EX-99.3 5 a5016011ex99-3.txt EXHIBIT 99.3 Exhibit 99.3 BEAR, STEARNS & CO. INC. UBS LOAN FINANCE LLC 383 Madison Avenue 877 Washington Boulevard New York, New York 10179 Stamford, Connecticut 06901 BEAR STEARNS CORPORATE UBS SECURITIES LLC LENDING INC. 299 Park Avenue 383 Madison Avenue New York, New York 10179 New York, New York 10179 November 7, 2005 Senior Bridge Loans Commitment Letter Laundry Holding Co. Laundry Merger Sub Co. c/o Apollo Management, L.P. MGM Tower 10250 Constellation Blvd., Suite 2900 Los Angeles, CA 90067 Attention: Andy Jhawar Ladies and Gentlemen: You have advised Bear, Stearns & Co. Inc. ("Bear Stearns"), Bear Stearns Corporate Lending Inc. ("BSCL"), UBS Loan Finance LLC ("UBS") and UBS Securities LLC ("UBSS"; and, together with Bear Stearns, BSCL and UBS, the "Commitment Parties") that Laundry Merger Sub Co. ("AcquisitionCo"), a newly formed, wholly owned subsidiary of Laundry Holding Co., a newly formed Delaware corporation ("Parent") formed by Apollo Management, L.P. (together with certain of its affiliates, collectively, the "Sponsor"), intends to acquire (the "Acquisition") Laundry, Inc., a Delaware corporation (the "Target"), for total consideration of approximately $1,366.6 million (including fees and expenses of approximately $71.8 million). You have further advised us that, upon consummation of the Acquisition, AcquisitionCo will be merged with and into Target with Target surviving as a wholly owned subsidiary of Laundry Holding Co. We understand that the Acquisition will be effected pursuant to a Merger Agreement between the AcquisitionCo and the Target (the "Purchase Agreement"). References herein to the "Transaction" shall include the Acquisition, the financings described herein, the payment of related premiums, fees and expenses and all other transactions related to the Acquisition and such financings. Exhibit A-1-3 You have also advised us that you propose to finance the Transaction from the following sources: (a) not less than $633.4 million in cash equity to the Parent by the Sponsor and one or more other investors reasonably acceptable to us on terms to be agreed by Parent and us (the "Contributed Equity"), which will be contributed by Parent to the common equity capital of AcquisitionCo to finance the Acquisition, and common equity retained in the Target on terms and conditions reasonably satisfactory to us (the "Rollover Equity; together with the Contributed Equity, the "Equity"); and (b) $650.0 million in cash proceeds from either (i) the issuance by AcquisitionCo of senior secured or unsecured floating or fixed rate notes (the "Take-out Notes"), in a public offering or Rule 144A private placement (the "Permanent Debt Financing"), or (ii) in the event that the placement of the Permanent Debt Financing cannot be consummated by the date on which the Acquisition is to be consummated, borrowings by the AcquisitionCo under a senior bridge facility (the "Senior Bridge Facility") in the amount of up to $650.0 million (the "Aggregate Commitment"). You have also advised us that you expect AcquisitionCo to, simultaneously with the financings described above, enter into a $600.0 million revolving credit facility (the "Senior ABL Facility") having the terms described in the Bank Commitment Letter of even date herewith among you and the Commitment Parties (the "Bank Commitment Letter"), of which an amount (not to exceed $100.0 million) equal to (i) the net working capital (current assets, other than cash, less current liabilities) of the Target as of the last completed month's balance sheet prior to the Closing Date less (ii) $470.0 million will be drawn immediately after giving effect to the Transaction (in addition, in connection with the Transaction, (x) up to $150.0 million face amount of letters of credit will be issuable under the Senior ABL Facility to replace outstanding letters of credit of the Target and (y) up to $10.0 million face amount of letters of credit for the benefit of CVS Corporation and certain affiliated entities will be issuable under the Senior ABL Facility). The principal amount of loans made under the Senior Bridge Facility (the "Senior Bridge Loans") will mature one year from their date of issuance but, provided that no Conversion Default (as defined in Exhibit A hereto) exists on such date, may (at the option of the holder) be exchanged for senior exchange notes of AcquisitionCo maturing on the eighth anniversary of the funding date of the Senior Bridge Loans (the "Exchange Notes" and, collectively with the Senior Bridge Loans, the "Bridge Financing"). The Senior ABL Facility will also be used to finance the continuing operations of the Target and its subsidiaries after the Transaction. Bear Stearns is pleased to advise you that it is willing to act as sole lead arranger and joint bookrunner for the Senior Bridge Loans, and UBSS is pleased to advise you that it is willing to act as joint bookrunner for the Senior Bridge Loans. Furthermore, in the event that the placement of the Permanent Debt Financing cannot be consummated by the date on which the Acquisition is to be consummated, BSCL is pleased to advise you of its commitment to provide (or to cause one of its subsidiaries or affiliates to provide) 75.0% of the Senior Bridge Loans and UBS is pleased to advise you of its commitment to provide (or to cause one of its subsidiaries or affiliates to provide) 25.0% of the Senior Bridge Loans, in each case, upon the terms and subject to the conditions set forth or referred to in this commitment letter (this "Commitment Letter") and in the Summary of Terms and Conditions attached hereto as Exhibit A (the "Senior Bridge Loans Term Sheet") and in the Bridge Fee Letter referred to below. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Senior Bridge Loans Term Sheet. Exhibit A-1-4 It is agreed that (i) Bear Stearns will act as the sole lead arranger and a joint bookrunner in respect of the Senior Bridge Facility, (ii) UBSS will act as a joint bookrunner in respect of the Senior Bridge Facility, (iii) BSCL will act as sole and exclusive administrative agent in respect of the Senior Bridge Facility, (iv) UBSS will act as sole and exclusive syndication agent in respect of the Senior Bridge Facility and (v) Bear Stearns, BSCL and UBSS will, in their respective capacities, perform the duties and exercise the authority customarily performed and exercised by them in such roles. You agree that no other agents, co-agents, lead arrangers or bookrunners will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Senior Bridge Loans Term Sheet and the Bridge Fee Letter referred to below) will be paid in connection with the Senior Bridge Facility, unless you and we shall so agree. BSCL and UBS intend to syndicate their respective Senior Bridge Facility commitments to a group of financial institutions, commercial banks and non-banking entities (together with BSCL and UBS, the "Lenders"), identified by Bear Stearns in consultation with you. Upon the acceptance by Bear Stearns of any commitment pursuant to the syndication of the Senior Bridge Facility, the commitments of BSCL and/or UBS, as applicable, hereunder in respect thereof shall be reduced by the amount of such accepted commitment. You understand that Bear Stearns intends to commence such syndication efforts in respect of the Senior Bridge Facility promptly following the execution by Parent and/or AcquisitionCo of the Purchase Agreement, and you agree actively to assist Bear Stearns in completing a syndication satisfactory to Bear Stearns prior to the closing of the Acquisition. Such assistance shall include (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit materially from your existing lending and investment banking relationships and the existing lending and investment banking relationships of the Target , (b) direct contact by the proposed Lenders with senior management and advisors of Parent, AcquisitionCo and the Target, (c) assistance in the preparation of a Confidential Information Memorandum and other marketing materials to be used in connection with the syndication, including causing such marketing materials to conform to market standards as reasonably determined by Bear Stearns and, at the request of Bear Stearns, the preparation of versions of the Confidential Information Memorandum that do not contain material non-public information concerning Parent, AcquisitionCo and Target and their respective affiliates for purposes of United States federal and state securities laws and (d) the hosting, with Bear Stearns, of one or more meetings of prospective Lenders and, in connection with any such meeting, consulting with Bear Stearns with respect to the presentations to be made at such meeting, and to make available appropriate officers and representatives of Sponsor, Parent, AcquisitionCo and the Target to rehearse such presentations prior to such meetings, as reasonably requested by Bear Stearns. You also agree that, at your expense, you will work with Bear Stearns to procure a rating for the Senior Bridge Facility by Moody's Investors Service, Inc. and Standard &Poor's Ratings Group promptly upon execution of the Purchase Agreement and prior to the commencement of syndication of the Senior Bridge Facility. Bear Stearns will manage, in consultation with you, all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate, the allocations of the commitments among the Lenders and the amount and distribution of fees among the Lenders. To assist Bear Stearns in its syndication efforts, you agree promptly to prepare and provide to Bear Stearns all information with respect to the Sponsor, Parent, AcquisitionCo, the Target and the Transaction, including all financial information and projections as Bear Stearns may reasonably request in connection with the arrangement and syndication of the Senior Bridge Facility, including a business plan and financial projections for fiscal years 2005 through 2013 and a satisfactory written analysis of the business and prospects of Parent and its subsidiaries for the period from the Closing Date through the final maturity of the Senior Bridge Facility Exhibit A-1-5 (collectively, the "Projections"). You hereby represent and covenant that (a) all information other than the Projections (the "Information") that has been or will be made available to Bear Stearns by you or any of your representatives, consultants or other advisors in connection with the Transaction, when taken as a whole, is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to Bear Stearns by you or any of your representatives have been or will be prepared in good faith based upon reasonable assumptions. You understand that in arranging and syndicating the Senior Bridge Facility Bear Stearns may use and rely on the Information and Projections without independent verification thereof. As consideration for the commitments and agreements of the Commitment Parties hereunder you agree to pay, or to cause the Target to pay, the nonrefundable fees set forth in the Senior Bridge Loans Term Sheet and in the fee letter dated the date hereof and delivered herewith (the "Bridge Fee Letter"), as and when indicated therein, and to perform the obligations set forth in the Bridge Fee Letter, including those relating to changes in the pricing, amounts, terms and structure of the Senior Bridge Facility. Each Commitment Party's commitments and agreements hereunder are subject to (a) there not occurring, subsequent to the date hereof, in the reasonable determination of Bear Stearns or UBS, any change, effect, event, occurrence or state of facts that is or would be materially adverse to the business, condition (financial or otherwise), assets, properties or results of operations of the Target and its subsidiaries taken as a whole, other than any changes, effects, events, occurrences or state of facts relating to or resulting from (i) changes in general economic, financial or securities market conditions in the United States or elsewhere, (iii) general changes or developments in the industry in which the Target and its subsidiaries operate, (iii) the announcement of the Purchase Agreement and the transactions contemplated thereby, (iv) any actions required under the Purchase Agreement to obtain any approval or authorization under applicable antitrust or competition laws for the consummation of the transactions contemplated by the Purchase Agreement, (v) the effect of incurring and paying expenses to the Target's financial advisor and other advisors to the Target in connection with negotiating, entering into, performing and consummating the transactions contemplated by the Purchase Agreement, (vi) changes in any applicable foreign, federal, state, provincial or local civil or criminal law, statute, code, ordinance, regulation, legally binding rule or other legally enforceable obligation imposed by a court or other any federal, state or local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental United States or foreign self-regulatory agency, commission or authority or any arbitral tribunal or the interpretation thereof after the date of the Purchase Agreement, (vii) changes in GAAP or the interpretation thereof after the date of the Purchase Agreement and (viii) any outbreak of major hostilities in which the United States is involved or any act of insurrection, sabotage or terrorism within the United States or directed against its facilities or citizens wherever located; provided in the case of the immediately preceding clauses (i), (ii) and (viii) that such changes do not affect the Exhibit A-1-6 Target or its subsidiaries disproportionately relative to other companies operating in the same economies or industries, (b) our not becoming aware after the date hereof of any information or other matter (including any matter relating to financial models and underlying assumptions relating to the Projections) affecting Parent, AcquisitionCo, the Target or the Transaction that in our reasonable judgment is inconsistent in a material and adverse manner with any such information or other matter disclosed to us prior to the date hereof , (c) the negotiation, execution and delivery on or before April 18, 2006 of definitive documentation with respect to the Acquisition, in form and substance satisfactory to each Commitment Party and its counsel, (d) our satisfaction that prior to and during the syndication of the Senior Bridge Facility there shall be no offering, placement or arrangement of any debt securities or bank financing by or on behalf of the Parent, AcquisitionCo, the Target and/or any of their respective affiliates, other than the Senior ABL Facility, that could disrupt or otherwise interfere with the orderly syndication of the Senior Bridge Facility, (e) your compliance with your covenants and agreements with us in respect of the Transaction (including, without limitation, your covenants and agreements contained in this Commitment Letter and the Bridge Fee Letter) and the correctness of your representations and warranties to us in connection therewith, and (f) the satisfaction of the other conditions set forth in Exhibit B to this Commitment Letter. Those matters relating to the Senior Bridge Facility that are not covered by the provisions hereof (including the immediately preceding paragraph hereof) and of the Senior Bridge Loans Term Sheet are subject to the approval and agreement of the Commitment Parties and you. You agree (a) to indemnify and hold harmless each Commitment Party, their respective affiliates and their respective officers, directors, employees, attorneys, advisors, and agents (each, an "Indemnified Person"), as set forth in Annex A hereto, and (b) to reimburse each Commitment Party and its affiliates on demand upon the Closing Date (if the Closing occurs) for all reasonable out-of-pocket expenses (including due diligence expenses, syndication expenses, consultant's fees (no consultant to be retained without prior approval of Sponsor, such approval not to be unreasonably withheld) and expenses, travel expenses, and reasonable fees, charges and disbursements of counsel) incurred in connection with the Senior Bridge Facility and any related documentation (including this Commitment Letter, the Senior Bridge Loans Term Sheet, the Bridge Fee Letter and the definitive financing documentation) or the administration, amendment, modification or waiver thereof. No Indemnified Person shall be liable for any damages arising from the use by unauthorized persons of Information or other materials sent through electronic, telecommunications or other information transmission systems that are intercepted by such persons or for any special, indirect, consequential or punitive damages on any theory of liability in connection with any act, omission, breach, occurrence or event relating in any respect to the Senior Bridge Facility or the Transaction. You agree to engage one or more investment banks (collectively, the "Investment Bank") reasonably satisfactory to the Commitment Parties to publicly sell or privately place up to $650 million aggregate principal amount of securities (the "Securities") of the Borrower (or if the Investment Bank shall so determine that a portion of such securities shall be issued by Parent, then by the Borrower and Parent) the proceeds of which will be used to provide funds for the consummation of the Transaction if such sale or placement is completed on or prior to the consummation thereof (and thereby reducing by the amount of such proceeds the aggregate amount of the commitments of the Commitment Parties with respect to the Senior Bridge Facility, which reduction shall be applied pro rata to such commitments of the Lenders) or, to the extent such sale or placement occurs after the making of loans under the Senior Bridge Facility, the proceeds of which will be used to repay such loans. You shall take any and every action reasonably necessary or desirable so that the Investment Bank can, as soon as practicable after the date hereof (whether before or after consummation of the Transaction), publicly sell or privately place, in one or more offerings or placements, the Securities. Exhibit A-1-7 You acknowledge that Bear Stearns and its affiliates and UBS and its affiliates (the terms "Bear Stearns" and "UBS" as used below in this paragraph being understood to include such applicable affiliates) may be providing debt financing, equity capital or other services to other companies in respect of which you or the Target may have conflicting interests regarding the Transaction and otherwise. Neither Bear Stearns nor UBS will use confidential information obtained from you by virtue of the Transaction or its other relationships with you in connection with the performance by Bear Stearns or UBS, as applicable, of services for other companies, and neither Bear Stearns nor UBS will furnish any such information to other companies, and that neither Bear Stearns nor UBS will be imputed to have knowledge of confidential information provided to or obtained by Bear Stearns or UBS, as applicable, in its capacity as financial advisor. You also acknowledge that neither Bear Stearns nor UBS has any obligation to use in connection with the Transaction, or to furnish to you, confidential information obtained from other companies. This Commitment Letter shall not be assignable by you without the prior written consent of each Commitment Party (and any purported assignment without such consent shall be null and void), is intended to be solely for the benefit of the signatory parties hereto and their permitted assigns and is not intended to confer any benefits upon, or create any rights in favor of the Target, any existing stockholder of the Target, or any other person except the signatory parties hereto and the Indemnified Persons. This Commitment Letter may not be amended or waived except by an instrument in writing signed by you and each Commitment Party. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter and the Bridge Fee Letter are the only agreements that have been entered into among us with respect to the Senior Bridge Facility and set forth the entire understanding of the parties with respect thereto. This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Senior Bridge Loans Term Sheet, the Bridge Fee Letter, nor any of their terms or substance shall be disclosed, directly or indirectly, by you to any other person except (a) to your officers, agents and advisors and, on a confidential basis, those of the Target who are directly involved in the consideration of this matter or (b) as may be compelled in a judicial or administrative proceeding or as otherwise required by law (in which case you agree to inform us promptly thereof); provided, (i) that this Commitment Letter and the Senior Bridge Loans Term Sheet only may be disclosed to the Target and its advisors on a confidential basis and (ii) that the Bridge Fee Letter disclosed to the Target shall be redacted in a manner acceptable to BSCL to omit certain terms; provided further, that this Commitment Letter, the Senior Bridge Loans Term Sheet and Exhibit B to this Commitment Letter (but not the Bridge Fee Letter) may be attached to, or filed with, the Purchase Agreement if and when the Purchase Agreement is filed or furnished as an exhibit to a report filed by the Target under the Securities Exchange Act of 1934, as amended. BSCL and UBS hereby notify the Sponsor, Parent, AcquisitionCo and the Target that, pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the "Act"), it, and each Lender, may be required to obtain, verify and record information that identifies the Sponsor, Parent, AcquisitionCo and the Target, which information includes the name and address of the Sponsor, Parent, AcquisitionCo and the Target and other information that will allow BSCL, UBS and each Lender to identify the Sponsor, Parent, AcquisitionCo and the Target in accordance with the Act. This notice is given in accordance with the requirements of the Act and is effective for BSCL, UBS and each Lender. Exhibit A-1-8 The compensation, reimbursement, indemnification and confidentiality provisions contained herein and all of the provisions contained in the Bridge Fee Letter shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwithstanding the termination of this Commitment Letter or BSCL's or UBS' respective commitment hereunder. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York (excluding the conflicts of laws rules). You hereby irrevocably submit to the non-exclusive jurisdiction of any court of the State of New York located in the County of New York or the United States District Court for the Southern District of the State of New York, or any appellate courts from any thereof, for the purpose of any suit, action or other proceeding arising out of this Commitment Letter, the Bridge Fee Letter, or any of the agreements or transactions contemplated hereby, which is brought by or against you and you (i) hereby irrevocably agree that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court and (ii) hereby agree not to commence any action, suit or proceeding relating to this Commitment Letter, the Bridge Fee Letter, or any such other agreements or transactions other than in such court except to the extent such forum is not available or mandated by applicable law. You hereby waive and agree not to assert any objection that you may now or hereafter have to the venue of any such suit, action or proceeding in any such court or that such suit, action or proceeding was brought in an inconvenient court and agree not to plead or claim the same. You hereby acknowledge that you have been advised by counsel in the negotiation, execution and delivery of this Commitment Letter, the Bridge Fee Letter, and the other agreements and transactions contemplated hereby, that no Commitment Party has any fiduciary relationship with or fiduciary duty to you or any other person arising out of or in connection with this Commitment Letter, the Bridge Fee Letter or any of the other agreements or transactions contemplated hereby and that no Commitment Party has been retained to advise or has advised you or any other person regarding the wisdom, prudence or advisability of entering into or consummating the Transaction. YOU HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS COMMITMENT LETTER, THE BRIDGE FEE LETTER OR ANY OF THE OTHER AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY AND FOR ANY COUNTERCLAIM RELATING THERETO. Parent and AcquisitionCo hereby agree to cause the Target (including each of the Obligors) to become jointly and severally liable, effective upon the closing of the Acquisition, for any and all liabilities and obligations of Parent and/or AcquisitionCo relating to or arising out of any of such parties' duties, responsibilities and obligations hereunder and under the Bridge Fee Letter. Exhibit A-1-9 If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Senior Bridge Loans Term Sheet and the Bridge Fee Letter by returning to us executed counterparts hereof and of the Bridge Fee Letter not later than 5:00 p.m., New York City time, on November 9, 2005. The commitments and agreements of the Commitment Parties herein will automatically expire (i) at such time in the event we have not received such executed counterparts in accordance with the immediately preceding sentence, (ii) upon termination of the Purchase Agreement and (iii) at 12:00 noon, New York City time, on April 18, 2006 if the Closing Date has not yet occurred. Unless BSCL's and UBS' commitments shall have terminated or expired pursuant to the terms hereof prior to such time, BSCL's and UBS' commitments to provide the Senior Bridge Loans pursuant to this Commitment Letter shall terminate upon the earlier of (a) the issuance of the Take-out Notes and (b) the receipt of a Securities Demand (as defined in the Bridge Fee Letter) from Bear Stearns. Each Commitment Party may terminate their respective commitments and agreements under this Commitment Letter at any time if any material breach or default occurs in the performance of any of your obligations to any of the Commitment Parties with respect to the Transaction. [Signature Page Follows] Exhibit A-1-10 We are pleased to have been given the opportunity to assist you in connection with this important financing. Very truly yours, BEAR, STEARNS & CO. INC. By: /s/ Lawrence B. Alletto -------------------------------- Name: Lawrence B. Alletto Title: Senior Managing Director BEAR STEARNS CORPORATE LENDING INC. By: /s/ Lawrence B. Alletto -------------------------------- Name: Lawrence B. Alletto Title: Vice President UBS LOAN FINANCE LLC By: /s/ David A. Juge -------------------------------- Name: David A. Juge Title: Managing Director By: /s/ Barbara S. Wang -------------------------------- Name: Barbara S. Wang Title: Director and Counsel Region Americas Legal Exhibit A-1-11 UBS SECURITIES LLC By: /s/ Brendan Connolly -------------------------------- Name: Brendan Connolly Title: Executive Director By: /s/ Barbara S. Wang -------------------------------- Name: Barbara S. Wang Title: Director and Counsel Region Americas Legal Accepted and agreed to as of the date first written above by: LAUNDRY HOLDING CO. Exhibit A-1-12 By: /s/ Andrew S. Jhawar ----------------------------------------- Name: Andrew S. Jhawar Title: Vice President LAUNDRY MERGER SUB CO. By: /s/ Andrew S. Jhawar ----------------------------------------- Name: Andrew S. Jhawar Title: Vice President Exhibit A-1-13 Exhibit A-1 ----------- SENIOR BRIDGE LOANS Summary Of Terms And Conditions November 7, 2005 Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Commitment Letter dated November 7, 2005 (the "Commitment Letter"), from Bear, Stearns & Co. Inc., Bear Stearns Corporate Lending Inc., UBS Loan Finance LLC and UBS Securities LLC to Parent and AcquisitionCo, of which this Summary of Terms and Conditions forms an integral part. Borrower: Laundry Merger Sub Co. (the "Borrower"). Concurrently with the consummation of the Acquisition, the Borrower will merge with and into the Target and the Target will assume all obligations of the Borrower. Guarantors: Each affiliate of the Borrower that guarantees all or a portion of the indebtedness under the Senior ABL Facility (the "Guarantors" and, together with the Borrower, the "Obligors"). Lead Arranger: Bear, Stearns & Co. Inc. (in such capacity, the "Lead Arranger"). Joint Bookrunners: Bear Stearns & Co. Inc. and UBS Securities LLC (in such capacities, the "Joint Bookrunners"). Administrative Agent: Bear, Stearns Corporate Lending Inc. ("BSCL") Syndication Agent: UBS Loan Finance LLC Lender(s): BSCL, UBS and a syndicate of financial institutions, commercial banks and other non-banking entities arranged by the Lead Arranger (collectively, the "Senior Bridge Lenders," and together with the Senior Lenders, the "Lenders"). Loans: $650.0 million in aggregate principal amount of senior bridge loans (the "Bridge Loans"). Guarantees: The Guarantors will jointly and severally guarantee the payment when due of all the Bridge Loans and the costs of collection and enforcement thereof pursuant to senior unconditional guarantees (the "Guarantees"). A subsidiary's guarantee will be released upon the sale of such subsidiary, subject to use of the proceeds therefrom to repay Bridge Loans and/or borrowings under the Senior ABL Facility or as otherwise provided in the definitive documentation governing the Bridge Loans (the "Bridge Financing Documents"). Exhibit A-1-14 Use of Proceeds: To consummate the Acquisition and to pay fees and reasonable expenses associated with the Transactions. Availability: The Bridge Loans must be drawn in a single drawing. Bridge Loans that are subsequently repaid may not be reborrowed. Maturity: One year from the Closing Date (the "First Anniversary"). If, upon the First Anniversary, any Bridge Loan has not been previously repaid in full, and provided no Conversion Default (as defined below under "Event of Default") exists on such date, the maturity date of the Bridge Loans shall be automatically extended until the eighth anniversary of the Closing Date and, during such extension period, each holder of a Bridge Loan shall have the right to exchange its Bridge Loan for a senior exchange note (each, an "Exchange Note") in an equal principal amount, due on the seven-year anniversary of the First Anniversary. The Exchange Notes will be issued pursuant to an Indenture that will be attached as an exhibit to the Bridge Financing Documents and will have the terms summarized on Exhibit A-2 to the Commitment Letter. The Exchange Notes will be delivered, undated, into escrow on the Closing Date for delivery on or after the First Anniversary. Interest: Until the First Anniversary, the Bridge Loans will bear interest (the "Bridge Interest Rate"), at a rate per annum equal to, at all times during each interest period (as set forth below and as determined at the beginning of the applicable interest period), the greater of (i) the three-month London Interbank Offered Rate, reset quarterly and adjusted for reserves, calculated on the basis of the actual number of days elapsed in a year of 360 days (the "Libor Rate"), plus a spread of 675 basis points and (ii) 10%. If the Bridge Loans are not repaid in whole within 90 days following the Closing Date, the spreads set forth in the preceding sentence will each increase by 50 basis points at the end of such 90-day period and shall increase by an additional 50 basis points at the end of each 90-day period thereafter until the First Anniversary. On and after the First Anniversary, the Bridge Interest Rate will be the Libor Rate calculated as described above plus a spread of 925 basis points. Furthermore, and in addition to any increase to the then-applicable Bridge Interest Rate due to the immediately preceding sentence, overdue interest, fees and other amounts shall bear interest at 2.0% per annum above the then-applicable Bridge Interest Rate. Interest will be payable quarterly in arrears and on the date of any prepayment or repayment of the Bridge Loans. Exhibit A-1-15 Collateral: Subject to the priorities described under "Priorities; Intercreditor Agreement" below, the obligations of the Credit Parties in respect of the Bridge Loans will be (and the Take-Out Notes may be) secured by the Collateral, as such term is defined under the caption "Security" in Annex I of the Bank Commitment Letter, except, in the case of any foreign subsidiary, to the extent such pledge or security interest would be prohibited by applicable law or would result in materially adverse tax consequences, and except to the extent the cost of obtaining such pledge or security interest is excessive in relation to the benefit thereof (as determined by the Lead Arranger in its reasonable discretion), and subject to such other exceptions as are agreed. Priorities; Intercreditor Agreement: The liens and security interests in the Collateral and various other related rights will be subject to the terms of an Intercreditor Agreement to be reasonably satisfactory to the Lead Arranger. That agreement will provide, among other things, that the liens on Collateral comprised of equipment, fixtures, trademarks, the pledged equity interests and any interests in owned real estate (but not leased real estate, except that the Borrower will use commercially reasonable efforts to deliver, with respect to each of its leased distribution centers, a perfected leasehold mortgage and landlord's consent in favor of the Administrative Agent (it being understood that commercially reasonable efforts shall not include the payment of any material fee to obtain a landlord's consent, the increasing of rent under any lease in a material amount, or other material revisions to the economic terms of any lease)) (the "Bridge Primary Collateral") will secure the Bridge Loans and any secured Take-Out Notes and the obligations in respect of swap agreements provided by the Lenders under the Bridge Facility or the holders of such Notes (the "Bridge and Take-Out Notes Obligations") on a first-priority basis and the Senior ABL Facility and the obligations in respect of swap agreements and cash management Exhibit A-1-16 arrangements provided by the Lenders under such Facility (the "Senior ABL Obligations") on a second-priority basis. The liens on all other Collateral (the "ABL Primary Collateral") shall secure the Senior ABL Obligations on a first-priority basis and the Bridge and Take-Out Notes Obligations on a second-priority basis. The Intercreditor Agreement shall provide, among other things, for customary and appropriate standstill and default notice provisions, for access to and use of (including licenses and trademarks) the Bridge Primary Collateral during an enforcement with respect to the ABL Primary Collateral, for procedures and limitations on the collection of proceeds of Collateral, the tracing of the priorities into such proceeds and the allocation and turn-over of any identified proceeds of Bridge Primary Collateral which are collected through the cash management process, for releases of second-priority liens upon sale or disposition of Collateral when the first-priority lien is released, for waiver of various adequate protection rights, for limitations on the rights of the second-priority lien holder to enforce on its Collateral if the effect would be to interfere with the first-priority lien holder, and for other customary provisions dealing with bankruptcy and enforcement issues between first-priority and second-priority lien holders. Ranking: The Bridge Loans will be joint and several, secured, senior obligations of the Obligors. Mandatory Repayments: The net proceeds from any of the following (collectively, "Net Proceeds"), will be used to repay the Bridge Loans, in each case, at 100.0% of the principal amount of the Bridge Loans repaid plus accrued and unpaid interest to the date of the repayment and any breakage costs: (i) any direct or indirect public offering or private placement of any equity securities of Parent, the Borrower or any direct or indirect parent holding company of the Borrower (below the level of Sponsor) (other than sales of equity to the Sponsor), (ii) any direct or indirect public offering or private placement of any senior or subordinated debt securities, including, without limitation, any Permanent Debt Financing, after the Closing Date by any Obligor, any subsidiary of any Obligor, and any direct or indirect parent holding company of the Borrower (below the level of Sponsor) (other than certain indebtedness permitted under the Bridge Financing Documents as in effect on the Closing Date), (iii) any future bank borrowings by any Obligor (other than under the Senior ABL Facility as in effect on the Closing Date, as the same may be amended or modified, or replaced, on terms consistent with recent comparable financings for affiliates of the Sponsor) and (iv) subject to prior mandatory prepayments of the Senior ABL Facility, and certain exceptions to be agreed upon any future asset sales proceeds by or from any Obligor or any affiliate or direct or indirect subsidiary of an Obligor. Exhibit A-1-17 Change of Control: The Borrower shall prepay the Bridge Loans at a price of 100.0% of principal amount, plus accrued and unpaid interest and any breakage costs, upon the occurrence of a change of control. Optional Repayment: Prior to the First Anniversary Date, the Bridge Loans may be prepaid, in whole or in part, at the option of the Borrower at any time upon three business days' written notice at a price equal to 100.0% of the principal amount thereof plus accrued interest to the date of redemption and any breakage costs. Bridge Loans may not be optionally prepaid after the First Anniversary Date and prior to the third anniversary following the Closing Date. After the third anniversary of the Closing Date the Bridge Loans may be optionally prepaid at a price equal to the following percentage of the principal amount prepaid during the corresponding year: (a) 103%, if such prepayment occurs after the third anniversary of the Closing Date and prior to the fourth anniversary of the Closing Date; (b) 102%, if such prepayment occurs on or after the fourth anniversary of the Closing Date and prior to the fifth anniversary of the Closing Date; (c) 101%, if such prepayment occurs on or after the fifth anniversary of the Closing Date and prior to the sixth anniversary of the Closing Date; and (d) 100%, if such prepayment occurs thereafter. Expenses and Indemnification: The Borrower shall pay (a) all reasonable out-of-pocket costs and expenses of the Bridge Lenders, including expenses incurred in connection with the preparation, execution, delivery and administration of the Bridge Financing Documents (including the fees and expenses and other charges of counsel) and (b) all out-of-pocket expenses of the Bridge Lenders (including the fees and expenses and other charges of counsel) in connection with the enforcement of the Bridge Financing Documents. The Bridge Lenders (and their affiliates and their respective officers, directors, employees, attorneys, advisors and agents) will have no liability for, and will be indemnified and held harmless against, any loss, liability cost or expense incurred in respect of the financing contemplated hereby or the use or the proposed use of proceeds therefor (except to the extent resulting from the gross negligence or willful misconduct of the indemnified party). Modification of the Bridge Modification of the Bridge Financing Documents may be made with Exhibit A-1-18 Loans: consent of the Required Lenders, except that, without the consent of the Lenders holding 100.0% of the Bridge Loans affected thereby, no modification or change may extend the maturity of any Bridge Loans or time of payment of any interest on the Bridge Loans, reduce the rate of interest or the principal amount of any Bridge Loans, alter the mandatory prepayment provisions of the Bridge Loans or reduce the percentage of Lenders necessary to modify or change the Bridge Financing Documents. As used herein, "Required Lenders" means the Bridge Lenders holding (i) prior to the Closing Date, greater than 50.0% of the Aggregate Commitment or (ii) after the Closing Date, more than 50.0% of the aggregate principal amount of the Bridge Loans then outstanding. Yield Protection: The Bridge Financing Documents shall contain customary provisions, changes in reserve, tax capital adequacy and other requirements, guidelines or policies or their interpretation or application, and from the imposition of withholding or other taxes illegality, change in circumstances, reserves and other provisions deemed necessary by the Bridge Lenders to provide customary protection for U.S. and non-U.S. financial institutions. Conditions Precedent: The availability of the Bridge Loans shall be conditioned upon the satisfaction on or before April 18, 2006 of the conditions set forth in Exhibit B to the Commitment Letter of which this Summary of Terms and Conditions forms an integral part (the date upon which all such conditions precedent shall be satisfied, the "Closing Date"). Covenants: The Bridge Financing Documents will contain such covenants with respect to the Borrower and its subsidiaries as are customary and appropriate, based on the covenants contained in the Senior Credit Documentation usual and customary for financings of this kind, including, without limitation, as to (i) use of proceeds, (ii) refinancing of the Bridge Loans, (iii) furnishing of financial statements in accordance with generally accepted accounting principles, officers' Certificates and other information reasonably requested by any Bridge Lender, (iv) compliance with laws and material contractual obligations, (v) continuance of business and maintenance of existence and material rights and privileges, (vi) payment of other obligations, (vii) notices of default, litigation and other matters, (viii) restrictions on liens, (ix) maintenance of books and records, (x) restrictions on indebtedness of the Borrower and its subsidiaries, (xi) restrictions on investments, (xii) restrictions on dividends, Exhibit A-1-19 distributions, redemptions and other payments in respect of capital stock, (xiii) restrictions on sales and leasing of assets, (xiv) restrictions on mergers and consolidations and restrictions on additional acquisitions, liquidations and dissolutions, (xv) restrictions on transactions with affiliates, (xvi) restrictions on sale-leaseback transactions, (xvii) restrictions on changes in business activities, (xviii) restrictions on material adverse amendments to charter documents, (xix) payments for consents (xx) restrictions on capital expenditures, and (xxi) restrictions on issuances and sales of equity interests in wholly owned subsidiaries. Events of Default: The Bridge Financing Documents will include such events of default as are customary and appropriate, based on the events of default contained in the Senior Credit Documentation. "Conversion Default" shall mean any payment default under the Bridge Loans or the Senior ABL Facility, any bankruptcy default (as defined) or any material default under the Engagement Letter or the Fee Letter. Representations and Warranties: The Bridge Financing Documents will contain such representations and warranties with respect to the Obligors, the Target and their respective subsidiaries as are customary and appropriate, based on the representations and warranties contained in the Senior Credit Documentation. Assignments and Participations: Each of the Bridge Lenders may, upon notice to the Borrower and the Administrative Agent: (i) assign all (or any portion in excess of $1.0 million) of its Bridge Loans to any one or more assignees, and (ii) pledge all (or any portion in excess of $1.0 million) of its Bridge Loans to any Federal Reserve Bank or to any funding source of such Bridge Lender. In addition, subject to customary limitations on participants' voting rights, each of the Bridge Lenders may sell participations (a) in its share of the Aggregate Commitment to any assignee, provided that no such participation shall relieve the selling Bridge Lender of its obligations to make Bridge Loans on the Closing Date, and (b) in its Bridge Loans to any assignee. Governing Law and Forum: New York. Counsel for the Lenders: Simpson Thacher & Bartlett LLP. Exhibit A-1-20 Exhibit A-2 SENIOR EXCHANGE NOTES Summary of Terms and Conditions Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Commitment Letter dated November 7, 2005 (the "Commitment Letter"), from Bear, Stearns & Co. Inc., Bear Stearns Corporate Lending Inc., UBS Finance LLC and UBS Securities LLC to Parent and AcquisitionCo, of which this Summary of Terms and Conditions forms an integral part. Exchange Notes: If the Bridge Loans are not repaid in their entirety at or before the First Anniversary, and assuming no Conversion Default has occurred and is continuing on the First Anniversary, each holder of a Bridge Loans will have the right to exchange their Bridge Loans on the First Anniversary for Exchange Notes in an aggregate principal amount equal to the then outstanding principal amount of the Bridge Loans (plus any capitalized interest added thereto, if applicable). The Borrower will issue Exchange Notes, and the Guarantors will issue joint and several guarantees thereof, under an indenture that complies with the Trust Indenture Act of 1939, as amended (the "Indenture"). The Obligors will appoint a trustee reasonably acceptable to the holders of the Exchange Notes. The Exchange Notes and the Indenture will be fully executed on the Closing Date and the Exchange Notes will be deposited, undated, into escrow at the closing of the Bridge Loans. Maturity: The Exchange Notes will mature on the eighth anniversary of the Closing Date (i.e., the seventh anniversary of the First Anniversary). Denomination: The Exchange Notes will be issued in denominations of $1,000 and integral multiples thereof. Interest Rate: A floating rate equal at all times to the Libor Rate calculated as described in Exhibit A-1 plus a spread of 925 basis points. Overdue interest, fees and other amounts shall bear interest at 2.0% per annum above the then-applicable interest rate on the Exchange Notes. 22 Interest on the Exchange Notes will be payable in arrears semi-annually after their release from escrow and on the maturity date of the Exchange Notes. Ranking; Subordination: Same as Bridge Loans. Guarantees: Same as Bridge Loans. Security: Same as Bridge Loans. Mandatory Redemptions: None. Change of Control: Upon the occurrence of a change of control, the Borrower shall offer to redeem the Exchange Notes at a price of 101.0% of principal amount, plus accrued interest. Optional Redemption: The Exchange Notes may not be redeemed, in whole or in part, at the option of the Borrower at any time prior to the third anniversary of the Closing Date. After the third anniversary of the Closing Date the Exchange Notes may be optionally redeemed at a redemption price equal to the following percentage of the principal amount redeemed during the corresponding year: (a) 103%, if such redemption occurs after the third anniversary of the Closing Date and prior to the fourth anniversary of the Closing Date; (b) 102%, if such redemption occurs on or after the fourth anniversary of the Closing Date and prior to the fifth anniversary of the Closing Date; (c) 101%, if such redemption occurs on or after the fifth anniversary of the Closing Date and prior to the sixth anniversary of the Closing Date; and (d) 100%, if such redemption occurs thereafter. In addition, on or prior to the second anniversary of the Closing Date, up to 35% of the original principal amount of the Exchange Notes may be redeemed from the proceeds of a qualifying equity offering by the Borrower or Parent at a redemption price equal to par plus a premium equal to the interest rate that is applicable to the Exchange Notes on the date on which notice of the redemption is given plus accrued interest. Payments: Same as Bridge Loans. Transferability: Unlimited except as otherwise provided by law. Defeasance Provisions of Exchange Notes: Customary for high-yield debt securities. 23 Modification: Modification of the Indenture may be made with consent of the Required Lenders, except that, without the consent of the Lenders holding 100.0% of the Exchange Notes affected thereby, no modification or change may extend the maturity of any Exchange Notes or time of payment of any interest on the Exchange Notes, reduce the rate of interest or the principal amount of any Exchange Notes, alter the mandatory prepayment provisions of the Exchange Notes or reduce the percentage of Bridge Lenders necessary to modify or change the Indenture. Registration Rights: The Obligors will file within 60 days after the initial issuance date of the Exchange Notes (the "Trigger Date"), and will use their best efforts to cause to become effective as soon thereafter as practicable, a shelf registration statement with respect to the Exchange Notes (a "Shelf Registration Statement"). If a Shelf Registration Statement is declared effective, the Obligors will keep such registration statement effective and available (subject to customary exceptions) until it is no longer needed to permit unrestricted resales of the Exchange Notes, but in no event shall the Obligors be required to keep such registration statement effective and available for more than two years after the Trigger Date. If within 120 days from the Trigger Date (the "Effectiveness Date"), a Shelf Registration Statement for the Exchange Notes has not been declared effective, then the Obligors will pay liquidated damages in the form of increased interest of 50 basis points per annum on the principal amount of Exchange Notes outstanding to holders of such Exchange Notes who are unable to freely transfer Exchange Notes from and including the 120th day after the Trigger Date to but excluding the effective date of such Shelf Registration Statement. On the 90th day after the Effectiveness Date, the interest shall increase by 50 basis points per annum, and on each 90-day anniversary of the Effectiveness Date thereafter, shall increase by 50 basis points per annum, to a maximum increase in interest of 200 basis points. The Obligors will also pay such increased interest for any period of time (subject to customary exceptions) following the effectiveness of a Shelf Registration Statement that such Shelf Registration Statement is not available for sales thereunder. All accrued increased 24 interest will be paid on each quarterly interest payment date. In addition, unless and until the Obligors have caused the Shelf Registration Statement to become effective, the holders of the Exchange Notes will have the right to "piggy-back" in the registration of any debt securities (subject to customary scale-back provisions) that are registered by any of the Obligors (other than on a Form S-4) unless all the Exchange Notes will be redeemed or repaid from the proceeds of such securities. Covenants: Customary for high-yield debt securities of similar issuers. Events of Default: Customary for high-yield debt securities of similar issuers. Governing Law and Forum: New York. Counsel for the Lenders: Simpson Thacher & Bartlett LLP. 25 Exhibit B The availability of each of the Facilities, in addition to the conditions set forth in Exhibit A, shall be subject to the satisfaction of each of the following conditions. Capitalized terms used but not defined herein have the meanings given in said Exhibits. (a) Each Credit Party shall have executed and delivered to the Lead Arranger, and the Lead Arranger shall be satisfied with, customary definitive financing documentation and such other documents and instruments as are customary for transactions of this type or as they may reasonably request, including: in the event the full amount of the Take-out Notes are not issued by the Borrower mutually satisfactory definitive Bridge Financing Documents. (b) The following transactions shall have occurred prior to, or shall occur concurrently with, the initial extension of credit under the Senior Bridge Facility: (i) The conditions to borrowing described in Annex II to the Bank Commitment Letter shall have been satisfied or waived and no revolving credit loans under the Senior ABL Facility shall be outstanding except as contemplated by the Bank Commitment Letter; (ii) Not less than $633.4 million in common equity shall have been issued by Parent to the Sponsor and other investors reasonably acceptable to the Lead Arranger on the terms and conditions set forth in the Commitment Letter thereto and otherwise satisfactory to the Lead Arranger, all of which shall have been contributed by Parent to the common equity capital of AcquisitionCo to finance the Acquisition; it being understood such equity may include rollover equity in the Target in amounts and on terms and conditions reasonably satisfactory to the Lead Arranger; (iii) The Acquisition shall concurrently be consummated in accordance with all applicable requirements of law pursuant to and in accordance with documentation (including the Purchase Agreement) in form and substance reasonably satisfactory to the Lead Arranger (the "Transaction Documentation") (it being understood and agreed that the draft Merger Agreement dated November 8, 2005 is acceptable to the Lead Arranger), and no material provision thereof shall have been amended, waived or otherwise modified without the prior written consent of the Lead Arranger and, in the case of each of the Bridge Loans and the Senior ABL Facility, the Required Lenders (as such term is defined in each of Exhibit A and Exhibit B, as applicable); (iv) All amounts outstanding under the Target's existing indebtedness shall have been repaid or repurchased in full, all commitments thereunder shall have been terminated and all liens or security interests related thereto shall have been terminated or released, in each case, on terms and conditions satisfactory to the Lead Arranger; and 26 (v) The capital and ownership structure of the Parent and the Borrower and their respective subsidiaries after giving effect to the Transaction shall be as described in the Commitment Letter and otherwise satisfactory to the Lead Arranger. (c) The Parent, AcquisitionCo, the Borrower and the Target and their subsidiaries and the transactions contemplated hereby shall be in compliance, in all material respects, with all applicable laws and regulations, except to the extent as would not have a material adverse effect on the Borrower and the Target and their subsidiaries, taken as a whole. All necessary governmental and material third party approvals in connection with the Transactions shall have been obtained and shall be in effect, except to the extent as would not have a material adverse effect on the Borrower and the Target and their subsidiaries, taken as a whole. (d) Each Lender shall have (i) received audited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Target for the fiscal year ended December 31, 2005 and for each of the prior two fiscal years (the "Audited Financial Statements") and (ii) received (A) unaudited consolidated balance sheets and related statements of income, stockholders' equity and cash flows of the Target for each fiscal quarter of the current fiscal year ending more than 20 days prior to the Closing Date, for the period from the beginning of the current fiscal year to the end of such fiscal quarter and for the comparable periods of the preceding fiscal year (the "Unaudited Financial Statements") (with respect to which the independent auditors shall have performed a SAS 100 review), (B) unaudited consolidated balance sheets and related statements of income of the Target for each fiscal month ending more than 20 days prior to the Closing Date, for the period from the beginning of the current fiscal year to the end of such month and for the comparable periods of the preceding fiscal year, and (C) a pro forma consolidated balance sheet and related statements of income and cash flows for Borrower (the "Pro Forma Financial Statements"), pro forma EBITDA ("Pro Forma EBITDA") and pro forma EBITDAR ("Pro Forma EBITDAR") for the last fiscal year covered by the Audited Financial Statements and for each twelve-month period ending after September 30, 2005 and more than 20 days prior to the Closing Date, in each case after giving effect to the Transactions. By no later than February 3, 2006, the Lead Arranger shall have received financial data for the year ended December 31, 2005 comparable to that typically contained in the Target's year end earnings releases. The financial statements referred to in clauses (i), (ii)(A) and (ii)(B) shall be prepared in accordance with accounting principles generally accepted in the United States. The Pro Forma Financial Statements shall be consistent in all material respects with the sources and uses described in the Commitment Letter. The Pro Forma Financial Statements shall be prepared on a basis consistent with pro forma financial statements that would be set forth in a registration statement filed with the Securities and Exchange Commission. (e) Pro Forma EBITDA (calculated in accordance with Schedule A attached hereto) of the Target for the fiscal year ended December 31, 2005 shall not be less than $140 million. The ratio of (x) pro forma total consolidated indebtedness (excluding any amounts drawn under the Senior ABL Facility on the Closing Date) of AcquisitionCo as of December 31, 2005 (after giving effect to the Transactions, including any voluntary capital contribution made in addition to the required minimum Equity Financing, the proceeds of which are used to 27 reduce indebtedness of Parent and its subsidiaries) plus eight times rent for the fiscal year ended December 31, 2005 to (y) Pro Forma EBITDAR (calculated in accordance with Schedule A attached hereto) for the fiscal year ended December 31, 2005 shall not be greater than 6.75x. Same store sales of the Target during the fiscal quarter ended December 31, 2005 shall not have decreased more than 6% from same store sales during the fiscal quarter ended December 31, 2004. (f) The Lead Arranger shall have received the results of such lien searches as it may request in each relevant jurisdiction with respect to the Parent, AcquisitionCo, the Borrower and the Target and their respective subsidiaries, and such searches shall reveal no liens on any of the assets of the Parent, AcquisitionCo, the Borrower and the Target or their respective subsidiaries except for liens permitted by the Senior Credit Documentation or liens to be discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Lead Arranger. All documents and instruments required to perfect the first and second priority security interests in the collateral , as appropriate, under the Facilities (including delivery of capital stock certificates and undated stock powers executed in blank) shall have been executed and be in proper form for filing, and, in connection with the real estate collateral, the Lead Arranger shall have received satisfactory title insurance policies, surveys and other customary documentation. (g) The Lead Arranger shall have received and shall be satisfied with a solvency certificate from the chief financial officer of each Credit Party, which shall document the solvency of each Credit Party after giving effect to the Transaction and the other transactions contemplated hereby. (h) The Lead Arranger shall have received and shall be satisfied with legal opinions (including opinions (i) from counsel to the Borrower and its subsidiaries, (ii) delivered pursuant to the Purchase Agreement, accompanied by reliance letters in favor of the Lead Agent and the Lenders and (iii) from such special and local counsel as may reasonably be required by the Lead Arranger). (i) The Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including the USA Patriot Act. (j) The Investment Bank shall have been afforded no less than 45 consecutive calendar days to market the Take-Out Notes for use in connection with the financing of the Acquisition, with the benefit of a preliminary prospectus or preliminary offering memorandum and other marketing materials relating to the Take-out Notes usable in a customary high-yield road show (which in the case of preliminary offering memoranda or preliminary prospectuses shall comply with the rules and regulations (including Regulation S-X) of the Securities Act of 1933), which shall include audited financials for the 2005 fiscal year or, if such audited financials are not available, unaudited financial statements for the fiscal quarter ended December 31, 2005, and upon which the Investment Bank shall have received customary comfort from the Target's independent outside auditors which, in the case of quarterly financial statements, shall mean comfort based upon a SAS 100 review of such financial statements. Schedule A ---------- Pro Forma EBITDA Definition For the purposes of calculating Pro Forma EBITDA for fiscal year 2005 related to the minimum condition of $140 million, Pro Forma EBITDA shall be defined as: o net earnings (loss) o plus income taxes, o plus interest expense, o less interest income, o plus depreciation, o plus amortization of intangibles, o plus goodwill amortization. Pro Forma EBITDA will be adjusted to exclude the following items that occurred in the first three quarters of fiscal year 2005: o expenses that can specifically be delineated as being attributable to this transaction (e.g. accounting, tax, legal, and other expenses specifically attributable to this transaction) in an amount to be no greater than $0.9 million in aggregate. Pro Forma EBITDA will be further adjusted to exclude the following items that occurred only during the fourth quarter of fiscal year 2005: o expenses that can specifically be delineated as being attributable to this transaction (e.g. accounting, tax, legal, and other expenses specifically attributable to this transaction); o expenses related to transaction bonus and stay compensation specifically related to this transaction in an amount to be no greater than $1.6 million; o shareholder reporting expenses (e.g. proxy statement preparation fees, proxy solicitor, printing, mailing expenses, etc.); o non-recurring non-cash goodwill and asset impairment charges (excluding any charges related to inventory); o restructuring reserve charges or credits related to the 2001 store closure program; o non-cash stock-based compensation charges; o severance costs associated with the Greensboro distribution center closure; and o non-recurring gains and losses from the sale of the Greensboro, NC distribution center; the Clifton, NJ headquarters building; the Secaucus, NJ store; the Plano, TX store; the College Station, TX store; and the Colorado Springs, CO store; In addition, the calculation of Pro Forma EBITDA should: o Incorporate the reversal of any change in accounting principles occurring after September 30, 2005, so that Pro Forma EBITDA will be calculated in the same manner as it would have been calculated on September 30, 2005 before such change; o Maintain the same methodology, procedures or practices employed by the Borrower related to areas of accounting estimates as used in and consistent with past practice; and o To the extent the Borrower does not comply with Section 5.1 of the Merger Agreement, not reflect any resulting impact to the income statement. Bear Stearns and UBSS and their agents will be permitted to review all work papers and have access to the Borrower's auditors in order to understand the basis for the Borrower's computation of Pro Forma EBITDA.