with respect to all Obligations and Pre-Petition Liabilities when Payment in Full shall have occurred, and (ii) the Pledgees shall deliver all remaining Cash Collateral to the Applicant Representative (or in accordance with applicable Law) within ten (10) Business Days following Payment in Full, provided, however, that (A) this Agreement, the Lien in favor of each Pledgee (for the benefit of the Credit Parties or the Pre-Petition Credit Parties, as applicable) and all other security interests granted hereby shall be reinstated if at any time payment, or any part thereof, of any portion of the Obligations or Pre-Petition Liabilities is rescinded or must otherwise be restored by any Credit Party, any Pre-Petition Credit Party or any Pledgor upon the bankruptcy or reorganization of any Pledgor or otherwise, and (B) in connection with the termination of this Agreement and the release and termination of the security interests in the Cash Collateral, each Pledgee may require such indemnities and collateral security as it shall reasonably deem necessary or appropriate to protect the Credit Parties or the Pre-Petition Credit Parties, as applicable, against (x) loss on account of credits previously applied to the Obligations or Pre-Petition Liabilities, as applicable, that may subsequently be reversed or revoked, and (y) any Obligations that may thereafter arise under Section 9.04 of the Letter of Credit Agreement or any Pre-Petition Liabilities that may thereafter arise under Section 10.04 of the Pre-Petition Credit Agreement.

(b) In the event of the returning undrawn to the L/C Issuer of any Letter of Credit or the passage of fifteen days following the expiry date of any Letter of Credit with no drawing or other presentment having been made, if no Event of Default under any of Sections 8.01(a), (b), (h), (i), (n) or (v) of the Letter of Credit Agreement then exists, the Pledgees shall remit to the Applicant Representative an amount equal to 103% of the face amount of such Letter of Credit within five (5) Business Days of such event and the Lien thereon shall automatically be released without any further action by any Pledgee or any Pledgor.

(c) If as of the Challenge Period Termination Date a party in interest with requisite standing (including any Committee) has filed a Challenge Proceeding against the Pre-Petition Credit Parties related to the Pre-Petition Debt and/or Pre-Petition Liens, then the Cash Management/Indemnity Account and the Pledged Cash therein shall be maintained until final resolution of such Challenge Proceeding, subject to the provisions of Paragraph 12(d)(iv) and Paragraph 38 of the Interim Borrowing Order. If as of the Challenge Period Termination Date no party has filed a Challenge Proceeding against the Pre-Petition Credit Parties related to the Pre-Petition Debt and/or Pre-Petition Liens, whether in the Chapter 11 Case or independently in another forum, court, or venue, then the Cash Management/Indemnity Account shall thereafter secure only the Cash Management Obligations.

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(d) If following the final resolution of all Challenge Proceedings described in the first sentence of Section 12(c) above or, if no Challenge Proceeding has been filed, following the Challenge Period Termination Date, (i) the Pledgors have terminated Bank of America’s cash management and treasury management services to the Pledgors, and (ii) all Cash Management Obligations (including, without limitation, all fees, costs and expenses with respect thereto) in connection with such services have then been paid, then all funds then on deposit in the Cash Management/Indemnity Account net of (x) any remaining unpaid Cash Management Obligations and (y) any amounts previously debited from such account shall be released to the Applicant Representative not later than ten (10) Business Days following the later of (i) the date of such termination, and (ii) the Lien Release Date, and the Lien on such funds shall automatically be released without any further action by any Pledgee or any Pledgor.

(e) Capitalized terms used in the foregoing Sections 12(c) and 12(d) but not defined in the Letter of Credit Agreement or herein shall have the meanings assigned to such terms in the Interim Borrowing Order.

13. Governing Law; Consent to Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE BANKRUPTCY CODE AND THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THE BANKRUPTCY COURT AND OF ANY COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN THE BANKRUPTCY COURT, SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY PLEDGEE MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY PLEDGOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

14. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND

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WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT). EACH PARTY HERETO (A) CERTIFIES THAT 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.

15. Miscellaneous. The headings of each section of this Agreement are for convenience only and shall not define or limit the provisions thereof. 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 Pledgor 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 L/C Issuer and the Pre-Petition Agent. 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. This Agreement may be executed in any number of 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. Delivery of an executed counterpart of a signature page of this Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

16. Relationship with DIP Orders. In the event of any inconsistency between the terms of the DIP Orders and this Agreement, the terms of the DIP Orders shall control.

[remainder of page intentionally left blank]

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

PLEDGORS:
THE WET SEAL, INC., as a Pledgor and as a Debtor-in-Possession
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer
THE WET SEAL RETAIL, INC., as a Pledgor and as a Debtor-in-Possession
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer
WET SEAL CATALOG, INC., as a Pledgor and as a Debtor-in-Possession
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer
WET SEAL GC, LLC, as a Pledgor and as a Debtor-in-Possession
By:	The Wet Seal, Inc., its Sole Member
By:	/s/ Edmond Thomas
Name:	Edmond Thomas
Title:	Chief Executive Officer

Signature Page to Pledge and Security Agreement

L/C ISSUER:
BANK OF AMERICA, N.A.
By:	/s/ Brian Lindblom
Name:	Brian Lindblom
Title:	Vice President
PRE-PETITION AGENT:
BANK OF AMERICA, N.A.
By:	/s/ Brian Lindblom
Name:	Brian Lindblom
Title:	Vice President

Signature Page to Pledge and Security Agreement

EX-10.4

Exhibit 10.4

EXECUTION COPY

PLAN SPONSORSHIP AGREEMENT

This Plan Sponsorship Agreement (this “Agreement”), dated as of January 15, 2015 (the “Execution Date”), is entered into by and among (1) The Wet Seal, Inc., The Wet Seal Retail, Inc., Wet Seal Catalog, Inc., and Wet Seal GC, LLC (individually, a “Company Party”, and collectively, the “Company”) and (2) B. Riley Financial, Inc. and its affiliates or designees selected in its sole discretion in accordance with section 26 of this Agreement (collectively, the “Sponsor” and, together with the Company, the “Parties”).

WHEREAS, the Parties previously executed the Exclusivity and Work Fee Agreement dated January 9, 2015 (including all exhibits, appendices, and attachments thereto, the “Term Sheet”), which outlines certain terms and conditions relating to a restructuring of the Company’s affairs subject to definitive documentation.

WHEREAS, the Parties have agreed to the restructuring of the Company’s affairs on the terms and conditions set forth in this Agreement (including all transactions contemplated by this Agreement in connection therewith, the “Restructuring”), which will be effected in voluntary bankruptcy cases (collectively, the “Bankruptcy Case”) commenced by the Company Parties under chapter 11 of title 11 of the United States Code, as amended (the “Bankruptcy Code”).

WHEREAS, the Company has entered into certain commitments with respect to debtor-in-possession financing (the “DIP Financing”).

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. Bankruptcy Actions.

(a) The Parties shall take the following actions and/or obtain the following relief by the specified deadlines:

(i) by January 15, 2015, the Company shall (A) commence the Bankruptcy Case in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) and (B) file a motion to approve the Company’s assumption of this Agreement;

(ii) by February 6, 2015, the Company shall (A) obtain entry of an order by the Bankruptcy Court approving assumption of this Agreement and specifically approving the allowance and payment of certain fee and expenses of the Sponsor as administrative expenses consistent with section 2(d)(iv) hereof (the “PSA Order”), (B) provide a list to the Sponsor reflecting all executory contracts necessary or desirable for the operation of the Company’s business (the “Contracts”) and unexpired leases (the “Leases”) to which the Company is a party, along with a list of any and all projected cure and reinstatement costs or expenses (the “Cure Costs”) of or relating to the potential assumption of each Contract and

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Lease, and (C) file a reorganization plan that is consistent with the terms set forth in this Agreement and/or is otherwise reasonably acceptable to the Sponsor and the Company (the “Plan”) and an accompanying disclosure statement (the “Disclosure Statement”);

(iii) by February 20, 2015, the Company shall provide any supplements to the list of Contracts, including associated Cure Costs;

(iv) by March 20, 2015, the Company shall obtain entry of an order by the Bankruptcy Court approving the Disclosure Statement and granting related relief, including, without limitation, approval of applicable solicitation procedures;

(v) by April 1, 2015, the Sponsor shall deliver to the Company a list of designated Contracts and Leases to be assumed on the Effective Date pursuant to the Plan (the “Designated Contracts”);

(vi) by April 7, 2015, the Company shall deliver a notice to each of the counterparties of the Designated Contracts providing each such counterparty with notice that the respective Designated Contract may be assumed by the Company subject to payment of the estimated Cure Cost, and informing such counterparty that objections to the proposed assumption, including objections to the estimated Cure Cost (such objections, “Assumption Objections”) must be filed with the Bankruptcy Court and submitted to the Parties no later than 4:00 p.m. prevailing Eastern time on April 21, 2015;

(vii) by April 10, 2015, the Sponsor shall deliver to the Company the new charter, bylaws, and stockholders agreement of the Reorganized Company, as well as the members of the board of directors of the Reorganized Company accompanied by any disclosures required by Bankruptcy Code section 1129(a)(5) in connection therewith;

(viii) by April 15, 2015, the Company shall file a supplement to the Plan (a “Plan Supplement”) (A) setting forth the Designated Contracts as well as the estimated Cure Cost for each such Designated Contract, (B) attaching the new charter, bylaws, and stockholders agreement of the Reorganized Company, and (C) identifying the members of the board of directors of the Reorganized Company;

(ix) by April 30, 2015, the Company shall (A) obtain entry of an order by the Bankruptcy Court confirming the Plan (such order, the “Confirmation Order”), and (B) obtain entry of an order of the Bankruptcy Court authorizing and approving the assumption of the Designated Contracts (excluding any Designated Contracts which are the subject of outstanding Assumption Objections pursuant to section 2(f) below) and fixing the Cure Costs for the Designated Contracts (the “Assumption Order”);¹ and

¹  Subject to section 2(f) below, the hearing to consider entry of the Confirmation Order and entry of the Assumption Order shall be scheduled for the same date (the “Confirmation Hearing”).

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(x) the Company shall obtain interim and final orders approving that certain postpetition financing set forth in the DIP Financing by the deadlines, on the terms, and subject to the conditions set forth in the DIP Financing.

(b) The Company agrees and covenants that, on the terms and subject to the conditions set forth in this Agreement, it will

(i) prepare, as soon as reasonably practicable after the date of this Agreement a draft Plan and a draft Disclosure Statement, and after such preparation promptly provide such Plan and Disclosure Statement, in draft form, to the Sponsor and the Sponsor’s legal and financial advisors for review and comment a reasonable period of time in advance of any filing thereof;

(ii) include in the approved Disclosure Statement a statement that the Company’s board of directors has recommended the acceptance of the Plan by the stakeholders of the Company who are entitled to vote on the Plan;

(iii) in consultation with the Sponsor, use its commercially reasonable efforts to commence solicitation of the Plan as soon as practicable following entry of an order by the Bankruptcy Court approving the Disclosure Statement, as provided in any such Bankruptcy Court order;

(iv) prepare and provide the proposed Confirmation Order, in draft form, to the Sponsor and the Sponsor’s legal and financial advisors for review and comment a reasonable period of time in advance of any filing thereof and, subject to the prior written consent of the Sponsor to the form and substance of the Confirmation Order (which consent shall not be unreasonably withheld, conditioned or delayed) and consultation with the Sponsor, use its commercially reasonable efforts to file with the Bankruptcy Court the proposed Confirmation Order promptly following the end of the period to solicit acceptances of the Plan;

(v) diligently pursue confirmation and consummation of the Plan;

(vi) reasonably cooperate with the Sponsor and the Sponsor’s legal advisor in connection with any discovery and hearings in connection with this Agreement, the Disclosure Statement, and/or the Plan and any transactions contemplated by such documents;

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(vii) use commercially reasonable efforts to provide drafts of any notices, motions, pleadings, filings, or other documents to be filed by the Company in the Bankruptcy Case to the Sponsor and the Sponsor’s legal advisor a reasonable period of time (or, in the event of an emergency, the longest period of time practicable under the circumstances) prior to the date on which the Company intends to file such documents with the Bankruptcy Court, which such documents must be reasonably acceptable to the Sponsor and the Company and consistent with this Agreement;

(viii) without duplication or limitation of the foregoing, use commercially reasonable efforts to provide drafts of any proposed modifications, amendments, supplements, schedules, exhibits, and other documents related to the Plan, the Restructuring, the Disclosure Statement or their terms and conditions (collectively, the “Plan Related Documents”) to the Sponsor and the Sponsor’s legal advisor a reasonable period of time prior to the date on which the Company intends to file such documents with the Bankruptcy Court, and any such Plan Related Documents must be reasonably acceptable to the Sponsor and the Company and consistent with this Agreement;

(ix) timely file a formal objection and prosecute in good faith such objection to any motion filed with the Bankruptcy Court seeking the entry of an order (A) modifying or terminating the Company’s exclusive right to file and/or solicit acceptances of a plan of reorganization pursuant to section 1121 of the Bankruptcy Code, (B) directing the appointment of an examiner with expanded powers or a trustee, (C) converting the Bankruptcy Case of any Company Party to a case under chapter 7 of the Bankruptcy Code, or (D) dismissing the Bankruptcy Case of a Company Party.

(c) The Sponsor agrees and covenants that, on the terms and subject to the conditions set forth in this Agreement, it and its affiliates will:

(i) upon execution of this Agreement and through the Bankruptcy Case, continue to support the Plan;

(ii) following the commencement of the Bankruptcy Case, not (1) object to the Plan or the Disclosure Statement or the consummation of the Plan, or any efforts to obtain acceptance of, and to confirm and implement, the Plan; (2) initiate any legal proceedings that are inconsistent with, or that would delay, prevent, frustrate or impede, the approval, confirmation or consummation of the Plan or the Disclosure Statement or the transactions outlined therein or otherwise commence any proceedings to oppose any of the transactions contemplated by the Plan or the Disclosure Statement, or take any other action that is barred by this Agreement; (3) vote for, consent to, support or participate in the formulation of any other restructuring, any other transaction involving the Company or its assets, or any plan of reorganization (with the sole exception of the Plan) or liquidation under applicable bankruptcy or insolvency laws, whether domestic or foreign, in respect of the Company; (4) directly or indirectly seek, solicit, support, formulate, entertain, encourage or engage in discussions, or enter into any agreements relating to, any restructuring, plan of reorganization, proposal or offer of

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dissolution, winding up, liquidation, reorganization, merger, transaction, sale, disposition or restructuring of the Company (or any of its assets or stock) other than the Plan (collectively, clauses (3) and (4) describe an “Alternative Plan”); (5) engage in or otherwise participate in any negotiations regarding any Alternative Plan, enter into any letter of intent, memorandum of understanding, agreement in principle or other agreement relating to any Alternative Plan; (6) solicit, encourage, or direct any person to undertake any action prohibited by clauses (1) through (5) of this subsection (c)(ii); or (7) permit any of its, or its controlled affiliates’, officers, directors, managers, employees, partners, representatives and agents to undertake any action prohibited by clauses (1) through (6) of this subsection (c)(ii); and

(iii) reasonably cooperate with the Company and the Company’s legal advisor in connection with any discovery and hearings in connection with this Agreement, the Disclosure Statement, and/or the Plan and any transactions contemplated by such documents.

2. The Plan and Certain Related Matters. The Plan and all related documents, including, without limitation, the Disclosure Statement, and the motion and order relating to approval of this Agreement, must be in form and substance reasonably acceptable to the Sponsor and the Company and not inconsistent with the terms and conditions set forth in this Agreement. The Plan shall provide for the following, among other things:

(a) Effective Date. The effective date of the Plan (the “Effective Date”) shall occur as soon as practicable but in no event later than May 15, 2015.

(b) Conditions Precedent to the Effective Date. The Plan shall include the following conditions precedent (each a “Condition Precedent”) which must be satisfied or waived prior to the occurrence of the Effective Date.

(i) The Plan and any and all Plan Supplements, including any amendments or modifications thereto, shall be reasonably acceptable to the Sponsor and the Company.

(ii) The Confirmation Order shall have been entered, shall not be subject to any stay on enforcement and be in form and substance reasonably satisfactory to the Sponsor and the Company. The Confirmation Order shall provide that, among other things, the Company or the Reorganized Company, as appropriate, is authorized to take all actions necessary or appropriate to consummate the Plan, including, without limitation, entering into, implementing, and consummating the contracts, instruments, releases, leases, indentures, and other agreements or documents created in connection with or described in the Plan.

(iii) All documents and agreements necessary to implement the Plan, including, without limitation, the Exit Facility (as defined below) shall have (A) been tendered for delivery, and (B) been effected or executed. All conditions precedent to all such documents and agreements shall have been satisfied or waived pursuant to the terms and conditions of such documents or agreements, as applicable.

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(iv) All actions, documents, certificates, and agreements necessary to implement this Plan shall have been effected or executed and delivered to the required parties and, to the extent required, filed with the applicable governmental units in accordance with applicable laws or regulations.

(v) As of the Effective Date, there shall be no existing or continuing events of default under the DIP Financing that has not been waived in writing.

(c) Transactions Structure. The transactions contemplated by the Plan shall be structured in an efficient manner (including, without limitation, from a tax perspective and given the intent that the Company, as reorganized pursuant to the Plan (the “Reorganized Company”), not be a “public” company as of the Effective Date) and otherwise reasonably acceptable to the Sponsor, in consultation with the Company.

(d) Treatment of Claims. Allowed claims shall be treated in a manner that satisfies the requirements of section 1129 of the Bankruptcy Code, including, without limitation, as follows:

(i) Secured Claims. Except to the extent that a particular claimant agrees to a less favorable treatment approved by the Sponsor, secured claims allowed under section 506(a) of the Bankruptcy Code shall be unimpaired and reinstated upon the Effective Date under the Plan consistent with the requirements of section 1129 of the Bankruptcy Code.

(ii) Priority Claims. Except to the extent that a particular claimant agrees to a less favorable treatment approved by the Sponsor, allowed claims that are entitled to priority under section 507(a) of the Bankruptcy Code will be paid in full in cash or treated as otherwise provided for under the Bankruptcy Code.

(iii) Non-Priority Unsecured Claims. Except to the extent that a particular claimant agrees to a less favorable treatment approved by the Sponsor, holders of non-priority unsecured claims allowed under section 502 of the Bankruptcy Code (the “Unsecured Claims”), including, without limitation, obligations arising under or in connection with that certain convertible senior note issued on March 26, 2014, will receive their pro rata shares of the Non-Sponsor Stock (as defined below) in satisfaction of such Unsecured Claims, unless a claimant participates in the Convenience Class (as defined below).

(1) The Plan shall provide for treatment of a class of Unsecured Claims that, for administrative convenience, will receive treatment different from the Unsecured Claims in the Unsecured Claims class (such class receiving different treatment, the “Convenience Class”). The Convenience Class will comprise all Unsecured Claims of a single holder of a type that would otherwise be included in the Unsecured Claims Class that are either (i) a

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maximum dollar amount or less in the aggregate or (ii) greater than such maximum dollar amount in the aggregate but as to which such holder has made an election (the “Convenience Class Election”) on the ballot for voting on the Plan to have such claim treated as a claim in the Convenience Class (all such claims, the “Convenience Claims”). The parties shall negotiate in good faith regarding the maximum dollar amount to be set forth in the Plan, which shall take into account the working capital needs of the Reorganized Company as of the Effective Date.

(iv) Administrative Expenses. Unless otherwise agreed by the holder thereof, the Plan will provide for the payment in full of all administrative expenses allowed under section 503 of the Bankruptcy Code consistent with section 1129(a)(9) of the Bankruptcy Code. The Sponsor’s reasonable fees and expenses incurred in connection with the Bankruptcy Case, including, without limitation, its legal fees, are actual and necessary costs and expenses of preserving the estates under section 503 of the Bankruptcy Code and must therefore be allowed and paid as administrative expenses in the Bankruptcy Case. Following entry of the PSA Order, the Sponsor or the Sponsor’s legal advisor shall periodically invoice (with reasonable detail concerning hours, rates and description of work performed, subject to redaction to preserve attorney-client privilege) the Company for legal fees due and owing, and the Company shall tender payment of such amounts due and owing within fifteen (15) days of receipt of such invoice. To the extent that any amounts remain due and owing pursuant to the Term Sheet, such amounts shall also be allowed and paid as administrative expenses in the Bankruptcy Case following entry of the PSA Order. Any remaining funds previously deposited pursuant to the Term Sheet shall be applied against the amounts incurred pursuant to this Agreement.

(e) Cancellation of Equity Securities. On the Effective Date, all previously issued and outstanding equity securities of the Company (and all rights to convert, exchange, exercise for, or otherwise receive equity securities of the Company) shall be deemed void, cancelled, and of no further force and effect.

(f) Executory Contracts and Unexpired Leases. The Sponsor, in consultation with the Company, shall determine the treatment of Contracts and Leases pursuant to the terms hereof and in a manner consistent with the Bankruptcy Code. All Contracts and Leases which are not Designated Contracts as of the Effective Date shall be deemed rejected as of such date. At any time before the effective date of assumption of a Designation Contract, the Sponsor may, in its sole discretion, withdraw or modify its designation of a Designation Contract for assumption by providing notice via email to the Company and its counsel.

(i) The Company shall promptly inform the Sponsor of any formal or informal Assumption Objection. In the event that the Company, the Sponsor, and such objecting counterparty cannot resolve an Assumption Objection prior to the Confirmation Hearing, the Assumption Objection will be heard during the Confirmation Hearing, or at such later date as the Parties and the objecting counterparty may fix and agree and the Bankruptcy Court approves.

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(ii) In the event that any outstanding Assumption Objection remains unresolved following the Confirmation Hearing, the Sponsor reserves the right to direct the Company to reject the Designated Contract which is the subject of such Assumption Objection at any time prior to entry of an order by the Bankruptcy Court authorizing the assumption of such Designated Contract. The Plan shall provide that rejection of the Designated Contract shall be effective upon the tenth (10th) day following delivery of a rejection notice to the contract counterparty.

(g) Claims Resolution. Resolutions of claims will be subject to the terms and procedures set forth in the Plan, which, among other things, will (i) require that the Reorganized Company file any and all objections to claims during the ninety (90)-day period following the Effective Date (unless such period is extended by the Bankruptcy Court) and (ii) provide that any settlements of claims approved by the Bankruptcy Court prior to the Effective Date will be binding on all parties.

(h) Avoidance Actions. The Plan shall provide that the Reorganized Company shall waive any avoidance actions that the Company or the estates may have against holders of Unsecured Claims that agree in writing to continue to participate in and extend trade credit in connection with the go-forward operations of the Reorganized Company. All other avoidance actions will be reserved and prosecuted by the Reorganized Company in its reasonable discretion.

(i) Corporate Governance. The Plan shall designate the number of members of the board of directors of the Reorganized Company (the “New Board”), as such number is determined by the Sponsor. At a minimum, the New Board shall consist of five (5) members, including the Chief Executive Officer of the Reorganized Company, one (1) member to be nominated by the official committee of unsecured creditors appointed by the United States Trustee in the Bankruptcy Case (the “Committee”) subject to the consent of the Sponsor (such consent not to be unreasonably withheld, conditioned or delayed)), and three (3) additional members to be selected by the Sponsor; provided that if the Committee fails to nominate a member to the New Board, the Sponsor shall be permitted to appoint an additional member to the New Board in lieu of the Committee’s nominee. The members of the New Board will be identified in the Plan Supplement, accompanied by any disclosures required by Bankruptcy Code section 1129(a)(5) in connection therewith. Under the Plan, the Reorganized Company will implement a new charter, bylaws, and stockholders agreement, all of which must be acceptable to the Sponsor in its reasonable discretion, and all of which will be filed in the Plan Supplement.

(j) Management Options. On or after the Effective Date, the New Board will support the implementation of a stock-based management incentive plan which will provide for distributions not exceeding 10%, in the aggregate, on a fully-diluted basis.

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(k) Exit Facility. The Reorganized Company shall obtain access to a revolving credit facility (the “Exit Facility”) to fund its operations on and after the Effective Date. The Sponsor shall be responsible for procuring the Exit Facility, the Company shall reasonably cooperate with the Sponsor’s efforts to procure the Exit Facility and the Exit Facility shall be in an amount and on terms and conditions reasonably acceptable to the Sponsor.

3. Equity in Reorganized Company. On the Effective Date, equity in the Reorganized Company will be distributed as follows:

(a) The Sponsor will purchase 80% of newly issued common stock in the Reorganized Company in consideration of $20 million in the form of (x) conversion of the principal amount of the DIP Financing into equity and (y) cash; and

(b) in full satisfaction of the Unsecured Claims that are not otherwise settled or resolved under the terms of the Plan, holders of such Unsecured Claims will receive collectively 20% of newly issued common stock in the Reorganized Company (the “Non-Sponsor Stock”).

4. Exclusivity.

(a) As used in this Agreement, “Alternative Transaction Proposal” means, other than the transactions contemplated by this Agreement, any offer, proposal, or inquiry relating to, or any third-party indication of interest in, any of the following:

(i) any purchase, sale, or other disposition of all or a material portion of the Company’s business or assets, except for the sale of assets in the ordinary course of business;

(ii) any issuance, sale, or other disposition of any equity interest (including, without limitation, securities or instruments directly or indirectly convertible or exchangeable into equity) in the Company (by the Company) or any subsidiary of the Company primarily engaged in the Company’s business (a “Business Subsidiary”) (other than the issuance of stock options or similar instruments to existing directors, officers, or employees in the ordinary course of business consistent with past practice or otherwise pursuant to existing contractual obligations);

(iii) any merger, acquisition, consolidation, or similar business combination transaction involving the Company or a Business Subsidiary; or

(iv) any other transaction the purpose or effect of which would be reasonably expected to, or which would, prevent or render impractical, or otherwise frustrate or impede in any material respect, any of the transactions contemplated by this Agreement.

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(b) As used in this Agreement, “Superior Proposal” means a bona fide written Alternative Transaction Proposal that the Company concludes in good faith, after consultation with its financial advisors and outside legal counsel, taking into account all legal, financial, regulatory, and other aspects of the proposal and the person or entity making the proposal (including any break-up fees, expense-reimbursement provisions, and conditions to consummation), (i) is more favorable, from a financial point of view, to the Company’s stakeholders than the transactions contemplated by this Agreement and (ii) is reasonably likely to be consummated on a timely basis on the terms proposed (taking into account financing, among other things).

(c) Except as expressly permitted by this Agreement, from and after the Execution Date, the Company agrees that it will not, and will cause each entity comprising the Company, and will use commercially reasonable efforts to cause its controlled affiliates, directors, officers, employees, advisors, and any other persons acting under the direction of any of them, and the representatives of any of the foregoing (collectively, all such entities and persons, the “Company Representatives”) not to, initiate or solicit inquiries or proposals with respect to, or engage or participate in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have or participate in any discussions with, any person or entity relating to, or approve or recommend, or propose to approve or recommend, or execute or enter into, any letter of intent, agreement in principle, or other agreement related to, any Alternative Transaction (an “Alternative Transaction Agreement”). This section 4(c) shall not prohibit the Company from furnishing nonpublic information regarding the Company and its subsidiaries to, or entering into discussions and negotiations with, any person or entity in response to an Alternative Transaction Proposal that is, or could reasonably be expected to result in, a Superior Proposal that is submitted to the Company by such person or entity (and not withdrawn prior to the furnishing of such information or such discussions) if (i) neither the Company nor any Company Representative shall have violated any of the restrictions set forth in this section 4, (ii) the Company receives from such person or entity an executed confidentiality agreement containing customary limitations on the use and disclosure of all nonpublic written and oral information furnished to such person or entity by or on behalf of the Company, and (iii) within one (1) business days after furnishing any such nonpublic information to such person or entity, the Company furnishes such nonpublic information to the Sponsor (to the extent such nonpublic information has not been previously furnished by the Company to the Sponsor) and gives the Sponsor written notice of the identity of such person or entity and of the Company’s intention to enter into discussions with such person or entity. The Company shall keep the Sponsor reasonably informed with respect to the status of any such Alternative Transaction Proposal, inquiry, indication of interest, or request and any modification or proposed modification thereto. Without limiting the generality of the foregoing, the Company acknowledges and agrees that any violation of or the taking of any action inconsistent with any of the restrictions set forth in the preceding sentence by any Company Representative, whether or not such Company Representative is purporting to act on behalf of the Company shall be deemed to constitute a breach of this section 4 by the Company.

(d) Notwithstanding anything to the contrary herein, the Company may terminate this Agreement in order to enter into a definitive Alternative Transaction Agreement with respect to a Superior Proposal that did not result from a breach of this section 4, subject to compliance with the following notice requirements and payment of the Break-Up Fee

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(defined below) in accordance with the terms of this Agreement, if (i) the Company has received an Alternative Transaction Proposal that, in the good-faith determination of the board of directors of the Company, constitutes a Superior Proposal, after having complied with the following notice requirements, and (ii) the board of directors of the Company determines in good faith, after consultation with its outside legal counsel, that failure to take such action would be inconsistent with the fiduciary obligations of the board of directors under applicable law (such entitlement to terminate the Agreement, the “Superior Proposal Company Termination Right”). The Company shall not be entitled to exercise the Superior Proposal Company Termination Right unless:

(i) the Company promptly notifies the Sponsor, in writing, at least three (3) Business Days (the “Notice Period”) before entering into an Alternative Transaction Agreement, of its intention to take such action with respect to a Superior Proposal, which notice shall state expressly that the Company has received an Alternative Transaction Proposal that the Company intends to declare a Superior Proposal and/or that the Company intends to enter into an Alternative Transaction Agreement;

(ii) the Company attaches to such notice the most current version of the proposed Alternative Transaction Agreement (which version shall be updated on a prompt basis) and the identity of the third party making such Superior Proposal;

(iii) the Company shall, and shall cause the Company Representatives to, during the Notice Period, negotiate with the Sponsor in good faith to make such adjustments in the terms and conditions of this Agreement so that such Alternative Transaction Proposal ceases to constitute a Superior Proposal, if the Sponsor, in its discretion, proposes to make such adjustments (it being agreed that in the event that, after commencement of the Notice Period, there is any material revision to the terms of a Superior Proposal, including, any revision in price, the Notice Period shall be extended, if applicable, to ensure that at least two (2) business days remain in the Notice Period subsequent to the time the Company notifies the Sponsor of any such material revision (it being understood that there may be multiple extensions)); and

(iv) the Company determines in good faith, after consulting with outside legal counsel and its financial advisor, that such Alternative Transaction Proposal continues to constitute a Superior Proposal after taking into account any adjustments made by the Sponsor during the Notice Period in the terms and conditions of this Agreement.

(e) Notwithstanding anything to the contrary set forth in this Agreement, the Company’s board of directors may terminate this Agreement following the occurrence of an event, fact, development or occurrence after the date hereof that did not result from a breach of this section 4 (an “Intervening Event”) if, subject to compliance with the following notice requirements and payment of the Break-Up Fee (defined below) in

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accordance with the terms of this Agreement, the board of directors of the Company determines in good faith, after consultation with its outside legal counsel, that failure to take such action would be inconsistent with the fiduciary obligations of the board of directors under applicable law because the Intervening Event makes it unlikely that either (x) the Company will maximize value for stakeholders by consummating the Plan or (y) the Company can consummate the Plan within a reasonable period of time (such entitlement to terminate the Agreement, the “Intervening Event Company Termination Right”). The Company shall not be entitled to exercise the Intervening Event Company Termination Right unless:

(i) the Company promptly notifies the Sponsor, in writing, at least five (5) Business Days before terminating this Agreement, of its intention to take such action with respect to an Intervening Event, which notice shall state expressly the Intervening Event as well as provide written notice and supporting documentation articulating the impact of the Intervening Event;

(ii) the Company shall, and shall cause the Company Representatives to, during the Notice Period, negotiate with the Sponsor in good faith (including, without limitation, promptly responding to the Sponsor’s reasonable requests for financial and other information regarding the Intervening Event and the impact of the Intervening Event) to make such adjustments in the terms and conditions of this Agreement so that the failure of the board of directors of the Company to terminate this Agreement in light of such Intervening Event would not be inconsistent with the fiduciary obligations of the board of directors under applicable law, if the Sponsor, in its discretion, proposes to make such adjustments (it being agreed that in the event that, after commencement of the Notice Period, there is any material revision to the Intervening Event, the Notice Period shall be extended, if applicable, to ensure that at least three (3) business days remain in the Notice Period subsequent to the time the Company notifies the Sponsor of any such material revision (it being understood that there may be multiple extensions)); and

(iii) the Company determines in good faith, after consulting with outside legal counsel and its financial advisor, that the failure of the board of directors of the Company to terminate this Agreement in light of such Intervening Event would be inconsistent with the fiduciary obligations of the board of directors under applicable law because the Intervening Event makes it unlikely that either (x) the Company will maximize value for stakeholders by consummating the Plan or (y) the Company can consummate the Plan within a reasonable period of time (such entitlement to terminate the Agreement, after taking into account any adjustments made by the Sponsor during the Notice Period in the terms and conditions of this Agreement).

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(f) For the avoidance of doubt, and notwithstanding anything to the contrary herein, this section 4 shall not prohibit, limit, or otherwise restrict the Company from participating in discussions with, or providing any information to, any official committee appointed in the Bankruptcy Case so long as the Company does not otherwise violate the prohibitions contained in this section 4.

5. Break-up Fee. The Company acknowledges and agrees that the Sponsor would not have undertaken the obligations set forth in this Agreement without the Company’s commitment to pay the Break-Up Fee (as defined below) on the terms and conditions set forth in this Agreement. In the event that the Company chooses to terminate this Agreement as set forth in section 11(b)(i) below, provided that the Sponsor is not in material breach of this Agreement, the Company shall pay to the Sponsor a break-up fee in the amount of one million dollars ($1,000,000) plus the Sponsor’s reasonable out-of-pocket fees and expenses (including, without limitation, legal fees, and after application of any retainer previously funded by the Company) (such fees and expenses, collectively, the “Break-Up Fee”), and such Break-Up Fee shall be deemed earned immediately for all purposes. The Break-Up Fee shall be paid (i) via wire transfer of immediately available funds upon the closing of a Superior Proposal in the event of an exercise of the Superior Proposal Company Termination Right or (ii) upon payment of other allowed administrative expenses of the Company under section 503 of the Bankruptcy Code in the event such Superior Proposal does not close or upon an exercise of the Intervening Event Company Termination Right. The Company expressly acknowledges that the Break-Up Fee is an actual and necessary cost and expense of preserving the estates under section 503 of the Bankruptcy Code and must therefore be allowed and paid as an administrative expense in the Bankruptcy Case, and the PSA Order shall so provide.

6. Exculpation. The Plan, the Disclosure Statement, and the Confirmation Order shall provide, to the maximum extent permitted by law, that each of the Parties, each Party’s affiliates and subsidiaries, the members of each Party’s respective boards of directors, and each Party’s directors, officers, employees, agents, consultants, advisors and other representatives, including each Party’s legal counsel, accountants and financial advisors, shall neither have nor incur any liability to any entity (as defined in section 101(15) of the Bankruptcy Code) for any prepetition or postpetition act taken or omitted to be taken in connection with, or related to, formulating, negotiating, preparing, disseminating, implementing, administering, confirming, or effecting the consummation of the Plan, the Disclosure Statement, or any contract, instrument, release, or other agreement or document created or entered into in connection with the Plan or any other prepetition or postpetition act taken or omitted to be taken in connection with or in contemplation of the Restructuring.

7. Releases. The Plan, the Disclosure Statement, and the Confirmation Order shall provide, to the maximum extent permitted by law, that the Company, the Company’s estates (within the meaning of the Bankruptcy Code), all holders of claims against the Company, all holders of interests in the Company, and all parties in interest with respect to the Company (collectively, the “Releasing Parties”), shall be deemed to have released the Sponsor and its representatives as well as the directors and officers of the Company serving in such capacity as of the date on which the Bankruptcy Case is commenced by filing a petition with the Bankruptcy Court (such directors and officers, the “Released Parties”) from any and all claims, obligations, suits, judgments, damages, rights, causes of action and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, at law, in equity or otherwise, relating to or based upon any act or omission relating to the Company which occurred prior to

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the effectiveness of the Restructuring, and furthermore that the performance of the terms of the Plan in facilitating the Restructuring shall be a full and complete settlement of any claims or causes of action, whether known or unknown, that the Releasing Parties have or could have against the Released Parties relating to the Releasing Parties.

8. Representations of the Sponsor. The Sponsor hereby represents and warrants to the Company as follows:

(a) it is duly organized, validly existing, and in good standing under the laws of its state of formation;

(b) it has the requisite corporate or entity power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement;

(c) the execution and delivery of this Agreement and the performance by it of its obligations under this Agreement have been duly authorized by all necessary corporate or entity action;

(d) this Agreement has been duly executed and delivered by it and constitutes the valid and binding obligation of it, enforceable against it in accordance with its terms; and

(e) assuming the accuracy of the Company’s representations in section 9(h), the execution, delivery, and performance by it of this Agreement do not and shall not require any material registration or filing with, consent or approval of, or notice to, or other action to, with, or by, any federal, state, or other governmental authority or regulatory body.

9. Representations of the Company. Each Company Party hereby represents and warrants to the Sponsor as follows, subject to Bankruptcy Court approval as applicable:

(a) it is duly organized, validly existing, and in good standing under the laws of its state of formation;

(b) it has the requisite corporate or entity power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement;

(c) the execution and delivery of this Agreement and the performance by it of its obligations under this Agreement have been duly authorized by all necessary corporate or entity action;

(d) this Agreement has been duly executed and delivered by it and constitutes the valid and binding obligation of it, enforceable against it in accordance with the Agreement’s terms;

(e) to the actual knowledge of the senior executive officers of the Company (the “Company’s Knowledge”), the financial and other information (excluding projections) concerning the Company which the Company or its representatives have made available to the Sponsor was complete and correct in all material respects as of the date of such information and did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not materially misleading in light of the circumstances under which such statements were made;

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(f) to the Company’s Knowledge, the Company and the Company’s business are in compliance, in all material respects, with all applicable laws, and no pending written claim has been filed against any of the Company Parties alleging a material violation of any United States federal, state, local or foreign statute, law, ordinance, regulation, rule, code, order, other requirement, or rule of law (collectively, “Laws”), in each case except any non-compliance or violation that would not have a material adverse impact on the Company’s ability to operate its business;

(g) as of the date of this Agreement, the Company has not received any written notice that the Company and the Company’s business are under current investigation by a Governmental Entity with respect to the violation of any Laws that have a material adverse impact on the Company’s ability to operate its business; and

(h) assuming the accuracy of the Sponsor’s representations in section 8(e), the execution, delivery, and performance by it of this Agreement do not and shall not require any material registration or filing with, consent or approval of, or notice to, or other action to, with, or by, any federal, state, or other governmental authority or regulatory body, except the filings in the Bankruptcy Case contemplated by this Agreement and as required under the federal securities laws.

10. Additional Conditions. In addition to the other conditions to the Parties’ obligations set forth in this Agreement, each obligation and liability of the Parties under this Agreement is conditioned in its entirety upon (a) the truth of the representations and warranties of the other Party set forth in this Agreement in all material respects and the other Party’s performance in all material respects of its agreements and covenants in this Agreement, (b) this Agreement not having been terminated pursuant to its terms, and (c) the Plan being (i) consistent in all material respects with the terms and provisions of this Agreement and (ii) otherwise reasonably acceptable to the Company and the Sponsor.

11. Termination of Agreement.

(a) The Sponsor may, but shall not be required to, terminate this Agreement immediately if any of the following occurs, by providing written notice of such termination to the Company.

(i) The Company fails to perform any obligation (including, without limitation, obtaining specified relief) by the applicable deadline or within the applicable timeframe specified in this Agreement, including, without limitation, as required under section 1(a) of this Agreement.

(ii) An event or occurrence required by this Agreement does not happen by the applicable deadline or within the applicable timeframe specified in this Agreement, including, without limitation, as required under section 2(a) of this Agreement.

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(iii) The Reorganized Company has failed to obtain access to the Exit Facility, or any other condition to occurrence of the Effective Date has not occurred, within the applicable required timeframe.

(iv) There is any material modification to, or material severance of any provision of, the Plan or any related document that is inconsistent with the terms and conditions set forth in this Agreement.

(v) There is an event of default under the DIP Financing, and such event of default is not cured in accordance with the terms (including, without limitation, within the timeframe) set forth in the DIP Financing or waived.

(vi) A motion is filed or relief is otherwise sought or supported by the Company or any Company Party seeking to (A) appoint a trustee, receiver, or examiner for any Company Party or any Company Party’s assets and/or business, in the Bankruptcy Case or otherwise, (B) convert the Bankruptcy Case of any Company Party to a case under chapter 7 of the Bankruptcy Code, or (C) dismiss any Bankruptcy Case of a Company Party.

(vii) An order is entered by the Bankruptcy Court (A) modifying or terminating the Company’s exclusive right to file and/or solicit acceptances of a plan of reorganization pursuant to section 1121 of the Bankruptcy Code, (B) directing the appointment of an examiner with expanded powers or a trustee, (C) converting the Bankruptcy Case of any Company Party to a case under chapter 7 of the Bankruptcy Code, or (D) dismissing any Bankruptcy Case of a Company Party.

(viii) An order is entered appointing a trustee, receiver, or examiner for any Company Party or any Company Party’s assets and/or business, in the Bankruptcy Case or otherwise.

(ix) There has been a material breach of, material inaccuracy in, or material failure to perform any representation, warranty, covenant, or agreement made by the Company in this Agreement that has not been cured by the Company within ten (10) business days following receipt of notice from the Sponsor.

(x) Any event or condition in respect of the operation of the Company has occurred that results, or would reasonably be expected to result, individually or in the aggregate, in a material adverse effect on (A) the business, financial condition and operations of the Company, taken as a whole, or on (B) the ability of the Company to consummate the transaction contemplated herein and in the Plan; provided, however, that for the purposes of this subsection, a material adverse effect shall not be deemed to include the effects of events or conditions resulting from (1) the Bankruptcy Case, (2) changes in general economic, financial or securities market or political conditions in the United States, (3) general changes or developments in the industries and markets in which the Business operates, (4) changes in (or proposals to change) any applicable Laws or regulations or applicable accounting regulations or principles or interpretations thereof, (5) any

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outbreak or escalation of hostilities or war or any act of terrorism, (6) the announcement, pendency or consummation of the transactions contemplated by this Agreement (including any impact on customers, suppliers, vendors or employees), or (7) any action taken (or omitted to be taken) as required by this Agreement or at the request, or with the consent, of the Sponsor, shall, in each case, be excluded from the determination of a material adverse effect; provided further, however, that such events or conditions referred to in clauses (2), (3), (4) and (5) above do not materially and disproportionately affect the Company, taken as a whole, as compared to other businesses in the industries in which the Company operates.

(xi) If any court of competent jurisdiction or other competent governmental or regulatory authority shall (i) have issued an order making illegal or otherwise restricting, preventing or prohibiting the Plan in a manner that cannot reasonably be remedied or (ii) have entered a final, non-appealable judgment or order declaring this Agreement or any material provision of this Agreement or any related document to be illegal, invalid, or unenforceable.

(xii) Edmond S. Thomas, or a replacement acceptable to the Sponsor in its sole and absolute discretion, ceases to be the chief executive officer of the Company.

(b) The Company may, but shall not be required to, terminate this Agreement immediately if any of the following occurs, by providing written notice of such termination to the Sponsor.

(i) Subject to the notice and other provisions of section 4(d) or section 4(e) of this Agreement, as applicable, the Company may terminate this Agreement (A) in connection with the Superior Proposal Company Termination Right, if the Company determines to enter into an Alternative Transaction Agreement in respect of a Superior Proposal; provided that in the event of such termination, the Company substantially concurrently enters into such Alternative Transaction Agreement, or (B) in connection with the Intervening Event Company Termination Right. If the Company exercises the Superior Proposal Company Termination Right or the Intervening Event Company Termination Right, the Company shall pay the Break-up Fee to the Sponsor in accordance with section 5.

(1) The Parties acknowledge and agree that the Break-up Fee (i) is an integral part of the transactions contemplated by this Agreement, and that, without the Break-up Fee, the Sponsor would not have entered into this Agreement and (ii) is not a penalty, but is liquidated damages, in a reasonable amount that will compensate the Sponsor in the circumstances in which such fee is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated by this Agreement, which amount would otherwise be impossible to calculate with precision. The payment of the Break-Up Fee in accordance with the terms of this Agreement shall constitute the sole and exclusive remedy of the Sponsor for any breach of this Agreement by the Company.

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(2) If the Company fails to pay the Break-up Fee in a timely manner, and, in order to obtain such payment, the Sponsor makes a claim against the Company that results in a judgment against the Company, the Company Party shall pay to the Sponsor the reasonable costs and expenses (including its reasonable attorneys’ fees and expenses) incurred or accrued by the Sponsor in connection with such suit, together with interest on the amounts set forth in this section at the prime lending rate prevailing during such period as published in The Wall Street Journal. Any interest payable hereunder shall be calculated on a daily basis from the date such amounts were required to be paid until (but excluding) the date of actual payment, and on the basis of a 360-day year.

(ii) There has been a material breach of, material inaccuracy in, or material failure to perform any representation, warranty, covenant, or agreement made by the Sponsor in this Agreement that has not been cured by the Sponsor within ten (10) business days following receipt of notice from the Company.

(iii) If any court of competent jurisdiction or other competent governmental or regulatory authority shall (i) have issued an order making illegal or otherwise restricting, preventing or prohibiting the Plan in a manner that cannot reasonably be remedied or (ii) have entered a final, non-appealable judgment or order declaring this Agreement or any material provision of this Agreement or any related document to be illegal, invalid, or unenforceable.

(iv) If the funding under the DIP Financing is terminated by the Sponsor.

(c) Subject to section 13(b), this Agreement shall terminate automatically upon occurrence of the Effective Date. For the avoidance of doubt, the DIP Financing shall survive any termination of this Agreement, except as otherwise specifically provided therein.

12. Notices. All demands, notices, requests, consents, and communications (each a “Notice”) under this Agreement shall be in writing and shall be deemed to have been duly given if delivered personally or by courier service, messenger, Federal Express or similar expedited delivery service, email, facsimile, telecopy, or if duly deposited in the mails, by certified or registered mail, postage prepaid-return receipt requested, to the following addresses, or such other addresses as may be furnished hereafter by a Notice to the Parties:

If to the Company,

Edmond S. Thomas, CEO

The Wet Seal, Inc.

26972 Burbank

Foothill Ranch, CA 92610

Email: Ed.Thomas@wetseal.com

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with a copy to

Michael Tuchin

Klee, Tuchin, Bogdanoff & Stern LLP

1999 Avenue of the Stars

39th Floor

Los Angeles, CA 90067

Email: mtuchin@ktbslaw.com

If to the Sponsor,

Steven H. Reiner, Managing Director

B. Riley & Co., L.L.C.

11100 Santa Monica Blvd., Suite 800

Los Angeles, CA 90025

Email: sreiner@brileyco.com

with a copy to

Van C. Durrer, II

Skadden, Arps, Slate, Meagher & Flom LLP

300 South Grand Avenue

Suite 3400

Los Angeles, CA 90071

Email: Van.Durrer@skadden.com

A Notice shall be deemed to have been duly given or made (a) upon delivery, if delivered personally or by courier service, messenger, or Federal Express or similar expedited delivery service, in each case with record of receipt, (b) upon transmission with confirmed delivery, if sent by facsimile or telecopy, or (c) two (2) business days after being sent by certified or registered mail, postage pre-paid, return receipt requested.

13. Remedies; Limitation on Liability.

(a) Subject to section 11(b)(i), the Parties acknowledge and agree that any breach of the terms of this Agreement would give rise to irreparable harm to the other Party for which money damages would not be an adequate remedy and, accordingly, agrees that each non-breaching Party shall be entitled to specific performance and injunctive or other equitable relief without the necessity of proving the inadequacy of money damages as a remedy or posting a bond or other security in connection with such remedy.

(b) Notwithstanding anything that may be expressed or implied in this Agreement, each Party hereto covenants, agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any Party’s affiliates, or any of such Party’s

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affiliates or respective former, current or future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, members, managers, general or limited partners or assignees (each a “Related Party” and collectively, the “Related Parties”) in each case other than the Parties and each of their respective successors and permitted assignees under this Agreement, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any of the Related Parties, as such, for any obligation or liability of any Party under this Agreement or any documents or instruments delivered in connection herewith for any claim based on, in respect of or by reason of such obligations or liabilities or their creation; provided, however, nothing in this section 13(b) shall relieve or otherwise limit the liability of any Party hereto or any of their respective successors or permitted assigns, for any breach or violation of its obligations under such contracts. For the avoidance of doubt, none of the Parties will have any recourse, be entitled to commence any proceeding or make any claim under this Agreement or in connection with the transactions contemplated hereby except against any of the Parties, as applicable. The limitation on liability provision in this Section 13(b) shall survive the termination of this Agreement.

14. Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the Parties with respect to the subject matter of this Agreement and supersedes all other prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter of this Agreement, including the Term Sheet; provided, however, without duplication, any expense reimbursement due to the Sponsor from the Company pursuant to the Term Sheet shall be allowed and paid as an administrative expense pursuant to section 2(d)(iv) hereof. This Agreement may not be amended, altered, or modified in any manner whatsoever, except by a written instrument executed by each of the Parties hereto.

15. Waiver. The Parties hereto may (a) extend the time for the performance of any of the obligations or other acts of the other Parties hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a Party hereto to any such extension or waiver shall be valid only if set forth in a written instrument executed by the Parties.

16. Public Announcements. Unless such disclosure is otherwise required by applicable Law or by obligations of the Company or the Sponsor or their respective affiliates pursuant to any listing agreement with or rules of any securities exchange, the Company and the Sponsor shall consult with each other before issuing any press release or otherwise making any public statement with respect to this Agreement, the transactions contemplated hereby or the activities and operations of the other and shall not issue any such release or make any such statement without the prior written consent of the other.

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17. Authority to Sign. Each of the Parties represents and warrants that the person who executes this Agreement on behalf of such Party has been duly authorized on behalf of such Party to execute this Agreement on behalf of such Party and, in the case of an entity, that such authority has been validly obtained in accordance with the articles of incorporation and bylaws (or other organizational documents) of such Party, and the laws of the state of its organization for such Party.

18. No Third-Party Beneficiaries. This Agreement shall be solely for the benefit of the Parties and no other person or entity shall be a third-party beneficiary of this Agreement except as set forth in section 13(b).

19. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to the provisions of such laws relating to conflicts of law).

20. Jurisdiction. The Company and the Sponsor each hereby irrevocably and unconditionally submit to the nonexclusive jurisdiction of any Delaware state court or federal court of the United States of America sitting in Wilmington, Delaware, or the Bankruptcy Court (following commencement of the Bankruptcy Case), and any appellate court from any of the foregoing, but solely in any action or proceedings to enforce this Agreement. Each of the Parties 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.

21. Savings Clause. Any provision or part of this Agreement that is determined to be invalid or unenforceable in any situation in any jurisdiction shall, as to such situation and such jurisdiction, be ineffective only to the extent of such invalidity and shall not affect the enforceability of the remaining provisions of this Agreement or the validity or enforceability of any such provision in any other situation or in any other jurisdiction. In lieu of any such provision, there shall be added a provision as similar in terms to such illegal, invalid, or unenforceable provision(s) as may be possible and mutually agreed upon by the Parties and still be legal, valid, and enforceable under applicable laws.

22. Headings. Section headings in this Agreement are used for convenience only and shall not be considered for any purpose in construing this Agreement.

23. Neutral Construction. Each Party has cooperated, including by and through its counsel, in the drafting and preparation of this Agreement. Hence, this Agreement will be construed neutrally, and will not be applied more strictly against one Party than against another.

24. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one document.

25. Electronic Transmittal. Signatures transmitted electronically (e.g., by facsimile or in .pdf format as an attachment to an e-mail) shall have the full force and effect of original signatures.

26. Assignment. Each Party hereby agrees, for so long as this Agreement shall remain in effect, not to assign it rights or obligations under this Agreement without the prior written consent of the other Party; provided, however, that B. Riley Financial, Inc. may assign its rights and obligations under this Agreement to its affiliates or designees selected in its sole discretion; provided further that no such assignment shall relieve B. Riley Financial, Inc. from its obligations under this Agreement.

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27. Acknowledgement. This Agreement and the transactions contemplated herein are the product of negotiations among the Parties, together with their respective representatives. Notwithstanding anything herein to the contrary, this Agreement is not, and shall not be deemed to be, (i) a solicitation of votes for the acceptance of the Plan or any Chapter 11 plan for the purposes of sections 1125 and 1126 of the Bankruptcy Code or otherwise or (ii) an offer for the purchase, sale, exchange, hypothecation, or other transfer of securities for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934. Notwithstanding anything herein to the contrary, the Company will not solicit acceptances of the Plan from any person until such person has been provided with a Disclosure Statement approved by the Bankruptcy Court.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their respective representatives duly authorized as of the Execution Date.

By the Company:

THE WET SEAL, INC.
THE WET SEAL RETAIL, INC.
WET SEAL CATALOG, INC.
WET SEAL GC, LLC
by	/s/ Edmond S. Thomas
	Name: Edmond S. Thomas
	Title: CEO

By the Sponsor:

B. RILEY FINANCIAL, INC., ON BEHALF OF THE ENTITIES CONSTITUTING THE SPONSOR
by	/s/ Phillip J. Ahn
	Name: Phillip J. Ahn
	Title: CFO & COO

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EX-99.1

Exhibit 99.1

Contact:

Jean Fontana

(646) 277-1214

WET SEAL FILES FOR CHAPTER 11 BANKRUPTCY PROTECTION

Announces Financing and Plan Sponsorship Agreement with B. Riley Financial, Inc.

FOOTHILL RANCH, CA, January 16, 2015 – The Wet Seal, Inc. (Nasdaq: WTSL), a specialty retailer to young women, today announced that it has filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) on January 15, 2015. The Company will continue to operate its business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.

In connection with the Chapter 11 cases, the Company has negotiated a debtor in possession financing arrangement (“DIP”) and plan sponsorship agreement (“PSA”) with B. Riley Financial, Inc., the parent of B. Riley & Co, LLC and Great American Group, LLC and its affiliates and designees (“B. Riley”).

The DIP provides for a $20 million term loan facility, subject to certain limitations and conditions, including a $5 million availability block at closing, from B. Riley to be funded on an interim and final basis. This loan facility will provide availability to fund the Company’s operations during the Chapter 11 cases, including to the Company’s vendors and other purveyors of goods and services. The Company also expects to continue to fund operations from cash on hand and cash generated during the cases. The DIP is subject to Bankruptcy Court approval and the satisfaction of specified closing conditions. The Company also expects to continue to receive certain financial accommodations from its existing lender, Bank of America, including continued cash management services.

The PSA provides a comprehensive blueprint for the Company’s emergence from Chapter 11 as a going concern pursuant to a plan of reorganization, under which B. Riley has agreed to provide funding and will receive a majority of the stock in the reorganized Company at emergence. The PSA contains certain milestones and conditions, including Bankruptcy Court approval of the Company’s assumption of the PSA. The transactions contemplated in the PSA, in turn, are subject to conditions and confirmation and effectiveness of the plan of reorganization.

In connection with the bankruptcy filing, the Company is seeking customary authority from the Bankruptcy Court that will enable it to continue to operate and serve its customers. The requested approvals include requests for the authority to make wage and salary payments, continue various benefits for employees, and honor certain customer programs, such as gift cards and returns on merchandise purchased prior to the bankruptcy filing.

As of January 12, 2015 the Company had approximately $31 million of cash on the balance sheet, including nearly $11 million of cash used to collateralize letters of credit. The additional financing from the DIP is expected to provide the Company with an immediate source of additional funds. These funding sources are expected to enable Wet Seal to satisfy the customary obligations associated with the daily operation of its business, including the timely payment of employee wages and other obligations.

“We are pleased to provide financial assistance to The Wet Seal in its efforts to revive this iconic fashion retailer,” said Bryant Riley, Chairman, of B. Riley Financial, Inc. “Taking a collaborative approach, and tapping our vast array of financial services, we believe that we have developed a financial solution that should benefit all parties involved.”

Ed Thomas, CEO of The Wet Seal Inc., stated, “After careful consideration, the Board of Directors unanimously concluded that filing for Chapter 11 was the appropriate course of action for the Company. Overall, we continue to believe in The Wet Seal and remain committed to executing on the strategic steps that we already started. We are thrilled to be working with B. Riley and other constituencies toward the successful and prompt emergence of the Company from Chapter 11.”

The Company indicated that it expects to provide additional details with respect to the Chapter 11 filing as soon as they are available. More information, including access to court documents, can be accessed at www.donlinrecano.com/wetseal (court-appointed claims agent site), or www.deb.uscourts.gov, the official Bankruptcy Court website.

The PSA provides that the Company will file and support a plan of reorganization that will not provide consideration to the holders of the Company’s common stock.

About The Wet Seal, Inc.

The Wet Seal, Inc., a pioneer in fast fashion retailing, sells apparel, footwear and accessories designed for teen girls and young women of all sizes through retail stores nationwide, as well as an e-commerce website. As of January 15, 2015, the company operated a total of 173 stores in 42 states and Puerto Rico and an e-commerce business at www.wetseal.com. For more company information, visit www.wetsealinc.com.

About B. Riley Financial, Inc.

B. Riley Financial, Inc. (OTCBB: RILY) provides collaborative financial services and solutions through several subsidiaries, including: B. Riley & Co. LLC, a leading investment bank which provides corporate finance, research, and sales & trading to corporate, institutional and high net worth individual clients; Great American Group, LLC a leading provider of advisory and valuation services, asset disposition and auction solutions, and commercial lending services; and B. Riley Asset Management, LLC, a provider of investment products to institutional and high net worth investors. B. Riley Financial, Inc. is headquartered in Los Angeles with offices in major financial markets throughout the United States and Europe. For more information on B. Riley Financial, Inc. please visit www.brileyfin.com.

Safe Harbor

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This news release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements that relate to the intent, beliefs, plans or expectations of the Company or its management, as well as any estimates or projections for the outcome of events that have not yet occurred at the time of this news release. All statements other than statements of historical fact are forward-looking statements. All forward-looking statements made by the Company are predictions and not guarantees of future performance, involve material risks and uncertainties and are subject to change based on factors that are difficult to predict and that may be beyond the Company’s control. Such factors include, but are not limited to: those described under the “Risk Factors” section and elsewhere in the Company’s most recent Quarterly Report on Form 10-Q filed with the Securities Exchange Commission on December 10, 2014, as well as in other past filings with the Securities and Exchange Commission; the risk that the Company may not be able to successfully execute its strategic steps; the transactions contemplated by the DIP and PSA are subject to closing conditions, which conditions may not be satisfied for various reasons, including for reasons outside of the Company’s control; risks and uncertainties relating to the bankruptcy filing by the Company, including but not limited to, (i) the Company’s ability to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 cases, (ii) the ability of the Company and its subsidiaries to prosecute, develop and consummate the transactions contemplated by the PSA with respect to the Chapter 11 cases, (iii) the effects of the Company’s bankruptcy filing on the Company and on the interests of various constituents, (iv) Bankruptcy Court rulings in the Chapter 11 cases and the outcome of the cases in general, (v) the length of time the Company will operate under the Chapter 11 cases, (vi) risks associated with third party motions in the Chapter 11 cases, which may interfere with the Company’s ability to develop and consummate the transactions contemplated by the PSA, (vii) the potential adverse effects of the Chapter 11 proceedings on the Company’s liquidity or results of operations, (viii) the ability to execute the Company’s business and transactions contemplated by the PSA, and (ix) increased legal costs to execute the Company’s reorganization, and other risks and uncertainties. The Company cautions that the trading in the Company’s securities during the pendency of the Chapter 11 cases is highly

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speculative and poses substantial risks. If the plan of reorganization contemplated by the PSA is consummated, the Company’s outstanding Class A common stock will be extinguished and the holders of the Company’s Class A common stock will not receive any consideration. Accordingly, the Company’s future performance and financial results may differ materially and/or adversely from those expressed or implied in any such forward-looking statements. You should not place undue reliance on forward-looking statements. The Company will not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

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