S-1

As filed with the Securities and Exchange Commission on April 17, 2007

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

hhgregg, Inc.

(Exact name of each registrant as specified in its charter)

Delaware	5731	20-8819207
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

4151 East 96^th Street

Indianapolis, Indiana 46240

317-848-8710

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Copies to:

Jerry W. Throgmartin Chief Executive Officer hhgregg, Inc. 4151 East 96^th Street Indianapolis, Indiana 46240 317-848-8710 Ann F. Chamberlain, Esq. Christina E. Melendi, Esq. Bingham McCutchen LLP 399 Park Avenue New York, New York 10022 212-705-7000 Danielle Carbone, Esq.
Robert Evans, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
212-848-4000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

(Approximate date of commencement of proposed sale to the public:    As soon as practicable after the effective date of this Registration Statement.)

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be registered	Proposed maximum offering price per share	Proposed maximum aggregate offering price(1)(2)		Amount of registration fee
Common Stock, par value, $.0001 per share			$	172,500,000	$	5,296

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act.

(2) Including              shares of common stock which may be purchased by the underwriters to cover over-allotments, if any.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL 17, 2007

             Shares

hhgregg, Inc.

Common Stock

This is an initial public offering of shares of common stock of hhgregg, Inc. We are offering              shares of common stock and the selling stockholders identified in this prospectus are offering an additional              shares of common stock. hhgregg, Inc. will not receive any of the proceeds from the sale of the shares being sold in this offering by the selling stockholders.

Prior to this offering, there has been no public market for our common stock. We expect the initial public offering price of our common stock will be between $             and $             per share. We will apply to list our common stock on the New York Stock Exchange under the symbol “HGG”.

The underwriters have a 30-day option to purchase up to a maximum of              additional shares of common stock from the selling stockholders at the public offering price, less the underwriting discounts and commissions, to cover the over-allotment of shares, if any.

Investing in our common stock involves risks. See “ Risk Factors” on page 11.

	Price to Public	Underwriting Discounts and Commissions	Proceeds, before expenses to us	Proceeds, before expenses to the selling stockholders
Per Share	$	$	$	$
Total	$	$	$	$

Delivery of the shares of common stock will be made on or about                     , 2007.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse Lehman Brothers

Wachovia Securities	UBS Investment Bank
Piper Jaffray	KeyBanc Capital Markets

The date of this prospectus is                     , 2007.

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY	1
RISK FACTORS	11
THE RECAPITALIZATION	20
IPO REORGANIZATION	21
2007 DEBT REFINANCING	22
USE OF PROCEEDS	23
DIVIDEND POLICY	23
CAPITALIZATION	24
DILUTION	25
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA	27
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	39
INDUSTRY OVERVIEW	55
BUSINESS	56

	Page
MANAGEMENT	67
COMPENSATION DISCUSSION AND ANALYSIS	70
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	84
PRINCIPAL AND SELLING STOCKHOLDERS	89
DESCRIPTION OF CAPITAL STOCK	91
SHARES ELIGIBLE FOR FUTURE SALE	93
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS	95
UNDERWRITING	99
NOTICE TO CANADIAN RESIDENTS	103
LEGAL MATTERS	105
EXPERTS	105
WHERE YOU CAN FIND MORE INFORMATION	105
INDEX TO FINANCIAL STATEMENTS	F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. When you make a decision about whether to participate in this offering, you should not rely on any information other than the information contained in this prospectus. This document may only be used where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus.

Until                     , all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information you need to consider in making your decision to invest in our common stock. This summary is qualified in its entirety by the more detailed information and consolidated financial statements and notes thereto included in this prospectus. You should read carefully this entire prospectus and should consider, among other things, the matters set forth in the section entitled “Risk Factors” before deciding to invest in our common stock. Unless otherwise indicated, “Issuer” refers solely to hhgregg, Inc., “Gregg Appliances” refers solely to Gregg Appliances, Inc. and “we,” “us” and “our” refer to hhgregg, Inc. and its subsidiaries, including Gregg Appliances. Unless otherwise indicated, the information contained in this prospectus assumes the completion of the IPO reorganization as described below. In addition, in this prospectus our fiscal years ended March 31, 2002, 2003, 2004, 2005, 2006, 2007, 2008 and 2009 are referred to as fiscal 2002, fiscal 2003, fiscal 2004, fiscal 2005, fiscal 2006, fiscal 2007, fiscal 2008 and fiscal 2009, respectively.

Our Company

We are a leading specialty retailer of premium video products, brand name appliances, audio products and accessories. We offer one of the most comprehensive brand and model selections of digital televisions and appliances in our industry, which we sell at competitive prices. We focus on providing our customers with a superior purchase experience from the time they first enter our stores to the delivery and installation of products in their homes. We distinguish ourselves from our competitors by employing an extensively trained, commissioned sales force that serves our customers with a consultative and educational sales approach. We also differentiate ourselves by offering same-day delivery of virtually all of our products. Over our 52-year history, our superior customer purchase experience has enabled us to successfully compete against the other leading video and appliance retailers. We currently operate 77 stores in Ohio, Indiana, Georgia, Tennessee, Kentucky, North Carolina, South Carolina and Alabama.

Our typical new store averages 30,000 square feet and is located in a power center or free standing location in a high-traffic area. Our stores are designed to be visually appealing to our customers and to highlight our premium selection of consumer electronics and appliances. Our store layout showcases our broad selection of products with advanced features and functionality utilizing LCD and plasma television display walls, extensive appliance displays and digital product centers. We carry over 100 models of flat panel televisions and 400 models of appliances, most of which we feature in our stores.

We have a proven track record of growth and profitability led by a seasoned management team. Over the last four fiscal years, we have opened 28 new stores and have grown our net sales and Adjusted EBITDA at a compound annual rate of 13.4% and 11.5%, respectively, while significantly investing in corporate infrastructure to support further expansion. For the 12 months ended December 31, 2006, we generated net sales of $997.4 million and Adjusted EBITDA of $57.3 million, representing growth of 12.7% and 35.9%, respectively, over the prior 12-month period.

Competitive Strengths

We believe the following strengths contribute significantly to our success and position us for growth within our existing and new markets:

Superior customer purchase experience. We believe our in-store experience, high level of customer service and delivery and installation capabilities result in a superior customer purchase experience, which drives loyalty, referrals and repeat business. Our extensively trained, commissioned sales force enables us to educate our customers on the features and benefits of the products we offer. Rigorous ongoing training and performance-monitoring programs ensure that our sales associates are customer-focused and have the knowledge necessary to

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articulate the differences in our products. We believe that when fully informed, customers frequently purchase higher-end, feature-rich products. Our ability to drive sales of more advanced video and appliance products has made us an important partner for our vendors to present their state-of-the-art offerings and enables us to be among the first to introduce new products and technologies in our stores. This further enhances our brand image and customer experience.

We offer same-day delivery for virtually all of our products and also provide quality in-home installation services. This expertise significantly enhances our ability to sell large, more complex products. We believe no other major consumer electronics or appliance retailer provides same-day delivery on as wide a range of products as we do. Our network of nine central and regional distribution centers provides a local supply of inventory that supports our same-day delivery strategy. We conduct approximately 100,000 customer surveys each year to ensure customer satisfaction and provide us with feedback to continue improving our superior customer purchase experience.

Balanced mix of premium video products and appliances. We have one of the most extensive product and brand offerings of premium video products and home appliances. Our television and video products contribute significantly to our growth in sales and profitability while our appliance business provides us with additional financial stability and strong cash flow generation. As a result of our balanced merchandise mix of video products and appliances, our cash flow tends to be less seasonal and more stable over the long term relative to our consumer electronics-focused competitors. In addition, the combination of large screen televisions and appliances, each of which generally requires home delivery and installation, provides us with significant efficiencies in home delivery and installation.

Proven ability to successfully penetrate new markets. We believe our store concept is highly portable. We seek to expand into new markets with attractive demographic profiles where we believe there is significant underlying demand for our product mix and customer services. Since 1999, we have successfully opened or acquired stores in six new metropolitan markets, adding 63 stores, most recently in the Atlanta, Charlotte and Knoxville markets. Our strategy is to initially open multiple stores in a market to leverage our advertising spending, regional management and delivery and distribution infrastructure, followed by additional store openings spread over time to fill out the market. For example, when we entered the Charlotte market we initially opened four new stores, and have added six stores in the Charlotte market since that time. This strategy allows us to capture strong market share in each of our markets.

Superior store economics. Our stores deliver compelling returns on investment. We closely adhere to our prototype store format when opening new stores, which helps simplify our operations and ensures consistent execution. We believe our store economic returns are superior to those of our major consumer electronics competitors.

During fiscal 2006 and 2007, our stores averaged net sales of $14.4 million per store and provided average four-wall EBITDA margins of approximately 7.5%. During this same period, our new stores required average net capital expenditures of $0.7 million and average initial net-owned inventory investments of $1.0 million. Our stores typically generate positive cash flow within three months of opening and provide a cash payback in less than two years. All of our stores produce positive four-wall EBITDA, which combined with our strong inventory turns, generates significant free cash flow to internally fund our growth.

Experienced management team. Our senior management team has an average of 24 years of relevant industry experience and an average of over 13 years of experience with us. Under our management team’s leadership, we have grown our store base by a compound annual growth rate, or CAGR, of 18.3% since fiscal

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1998 and successfully entered six metropolitan markets. We believe our management’s depth of experience has enabled us to anticipate and respond effectively to industry trends and competitive dynamics while driving superior customer service and cultivating long-standing relationships with our vendors.

Key Growth Initiatives

We believe the following are key elements to our growth strategy:

Open stores in new and existing markets. We believe our proven business model and exceptional store economics will allow us to continue to expand into new high growth markets while continuing to build out our store base in existing markets. In fiscal 2008, we plan to accelerate our store growth by opening approximately 13 to 15 new stores, primarily by entering the Raleigh/Durham and Birmingham markets. Beginning in fiscal 2009, we intend to enter the highly attractive Florida market which we expect will provide significant store growth opportunities in the future. We believe our substantial investments in our managers-in-training program, real estate development and distribution infrastructure and our site selection experience will allow us to grow in a variety of new and existing markets. We intend to continue to grow our store count at a compound annual rate of 15% to 20% over the next several years from internally generated funds without adversely impacting our profitability or our superior customer purchase experience. We believe, based upon our new-store site selection criteria, that there are substantial opportunities to add stores in new and existing markets with a long-term potential for more than 400 hhgregg stores in the United States.

Capitalize on strong demand for premium product offerings. We are well positioned to benefit from the expected strong demand for premium video products as well as the continued stability of the appliances market. According to the Consumer Electronics Association, or the CEA, strong growth is expected to continue within our core video products category. Larger flat-panel screen sizes and continued product innovations, such as 120hz and 1080p technology, are driving strong growth of digital televisions. In addition, price declines in plasma and LCD televisions have generated broad-based consumer demand for flat panel products, particularly in larger screen sizes. Digital television price declines, coupled with the FCC mandate requiring that all televisions incorporate a digital tuner by 2009, have hastened the replacement of non-digital televisions and increased the adoption rate of flat panel display units. As a result of these positive industry trends, digital television sales are expected to grow at a compound annual rate of 12.7% through 2010, according to Display Search.

We believe that our appliance business is driven primarily by consumers who seek to upgrade the style and features of their appliances. There are a limited number of specialty retailers offering as broad a selection of appliances as we do and we expect to continue to gain market share in this segment due to our extensive product and brand assortment coupled with our superior customer purchase experience. The growth of premium appliance categories, including energy efficient washers, dryers and three-door refrigeration, has increased our average selling prices over the last three years. During fiscal 2007, our appliance comparable store sales increased 4%.

Selectively introduce complementary merchandise. We plan to exploit growing niches in the consumer electronics and appliances categories while strategically introducing higher margin merchandise and traffic driving products.

• Fine Lines. Beginning in fiscal 2006, we introduced our Fine Lines appliance department concept in select markets. Our Fine Lines department focuses on ultra premium appliances, such as Sub-Zero, Wolf and Thermador. Fine Lines increases store traffic, helps drive sales of higher margin appliances in our core product assortments and enhances our reputation for premium offerings in the marketplace with both our customers and vendors. We believe there is an opportunity to introduce our Fine Lines department concept in select existing and new stores in each of our markets.

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• Center of store initiatives. We intend to capitalize on our core strengths to bolster our market position in our center of store categories, which include take-with products such as cameras, camcorders, notebook computers, MP3 players and high margin accessories. We continue to refine our merchandise assortments, enhance our in-store visual presentation, optimize our available square footage and opportunistically add products. For example, we began selling notebook computers in the second half of fiscal 2007, and we expect our sales in that category to grow significantly in fiscal 2008. We believe center of store categories drive customer traffic to our stores and allow us to capitalize on the convergence of video and personal computing technologies in the home.

• Other merchandise categories. In order to leverage our in-store, consultative selling expertise and home delivery capabilities, we began selling Serta mattresses in fiscal 2006. Mattresses contribute higher margins than consumer electronics and appliance products, while helping to drive cost efficiencies in our home delivery network. We continue to evaluate other merchandise categories to further enhance our product offering and complement our core competencies of customer service, home delivery and installation.

We extensively test all new product initiatives prior to rollout to ensure category success, and we continually assess our assortment in both existing and new categories in order to optimize our product mix, build our brand and maximize profitability.

Drive operating and working capital efficiencies. We believe we can further drive returns on investment as we grow our store base by leveraging our increased size, operating efficiencies and financial position. As we penetrate new metropolitan markets, we expect to increase our purchase volumes, drive distribution efficiencies and strengthen our relationships with our key vendors. We also expect our increased store base and higher net sales to further leverage our existing corporate and regional infrastructure. Additionally, as we continue to improve our financial position and increase the number of stores we open each year, we expect to be able to negotiate more favorable lease terms for our stores.

We are a Delaware corporation and the address of our principal executive offices is 4151 East 96th Street, Indianapolis, Indiana 46240. Our telephone number is 317-848-8710 and our website is www.hhgregg.com. Please note that any references to www.hhgregg.com in the registration statement and this prospectus are inactive textual references only and that the information contained in hhgregg’s website is neither incorporated by reference into this registration statement or prospectus nor intended to be used in connection with this offering.

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The Offering

Common stock offered by us	shares
Common stock offered by the selling stockholders	shares
Common stock to be outstanding after this offering	shares
Underwriters’ over-allotment option to purchase additional common stock from the selling stockholders	shares
Proposed NYSE Symbol	HGG

The number of shares of common stock to be outstanding after this offering is based on the number of shares outstanding as of                     , 2007. This number does not include, as of                     , 2007:

• 2,012,000 shares of common stock subject to options outstanding, at a weighted average exercise price of $13.57 per share; and

• 1,500,000 shares of common stock reserved for future grant or issuance under our new equity incentive plan pursuant to which              options to purchase our common stock will be granted immediately upon the consummation of this offering with an exercise price equal to the offering price.

Except as otherwise indicated, all information in this prospectus assumes no exercise of the underwriters’ over-allotment option.

Risk Factors

You should consider carefully the information set forth in the section entitled “Risk Factors” beginning on page 11 and all other information contained in this prospectus before investing in our common stock.

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The Recapitalization

We consummated a recapitalization of Gregg Appliances on February 3, 2005. As part of the recapitalization, a wholly owned subsidiary of Gregg Investment Corporation, LLC, or GIC, an entity formed by Freeman Spogli & Co., or Freeman Spogli, merged with and into Gregg Appliances and GIC acquired $111.2 million of equity of Gregg Appliances. In connection with the recapitalization, total consideration of approximately $286.4 million was paid to the then existing equity holders of Gregg Appliances in exchange for their shares of common stock of Gregg Appliances. As part of the consideration, Gregg Appliances issued to certain of our stockholders $25.0 million principal amount of 6% junior subordinated notes, or junior notes, which will be redeemed as required by their terms with the proceeds of this offering. Three of our management stockholders retained a portion of the common stock of Gregg Appliances held by them before the recapitalization.

Freeman Spogli is a private equity firm dedicated to investing and partnering with management in companies in the retailing, direct marketing and distribution industries in the United States. Since its founding in 1983, Freeman Spogli has invested approximately $2.4 billion of equity in 41 portfolio companies with aggregate transaction values in excess of $16.0 billion.

IPO Reorganization

hhgregg, Inc., the Issuer, is a recently formed Delaware corporation and does not have any operations. Immediately prior to the effectiveness of the registration statement on Form S-1 of which this prospectus is a part, the stockholders of Gregg Appliances will contribute their shares of Gregg Appliances to the Issuer in exchange for common stock of the Issuer. As a result of this contribution, the stockholders of Gregg Appliances will own common stock of the Issuer in the same proportion as their ownership in Gregg Appliances prior to the contribution, and Gregg Appliances will be a wholly owned subsidiary of the Issuer. In addition, the Issuer will assume the options to purchase common stock of Gregg Appliances previously granted by Gregg Appliances to its directors, officers and employees. Immediately after the contribution, GIC, the majority stockholder of Gregg Appliances, will be dissolved and the common stock of the Issuer held by it will be distributed to its members in proportion to their ownership interest in GIC. These transactions are referred to in this prospectus as the IPO reorganization.

2007 Debt Refinancing

In connection with the consummation of this offering, we intend to amend and restate our existing $75 million revolving credit facility to, among other things, increase the amount to $100 million, and to enter into a new $100 million term loan B. We collectively refer to these credit facilities in this prospectus as our new credit facilities. In addition, we intend to offer to purchase all of our outstanding 9% senior notes due 2013, or senior notes, pursuant to a tender offer we commenced on                     , 2007, and redeem all of our junior notes pursuant to their terms. These transactions are referred to in this prospectus as the 2007 debt refinancing.

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Summary Historical and Pro Forma Consolidated Financial and Other Data

The following table sets forth our summary historical and pro forma consolidated financial and other data as of the dates and for the periods indicated. The historical consolidated statement of income data for the fiscal years ended March 31, 2004, 2005 and 2006 are derived from, and are qualified in their entirety by, the historical audited consolidated financial statements of Gregg Appliances included elsewhere in this prospectus. The historical consolidated statement of income data for the nine months ended December 31, 2005 and 2006 and the historical consolidated balance sheet data as of December 31, 2006 are derived from and qualified in their entirety by the unaudited consolidated financial statements of Gregg Appliances included elsewhere in this prospectus. For the fiscal year ended March 31, 2004 and for a portion of the fiscal year ended March 31, 2005, Gregg Appliances was required, pursuant to GAAP, to consolidate certain variable interest entities controlled by a former director and principal stockholder or members of his immediate family, from which we lease or have leased certain real property and our corporate airplane. Effective at the closing of the recapitalization of Gregg Appliances on February 3, 2005, Gregg Appliances was no longer required to consolidate these variable interest entities for accounting purposes. Thus, the financial information for the periods following the closing of the recapitalization does not include these entities.

The summary pro forma consolidated financial data have been derived from the pro forma consolidated financial information included elsewhere in this prospectus and give effect to this offering and the 2007 debt refinancing as if this offering and the 2007 debt refinancing had occurred on April 1, 2005 with respect to the operating and other financial data and as of December 31, 2006 with respect to the balance sheet data. The summary pro forma consolidated financial data do not necessarily represent what our financial position and results of operations would have been if this offering and the 2007 debt refinancing had actually been completed as of April 1, 2005 or December 31, 2006, and are not intended to project our financial position or results of operations for any future period. You should read the following summary financial, pro forma and other data together with “Business,” “Selected Historical Consolidated Financial and Other Data,” “Unaudited Pro Forma Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements of Gregg Appliances and related notes appearing elsewhere in this prospectus. In the following tables (including the footnotes thereto), dollars are in thousands, except store data, per share data and as otherwise indicated.

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	Fiscal Year Ended March 31,									Nine Months Ended December 31,						12 Months Ended December 31,     2006			Pro Forma 12 Months Ended December 31,     2006
	2004			2005			2006			2005			2006
Statement of Income Data:
Net sales	$	753,156		$	803,199		$	900,424		$	679,115		$	776,067		$	997,376		$	997,376
Cost of goods sold		513,408			548,105			616,512			468,272			538,134			686,374			686,374
Gross profit		239,748			255,094			283,912			210,843			237,933			311,002			311,002
Selling, general and administrative expenses		175,034			184,224			209,484			158,284			168,422			219,622			219,622
Net advertising expense		33,243			35,678			41,660			30,084			34,202			45,778			45,778
Stock-based compensation(1)		2,390			9,277			—			—			104			104			104
Gain on transfer of extended maintenance obligations(2)		—			—			(27,850	)		(27,850	)		—			—			—
Restructuring and asset impairment charges(3)		—			—			1,009			1,320			—			(311	)		(311	)
Income from operations		29,081			25,915			59,609			49,005			35,205			45,809			45,809
Other expense (income):
Interest expense		1,052			3,866			19,000			14,495			13,624			18,129			11,827
Interest income		(278	)		(977	)		(231	)		(189	)		(66	)		(108	)		(108	)
Gain related to early extinguishment of debt		—			—			(39	)		—			(440	)		(479	)		—
Recapitalization transaction costs		—			4,745			—			—			—			—			—
Minority interest		99			3,813			—			—			—			—			—
Total other expense		873			11,447			18,730			14,306			13,118			17,542			11,719
Income before income taxes		28,208			14,468			40,879			34,699			22,087			28,267			34,090
Income tax expense (benefit)(4)		—			(14,780	)		18,664			16,230			9,072			11,506			13,835
Net income	$	28,208		$	29,248		$	22,215		$	18,469		$	13,015		$	16,761		$	20,255
Per Share Data:
Basic net income per share(5)	$	0.91		$	1.02		$	1.57		$	1.31		$	0.91		$	1.18		$
Diluted net income per share(6)	$	0.91		$	1.02		$	1.57		$	1.31		$	0.91		$	1.18		$
Weighted average shares outstanding—Basic		30,905,294			28,790,285			14,153,666			14,124,591			14,249,204			14,247,553
Weighted average shares outstanding—Diluted		30,905,324			28,806,645			14,153,666			14,124,591			14,267,690			14,261,481
Other Data:
EBITDA(7)	$	38,353		$	25,992		$	70,107		$	56,808		$	44,626		$	57,925		$	57,446
Adjusted EBITDA(8)		38,787			38,295			44,596			31,478			44,186			57,304			57,304
Capital expenditures		15,546			15,212			19,046			13,805			13,190			18,431			18,431
Store Data:
Number of stores, end of period		54			58			67			67			74			74			74
Total store square footage (in thousands)		1,862			2,009			2,333			2,333			2,547			2,547			2,547
Net sales per store (in thousands)(9)	$	13,897		$	14,005		$	14,074		$	14,251		$	14,256		$	14,256		$	14,256
Net sales per square foot(10)	$	397		$	404		$	405		$	411		$	409		$	409		$	409
Comparable store sales(11)		1.3	%		0.4	%		1.7	%		3.2	%		2.9	%		1.6	%		1.6	%
Inventory turnover(12)		6.8	x		7.3	x		7.0	x		4.9	x		5.6	x		5.6	x		5.6x

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	As of December 31, 2006
	Actual		Pro forma
Balance Sheet Data:
Cash and cash equivalents	$	3,219	$	3,219
Total assets		322,580		330,194
Total debt		163,122		152,420
Stockholders’ equity		7,864		32,244

(1) Stock-based compensation expense for fiscal 2004 and 2005 represents compensation expense related to stock issued in exchange for a nonrecourse note and stock appreciation rights representing variable awards to our employees under our previous stock appreciation rights and option programs which were terminated at the time of the recapitalization. Stock compensation expense for the nine months ended December 31, 2006, the 12 months ended December 31, 2006, and the pro forma 12-months ended December 31, 2006 represents compensation expense of share-based payment awards in accordance with the provisions of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R).

(2) Prior to October 2005, we sold third-party extended service plans, or ESPs, on appliances and sold our own self-insured ESPs on electronics. We also maintained a service and repair network to service the electronics ESPs we sold and to do repair work on behalf of certain electronics manufacturers for manufacturer warranty claims. In October 2005, we began outsourcing our self-insured electronics warranties and exited the product service business to remove exposure to warranty liabilities and reduce the costs and complexity associated with product service and repair. The gain reflects the transfer of our existing extended service plan liabilities on electronics to General Electric Company, or GE, the party that serviced our appliance warranties less the payment made to GE.

(3) This amount represents the restructuring charges related to the outsourcing of our product service and repair offerings.

(4) For all periods prior to the recapitalization, we operated as an S corporation and were not subject to U.S. federal and certain state income taxes. Upon the closing of the recapitalization, we became subject to U.S. federal and certain state and local income taxes applicable to C corporations.

(5) Basic net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding.

(6) Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares from outstanding options and stock appreciation rights been issued.

(7) EBITDA represents net income before income tax expense, interest income, interest expense, depreciation and amortization. We have presented EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Management uses EBITDA as a measurement tool for evaluating our actual operating performance compared to budget and prior periods. Other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measure of performance under GAAP and should not be considered as a substitute for net income prepared in accordance with GAAP. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

• EBITDA does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our debt;

• EBITDA does not reflect tax expense or the cash requirements necessary to pay for tax obligations; and

• Although depreciation and amortization are non-cash charges, the asset being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements.

• We compensate for these limitations by relying primarily on our GAAP results and using EBITDA only as a supplement.

(8) Adjusted EBITDA is defined as EBITDA without giving effect to certain stock-based compensation, the consolidation of the variable interest entities which are no longer consolidated, the non-capitalized transaction costs related to the recapitalization, the restructuring charges related to the outsourcing of our product service and repair offerings, the gain on transfer of extended maintenance obligations, the gain related to the early extinguishment of debt, the IPO reorganization, this offering and the 2007 debt refinancing. We have presented Adjusted EBITDA because we believe that the exclusion of these non-recurring items is necessary to provide the most accurate measure of our core operating results and as a means to evaluate period-to-period results. We have provided this information to analysts, investors and other third parties to enable them to perform more meaningful comparisons of past, present, and future operating results and as a means to evaluate the results of our on-going operations. Management uses Adjusted EBITDA to determine payment levels on our executives’ incentive compensation plan as well as our compliance with certain covenants under our credit agreement that are calculated based on similar measures. Other companies in our industry may calculate Adjusted EBITDA differently than we do. Adjusted EBITDA is not a measure of performance under GAAP and should not be considered as a substitute for net income prepared in accordance with GAAP. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

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• Adjusted EBITDA does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our debt;

• Adjusted EBITDA does not reflect tax expense or the cash requirements necessary to pay for tax obligations; and

• Although depreciation and amortization are non-cash charges, the asset being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as a supplement.

The following table contains a reconciliation of our net income determined in accordance with GAAP to EBITDA and Adjusted EBITDA:

	Fiscal Year Ended March 31,									Nine Months Ended December 31, 2006						12 Months Ended December 31,     2006			Pro Forma 12 Months Ended December 31,     2006
	2004			2005			2006			2005			2006
Net income	$	28,208		$	29,248		$	22,215		$	18,469		$	13,015		$	16,761		$	20,255
Income tax (benefit) expense		—			(14,780	)		18,664			16,230			9,072			11,506			13,835
Interest income		(278	)		(977	)		(231	)		(189	)		(66	)		(108	)		(108	)
Interest expense		1,052			3,866			19,000			14,495			13,624			18,129			11,827
Depreciation and amortization		9,371			8,635			10,459			7,803			8,981			11,637			11,637
EBITDA		38,353			25,992			70,107			56,808			44,626			57,925			57,446
Stock-based compensation adjustment(a)		2,390			9,277			—			—			—			—			—
De-consolidation adjustment(b)		(1,956	)		(1,719	)		—			—			—			—			—
Recapitalization transaction costs(c)		—			4,745			—			—			—			—			—
Restructuring charges related to service exit(d)		—			—			2,378			2,520			—			(142	)		(142	)
Gain on transfer of extended maintenance obligations(e)		—			—			(27,850	)		(27,850	)		—			—			—
Gain related to early extinguishment of debt(f)		—			—			(39	)		—			(440	)		(479	)		—
Adjusted EBITDA	$	38,787		$	38,295		$	44,596		$	31,478		$	44,186		$	57,304		$	57,304

(a) Represents stock-based compensation expense recognized in fiscal 2004 and 2005 related to stock issued in exchange for a nonrecourse note and stock appreciation rights representing variable awards granted to our employees.

(b) Reflects amounts required to be included in our financial statements from the consolidation of certain variable interest entities that lease property to us. These adjustments add back rent expense paid to related entities, eliminate the depreciation and amortization related to the leased properties and eliminate the minority interest and the interest related to third-party secured debt on some of the leased property.

(c) Represents the non-capitalized costs associated with the recapitalization transaction.

(d) Represents restructuring charges related to the outsourcing of our product service and repair offerings.

(e) Represents the gain on the transfer of certain extended service plan warranties.

(f) Represents the gain related to the early extinguishment of debt. These adjustments represent the difference between the purchase price and the carrying value of our senior notes, as well as the associated write-off of debt issuance costs.

(9) Net sales per store is calculated by dividing net sales for the trailing 12-month period, as adjusted to exclude service revenues, for stores open the entire period by the number of stores open the entire period. Net sales excludes service revenues of $11,507, $13,670, $7,443, $7,443, $0, $0 and $0 for fiscal 2004, 2005, 2006, the nine months ended December 31, 2005 and 2006, the 12 months ended December 31, 2006 and the pro forma 12 months ended December 31, 2006, respectively.

(10) Net sales per square foot is calculated by dividing net sales for the trailing 12-month period, as adjusted to exclude service revenues, for stores open the entire period by the total square feet for those stores. Net sales excludes service revenues of $11,507, $13,670, $7,443, $7,443, $0, $0 and $0 for fiscal 2004, 2005, 2006, the nine months ended December 31, 2005 and 2006, the 12 months ended December 31, 2006 and the pro forma 12 months ended December 31, 2006, respectively.

(11) Comprised of net sales at stores operating for at least 14 full months, including remodeled and relocated locations and our website.

(12) Inventory turnover for the specified period is calculated by dividing our cost of goods sold for the trailing 12-month period by the average of the beginning and ending inventory for that period.

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RISK FACTORS

You should carefully consider the following risk factors in addition to the other information presented in this prospectus before investing in our common stock. Any of the following risks could materially adversely affect our business, financial condition, results of operations or cash flow. The risks below are not the only ones facing our company. Additional risks not known to us or that we currently deem immaterial also may materially adversely affect us. If any of the following risks and uncertainties actually occur, you may lose all or part of your original investment.

Risks Relating to Our Business

We face significant competition, which could reduce our share of the market for home appliances and consumer electronics and our net sales. Competition could also cause us to increase expenditures, cause us to reduce our prices or margins and impact our comparable store sales.

The retail market for major home appliances and consumer electronics is intensely competitive. We currently compete against a diverse group of national retailers, including Best Buy, Circuit City, Sears, Lowe’s and Home Depot, locally-owned regional or independent specialty retail stores and mass merchandisers that sell many of the same or similar consumer electronics and major home appliances. There are few barriers to entry and as a result new competitors may enter our existing or new markets at any time.

We may not be able to compete successfully against existing and future competitors. Some of our competitors have financial resources that are substantially greater than ours and may be able to purchase inventory at lower prices. Our competitors may respond more quickly to new or emerging technologies and may have greater resources to devote to discounts, promotions and sales of products and services. They may also have financial resources that enable them to weather economic downturns better than us.

Our existing competitors or new entrants into our industry may use a number of different strategies to compete against us, including:

• lower pricing;

• more aggressive advertising and marketing;

• enhanced product and service offerings;

• extension of credit to customers on terms more favorable than we make available;

• innovative store formats; and

• improved retail sales methods.

Competition could cause us to lose market share, net sales and customers, increase expenditures or reduce prices or margins, any of which could have a material adverse effect on our business and results of operations. In addition, competition could have an impact on our comparable store sales.

Our growth strategy depends in part on our ability to open and profitably operate new stores in existing and new geographic markets. If we fail to successfully manage the challenges our planned growth poses, fail to maintain our financial and internal controls and systems or encounter unexpected difficulties during our expansion, our net sales and profitability could be materially adversely affected.

We opened nine stores in each of fiscal 2006 and fiscal 2007 and acquired one store during fiscal 2007. In fiscal 2008, we plan to open 13 to 15 stores. New stores that we open may not be profitable or may take longer than planned to open or to reach desired levels of profitability. Furthermore, the addition of new stores in existing markets may adversely affect the performance of nearby stores. Collectively, these circumstances could lower

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our profit, operating income and profit margins. There are a number of factors that could affect our ability to open or acquire as well as operate new stores at profitable levels consistent with our existing stores, including:

• competitors, consumer tastes and discretionary spending patterns in adjacent and new markets that are different from those in our existing markets;

• the failure to open enough stores in new markets to achieve a sufficient market presence to compete successfully;

• the inability to identify and acquire suitable store sites and to negotiate acceptable leases for these sites;

• difficulties associated with the hiring, training and retention of additional sales personnel and store managers;

• the inability to obtain government approvals, licenses and permits in a timely manner;

• the failure to adequately supervise construction and manage development costs;

• the inability to secure adequate landlord financing;

• difficulties or delay in obtaining construction materials and labor; and

• problems or delays in pre-opening store promotion and related publicity.

In addition, our growth plans will require management to expend significant time, effort and resources to ensure the continuing adequacy of our financial and other internal controls, operating procedures, information systems, product purchasing, inventory management, warehousing and distribution systems and employee training programs. We may not be able to effectively manage these increased demands or respond on a timely basis to the changing demands that our planned expansion will impose on our management, financial and other internal controls and information systems. If we fail to successfully manage the challenges our planned growth poses, fail to improve these systems and controls or encounter unexpected difficulties during our expansion, our net sales and profitability could be materially adversely affected.

If new products are not introduced or consumers do not accept new products, our net sales and profitability may decline.

Our ability to maintain and increase net sales and profitability depends to a large extent on the periodic introduction and availability of new products and technologies. The consumer electronics industry depends on new products to drive comparable store sales increases. Typically new consumer electronic products are introduced at relatively high price points, which are then generally reduced over time to spur consumer demand, often becoming lower-margin and commoditized. Consequently, we believe that the introduction and continued growth in consumer acceptance of new products, such as flat panel televisions, high-definition DVD recorders and three-door refrigeration, will have a significant impact on our ability to maintain and increase our net sales and profitability. Many of these new products contain the latest technology. The benefits of technology may not be fully realized without the cooperation of third-party broadcasters, governmental entities and others to facilitate and promote the use of this technology, all of which could affect the success of new consumer electronics or appliance technologies.

Our failure to effectively manage a product transition could reduce the demand for our products and the profitability of our operations. Continuing improvements in technology mean frequent new product introductions, short product life cycles, and improvement in product performance characteristics. Product transitions present execution challenges and risks for us. If we are unable to effectively manage a product transition, our business and results of operations could be adversely affected.

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A disruption in our relationships with, or in the operations of, any of our key suppliers could cause our net sales and profitability to decline.

The success of our business and our growth strategy depends to a significant degree on our relationships with our suppliers. Our largest suppliers include Frigidaire, Hitachi, Sony, Toshiba and Whirlpool. Whirlpool and Frigidaire each represented more than 10% of our total purchases in fiscal 2006. We do not have long-term supply agreements or exclusive arrangements with our major suppliers. We typically order our inventory through the issuance of individual purchase orders to vendors. We have no contractual assurance of the continued supply of merchandise in the amount and assortment we currently offer our customers and we may be subject to rationing by suppliers. In addition, we rely heavily on a relatively small number of suppliers. Our top ten and 20 suppliers represented 72.2% and 87.0%, respectively, of our purchases in fiscal 2006. The loss of any one or more of our key vendors or our failure to establish and maintain relationships with these and other vendors could materially adversely affect our supply and assortment of products, as we may not be able to find suitable replacements to supply products at competitive prices.

If we fail to anticipate changes in consumer preferences, our net sales and profitability may decline.

Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to change. Our success depends upon our ability to anticipate and respond in a timely manner to trends in consumer preferences relating to major household appliances and consumer electronics. Significant deviations from the anticipated consumer preferences for the products we sell could result in lost sales and lower margins due to the need to mark down excess inventory. For example, we anticipated an increase in flat and large screen television sales by remodeling many of our stores to include plasma and LCD television display walls. Similarly, we added fully operational kitchens in several of our locations as we began to offer home appliances with added features. Had we misjudged the market for these products, we not only would have had excess inventory, but our remodeling expenses would have decreased our net sales, profitability and cash flow without the counterbalance of the increased sales of these products.

If we cannot attract and retain highly qualified sales personnel and store managers, our level of customer service may decline, which may decrease our net sales and profitability.

A key element of our competitive strategy is to provide product expertise to our customers through our extensively trained, commissioned sales associates which, we believe, results in more of our customers purchasing higher-margin, feature-rich products. If we are unable to attract and retain qualified personnel as needed in the future, including qualified sales personnel and candidates for our manager-in-training, or MIT, program, our level of customer service may decline, which may decrease our net sales and profitability.

We have significant future capital needs that we may be unable to fund and this failure could curtail our projected growth.

Our expansion plans will require substantial capital, including funds for capital expenditures, pre-opening costs, working capital requirements and initial operating losses related to new store openings. We also require additional capital for remodeling and renovating our existing stores and to transition to a new management information system. Gross capital expenditures during fiscal 2006, prior to any forward funding arrangements, were $19 million and we estimate that gross capital expenditures for fiscal 2007 will range from $18 million to $20 million. See “—Any failure of our information technology infrastructure, or any delay or problem with the upgrading of our existing management information system, could cause a disruption in our business and increase costs.” If the cash provided by operating activities, available borrowings under our revolving credit facility and proceeds from sale and leaseback transactions are not sufficient to fund our operations, store expansion and renovation activities and infrastructure and information technology investment, we may be required to seek additional capital. If we are not able to obtain such additional financing on favorable terms, we may need to curtail our expansion plans and defer some or all of the upgrade of our management information system.

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Due to the concentration of our stores in Ohio, Indiana, Georgia, Tennessee, Kentucky, North Carolina, South Carolina and Alabama, we are subject to risks from economic downturns as well as from weather conditions and natural disasters in these areas, which could negatively impact our net sales and reduce our profitability.

Our stores are located in Ohio, Indiana, Georgia, Tennessee, Kentucky, North Carolina, South Carolina and Alabama. We therefore have exposure to these local economies as well as weather conditions and natural disasters occurring in these states. If these markets individually or collectively suffer an economic downturn or other adverse event, there could be an adverse impact on our comparable store sales, net sales and profitability and our ability to implement our planned expansion program. Several of our larger competitors operate stores nationwide and thus are not as vulnerable as we are to these risks. In addition, our net sales depend on discretionary consumer spending, which may decrease on a regional or national basis due to a number of factors beyond our control, including unfavorable economic conditions, increases in consumer debt levels, unemployment or inflation, or other factors that adversely affect consumer confidence.

A natural disaster or other disruption at our central distribution centers could cause us to lose merchandise and be unable to effectively deliver to our customers and stores, which could reduce our profits.

We currently rely on two central distribution centers in Atlanta and Indianapolis to handle our distribution needs. Any natural disaster or other serious disruption to these centers due to fire, tornado or any other calamity could damage a significant portion of our inventory, and materially impair our ability to adequately stock our stores and deliver merchandise to customers and could result in decreased net sales, increased costs and reduced profits.

Our quarterly results fluctuate due to seasonal demand for our products and if we miscalculate this demand our net sales and profitability could decline.

We experience seasonal fluctuations in our net sales and operating results due in part to seasonal shopping patterns. For example, in fiscal 2007 and 2006, we generated 31.6% and 31.2%, respectively, of our net sales in the fiscal quarter ended December 31, which includes the holiday selling season. We also incur significant additional costs and expenses during this fiscal quarter due to increased staffing levels and higher purchase volumes. If we miscalculate the demand for our products generally or for our product mix during the fiscal quarter ending December 31, our net sales could decline, resulting in excess inventory, which could tie up our working capital and revolving credit facility, as well as lower our profit margin as a result of product markdowns. A shortfall in expected net sales, combined with our significant additional expenses during these fiscal quarters, could cause a significant decline in our operating results.

If we are unable to retain key management, we could have difficulty implementing our business strategy, which may result in reduced net sales, operating margins and profitability.

We are dependent on the skills, experience and continued service of our Chairman and Chief Executive Officer and our President and Chief Operating Officer, and other key personnel. We entered into employment agreements with our key officers which include secrecy, non-competition and other customary provisions. If these individuals cease to be active in the management of our business, or if these individuals decide to join a competitor or otherwise compete directly or indirectly with us, our business and operations could be harmed, and we could have difficulty in implementing our strategy, which may result in reduced net sales, operating margins and profitability.

If our third-party delivery service is unable to meet our promised delivery schedule, our net sales may decline due to a decline in customer satisfaction.

We offer same-day delivery on virtually all of the products we sell. A majority of our deliveries is outsourced to a third-party delivery service. Our third-party delivery service is subject to risks that are beyond our control. If our products are not delivered to our customers on time, our customers may cancel their orders or we may lose business from these customers in the future. As a result, our net sales and profitability may decline.

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Changes in trade regulations, currency fluctuations and other factors beyond our control could negatively affect our net sales, profitability and competitive position.

A significant portion of our inventory is manufactured outside the United States. Changes in trade regulations, currency fluctuations, economic or political instability, natural disasters, public health emergencies and other factors beyond our control may increase the cost of items we purchase or create shortages of these items, which in turn could have a material adverse effect on our cost of goods, or may force us to increase prices, thereby adversely impacting net sales and profitability. Conversely, significant reductions in the cost of these items in U.S. dollars may cause a significant reduction in the retail prices of those products, enabling price competition that adversely impacts net sales and profitability, as well as our competitive position.

Any failure of our information technology infrastructure, or any delay or problem with the upgrading of our existing management information system, could cause a disruption in our business and increase costs.

Our ability to operate our business from day to day largely depends on the efficient operation of our management information system. We use our management information system to conduct our operations and for critical corporate and business planning functions, including store operations, sales management, merchandising, marketing, supply chain and inventory management, financial reporting and accounting, delivery and other customer services and various administrative functions. Our management information system is vulnerable to damage or interruption from:

• power loss, computer systems failures and internet, telecommunications or data network failures;

• operator negligence or improper operation by, or supervision of, employees;

• physical and electronic loss of data or security breaches, misappropriation and similar events;

• computer viruses;

• acts of terrorism;

• intentional acts of vandalism and similar events; and

• hurricanes, fires, floods and other natural disasters.

The software that we have implemented may contain previously undetected errors that could cause our network to fail or compromise the integrity of our data. Any failure that is not contained by our disaster recovery plan could cause an interruption in our operations and adversely affect our financial results.

In addition, our existing computer hardware platform and several key business software applications will no longer be supported by our primary vendor after December 31, 2008. We have commenced a multi-phase plan for transitioning to a new management information system over the next two years. Our current estimate of the additional capital expenditures related to the project is approximately $7 million to $10 million over the next two years. This estimate could increase if we are required to accelerate the implementation of our transition plan. Our transition to the new management system may not be completed in the expected timeframe, and may result in significant costs.

Risks Related to this Offering and Ownership of our Common Stock

There has been no prior trading market for our common stock, and an active trading market may not develop or be sustained following this offering.

Prior to this offering, there has been no public market for our common stock, and we cannot assure you that an active trading market will develop or be sustained after this offering. The initial public offering price will be negotiated between us and representatives of the underwriters and may not be indicative of the market price of our common stock after this offering. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the price paid by you in the offering.

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Our stock price may be volatile, and you could lose all or part of your investment.

The market for equity securities has been extremely volatile. The following factors could cause the price of our common stock in the public market to fluctuate significantly from the price you will pay in this offering:

• actual or anticipated variations in our quarterly results of operations;

• changes in market valuations of companies in the consumer electronics and home appliances industries;

• changes in expectations of future financial performance or changes in estimates of securities analysts;

• fluctuations in stock market prices and volumes;

• issuances of common stock or other securities in the future;

• the addition or departure of key personnel; and

• announcements by us, our competitors or our suppliers of acquisitions, investments or strategic alliances.

Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the public offering price.

The sale of a substantial number of shares of our common stock after this offering may cause the market price of our common stock to decline.

If our existing stockholders sell shares of common stock in the public market following this offering, including shares issued upon the exercise of outstanding options, or if the market perceives that these sales could occur, the market price of our common stock could decline. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate, or to use equity as consideration for future acquisitions.

Upon completion of this offering, we will have              outstanding shares of common stock, assuming no exercise of outstanding options. After this offering, approximately              shares, including the shares to be sold in this offering, will be freely tradable.              shares and              shares issuable upon exercise of outstanding options are subject to lock-up agreements in which the holders have agreed not to sell any shares for 180 days after the date of this prospectus without the prior written consent of Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. The shares and shares subject to options that are subject to lock-up agreements generally will be available for sale after the end of the lock-up period.

We have also entered into a registration rights agreement that will obligate us, after completion of this offering, to register for public resale an aggregate of              shares of outstanding common stock, at the option of the shareholders who are parties to that agreement. However, under the registration rights agreement, Jerry W. Throgmartin has agreed, and under the lock-up agreements described above the holders of registrable shares have agreed, not to exercise their registration rights for 180 days following this offering. If, upon the expiration of the lock-up agreements, all or a portion of these shareholders exercise their right to require us to register their shares for resale and sell shares of common stock in the public market, the market price of our common stock could decline.

We have anti-takeover defense provisions in our certificate of incorporation and bylaws and provisions in our debt instruments that may deter potential acquirors and depress the price of our common stock.

Our certificate of incorporation and bylaws contain provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. These provisions:

• authorize our board of directors to issue “blank check” preferred stock and determine the powers, preferences and privileges of those shares without prior stockholder approval;

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• limit the calling of special meetings of stockholders; and

• impose a requirement that an affirmative vote of the holders of 66 2/3% of the outstanding shares of common stock is required to amend certain provisions of the certificate of incorporation and bylaws.

Our debt instruments also contain provisions that could have the effect of making it more difficult or less attractive for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. Specifically, the terms of our senior notes require that they be redeemed at a premium over their principal amount in the event that we undergo a change of control. In addition, our existing credit facility provides that a change of control constitutes an event of default under that facility and will cause the borrowing under our credit facility to become immediately due. Our future debt agreements, including our new credit facilities, may contain similar provisions. The need to repay all of this indebtedness may deter potential third parties from acquiring us.

Under these various provisions in our certificate of incorporation, bylaws and debt instruments, a takeover attempt or third-party acquisition of us, including a takeover attempt that may result in a premium over the market price for shares of our common stock, could be delayed, deterred or prevented. In addition, these provisions may prevent the market price of our common stock from increasing in response to actual or rumored takeover attempts and may also prevent changes in our management. As a result, these anti-takeover and change of control provisions may limit the price investors are willing to pay in the future for shares of our common stock.

Our executive officers, directors and current principal stockholders own a large percentage of our voting common stock and could limit new stockholders’ influence on corporate decisions.

Immediately after this offering, our executive officers, directors, current holders of more than 5% of our outstanding common stock and their respective affiliates will beneficially own, in the aggregate, approximately         % of our outstanding common stock. Should some of these stockholders act together, they would be able to control all matters requiring approval by our stockholders, including mergers, sales of assets, the election of directors, the approval of mergers or other significant corporate transactions. The interests of these stockholders may not always coincide with our corporate interests or the interests of other stockholders, and they may act in a manner with which you may not agree or that may not be in the best interests of our other stockholders.

We do not currently intend to pay dividends on our common stock in the foreseeable future.

We currently intend to retain our future earnings to fund the development and growth of our business. It is uncertain when, if ever, we will pay dividends to our stockholders. Our existing credit facility prohibits us from paying dividends, and future debt agreements, including our new credit facilities, may contain similar prohibitions. In addition, our principal assets are equity interests in our subsidiaries, and we would have to rely on distributions from these subsidiaries if we were to pay any dividends to our stockholders. You should not invest in our common stock if you require or expect dividend income. For the foreseeable future, we expect that the only return on an investment in us, if any, would come from the capital appreciation of our common stock.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should,” or “will,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance relating to store growth, expansion into new markets, generation of free cash flow, sales trends of particular lines of merchandise and other statements contained in this prospectus, including certain statements under the headings “Prospectus Summary,” “Risk Factors,” “Unaudited Pro Forma Condensed Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry Overview” and “Business,” are forward-looking statements.

We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, these forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this prospectus under the headings “Prospectus Summary,” “Risk Factors,” “Unaudited Pro Forma Condensed Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry Overview” and “Business,” may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations are:

• changes in consumer preferences;

• our ability to effectively manage and monitor our operations, costs and service quality;

• competition in existing, adjacent and new markets;

• our reliance on a small number of suppliers;

• rapid inflation or deflation in core product prices;

• the failure of manufacturers to introduce new products and technologies;

• customer acceptance of new technology;

• our dependence on our key management personnel and our ability to attract and retain qualified sales personnel;

• our ability to negotiate with our suppliers to provide products on a timely basis at competitive prices;

• the identification and acquisition of suitable sites for our stores and the negotiation of acceptable leases for those sites;

• the effect of general and regional economic, housing and employment conditions on our net sales;

• fluctuation in seasonal demand;

• our ability to maintain our rate of growth and penetrate new geographic areas;

• our ability to locate suitable new store sites;

• our ability to obtain additional financing and maintain our credit facilities;

• our ability to maintain and upgrade our information technology systems;

• the effect of a disruption at our central distribution centers;

• changes in cost for print, radio and television advertising; and

• changes in trade regulations, currency fluctuations and prevailing interest rates.

Other factors that could cause actual results to differ from those implied by the forward-looking statements in this prospectus are more fully described in the “Risk Factors” section and elsewhere in this prospectus. Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this prospectus are made only as of the date hereof. We do not undertake and specifically decline any obligation to update any of these statements or to publicly announce the results of any revisions to any of these statements to reflect future events or developments.

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MARKET AND INDUSTRY DATA AND FORECASTS

In this prospectus, we rely on and refer to information and statistics regarding the consumer electronics and home appliances industries. We obtained this information and statistics from various third-party sources, discussions with our customers and vendors and our own internal estimates. We believe that these sources and estimates are reliable but have not independently verified them and cannot guarantee their accuracy or completeness.

In addition, certain data included in this prospectus regarding markets and ranking, including the size of certain markets and our position and the position of our competitors within these markets, and other data, are based on our management’s knowledge and experience in the markets and industries in which we operate. Our estimates have been based on information obtained from our customers, suppliers and other contacts in the markets and industries in which we operate. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for our estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in data gathering. As a result, you should be aware that market, ranking and other similar data included in this prospectus, and estimates and beliefs based on that data, may not be reliable, and we cannot guarantee the accuracy or completeness of such information.

We refer to the term “EBITDA” and “Adjusted EBITDA” in various places in this prospectus. EBITDA is defined by us as net income before income tax expense, interest income, interest expense, depreciation and amortization and cumulative effect of a change in accounting principle. EBITDA and Adjusted EBITDA are not measures of operating performance under U.S. generally accepted accounting principles, or GAAP, and should not be considered as a substitute for net income, cash flows from operating activities and other income or cash flow statement data. EBITDA and Adjusted EBITDA as defined by us may not be comparable to similar non-GAAP measures presented by other issuers. We include EBITDA and Adjusted EBITDA in this prospectus as one measure of operating performance. Please see footnotes (7) and (8) of “Summary Historical and Pro Forma Consolidated Financial and Other Data” for a more thorough discussion of our use of EBITDA and Adjusted EBITDA in this prospectus. In addition, we refer to the term “four-wall EBITDA” which is defined by us as store-level operating income before depreciation, including store wages, rent, other store operating expenses, net advertising expense and distribution costs.

REGISTERED TRADEMARKS

This prospectus refers to trademarks owned by us. The trademarks we own include hhgregg^®, HHGREGG.COM^™, H.H. Gregg Appliances Electronics Computers^™, WELCOME TO THE REVOLUTION^™, HHG^™ and Fine Lines^®. This prospectus also includes product names and other trade names and service marks owned by other companies. The tradenames and service marks of other companies are the property of such other companies.

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THE RECAPITALIZATION

We consummated a recapitalization of Gregg Appliances on February 3, 2005. As part of the recapitalization, a wholly owned subsidiary of GIC, an entity formed by an affiliate of Freeman Spogli, merged with and into Gregg Appliances and GIC acquired $111.2 million of equity of Gregg Appliances. In connection with the recapitalization, total consideration of approximately $286.4 million was paid to the then existing equity holders of Gregg Appliances. As part of the consideration, Gregg Appliances issued to certain of our stockholders $25.0 million principal amount of junior notes, which will be redeemed as required by their terms with the proceeds of this offering. Three of our management stockholders retained a portion of the common stock of Gregg Appliances held by them before the recapitalization.

Freeman Spogli is a private equity firm dedicated to investing and partnering with management in companies in the retailing, direct marketing and distribution industries in the United States. Since its founding in 1983, Freeman Spogli has invested approximately $2.4 billion of equity in 41 portfolio companies with aggregate transaction values in excess of $16.0 billion.

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IPO REORGANIZATION

hhgregg, Inc., the Issuer, is a recently formed Delaware corporation and does not have any independent operations. As of the date of this prospectus, the Issuer is a stand-alone entity with no assets or operations. Prior to the effectiveness of the registration statement on Form S-1 of which this prospectus is a part, Gregg Appliances will become a wholly owned subsidiary of the Issuer. The diagram below illustrates the ownership structure of Gregg Appliances prior to the IPO reorganization described below. The ownership percentages presented in the charts below exclude all outstanding options.

Structure Prior to IPO Reorganization

Immediately prior to the effectiveness of the registration statement on Form S-1 of which this prospectus is a part, GIC and the Management Stockholders will contribute their shares of Gregg Appliances to the Issuer in exchange for common stock of the Issuer. As a result of this contribution, GIC and the Management Stockholders will own common stock of the Issuer in the same proportion as their ownership in Gregg Appliances prior to this contribution, and Gregg Appliances will be a wholly owned subsidiary of the Issuer. In addition, the Issuer will assume all outstanding options to purchase common stock of Gregg Appliances held by the directors, officers and employees of Gregg Appliances. Immediately after the contribution, GIC will be dissolved, and the common stock of the Issuer held by GIC will be distributed to its members in proportion to their ownership interest in GIC. These transactions are referred to in this prospectus as the IPO reorganization. In the above chart, the “Non-Management Members” of GIC includes Freeman Spogli, and the “Management Stockholders” of Gregg Appliances include Jerry W. Throgmartin, Dennis L. May and Gregg W. Throgmartin.

In connection with this offering, we intend to repurchase all of our outstanding junior notes and senior notes and refinance our existing credit facilities. The diagram below illustrates our ownership structure following the IPO reorganization and sale of common stock by us and the selling stockholders in this offering.

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Structure Following IPO Reorganization

Other than its ownership interest in Gregg Appliances, the Issuer will not have any independent operations. The Issuer will derive all of its revenues and cash flow from its subsidiary, Gregg Appliances. HHG Distributing, LLC is a wholly owned subsidiary of Gregg Appliances and has substantially no assets or operations.

2007 DEBT REFINANCING

In connection with the consummation of this offering, we intend to amend and restate our existing $75 million revolving credit facility to, among other things, increase the amount to $100 million, and enter into a new $100 million term loan B. In addition, we intend to offer to purchase all of our outstanding senior notes pursuant to a tender offer we commenced on                     , 2007 and redeem all of our outstanding junior notes pursuant to their terms.

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USE OF PROCEEDS

The estimated net proceeds to us from this offering will be approximately $             million based on an assumed initial public offering price of $             per share, the mid-point of the price range set forth on the front cover of this prospectus after deducting estimated discounts, commissions and expenses payable by us. We intend to use the net proceeds from this offering, together with cash on hand and borrowings under our new credit facilities, to (i) redeem $25.0 million in aggregate principal amount of our junior notes pursuant to their terms and (ii) offer to purchase all of our outstanding senior notes pursuant to the tender offer we commenced on                     , 2007. The junior notes and the senior notes accrue interest at 6% and 9%, respectively, and have a maturity date of February 3, 2015 and February 1, 2013, respectively. Until the proceeds are used for these purposes, we intend to invest the proceeds in cash and cash equivalents. We will not receive any of the proceeds from the sale of shares of common stock offered by the selling stockholders.

DIVIDEND POLICY

We have not declared or paid any cash dividend on our capital stock since the recapitalization on February 3, 2005. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.

The terms of our existing revolving credit facility and senior notes indenture place restrictions on our ability to pay dividends and otherwise transfer assets to our stockholders and our future debt agreements, including our new credit facilities, will contain similar restrictions.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2006 (1) on an actual basis and (2) as adjusted to give pro forma effect to the IPO reorganization, this offering and the 2007 debt refinancing. The table below should be read in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Consolidated Financial Statements” and the historical consolidated financial statements of Gregg Appliances and related notes included elsewhere in this prospectus.

	As of December 31, 2006
	Actual		Pro Forma
	(unaudited) (dollars in thousands)
Cash and cash equivalents	$	3,219	$	3,219
Revolving credit facility(1)		—		52,420	(2)
New term loan		—		100,000	(3)
Senior notes		145,000		—	(4)
Junior notes		18,122		—	(5)
Total debt		163,122		152,420
Total stockholders’ equity		7,864		32,244	(6)
Total capitalization	$	170,986	$	184,664

(1) The existing revolving credit facility provides for up to $75 million in borrowings and includes a $25 million sub-limit for letters of credit. Borrowings under the revolving credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. The existing revolving credit facility has a scheduled maturity of February 3, 2010. The amount outstanding under our revolving credit facility does not reflect outstanding letters of credit totaling $3.1 million as of December 31, 2006.

(2) Simultaneously with the closing of this offering, we expect to enter into an amended and restated $100 million revolving credit facility with a $             million sub-limit for letters of credit. Borrowings under the amended and restated revolving credit agreement will be subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. The amended and restated revolving credit facility is expected to have a five-year term. It is expected that the amended and restated revolving credit facility would have $52.4 drawn as of December 31, 2006 on a pro forma basis to pay fees and expenses associated with this offering and to fund a portion of the 2007 debt refinancing. We expect that the amount drawn on our amended and restated revolving credit facility will decrease by approximately $11.5 million for every $10 million of senior notes not purchased.

(3) In connection with the closing of this offering, we expect to enter into a new $100 million term loan B. We expect the new term loan B will have a six-year term. The proceeds will be used to fund the 2007 debt refinancing.

(4) We intend to offer to purchase all of our outstanding senior notes pursuant to a tender offer we commenced on                 , 2007. We have assumed that 100% of the senior notes will be purchased in the tender offer and that the purchase price will be based on the reference treasury rate plus a market premium plus interest to the closing date of the tender offer. The actual amount of the senior notes that we purchase and the purchase price may vary.

(5) In conjunction with the closing of this offering, the junior notes will be redeemed in accordance with their terms.

(6) After giving effect to the sale by us of              shares of common stock at an assumed initial public offering price of $             per share, the mid-point of the price range on the front cover of this prospectus, after deducting estimated underwriting discounts, commissions and estimated offering expenses payable by us.

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DILUTION

If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock upon completion of this offering.

Our net tangible book value as of December 31, 2006 was approximately $             million, or $             per share of our common stock. Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding before giving effect to this offering.

After giving effect to the sale by us of             shares of common stock in this offering at the assumed initial public offering price of $             per share after deducting estimated underwriting discounts and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value at December 31, 2006 would have been $             million, or $             per share of our common stock. This represents an immediate increase in net tangible book value of $             per share to our existing stockholders and an immediate dilution of $             per share to the new investors purchasing shares in this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share of common stock		$
Net tangible book value per share of common stock at December 31, 2006	$
Increase per share attributable to new investors	$
Pro forma as adjusted net tangible book value per share after this offering		$
Dilution per share to new investors	$

If the underwriters exercise their over-allotment option in full, our pro forma as adjusted net tangible book value will increase to $             per share, representing an increase to existing holders of $             per share, and there will be an immediate dilution of $             per share to new investors.

The following table sets forth, on an as adjusted basis at December 31, 2006, the number of shares of common stock purchased or to be purchased from us, the total consideration paid or to be paid and the average price per share paid or to be paid by existing holders of common stock and by the new investors, at an assumed initial public offering price of $             per share, before deducting estimated underwriting discounts and estimated offering expenses payable by us.

	Shares Purchased			Total Consideration			Average Price Per Share
	Number	Percent		Amount	Percent
Existing stockholders			%	$		%	$
New investors
Total			%			%	$

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share would increase (decrease) total consideration paid by new investors $            , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their overallotment option in full, our existing stockholders would own     % and our new investors would own    % of the total number of shares of common stock outstanding after this offering.

Sales by the selling stockholders in this offering will cause the number of shares held by existing stockholders to be reduced to              shares or             % of the total number of shares of our common stock

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outstanding after this offering. If the underwriters’ over-allotment option is exercised in full, the number of shares held by the existing stockholders after this offering would be reduced to              or             % of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors would increase to              or             % of the total number of shares of our common stock outstanding after this offering.

To the extent outstanding options are exercised, new investors will experience further dilution.

The number of shares purchased is based on              shares of common stock outstanding as of December 31, 2006. The discussion and table above exclude the following shares:

• 2,012,000 shares of common stock issuable upon the exercise of options outstanding as of the date of this offering, at a weighted average exercise price of $13.57; and

• An additional 1,500,000 shares of common stock reserved under our new equity incentive plan pursuant to which              options to purchase our common stock will be granted immediately upon the consummation of this offering with an exercise price equal to the offering price.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth our selected historical consolidated financial data and store operating information as of the dates and for the periods indicated. The selected historical consolidated statement of income and balance sheet data as of and for each of the fiscal years ended March 31, 2002, 2003, 2004, 2005 and 2006 are derived from, and are qualified in their entirety by, the historical audited consolidated financial statements of Gregg Appliances. The historical consolidated statement of income and balance sheet data for the nine months ended December 31, 2005 and 2006, are derived from and qualified in their entirety by, the unaudited consolidated financial statements of Gregg Appliances included elsewhere in this prospectus. For the fiscal years ended March 31, 2002, 2003, 2004 and for a portion of the fiscal year ended March 31, 2005, Gregg Appliances was required, pursuant to GAAP, to consolidate certain variable interest entities controlled by a former director and principal stockholder or members of his immediate family, from which we lease certain real property and our corporate airplane. Effective at the closing of the recapitalization of Gregg Appliances on February 3, 2005, Gregg Appliances was no longer required to consolidate the variable interest entities for accounting purposes. Thus the financial information for the period following the closing of the recapitalization does not include these entities. Historical results are not necessarily indicative of the results to be expected in the future. You should read the following data together with “Business,” “Unaudited Pro Forma Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements of Gregg Appliances and the related notes. In the following tables (including the footnotes thereto), dollars are in thousands, except per share data, store data and as otherwise indicated.

	Fiscal Year Ended March 31,															Nine Months Ended December 31,
	2002			2003			2004			2005			2006			2005			2006
Statement of Income Data:
Net sales	$	580,611		$	617,402		$	753,156		$	803,199		$	900,424		$	679,115		$	776,067
Cost of goods sold		406,453			422,862			513,408			548,105			616,512			468,272			538,134
Gross profit		174,158			194,540			239,748			255,094			283,912			210,843			237,933
Selling, general and administrative expenses		125,562			141,619			175,034			184,224			209,484			158,284			168,422
Net advertising expense		17,171			25,269			33,243			35,678			41,660			30,084			34,202
Stock-based compensation(1)		—			—			2,390			9,277			—			—			104
Gain on transfer of extended maintenance obligations(2)		—			—			—			—			(27,850	)		(27,850	)		—
Restructuring and asset impairment charges(3)		—			—			—			—			1,009			1,320			—
Income from operations		31,425			27,652			29,081			25,915			59,609			49,005			35,205
Other expense (income):
Interest expense		2,060			1,311			1,052			3,866			19,000			14,495			13,624
Interest income		(749	)		(444	)		(278	)		(977	)		(231	)		(189	)		(66	)
Gain related to early extinguishment of debt		—			—			—			—			(39	)		—			(440	)
Recapitalization transaction costs		—			—			—			4,745			—			—			—
Minority interest		690			484			99			3,813			—			—			—
Total other expense		2,001			1,351			873			11,447			18,730			14,306			13,118
Income before income taxes and cumulative effect of accounting change		29,424			26,301			28,208			14,468			40,879			34,699			22,087
Income tax expense (benefit)(4)		—			—			—			(14,780	)		18,664			16,230			9,072
Income before cumulative effect of accounting change		29,424			26,301			28,208			29,248			22,215			18,469			13,015
Cumulative effect of change in accounting principle(5)		—			(1,313	)		—			—			—			—			—
Net income	$	29,424		$	24,988		$	28,208		$	29,248		$	22,215		$	18,469		$	13,015

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	Fiscal Year Ended March 31,															Nine Months Ended December 31,
	2002			2003			2004			2005			2006			2005			2006
Per Share Data:
Basic net income per share(6)	$	0.98		$	0.83		$	0.91		$	1.02		$	1.57		$	1.31		$	0.91
Diluted net income per share(7)	$	0.98		$	0.83		$	0.91		$	1.02		$	1.57		$	1.31		$	0.91
Weighted average shares outstanding—Basic		30,031,429			30,031,429			30,905,294			28,790,285			14,153,666			14,124,591			14,249,204
Weighted average shares outstanding—Diluted:		30,031,429			30,031,429			30,905,324			28,806,645			14,153,666			14,124,591			14,267,690
Other Data:
EBITDA(8)	$	35,167		$	33,592		$	38,353		$	25,992		$	70,107		$	56,808		$	44,626
Adjusted EBITDA(9)		34,218			32,200			38,787			38,295			44,596			31,478			44,186
Capital expenditures		11,122			25,194			15,546			15,212			19,046			13,805			13,190
Store Data:
Number of stores, end of period		42			48			54			58			67			67			74
Total store square footage (in thousands)		1,444			1,624			1,862			2,009			2,333			2,333			2,547
Net sales per store (in thousands)(10)	$	14,129		$	13,438		$	13,897		$	14,005		$	14,074		$	14,251		$	14,256
Net sales per square foot(11)	$	406		$	388		$	397		$	404		$	405		$	411		$	409
Comparable store sales(12)		1.7	%		(5.5	)%		1.3	%		0.4	%		1.7	%		3.2	%		2.9	%
Inventory turnover(13)		6.8	x		6.1	x		6.8	x		7.3	x		7.0	x		4.9	x		5.6	x
Balance Sheet Data (at end of period):
Cash and cash equivalents	$	33,101		$	9,151		$	8,648		$	8,642		$	2,301		$	2,184		$	3,219
Total assets		163,902			176,581			177,767			293,104			283,764			319,713			322,580
Total debt		26,382			15,226			15,383			182,285			178,242			182,633			163,122
Minority interest		8,569			10,523			16,478			—			—			—			—
Stockholders’ equity (deficit)		21,726			26,802			25,589			(32,847	)		(5,154	)		(9,027	)		7,864

(1) Stock-based compensation expense for fiscal 2004 and 2005 represents compensation expense related to stock issued in exchange for a nonrecourse note and stock appreciation rights representing variable awards to our employees under our previous stock appreciation right and option programs which were terminated at the time of the recapitalization. Stock compensation expense for the nine months ended December 31, 2006 represents compensation expense of share-based payment awards in accordance with the provisions of Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment (SFAS 123R).

(2) Prior to October 2005, we sold third-party extended service plans, or ESPs, on appliances and sold our own self-insured ESPs on electronics. We also maintained a service and repair network to service the electronics ESPs we sold and to do repair work on behalf of certain electronics manufacturers for manufacturer warranty claims. In October 2005, we began outsourcing our self-insured electronics warranties and exited the product service business to remove exposure to warranty liabilities and reduce the costs and complexity associated with product service and repair. The gain reflects the transfer of our existing extended service plan liabilities on electronics to General Electric Company, or GE, the party that serviced our appliance warranties less the payment made to GE.

(3) This amount represents the restructuring charges related to the outsourcing of our product service and repair offerings.

(4) For all periods prior to the recapitalization, we operated as an S corporation and were not subject to U.S. federal and certain state income taxes. Upon the closing of the recapitalization, we became subject to U.S. federal and certain state and local income taxes applicable to C corporations.

(5) In fiscal 2003, we recorded a cumulative effect adjustment of $1,313 resulting from vendor consideration initially recognized in fiscal 2002 that is recorded as a reduction in inventory cost (rather than as a reduction in advertising expense) under EITF Issue 02-16, Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor.

(6) Basic net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding.

(7) Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares from outstanding options and stock appreciation rights been issued.

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(8) EBITDA represents net income before income tax expense, interest income, interest expense, depreciation and amortization and cumulative effect of change in accounting principle. We have presented EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by analysts, investors and other interested parties in the evaluation of companies in our industry. Management uses EBITDA as a measurement tool for evaluating our actual operating performance compared to budget and prior periods. Other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measure of performance under GAAP and should not be considered as a substitute for net income prepared in accordance with GAAP. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

• EBITDA does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our debt;

• EBITDA does not reflect tax expense or the cash requirements necessary to pay for tax obligations; and

• Although depreciation and amortization are non-cash charges, the asset being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements.

We compensate for these limitations by relying primarily on our GAAP results and using EBITDA only as a supplement.

(9) Adjusted EBITDA is defined as EBITDA, without giving effect to stock-based compensation, the consolidation of the variable interest entities which are no longer consolidated, the non-capitalized transaction costs related to the recapitalization, the restructuring charges related to the outsourcing of our product service and repair offerings, the gain on transfer of extended maintenance obligations, the gain related to the early extinguishment of debt, the IPO reorganization, this offering and the 2007 debt refinancing. We have presented Adjusted EBITDA because we believe that the exclusion of these non-recurring items is necessary to provide the most accurate measure of our core operating results and as a means to evaluate period-to-period results. We have provided this information to analysts, investors and other third parties to enable them to perform more meaningful comparisons of past, present, and future operating results and as a means to evaluate the results of our on-going operations. Management uses Adjusted EBITDA to determine payment levels on our executives’ incentive compensation plan as well as our compliance with certain covenants under our credit agreement that are calculated based on similar measures. Other companies in our industry may calculate Adjusted EBITDA differently than we do. Adjusted EBITDA is not a measure of performance under GAAP and should not be considered as a substitute for net income prepared in accordance with GAAP. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

• Adjusted EBITDA does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our debt;

• Adjusted EBITDA does not reflect tax expense or the cash requirements necessary to pay for tax obligations; and

• Although depreciation and amortization are non-cash charges, the asset being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as a supplement.

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The following table contains a reconciliation of our net income determined in accordance with GAAP to EBITDA and Adjusted EBITDA:

	Fiscal Year Ended March 31,															Nine Months Ended December 31, 2006
	2002			2003			2004			2005			2006			2005			2006
Net income	$	29,424		$	24,988		$	28,208		$	29,248		$	22,215		$	18,469		$	13,015
Income tax (benefit) expense		—			—			—			(14,780	)		18,664			16,230			9,072
Interest income		(749	)		(444	)		(278	)		(977	)		(231	)		(189	)		(66	)
Interest expense		2,060			1,311			1,052			3,866			19,000			14,495			13,624
Depreciation and amortization		4,432			6,424			9,371			8,635			10,459			7,803			8,981
Cumulative effect of change in accounting principle		—			1,313			—			—			—			—			—
EBITDA		35,167			33,592			38,353			25,992			70,107			56,808			44,626
Stock-based compensation adjustment(a)		—			—			2,390			9,277			—			—			—
De-consolidation adjustment(b)		(949	)		(1,392	)		(1,956	)		(1,719	)		—			—			—
Recapitalization transaction costs(c)		—			—			—			4,745			—			—			—
Restructuring charges related to service exit(d)		—			—			—			—			2,378			2,520			—
Gain on transfer of extended maintenance obligations(e)		—			—			—			—			(27,850	)		(27,850	)		—
Gain related to early extinguishment of debt(f)		—			—			—			—			(39	)		—			(440	)
Adjusted EBITDA	$	34,218		$	32,200		$	38,787		$	38,295		$	44,596		$	31,478		$	44,186

(a) Represents compensation expense recognized in fiscal 2004 and 2005 related to stock issued in exchange for a nonrecourse note receivable and stock appreciation rights representing variable awards granted to our employees.

(b) Reflects amounts required to be included in our financial statements from the consolidation of certain variable interest entities that lease property to us. These adjustments add back rent expense paid to related entities, eliminate the depreciation and amortization related to the leased properties and eliminate the minority interest and the interest related to third-party secured debt on some of the leased property.

(c) Represents non-capitalized transaction costs related to the recapitalization.

(d) Represents restructuring charges related to the outsourcing of our product services and repair offerings.

(e) Represents the gain on the transfer of certain extended service plan warranties.

(f) Represents the gain related to the early extinguishment of debt. These adjustments represent the difference between the purchase price and the carrying value of our senior notes, as well as the associated write-off of debt issuance costs.

(10) Net sales per store is calculated by dividing net sales for the trailing 12-month period, as adjusted to exclude service revenues, for stores open the entire period by the number of stores open the entire period. Net sales excludes service revenues of $10,165, $10,679, $11,507, $13,670, $7,443, $7,443, and $0 for fiscal 2002, 2003, 2004, 2005, 2006, and the nine months ended December 31, 2005 and 2006, respectively.

(11) Net sales per square foot is calculated by dividing net sales for the trailing 12-month period, as adjusted to exclude service revenues, for stores open the entire period by the total square feet for those stores. Net sales excludes service revenues of $10,165, $10,679, $11,507, $13,670, $7,443, $7,443 and $0 for fiscal 2002, 2003, 2004, 2005, 2006, and the nine months ended December 31, 2005 and 2006, respectively.

(12) Comprised of net sales at stores operating for at least 14 full months, including remodeled and relocated locations and our website.

(13) Inventory turnover for the specified period is calculated by dividing our cost of goods sold for the trailing 12-month period by the average of the beginning and ending inventory for that period.

30

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated financial statements have been derived from the application of pro forma adjustments to our historical condensed financial statements appearing elsewhere in this prospectus.

The unaudited pro forma condensed consolidated balance sheet gives effect to:

• this offering;

• expected borrowings under our amended and restated revolving credit facility;

• expected borrowings from a new term loan B; and

• the application of proceeds from the foregoing items to the purchase of our senior notes and related payment of purchase premiums and accrued interest, the redemption of our junior notes and the payment of transaction fees and expenses related to this offering and 2007 debt refinancing

as if these transactions had occurred on December 31, 2006.

The unaudited pro forma condensed consolidated statements of income for the fiscal year ended March 31, 2006, and the nine months and 12 months ended December 31, 2006 give effect to this offering and the 2007 debt refinancing as described above as if they had occurred on April 1, 2005. The unaudited pro forma condensed consolidated statements of income do not give effect to the transaction costs, including the expected loss on early extinguishment of debt, and the related income tax benefit due to their non-recurring nature for the respective periods presented herein. We estimate that we would have recorded a one-time charge of approximately $19.1 million, net of tax, related to the early extinguishment of our debt in the fiscal year that the 2007 debt refinancing occurred.

Preparation of the pro forma information was based on assumptions deemed appropriate by our management. The pro forma information is unaudited and is not necessarily indicative of the results which would have actually occurred if this offering and the 2007 debt refinancing had been consummated at the beginning of the periods presented, nor does it purport to represent the financial position and results of operations for future periods. You should read the following summary financial, pro forma and other data together with “IPO Reorganization”, “2007 Debt Refinancing”, “Use of Proceeds”, “Capitalization”, “Business”, “Selected Historical Consolidated Financial and Other Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements of Gregg Appliances and related notes appearing elsewhere in this prospectus. In the following tables (including the footnotes thereto), dollars are in thousands, except as otherwise indicated.

31

hhgregg, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Income

	For the Fiscal Year Ended March 31, 2006
	Actual			Adjustments			Pro Forma
Net sales	$	900,424		$	—		$	900,424
Cost of goods sold		616,512			—			616,512
Gross profit		283,912			—			283,912
Selling, general and administrative expenses		209,484			—			209,484
Net advertising expense		41,660			—			41,660
Gain on transfer of extended maintenance obligations		(27,850	)		—			(27,850	)
Restructuring and asset impairment charges		1,009			—			1,009
Income from operations		59,609			—			59,609
Other expense (income):
Interest expense (1)		19,000			(9,241	)		9,759
Interest income		(231	)		—			(231	)
Gain related to early extinguishment of debt		(39	)		39			—
Total other expense		18,730			(9,202	)		9,528
Income before income taxes		40,879			9,202			50,081
Income tax expense (2)		18,664			3,681			22,345
Net income	$	22,215		$	5,521		$	27,736
Basic net income per share (3)	$	1.57					$
Diluted net income per share (3)	$	1.57					$
Weighted average shares outstanding – Basic (3)		14,153,666
Weighted average shares outstanding – Diluted (3)		14,153,666

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.

32

hhgregg, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Income

	For the Nine Months Ended December 31, 2006
	Actual			Adjustments			Pro Forma
Net sales	$	776,067		$	—		$	776,067
Cost of goods sold		538,134			—			538,134
Gross profit		237,933			—			237,933
Selling, general and administrative expenses		168,422			—			168,422
Net advertising expense		34,202			—			34,202
Stock-based compensation		104			—			104
Income from operations		35,205			—			35,205
Other expense (income):
Interest expense (1)		13,624			(4,455	)		9,169
Interest income		(66	)		—			(66	)
Gain related to early extinguishment of debt		(440	)		440			—
Total other expense		13,118			(4,015	)		9,103
Income before income taxes		22,087			4,015			26,102
Income tax expense (2)		9,072			1,606			10,678
Net income	$	13,015		$	2,409		$	15,424
Basic net income per share (3)	$	0.91					$
Diluted net income per share (3)	$	0.91					$
Weighted average shares outstanding – Basic (3)		14,249,204
Weighted average shares outstanding – Diluted (3)		14,267,690

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.

33

hhgregg, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Statement of Income

	For the 12 Months Ended December 31, 2006
	Actual			Adjustments			Pro Forma
Net sales	$	997,376		$	—		$	997,376
Cost of goods sold		686,374			—			686,374
Gross profit		311,002			—			311,002
Selling, general and administrative expenses		219,622			—			219,622
Net advertising expense		45,778			—			45,778
Stock-based compensation		104			—			104
Restructuring and asset impairment charges		(311	)		—			(311	)
Income from operations		45,809			—			45,809
Other expense (income):
Interest expense (1)		18,129			(6,302	)		11,827
Interest income		(108	)		—			(108	)
Gain related to early extinguishment of debt		(479	)		479			—
Total other expense		17,542			(5,823	)		11,719
Income before income taxes		28,267			5,823			34,090
Income tax expense (2)		11,506			2,329			13,835
Net income	$	16,761		$	3,494		$	20,255
Basic net income per share (3)	$	1.18					$
Diluted net income per share (3)	$	1.18					$
Weighted average shares outstanding – Basic (3)		14,247,553
Weighted average shares outstanding – Diluted (3)		14,261,481

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.

34

hhgregg, Inc. and Subsidiaries

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income

(1) The adjustments to interest expense are comprised of the following:

	For the Fiscal Year Ended March 31, 2006			For the Nine Months Ended December 31, 2006			For the 12 Months Ended December 31, 2006
Elimination of interest on senior notes	$	(15,106	)	$	(10,255	)	$	(13,943	)
Elimination of interest and accretion on junior notes		(1,824	)		(1,505	)		(1,865	)
Elimination of amortization of historical deferred financing costs		(1,594	)		(1,157	)		(1,564	)
Elimination of interest and fees for existing revolving credit facility		(568	)		(762	)		(904	)
Sub-total	$	(19,092	)	$	(13,679	)	$	(18,276	)
Interest on term loan B borrowings		6,109			5,521			7,229
Interest and fees under amended and restated revolving credit facility		3,249			3,333			4,252
Amortization of new deferred financing costs		493			370			493
Total	$	(9,241	)	$	(4,455	)	$	(6,302	)

We have assumed we will purchase 100% of the senior notes and that the purchase price will be based on the reference treasury rate plus a market premium. The actual amount of the senior notes that we purchase and the purchase price may vary from our assumption. We expect that the amount of interest expense will increase by $0.2 million for every $10 million of senior notes not purchased. In addition, assuming we purchase 100% of the senior notes, an increase or decrease of 0.25% in the interest rate on our new revolving credit facility or term loan B would result in an increase or decrease of annual interest expense of $0.1 million or $0.3 million, respectively. The interest expense presented above does not include the effect of capitalized interest.

(2) Adjustment to reflect taxes on the pro forma income before income taxes at an assumed rate of 40.0%, for all respective periods.

(3) Pro forma assumes that the                  primary shares expected to be issued pursuant to this offering were outstanding for the fiscal year ended March 31, 2006 and the nine and 12 months ended December 31, 2006.

35

hhgregg, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Balance Sheet

	As of December 31, 2006
	Actual			Adjustments (1)			Pro Forma
ASSETS
Current assets:
Cash and cash equivalents	$	3,219		$	—		$	3,219
Accounts receivable-trade		22,091			—			22,091
Accounts receivable-other		13,971			—			13,971
Merchandise inventories		128,634			—			128,634
Prepaid expenses and other current assets		4,333			—			4,333
Deferred income taxes (2)		1,882			12,747			14,629
Total current assets		174,130			12,747			186,877
Net property and equipment		52,250			—			52,250
Deposits		774			—			774
Deferred financing costs, net (3)		7,933			(5,133	)		2,800
Deferred income taxes		87,208			—			87,208
Other		285			—			285
Total assets	$	322,580		$	7,614		$	330,194
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable – third party	$	1,857		$	—		$	1,857
Accounts payable – vendors		77,454			—			77,454
Line of credit		—			52,420			52,420
Customer deposits		18,560			—			18,560
Accrued liabilities		39,896			(6,064	)		33,832
Total current liabilities		137,767			46,356			184,123
Long-term liabilities:
Long-term debt		163,122			(63,122	)		100,000
Other liabilities		13,827			—			13,827
Total long-term liabilities		176,949			(63,122	)		113,827
Total liabilities		314,716			(16,766	)		297,950
Stockholders’ equity:
Preferred stock		—			—			—
Common stock (4)		113,823			43,500			157,323
Accumulated deficit (2)		(105,744	)		(19,120	)		(124,864	)
		8,079			24,380			32,459
Notes receivable for common stock		(215	)		—			(215	)
Total stockholders’ equity		7,864			24,380			32,244
Total liabilities and stockholders’ equity	$	322,580		$	7,614		$	330,194

The accompanying notes are an integral part of the unaudited pro forma condensed consolidated financial statements.

36

hhgregg, Inc. and Subsidiaries

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

(1) The unaudited pro forma condensed consolidated balance sheet gives effect to the following estimated sources and uses of funds from this offering and the 2007 debt refinancing as if they had occurred on December 31, 2006 and excludes all proceeds from the offering of shares by the selling stockholders included in this offering:

Source of funds:
Assumed proceeds from issuance of common stock (a)	$	50,000
Assumed borrowings from amended and restated revolving credit facility		52,420
Assumed borrowings from new term loan B		100,000
	$	202,420
Uses of funds:
Purchase of aggregate principal of senior notes (b)	$	145,000
Purchase premium on senior notes (b)		16,356
Redemption of accreted book value of junior notes		18,122
Payment of remaining original issue discount on junior notes (c)		6,878
Deferred financing costs incurred on the amendment and restatement of our revolving credit facility and new term loan B		2,800
Accrued interest on senior and junior notes		6,064
Underwriters’ commissions and discounts on primary offering		3,500
Estimated fees and expenses associated with tender offer on senior notes		700
Estimated fees and expenses associated with this offering		3,000
	$	202,420

(a) Represents expected primary proceeds of $50.0 million from the issuance of common stock in this offering.

(b) Assumes that we will purchase 100% of the senior notes and that the purchase price is based on the reference treasury rate plus a market premium. Subsequent to December 31, 2006, we purchased approximately $28.8 million of additional senior notes at an average price of 102.09% on the open market. The actual amount of the senior notes that we purchase and the purchase price may vary.

(c) Represents payment of the remaining original issue discount on the junior notes in accordance with their terms.

(2) Reflects the following adjustments to accumulated deficit and deferred income taxes related to this offering and the 2007 debt refinancing:

Loss on the early extinguishment of debt (a)	$	(31,867	)
Income tax benefit associated with this offering and the 2007 debt refinancing, at an assumed income tax rate of 40.0%		12,747
Total	$	(19,120	)

(a) Reflects the one-time charge for the estimated loss on the early extinguishment of debt associated with the 2007 debt refinancing, comprised of the following components:

Purchase premium on senior notes (see footnote 1 (b) above)	$	(16,356	)
Payment of remaining original issue discount on junior notes		(6,878	)
Estimated fees and expenses associated with tender offer on senior notes		(700	)
Write-off of deferred financing costs on senior and junior notes and revolving credit facility		(7,933	)
Total	$	(31,867	)

37

hhgregg, Inc. and Subsidiaries

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

(3) Reflects the write-off of deferred financing costs of $7.9 million related to our senior notes, junior notes and the existing revolving credit facility and the recording of $2.8 million related to our amended and restated revolving credit facility and term loan B.

(4) Reflects the following adjustments to common stock related to this offering:

Assumed proceeds from issuance of common stock (see footnote (1) (a) above)	$	50,000
Underwriters’ commissions and discounts on primary offering		(3,500	)
Estimated fees and expenses associated with this offering		(3,000	)
Total	$	43,500

38

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this discussion and analysis of our financial condition and results of operations in conjunction with our “Selected Historical Consolidated Financial and Other Data,” “Unaudited Pro Forma Consolidated Financial Statements” and the consolidated financial statements of Gregg Appliances and the related notes appearing elsewhere in this prospectus. This discussion and analysis of our financial condition and results of operations assumes that the IPO reorganization has been completed and Gregg Appliances is our wholly owned subsidiary. The information in this section contains forward-looking statements (see “Cautionary Note Regarding Forward-Looking Statements”). Our actual results may differ significantly from the results suggested by these forward-looking statements and from our historical results. Some factors that may cause our results to differ are described in the “Risk Factors” section of this prospectus.

IPO Reorganization

The Issuer is a recently formed Delaware corporation and does not have any independent operations. Immediately prior to the effectiveness of the registration statement on Form S-1 of which this prospectus is a part, the stockholders of Gregg Appliances will contribute their shares of Gregg Appliances to the Issuer in exchange for common stock of the Issuer. As a result of this contribution, the stockholders of Gregg Appliances will own common stock of the Issuer in the same proportion as their ownership in Gregg Appliances prior to the contribution, and Gregg Appliances will be a wholly owned subsidiary of the Issuer. Immediately after the contribution, GIC, the majority stockholder of Gregg Appliances, will be dissolved and the common stock of the Issuer held by GIC will be distributed to its members in proportion to their ownership interest in GIC.

Recapitalization of Gregg Appliances

We consummated a recapitalization of Gregg Appliances on February 3, 2005. As part of the recapitalization, a wholly owned subsidiary of GIC, an entity formed by an affiliate of Freeman Spogli, merged with and into Gregg Appliances and GIC acquired $111.2 million of equity of Gregg Appliances. The equity holders of Gregg Appliances at the time of the recapitalization received consideration of approximately $286.4 million. As part of the consideration, Gregg Appliances issued to certain of its stockholders $25.0 million principal amount of junior notes. The junior notes will be redeemed with the proceeds of this offering pursuant to their terms. Three of our management stockholders retained a portion of the common stock of Gregg Appliances held by them before the recapitalization.

Immediately following the consummation of the recapitalization of Gregg Appliances on February 3, 2005, GIC owned 80.01% of the outstanding common stock of Gregg Appliances and the remaining 19.99% of the common stock of Gregg Appliances was held by three of its management stockholders. GIC and the former stockholders of Gregg Appliances made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, or the Code, to treat the recapitalization as an asset purchase for tax purposes. This has the effect of increasing the tax basis of our assets and thereby lowering our cash taxes. In accordance with Emerging Issues Task Force, or EITF, 94-10, Accounting by a Company for the Income Tax Effect of Transactions among or with Its Shareholders, under Financial Accounting Standards Board, or FASB Statement No. 109, the tax benefit of the recapitalization transaction was recorded as an equity transaction. The total deferred taxes set up at February 3, 2005 as a result of these transactions were $115.5 million. For all periods prior to the recapitalization Gregg Appliances operated as an S corporation for U.S. federal and state income tax purposes, which means that taxable income of Gregg Appliances was taxed at the stockholder level rather than at the corporate level. Following the recapitalization Gregg Appliances no longer qualifies as an S corporation, and we are now subject to U.S. federal and certain state and local income taxes applicable to C corporations. In addition, as a result of the accounting treatment for the recapitalization, our stockholders’ equity account initially became negative because the payments to our stockholders whose shares of our capital stock were redeemed in the recapitalization (converted to cash in the merger) reduced retained earnings.

39

Consolidation of Certain Related Party Entities

As of the date of the recapitalization, we leased seven of our stores and our corporate airplane from entities controlled by a director and principal stockholder of our company, or members of his immediate family. Until September 30, 2004, we leased three additional stores from entities controlled by members of the principal stockholder’s extended family, the properties for which were sold to unaffiliated third parties on September 30, 2004. Pursuant to FASB Interpretation No. 46R, Consolidation of Variable Interest Entities, or FIN 46R, for periods prior to the recapitalization, we were required to consolidate these related party entities for accounting purposes, effective as of March 31, 2004. Prior to the effective date of FIN 46R, we were required to consolidate these entities based on guidance in EITF Issue No. 90-15, Impact of Nonsubstantive Lessors, Residual Value Guarantees, and Other Provisions in Leasing Transactions and EITF Topic No. D-14, Transactions involving Special-Purpose Entities.

FIN 46R explains how to identify variable interest entities and how an entity determines whether it has a controlling financial interest in a variable interest entity through means other than voting control and, accordingly, whether it should consolidate that entity. Because, prior to the recapitalization, we and the Throgmartin entities from which we lease or have leased property were controlled by the same persons or their immediate family members and because of our contractual lease arrangements with these variable interest entities, we were required to consolidate these entities for accounting purposes.

Effective upon the closing of the recapitalization, we were no longer required to consolidate these entities because we were no longer under common control with them and there was no longer an implicit guarantee.

We discuss the impact of the consolidation of the related party entities on our financial condition and results of operations below. In general, our historical consolidated balance sheets prior to the recapitalization reflect:

• an increase in property and equipment as the result of the inclusion of the leased property;

• an increase in indebtedness to account for the third-party debt secured by some of the property owned by these entities; and

• a minority interest in earnings with respect to the variable interest entities.

As a result of the consolidation of the related party entities, our historical consolidated statements of income prior to the recapitalization reflected:

• a decrease in rent expense included in selling, general and administrative expenses due to the elimination of rent expense owed to the related entities;

• an increase in depreciation and amortization expense included in selling, general and administrative expense related to the leased properties;

• an increase in gain on sale of property related to the leased properties owned by the related party entities;

• an increase in interest expense related to the third-party secured debt on properties that we lease from related party entities; and

• a minority interest by related party entities.

For a more complete description of the impact of the adoption of FIN 46R on our historical consolidated financial statements, see notes 1(s) and 11 to the notes to our audited consolidated financial statements included elsewhere in this prospectus and the table of selected statement of income data for our company in “Results of Operations.”

40

Overview

We are a specialty retailer of consumer electronics, home appliances, mattresses and related services operating under the names hhgregg^® and Fine Lines^®. We operate 77 stores located in Ohio, Indiana, Georgia, Tennessee, Kentucky, North Carolina, South Carolina and Alabama.

Over the past several years, we have added stores in existing markets where we believe we could gain market share from our competitors and leverage our distribution network and advertising costs. We have also expanded into new markets where we believe there was significant underlying demand for our product mix and customer services as well as an attractive demographic profile. We plan to continue to add stores in existing and new markets. We target markets that meet our demographic and competitive criteria, including areas that demonstrate above-average economic growth, strong household incomes, growth in new housing starts and/or remodeling activity. Our markets typically include most or all of our major competitors. Consistent with our expansion in the past, we plan to continue to follow our approach of building store density in each major market and distribution area, which in the past has helped us to improve our market share and realize operating efficiencies.

For each new market, we develop a plan that establishes annual revenue and market share targets for the entire market and includes a store roll-out plan aimed at achieving those targets. As we build out a market, our most recently opened stores may reduce the comparable store sales performance of other stores. This potential impact on comparable store performance is acceptable to us as long as our total share of a market and our total market sales and profits increase meaningfully over the prior period. After we have completed building out a market, which generally takes between 18 to 30 months, and our stores have reached targeted performance levels, we shift our focus to driving comparable store sales growth for that market. We plan to open approximately 13 to 15 new stores in fiscal 2008, primarily by entering the Raleigh/Durham and Birmingham markets and, beginning in fiscal 2009, we plan to enter the Florida market which we expect will provide significant store growth opportunities in the future.

Both the consumer electronics and home appliance industries have experienced attractive CAGRs over the past several years, driven by product innovations and introductions particularly in the premium segment that we target. Our average selling prices for major appliances have increased for the last three fiscal years in part due to innovations in high efficiency laundry and three-door refrigeration. This trend has added stability to our sales performance relative to our consumer electronics-focused competitors. The consumer electronics industry depends on new products to drive sales and profitability. Innovative, heavily-featured digital flat panel products are typically introduced at relatively high price points, which are then gradually reduced to drive consumption. As prices for these products fall below the $3,000 range, more of our customers purchase them, with the result that the average selling price of the video products we carry and the quantity we sell have risen in each of the last three fiscal years.

The innovation in certain consumer electronic product categories, such as DVD players, camcorders and audio products, has not been sufficient to maintain average selling prices. These mature products have become commoditized and have experienced price declines and reduced margins. As certain of our products become commodities, we focus on selling the next generation of products, such as 1080p and 120hz technology, while carefully managing the selection of commoditized products that we offer. We must continue to shift our sales mix to newer, higher-margin items or increase our unit sales at a rate greater than the decline in product prices. Our past experience is that we have been able to shift our product mix to newer, higher-margin products.

Digital products, such as home theater systems, have become increasingly complex and require sophisticated instruction and, in many cases, home installation. Consequently, our strategy of employing knowledgeable sales personnel and providing superior post-sale support is well-suited to meet customer demand for these products. Additionally, mattresses and most major appliances require home delivery and installation, further leveraging our delivery and installation expertise. The majority of our large screen television, major appliance and mattress customers purchase our delivery or installation service.

41

Prior to October 2005, we sold third-party extended service plans, or ESPs, on appliances and sold our own self-insured ESPs on electronics. We also maintained a service and repair network to service the electronics ESPs we sold and to do repair work on behalf of certain electronics manufacturers for manufacturer warrantee claims. In October 2005, we began outsourcing our self-insured electronics warranties and exited the product service business to remove exposure to warranty liabilities and reduce the escalating costs and complexity associated with product service and repair. We transferred our existing extended service plan liabilities on electronics to General Electric Company, or GE, the party that serviced our appliance warranties. We paid GE approximately $21.5 million to assume these obligations and recognized a pre-tax net gain of approximately $27.9 million for the elimination of the obligations, which reflected the net liabilities transferred to GE less the $21.5 million payment to GE. We also incurred a restructuring and asset impairment charge of $2.4 million during fiscal 2006 related to exiting the service business.

This transfer allowed us to recognize the sale of ESPs and the related expense at the time of the sale of a product rather than deferring the revenue associated with the sale and amortizing the direct selling costs, including commissions, over the term of the service agreement. Upon the transfer, we no longer recognized revenue or expenses related to ESPs sold in prior periods and no longer had any liability for ESPs. We also no longer received revenue from manufacturers for performing service and repair on their behalf and no longer incurred any related costs. The comprehensive impact to our results of operations following this transfer was a reduction in gross margin percent, offset by a larger reduction in SG&A expense, as a percentage of net sales.

Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amount of assets and liabilities, revenues, expenses and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and on other assumptions that we believe to be relevant under the circumstances and these estimates form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions and/or conditions. We continually evaluate the information used to make these estimates as our business and the economic environment changes. We use estimates throughout our financial statements, but the accounting policies and estimates we consider most critical, are described below:

Vendor Allowances. We receive funds from our vendors for volume rebates, marketing support, training and other discount and promotional programs, which we record on an accrual basis as a reduction of either the related expense or the related product cost. The majority of our vendors support us with cooperative advertising. The programs are typically negotiated at least annually and are generally based on product purchase volume.

We accrue allowances based on the satisfaction of terms of the program and sales of qualifying products even though we may not receive the allowances until the end of a quarter or year. When we record vendor allowances we must determine the period in which they should be recognized in the condensed consolidated statements of income and whether they should be reflected as adjustments to cost of goods sold or the related expense, as provided in EITF Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Cash Consideration Received from a Vendor. If the programs provide reimbursement for specific, incremental and identifiable costs incurred to promote a vendor’s products, the allowances, credits, or payments are recorded as a reduction of the related expense in the period in which the cost is incurred.

We also deduct amounts for cooperative advertising from our payments to manufacturers for inventory purchases based on individual agreements with our manufacturers. For all other vendor programs, the allowances, credits or payments are recorded as a reduction to the related inventory cost (rather than as a reduction to advertising expense) and recognized in cost of goods sold when the product is sold.

Self-Insured Liabilities. We are self-insured for certain losses related to workers’ compensation, general liability, motor vehicle and health insurance. We obtain third-party insurance coverage to limit our exposure to

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certain of these claims. When estimating our self-insurance liabilities, we consider a number of factors, including historical claims experience, loss estimates and information provided by third-party administrators. We periodically review our assumptions, estimates and the information provided by third-party administrators to determine the adequacy of our reserves for our self-insured liabilities. Our reserves for self-insurance were $5.1 million and $4.1 million as of December 31, 2006 and March 31, 2006, respectively.

Stock-based Compensation. On April 1, 2006 we adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R). As we are considered a nonpublic entity, as defined in SFAS 123R, that used the minimum value method for pro forma disclosures under SFAS No. 123, Accounting for Stock-Based Compensation (FAS 123), we were required to apply the prospective transition method at the date of adoption. Under this transition method, we apply SFAS 123R to any new awards and to any awards modified, repurchased or cancelled since April 1, 2006. For all awards outstanding on March 31, 2006, we continue to apply the intrinsic-value-based method of accounting prescribed by APB Opinion No. 25. Under the provisions of SFAS No. 123R, we will not provide pro forma disclosures for outstanding awards accounted for under the intrinsic value method. In accordance with APB Opinion No. 25, we did not recognize compensation expense in connection with employee stock option grants upon adoption because stock options, granted prior to April 1, 2006 were granted at exercise prices equal to or greater than the fair value of the common stock at the date of grant.

The calculation of share-based employee compensation expense involves estimates that require management’s judgment. These estimates include the fair value of each of the stock option awards granted, which is estimated on the date of grant using a Black-Scholes option pricing model. There are two significant elements in the Black-Scholes option pricing model: expected volatility and expected term. We use an independent valuation advisor to assist us in projecting expected stock price volatility. We also consider both the historical volatility of our peer group’s stock price as well as implied volatilities from exchange-traded options on our peer group’s stock in accordance with Staff Accounting Bulletin No. 107 (SAB 107). Our expected term represents the period that our stock options are expected to be outstanding and is determined using the simplified method described in SAB 107. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate, and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from its estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. See Note 6 to the consolidated financial statements for a further discussion on stock-based compensation.

Income Taxes. We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

SFAS No. 109, Accounting for Income Taxes, establishes financial accounting and reporting standards for the effect of income taxes. We are subject to U.S. federal and certain state and local income taxes applicable to C corporations. We use significant estimates that require management’s judgment in calculating our provision for income taxes. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position, results of operations, or cash flows.

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In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment and ensuring that the deferred tax asset valuation allowance is adjusted as appropriate.

Description of Certain Line Items

The following is a description of additional components of certain line items from our consolidated financial statements:

Net Sales. Net sales consists of gross revenues from sales of products, delivery and installation and other services, net of promotions, rebates and discounts. Net sales also include revenues from sales of our extended service plans, or ESPs. In October 2005, a third party assumed our obligations related to our previously sold ESPs. See note 15 to our audited consolidated financial statements for further discussion of the transaction related to our ESPs. When we were the primary obligor on the ESP, we recognized revenue from the sale of the ESP ratably over the life of the contract. When the primary obligor on the ESP is a third party, we recognize commission revenue from the sale of the ESP at the time of sale, net of the portion paid to the third-party obligor.

Cost of Goods Sold. Cost of goods sold is defined as the cost of gross inventory sold, including any handling charges, in-bound freight expenses and physical inventory losses, less the recognized portion of certain vendor allowances. Because we do not include costs related to our store distribution facilities in cost of goods sold, our gross profit may not be comparable to that of other retailers that include these costs in cost of goods sold and in the calculation of gross profit.

Selling, General & Administrative Expenses (SG&A). SG&A includes the majority of our costs (other than cost of goods sold, net advertising expense, stock-based compensation (in accordance with SFAS No. 123R), gain on transfer of extended maintenance obligations, restructuring and asset impairment charges and interest) including wages, rent, depreciation and amortization, taxes (other than income taxes), insurance, utilities, delivery costs, distribution costs, service expense, repairs and maintenance of stores and equipment, and other general administrative expenses.

Net Advertising Expense. Net advertising expense consists of advertising costs as incurred reduced by payments received from vendors under cooperative advertising.

Stock-based Compensation. Stock-based compensation reflects all compensation expense associated with stock options and stock appreciation rights issued under the Equity Incentive Plan as further discussed in note 7 to our audited consolidated financial statements.

Gain on Transfer of Extended Maintenance Obligations. Gain on transfer of extended maintenance obligations reflects the net liabilities transferred less payments made to a third party to transfer our extended maintenance obligations.

Restructuring and Asset Impairment Charges. Restructuring and asset impairment charges consist of charges associated with our decision to outsource our product service and repair offerings. These charges reflect fair market adjustments to the carrying value of long-lived assets, primarily comprised of vehicles and equipment, and severance related charges in relation to certain eliminated positions.

Other Expense (Income). Other expense (income) includes interest expense, interest income, gain related to early extinguishment of debt, recapitalization transaction costs, and minority interest.

Deferred Revenue on Extended Maintenance Agreements. Deferred revenue on extended maintenance agreements represents the liability recognized on our balance sheet with respect to sales of ESPs under which we were the obligor. We amortize the deferred revenue on extended maintenance agreements where we were the primary obligor ratably over the life of the ESP contract.

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Results of Operations

Summary of Key Operating Trends for our Company on a De-consolidated Basis. As discussed in “Consolidation of Certain Related Party Entities,” we were required, pursuant to GAAP, to consolidate certain variable interest entities controlled by a former director and principal stockholder of ours or members of his immediate family prior to the recapitalization of Gregg Appliances on February 3, 2005. Following the recapitalization, we were no longer required to consolidate these related party entities for accounting purposes because these entities were no longer under common control and there was no longer an implicit guarantee. As a result of the consolidation of the related party entities, our accompanying consolidated statements of income are not comparable. A detailed description of these related party transactions can be found in “Certain Relationships and Related Party Transactions”. The following condensed statements of income for the years ended March 31, 2004, 2005 and 2006 and the nine months ended December 31, 2005 and 2006 have been presented on a consolidated basis, as well as on a de-consolidated basis, for comparative purposes.

Certain Operating Information

The following table reflects our operating results on a consolidated basis including the variable interest entities for the years and periods indicated as a percentage of net sales.

	Fiscal Year Ended March 31,						Nine Months Ended December 31,
	2004		2005		2006		2005		2006
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	68.2		68.2		68.5		69.0		69.3
Gross profit	31.8		31.8		31.5		31.0		30.7
Selling, general and administrative expenses	23.2		22.9		23.3		23.3		21.7
Net advertising expense	4.4		4.4		4.6		4.4		4.4
Stock-based compensation	0.3		1.2		—		—		—
Gain on transfer of extended maintenance obligations	—		—		(3.1	)	(4.1	)	—
Restructuring and asset impairment charges	—		—		0.1		0.2		—
Income from operations	3.9		3.2		6.6		7.2		4.5
Other expense	0.1		1.4		2.1		2.1		1.7
Income tax expense (benefit)	—		(1.8	)	2.1		2.4		1.2
Net income	3.7	%	3.6	%	2.5	%	2.7	%	1.7	%

Certain percentage amounts do not sum to total due to rounding.

The following table reflects our operating results on a de-consolidated basis excluding the variable interest entities for the years and periods indicated as a percentage of net sales.

	Fiscal Year Ended March 31,						Nine Months Ended December 31,
	2004		2005		2006		2005		2006
Net sales	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	68.2		68.2		68.5		69.0		69.3
Gross profit	31.8		31.8		31.5		31.0		30.7
Selling, general and administrative expenses	23.4		23.5		23.3		23.3		21.7
Net advertising expense	4.4		4.4		4.6		4.4		4.4
Stock-based compensation	0.3		1.2		—		—		—
Gain on transfer of extended maintenance obligations	—		—		(3.1	)	(4.1	)	—
Restructuring and asset impairment charges	—		—		0.1		0.2		—
Income from operations	3.7		2.7		6.6		7.2		4.5
Other expense (income)	(0.1	)	0.9		2.1		2.1		1.7
Income tax expense (benefit)	—		(1.8	)	2.1		2.4		1.2
Net income	3.7	%	3.6	%	2.5	%	2.7	%	1.7	%

Certain percentage amounts do not sum to total due to rounding.

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The following table sets forth our selected historical de-consolidated statement of income data for the years and periods indicated (dollars are in thousands).

	Fiscal Year Ended March 31,									Nine Months Ended December 31,
	2004			2005			2006			2005			2006
Net sales	$	753,156		$	803,199		$	900,424		$	679,115		$	776,067
Cost of goods sold		513,408			548,105			616,512			468,272			538,134
Gross profit		239,748			255,094			283,912			210,843			237,933
Selling, general and administrative expenses		176,460			188,469			209,484			158,284			168,526
Net advertising expense		33,243			35,678			41,660			30,084			34,202
Stock-based compensation		2,390			9,277			—			—			—
Gain on transfer of extended maintenance obligations		—			—			(27,850	)		(27,850	)		—
Restructuring and asset impairment charges		—			—			1,009			1,320			—
Income from operations		27,655			21,670			59,609			49,005			32,205
Other expense (income)		(553	)		7,202			18,730			14,306			13,118
Income tax expense (benefit)		—			(14,780	)		18,664			16,230			9,072
Net income	$	28,208		$	29,248		$	22,215		$	18,469		$	13,015

Nine Months Ended December 31, 2006 Compared to Nine Months Ended December 31, 2005

Net Sales. Net sales for the nine months ended December 31, 2006 increased 14.3% to $776.1 million from $679.1 million for the nine months ended December 31, 2005. This increase in sales was primarily attributable to the addition of seven stores during the past 12 months and a 2.9% increase in comparable stores sales during the first nine months of fiscal 2007. The comparable store sales performance was driven by gains in video, major appliances and mattresses. Video sales performance was fueled by flat panel television sales growth outpacing the sales decline in projection and tube televisions.

Gross Profit. As a percentage of sales, our gross profit margin declined to 30.7% for the nine months ended December 31, 2006 from 31.0% for the nine months ended December 31, 2005. The decline in gross profit, as a percentage of sales, was primarily attributable to our decision to outsource our product service and repair work to third-party providers as well as to sell third-party ESPs along with the related change in ESP revenue recognition associated with these changes. This decline was more than offset by improvements in our SG&A expense measured as a percentage of sales. These reductions in gross profit were partially offset by increases in core product margins.

Selling, General and Administrative Expenses (SG&A). SG&A expenses decreased by 1.6%, as a percentage of sales to 21.7% for the nine months ended December 31, 2006. The decrease in SG&A expense as a percentage of sales was primarily attributable to the outsourcing of our product service and repair work to third-party providers and our decision to sell third-party extended service plans last year, as well as the leveraging effect of our sales growth across many SG&A categories.

Net Advertising Expense. As a percentage of sales, net advertising expense for the nine months ended December 31, 2006 remained flat at 4.4% from the nine months ended December 31, 2005.

Gain on Transfer of Extended Maintenance Obligations. During the nine months ended December 31, 2005, in connection with our efforts to exit our product service and repair offerings, we entered into an agreement with a third party to transfer our product service obligations for previously sold extended service plans. We paid the third party $21.5 million to assume our product service obligation and recognized a $27.9 million pretax gain on the sale.

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Restructuring and Asset Impairment Charges. In connection with our transition to outsource our product service and repair services, we recorded restructuring and asset impairment charges of $1.3 million during the nine months ended December 31, 2005 in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. These charges represented asset impairments of certain long-lived assets and severance and benefits costs. The severance and benefits costs resulted in a cash outlay while the asset impairments were recognized as non-cash charges to write-off certain assets.

Other Expense. Other expense declined to $13.1 million for the nine months ended December 31, 2006 from $14.3 million for the nine months ended December 31, 2005. This decrease in other expense was due to a decrease in net interest expense of $0.7 million and a $0.4 million gain related to early extinguishment of debt representing the difference between the purchase price and the carrying value of the repurchased senior notes during the nine months ended December 31, 2006, along with the associated write-off of debt issuance costs.

Income Tax Expense. The decrease in income tax expense during the nine months ended December 31, 2006 compared to the nine months ended December 31, 2005 was primarily the result of a reduction in income before income taxes in the current year compared to the prior year. In addition, during the nine months ended December 31, 2005, tax law changes were enacted to change the tax rates of certain states in which we operate which resulted in an additional $2.1 million of tax expense.

Fiscal Year Ended March 31, 2006 Compared to Fiscal Year Ended March 31, 2005

Net Sales. Net sales in fiscal 2006 increased 12.1% to $900.4 million from $803.2 million in fiscal 2005. This increase in sales was primarily attributable to the addition of nine stores and a 1.7% increase in comparable stores sales in fiscal 2006. The comparable store sales performance was primarily driven by sales growth in the major appliance and video categories, with gains in flat panel televisions outpacing the sales decline in projection and tube television sales.

Gross Profit. As a percentage of sales, our gross profit margin decreased by 0.3% to 31.5% in fiscal 2006 from 31.8% in fiscal 2005. The decrease in gross profit, as a percentage of sales, was primarily attributable to our decision to outsource our product service and repair work to third-party providers as well as to sell third-party ESPs.

Selling, General and Administrative Expenses. On a consolidated basis, SG&A expenses increased by 0.4%, as a percentage of sales, from 22.9% in fiscal 2005 to 23.3% for fiscal 2006. As adjusted to remove the impact of the consolidation of our variable interest entities, SG&A expenses decreased by 0.2%, as a percentage of sales, from 23.5% in fiscal 2005 to 23.3%. The decrease in SG&A expense as a percentage of sales, on a de-consolidated basis, for the year ended March 31, 2006 was primarily attributable to a decrease of approximately 0.8% from the outsourcing of our product service and repair work to third-party providers and our decision to sell third-party ESPs, partially offset by increases in professional fees, utilities and depreciation expense.

Net Advertising Expense. As a percentage of sales, net advertising expense increased 0.2% to 4.6% in fiscal 2006 from 4.4% in fiscal 2005. The increase was primarily attributable to the timing of excess advertising rebates received from vendors which were treated as a reduction in inventory in accordance with EITF 02-16, Accounting by a Customer (including a Reseller) for Cash Consideration Received from a Vendor.

Stock-Based Compensation. During fiscal 2005, we recognized stock-based compensation expense of $9.3 million related to the outstanding stock issued in exchange for a nonrecourse note and stock appreciation rights representing variable awards under Accounting Principles Board, or APB, Opinion No. 25 and related interpretations. Accordingly, stock-based compensation expense was recorded to reflect the increase in fair value of our common stock prior to our recapitalization. No stock-based compensation expense was recognized in

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fiscal 2006 in accordance with APB Opinion No. 25 as the stock options granted in fiscal 2006 were fixed awards and the exercise price of the stock options granted was equal to or greater than the fair value of the common stock on the date of grant.

Gain on Transfer of Extended Maintenance Obligations. In connection with our efforts to exit our product service and repair offerings, we entered into an agreement with a third party in fiscal 2006 to transfer our product service obligations for previously sold extended service plans. We paid the third party $21.5 million to assume our product service obligations and recognized a $27.9 million gain on the sale. The unrelated third party is now the obligor on virtually all of the ESPs we sell.

Restructuring and Asset Impairment Charges. In connection with our transition to outsource our product service and repair services, we recorded restructuring and asset impairment charges of $1.0 million during fiscal 2006 in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. These charges represented asset impairments of certain long-lived assets and severance and benefits costs. The severance and benefits costs resulted in a cash outlay while the asset impairments were recognized as non-cash charges to write-off certain assets.

Other Expense (Income). Other expense, including recapitalization transaction costs and minority interest, on a consolidated basis increased $7.3 million from $11.4 million in fiscal 2005 to $18.7 million in fiscal 2006. As adjusted to remove the impact of the consolidation of our variable interest entities, other expense increased $11.5 million. This increase in other expense was primarily comprised of an increase in interest expense on the notes issued in connection with our recapitalization, partially offset by $4.7 million in transaction costs in fiscal 2005 related to the recapitalization.

Income Tax Expense (Benefit). Prior to February 3, 2005, Gregg Appliances was organized as an S corporation. Accordingly, the allocable share of taxable income or loss was included in the tax returns of the stockholders and income taxes were not reflected in our consolidated financial statements. Following the recapitalization, we no longer qualify as an S corporation and are now subject to U.S. federal and certain state and local income taxes applicable to C corporations. During the year ended March 31, 2006 we recorded income tax expense of $18.7 million which was comprised of $18.6 million of deferred income tax expense, primarily the result of an increase in income before income taxes, and $0.1 million of current state tax expense. During fiscal 2005, we recorded deferred income tax assets of $115.5 million as of the date we converted from an S corporation to a C corporation, of which $16.6 million was credited to income tax benefit and $98.9 million was credited to retained earnings.

Fiscal Year Ended March 31, 2005 Compared to Fiscal Year Ended March 31, 2004

Net Sales. Net sales in fiscal 2005 increased 6.6% to $803.2 million from $753.2 million in fiscal 2004. This increase in net sales was primarily attributable to the net addition of five stores coupled with a 0.4% increase in comparable store sales in fiscal 2005. The comparable store sales performance was primarily driven by strong sales performance in the video category, particularly flat panel televisions, partially offset by weaker tube television sales.

Gross Profit. As a percentage of sales, our gross profit margin remained flat at 31.8% from fiscal 2004 which reflected similar vendor support as well as relatively stable margins across product lines.

Selling, General and Administrative Expenses. On a consolidated basis, SG&A expenses decreased by 0.3%, as a percentage of sales, from 23.2% in fiscal 2004 to 22.9% for fiscal 2005. As adjusted to remove the impact of the consolidation of our variable interest entities, SG&A expenses increased by 0.1%, as a percentage of sales, from the comparable prior year period to 23.5% for fiscal 2005. The increase in SG&A expense as a percentage of sales, on a de-consolidated basis, for the 12 months ended March 31, 2005 was primarily attributable to increases in rent, property taxes and service expense, partially offset by decreases in depreciation and insurance.

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Net Advertising Expense. As a percentage of sales, net advertising expense in fiscal 2005 remained flat at 4.4% from fiscal 2004.

Stock-Based Compensation. During fiscal 2005, we recognized stock-based compensation expense of $9.3 million related to the outstanding stock issued in exchange for a nonrecourse note and stock appreciation rights representing variable awards under APB Opinion No. 25 and related interpretations. Accordingly, the increase of $6.9 million in stock-based compensation expense in fiscal 2005 from $2.4 million in fiscal 2004 was due to an increase in the value of common stock and accelerated vesting of stock appreciation rights related to the recapitalization.

Other Expense (Income). Other expense, including recapitalization transaction costs and minority interest, on a consolidated basis increased $10.5 million from $0.9 million in fiscal 2004 to $11.4 million in fiscal 2005. The increase in other expense on a consolidated basis was the result of $4.7 million of transaction costs related to the recapitalization, an increase of $3.7 million in minority interest expense and an increase in interest expense due to the notes issued in connection with the recapitalization. As adjusted to remove the impact of the consolidation of our variable interest entities, other expense increased $7.8 million from income of $0.6 million in fiscal 2004 to expense of $7.2 million in fiscal 2005. This increase in other expense was primarily the result of the increase in interest expense on the notes issued in connection with our recapitalization and transaction costs related to the recapitalization.

Income Tax Expense (Benefit). Prior to February 3, 2005, Gregg Appliances was organized as an S corporation. Accordingly, the allocable share of taxable income or loss was included in the tax returns of the stockholders and income taxes were not reflected in our financial statements. Following the recapitalization, we no longer qualify as an S corporation and are now subject to U.S. federal and certain state and local income taxes applicable to C corporations. During the year ended March 31, 2005 we recorded deferred income tax assets of $115.5 million as of the date our company was converted from an S corporation to a C corporation, of which $16.6 million was credited to income tax benefit and $98.9 million was credited to retained earnings.

Liquidity and Capital Resources

Following the recapitalization, we are no longer required to consolidate the variable interest entities for accounting purposes. See “Consolidation of Certain Related Party Entities”. Thus, the results presented below for fiscal 2006 are the same on both a consolidated and de-consolidated basis.

The following table presents a summary on a consolidated basis of our net cash (used in) provided by operating, investing and financing activities (dollars are in thousands):

	Fiscal Year Ended March 31,									Nine Months Ended December 31,
	2004			2005			2006			2005			2006
Net cash (used in) provided by operating activities	$	34,170		$	38,331		$	(524	)	$	(13,486	)	$	23,725
Net cash (used in) provided by investing activities		(12,466	)		2,555			(16,143	)		(12,323	)		(8,414	)
Net cash provided by (used in) financing activities		(24,661	)		(40,892	)		10,326			19,351			(14,393	)

The following table presents a summary on a de-consolidated basis of our net cash (used in) provided by operating, investing and financing activities (dollars are in thousands):

	Fiscal Year Ended March 31,									Nine Months Ended December 31,
	2004			2005			2006			2005			2006
Net cash (used in) provided by operating activities	$	32,875		$	36,750		$	(524	)	$	(13,486	)	$	23,725
Net cash (used in) provided by investing activities		(5,860	)		(7,646	)		(16,143	)		(12,323	)		(8,414	)
Net cash provided by (used in) financing activities		(30,050	)		(28,940	)		10,326			19,351			(14,393	)

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Our liquidity requirements arise primarily from our need to fund working capital requirements and capital expenditures.

Capital Expenditures. We make capital expenditures principally to fund our expansion strategy, which includes, among other things, investments in new stores and new distribution facilities, remodeling and relocation of existing stores, as well as information technology and other infrastructure-related projects that support our expansion. Capital expenditures were $13.2 million, $13.8 million, $19.0 million and $15.2 million for the nine months ended December 31, 2006 and 2005, fiscal 2006 and fiscal 2005, respectively, on both a consolidated and de-consolidated basis. For fiscal 2004, capital expenditures were $15.5 million and $11.8 million on a consolidated and de-consolidated basis, respectively. The increase in capital expenditures during fiscal 2006 is primarily attributable to a greater number of store openings during the period and continued investments in our information systems. We opened nine new stores, acquired one new store, and relocated one store during fiscal 2007. Furthermore, we plan to continue to invest in our management information system infrastructure as well as incur capital remodeling and improvement costs. Collectively, our gross capital outlay is expected to range between $18 million to $20 million for fiscal 2007. This is expected to be partially offset by proceeds from sale leaseback transactions totaling approximately $7 million in fiscal 2007.

Cash Provided by (Used in) Operating Activities. Cash provided by (used in) operating activities primarily consists of net income as adjusted for increases or decreases in working capital and non-cash depreciation and amortization. Cash provided by (used in) operating activities was $23.7 million, $(13.5) million, $(0.5) million, $38.3 million and $34.2 million for the nine months ended December 31, 2006 and 2005 and the years ended March 31, 2006, 2005 and 2004, respectively. As adjusted to remove the impact of our variable interest entities, cash provided by (used in) operating activities was $23.7 million, $(13.5) million, $(0.5) million, $36.8 million and $32.9 million for the same periods. The increase in cash flows for the nine months ended December 31, 2006 as compared to the comparable prior year period was primarily the result of non-recurring payments and gains on the transfer of extended maintenance obligations to a third party during fiscal 2006. The decrease in cash flows, on a de-consolidated basis, for fiscal 2006 as compared to fiscal 2005 was primarily a result of a $21.5 million cash payment related to the transfer of our extended maintenance obligations to a third party, an increase in inventories and a decrease in net income. These items were partially offset by an increase in accounts payable. The increase in cash flows, on a de-consolidated basis, for fiscal 2005 as compared to fiscal 2004 was a result of a slight increase in net income and improved management of working capital, partially offset by an increase in inventories.

Cash (Used in) Provided by Investing Activities. Cash (used in) provided by investing activities on a consolidated basis was $(8.4) million, $(12.3) million, $(16.1) million, $2.6 million and $(12.5) million for the nine month periods ended December 31, 2006 and 2005, and the years ended March 31, 2006, 2005 and 2004, respectively. As adjusted to remove the impact of our variable interest entities, cash used in investing activities was $(8.4) million, $(12.3) million, $(16.1) million, $(7.6) million and $(5.9) million for the same periods. The differences between the nine-month periods ended December 31, 2006 and 2005 was attributable to non-comparable sale and leaseback activity. The increase for fiscal 2006 as compared to fiscal 2005, on a de-consolidated basis, was primarily due to an increase in capital expenditures, reduction of sales of property and equipment and repayment of notes receivable in fiscal 2005. The increase for fiscal 2005, on a de-consolidated basis, as compared to fiscal 2004, was primarily due to an increase in capital expenditures and sales of property and equipment.

Cash (Used in) Provided by Financing Activities. On a consolidated basis, financing activities (used) provided $(14.4) million, $19.4 million, $10.3 million, $(40.9) million and $(24.7) million in cash for the nine-month periods ended December 31, 2006 and 2005, and the years ended March 31, 2006, 2005 and 2004, respectively. On a de-consolidated basis, financing activities (used) provided $(14.4) million, $19.4 million, $10.3 million, $(28.9) million and $(30.1) million for the same periods. The change between the nine-month periods ended December 31, 2006 and 2005 was primarily due to payments for the early extinguishment of debt in fiscal 2007 and an increase in bank overdrafts in fiscal 2006. The change for fiscal 2006 as compared to fiscal 2005 was primarily due to distributions to stockholders of $300.6 million in fiscal 2005, partially offset by

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proceeds from debt issuance, proceeds from common stock issuances, net payments on related party notes payable, payment of financing costs related to the recapitalization transaction in fiscal 2005 and an increase in book overdrafts. The decrease in 2005 as compared to fiscal 2004 was primarily due to net recapitalization activities.

Senior Notes. In connection with our recapitalization on February 3, 2005, Gregg Appliances issued $165 million in unsecured 9% senior notes. Interest on the senior notes is payable in arrears twice a year on February 1 and August 1. The senior notes will mature on February 3, 2013. On September 1, 2005, the interest on the senior notes increased to 9.25% per annum pursuant to section 4 of the Registration Rights Agreement dated February 3, 2005 between us and the initial purchasers of the senior notes. The interest rate increase remained in effect until the Registration Statement covering the exchange offer with respect to the senior notes was declared effective by the SEC and the exchange offer was consummated. On November 4, 2005, the exchange offer was consummated and the interest rate consequently decreased to 9.0% per annum.

Through December 31, 2006, we had purchased $20.0 million of our senior notes of which $15.5 million was purchased during the first nine months of fiscal 2007 at a weighted-average price of 92.45% of face value. For the three and nine months ended December 31, 2006, we recorded a gain related to the early extinguishment of debt representing the difference between the purchase price and the carrying value of the senior notes, net of related capitalized debt issuance costs of approximately $0.1 million and $0.4 million, respectively. Subsequent to December 31, 2006, we have purchased an additional $28.8 million of our senior notes at a weighted-average price of 102.09% of face value. We intend to offer to purchase all of our outstanding senior notes with the proceeds of this offering.

Junior Notes. On February 3, 2005 Gregg Appliances issued to certain of our stockholders, $25.0 million in unsecured 6% junior subordinated notes based on an effective interest rate of 11%. These junior notes are subordinated to the senior notes and any payment of principal thereof directly or indirectly is deferred until the payment in full of all of the senior debt. Unless there is a default or an event of default under any senior debt, interest on the junior notes is payable in arrears on February 1 and August 1. The junior notes will mature on February 3, 2015. Accretion of the discount, which is included in interest expense in the accompanying condensed consolidated statements of income, was approximately $0.4 million for the nine months ended December 31, 2006. We intend to redeem all of our outstanding junior notes pursuant to their terms with the proceeds of this offering and the additional debt refinancing described below.

Revolving Credit Facility. Gregg Appliances has a revolving credit agreement with a bank group for up to $75 million. The facility includes a $25 million sub-limit for letters of credit. Borrowings under the revolving credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. Interest on borrowings is payable monthly at a fluctuating rate based on the bank’s prime rate or LIBOR plus an applicable margin. Until the agreement was amended on January 17, 2007, we paid an annual commitment fee of 3/8% on the unused portion of the facility. Under the amended agreement the annual commitment fee was reduced to 1/4% on the unused portion of the facility.

The interest rate based on the bank’s prime rate as of December 31, 2006 was 8.50%. As of December 31, 2006, we had no borrowings outstanding under our existing credit facility and $3.1 million of letters of credit outstanding. As of December 31, 2006, the total borrowing availability under our existing credit facility was $65.4 million.

The senior notes and our existing revolving credit facility are guaranteed by our wholly owned subsidiary, HHG Distributing, LLC, which has substantially no assets or operations. The guarantee is full and unconditional.

The revolving credit agreement and senior notes indenture contain restrictions on incurring additional debt or liens, making investments, selling assets or making equity repurchases, debt prepayments and transactions with affiliates. The revolving credit agreement also contains restrictions on mergers and a financial covenant

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requiring maintenance of a minimum fixed charge coverage ratio if excess liquidity, as defined, falls below a certain threshold. The revolving credit agreement prohibits the payment of dividends and the senior notes indenture restricts payment of dividends unless certain conditions are met. We were in compliance with the restrictions and covenants in the debt agreements at December 31, 2006.

In connection with the consummation of this offering, we intend to amend and restate our existing revolving credit facility to increase our revolving credit facility to $100 million and enter into a new $100 million term loan B.

Long Term Liquidity. Anticipated cash flows from operations and funds available from our new credit facilities, together with cash on hand, should provide sufficient funds to finance our operations for at least the next 12 months. As a normal part of our business, we consider opportunities to refinance our existing indebtedness, based on market conditions. Although we may refinance all or part of our existing indebtedness in the future, there can be no assurances that we will do so. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may require us to seek additional debt or equity financing. There can be no guarantee that financing will be available on acceptable terms or at all. Additional debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions.

Impact of Inflation

The impact of inflation and changing prices has not been material to our revenue or net income in any of the last three fiscal years. Highly competitive market conditions and the general economic environment minimized inflation’s impact on the selling prices of our products and our expenses. In addition, price deflation and the continued commoditization of key technology products affects our ability to increase our gross profit margin.

Contractual Obligations

Our contractual obligations at March 31, 2006, were as follows (dollars are in millions):

	Payments due by period
	Total		Less than 1 year		1-3 years		4-5 years		More than 5 years
Operating lease obligations	$	189.2	$	22.9	$	42.4	$	34.9	$	89.0
Junior and senior notes		185.5		—		—		—		185.5
Interest payable on junior and senior notes		114.6		15.9		31.9		31.9		34.9
Total	$	489.3	$	38.8	$	74.3	$	66.8	$	309.4

We lease certain retail stores, warehouse and office space, our corporate airplane and vehicles under operating leases. Our noncancellable lease agreements expire through March 31, 2026, require various minimum annual rentals and contain certain options for renewal. Certain of these leases are with related parties, including one of our stockholders. The majority of the real estate leases require payment of property taxes, normal maintenance and insurance on the properties. Total rent expense with respect to real property was approximately $21.2 million, $16.3 million and $13.9 million in fiscal 2006, 2005 and 2004, respectively. As adjusted to add back the reduction in rent expense attributable to the consolidation of our variable interest entities, total rent expense for our real property would have been approximately $21.2 million, $18.3 million and $15.9 million in fiscal 2006, 2005 and 2004, respectively. Contingent rentals based upon sales are applicable to certain of the store leases. Contingent rent expense was approximately $0.2 million in fiscal 2006 and 2005 and $0.1 million in fiscal 2004, respectively. Total rental expense with respect to real property has increased as a result of the increase in the number of our stores.

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Off Balance Sheet Items

Other than operating leases, we do not have any off balance sheet arrangements. We finance some of our development programs through sale and leaseback transactions, which involve selling stores to unrelated parties and then leasing the stores back under leases that are accounted for as operating leases in accordance with GAAP. A summary of our operating lease obligations by fiscal year is included in the “Contractual Obligations” section above. Additional information regarding our operating leases is available in “Business—Properties,” and Note 8, Leases, of the Notes to our audited consolidated financial statements, included in this prospectus.

Recently Issued Accounting Standards

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires all entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This eliminates the exception to account for such awards using the intrinsic value-based method previously allowable under APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123R allows implementation using a modified version of prospective application, under which compensation expense for the unvested portion of previously granted awards and all new awards will be recognized on or after the date of adoption. SFAS No. 123R is effective for annual reporting periods beginning on or after June 15, 2005. We adopted SFAS No. 123R effective April 1, 2006 using the prospective method and the adoption did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error Corrections. SFAS No. 154 requires retrospective application for voluntary changes in accounting principle unless impractical to do so. Retrospective application refers to the application of a different accounting principle to previously issued financial statements as if that principle had always been used. This Statement is effective for our fiscal year beginning April 1, 2006. The impact of SFAS 154 will depend on the accounting change, if any, in a future period.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006 with earlier adoption permitted at the beginning of a fiscal year if interim financial statements for that year have not been issued. We are currently evaluating the impact, if any, the adoption of FIN 48 will have on the consolidated financial statements.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006. Early application is encouraged, but not required. We are currently assessing the impact, if any, that the adoption of SAB No. 108 will have on our operating income or net earnings. The cumulative effect, if any, of applying the provisions of SAB No. 108 will be reported as an adjustment to beginning-of-year retained earnings.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement applies to previous accounting pronouncements that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after December 15, 2007. We are currently evaluating the impact, if any, the adoption of SFAS No. 157 will have on our operating income or net earnings.

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Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in the floating rate interest on the outstanding debt under our revolving credit facility. As of December 31, 2006, we had no cash borrowings under our revolver. We are not currently exposed to market risk from currency fluctuations as all our purchases are dollar-denominated. We do not hedge interest rate exposure. We will consider entering into interest rate swap agreements at such times as we deem appropriate.

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INDUSTRY OVERVIEW

The consumer electronics and home appliance industries have demonstrated strong growth, driven by new product innovations, particularly in the premium categories. According to the CEA and the Association of Home Appliance Manufacturers, or AHAM, U.S. consumers spent a combined total of $164.5 billion on consumer electronics and home appliances during 2006, representing an increase of 12.3% from 2005.

Consumer electronics and home appliances are distributed through several different channels, including mass merchant, specialty retail stores, home improvement superstores, home office retailers, discount stores, single- and multi-unit independent dealers, and direct-to-customer channels. A shift in consumer preferences toward large flat screen television technology, as well as higher-end, more-sophisticated appliances has raised the importance of delivery and installation services. The availability of these types of services is increasingly becoming a key differentiating factor among retail channels. Mass merchants, for example, do not offer the delivery and installation required for larger and more complex home theater and appliance products.

Consumer Electronics Industry

According to the CEA, sales of consumer electronics increased at a CAGR of 10.3% from $98.4 billion in 2002 to $145.7 billion in 2006 and are expected to grow by 6.5% in 2007 to $155.2 billion. Demand for consumer electronics products is expected to remain strong due to the continued adoption of digital and more portable products along with continuing trends of price declines for high ticket items, such as flat-panel televisions. According to the CEA, unit sales of digital products, including digital televisions and displays, MP3 players, digital cameras, personal computers, DVD players and recorders, portable CD equipment, PDAs and portable navigation devices, grew at a CAGR of 19.6% over the past five years.

Furthermore, the FCC mandate requiring that all televisions incorporate a digital tuner by 2009 has increased the replacement rate of non-digital televisions and contributes to the rapid adoption rate of flat panel display units. According to the CEA, sales of digital televisions were expected to climb to $23.3 billion in 2006 from $17.4 billion in 2005 representing an annual growth rate of 33.9%. Similarly, volume shipments were expected to grow to 18.7 million units in 2006 from 12.3 million in 2005 representing an annual growth rate of 52.0%. This implies a trend of declines in average selling prices of digital televisions which is fueling demand for larger screen size units as they become relatively more affordable to more consumers. This strong demand is bolstered by the introduction of new digital technology product advancements such as 120hz and 1080p, two technological developments that enhance display quality. The CEA projects that sales of digital televisions will grow from 21 million units in 2007 to 28 million units in 2009, representing a CAGR of 15.5%. This positive growth trend is expected to continue with Display Search projecting digital television sales to grow at a CAGR of 12.7% through 2010.

Appliance Industry

The major household appliance industry is influenced by a combination of economic, demographic, and lifestyle patterns. In a strong economy, evidenced by growing GDP and personal consumption expenditures, consumers often upgrade and purchase more luxury appliances. According to AHAM, U.S. consumer spending on major appliances reached $19.5 billion in 2006 despite a housing slowdown, representing an increase of 7.1% over 2005. According to AHAM, unit shipments of washers, dryers, dishwashers, refrigerators, freezers and ranges, are expected to increase by 1.8% in 2007 to 48.7 million units. We believe that average unit selling prices will continue to increase. Form and aesthetics have become an increasingly large determinant in consumers’ major appliance purchases, stimulating growth beyond the basic need for repair and replacement. Manufacturers of major household appliances increasingly rely on innovations that offer improved performance and convenience to boost brand image. Advanced products are being introduced for cooking, refrigeration, fabric care and dishwashing and are expected to continue to drive growth in this sector.

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BUSINESS

Our Company

We are a leading specialty retailer of premium video products, brand name appliances, audio products and accessories. We offer one of the most comprehensive brand and model selections of digital televisions and appliances in our industry, which we sell at competitive prices. We focus on providing our customers with a superior purchase experience from the time they first enter our stores to the delivery and installation of products in their homes. We distinguish ourselves from our competitors by employing an extensively trained, commissioned sales force that serves our customers with a consultative and educational sales approach. We also differentiate ourselves by offering same-day delivery of virtually all of our products. Over our 52-year history, our superior customer purchase experience has enabled us to successfully compete against the other leading video and appliance retailers. We currently operate 77 stores in Ohio, Indiana, Georgia, Tennessee, Kentucky, North Carolina, South Carolina and Alabama.

Our typical new store averages 30,000 square feet. Our stores are designed to be visually appealing to our customers and to highlight our premium selection of consumer electronics and appliances. Our store layout showcases our broad selection of products with advanced features and functionality utilizing LCD and plasma television display walls, extensive appliance displays and digital product centers. We carry over 100 models of flat panel televisions and 400 models of appliances, most of which we feature in our stores. Our stores are located in power centers or freestanding locations in high traffic areas, usually near our major competitors. We drive store traffic and enhance our brand recognition through year-round television advertising, weekly newspaper inserts, direct mail and web promotions.

Our sales can be categorized in the following manner:

• Video products: We offer a broad selection of the latest video products, such as LCD, plasma and micro-display televisions as well as DVD recorders. Representative brands include Hitachi, JVC, Mitsubishi, Panasonic, Philips, Samsung, Sharp, Sony and Toshiba. For the 12 months ended December 31, 2006, video products represented 45% of merchandise sales.

• Home appliances: We offer a broad selection of major appliances, including the latest generation refrigerators, ranges, dishwashers, freezers, washers and dryers, sold under a variety of leading brand names. Representative brands include Bosch, Frigidaire, GE, KitchenAid, LG, Maytag, Subzero, Thermador, Viking, Whirlpool and Wolf. For the 12 months ended December 31, 2006, home appliances represented 42% of merchandise sales.

• Other products and services: We also sell audio products, Serta mattresses, notebook computers and other select popular consumer electronics and accessories. We continue to evaluate other merchandise categories which will further enhance our product offering. Additionally, we provide our customers with a suite of services including ESPs, same-day delivery and installation and in-home repair and maintenance for which we receive revenues. Products such as home audio systems, notebook computers, cameras, telephones, satellite dish network systems and advanced cables generate and support store traffic and create cross-selling opportunities with our other products. Our suite of services is aimed at enhancing our customers’ superior purchase experience. For the 12 months ended December 31, 2006, other products and services represented 13% of merchandise sales.

We have a proven track record of growth and profitability led by a seasoned management team. Over the last four fiscal years, we have opened 28 new stores and have grown our net sales and Adjusted EBITDA at a compound annual rate of 13.4% and 11.5%, respectively, while significantly investing in corporate infrastructure to support further expansion. For the 12 months ended December 31, 2006, we generated net sales of $997.4 million and Adjusted EBITDA of $57.3 million, representing growth of 12.7% and 35.9%, respectively, over the prior trailing 12-month period.

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Competitive Strengths

We believe the following strengths contribute significantly to our success and position us for growth within our existing and new markets:

Superior customer purchase experience. We believe our in-store experience, high level of customer service and delivery and installation capabilities result in a superior customer purchase experience, which drives loyalty, referrals and repeat business. Our extensively trained, commissioned sales force enables us to educate our customers on the features and benefits of the products we offer. Rigorous ongoing training and performance-monitoring programs ensure that our sales associates are customer-focused and have the knowledge necessary to articulate the differences in our products. We believe that when fully informed, customers frequently purchase higher-end, feature-rich products. Our ability to drive sales of more advanced video and appliance products has made us an important partner for our vendors to present their state-of-the-art offerings and enables us to be among the first to introduce new products and technologies in our stores. This further enhances our brand image and customer experience.

We offer same-day delivery for virtually all of our products and also provide quality in-home installation services. This expertise significantly enhances our ability to sell large, more complex products. We believe no other major consumer electronics or appliance retailer provides same-day delivery on as wide a range of products as we do. Our network of nine central and regional distribution centers provides a local supply of inventory that supports our same-day delivery strategy. We conduct approximately 100,000 customer surveys each year to ensure customer satisfaction and provide us with feedback to continue improving our superior customer purchase experience.

Balanced mix of premium video products and appliances. We have one of the most extensive product and brand offerings of premium video products and home appliances. Our television and video products contribute significantly to our growth in sales and profitability while our appliance business provides us with additional financial stability and strong cash flow generation. As a result of our balanced merchandise mix of video products and appliances, our cash flow tends to be less seasonal and more stable over the long term relative to our consumer electronics-focused competitors. In addition, the combination of large screen televisions and appliances, each of which generally requires home delivery and installation, provides us with significant efficiencies in home delivery and installation.

Proven ability to successfully penetrate new markets. We believe our store concept is highly portable. We seek to expand into new markets with attractive demographic profiles where we believe there is significant underlying demand for our product mix and customer services. Since 1999, we have successfully opened or acquired stores in six new metropolitan markets, adding 63 stores, most recently in the Atlanta, Charlotte and Knoxville markets. Our strategy is to initially open multiple stores in a market to leverage our advertising spending, regional management and delivery and distribution infrastructure, followed by additional store openings spread over time to fill out the market. For example, when we entered the Charlotte market we initially opened four new stores and have added six stores in the Charlotte market since that time. This penetration allows us to capture strong market share in each of our markets.

Superior store economics. Our stores deliver compelling returns on investment. We closely adhere to our prototype store format when opening new stores, which helps simplify our operations and ensures consistent execution. We believe our store economic returns are superior to those of our major consumer electronics competitors.

During fiscal 2006 and 2007, our stores averaged net sales of $14.4 million per store and provided average four-wall EBITDA margins of approximately 7.5%. During this same period, our new stores required average net capital expenditures of $0.7 million and average initial net-owned inventory investments of $1.0 million. Our stores typically generate positive cash flow within three months of opening and provide a cash payback in less than two years. All of our stores produce positive four-wall EBITDA, which combined with our strong inventory turns, generates significant free cash flow to internally fund our growth.

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Experienced management team. Our senior management team has an average of 24 years of relevant industry experience and an average of over 13 years of experience with us. Under our management team’s leadership, we have grown our store base by a CAGR of 18.3% since fiscal 1998 and successfully entered six metropolitan markets. We believe our management’s depth of experience has enabled us to anticipate and respond effectively to industry trends and competitive dynamics while driving superior customer service and cultivating long-standing relationships with our vendors.

Key Growth Initiatives

We believe the following are key elements to our growth strategy:

Open stores in new and existing markets. We believe our proven business model and exceptional store economics will allow us to continue to expand into new high growth markets while continuing to build out our store base in existing markets. In fiscal 2008, we plan to accelerate our store growth by opening approximately 13 to 15 new stores, primarily by entering the Raleigh/Durham and Birmingham markets. Beginning in fiscal 2009, we intend to enter the highly attractive Florida market which we expect will provide significant store growth opportunities in the future. We believe our substantial investments in our managers-in-training program, real estate development, distribution infrastructure and our site selection experience will allow us to grow in a variety of new and existing markets. We intend to continue to grow our store count at a compound annual rate of 15% to 20% over the next several years from internally generated funds without adversely impacting our profitability or our superior customer purchase experience. We believe, based upon our new-store site selection criteria, that there are substantial opportunities to add stores in new and existing markets with a long-term potential for more than 400 hhgregg stores in the United States.

Capitalize on strong demand for premium product offerings. We are well positioned to benefit from the expected strong demand for premium video products as well as the continued stability of the appliances market. According to CEA, strong growth is expected to continue within our core video products category. Larger flat-panel screen sizes and continued product innovations, such as 120hz and 1080p technology, are driving strong growth of digital televisions. In addition, price declines in plasma and LCD televisions have generated broad- based consumer demand for flat panel products, particularly in larger screen sizes. Digital television price declines, coupled with the FCC mandate requiring that all televisions incorporate a digital tuner by 2009, have hastened the replacement of non-digital televisions and increased the adoption rate of flat panel display units. As a result of these positive industry trends, digital television sales are expected to grow at a compound annual rate of 12.7% through 2010, according to Display Search.

We believe that our appliance business is driven primarily by consumers who seek to upgrade the style and features of their appliances. There are a limited number of specialty retailers offering as broad a selection of appliances as we do and we expect to continue to gain market share in this segment due to our extensive product and brand assortment coupled with our superior customer purchase experience. The growth of premium appliance categories, including energy efficient washers, dryers and three-door refrigeration, has increased our average selling prices over the last three years. During fiscal 2007, our appliance comparable store sales increased 4%.

Selectively introduce complementary merchandise. We plan to exploit growing niches in the consumer electronics and appliances categories while strategically introducing higher-margin merchandise and traffic driving products.

• Fine Lines. Beginning in fiscal 2006, we introduced our Fine Lines appliance department concept in select markets. Our Fine Lines department focuses on ultra premium appliances, such as Sub-Zero, Wolf and Thermador. Fine Lines increases store traffic, helps drive sales of higher margin appliances in our core product assortments and enhances our reputation for premium offerings in the marketplace with both our customers and vendors. We believe there is an opportunity to introduce our Fine Lines department concept in select existing and new stores in each of our markets.

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• Center of store initiatives. We intend to capitalize on our core strengths to bolster our market position in our center of store categories, which include take-with products such as cameras, camcorders, notebook computers, MP3 players and high margin accessories. We continue to refine our merchandise assortments, enhance our in-store visual presentation, optimize our available square footage and opportunistically add products. For example, we began selling notebook computers in the second half of fiscal 2007, and we expect our sales in that category to grow significantly in fiscal 2008. We believe center of store categories drive customer traffic to our stores and allow us to capitalize on the convergence of video and personal computing technologies in the home.

• Other merchandise categories. In order to leverage our in-store, consultative selling expertise and home delivery capabilities, we began selling Serta mattresses in our stores during fiscal 2007. Mattresses contribute higher margins than consumer electronics and appliance products, while helping to drive cost efficiencies in our home delivery network. We continue to evaluate other merchandise categories to further enhance our product offering and complement our core competencies of customer service, home delivery and installation.

We extensively test all new product initiatives prior to rollout to ensure category success and we continually assess our assortment in both existing and new categories in order to optimize our product mix, build our brand and maximize profitability.

Gains in operating and working capital efficiencies. We believe we can further drive returns on investment as we grow our store base by leveraging our increased size, operating efficiencies and financial position. As we penetrate new metropolitan markets, we expect to increase our purchase volumes, drive distribution efficiencies and strengthen our relationships with our key vendors. We also expect our increased store base and higher net sales to further leverage our existing corporate and regional infrastructure. Additionally, as we continue to improve our financial position and increase the number of stores we open each year, we expect to be able to negotiate more favorable lease terms for our stores.

Customer Purchase Experience

Our goal is to serve our customers in a manner that generates loyalty, referrals and repeat business. We focus on making every customer’s purchase experience a positive one and aim to be the primary destination for consumer electronics and home appliances. We employ multiple internal systems to ensure customer satisfaction in each of our markets, and we focus on offering a comprehensive suite of services such as delivery and home installation to our customers. We aim to offer the customer a convenient shopping experience by locating our stores in high traffic areas with a focus on visibility, access and parking availability.

Our philosophy for providing our customers with a superior purchase experience includes;

• employing a highly motivated, commissioned sales force and extensively training them so they are able to educate our customers on the benefits of feature-rich, higher margin products;

• soliciting customer feedback to allow us to monitor and improve individual employee performance;

• conducting broad consumer and market research to ensure a top quality, competitively priced offering;

• offering an exceptionally deep product assortment in core categories;

• providing a warm and bright store ambiance that showcases our products well;

• providing same-day delivery for virtually all of our products and quality in-home installation services;

• offering extended-term financing through a third-party private label credit card to qualified customers;

• offering convenient 40 minute call ahead service for delivery;

• offering customer support through our central call center seven days per week; and

• providing third-party ESPs and third-party in-home service and repair of our products.

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Product Service and Support. We currently outsource product service and repair of our products sold with and without extended warranties. We sell third-party ESPs to our customers. The ESPs typically extend three to five years beyond the manufacturer’s warranty and cover all service and repair-related maintenance. We closely monitor the performance of our third-party vendor to ensure the quality and timeliness of its repair services. We offer customer support via our central customer service call center. Our service center is open seven days a week and provides customers with a toll-free resource to ask product and other support-related questions.

Private Label Credit Card. We offer customers financing through a private label credit card with a third-party financial institution. We believe the use of financing encourages customers to make larger ticket purchases and promotes our business by allowing us to market directly to our private credit card holders. The third-party institution assumes the risk of collection from our customers and has no recourse against us for any uncollected amounts.

Merchandising and Purchasing

Merchandise. We focus on offering one of the most extensive product and brand selections in our industry. We offer a broad selection of the leading brands at everyday competitive prices and provide a balance of digital and home theater products and appliances. Our premium products help drive margins and profitability while our lower-margin products help drive customer traffic providing us with stable, less-seasonal cash-flow. Our balanced mix of premium video products and appliances positions us to benefit from the expected strong growth in digital products, as well as the stability in major appliances.

Product Categories. We sell a wide variety of premium video products, including digital televisions and home theater systems, appliances, audio products, mattresses and related services. The table below lists selected products and representative brands for our core merchandise categories:

Category	Products	Selected Brands
Video Products	Flat panel televisions, digital projection televisions, DVD recorders	Hitachi, JVC, Mitsubishi, Panasonic, Philips, Samsung, Sharp, Sony and Toshiba
Home Appliances	Refrigerators, freezers, washers and dryers, cooking ranges, dishwashers, air conditioners	Bosch, Frigidaire, GE, KitchenAid, LG, Subzero, Thermador, Viking, Whirlpool and Wolf
Other Products	Home theater receivers, CD players, speaker systems, digital cameras, digital camcorders, notebook computers, MP3 players, mattresses	Bose, Canon, JVC, Klipsch, Minolta, Onkyo, Polk, Serta, Sony and Toshiba

Vendor Relationships. Our top ten and 20 suppliers accounted for over 72.2% and 87.0%, respectively, of merchandise purchased by us during fiscal 2006. Two of our vendors, Whirlpool and Frigidaire, each represented more than 10% of our total purchases in fiscal 2006. Our other key suppliers include Hitachi, Panasonic, Philips, Sony and Toshiba.

Our purchasing strategy varies by vendor and product line. We do not generally have long-term contracts with any of our major suppliers. We typically order our inventory through the issuance of individual purchase orders to vendors. Our ability to sell a broad selection of products has made us an important partner for our vendors to showcase their higher-margin product offerings and introduce new products and technologies to

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consumers. In an effort to support our strategy, vendors offer us various incentives including volume discounts, trade financing, co-op advertising, purchase discounts and allowances, promotional items and inventory on a consignment basis.

Personnel and Training

Commissioned Sales Associates. We seek to hire individuals who are career-oriented and motivated by a commission-based environment. Over 90% of our sales associates are full time employees. Our sales associates are compensated based on both sales and product profitability. New sales associates are required to complete 80 hours of initial in-house training focused on product knowledge and functionality, customer service and general store operations. Sales associates also participate in on-going training for an average of ten hours per month in order to stay current with new product offerings and customer service initiatives. This on-going training includes quarterly meetings with vendors to learn about upcoming product releases.

Manager-In-Training (MIT) Program. We operate a professional development program that provides managers with a variety of tools and training to assist them in leading their sales associates and meeting their performance objectives. Manager candidates undergo comprehensive training in store operations, sales, management and communications skills so that they can eventually manage their own stores and have the opportunity to become regional managers. Candidates first participate in our MIT program, which develops each manager’s managerial and supervisory skills. After completion of our training programs, manager candidates work as assistant managers. Successful assistant managers then manage one of our lower-volume stores, where they are supervised closely by the store’s regional manager. We give managers an opportunity to operate higher-volume stores as they become more proficient in their management skills.

Our store and regional managers are essential to our store expansion strategy. We use experienced store and regional managers from our existing markets when entering new markets. Our MIT program provides a pipeline of future store and regional managers. This program allows us to fill store management positions with personnel promoted from within each store and to staff new stores from our pool of experienced managers.

Stores and Store Operations

Operations. We have developed a standardized system for operating our stores. The system includes customer service, scheduling, delivery and installation, procedures for inventory management, transaction processing, labor and store administration and merchandise display. Our store operations are organized into nine geographic regions. Each region is supervised by a regional manager who monitors store operations and meets regularly with store managers to discuss merchandising, new product introductions, sales promotions, customer feedback and store operating performance. A store is typically overseen by a general manager, a sales manager, an operations manager and a staff averaging 20 salespeople and ten additional support staff. Our stores are open seven days and six nights a week.

Locations. We currently lease all 77 of our stores, which are located in Ohio, Indiana, Georgia, Tennessee, Kentucky, North Carolina, South Carolina and Alabama. Our stores average approximately 34,000 square feet. We also lease our corporate headquarters which is located in Indianapolis, Indiana. Our corporate headquarters includes a store, corporate training center, central distribution and warehousing facility, and corporate call center.

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The following table sets forth our store name and opening date grouped by our geographic regions:

Location	Opening Date	Location	Opening Date
Central Indiana:		Columbus:
Indianapolis North	January 1990	Taylor Park(1)	July 1999
Indianapolis West	September 1993	Chillicothe	July 1999
Indianapolis East	November 1994	Newark	July 1999
Terre Haute	March 1997	West Broad	July 1999
Indianapolis South	September 1997	Zanesville	July 1999
Avon	July 2001	Sawmill	October 2000
		Blacklick	January 2007
Northern Indiana:
Ft. Wayne	November 1993	Cleveland:
Anderson	May 1994	Canton	October 2001
Muncie	May 1994	Mentor	October 2001
Lafayette	June 1994	North Randall	October 2001
Kokomo	June 1998	Parma	October 2001
Richmond	October 1999	Chapel Hill	June 2002
Noblesville	July 2006	Fairlawn	October 2002
		Easton	November 2005
Nashville:		North Olmsted	July 2006
Thompson Lane	April 1984
Hickory Hollow	August 1987	Atlanta:
Bowling Green(1)	June 1990	Kennesaw	March 2003
Clarksville	August 1995	Southlake	March 2003
Rivergate	December 1997	Fayetteville	April 2003
Cool Springs	November 2000	Gwinnett	April 2003
Murfreesboro	July 2004	Stonecrest	April 2003
Huntsville, AL(2)	October 2004	Douglasville	September 2003
Knoxville (Turkey Creek), TN(2)	May 2006	Mall of Georgia	October 2003
Knoxville (Northwest Crossing), TN(2)	June 2006	Smyrna	October 2003
		Alpharetta	October 2004
Montgomery, AL(2)	October 2006	Newnan	October 2004
		Columbus	November 2004
Louisville/Lexington:		Macon	September 2006
Clarksville	August 1995	Augusta	February 2007
Louisville	November 1996
Bloomington	October 1998	Charlotte:
Outer Loop	October 2002	Concord	April 2005
Lexington	June 2003	Matthews	April 2005
		Pineville	June 2005
Cincinnati/Dayton:		Greenville	July 2005
Colerain	February 1999	Harbison	October 2005
Eastgate	February 1999	Sandhill	October 2005
Florence	February 1999	Anderson, SC(4)	October 2005
Fields Ertel	March 1999	Northlake Village	November 2005
Western Hill	March 1999	Hickory, NC(4)	November 2006
Hamilton(3)	May 1999	Gastonia, SC(4)	January 2007
Beavercreek	April 2001
Dayton Mall	October 2001
Piqua	June 2002
Tri County	October 2002

(1) Relocated in September 2005.

(2) Our Huntsville, AL, Montgomery, AL and two Knoxville, TN stores are served by our Nashville distribution center and, consequently, are included in the Nashville market.

(3) Relocated in August 2006.

(4) Our Anderson, SC, Hickory, NC and Gastonia, SC stores are served by our Charlotte, NC distribution center and, consequently, are included in the Charlotte market.

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Market and Site Selection. We target markets that meet our demographic and competitive criteria, including areas that demonstrate above average economic growth and household incomes, home ownership rates, growth in new housing starts and remodeling activity. Our target markets typically include most or all of our major competitors. When considering new sites, we analyze total store and market potential and advertising and occupancy costs for a market, as well as proximity to distribution facilities. Within our markets, we open or acquire our stores in power centers or freestanding locations in high traffic areas, usually near our major competitors. Primary site evaluation criteria include total sales volume potential, co-tenancies, traffic patterns, visibility, access, parking availability and occupancy costs. We initially open multiple stores in a new market and add stores to the market over time to increase market share. We plan to continue to open or acquire stores in new and existing markets. Our expansion plans include entering the Raleigh/Durham and Birmingham markets during fiscal 2008 and the highly attractive Florida market beginning in fiscal 2009.

Store Development. Since 1999, we have successfully entered six new major markets, most recently in Atlanta, Charlotte and Knoxville, and intend to accelerate our new store opening program. Historically, we have been able to locate and open stores profitably in a wide variety of trade areas by negotiating lease terms that we believe are favorable. Approximately 12 to 18 months are required for site approval, lease negotiation, property build out, the hiring and training of associates and the stocking of inventory before the opening of a store. This timeframe can be reduced to 6 to 12 months when no new property build-out is required.

We generally lease new stores through build-to-suit arrangements, whereby a landlord develops a building shell for long-term rental to us. This strategy significantly reduces our capital outlay for new store construction by limiting our capital outlay to furniture, fixtures and equipment. Additionally, we occasionally execute a sale and leaseback on stores not developed through a build-to-suit program. Through this sale and leaseback process, in which the land, building and/or leasehold improvements are sold to a third party and leased back to us on a single tenant basis, much of the construction cost associated with a new store can be deferred and recognized over a long-term rental period, which is generally 10 to 15 years.

Distribution and Warehousing

Our distribution and warehousing functions are designed to optimize inventory availability and turnover, delivery efficiency, and minimize product handling. Our distribution and warehousing system consists of two central distribution centers, or CDCs, and seven regional distribution centers, or RDCs. We operate CDCs in Indianapolis and Atlanta and RDCs in Birmingham, Charlotte, Cincinnati, Cleveland, Columbus, Louisville and Nashville. CDCs receive products directly from manufacturers and stock merchandise for local customer delivery and store and RDC replenishment. RDCs receive inventory daily from their respective CDCs or directly from manufacturers for home delivery. Merchandise is generally not transferred between stores. Our CDCs and RDCs operate seven days a week. We believe that our existing distribution and warehouse system is adequate to support expansion in our existing markets. To the extent we expand into new markets that cannot be served by our existing CDCs and RDCs, we expect to invest in additional distribution and warehouse infrastructure. All of our distribution facilities are leased.

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The following table sets forth certain information relating to our CDCs and RDCs:

Facility	Opening Date	Area Served	Size (sq. ft)
CDC:
Atlanta, Georgia	January 2003	Southeast	273,200
Indianapolis, Indiana	June 1986	Midwest	319,458
RDC:
Birmingham, Alabama	April 2007	Birmingham	65,000
Charlotte, North Carolina	April 2005	Charlotte	99,688
Cincinnati, Ohio	March 1999	Cincinnati	100,800
Cleveland, Ohio	September 2001	Cleveland	100,800
Columbus, Ohio	August 1999	Columbus	166,790
Louisville, Kentucky	August 2002	Louisville	61,000
Nashville, Tennessee	October 2006	Nashville	100,000

Typically, large appliances, large screen televisions, home theater products and mattresses are delivered directly to a customer’s home. The majority of our customers purchasing these products also use our delivery or installation service. Our stores carry a limited inventory of these larger items to accommodate customers who prefer to transport merchandise themselves. Smaller-sized items such as DVD players, camcorders, digital cameras, televisions less than 37 inches and small appliances are adequately stocked in-store to meet customer demand.

We began outsourcing our delivery services in the Atlanta market in April 2003 and have since outsourced our delivery services in all of our markets other than our Central and Northern Indiana markets. Our outsourcing partners assign certain employees to us and those employees deliver products exclusively for us, generally carry our logo on their vehicles and wear hhgregg uniforms. This allows us to maintain our brand identity and high customer service levels following the purchase of our products. We provide all installation services using our highly skilled employees. We remain the customer’s primary point of contact throughout the delivery and installation process, thereby ensuring that we maintain control over the quality of the service provided. We also closely monitor our delivery partners to assess our customer’s satisfaction with their services. We are not subject to any long-term agreements with any of our delivery partners. Given our ability to lower costs while maintaining high delivery service levels by outsourcing our delivery service, we will continue to assess opportunities to outsource additional portions of our delivery function. We continue to provide delivery services in our Central and Northern Indiana markets where there is sufficient density to economically support our maintenance and delivery services.

As of December 31, 2006, we utilized a fleet of approximately 250 vehicles, which are both leased and owned, to support the transportation and delivery services that have not been outsourced to a third-party provider as well as our installation services.

Advertising and Promotion

We utilize advertising and promotion to increase our brand awareness and drive in-store traffic. We seek to be the advertising leader in each of our markets by continually developing and enhancing our advertising and promotion programs and initiatives. We aggressively promote our products and services through the use of a balanced media mix, which includes preprinted newspaper inserts, television, direct mail, web promotions and outdoor event sponsorship. We currently outsource media placement to an advertising agency, but handle newspaper advertisement design and placement internally. We utilize television advertising to reach our target audience.

We enter new major markets with a comprehensive brand awareness campaign for a four-week period leading up to our grand opening. During the week of grand opening, we utilize a combination of television, radio and special print offers to drive traffic to our stores.

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Our Fine Lines department concept enhances our overall brand reputation for premium offerings in the markets that they serve. We use a mixture of direct mail, an internally-produced publication and culinary events to promote the concept.

Our website, www.hhgregg.com, features our full line of products and provides useful information to consumers on the features and benefits of our products, our store locations and hours of operations. We offer both on-line shopping with delivery, as well as an in-store pickup option to increase customer traffic. We also utilize the internet as an important customer information resource to drive in-store purchases of our merchandise.

Management Information Systems

Over the past three fiscal years, we have been systematically updating and upgrading our management information systems in a multi-phase process to improve the efficiency of our store operations and enhance critical corporate and business planning functions. During fiscal 2005, we implemented a new point-of-sale system to enhance store-level productivity and improve controls. In fiscal 2006, we installed a new enterprise data warehouse to better integrate operating and merchandising information in a relational data base environment. During fiscal 2007, we successfully converted our financial reporting and accounting systems to a retail industry standard application to support our anticipated future growth.

We are currently in the process of migrating our inventory and supply chain management software from our legacy hardware platform and operating system, which our primary hardware vendor will no longer be providing support for after December 31, 2008, to a new hardware platform and operating system. This migration will transfer our existing applications to a platform scalable for future growth and is intended to ensure complete continuity in the end-user interface screens, thereby eliminating the cost and lost productivity of re-training our store and distribution associates on a new ERP application. The migration also maintains our applications’ proven transactional processing capabilities that have contributed to industry-leading inventory turns and shrink results, as well as enables same-day delivery on virtually all of our products. In connection with this migration project, we are also implementing a retail industry standard demand management and forecasting tool to add more robust analytical capabilities to our inventory management process. Our current estimate of the remaining capital expenditures for this phase of our management information systems upgrade is between $7 and $10 million over the next two fiscal years, with the majority expected to be invested in fiscal 2008.

Our management information system includes a wide-area network linking our stores and distribution centers to our corporate offices. This provides real-time polling of sales, scheduled deliveries and inventory levels at the store and distribution center level. In our distribution centers, we use radio frequency networks to assist in receiving, stock put-away, stock movement, order filling, cycle counting and inventory management. We are currently enhancing our disaster recovery capabilities by opening a second, offsite data center for an estimated capital outlay of approximately $0.5 million to be completed during fiscal 2008.

Competition

The consumer electronics and appliance industry is highly competitive and concentrated among a group of major retailers. Our stores compete against other consumer electronics retailers, specialty home office retailers, mass merchants, home improvement superstores and a number of direct-to-customer alternatives. Our stores also compete against independent dealers, regional chain discount stores, wholesale clubs and other specialty single- and multi-unit retail stores. Mass merchants continue to increase their offerings of consumer electronics products, primarily those that are less complex to sell, deliver and install. Similarly, large home improvement retailers have expanded their assortment of appliances.

We compete against Best Buy, Circuit City, Sears, Lowe’s and Home Depot in the vast majority of our markets. We also compete against regional retailers, such as Fry’s and BrandsMart, in several of our markets. We have achieved a leading market position in digital televisions and major appliances in the majority of our markets. We have established these leading positions despite the presence, or entrance, of each of these leading

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competitors in our markets. We will continue to expand in our existing markets by adding stores in those regions where we can continue to gain market share from our competitors and leverage our existing distribution network and advertising initiatives.

The retail appliance and consumer electronics industry competes on product selection, price and customer service. We differentiate ourselves through our emphasis on an extensive product offering, customer service and satisfaction while matching our competitors on price. We believe that our highly trained commissioned sales force, broad product and brand offerings and customer support services allow us to compete effectively in our markets.

• Our commissioned sales force is motivated to attend to customer needs quickly and is knowledgeable about the products we carry. The majority of our key competitors pay their sales force on an hourly basis. Because our sales staff is commissioned and highly trained in product knowledge, we believe our sales force is driven to more quickly and efficiently assist our customers in making their purchase decisions. We believe that when fully informed, customers purchase higher-end, feature-rich products due to an appreciation of the performance of those products.

• By combining this knowledgeable sales force with a broad selection of key brands and products with complex, premium features, we differentiate ourselves from our competitors.

• We promote our products both in our stores and through advertising. We also highlight our service offerings, such as same-day delivery and 40 minute call-ahead delivery. These services are key to our customer base which appreciates better product information, high-end products and more flexible delivery.

Seasonality

We experience seasonal fluctuations in our net sales and operating results due in part to seasonal shopping patterns. For example, in fiscal 2007 and 2006, we generated 31.6% and 31.2%, respectively of our net sales in the fiscal quarter ended December 31, which includes the holiday selling season. We also incur significant additional costs and expenses during this fiscal quarter due to increased staffing levels and higher purchase volumes.

Trade Names and Trademarks

We have registered, acquired the registration of, or claim ownership of the following trade names and trademarks for use in our business: hhgregg^®, HHGREGG.COM^™, H.H. Gregg Appliances Electronics Computers^™, WELCOME TO THE REVOLUTION^™, HHG^™ and Fine Lines^®. We do not know of any infringing uses that materially affect our use of these marks.

Employees

As of March 31, 2007, we employed 3,171 employees, of whom approximately 96% were full-time. We have no collective bargaining agreements covering any of our employees and have never experienced any material labor disruption. We consider our employee relations to be good.

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MANAGEMENT

The following table provides information about our directors and executive officers as of April 1, 2007.

Name	Age	Position with our Company
Jerry W. Throgmartin	52	Chairman, Chief Executive Officer and Director
Dennis L. May	39	President and Chief Operating Officer and Director
Donald J.B. Van der Wiel	47	Chief Financial Officer
Michael D. Stout	54	Chief Administrative Officer
Jeffrey J. McClintic	51	Vice President of Appliance Merchandising
Michael G. Larimer	53	Vice President of Electronics Merchandising
Lawrence P. Castellani	61	Director
Benjamin D. Geiger	32	Director
John M. Roth	48	Director
Charles P. Rullman	58	Director
Michael L. Smith	58	Director
Peter M. Starrett	59	Director

Jerry W. Throgmartin, our Chairman and Chief Executive Officer and a Director, joined our company in 1975. He has served as our Chairman and Chief Executive Officer since January 2003 and a Director since 1988. From 1999 to January 2003 he also served as our Chief Executive Officer and President. From 1988 to 1999 he served as the President and Chief Operating Officer. Other positions held by Mr. Throgmartin within our company include store manager, district manager, advertising director and Vice President of Store Operations.

Dennis L. May, our President, Chief Operating Officer and a Director, joined us in January 1999. From 1999 to January 2003 he served as the Executive Vice President and Chief Operating Officer and was appointed President and Chief Operating Officer in January 2003. He became a Director in connection with the recapitalization. Mr. May joined our company as part of the acquisition of certain store leases of Sun TV & Appliance, Inc. where he held the positions of Vice President of Marketing, Executive Vice President and Chief Operating Officer.

Donald J.B. Van der Wiel, our Chief Financial Officer, joined us in October 2005. From November 2004 to October 2005 he served as Vice President of Finance for Buffets Holdings, Inc., a restaurant holding company. From 2001 to October 2004 he served as Vice President, Controller of Buffets Holdings, Inc. From 1999 to 2001 he served as Controller of Things Remembered, Inc., a specialty retail chain. From 1997 to 1999 he served as Vice President of Finance for the retail division of The William Carter Company, a children’s apparel company.

Michael D. Stout, our Chief Administrative Officer, joined us in 1978. Mr. Stout was named Chief Administrative Officer in October 2005. Mr. Stout served as Chief Financial Officer from 1997 to September 2005. From 1987 to 1997 he served as Treasurer. From 1986 to 1987 he served as Controller.

Jeffrey J. McClintic, our Vice President of Appliance Merchandising, joined us in 1975. Mr. McClintic was named Vice President of Appliance Merchandising in 2001. Other positions held by Mr. McClintic with our company include Appliance Merchandising Manager, Director of Commercial Sales, Director of Service, store manager, regional manager and buyer.

Michael G. Larimer, our Vice President of Electronics Merchandising, joined us in March 1999. From 1999 to 2001 he served as the Video Merchandising Manager and was appointed Vice President of Electronics Merchandising in 2001. Prior to joining our company Mr. Larimer served as the Vice President of Electronics and Appliances at Sun TV & Appliances, Inc. from 1986 to 1999.

Lawrence P. Castellani became a Director in July 2005. From February 2003 to May 2005, Mr. Castellani served as the Chairman of Advance Auto Parts, Inc., a specialty retailer of auto parts, and served as its Chief

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Executive Officer from 2000 until May 2005. Mr. Castellani served as President and Chief Executive Officer of Ahold Support Services in Latin America (a division of Royal Ahold, a supermarket company) from 1998 to 2000, as Executive Vice President of Ahold USA from 1997 through 1998, and as President and Chief Executive Officer of Tops Friendly Markets from 1991 through 1997. Mr. Castellani serves on the board of Advance Auto Parts, Inc.

Benjamin D. Geiger became a Director in connection with the recapitalization. Mr. Geiger joined Freeman Spogli in 1998 and became a principal in December 2002. From 1996 to 1998, Mr. Geiger was employed by Merrill Lynch & Co. in the Mergers and Acquisitions Group.

John M. Roth became a Director in connection with the recapitalization. Mr. Roth joined Freeman Spogli in 1988 and became a general partner in 1993. From 1984 to 1988, Mr. Roth was employed by Kidder, Peabody & Co. Incorporated in the Mergers and Acquisitions Group. Mr. Roth also serves on the boards of directors of Asbury Automotive Group, Inc., an automotive dealership group, and AFC Enterprises, Inc., a restaurant franchisor.

Charles P. Rullman has served as a Director since March 2005. Mr. Rullman joined Freeman Spogli in 1995 as a general partner and retired in December 2005. From 1992 to 1995, Mr. Rullman was a general partner of Westar Capital, a private equity investment firm specializing in middle market transactions. Prior to joining Westar, Mr. Rullman spent 20 years at Bankers Trust Company and its affiliate, BT Securities Corporation, where he was a Managing Director and Partner.

Michael L. Smith became a Director in July 2005. Mr. Smith served as Executive Vice President and Chief Financial and Accounting Officer of Wellpoint, Inc., a health benefits company, from 2001 to January 2005. He served as Executive Vice President and Chief Financial Officer of Anthem, Inc. from 1999 to April 2001. From 1996 to 1998, Mr. Smith served as Chief Operating Officer and Chief Financial Officer of American Health Network, Inc., a former subsidiary of Anthem, Inc. He was Chairman, President and Chief Executive Officer of Mayflower Group, Inc., a transport company, from 1989 to 1995. He is a director of Kite Realty Group Trust, a REIT; Emergency Medical Services Corp., a provider of emergency medical services; Calumet Specialty Products LP, a refining operation; Vectren Corporation, a gas and electric utility; and Intermune, Inc., a biopharmaceutical manufacturing company.

Peter M. Starrett became a Director of our board in connection with the recapitalization and served as vice chairman of our board from the recapitalization to April 2007. In 1998, Mr. Starrett founded Peter Starrett Associates, a retail advisory firm, and currently serves as its President. From 1990 to 1998, Mr. Starrett served as the President of Warner Bros. Studio Stores Worldwide. Previously, he held senior executive positions at both Federated Department Stores and May Department Stores. Mr. Starrett also serves on the boards of directors of Guitar Center, Inc., a musical instruments retailer, Pacific Sunwear, Inc., a clothing retailer, and PETCO Animal Supplies, Inc., a retailer of pet food and supplies.

We have adopted a Finance Code of Ethics that applies to our Chairman and Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, Chief Administrative Officer and all other employees with financial reporting responsibilities. We have also adopted a Code of Ethics that applies to our directors and all of our employees.

Board Committees

In connection with the filing of this registration statement, our board of directors undertook a review of the independence of each director and considered whether any director has a material relationship with us that could compromise his ability to exercise independent judgment in carrying out his responsibilities. As a result of this review, our board of directors determined that each of Messrs. Castellani, Rullman and Smith is an “independent director” as defined under the rules of the Sarbanes-Oxley Act of 2002 and the NYSE. We will seek to find suitable

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additional independent members of our board and our board committees following this offering during the period permitted by the rules of the NYSE, and will continue to evaluate our compliance with these criteria over time. To the extent that we determine necessary, we will seek to appoint or nominate for election by the stockholders additional independent directors.

Audit Committee. The audit committee has a charter that sets forth the audit committee’s purpose and responsibilities. The audit committee is responsible for recommending to the board of directors the appointment of our independent auditors, analyzing the reports and recommendations of the auditors and reviewing our internal audit procedures and controls. Messrs. Geiger, Rullman and Smith are members of the audit committee and Mr. Smith is the Chairman. Messrs. Rullman and Smith are independent directors. We intend to replace Mr. Geiger with an independent director within one year of the effective date of this prospectus as required by the NYSE rules.

Compensation Committee. The compensation committee has a written charter that sets forth the compensation committee’s purpose and responsibilities. The purpose of the compensation committee is to discharge the overall responsibility of our board of directors relating to executive and director compensation. The compensation committee is responsible for reviewing and recommending the compensation structure for our officers and directors, including salaries, participation in incentive compensation, benefit and stock option plans and other forms of compensation. Members of our compensation committee are non-employee directors. Messrs. Castellani, Roth and Starrett are members of the compensation committee and Mr. Castellani is the Chairman.

Nominating and Corporate Governance Committee. The nominating and corporate governance committee has a written charter that sets forth the committee’s purpose and responsibilities. The nominating and corporate governance committee is responsible for reviewing and recommending nominees for election as directors, assessing the performance of our directors and developing corporate governance guidelines for our board. Messrs. Roth, Rullman and Smith, are members of our nominating and corporate governance committee and are non-employee members of our board. Mr. Rullman is the Chairman of the nominating and corporate governance committee.

Executive Committee. The executive committee has a written charter that sets forth the executive committee’s purpose and responsibilities. The executive committee makes decisions and evaluates issues referred to the executive committee by our board of directors or the Chairman of the board. Our executive committee may exercise the full authority of our board of directors between meetings of the board of directors. Messrs. Geiger, Roth and Throgmartin are members of the executive committee and Mr. Throgmartin is the Chairman.

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COMPENSATION DISCUSSION AND ANALYSIS

The following discussion and analysis of compensation arrangements of our named executive officers for fiscal 2007 should be read together with the compensation tables and related disclosures set forth below. This discussion assumes that the IPO reorganization has been completed. This discussion contains certain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt in the future may differ materially from currently planned programs as summarized in this discussion.

The compensation committee of our board of directors administers the compensation of our executive officers. The role of the compensation committee is to oversee our compensation and benefits plans and policies, administer our equity incentive plans and review and approve all compensation decisions relating to all executive officers and directors.

The primary objectives of the compensation committee with respect to executive compensation are:

• to attract and retain the appropriate level of executive talent;

• to tie annual incentives to the achievement of measurable company and individual performance targets, and

• to ensure that the executive officers have financial incentives to achieve growth in stockholder value.

Our method of determining compensation varies from case to case based on a discretionary and subjective determination of what is appropriate at the time. When establishing salaries and bonus levels, the compensation committee considers individual experience and performance. The compensation committee also considers the compensation of executives in other companies of similar size and stage of development operating in our industry and local markets that the committee believes are comparable, taking into account our relative performance and our own strategic goals. In determining specific components of compensation, the compensation committee considers individual performance, level of responsibility, skills and experience, and other compensation awards or arrangements. With respect to officers other than the chief executive officer the compensation committee also takes into consideration the recommendations of the chief executive officer.

Our compensation committee performs an annual review of our compensation policies, including the appropriate mix of base salary, bonuses and long-term incentive compensation. The compensation committee also reviews and approves all annual bonus targets, long-term incentive compensation and welfare benefits (including our 401(k) and our non-qualified deferred compensation plan).

Compensation Components

Our compensation program for our named executive officers consists of four primary elements: (1) base salary; (2) an annual bonus; (3) equity incentive awards; and (4) deferred compensation and other benefits.

Base Salary. In determining base salaries the compensation committee takes into account such factors as competitive industry and local market salary ranges, a named executive officer’s scope of responsibilities, level of experience, and individual performance and contribution to our company. The compensation committee also takes into account both external competitiveness for such individual’s position and internal equity of salaries of individuals in comparable positions and markets. Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. Our employment agreements with Messrs. Throgmartin, May and Van der Wiel provide that we may increase, but not decrease, their base salaries.

Annual Bonus. Each year we establish a corporate bonus plan to promote the achievement of company financial performance objectives based on Adjusted EBITDA targets for named executive officers to provide

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incentives for the achievement of individual and company performance objectives. The Adjusted EBITDA levels are set by our compensation committee each year based on our board-approved budget. We use Adjusted EBITDA to measure our performance when determining management bonuses because Adjusted EBITDA facilitates performance comparisons from period to period by backing out certain non-recurring or non-cash items and presenting what we believe to be the most accurate measure of our core operating results.

Annual bonuses are set based on a percentage of base salary for each individual. For fiscal 2006, target bonuses for Messrs. May, Van der Wiel and Stout were set at approximately 100% of base salary and at $125,000 for Mr. McClintic, which is approximately 70% of his base salary, for achieving an Adjusted EBITDA target. If the company’s performance exceeds an Adjusted EBITDA target, executive officers participating in the bonus plan may receive up to 120% of their targeted bonuses.

Equity Awards. Equity awards are an integral part of our overall executive compensation program because we believe that our long-term performance will be enhanced through the use of equity awards that reward our executives for maximizing stockholder value over time. We have historically elected to use stock options and restricted unit awards that vest over time as the primary long-term equity incentive vehicle to promote retention of our key executives. Although we have not adopted formal stock ownership guidelines, our named executive officers currently hold 15.0% of our common stock. In determining the number of stock options or restricted units in GIC to be granted to executives, we take into account the individual’s position, scope of responsibility, ability to affect profits and stockholder value and the value of the stock options and GIC restricted units in relation to other elements of the individual executive’s total compensation.

Stock Options. The Gregg Appliances, Inc. 2005 Stock Option Plan authorizes us to grant options to purchase shares of common stock of Gregg Appliances to our officers, directors, consultants and key employees. Our compensation committee oversees the administration of our stock option plan. Historically, our compensation committee has made stock option grants at an employee’s commencement of employment and makes annual grants of options to employees. In fiscal 2007, the named executive officers were awarded stock options in the amounts indicated in the section entitled “Grants of Plan-Based Awards”. All stock options granted by us in fiscal 2007 were made at what our compensation committee determined to be the fair market value of the common stock of Gregg Appliances at the date of grant. The compensation committee retained an independent third-party valuation firm to assist it in its analysis of the value of the common stock of Gregg Appliances. The stock options granted to our named executive officers are non-qualified options and vest in three annual installments beginning on the first anniversary of the date of grant.

Restricted Unit Awards. The Gregg Investment Corporation, LLC Restricted Unit Plan authorizes GIC to issue or grant restricted units of GIC to our employees. The units may be issued by GIC at the discretion of its managing member for a purchase price equal to the fair market value of the units, as determined by the board of directors of Gregg Appliances. Our compensation committee periodically has recommended to the managing member of GIC to grant restricted units at an employee’s commencement of employment.

In connection with the IPO reorganization, each of the outstanding stock options will be assumed by the Issuer and each restricted unit will be exchanged for a share of the Issuer’s common stock.

Deferred Compensation Benefits. We offer a non-qualified deferred compensation plan to selected executive officers which provides unfunded, non-tax qualified deferred compensation benefits. We believe this program helps promote the retention of our senior executives. A participant in the non-qualified deferred compensation plan is credited annually with a percentage of the participant’s base salary that varies in accordance with a financial target as established by the compensation committee and the participant’s employment classification. Benefits are payable in one lump sum in cash upon the later of termination of employment or the attainment of age 55.

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Other Benefits. Our executives are eligible to participate in all of our employee benefit plans, such as medical, dental, vision, long and short-term disability and life insurance, in each case on the same basis as our other employees. Our executive officers are also eligible for additional life insurance coverage. Under these arrangements, Messrs. Throgmartin, May, Van der Wiel and Stout are eligible for $240,000 of life insurance coverage while Mr. McClintic is eligible for $120,000 of life insurance coverage.

Tax Considerations

Section 162(m) of the Code generally disallows a tax deduction for compensation in excess of $1.0 million paid to our name executive officer. Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met. We generally intend to structure the performance-based portion of our executive compensation, when feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, our board or compensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes that such payments are appropriate to attract and retain executive talent.

2007 Summary Compensation Table

The following table sets forth information concerning fiscal 2007 compensation of the Chief Executive Officer and Chief Financial Officer of Gregg Appliances and the three other most highly compensated executive officers of Gregg Appliances whose aggregate fiscal 2007 compensation was at least $100,000 for services rendered in all capacities. The Issuer does not compensate any of its officers or directors.

Name and Principal Position	Fiscal Year	Salary		Bonus		Stock Awards		Option Awards(1)		Non-Equity Incentive Plan Compensation(2)		All Other Compensation(3)		Total
Jerry W. Throgmartin— Chairman and Chief Executive Officer(4)	2007	$	303,891	$	—	$	—	$	18,494	$	39,423	$	65,735	$	427,543
Dennis L. May— President and Chief Operating Officer(4)	2007	$	276,762	$	—	$	—	$	18,494	$	364,622	$	5,459	$	665,337
Donald J.B. Van der Wiel Chief Financial Officer	2007	$	239,423	$	—	$	—	$	11,097	$	312,000	$	60,170	$	622,690
Michael D. Stout— Chief Administrative Officer	2007	$	242,232	$	—	$	—	$	11,097	$	318,388	$	2,858	$	574,575
Jeffrey J. McClintic— Vice President of Appliance Merchandising	2007	$	178,130	$	—	$	—	$	4,624	$	172,556	$	2,553	$	357,863

(1) Option award amounts represent the executive’s portion of our reported stock compensation expense for fiscal 2007 in accordance with FAS 123R. Please refer to footnote 5 of the notes to the unaudited condensed consolidated financial statements of Gregg Appliances included elsewhere herein for discussion of the relevant assumptions to determine the option award value at the grant date. No awards were forfeited as of March 31, 2007.

(2) This amount includes both amounts earned under the Bonus Plan and the Nonqualified Deferred Compensation Plan. All executives other than the Chairman and Chief Executive Officer participate in the “Company Officer Personal Bonus Plan” or bonus plan. Please refer to the “Grants of Plan-Based Awards Table” and “Compensation Discussion and Analysis” section for more information. The bonus amounts set forth in this column are estimated and are subject to the approval of our compensation committee.

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(3) The following chart is a summary of the items that are included in the “All Other Compensation” totals:

	Personal Use of Company Plane		Tax Reimbursement(a)		Executive Relocation		Company Contributions to a Defined Contribution Plan		Other(b)		Total
Jerry W. Throgmartin	$	36,152	$	25,368	$	—	$	3,345	$	870	$	65,735
Dennis L. May	$	—	$	—	$	—	$	2,544	$	2,915	$	5,459
Don Van der Wiel	$	—	$	24,540	$	35,530	$	—	$	100	$	60,170
Michael D. Stout	$	—	$	—	$	—	$	2,181	$	677	$	2,858
Jeffrey J. McClintic	$	—	$	—	$	—	$	1,916	$	637	$	2,553

(a) Tax reimbursements represents Mr. Throgmartin’s personal use of our plane as provided in his employment agreement and represents Mr. Van der Wiel’s executive relocation. See “—Employment Agreements”.

(b) Represent amounts paid for life insurance premiums, executive health premiums and car allowance.

(4) Neither Mr. Throgmartin nor Mr. May receives any compensation for his service on our or Gregg Appliances’ board of directors.

2007 Grants of Plan-Based Awards

The following table sets forth information regarding grants of plan-based awards to named executive officers for the fiscal year ended March 31, 2007.

Name	Grant Date	Estimated Future Payouts Under Non-equity Incentive Plan Awards									All Other Stock Awards: Number of Shares of Stock	All Other Option Awards: Number of Securities Underlying Options		Exercise or Base Price of Option Awards		Grant Date Fair Value of Option Awards
		Threshold			Target			Maximum
Jerry W. Throgmartin Chairman and Chief Executive Officer	9/8/2006	$ $	—   30,309	(1) (2)	$ $	—   39,423	(1) (2)	$ $	—   39,423	(1) (2)	—	20,000	(3)	$	11.70	$	95,120	(4)
Dennis L. May President and Chief Operating Officer	9/8/2006	$ $	68,750 26,258	(1) (2)	$ $	275,000 34,622	(1) (2)	$ $	330,000 34,622	(1) (2)	—	20,000	(3)	$	11.70	$	95,120	(4)
Donald J.B. Van der Wiel Chief Financial Officer	9/8/2006	$ $	60,000 16,800	(1) (2)	$ $	240,000 24,000	(1) (2)	$ $	288,000 24,000	(1) (2)	—	12,000	(3)	$	11.70	$	57,072	(4)
Michael D. Stout Chief Administrative Officer	9/8/2006	$ $	60,000 23,084	(1) (2)	$ $	240,000 30,388	(1) (2)	$ $	288,000 30,388	(1) (2)	—	12,000	(3)	$	11.70	$	57,072	(4)
Jeffrey J. McClintic Vice President of Appliance Merchandising	9/8/2006	$ $	31,250 17,192	(1) (2)	$ $	125,000 22,556	(1) (2)	$ $	150,000 22,556	(1) (2)	—	5,000	(3)	$	11.70	$	23,780	(4)

(1) All executives other than the Chairman and Chief Executive Officer participate in the “Company Officer Personal Bonus Plan,” or bonus plan. The “Threshold” amount represents the amounts that would be paid to the named executive officer if our company’s performance meets a minimum level of Adjusted EBITDA. If this minimum level of EBITDA is not achieved, the named executive officer receives no bonus. The “Target” amount represents the amounts that would be paid to the named executive officers if our company’s performance meets the target level of Adjusted EBITDA as more fully described in the “Compensation Discussion and Analysis” section. The “Maximum” amounts represent the amounts that would have been paid if our company performance exceeded the Adjusted EBITDA target by a certain amount. Earned bonuses are paid out in the first quarter of the subsequent fiscal year.

(2) In April 2000, we adopted the H. H. Gregg Non-Qualified Deferred Compensation Plan which provides unfunded, non-tax qualified deferred compensation benefits for selected executives of our company. We provide varying levels of annual contributions under the plan on behalf of the employee based on our performance targets. In a given year, if the minimum performance target is not met, no contribution is made on behalf of the employee by us. In addition, we also contribute interest at an interest rate decided by the compensation committee based on the employee’s aggregate balance at the beginning of each fiscal year. For fiscal year 2007, the executives’ accounts were credited at the maximum amount under the plan, 10% of the participant’s base salary, plus interest. The threshold amounts shown in the table represent 7% of the executive’s base salary plus interest. We credited each executive’s account interest of 5% on the beginning balance of each executive’s account at April 1, 2006.

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(3) The options were granted pursuant to the Gregg Appliances 2005 Stock Option Plan. The shares subject to the option vest in equal installments over three years commencing on the first anniversary of the date of grant. The option has a seven-year term from the date of grant, subject to earlier expiration if the executive’s employment terminates.

(4) Represents the full fair value of options granted during fiscal 2007 at date of grant under the Gregg Appliances, Inc. 2005 Stock Option Plan. Please refer to footnote 5 of the Notes to the unaudited condensed consolidated financial statements for discussion of the relevant assumptions to determine the option award value at the grant date. No awards were forfeited as of March 31, 2007.

Outstanding Equity Awards At Fiscal Year End

Option Awards

The following tables summarizes information regarding option awards granted to our named executive officers that remain outstanding as of March 31, 2007.

Name	Number of Securities Underlying Unexercised Options Exercisable	Number of Securities Underlying Unexercised Options Unexercisable	Option Exercise Price		Option Expiration Date
Jerry W. Throgmartin Chairman and Chief Executive Officer	63,333 31,667 31,667 —	126,667 63,333 63,333 20,000	$	10.00 15.00 20.00 11.70	7/26/2012 7/26/2012 7/26/2012 9/8/2013
Dennis L. May President and Chief Operating Officer	25,333 12,667 12,667 —	50,667 25,333 25,333 20,000	$	10.00 15.00 20.00 11.70	7/26/2012 7/26/2012 7/26/2012 9/8/2013
Donald J.B. Van der Wiel Chief Financial Officer	20,000 10,000 10,000 —	40,000 20,000 20,000 12,000	$	10.00 15.00 20.00 11.70	10/31/2012 10/31/2012 10/31/2012 9/8/2013
Michael D. Stout Chief Administrative Officer	15,000 7,500 7,500 —	30,000 15,000 15,000 12,000	$	10.00 15.00 20.00 11.70	7/26/2012 7/26/2012 7/26/2012 9/8/2013
Jeffrey J. McClintic Vice President of Appliance Merchandising	16,667 8,333 8,333 —	33,333 16,667 16,667 5,000	$	10.00 15.00 20.00 11.70	7/26/2012 7/26/2012 7/26/2012 9/8/2013

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2007 Stock Awards

The following table provides information regarding outstanding stock awards for the named executive officers as of March 31, 2007.

Name	Number of Shares or Units of Stock That Have Not Vested	Market Value of Shares or Units of Stock That Have Not Vested
Donald J.B. Van der Wiel(1) Chief Financial Officer	6,667	$	100,000

(1) Mr. Van der Wiel was awarded 10,000 restricted units under the Gregg Investment Corporation, LLC 2005 Restricted Unit Subscription Plan. The units vest over a three-year incentive period beginning on the award date of October 31, 2005. Units that were not vested as of March 31, 2007 were valued at a market price of $15.00 per unit based on the analysis of our compensation committee. The compensation committee retained an independent third-party valuation firm which provided a report as of February 14, 2007 to assist it in valuing the common stock of Gregg Appliances.

2007 Stock Vested

The following table provides information regarding stock held by the named executive officers that vested during the fiscal year ended March 31, 2007.

	Stock Awards
Name	Number of Shares Acquired on Vesting	Value Realized on Vesting
Donald J.B. Van der Wiel(1) Chief Financial Officer	3,333	$	39,000

(1) Mr. Van der Wiel was awarded 10,000 restricted units under the Gregg Investment Corporation, LLC 2005 Restricted Unit Subscription Plan. Units vest over a three-year incentive period beginning on the award date of October 31, 2005. Value realized on vesting was calculated based on a market price of $11.70 per unit based on the analysis of our compensation committee. The compensation committee retained an independent third-party valuation firm which provided a report as of September 8, 2006 to assist it in valuing the common stock of Gregg Appliances.

Nonqualified Deferred Compensation

The following table sets forth certain information regarding the nonqualified deferred compensation of the named executive officers as of fiscal year ended March 31, 2007.

Name	Executive Contributions in Last FY ($)		Registrant Contributions in Last FY ($)(1)		Aggregate Earnings in Last FY ($)		Aggregate Withdrawals/ Distributions ($)		Aggregate Balance in Last FYE ($)
Jerry W. Throgmartin Chairman and Chief Executive Officer	$	—	$	39,423	$	39,423	$	—	$	220,296
Dennis L. May President and Chief Operating Officer	$	—	$	34,622	$	34,622	$	—	$	169,475
Donald J.B. Van der Wiel Chief Financial Officer	$	—	$	24,000	$	24,000	$	—	$	24,000
Michael D. Stout Chief Administrative Officer	$	—	$	30,388	$	30,388	$	—	$	151,196
Jeffrey J. McClintic Vice President of Appliance Merchandising	$	—	$	22,556	$	22,556	$	—	$	116,095

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(1) See description of the Non-Qualified Deferred Compensation Plan in the “—Grants of Plan Based Awards” section. Our contributions and aggregate earnings in fiscal 2007 in the “Nonqualified Deferred Compensation” table are also included in the “Summary Compensation Table” under “Non-Equity Incentive Plan Compensation”. The following table shows our contribution to each named executive officer’s account.

Name	Contribution		Interest(a)		Total
Jerry W. Throgmartin	$	30,380	$	9,044	$	39,423
Dennis L. May		27,880		6,743		34,622
Donald J.B. Van der Wiel		24,000		—		24,000
Michael D. Stout		24,348		6,040		30,388
Jeffrey J. McClintic		17,879		4,677		22,556

(a) Simple interest is calculated based on an interest rate of 5% applied to the balance as of April 1, 2006.

In April 2000, we adopted the H.H. Gregg Nonqualified Deferred Compensation Plan, which provides unfunded, non-tax qualified deferred compensation benefits to selected executives of our company. The plan participants are generally our creditors. A participant’s account is credited annually with a percentage of the participant’s base salary that varies in accordance with a financial target as established by our compensation committee and the participant’s employment classification. Accounts may be credited with interest annually at our discretion. Vesting occurs when the participant reaches age 55 while still employed, after ten years of continuous service or on death or disability. Accounts are forfeited upon a termination for cause. Benefits are payable in one lump sum in cash upon the later of termination of employment or the attainment of age 55. The aggregate balance for all participants in the plan as of March 31, 2007 and 2006 was approximately $3.1 million and $2.3 million, respectively.

Employment Agreements

In connection with the recapitalization of Gregg Appliances, Gregg Appliances entered into employment agreements with Jerry W. Throgmartin, our Chairman and Chief Executive Officer, and Dennis L. May, our President and Chief Operating Officer.

Each of the employment agreements provides for a two-year term. The agreements provide for a base salary of $300,000 for the first year, subject to increase, for Mr. Throgmartin and $250,000 per year for the first year, subject to increase, for Mr. May. Mr. May also is entitled to receive an annual cash bonus of up to approximately 120% of his base salary based on the achievement of EBITDA targets in accordance with our existing bonus plan. In addition, each of Messrs. Throgmartin and May participates in our pension and welfare plans, programs and arrangements that are generally available to our executives. Pursuant to the terms of the employment agreements, if we terminate the executive without “cause,” the executive will receive a continuation of his base salary and continued coverage under health and insurance plans (or substantially equivalent benefits) for the remainder of the term of the employment agreement, plus a pro-rated bonus for the year in which the executive was terminated.

For purposes of the agreements, “cause” means the executive’s (i) repeated failure to perform his duties in a manner reasonably consistent with the criteria established by our board of directors and communicated to the executive after written notice and an opportunity to correct his conduct; (ii) breach of any statutory, contractual or common law duty of loyalty or care or other conduct that demonstrates dishonesty or deceit in his dealings with us; (iii) misconduct which is material to the performance of his duties to us, including the disclosure of confidential information or a breach of his non-competition or non-solicitation obligations; (iv) conduct causing or aiding a breach by us of our agreement under the stockholders agreement not to terminate our independent auditors or engage any outside auditor or any other accounting firm to perform any non-audit services for us; or (v) commission of any crime involving moral turpitude or any felony.

Mr. Throgmartin’s agreement contains covenants prohibiting Mr. Throgmartin for the later of October 19, 2010 or for so long as he receives severance benefits from us, from competing with us in the contiguous United

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States and from soliciting our employees for employment. In addition, Mr. Throgmartin’s agreement provides for his use of our corporate airplane for up to 20 hours per year for personal purposes at our expense. Mr. Throgmartin’s employment agreement was amended effective April 13, 2007 to provide that Mr. Throgmartin is entitled to a reasonable number of vacation days per year and to allow Mr. Throgmartin to participate in our health plan until age 65 so long as Mr. Throgmartin pays the related premium cost after he is no longer our employee. In addition, we have agreed to assign to Mr. Throgmartin our interest in a key-man life insurance policy on the life of Mr. Throgmartin after he is no longer employed by us. After this assignment, Mr. Throgmartin will pay the premiums for this policy.

Mr. May’s agreement contains covenants prohibiting Mr. May for the later of October 19, 2007 or for so long as he receives severance benefits from us, from competing with us in the states in which we have or plan to have stores, and all states contiguous to such states, and from soliciting our employees for employment.

During fiscal 2006, we entered into an employment agreement with Donald J.B. Van der Wiel, our Chief Financial Officer. The employment agreement provides for an annual base salary of $225,000 for the first year, subject to increase, which is reviewed annually for adjustment at the discretion of the compensation committee of our board of directors. Mr. Van der Wiel is also entitled to receive an annual cash bonus of up to 120% of his base salary based on the achievement of EBITDA targets in accordance with our existing bonus plan. For fiscal 2006, Mr. Van der Wiel was guaranteed a cash bonus of $100,000. In addition, Mr. Van der Wiel participates in our pension and welfare plans, programs and arrangements that are generally available to our executives. Pursuant to the terms of the employment agreement, if we terminate Mr. Van der Wiel without “cause,” he will receive his base salary for a period of 12 months following his departure from our company. Mr. Van der Wiel will not be eligible to participate in any of our welfare or benefit plans after the date of his termination for any future period except for the right to receive benefits which have vested under any plan in accordance with the terms of the plan. In addition, Mr. Van der Wiel will not be eligible to receive any cash bonus for our fiscal year during which his termination occurs and any later year.

Potential Payments Upon Termination or Change in Control Table

The following table provides an estimate of the inherent value of each of our named executive officer’s employment agreement described above, assuming the agreements were terminated on March 31, 2007, the last day of fiscal 2007. Please refer to “—Employment Agreements” for more information.

Executive and Benefits	Voluntary Termination, Retirement or For Cause (a)		Disability		Death		Termination by Company Other than Retirement, Disability, Death, or Without Cause
Jerry W. Throgmartin
Salary Continuation (b)	$	—	$	151,899	$	607,595	$	607,595
Non-Equity Incentive Plan Compensation (c)	$	—	$	—	$	—	$	39,423
Stock Options (d)	$	—	$	—	$	—	$	—
Healthcare (e)	$	—	$	103,200	$	—	$	11,952
Dennis L. May
Salary Continuation (b)	$	—	$	139,399	$	557,594	$	557,594
Non-Equity Incentive Plan Compensation (c)	$	—	$	—	$	—	$	364,622
Stock Options (d)	$	—	$	—	$	—	$	—
Healthcare (e)	$	—	$	103,200	$	—	$	11,952
Donald Van der Wiel
Salary Continuation (f)	$	—	$	—	$	240,000	$	240,000
Non-Equity Incentive Plan Compensation (g)	$	—	$	—	$	—	$	—
Stock Options (d)	$	—	$	—	$	—	$	—
Healthcare (h)	$	—	$	—	$	—	$	—

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(a) Termination for cause makes an executive ineligible to receive base salary or to participate in any employee benefit plans for the remainder of the term of the employment agreement, except for the right to receive benefits that have vested under any plan.

(b) Executives are eligible to receive the then current base salary for the remainder of the term of the employment agreement upon a termination by us other than for cause or disability. Upon the death of an executive, the base salary for the remainder of the term of the employment agreement will be paid to the executive’s beneficiary or estate. Upon disability, the executive is entitled to receive his base salary for six months before we can terminate his employment.

(c) An executive is entitled to receive a pro-rata share of the annual bonus for the portion of the year during which the executive was employed if he is terminated by us without cause. If the executive is terminated for cause, he is not entitled to any bonus for the fiscal year during which the termination occurs. This amount includes both amounts earned under the Bonus Plan and the Nonqualified Deferred Compensation Plan. All executives other than Mr. Throgmartin participate in the “Company Officer Personal Bonus Plan” or bonus plan. See “—Grants of Plan Based Awards Table” and “ Compensation Discussion and Analysis” for more information.

(d) Upon a termination of employment or the death of the executive, the options terminate, except that options can be exercised to the extent that the options were exercisable on the date of termination. The options can be exercised for the following periods: (i) 90 days, following termination by us or the voluntary resignation of the executive or (ii) 120 days following the death or disability of the executive. If the executive is terminated by us for cause, the options terminate immediately. See “—Outstanding Equity Awards at Fiscal Year End” and “—2007 Grants of Plan Based Awards” for more information.

(e) Upon a termination without cause or disability, the executive is entitled to receive continued coverage under the then existing health care plans for the remainder of the term of the employment agreement, and if the plan does not permit such continued coverage, then we are obligated to provide a substantially similar and no less favorable benefit. If the executive becomes permanently disabled, as defined in the employment agreement, and we exercise the right to terminate the employment of the executive, he is entitled to receive disability benefits in accordance with the disability policy maintained by us.

(f) If Mr. Van der Wiel’s employment is terminated by us without cause or upon his death, he, or his estate, respectively, is entitled to his current base salary for a period of 12 months. The salary will be paid in accordance with our then current payroll practice.

(g) Following a termination without cause by us, Mr. Van der Wiel is not eligible to receive any bonus for the fiscal year during which the termination occurs.

(h) Mr. Van der Wiel is not eligible to participate in any executive benefit plans after the date of termination, except for the right to receive benefits that have vested under any such plan.

Employee Benefit Plans

New Equity Incentive Plan. Our board of directors approved the adoption of the hhgregg, Inc. 2007 Equity Incentive Plan on April 12, 2007, subject to stockholder approval. The maximum number of shares of common stock that can be issued pursuant to awards under our new equity incentive plan, including options intended to qualify as incentive stock options under Section 422 of the Code, is 1,500,000 shares. The term of our new equity incentive plan commenced on the date of approval by our board of directors and continues until the tenth anniversary of the approval by our board of directors.

Our new equity incentive plan is administered by our compensation committee. Our compensation committee has the authority to make or select the manner in which all determinations with respect to each award is granted by us under our equity incentive plan. In granting an award, our compensation committee considers the following factors: (i) the nature of the services rendered by the potential recipient, (ii) the potential recipient’s present and potential contributions to us and (iii) other factors the compensation committee deems to be relevant. The compensation committee has the authority to interpret our equity incentive plan and amend the rules and regulations relating to it to determine the terms of the respective award agreements and to make all other determinations necessary for the administration of our equity incentive plan.

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Individuals eligible to receive an award under our equity incentive plan include employees of, consultants to, and non-employee members of the board of directors of our company or any of our affiliates. An award is subject to the terms and conditions of our equity incentive plan and such other terms and conditions as the compensation committee prescribes in the respective award agreements.

The committee can issue the following types of awards under our equity incentive plan:

• Nonstatutory stock options and incentive stock options are rights to purchase our common stock. A stock option may be immediately exercisable or become exercisable in such installments, cumulative or non-cumulative, as the committee may determine. A stock option may be exercised by the recipient giving written notice to us, specifying the number of shares with respect to which the stock option is then being exercised, and accompanied by payment of an amount equal to the exercise price of the shares to be purchased. The purchase price may be paid by cash, check, by delivery to us (or attestation of ownership) of shares of common stock held at least six months, by surrender to us of a portion of the shares subject to the option equal to the exercise price, by delivery to us of an executed promissory note in the principal amount equal to the exercise price (each of the foregoing of which is subject to the discretion and approval of the compensation committee except the cash or check payment options), or through and under the terms and conditions of any formal cashless exercise program authorized by us.

• Incentive stock options may be granted only to eligible employees of us or any parent or subsidiary corporation and must have an exercise price of not less than 100% of the fair market value of our common stock on the date of grant (or 110% for incentive stock options granted to any holder of 10% of our total combined voting power). In addition, the term of an incentive stock option may not exceed 10 years (or five years, if granted to any 10% stockholder). Nonstatutory options are not subject to these limits on exercise price and term. In the case of an incentive stock option, the amount of the aggregate fair market value of common stock (determined at the time of grant) with respect to which incentive stock options are exercisable for the first time by an employee during any calendar year (under all such plans of his employer corporation and its parent and subsidiary corporations) may not exceed $100,000.

• Stock appreciation rights are rights to receive (without payment to us) cash, property or other forms of payment, or any combination thereof, based on the increase in the value of the number of shares of common stock specified in the stock appreciation right. The committee determines the form of the payment. The base price (above which any appreciation is measured) will in no event be less than 50% of the fair market value of our stock on the date of grant of the stock appreciation right. If the stock appreciation right is granted in tandem with a stock option (that is, so that the recipient has the opportunity to exercise either the stock option or the stock appreciation right, but not both), the base price will not be less than the exercise price under the associated stock option.

• Awards of restricted stock are grants or sales of common stock which are subject to a risk of forfeiture, such as a requirement of the continued performance of services for a stated term or the achievement of individual or company performance goals. Awards of restricted stock will include the right to any dividends on the shares before such shares vest or are forfeited. The committee has the discretion to defer the dividends and, if deferred, the dividends may be reinvested in additional shares of restricted stock.

• Awards of restricted stock units and performance units are grants of rights to receive either shares of our common stock (in the case of restricted stock units) or the appreciation over a base value (as specified by the committee) of a number of shares of common stock (in the case of performance units) subject to satisfaction of service or performance requirements established by the committee in connection with the award. Such awards may include the right to the equivalent of any dividends on the shares covered by the award, which amount may in the discretion of the committee be deferred and paid if and when the award vests.

• A stock grant is a grant of shares of common stock that is not subject to restrictions or other forfeiture conditions. Stock grants may be awarded in recognition of significant contributions to our success, in lieu of compensation otherwise already due, or in other circumstances which the committee deems appropriate.

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Effect of Termination of Employment or Association. Unless the committee determines otherwise in connection with any particular award under the new equity incentive plan, stock options and SARs will generally terminate 90 days following the recipient’s termination of employment or other association and during such time shall only be exercisable to the extent exercisable as of the date of termination. The effect of termination on other awards will depend on the terms of those awards specified in the applicable award agreements.

Transferability. In general, no award under the new equity incentive plan may be transferred by the recipient, other than by will or by the laws of decent and distribution, and during the life of the recipient all rights under an award may be exercised only by the recipient or his or her legal representative. However, the committee may approve the transfer, without consideration, of an award of a nonstatutory option or restricted stock to a family member.

Effect of Significant Corporate Event. In the event of any change in the outstanding shares of our common stock through merger, consolidation, sale of all or substantially all of our property, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other distribution with respect to such shares of common stock, an appropriate and proportionate adjustment will be made in (i) the maximum numbers and kinds of shares subject to the new equity incentive plan, (ii) the numbers and kinds of shares or other securities subject to the then outstanding awards, (iii) the exercise price for each share or other unit of any other securities subject to then outstanding stock options or stock appreciation rights (without change in the aggregate purchase or hurdle price as to which stock options or stock appreciation right remain exercisable), and (iv) the repurchase price of each share of restricted stock then subject to a risk of forfeiture in the form of a repurchase right in our favor. In the event of a change in control (which may include an acquisition), any and all awards not otherwise vested shall be fully vested and, as applicable, exercisable, and upon our dissolution or liquidation, other than as part of an acquisition or similar transaction, each outstanding stock option or stock appreciation right shall terminate, but the holder shall have the right, immediately prior to the dissolution or liquidation, to exercise the stock option or stock appreciation right to the extent exercisable on the date of dissolution or liquidation.

Amendments to the New Equity Incentive Plan. Our board may amend or modify the new equity incentive plan at any time subject to the rights of holders of outstanding awards on the date of amendment or modification; provided, however, that the board may not, without the approval of shareholders (i) materially increase the number of shares of our common stock available under the new equity incentive plan or issuable to a participant (other than as a result of adjustments to reflect a significant corporate event); (ii) change the types of awards that may be granted under the new equity incentive plan; (iii) expand the class of persons eligible to receive awards or otherwise participate in the new equity incentive plan; (iv) reduce the price at which an option is exercisable either by amendment of an award or by substitution of a new award at a reduced price (other than as a result of adjustments to reflect a significant corporate event); or (v) make any other amendment or modification which requires stockholder approval pursuant to the requirements of any exchange on which our common stock is then listed or applicable law.

Summary of Tax Consequences. The following is a brief and general discussion of the federal income tax consequences to recipients of awards granted under the new equity incentive plan. In general, whenever a recipient is required to recognize ordinary income in connection with an award, we will be entitled to a corresponding tax deduction.

• Nonstatutory stock options. Generally, there are no federal income tax consequences to the participants upon the grant of nonstatutory stock options. Upon the exercise of such an option, the participant will recognize ordinary income in an amount equal to the amount by which the fair market value of the common stock acquired upon the exercise of such option exceeds the exercise price, if any. A sale of common stock so acquired will give rise to a capital gain or loss equal to the difference between the fair market value of the common stock on the exercise and sale dates.

• Incentive stock options. Except as noted at the end of this paragraph, there are no federal income tax consequences to the participant upon grant or exercise of an incentive stock option. If the participant

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holds shares of common stock purchased pursuant to the exercise of an incentive stock option for at least two years after the date the option was granted and at least one year after the exercise of the option, the subsequent sale of common stock will give rise to a long-term capital gain or loss to the participant and no deduction will be available to us. If the participant sells the shares of common stock within two years after the date an incentive stock option is granted or within one year after the exercise of an option, the participant will recognize ordinary income in an amount equal to the difference between the fair market value at the exercise date and the option exercise price, and any additional gain or loss will be a capital gain or loss. Some participants may have to pay alternative minimum tax in connection with exercise of an incentive stock option.

• Restricted stock. A participant will generally recognize ordinary income on receipt of an award of restricted stock when his or her rights in that award become substantially vested, in an amount equal to the amount by which the then fair market value of the common stock acquired exceeds the price he or she has paid for it, if any. Recipients of restricted stock may, however, within 30 days of receiving an award of restricted stock, choose to have any applicable risk of forfeiture disregarded for tax purposes pursuant to Section 83(b) of the Code, or an “83(b) election”. If the participant makes an 83(b) election, he or she will have to report compensation income equal to the difference between the value of the shares and the price paid for the shares, if any, at the time of the transfer of the restricted stock.

• Stock appreciation rights. A participant will generally recognize ordinary income on receipt of cash or other property pursuant to the exercise of an award of stock appreciation rights.

• Restricted stock units, performance units and stock grants. A participant will generally recognize ordinary income on the receipt of any shares of common stock, cash or other property in satisfaction of any of these awards under the new equity incentive plan.

• Potential deferred compensation. For purposes of the foregoing summary of federal income tax consequences, we assumed that no award under the new equity incentive plan will be considered “deferred compensation” as that term is defined in Section 409A of the Code for purposes of recent federal tax legislation governing nonqualified deferred compensation arrangements, or, if any award were considered to any extent to constitute deferred compensation, its terms would comply with the requirements of that legislation (in general, by limiting any flexibility in the time of payment). For example, the award of a nonstatutory stock option with an exercise price which is less than the market value of the stock covered by the option, might constitute deferred compensation. If an award includes deferred compensation, and its terms do not comply with the requirements of the legislation, then any deferred compensation component of an award under the new equity incentive plan will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a 20% additional tax.

• Section 162(m) limitations on the company’s taxes deduction. We will not be entitled to deductions in connection with awards under the new equity incentive plan to certain senior executive officers to the extent that the amount of deductible income in a year to any such officer, together with his or her other compensation from us exceeds the $1 million dollar limitation of Section 162(m) of the Code. Compensation which qualifies as “performance-based” is not subject to this limitation, however.

Existing Stock Option Plan. The board of directors of Gregg Appliances approved the adoption of the Gregg Appliances, Inc. 2005 Stock Option Plan on March 8, 2005. The existing stock option plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Code and nonqualified stock options to our officers, directors, consultants and key employees. An aggregate of 2,500,000 shares of common stock is reserved for issuance under the Stock Option Plan. As of the date of this prospectus, options to purchase an aggregate of 2,012,000 shares were granted under the Stock Option Plan. The existing stock option plan will no longer be used to grant options upon the consummation of this offering and each option issued under the existing stock option plan will be assumed by the Issuer. The shares of common stock reserved under the Stock Option Plan will be reduced as options terminate or expire.

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Restricted Unit Plan. On June 14, 2005, GIC adopted the Gregg Investment Corporation, LLC 2005 Restricted Unit Subscription Plan pursuant to which certain of our employees, directors, and consultants are given the opportunity to purchase units in GIC. The units may be issued by GIC at the discretion of its managing member for a purchase price equal to the fair market value of the units, as determined by our board of directors. As of the date of this prospectus, GIC issued 288,550 Series A Units to our employees and directors. All Series A Units were issued at a purchase price of $10.00 per unit. The Restricted Unit Plan will be terminated in connection with the consummation of this offering and each Series A Unit issued under the Restricted Unit Plan will be exchanged for a share of our common stock. Upon the consummation of this offering, the shares of our common stock issued in exchange for the Series A units will not be subject to any restrictions.

401(k) Plan. We maintain the Gregg Appliances, Inc. Employees Retirement Plan, or 401(k) Plan, a profit-sharing plan with salary deferral and matching contribution features. The 401(k) Plan covers all of our employees who have reached age 21 and performed at least 1,000 hours of service within a 12-month period. After one year of service, employees may contribute up to 60% of their pre-tax compensation to the 401(k) Plan, subject to limitations imposed by the Code. We may make a discretionary matching contribution to participants who make salary deferral contributions to the 401(k) Plan, and may also make discretionary profit sharing contributions in proportion to compensation for each participant who is employed on the last day of the year or has completed at least 501 hours of service in the year. Corporate officers participate in the 401(k) Plan on the same basis as all other employees. Amounts credited to the 401(k) Plan matching contribution accounts of our named executive officers for fiscal 2005 are included in the Summary Compensation Table above under “All Other Compensation”.

2007 Director Compensation

Directors who are also our employees or who beneficially own, or are employees of entities that beneficially own, more than 20% of our common stock do not receive any compensation for their services on our board, other than reimbursement for out-of-pocket expenses. Our other directors are compensated for their services as described below.

Messrs. Castellani and Smith each (i) received an initial option grant upon their appointment to our board of 50,000 options, (ii) received annual option grants of 5,000 options, (iii) received a retainer of $35,000 payable quarterly in arrears and (iv) were reimbursed for out-of-pocket expenses. In addition, Mr. Smith received $15,000 as an annual retainer for serving as Chairman of our audit committee, payable quarterly in arrears.

Mr. Starrett, as compensation for serving as Vice Chairman of our board, (i) received an initial option grant of 100,000 options, (ii) received an annual option grant of 5,000 options, (iii) received a $50,000 annual retainer and (iv) was reimbursed for out-of-pocket expenses.

The information provided in the following table reflects the compensation received by our directors, excluding directors who are also our employees or who beneficially own, or are employees of entities or affiliates of entities that beneficially own, more than 20% of our common stock and, therefore, received no compensation for their service on our board in fiscal 2007.

Name	Fees Earned or Paid in Cash		Stock Awards ($)		Option Awards ($)		All Other Compensation		Total
Lawrence Castellani	$	35,000	$	—	$	4,624	$	—	$	39,624
Charles Rullman	$	8,750	$	—	$	—	$	—	$	8,750
Michael Smith	$	50,000	$	—	$	4,624	$	—	$	54,624
Peter Starrett	$	50,000	$	—	$	4,624	$	—	$	54,624

Our compensation committee has approved an increase in compensation for our directors for fiscal 2008. Directors who are also our employees or who beneficially own, or are employees of entities or affiliates of

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entities that beneficially own, more than 20% of our common stock, will continue to receive only reimbursement for out-of-pocket expenses. Each director who is not our employee or who does not beneficially own, or is not an employee of an entity or affiliate of an entity that beneficially owns, more than 20% of our common stock will receive an annual retainer of $50,000 and an annual grant of 5,000 options. New directors will also receive an initial grant of 5,000 options upon appointment to our board. The Chairman of the audit, nominating and corporate governance and compensation committees will receive an additional annual retainer of $10,000.

Indemnification of Executive Officers and Directors

Our Certificate of Incorporation provides that all of our directors, officers, employees and agents shall be entitled to be indemnified by us to the fullest extent permitted by Section 145 of the Delaware General Corporation Law, or DGCL.

Article VII of our Certificate of Incorporation provides:

Our company, to the full extent permitted by Section 145 of the DGCL as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. It further provides that expenses (including attorneys fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding or to which the officer or director may be entitled to indemnification hereunder shall be paid by us in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it shall ultimately be determined that he or she is not entitled to be indemnified by us as authorized by our certificate of incorporation.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions of our certificate of incorporation, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against these liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to the court of its appropriate jurisdiction the question whether indemnification by us against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

We will pay for or reimburse reasonable expenses incurred by a director and may pay for or reimburse reasonable expenses incurred by an officer in defending any action, suit, or proceeding in advance of the final disposition thereof upon (i) receipt of a written affirmation of the director’s or officer’s good faith belief that the director or officer has met the standard of conduct prescribed by Delaware law; (ii) receipt of an undertaking of the director or officer to repay the amount paid by us if it is ultimately determined that the director or officer is not entitled to indemnification by us and (iii) a determination that the facts then known to those making the determination would not preclude indemnification under the DGCL.

In addition, we have entered into customary indemnity agreements with each of our directors and executive officers.

There is no pending litigation or proceeding involving any of our directors, officers, employees or other agents as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director, officer, employee or other agent.

Additional Information with Respect to Compensation Committee Interlocks

The compensation committee of our board of directors determines the compensation of our officers and directors. None of our executive officers currently serves on the compensation committee or board of directors of any other company of which any members of our board of directors or our compensation committee is an executive officer.

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CERTAIN RELATIONSHIPS AND

RELATED PARTY TRANSACTIONS

Affiliate Leases

We lease our headquarters, which includes a store, a corporate training center and a central distribution and warehouse facility, and ten additional stores (including stores leased from the entities required to be consolidated with us prior to the recapitalization) from W. Gerald Throgmartin, the father of Jerry W. Throgmartin, and entities controlled by Jerry W. Throgmartin and his siblings, or companies or trusts affiliated with Jerry W. Throgmartin. We believe the affiliate leases are “arm’s length,” such that the terms are no less favorable to us than non-affiliate leases. All affiliate leases are on a triple net basis. Rent expense for these affiliate leases was $4.2 million, $3.8 million and $4.2 million for fiscal 2007, 2006 and 2005, respectively.

Until September 30, 2004, we also leased seven stores (including stores leased from the entities required to be consolidated with us prior to the recapitalization) from R. Don Throgmartin, Jerry W. Throgmartin’s uncle. All of these properties were sold to unaffiliated third parties on September 30, 2004. We believe that these leases are “arm’s length,” such that the terms of these leases are no less favorable to us than our non-affiliate leases. Rent expense for these affiliate leases was $1.0 million and $1.9 million in fiscal 2005 and 2004, respectively.

We lease our corporate airplane from Throgmartin Leasing, LLC, an entity controlled by W. Gerald Throgmartin, the father of Jerry W. Throgmartin. During fiscal 2007, 2006 and 2005 we paid rent of $0.3 million for each period to Throgmartin Leasing, LLC for use of the airplane. In addition, we also paid $0.7 million, $0.6 million, and $0.5 million during fiscal 2007, 2006 and 2005, respectively, for the corporate airplane’s operating costs. W. Gerald Throgmartin, the beneficial owner of the airplane, uses the airplane for a certain number of hours per year in exchange for a reduced per hour rental rate.

Existing Stockholders Agreement

Under the stockholders agreement with Freeman Spogli, GIC, Jerry W. Throgmartin, Gregg W. Throgmartin and Dennis L. May, prior to an initial public offering by us or such time as a stockholder transfers more than 50% of the shares of our common stock held by the stockholder immediately following the recapitalization, GIC, Messrs. J. Throgmartin, G. Throgmartin and May have the right to purchase their pro rata share of some new issuances of our securities, including some issuances of our common stock. The stockholders agreement prohibits Messrs. J. Throgmartin, G. Throgmartin and May from transferring any of their shares of our common stock until February 3, 2008 (other than permitted transfers to family trusts or similar entities for the benefit of immediate family members and transfers by Mr. May to Messrs. J. Throgmartin and G. Throgmartin following a termination of Mr. May’s employment agreement by us without “cause” (as defined in his employment agreement discussed above in “Compensation Discussion and Analysis—Employment Agreements”)). Other than these permitted transfers, from February 3, 2008 to February 3, 2010 these three stockholders may transfer no more than 50% of the shares of our common stock that they owned immediately following the closing of the recapitalization. In addition, prior to an initial public offering by us or such time as GIC transfers more than 50% of the shares of our common stock held by it immediately following the recapitalization, any transfers of our common stock by Messrs. J. Throgmartin, G. Throgmartin and May (other than permitted transfers by these stockholders to immediate family, family trusts or similar entities for the benefit of immediate family members) are subject to rights of first refusal in favor of GIC and any third person designated by GIC including us. The stockholders agreement further provides tag-along rights such that (1) upon transfers of our common stock by Messrs. J. Throgmartin, G. Throgmartin or May, GIC shall have the right to participate in such sales on a pro rata basis and (2) upon transfers of our common stock by GIC, Messrs. J. Throgmartin, G. Throgmartin and May shall have the right to participate in such sales on a pro rata basis. A sale by Freeman Spogli of its equity interest in GIC is considered a sale of our common stock for purposes of the tag-along rights under the stockholders agreement. In addition, if GIC sells any shares of our common stock to a third-party buyer or if Freeman Spogli sells all or a substantial percentage of its equity interest in GIC, each of

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Messrs. J. Throgmartin, G. Throgmartin and May will be obligated to sell, at the request of GIC or Freeman Spogli, as applicable, the same percentage of the shares of common stock and other securities beneficially held by him.

The stockholders agreement further provides that the parties will vote at each regular or special meeting of our stockholders to elect to our board of directors, Jerry W. Throgmartin, Dennis L. May and each board nominee selected by GIC. GIC may establish the size of our board of directors in its sole discretion. The rights of each of these parties to be represented on our board of directors (and GIC’s right to establish the size of our board of directors) terminate at such time as the stockholder transfers more than 50% of the shares of our common stock held by the stockholder immediately after the recapitalization. In addition, the presence of a director who is an employee or member of Freeman Spogli or its affiliates is required to constitute a quorum for all board meetings and any director who is an employee or member of Freeman Spogli or its affiliates may call for a stockholder vote on any matter that comes before the board of directors provided that the board of directors has a full and fair opportunity to discuss the matter and may adjourn the board of directors meeting for this purpose. In addition, each of the stockholders party to the stockholders agreement agrees to vote in favor of certain actions if presented to our board, including reorganizing our company as a Delaware corporation and reorganizing our company in preparation for an initial public offering of our common stock. We have agreed that we will not, without GIC’s consent, terminate our current outside auditor, KPMG LLP, or hire another outside accounting firm to assist us with any audit. For so long as the junior notes remain outstanding, the stockholders agreement provides that neither Freeman Spogli nor GIC may take any action or cause or authorize any nominated members of our board who are stockholders, employees or members of Freeman Spogli to cause our board of directors (i) to declare a dividend or other distribution in favor of our stockholders before the consummation of an offer and sale of our common stock that has been declared effective by the SEC other than the repurchase, redemption or other acquisition or retirement for value of any of our equity interests or that of our subsidiaries held by any current or former officer, director or employee pursuant to any equity subscription agreement, stock option agreement, stockholders agreement or similar agreement or (ii) to loan money or pay any fees to Freeman Spogli other than the payment of fees for financial or mergers and acquisitions advisory, financing, underwriting or placement services in connection with financings, acquisitions or divestitures. In the event of a violation of either clause (i) or (ii) above, Freeman Spogli and GIC are to refund to us any property lost as a result of the violation. Additionally, Freeman Spogli and GIC may not cause or authorize and nominate members of our board of directors who are stockholders, employees, or members of Freeman Spogli to approve a resolution or issue or approve an order to any of our officers or employees that prohibits or restricts the payment of any cash interest due to a holder of a junior note in accordance with its terms, unless such nominee determines in good faith at a duly noticed board meeting, that it is in our best interest and the interest of our stockholders to prohibit or restrict such cash interest payment.

The existing stockholders agreement terminates upon the consummation of the IPO reorganization.

Existing Registration Rights Agreement

In connection with the recapitalization, GIC and Messrs. J. Throgmartin, G. Throgmartin and May entered into a registration rights agreement with respect to all the shares of common stock of Gregg Appliances that they hold. Under the registration rights agreement, GIC may at any time, and Messrs J. Throgmartin, G. Throgmartin and May, beginning 180 days after the consummation of an initial public offering of the common stock of Gregg Appliances, require Gregg Appliances to register for resale under the Securities Act their shares of common stock. The existing registration rights agreement terminates upon the consummation of the IPO reorganization.

New Registration Rights Agreement

In connection with the IPO reorganization, FSEP V, FS Affiliates V, L.P., the California State Teachers’ Retirement System, A.S.F. Co-Investment Partners II, L.P., the Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust and Messrs. J. Throgmartin, G. Throgmartin and May, will enter into a registration rights agreement with respect to all of our shares of common stock that they hold.

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Under the new registration rights agreement, FSEP V may at any time, and Jerry W. Throgmartin may, at any time beginning 180 days after the consummation of this offering, require us to register for resale under the Securities Act their registrable shares of common stock. These registration rights include the following provisions:

Demand Registration Rights. We have granted three demand registration rights to FSEP V and one demand registration right to Jerry W. Throgmartin so long as the holder or holders request the registration of registrable common stock having a fair market value of at least $25,000,000, as determined by our board of directors. In the case of Jerry W. Throgmartin, registrable shares held by the Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust and Messrs. G. Throgmartin and May may be included in the request for registration to reach the $25,000,000 threshold. In the case of a demand by FSEP V, registrable shares held by FS Affiliates V, L.P., the California State Teachers’ Retirement System and A.S.F. Co-Investment Partners II, L.P. may be included in the request for registration to reach the $25,000,000 threshold. Upon a demand made by either FSEP V or Jerry W. Throgmartin, every party to the agreement can request to be included in the registration on a pro rata basis.

Piggyback Registration Rights. Each party to the registration rights agreement also has unlimited piggyback registration rights subject only to a determination by the underwriters that the success of the offer or the offering price would be adversely affected by the inclusion of securities of the parties. If at any time on or after the closing of this offering, we propose to file a registration statement under the Securities Act for the same class of common stock held by the parties to the new registration rights agreement, the parties shall have the opportunity to include their registrable shares in the registration.

Expenses. We are responsible for paying all registration expenses, excluding underwriting discounts and commissions and the out of pocket expenses of the holders.

Indemnification. We have agreed to indemnify each of the stockholders party to the registration rights agreement against certain liabilities under the Securities Act.

Consulting Agreement

We have a consulting agreement with W. Gerald Throgmartin. The agreement requires us to pay consulting fees in an amount of $25,000 per year and permits Mr. Throgmartin to continue to participate in our health and disability insurance plans on the same basis as our employees through the term of this agreement. The agreement expires on February 3, 2010.

Life Insurance Policy

In September 2005, Jerry W. Throgmartin, along with certain members of his immediate family, acquired a whole key-man life insurance policy for W. Gerald Throgmartin that had previously benefited our company for a purchase price of $1.1 million. The purchase price of the life insurance policy equaled the cash surrender value of the policy. The transaction was approved by our board of directors.

Purchase of Land

In December 2005, Jerry W. Throgmartin, along with certain members of his immediate family, acquired land owned by us located in Ohio for a purchase price of $1.4 million paid in the form of a promissory note. Our board determined the purchase price to be the fair market value of the land. On February 3, 2006, Mr. Throgmartin paid all amounts due under the note in cash.

Affiliate Debt

In May 2004, Gregg Appliances loaned $16,551,012 to Jerry W. Throgmartin, our Chairman, Chief Executive Officer and a Director. The entire amount of principal and interest was repaid in full in connection with the recapitalization. The largest aggregate amount of indebtedness outstanding since the date of execution of

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the note evidencing this loan was $16,817,075. The note was secured by a mortgage on certain real property located in Marion County, Florida, and bore interest at the prime rate as set by National City Bank of Indiana.

In September 2003, in connection with his purchase of 45,000 shares of common stock of Gregg Appliances, Dennis L. May, our President, Chief Operating Officer, and a Director, executed a nonrecourse installment promissory note payable to Gregg Appliances in the principal amount of $8,500,050, which bore interest at 5.08% per annum. The entire amount of principal and interest was repaid in full in connection with the recapitalization. The largest aggregate amount of indebtedness outstanding since the date of execution was $8,788,704. The note was secured by a pledge of the 45,000 shares of our common stock purchased by Mr. May.

Payments Relating to the Recapitalization

In connection with the recapitalization, certain of the equity holders of Gregg Appliances prior to the recapitalization received consideration in an aggregate amount of approximately $286.1 million in exchange for their shares of our common stock. As part of the consideration, Gregg Appliances issued Jerry W. Throgmartin, Gregg W. Throgmartin, our Vice President of Sales, and Dennis L. May aggregate $18.75 million principal amount of junior notes with a fair value of $12.9 million. Jerry W. Throgmartin, Gregg W. Throgmartin and Dennis L. May each retained and did not receive cash in the recapitalization for a portion of shares of our common stock held by them with an aggregate value of approximately $27.8 million. Freeman Spogli received an advisory services fee of $4.0 million for its services provided to us in structuring and arranging the recapitalization. In addition, Mr. Starrett received $250,000 in connection with his services provided to our company in connection with the recapitalization.

S Corporation Distribution and Tax Indemnification

Prior to the recapitalization, Gregg Appliances was treated for U.S. federal and certain state income tax purposes as an S corporation under Subchapter S of the Code and comparable state laws. As a result, our earnings had been taxed, with certain exceptions, directly to our stockholders rather than to us, leaving our stockholders responsible for paying income taxes on these earnings. Gregg Appliances historically paid distributions to its stockholders to enable them to pay their income tax liabilities as a result of its status as an S corporation and, from time to time, to distribute previously undistributed S corporation earnings and profits. We made aggregate cash distributions to our stockholders of $14.3 million during fiscal 2005 and no cash distributions to our shareholders during fiscal 2006 or fiscal 2007. The S corporation status of Gregg Appliances terminated as a result of the recapitalization. The merger agreement requires that our stockholders prior to the recapitalization indemnify us for any taxes imposed on us relating to any invalidity of our S corporation election under the Code.

Related Person Transaction Policy

Our board of directors adopted certain written policies and procedures for the review, approval and ratification of related party transactions, which we refer to as our Related Person Policy. Among other things, our Related Person Policy provides that any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we (including any of our subsidiaries) were, are or will be a participant and the amount involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest, must be reported to our board of directors prior to the consummation or amendment of the transaction. A related person, as defined in our Related Person Policy, means any person who is, or at any time since the beginning of our last fiscal year was, a director or executive officer of our company or a nominee to become a director of our company; any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee or more than 5% beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner; and any firm, corporation or other entity in which

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any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest. Our board of directors reviews these related party transactions and considers all of the relevant facts and circumstances available to the board, including (if applicable) but not limited to: the benefits to us; the availability of other sources of comparable products or services; the terms of the transaction; and the terms available to unrelated third parties or to employees generally. Our board of directors may approve only those related party transactions that are in, or are not inconsistent with, the best interests of us and of our stockholders, as our board of directors determines in good faith. At the beginning of each fiscal year, our board of directors will review any previously approved or ratified related party transactions that remain ongoing and have a remaining term of more than six months. Our board of directors will consider all of the relevant facts and circumstances and will determine if it is in the best interests of us and our stockholders to continue, modify or terminate these related party transactions.

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PRINCIPAL AND SELLING STOCKHOLDERS

Except as otherwise noted, each beneficial owner in the table below has sole voting power with respect to the shares listed. The following table sets forth beneficial ownership of our common stock following consummation of the IPO reorganization, and as adjusted to reflect the sale of              shares of common stock in this offering by us and the sale of              shares of common stock in this offering by selling stockholders with respect to the beneficial ownership of our common stock by:

• each person who beneficially owns more than 5% of the shares;

• each of our executive officers named in the summary compensation table and certain other executive officers;

• each member of our board of directors;

• all executive officers and directors as a group; and

• each selling stockholder selling shares in this offering.

Unless otherwise indicated in the footnotes below, the persons and entities named in the table have sole voting and investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Unless otherwise indicated in the footnotes below, the address of the stockholders is c/o hhgregg, Inc., 4151 East 96^th Street, Indianapolis, Indiana 46240.

We have agreed to bear the expenses (other than underwriting discounts and commissions) of the selling stockholders in connection with this offering and to indemnify them against certain liabilities, including liabilities under the Securities Act of 1933.

The percentages of common stock beneficially owned are based on 14,245,800 shares of common stock outstanding as of April 1, 2007. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage of ownership held by that person, shares of common stock subject to options held by that person that are currently exercisable or will become exercisable within 60 days after April 1, 2007 are deemed outstanding, while these shares are not deemed outstanding for computing percentage ownership of any other person.

	Beneficial Ownership Prior to the Offering			Number of Shares to be Sold in this Offering	Beneficial Ownership Immediately After the Offering
Name	Number	Percent			Number	Percent
Freeman Spogli & Co. (1)	9,121,388	64.0	%
John M. Roth(2)	9,121,388	64.0	%
California State Teachers’ Retirement System(3)	1,500,000	10.5	%
A.S.F. Co-Investment Partners II, L.P.(4)	500,000	3.5	%
Jerry W. Throgmartin(5)	1,654,917	11.5	%
Dennis L. May(6)	606,376	4.2	%
Donald J.B. Van der Wiel(7)	65,000	*
Michael D. Stout(8)	45,000	*
Jeffrey J. McClintic(9)	48,333	*
Michael G. Larimer(10)	43,333	*
Gregg W. Throgmartin(11)	737,986	5.2	%
Lawrence P. Castellani(12)	116,667	*
Benjamin D. Geiger(2)	—	—
Michael L. Smith(13)	41,667	*
Charles P. Rullman	—	—
Peter M. Starrett(14)	103,333	*
All directors and officers as a group (12 individuals)(15)	11,846,014	81.0	%

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 * Less than 1%.

(1) 9,121,388 shares of our common stock are held of record by FSEP V and FS Affiliates V, L.P., or, collectively, FSEP V. FS Capital Partners V, LLC, as the general partner of FSEP V, has the sole power to vote and dispose of the shares of our common stock owned by FSEP V. Messrs. Mark J. Doran, Bradford M. Freeman, Todd W. Halloran, Jon D. Ralph, John M. Roth, J. Frederick Simmons and William M. Wardlaw are the managing members of FS Capital Partners V, LLC, and Messrs. Doran, Freeman, Halloran, Ralph, Roth, Simmons and Wardlaw are the members of Freeman Spogli & Co., and as such may be deemed to be the beneficial owners of the shares of our common stock owned by FSEP V. Messrs. Doran, Freeman, Halloran, Ralph, Roth, Simmons and Wardlaw each disclaims beneficial ownership in the shares except to the extent of his pecuniary interest in them. The business address of FSEP V and FS Capital Partners V, LLC is c/o Freeman Spogli & Co., 11100 Santa Monica Boulevard, Suite 1900, Los Angeles, California 90025.

(2) The business address of Messrs. Geiger and Roth is c/o Freeman Spogli & Co., 299 Park Avenue, 20th Floor, New York, NY 10171.

(3) The business address of California State Teachers’ Retirement System is 7667 Folsom Boulevard, Suite 250, MS4, Sacramento, CA 95826.

(4) The business address of A.S.F. Co-Investment Partners II, L.P. is 1133 Westchester Avenue, White Plains, NY 10604.

(5) Includes 126,667 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(6) Includes 50,667 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(7) Includes 40,000 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(8) Includes 30,000 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(9) Includes 33,333 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(10) Includes 33,333 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(11) Includes 43,333 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(12) Includes 100,000 shares of our common stock held of record by the Lawrence P. Castellani Grantor Retained Annuity Trust for which Mr. Castellani is trustee and has sole power to vote and dispose of such shares. Includes 16,667 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(13) Includes 22,401 shares of our common stock held of record by the Michael L. Smith 2006 Grantor Retained Annuity Trust for which Mr. Smith is the trustee and has sole power to vote and dispose of such shares. Includes 16,667 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(14) Includes 70,000 shares of our common stock held of record by the Starrett Family Trust for which Mr. Starrett is the trustee and has the sole power to vote and dispose of such shares. Includes 33,333 shares of our common stock issuable upon exercise of options exercisable within 60 days of April 1, 2007.

(15) Includes 126,667, 50,667, 40,000, 30,000, 33,333, 33,333, 16,667, 16,667 and 33,333 shares of our common stock issuable upon exercise of options granted to Messrs. J. Throgmartin, May, Van der Wiel, Stout, McClintic, Larimer, Castellani, Smith and Starrett respectively, exercisable within 60 days of April 1, 2007.

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 150,000,000 shares of common stock, par value $.0001 per share, and 10,000,000 shares of preferred stock, par value $.0001 per share.

At                     , 2007, there were             shares of our common stock outstanding, which were held by             stockholders of record.

The following description of our capital stock is not complete and is subject to and qualified in its entirety by our certificate of incorporation and bylaws, which are included as exhibits to the registration statement filed of which this prospectus forms a part, and by the provisions of applicable Delaware law.

Common Stock

Holders of shares of our common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled or permitted to vote. Our certificate of incorporation and bylaws provide that, except as otherwise provided by law, the affirmative vote of a majority of the shares entitled to vote, present in person or represented by proxy at a meeting at which a quorum is present, shall be the act of the stockholders. Delaware law requires the affirmative vote of a majority of the outstanding shares entitled to vote thereon to authorize certain extraordinary actions, such as mergers, consolidations, dissolutions of the corporation or an amendment to the certificate of incorporation of the corporation. There is no cumulative voting for the election of directors. Upon a liquidation, our creditors and any holders of preferred stock with preferential liquidation rights will be paid before any distribution of holders of our common stock. The holders of our common stock would be entitled to receive a pro rata amount per share of any excess distribution. Holders of common stock have no preemptive or subscription rights. There are no conversion rights, redemption rights, sinking fund provisions or fixed dividend rights with respect to the common stock. All outstanding shares of our common stock are fully paid and nonassessable.

Preferred Stock

Our certificate of incorporation empowers our board of directors to issue up to 10,000,000 shares of preferred stock from time to time in one or more series. The board also may fix the designation, privileges, preferences and rights and the qualifications, limitations and restrictions of those shares, including dividend rights, conversion rights, voting rights, redemption rights, terms of sinking funds, liquidation preferences and the number of shares constituting any series or the designation of the series. Terms selected could decrease the amount of earnings and assets available for distribution to holders of common stock or adversely affect the rights and powers, including voting rights, of the holders of our common stock without any further vote or action by the stockholders. The rights of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred shares that we may be issued in the future. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of the common stock and may adversely affect the voting and other rights of the holders of common stock. Although there are no shares of preferred stock currently outstanding and we have no present intention to issue any shares of preferred stock, any issuance could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

Registration Rights

In addition to rights of sale under Rule 144, several of our officers, directors and stockholders that hold an aggregate of              shares of outstanding common stock have registration rights which enable them to require us to file a registration statement registering their shares for resale to the public. Under the “New Registration Rights Agreement,” FSEP V may at any time exercise its three demand registration rights, and Jerry W. Throgmartin may at any time 180 days after the consummation of this offering exercise his one demand registration right, which would require us to register for resale under the Securities Act their shares of common stock. For a description of the new registration rights agreement, see “Certain Relationships and Related Party Transactions—New Registration Rights Agreement.”

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Potential Anti-takeover Effect of Delaware Law, Our Certificate of Incorporation and Bylaws

We are subject to the “business combinations” provisions of the Delaware General Corporation Law. In general, such provisions prohibit a publicly held Delaware corporation from engaging in various “business combination” transactions with any “interested stockholder” for a period of three years after the date of the transaction in which the person became an “interested stockholder,” unless:

• the board of directors approved the transaction before the “interested stockholder” obtained such status;

• upon consummation of the transaction that resulted in the stockholder becoming an “interested stockholder,” the “interested stockholder” owned at least 85% of our outstanding common stock at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned (i) by persons who are directors and are also officers and (ii) employee stock plans in which the participants do not have the right to determine confidentially whether shares held subject to the plans will be tendered in the tender or exchange offer; or

• on or subsequent to such date, the business combination or merger is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by two-thirds of the holders of the outstanding common stock not owned by the “interested stockholder”.

A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. In general, an “interested stockholder” is a person who, together with affiliates and associates, owns 15% or more of a corporation’s voting stock or within three years did own 15% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts.

Provisions of our certificate of incorporation and bylaws providing that only a majority of the board of directors, the chairman of the board of directors or the chief executive officer may call special meetings of stockholders may have the effect of making it more difficult for a third party to acquire control of us, or of discouraging a third party from attempting to acquire control of us. Amendment of these provisions requires the affirmative vote of holders of 66 ²/3% of our outstanding capital stock. In addition, our certificate of incorporation allows our board of directors to issue up to 10,000,000 shares of preferred stock that could have, when issued, voting rights or preferences that could impede the success of any hostile takeover, or delay a change in control or change in our management.

Listing

We intend to apply to list our common stock on the NYSE under the trading symbol “HGG”.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is                     . The transfer agent’s address is                      and telephone number is                     .

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SHARES ELIGIBLE FOR FUTURE SALE

We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market could adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity securities.

Upon the completion of this offering, we will have outstanding              shares of our common stock, assuming no exercise of outstanding options. We will have reserved 1,500,000 shares of common stock for future grant or issuance under our new equity incentive plan pursuant to which              options to purchase our common stock will be granted immediately upon the consummation of this offering with an exercise price equal to the offering price. The grant of options to purchase shares of common stock under our stock option plans is conditional on our having available a sufficient number of shares of capital stock authorized for issuance.

Lock Up Agreements

At                     , 2007, our executive officers and directors and certain entities and other individuals holding an aggregate of              shares of our common stock, as well as options to purchase an additional                      shares of our common stock, and the selling stockholders have entered into the lock-up agreements described in “Underwriting”.

Rule 144

In general, under Rule 144, a person, including each of our “affiliates,” who has beneficially owned “restricted securities” for at least one year, will be entitled to sell in any three-month period a number of shares that does not exceed the greater of:

• 1% of our then outstanding shares of the common stock, approximately              shares as of                     , 2007; or

• the average weekly trading volume in our common stock during the four calendar weeks preceding the filing of a notice of the sale with the SEC.

Sales pursuant to Rule 144 are subject to requirements relating to manner of sale, notice and availability of current public information about us. Under Rule 144(k), a holder of “restricted securities” who is not an affiliate of us and who has beneficially owned his or her shares for at least two years is entitled to sell such shares pursuant to Rule 144(k) without regard to the limitations described above.

Rule 701

In general, and subject to lock-up agreements, any of our employees, consultants or advisors, other than affiliates, who purchased shares from us under our equity incentive plan, or other written agreements in accordance with Rule 701 of the Securities Act, are eligible to resell their shares under Rule 144 after satisfying the one year holding period.

Registration of Shares Under New Equity Incentive Plan and Our Stock Option Plan

We intend to file a registration statement on Form S-8 covering all of the shares of common stock issuable or reserved for issuance under our new equity incentive plan, including the shares of common stock issuable upon exercise of the substitute stock options granted to certain of the option holders of Gregg Appliances. When issued, these shares will be freely tradable in the public market, subject to Rule 144 volume limitations applicable to affiliates and, in some cases, the expiration of the lock-up agreements described in “Underwriting”.

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Registration Rights Agreement

In addition to rights of sale under Rule 144, several of our officers, directors and stockholders that hold an aggregate of             shares of outstanding common stock have registration rights which enable them to require us to file a registration statement registering their registrable shares for resale to the public. Under the new registration rights agreement, FSEP V may at any time exercise its three demand registration rights, and Jerry W. Throgmartin may at any time 180 days after the consummation of this offering exercise his one demand registration right, which would require us to register for resale under the Securities Act their registrable shares of common stock. See “Certain Relationships and Related Party Transactions—New Registration Rights Agreement”.

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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

This section summarizes certain material U.S. federal income and estate tax considerations generally applicable to beneficial owners of our common stock that acquire shares of our common stock pursuant to this offering and that hold such shares as capital assets. This summary does not provide a complete analysis of all potential tax considerations. The information provided below is based on existing authorities. These authorities may change with retroactive effect or the Internal Revenue Service (“IRS”) might interpret the existing authorities differently. In either case, the tax considerations of owning or disposing of common stock could differ from those described below. The summary generally does not address tax considerations that may be relevant to particular investors because of their specific circumstances, or because they are subject to special rules, including, without limitation, certain former citizens or long-term residents of the United States; “hybrid entities” (entities treated as flow-through entities in one jurisdiction but as taxable entities in another) and their owners; “controlled foreign corporations;” “passive foreign investment companies;” or partnerships or other pass-through entities for U.S. federal income tax purposes. Finally, the summary does not describe the effects of any applicable foreign, state or local laws.

For purposes of this summary, the term “U.S. holder” means a beneficial owner of shares of our common stock that, for U.S. federal income tax purposes, is (i) an individual who is a citizen or resident of the United States; (ii) a corporation or other entity taxable as a corporation created in or organized under the laws of the United States, any state thereof or the District of Columbia; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (iv) a trust (x) if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust or (y) that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. The term “non-U.S. holder” means a beneficial owner of shares of our common stock that is neither a U.S. holder nor a partnership (including an entity that is treated as a partnership for U.S. federal income tax purposes).

If a partnership holds shares of our common stock, the U.S. federal income tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Partners of partnerships that hold shares of our common stock should consult their tax advisors regarding the tax consequences to them of holding and disposing of our common stock.

INVESTORS CONSIDERING THE PURCHASE OF COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE, OR LOCAL TAX LAWS, AND TAX TREATIES.

U.S. Holders

The following discussion summarizes certain material U.S. federal income tax consequences of the ownership and disposition of our common stock applicable to “U.S. holders,” subject to the limitations described above.

Dividends

We have not made any distributions on our common stock, and we do not plan to make any distributions for the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Any such dividend will be eligible for the dividends received deduction if received by an otherwise qualifying corporate U.S. holder that meets the holding period and other requirements for the dividends received deduction. Dividends paid to certain non-corporate U.S. holders (including individuals) generally are eligible for U.S. federal income taxation at rates

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generally applicable to long-term capital gain. To the extent our distributions exceed our current and accumulated earnings and profits, they will constitute a return of capital and will first reduce a U.S. holder’s basis in our common stock, but not below zero, and then will be treated as gain from the sale of our common stock.

Dispositions of Common Stock

Upon a sale, exchange or other taxable disposition of our common stock, a U.S. holder generally will recognize capital gain or loss equal to the difference between the amount realized on the sale, exchange or other taxable disposition and the U.S. holder’s adjusted tax basis in our common stock. Such gain or loss will constitute long-term capital gain or loss if the U.S. holder has held the common stock for more than one year at the time of disposition. Long-term capital gains of certain non-corporate U.S. holders (including individuals) are currently subject to U.S. federal income taxation at a maximum rate of l5%. The deductibility of capital losses is subject to limitations under the Code.

Backup Withholding and Information Reporting Requirements

The Code and the Treasury regulations require those who make specified payments to report such payments to the IRS. Among the specified payments are dividends and proceeds paid by brokers to their customers. The required information returns enable the IRS to determine whether the recipient properly included the payments in income. This reporting regime is reinforced by “backup withholding” rules. These rules require the payors to withhold tax from payments subject to information reporting if the recipient fails to cooperate with the reporting regime by failing to provide his taxpayer identification number to the payor, furnishing an incorrect identification number, or repeatedly failing to report interest or dividends on his returns. The withholding tax rate is currently 28 percent. The backup withholding rules do not apply to payments to corporations, whether domestic or foreign.

In general, dividends on our common stock and payments of the proceeds of a sale, exchange or other disposition of our common stock paid to a U.S. holder are subject to information reporting and may be subject to backup withholding unless the U.S. holder is a corporation or other exempt recipient or provides an accurate taxpayer identification number and certifies that it is not subject to backup withholding.

Any amounts withheld under the backup withholding rules from a payment to a U.S. holder generally can be refunded or credited against the U.S. holder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.

Non-U.S. Holders

The following discussion summarizes certain material U.S. federal income tax consequences of the ownership and disposition of our common stock applicable to “non-U.S. holders,” subject to the limitations described above.

Dividends

We have not made any distributions on our common stock, and we do not plan to make any distributions for the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed our current and accumulated earnings and profits, they will constitute a return of capital and will first reduce a non-U.S. holder’s basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock. Any dividend paid to a non-U.S. holder on our common stock will generally be subject to U.S. withholding tax at a 30% rate. The withholding tax might apply at a reduced rate under the terms of an applicable income tax treaty between the United States and the non-U.S. holder’s country of residence. A non-U.S. holder must demonstrate its entitlement to treaty benefits by certifying eligibility. A non-U.S. holder can meet this

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certification requirement by providing a Form W-8BEN or appropriate substitute form. If the holder holds the stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to the agent. The holder’s agent will then be required to provide certification, either directly or through other intermediaries. For payments made to a foreign partnership or other flow-through entity, the certification requirements generally apply to the partners or other owners as well as to the partnership or other entity, and the partnership or other entity must provide the partners’ or other owners’ documentation. Special rules, described below, apply if a dividend is effectively connected with a U.S. trade or business conducted by the non-U.S. holder.

Dispositions of Common Stock

Non-U.S. holders generally will not be subject to U.S. federal income tax on any gains realized on the sale, exchange, or other taxable disposition of common stock. This general rule, however, is subject to several exceptions. For example, the gain would be subject to U.S. federal income tax if:

• the gain is effectively connected with the conduct by the non-U.S. holder of a U.S. trade or business (in which case the special rules described below apply);

• the non-U.S. holder is an individual who holds our common stock as a capital asset (generally, an asset held for investment purposes) and who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or

• the rules of the Foreign Investment in Real Property Tax Act, or FIRPTA (described below), treat the gain as effectively connected with a U.S. trade or business.

An individual non-U.S. holder described in the second bullet point immediately above will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States.

The FIRPTA rules may apply to a sale, exchange or other disposition of common stock if we are, or were within five years before the transaction, a “U.S. real property holding corporation,” or a USRPHC. We do not believe that we are a USRPHC or that we will become one in the future. If we are or become a USRPHC, so long as our common stock is regularly traded on an established securities market, only a non-U.S. holder who, actually or constructively, holds or held (at any time during the shorter of the five year period preceding the date of disposition or the holder’s holding period) more than 5% of our common stock will be subject to U.S. federal income tax on the disposition of our common stock.

Dividends or Gain Effectively Connected With a U.S. Trade or Business

If any dividend on common stock, or gain from the sale, exchange or other taxable disposition of common stock, is effectively connected with a U.S. trade or business conducted by the non-U.S. holder, then the dividend or gain will be subject to U.S. federal income tax at the regular graduated rates. If the non-U.S. holder is eligible for the benefits of a tax treaty between the United States and the holder’s country of residence, any “effectively connected” dividend or gain generally would be subject to U.S. federal income tax only if it is also attributable to a permanent establishment or fixed base maintained by the holder in the United States. Payments of dividends that are effectively connected with a U.S. trade or business, and therefore included in the gross income of a non-U.S. holder, will not be subject to the 30% withholding tax. To claim exemption from withholding, the non-U.S. holder must certify its qualification, which can be done by providing a Form W-8ECI. If the non-U.S. holder is a corporation, that portion of its earnings and profits that is effectively connected with its U.S. trade or business would generally be subject to a “branch profits tax”. The branch profits tax rate generally is 30%, although an applicable income tax treaty might provide for a lower rate.

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Backup Withholding and Information Reporting

Payments to non-U.S. holders of dividends on common stock generally will not be subject to backup withholding, and payments of proceeds made to non-U.S. holders by a broker upon a sale of common stock will not be subject to information reporting or backup withholding, in each case so long as the non-U.S. holder certifies its nonresident status. Some of the common means of certifying nonresident status are described under “–Non-U.S. Holders–Dividends”. We must report annually to the IRS any dividends paid to each non-U.S. holder and the tax withheld, if any, with respect to such dividends. Copies of these reports may be made available to tax authorities in the country where the non-U.S. holder resides.

Any amounts withheld from a payment to a holder of common stock under the backup withholding rules generally can be credited against any U.S. federal income tax liability of the holder.

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UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting agreement dated                     , 2007, Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. are acting as representatives and joint book-running managers. We and the selling stockholders have agreed to sell to the underwriters named below, and the underwriters have severally agreed to purchase from us and the selling stockholders the following respective numbers of shares of common stock:

Underwriter	Number of Shares
Credit Suisse Securities (USA) LLC
Lehman Brothers Inc.
Wachovia Capital Markets, LLC
UBS Securities LLC
Piper Jaffray & Co.
KeyBanc Capital Markets Inc.
Total

The underwriting agreement provides that the underwriters are obligated to purchase all the shares of common stock in the offering if any are purchased, other than those shares covered by the option to purchase described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.

The selling stockholders have granted to the underwriters a 30-day option to purchase on a pro rata basis up to              additional outstanding shares from the selling shareholders at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $             per share. The underwriters and selling group members may allow a discount of $             per share on sales to other broker/dealers. After the initial public offering the representatives may change the public offering price and concession and discount to broker/dealers.

The following table summarizes the compensation and estimated expenses we and the selling stockholders will pay:

	Per Share		Total
	Without Over-allotment	With Over-allotment	Without Over-allotment	With Over-allotment
Underwriting Discounts and Commissions paid by us	$	$	$	$
Expenses payable by us	$	$	$	$
Underwriting Discounts and Commissions paid by selling stockholders	$	$	$	$
Expenses payable by selling stockholders	$	$	$	$

The representatives have informed us that they do not expect sales to accounts over which the underwriters have discretionary authority to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or

99

filing, without the prior written consent of Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. for a period of 180 days after the date of this prospectus. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day period, we issue an earnings release or material news or a material event relating to us occurs; or (2) prior to the expiration of the 180-day period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions shall continue to apply until either (x) the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event if, within three days of that issuance or occurrence, any of the underwriters publishes or otherwise distributes a research report or makes public appearance concerning us, or (y) the later of the last day of the 180-day period and the third day after we issue the release or the material news or material event occurs.

Certain of our officers, directors and principal stockholders have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or securities convertible into or exchangeable or exercisable for any shares of our common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of Credit Suisse Securities (USA) LLC and Lehman Brothers Inc. for a period of 180 days after the date of this prospectus. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day period, we issue an earnings release or material news or a material event relating to us occurs; or (2) prior to the expiration of the 180-day period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions shall continue to apply until either (x) the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of the material news or material event if, within three days of that issuance or occurrence, any of the underwriters publishes or otherwise distributes a research report or makes public appearance concerning us, or (y) the later of the last day of the 180-day period and the third day after we issue the release or the material news or material event occurs.

We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in that respect.

We intend to apply to list our common stock on the NYSE under the symbol “HGG”.

Certain of the underwriters and their respective affiliates have performed and may in the future perform investment banking, financial advisory and lending services for us and our affiliates from time to time, for which they have received customary compensation, and may do so in the future.

Prior to this offering, there has been no public market for our common stock. The initial public offering price has been determined by a negotiation among us, the selling stockholders and the representatives and will not necessarily reflect the market price of our common stock following the offering. The principal factors that were considered in determining the public offering price included

• the information presented in this prospectus and otherwise available to the underwriters;

• the history of and prospects for the industry in which we will compete;

• the ability of our management;

• the prospects for our future earnings;

• the present state of our development and current financial condition;

• the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies; and

• the general condition of the securities markets at the time of this offering.

100

We offer no assurances that the initial public offering price will correspond to the price at which the common stock will trade in the public market subsequent to the offering or that an active trading market for our common stock will develop and continue after the offering.

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act.

• Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

• Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option and/or purchasing shares in the open market.

• Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

• Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.

The shares are offered for sale in those jurisdictions in the United States, Europe, Asia and elsewhere where it is lawful to make such offers.

Each of the underwriters has represented and agreed that it has not offered, sold or delivered and will not offer, sell or deliver any of the shares directly or indirectly, or distribute this prospectus supplement or the accompanying prospectus or any other offering material relating to the shares, in or from any jurisdiction except under circumstances that will result in compliance with the applicable laws and regulations thereof and that will not impose any obligations on us except as set forth in the underwriting agreement.

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each Underwriter represents and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the Relevant Implementation Date) it has not made and will not make an offer of Securities to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Securities which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another

101

Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Securities to the public in that Relevant Member State at any time,

(a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;

(c) to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the manager for any such offer; or

(d) in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of Shares to the public” in relation to any Shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Shares to be offered so as to enable an investor to decide to purchase or subscribe the Shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression Prospectus Directive means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Each of the underwriters severally represents, warrants and agrees as follows:

(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) to persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or in circumstances in which section 21 of FSMA does not apply to the company; and

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

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make Internet distributions on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

102

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the shares in Canada is being made only on a private placement basis exempt from the requirement that we and the selling stockholders prepare and file a prospectus with the securities regulatory authorities in each province where trades of shares are made. Any resale of the shares in Canada must be made under applicable securities laws which will vary depending on the relevant jurisdiction, and which may require resales to be made under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the shares.

Representations of Purchasers

By purchasing shares in Canada and accepting a purchase confirmation a purchaser is representing to us, the selling stockholders and the dealer from whom the purchase confirmation is received that:

• the purchaser is entitled under applicable provincial securities laws to purchase the shares without the benefit of a prospectus qualified under those securities laws,

• where required by law, that the purchaser is purchasing as principal and not as agent,

• the purchaser has reviewed the text above under Resale Restrictions, and

• the purchaser acknowledges and consents to the provision of specified information concerning its purchase of the shares to the regulatory authority that by law is entitled to collect the information.

Further details concerning the legal authority for this information are available on request.

Rights of Action – Ontario Purchasers Only

Under Ontario securities legislation, certain purchasers who purchase a security offered by this prospectus during the period of distribution will have a statutory right of action for damages, or while still the owner of the shares, for rescission against us and the selling stockholders in the event that this prospectus contains a misrepresentation without regard to whether the purchaser relied on the misrepresentation. The right of action for damages is exercisable not later than the earlier of 180 days from the date the purchaser first had knowledge of the facts giving rise to the cause of action and three years from the date on which payment is made for the shares. The right of action for rescission is exercisable not later than 180 days from the date on which payment is made for the shares. If a purchaser elects to exercise the right of action for rescission, the purchaser will have no right of action for damages against us or the selling stockholders. In no case will the amount recoverable in any action exceed the price at which the shares were offered to the purchaser and if the purchaser is shown to have purchased the securities with knowledge of the misrepresentation, we and the selling stockholders, will have no liability. In the case of an action for damages, we and the selling stockholders, will not be liable for all or any portion of the damages that are proven to not represent the depreciation in value of the shares as a result of the misrepresentation relied upon. These rights are in addition to, and without derogation from, any other rights or remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant statutory provisions.

Enforcement of Legal Rights

All of our directors and officers as well as the experts named herein and the selling stockholders may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.

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Taxation and Eligibility for Investment

Canadian purchasers of shares should consult their own legal and tax advisors with respect to the tax consequences of an investment in the shares in their particular circumstances and about the eligibility of the shares for investment by the purchaser under relevant Canadian legislation.

104

LEGAL MATTERS

Certain legal matters with respect to the common stock offered hereby will be passed upon for us and the selling stockholders by Bingham McCutchen LLP, New York, New York. Certain legal matters with respect to this offering will be passed upon for the underwriters by Shearman & Sterling LLP, New York, New York. Certain partners and employees of Bingham McCutchen LLP are limited partners in partnerships that are limited partners of the Freeman Spogli investment funds that own equity interests of us.

EXPERTS

The consolidated financial statements of Gregg Appliances, Inc. and subsidiaries as of March 31, 2006 and 2005, and for each of the years in the three-year period ended March 31, 2006, have been included herein in reliance upon the report of KPMG LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to our common stock. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.

You may read and copy any document we have filed or may in the future file at the SEC’s public reference facility in Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov.

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INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

GREGG APPLIANCES, INC.

	Page
Audited Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Statements of Income for years ended March 31, 2006, 2005 and 2004	F-3
Consolidated Balance Sheets as of March 31, 2006 and 2005	F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for years ended March 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for years ended March 31, 2006, 2005 and 2004	F-6
Notes to Consolidated Financial Statements	F-7
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2006 and 2005	F-24
Condensed Consolidated Balance Sheets as of December 31, 2006 and March 31, 2006	F-25
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2006 and 2005	F-26
Notes to Condensed Consolidated Financial Statements	F-27

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Gregg Appliances, Inc.:

We have audited the accompanying consolidated balance sheets of Gregg Appliances, Inc. and subsidiaries as of March 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended March 31, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gregg Appliances, Inc. and subsidiaries as of March 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2006, in conformity with generally accepted accounting principles in the United States.

/s/ KPMG LLP

Indianapolis, Indiana

June 16, 2006, except as to Note 6,

which is as of April 16, 2007

F-2

GREGG APPLIANCES, INC. AND SUBSIDIARIES

Consolidated Statements of Income

Years Ended March 31, 2006, 2005 and 2004

	2006			2005			2004
	(In thousands, except per share data)
Net sales	$	900,424		$	803,199		$	753,156
Cost of goods sold		616,512			548,105			513,408
Gross profit		283,912			255,094			239,748
Selling, general and administrative expenses		209,484			184,224			175,034
Net advertising expense		41,660			35,678			33,243
Stock-based compensation		—			9,277			2,390
Gain on transfer of extended maintenance obligations		(27,850	)		—			—
Restructuring and asset impairment charges		1,009			—			—
Income from operations		59,609			25,915			29,081
Other expense (income):
Interest expense		19,000			3,866			1,052
Interest income		(231	)		(977	)		(278	)
Gain related to early extinguishment of debt		(39	)		—			—
Recapitalization transaction costs		—			4,745			—
Minority interest		—			3,813			99
Total other expense		18,730			11,447			873
Income before income taxes		40,879			14,468			28,208
Income tax expense (benefit)		18,664			(14,780	)		—
Net income	$	22,215		$	29,248		$	28,208
Basic net income per share	$	1.57		$	1.02		$	0.91
Diluted net income per share	$	1.57		$	1.02		$	0.91
Weighted average shares outstanding—Basic		14,153,666			28,790,285			30,905,294
Weighted average shares outstanding—Diluted		14,153,666			28,806,645			30,905,324

See accompanying notes to consolidated financial statements.

F-3

GREGG APPLIANCES, INC. AND SUBSIDIARIES

C onsolidated Balance Sheets

March 31, 2006 and 2005

	2006			2005
	(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	2,301		$	8,642
Accounts receivable—trade		7,024			5,907
Accounts receivable—other		8,862			8,892
Merchandise inventories		98,807			76,817
Deferred commissions		—			3,670
Land held for sale		—			1,359
Prepaid expenses and other current assets		4,572			3,431
Deferred income taxes		1,560			6,999
Total current assets		123,126			115,717
Net property and equipment		50,986			43,826
Deferred commissions		—			6,265
Deposits		2,862			7,858
Cash surrender value of life insurance		—			1,096
Deferred financing costs, net		9,821			10,997
Deferred income taxes		96,522			106,724
Other		447			621
		160,638			177,387
Total assets	$	283,764		$	293,104
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable—third party	$	3,319		$	—
Accounts payable—vendors		52,011			28,651
Customer deposits		14,912			12,562
Accrued liabilities		31,920			32,980
Deferred revenue on extended maintenance agreements		—			22,844
Total current liabilities		102,162			97,037
Long-term liabilities:
Long-term debt		178,242			182,285
Deferred revenue on extended maintenance agreements		120			38,805
Other long-term liabilities		8,394			7,824
Total long-term liabilities		186,756			228,914
Total liabilities		288,918			325,951
Stockholders’ equity (deficit):
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding as of March 31, 2006 and 2005		—			—
Common stock, no par value; 52,500,000 shares authorized; 14,254,800 and 13,970,000 shares issued and outstanding as of March 31, 2006 and 2005, respectively		113,809			111,054
Accumulated deficit		(118,744	)		(143,901	)
		(4,935	)		(32,847	)
Note receivable for common stock		(219	)		—
Total stockholders’ deficit		(5,154	)		(32,847	)
Total liabilities and stockholders’ equity (deficit)	$	283,764		$	293,104

See accompanying notes to consolidated financial statements.

F-4

GREGG APPLIANCES, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Deficit)

Years Ended March 31, 2006, 2005 and 2004

	Preferred Stock Amount		Common Stock Amount			Retained Earnings (Accumulated Deficit)			Receivable for Common Stock			Total Stockholders’ Equity
Balance at March 31, 2003	$	—	$	75		$	26,727		$	—		$	26,802
1,503,000 shares of common stock issued to an executive employee		—		8,500			—			(8,500	)		—
Stock compensation expense		—		1,252			—			—			1,252
Net income		—		—			28,208			—			28,208
Distributions to stockholders		—		—			(30,674	)		—			(30,674	)
Balance at March 31, 2004	$	—	$	9,827		$	24,261		$	(8,500	)	$	25,588
Payments received on receivable for common stock		—		—			—			8,500			8,500
Stock compensation expense		—		3,748			—			—			3,748
Issuance of common stock as part of the recapitalization		—		111,214			—			—			111,214
Transaction costs for stock issuance		—		(2,825	)		—			—			(2,825	)
Issuance of common stock		—		700			—			—			700
Income tax benefit due to recapitalization		—		—			98,942			—			98,942
Net income		—		—			29,248			—			29,248
Distributions to stockholders		—		(11,610	)		(296,352	)		—			(307,962	)
Balance at March 31, 2005	$	—	$	111,054		$	(143,901	)	$	—		$	(32,847	)
Net issuance of common stock		—		2,792			—			(238	)		2,554
Adjustment of income tax benefit from recapitalization		—		—			2,947			—			2,947
Common stock repurchase		—		(37	)		(5	)		19			(23	)
Net income		—		—			22,215			—			22,215
Balance at March 31, 2006	$	—	$	113,809		$	(118,744	)	$	(219	)	$	(5,154	)

See accompanying notes to consolidated financial statements.

F-5

GREGG APPLIANCES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended March 31, 2006, 2005 and 2004

	2006			2005			2004
	(In thousands)
Cash flows from operating activities:
Net income	$	22,215		$	29,248		$	28,208
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,459			8,635			9,371
Amortization of deferred financing costs		1,594			259			—
Accretion of original issue discount		458			42			—
Stock-based compensation		—			9,277			2,390
(Gain) loss on sales of property and equipment		165			(3,043	)		128
Gain on early extinguishment of debt		(39	)		—			—
Deferred income taxes		18,588			(14,780	)		—
Restructuring and asset impairment charges		1,009			—			—
Gain on transfer of extended maintenance obligations		(27,850	)		—			—
Payments for transfer of extended maintenance obligations		(21,467	)		—			—
Minority interest		—			3,813			99
Changes in operating assets and liabilities:
Accounts receivable—trade		(1,117	)		(652	)		(2,675	)
Accounts receivable—other		103			(2,421	)		911
Merchandise inventories		(21,990	)		(2,784	)		3,499
Prepaid expenses and other assets		(967	)		(219	)		(513	)
Deferred commissions		472			(1,039	)		(1,010	)
Deposits		4,996			1,494			(1,388	)
Accounts payable—third parties		3,319			(3,994	)		(6,896	)
Accounts payable—vendors		11,976			3,962			(9,172	)
Deferred revenue on extended maintenance agreements		(2,749	)		5,781			6,157
Customer deposits		2,350			2,724			1,733
Other accrued liabilities		(2,619	)		727			1,930
Other long-term liabilities		570			1,301			1,398
Net cash (used in) provided by operating activities		(524	)		38,331			34,170
Cash flows from investing activities:
Purchases of property and equipment		(19,046	)		(15,212	)		(15,546	)
Payments on notes receivable—related parties		—			25,051			3,170
Advances on notes receivable—related parties		—			(16,551	)		(36	)
Proceeds on sale (purchase) of land held for sale		1,359			(963	)		—
(Increase) decrease in cash surrender value of life insurance		1,096			(196	)		(199	)
Deconsolidation of cash of variable interest entities		—			(585	)		—
Proceeds from sales of property and equipment		448			11,011			145
Net cash (used in) provided by investing activities		(16,143	)		2,555			(12,466	)
Cash flows from financing activities:
Net increase in book overdrafts		11,384			—			—
Repayments of mortgage notes payable		—			(7,141	)		(338	)
Proceeds from long-term debt		—			182,243			—
Payment related to early extinguishment of debt		(2,844	)		—			—
Proceeds from notes payable—related parties		—			23,336			41,074
Payments on notes payable—related parties		—			(31,707	)		(40,579	)
Payment of financing costs		(645	)		(11,256	)		—
Proceeds from issuance of common stock		2,548			111,914			—
Payments for repurchase of common stock		(23	)		—			—
Transaction costs for stock issuance		(94	)		(2,825	)		—
Distributions to stockholders		—			(300,646	)		(30,674	)
Minority interest		—			(4,810	)		5,856
Net cash provided by (used in) financing activities		10,326			(40,892	)		(24,661	)
Net decrease in cash and cash equivalents		(6,341	)		(6	)		(2,957	)
Cash and cash equivalents
Beginning of year		8,642			8,648			11,605
End of year	$	2,301		$	8,642		$	8,648
Supplemental disclosure of cash flow information:
Issuance of common stock for note receivable from an executive employee	$	—		$	—		$	8,500
Distribution payable for S Corp deposit		—			7,318			—
Note receivable for issuance of common stock from GIC		219			—			—
Interest paid		16,991			988			1,058
Income taxes paid		35			—			—

See accompanying notes to consolidated financial statements.

F-6

GREGG APPLIANCES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

Description of Business

Gregg Appliances, Inc. (the Company) is a specialty retailer of consumer electronics, home appliances and related services operating under the names hhgregg^® and Fine Lines^®. As of March 31, 2006, the Company had 67 stores located in Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee. The Company operates in one reportable segment.

Sales for the years ended March 31, 2006, 2005, and 2004 can be categorized as follows:

	2006		2005		2004
Video products	47	%	47	%	45	%
Home appliances	38		37		38
Other products and services	15		16		17
	100	%	100	%	100	%

The Company purchases a significant portion of its merchandise from two vendors. For the year ended March 31, 2006, two vendors accounted for 15.0% and 10.2%, respectively, of merchandise purchases. For the year ended March 31, 2005, two vendors accounted for 15.2% and 9.9%, respectively, of merchandise purchases. For the year ended March 31, 2004, two vendors accounted for 14.1% and 12.6%, respectively, of merchandise purchases.

(a) Recapitalization

On October 19, 2004, the Company entered into an Agreement and Plan of Merger, as amended, with Gregg Investment Corporation, LLC (GIC) to consummate a recapitalization of the Company. Under the terms of the Agreement and Plan of Merger, GIC, an entity formed by an affiliate of Freeman Spogli & Co. LLC, merged with and into Gregg Appliances, Inc. and Gregg Appliances, Inc. survived the merger. The recapitalization was effected on February 3, 2005.

Pursuant to the Agreement and Plan of Merger, GIC contributed cash of $111.2 million in equity capital to the Company and the equity holders received consideration of approximately $286.4 million. As part of the consideration, the Company issued $25.0 million principal amount of 6% junior subordinated notes with a fair value of $17.2 million to certain stockholders. The junior subordinated notes will mature on February 3, 2015 and are subordinate to all of the Company’s existing and future senior and subordinated debt. Three of the management stockholders retained a portion of the Company’s common stock held by them before the recapitalization with an aggregate value of $27.8 million, based on the valuation of the Company determined in connection with the recapitalization, and they did not receive consideration in the recapitalization with respect to the stock they retained. Following the recapitalization, GIC owns 80.01% of the Company’s common stock and the three management stockholders collectively own 19.99% of the Company’s common stock. GIC and the former stockholders made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to treat the recapitalization as an asset purchase for tax purposes. In accordance with Emerging Issues Task Force (EITF) 94-10, Accounting by a Company for the Income Tax Effects of Transactions among or with Its Shareholders under FASB Statement No. 109, the tax benefit of this election was recorded as an equity transaction. For all periods prior to the recapitalization the Company operated as an S corporation for federal and state income tax purposes. However, following the recapitalization the Company no longer qualified as an S corporation and became subject to U.S. Federal and certain state and local income taxes applicable to C corporations. The transaction was accounted for as a leveraged recapitalization with no change in the book basis of assets and liabilities.

F-7

(b) Principles of Consolidation

The consolidated financial statements include the accounts of Gregg Appliances, Inc. and its wholly-owned subsidiary, HHG Distributing, LLC (HHG). HHG is inactive and its assets consist of a 5% ownership interest in a distributing company, totaling $0.1 million which is accounted for on the cost method.

As discussed in note 10, the consolidated financial statements for the period prior to the recapitalization date of February 3, 2005 and for the year ended March 31, 2004, also include the financial statements of certain special-purpose entities owned by related parties through the date of the recapitalization. The special-purpose entities all had fiscal years ended December 31. The Company believes that use of the different fiscal period for these entities has not had a material impact on the Company’s results of operations. All significant intercompany balances and transactions have been eliminated in consolidation. Effective as of the recapitalization, Gregg Appliances, Inc, is no longer required to consolidate the special-purpose entities as an implicit guarantee no longer exists due to changes in majority ownership and corporate governance.

(c) Estimates

Management uses estimates and assumptions in preparing financial statements in conformity with accounting principles generally accepted in the United States. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates and assumptions.

(d) Cash and Cash Equivalents

Cash and cash equivalents may include money market deposits and other financial instruments with original maturities of three months or less.

(e) Accounts Receivable

Accounts receivable are recorded at the invoiced amount and are subject to finance charges. Accounts receivable-other consists mainly of amounts due from vendors for advertising and volume rebates. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance sheet credit exposure related to its customers. The Company has determined an allowance of $0.7 million and $0.1 million is necessary at March 31, 2006 and 2005, respectively, based on historical write-off experience and specific customer data. The Company recorded provisions for bad debt, net of recoveries, of $1.4 million, $0.6 million and $0.3 million for the years ended March 31, 2006, 2005, and 2004, respectively. The allowance at March 31, 2006 includes $0.3 million for product service and repair receivables which the Company determined was necessary based on our restructuring efforts to outsource our product service and repair as discussed in note 14. Additionally, the recorded allowance for bad debt, net of recoveries, for the year ended March 31, 2006 includes $0.6 million related to product service and repair receivables.

(f) Merchandise Inventories

Merchandise inventories are stated at the lower of average cost or net realizable value.

(g) Land Held for Sale

From 2003 to 2005, the Company purchased land, which was sold in December 2005. As discussed in note 8, the land was sold to the Chairman and Chief Executive Officer of the Company, along with certain members of his immediate family, at its estimated fair market value in exchange for cash. No gain or loss was recognized on the sale of the land as the purchase price of $1.4 million was equal to the book value on the date of sale.

F-8

(h) Property and Equipment

Property and equipment are recorded at cost and are being depreciated over their expected useful lives on a straight-line basis. Leasehold improvements are depreciated over the shorter of the lease term or expected useful life. Repairs and maintenance costs are charged directly to expense as incurred.

Property and equipment consisted of the following at March 31 (in thousands):

	2006			2005
Buildings	$	2,725		$	—
Machinery and equipment		7,097			7,903
Office furniture and equipment		37,897			31,719
Vehicles		6,178			7,790
Signs		3,562			2,824
Leasehold improvements		31,964			26,502
Construction in progress		2,945			3,062
		92,368			79,800
Less accumulated depreciation and amortization		(41,382	)		(35,974	)
Net property and equipment	$	50,986		$	43,826

Estimated useful lives by major asset category are as follows:

Asset	Life (in years)
Buildings	40
Machinery and equipment	5–7
Office furniture and equipment	3–7
Vehicles	5
Signs	7
Leasehold improvements	5–20

(i) Impairment of Long-Lived Assets

The Company accounts for the impairment or disposal of long-lived assets in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires long-lived assets, such as property and equipment, to be evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset (if any) are less than the carrying value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value. The Company has determined that no impairment loss was required to be recognized during the years ended March 31, 2005 or 2004. As discussed in note 14, for the year ended March 31, 2006, the Company recorded asset impairment charges of $0.8 million in connection with our restructuring efforts related to the outsourcing of our product service and repair. The Company determined that no additional impairment loss was required to be recognized during the year ended March 31, 2006.

(j) Deferred Financing Costs

Costs incurred related to debt financing are capitalized and amortized over the life of the related debt as a component of interest expense. For the years ended March 31, 2006 and 2005, the Company capitalized $0.6 million and $11.3 million of financing related costs and recognized related amortization expense of $1.6 million and $0.3 million, respectively. As discussed in note 4, $0.2 million of deferred financing costs were written off in fiscal 2006 in connection with the Company’s early extinguishment of debt related to the 9% senior notes.

F-9

(k) Revenue Recognition

The Company recognizes revenue from the sale of merchandise at the time the customer takes possession of the merchandise. The Company honors returns from customers within ten days from the date of sale and provides allowances for estimated returns based on historical experience. The Company recorded an allowance for sales returns of $0.1 million at March 31, 2006 and 2005. The Company recognizes service revenue at the time the service is completed, the price is fixed or determinable, and collectibility is reasonably assured. Proceeds from the sales of gift cards are deferred until redeemed by the customer. Amounts billed to customers for delivery of merchandise are included in revenue.

The Company sells extended service plans (ESPs) on appliance and electronic merchandise for periods ranging up to ten years. Funds received for ESPs in which the Company is the primary obligor are deferred and the incremental direct costs of selling the ESP, including commissions, are capitalized and amortized on a straight-line basis over the term of the service agreement. Costs of services performed pursuant to the ESP are expensed as incurred. For ESPs sold by the Company on behalf of a third party, the net commission revenue is recognized at the time of sale. The Company is not the primary obligor on ESPs sold on behalf of third parties. As discussed in note 15, in October 2005, an unrelated party assumed the Company’s remaining product service obligations for its previously sold ESPs, with the exception of certain small electronics ESPs sold by the Company.

The information below provides the changes in the Company’s deferred revenue on extended service agreements (in thousands):

	Year ended March 31
	2006			2005			2004
Deferred revenue on extended service agreements:
Balance at beginning of year	$	61,649		$	55,868		$	49,711
Revenue deferred on new agreements		21,071			44,269			41,458
Revenue recognized		(23,700	)		(38,488	)		(35,301	)
Transfer of extended service agreements, see note 15		(58,900	)		—			—
Balance at end of year	$	120		$	61,649		$	55,868

(l) Cost of Goods Sold

Cost of goods sold includes the total cost of products sold, vendor allowances, handling charges, in-bound freight expenses, and physical inventory losses. Delivery charges of $21.0 million, $19.3 million, and $19.3 million for the years ended March 31, 2006, 2005, and 2004, respectively, were included in selling, general, and administrative expenses.

(m) Vendor Allowances

The Company receives allowances from vendors as a result of purchasing and promoting their products. Vendor allowances provided as a reimbursement of specific, incremental and identifiable costs incurred to promote a vendor’s products are recorded as a reduction to the related expense when the cost is incurred. For all other vendor programs, including vendor allowances received in excess of the cost to promote a vendor’s product, or vendor allowances directly related to the purchase of a vendor’s product, allowances are recorded as a reduction to the related inventory, and therefore recognized in cost of goods sold when the product is sold.

(n) Advertising Costs

Advertising costs are expensed as incurred. These amounts have been reduced by payments received from vendors under cooperative advertising which totaled $16.5 million, $15.6 million, and $15.4 million for the years ended March 31, 2006, 2005, and 2004, respectively.

F-10

(o) Store Opening Costs

Store opening costs, other than capital expenditures, are expensed as incurred.

(p) Income Taxes

Prior to February 3, 2005, Gregg Appliances, Inc. was organized as an S corporation. Accordingly, the allocable share of taxable income or loss was includable in the tax returns of the stockholders and income taxes were not reflected in the Company’s consolidated financial statements. Following the recapitalization, the Company no longer qualified as an S corporation and became subject to U.S. federal and certain state and local income taxes applicable to C corporations.

Subsequent to the recapitalization and change to C corporation status, the Company began recognizing deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Following the recapitalization, GIC and the former stockholders of the Company made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to treat the recapitalization as an asset purchase for tax purposes. In accordance with Emerging Issues Task Force (EITF) 94-10, Accounting by a Company for the Income Tax Effects of Transactions among or with Its Shareholders under FASB Statement No. 109, the tax benefit of this election was recorded as an equity transaction.

During the year ended March 31, 2006, the deferred tax asset related to goodwill for tax purposes was finalized and an additional $2.9 million was recorded as an equity transaction. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. During the year ended March 31, 2006, tax law changes were enacted to change the tax rates of certain states in which the Company operates. These changes have been recognized in income tax expense during the year ended March 31, 2006 and are included within the income tax rate reconciliation in note 5.

(q) Common Stock, Stock Options, and Stock Appreciation Rights

The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, an interpretation of APB Opinion No. 25, to account for its stock options and stock appreciation rights. FASB Statement No. 123, Accounting for Stock-Based Compensation, and FASB Statement No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As permitted by existing accounting standards, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of FASB Statement No. 123, as amended. The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding awards for the years ended March 31, 2006, 2005, and 2004 (in thousands).

	2006			2005			2004
Net income, as reported	$	22,215		$	29,248		$	28,208
Add stock-based employee compensation expense included in reported net income		—			9,277			2,390
Deduct total stock-based employee compensation expense determined under fair-value-based method for all awards, net of tax		(222	)		(5,530	)		(1,138	)
Pro forma net income	$	21,993		$	32,995		$	29,460

F-11

(r) Accrued Straight-Line Rent

Most of the Company’s leases include fixed-dollar rental commitments, with many containing rent escalations based on a fixed amount. In accordance with SFAS No. 13, Accounting for Leases, as amended by SFAS No. 29, Determining Contingent Rentals, and FASB Technical Bulletin 85-3, Accounting for Operating Leases with Scheduled Rent Increases, the Company recognizes rental expense for minimum lease payments from operating leases on a straight-line basis over the lease term, including any additional cancelable option periods where failure to exercise such options would have resulted in an economic penalty. The rental expense commences at the start of the build-out period, during which time the Company typically does not make rent payments, and is recognized over the lease term. Allowances received for leasehold improvements are included as accrued straight-line rent. Accrued straight-line rent is included in other long-term liabilities on the balance sheets and was $5.9 million and $6.1 million at March 31, 2006 and 2005, respectively.

(s) Variable Interest Entities

In December 2003, the FASB issued FASB Interpretation No. 46R, Consolidation of Variable Interest Entities (FIN 46R), which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, Consolidation of Variable Interest Entities, which was issued in January 2003. The Company was required to apply FIN 46R as of March 31, 2004. Under FIN 46R, the Company had to consolidate certain special-purpose leasing entities because they were owned by related parties. Prior to the effective date of FIN 46R, the Company was required to consolidate these entities based on guidance in EITF Issue No. 90-15, Impact of Nonsubstantive Lessors, Residual Value Guarantees, and Other Provisions in Leasing Transactions, and EITF Topic No. D-14, Transactions involving Special-Purpose Entities. Effective as of the recapitalization date, the Company is no longer required to consolidate these entities due to changes in the Company’s majority ownership and corporate governance.

(t) Reclassifications

Certain amounts in the 2005 and 2004 financial statements have been reclassified to conform with the 2006 presentation.

(u) Recently Issued Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”, which establishes standards for transactions in which an entity exchanges its equity instruments for goods or services. This standard requires all entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This eliminates the exception to account for such awards using the intrinsic value-based method previously allowable under APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS 123R allows implementation using a modified version of prospective application, under which compensation expense for the unvested portion of previously granted awards and all new awards will be recognized on or after the date of adoption. SFAS No. 123R is effective for annual reporting periods beginning on or after June 15, 2005. We adopted SFAS No. 123R effective April 1, 2006 using the prospective method and the adoption did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued FASB Statement No. 154, Accounting Changes and Error Corrections. SFAS No. 154 requires retrospective application for voluntary changes in accounting principle unless impractical to do so. Retrospective application refers to the application of a different accounting principle to previously issued financial statements as if that principle had always been used. This Statement is effective for the Company’s fiscal year beginning April 1, 2006. The impact of SFAS 154 will depend on the accounting change, if any, in a future period.

F-12

(v) Comprehensive Income

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and presentation of comprehensive income and its components. As of years ended March 31, 2006 and 2005, the Company has no items that represent other comprehensive income and, therefore, has not included a schedule of comprehensive income in the financial statements.

(2) Inventories

Inventories consisted of the following at March 31 (in thousands):

	2006		2005
Appliances	$	32,867	$	25,934
Electronics		65,940		49,271
Service parts		—		1,612
	$	98,807	$	76,817

(3) Accounts Payable–Third Party

The Company has an inventory purchasing arrangement with a financial institution, which provides for advances up to $8 million, except for the period from October 1 through January 1, when it increases to $10 million. Inventory purchases under this arrangement are collateralized by a security interest in the specific merchandise inventories. The Company does not pay interest on amounts outstanding unless such amounts become past due. The financial institution negotiates terms directly with the vendors and the agreement has provisions that entitle the financial institution to a portion of the discounts provided by the vendor. Amounts outstanding under the purchasing arrangement were $3.3 million and $0 at March 31, 2006 and 2005, respectively.

(4) Debt

A summary of long-term debt at March 31 is as follows (in thousands):

	2006		2005
9.0% Senior notes, interest due in arrears on a semi-annual basis on February 1 and August 1 through February 3, 2013	$	160,500	$	165,000
6.0% Junior subordinated notes, interest due on a semi-annual basis on February 1 and August 1 though February 1, 2015, net of discount of $7,258 and $7,715 at March 31, 2006 and 2005, respectively		17,742		17,285
Total debt		178,242		182,285
Less current maturities of long-term debt		—		—
Total long-term debt	$	178,242	$	182,285

Scheduled maturities of long-term debt at March 31, 2006 are as follows:

2013	$	160,500
2015		25,000
	$	185,500

In connection with its recapitalization on February 3, 2005, the Company issued $165 million in unsecured 9% senior notes. Interest on the notes is payable in arrears twice a year on February 1 and August 1. The notes will mature on February 3, 2013. On September 1, 2005, the interest on the senior notes increased to 9.25% per

F-13

annum pursuant to section 4 of the Registration Rights Agreement dated February 3, 2005 between the Company and the initial purchasers of the notes. The interest rate increase remained in effect until the Registration Statement covering the exchange offer with respect to the notes was declared effective by the Securities and Exchange Commission (the SEC) and the exchange offer was consummated. On November 4, 2005, the exchange offer was consummated and the interest rate consequently decreased to 9.0% per annum.

During the fourth quarter of fiscal 2006, the Company purchased $4.5 million of its 9% senior notes at a weighted-average price of 94.08% of face value. For the year ended March 31, 2006, the Company recorded a gain related to the early extinguishment of debt of approximately $39,000 representing the difference between the purchase price and the carrying value of the 9% senior notes, net of related capitalized debt issuance costs.

On February 3, 2005 the Company also issued to certain of its stockholders, $25 million in unsecured 6% junior subordinated notes with a fair value of $17.2 million at the time of issue, based on an effective interest rate of 11%. These notes are subordinated to the unsecured senior notes and any payment of principal thereof directly or indirectly is deferred until the payment in full of all of the senior debt. Unless there is a default or an event of default under any senior debt, interest on the junior subordinated debt is payable in arrears on February 1 and August 1. The junior notes will mature on February 1, 2015. The original discount on the notes will be accreted to interest expense through the maturity date. Accretion of the discount was approximately $0.5 million and $0.1 million during the years ended March 31, 2006 and 2005, respectively, and is included in interest expense in the accompanying consolidated financial statements.

The Company has a revolving credit agreement with a bank group for up to $75 million. The facility includes a $25 million sub-limit for letters of credit. Borrowings under the revolving credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. Interest on borrowings is payable monthly at a fluctuating rate based on the bank’s prime rate or LIBOR plus an applicable margin. The Company pays an annual commitment fee of 3/8% on the unused portion of the facility.

The interest rate based on the bank’s prime rate as of March 31, 2006 was 7.75%. As of March 31, 2006, under the revolving credit facility, the Company had no cash borrowings outstanding and $5.9 million of letters of credit outstanding which expire through November 1, 2006. As of March 31, 2006, the total borrowing availability under the revolving credit facility was $39.7 million.

The unsecured senior notes and the revolving credit facility are guaranteed by the Company’s wholly-owned subsidiary, HHG, which has substantially no assets or operations. The guarantee is full and unconditional and the Company has no other subsidiaries. In addition, there are no restrictions on HHG’s ability to pay dividends under the arrangement.

The debt agreements contain restrictions on mergers, incurring additional debt or liens, making investments, selling assets or making equity repurchases, debt prepayments and transactions with affiliates. The revolving credit agreement also contains a financial covenant requiring maintenance of a minimum fixed charge coverage ratio. The debt agreements also restrict payment of dividends unless the Company achieves a specific fixed charge coverage ratio as defined in the debt agreements. Any such dividends are limited to the lesser of 50% of consolidated net income and 100% of equity contributions since the date of the recapitalization. The Company was in compliance with the restrictions and covenants at March 31, 2006.

F-14

(5) Income Taxes

Income tax expense (benefit) for the years ended March 31 consisted of the following (in thousands):

	2006		2005
Current:
Federal	$	—	$	—
State		76		—
Total current		76		—
Deferred:
Federal		13,354		(12,543	)
State		5,234		(2,237	)
Total deferred		18,588		(14,780	)
Total	$	18,664	$	(14,780	)

Deferred income taxes at March 31 consisted of the following:

	2006		2005
Deferred tax assets:
Goodwill for tax purposes	$	92,329	$	97,843
Deferred revenue		—		25,110
Accrued expenses		2,870		2,610
Inventories		375		375
Supplemental retirement plan		933		720
Other		313		59
NOL and credit carryforwards		6,970		1,446
Total deferred tax assets		103,790		128,163
Deferred tax liabilities:
Deferred commissions		—		6,068
Property and equipment		2,220		4,727
Discount on junior notes		2,903		3,142
Other		585		503
Total deferred tax liabilities		5,708		14,440
Net deferred tax assets	$	98,082	$	113,723

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which temporary differences are expected to reverse, the Company believes it is more likely than not that it will realize the benefits of these deductible differences.

At March 31, 2006, the Company has net operating loss carryforwards for federal income tax purposes of $15.9 million, which are available to offset future federal taxable income through 2026.

F-15

The expense (benefit) for income taxes differs from the amount of income tax determined by applying the U.S. federal income tax rate of 35% to income before income taxes and cumulative effect of accounting change due to the following (in thousands):

	2006		2005
Computed “expected” tax expense	$	14,308	$	5,064
State income tax expense, net of federal income tax benefit		2,141		—
Deferred tax assets at date of conversion to C corporation		—		(16,587	)
Tax effect of income while an S corporation		—		(3,372	)
State taxes after conversion to a C corporation		—		242
Changes in state income tax rates and apportionment		2,057		—
Other		158		(127	)
	$	18,664	$	(14,780	)

(6) Net Income Per Share

Basic net income per share is calculated based on the weighted-average number of outstanding common shares in accordance with SFAS No. 128, Earnings Per Share. Diluted net income per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares. When the Company reports net income, the calculation of diluted net income per share excludes shares underlying outstanding stock options with exercise prices that exceed the average market price of the Company’s common stock for the period, as the effect would be antidilutive. Potential common shares are composed of shares of common stock issuable upon the exercise of stock options (in thousands, except per share amounts).

	Year Ended Mar 31,
	2006		2005		2004
Net income, as reported (A)	$	22,215	$	29,248	$	28,208
Weighted average outstanding shares of common stock (B)		14,153,666		28,790,285		30,905,294
Dilutive effect of employee stock options and stock appreciation rights		—		16,360		30
Common stock and common stock equivalents (C)		14,153,666		28,806,645		30,905,324
Net income per share:
Basic (A/B)	$	1.57	$	1.02	$	0.91
Diluted (A/C)	$	1.57	$	1.02	$	0.91

Antidilutive shares not included in the diluted per share calculation for 2006 were 1,853,000. There were no antidilutive shares in 2005 and 2004.

(7) Stockholders’ Equity

Common Stock

During fiscal year 2004, the Company accepted an $8.5 million note receivable from one of its executives for the purchase of Company stock. The note bore interest at 5.08% per annum payable annually in arrears. Principal payments were due annually in the amount by which distributions exceeded the stockholder’s income tax liability, with the remaining outstanding principal and accrued interest due on September 30, 2014. The note and accrued interest were paid in full during fiscal year 2005. Interest income on the note receivable was $0.4 million for the year ended March 31, 2005. The common stock was subject to a buy-sell agreement. If the executive desired to sell all or a portion of his shares, he was required to offer them to the Company and, if the Company declined, to the other stockholders. If the other stockholders did not elect to purchase the shares, the Company was required to purchase the shares at fair value. The note was considered a nonrecourse note under

F-16

APB Opinion No. 25 and related interpretations. Accordingly, the stock purchase was treated as a variable award and stock compensation expense of $3.7 million and $1.3 million was recorded for the years ended March 31, 2005 and 2004, respectively, to reflect the increase in estimated fair value of the Company’s common stock.

During fiscal year 2006, the Company issued 288,550 shares of common stock to GIC at $10.00 per share in exchange for $2.6 million, notes receivable of $0.2 million, as well as the recognition of $0.1 million of compensation expense associated with a stock grant. The notes receivable was reduced to $0.2 million as of March 31, 2006 as the Company repurchased 3,750 shares of common stock for approximately $23,000 and cancellation of a note receivable of approximately $19,000. The remaining $0.2 million notes receivable balance as of March 31, 2006 has been classified as an offset to equity in the accompanying condensed consolidated balance sheet. The notes accrue interest at 6.0% per annum, payable in arrears commencing on May 31, 2006 and on each succeeding May 31 thereafter with respect to the interest accrued during the previous twelve-month period ending March 31 until the notes are paid in full. The principal balance of each note and all accrued and unpaid interest on such note is payable in full by each borrower on the seventh anniversary of the date of such note. The Company recognized interest income of approximately $9,000 for the year ended March 31, 2006 related to the notes receivable. The compensation expense associated with the stock grant was recorded within Selling, General and Administrative expense in the accompanying consolidated statement of income for the year ended March 31, 2006.

Stock Option Plan

Effective April 1, 2003, the Company adopted an Equity Incentive Plan that permitted the grant of stock options and stock appreciation rights for up to 5,711,400 (as adjusted for the February 2005 stock split) common shares of the Company. The options and rights were granted at no less than 100% of the fair market value of the common stock at the date of grant. The options and rights expired no later than 10 years from the anniversary of the grant date and vested over a specified number of years from the grant date as determined by the Company’s board of directors. Shares that were forfeited reverted and became available for future issuance. All awards granted under this plan that were outstanding and not exercisable would, unless otherwise provided for in the applicable individual award agreements, become immediately vested and exercisable as of the first date that a change in control of the Company had been deemed to occur, as defined in the plan.

During fiscal year 2004, the Company issued options for 1,503,000 shares of common stock at approximately $5.66 per share to an employee of the Company, which were immediately vested. The options remained outstanding at March 31, 2004.

During fiscal year 2004, 2,004,000 stock appreciation rights were issued to certain key executives of the Company at a fair value of approximately $5.66 per right. At March 31, 2004, 1,302,600 of the rights were fully vested. The remaining rights would vest and be exercisable by the participants on March 31, 2010.

The stock appreciation rights were variable awards under APB Opinion No. 25 and related interpretations. Accordingly, stock compensation expense of $5.5 million and $1.1 million was recorded for the years ended March 31, 2005 and 2004, respectively, to reflect the increase in fair value of the Company’s common stock prior to the recapitalization.

Effective with the recapitalization, all of the previously unvested stock options and appreciation rights became vested and were exercised. The fair value of options granted by the Company was estimated to be zero at the date of grant using a Black-Scholes option pricing model, without considering the expected volatility of the underlying stock, with the following weighted average assumptions:

Risk-free interest rate	4.0	%
Dividend yield	10.0	%
Expected life of the options (years)	10

F-17

On March 8, 2005, the Company’s board of directors approved the adoption of the Gregg Appliances, Inc. 2005 Stock Option Plan (Stock Option Plan). The Stock Option Plan provides for the grant of incentive stock options and nonqualified stock options to the Company’s officers, directors, consultants, and key employees. An aggregate of 2,500,000 shares of common stock is reserved for issuance under the Stock Option Plan. If an option expires, is terminated or canceled without having been exercised or repurchased by the Company, or common stock is used to exercise an option, the terminated portion of the option or the common stock used to exercise the option will become available for future grants under the Stock Option Plan unless the plan is terminated.

The board of directors will determine the exercise price of the options under the Stock Option Plan, but the exercise price must be at least equal to the fair market value of the Company’s common stock on the date of the grant. The term of an incentive stock option and a nonqualified stock option may not exceed seven years (the board of directors may extend the term of the options after the options have been granted), except that with respect to any participant who owns 10% of the voting power of all classes of the Company’s outstanding capital stock, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value of the Company’s common stock on the date of the grant.

During fiscal 2006, the Company issued options for 1,869,000 shares of Common Stock under the Stock Option Plan to certain employees and directors of the Company. The options vest over a three year period and expire seven years from the date of the grant or at an earlier date. The per share weighted average fair value of stock options granted during fiscal 2006 was $0.91 on the date of grant using a Black-Scholes option pricing model, without considering the expected volatility of the underlying stock, with the following weighted average assumptions:

Risk-free interest rate	4.1	%
Dividend yield	—
Expected life of the options (years)	5

Activity under the Equity Incentive Plan dated April 1, 2003 is summarized as follows:

Range of Exercise Prices	Number of Shares Outstanding		Weighted Average Exercise Price per Share
Outstanding at March 31, 2003	—		$	—
Granted	1,053,000			5.66
Exercised	—			—
Canceled	—			—
Outstanding at March 31, 2004	1,053,000		$	5.66
Granted	—			—
Exercised	(1,053,000	)		(5.66	)
Canceled	—			—
Outstanding at March 31, 2005	—		$	—

Activity under the Gregg Appliances, Inc. 2005 Stock Option Plan is summarized as follows:

Range of Exercise Prices	Number of Shares Outstanding		Weighted Average Exercise Price per Share
Outstanding at March 31, 2005	—		$	—
Granted	1,869,000			13.75
Exercised	—			—
Canceled	(16,000	)		(13.75	)
Outstanding at March 31, 2006	1,853,000		$	13.75

F-18

The following table summarizes the Company’s outstanding stock options as of March 31, 2006:

Exercise Prices	Number of Shares Outstanding	Weighted Average Remaining Option Term (in years)	Weighted Average Exercise Price per Share
$10.00	926,500	6.34	$	10.00
$15.00	463,250	6.34		15.00
$20.00	463,250	6.34		20.00
$10.00 to $20.00	1,853,000	6.34	$	13.75

(8) Leases

The Company leases certain retail stores, warehouse and office space, our corporate airplane and vehicles under operating leases. Noncancelable lease agreements expire at various dates through March 31, 2026, require various minimum annual rentals, and contain certain options for renewal. The majority of these agreements require payment of property taxes, normal maintenance, and insurance on the properties. Total rental expense was $22.9 million, $17.2 million, and $15.2 million for the years ended March 31, 2006, 2005, and 2004, respectively, of which $4.7 million, $3.4 million, and $3.4 million was with related parties. Contingent rentals based upon sales are applicable to certain of the store leases. Contingent rental payments expensed were approximately $0.2 million, $0.2 million, and $0.1 million for the years ended March 31, 2006, 2005, and 2004, respectively.

Future minimum required rental payments for noncancelable operating leases, with terms of one year or more, consist of the following as of March 31, 2006 (in thousands):

	Rental Payments
Payable in fiscal year:
2007	$	22,938
2008		21,616
2009		20,796
2010		18,451
2011		16,403
Thereafter		88,996
Total required payments	$	189,200

(9) Related Party Transactions

During fiscal year 2006, the Chairman and Chief Executive Officer of the Company, along with certain members of his immediate family, acquired a whole life insurance policy benefiting the Company. No gain or loss was recognized on the sale of the policy as the purchase price of $1.1 million was equal to the book value and cash surrender value on the date of sale.

During fiscal year 2006, the Chairman and Chief Executive Officer of the Company, along with certain members of his immediate family, acquired the Company’s land held for sale at its estimated fair market value in exchange for cash. No gain or loss was recognized on the sale of the land as the purchase price of $1.4 million was equal to the book value on the date of sale.

During fiscal year 2005, the Company entered into a $16.6 million note receivable with one of the Company’s stockholders, with interest at the prime rate. The note and accrued interest were paid in full during fiscal year 2005. Interest income on the note receivable was $0.6 million for the year ended March 31, 2005.

F-19

During fiscal year 2005, the Company made a payment of $4.0 million to Freeman Spogli & Co. V, L.P. This payment included $1.0 million for advisory services related to the recapitalization and $3.0 million for advisory services related to financing transactions. The Company also made a payment of $0.3 million to a board member for advisory services related to the recapitalization.

The Company had several debt agreements with various related parties totaling $8.2 million at March 31, 2004. The notes were due on demand and were paid off during fiscal year 2005. Interest was payable monthly at the prime rate (4.0% at March 31, 2004). The Company recorded interest expense of approximately $0.3 million and $0.4 million for the years ended March 31, 2005 and 2004, respectively, for related party notes payable.

During fiscal year 2002, the Company entered into a $6.2 million note receivable with one of its stockholders. The note bore interest at 4.77% per annum due annually in arrears. The note and accrued interest were paid in full during fiscal year 2004. Interest income on the note receivable was approximately $36,000 for the year ended March 31, 2004.

In addition, the Company has a consulting agreement with a member of the Chairman and Chief Executive Officer of the Company’s immediate family. Payments on the agreement were not material for the years ended March 31, 2005 and 2004. The agreement lasts through February 3, 2010.

The Company also has several leases with the Chairman and Chief Executive Officer of the Company and members of his immediate family for their headquarters and certain stores. The leases are “arm’s length,” such that the terms are no less favorable than the Company’s other leases. See note 7.

(10) Lease Accounting Adjustment

In February, 2005, the Securities and Exchange Commission (SEC) issued a letter expressing its interpretations of certain lease accounting issues relating to the amortization of leasehold improvements, the recognition of rent expense when leases have rent holidays and allowances received by tenants for leasehold improvements. As a result of a review of its historical lease accounting practices, the Company found some deviations to these interpretations. As these items were not significant to results of operations in fiscal 2005 and 2004, the Company recorded a pre-tax, non-cash benefit in the fourth quarter of fiscal year 2005 of approximately $0.7 million ($0.4 million after taxes). In addition, net fixed assets were increased by approximately $4.7 million and other liabilities were increased by approximately $4.1 million at March 31, 2005.

(11) Variable Interest Entities

Gregg Appliances, Inc. leases an airplane and several retail stores from special-purpose entities owned by related parties, including Throgmartin Leasing, LLC; WGT V, LLC; and DT Development South LLC. Gregg Appliances, Inc. does not guarantee the debt of any of these entities, nor provide guarantees of the residual value of the leased property. However, these entities were consolidated during fiscal 2005 and 2004 until the recapitalization because they involve single-lessee leasing arrangements owned by related parties, which were considered to include an implicit guarantee by the Company.

Effective as of the recapitalization, Gregg Appliances, Inc. is no longer required to consolidate these entities, as an implicit guarantee no longer exists due to changes in majority ownership and corporate governance. Accordingly, the assets and liabilities of those entities are not included in the March 31, 2006 and 2005 consolidated financial statements, respectively.

(12) Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments (SFAS 107), requires disclosure of the fair value of financial assets and liabilities for which it is

F-20

practicable to estimate. Fair value is defined in SFAS 107 as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The carrying amounts of cash and cash equivalents, accounts receivable—trade, accounts receivable—other, accounts payable—third party, accounts payable—vendors, and customer deposits approximate fair value because of the short maturity of these instruments. The fair value of the Company’s 9% Senior notes and 6% Junior subordinated notes at March 31, 2006 and 2005, based on quoted market values, have aggregate fair values of $148.9 million and $159.2 million, and $16.8 million and $16.8 million, respectively.

(13) Employee Benefit Plans

The Company sponsors a 401(k) retirement savings plan covering all employees who have attained the age of 21 and have worked at least 1,000 hours within a 12-month period. Plan participants may elect to contribute 1% to 12% of their compensation to the Plan, subject to IRS limitations. The Company provides a discretionary matching contribution up to 7% of each participant’s compensation, with total Company expense, including payment of administrative fees, aggregating approximately $0.4 million, $0.2 million, and $0.3 million for the years ended March 31, 2006, 2005, and 2004, respectively.

The Company has an unfunded, nonqualified supplemental retirement plan for members of executive management. Benefits accrue to individual participants annually based on a predetermined formula, as defined, which considers operating results of the Company and the participant’s base salary. Vesting of benefits is attained upon reaching 55 years of age or 10 years of continuous service, measurement of which is retroactive to the participant’s most recent start date. Annual interest is credited to participant accounts at an interest rate determined at the sole discretion of the Company. Benefits will be paid to individual participants upon the later of terminating employment with the Company or the participant attaining the age of 55. The Company recorded approximately $0.6 million, $0.4 million, and $0.5 million in expenses related to this plan for the years ended March 31, 2006, 2005, and 2004, respectively. At March 31, 2006 and 2005, the Company had approximately $2.3 million and $1.8 million, respectively, of benefits accrued in other long-term liabilities.

(14) Legal Proceedings

The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

(15) Restructuring and Asset Impairment Charges

In September 2005, the Company announced that it would outsource its product service and repair offerings. The charges related to this restructuring initiative were recorded as the various stages of the initiative took effect in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS No. 146). SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when a liability is incurred.

In connection with this restructuring, the Company recorded pre-tax charges of approximately $1.0 million for the year ended March 31, 2006. The pre-tax restructuring charges are composed of (in thousands):

	Asset Impairments			Severance and Benefits Costs			Total
Total charge	$	756		$	253		$	1,009
Cash payments		—			(210	)		(210	)
Charge against assets		(756	)		—			(756	)
Balance as of March 31, 2006	$	—		$	43		$	43

Asset impairments relate primarily to the write-down of property, plant and equipment, resulting from the outsourcing of the Company’s product service and repair offerings. The fair values of the impaired long-lived

F-21

assets were determined primarily using probability-weighted expected cash flows in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). The severance and benefits costs relate to a reduction in the Company’s product service and repair workforce of approximately 210 employees as of September 30, 2005. These severance and benefits costs were recorded as of the announcement date in accordance with SFAS No. 146.

In addition to the above restructuring charges, the Company also incurred additional charges resulting from the decision to exit the product service and repair business during the year ended March 31, 2006. These charges were as follows (in thousands):

Markdowns of service parts inventory within Cost of Goods Sold	$	756
Bad debt charge within Selling, General and Administrative		613
	$	1,369

(16) Transfer of Extended Service Obligations

In fiscal 2006, General Electric Company (GE) assumed the Company’s product service obligations for the Company’s previously sold extended service plans (ESPs). In November 2005, the Company paid cash of approximately $21.5 million to GE for GE’s assumption of these obligations. The Company recognized a pre-tax gain on the transfer of the obligations of approximately $27.9 million for the elimination of the obligations (net of deferred commissions) under its previously sold ESPs. On a prospective basis, GE will be the primary obligor on virtually all appliance and electronics ESPs sold by the Company. The Company will remain the primary obligor on certain small electronics ESPs.

(17) Subsequent Event

In May 2006, the Company purchased $8.0 million of our 9% senior notes at a price of 93.06% of face value. The Company anticipates recording a gain related to the early extinguishment of debt representing the difference between the purchase price and the carrying value of the senior notes, as well as the associated write-off of debt issuance costs.

F-22

(18) Interim Financial Results (Unaudited)

The following table sets forth certain unaudited quarterly information for each of the eight fiscal quarters for the years ended March 31, 2006 and 2005, (in thousands). In management’s opinion, this unaudited quarterly information has been prepared on a consistent basis with the audited financial statements and includes all necessary adjustments, consisting only of normal recurring adjustments, that management considers necessary for a fair presentation of the unaudited quarterly results when read in conjunction with the Consolidated Financial Statements and Notes.

	For the Year Ended March 31, 2006
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Net sales	$	185,017		$	212,897		$	281,201		$	221,309
Cost of goods sold		121,748			147,535			198,989			148,240
Gross profit		63,269			65,362			82,212			73,069
Selling, general and administrative expenses		49,277			53,491			55,516			51,200
Net advertising expense		9,210			9,124			11,750			11,576
Gain on transfer of extended maintenance obligations		—			—			(27,850	)		—
Restructuring and asset impairment charges		—			1,320			—			(311	)
Income from operations		4,782			1,427			42,796			10,604
Other expense (income):
Interest expense		4,726			4,812			4,957			4,505
Interest income		(89	)		(80	)		(20	)		(42	)
Gain related to early extinguishment of debt		—			—			—			(39	)
Total other expense (income)		4,637			4,732			4,937			4,424
Income (loss) before income taxes		145			(3,305	)		37,859			6,180
Income tax expense		105			852			15,273			2,434
Net income (loss)	$	40		$	(4,157	)	$	22,586		$	3,746
	For the Year Ended March 31, 2005
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
Net sales	$	158,960		$	184,513		$	254,175		$	205,551
Cost of goods sold		110,692			122,160			178,159			137,094
Gross profit		48,268			62,353			76,016			68,457
Selling, general and administrative expenses		42,020			44,552			47,911			49,741
Net advertising expense		6,109			10,369			9,981			9,219
Stock-based compensation		21			6,700			—			2,556
Income from operations		118			732			18,124			6,941
Other expense (income):
Interest expense		239			295			320			3,012
Interest income		(195	)		(303	)		(315	)		(164	)
Recapitalization transaction costs		—			—			—			4,745
Minority interest		(516	)		827			3,475			27
Total other expense (income)		(472	)		819			3,480			7,620
Income (loss) before income taxes		590			(87	)		14,644			(679	)
Income tax benefit		—			—			—			(14,780	)
Net income (loss)	$	590		$	(87	)	$	14,644		$	14,101

F-23

GREGG APPLIANCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	December 31, 2006			December 31, 2005			December 31, 2006			December 31, 2005
	(In thousands, except per share data)
Net sales	$	335,101		$	281,201		$	776,067		$	679,115
Cost of goods sold		235,527			198,989			538,134			468,272
Gross profit		99,574			82,212			237,933			210,843
Selling, general and administrative expenses		62,582			55,516			168,526			158,284
Net advertising expense		14,198			11,750			34,202			30,084
Gain on transfer of extended maintenance obligations		—			(27,850	)		—			(27,850	)
Restructuring and asset impairment charges		—			—			—			1,320
Income from operations		22,794			42,796			35,205			49,005
Other expense (income):
Interest expense		4,471			4,957			13,624			14,495
Interest income		(51	)		(20	)		(66	)		(189	)
Gain related to early extinguishment of debt		(145	)		—			(440	)		—
Total other expense		4,275			4,937			13,118			14,306
Income before income taxes		18,519			37,859			22,087			34,699
Income tax expense		7,653			15,273			9,072			16,230
Net income	$	10,866		$	22,586		$	13,015		$	18,469
Basic net income per share	$	0.76		$	1.59		$	0.91		$	1.31
Diluted net income per share	$	0.76		$	1.59		$	0.91		$	1.31
Weighted average shares outstanding—Basic		14,245,800			14,240,289			14,249,204			14,124,591
Weighted average shares outstanding—Diluted		14,287,470			14,240,289			14,267,690			14,124,591

See accompanying notes to condensed consolidated financial statements.

F-24

GREGG APPLIANCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31, 2006			March 31, 2006
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	3,219		$	2,301
Accounts receivable—trade, less allowances of $617 and $181, respectively		22,091			7,024
Accounts receivable—other, less allowances of $72 and $329, respectively		13,971			8,862
Merchandise inventories		128,634			98,807
Prepaid expenses and other current assets		4,333			4,572
Deferred income taxes		1,882			1,560
Total current assets		174,130			123,126
Net property and equipment		52,250			50,986
Deposits		774			2,862
Deferred financing costs, net		7,933			9,821
Deferred income taxes		87,208			96,522
Other		285			447
		148,450			160,638
Total assets	$	322,580		$	283,764
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable—third party	$	1,857		$	3,319
Accounts payable—vendors		77,454			52,011
Line of credit		—			—
Customer deposits		18,560			14,912
Accrued liabilities		39,896			31,949
Total current liabilities		137,767			102,191
Long-term liabilities:
Long-term debt		163,122			178,242
Other long-term liabilities		13,827			8,485
Total long—term liabilities		176,949			186,727
Total liabilities		314,716			288,918
Stockholders’ equity (deficit):
Preferred stock; no par value; 10,000,000 shares authorized; no shares issued and outstanding as of December 31, 2006 and March 31, 2006		—			—
Common stock; no par value; 52,500,000 shares authorized; 14,245,800 and 14,254,800 shares issued and outstanding as of December 31, 2006 and March 31, 2006		113,823			113,809
Accumulated deficit		(105,744	)		(118,744	)
		8,079			(4,935	)
Note receivable for common stock		(215	)		(219	)
Total stockholders’ equity (deficit)		7,864			(5,154	)
Total liabilities and stockholders’ equity (deficit)	$	322,580		$	283,764

See accompanying notes to condensed consolidated financial statements.

F-25

GREGG APPLIANCES, INC. AND SUBSIDIARIES.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	December 31, 2006			December 31, 2005
	(In thousands)
Operating activities:
Net income	$	13,015		$	18,469
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		8,981			7,803
Amortization of deferred financing costs		1,158			1,186
Accretion of original issue discount		380			348
Stock-based compensation		104			—
Loss on disposal of assets		76			166
Gain on early extinguishment of debt		(440	)		—
Deferred income taxes		8,992			16,173
Restructuring and asset impairment charges		—			1,320
Gain on transfer of extended maintenance obligations		—			(27,850	)
Payments for transfer of extended maintenance obligations		—			(21,467	)
Changes in operating assets and liabilities:
Accounts receivable—trade		(15,067	)		(10,437	)
Accounts receivable—other		(5,162	)		(7,786	)
Merchandise inventories		(29,827	)		(39,851	)
Prepaid expenses and other assets		401			(748	)
Deferred commissions		—			448
Deposits		2,088			5,402
Accounts payable—third parties		(1,462	)		6,317
Accounts payable—vendors		25,405			30,817
Deferred revenue on extended maintenance agreements		16			(2,714	)
Customer deposits		3,648			2,472
Other accrued liabilities		7,940			6,015
Other long-term liabilities		3,479			431
Net cash provided by (used in) operating activities		23,725			(13,486	)
Investing activities:
Purchases of property and equipment		(13,190	)		(13,805	)
Proceeds from sale and leaseback transaction		2,725			—
Decrease in cash surrender value of life insurance		—			1,096
Deposit on future sale and leaseback transaction		1,854			—
Proceeds from sales of property and equipment		197			386
Net cash used in investing activities		(8,414	)		(12,323	)
Financing activities:
Net increase in bank overdrafts		38			17,692
Repurchase of stock previously issued		(105	)		—
Payment of financing costs		—			(739	)
Proceeds from issuance of common stock		—			2,398
Payments received on notes receivable for issuance of common stock from GIC		4			—
Payment for early debt extinguishment		(14,330	)		—
Net cash (used in) provided by financing activities		(14,393	)		19,351
Net increase (decrease) in cash and cash equivalents		918			(6,458	)
Cash and cash equivalents:
Beginning of period		2,301			8,642
End of period	$	3,219		$	2,184
Supplemental disclosure of cash flow information:
Interest paid	$	8,730		$	8,145
Income taxes paid		92			—
Note receivable for issuance of common stock from GIC		—			238
Non-cash item—land held for sale for current note receivable		—			1,359

See accompanying notes to condensed consolidated financial statements.

F-26

GREGG APPLIANCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Nature of Organization

Description of Business

Gregg Appliances, Inc. (the Company) is a specialty retailer of consumer electronics, home appliances, bedding and related services operating under the names hhgregg® and Fine Lines®. As of December 31, 2006, the Company had 74 stores located in Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee. The Company operates in one reportable segment.

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, these unaudited condensed consolidated financial statements reflect all necessary adjustments, which are of a normal recurring nature, for a fair presentation of such data. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the fiscal year ended March 31, 2006, included in the Company’s latest annual report on Form 10-K filed with the SEC on June 26, 2006. The condensed consolidated results of operations and financial position for interim periods are not necessarily indicative of those to be expected for a full year. Further, the Company has made a number of estimates and assumptions relating to the assets and liabilities and the reporting of revenue and expenses to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Gregg Appliances, Inc. and its wholly-owned subsidiary, HHG Distributing, LLC (HHG). HHG is inactive and its assets consist of a 5% ownership interest in a distributing company, totaling $100,000, accounted for on the cost method.

Property and Equipment

The Company sold one location in the nine months ended December 31, 2006. The Company leased the location back applying the provisions of Statement of Financial Accounting Standards (SFAS) No. 98, “Accounting for Leases.” Net proceeds from the transaction were $2.7 million. The Company recognized an immaterial loss on this transaction. The Company does not have any continuing ownership interest with the sale and leaseback location. The lease is accounted for as an operating lease.

Taxes

We collect certain taxes from our customers at the time of sale and remit the collected taxes to government authorities. These taxes are excluded from net sales and cost of goods sold in the Company’s condensed consolidated statements of income.

Stock-based Compensation

On April 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which requires the measurement and recognition of compensation

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expense for all share-based payment awards made to employees and directors under the Company’s stock option plans, based on fair value, using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s condensed consolidated statements of income. In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (SAB 107) relating to SFAS 123R, which the Company utilized in its adoption of SFAS 123R.

Prior to April 1, 2006, the Company applied the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including Financial Accounting Standards Board (FASB) Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation, to account for activity under its stock-based employee compensation plans.

As the Company is considered a nonpublic entity, as defined in SFAS 123R, that used the minimum value method for pro forma disclosures under SFAS No. 123, Accounting for Stock-Based Compensation (FAS 123); the Company was required to apply the prospective transition method at the date of adoption. As such, the Company applies the statement to any new awards and to any awards modified, repurchased or cancelled since April 1, 2006. For all awards outstanding on March 31, 2006, the Company continues to apply the intrinsic-value-based method of accounting prescribed by APB Opinion No. 25. Under the provisions of SFAS No. 123R, the Company will not provide pro forma disclosures for outstanding awards accounted for under the intrinsic value method. In accordance with APB Opinion No. 25, the Company did not recognize compensation expense in connection with employee stock option grants upon adoption because stock options, granted prior to April 1, 2006 were granted at exercise prices equal to or greater than the fair value of the common stock at the date of grant.

Stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the three and nine months ended December 31, 2006 included compensation expense for the share-based payment awards granted subsequent to April 1, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. Compensation expense for all share-based payment awards is recognized using the straight-line single option approach. Stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the three and nine months ended December 31, 2006 is based on awards ultimately expected to vest and has been reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense for employee stock options recognized under SFAS 123R for the nine months ended December 31, 2006 was approximately $0.1 million.

With the adoption of SFAS 123R, the Company continued to use the Black-Scholes option-pricing model as its method of valuation for share-based awards. For additional information, refer to Note 4. The Company’s determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behaviors.

Reclassifications

Certain amounts shown in the prior-period condensed consolidated financial statements (unaudited) have been revised to conform to the current period condensed consolidated financial statement (unaudited) presentation. As part of these revisions, cash overdrafts were reclassified from operating cash flows to financing cash flows in the statement of cash flows, which is consistent with the classification in the Company’s report on Form 10-K for the year ended March 31, 2006. The reclassification resulted in a $21.4 million decrease in net cash provided by (used in) operating activities and an increase of $17.7 million in net cash provided by financing activities. None of these reclassifications had an effect on net income or stockholders’ equity (deficit) as previously presented.

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2. Recent Accounting Pronouncements

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 is effective for fiscal years beginning after December 15, 2006 with earlier adoption permitted at the beginning of a fiscal year if interim financial statements for that year have not been issued. The Company is currently evaluating the impact, if any, the adoption of FIN 48 will have on the consolidated financial statements.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006. Early application is encouraged, but not required. We are currently assessing the impact, if any, that the adoption of SAB No. 108 will have on our operating income or net earnings. The cumulative effect, if any, of applying the provisions of SAB No. 108 will be reported as an adjustment to beginning-of-year retained earnings.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement applies to previous accounting pronouncements that require or permit fair value measurements. Accordingly, this Statement does not require any new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after December 15, 2007. We are currently evaluating the impact, if any, the adoption of SFAS No. 157 will have on our operating income or net earnings.

3. Properties

Property and equipment consisted of the following at December 31, 2006 and March 31, 2006 (in thousands):

	December 31, 2006			March 31, 2006
Buildings	$	—		$	2,725
Machinery and equipment		7,218			7,097
Office furniture and equipment		44,111			37,897
Vehicles		5,662			6,178
Signs		4,015			3,562
Leasehold improvements		38,775			31,964
Construction in progress		1,199			2,945
		100,980			92,368
Less accumulated depreciation and amortization		(48,730	)		(41,382	)
Net property and equipment	$	52,250		$	50,986

4. Net Income Per Share

Basic net income per share is calculated based on the weighted-average number of outstanding common shares in accordance with SFAS No. 128, Earnings per Share. Diluted net income per share is calculated based on the weighted-average number of outstanding common shares plus the effect of dilutive potential common shares. When the Company reports net income, the calculation of diluted net income per share excludes shares underlying outstanding stock options with exercise prices that exceed the average market price of the Company’s common stock for the period, as the effect would be antidilutive. Potential common shares are composed of shares of common stock issuable upon the exercise of stock options (in thousands, except per share amounts).

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	Three Months Ended				Nine Months Ended
	December 31, 2006		December 31, 2005		December 31, 2006		December 31, 2005
Net income, as reported (A)	$	10,866	$	22,586	$	13,015	$	18,469
Weighted average outstanding shares of common stock (B)		14,245,800		14,240,289		14,249,204		14,124,591
Dilutive effect of employee stock options and stock appreciation rights		41,670		—		18,486		—
Common stock and common stock equivalents (C)		14,287,470		14,240,289		14,267,690		14,124,591
Net income per share:
Basic (A/B)	$	0.76	$	1.59	$	0.91	$	1.31
Diluted (A/C)		0.76		1.59		0.91		1.31

Antidilutive shares not included in the diluted per share calculation for three months ended December 31, 2006 and 2005 were 1,089,500 and 1,853,000, respectively, and for the nine months ended December 31, 2006 and 2005 were 1,089,500 and 1,853,000, respectively.

5. Stock-based Compensation

On March 8, 2005, the Company’s Board of Directors approved the adoption of the Gregg Appliances, Inc. 2005 Stock Option Plan (Stock Option Plan). The Stock Option Plan provides for the grant of incentive stock options and nonqualified stock options to the Company’s officers, directors, consultants, and key employees. An aggregate of 2,500,000 shares of common stock is reserved for issuance under the Stock Option Plan. If an option expires, is terminated or canceled without having been exercised or repurchased by the Company, or common stock is used to exercise an option, the terminated portion of the option or the common stock used to exercise the option will become available for future grants under the Stock Option Plan unless the plan is terminated.

The Board of Directors will determine the exercise price of the options under the Stock Option Plan, but the exercise price must be at least equal to the fair market value of the Company’s common stock on the date of the grant. The term of an incentive stock option and a nonqualified stock option may not exceed seven years (the Board of Directors may extend the term of the options after the options have been granted), except that with respect to any participant who owns 10% of the voting power of all classes of the Company’s outstanding capital stock, the term of an incentive stock option must not exceed five years and the exercise price of an incentive stock option must equal at least 110% of the fair market value of the Company’s common stock on the date of the grant.

The Company did not issue any options for shares of common stock during the three months ending December 31, 2006. During the nine months ended December 31, 2006, the Company issued options for 203,000 shares of common stock under the Stock Option Plan to certain employees and directors of the Company. The options vest over a three-year period and expire seven years from the date of the grant. The Company estimated the fair value of stock options using the Black-Scholes valuation model. The fair value of each option grant is estimated on the date of grant and is amortized on a straight-line basis over the vesting period.

The weighted-average estimated value of options granted to employees and directors under the Stock Option Plan was $4.76 during the nine months ended December 31, 2006, using the Black-Scholes model with the following assumptions:

Risk-free interest rate	4.71	%
Dividend yield	—
Expected volatility	40.9	%
Expected life of the options (years)	4.5

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Risk-Free Rate: The Company bases the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term commensurate with the estimated expected life of the stock options.

Expected Dividend: The Black-Scholes valuation model calls for a single expected dividend yield as an input. The Company has not issued any dividends and has no expectation to do so in the foreseeable future.

Expected Volatility: The Company uses an independent valuation advisor to assist us in projecting expected stock price volatility. The Company considers both the historical volatility of our peer group’s stock price as well as implied volatilities from exchange-traded options on our peer group’s stock in accordance with SAB 107.

Expected Term: The Company’s expected term represents the period that the Company’s stock options are expected to be outstanding and was determined using the simplified method described in SAB 107.

Estimated Forfeitures: Beginning April 1, 2006, the Company included an estimate for forfeitures in calculating stock option expense. When estimating forfeitures, the Company considers historical termination behavior as well as any future trends it expects. Prior to 2006, the Company accounted for forfeitures of employee stock options for pro forma disclosure purposes under FAS 123 on an as-incurred basis.

Activity under the Gregg Appliances, Inc. 2005 Stock Option Plan is summarized as follows:

Range of Exercise Prices	Number of Shares Outstanding		Weighted Average Exercise Price per Share
Outstanding at March 31, 2006	1,853,000		$	13.75
Granted	203,000			11.70
Exercised	—			—
Canceled	(80,000	)		(13.75	)
Outstanding at December 31, 2006	1,976,000		$	13.54

The following table summarized the Company’s outstanding stock options as of December 31, 2006:

Exercise Prices	Number of Shares Outstanding	Weighted Average Remaining Option Term (in years)	Weighted Average Exercise Price per Share
$10.00	886,500	5.59	$	10.00
$11.70	203,000	6.69		11.70
$15.00	443,250	5.59		15.00
$20.00	443,250	5.59		20.00
$10.00 to $20.00	1,976,000	5.70	$	13.54

As of December 31, 2006, there was approximately $0.8 million of total unrecognized compensation cost related to non-vested stock options. These costs are expected to be recognized over the remaining vesting period of approximately three years.

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6. Inventories

Inventories as of December 31, 2006 and March 31, 2006 were comprised as follows (in thousands):

	December 31, 2006		March 31, 2006
Appliances	$	39,640	$	32,867
Electronics		85,249		63,405
Bedding and furniture		3,745		2,535
	$	128,634	$	98,807

7. Debt

Debt outstanding consisted of the following at December 31, 2006 and March 31, 2006 (in thousands):

	December 31, 2006		March 31, 2006
Revolving credit facility	$	—	$	—
9.0% senior notes, interest due in arrears on a semi-annual basis on February 1 and August 1 through February 3, 2013		145,000		160,500
6.0% junior notes, interest due in arrears on a semi-annual basis on February 1 and August 1 through February 3, 2015, net of discount of $6,878 and $7,258 at December 31, 2006 and March 31, 2006, respectively		18,122		17,742
Total debt		163,122		178,242
Less current maturities		—		—
Total long-term debt	$	163,122	$	178,242

In connection with the Company’s recapitalization on February 3, 2005, the Company issued $165 million in unsecured 9% senior notes. Interest on the notes is payable in arrears twice a year on February 1 and August 1. The notes will mature on February 3, 2013. On September 1, 2005, the interest on the senior notes increased to 9.25% per annum pursuant to section 4 of the Registration Rights Agreement dated February 3, 2005 between the Company and the initial purchasers of the notes. The interest rate increase remained in effect until the Registration Statement covering the exchange offer with respect to the notes was declared effective by the SEC and the exchange offer was consummated. On November 4, 2005, the exchange offer was consummated and the interest rate consequently decreased to 9.0% per annum.

Through December 31, 2006, the Company has purchased $20.0 million of its 9% senior notes of which $15.5 million was purchased during the first nine months of fiscal 2007 at a weighted-average price of 92.45% of face value. For the three and nine months ended December 31, 2006, the Company recorded a gain related to the early extinguishment of debt representing the difference between the purchase price and the carrying value of the 9% senior notes, net of related capitalized debt issuance costs, of approximately $0.1 million and $0.4 million, respectively.

On February 3, 2005, the Company issued to certain of its stockholders, $25 million in unsecured 6% junior subordinated notes, with a fair value of $17.2 million at the time of issue, based on an effective interest rate of 11%. These notes are subordinated to the unsecured senior notes and any payment of principal thereof directly or indirectly is deferred until the payment in full of all of the senior debt. Unless there is a default or an event of default under any senior debt, interest on the junior subordinated debt is payable in arrears on February 1 and August 1. The junior notes will mature on February 3, 2015. The original discount on the notes will be accreted to interest expense through the maturity date. Accretion of the discount, which is included in interest expense in the accompanying condensed consolidated statements of income, was approximately $0.1 million and $0.4 million for the three and nine months ended December 31, 2006, respectively.

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The Company has a revolving credit agreement with a bank group for up to $75 million. The facility includes a $25 million sub-limit for letters of credit. Borrowings under the revolving credit agreement are subject to a borrowing base calculation based on specified percentages of eligible accounts receivable and inventories. Interest on borrowings is payable monthly at a fluctuating rate based on the bank’s prime rate or LIBOR plus an applicable margin. The Company pays an annual commitment fee of 3/8% on the unused portion of the facility.

The interest rate based on the bank’s prime rate as of December 31, 2006 was 8.50%. As of December 31, 2006, the Company had no borrowings outstanding under the revolving credit facility and $3.1 million of letters of credit outstanding. As of December 31, 2006, the total borrowing availability under the revolving credit facility was $65.4 million.

The unsecured senior notes and the revolving credit facility are guaranteed by the Company’s wholly-owned subsidiary, HHG, which has substantially no assets or operations. The guarantee is full and unconditional and the Company has no other subsidiaries. In addition, there are no restrictions on HHG’s ability to pay dividends under the arrangement.

The debt agreements contain restrictions on mergers, incurring additional debt or liens, making investments, selling assets or making equity repurchases, and debt prepayments and transactions with affiliates. The revolving credit agreement also contains a financial covenant requiring maintenance of a minimum fixed charge coverage ratio. The debt agreements also restrict payment of dividends unless the Company achieves a specific fixed charge coverage ratio as defined in the debt agreements. Any such dividends are limited to the lesser of 50% of consolidated net income and 100% of equity contributions since the date of the recapitalization. The Company was in compliance with the restrictions and covenants in the debt agreements at December 31, 2006.

8. Income Taxes

Prior to February 3, 2005, Gregg Appliances, Inc. was organized as an S corporation. Accordingly, the allocable share of taxable income or loss was includable in the tax returns of the stockholders and income taxes were not reflected in the Company’s consolidated financial statements. Following the recapitalization, Gregg Appliances, Inc. no longer qualified as an S corporation and became subject to U.S. federal and certain state and local income taxes applicable to C corporations.

Subsequent to the recapitalization and change to C corporation status, the Company began recognizing deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Following the recapitalization, Gregg Investment Corporation, LLC and the former stockholders of the Company made an election under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, to treat the recapitalization as an asset purchase for tax purposes. In accordance with Emerging Issues Task Force (EITF) 94-10, Accounting by a Company for the Income Tax Effects of Transactions among or with Its Shareholders under FASB Statement No. 109, the tax benefit of this election was recorded as an equity transaction. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which temporary differences are expected to reverse, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

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9. Subsequent Event

On January 17, 2007, the Company entered into Amendment No. 2 to the Loan and Security Agreement (the “Credit Agreement”). The Amendment reduced the unused line fee, reduced the monthly service fee and the letter of credit fees, as defined in the Amendment. The Amendment also reduced the tier pricing on the facility. In addition, under the terms of the Amendment, the Company is allowed to repurchase Senior Notes so long as the Company has excess availability of $10 million after the repurchase transaction and as long as the Company is not in default under the Credit Agreement. Finally, advances on inventory, inventory appraisal requirements and certain other modifications have been amended throughout the Credit Agreement.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth the estimated expenses payable by the registrant in connection with the sale and distribution of the securities registered hereby. All amounts are estimates except for the SEC registration fee, the NASD filing fee and the New York Stock Exchange Listing Fee. The selling stockholders will not pay any of the registration expenses.

SEC Registration Fee	$	5,296
NASD Filing Fee	$	17,750
New York Stock Exchange Listing Fee	$
Accounting Fees and Expenses	$
Legal Fees and Expenses	$
Printing Fees and Expenses	$
Miscellaneous	$
Total:	$

Item 14. Indemnification of Directors and Officers.

Our certificate of incorporation provides that the Company, to the full extent permitted by Section 145 of the Delaware General Corporation Law, as amended from time to time, shall indemnify all persons whom it may indemnify pursuant thereto. It further provides that expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding for which such officer or director may be entitled to indemnification hereunder shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized thereby.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Registrant’s directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Item 15. Recent Sales of Unregistered Securities.

We are a newly formed corporation that has not issued any securities as of the date hereof. Prior to the effectiveness of this registration statement, Gregg Appliances, Inc. (“Gregg Appliances”) will become our wholly owned subsidiary and its existing stockholders will become our stockholders pursuant to an Incorporation and Exchange Agreement as described in this registration statement.

II-1

Since January 1, 2004, Gregg Appliances issued unregistered securities to a limited number of persons as described below.

(1) On February 3, 2005 in connection with the recapitalization of Gregg Appliances, Gregg Appliances, Inc. issued 11,121,390 shares to Gregg Investment Corporation, LLC (“GIC”) at a purchase price of $10.00 per share pursuant to an Agreement and Plan of Merger between GIC, Gregg Appliances and its existing stockholders. At the time of the sale, a majority of the equity interests in GIC were owned by FS Equity Partners V, L.P., a private equity fund. Also in connection with the recapitalization, we issued $25 million in principal amount of 6.0% junior subordinated notes to accredited investors who were existing stockholders of Gregg Appliances. The offers, sales and issuances of the securities described in this paragraph were made in reliance on Section 4(2) of the Securities Act and Regulation D promulgated thereunder, in that the issuance of the securities to the recipients did not involve a public offering. A Form D filing was made with the SEC with respect to the issuance of securities described in this paragraph on February 14, 2005.

(2) On February 3, 2005, Gregg Appliances sold $165 million aggregate principal amount at maturity of 9% senior subordinated notes due 2013 to Wachovia Capital Markets, as initial purchaser for aggregate net proceeds of approximately $160.6 million. The sale of the senior notes described in this paragraph was exempt from the registration requirements of the Securities Act, in reliance on Rule 144A and Regulation S. On November 4, 2005, Gregg Appliances consummated an offer to exchange all of the unregistered senior notes for a like amount of registered senior notes pursuant to a Registration Statement on Form S-4 filed with the SEC. Gregg Appliances did not receive any proceeds from the exchange offer.

(3) Between January 1, 2004 and February 14, 2007, Gregg Appliances granted options to purchase a total of 2,012,000 shares of its common stock, with exercise prices ranging from $10.00 to $20.00 per share in reliance on Rule 701 under the Securities Act. During that time, no options were exercised. All options vest over a three-year period in equal installments beginning on the first anniversary of the date of grant.

(4) On July 26, 2005, August 3, 2005, October 31, 2005 and March 31, 2006 Gregg Appliance issued 262,050 shares, 1,500 shares, 10,000 shares and 15,000 shares, respectively, of common stock to GIC for consideration equal to $10.00 per share. These issuances were made in reliance on Section 4(2) of the Securities Act, in that the issuances of the securities to the recipients did not involve a public offering.

In connection with the effectiveness of this Registration Statement, the Registrant will consummate a reorganization whereby each of the stockholders of Gregg Appliances will contribute their shares of Gregg Appliances to the Registrant in exchange for common stock of the Registrant for no additional consideration. As a result of this contribution, the stockholders of Gregg Appliances will become the stockholders of the Registrant and Gregg Appliances will become a wholly owned subsidiary of the Registrant. The stockholders of Gregg Appliances have executed an Incorporation and Exchange Agreement as of April 12, 2007 which is filed as Exhibit      to this Registration Statement. The Incorporation and Exchange Agreement provides that the reorganization described above will automatically occur immediately prior to the effectiveness of this Registration Statement. The offer, sale and issuance of securities in connection with the Incorporation and Exchange Agreement is exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act in that the issuance of the securities to the recipients did not involve a public offering.

There were no underwriters employed in connection with any of the transactions set forth in this Item 15.

II-2

Item 16. Exhibits and Financial Statements Schedules.

Exhibit Number		Description of Document
1.1	*	Form of Underwriting Agreement.
2.1		Agreement and Plan of Merger, dated October 19, 2004, among Gregg Appliances, Gregg Investment Corporation, LLC (“GIC”), GIC Corporation (“Merger Sub”) and Jerry W. Throgmartin (on his own behalf and as trustee for the Jerry W. Throgmartin Charitable Trust and the Jerry W. Throgmartin Irrevocable Trust for the benefit of Christy and Nicky Throgmartin), Gregg William Throgmartin, Kelli Throgmartin Ball, Sandra M. Throgmartin, Janice K. Malone, Monica L. Adams, William G. Throgmartin and Dennis L. May (the “Sellers”).
2.2		First Amendment to the Agreement and Plan of Merger, dated January 13, 2005, among Gregg Appliances, Inc. (“Gregg Appliances”), GIC, Merger Sub and the Sellers.
2.3		Second Amendment to the Agreement and Plan of Merger, dated January 31, 2005, among Gregg Appliances, GIC, Merger Sub and the Sellers.
2.4		Incorporation and Exchange Agreement, dated April 12, 2007, by and among Gregg Appliances, GIC, the Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust (the “Throgmartin Trust”), Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May, FS Equity Partners V, L.P. (“FSEP V”), FS Affiliates V, L.P. (“FSA V”), California State Teachers’ System (“Cal STRS”), A.S.F. Co-Investment Partners II, L.P. and hhgregg, Inc. (“hhgregg”).
3.1		Certificate of Incorporation of the Company.
3.2		Bylaws of the Company.
4.1	*	Specimen stock certificate for shares of common stock of the Company.
4.2		Indenture, dated February 3, 2005, among Gregg Appliances, the Guarantor and Wells Fargo Bank, National Association (the “Trustee”).
4.3		Stockholders Agreement, dated February 3, 2005, among Gregg Appliances, GIC, FS Equity Partners V, L.P., (the “Sponsor”) and Jerry W. Throgmartin, Gregg William Throgmartin and Dennis L. May (the “Existing Stockholders”).
4.4		First Amendment to the Stockholders Agreement, dated March 8, 2005, among Gregg Appliances, GIC, the Sponsor, and the Existing Stockholders.
4.5		Registration Rights Agreement, dated February 3, 2005, among Gregg Appliances, GIC, and the Existing Stockholders.
4.6		Registration Rights Agreement, dated April 12, 2007, by and among FSEP V, FSA V, Cal STRS, ASF, the Throgmartin Trust, Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May and hhgregg.
5.1	*	Opinion of Bingham McCutchen LLP.
10.1		Employment Agreement, dated October 19, 2004, between Gregg Appliances and Jerry W. Throgmartin.
10.2		Amendment No. 1 to Employment Agreement, dated April 12, 2007, between Gregg Appliances and Jerry W. Throgmartin.
10.3		Employment Agreement, dated October 19, 2004, between Gregg Appliances and Dennis L. May.
10.4		Compensation Agreement, dated September 7, 2004, between Gregg Appliances and John S. Hickey.
10.5		Non-Qualified Deferred Compensation Plan, dated April 1, 2000.
10.6		Amendment No. 1 to Gregg Appliances’ Non-Qualified Deferred Compensation Plan, dated December 26, 2004.
10.7		Non-Standardized Adoption Agreement of Gregg Appliances, dated January 29, 2005.
10.8		Form of 6% Junior Subordinated Note.
10.9		Loan and Security Agreement, dated February 3, 2005 (the “Loan and Security Agreement”), among Gregg Appliances, the Guarantor, the lenders party thereto, Congress Financial Corporation (Central) (“Congress”), Wachovia Capital Markets, LLC and Wachovia Bank National Association.

II-3

Exhibit Number	Description of Document
10.10	Amendment No. 1 to Loan and Security Agreement, dated February 13, 2006.
10.11	Amendment No. 2 to Loan and Security, dated January 17, 2007.
10.12	Pledge and Security Agreement, dated February 3, 2005, executed by Gregg Appliances in favor of Congress.
10.13	Trademark Collateral Assignment and Security Agreement, dated February 3, 2005 between Gregg Appliances and Congress.
10.14	Collateral Assignment of Merger Agreement, dated February 3, 2005 executed by Gregg Appliances in favor of Congress.
10.15	Guarantee, dated February 3, 2005 executed by the Guarantor in favor of Congress.
10.16	Subsidiary Guarantee of the Guarantor, dated February 3, 2005.
10.17	2005 Stock Option Plan, dated March 8, 2005.
10.18	Amendment No. 1 to 2005 Stock Option Plan, dated April 12, 2007.
10.19	Gregg Investment Corporation, LLC Restricted Unit Plan.
10.20	hhgregg, Inc. Equity Incentive Plan
10.21	Consulting Agreement, dated February 3, 2005, between W. Gerald Throgmartin and Gregg Appliances.
10.22	Severance Agreement, dated October 25, 2005, between Gregg Appliances and Donald J. B. Van der Wiel.
14.1	Finance Code of Ethics
21.1	List of our Subsidiaries.
23.1	Consent of KPMG LLP, independent registered public accounting firm.
23.2*	Consent of Bingham McCutchen LLP (included as part of Exhibit 5.1)
24.1	Power of Attorney (included in signature pages).

* To be filed by amendment.

Item 17. Undertakings.

(1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(2) The undersigned registrant hereby undertakes that:

(a) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, state of New York on April 17, 2007.

HHGREGG, INC.
By:	/S/    JERRY W. THROGMARTIN
	Jerry W. Throgmartin
	Chief Executive Officer
By:	/S/    DONALD J.B. VAN DER WIEL
	Donald J.B. Van der Wiel
	Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Jerry W. Throgmartin and John M. Roth his true and lawful attorney-in-fact, with full power of substitution, for him and his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto such said attorneys-in-fact and agents with full power and authority to do so and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following:

Signature	Title	Date
/S/    JERRY W. THROGMARTIN         Jerry W. Throgmartin	Chairman and Chief Executive Officer and Director (Principal Executive Officer)	April 17, 2007
/S/    DONALD J.B. VAN DER WIEL         Donald J.B. Van der Wiel	Chief Financial Officer (Principal Financial Officer)	April 17, 2007
/S/    DENNIS L. MAY         Dennis L. May	President and Chief Operating Officer and Director	April 17, 2007
/S/    LAWRENCE P. CASTELLANI         Lawrence P. Castellani	Director	April 17, 2007
/S/    BENJAMIN D. GEIGER         Benjamin D. Geiger	Director	April 17, 2007
/S/    JOHN M. ROTH         John M. Roth	Director	April 17, 2007

II-5

Signature	Title	Date
/S/    CHARLES P. RULLMAN         Charles P. Rullman	Director	April 17, 2007
/S/    MICHAEL L. SMITH         Michael L. Smith	Director	April 17, 2007
/S/    PETER M. STARRETT         Peter M. Starrett	Director	April 17, 2007

II-6

Exhibit Number		Description of Document
1.1	*	Form of Underwriting Agreement.
2.1		Agreement and Plan of Merger, dated October 19, 2004, among Gregg Appliances, Inc. (“Gregg Appliances”), Gregg Investment Corporation, LLC (“GIC”), GIC Corporation (“Merger Sub”) and Jerry W. Throgmartin (on his own behalf and as trustee for the Jerry W. Throgmartin Charitable Trust and the Jerry W. Throgmartin Irrevocable Trust for the benefit of Christy and Nicky Throgmartin), Gregg William Throgmartin, Kelli Throgmartin Ball, Sandra M. Throgmartin, Janice K. Malone, Monica L. Adams, William G. Throgmartin and Dennis L. May (the “Sellers”).
2.2		First Amendment to the Agreement and Plan of Merger, dated January 13, 2005, among Gregg Appliances, GIC, Merger Sub and the Sellers.
2.3		Second Amendment to the Agreement and Plan of Merger, dated January 31, 2005, among Gregg Appliances, GIC, Merger Sub and the Sellers.
2.4		Incorporation and Exchange Agreement, dated April 12, 2007, by and among Gregg Appliances, GIC, the Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust (the “Throgmartin Trust”), Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May, FS Equity Partners V, L.P. (“FSEP V”), FS Affiliates V, L.P. (“FSA V”), California State Teachers’ System (“Cal STRS”), A.S.F. Co-Investment Partners II, L.P. and hhgregg, Inc. (“hhgregg”).
3.1		Certificate of Incorporation of the Company.
3.2		Bylaws of the Company.
4.1	*	Specimen Stock Certificate for shares of common stock of the Company.
4.2		Indenture, dated February 3, 2005, among Gregg Appliances, the Guarantor and Wells Fargo Bank, National Association (the “Trustee”).
4.3		Stockholders Agreement, dated February 3, 2005, among Gregg Appliances, GIC, FS Equity Partners V, L.P., (the “Sponsor”) and Jerry W. Throgmartin, Gregg William Throgmartin and Dennis L. May (the “Existing Stockholders”).
4.4		First Amendment to the Stockholders Agreement, dated March 8, 2005, among Gregg Appliances, GIC, the Sponsor, and the Existing Stockholders.
4.5		Registration Rights Agreement, dated February 3, 2005, among the Company, GIC, and the Existing Stockholders.
4.6		Registration Rights Agreement, dated April 12, 2007, by and among hhgregg, FSEP V, FSA V, Cal STRS, ASF, the Throgmartin Trust, Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May & hhgregg.
5.1	*	Opinion of Bingham McCutchen.
10.1		Employment Agreement, dated October 19, 2004, between Gregg Appliances and Jerry W. Throgmartin.
10.2		Amendment No. 1 to Employment Agreement, dated April 12, 2007, between Gregg Appliances and Jerry W. Throgmartin.
10.3		Employment Agreement, dated October 19, 2004, between Gregg Appliances and Dennis L. May.
10.4		Compensation Agreement, dated September 7, 2004, between Gregg Appliances and John S. Hickey.
10.5		Non-Qualified Deferred Compensation Plan, dated April 1, 2000.
10.6		Amendment No. 1 to Gregg Appliances’ Non-Qualified Deferred Compensation Plan, dated December 26, 2004.
10.7		Non-Standardized Adoption Agreement of Gregg Appliances, dated January 29, 2005.
10.8		Form of 6% Junior Subordinated Note.
10.9		Loan and Security Agreement, dated February 3, 2005 (the “Loan and Security Agreement”), among Gregg Appliances, the Guarantor, the lenders party thereto, Congress Financial Corporation (Central) (“Congress”), Wachovia Capital Markets, LLC and Wachovia Bank National Association.

Exhibit Number	Description of Document
10.10	Amendment No. 1 to Loan and Security Agreement, dated February 13, 2006.
10.11	Amendment No. 2 to Loan and Security Agreement, dated January 17, 2007.
10.12	Pledge and Security Agreement, dated February 3, 2005, executed by Gregg Appliances in favor of Congress.
10.13	Trademark Collateral Assignment and Security Agreement, dated February 3, 2005 between Gregg Appliances and Congress.
10.14	Collateral Assignment of Merger Agreement, dated February 3, 2005 executed by Gregg Appliances in favor of Congress.
10.15	Guarantee, dated February 3, 2005 executed by the Guarantor in favor of Congress.
10.16	Subsidiary Guarantee of the Guarantor, dated February 3, 2005.
10.17	2005 Stock Option Plan, dated March 8, 2005.
10.18	Amendment No. 1 to 2005 Stock Option Plan, dated April 12, 2007.
10.19	Gregg Investment Corporation, LLC Restricted Unit Plan.
10.20	hhgregg, Inc. Equity Incentive Plan
10.21	Consulting Agreement, dated February 3, 2005, between W. Gerald Throgmartin and Gregg Appliances.
10.22	Severance Agreement, dated October 25, 2005, between Gregg Appliances and Donald J. B. Van der Wiel.
14.1	Finance Code of Ethics
21.1	List of our Subsidiaries.
23.1	Consent of KPMG LLP, independent registered public accounting firm.
23.2*	Consent of Bingham McCutchen LLP (included as part of Exhibit 5.1).
24.1	Power of Attorney (included in signature pages).

* To be filed by amendment.

EX-2.1

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

GREGG INVESTMENT CORPORATION, LLC

GIC CORPORATION,

GREGG APPLIANCES, INC.

AND

THE SELLERS NAMED HEREIN

TABLE OF CONTENTS

		Page
ARTICLE I	MERGER; CLOSING	2
Section 1.01.	The Merger	2
Section 1.02.	Effect on Capital Stock	3
Section 1.03.	Closing	3
ARTICLE II	PURCHASE PRICE	3
Section 2.01.	Purchase Price	3
Section 2.02.	EBITDA-Based Purchase Price Adjustment	4
Section 2.03.	Working Capital Purchase Price Adjustments	5
Section 2.04.	Allocation of Purchase Price	7
Section 2.05.	Required Withholding	7
ARTICLE III	CONDITIONS PRECEDENT TO THE CLOSING	7
Section 3.01.	Investor’s and the Merger Sub’s Conditions to Closing	7
Section 3.02.	Sellers’ Conditions to Closing	10
Section 3.03.	Closing Deliveries of the Sellers and the Company	11
Section 3.04.	Closing Deliveries of Investor	11
Section 3.05.	Closing Deliveries of the Company	12
ARTICLE IV	REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE SELLERS	13
Section 4.01.	Organization and Standing; Authority	13
Section 4.02.	Authority of the Sellers; No Violation	14
Section 4.03.	Capital Structure of the Company and Related Matters; Owners of Shares; Subsidiaries	15
Section 4.04.	Transactions with Certain Persons	16
Section 4.05.	Financial Statements	16
Section 4.06.	Outstanding Debt and Related Matters	17
Section 4.07.	Taxes	17
Section 4.08.	Compliance with Laws; No Default or Litigation	19
Section 4.09.	Absence of Certain Changes	19
Section 4.10.	Absence of Undisclosed Liabilities	20
Section 4.11.	Real Property	20
Section 4.12.	Personal Property	22

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TABLE OF CONTENTS

(continued)

		Page
Section 4.13.	Intellectual Property	23
Section 4.14.	Contracts	25
Section 4.15.	Permits	27
Section 4.16.	Labor Relations: Employees	27
Section 4.17.	Employee Benefit Plans	28
Section 4.18.	Environmental, Health and Safety Matters	31
Section 4.19.	Bank Accounts	32
Section 4.20.	Absence of Certain Business Practices	32
Section 4.21.	Minute Books and Stock Record Books	32
Section 4.22.	Directors and Officers	32
Section 4.23.	Brokerage	32
Section 4.24.	Accounts Receivable; Inventory	32
Section 4.25.	Insurance	33
Section 4.26.	Vendors	34
Section 4.27.	Claims Against Third Parties	34
ARTICLE V	REPRESENTATIONS AND WARRANTIES OF INVESTOR AND MERGER SUB	34
Section 5.01.	Organization	34
Section 5.02.	Authority; Consent	34
Section 5.03.	Consents and Approvals	35
Section 5.04.	Litigation	35
Section 5.05.	No Brokers’ or Finders’ Fees	35
Section 5.06.	Sufficient Funds	35
ARTICLE VI	PRE-CLOSING COVENANTS OF THE PARTIES	36
Section 6.01.	Negative Covenants	36
Section 6.02.	Affirmative Covenants	38
Section 6.03.	Approvals, Consents, Etc.	39
Section 6.04.	Consent Process	39
Section 6.05.	Consent Concessions	39
Section 6.06.	Access Prior to Closing	40

ii

TABLE OF CONTENTS

(continued)

		Page
Section 6.07.	Notification	40
Section 6.08.	Exclusivity	40
Section 6.09.	Environmental Testing	40
Section 6.10.	Required Filings	41
Section 6.11.	Voting Agreement	41
Section 6.12.	Delivery of New 2004 Audited Financial Statements and Revised 2002 and 2003 Audited Financial Statements	42
Section 6.13.	Payoff of Note Receivable	42
Section 6.14.	Exercise of Options	42
Section 6.15.	Execution of Credit Documents	42
Section 6.16.	Payment of Sellers’ Expenses	43
Section 6.17.	Delivery of Monthly Financial Statements	43
Section 6.18.	Amendment of 401(k) Plan	43
Section 6.19.	Continuation of SERP	43
Section 6.20.	Intercreditor Agreements and Amendments	43
Section 6.21.	Stock Option Plan	43
ARTICLE VII	POST-CLOSING COVENANTS	44
Section 7.01.	Retention of Records	44
Section 7.02.	Non-Competition	44
Section 7.03.	Tax Deposits	46
Section 7.04.	Survival of Covenants	46
Section 7.05.	Release	46
ARTICLE VIII	TAX MATTERS	47
Section 8.01.	Preparation of Tax Returns; Payment of Taxes	47
Section 8.02.	Section 338(h)(10) Election	48
Section 8.03.	Tax Allocation	49
Section 8.04.	Defense of Tax Claims	50
Section 8.05.	Payment	50
ARTICLE IX	TERMINATION	51
Section 9.01.	Termination of Agreement	51
Section 9.02.	Effect of Termination	52

iii

TABLE OF CONTENTS

(continued)

		Page
ARTICLE X	SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; DISPUTES	52
Section 10.01.	Survival of Representations and Warranties	52
Section 10.02.	Sellers’ Indemnification	53
Section 10.03.	Investor’s Indemnification	53
Section 10.04.	Defense of Third-Party Claims	53
Section 10.05.	Direct Claims	55
Section 10.06.	Limitations	55
Section 10.07.	Resolution of Disputes	56
Section 10.08.	Offset Against Escrow Amount	57
Section 10.09.	Sole Remedy	57
ARTICLE XI	DEFINITIONS	57
ARTICLE XII	MISCELLANEOUS	68
Section 12.01.	Assignment; Third Parties; Binding Effect	68
Section 12.02.	Expenses	68
Section 12.03.	Notices	69
Section 12.04.	Appointment of Sellers’ Representative	70
Section 12.05.	Remedies Not Exclusive	70
Section 12.06.	Counterparts/Facsimile Signatures	71
Section 12.07.	Captions and Section Headings	71
Section 12.08.	Waivers	71
Section 12.09.	Amendments, Supplements or Modifications	71
Section 12.10.	Entire Agreement	71
Section 12.11.	Governing Law	71
Section 12.12.	Interpretive Rules	71
Section 12.13.	Transfer Taxes	72
Section 12.14.	Specific Performance	72
Section 12.15.	Public Announcement	72

iv

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made this 19th day of October, 2004 (the “Execution Date”), by and among Gregg Investment Corporation, LLC, a Delaware limited liability company (“Investor”), GIC Corporation, an Indiana corporation (the “Merger Sub”), Gregg Appliances, Inc., an Indiana corporation (the “Company”), and Jerry W. Throgmartin, Gregg William Throgmartin (on his own behalf and as trustee for the Jerry W. Throgmartin Charitable Trust and the Jerry W. Throgmartin Irrevocable Trust for the benefit of Christy and Nicky Throgmartin), Kelli Throgmartin Ball, Sandra M. Throgmartin, Janice K. Malone, Monica L. Adams, William G. Throgmartin and Dennis L. May, each an individual residing in the State of Indiana, (collectively, the “Sellers” and each individually, a “Seller”).

PRELIMINARY STATEMENTS

WHEREAS, the Company is a specialty retailer of brand name appliances and consumer electronics and provides related installation, servicing, financing, extended warranty plans and repair services (the “Business”);

WHEREAS, each of the Sellers is the holder of the number of shares of Common Stock of the Company (the “Shares”), set forth opposite such Seller’s name as listed on Exhibit A attached hereto and designated as “Owned Shares”;

WHEREAS, Investor desires to acquire 80.01% of the outstanding Shares following the Merger by merging Merger Sub with and into the Company, with the Company as the Surviving Corporation in the Merger (the “Surviving Corporation”);

WHEREAS, certain Sellers will retain a portion of their Owned Shares and such Owned Shares will not be converted into the right to receive the Per Share Merger Consideration, which shares will represent in the aggregate 19.99% of the outstanding Shares following the Merger.

WHEREAS, the respective Managing Member or Boards of Directors of Investor, the Merger Sub and the Company each have approved and adopted this Agreement and the Merger on the terms and conditions set forth herein;

WHEREAS, each Seller has approved and bound itself to the terms of this Agreement as provided herein;

WHEREAS, Sellers desire to appoint Jerry W. Throgmartin as their Sellers’ Representative to represent them in the conduct of this transaction, in accordance with Section 12.04(a) of this Agreement;

WHEREAS, the parties hereto desire to enter into the transactions contemplated by this Agreement, all pursuant to the terms and conditions set forth herein; and

WHEREAS, capitalized terms used herein and not otherwise defined shall have the meanings set forth in Article XI.

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NOW THEREFORE, in consideration of the covenants, representations, warranties and mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

Merger; Closing

Section 1.01. The Merger.

(a) On and subject to the terms and conditions of this Agreement, at the Effective Time, the Merger Sub shall be merged with and into the Company (the “Merger”) in accordance with the IBCL. At the Closing, articles of merger, in the form attached hereto as Exhibit B (the “Articles of Merger”), shall be duly executed and acknowledged by the Merger Sub and the Company in accordance with the IBCL and shall be filed with the Indiana Secretary of State. The Merger shall become effective upon the filing of the Articles of Merger. The date and time when the Merger shall become effective is hereinafter referred to as the “Effective Time.”

(b) At the Effective Time, the Merger Sub shall be merged with and into the Company, and the separate corporate existence of the Merger Sub shall cease, and the Company shall continue as the “Surviving Corporation” under the IBCL.

(c) From and after the Effective Time, the Merger shall have the effects set forth in this Agreement and in Section IC 23-1-40-6 of the IBCL.

(d) As a result of the Merger and at the Effective Time, the Articles of Incorporation of the Company, as amended and restated in the form attached hereto as Exhibit C, shall be the Articles of Incorporation of the Surviving Corporation unless and until such Articles of Incorporation thereafter shall be duly amended in accordance with applicable law.

(e) As a result of the Merger and at the Effective Time, the Bylaws of the Company, as amended and restated in the form attached hereto as Exhibit D, shall be the Bylaws of the Surviving Corporation unless and until such bylaws thereafter shall be changed in accordance with the provisions thereof, the provisions of the Articles of Incorporation of the Surviving Corporation and applicable law.

(f) At the Effective Time, the directors of the Surviving Corporation shall be the directors of the Merger Sub in addition to Jerry W. Throgmartin and Dennis L. May, who shall be appointed in accordance with the Stockholders Agreement, with each of such directors to hold office, subject to the applicable provisions of the IBCL and the Articles of Incorporation and Bylaws of the Surviving Corporation, until the next annual shareholders’ meeting of the Surviving Corporation and until their respective successors shall be duly elected or appointed and qualified. At the Effective Time, the officers of the Company shall be, subject to the applicable provisions of the Articles of Incorporation and Bylaws of the Surviving Corporation, the officers of the Surviving Corporation.

2

Section 1.02. Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Investor, the Merger Sub, the Company or any holder of Merger Shares:

(a) Each issued and outstanding share of Common Stock of the Company other than the Retained Shares (each, a “Merger Share” and, collectively, the “Merger Shares”) shall be converted into a right to receive, upon surrender of the certificate representing such Merger Share, cash equal to the Per Share Closing Payment. The Retained Shares shall remain outstanding and shall not convert into a right to receive such payment.

(b) Each issued and outstanding share of common stock of the Merger Sub shall be converted into and become that number of fully paid and nonassessable shares of Common Stock of the Surviving Corporation which equals the product of 4.0025 multiplied by the number of Retained Shares, rounded to the nearest whole share.

Section 1.03. Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) will take place at 9:00 A.M. local time, at the offices of Ice Miller as soon as practicable after all of the conditions set forth in Sections 3.01 and 3.02 have been satisfied or waived (the “Closing Date”).

ARTICLE II

PURCHASE PRICE

Section 2.01. Purchase Price. The aggregate purchase price (the “Purchase Price”) for the Merger Shares shall be the amount calculated pursuant to this Section 2.01, as adjusted in accordance with Sections 2.02 and 2.03(a) (the “Closing Payment”), subject to the further adjustment described in Section 2.03(b). The amount of the Closing Payment, prior to adjustment in accordance with Sections 2.02 and 2.03(a), shall be calculated as follows:

(a) Three Hundred Fifteen Million Dollars ($315,000,000) in cash;

(b) plus an amount equal to the Cash on the Closing Date;

(c) less the amount of any Debt that is not paid by the Sellers or the Company pursuant to Sections 3.01(h) and 3.01(i) prior to or simultaneously with the Closing;

(d) less the Sellers’ Expense Payments;

(e) less the amount of all cash payments paid, or payable (based on the value of the Common Stock as of the Closing), by the Company to holders of stock appreciation rights set forth on Schedule 4.04 upon the exercise of such stock appreciation rights;

(f) less all amounts owed to current or former stockholders of the Company in respect of accrued but unpaid dividends or reinvested dividends, including all amounts set forth on Schedule 4.04; and

3

(g) less Thirty Million Seven Hundred Eighty-Four Thousand Six Hundred Dollars ($30,784,600) (the “Rollover Investment Amount”).

Section 2.02. EBITDA-Based Purchase Price Adjustment.

(a) Within two (2) Business Days after its receipt of the New 2004 Audited Financial Statements, Sellers’ Representative shall calculate consolidated earnings of the Company before interest, taxes, depreciation and amortization expenses for fiscal year 2004 as derived from the New 2004 Audited Financial Statements and as adjusted as set forth on Exhibit E attached hereto (the “2004 EBITDA”) and shall deliver a statement of such calculation to Investor. The Closing Payment shall be adjusted in the following manner:

(i) If the 2004 EBITDA is greater than or equal to Thirty-Six Million Five Hundred Thousand Dollars ($36,500,000) and less than or equal to Thirty-Seven Million Five Hundred Thousand Dollars ($37,500,000), then there shall be no adjustment to the Closing Payment based upon this Section 2.02;

(ii) Subject to Section 9.01(h), if the 2004 EBITDA is greater than Thirty-Seven Million Five Hundred Thousand Dollars ($37,500,000), then the Closing Payment shall be increased by an amount equal to six and one-half (6.5) times the amount by which the 2004 EBITDA is greater than Thirty-Seven Million Five Hundred Thousand Dollars ($37,500,000); and

(iii) Subject to Section 9.01(i), if the 2004 EBITDA is less than Thirty-Six Million Five Hundred Thousand Dollars ($36,500,000), then the Closing Payment shall be reduced by an amount equal to six and one-half (6.5) times the amount by which the 2004 EBITDA is less than Thirty-Six Million Five Hundred Thousand Dollars ($36,500,000).

(b) Investor shall have ten (10) Business Days after the receipt of the statement of 2004 EBITDA to verify and confirm the accuracy thereof. If, after such review, Investor agrees with Sellers’ Representative’s determination of the 2004 EBITDA, Investor shall promptly notify Sellers’ Representative of its agreement. If, after such review, Investor objects to Sellers’ Representative’s determination of EBITDA, Investor shall promptly provide Sellers’ Representative with a written statement indicating the basis for its objection and Investor and Sellers’ Representative shall work in good faith to resolve such dispute, which dispute shall be resolved prior to the Closing. In the event that Investor and Sellers’ Representative are unable to resolve such dispute, such dispute shall be resolved in accordance with the procedures set forth in Section 2.03(c) as modified to provide for as prompt a resolution as practicable under the circumstances and to reflect the nature of such dispute, including a modification requiring the parties to direct the Neutral Accounting Firm to make its determination within ten (10) days after such dispute is submitted and a modification to provide that the parties shall each bear one-half of the fees and expenses of the Neutral Accounting Firm. The failure of Investor to provide such a notice of objection to Sellers’ Representative within ten (10) Business Days after its receipt of Sellers’ Representative’s determination of 2004

4

EBITDA shall be deemed to be Investor’s agreement that Sellers’ Representative’s determination of 2004 EBITDA is accurate and final.

Section 2.03. Working Capital Purchase Price Adjustments.

(a) Closing Date Adjustments. No later than five (5) Business Days prior to the Closing, the Sellers’ Representative shall deliver to Investor a statement (the “Preliminary Working Capital Statement”) setting forth the Net Working Capital as of the Closing Date. The Preliminary Working Capital Statement shall (i) be prepared in accordance with GAAP and provide for the true up of all reserves, in all cases using the same accounting principles, practices and methodologies, consistently applied, that were used to prepare the New 2004 Audited Financial Statements, (ii) reflect the results of a physical inventory audit conducted by the Company and supervised by Investor on a date mutually acceptable to the Company and Investor (the “Physical Inventory”), and (iii) not reflect any Tax benefits or other accounting adjustments arising from the transactions resulting from or in connection with this Agreement or any of the Related Agreements. As part of this process, the reserves for general liability, automobile liability and workers’ compensation obligations shall also be trued up even though such reserves shall not be included in Current Liabilities when determining Net Working Capital. The Closing Payment shall be reduced by an amount equal to the excess, if any, of the Target Net Working Capital over the Net Working Capital set forth on the Preliminary Working Capital Statement. The Closing Payment shall be increased by an amount equal to the excess, if any, of the Net Working Capital set forth on the Preliminary Working Capital Statement over the Target Net Working Capital.

(b) Post-Closing Adjustments. As soon as practicable after the Closing but no later than sixty (60) Business Days after the Closing Date, Investor shall deliver to the Sellers’ Representative a final calculation of the Net Working Capital as of the Closing Date (the “Final Working Capital Statement”). The Final Working Capital Statement shall (i) be prepared in accordance with GAAP and provide for the true up of all reserves, in all cases using the same accounting principles, practices and methodologies, consistently applied, that were used to prepare the New 2004 Audited Financial Statements, (ii) reflect the results of the Physical Inventory, and (iii) not reflect any Tax benefits or other accounting adjustments arising from the transactions resulting from or in connection with this Agreement or any of the Related Agreements. As part of this process, the reserves for general liability, automobile liability and workers’ compensation obligations shall also be trued up even though such reserves shall not be included in Current Liabilities when determining Net Working Capital. If the Net Working Capital set forth on the Final Working Capital Statement is greater than the Net Working Capital set forth in the Preliminary Working Capital Statement, then the Company shall remit the entire amount of the difference to the Sellers’ Representative for payment to the Sellers according to their respective Ownership Percentages. If the Net Working Capital set forth on the Final Working Capital Statement is less than the Net Working Capital set forth in the Preliminary Working Capital Statement, then the Sellers’ Representative shall direct the Escrow Agent, pursuant to the Escrow Agreement, to pay to the Company, out of the then-remaining Escrow Amount, an amount equal to such difference. Sellers shall remit the entire amount of such difference in excess of such Escrow Amount to the

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Company according to their respective Ownership Percentages. Amounts payable under this Section 2.03(b) shall be due no later than ten (10) Business Days following the finalization of the Final Working Capital Statement pursuant to Section 2.03(c) below.

(c) Acceptance of Final Working Capital Statement. If the Sellers’ Representative disagrees with any item set forth on the Final Working Capital Statement or the calculation of Net Working Capital based thereon, the parties shall work together to resolve any such disagreements, including, but not limited to, providing each other with such financial information regarding the Company as of the Closing Date as each may reasonably request. If the parties are unable to resolve their disagreement regarding the Final Working Capital Statement or the calculation of Net Working Capital based thereon within ten (10) Business Days of the Sellers’ Representative’s receipt of the Final Working Capital Statement, then the parties shall submit the matter to an independent accounting firm willing to abide by the procedures set forth in this Section 2.03(c) and mutually acceptable to Investor and the Sellers’ Representative (the “Neutral Accounting Firm”). The Neutral Accounting Firm shall act as an arbitrator to determine only those issues still in dispute and the determination of the Neutral Accounting Firm shall either adopt the position of the Sellers (as stated by the Sellers’ Representative) or Investor or result in an adjustment that is within the range of those respective positions. If possible, the Neutral Accounting Firm shall make its determination based solely on presentations by the Sellers’ Representative and Investor; provided, that if the Neutral Accounting Firm is unable to reach a conclusion on this basis, the Neutral Accounting Firm shall review such additional information and perform such additional procedures as the Neutral Accounting Firm deems reasonably necessary. The determination of the Neutral Accounting Firm shall be made as promptly as practicable following the date on which the dispute is submitted (and the parties shall direct the Neutral Accounting Firm to use all commercially reasonable efforts to make such determination within thirty (30) days of such date), shall be set forth in a written statement delivered to the Sellers’ Representative and Investor, and shall be final, binding and conclusive on the parties and shall not be appealable or subject to further review. The fees and any expenses of the Neutral Accounting Firm shall be paid by Investor on the one hand and the Sellers (pro-rata in accordance with their respective Ownership Percentages, unless otherwise determined as set forth below) on the other hand within five (5) Business Days of such determination, as follows: (a) if the Neutral Accounting Firm adopts the position of the Sellers, Investor shall bear such fees and expenses; (b) if the Neutral Accounting Firm adopts the position of Investor, the Sellers shall bear such fees and expenses; or (c) if the Neutral Accounting Firm adopts a position within the range of the positions of Investor and the Sellers, each party shall bear that percentage of such fees and expenses deemed reasonable by the Neutral Accounting Firm in light of the final determination and the original positions of Investor and the Sellers. If a retainer is required by the Neutral Accounting Firm, the retainer shall be split equally between Investor and the Sellers; provided, however, that the retainer shall be considered part of the fees and expenses of the Neutral Accounting Firm and if either party has paid a portion of such retainer, that party will be entitled to be reimbursed by the other party to the extent required by this Section 2.03(c). In the event a party does not comply with the procedural and time requirements contained herein or such other procedural or time requirements as the parties otherwise elect in writing, the Neutral Accounting Firm shall render a decision

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based solely on the evidence it has which was timely filed by the parties. The Final Working Capital Statement shall be deemed finalized at the first to occur of (i) the tenth (10^th) Business Day following receipt of the Final Working Capital Statement, if the Sellers’ Representative does not provide written notice of any objections to or disagreements with the Final Working Capital Statement or the determination of Net Working Capital set forth thereon, which notice shall describe such objections in detail, (ii) the date on which the parties agree to a resolution of any objections or disagreements with the Final Working Capital Statement put forth by the Sellers’ Representative or (iii) the date on which the Neutral Accounting Firm delivers its decision to Investor and the Sellers’ Representative.

Section 2.04. Allocation of Purchase Price.

(a) The Sellers and Investor shall allocate the Purchase Price (and adjustments thereto) as provided on Schedule 2.04(a) pursuant to and in accordance with Code Section 338 and the Treasury Regulations thereunder. Investor shall prepare the final allocation in accordance with Schedule 2.04(a), which final allocation shall be delivered at the Closing by Investor pursuant to Section 3.04(c).

(b) The Sellers and Investor shall jointly file with the Internal Revenue Service Form 8023, Elections Under Section 338 for Corporations Making Qualified Stock Purchases, which shall be prepared in a manner that is consistent with the foregoing allocation, and the Sellers and Investor shall take no position inconsistent with such allocation in any Return, any proceeding before any taxing authority or otherwise. In the event that such allocation is disputed by any Taxing Authority, the party receiving notice of such dispute shall promptly notify and consult with the other party concerning the dispute.

Section 2.05. Required Withholding. Investor shall be entitled to deduct and withhold from any amount payable pursuant to this Agreement to the Sellers such amounts as may be required to be deducted or withheld therefrom under the Code or under any provision of state, local or foreign Tax law or under any other applicable Law. To the extent any such amounts are so deducted or withheld, they shall be treated for all purposes under this Agreement as having been paid to the Person to whom they would otherwise have been paid hereunder. Notwithstanding the foregoing, if Investor determines that withholding is required, Investor shall provide written notice to the Sellers’ Representative at least five (5) Business Days before the withholding is required describing the applicable Law under which withholding is required and indicating the amount of withholding. If the Sellers’ Representative provides an opinion of legal counsel reasonably acceptable to Investor that no withholding is required, then Investor shall not withhold the amount set forth in such written notice.

ARTICLE III

CONDITIONS PRECEDENT TO THE CLOSING

Section 3.01. Investor’s and the Merger Sub’s Conditions to Closing. The obligations of Investor and the Merger Sub to effect the Closing shall be subject to the

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satisfaction of the following conditions, any or all of which conditions may be waived by Investor in its sole and absolute discretion:

(a) Accuracy of Representations, Warranties and Agreements. The representations and warranties made by the Sellers herein or in any document delivered pursuant hereto shall be true and correct (after giving effect to any notifications and schedule updates made by the Sellers pursuant to Section 6.07 but without giving effect to any Material Adverse Effect or materiality qualifiers therein) when made and on and as of the Closing Date as though made at that time (unless a representation and warranty speaks as to a stated date, in which case such representation shall be true as of such date), except to the extent that all such failures of the representations and warranties to be true and correct, considered collectively, could not reasonably be expected to have a Material Adverse Effect on the Company or adversely affect the ability of the Sellers to consummate the transactions contemplated by this Agreement; provided that, the foregoing notwithstanding, the representations and warranties set forth in Sections 4.01 (other than the third sentence of Section 4.01(a)), 4.02 and 4.03 shall be true and correct in all respects when made and on and as of the Closing Date as though made at the Closing Date (unless a representation and warranty speaks as to a stated date, in which case such representation shall be true as of such date). The Sellers shall have performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed and complied with by them at or prior to the Closing Date and the Sellers shall have delivered to Investor a certificate executed by the Sellers’ Representative on behalf of the Sellers certifying that the conditions set forth in this Section 3.01(a) have been satisfied as of the Closing Date (the “Sellers’ Closing Certificate”).

(b) Consents and Approvals. The Sellers shall have received and delivered to Investor any and all lien waivers, consents and approvals (“Closing Approvals”) set forth on Schedule 3.01(b) attached hereto, which schedule shall include all store and warehouse leases requiring landlord consent to the transactions contemplated by this Agreement, each in form and substance reasonably satisfactory to Investor.

(c) Hart-Scott-Rodino Act. All filings required pursuant to the Hart-Scott-Rodino Act will have been made, and any Closing Approvals required thereunder will have been obtained, or the waiting period required thereby will have expired or have been terminated, as the case may be.

(d) Sellers’ Closing Deliveries. Investor shall have received each of the Sellers’ and the Company’s closing deliveries set forth in Section 3.03.

(e) Litigation. (i) No temporary restraining order, preliminary or permanent injunction, or cease and desist order issued by any Governmental Entity preventing the transactions contemplated hereby or the consummation of the Closing shall be in effect or threatened at the Closing Date, (ii) no proceeding seeking to restrict or prohibit the transactions contemplated hereby or the consummation of the Closing shall be pending or threatened on the Closing Date by any Governmental Entity and (iii) no material proceeding seeking to restrict or prohibit the transactions contemplated hereby or the

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consummation of the Closing which has a reasonable likelihood of success shall be pending or threatened on the Closing Date before any Governmental Entity.

(f) Material Adverse Change. There shall not have been a Material Adverse Change.

(g) Diligence. Investor shall be reasonably satisfied with the results of its due diligence examination of the Company. Investor acknowledges that (A) except for the items listed on Schedule 3.01(g), it has completed its due diligence examination of the Company and is satisfied with the results of such due diligence examination, and (B) the information included on the disclosure schedules delivered on the Execution Date does not form the basis for any such dissatisfaction.

(h) Repayment of Debt. Investor shall have received evidence reasonably satisfactory to it (including, at Investor’s sole discretion, UCC-3 termination statements authorized by the applicable lenders) that the Sellers have caused the Company to repay all outstanding Debt other than Debt set forth on Schedule 3.01(h) that is outstanding as of the date of this Agreement and that the Inventory is free and clear of all Liens other than Liens set forth on Schedule 3.01(h) that are outstanding as of the date of this Agreement.

(i) Related Party Transactions. Investor shall have received evidence reasonably satisfactory to it that (i) the Company has repaid all Debt or other amounts payable to any of its Affiliates (other than amounts payable pursuant to any of the Leases); and (ii) each of the Company’s Affiliates has repaid all Debt or other amounts payable to the Company (or that such Debt will be repaid concurrent with the Closing).

(j) Affiliate Lease Amendments. Investor shall have received from Sellers amendments to the Leases with Affiliates of the Company described on Schedule 3.01(j) attached hereto containing terms substantially as set forth on Schedule 3.01(j) attached hereto, duly executed by each applicable Affiliate.

(k) Opinion of Counsel. Investor shall have received an opinion, dated as of the Closing Date, of Ice Miller, counsel to the Company, in substantially the form set forth on Exhibit F attached hereto.

(l) Financing. As of the Closing Date, the Company shall have obtained debt financing described in the Wachovia Commitment Letter.

(m) New 2004 Audited Financial Statements. The Company shall have delivered to the Investor the New 2004 Audited Financial Statements and the New 2004 Audited Financial Statements shall not differ in any material respect from the Annual Financial Statements for the fiscal year ended March 31, 2004, as determined by Investor acting in good faith.

(n) Trademark License. The Company and Affinity Logistic Corp. shall have executed an amendment, in form and substance reasonably satisfactory to Investor, to the Independent Contractor Agreement, dated as of March 4, 2003, which amendment shall

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grant to Affinity Logistic Corp. a license to use certain of the Company’s Marks subject to customary limitations.

(o) Intercreditor Agreements and Amendments. (i) GE Commercial Distribution Finance Corporation shall have entered into an intercreditor and subordination agreement regarding amounts payable, and security interests granted, under the GE Wholesale Financing Agreement, (ii) Electrolux Home Products, Inc. shall have entered into an intercreditor and subordination agreement regarding amounts payable, and security interests granted, under the Consignment Agreement dated September 24, 2003, and (iii) GE Capital Consumer Card Co. shall have entered into an amendment to the Private Label Consumer Credit Card Program Agreement dated August 26, 2004 to reset the financial covenants to reflect the Merger and the financing extended to the Company in connection therewith, and such amendment and each intercreditor and subordination agreement shall be in form and substance reasonably satisfactory to Investor, Congress Financial Corporation (Central) and Wachovia Bank, N.A.

(p) Releases. Each Person that has exercised, or is exercising concurrent with the Closing, a stock appreciation right granted by the Company shall have executed and delivered to Investor an agreement, in form and substance reasonably satisfactory to Investor, that (i) provides for release language substantially similar to that set forth in Section 7.05 and (ii) confirms that his or her obligations under the confidentiality, nonsolicitation and noncompete agreement executed in connection with the receipt of such stock appreciation right continue to be valid and binding.

Section 3.02. Sellers’ Conditions to Closing. The obligations of the Sellers to effect the Closing under this Agreement are subject to the satisfaction of the following conditions, any or all of which may be waived by the Sellers’ Representative in his sole and absolute discretion:

(a) Accuracy of Representations, Warranties and Agreements. The representations, warranties and agreements of Investor herein shall be true and correct in all material respects on the Closing Date. Investor shall have performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed and complied with by it at or prior to the Closing Date and Investor shall have delivered to the Sellers’ Representative a certificate certifying that the conditions set forth in this Section 3.02(a) are satisfied in all material respects as of the Closing Date (the “Investor Closing Certificate”).

(b) Consents and Approvals. Investor shall have received all Closing Approvals necessary to consummate the transaction contemplated by this Agreement all in form and substance reasonably satisfactory to the Sellers’ Representative.

(c) Litigation. No temporary restraining order, preliminary or permanent injunction, or cease and desist order issued by any Governmental Entity preventing the transactions contemplated hereby or the consummation of the Closing, shall be in effect or threatened at the Closing Date, and no proceeding by any Governmental Entity seeking to restrict or prohibit the transactions contemplated hereby or the consummation of the Closing shall be pending or threatened on the Closing Date.

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(d) Investor’s Closing Deliveries. The Sellers’ Representative shall have received the Closing Payment and each of Investor’s closing deliveries set forth in Section 3.04.

(e) Hart-Scott-Rodino Act. All filings required pursuant to the Hart-Scott-Rodino Act will have been made, and any Closing Approvals required thereunder will have been obtained, or the waiting period required thereby will have expired or have been terminated, as the case may be.

Section 3.03. Closing Deliveries of the Sellers and the Company. At the Closing, the Company and the Sellers shall have delivered the following to Investor:

(a) Certificates representing the Merger Shares duly endorsed for transfer to the Company and accompanied by an appropriate stock power;

(b) The stock ledger, minute book, corporate seal and any other corporate records of the Company;

(c) A certificate of existence from the State of Indiana, and the equivalent thereof for each state in which the Company is qualified to do business, each dated within five (5) Business Days before the Closing Date, certifying that the Company is validly existing and, to the extent applicable, in good standing under the applicable Laws of the state;

(d) Counterparts to the Related Agreements to which the Company and/or each Seller are a party;

(e) Resignations of all of the directors of the Company other than Jerry W. Throgmartin, and the resignation of each person who is a trustee, custodian or authorized signatory under any employee benefit plan of the Company, effective as of the Closing Date, as designated by Investor;

(f) The Sellers’ Closing Certificate;

(g) The Preliminary Working Capital Statement;

(h) Counterparts of Form 8023, executed by the Sellers in connection with Section 338(h)(10) election for federal income tax purposes contemplated by Section 2.03(b), as well as any other equivalent election for state tax purposes; and

(i) Such further certificates, instruments and other documents requested by Investor as may be reasonably required to effectively carry out the intent of this Agreement.

Section 3.04. Closing Deliveries of Investor. At the Closing, Investor shall deliver the following to the Sellers:

(a) The Investor Closing Certificate;

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(b) Counterparts to the Related Agreements to which Investor is a party;

(c) The final allocation of the Purchase Price (and adjustments thereto) in accordance with Schedule 2.04(a);

(d) Counterparts of Form 8023, executed by the Investor, in connection with Section 338(h)(10) election for federal income tax purposes contemplated by Section 2.03(b), as well as any other equivalent election for state tax purposes;

(e) A certificate of good standing from the State of Delaware, and the equivalent thereof for each state in which Investor is qualified to do business, each dated within five (5) Business Days before the Closing Date, certifying that Investor is validly existing and in good standing under the applicable Laws of the state;

(f) A certificate of good standing from the State of Indiana, and the equivalent thereof for each state in which Merger Sub is qualified to do business, each dated within five (5) Business Days before the Closing Date, certifying that Merger Sub is validly existing and, to the extent applicable, in good standing under the applicable Laws of the state;

(g) Such further certificates, instruments and other documents requested by the Sellers’ Representative as may be reasonably required to effectively carry out the intent of this Agreement; and

(h) Counterparts of indemnity agreements in form and substance reasonably acceptable to Sellers’ Representative regarding the Company’s obligation to indemnify each of Jerry W. Throgmartin, Dennis L. May and Michael D. Stout from and against liabilities arising out of the performance of their respective duties as officers of the Company.

Section 3.05. Closing Deliveries of the Company. At the Closing, the Company shall deliver the Closing Payment as follows:

(a) Nine Million Four Hundred Thousand Dollars ($9,400,000) of the Closing Payment (the “Escrow Amount”) shall be delivered to the Escrow Agent in accordance with the terms of the Escrow Agreement, which terms shall provide that, subject to retention of amounts pursuant to the Escrow Agreement with respect to any pending claims pursuant to Article VIII or Article X, (i) Four Million Seven Hundred Thousand Dollars ($4,700,000) of the Escrow Amount less the amount of any payment previously made to the Company from the Escrow Amount as a result of an indemnity claim or a downward adjustment to the Purchase Price pursuant to Section 2.03(b) (or, if the amount of such adjustment has been disputed and such dispute has not yet been resolved pursuant to Section 2.03(c), less the claimed amount of such adjustment based on the Final Working Capital Statement delivered by Investor) shall be released on the later of (A) June 30, 2005 and (B) twenty-one (21) days after audited financial statements for the fiscal year ended March 31, 2005 are made available and delivered to Investor, and (ii) the remainder of the Escrow Amount shall be released on the later of (A) June 30, 2006

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and (B) twenty-one (21) days after audited financial statements for the fiscal year ended March 31, 2006 are made available and delivered to Investor.

(b) The remainder of the Closing Payment shall be delivered to the Sellers’ Representative who shall distribute such amount in the following manner: Each Seller shall receive an amount of the Closing Payment equal to the number of Merger Shares owned by such Seller multiplied by the Per Share Closing Payment less such Seller’s pro-rata portion of the Escrow Amount based on his or her Ownership Percentage as set forth on Exhibit A hereto.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND

AGREEMENTS OF THE COMPANY AND THE SELLERS

The Company and the Sellers, jointly and severally (except as specifically otherwise set forth in Section 4.02), represent and warrant to each of Investor and Merger Sub as follows (with the understanding that (i) each of Investor and Merger Sub is relying on such representations and warranties in entering into and performing this Agreement and (ii) each reference to the “Company” in this Article IV shall be deemed to be a reference to the Company and each of its subsidiaries):

Section 4.01. Organization and Standing; Authority.

(a) The Company is a corporation duly organized and validly existing under the laws of the State of Indiana. The Company has full power and authority to carry on its business as and where now conducted and to own or lease and operate its properties at and where now owned or leased and operated by it. Except as set forth on Schedule 4.01(a), the Company is qualified to do business in every jurisdiction in which the nature of its business or ownership of its assets makes such qualification necessary, except where the failure to be so qualified would not result in a material liability or obligation of the Company. The Company has the full capacity, right, power and authority to enter into, execute and deliver this Agreement and any and all Related Agreements to which it is a party, to consummate the transactions contemplated by this Agreement and any and all Related Agreements to which it is a party, and to comply with and fulfill the terms and conditions of this Agreement and any and all Related Agreements to which it is a party.

(b) Except as set forth on Schedule 4.01(b), the execution, delivery and performance of this Agreement and any and all Related Agreements to which it is a party by the Company has been authorized by all necessary corporate action on the part of the Company and each constitutes a valid and binding obligation of the Company, enforceable in accordance with its respective terms and conditions, except as such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws affecting creditors generally and by the availability of equitable remedies. Except as set forth on Schedule 4.01(b), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance by the Company

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with any of the provisions of this Agreement or the Related Agreements to which it is a party, will:

(i) Conflict with, violate, result in a breach or violation of, constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, give rise to any right of termination, cancellation, or acceleration under, or require a consent or waiver under any provision of the Articles of Incorporation or Bylaws of the Company, or any of the terms, conditions or provisions of any note, Lien, bond, Lease, mortgage or indenture, or material license, lease, loan, contract, commitment, agreement, understanding, arrangement, restriction or other instrument or obligation to which the Company is a party or by which the Company or any of the properties or assets of the Company may be bound;

(ii) Violate, or conflict with, in any material respect any Law applicable to the Company or to any properties or assets of the Company; or

(iii) Conflict with, violate or cause the termination of any material Permit held by the Company;

(iv) Constitute an event which, with or without notice, lapse of time, or action by a third party, could result in the creation of any Lien upon any properties or assets of the Company, cause the maturity of any material liability, obligation or debt of the Company to be accelerated or increased or result in the loss of any material benefit to which the Company is entitled under any Contract or Lease.

(c) Except as set forth on Schedule 4.01(c) or described in Section 6.10, the execution, delivery, and performance by the Company of this Agreement and any Related Agreements to which it is a party and the consummation by the Company of the transactions contemplated hereby or thereby will require any notice to, filing with, or consent, authorization or approval from any Governmental Entity or any other Person.

Section 4.02. Authority of the Sellers; No Violation. Each Seller represents as follows only with respect to himself or herself and the Shares set forth opposite his or her name on Exhibit A:

(a) He or she has the full capacity, right, power and authority to enter into, execute and deliver this Agreement and any and all Related Agreements to which he or she is a party, to consummate the transactions contemplated by this Agreement and any and all Related Agreements to which he or she is a party, and to comply with and fulfill the terms and conditions of this Agreement and any and all Related Agreements to which he or she is a party. This Agreement and all Related Agreements to which he or she is a party each constitute a valid and binding obligation of him or her enforceable in accordance with its respective terms and conditions, except as such enforceability may be limited by bankruptcy, insolvency, reorganization and similar laws affecting creditors generally and by the availability of equitable remedies. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated

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hereby, nor compliance by him or her with any of the provisions of this Agreement or any of the Related Agreements to which he or she is a party will constitute an event which, with or without notice, lapse of time, or action by a third party, could result in the creation of any Lien upon any of the Shares owned by him or her.

(b) Except as set forth on Schedule 4.02 or described in Section 6.10, the execution, delivery, and performance by him or her of this Agreement and any Related Agreements to which he or she is a party and the consummation by him or her of the transactions contemplated hereby or thereby will not (i) require any notice to, filing with, or consent, authorization or approval from any Governmental Entity or any other Person, (ii) violate, or conflict with, in any material respect any law applicable to such Seller or (iii) conflict with, violate, result in a breach or violation of, constitute a default (or an event which, with or without notice or lapse of time or both, would cause a default) under, give right to any right of termination, cancellation, or acceleration under, or require a consent or waiver under, any of the terms, conditions or provisions of any note, lien, bond, mortgage, indenture, license, lease, loan, contract, commitment, agreement, understanding, arrangement, restriction or other instrument or obligation to which such Seller is a party.

(c) He or she is the lawful owner of record and owns beneficially that number of Shares set forth opposite his or her name on Exhibit A hereto, free and clear of all Liens and with no restriction on the voting rights and other incidents of record and beneficial ownership pertaining thereto except as set forth on Schedule 4.02. Except for this Agreement and the Related Agreements, there are no agreements or understandings between such Seller and any other Person with respect to the acquisition, disposition, transfer, registration, or voting of, or any other matter pertaining or relating in any way to, the Shares except as set forth on Schedule 4.02. At the Closing, Investor will receive good and valid title to the Shares owned by him or her, free and clear of all Liens.

Section 4.03. Capital Structure of the Company and Related Matters; Owners of Shares; Subsidiaries.

(a) The total authorized, issued and outstanding capital stock of the Company as of the date hereof is set forth on Exhibit A. All of the issued and outstanding shares of capital stock of the Company are owned by the Sellers. All outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and non-assessable and none of such shares was issued in violation of any preemptive right. Except as set forth on Schedule 4.03(a), there are no outstanding options, warrants or other rights of any kind to acquire any shares of the Company’s capital stock, nor any outstanding securities convertible into or exchangeable for, or which otherwise confer on the holder thereof any right to acquire, any shares of the Company’s capital stock. Except as set forth on Schedule 4.03(a), the Company is not committed to issue or deliver or to repurchase, redeem or otherwise acquire any such option, warrant, right, security or capital stock of the Company.

(b) Except as set forth on Schedule 4.03(b), the Company does not have any direct or indirect ownership interest or investment of any kind in any Person. Except as set forth on Schedule 4.03(b), the Company is not a party to any joint venture with any

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other Person and has no relations with any special purpose entities. HHG Distributing, LLC and each other subsidiary set forth on Schedule 4.03(b) is a “qualifying Subchapter S subsidiary” within the meaning of the Code.

Section 4.04. Transactions with Certain Persons. Except for compensation paid for services rendered in the ordinary course of the Business or except as set forth on Schedule 4.04, the Company is not owed any amount from, owes no amount to, or guaranties any amount owed by, has no contracts with and has no commitments to: (a) any of the Sellers; (b) any employee of the Company; or (c) any Affiliate. Except as set forth on Schedule 4.04, no officer or director of the Company (except in his or her capacity as such) has any direct or indirect interest in (i) any property or assets of the Company (except as a shareholder), (ii) any competitor, customer, supplier or agent of the Company or any other Person having any business dealings or a business relationship with the Company; or (iii) any Person which is a party to any contract or agreement with the Company. To the Knowledge of the Company and the Sellers, based on a review of the prevailing rental market in the various locations in which the Company’s stores are located and a comparison of the terms of the Affiliate Leases to the leases of stores by the Company from non-affiliated persons, the terms of each of the Affiliate Leases, including, without limitation, the amount of rent payable thereunder, are no less favorable to the Company than terms that would be available through arms-length negotiations with unaffiliated parties. No property that is the subject of an Affiliate Lease under which a Seller or an Affiliate (other than a sibling) of a Seller is the lessor is encumbered by a mortgage or deed of trust. To the Knowledge of the Company and the Sellers, based on a review of the prevailing rental market, the terms of the Aircraft Hourly Rental Agreement, dated August 5, 2002, between the Company and Throgmartin Leasing, LLC, including, without limitation, the amount of rent payable thereunder, are no less favorable to the Company than terms that would be available through arms-length negotiations with unaffiliated parties.

Section 4.05. Financial Statements.

(a) True and complete copies of the audited balance sheets of the Company as of March 31, 2002, 2003 and 2004 and the related audited income statements and statements of cash flows for the fiscal years ended March 31, 2002, 2003 and 2004, respectively (collectively, the “Annual Financial Statements”), and the internally prepared balance sheets and income statements of the Company as of August 31, 2004 and for the five (5) months then ended (the “Interim Financial Statements”) are attached hereto as Schedule 4.05(a) (collectively the “Financial Statements”). The Financial Statements are, and the Monthly Financial Statements, when delivered, will be, true, correct and complete, and have been, or will have been, prepared from the books and records of the Company in accordance with GAAP consistently applied except for the absence of notes and year end adjustments in the case of the Interim Financial Statements and the Monthly Financial Statements. The balance sheets included in the Financial Statements fairly present, and the Monthly Financial Statements, when delivered, will fairly present, the financial condition of the Company as of the respective dates thereof, and the income statements and statement of cash flows included therein, when delivered, will fairly present the results of operations of the Company for the periods indicated. The Financial Statements contain and reflect adequate provisions for all reasonably anticipated liabilities and adequate reserves for all reasonably anticipated losses, costs and expenses in accordance with GAAP, including reserves for uncollectible accounts

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receivable, reserves related to general liability, automobile liability and workers’ compensation obligations and claims under Extended Service Plans in effect on the date hereof.

(b) The Company maintains a system of internal accounting controls and procedures that the management of the Company reasonably believes is sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Schedule 4.05(b) sets forth a true and correct list of all non-audit services set forth in Section 201 of Title II of the Sarbanes-Oxley Act of 2002 (i) performed by Ernst & Young LLP on behalf of the Company since March 31, 2001, (ii) performed by KPMG LLP on behalf of the Company since the date on which it was first engaged to perform any services on behalf of the Company, and (iii) for which any outside accounting firms are currently engaged to perform on behalf of the Company.

Section 4.06. Outstanding Debt and Related Matters. All outstanding Debt of the Company is set forth in the Financial Statements. There exists no material default under the provisions of any instrument evidencing such Debt or of any agreement relating thereto. Except as set forth on Schedule 4.06, none of the Sellers nor any other Person has guaranteed any obligation of the Company, including obligations with respect to Debt. Schedule 4.06 sets forth all outstanding letters of credit issued on behalf of the Company. Prior to or in connection with the Closing, the Sellers have caused (or will have caused) the Company to repay all outstanding Debt except as set forth on Schedule 3.01(h). Upon such repayment of outstanding Debt, the Inventory will be free and clear of all Liens except as set forth on Schedule 3.01(h).

Section 4.07. Taxes. Except as set forth on Schedule 4.07:

(a) The Company has timely filed all Returns that are required to be filed with respect to all Tax periods that end on or before the Closing Date and all such Returns are true, correct and complete.

(b) All Taxes that are due and payable by the Company with respect to all Tax periods that end on or before the Closing Date have been paid.

(c) There is no pending or, to the Knowledge of the Sellers and the Knowledge of the Company, threatened claim by a Taxing Authority in a jurisdiction wherein the Company does not file Returns that the Company is or may be subject to taxation by that jurisdiction.

(d) At all times since June 1, 1960, the Company has been a validly electing S corporation within the meaning of Sections 1361 and 1362 of the Code, and the Company will be an S corporation at all times up to and including the Closing Date. The Company does not have any liability for Taxes under Section 1374 of the Code.

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(e) There is not now in force any extension of time with respect to the date on which any Return was or is due to be filed by or on behalf of or with respect to the Company, or any waiver or agreement by the Company for an extension of time for the assessment of any Tax.

(f) The Company is not subject to any penalty by reason of a violation of any order, rule or regulation of, or with respect to any Return required to be filed with, any Taxing Authority.

(g) The Company does not have any pending requests for a ruling with any Taxing Authority.

(h) There are no Liens for Taxes upon the assets of the Company except Liens for current Taxes not yet due and payable.

(i) The Company is not a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code.

(j) The Company is not a nonresident alien individual, foreign person, or foreign corporation for purposes of the provisions of Sections 871, 882 or 1445 of the Code.

(k) The Company is not a party to any Contract that would result, separately or in the aggregate, in the payment of and has not previously made any “excess parachute payments” within the meaning of Code Section 280G.

(l) The Company is not a party to any express Tax settlement agreement, arrangement, policy or guideline, formal or informal, as of the Closing Date, and the Company has no obligation to make payments under any such arrangement.

(m) The Company has not been a party to any Tax allocation or sharing agreement.

(n) The Company has made all withholding of Taxes required to be made under all applicable Laws, including, without limitation, withholding with respect to sales and use Taxes and compensation paid to any employee, independent contractor, creditor of the Company or other third party and the amounts withheld have been properly and timely paid over to the appropriate Taxing Authority. The transactions contemplated by this Agreement are not subject to the Tax withholding provisions of Section 3406 of the Code or of Subchapter A of Chapter 3 of the Code, or of any comparable provision of Law.

(o) The Company has no liability for the Taxes of any other person under Treas. Reg. § 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

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Section 4.08. Compliance with Laws; No Default or Litigation. Except as set forth on Schedule 4.08:

(a) The Company is not in default or violation (nor has any event occurred which, with or without notice or lapse of time or both, would constitute a default or violation or has the Company received any notice from, or been advised that, any Governmental Entity or other Person is claiming any violation or potential violation) under any Law (including, without limitation, Environmental, Health and Safety Laws and any Laws relating to antitrust, civil rights, health, or occupational health and safety); that could result in any material liability or obligation on the part of the Company.

(b) There are no actions, suits, claims, investigations, complaints, grievances, legal arbitrations or administrative proceedings in progress, pending, or, to the Knowledge of the Sellers or to the Knowledge of the Company, threatened by or against the Company or any of its assets or any of the Sellers with respect to the Shares or the transactions contemplated hereby whether at law or in equity, whether civil or criminal in nature, or whether before or by a Governmental Entity and all such matters set forth on Schedule 4.08 are covered by insurance and will not in the aggregate result in a material liability or obligation of the Company; and

(c) Neither the Company nor any of the Sellers has been charged with or received any notice of any violation of any Law relating to either the Company, any of the properties or assets of the Company, the Shares, or the transactions contemplated by this Agreement and there is no pending or, to the Knowledge of the Sellers or to the Knowledge of the Company, threatened investigation of the Company or the Sellers that could result in such charge or notice in the future.

Section 4.09. Absence of Certain Changes. Except as set forth on Schedule 4.09 hereto, since March 31, 2004 there has not been any: (a) damage, destruction, or casualty or personal injury or loss, whether or not insured, affecting a material portion of the assets or properties of the Company; (b) material change in the Company’s customary methods of operations or the manner in which the Business is conducted; (c) change in the Company’s accounting policies, procedures or methodologies or tax principles, practices or policies, (d) any increase in reserves or any revaluation of any of the Company’s assets; (e) sale, transfer or assignment of any material tangible or intangible asset of the Company, except in the ordinary course of the Business; (f) material mortgage, pledge or imposition of any Lien on any asset of the Company, or material lease of real property, machinery, equipment or buildings entered into by the Company; (g) declaration, setting aside or payment of any dividend or any other distribution in respect of any capital stock or other securities of the Company or, directly or indirectly, any purchase, redemption, issuance, or other acquisition or disposition by the Company of any shares of capital stock or other securities or grant of any option relating to its authorized shares of capital stock, except regularly scheduled quarterly dividends to pay Taxes that are due and payable by the Sellers and attributable to the earnings of the Company; (h) capital investment in, loan to, or acquisition of the securities or assets of (including by merger or consolidation), any other Person; (i) increase in the compensation, bonus or other benefits payable to directors, consultants, officers or employees of the Company, other than increases in the ordinary course of business consistent with past practice or payments made in the ordinary course of the Business consistent with past practice; (j) delay or postponement of any accounts payable or other material liabilities or acceleration or acceptance of the prepayment of any notes or accounts receivable outside the ordinary course of the Business; (k) change made or

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authorization to make a change to the Company’s Articles of Incorporation or Bylaws; (l) amendment or termination of any material contract, agreement or Permit, (m) waiver, settlement or release of any material right or claim relating to the Business, except in the ordinary course of the Business, (n) write-off as uncollectible any notes or accounts receivable related to the Business, except write-offs in the ordinary course of the Business charged to applicable reserves, none of which individually or in the aggregate is material to the Business; (o) change in the terms of Extended Service Plans sold, (p) capital expenditure not in accordance with the capital expenditure plan included in the Confidential Memorandum, (q) event or condition of any character that constitutes or could reasonably be expected to constitute a Material Adverse Effect; or (r) agreement, whether or not in writing, to do any of the foregoing.

Section 4.10. Absence of Undisclosed Liabilities. Except as set forth on Schedule 4.10 or in the Financial Statements or notes thereto, the Company has no material liabilities, either direct or indirect, accrued, matured or unmatured or absolute, contingent or otherwise (whether or not required to be reflected in Financial Statements in accordance with GAAP), other than those liabilities which are not unusual in nature or amount incurred, consistent with past practice in the Business, in or as a result of the normal and ordinary course of the Business.

Section 4.11. Real Property.

(a) Real Property Defined. All real property (including, without limitation, all interests in and rights to real property) and improvements located thereon which are owned (the “Owned Real Property”) or leased (the “Leased Real Property”) by the Company are listed on Schedule 4.11(a) (Owned Real Property and Leased Real Property are collectively referred to herein as the “Real Property”). The Real Property constitutes all of the real property interests owned, leased or occupied in whole or in part by the Company or which are used in connection with the Business.

(b) Leases. Except as otherwise contemplated by this Agreement, any leases for Real Property (the “Leases”) are, and at the Closing shall be, in full force and effect and, except as otherwise specified in this Agreement, have not been assigned, modified, supplemented or amended by the Company or a predecessor tenant. True, correct and complete copies of the Leases have been made available to Investor. The Company is not in default in any material respect under any of the Leases, and, to the Knowledge of the Sellers and the Company, no circumstances or state of facts presently exists which, with the giving of notice or passage of time, or both, would constitute a material default thereunder. No landlord under any Lease is in material default under any of the Leases, and, to the Knowledge of the Sellers and the Company, no circumstances or state of facts presently exists which, with the giving of notice or passage of time, or both, would constitute a material default thereunder.

(c) Access. The buildings and structures included on the Real Property currently have access to (i) public roads or valid easements over private streets or private property for ingress to and egress from all such buildings and structures, and (ii) all appropriate public utilities at customary rates, in each case to the extent necessary for the conduct of the Business as it is currently conducted. All utilities serving the Real

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Property are adequate and have sufficient capacity to serve the Real Property if used in a manner consistent with the Company’s current use of the Real Property.

(d) With respect to the Owned Real Property:

(i) There is no condemnation proceeding, eminent domain proceeding or compulsory acquisition order, as applicable, pending or, to the Knowledge of the Sellers and the Company, threatened against the Owned Real Property;

(ii) The Owned Real Property is occupied under a valid and current certificate of occupancy or the like, if applicable; there are to the Knowledge of the Sellers and the Company no facts which would prevent the Owned Real Property from being occupied after the Closing Date in substantially the same manner as before;

(iii) The Owned Real Property does not violate, and all improvements are constructed in compliance with, any applicable Laws including, without limitation, any building, zoning, fire or environmental laws or codes, except to the extent any such violations could not be reasonably expected to result in any material liability or obligation on the part of the Company;

(iv) There are no outstanding variances or special use permits affecting the Owned Real Property or its uses;

(v) No notice of a violation of any Laws, or of any covenant, condition, easement or restriction affecting the Owned Real Property or relating to its use or occupancy has been given to the Company;

(vi) All buildings, improvements and structures situated on the Owned Real Property, if any, are without material structural defects, are in good operating condition and are in a state of good maintenance and repair (subject to normal wear and tear), and are adequate for the uses to which they are put; and

(vii) The Company holds good, valid and marketable fee simple title to the Owned Real Property free and clear of all Liens, other than minor title imperfections and easements and encroachments created by the Company which do not adversely affect the use or operation of the Owned Real Property by the Company.

(e) With respect to the Leased Real Property:

(i) There is no condemnation proceeding, eminent domain proceeding or compulsory acquisition order, as applicable, pending or to the Knowledge of the Sellers and the Company threatened against the Leased Real Property;

(ii) The Leased Real Property is occupied under a valid and current certificate of occupancy or the like, if applicable; there are to the Knowledge of the Sellers and the Company no facts which would prevent the Leased Real

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Property from being occupied after the Closing Date in substantially the same manner as before;

(iii) The Leased Real Property does not violate, and all improvements are constructed in compliance with, any applicable Laws including, without limitation, any building, zoning, fire or environmental laws or codes, except to the extent any such violations could not be reasonably expected to result in any material liability or obligation on the part of the Company;

(iv) No notice of a violation of any Laws, or of any covenant, condition, easement or restriction which is material to the Leased Real Property or its use or occupancy has been given to the Company;

(v) All buildings, improvements and structures situated on the Leased Real Property are without material structural defects, are in good operating condition and in a state of good maintenance and repair (subject to normal wear and tear), and are adequate for the uses to which they are put except for inadequacies which in the aggregate would not result in a material liability or obligation of the Company;

(vi) Schedule 4.11(e)(vi) sets forth a list of all Leases where the lessor is either a Seller or an Affiliate thereof (the “Affiliate Leases”);

(vii) The Company holds good, valid and marketable leasehold title to the Real Property free and clear of all Liens, other than minor title imperfections and easements and encroachments created by the Company which do not adversely affect the use or operation of the Leased Real Property by the Company;

(viii) Except as set forth on Schedule 4.11(e)(viii), the Company has obtained a nondisturbance agreement from the lender of each lessor of a Leased Real Property which interest in such Leased Real Property is encumbered by a mortgage or deed of trust; and

(ix) Except as set forth on Schedule 4.11(d)(ix), no Leased Real Property is subject to any sublease, license, concession agreement or other similar occupancy agreement.

Section 4.12. Personal Property.

(a) Schedules 4.12 sets forth, lists or otherwise describes all equipment, machinery, furniture, fixtures and improvements and vehicles owned by the Company (the “Owned Personal Property”) or leased by the Company (the “Leased Personal Property” and together with the Owned Personal Property, the “Personal Property”) having a book value exceeding twenty-five thousand dollars ($25,000). Except as set forth on Schedule 4.12, the Company has good, valid and marketable title to the Owned Personal Property free and clear of Liens, except for Liens for property taxes not yet due and payable. With respect to Leased Personal Property, Schedule 4.12 identifies and

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provides reasonable detail with respect to the applicable leases, including the Personal Property subject to the lease, the annual lease payments, the name and address of the lessor and the remaining term of the lease with respect to: (i) leases with total remaining obligations (determined as of the date of the Interim Financial Statements) in excess of twenty-five thousand dollars ($25,000); and (ii) leases ending within one (1) calendar year of the Closing Date. True and complete copies of all such leases have been delivered to Investor, and each of such leases is in full force and effect and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms. Except as set forth on Schedule 4.12, no consent of any lessor of the Personal Property is required in connection with the transactions contemplated by this Agreement, nor do the transactions contemplated by this Agreement give rise to a termination of any lease of Personal Property or any acceleration of payments or loss of a material benefit thereunder, either at the election of the lessor or otherwise.

(b) The Personal Property is in material compliance with all applicable Laws including, without limitation, applicable zoning, environmental, motor vehicle safety and occupational safety and health Laws.

(c) The Personal Property is adequate and sufficient for the continued operation of the Business in the manner conducted by the Company prior to the Closing Date and such assets are structurally sound and are in good operating condition and repair (subject to normal wear and tear) and adequate for the uses to which they are put, except for routine replacement, maintenance and repair.

Section 4.13. Intellectual Property.

(a) The Company owns, licenses, or possesses sufficient rights to make, use, offer for sale, sell, develop, license, distribute, modify, and otherwise use or exploit indefinitely the Intellectual Property used in, necessary or useful for the conduct of the Business as now conducted.

(b) Schedule 4.13(b) sets forth a complete and accurate list of all Intellectual Property owned by the Company and used in, necessary or useful in the conduct of the Business. The Intellectual Property listed on Schedule 4.13(b), together with the Intellectual Property that is the subject of the Licenses, constitutes all the Intellectual Property used in, necessary or useful for the conduct of the Business in the manner in which it is currently, or historically has been, conducted.

(c) Except as otherwise indicated on Schedule 4.13(b), no Person has any ownership of or any right to use any of the Intellectual Property listed on Schedule 4.13, and the Company is the owner of all right, title, and interest in and to the Intellectual Property listed on Schedule 4.13(b), free and clear of all Liens. No Affiliate of the Company has any right, title, or interest in any Intellectual Property.

(d) To the Knowledge of the Company, none of the Intellectual Property set forth on Schedule 4.13(b) is or has been infringed, interfered with, misappropriated, or, to the Company’s Knowledge, has been challenged or threatened in any way. Neither the operation of the Business, nor the Intellectual Property or the subject matter thereof, nor

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any process or Know-How used by the Company, infringes or misappropriates or is alleged to infringe or misappropriate, any valid, enforceable Intellectual Property right or other proprietary right of any other Person in a manner that when aggregated would result in a material liability or obligation of the Company. The Company has no Knowledge of any facts or circumstances that would render any Intellectual Property invalid or unenforceable. All Company Intellectual Property will be fully transferable, alienable or licensable without restriction and without payment of any kind to any third party.

(e) No Intellectual Property is subject to any proceeding or outstanding decree, order, judgment or settlement agreement or stipulation that restricts in any manner the use, transfer, provision, sale or licensing thereof by the Company or that may affect the validity, use or enforceability of such Intellectual Property.

(f) Each item of Intellectual Property set forth on Schedule 4.13(b) that is the property of the Company is currently in compliance with all formal legal requirements (including payment of filing, examination and maintenance fees and proofs of use) and is valid and enforceable. All necessary documents and certificates in connection with such Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Intellectual Property. There are no actions that must be taken by the Company within one hundred twenty (120) days of the Closing Date, including the payment of any registration, maintenance or renewal fees or the filing of any responses to PTO office actions, documents, applications or certificates for the purposes of obtaining, maintaining, perfecting or preserving or renewing any Company Registered Intellectual Property.

(g) All Intellectual Property owned by the Company that is used in, necessary to, or which would be infringed by the conduct of Business by the Company as presently conducted or currently planned to be conducted was written, invented, developed and created solely by either (i) employees of the Company acting within the scope of their employment or (ii) by third parties who have validly and irrevocably assigned all of their rights, in any such Intellectual Property, to the Company, and no third party owns or has any rights to any such Intellectual Property. In each case in which the Company has acquired or purported to acquire any Intellectual Property from any Person, the Company has obtained a valid and enforceable assignment sufficient to irrevocably transfer all rights in such Intellectual Property (including the right to seek past and future damages with respect thereto) to the Company.

(h) All contracts, licenses and agreements to which the Company is a party with respect to any Intellectual Property used in, necessary or useful for the conduct of the Business as now conducted and as currently planned to be conducted by the Company (including agreements to provide or receive services related to Software) (the “Licenses”) are listed on Schedule 4.13(h); provided, however that Schedule 4.13(h) need not list “off-the-shelf” Licenses for software (or maintenance therefor) used in the day-to-day business operations of the Company, provided that such software was not custom written and the source code of such software was not custom modified by or on behalf of the Company. The Licenses are valid, binding and enforceable, are in full force and effect

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and, except as otherwise specified on Schedule 4.13(h), will continue in full force and effect after the Closing without the consent of any other party. Company is not in breach of, nor has the Company failed to perform under, any of the Licenses and, to the Company’s Knowledge, no other party to any License is in breach thereof or has failed to perform thereunder. The consummation of the transactions contemplated in this Agreement (i) will neither violate nor result in the breach, modification, termination or suspension of (or give the other party thereto the right to cause any of the foregoing) any of the Licenses referenced in this paragraph, (ii) will not result in the payment of any additional amounts or consideration other than the ongoing fees, royalties or other payments which the Company would otherwise have been required to pay to had the transactions contemplated by this Agreement not occurred and (iii) will not violate or conflict with any Intellectual Property or other rights of any Person.

(i) The Company has complied with all applicable Laws and its internal privacy policies relating to (i) the privacy of purchasers of the Company’s products and services, and users of all Websites owned, maintained or operated by the Company and (ii) the collection, storage and transfer of any personally identifiable information collected by the Company or by third parties having authorized access to the records of the Company except for failures to comply which in the aggregate would not result in a material liability or obligation of the Company. Copies of the current privacy policies of the Company, including the privacy policy included in the Company’s Website, are attached to Schedule 4.13(i).

Section 4.14. Contracts.

(a) Schedule 4.14 lists all of the following contracts, agreements, arrangements, and understandings (whether oral or in writing) including all amendments thereto, to which the Company is a party (or by which any of its properties or assets are bound) (the “Contracts”); provided, however, that an agreement need not be disclosed on Schedule 4.14 and shall not be deemed a “Contract” if it requires the Company to pay, or authorizes the Company to receive, aggregate payments of twenty-five thousand dollars ($25,000) or less in any given year, except that this limitation shall not apply to subparagraphs (ii), (iv), (v), (vi), (vii), (x), (xi), (xii), (xiv), (xv), (xvi) or (xvii):

(i) Contracts, agreements, arrangements and understandings (whether oral or in writing) involving capital leases or capital expenditures or requiring the Company to make, or authorizing the Company to receive, payments;

(ii) Loans, lines of credit, letters of credit, indentures, promissory notes, security agreements, pledges, mortgages, hypothecations, loan agreements, guaranties, or other payment or collateral obligations;

(iii) Agreements with vendors;

(iv) Agreements of guaranty or indemnification;

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(v) Agreements, contracts, and commitments containing any covenant, condition, or promise limiting the right of the Company to engage in any line of business or activity or compete with any Person;

(vi) Employment agreements, contracts, policies, and commitments with or between the Company and any of its employees, directors, or officers, including without limitation, those relating to severance;

(vii) Agreements with employees as a group or individually;

(viii) Contracts with subcontractors and other service providers;

(ix) Contracts (including rebate programs) with suppliers and vendors of parts, equipment, consumables and other items used by the Company in the ordinary course of the Business;

(x) Contracts with any present or former stockholder, director or employee or any Affiliate of the foregoing;

(xi) Profit sharing, stock option, stock purchase, stock appreciation, deferred compensation or other equity-based or profit sharing plan or arrangement for the benefit of the Company’s current or former directors, officers and employees;

(xii) Contracts that include minimum purchase conditions or requirements or other terms that restrict or limit the purchasing relationships of the Company or any customer, licensee or lessee thereof;

(xiii) Agreements to sell, lease or otherwise dispose of any assets or properties of the Company other than in the ordinary course of the Business;

(xiv) Joint venture, partnership or other similar agreements;

(xv) Shareholder agreements;

(xvi) Any other agreement that is material to the Company; and

(xvii) All commitments to enter into any of the foregoing.

(b) All of the Contracts are valid and binding obligations of the Company, are enforceable in accordance with their respective terms except as would not be reasonably expected to have a Material Adverse Effect on the Company, are in full force and effect and, except as otherwise specified on Schedule 4.14, will continue in full force and effect after the Closing without the consent of any other party. Except as set forth on Schedule 4.14, none of the Contracts contain any provision that is triggered by a change of control of the Company or by any transactions contemplated by this Agreement. Except as set forth on Schedule 4.14, (i) none of the Contracts contain a provision imposing a penalty if any of the amounts due thereunder are prepaid; and (ii) there is no

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existing default by the Company and, to the Knowledge of the Sellers and to the Knowledge of the Company, there is no existing default by any third party or any event which, with or without notice or lapse of time, or both, would constitute a default or result in a right to accelerate or loss of rights under or with respect to any of the Contracts. The Company is not a party to, or bound by the provisions of, any contract (including purchase orders, blanket purchase orders and agreements and delivery orders) with any Governmental Entity. Correct and complete copies of all of the Contracts in written form have been delivered to Investor.

Section 4.15. Permits. The Company possesses all franchises, licenses, permits, certificates, approvals, consents, clearances, notifications, registrations, and other authorizations necessary to conduct the Business as now conducted (the “Permits”). Except as set forth on Schedule 4.15, all Permits after the Closing Date will continue in full force and effect without the consent of any other party or Governmental Entity and no proceeding is pending, or, to the Knowledge of the Sellers and to the Knowledge of the Company, threatened to revoke or limit any Permit.

Section 4.16. Labor Relations: Employees.

(a) Except as set forth on Schedule 4.16(a): (i) the Company’s employees are not members of any union; (ii) the Company has not agreed to recognize any union or other collective bargaining representative, nor has any union or other collective bargaining representative been certified as the exclusive bargaining representative of any of its employees; and (iii) there is no question concerning representation as to any collective bargaining representative concerning employees of the Company, and no labor union or representative thereof claims to or is seeking to represent employees of the Company. To the Knowledge of the Sellers and to the Knowledge of the Company, no union organizational campaign or representation petition is currently pending with respect to any of the employees of the Company, nor has any such campaign or petition occurred at any time during the previous twenty-four (24) months. There is no labor strike or labor dispute, slowdown, work stoppage or lockout pending or, to the Knowledge of the Sellers and to the Knowledge of the Company, threatened against or affecting the Company, and the Company has not experienced any labor strike, slowdown, work stoppage or lockout. Except as set forth on Schedule 4.16(a), the Company is not a party to or bound by any collective bargaining agreement, other labor contract or individual agreement applicable to any of its employees.

(b) Except as set forth on Schedule 4.16(b), the Company (i) is, and has always been, in substantial compliance with all applicable Laws regarding labor and employment practices, including, without limitation, Laws relating to terms and conditions of employment, equal employment opportunity, employee compensation, employee benefits, affirmative action, wages and hours, plant closing and mass layoff, occupational safety and health, immigration, workers’ compensation, disability, unemployment compensation, whistle blower laws or other employment or labor relations laws, (ii) is not engaged, nor has it engaged, in any unfair labor practices, and has no, and has not had any, unfair labor practice charges or complaints before the National Labor Relations Board pending or, to the Knowledge of the Sellers and to the Knowledge of the Company, threatened against it, and (iii) has no, and has not had any,

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charges, complaints, or proceedings before the Equal Employment Opportunity Commission, Department of Labor or any other Governmental Entity responsible for regulating labor or employment practices, pending, or, to the Knowledge of the Sellers, threatened against it.

(c) Except as set forth on Schedule 4.16(c), the Company has no liability for payments or benefits due under the Worker Adjustment and Retraining Notification Act of 1988 (“WARN”) as a result of any “mass layoff” or “employment loss” (each as defined in WARN) which has not been satisfied in full; nor has the Company been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local laws.

(d) All employees of the Company are lawfully authorized to work in the United States according to applicable immigration laws.

(e) The Company is, and at all times prior to Closing, has been, in full compliance in all material respects with all applicable Laws respecting labor, employment and employment practices and terms and conditions of employment, including, without limitation, wages and hours (including the payment of overtime wages), welfare, health and safety and immigration and naturalization.

(f) Schedule 4.16(f) sets forth an accurate and complete list of the names, titles, hire dates, current annual rates of salary, bonuses and other compensation, including any severance payments that may be owed from the Company upon termination of such employee’s employment for any reason, or upon the consummation of the Merger, whether pursuant to a written or oral agreement or arrangement, of all of the present officers, directors, employees, and agents of the Company or who are otherwise employed by the Company in connection with the Business, which list will be updated as of the Closing Date. Any such employees who are currently on disability leave or any other leave of absence have been so noted on such schedule.

Section 4.17. Employee Benefit Plans.

(a) Schedule 4.17(a) sets forth a list of all “employee benefit plans” (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), all bonus, incentive, deferred compensation, stock or stock option plans or arrangements, all severance, change-in-control and other employee fringe benefit plans or arrangements, and all welfare plans or arrangements, whether oral or written, under which any current or former employee, director or independent contractor of the Company or any other Person has any present or future right to benefits or under which the Company has any liability, whether actual or contingent (the “Benefit Plans”);

(b) As applicable with respect to each Benefit Plan, the Sellers have made available to Buyer copies of (i) each current Benefit Plan document, including any amendments, and written summaries of each unwritten Benefit Plan, (ii) all trust documents, custodial agreements and other funding documents relating thereto, (iii) any summary plan description provided under a Benefit Plan, (iv) the three most recent annual reports (Form 5500 and all schedules thereto) filed with the Department of Labor

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or IRS, (v) any audited financial statements and actuarial valuation reports for the three most recent fiscal years, (vi) the most recent IRS determination letter, (vii) all service provider agreements, and (viii) any governmental advisory opinions, rulings, compliance statements, closing agreements or similar materials;

(c) Except as disclosed on Schedule 4.17(c), each Benefit Plan has been maintained, operated and administered, in all material respects, in compliance with its terms and any related documents or agreements and the applicable provisions of ERISA, the Code and other applicable laws, except in any case in which any Benefit Plan is currently required to comply with a provision of ERISA or of the Code, but is not yet required to be amended to reflect such provision, it has been administered in all material respects in accordance with such provision of ERISA or of the Code. Without limiting the generality of the foregoing, the Company has timely corrected any failure of the Gregg Appliances, Inc. Employees Retirement Plan to comply with the nondiscrimination provisions of Section 401(a)(4) of the Code and the regulations issued thereunder and the Company has incurred no liability for excise taxes in connection therewith;

(d) No Benefit Plan is a “multiemployer plan” within the meaning of Section 3(37) of ERISA. Neither the Company nor any ERISA Affiliate has ever contributed to or had any obligation to contribute to, or withdrawn from, any “multiemployer plan” or had any fixed or contingent liability under Section 4204 of ERISA;

(e) The Benefit Plans which are “employee pension benefit plans” within the meaning of Section 3(2) of ERISA and which are intended to meet the qualification requirements of Section 401(a) of the Code (each a “Pension Plan”) have received determination letters from the IRS to the effect that such Pension Plans are qualified and the related trusts are exempt from federal income taxes and no determination letter with respect to any Pension Plan has been revoked, and no event has occurred which would cause the revocation of any such determination letter or which requires or could require action under the compliance resolution programs of the IRS to preserve such qualification;

(f) Neither the Company, the Benefit Plans nor any other Person have engaged in a prohibited transaction, as defined under Section 4975 of the Code or Section 406 of ERISA, which could subject the Company, either directly or indirectly through an obligation to indemnify or otherwise, to any taxes, penalties or other liabilities under Section 4975 of the Code or Sections 409 or 502(i) of ERISA;

(g) All contributions to any Pension Plan, with respect to or on behalf of employees of the Company, which have been required in accordance with the terms of such Benefit Plan through the Closing Date have been timely made or accrued. No Pension Plan is subject to Part 3, Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. Neither the Company nor any ERISA Affiliate has ever contributed to, or had any obligation to contribute to, any plan subject to Part 3, Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code;

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(h) Each Benefit Plan that is a “group health plan” within the meaning of ERISA Section 607(1) or Code Section 5000(b)(1), and each “group health plan,” within the meaning of such sections maintained by any ERISA Affiliate or to which any ERISA Affiliate has contributed or had an obligation to contribute, has been operated in compliance in all material respects with the applicable continuation coverage requirements of Part 6, Subtitle B of Title I of ERISA and Code Section 4980B and of similar state law (together, “COBRA”);

(i) No Benefit Plan provides, with respect to employees of the Company, death, medical or other welfare benefits beyond termination of service or retirement other than (A) coverage mandated by law or (B) benefits under a Benefit Plan qualified under Code Section 401(a);

(j) With respect to any Benefit Plan, no actions, audits, investigations, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the Knowledge of the Sellers, threatened;

(k) The consummation of the transactions contemplated by this Agreement will not result in or satisfy a condition to the payment of compensation that would, in combination with any other payment, result in an “excess parachute payment” within the meaning of Section 280G(b) of the Code;

(l) No Benefit Plan is or has ever formed part of a “multiple employer welfare arrangement” within the meaning of ERISA Section 3(40);

(m) Except as described on Schedule 4.17(m), the execution of this Agreement and the consummation of the transactions contemplated hereby will not, by themselves or in combination in any other event, result in any payment (whether of severance pay or otherwise) becoming due from or under any Benefit Plan, including, without limitation, the H. H. Gregg Supplemental Executive Retirement Plan, to any current or former director, consultant or employee of the Company or result in the vesting, acceleration of payment or increases in the amount of any benefit payable to or in respect of any such current or former director, consultant or employee;

(n) No communication, report or disclosure has been made which, at the time made, did not accurately reflect the terms and operations of any Benefit Plan, and the Company has not announced its intention or undertaken (whether or not legally bound) to modify or terminate any Benefit Plan or to adopt any arrangement or program that, once established, would come into the definition of Benefit Plan;

(o) Except as disclosed on Schedule 4.17(o), no employee of the Company is on long-term disability leave, receiving benefits pursuant to workers’ compensation legislation or on leave of absence, including any leave of absence by reason of disability or pursuant to the Family and Medical Leave Act of 1993 or the Uniformed Services Employment and Reemployment Rights Act of 1994. Except as disclosed on Schedule 4.17(o), no present or former employee of the Company or any child or present or former spouse of any present or former employee of the Company is receiving benefits

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under any Benefit Plan pursuant to COBRA or is entitled to elect COBRA coverage under any Benefit Plan as a result of an event occurring prior to the Closing Date;

(p) Schedule 4.17(p) sets forth a list of (1) each Person, whether or not an employee, director or contractor of the Company, who, at any time within the two year period immediately preceding the date of this Agreement has received, or at anytime hereafter is entitled to receive, any benefits or perquisites from the Company which were not provided pursuant to a Benefit Plan listed in Schedule 4.17(a), including, without limitation, purchase of Company inventory at a discount, use of Company inventory, use of company vehicles or other real or personal property of the Company, relocation assistance, health plan coverage, financial planning assistance or similar benefits, and (2) a description of each such benefit or perquisite; and

(q) Neither the Company nor the Sellers have used the services of third party contract labor suppliers, temporary or leased employees, independent contractors or other contingent workers to an extent that could result in the disqualification of any Benefit Plan or the imposition of penalties or Taxes with respect thereto by any Taxing Authority.

Section 4.18. Environmental, Health and Safety Matters. The Company is not required to obtain any Permits in order to operate the Business in compliance with applicable Environmental, Health and Safety Laws. Except as disclosed on Schedule 4.18:

(a) The Company and all of its assets have complied and are in compliance with all applicable Environmental, Health and Safety Laws in all material respects;

(b) The Company has no material liability under any Environmental, Health and Safety Laws;

(c) None of the operations of the Company involve, or have involved, the violation of Environmental, Health and Safety Laws governing the generation, storage or transportation of Contaminants;

(d) The Company has not disposed of any Contaminant by placing it at, in, on, under or about the Real Property, any real property formerly owned, leased or operated by the Company, or any other real property, except to the extent such disposal was in compliance with all applicable Environmental, Health and Safety Laws in all material respects;

(e) No underground storage tanks or surface impoundments are or ever have been located on the Real Property, in violation of any applicable Environmental, Health and Safety Laws;

(f) There have been no Releases of Contaminants at, in, on, under or about the Real Property in violation of applicable Environmental, Health and Safety Laws;

(g) There are no PCBs or friable asbestos located at or on the Real Property;

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(h) The Company has not received any written requests for information, notice, demand, letter, administrative inquiry, or formal or informal complaint or claim with respect to Contaminants or the environment;

(i) Sellers have made available for review by Investor, true, correct and complete copies of all environmental reports in their possession or in the Company’s possession relating to the Real Property, the Company’s operations and any real property previously owned, leased or operated by the Company; and

(j) None of the matters set forth on Schedule 4.18, individually or in the aggregate, would reasonably be expected to result in a material liability or obligation on the part of the Company.

Section 4.19. Bank Accounts. Set forth on Schedule 4.19 is a list of all bank and securities accounts maintained by the Company. Such list shows, for each such account, the account number, the type of account, the relevant address for the account and a list of persons authorized to sign on behalf of the Company with respect to such account.

Section 4.20. Absence of Certain Business Practices. Except as set forth on Schedule 4.20, neither the Company, the Sellers nor any other Persons acting on behalf of any of them has given or agreed to give, directly or indirectly, any gift or similar benefit to any governmental employee or other Person who is or may be in a position to help or hinder the Business (or assist the Company in connection with any actual or proposed transaction relating to the Business), which might subject the Company to any damage or penalty in any civil, criminal, or governmental litigation or proceeding or which, if not continued in the future, could reasonably be expected to have a Material Adverse Effect on the Company.

Section 4.21. Minute Books and Stock Record Books. The minute book of the Company contains complete and accurate records of all official meetings and other official corporate actions of its shareholders and Board of Directors, including committees of its Board of Directors. The stock record book of the Company contains a complete and accurate record of the current ownership of all outstanding shares of capital stock of the Company. All books and records of the Company are complete and correct and reflect in all material respects an accurate and complete record of the financial affairs, ownership, operation and control of the Company.

Section 4.22. Directors and Officers. Schedule 4.22 attached hereto identifies all of the directors and officers of the Company on the date hereof.

Section 4.23. Brokerage. Except as otherwise set forth on Schedule 4.23 and the fees payable by the Sellers to KeyBanc Capital Markets, no agent, broker, investment banker or other person or firm acting on behalf of any of the Sellers, the Company or the directors or officers of the Company, or under the authority of any of them, is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, from the Company and/or the Sellers in connection with any of the transactions contemplated hereby.

Section 4.24. Accounts Receivable; Inventory.

(a) All Accounts Receivable are presented on the Financial Statements net of reserves for doubtful accounts, bona fide claims against debtors for sales or other charges arising in the ordinary course of the Business, and, to the Knowledge of the Sellers, no

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debtor thereunder has asserted any defense thereto. Adequate reserves have been accrued and maintained in the Financial Statements to provide for all doubtful accounts of, valid counterclaims or setoff by, rebates, discounts and allowances to, and returns from, any customers of the Company, and such reserves were established in a manner consistent with the Company’s collection experience in prior periods. All Accounts Receivable are collectible in the ordinary course of business (without the necessity of legal proceedings) and are free and clear of all Liens. The Company has fully performed all obligations with respect to such Accounts Receivable that it was obligated to perform to the date hereof.

(b) All of the finished goods and supplies owned by the Company and relating to the Business and all rights of the Company to warranties received from its vendors with respect to the foregoing (to the extent assignable) and related claims, credits, and rights of recovery with respect thereto (the “Inventory”) reflected on the Financial Statements (i) consist of or shall consist of a quality and quantity saleable in the ordinary course of business with markups consistent with past practice, (ii) was acquired in the ordinary course of the Business, and (iii) is of good and merchantable quality. All Inventory is reflected on the Financial Statements in accordance with GAAP and net of appropriate obsolescence and shrinkage reserves, including reserves for damaged, excess and slow-moving inventory. Except as set forth on Schedule 4.24, the Company has good and marketable title to all Inventory, free and clear of any Liens. The Company is not under any liability or obligation with respect to the return of Inventory in the possession of customers in excess of established reserves. The Company holds no Inventory on consignment except as set forth on Schedule 4.24, or holds title to or ownership of any Inventory in the possession of others. Schedule 4.24 lists all physical locations other than the Company’s stores or warehouses where the Inventory is located.

Section 4.25. Insurance. Schedule 4.25 contains a true and correct list of all the policies of insurance (including bonding) covering the Business, properties and assets of the Company presently in force, including (i) risk insured against, (ii) name of carrier, (iii) policy number, (iv) amount of coverage, (v) amount of premium, (vi) expiration date, (vii) self-insured retentions, deductibles, dividend or retrospective rating plan details for all plans for which the Company has open obligations, and (viii) the property, if any, insured, indicating as to each whether it insures on an “occurrence” or a “claims made” basis. All of the insurance policies set forth on Schedule 4.25 are in full force and effect and all premiums, retention amounts and other related expenses due have been paid, and the Company has not received any notice of cancellations with respect to any of the policies. All such policies are reasonable and customary for the business operations, assets and properties of the Company and current and historical limits of liability of such policies have not been exhausted and are not impaired. None of the insurance coverage provided by any of such policies will terminate or lapse by reason of the transactions contemplated by this Agreement. To the Knowledge of the Sellers and the Knowledge of the Company, the carriers of all such insurance policies are financially solvent. Except as set forth on Schedule 4.25, (x) no such policy is assessable, (y) all such policies are placed with carriers rated A- or better per A.M. Best rating agency, and (z) no insurers have issued a reservation of rights letter in the defense of claims. The Company is not in default with respect to any insurance policies and has not failed to give notice or present any claim under such insurance policies in due and timely fashion and has not waived or released any material

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rights thereunder. The Company has not been refused any insurance by any insurance carrier to which it has applied for insurance during the last five (5) years.

Section 4.26. Vendors. Schedule 4.26 contains a list of all material suppliers, vendors or other provider of services of the Company. No vendor has terminated its relationship with the Company or, to the Knowledge of the Sellers and to the Knowledge of the Company, intends to, has threatened to, or is considering either terminating its relationship with the Company, materially reducing the level or volume of its business with the Company or changing its relationship or arrangement with respect to the Business, whether as a result of the transactions contemplated hereby or otherwise.

Section 4.27. Claims Against Third Parties. Schedule 4.27 contains a complete list and brief description of all of the material rights, claims and causes of action of the Company against third parties related to the conduct of the Business.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF

INVESTOR AND MERGER SUB

Each of Investor and Merger Sub represents and warrants to each of the Sellers and the Company as follows (with the understanding that the Sellers and the Company are relying on such representations and warranties in entering into and performing this Agreement) as of the date of this Agreement:

Section 5.01. Organization. Investor is a limited liability company, formed, organized, validly existing and in good standing under the Laws of the State of Delaware. Merger Sub is a corporation organized and validly existing under the Laws of the State of Indiana. Each of Investor and Merger Sub has all the requisite power and authority to own, lease and operate its properties and carry on its business as it is now being conducted.

Section 5.02. Authority; Consent. Each of Investor and Merger Sub has the full capacity, right, power and authority to enter into, execute and deliver this Agreement and any and all Related Agreements to which it is a party, to consummate the transactions contemplated by this Agreement and any and all Related Agreements to which it is a party, and to comply with and fulfill the terms and conditions of this Agreement and any and all Related Agreements to which it is a party. The execution and delivery of this Agreement and all Related Agreements to which it is a party by each of Investor and Merger Sub and the consummation by each of Investor and Merger Sub of the transactions contemplated hereby or thereby have been duly and validly authorized by all necessary action on the part of each of Investor and Merger Sub. This Agreement and each Related Agreement to which Investor or Merger Sub is a party constitutes a valid and binding obligation of Investor or Merger Sub, as applicable, enforceable against Investor or Merger Sub, as applicable, in accordance with its respective terms and conditions. No further action is necessary by Investor or Merger Sub to make this Agreement or any Related Agreements valid and binding upon Investor and Merger Sub and enforceable against Investor and Merger Sub in accordance with the terms hereof or thereof or to carry out the transactions contemplated hereby or thereby. Neither the execution and delivery of this Agreement or any Related Agreement to which it is a party, nor the consummation of the transactions contemplated

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hereby or thereby, nor compliance by Investor and Merger Sub with any of the provisions of this Agreement or any Related Agreement will:

(a) Conflict with, violate, result in a breach or violation of, constitute a default (or an event which, with or without notice or lapse of time or both, would constitute a default) under, or give rise to any right of termination, cancellation, or acceleration, or requires a consent or waiver, under any provision of Investor’s Certificate of Formation or Operating Agreement and Merger Sub’s Articles of Incorporation, or Bylaws or other organization and/or governing documents or under any of the terms, conditions or provisions of any note, Lien, bond, mortgage, indenture, license, lease, loan, contract, commitment, agreement, understanding, arrangement, restriction or other instrument or obligation to which either Investor or Merger Sub is a party or by which either Investor or Merger Sub or any of their respective properties or assets may be bound;

(b) Violate or conflict with any Law applicable to Investor or Merger Sub or any properties or assets of Investor or Merger Sub; or

(c) Constitute an event which, with or without notice, lapse of time, or action by a third party, could result in the creation of any Lien, upon any of the assets or properties of Investor or Merger Sub, or cause the maturity of any liability, obligation, or debt of Investor or Merger Sub to be accelerated or increased.

Section 5.03. Consents and Approvals. Except as set forth on Schedule 5.03, the execution and delivery by each of Investor and Merger Sub of this Agreement and any Related Agreements to which it is a party and the consummation by each of Investor and Merger Sub of the transactions contemplated hereby or thereby will not require any notice to, filing with, or consent, authorization, or approval from any Governmental Entity or any other Person. Except as set forth on Schedule 5.03, any and all notices, consents, authorizations and approvals set forth on Schedule 5.03 have been made and obtained.

Section 5.04. Litigation. Except as set forth on Schedule 5.04, there is no action, proceeding or investigation before any Governmental Entity pending or, to the Knowledge of Investor or Merger Sub, threatened against Investor or Merger Sub which seeks to enjoin or obtain damages in respect of the consummation of the transactions contemplated hereby.

Section 5.05. No Brokers’ or Finders’ Fees. Except as set forth on Schedule 5.05, no agent, broker, investment banker or other person or firm acting on behalf of Investor or Merger Sub or any of their respective directors or officers, or under the authority of any of them, is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee, directly or indirectly, from Investor or Merger Sub in connection with any of the transactions contemplated hereby.

Section 5.06. Sufficient Funds. Investor and its Affiliates have obtained the debt commitments set forth in the Wachovia Commitment Letter and Investor has obtained the equity commitment from FS Equity Partners V, L.P. set forth in the FS Commitment Letter, each for the financing of the transactions contemplated hereby subject to the terms and conditions set forth therein.

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ARTICLE VI

PRE-CLOSING COVENANTS OF THE PARTIES

Section 6.01. Negative Covenants. The Sellers covenant and agree with Investor and Merger Sub that, except as (i) specifically contemplated by this Agreement or (ii) set forth on Schedule 6.01 attached hereto, they shall not, and shall cause the Company and each of its subsidiaries not to, do any of the following with respect to the Business or the Company during the period beginning on the date hereof and ending on the Closing Date:

(a) Sell or otherwise dispose of, pledge or encumber any material assets, cancel any debts or claims in excess of fifty thousand dollars ($50,000), individually or in the aggregate, or pledge, assign or otherwise convey, or cause or allow any Lien to be placed upon, any asset of the Company;

(b) Incur any Debt except under credit arrangements in existence as of the date of this Agreement;

(c) Amend its Articles of Incorporation or Bylaws;

(d) Permit its corporate existence or any Permit to be suspended, lapsed, revoked or modified in any way that could reasonably be expected to create a material liability or obligation on the part of the Company;

(e) Amend or terminate any Contract except in accordance with its terms;

(f) Allow any insurance policy relating to the Business or the Company to be amended or terminated without replacing such policy with a policy providing substantially equivalent coverage, insuring comparable risks and issued by an insurance company financially comparable to the prior insurance company;

(g) Except for routine salary adjustments consistent with past practice, increase any compensation or benefits paid or payable to any employee, consultant or agent to the Company, modify its termination pay policies or enter into or amend any employment agreements with any employee of the Company or consulting or other agreements with any consultants or agents to the Company;

(h) Take any action that could affect the Company’s Subchapter S status;

(i) Enter into any new, or amend or extend the scope of any existing, contract for the outsourcing of services of the Company including, but not limited to, Extended Service Plan obligations;

(j) Change or alter the terms, or extend the scope, of its Extended Service Plans;

(k) Make any new, or change any existing, tax election or settle and/or compromise any tax liability, prepare any Returns in a manner which is inconsistent with

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the past practices of the Company with respect to the treatment of items on such Returns, incur any material liability for Taxes other than in the ordinary course of business or file an amended Return or a claim for refund of Taxes with respect to the income, operations or property of the Company;

(l) Make any declaration or payment of dividends by or on behalf of the Company, except regularly scheduled dividends to pay Taxes due and payable by the Sellers and attributable to the earnings of the Company;

(m) (i) Authorize, issue or commit to issue any shares of its capital stock of any class (whether or not from treasury stock) or other equity interests in the Company, except for the issuance of shares of Common Stock upon the exercise of, and in accordance with, outstanding option agreements; (ii) split up, combine or reclassify any of its capital stock or other equity interests in the Company; (iii) grant, commit to grant, issue or commit to issue any options, warrants or other rights to subscribe for or purchase any shares of its capital stock, other equity interests in the Company or any security directly or indirectly convertible into or exchangeable for, or which in any manner confers upon the holder thereof the right to acquire, any shares of any class of its capital stock or other equity securities; or (iv) purchase, redeem or otherwise acquire any shares of its capital stock of any class or any equity interests in the Company, or any interest in or right to acquire any such shares or other equity interests in the Company;

(n) Grant any additional stock appreciation rights or accelerate the vesting of any outstanding stock appreciation rights;

(o) Change from KPMG LLP, or remove, the certified public accountants for the Company, or otherwise make any change in its accounting principles or any method of accounting or auditing practice by which such principles are applied for financial accounting purposes (except as may be required by GAAP);

(p) Engage any “Big Four” accounting firm to provide any non-audit services set forth in Section 201 of Title II of the Sarbanes-Oxley Act of 2002;

(q) Acquire all or substantially all, or a portion of all, the assets, capital stock or other equity securities of any other Person, or any business division of any other Person or otherwise organize or acquire control or ownership of any other Person;

(r) Conduct its cash management or warranty customs and practices (including collection policies and payment terms applicable to any suppliers, distributors and customers) other than in the ordinary course of business consistent with past practice or make any material change in any advertising, marketing, new store promotion, pricing, purchasing, personnel or budget policies or practices;

(s) Engage in any transaction with any Affiliate, directly or indirectly, other than in the ordinary course of business consistent with the terms and conditions of existing Affiliate agreements disclosed to Investor prior to the date hereof; or

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(t) Take, undertake, incur, authorize, commit or agree to take any of the foregoing actions.

Section 6.02. Affirmative Covenants. The Sellers covenant and agree that, during the period beginning on the date hereof and ending on the Closing Date, they shall (or shall cause the Company and each of its subsidiaries to) use all reasonable efforts, in the ordinary course of the Business, to:

(a) Operate the Business in the normal course;

(b) Comply in all material respects with all applicable Laws affecting the Company or its assets;

(c) Pay all trade accounts payable by the Company substantially in accordance with its past practice;

(d) Preserve its relationships with vendors to the Company and others having business relations with the Company in accordance with past practice;

(e) Continue to spend amounts consistent with past practice to open new stores in subsequent years, continue to make expenditures to identify and develop new store locations and otherwise maintain the growth of the Company in a manner consistent with the growth plans described in the Confidential Memorandum;

(f) Keep available in all material respects the services of its present key officers, directors, employees, agents, consultants and other similar representatives;

(g) Maintain the Company’s books and records and accounts in its usual, regular and ordinary manner and post all entries therein promptly in compliance with accepted practice and all applicable Laws;

(h) Pay and discharge when due all Taxes, assessments and governmental charges imposed upon it or any of its properties, or upon the income or profit therefrom;

(i) Make the capital expenditures provided for in its capital expenditure budget;

(j) Sell Extended Service Plans in conformity with past practice on terms consistent with Extended Service Plans sold in the past;

(k) Terminate prior to the Closing any non-audit services set forth in Section 201 of Title II of the Sarbanes-Oxley Act of 2002 that are being provided by any “Big Four” accounting firm;

(l) Use commercially reasonable efforts to obtain a nondisturbance agreement in form and substance reasonably satisfactory to Investor for each of the Leases other than Leases under which a Seller or an Affiliate (other than a sibling) of a Seller is the lessor;

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(m) Diligently collect all Accounts Receivable in accordance with its past practice; and

(n) Assist Investor in the acquisition of financing for the transactions contemplated by this Agreement, including without limitation (a) the preparation and distribution to the lead arranger and potential investors of copies of an offering memorandum for the offer and sale of the senior notes contemplated under the Wachovia Commitment Letter pursuant to Rule 144A under the Securities Act of 1933, as amended, which offering memorandum shall contain such disclosures as may be required by applicable laws or as are customary and appropriate for such document (including all audited, pro forma and other financial statements and schedules of the Company of the type that would be required in a registered public offering of such senior notes on Form S-1 under the Securities Act of 1933, as amended) and (b) active participation by the management of the Company in due diligence, rating agency presentations and a road show and other meetings with potential investors for such senior notes.

Section 6.03. Approvals, Consents, Etc. Each party shall use its reasonable efforts to consummate the transactions contemplated hereby and to obtain in writing prior to the Closing Date all Closing Approvals necessary in order to effectuate the transactions contemplated hereby and shall deliver to the other party copies of such approvals and consents in form and substance reasonably satisfactory to the other party.

Section 6.04. Consent Process. The Sellers shall use their commercially reasonable efforts (including providing Consent Concessions if necessary) to obtain and deliver to Investor a Consent for each Consent Lease prior to the Closing. Investor shall reasonably cooperate with the Sellers to obtain such Consents. The Sellers and Investor shall jointly control the process of obtaining Consents for the Consent Leases. All communications with a Consenting Landlord and Lender, including the form of Consent, shall be subject to the approval of both the Sellers and Investor. The Sellers shall not withhold their consent to the inclusion of lien waivers in connection with warehouse leases and a lease estoppel in such initial communication, however, the refusal of a Consenting Landlord to agree to such request shall not constitute grounds for rejection of such Consent. In obtaining a Consent, neither the Sellers nor the Company may agree to a modification of a Consent Lease without the prior written consent of Investor. The Sellers shall keep Investor apprised of the status of obtaining Consents and shall promptly deliver copies of all Consents obtained to Investor. The Sellers shall pay all Review Fees and Net Profit Payments in connection with any Lease.

Section 6.05. Consent Concessions. The Sellers and Investor agree that, if necessary to obtain a Consent, the parties may provide Consent Concessions to a Consenting Landlord and/or Lender, provided that the amount and terms of such Consent Concessions shall be subject to the approval of both the Sellers’ Representative and Investor. If any such Consent Concessions are provided, then Sellers shall pay for all Consent Concessions, subject to the Concession and Remediation Limit. Consent Concessions incurred through lease amendments shall be deemed paid by Investor, and therefore subject to reimbursement by Sellers at Closing. If any Consent Concession deemed paid by Investor is not required to be paid by Investor as of the Closing, then for purposes of valuing such Consent Concession, the parties shall present value such Consent Concession using a discount rate of ten percent (10%). No later than three (3) business days prior to the Closing Date, the Sellers shall prepare and deliver to Investor a

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statement setting forth in reasonable detail the calculation of any Consent Concessions. If Investor disagrees with said statement, Investor and Sellers’ Representative shall work in good faith to resolve such dispute, which dispute shall be resolved prior to the Closing.

Section 6.06. Access Prior to Closing. Prior to the Closing Date, the Sellers and the Company shall provide Investor and its representatives with reasonable access (at reasonable times, on reasonable prior notice and in a manner so as not to interfere with the normal business operations of the Company or the Business) to, and will make available for inspection (including, without limitation, environmental inspections) and review, all properties, books, records, accounts and designated management personnel of the Company in order that Investor may have a reasonable opportunity to make such investigation as it shall reasonably desire to make of the Business and the Company.

Section 6.07. Notification. Between the date of this Agreement and the Closing, the Sellers’ Representative and the Company shall promptly notify Investor in writing if it becomes aware of (i) any fact or condition that causes or constitutes a breach of any of their respective representations and warranties made as of the date of this Agreement or (ii) the occurrence after the date of this Agreement of any fact or condition that could reasonably be expected to cause or constitute a breach of any such representation or warranty had that representation or warranty been made as of the time of the occurrence of, or the Sellers’ discovery of, such fact or condition. Should any such fact or condition require any change to the disclosure schedules attached hereto, the Sellers’ Representative shall promptly deliver to Investor a supplement to the relevant disclosure schedule(s) specifying such changes; provided, however, that any such notification made by the Sellers’ Representative shall be subject to the termination provisions of Section 9.01 herein.

Section 6.08. Exclusivity. Each of the Sellers agree that unless and until this Agreement is terminated pursuant to Section 9.01, neither the Sellers, the Company, nor their representatives, employees or Affiliates, including, without limitation, their accounting and legal advisors, shall directly or indirectly institute, pursue or enter into any discussions, negotiations or agreements of any kind with any Person concerning any merger, acquisition, purchase or sale of a material portion of the assets of the Company or of any of the capital stock of the Company, or other business combination or change in control of the Company (“Sale Transaction”). In the event that any Seller or the Company receives a written offer for a Sale Transaction, the Sellers or the Company shall immediately notify Investor of such an offer and shall refrain from negotiating with the offeror or otherwise pursuing said offer in any manner and shall send notice to the offeror, with a copy of said notice to Investor, to that effect.

Section 6.09. Environmental Testing.

(a) Prior to the Closing, Investor shall have the right, but not the obligation, to elect to conduct, at its expense (subject to the reimbursement provisions of Section 12.02), reasonable environmental testing of the Real Property. If Investor elects to have any Real Property so tested, Sellers shall, and shall cause the Company to, provide access to such Real Property and such personnel as may be reasonably requested by Investor or its appointed environmental engineering firm as may be deemed necessary by Investor or such firm in the furtherance of such testing. Investor will promptly share any formal written reports (e.g., Phase I Environmental Assessment Reports) of any such testing with Sellers’ Representative and the Company. If as a result of such environmental testing,

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Investor’s environmental engineering firm recommends any further Remedial Work, then the Company shall promptly undertake any and all such Remedial Work at Sellers’ sole cost and expense, subject to the Concession and Remediation Limit.

(b) The Sellers shall indemnify, defend and hold harmless the Investor’s Indemnitees from any and all Losses resulting from or attributable to: (i) the presence of the environmental conditions giving rise to the Remedial Work, (ii) the Remedial Work, and (iii) the Remediation Costs. Notwithstanding anything to the contrary contained in this Agreement, in the event that any matter giving rise to indemnification pursuant to this Section 6.09 is also subject to indemnification pursuant to the terms of Section 10.02, then the indemnification set forth in this Section 6.09 shall prevail and the Investor’s Indemnitees shall be entitled to the indemnification set forth in this Section 6.09 without regard to any limitations set forth in Article X. Notwithstanding anything to the contrary contained in this Agreement, the provisions of this Section 6.09 shall survive the Closing.

Section 6.10. Required Filings.

(a) If required, the Sellers and Investor shall cause to be filed with the United States Department of Justice (the “DOJ”) and the Federal Trade Commission (the “FTC”) the notification form required pursuant to the HSR Act with respect to the transactions contemplated hereby, together with a request for early termination of the waiting period specified under the HSR Act. The parties agree with respect to such filing that they shall (i) after any request by the DOJ or the FTC, promptly file any information or documents requested by the DOJ or the FTC, and (ii) notify each other of any communications with the DOJ or the FTC which relate to the transactions contemplated hereby. The HSR Act filing fee shall be borne equally by the Investor and the Company.

(b) The Sellers and Investor agree to (i) promptly file, or cause to be promptly filed, with all appropriate authorities all notices, registrations, declarations, applications and other documents as may be necessary to consummate the transactions contemplated hereby and (ii) thereafter diligently pursue all consents, approvals and authorizations from such authorities as may be necessary to consummate the transactions contemplated hereby.

Section 6.11. Voting Agreement. Each Seller hereby approves this Agreement and the Merger and covenants and agrees that, prior to the Closing, at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of the stockholders of the Company, however called, unless otherwise directed in writing by Investor, each Seller will appear at the meeting or otherwise cause such Seller’s Shares to be counted as present thereat for purposes of establishing a quorum and vote or cause to be voted the Shares:

(a) in favor of the approval of this Agreement;

(b) in favor of any matter that could reasonably be expected to facilitate the Merger;

(c) to the extent a vote is solicited in connection with the approval of any action, agreement or proposal that would result in a breach of any representation,

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warranty, covenant or obligation of the Company in this Agreement or that would delay or hinder the consummation of the Merger or that would preclude fulfillment of a condition precedent under this Agreement to the Company’s obligation to consummate the Merger, against the approval of such action, agreement or proposal; and

(d) against approval of any action, agreement or proposal made in opposition to, in competition with or otherwise inconsistent with, the consummation of the Merger, including, without limitation, any Sale Transaction.

Section 6.12. Delivery of New 2004 Audited Financial Statements and Revised 2002 and 2003 Audited Financial Statements. The Company shall use commercially reasonable efforts to deliver to the Investor, as promptly as is reasonably practicable, and in any event on or before October 28, 2004, balance sheets of the Company as of March 31, 2004 and the related income statements and statements of cash flows for the fiscal year ended March 31, 2004, each audited by KPMG LLP, which comply in all material respects with Regulation S-X of the Securities Act of 1933, as amended, and include an unqualified audit opinion of KPMG LLP (the “New 2004 Audited Financial Statements”); provided that Investor or its representatives shall have the right to examine the audit workpapers and discuss the New 2004 Audited Financial Statements with KPMG LLP prior to the issuance of such audit opinion thereon. In connection with such audit, the Company shall cause KPMG LLP to examine the Company’s Annual Financial Statements as of March 31, 2003 and 2002 and for the years then ended and make recommendations regarding changes to the footnotes therein that are necessary to conform the presentation of such footnotes to the requirements of Regulation S-X of the Securities Act of 1933, as amended. Upon receiving such recommendations, the Company shall promptly revise such footnotes in accordance with such recommendations, use its commercially reasonable efforts to obtain the consent of Ernst & Young LLP to such revisions, and deliver its Annual Financial Statements as of March 31, 2003 and 2002 and for the fiscal years then ended, as revised, to Investor. At the time the Company delivers the New 2004 Audited Financial Statements and the revised Annual Financial Statements as of March 31, 2003 and 2002 and for the fiscal years then ended, the Sellers and the Company shall update Section 4.05 and Schedule 4.05(a) confirming that (a) the New 2004 Audited Financial Statements (i) have been prepared from the books and records of the Company in accordance with GAAP consistently applied, (ii) fairly present the financial condition and results of operation of the Company, and (iii) comply with Regulation S-X of the Securities Act of 1933, as amended; and (b) the revised Annual Financial Statements as of March 31, 2003 and 2002 and for the fiscal years then ended comply with Regulation S-X of the Securities Act of 1933, as amended.

Section 6.13. Payoff of Note Receivable. The Company’s note receivable from Dennis L. May shall be paid in full prior to or concurrent with the Closing.

Section 6.14. Exercise of Options. All outstanding vested options to purchase securities of the Company shall be exercised in full prior to the Closing. Any such options that are not so exercised and all unvested options shall be terminated concurrently with the Closing.

Section 6.15. Execution of Credit Documents. Prior to or concurrent with the Closing, the Company shall enter into all credit agreements, indentures, purchase agreements and related agreements and documents (i) necessary to effect the borrowings provided for under the

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Wachovia Commitment Letter on terms consistent with the Wachovia Commitment Letter or (ii) that are approved by Investor.

Section 6.16. Payment of Sellers’ Expenses. All expenses incurred by, or to be borne by, Sellers in connection with the transactions contemplated by this Agreement that remain unpaid as of the Closing Date, including all amounts owed to KeyBanc Capital Markets or its Affiliates, shall be paid by the Company concurrently with the Closing or as such payments come due (such payments are collectively referred to herein as the “Sellers’ Expense Payments”; provided, however, that the value of all Consent Concessions payments shall be determined in accordance with Section 6.05 for purposes of such defined term). Sellers’ Representative shall make necessary and appropriate arrangements with Investor and the Company in advance of the Closing to allow the Company to make the Sellers’ Expense Payments.

Section 6.17. Delivery of Monthly Financial Statements. The Company shall deliver to Investor the internally prepared monthly balance sheets and income statements of the Company for each full calendar month of the Company’s 2005 fiscal year subsequent to August 2004 that transpires prior to the Closing (the “Monthly Financial Statements”) promptly after they have been prepared and, in any event, within thirty (30) days after the end of such calendar month.

Section 6.18. Amendment of 401(k) Plan. The Company shall amend its Employees Retirement Plan (Plan No. 001) in a manner reasonably satisfactory to both the Company and the Investor to (i) restate such plan as a non-standardized or individually designed plan and (ii) update such plan as may be required by law, each prior to the Closing.

Section 6.19. Continuation of SERP. The Company shall take all steps required under its Supplemental Executive Retirement Plan to provide that such plan shall be continued by the Surviving Corporation and that Investor shall not assume, or otherwise be directly responsible for, any liabilities of such plan.

Section 6.20. Intercreditor Agreements and Amendments. Prior to the Closing, the Company shall use commercially reasonable efforts to (i) cause GE Commercial Distribution Finance Corporation to enter into (A) an intercreditor and subordination agreement regarding amounts payable, and security interests granted, under the GE Wholesale Financing Agreement and (B) an amendment to the GE Wholesale Financing Agreement, (ii) cause Electrolux Home Products, Inc. to enter into an intercreditor and subordination agreement regarding amounts payable, and security interests granted, under the Consignment Agreement dated September 24, 2003, and (iii) cause GE Capital Consumer Card Co. to enter into an amendment to the Private Label Consumer Credit Card Program Agreement dated August 26, 2004, each such amendment and intercreditor and subordination agreement to be in form and substance reasonably satisfactory to Investor, Wachovia Bank, N.A. and Congress Financial Corporation (Central); provided, however, that the amendment described in clause (i)(B) shall not be a condition to Closing.

Section 6.21. Stock Option Plan. Prior to the Closing, Investor and the Company shall cooperate to establish a Stock Option Plan (the “Plan”) under which a number of shares of Common Stock equal to ten percent (10%) of the number of outstanding shares of Common Stock as of the Closing (the “Initial Share Number”) will be reserved for the following contemplated future grants: (i) options representing five percent (5.0%) of the Initial Share Number will be granted at an exercise price equal to the fair market value of the Company’s

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Common Stock as of the Closing, (ii) options representing two and one-half percent (2.5%) of the Initial Share Number will be granted at an exercise price equal to one hundred fifty percent (150%) of the fair market value of the Company’s Common Stock as of the Closing Date, and (iii) options representing two and one-half percent (2.5%) of the Initial Share Number will be granted at an exercise price equal to two hundred percent (200%) of the fair market value of the Company’s Common Stock as of the Closing Date. The shares of Common Stock subject to options granted under the Plan will become exercisable in three equal annual installments with the first installment exercisable one year from the date of grant and have a term of seven years from the date of grant. The terms and conditions of the Plan and the options to be granted thereunder will be determined by Investor.

ARTICLE VII

POST-CLOSING COVENANTS

Section 7.01. Retention of Records. The Company shall retain possession of all files and records which relate to the Business before the Closing Date, for a period not to exceed seven (7) years from the Closing Date. In addition, from and after the Closing Date, upon reasonable notice and during normal business hours, Investor shall provide access to the Sellers and their attorneys, accountants and other representatives, at the respective Sellers’ expense, to such files and records as such Sellers may reasonably deem necessary to properly prepare for, file, prove, answer, prosecute, and/or defend any Tax Return, filing, audit, protest, claim, suit, inquiry, or other proceeding in connection with the Business relating to periods preceding the Closing.

Section 7.02. Non-Competition.

(a) Restricted Activity. For purposes of this Agreement, the term “Restricted Activity” shall mean the Business or activities relating to the Business.

(b) Restricted Area. For purposes of this Agreement, the term “Restricted Area” shall mean the contiguous United States of America; provided, however, that with respect to Dennis L. May only, the term Restricted Area shall mean each State in which the Company has opened, or has existing plans to open, stores and all States contiguous with such States; provided, further, that, it being the desire and intent of the parties to this Agreement that the provisions of this Section 7.02 be enforced to the fullest extent permissible under the Laws and public policies applied in each jurisdiction in which enforcement is sought, if the Restricted Area as herein defined shall be adjudicated to be invalid or unenforceable as so defined, such definition shall be deemed amended to reflect the largest geographic area which would be valid and enforceable under the laws of such jurisdiction; and provided, further, that such amendment shall apply only with respect to the operation of such definition in the particular jurisdiction in which such adjudication is made.

(c) Noncompetition Period. For purposes of this Agreement, the term “Noncompetition Period” shall mean the period commencing on the Closing Date and extending to and including the five (5) year anniversary of the Closing Date; provided, however, that with respect to Dennis L. May only, the term Noncompetition Period shall

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mean the period commencing on the Closing Date and extending to and including the two (2) year anniversary of the Closing Date. In the event of a breach of this Agreement by a Seller, the Noncompetition Period shall be automatically extended for such Seller by the period of the breach.

(d) Agreement Not to Compete. Each Seller agrees that, during the Noncompetition Period, he or she shall not, directly or indirectly, whether as principal, agent, officer, director, employee, investor, consultant, stockholder, lender, partner, member, owner, sponsor, or otherwise, alone or in association with any other Person:

(i) carry on, manage, operate, finance, sponsor or become engaged or concerned in, or otherwise take part in, a Restricted Activity in the Restricted Area; or

(ii) be employed by or render services to, or own, share in the earnings of, or invest in the stock, bonds or other securities of, or lend money or extend credit to, or otherwise directly or indirectly assist, any Person engaged in a Restricted Activity in the Restricted Area.

(e) Exceptions. Notwithstanding any other provision of this Agreement, this Section 7.02 shall not be deemed to prohibit investing as a passive investor in any publicly-held entity engaged wholly or in part in a Restricted Activity as long as such investments in such entity do not, in the aggregate, exceed three (3) percent of such entity’s total ownership.

(f) Nonsolicitation. Each Seller agrees that, during the Noncompetition Period, he or she shall not, directly or indirectly, solicit, induce, recruit, or encourage to leave the employment of the Company for any reason or to perform work for a competitor of the Company as an employee, independent contractor, or otherwise (such conduct is collectively referred to herein as “Solicitation”) any person who is then employed by the Company or who left the employ of the Company less than six months prior to the Solicitation. Nothing in this subparagraph (f) shall prevent any Seller from hiring any such person (i) who contacts such Seller on his or her own initiative without any direct or indirect solicitation by or encouragement from such Seller, (ii) as a result of placing general advertisements in trade journals, newspapers or similar publications which are not directed at the Company or its employees, or (iii) as a result of the efforts of executive recruiters who contact such person on their own initiative without any encouragement from or on behalf of such Seller relating to the Company or its employees.

(g) Reformation.

(i) The necessity of protection against competition from the Sellers and the nature and scope of such protection has been carefully considered by the parties to this Agreement based upon the consultation with and advice from their respective legal counsel. The parties agree and acknowledge: (A) that the duration, scope and geographic areas applicable to the covenants contained in

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this Agreement are fair, reasonable and necessary, and do not impose a greater restraint than is necessary to protect the goodwill or other business interest of the Company’s and Investor’s investment therein and its business goodwill, (B) that adequate compensation has been received by the Sellers for such obligations, (C) that these obligations do not prevent the Sellers from earning a livelihood and/or conducting business.

(ii) If any provision of this Section 7.02 is held to be illegal, invalid or unenforceable under present or future Laws effective during the period set forth in Section 7.02, the legality, validity and, enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired.

(h) Relief. Each Seller recognizes that any actual or threatened breach of this Section 7.02 shall cause irreparable injury to the Company, inadequately compensable in monetary damages. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company, each Seller agrees that the Company shall be able to seek and obtain injunctive relief in the form of a temporary restraining order, preliminary injunction, or permanent injunction The Company shall not be required to demonstrate actual injury or damage to obtain injunctive relief from the courts. In addition, in any action at law or in equity arising out of this Section 7.02, the prevailing party shall be entitled to recover, in addition to any damages caused by a breach of this Section 7.02, all costs and expenses, including but not limited to, reasonable attorneys’ fees, expenses, and court costs incurred by such party in connection with such action or proceeding.

Section 7.03. Tax Deposits. Notwithstanding anything to the contrary contained herein, Investor is not purchasing in connection with the transaction contemplated by this Agreement, and the Sellers are not selling in connection with the transaction contemplated by this Agreement, any and all Tax deposits and claims for refund of Taxes and other governmental charges of whatever nature which are refundable to the Sellers, including without limitation those set forth on Schedule 7.03 (collectively, “Tax Deposits and Refunds”), and Investor, the Sellers and the Company hereby acknowledge and agree that all Tax Deposits and Refunds shall at all times be and remain the property of the Sellers. Investor shall provide (or cause the Company to provide) the Sellers with reasonable assistance as needed in obtaining any and all Tax Deposits and Refunds. In the event that the Tax Deposit and Refunds are paid by any Governmental Entity to the Company, Investor shall cause the Company to deliver such Tax Deposits and Refunds to the Sellers as promptly as reasonably practicable.

Section 7.04. Survival of Covenants. Notwithstanding the Closing of the transactions contemplated under this Agreement, the covenants contained in this Article VII and in Article VIII shall survive the Closing and shall remain enforceable thereafter against the Company, Investor and the Sellers in accordance with their terms.

Section 7.05. Release. For and in consideration of the amounts payable to the Sellers under this Agreement, effective as of the Closing Date, the Sellers and their Affiliates (other than the Company) hereby release, acquit and forever discharge the Company and its subsidiaries, their respective present and former officers, directors, attorneys, agents, representatives, trustees, employees and other representatives and Affiliates, and each of their respective heirs, executors, administrators, successors and assigns, of and from any and all manner of action or actions,

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cause or causes of action, demands, rights, damages, debts, dues, sums of money, accounts, reckonings, costs, expenses, responsibilities, covenants, contracts, controversies, agreements and claims whatsoever, whether known or unknown, of every name and nature, both in law and in equity, which the Sellers or their successors or assigns ever had, now have, or hereafter may or shall have against the Company or any other Person referred to above arising out of any matters, causes, conditions, acts, conduct, claims, circumstances or events existing at or prior to the Closing, including with respect to the transactions contemplated by this Agreement and the Related Agreements, matters, causes, conditions, acts, conduct, claims, circumstances or events occurring or failing to occur at or prior to the Closing or existing at or prior to the Closing, except with respect to the matters set forth on Schedule 7.05. This release shall not apply to or otherwise limit, restrict or affect the indemnification and other obligations of Investor to the Sellers set forth in this Agreement.

ARTICLE VIII

TAX MATTERS

Section 8.01. Preparation of Tax Returns; Payment of Taxes.

(a) The Sellers, at their own expense, will be responsible for preparing and filing with the appropriate Taxing Authorities all Returns with respect to the Company for any taxable period ending on or prior to the Closing Date, including, without limitation, the income tax returns of the Company and the Sellers for the period from January 1, 2004 through the Closing Date and for paying all Taxes shown as due on such Returns. The Investor, including the Company, following the Closing Date, will cooperate with the Sellers to make available all necessary records and timely take all action necessary to allow the Sellers to file, or prepare to file, as the case may be, any such Returns, including, without limitation, by providing or causing to be provided to the Sellers any powers of attorney that the Sellers reasonably request for purposes of filing any Returns. The Sellers will prepare such Returns in accordance with the Company’s past practices. The Sellers will deliver to Investor, within one hundred eighty (180) days after the Closing Date, a copy of any such Returns for the period from January 1, 2004 through the Closing Date.

(b) Investor, including the Company following the Closing Date, will be responsible for preparing and filing with the appropriate Taxing Authority all Returns that relate to the Taxes of the Company other than those described in Section 8.01(a), above, and for paying all Taxes shown as due by the Company on such Return; provided, however, that Sellers shall be liable for and shall pay to the Company at least five (5) days prior to filing such Returns all Taxes shown on such Returns relating to the pre-Closing portion of any Tax period that includes but ends after the Closing Date (each, a “Straddle Period”) but only to the extent such Taxes exceed the amount accrued as a Current Liability on the Final Working Capital Statement (it being understood that no amounts are accrued therein for federal income Taxes or with respect to Tax Deposits and Refunds); and provided, further, that for purposes of applying this Section 8.01(b), Sellers and Investor shall allocate liability in respect of any Taxes of the Company or any subsidiary of the Company attributable to any Straddle Period as follows: (i) for any

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income Taxes or any transactional Taxes, including Taxes based on sales or revenue, the allocation of Taxes to pre- and post-Closing portions of a Straddle Period shall be determined using a closing-of-the-books method assuming that the applicable Straddle Period consists of two taxable periods, one ending at the close of the Closing Date and one beginning at the opening of the day after the Closing Date and; (ii) for any Taxes based on net worth, capital, intangibles, or similar items, and for any real estate Taxes or other property or tangible asset-based Taxes, the allocation of Taxes to pre- and post-Closing portions of a Straddle Period shall be determined on a per-diem basis taking into account the number of days in the Straddle Period through and including the Closing Date and the number of days in the entire Straddle Period. The Sellers will cooperate with Investor and make available any necessary records and timely take any action reasonably necessary to allow Investor (including the Company following the Closing Date) to file, or prepare and file, as the case may be, any Returns of the Company as contemplated in this Section 8.01(b).

(c) The Sellers will not file or cause to be filed any amended Return which materially and adversely affect the Tax liability of the Company, or can be reasonably expected to materially and adversely affect the future Tax liability of the Company, without prior written consent of Investor. Investor will not file or allow or cause to be filed any amended Return for the Company covering any period or adjusting any Taxes for a period which includes any period ending on or prior to the Closing Date, without the prior written consent of the Sellers.

Section 8.02. Section 338(h)(10) Election.

(a) The Sellers and Investor shall jointly make a timely election pursuant to Section 338(h)(10) of the Code and Section 1.338(h)(10)-1 of the United States Treasury Regulations and any comparable election under applicable state or local Law (collectively, the “Section 338(h)(10) Election”) with respect to the purchase by Investor of the Merger Shares. In addition, the Sellers, Investor and the Company shall, as promptly as practicable following the Closing Date, cooperate with each other to take all actions necessary and appropriate (including filing Form 8883, Asset Allocation Statement Under Section 338, and such additional forms, returns, elections, schedules and other documents as may be required by applicable state or local Law) to effect and preserve a timely Section 338(h)(10) Election in accordance with any comparable provisions of applicable Law, and the parties responsible for filing any such Section 338(h)(10) Election under applicable Law shall promptly file or cause to be filed such Section 338(h)(10) Election with the appropriate Taxing Authority and provide written evidence of such filing to the other parties. The Sellers and Investor shall report the purchase by Investor of the Merger Shares consistent with the Section 338(h)(10) Election and the allocation as set forth on Schedule 2.04(a) and no party shall take (and prior to the Closing the Sellers shall not permit the Company to take, and after the Closing the Company shall not take) any position contrary thereto in any Tax Return, any proceeding before any Taxing Authority or otherwise. In the event that any Section 338(h)(10) Election is disputed by any Taxing Authority, the party receiving notice of such dispute shall promptly notify and consult with the other party concerning such dispute.

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(b) If it is determined by a finding or order in connection with any governmental or judicial audit or proceeding, including any settlement of such a proceeding to which any of the parties hereto are parties (but only if the requirements of Section 8.04 have been satisfied, unless the failure to satisfy such requirements is not materially prejudicial to Sellers), that the Company’s S election was not validly in effect for any period after such election was purportedly made (including the period ending on the Closing Date, but excluding any periods commencing with the Closing), then Sellers shall be obligated, jointly and severally, to indemnify and hold harmless the Company (pro-rata in accordance with their respective Ownership Percentages) with respect to (i) any and all Taxes imposed on the Company due to such invalid election or pre-Closing termination of the Company’s S Corporation status and (ii)(a) any and all Taxes imposed on the Company due to an invalid 338(h)(10) Election caused by the invalid election or the pre-Closing termination of the Company’s S status resulting in the disallowance of any and all Tax benefits, including, but not limited to, the disallowance of deductions and losses that otherwise could have been available pursuant to a valid 338(h)(10) Election and (b) the net present value of any and all future Tax benefits, including, but not limited to, deductions and losses that were disallowed that the Company could reasonably have expected to realize in subsequent periods as the result of a valid 338(h)(10) Election (with such expectation to be measured based on circumstances as of the Closing Date), using a discount rate of 15% per annum from the date upon which such Tax benefits were disallowed through the date the Company could reasonably have expected to realize such Tax benefits (with such expectation to be measured based on circumstances as of the Closing Date). Such payment shall be made in accordance with Section 8.05. Notwithstanding anything to the contrary contained in this Agreement or in the Escrow Agreement, the provisions of this Section shall survive the termination of the Escrow Agreement, shall remain in effect as personal obligations of Sellers on a joint and several basis until the applicable statutes of limitations shall have expired and shall not be subject to the limitations set forth in Section 10.06; provided, however, that Sellers shall not be required to indemnify the Company and/or the Investor under both Article X and this Section 8.02(b) for the same Losses or claim. The Sellers’ obligation to indemnify the Company shall not apply to issues regarding allocation of purchase price, depreciable life of acquired assets or other matters that relate to the Tax benefits realized from the 338(h)(10) Election, but which are not caused specifically by the disallowance of the 338(h)(10) Election by reason of the Company’s failure to qualify as an S Corporation or by Sellers’ breach of this Agreement.

Section 8.03. Tax Allocation. The parties hereby agree and acknowledge that the servicing costs portion of deferred revenue on Extended Service Plans is a contingent liability which is neither fixed nor determinable and (i) shall not be included in calculating either the Purchase Price in the year in which the Closing occurs, the “aggregate deemed sale price” or “adjusted grossed-up basis” and (ii) shall not be reported on the initial Form 8883. The satisfaction of the servicing costs portion of deferred revenue on Extended Service Plans, in whole or in part, subsequent to the Closing by the Company shall be considered additional Purchase Price for purposes of determining the necessary adjustments to such “aggregate deemed sale price” and “adjusted grossed-up basis” and allocated among the Company’s assets pursuant to and accordance with Section 2.04 and Schedule 2.04(a). Each tax year, the Company shall forward to the Sellers any information necessary for the Sellers to calculate the adjusted

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“aggregate deemed sale price.” The Sellers, the Company and Investor shall take no position inconsistent with the foregoing on any Return.

Section 8.04. Defense of Tax Claims.

(a) If a notice of deficiency, proposed adjustment, adjustment, assessment, audit, examination, administrative or court proceeding, suit, dispute or other claim is delivered, sent, commenced or initiated to or against the Company by any Taxing Authority with respect to Taxes (including, but not limited to, Taxes and amounts relating to the loss of Tax benefits described in Section 8.02) for which Sellers are obligated, jointly and severally, to indemnify the Investor’s Indemnitees (a “Tax Claim”), the Company shall promptly notify Sellers’ Representative and Investor in writing of the Tax Claim, unless Sellers’ Representative or any Seller has knowledge of such Tax Claim, in which event the Company shall be under no obligation to notify Sellers’ Representative of such Tax Claim.

(b) Except as otherwise provided in this Section 8.03, Investor shall be solely responsible for controlling the defense of such Tax Claim.

(c) If such Tax Claim relates to a pre-Closing Tax period or to the election or termination of the Company’s S Corporation status during a pre-Closing Tax period, Sellers’ Representative shall control, defend, settle, compromise, or contest such Tax Claim; provided, however, that, notwithstanding anything to the contrary set forth herein, (i) Sellers’ Representative shall keep Investor and the Company fully informed of any proceedings, events and developments related to or in connection with such Tax Claim; (ii) Investor and the Company shall be entitled to receive copies of all correspondence and documents related to such Tax Claim; (iii) Sellers’ Representative shall consult with Investor and shall not enter into any settlement with respect to any such Tax Claim without Investor’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned; and (iv) Investor and/or the Company shall have the right to participate in the defense of such Tax Claim, each at its own cost and expense. Notwithstanding the foregoing, in the event Sellers’ Representative wishes to settle a Tax Claim and the Company and/or Investor withholds its consent, Investor or the Company shall take over control of the Tax Claim at its own cost and expense and, to the extent that the amount of the Tax Claim ultimately is determined to be greater than the amount for which Sellers’ Representative was willing to settle, Investor or the Company, as the case may be, shall bear such excess cost, including interest and/or penalties accruing on or after the date Investor and/or the Company advised the Sellers’ Representative that it was withholding consent to the settlement. Except as provided in the preceding sentence, the costs and expenses (including the cost of counsel) incurred by Sellers’ Representative in contesting any such Tax Claim shall be born by Sellers. Investor’s Indemnitees shall cooperate with Sellers’ Representative in connection with any such Tax Claim.

Section 8.05. Payment. Sellers’ payment to the Company for the Losses described in Section 8.02(b), above, shall be due and payable on or before the fifteenth (15th) day following the final determination of the Internal Revenue Service that the Company did not qualify as an S Corporation for the period in question or that the 338(h)(10) Election is disallowed because the Company was not an S corporation, provided that if Seller’s

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Representative determines to appeal such determination to the United States Tax Court, then such payment shall not be due and payable until such determination has been made by the Tax Court. Sellers shall diligently prosecute any such appeal before the Tax Court. If the Internal Revenue Service’s determination is reversed by the United States District Court, all amounts paid by the Sellers to the Company shall be refunded within fifteen (15) days following the announcement of such decision.

ARTICLE IX

TERMINATION

Section 9.01. Termination of Agreement. Anything herein to the contrary notwithstanding, this Agreement may be terminated at any time before the Closing Date as follows and in no other manner, provided that the terminating party is not in material breach of its representations, warranties, agreements or covenants set forth herein:

(a) By mutual consent in writing of Investor and the Sellers’ Representative, acting on behalf of the Sellers.

(b) By the Sellers if there has been a material misrepresentation or a material default or material breach by Investor with respect to Investor’s representations and warranties in Article V of this Agreement or the due and timely performance of any of the covenants or agreements of Investor contained in this Agreement, and in the case of a covenant or agreement default or breach, such default or breach shall not have been cured within fifteen (15) Business Days after receipt by Investor of written notice specifying particularly such default or breach.

(c) By Investor if there has been a material misrepresentation or a material default or material breach by the Sellers with respect to the Sellers’ representations and warranties in Article IV of this Agreement or the due and timely performance of any of the covenants and agreements of the Sellers and/or the Company contained in this Agreement, and in the case of a covenant or agreement default or breach, such default or breach shall not have been cured within fifteen (15) Business Days after receipt by the Sellers’ Representative of written notice specifying particularly such default or breach.

(d) By Investor or the Sellers at any time after the later of (i) January 21, 2005 and (ii) the forty-fifth (45^th) day after the New 2004 Audited Financial Statements are made available, if such party’s conditions to closing, as set forth in Article III, have not been satisfied or waived by the party seeking to terminate pursuant to this Section 9.01(d), unless such failure is the result of the action or inaction of the party seeking to terminate this Agreement.

(e) By Investor if any fact or condition requires any change to the disclosure schedules by the Sellers, and the subject matter of the change to the disclosure schedules relates to events that occurred on or before the Execution Date; provided, such termination shall be effective only if Investor provides written notice to the Sellers’ Representative of its desire to terminate this Agreement within seven (7) Business Days

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of receipt by Investor of written notice from the Sellers’ Representative of the change to the disclosure schedule.

(f) By Investor (i) if any fact or condition requires any change to the disclosure schedules by the Sellers, and the subject matter of the change to the disclosure schedules relates to events that occurred after the Execution Date; and (ii) the subject matter of the change to the disclosure schedule and all other changes to the disclosure schedule could reasonably be expected to have a Material Adverse Effect; provided, such termination shall be effective only if Investor provides written notice to the Sellers’ Representative of its desire to terminate this Agreement within seven (7) Business Days of receipt by Investor of written notice from the Sellers’ Representative of the change to the disclosure schedule. Upon receipt of any change to the disclosure schedule, Investor shall be entitled to consider the effect of any prior changes to the disclosure schedule notwithstanding the fact that Investor did not terminate this Agreement with respect to such prior changes.

(g) By Investor if the sum of the aggregate value of all Consent Concessions, determined in accordance with Section 6.05, plus the aggregate cost of all Remedial Work recommended by Investor’s environmental engineering firm, as set forth in Section 6.09, exceeds Ten Million Dollars ($10,000,000).

(h) By Investor if the 2004 EBITDA, as finally agreed upon pursuant to Section 2.02(b), is greater than Forty Million Dollars ($40,000,000).

(i) By the Sellers if the 2004 EBITDA, as finally agreed upon pursuant to Section 2.02(b), is less than Thirty-Six Million Five Hundred Thousand Dollars ($36,500,000).

Section 9.02. Effect of Termination. If any party terminates this Agreement pursuant to Section 9.01, all rights and obligations of the parties hereunder shall terminate without any liability of any party to any other party; provided, however, that if this Agreement is terminated by a party due to the breach by the other party of any covenant or agreement contained herein, or due to any breach or misrepresentation in any of such other party’s representations or warranties contained herein, or due to the failure of such other party to fulfill its obligations in connection with the satisfaction of any covenant prior to the Closing Date, then the terminating party shall remain entitled to pursue all available legal rights and remedies pursuant to this Agreement or otherwise (including specific performance if available), notwithstanding such termination.

ARTICLE X

SURVIVAL OF REPRESENTATIONS AND

WARRANTIES; INDEMNIFICATION; DISPUTES

Section 10.01. Survival of Representations and Warranties. Notwithstanding the Closing of the transactions contemplated under this Agreement, any investigation made by or on behalf of Investor, or any notifications or supplements to the disclosure schedules attached hereto

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made pursuant to Section 6.07, but subject to the limitations set forth in Section 10.06 below, the representations and warranties of the Company and the Sellers contained in this Agreement shall survive the Closing, and all covenants, agreements and indemnities in this Agreement shall survive the Closing and remain in effect indefinitely, unless such covenants, agreements and indemnities by their terms are to be performed for a specified period of time set forth in this Agreement, in which case such covenants, agreements and indemnities shall survive until the expiration of all applicable statute of limitations with respect to the matters covered thereby.

Section 10.02. Sellers’ Indemnification. The Sellers shall indemnify, defend and hold harmless Investor, the Merger Sub (for the period of time from the date hereof through the Effective Time), the Company (from and after the Effective Time) and each of Investor’s, the Merger Sub’s and the Company’s respective Affiliates, subsidiaries, shareholders, directors, officers, employees and agents, other than the Sellers and their Affiliates (not including the Company) (collectively, “Investor’s Indemnitees”), from any and all Losses resulting from or attributable to: (i) the breach of, or misstatement in, any one or more of the representations or warranties of the Sellers or the Company set forth in this Agreement, determined without giving effect to any Material Adverse Effect or materiality qualifiers contained in such representations or warranties, (ii) any claims, demands, suits, investigations, proceedings or actions by any third party containing or relating to allegations that, if true, would constitute a breach of, or misstatement in, any one or more of the representations or warranties of the Sellers set forth in this Agreement, without giving effect to any Material Adverse Effect or materiality qualifiers contained in such representations or warranties, (iii) the failure to perform any of the covenants of the Sellers set forth in this Agreement including, but not limited to, those set forth in Section 2.03(b) and Article VIII, (iv) any actual or alleged Tax liability of the Company in respect of any period (or portion thereof) through the Closing Date as well as the Losses described in Section 8.02(b), (v) the failure of the Company to obtain a nondisturbance agreement for any of the Leases other than the Leases under which a Seller or an Affiliate (other than a sibling) of a Seller is the lessor prior to the Closing; provided, however, that Sellers’ indemnification obligations pursuant to this clause (v) shall be subject to the Minimum Loss and Indemnification Cap limitations set forth in Section 10.06, or (vi) fees payable to KeyBanc Capital Markets.

Section 10.03. Investor’s Indemnification. Investor covenants and agrees to indemnify, defend and hold harmless each of the Sellers and their respective Affiliates from any and all Losses resulting from or attributable to (i) the breach of, or misstatement in, any one or more of the representations or warranties of Investor or the Merger Sub set forth in this Agreement, (ii) any claims, demands, suits, investigations, proceedings or actions by any third party containing or relating to allegations that, if true, would constitute a breach of, or misstatement in, any one or more of the representations or warranties of Investor or the Merger Sub set forth in this Agreement, or (iii) the failure to perform any of the covenants of Investor or the Merger Sub set forth in this Agreement including those set forth in Section 7.03.

Section 10.04. Defense of Third-Party Claims.

(a) In the event that any party shall claim that it is entitled to be indemnified pursuant to the terms of this Article X, such party (the “Claiming Party”) shall promptly notify the party against which the claim is made (the “Indemnifying Party”) in writing (a “Claim Notice”) of such claim promptly after the Claiming Party receives notice of any action, proceeding, investigation, audit, examination, demand or assessment or other

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claim of a third party, including a Governmental Entity (a “Third Party Claim”) that may reasonably be expected to result in a claim for indemnification by the Claiming Party against the Indemnifying Party. The Claim Notice shall specify the breach of warranty, representation, agreement or covenant claimed by the Claiming Party and the Losses which have been or may be incurred by, or imposed upon, the Claiming Party on account thereof. If such Losses are liquidated in amount, the Claim Notice shall so state and such amount shall be deemed the amount of the claim of the Claiming Party. If such Losses are not liquidated, the Claim Notice shall so state and, in such event, a claim shall be deemed asserted against the Indemnifying Party on behalf of the Claiming Party, but no payment shall be made on account thereof until the amount of such claim is liquidated and the claim is finally determined.

(b) The following provisions shall apply to claims of the Claiming Party which are based upon a Third Party Claim:

(i) The Indemnifying Party shall have, for ten (10) Business Days following receipt of the Claim Notice and at its expense, the option to defend such Third Party Claim in its own name or, if necessary, in the name of the Claiming Party unless (i) the claim for indemnification relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation or seeks injunctive or other equitable relief; (ii) the Claiming Party has been advised in writing by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Claiming Party; or (iii) upon petition by the Claiming Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such claim. The Claiming Party shall cooperate with and make available to the Indemnifying Party such assistance and materials as may be reasonably requested of the Claiming Party. Any Claiming Party shall have the right to employ separate counsel in any such action or claim and to participate in (but not control) the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the Indemnifying Party unless (i) the employment of such counsel has been specifically authorized in writing by the Indemnifying Party, which authorization shall not be unreasonably withheld, or (ii) the named parties to any such action (including any impleaded parties) include both such Claiming Party and the Indemnifying Party and such Claiming Party shall have been advised in writing by such counsel that there may be one or more legal defenses available to the Claiming Party which are not available to the Indemnifying Party. The Indemnifying Party shall have the right to settle and compromise such Third Party Claim only with the prior written consent of the Claiming Party (which consent shall not be unreasonably withheld, conditioned or delayed) unless the following shall apply (in which case the Indemnifying Party may settle and compromise such Third Party Claim without the prior written consent of the Claiming Party): (A) there is no finding or admission of any violation of Law or any violation of the rights of any Person and no affect on any other claims that may be made against the Claiming Party; (B) included as an unconditional term thereof is an unconditional release by the Persons asserting the Third Party Claim of the Claiming Party from all liability with respect to such Third Party Claim or a consent to entry of judgment; and (C)

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the sole relief provided is monetary damages that are paid in full by the Indemnifying Party. If the Claiming Party fails to consent to any settlement or compromise offer, the Indemnifying Party may continue to contest such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party for such Third Party Claim shall not exceed such settlement or compromise offer.

(ii) Regardless of whether the Indemnifying Party elects to defend the Third Party Claim, the Indemnifying Party shall also have the right within twenty (20) Business Days from receipt of the Claim Notice to notify the Claiming Party that the Indemnifying Party disputes the merits of the Third Party Claim and/or that the Third Party Claim is the subject of indemnification hereunder. Such dispute shall not affect the Indemnifying Party’s right to defend the Third Party Claim under subsection (i), above.

(iii) In the event the Indemnifying Party does not notify the Claiming Party that the Indemnifying Party wishes to defend, or fails to adequately defend, such Third Party Claim, then the Claiming Party shall have the right to conduct a defense against such Third Party Claim and shall have the right to settle and compromise such Third Party Claim without having to first obtain the consent of the Indemnifying Party.

(c) The Indemnifying Party shall have twenty (20) Business Days from the receipt of a Claim Notice to notify the Claiming Party that the Indemnifying Party disputes such claim. If the Indemnifying Party does not timely notify the Claiming Party of such dispute, then the amount of such claim shall be deemed, conclusively, a liability of the Indemnifying Party hereunder. If the Indemnifying Party does timely notify the Claiming Party of such dispute, then the Claiming Party and the Indemnifying Party shall resolve such dispute in accordance with Section 10.07.

(d) The provisions of this Section 10.04 shall not apply to Tax Claims.

Section 10.05. Direct Claims. In any case in which the Claiming Party seeks indemnification hereunder which is not subject to Section 10.04 because no Third Party Claim is involved, the Claiming Party shall notify the Indemnifying Party in writing of any Losses which the Claiming Party claims are subject to indemnification under the terms hereof. The failure of the Claiming Party to exercise promptness in such notification shall not amount to a waiver of such claim unless the resulting delay materially prejudices the position of the Indemnifying Party with respect to such claim.

Section 10.06. Limitations.

(a) Minimum Loss; Maximum Amount of Indemnified Costs. No Indemnifying Party shall be required to indemnify a Claiming Party for Losses unless and until the aggregate amount of such Losses for which the Claiming Party is otherwise entitled to indemnification pursuant to this Article X exceeds One Million Four Hundred Thousand Dollars ($1,400,000) (the “Minimum Loss”). After the Minimum Loss is exceeded, the Claiming Party shall be entitled to be paid the amount of its Losses in excess of the Minimum Loss, subject to the limitations on recovery and recourse set forth

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herein. In no event shall the Indemnifying Party in the aggregate be liable to the Claiming Party for Losses in excess of Thirty-One Million Five Hundred Thousand Dollars ($31,500,000) (“Indemnification Cap”). Notwithstanding the foregoing or anything else in this Agreement, the Minimum Loss and Indemnification Cap limitations described above shall not apply to any Losses arising from or related to (i) breaches or misrepresentations made by the Sellers or the Company under Sections 4.01 (other than the third sentence of Section 4.01(a)), 4.02, 4.03, 4.04, 4.06, 4.07, 4.17 and 4.23, (ii) breaches of covenants made by the Sellers or, prior to the Closing, by the Company, under this Agreement or any of the Related Agreements, (iii) matters set forth in clauses (iv) and (vi) of Section 10.02, (iv) violation by Investor of its covenants and obligations under Section 7.03, and (v) fraud, bad faith or intentional misconduct or misrepresentation.

(b) Losses Net of Insurance. For purposes of this Article X, the amount of any Losses for which indemnification is provided hereunder shall be net of any amounts recovered by the Claiming Party under insurance policies with respect to such Losses, it being understood that the obligations of the Claiming Party hereunder shall not be so reduced to the extent that any such recovery results in an increase in the Claiming Party’s insurance premiums, or results in any other additional cost or expense to any such Claiming Party.

(c) Limitation as to Time. No Indemnifying Party shall be liable for any Losses with respect to a breach of a representation or warranty unless a written claim for indemnification is given by the Claiming Party to the Indemnifying Party with respect thereto on or before the later of (x) June 30, 2006 and (y) twenty-one (21) days after audited financial statements for the fiscal year ended March 31, 2006 are made available and delivered to Investor, except this limitation shall not apply to (i) any claims involving fraud, bad faith or intentional misconduct or misrepresentation, (ii) claims for breach of the representations and warranties and/or covenants contained in Sections 2.03(b), 4.01 (except the third sentence of Sections 4.01(a)), 4.02, 4.03, 4.04, 4.07, 4.16(e), 4.17, 4.23, 7.02, and 7.05 and Article VIII unless otherwise barred by the applicable statute of limitations or other Law, or (iii) claims for breach of the representations and warranties contained in Section 4.18, which shall survive the Closing for a period of three (3) years.

(d) Limitation as to each Seller. Sellers shall be jointly and severally liable for any Losses under this Article X and such liability for losses shall not be limited to the Escrow Amount; provided, however, that no Seller shall be responsible for the breach by another Seller of the representations and warranties and/or covenants set forth in Section 4.02 and Section 7.02.

Section 10.07. Resolution of Disputes. Except as otherwise provided in Section 2.02(b) or Section 2.03(c), in the event of any dispute or disagreement between the parties either with respect to the interpretation of any provision of this Agreement or with respect to the performance by the Sellers, the Company or Investor, then upon the written request of such party, each of the parties will meet for the purpose of endeavoring to resolve such dispute. The parties will discuss the matter under dispute and negotiate in good faith in an effort to resolve the dispute without the necessity of any formal proceeding. During the course of such

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negotiation, all reasonable requests made by one party to the other for information will be honored in order that each of the parties may be fully advised. The specific format for such discussions will be left to the discretion of the parties, but may include the preparation of agreed upon statements of fact or of positions furnished to the other party. All verbal and written offers to settle or resolve the dispute communicated by the parties in connection with this Section 10.07 will be deemed prepared and communicated in furtherance, and in the context, of dispute settlement, and will be exempt from discovery and production, and will not be admissible in evidence (whether as an admission or otherwise) in any proceedings for the resolution of the dispute. No formal proceedings for the resolution of such dispute will be commenced until any of the parties concludes in good faith that continued negotiation of the matter in issue under this Section 10.07 does not appear likely to produce a mutually acceptable resolution.

Section 10.08. Offset Against Escrow Amount. Sellers’ Representative shall direct the Escrow Agent, pursuant to the Escrow Agreement, to pay to the applicable Investor’s Indemnitees, out of the then-remaining Escrow Amount, an amount equal to Sellers’ liability for Losses under this Article X. Sellers shall pay to such Investor’s Indemnitees any such liability in excess of such Escrow Amount, subject to the provisions of Section 10.06(d).

Section 10.09. Sole Remedy. Except in (i) any case involving fraud, bad faith, or intentional misconduct or misrepresentation, (ii) the case of disputes relating to adjustments of the amount of the Closing Payment pursuant to Sections 2.02 and 2.03, (iii) a termination of this Agreement pursuant to Article IX, or (iv) a breach of Section 7.02, the rights to indemnification under Article VIII and this Article X, subject to all of the terms and conditions of such Articles, shall constitute the sole and exclusive right and remedy available to any party hereto for any actual or threatened breach of this Agreement by any party hereto, including a breach of any representation, warranty, covenant or agreement contained herein.

ARTICLE XI

DEFINITIONS

As used in this Agreement, the following terms have the meanings indicated below:

“2004 EBITDA” has the meaning specified in Section 2.02(a).

“Accounts Receivable” means all accounts and notes receivable, rights to refunds, and deposits of any kind of the Company.

“Advisory Services Agreement” means that certain Advisory Services Agreement, dated as of the Closing Date and in substantially the form of Exhibit J hereto, by and between the Company and Freeman Spogli & Co. V, L.P., a Delaware limited partnership.

“Affiliate” means any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, limited liability company, joint stock company, trust, or unincorporated organization, that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the Company or any of the Sellers and any spouse, parent, sibling or descendant of any Seller or any director or officer of the Company or any of the foregoing entities. For purposes of this definition,

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“control” means the ability to direct the operation or management of a Person, whether by contract, ownership of securities, status as director, officer or other position therein, or otherwise.

“Affiliate Lease” has the meaning specified in Section 4.11(e)(viii).

“Agreement” means this Agreement and Plan of Merger, by and among Investor, the Merger Sub, the Company and the Sellers dated as of the date hereof, as amended or modified from time to time in accordance with the applicable provisions hereof.

“Agreements Concerning Stock” means each agreement set forth on Schedule 4.02 and each agreement giving rise to a lien set forth on Schedule 4.02.

“Annual Financial Statements” has the meaning specified in Section 4.05.

“Articles of Merger” has the meaning specified in Section 1.01(a).

“Benefit Plans” has the meaning specified in Section 4.17(a).

“Business” has the meaning set forth in the Preliminary Statements of this Agreement.

“Business Days” shall mean every day other than Saturday or Sunday or a legal holiday on which commercial banks are authorized or required under applicable laws to be closed for business in New York, New York.

“Cash” means the aggregate amount of all positive balances in any and all bank accounts of the Company, offset by any negative balances in any such bank accounts and net of drafts, checks and wire transfers issued against accounts of the Company that remain outstanding as of the relevant time and date in excess of Three Million Dollars ($3,000,000).

“Claiming Party” has the meaning specified in Section 10.04(a).

“Claim Notice” has the meaning specified in Section 10.04(a).

“Closing” has the meaning specified in Section 1.03.

“Closing Approvals” has the meaning specified in Section 3.01(b).

“Closing Date” has the meaning specified in Section 1.03.

“Closing Payment” has the meaning specified in Section 2.01.

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

“Common Stock” means shares of common stock, no par value, of the Company and, after the Merger, of the Surviving Corporation.

“Commitments” has the meaning specified in Section 5.07.

“Company” has the meaning specified in the first paragraph of this Agreement.

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“Company Intellectual Property” means all Intellectual Property owned by, or exclusively licensed to, the Company.

“Concession and Remediation Limit” means the maximum aggregate dollar amount of Consent Concessions values plus Remedial Work costs that Sellers shall be responsible for paying, which maximum amount shall be (i) Five Million Dollars ($5,000,000) plus (ii) fifty percent (50%) of the aggregate amount of all Consent Concessions values plus Remedial Work costs in excess of Five Million Dollars ($5,000,000) but less than Ten Million Dollars ($10,000,000). The Company shall be responsible for the remainder of such values and costs.

“Confidential Memorandum” means that certain June 2004 Confidential Memorandum prepared by KeyBanc Capital Markets and distributed to Investor.

“Confidentiality Letter” means that certain confidentiality letter, dated June 10, 2004 between Investor, the Sellers and the Company.

“Consent” shall mean any approval or consent of a Consenting Landlord and/or Lender which may be required to consummate the transactions contemplated by this Agreement.

“Consent Concessions” shall mean all incentives, whether in the form of cash payments, lease amendments or otherwise, required by a Consenting Landlord or Lender to provide its Consent for a Consenting Lease. Consent Concessions shall not include any Net Profit Payments or Review Fees.

“Consent Lease” shall mean any Lease requiring a Consent.

“Consenting Landlord” shall mean the Landlord under a Consent Lease.

“Contaminant” means (i) any element, compound or chemical that is defined, listed or otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous substance or chemical, hazardous waste, special waste, or solid waste under any Environmental, Health and Safety Law or that is likely to cause immediately, or at some future time, harm to or have an adverse effect on, the environment or risk to human health or safety, including, without limitation, any pollutant, contaminant, waste, hazardous waste, toxic substance or dangerous good which is defined or identified in any Environmental, Health and Safety Law; (ii) petroleum and its refined products; (iii) polychlorinated biphenyls; (iv) any substance exhibiting a hazardous waste characteristic, including, without limitation, corrosivity, ignitability, toxicity or reactivity as well as any radioactive or explosive materials; and (v) any asbestos or asbestos containing materials.

“Contracts” has the meaning specified in Section 4.14(a).

“Copyrights” means all domestic and foreign copyright interests in any original work of authorship fixed in a tangible medium or expression, whether registered or unregistered, including but not limited to all copyright registrations or foreign equivalents, applications for registration or foreign equivalents, all moral rights, all common-law rights, and all rights to register and obtain renewals and extension of copyright registrations, together with all other copyright interests accruing by reason of international copyright convention.

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“Current Assets” means, with respect to any Person or Persons, all assets of such Person or Persons that in accordance with GAAP are properly classified as current assets of the types identified in the balance sheet account descriptions set forth in the internally prepared financial statements (and, for purposes of clarification, “Current Assets” shall exclude any current assets of a type that are not identified in the balance sheet account descriptions set forth in the internally prepared financial statements, except as specifically identified); provided, that the following items shall be excluded from the definition of Current Assets (without duplication to the extent already so excluded): (i) cash and cash equivalents; (ii) deferred commissions (both current and long-term); (iii) inventory held on consignment; (iv) accrued interest receivable; (v) notes receivable from Affiliates and related parties; (vi) construction in progress; (vii) buildings and land held for sale; (viii) cash surrender value of life insurance, and (ix) Tax Deposits and Refunds. Solely for purposes of illustration, Schedule 11.01 sets forth a determination of Current Assets based on the Company’s internally prepared financial statements for the period ended August 31, 2004.

“Current Liabilities” means, with respect to any Person or Persons, all liabilities of such Person or Persons that in accordance with GAAP are properly classified as current liabilities of the types identified in the balance sheet account descriptions set forth in the internally prepared financial statements (and, for purposes of clarification, “Current Liabilities” shall exclude any current liabilities of a type that are not identified in the balance sheet account descriptions set forth in the internally prepared financial statements, except as specifically identified); provided, that the following items shall be excluded from the definition of Current Liabilities (without duplication to the extent already so excluded): (i) notes payable to Affiliates and related parties; (ii) short-term funded debt; (iii) accrued interest payable; (iv) deferred revenue on extended maintenance agreements; (v) accounts payable applicable to inventory on consignment; (vi) liabilities for the expenses described in Section 6.16, and (vii) accrued amounts in respect of automobile liability, general liability and workers compensation obligations recorded in the New 2004 Audited Financial Statements as well as any subsequent increase or decrease to such accrued amounts recorded from the date of the New 2004 Audited Financial Statements through Closing. Solely for purposes of determining Net Working Capital, Current Liabilities also shall include the current and long term servicing costs portion of deferred revenue on Extended Service Plans regardless of its classification in the internally prepared financial statements and the New 2004 Audited Financial Statements. Solely for purposes of illustration, Schedule 11.01 sets forth a determination of Current Liabilities based on the Company’s internally prepared financial statements for the period ended August 31, 2004.

“Debt” means any obligation of the Company whether recourse is secured by or is otherwise available against all or only a portion of the assets of the Company, including: (i) every obligation for money borrowed, including the current portion of all long-term indebtedness, all interest accrued, all pre-payment penalties and all LIBOR breakage fees; (ii) every obligation evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses and notes payable to Affiliates; (iii) every reimbursement obligation with respect to letters of credit, banker’s acceptances or similar facilities issued for the account of the Company; (iv) obligations or commitments to repay deposits or other amounts advanced by and owing to third parties, other than customer deposits received in the ordinary course of business in connection with the sale and future delivery of inventory and advertising coop deposits made by vendors in the ordinary

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course of business; (v) indebtedness secured by a Lien on assets or properties of the Company (other than amounts payable pursuant to the GE Wholesale Financing Agreement); (vi) every obligation under conditional sale or other title retention agreements and interest rate or currency swap transactions (valued at the termination value thereof), (vii) every obligation with respect to the deferred purchase price of property or services; (viii) all amounts payable to GE Capital Consumer Card Co. pursuant to the Private Label Consumer Credit Card Program Agreement, dated August 26, 2004, or any predecessor agreement; (ix) all amounts payable to James Mercer, including those disclosed on Schedule 4.10; (x) leases treated as capital leases under GAAP; and (xi) guarantees of the Company of any obligation of another person.

“Documentation” means, collectively, if any, all programmers’ notes or logs, source code annotations, user guides, manuals, instructions, forms, software architecture designs, layouts, and other designs, plans, drawings, documentation or materials that relate to any aspect of the Software or the Intellectual Property, whether in tangible or intangible form.

“DOJ” has the meaning specified in Section 6.10(a).

“Dollar” or “dollar” shall refer to the currency of the United States of America.

“Effective Time” has the meaning specified in Section 1.01(a).

“Environmental, Health and Safety Laws” means the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.) and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as such laws may be amended or otherwise modified from time to time, and any other present or future Law imposing liability or establishing standards of conduct for protection of the environment or other government restrictions relating to safety, health, the protection of the environment or the release, emission, deposit, discharge, leaching, migration or spill of any Contaminant into the environment.

“ERISA” has the meaning specified in Section 4.17(a).

“ERISA Affiliate” means any Person who, together with the Company, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code.

“Escrow Agent” means Citibank, N.A.

“Escrow Agreement” means that certain Escrow Agreement, dated as of the Closing Date and in substantially the form of Exhibit G hereto, by and among the Sellers’ Representative, the Company, Investor and the Escrow Agent.

“Escrow Amount” has the meaning specified in Section 3.05(a).

“Execution Date” has the meaning set forth in the first paragraph of this Agreement.

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“Extended Service Plans” means the warranty contracts offered by the Company to its customers.

“Final Working Capital Statement” has the meaning specified in Section 2.03(b).

“Financial Statements” has the meaning specified in Section 4.05.

“Former Seller” has the meaning specified in Section 12.04(c).

“FS Commitment Letter” means that certain Commitment Letter dated October 19, 2004, by and between FS Equity Partners V, L.P. and Investor.

“FTC” has the meaning specified in Section 6.10(a).

“GAAP” means generally accepted accounting principles in the United States of America, in effect from time to time, consistently applied.

“GE Wholesale Financing Agreement” means the Agreement for Wholesale Financing, dated September 8, 2000, between GE Commercial Distribution Finance Corporation and the Company.

“Governmental Entity” means any court, government agency, department, commission, board, bureau or instrumentality of the United States, any local, county, state or federal or political subdivision thereof, or any foreign governmental body of any kind.

“HSR ACT” or “Hart-Scott-Rodino Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“IBCL” means the Indiana Business Corporation Law, as amended.

“Indemnification Cap” has the meaning specified in Section 10.06(a).

“Indemnifying Party” has the meaning specified in Section 10.04(a).

“Initial Share Number” has the meaning specified in Section 6.21.

“Intellectual Property” means any or all of the following and all rights in, arising out of, or associated therewith throughout the world (including claims against third Persons for infringement, whether or not heretofore asserted): Patents, Marks, Copyrights, Documentation, Know-How, Software, Trade Secrets, Websites, mask works, and internet domain name registrations.

“Interim Financial Statements” has the meaning specified in Section 4.05.

“Inventory” has the meaning specified in Section 4.24(b).

“Investor” has the meaning set forth in the first paragraph of this Agreement.

“Investor Closing Certificate” has the meaning specified in Section 3.02(a).

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“IRS” means the Internal Revenue Service.

“Know-How” means scientific, engineering, financial, marketing, practical, or other knowledge or experience useful in exploiting other Intellectual Property or otherwise useful conducting the Business.

“Knowledge of Investor” or words of like import means, with respect to the existence or absence of a fact, the actual knowledge of any officer, member, partner or director of Investor after completion of a due diligence investigation that is reasonable under the circumstances.

“Knowledge of the Company” or words of like import means, with respect to the existence or absence of a fact, the actual knowledge of any officer or director of the Company after completion of a due diligence investigation that is reasonable under the circumstances.

“Knowledge of the Sellers” or words of like import means, with respect to the existence or absence of a fact, the actual knowledge of each Seller after completion of a due diligence investigation that is reasonable under the circumstances.

“Landlord” shall mean the lessor under a Lease or, to the extent that a Lease is a sublease, the lessor under the master lease and the sublessor under the sublease.

“Law” or “Laws” mean any local, county, state, federal, foreign or other law, statute, regulation, ordinance, rule, code, order, decree, judgment, consent decree, permit, license, common law, settlement agreement or governmental requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Entity.

“Leased Personal Property” has the meaning specified in Section 4.12(a).

“Leased Real Property” has the meaning specified in Section 4.11(a).

“Leases” has the meaning specified in Section 4.11(b).

“Lender” shall mean the holder of any mortgage or deed of trust which encumbers a Consenting Landlord’s interest in any Leased Real Property.

“Licenses” has the meaning specified in Section 4.13(h).

“Lien” or “Liens” means, with respect to any asset, including the assets of the Company or the Shares, any and all mortgages, liens, claims, charges, pledges, or other encumbrances of any nature whatsoever, including without limitation licenses, leases, chattel or other mortgages, collateral security arrangements, pledges, title imperfections, defect or objection liens, security interests, conditional and installment sales agreements, charges, easements, encroachments or restrictions, rights of third parties, or any other interests of any kind or character whatsoever.

“Losses” means all damages, losses, fines, penalties, deficiencies, liabilities, claims, actions, demands, judgments, fines, fees, costs and expenses (including without limitation reasonable legal and accountants’ fees).

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“Marks” means and includes all domestic and foreign trademarks, trade dress, service marks, trade names, icons, logos, slogans and other indicia of source or sponsorship of goods and services, designs and logotypes related to the above, in any and all forms, all domestic and foreign, trademark registrations and applications for registration related to such trademarks (including, but not limited to, intent-to-use applications), the Company’s name, and all assumed fictional business names, trade names.

“Material Adverse Effect” means, when used with respect to the Company, any change, event, violation, inaccuracy, circumstance or effect that is or would reasonably be expected to be materially adverse to the Business, assets, capitalization, financial condition, results of operations or prospects of the Company.

“Material Adverse Change” means, when used with respect to the Company, any change, event, violation, inaccuracy, circumstance or effect that is or would reasonably be expected to be materially adverse to the Business, assets, capitalization, financial condition or results of operations or prospects of the Company. For purposes of clarity, it is agreed that (i) information expressly set forth in the disclosure schedules or (ii) events or circumstances affecting the brand name appliance and consumer electronics industry generally, unless such events or circumstances disproportionately affect the Company’s market as compared to other participants in such industry, shall not form the basis of a Material Adverse Change.

“Merger” has the meaning specified in Section 1.01(a).

“Merger Share(s)” has the meaning specified in Section 1.02(a).

“Merger Sub” has the meaning set forth in the first paragraph of this Agreement.

“Minimum Loss” has the meaning specified in Section 10.06(a).

“Monthly Financial Statements” has the meaning specified in Section 6.17.

“Net Profit Payments” shall mean any consideration which by the terms of a Lease is required to be paid by the tenant to the Landlord thereunder as a result of the tenant’s receipt of consideration or other payment in connection with the Landlord’s consent under a Lease to the transactions contemplated by this Agreement.

“Net Working Capital” on a given date shall mean the sum of all Current Assets minus the sum of all Current Liabilities, as defined, and reflected on the internally prepared financial statements, each as determined in accordance with GAAP and consistent with the New 2004 Audited Financial Statements, except that the internally prepared financial statements on any given date may exclude normal year-end adjustments including, but not limited to, executive bonuses and the inventory vendor rebate adjustment recorded in accordance with EITF 02-16 “Accounting by a Customer for Certain Consideration Received from a Vendor”. Notwithstanding anything to the contrary in this Agreement, amounts payable in connection with the GE Wholesale Financing Agreement shall continue to be included in accounts payable for the purpose of computing Net Working Capital. Solely for purposes of illustration, Schedule 11.01 sets forth a determination of Net Working Capital based on the Company’s internally prepared financial statements for the period ended August 31, 2004.

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“Neutral Accounting Firm” has the meaning specified in Section 2.03(c).

“New 2004 Audited Financial Statements” has the meaning set forth in Section 6.12.

“Noncompetition Period” has the meaning specified in Section 7.02(c).

“Owned Personal Property” has the meaning specified in Section 4.12(a).

“Owned Real Property” has the meaning specified in Section 4.11(a).

“Ownership Percentage” means, with respect to any Seller, the pro-rata percentage based on the ratio of the number of Shares held by such Seller immediately prior to the Merger to the number of Shares held by all Sellers immediately prior to the Merger.

“Patents” means and includes all domestic and foreign patents (including certificates of invention and other patent equivalents), provisional applications, patent applications and patents issuing therefrom, as well as any division, continuation or continuation in part, reissue, extension, reexamination certification, revival or renewal of any patent, and all inventions, discoveries, invention disclosures, and other subject matter related to such patents or patent applications, in any and all forms.

“Pension Plan” has the meaning specified in Section 4.17(e).

“Per Share Closing Payment” means the quotient obtained by dividing the sum of the Closing Payment plus the Rollover Investment Amount by the number of Shares outstanding immediately prior to the Merger.

“Permits” has the meaning specified in Section 4.15.

“Person” means any individual, corporation, general partnership, limited partnership, limited liability partnership, joint venture, association, limited liability company, joint stock company, trust, or unincorporated organization, or any governmental agency, officer, department, commission, board, bureau, or instrumentality thereof.

“Personal Property” has the meaning specified in Section 4.12(a).

“Physical Inventory” has the meaning specified in Section 2.03(a).

“Plan” has the meaning specified in Section 6.21.

“Preliminary Working Capital Statement” has the meaning specified in Section 2.03(a).

“PTO” shall mean the United States Patent and Trademark Office.

“Purchase Price” has the meaning specified in Section 2.01.

“Real Property” has the meaning specified in Section 4.11(a).

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“Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of the Closing Date and in substantially the form of Exhibit H hereto, by and among the Company and the shareholders of the Company.

“Related Agreements” shall mean the Escrow Agreement, the Advisory Services Agreement, the Stockholders Agreement, the Termination Agreement and the Registration Rights Agreement.

“Release” means any release, threatened release, spill, emission, leaking, escaping, pumping, injection, deposit, disposal, discharge, dispersal, or leaching of Contaminants into the environment.

“Remedial Work” means such activities which are necessary or advisable to remediate any environmental condition including, without limitation, preliminary assessments, remedial investigations, feasibility studies, response, remedial action plans, removal, treatment, storage, transportation and disposal of Contaminants, restoration, repair, clean-up, detoxification, post-remediation testing, monitoring and closure.

“Remediation Cost” means the cost of the Remedial Work.

“Restricted Activity” has the meaning specified in Section 7.02(a).

“Restricted Area” has the meaning set forth in Section 7.02(b).

“Retained Shares” shall mean such number of Shares as shall equal the quotient of $30,784,600 divided by the Per Share Closing Payment, with 55% of such Retained Shares being allocated to Jerry W. Throgmartin, 25% of such Retained Shares being allocated to Gregg William Throgmartin and 20% of such Retained Shares being allocated to Dennis L. May.

“Returns” means all returns, reports, information returns, and other schedules, forms, exhibits, coupons or other documents (including all related and supporting information) filed or required to be filed with any Governmental Entity, in connection with the determination, assessment, collection, or administration of any Taxes.

“Review Fees” shall mean any fees, costs, expenses and reimbursements payable by the tenant under a Lease to a Lender, a Consenting Landlord or their respective agents or consultants in connection with the review, processing and granting of any Consent.

“Rollover Investment Amount” has the meaning set forth in Section 2.01(g).

“Sale Transaction” has the meaning specified in Section 6.08.

“Section 338(h)(10) Election” has the meaning specified in Section 8.02.

“Seller” or “Sellers” have the meaning specified in the first paragraph of this Agreement.

“Sellers’ Closing Certificate” has the meaning specified in Section 3.01(a).

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“Sellers’ Expense Payments” has the meaning specified in Section 6.16.

“Sellers’ Representative” has the meaning specified in Section 12.04(a).

“Shares” has the meaning specified in the Preliminary Statements of this Agreement.

“Software” means all versions of all software and code (including, without limitation, software programs, objects, modules, routines, algorithms and code, in source code, object code and executable form), machine readable databases and compilations, data structures and all data and collections of data and all content on internet sites owned by or licensed to the Company and all derivative works of any such software.

“Solicitation” has the meaning specified in Section 7.02(f).

“Stockholders Agreement” means that certain Stockholders Agreement, dated as of the Closing Date and in substantially the form of Exhibit I hereto, by and among the Company and the shareholders of the Company.

“Straddle Period” has the meaning specified in Section 8.01(b).

“Successor Seller” has the meaning specified in Section 12.04(c).

“Surviving Corporation” has the meaning specified in the recitals of this Agreement.

“Target Net Working Capital” means $17,000,000.

“Tax” or “Taxes” mean all federal, state, local and foreign taxes (including excise taxes, value added taxes, occupancy taxes, employment taxes, unemployment taxes, ad valorem taxes, customs duties, transfer taxes, and fees), levies, imposts, fees, impositions, assessments and other governmental charges of any nature imposed upon a Person, including all taxes and governmental charges imposed upon any of the personal properties, real properties, tangible or intangible assets, income, receipts, payrolls, transactions, stock transfers, capital stock, net worth or franchises of a Person (including all sales, use, withholding or other taxes which a Person is required to collect and/or pay over to any government), and all related additions to tax, penalties or interest thereon.

“Tax Claim” has the meaning specified in Section 8.04(a).

“Tax Deposits and Refunds” has the meaning set forth in Section 7.03.

“Taxing Authority” means any domestic or foreign Governmental Entity having responsibility for the imposition of any Tax.

“Termination Agreement” shall mean the agreement terminating the Agreements Concerning Stock.

“Third Party Claim” has the meaning specified in Section 10.04(a).

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“Trade Secrets” means any information, Know-How, Software, any formula, design, device, or compilation or other information which is used or held for use by a business, which gives the holder thereof any advantage or opportunity for advantage over competitors which do not have or use the same, and which is not generally known by the public and which the holder has taken steps to keep confidential. Trade Secrets include, by way of example, formulas, certain Software, market surveys, market research studies, customer lists, prospect lists, mailing lists, information contained on drawings, and other documents and information related to research, development or testing.

“Wachovia Commitment Letter” means that certain HH Gregg Commitment Letter dated October 19, 2004, by and between Wachovia Capital Markets, LLC, Wachovia Capital Investments, Inc. Wachovia Bank, N.A. and Congress Financial Corporation (Central), on the one hand, and Investor, on the other hand, and any amendments thereto.

“WARN” has the meaning specified in Section 4.16(c).

“Website” means all of the data, scripts, information, text and graphics relating to any and all of the Company’s world wide web sites or FTP sites on the internet, including domain names, the structure, sequence and organization of the sites, all text, graphics and other information displayed thereon and the rights owned by or licensed to the Company for any and all Software used by the Company to develop, maintain or enhance such text, graphics and other information displayed thereon.

ARTICLE XII

MISCELLANEOUS

Section 12.01. Assignment; Third Parties; Binding Effect. The rights under this Agreement are not assignable nor are the duties delegable by a party without the written consent of the party first having been obtained, and any attempted assignment or delegation without such consent will be null and void; provided, however, that the rights and duties of Investor under this Agreement, and the rights and duties of the Company, are assignable or delegable by Investor or, as of the Closing, the Company without the advance consent of the Sellers’ Representative (i) to a party controlled by, controlling or under common control with Investor, and (ii) by way of collateral assignment to any bank or financial institution or any agent acting on behalf of any banks or financial institutions providing financing to the Company or Investor, provided that Investor shall remain liable for the performance of Investor’s obligations hereunder, and after the Closing, are assignable to any purchaser of Investor’s securities of the Company and to any purchaser of all or substantially all of the assets of the Company. Nothing contained in this Agreement is intended to convey upon any person or entity, other than the parties and their successors in interest and permitted assigns, any rights or remedies under or by reason of this Agreement unless expressly stated. All covenants, agreements, representations and warranties of the parties contained in this Agreement are binding on and will inure to the benefit of Investor and the Company, respectively, and their respective successors and permitted assigns.

Section 12.02. Expenses. Investor and the Sellers will bear their own respective expenses, including without limitation, counsel and accountants’ fees, in connection with the

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preparation and negotiation of, and transactions contemplated under, this Agreement; provided, however, that expenses, including reasonable legal fees, incurred by a prevailing party to enforce the terms of this Agreement shall be recoverable against the breaching party and provided, further, that only upon and immediately after the Merger becoming effective, the Company shall pay or reimburse all out-of-pocket expenses incurred by Investor and its Affiliates in connection with the preparation and negotiation of, and transactions contemplated under, this Agreement. The Company shall bear the fees and expenses associated with the audit and examination by KPMG LLP described in Section 6.12.

Section 12.03. Notices. All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed duly given, unless otherwise expressly indicated to the contrary in this Agreement, (i) when personally delivered, (ii) upon receipt of a telephonic facsimile transmission with a confirmed telephonic transmission answer back, (iii) three (3) Business Days after having been deposited in the United States mail, certified or registered, return receipt requested, postage prepaid, or (iv) one (1) Business Day after having been dispatched by a nationally recognized overnight courier service, addressed to the parties or their permitted assigns at the following addresses (or at such other address or number as is given in writing by either party to the other) as follows:

To Investor:	Gregg Investment Corporation, LLC c/o Freeman Spogli & Co. 599 Lexington Avenue 18th Floor New York, New York 10022 Facsimile: (212) 758-7499 Attention: John M. Roth and Benjamin D. Geiger
With a copy to:	Bingham McCutchen LLP 355 South Grand Avenue Suite 4400 Los Angeles, California 90071 Facsimile No.: (213) 680-6499 Attention: Richard J. Welch
To the Company:	Gregg Appliances, Inc. 4151 East 96th Street Indianapolis, Indiana 46240 Facsimile No.: (317) 848-8768 Attention: Jerry W. Throgmartin
With a copy to:	Ice Miller One American Square Box 82001 Indianapolis, Indiana 46282-0002 Facsimile No.: (317) 592-4675 Attention: Steven K. Humke

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To the Sellers:	Jerry W. Throgmartin 4151 East 96th Street Indianapolis, Indiana 46240 Facsimile No.: (317) 848-8768
With a copy to:	Ice Miller One American Square Box 82001 Indianapolis, Indiana 46282-0002 Facsimile No.: (317) 592-4675 Attention: Steven K. Humke

Section 12.04. Appointment of Sellers’ Representative.

(a) By the execution and delivery of this Agreement, each Seller hereby irrevocably constitutes and appoints Jerry W. Throgmartin as the initial true and lawful agent and attorneys-in-fact (the “Sellers’ Representative”) of the Sellers with full authority and power of substitution to act in the name, place and stead of such Sellers with respect to the consummation of the transactions contemplated hereunder.

(b) Investor, and any other person, may conclusively and absolutely rely, without inquiry, upon any consent, approval or action of the Sellers’ Representative as the consent, approval or action, as the case may be, of each Seller individually and all Sellers as a group in all matters referred to herein, and each Seller confirms all that the Sellers’ Representative shall do or cause to be done by virtue of his or her appointment as the Sellers’ Representative.

(c) Each Seller covenants and agrees that he or she will not voluntarily revoke the power of attorney conferred in this Section 12.04. If any Seller dies or becomes incapacitated, disabled or incompetent (such deceased, incapacitated, disabled or incompetent Seller being a “Former Seller”) and, as a result, the power of attorney conferred by this Section 12.04 is revoked by operation of law, it shall not be a breach by such Former Seller under this Agreement if the heirs, beneficiaries, estate, administrator, executor, guardian, conservator or other legal representative of such Former Seller (each a “Successor Seller”) confirms the appointment of the Sellers’ Representative as agent and attorneys-in-fact for such Successor Seller.

(d) Each of the Sellers hereby consents and agrees to all actions or inactions taken or omitted to be taken in good faith by the Sellers’ Representative under this Agreement and hereby agrees to indemnify and hold harmless the Sellers’ Representative from and against all damages, losses, liabilities, charges, penalties, costs and expenses (including court costs and legal fees and expenses) incurred in any claim, action, dispute or proceeding between any such person or persons and the Sellers (or any of them) or between any such person or persons and any third party or otherwise incurred or suffered as a result of or arising out of such actions or inactions.

Section 12.05. Remedies Not Exclusive. Except as otherwise provided in Section 10.06, no remedy conferred by any of the specific provisions of this Agreement is

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intended to be exclusive of any other remedy, and each and every remedy will be cumulative and will be in addition to every remedy given under this Agreement or now or subsequently existing, at law or in equity, by statute or otherwise. The election of any one or more remedies by Investor or the Company will not constitute a waiver of the right to pursue other available remedies.

Section 12.06. Counterparts/Facsimile Signatures. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same document. The parties agree that for purposes of negotiating and finalizing this Agreement, any signed documentation, including this Agreement and any subsequent amendments, transmitted by facsimile machine shall be treated in all manners and in all respects as an original document and shall have the same binding legal effect as an original contract. The signature of any party shall be considered for these purposes an original signature. At the request of any party, any facsimile document shall be re-executed by all parties in an original form.

Section 12.07. Captions and Section Headings. Captions and section headings are for convenience only, are not a part of this Agreement and may not be used in construing it.

Section 12.08. Waivers. Any failure by any of the parties to comply with any of the obligations, agreements or conditions set forth in this Agreement may be waived by the other party or parties, but any such waiver will not be deemed a waiver of any other obligation, agreement or condition contained herein.

Section 12.09. Amendments, Supplements or Modifications. Each of the parties agrees to cooperate in the effectuation of the transactions contemplated under this Agreement and to execute any and all additional documents to take such additional action as is reasonably necessary or appropriate for such purposes.

Section 12.10. Entire Agreement. This Agreement and the Related Agreements, including any certificate, schedule, exhibit or other document delivered pursuant to their respective terms, and the Confidentiality Letter, constitute the entire agreement between the parties. There are no verbal agreements, representations, warranties, undertakings or agreements between the parties, and this Agreement may not be amended or modified in any respect, except by a written instrument signed by the parties to this Agreement.

Section 12.11. Governing Law. This Agreement is to be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to the conflicts of law principles of any jurisdiction to the contrary. For any actions arising in connection with this Agreement, the proper venue shall be in a federal or state court within the State of Delaware, and the parties agree to submit to the exclusive jurisdiction of such court.

Section 12.12. Interpretive Rules. For purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires: (a) defined terms include the plural as well as the singular and the use of any gender shall be deemed to include the other gender; (b) references to “Articles,” “Sections” and other subdivisions and to “Schedules” and “Exhibits” without reference to a document, are to designated Articles, Sections and other subdivisions of, and to Schedules and Exhibits to, this Agreement; (c) the use of the term “including” means “including but not limited to”; and (d) the words “herein,” “hereof,”

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“hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision.

Section 12.13. Transfer Taxes. Any transfer taxes, documentary recording fees, sales taxes, excise taxes or other taxes or imposts assessed as a result of the consummation of the transactions contemplated by this Agreement shall be the responsibility of, and be borne by, the Sellers.

Section 12.14. Specific Performance. Each party hereto acknowledges and agrees that any breach of the agreements and covenants contained in this Agreement would cause irreparable injury to the other parties hereto for which such parties would have no adequate remedy at law. In addition to any other remedy to which any party hereto may be entitled, each of the parties hereto acknowledges and agrees that, in the event of any breach of this Agreement, each non breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law and (ii) will be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement.

Section 12.15. Public Announcement. No party to this Agreement shall make any public announcement regarding this Agreement or any of the Related Agreements or the transactions provided for in or contemplated by this Agreement or any of the Related Agreements (other than the customary notification by FS Equity Partners V, L.P. to its limited partners) unless the form and substance of the announcement are mutually agreed upon by each party, which agreement shall not be unreasonably withheld, conditioned or delayed, or unless public disclosure is necessary to comply with applicable Law.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first above written.

“INVESTOR”
GREGG INVESTMENT CORPORATION, LLC
By:	FS Equity Partners V, L.P.
Its:	Managing Member
	By:	FS Capital Partners V, LLC
	Its:	General Partner
		By:	/s/ John M. Roth
			Name:	John M. Roth
			Title:	Managing Member
“MERGER SUB”
GIC CORPORATION
		By:	/s/ John M. Roth
			Name:	John M. Roth
			Title:	Chief Executive Officer
“COMPANY”
GREGG APPLIANCES, INC.
		By:	/s/ Jerry W. Throgmartin
			Name:	Jerry W. Throgmartin
			Title:	Chairman and Chief Executive Officer

[signatures continue on next page]

“SELLERS”
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin
By:	/s/ Kelli Throgmartin Ball
	Name:	Kelli Throgmartin Ball
By:	/s/ Sandra M. Throgmartin
	Name:	Sandra M. Throgmartin
By:	/s/ Janice K. Malone
	Name:	Janice K. Malone
By:	/s/ Monica L. Adams
	Name:	Monica L. Adams
By:	/s/ William G. Throgmartin
	Name:	William G. Throgmartin
By:	/s/ Dennis L. May
	Name:	Dennis L. May
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin, as trustee of the Jerry W. Throgmartin Charitable Trust
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin, as trustee of the Jerry W. Throgmartin Irrevocable Trust for the benefit of Christy and Nicky Throgmartin

EX-2.2

Exhibit 2.2

FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER

This FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “Amendment”) is made as of this 13th day of January 2005, by and among Gregg Investment Corporation, LLC, a Delaware limited liability company (“Investor”), GIC Corporation, an Indiana corporation (the “Merger Sub”), Gregg Appliances, Inc., an Indiana corporation (the “Company”), and Jerry W. Throgmartin, Gregg William Throgmartin (on his own behalf and as trustee for the Jerry W. Throgmartin Charitable Trust and the Jerry W. Throgmartin Irrevocable Trust for the benefit of Christy and Nicky Throgmartin), Kelli Throgmartin Ball, Sandra M. Throgmartin, Janice K. Malone, Monica L. Adams, William G. Throgmartin and Dennis L. May, each an individual residing in the State of Indiana, (collectively, the “Sellers” and each individually, a “Seller”). Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement (as defined below).

RECITALS

WHEREAS, Investor, Merger Sub, the Company and the Sellers are parties to that certain Agreement and Plan of Merger, dated as of October 19, 2004 (the “Merger Agreement”), providing for the merger of Merger Sub with and into the Company on the terms and subject to the conditions set forth therein; and

WHEREAS, the parties hereto desire to amend the Merger Agreement in accordance with Section 12.10 thereof.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Amendments to Merger Agreement.

1.1 Merger Consideration.

(a) Section 2.01(a) of the Merger Agreement is hereby amended to read in its entirety as follows: “(a) Two Hundred Ninety Million Dollars ($290,000,000) in cash plus the aggregate principal amount of the Junior Subordinated Notes set forth on Schedule 1.02(a);”.

(b) Section 1.02(a) of the Merger Agreement is hereby amended to read in its entirety as follows:

(a) With respect to each Seller, all of the issued and outstanding shares of Common Stock of the Company held by such Seller other than the Retained Shares (each, individually, a “Merger Share” and, collectively with respect to all Sellers, the “Merger Shares”) shall be

converted into a right to receive, upon surrender of the certificates representing such Merger Shares held by such Seller, (i) a Junior Subordinated Note in the original principal amount set forth opposite such Seller’s name on Schedule 1.02(a), and (ii) cash equal to (A) the product of the Per Share Closing Payment multiplied by the number of Merger Shares held by such Seller, less (B) the original principal amount of the Junior Subordinated Note issued to such Seller pursuant to clause (i) of this Section 1.02(a). The Retained Shares shall remain outstanding and shall not convert into a right to receive such payment.

(c) A new definition is hereby inserted into Article XI of the Merger Agreement immediately following the definition of “IRS,” which new definition shall read in its entirety as follows:

“Junior Subordinated Note” shall mean a subordinated promissory note, dated as of the Closing Date and in substantially the form of Exhibit K hereto, issued by the Company to a Seller.

(d) Exhibit A to this Amendment is hereby added to the Merger Agreement as new Schedule 1.02(a) to the Merger Agreement.

(e) Exhibit B to this Amendment is hereby added to the Merger Agreement as new Exhibit K to the Merger Agreement.

(f) Section 3.05(b) of the Merger Agreement is hereby amended to read in its entirety as follows:

(b) The remainder of the Closing Payment shall be delivered to the Sellers’ Representative who shall distribute such amount in the following manner: Each Seller shall receive (i) the Junior Subordinated Note issued to such Seller by the Company in the original principal amount set forth opposite such Seller’s name on Schedule 1.02(a) and (ii) a cash amount equal to the number of Merger Shares owned by such Seller multiplied by the Per Share Closing Payment less such Seller’s pro-rata portion of the Escrow Amount based on his or her Ownership Percentage as set forth on Exhibit A hereto and less the original principal amount of the Junior Subordinated Note delivered to such Seller pursuant to clause (i) of this Section 3.05(b).

(g) A new sentence is added to the end of Section 7.05 of the Merger Agreement, which sentence shall read in its entirety as follows:

This release shall not apply to, or otherwise limit, restrict or affect, the obligations of the Company set forth in the Junior Subordinated Notes.

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(h) Section 12.04(a) of the Merger Agreement is hereby amended to read in its entirety as follows:

(a) By the execution and delivery of this Agreement, each Seller hereby irrevocably constitutes and appoints Jerry W. Throgmartin as the initial true and lawful agent and attorney-in-fact (the “Sellers’ Representative”) of the Sellers, and of each Seller, with full authority and power of substitution to act (in the judgment of the Sellers’ Representative) in the name, place and stead of the Sellers with respect to any amendment of, or action, decision, proceeding or performance of any obligation that is required of, or may otherwise be taken or brought by, any Seller pursuant to, or in connection with, this Agreement or the Junior Subordinated Notes, in each case both before and after the consummation of the transactions contemplated hereunder. Each Seller agrees that any action that such Seller may otherwise take with regard to this Agreement or such Junior Subordinated Note shall be taken exclusively by the Sellers’ Representative and such Seller shall not personally take any such action.

1.2 Elimination of EBITDA Adjustment.

(a) Section 2.02 and Exhibit E of the Merger Agreement are hereby deleted in their entirety and replaced with the words “intentionally omitted.”

(b) Section 9.01(h) and Section 9.01(i) of the Merger Agreement are hereby deleted in their entirety.

(c) The defined term “2004 EBITDA” is hereby deleted in its entirety from Article XI of the Merger Agreement.

(d) All references to Section 2.02 or any subsection thereof contained in Section 2.01, Section 10.07 and Section 10.09 of the Merger Agreement are hereby deleted.

1.3 Rollover Investment Amount.

(a) Section 2.01(g) of the Merger Agreement is hereby amended to read in its entirety as follows:

(g) less Twenty-Seven Million, Seven Hundred Eighty-Six Thousand, One Hundred Dollars ($27,786,100) (the “Rollover Investment Amount”).

(b) The definition of “Retained Shares” in Article XI of the Merger Agreement is hereby amended to read in its entirety as follows:

“Retained Shares” shall mean such number of Shares as shall equal the quotient of $27,786,100 divided by the Per Share Closing Payment, with 55% of such Retained Shares being allocated to Jerry W. Throgmartin, 25% of such Retained Shares being allocated to

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Gregg William Throgmartin and 20% of such Retained Shares being allocated to Dennis L. May.

1.4 Extension of Termination Date. Clause (i) of Section 9.01(d) of the Merger Agreement is hereby amended to read in its entirety as follows: “(i) February 11, 2005 and.”

1.5 Definition of Current Liabilities. The second sentence of the defined term “Current Liabilities” in Article XI of the Merger Agreement is hereby amended to read in its entirety as follows:

Solely for purposes of determining Net Working Capital, Current Liabilities also shall include the following items regardless of their classification in the internally prepared financial statements and the New 2004 Audited Financial Statements: (i) accrued pension fund (SERP), and (ii) the current and long term servicing costs portion of deferred revenue on Extended Service Plans, calculated as 20% of the total long term and short term deferred revenue on Extended Service Plans.

1.6 Preparation of Working Capital Statements.

(a) Clause (i) of the second sentence of Section 2.03(a) and clause (i) of the second sentence of Section 2.03(b) of the Merger Agreement are each hereby amended to read in its entirety as follows:

(i) except as expressly set forth in the definition of Net Working Capital in Article XI, be prepared in accordance with GAAP and provide for the true up of all reserves, in all cases using the same accounting principles, practices and methodologies, consistently applied, that were used to prepare the New 2004 Audited Financial Statements,

(b) The first sentence of the defined term “Net Working Capital” in Article XI of the Merger Agreement is hereby amended to read in its entirety as follows:

“Net Working Capital” on a given date shall mean the sum of all Current Assets minus the sum of all Current Liabilities, as defined, and reflected on the internally prepared financial statements, each as determined in accordance with GAAP and consistent with the New 2004 Audited Financial Statements, except that the internally prepared financial statements on any given date (i) may exclude normal year-end adjustments including, but not limited to, executive bonuses and the inventory vendor rebate adjustment recorded in accordance with EITF 02-16 “Accounting by a Customer for Certain Consideration Received from a Vendor” and (ii) shall exclude the assets, liabilities and results of operations of all entities other than the Company and HHG Distributing, LLC.

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1.7 Expansion of Stock Option Pool. Section 6.21 of the Merger Agreement is hereby amended to read in its entirety as follows:

Section 6.21. Stock Option Plan. Prior to the Closing, Investor and the Company shall cooperate to establish a Stock Option Plan (the “Plan”) under which a number of shares of Common Stock equal to twelve percent (12%) of the number of outstanding shares of Common Stock as of the Closing (the “Initial Share Number”) will be reserved for the following contemplated future grants: (i) options representing six percent (6.0%) of the Initial Share Number will be granted at an exercise price equal to the fair market value of the Company’s Common Stock as of the Closing, (ii) options representing three percent (3.0%) of the Initial Share Number will be granted at an exercise price equal to one hundred fifty percent (150%) of the fair market value of the Company’s Common Stock as of the Closing Date, and (iii) options representing three percent (3.0%) of the Initial Share Number will be granted at an exercise price equal to two hundred percent (200%) of the fair market value of the Company’s Common Stock as of the Closing Date. Three percent (3.0%) of the Initial Share Number will also be reserved for future grants so that the Plan will cover a number of shares of Common Stock equal to fifteen percent (15.0%) of the Initial Share Number. The shares of Common Stock subject to options granted under the Plan will become exercisable in three equal annual installments with the first installment exercisable one year from the date of grant and have a term of seven years from the date of grant. The terms and conditions of the Plan and the options to be granted thereunder will be determined by Investor.

1.8 Asbestos Maintenance Plan. A new Section 6.22 is hereby added to the Merger Agreement, which section shall read in its entirety as follows:

Section 6.22. Asbestos Maintenance Plan. Prior to the Closing, the Company shall create and adopt, at the Sellers’ sole cost and expense, an asbestos maintenance plan, in a form reasonably satisfactory to Investor, for its Brooklyn, Ohio facility.

1.9 Advisory Services Agreement. Clause (i) of Section 2 of the form of Advisory Services Agreement attached to the Merger Agreement as Exhibit J is hereby amended to read in its entirety as follows: “(i) pay to FS a one-time nonrefundable fee of $4,250,000, and”.

1.10 Additional Amendments. The second sentence of Section 12.10 of the Merger Agreement is hereby amended to read in its entirety as follows:

There are no verbal agreements, representations, warranties, undertakings or agreements between the parties, and this Agreement may not be amended or modified in any respect, except by a written instrument signed by Investor, the Merger Sub, the Company and the Sellers’ Representative.

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1.11 Restrictions on Certain Board Member Actions.

(a) A new sentence is hereby added to the end of Recital B of the Stockholders Agreement, which sentence shall read in its entirety as follows:

The Existing Stockholders also shall receive the Junior Subordinated Notes (as defined in the Merger Agreement) as consideration in the Merger and Section 7.1(f) below will govern certain actions of the Company and the Investor Parties with respect to such instruments.

(b) A new Section 7.1(f) is hereby added to the form of Stockholders Agreement attached to the Merger Agreement as Exhibit I, which new Section shall read in its entirety as follows:

(f) The Investor Parties will not take any action and will not cause or authorize Investor Nominees who are FS Existing Stockholders or who are employees or members of Freeman Spogli & Co., LLC or Freeman Spogli & Co. V, L.P. and its general partner Freeman Spogli & Co. V, LLC to take any action, that would violate Sections 1.07(d) or (e) of the Junior Subordinated Note. The Investor Parties shall refund to the Company any property received from the Company in violation of Sections 1.07(d) or (e) of the Junior Subordinated Note

(c) A new Section 7.1(g) is hereby added to the form of Stockholders Agreement attached to the Merger Agreement as Exhibit I, which new Section shall read in its entirety as follows:

(g) The Investor Parties will not and will not cause or authorize Investor Nominees who are FS Existing Stockholders or who are employees or members of Freeman Spogli & Co., LLC or Freeman Spogli & Co. V, L.P. and its general partner Freeman Spogli & Co. V, LLC to approve any resolution or issue or approve any order to any officer or employee of the Company that prohibits or restricts the payment of any cash interest payment otherwise payable to a holder of a Junior Subordinated Note in accordance with the terms of the Junior Subordinated Note, unless such Investor Nominees determine in good faith at a duly noticed meeting of the Board of Directors that it is in the best interests of the Company and its stockholders to restrict or prohibit the payment of such cash interest.

1.12 Limitation on Sales in Public Offerings. A new sentence is hereby added to the end of Section 5.1 of the form of Registration Rights Agreement attached to the Merger Agreement as Exhibit H, which new sentence shall read in its entirety as follows:

In addition, no Person may participate in any underwritten registration hereunder unless all Junior Subordinated Notes (as defined in the Merger Agreement) have been repaid in full or will be repaid in full in connection with the public offering effected pursuant to such registration; provided, however, that this sentence shall not apply to any limited partner of FS

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Equity Partners V, L.P. that purchases common stock of the Company in connection with the Merger or from the Investor after the consummation of the Merger.

2. FS Commitment Letter. The parties hereto acknowledge and agree that the FS Commitment Letter shall be amended to reduce each of the committed investment in Investor and the committed capital contribution to Merger Sub to $111,213,900.

3. Accommodation of Subsequent Transfers by Investor. The Company and Jerry W. Throgmartin, on his own behalf and on behalf of all necessary Sellers (in his capacity as Sellers’ Representative), shall execute such amendments to the Stockholders Agreement and the Registration Rights Agreement, and take such other actions, in each case as are reasonably necessary to allow any limited partner of FS Equity Partners V, L.P. that purchases common stock of the Company in connection with the Merger or from Investor after the consummation of the Merger to participate on a pro rata basis in rights granted to Investor thereunder, including, but not limited to, registration rights, rights of first refusal and rights with respect to the issuance of additional securities and the transfers of shares, and to be granted any other reasonable and customary rights requested by such limited partner, other than veto rights over major transactions.

4. Miscellaneous.

4.1 Effect of Amendment. Except as otherwise expressly provided herein, the Merger Agreement shall remain unchanged and shall continue in full force and effect. From and after the date hereof, any references to the Merger Agreement shall be deemed to be references to the Merger Agreement as amended by this Amendment.

4.2 Successors and Assigns. The terms and conditions of this Amendment shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

4.3 Governing Law. This Amendment shall be interpreted and enforced in accordance with, and its validity and performance shall be governed by, the laws of the State of Delaware without regard to its laws regarding conflicts of laws.

4.4 Counterpart Execution. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

4.5 Facsimile Signatures. This Amendment may be executed by any party by delivery of a facsimile signature, which signature shall have the same force and effect as an original signature.

[remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have duly executed this First Amendment to Agreement and Plan of Merger as of the date first above written.

“INVESTOR”
GREGG INVESTMENT CORPORATION, LLC
By:	FS Equity Partners V, L.P.
Its:	Managing Member
	By:	FS Capital Partners V, LLC
	Its:	General Partner
		By:	/s/ John M. Roth
			Name:	John M. Roth
			Title:	Managing Member
“MERGER SUB”
GIC CORPORATION
		By:	/s/ John M. Roth
			Name:	John M. Roth
			Title:	Chief Executive Officer
“COMPANY”
GREGG APPLIANCES, INC.
		By:	/s/ Jerry W. Throgmartin
			Name:	Jerry W. Throgmartin
			Title:	Chairman and Chief Executive Officer

[signatures continue on next page]

S-1

“SELLERS”

By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin

By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin
By:	/s/ Kelli Throgmartin Ball
	Name:	Kelli Throgmartin Ball
By:	/s/ Sandra M. Throgmartin
	Name:	Sandra M. Throgmartin
By:	/s/ Janice K. Malone
	Name:	Janice K. Malone
By:	/s/ Monica L. Adams
	Name:	Monica L. Adams
By:	/s/ William G. Throgmartin
	Name:	William G. Throgmartin
By:	/s/ Dennis L. May
	Name:	Dennis L. May
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin,   as trustee of the Jerry W. Throgmartin   Charitable Trust
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin,   as trustee of the Jerry W. Throgmartin   Irrevocable Trust   for the benefit of Christy and   Nicky Throgmartin

S-2

EX-2.3

Exhibit 2.3

SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER

This SECOND AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this “Amendment”) is made as of this 31st day of January 2005, by and among Gregg Investment Corporation, LLC, a Delaware limited liability company (“Investor”), GIC Corporation, an Indiana corporation (the “Merger Sub”), Gregg Appliances, Inc., an Indiana corporation (the “Company”), and Jerry W. Throgmartin, an individual residing in the State of Indiana, in his capacity as Sellers’ Representative. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to them in the Merger Agreement (as defined below).

RECITALS

WHEREAS, Investor, Merger Sub, the Company and the Sellers are parties to that certain Agreement and Plan of Merger, dated as of October 19, 2004, as amended by that certain First Amendment To Agreement and Plan of Merger dated January 13, 2005 (the “Merger Agreement”), providing for the merger of Merger Sub with and into the Company on the terms and subject to the conditions set forth therein; and

WHEREAS, the parties hereto desire to amend the Merger Agreement in accordance with Section 12.10 thereof.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Amendments to Merger Agreement.

1.1 January 31, 2005 Calculation Date.

(a) Section 2.01(b) of the Merger Agreement is hereby amended to read in its entirety as follows: “(b) plus an amount equal to the Cash on January 31, 2005;”.

(b) Section 2.01(c) of the Merger Agreement is hereby amended to read in its entirety as follows: “(c) less the amount of Debt outstanding on January 31, 2005;”.

(c) The first sentence of Section 2.03(a) of the Merger Agreement is hereby amended to read in its entirety as follows:

No later than two (2) Business Days prior to the Closing, the Sellers’ Representative shall deliver to Investor a statement (the “Preliminary Working Capital Statement”) setting forth the Net Working Capital as of January 31, 2005.

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(d) The first sentence of Section 2.03(b) of the Merger Agreement is hereby amended to read in its entirety as follows:

As soon as practicable after the Closing but no later than sixty (60) Business Days after the Closing Date, Investor shall deliver to the Sellers’ Representative a final calculation of the Net Working Capital as of January 31, 2005 (the “Final Working Capital Statement”).

(e) The first sentence of Section 2.03(c) of the Merger Agreement is hereby amended to read in its entirety as follows:

If the Sellers’ Representative disagrees with any item set forth on the Final Working Capital Statement or the calculation of Net Working Capital based thereon, the parties shall work together to resolve any such disagreements, including, but not limited to, providing each other with such financial information regarding the Company as of January 31, 2005 as each may reasonably request.

(f) A new Section 6.23 is hereby added to the Merger Agreement, which Section shall read in its entirety as follows:

Section 6.23. Restriction on Cash Disbursements. The Sellers covenant and agree with Investor and Merger Sub that they shall not, and shall cause the Company and each of its subsidiaries not to, make any disbursement of Cash from any bank account of the Company or any of its subsidiaries, except to pay ordinary course of business expenses consistent with past practice, during the period beginning on January 31, 2005 and continuing through the end of the Closing Date, and except for disbursements made on the Closing Date in connection with the Closing Payment, stock appreciation rights, the stock option held by Dennis L. May, Debt owed to National City Bank of Indiana, fees payable to KeyBanc Capital Markets or its Affiliates, fees payable to Freeman Spogli & Co. V, L.P., fees payable to the Escrow Agent and fees payable in connection with the debt financing described in the Wachovia Commitment Letter.

1.2 Delivery of Purchase Price Allocation.

(a) The final sentence of Section 2.04(a) of the Merger Agreement is hereby amended to read in its entirety as follows:

Investor shall prepare the final allocation in accordance with Schedule 2.04(a) as of January 31, 2005, which final allocation shall be delivered no later than fifteen (15) days after the Final Working Capital Statement has been deemed finalized, but in any event thirty (30) days prior to the date on which the Form 8023 referred to in Section 2.04(b) is required to be filed with the Internal Revenue Service. Sellers and Investor will execute and deliver the Form 8023 in connection with the 338(h)(10) election for

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federal income tax purposes contemplated by Section 2.04(b), as well as any other equivalent election for state tax purposes as soon as practicable after delivery thereof by Investor and in any event at least ten (10) days before the Form 8023 or such equivalent election is required to be filed.

(b) Section 3.03(h) and Section 3.04(d) of the Merger Agreement are hereby deleted in their entirety.

1.3 Termination of Stock Appreciation Rights and Stock Options.

(a) Section 2.01(e) of the Merger Agreement is hereby amended to read in its entirety as follows:

(e) less the amount of all cash payments paid, or payable, by the Company to (i) holders of stock appreciation rights set forth on Schedule 4.04 in connection with the exercise or termination of such stock appreciation rights, and (ii) Dennis L. May in connection with the termination of his stock option;

(b) Section 6.14 of the Merger Agreement is hereby amended to read in its entirety as follows:

Section 6.14. Termination of Options. All outstanding options to purchase securities of the Company shall be terminated concurrently with, or prior to, the Closing.

(c) Exhibit A to the Merger Agreement is hereby amended as follows: (i) the number set forth opposite Dennis L. May in the “Owned Shares” column shall read “45,000” instead of “90,000”, (b) the total of the “Owned Shares” column shall read “945,000” instead of “990,000”, and (c) the footnote at the bottom of Exhibit A is hereby deleted in its entirety.

(d) All references to “990,000” in paragraph B.2. of Article IV of the Articles of Merger attached to the Merger Agreement as Exhibit B are hereby amended to read “945,000”.

1.4 Additional Indemnification.

(a) The “or” immediately preceding clause (vi) of Section 10.02 of the Merger Agreement is hereby deleted and an additional clause is hereby added to the end of such Section, which clause shall read in its entirety as follows:

(vii) the failure of the Company to obtain the consent of Citicorp Leasing, Inc. listed as number 32 on Schedule 3.01(b), which shall no longer be a condition to Closing as provided in Section 3.01(b); provided, however, that Sellers’ indemnification obligations pursuant to this clause (vii) shall be subject to the Minimum Loss and Indemnification Cap limitations set forth in Section 10.06.

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(b) An additional sentence is hereby added to the end of Section 10.02 of the Merger Agreement, which sentence shall read in its entirety as follows:

In addition, that certain e-mail of February 1, 2005 to Steven M. Humke from Richard J. Welch regarding certain ERISA matters is hereby incorporated by reference into this Section 10.02 as if fully set forth herein and Sellers agree to the indemnification obligations as set forth therein.

1.5 No Physical Inventory. Clause (ii) of the second sentence of Section 2.03(a) of the Merger Agreement and Clause (ii) of the second sentence of Section 2.03(b) of the Merger Agreement, each are hereby deleted in their entirety and the following clause (iii) in each such section shall be renumbered as clause (ii). Investor waives the requirement of a physical inventory in the determination of Net Working Capital.

1.6 Retained Shares. The definition of “Retained Shares” in Article XI of the Merger Agreement is hereby amended to read in its entirety as follows:

“Retained Shares” shall mean such number of Shares as shall equal the quotient of $27,786,100 divided by the Per Share Closing Payment, rounded to the nearest whole Share, with 55% of such Retained Shares being allocated to Jerry W. Throgmartin, 25% of such Retained Shares being allocated to Gregg William Throgmartin and 20% of such Retained Shares being allocated to Dennis L. May, in each case allocated to the nearest whole Share.”

1.7 Junior Subordinated Note. The final form of Junior Subordinated Note to be attached as Exhibit K to the Merger Agreement is attached as Exhibit A to this Amendment.

2. Advisory Services Agreement. The parties hereto acknowledge and agree that, notwithstanding the form attached as Exhibit J to the Merger Agreement, the Advisory Services Agreement between the Company and Freeman Spogli & Co V, L.P. (“FS”) shall be amended to reduce the one-time non-refundable fee payable to FS immediately following the Closing to $4,000,000 and to provide for a separate payment of $250,000 to be made directly to Peter M. Starrett upon his investment in Investor.

3. Reduce the one-time non-refundable fee payable to FS immediately following the Closing to $4,000,000 and to provide for a separate payment of $250,000 to be made directly to Peter M. Starrett upon his investment in Investor.

4. Miscellaneous.

4.1 Effect of Amendment. Except as otherwise expressly provided herein, the Merger Agreement shall remain unchanged and shall continue in full force and effect. From and after the date hereof, any references to the Merger Agreement shall be deemed to be references to the Merger Agreement as amended by this Amendment.

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4.2 Successors and Assigns. The terms and conditions of this Amendment shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns.

4.3 Governing Law. This Amendment shall be interpreted and enforced in accordance with, and its validity and performance shall be governed by, the laws of the State of Delaware without regard to its laws regarding conflicts of laws.

4.4 Counterpart Execution. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

4.5 Facsimile Signatures. This Amendment may be executed by any party by delivery of a facsimile signature, which signature shall have the same force and effect as an original signature.

[remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties have duly executed this Second Amendment to Agreement and Plan of Merger as of the date first above written.

“INVESTOR”
GREGG INVESTMENT CORPORATION, LLC
By:	FS Equity Partners V, L.P.
Its:	Managing Member
	By:	FS Capital Partners V, LLC
	Its:	General Partner
		By:	/s/ John M. Roth
			Name:	John M. Roth
			Title:	Managing Member
“MERGER SUB”
GIC CORPORATION
		By:	/s/ John M. Roth
			Name:	John M. Roth
			Title:	Chief Executive Officer
“COMPANY”
GREGG APPLIANCES, INC.
		By:	/s/ Jerry W. Throgmartin
			Name:	Jerry W. Throgmartin
			Title:	Chairman and Chief
				Executive Officer
“SELLERS”
		By:	/s/ Jerry W. Throgmartin
			Name:	Jerry W. Throgmartin
			Title:	Sellers’ Representative

6

EX-2.4

Exhibit 2.4

INCORPORATION AND EXCHANGE AGREEMENT

by and among

GREGG APPLIANCES, INC.

GREGG INVESTMENT CORPORATION, LLC,

THE JERRY W. THROGMARTIN 2007 GRANTOR RETAINED ANNUITY TRUST,

JERRY W. THROGMARTIN,

GREGG WILLIAM THROGMARTIN,

DENNIS L. MAY,

FS EQUITY PARTNERS V, L.P.,

FS AFFILIATES V, L.P.,

CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM,

A.S.F. CO-INVESTMENT PARTNERS II, L.P.,

and

hhgregg, Inc.

APRIL 12, 2007

TABLE OF CONTENTS

				Page
ARTICLE I		DEFINITIONS		2
	Section 1.01		Definitions	2
ARTICLE II		EXCHANGE		4
	Section 2.01		Exchange of GA Common Stock for Company Common Stock by GIC	4
	Section 2.02		Exchange of GA Common Stock for Company Common Stock by Management Stockholders	4
	Section 2.03		Assumption of GA Options by the Company	5
	Section 2.04		Registration Rights Agreement	5
	Section 2.05		Closing	5
	Section 2.06		Termination of Prior Agreements	5
	Section 2.07		Dissolution of GIC	5
	Section 2.08		Distribution of Company Common Stock with respect to the GIC Restricted Units upon the Dissolution of GIC	6
	Section 2.09		Further Assurances by GIC Members	6
ARTICLE III		RESTRICTIVE LEGENDS		6
	Section 3.01		Restrictive Legends	6
ARTICLE IV		REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS		7
	Section 4.01		Ownership and Capital Structure	7
	Section 4.02		Investment Intent	7
	Section 4.03		Authority	7
	Section 4.04		No Conflict	8
ARTICLE V		REPRESENTATIONS AND WARRANTIES OF THE COMPANY		8
	Section 5.01		Organization	8
	Section 5.02		Capitalization	8
	Section 5.03		Valid Issuance of Securities	8
	Section 5.04		Authority	8
	Section 5.05		No Conflict	9
ARTICLE VI		CONDITIONS PRECEDENT TO CLOSING		9
	Section 6.01		Dissolution of GIC	9
	Section 6.02		Accuracy of the Company’s Representations and Warranties	9
	Section 6.03		Performance by the Company	9
	Section 6.04		Certification by the Company	10

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	Section 6.05		Accuracy of the Stockholders’ Representations and Warranties	10
	Section 6.06		Performance by the Stockholders	10
	Section 6.07		Certification by the Stockholders	10
	Section 6.08		Exchange of Securities	10
ARTICLE VII		TERMINATION		10
	Section 7.01		Termination	10
ARTICLE VIII		TRANSFER TAXES AND OTHER FEES		10
	Section 8.01		Transfer Taxes and Other Fees	10
ARTICLE IX		MISCELLANEOUS		11
	Section 9.01		Notices	11
	Section 9.02		Fulfillment of Conditions	12
	Section 9.03		Survival	12
	Section 9.04		Amendments, Modifications and Waivers	12
	Section 9.05		Stock Split	12
	Section 9.06		Successors and Assigns; Enforceability by Stockholders	12
	Section 9.07		Severability	12
	Section 9.08		Captions	12
	Section 9.09		Entire Agreement	13
	Section 9.10		Governing Law	13
	Section 9.11		Consent to Jurisdiction; Service of Process; Waiver of Jury Trial	13
	Section 9.12		Director and Officer Liability Insurance	13
	Section 9.13		Indemnification of FSEP V	13
	Section 9.14		Lock-Up	14
	Section 9.15		Remedies	14
	Section 9.16		Counterparts	14

ii

INCORPORATION AND EXCHANGE AGREEMENT

This Incorporation and Exchange Agreement (the “Agreement”) is made as of this 12^th day of April 2007 by and among Gregg Appliances, Inc., an Indiana corporation (“Gregg Appliances”), Gregg Investment Corporation, LLC, a Delaware limited liability company (“GIC”), Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May (each of such three individuals, a “Management Stockholder” and, collectively, the “Management Stockholders”), the Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust (the “J. Throgmartin Trust”), FS Equity Partners V, L.P., a Delaware limited liability company and the managing member of GIC (“FSEP V”), FS Affiliates V, L.P., a Delaware limited partnership (“FSA V”), California State Teachers’ Retirement System, a government pension plan (“Cal STRS”), A.S.F. Co-Investment Partners II, L.P., a Delaware limited partnership (“ASF” and, collectively with FSEP V, FSA V and Cal STRS, the “GIC Members”) and hhgregg, Inc., a Delaware corporation (the “Company”) with reference to the following background.

RECITALS

WHEREAS, the parties hereto deem it advisable and in their best interests to form the Company for purposes of effecting an initial public offering of Company Common Stock pursuant to a registration statement (the “Registration Statement”) to be filed with and declared effective by the SEC;

WHEREAS, pursuant to the transactions contemplated hereby, Gregg Appliances will become a wholly owned subsidiary of the Company and the Company will obtain the benefits and certainty of Delaware General Corporation Law with respect to the Company’s corporate governance and corporate and stockholder matters;

WHEREAS, GIC owns 80.5% of the issued and outstanding common stock of Gregg Appliances, and the Management Stockholders and the J. Throgmartin Trust own in the aggregate 19.5% of the issued and outstanding common stock of Gregg Appliances, and FSEP V owns a majority of the outstanding Units of GIC and is GIC’s managing member;

WHEREAS, pursuant to the terms of this Agreement, immediately prior to the effectiveness of the Registration Statement, GIC and the Management Stockholders wish to exchange their respective shares of GA Common Stock (the “Exchange”) for an equivalent number of shares of the Company Common Stock;

WHEREAS, pursuant to the terms of this Agreement, the Management Stockholders and the holders of options to purchase shares of GA Common Stock (the “GA Options”) listed on Schedule A hereto (collectively, the “Optionholders” and each, an “Optionholder”) will have their GA Options assumed by the Company;

WHEREAS, immediately prior to the effectiveness of the Registration Statement, Gregg Appliances will be a wholly owned subsidiary of the Company;

WHEREAS, the GIC Members, immediately prior to the effectiveness of the Registration Statement, wish to (i) dissolve GIC and (ii) distribute the shares of Company Common Stock held by GIC to its members in proportion to their ownership of outstanding Units of GIC; and

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WHEREAS, pursuant to the terms of this Agreement, immediately prior to the effectiveness of the Registration Statement, the holders of restricted units of GIC (the “GIC Restricted Units”) listed on Schedule A hereto (collectively, the “Restricted Unitholders” and each, a “Restricted Unitholder”) will be distributed shares of Company Common Stock, which shares of Company Common Stock will be subject to substantially equivalent terms and conditions applicable to the GIC Restricted Units.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and of the mutual agreements hereinafter contained, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. As used in this Agreement, the following terms have the following meanings:

“Affiliate” means with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Assumed Options” shall have the meaning set forth in Section 2.03(a).

“Agreement” means this Incorporation and Exchange Agreement, as amended from time to time.

“Board” means the Board of Directors of the Company.

“Claims” shall have the meaning set forth in Section 9.13.

“Closing” shall have the meaning set forth in Section 2.05.

“Closing Date” shall have the meaning set forth in Section 2.05.

“Code” means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law).

“Company Common Stock” means the common stock of the Company, $0.0001 par value per share.

“Contractual Obligation” shall have the meaning set forth in Section 4.04.

“Exchange” shall have the meaning set forth in the recitals.

“GA Common Stock” means the common stock of Gregg Appliances, without par value.

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“GA Option Plan” means the 2005 Stock Option Plan dated March 8, 2005 of Gregg Appliances, as amended.

“GA Options” shall have the meaning set forth in the recitals.

“GIC Members” shall have the meaning set forth in the preamble.

“GIC Restricted Units” shall have the meaning set forth in the recitals.

“Governmental Authority” shall have the meaning set forth in Section 4.03.

“Indemnitee” shall have the meaning set forth in Section 9.13.

“IPO” means the initial sale of Company Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).

“Management Stockholder(s)” shall have the meaning set forth in the preamble.

“Optionholder(s)” shall have the meaning set forth in the recitals.

“Person” means an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

“Prior Agreements” shall have the meaning set forth in Section 2.06.

“Registration Rights Agreement” shall have the meaning set forth in Section 4.03.

“Registration Statement” shall have the meaning set forth in the recitals.

“Restricted Unitholder” shall have the meaning set forth in the preamble.

“Restricted Unit Purchase Agreement” means any agreement pursuant to which GIC issued GIC Restricted Units.

“Requirement of Law” shall have the meaning set forth in Section 4.04.

“SEC” means the U.S. Securities and Exchange Commission.

“Secondary Offering” shall have the meaning set forth in Section 2.01.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder by the SEC from time to time.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Stockholders” means GIC, the Management Stockholders and, upon dissolution of GIC, the GIC Members.

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“Subsidiary” of any entity means (i) a corporation a majority of whose capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such entity, by one or more Subsidiaries of such entity or by such entity and one or more Subsidiaries of such entity or (ii) any other entity (other than a corporation) in which such entity, a subsidiary of such entity or such entity and one or more subsidiaries of such entity, directly or indirectly, at the date of determination thereof, has (x) at least a majority ownership interest or (y) the power to elect or direct the election of the directors or other governing body of such entity.

“Units” means the Series A and Series B Units of GIC.

ARTICLE II

EXCHANGE

Section 2.01 Exchange of GA Common Stock for Company Common Stock by GIC. On the terms and subject to the conditions of this Agreement, at the Closing, the Company hereby agrees to issue to GIC shares of Company Common Stock (based on an exchange ratio of one (1) share of Company Common Stock to one (1) share of GA Common Stock) registered in GIC’s name and for the number of shares of GA Common Stock set forth on Schedule 2.01 hereto in exchange for shares of GA Common Stock, which are all of the shares of GA Common Stock held by GIC. At the Closing (as hereinafter defined), GIC shall deliver to the Company certificates evidencing the GA Common Stock so exchanged, duly endorsed for transfer or accompanied by stock powers or assignments duly executed with all necessary stock transfer stamps attached thereto. The parties hereto agree and acknowledge that shares of Company Common Stock may be sold in the IPO by the GIC Members (the “Secondary Offering”) and in connection with the underwriters’ exercise of an over-allotment option.

Section 2.02 Exchange of GA Common Stock for Company Common Stock by Management Stockholders. On the terms and subject to the conditions of this Agreement, at the Closing, the Company hereby agrees to issue to:

(a) Jerry W. Throgmartin 1,528,250 shares of Company Common Stock (based on an exchange ratio of one (1) share of Company Common Stock to one (1) share of GA Common Stock) registered in the name of Jerry W. Throgmartin;

(b) Gregg William Throgmartin 694,653 shares of Company Common Stock (based on an exchange ratio of one (1) share of Company Common Stock to one (1) share of GA Common Stock) registered in the name of Gregg William Throgmartin; and

(c) Dennis L. May 555,709 shares of Company Common Stock (based on an exchange ratio of one (1) share of Company Common Stock to one (1) share of GA Common Stock) registered in the name of Dennis L. May.

At the Closing, each of the Management Stockholders shall deliver to the Company certificates evidencing their respective number of shares of GA Common Stock and representing all of the shares of GA Common Stock held by such Management Stockholder, duly endorsed for transfer or accompanied by stock powers or assignments duly executed with all necessary stock transfer stamps attached thereto, in exchange for the shares of Company Common Stock as provided in this Section 2.02.

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Section 2.03 Assumption of GA Options by the Company. At the Closing, and upon the terms and subject to the conditions set forth in this Agreement:

(a) the Company shall assume each GA Option that is outstanding and unexercised immediately before the Closing, whether or not such GA Option is vested or exercisable, set forth opposite each Optionholder’s name on Schedule A hereto, and each such GA Option shall thereupon be converted into and become an option to purchase the same number of shares of Company Common Stock, and for the same exercise price per share, in accordance with the terms of the GA Option Plan and the terms of the stock option agreement by which such GA Option is evidenced, all as set forth on Schedule A hereto (the GA Options so assumed are hereafter referred to as the “Assumed Options”). Any restriction on the exercise of any Assumed Option shall continue in full force and effect, and the term, exercisability, vesting schedule and other provisions of such Assumed Option shall otherwise remain unchanged as a result of the assumption by the Company of such Assumed Option. After the Closing, each Assumed Option may be exercised solely to purchase shares of Company Common Stock;

(b) upon such assumption, no additional options will be issued under the GA Option Plan, but all Assumed Options will remain subject to the terms and conditions of the GA Option Plan; and the Board or a committee thereof shall succeed to the authority and responsibility of the board of directors of Gregg Appliances or any committee thereof with respect to each Assumed Option and shall interpret and administer the provisions of the GA Option Plan or any agreement pursuant thereto in a manner consistent herewith; and

(c) each Assumed Option shall, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, division or subdivision of shares, stock dividend, issuance of bonus shares, reverse stock split, consolidation of shares, reclassification, recapitalization or other similar transaction with respect to Company Common Stock subsequent to the Closing.

Section 2.04 Registration Rights Agreement. The Company and each of the Stockholders shall execute and deliver the Registration Rights Agreement in the form attached hereto as Exhibit 4.03, which shall automatically become effective upon the consummation of the Closing.

Section 2.05 Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take immediately prior to the effectiveness of the Registration Statement (the “Closing Date”) at a time and place determined by the Company and FSEP V. Upon consummation of the Closing, the Company will own 100% of the outstanding shares of GA Common Stock.

Section 2.06 Termination of Prior Agreements. The parties hereto agree that effective upon consummation of the Closing, each of the Prior Agreements shall be terminated and be of no further force and effect and no party thereto shall have any rights, claims or liabilities whatsoever relating to or arising from the Prior Agreements, each and all of which are hereby irrevocably and unconditionally expressly released and waived. The term “Prior Agreements” means each and all of the following, and any agreement entered into pursuant thereto or as an Exhibit or Appendix thereto: (i) the Stockholders Agreement relating to Gregg Appliances, entered into February 3, 2005, as amended, and the Registration Rights Agreement relating to the GA Common Stock, entered into February 3, 2005.

Section 2.07 Dissolution of GIC. The GIC Members, and FSEP V as managing member of GIC, hereby approve the dissolution of GIC, and FSEP V agrees to take all steps necessary to

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dissolve GIC at the Closing. Upon such dissolution, GIC hereby assigns to the Company all of its rights under the Restricted Unit Purchase Agreements pursuant to which the GIC Restricted Units were issued, and its rights under all related pledge agreements and promissory notes assigned to Gregg Appliances, Inc.

Section 2.08 Distribution of Company Common Stock with respect to the GIC Restricted Units upon the Dissolution of GIC. Upon the terms and subject to the conditions set forth in this Agreement, upon the dissolution of GIC, each Restricted Unitholder shall receive the number of shares of Company Common Stock set forth next to such Restricted Unitholder’s name on Schedule A hereto (as adjusted as appropriate for any stock split effected by the Company in connection with the IPO), which Company Common Stock shall be subject to terms and conditions substantially equivalent to the terms and conditions of the GIC Restricted Units, and which shares of Company Common Stock will be subject to the terms and conditions of the Restricted Unit Purchase Agreement under which the GIC Restricted Units were issued.

Section 2.09 Further Assurances by GIC Members. The GIC Members hereby agree to execute any and all documents reasonably required by FSEP V in connection with the dissolution of GIC.

ARTICLE III

RESTRICTIVE LEGENDS

Section 3.01 Restrictive Legends.

(a) It is understood and agreed that the certificates evidencing the shares of Company Common Stock to be delivered to GIC and the Management Stockholders at the Closing, and each certificate issued upon transfer thereof, shall bear the following legends, in addition to any other legends required by Delaware law:

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT.

(b) The Company agrees that it will issue new certificates for shares of Company Common Stock without the first sentence of the legend referred to in Section 3.01(a) to a Stockholder if the Stockholder demonstrates to the reasonable satisfaction of the Company, through, among other things, any of the actions referred to in clauses (i), (ii) or (iii) of the second sentence of Section 4.02 that such legend is not necessary under the Securities Act.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

Each Stockholder severally represents and warrants (as to itself or himself only) to the Company as follows:

Section 4.01 Ownership and Capital Structure.

(a) Other than as set forth on Schedule 4.01 hereto, such Stockholder does not hold any shares of GA Common Stock or securities convertible into or exchangeable for any shares of GA Common Stock or any rights to subscribe for or to purchase, or any warrants or options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) or, or any calls, commitments or claims of any character relating to any such shares of GA Common Stock.

(b) Such Stockholder is the lawful owner of the shares of GA Common Stock to be transferred by it hereunder, free and clear of all liens, encumbrances, restrictions and claims of every kind and has full legal right, power and authority to enter into this Agreement and to sell, assign, transfer and convey its shares of GA Common Stock pursuant to this Agreement; and, upon the transfer to the Company of such Stockholder’s shares of GA Common Stock pursuant to this Agreement the Company will hold valid title thereto free and clear of all liens, encumbrances, restrictions, preemptive rights, options and claims of every kind.

Section 4.02 Investment Intent. The shares of Company Common Stock to be acquired by such Stockholder hereunder, as applicable, (i) are being acquired by such Stockholder for its own account (as principal and not as trustee or agent, except as set forth on Schedule 4.02) and (ii) are not being acquired by such Stockholder with a view to, or for sale in connection with, any distribution thereof which is not in compliance with applicable securities laws. Such Stockholder hereby acknowledges that such shares of Company Common Stock may be transferred only upon (i) registration thereof under the Securities Act or (ii) furnishing to the Company a no-action letter or an opinion of experienced securities counsel to the effect that such transfer is in accordance with an available exemption from the registration requirements thereof or (iii) delivery of a certificate setting forth the basis for applying Rule 144 under the Securities Act to such transfer; and that none of the shares of Company Common Stock have been registered under the Securities Act.

Section 4.03 Authority. Such Stockholder has full legal right, power and authority to enter into and perform this Agreement, the Registration Rights Agreement to be executed and delivered on the Closing Date by and among the Company, FSEP V, the GIC Members and the Management Stockholders substantially in the form attached hereto as Exhibit 4.03 (the “Registration Rights Agreement”), and the execution and delivery of this Agreement and the Registration Rights Agreement by it or him, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary requisite action. Except for compliance with any applicable requirements of the Securities Act and the Securities Exchange Act, no consent, waiver or authorization of, or filing with any other person (including without limitation, any federal or state governmental authority or other political authority (collectively, “Governmental Authority”)) is required in connection with any of the foregoing or with the validity or enforceability against such Stockholder of this Agreement and the Registration Rights Agreement. Each of this Agreement and the Registration Rights Agreement has been duly executed and delivered by such Stockholder and constitutes the legal, valid and binding agreement of such Stockholder, enforceable against it or him in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and subject to general principles of equity.

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Section 4.04 No Conflict. The execution, delivery and performance of this Agreement and the Registration Rights Agreement, and the consummation of the transactions contemplated hereby and thereby, do not and will not, with or without the passage of time or the giving of notice or both, (i) conflict with or violate any provision of such Stockholder’s respective Certificate of Incorporation, By-laws, partnership agreement or other governing documents, as applicable, (ii) assuming compliance with the matters referred to in Section 4.03, conflict with or violate any applicable law, statute, treaty, rule, regulation, arbitration award, judgment, decree, order or other determination of any Governmental Authority (collectively, “Requirement of Law”) applicable to such Stockholder or any mortgage, security, lease franchise, agreement, guaranty, instrument or undertaking (collectively, “Contractual Obligation”) of such Stockholder or (iii) result in, or require, the creation or imposition of any lien charge or other encumbrance on any of its properties or revenues pursuant to any Requirement of Law or Contractual Obligation.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to each Stockholder as follows:

Section 5.01 Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Exhibit 5.01A hereto contains a true and correct copy of the Certificate of Incorporation of the Company as presently in effect, and Exhibit 5.01A hereto contains a true and correct copy of the By-laws of the Company, as presently in effect.

Section 5.02 Capitalization. The Company’s authorized capital stock consists of, and on the Closing Date will consist of, 150,000,000 shares of Company Common Stock and 10,000,000 shares of Preferred Stock, $0.0001 par value per share. Immediately after the Closing, the Company’s issued and outstanding capital stock will be as set forth on Schedule 5.02 hereto. Other than as set forth on Schedule 5.02, with respect to a new equity incentive plan to be adopted by the Company prior to the IPO, and the grant of equity incentives thereunder, with respect to the Assumed Options, and the shares to be issued in the IPO, there are no issued or outstanding options, warrants or other rights to acquire, or any outstanding securities or obligations convertible into or exchangeable for, any shares of the capital stock of the Company.

Section 5.03 Valid Issuance of Securities. The shares of Company Common Stock, when issued and delivered by the Company and paid for by the Stockholders pursuant to the terms of this Agreement, (i) will have been duly authorized, validly issued, fully paid and nonassessable, (ii) will be free and clear of all liens, encumbrances, equities and claims (other than securities law restrictions) and (iii) will be issued without violation of any preemptive rights.

Section 5.04 Authority. The Company has full legal right, power and authority (i) to enter into and perform this Agreement and the Registration Rights Agreement, including the issuance of the shares of Company Common Stock. The execution, delivery and performance of this Agreement and the Registration Rights Agreement by the Company, the issuance of the shares of Company Common Stock by the Company and the consummation by the Company of the transactions

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contemplated hereby and thereby have all been duly authorized by all necessary corporate action on the part of the Company, its Board and its stockholders. No consent, waiver or authorization of, or filing with any other person (including without limitation, any Governmental Authority) is required in connection with any of the foregoing or with the validity or enforceability against the Company of this Agreement, the Registration Rights Agreement and the shares of Company Common Stock, except for consents, waivers, authorizations or filings which if not obtained or made would not have a material adverse effect, and except for required securities filings. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and subject to general principles of equity. When executed and delivered by the Company, in accordance with the terms of this Agreement, the Registration Rights Agreement will have been duly executed and delivered by the Company and will constitute the legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and subject to general principles of equity.

Section 5.05 No Conflict. The execution, delivery and performance of this Agreement and the Registration Rights Agreement, and the consummation of the transactions contemplated hereby and thereby, do not and will not, with or without the passage of time or the giving of notice or both, (i) conflict with or violate any provision of the Company’s or Gregg Appliances’ Certificate of Incorporation or By-laws, (ii) conflict with or violate any Requirement of Law applicable to the Company or Gregg Appliances or any Contractual Obligation of the Company or Gregg Appliances, in each case in a manner which would have a material adverse effect or (iii) result in, or require, the creation or imposition of any lien, charge or other encumbrance on any of its properties or revenues pursuant to any Requirement of Law or Contractual Obligation.

ARTICLE VI

CONDITIONS PRECEDENT TO CLOSING

The obligations of the Stockholders and the Company hereunder are subject to the satisfaction or waiver, on or prior to the Closing Date, of all of the conditions set out below in Section 6.01. The obligations of the Stockholders hereunder are further subject to the satisfaction or waiver, on or prior to the Closing Date, of all of the conditions set forth below in Sections 6.02 through 6.04. The obligations of the Company hereunder are subject to the satisfaction or waiver, on or prior to the Closing Date, of all of the conditions set forth below in Sections 6.05 through 6.08.

Section 6.01 Dissolution of GIC. FSEP V, as managing member of GIC, shall have taken all necessary actions so that (i) GIC shall be dissolved at the Closing, and (ii) the shares of Company Common Stock held by GIC shall be distributed to its members in proportion to their ownership of outstanding Units of GIC.

Section 6.02 Accuracy of the Company’s Representations and Warranties. The representations and warranties of the Company set forth in this Agreement and in any of the documents and agreements entered into pursuant to this Agreement shall be true and correct in all material respects as of the Closing Date as if made on that date.

Section 6.03 Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, complied with, or satisfied by the Company on or prior to the Closing Date.

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Section 6.04 Certification by the Company. The Stockholders shall have received a certificate, dated the Closing Date, signed by the Company, certifying that the conditions specified in Sections 6.01, 6.03 and 6.04 have been fulfilled.

Section 6.05 Accuracy of the Stockholders’ Representations and Warranties. The representations and warranties of each of the Stockholders set forth in this Agreement and in any of the documents and agreements entered into pursuant to this Agreement shall be true and correct in all material respects as of the Closing Date as if made on that date.

Section 6.06 Performance by the Stockholders. The Stockholders shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, complied with, or satisfied by the Stockholders on or prior to the Closing Date.

Section 6.07 Certification by the Stockholders. The Company shall have received certificates, dated the Closing Date, signed by each of the Stockholders, certifying that the conditions specified in Sections 6.02, 6.06 and 6.07 have been fulfilled.

Section 6.08 Exchange of Securities. At the Closing, the Stockholders shall have delivered to the company certificates representing the shares of GA Common Stock, duly endorsed in blank, or accompanied by appropriate stock powers, in proper form for exchange pursuant to Section 2.01 with all necessary stock transfer stamps attached thereto.

ARTICLE VII

TERMINATION

Section 7.01 Termination. Notwithstanding anything to the contrary contained herein, this Agreement shall terminate and there shall be no liability or obligation on the part of the Company or the Stockholders or any of their respective Affiliates if the IPO is not consummated by November 1, 2007.

ARTICLE VIII

TRANSFER TAXES AND OTHER FEES

Section 8.01 Transfer Taxes and Other Fees. The Company will pay to each Stockholder an amount, if any, which, after deduction of all taxes imposed on the receipt or accrual thereof, will equal all transfer taxes (but not income, franchise or other taxes measured by receipts or income) which are payable in connection with the execution and delivery of this Agreement or the authorization and issuance of or exchange for the shares of Company Common Stock hereunder or in connection with any modification of this Agreement, and will indemnify and save each Stockholder harmless without limitation as to time, from and against any and all liabilities with respect to all such taxes, if any, and the Company agrees to pay to each Stockholder additional amounts which, after deduction of all taxes imposed on the receipt or accrual thereof, will ensure that each Stockholder incurs no greater cost or expense than it would have incurred had there been no such taxes payable. The Stockholders will cooperate with the Company to obtain a refund of any such taxes from governmental authorities, if applicable.

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ARTICLE IX

MISCELLANEOUS

Section 9.01 Notices. All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed duly given, unless otherwise expressly indicated to the contrary in this Agreement, (i) when personally delivered, (ii) upon receipt of a telephonic facsimile transmission with a confirmed telephonic transmission answer back, (iii) three (3) business days after having been deposited in the United States mail, certified or registered, return receipt requested, postage prepaid, or (iv) one (1) business day after having been dispatched by a nationally recognized overnight courier service, addressed to the parties or their permitted assigns at the following addresses:

if to Gregg Appliances, the Company, GIC, FSEP V or GIC Members:

Freeman Spogli & Co. Incorporated

299 Park Avenue

20th Floor

New York, New York 10171

Attention: John Roth and Ben Geiger

with a copy to:

Bingham McCutchen LLP

355 South Grand Avenue, Suite 4400

Los Angeles, California 90071-3106

Attention: Richard J. Welch, Esq.

if to the Management Stockholders:

c/o Jerry W. Throgmartin

4151 East 96^th Street

Indianapolis, Indiana 46240

Facsimile No.: (317) 848-8768

with a copy to:

Ice Miller LLP

One American Square

Suite 3100

Indianapolis, Indiana 46282-0002

Facsimile No.: (317) 592-4675

Attention: Steven K. Humke

or at such other address as a party may furnish in writing to each other party.

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Section 9.02 Fulfillment of Conditions. Each party will use their or its respective best efforts to perform, comply with and fulfill all obligations, covenants and conditions required by this Agreement to be performed, complied with or fulfilled by such party prior to or as of the Closing Date. Each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations (including, without limitation, in connection with obtaining any requisite approval) and to execute such agreements, powers of attorney or other documents or instruments to expeditiously consummate and make effective the transactions contemplated by this Agreement. In case at any time after the closing any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party to this Agreement shall take all such necessary action.

Section 9.03 Survival. All warranties, representations, and covenants made herein or in any certificate or other instrument delivered by the parties hereto or on their behalf under this Agreement shall be considered to have been relied upon and shall survive the delivery of the shares of Company Common Stock and payment therefor, regardless of any investigation made by any such party or on their behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by such party hereunder.

Section 9.04 Amendments, Modifications and Waivers. Any covenant, agreement, provision or condition of this Agreement may be amended or modified, or compliance therewith may be waived (either generally or in any particular instance and either retroactively or prospectively), by (and only by) an instrument in writing signed by the Company and Stockholders who hold (or will hold) more than fifty percent (50%) of the Company Common Stock issued or to be issued by the Company in the Exchange.

Section 9.05 Stock Split. All references to numbers of shares in this Agreement shall be appropriately adjusted to reflect any stock dividend, stock split, combination, recapitalization and other transactions affecting the Company Common Stock occurring after the date of this Agreement; and the terms and conditions of this Agreement shall apply to such adjusted numbers of shares of Company Common Stock.

Section 9.06 Successors and Assigns; Enforceability by Stockholders. This Agreement shall be so binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

Section 9.07 Severability. Should any part of this Agreement for any reason be declared invalid, such decision shall not affect the validity of any remaining portion which remaining portion shall remain in full force and effect as if this Agreement had been executed with the invalid portion thereto eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without included therein any such part or parts which may, for any reason, be hereafter declared invalid.

Section 9.08 Captions. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof.

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Section 9.09 Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof.

Section 9.10 Governing Law. This Agreement and the rights of the parties hereunder shall be interpreted in accordance with the laws of the State of Delaware, and all rights and remedies shall be governed by such laws without regard to principles of conflicts of laws.

Section 9.11 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.

(a) Any claim arising out of or relating to this Agreement or the transactions contemplated hereby may be instituted in any of the state or federal courts located in Delaware, and each party hereby agrees not to assert, by way of motion, as a defense or otherwise, in any such claim, that it, he or she is not subject personally to the jurisdiction of such court, that the claim is brought in an inconvenient forum, that the venue of the claim is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. Each party further irrevocably submits to the jurisdiction of such court in any such claim.

(b) Any and all service of process and any other notice in any such claim shall be effective against any party if given personally or by registered or certified mail, return receipt requested or by any other means of delivery that requires a signed receipt, postage prepaid, mailed to such party as herein provided. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY.

(d) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN SECTION 9.11(c), (ii) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS IN SECTION 9.11(c) AND THIS SECTION 9.11(d).

Section 9.12 Director and Officer Liability Insurance. The Company agrees to maintain, and shall cause each Subsidiary of the Company to maintain, in effect, at the expense of the Company, a director and officer insurance policy for the benefit of the Company or such Subsidiary and the directors and executive officers of the Company.

Section 9.13 Indemnification of FSEP V. The Company agrees to indemnify, defend and hold harmless to the fullest extent permitted by applicable law, FSEP V, its successors, assigns, partners and Affiliates, and each of FSEP V’s and such other persons’ employees, officers, directors,

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members, managers, partners, stockholders, agents, advisors, representatives and Affiliates (each an “Indemnitee”) from and against all claims, liabilities, causes of action, actions, suits, proceedings, investigations, judgments, decrees, losses, damages, fees, costs and expenses (including attorney fees and expenses of investigation and of enforcing the rights under this Section 9.13), whether incurred with respect to third parties or otherwise, arising out of, resulting from or in connection with, based upon or relating to, (A) the fact that an Indemnitee is or was a stockholder of the Company, (B) any action or inaction taken in such capacity or (C) any breach or alleged breach by an Indemnitee of any fiduciary duty as a stockholder of the Company (collectively “Claims”). The Company may participate in, but not assume the defense of or control the defense with respect to, any Claim. The Company shall advance all costs and expenses, including attorneys fees incurred by any Indemnitee in advance of any final disposition of a Claim within 30 days of receipt of a notice setting forth the amount of such costs and expenses, subject to receipt of an undertaking to repay such advances if such Indemnitee is finally determined not to be entitled to indemnification by the Company. An Indemnitee may compromise, settle or resolve any Claim at the expense and risk of the Company. The Company may not settle, compromise or resolve any Claim without the consent of the affected Indemnitee, which consent shall not be unreasonably withheld.

Section 9.14 Lock-Up. Each Stockholder hereby agrees that it or he will enter into customary lock-up agreements as reasonably requested by the Company from time to time.

Section 9.15 Remedies. Each party to this Agreement acknowledges and agrees that in the event of any breach of this Agreement by any one of them, any of the parties, as the case may be, would be irreparably harmed and could not be made whole by monetary damages. Each party accordingly agrees (a) to waive the defense in any action for specific performance that a remedy at law would be adequate and (b) each party, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of this Agreement.

Section 9.16 Counterparts. This Agreement may be executed in any number of counterparts and by facsimile, each of which shall be considered an original, but all of which taken together shall constitute one instrument.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

GREGG APPLIANCES, INC.,
By:	/s/ Jerry W. Throgmartin
	Jerry W. Throgmartin
	Chairman and Chief Executive Officer
hhgregg, Inc.,
By:	/s/ Jerry W. Throgmartin
	Jerry W. Throgmartin
	Chairman and Chief Executive Officer
FS EQUITY PARTNERS V, L.P.
By:	FS Capital Partners V, LLC
Its:	General Partner
By:	/s/ John M. Roth
	John M. Roth
	Managing Member
FS AFFILIATES V, L.P.
By:	FS Capital Partners V, LLC
Its:	General Partner
By:	/s/ John M. Roth
	John M. Roth
	Managing Member
CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM
By:	/s/ Christopher J. Ailman
Name:	Christopher J. Ailman
Title:	Chief Investment Officer

A.S.F. CO-INVESTMENT PARTNERS II, L.P.
By:	PAF 1/03, LLC
Its:	General Partner
By:	OLD KINGS II, LLC
Its:	Managing Member
By:	William J. Indelicato
Name:	William J. Indelicato
Title:	Managing Director
THE JERRY W. THROGMARTIN 2007 GRANTOR RETAINED ANNUITY TRUST
By:	/s/ Jerry W. Throgmartin
	Jerry W. Throgmartin, Trustee
/s/ Jerry W. Throgmartin
Jerry W. Throgmartin
/s/ Gregg William Throgmartin
Gregg William Throgmartin
/s/ Dennis L, May
Dennis L. May

Schedule A

Holders of Options of Gregg Appliances, Inc.

Name	Number of Options	Exercise Price
Jerry W. Throgmartin	190,000	$	10.00
	95,000	$	15.00
	95,000	$	20.00
	20,000	$	11.70
Gregg William Throgmartin	65,000	$	10.00
	32,500	$	15.00
	32,500	$	20.00
	4,000	$	11.70
Dennis L. May	76,000	$	10.00
	38,000	$	15.00
	38,000	$	20.00
	20,000	$	11.70
Donald J.B. Van der Wiel	60,000	$	10.00
	30,000	$	15.00
	30,000	$	20.00
	12,000	$	11.70
Michael Dean Stout	45,000	$	10.00
	22,500	$	15.00
	22,500	$	20.00
	12,000	$	11.70
Jeffrey Jay McClintic	50,000	$	10.00
	25,000	$	15.00
	25,000	$	20.00
	5,000	$	11.70
Michael George Larimer	50,000	$	10.00
	25,000	$	15.00
	25,000	$	20.00
	5,000	$	11.70
Jack Harper McKinney Sr.	30,000	$	10.00
	15,000	$	15.00
	15,000	$	20.00
	3,000	$	11.70
Diane Susan Lutz	30,000	$	10.00
	15,000	$	15.00
	15,000	$	20.00
	5,000	$	11.70

Schedule A

Name	Number of Options	Exercise Price
Thomas William Westcott	30,000	$	10.00
	15,000	$	15.00
	15,000	$	20.00
	3,000	$	11.70
Gary John Eck	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	4,000	$	11.70
Michael Kerlik Jr.	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	4,000	$	11.70
James William Witcher	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	3,000	$	11.70
Clark Ronald Mayfield	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	3,000	$	11.70
Lindsay Martin Jones	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	3,000	$	11.70
James William Wilson II	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	2,500	$	11.70
John Theodore Eppen	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	3,000	$	11.70
John Stephen Hickey	14,000	$	10.00
	7,000	$	15.00
	7,000	$	20.00
	3,000	$	11.70

Schedule A

Name	Number of Options	Exercise Price
Jeremy Jay Aguilar	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	5,000	$	11.70
	36,000	$	15.00
Paul Frederick Roth	8,000	$	10.00
	4,000	$	15.00
	4,000	$	20.00
	2,000	$	11.70
Daniel Joseph Turner	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	1,500	$	11.70
Larry Charles Keller	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	1,500	$	11.70
Gregory Alan Walker	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	1,500	$	11.70
Chapman Michael Logsdon	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	2,000	$	11.70
Brady Leslie Overstreet	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	2,000	$	11.70
Brad Edward Salow	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	2,000	$	11.70
Michael David Schuman	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	2,000	$	11.70

Schedule A

Name	Number of Options	Exercise Price
Karen Sue Drook	4,500	$	10.00
	2,250	$	15.00
	2,250	$	20.00
	1,000	$	11.70
Lawrence P. Castellani	25,000	$	10.00
	12,500	$	15.00
	12,500	$	20.00
	5,000	$	11.70
Michael L. Smith	25,000	$	10.00
	12,500	$	15.00
	12,500	$	20.00
	5,000	$	11.70
Peter Starrett	50,000	$	10.00
	25,000	$	15.00
	25,000	$	20.00
	5,000	$	11.70
Steve Nelson	10,000	$	11.70
Bruce Dixon	25,000	$	11.70
Jeff Pearson	10,000	$	11.70
Tracy Young	1,000	$	11.70
Bob Altman	1,000	$	11.70
Julie McKinney	1,000	$	11.70
Daryl Massey	1,000	$	11.70
Russell J. Brim	1,000	$	11.70
Scott Buchholz	1,000	$	11.70
Brian C. Broyles	1,000	$	11.70
Dustin Netral	1,000	$	11.70

Schedule A

Holders of Restricted Units of Gregg Investment Corporation, LLC

Name	Number of Restricted Units
Lawrence P. Castellani	100,000
Michael L. Smith	25,000
Donald J.B. Van der Wiel	21,667
Michael Dean Stout	15,000
Jeffrey Jay McClintic	15,000
Michael George Larimer	10,000
Jack Harper McKinney Sr.	8,000
Diane Susan Lutz	8,000
Thomas William Westcott	8,000
Gary John Eck	6,000
Michael Kerlik Jr.	4,000
James William Witcher	6,000
Clark Ronald Mayfield	6,000
Lindsay Martin Jones	4,000
James William Wilson II	4,000
John Theodore Eppen	6,000
John Stephen Hickey	6,000
Jeremy Jay Aguilar	1,500
Paul Frederick Roth	2,500
Daniel Joseph Turner	1,550
Larry Charles Keller	2,250
Gregory Alan Walker	2,250
Chapman Michael Logsdon	2,250
Brady Leslie Overstreet	2,250
Brad Edward Salow	2,250
Michael David Schurman	1,500
Karen Sue Drook	1,500

Schedule 2.01

Exchange of GA Common Stock for Company Common Stock by GIC

GIC is the owner of 11,467,188 shares of GA Common Stock.

Schedule 4.01

Ownership and Capital Structure

Name	Number of Shares of GA Common Stock	Number of Shares of GA Common Stock Underlying Options
GIC	11,467,188	—
Jerry W. Throgmartin	528,250	400,000
The Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust	1,000,000	—
Gregg William Throgmartin	694,653	134,000
Dennis L. May	555,709	172,000

Schedule 4.02

Investment Intent

Jerry Throgmartin will hold 1,000,000 shares of Company Common Stock as trustee of The Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust.

Schedule 5.02

Capitalization

Name	Number of Shares	Number of Options
FSEP V	9,000,986	—
FSA V	120,402	—
Cal STRS	1,500,000	—
ASF	500,000	—
Peter Starrett	70,000	105,000
Jerry W. Throgmartin	1,528,250	400,000
Gregg William Throgmartin	694,653	134,000
Dennis L. May	555,709	172,000
Lawrence P. Castellani	100,000	55,000
Michael L. Smith	25,000	55,000
Donald J.B. Van der Wiel	25,000	132,000
Michael Dean Stout	15,000	102,000
Jeffrey Jay McClintic	15,000	105,000
Michael George Larimer	10,000	105,000
Jack Harper McKinney Sr.	8,000	63,000
Diane Susan Lutz	8,000	65,000
Thomas William Westcott	8,000	63,000
Gary John Eck	6,000	32,000
Michael Kerlik Jr.	4,000	32,000
James William Witcher	6,000	31,000
Clark Ronald Mayfield	6,000	31,000
Lindsay Martin Jones	4,000	31,000
James William Wilson II	4,000	30,500
John Theodore Eppen	6,000	31,000
John Stephen Hickey	6,000	31,000
Jeremy Jay Aguilar	1,500	50,000
Paul Frederick Roth	2,500	18,000
Daniel Joseph Turner	1,550	10,500
Larry Charles Keller	2,250	10,500
Gregory Alan Walker	2,250	10,500
Chapman Michael Logsdon	2,250	11,000
Brady Leslie Overstreet	2,250	11,000
Brad Edward Salow	2,250	11,000
Michael David Schurman	1,500	11,000
Karen Sue Drook	1,500	10,000
Steve Nelson	—	10,000
Bruce Dixon	—	25,000
Jeff Pearson	—	10,000
Tracy Young	—	1,000
Bob Altman	—	1,000
Julie McKinney	—	1,000
Daryl Massey	—	1,000
Russell J. Brim	—	1,000

Schedule 5.02

Name	Number of Shares	Number of Options
Scott Buchholz	—	1,000
Brian C. Broyles	—	1,000
Dustin Netral	—	1,000

EX-3.1

Exhibit 3.1

CERTIFICATE OF INCORPORATION

OF

hhgregg, Inc.

Incorporated pursuant to a Certificate of Incorporation filed

with the Secretary of State of the State of Delaware on April 10, 2007

Under the Name hhgregg, Inc.

hhgregg, Inc., a Delaware corporation (the “Corporation”), hereby certifies that this Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 101 and 103 of the General Corporation Law of the State of Delaware (the “DGCL”):

Article I

The name of the Corporation is hhgregg, Inc.

Article II

The address of the Corporation’s registered office in the State of Delaware is c/o Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The registered agent in charge thereof is The Corporation Trust Company.

Article III

The nature of the business and purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

Article IV

The total number of shares of all classes of stock which the Corporation shall have authority to issue is 160,000,000 shares, consisting solely of:

150,000,000	shares of common stock, par value $.0001 per share (“Common Stock”); and
10,000,000	shares of preferred stock, par value $.0001 per share (“Preferred Stock”).

The following is a statement of the powers, designations, preferences, privileges, and relative rights in respect of each class of capital stock of the Corporation.

A. COMMON STOCK.

1. General. The voting, dividend and liquidation rights of the holders of Common Stock are subject to and qualified by the rights of the holders of Preferred Stock.

2. Voting. The holders of Common Stock are entitled to one vote for each share held at all meetings of stockholders. There shall be no cumulative voting for the election of directors.

3. Dividends. Dividends may be declared and paid on the Common Stock from funds lawfully available therefor if, as and when determined by the board of directors of the Corporation (the “Board of Directors”) and subject to any preferential dividend rights of any then outstanding shares of Preferred Stock.

4. Liquidation. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to the rights of creditors and any preferential rights of any then outstanding shares of Preferred Stock.

B. PREFERRED STOCK.

Shares of Preferred Stock may be issued from time to time in one or more series, each of such series to have such powers, designations, preferences, and relative, participating, optional, or other special rights, if any, and such qualifications and restrictions, if any, of such preferences and rights, as are stated or expressed in the resolution or resolutions of the Board of Directors providing for such series of Preferred Stock. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly so provided in such resolution or resolutions.

Authority is hereby granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions to determine and fix the powers, designations, preferences, and relative, participating, optional, or other special rights, if any, and the qualifications and restrictions, if any, of such preferences and rights, including without limitation dividend rights, conversion rights, voting rights (if any), redemption privileges, and liquidation preferences, of such series of Preferred Stock (which need not be uniform among series), all to the fullest extent now or hereafter permitted by the DGCL. Without limiting the generality of the foregoing, the resolution or resolutions providing for the creation or issuance of any series of Preferred Stock may provide that such series shall be superior to, rank equally with, or be junior to the Preferred Stock of any other series, all to the fullest extent permitted by law. No resolution, vote, or consent of the holders of the capital stock of the Corporation shall be required in connection with the creation or issuance of any shares of any series of Preferred Stock authorized by and complying with the conditions of this Certificate of Incorporation, the right to any such resolution, vote, or consent being expressly waived by all present and future holders of the capital stock of the Corporation.

2

Any resolution or resolutions adopted by the Board of Directors pursuant to the authority vested in them by this Article Fourth shall be set forth in a certificate of designation along with the number of shares of stock of such series as to which the resolution or resolutions shall apply and such certificate shall be executed, acknowledged, filed, recorded, and shall become effective, in accordance with §103 of the DGCL. Unless otherwise provided in any such resolution or resolutions, the number of shares of stock of any such series to which such resolution or resolutions apply may be increased (but not above the total number of authorized shares of the class) or decreased (but not below the number of shares thereof then outstanding) by a certificate likewise executed, acknowledged, filed and recorded, setting forth a statement that a specified increase or decrease therein has been authorized and directed by a resolution or resolutions likewise adopted by the Board of Directors. In case the number of such shares shall be decreased, the number of shares so specified in the certificate shall resume the status which they had prior to the adoption of the first resolution or resolutions. When no shares of any such class or series are outstanding, either because none were issued or because none remain outstanding, a certificate setting forth a resolution or resolutions adopted by the Board of Directors that none of the authorized shares of such class or series are outstanding, and that none will be issued subject to the certificate of designations previously filed with respect to such class or series, may be executed, acknowledged, filed and recorded in the same manner as previously described and it shall have the effect of eliminating from the certificate of incorporation all matters set forth in the certificate of designations with respect to such class or series of stock. If no shares of any such class or series established by a resolution or resolutions adopted by the Board of Directors have been issued, the voting powers, designations, preferences and relative, participating, optional or other rights, if any, with the qualifications, limitations or restrictions thereof, may be amended by a resolution or resolutions adopted by the Board of Directors. In the even of any such amendment, a certificate which (i) states that no shares of such class or series have been issued, (ii) sets forth the copy of the amending resolution or resolutions and (iii) if the designation of such class or series is being changed, indicates the original designation and the new designation, shall be executed, acknowledged, filed, recorded, and shall become effective, in accordance with §103 of the DGCL.

Article V

The name and mailing address of the incorporator is as follows:

Name	Address
James F. Collins Jr.	Bingham McCutchen LLP
	399 Park Avenue, New York, NY 10022

3

Article VI

No director of the Corporation shall be personally liable to the Corporation or to any of its stockholders for monetary damages for breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability; provided, however, that to the extent required from time to time by applicable law, this Article VI shall not eliminate or limit the liability of a director, to the extent such liability is provided by applicable law, (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any transactions from which the director derived an improper personal benefit. If the DGCL hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended DGCL. No amendment to or repeal of this Article VI shall apply to or have any effect on the liability or alleged liability of any director for or with respect to any acts or omissions of such director occurring prior to the effective date of such amendment or repeal.

Article VII

The Corporation shall, to the fullest extent permitted by Section 145 of the DGCL, as amended from time to time, indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgements, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom.

Indemnification shall include payment by the Corporation of expenses in defending an action or proceeding in advance of the final disposition of such action or proceeding upon (i) receipt of an undertaking by the person indemnified to repay such payment if it is ultimately determined that such person is not entitled to indemnification under this Article Seventh, which undertaking may be accepted without reference to the financial ability of such person to make such repayment, (ii) receipt of a written affirmation of the director’s of officer’s good faith belief that the director or officer has met the standard of conduct prescribed by Delaware law and (iii) a determination that the facts then known to those making the determination would not preclude indemnification under the DGCL.

4

The Corporation shall not indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person unless the initiation thereof was approved by the Board of Directors.

The indemnification rights provided in this Article VII (i) shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any law, agreement or vote of stockholders or disinterested directors or otherwise, and (ii) shall inure to the benefit of the heirs, executors and administrators of such persons. The Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article VII.

Article VIII

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any Class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of §391 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Corporation under the provisions of §279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such a manner as the said court directs. If a majority of the number representing three-fourths (3/4ths) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all creditors or class of creditors, and/or stockholders or class of stockholders of the Corporation, as the case may be, and also on the Corporation.

Article IX

The Board of Directors, when considering a tender offer or merger or acquisition proposal, may take into account factors in addition to potential economic benefits to stockholders, including without limitation (i) comparison of the proposed consideration to be received by stockholders in relation to the then current market price of the Corporation’s capital stock, the estimated current value of the Corporation in a freely negotiated transaction, and the estimated future value of the Corporation as an independent entity and (ii) the impact of such a transaction on the employees, suppliers, and customers of the Corporation and its effect on the communities in which the Corporation operates.

5

Article X

Any action required or permitted to be taken by the stockholders of the Corporation may be taken only at a duly called annual or special meeting of the stockholders or by the written consent of the stockholders. Special meetings of stockholders may be called only by the Chairman of the Board of Directors, a majority of the Board of Directors or the Chief Executive Officer.

Article XI

The affirmative vote of the holders of at least 66 2/3% of the outstanding voting stock of the Corporation (in addition to any separate class vote that may in the future be required pursuant to the terms of any outstanding Preferred Stock) shall be required to amend or repeal the provisions of Articles IV (only to the extent it relates to the authority of the Board of Directors to issue shares of Preferred Stock in one or more series, the terms of which may be determined by the Board of Directors), VI, VII, IX, X, XI of this Certificate of Incorporation or to reduce the numbers of authorized shares of Common Stock or Preferred Stock.

Article XII

The Corporation reserves the right to amend this Certificate of Incorporation in any manner permitted by the DGCL.

6

Executed on April 10, 2007

hhgregg, Inc.
By:	/s/ James F. Collins Jr.
Name:	James F. Collins Jr.
Title:	Incorporator

EX-3.2

Exhibit 3.2

hhgregg, Inc.

BY-LAWS

Article I. - General.

1.1. Offices. The registered office of hhgregg, Inc. (the “Company”) shall be the Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, State of Delaware. The Company may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Company may require.

1.2. Seal. The seal, if any, of the Company shall be in the form of a circle and shall have inscribed thereon the name of the Company, the year of its organization and the words “Corporate Seal, Delaware.”

1.3. Fiscal Year. The fiscal year of the Company shall be the period from April 1 through March 31.

Article II. - Stockholders.

2.1. Place of Meetings. Each meeting of the stockholders shall be held upon notice as hereinafter provided, at such place, either within or without of the State of Delaware, as the Board of Directors shall have determined and as shall be stated in such notice.

2.2. Annual Meeting. The annual meeting of the stockholders shall be held each year on such date and at such time as the Board of Directors may determine. At each annual meeting the stockholders entitled to vote shall elect such members of the Board of Directors as are standing for election, by plurality vote by ballot, and they may transact such other corporate business as may properly be brought before the meeting. At the annual meeting any business may be transacted, irrespective of whether the notice calling such meeting shall have contained a reference thereto, except where notice is required by law, the Company’s Certificate of Incorporation, or these by-laws.

2.3. Quorum. At all meetings of the stockholders, the presence, in person or represented by proxy, of the holders of a majority of the stock issued and outstanding and entitled to vote, shall constitute a quorum requisite for the transaction of business except as otherwise provided by law, the Company’s Certificate of Incorporation, or these by-laws. Whether or not there is such a quorum at any meeting, the chairman of the meeting or the stockholders entitled to vote thereat, present in person or by proxy, by a majority vote, may adjourn the meeting from time to time without notice other than announcement at the meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting, at which the requisite amount of voting stock shall be represented, any business may be transacted that might have been transacted if the meeting had been held as originally called. The stockholders present in person or by proxy at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

2.4. Right to Vote; Proxies. Subject to the provisions of the Company’s Certificate of Incorporation, each holder of a share or shares of capital stock of the Company having the right to vote at any meeting shall be entitled to one vote for each such share of stock held by him. Any stockholder entitled to vote at any meeting of stockholders may vote either in person or by proxy, but no proxy that is dated more than three years prior to the meeting at which it is offered shall confer the right to vote thereat unless the proxy provides that it shall be effective for a longer period. A proxy may be granted by a writing executed by the stockholder or his authorized agent or by transmission or authorization of transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization, or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, subject to the conditions set forth in Section 212 of the Delaware General Corporation Law, as it may be amended from time to time (the “DGCL”).

2.5. Voting. At all meetings of stockholders, except as otherwise expressly provided for by statute, the Company’s Certificate of Incorporation, or these by-laws, (i) in all matters other than the election of directors, the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on such matter shall be the act of the stockholders and (ii) directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

2.6. Notice of Annual Meetings. Written notice of the annual meeting of the stockholders shall be mailed to each stockholder entitled to vote at such meeting at such address as appears on the stock books of the Company at least ten (10) days (and not more than sixty (60) days) prior to the meeting. The Board of Directors may postpone any annual meeting of the stockholders at its discretion, even after notice thereof has been mailed. It shall be the duty of every stockholder to furnish to the Secretary of the Company or to the transfer agent, if any, of the class of stock owned by him and his post-office address, and to notify the Secretary of any change therein. Notice need not be given to any stockholder who

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submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.

2.7. Stockholders’ List. A complete list of the stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order and showing the address of each stockholder, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and shall be open to examination of any stockholder, for any purpose germane to the meeting for a period of at least ten days before such meeting (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours at the principal office of the corporation, and said list shall be open to examination during the whole time of said meeting, at the place of said meeting, or, if the meeting held is by remote communication, on a reasonably accessible electronic network and the information required to access such list shall be provided with the notice of the meeting.

2.8. Special Meetings. Special meetings of the stockholders for any purpose or purposes, unless otherwise provided by statute, may be called only by the Chairman of the Board of Directors, a majority of the Board of Directors, the Chief Executive Officer, the President or the holders of a majority of the outstanding common stock. Any such person or persons may postpone any special meeting of the stockholders at its or their discretion, even after notice thereof has been mailed.

2.9. Notice of Special Meetings. Written notice of a special meeting of stockholders, stating the time and place and object thereof shall be mailed, postage prepaid, not less than ten (10) nor more than sixty (60) days before such meeting, to each stockholder entitled to vote at such meeting, at such address as appears on the books of the Company. No business may be transacted at such meeting except that referred to in said notice, or in a supplemental notice given also in compliance with the provisions hereof, or such other business as may be germane or supplementary to that stated in said notice or notices. Notice need not be given to any stockholder who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of a stockholder at a meeting of stockholders shall constitute a waiver of notice of such meeting, except when the stockholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.

2.10. Inspectors.

(a) One or more inspectors shall be appointed by the Board of Directors in advance of any meeting of the stockholders to act at the meeting and make a written report

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thereof. If no inspect or alternate is able to act at a meeting of the stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at such meeting. Before discharging his duties as an inspector, each inspector shall take and sign an oath to execute his duties with strict impartiality and to the best of his ability. At the meeting for which the inspector or inspectors are appointed, he or they shall acertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and the validity of proxies and ballots, count all votes and ballots, retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and certify the determination of the shares represented and the count of all votes and ballots.

(b) At any time at which the Company has a class of voting stock that is (i) listed on a national securities exchange, (ii) authorized for quotation on an inter-dealer quotation system of a registered national securities association, or (iii) held of record by more than 2,000 stockholders, the provisions of Section 231 of the DGCL with respect to inspectors of election and voting procedures shall apply, in lieu of the provisions of paragraph (a) of this § 2.10.

2.11. Stockholders’ Consent in Lieu of Meeting.

(a) Unless otherwise provided in the Company’s Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Company, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to the Company’s registered office, principal place of business or an officer or agent of the Company having custody of the book in which proceedings of minutes of stockholders are recorded. Delivery made to the Company’s registered office shall be by hand or by certified or registered mail, return receipt requested.

(b) Every written consent shall bear the date of signature of each stockholder who signs such consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required to the Company, written consents signed by a sufficient number of stockholders to take action are delivered to the Company in the manner required by Section 2.11(a).

(c) Prompt notice of the taking of corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a duly called annual or special meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of stockholders to take the action were delivered to the Company in the manner required by Section 2.11(a).

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2.12. Procedures. For nominations for the Board of Directors or for other business to be properly brought by a stockholder before a meeting of stockholders, the stockholder must first have given timely written notice thereof to the Secretary of the Company. To be timely, a notice of nominations or other business to be brought before an annual meeting of stockholders must be delivered to the Secretary not less than 120 nor more than 150 days prior to the first anniversary of the date of the Company’s proxy statement delivered to stockholders in connection with the preceding year’s annual meeting, or if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary, or if no proxy statement was delivered to stockholders by the Company in connection with the preceding year’s annual meeting, such notice must be delivered not earlier than 90 days prior to such annual meeting and not later than the later of (i) 60 days prior to the annual meeting or (ii) 10 days following the date on which public announcement of the date of such annual meeting is first made by the Company. With respect to special meetings of stockholders, such notice must be delivered to the Secretary not more than 90 days prior to such meeting and not later than the later of (i) 60 days prior to such meeting or (ii) 10 days following the date on which public announcement of the date of such meeting is first made by the Company. Such notice must contain the name and address of the stockholder delivering the notice and a statement with respect to the amount of the Company’s stock beneficially and/or legally owned by such stockholder, the nature of any such beneficial ownership of such stock, the beneficial ownership of any such stock legally held by such stockholder but beneficially owned by one or more others, and the length of time for which all such stock has been beneficially and/or legally owned by such stockholder, and information about each nominee for election as a director substantially equivalent to that which would be required in a proxy statement pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder, and/or a description of the proposed business to be brought before the meeting, as the case may be.

Article III. - Directors.

3.1. Number of Directors.

(a) Except as otherwise provided by law, the Company’s Certificate of Incorporation, or these by-laws, the property and business of the Company shall be managed by or under the direction of a board of directors. Directors need not be stockholders, residents of Delaware, or citizens of the United States. The use of the phrase “whole board” herein refers to the total number of directors which the Company would have if there were no vacancies.

(b) The number of directors constituting the full Board of Directors shall be as determined by the Board of Directors from time to time, with a minimum of six and a maximum of twelve directors. Members of the Board of Directors shall hold office until the annual meeting of stockholders at which their respective successors are elected and qualified

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or until their earlier death, incapacity, resignation, or removal. Except as the DGCL or the Company’s Certificate of Incorporation may otherwise require, in the interim between annual meetings of stockholders or special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancy in that connection, any vacancies in the Board of Directors, including unfilled vacancies resulting from the removal of directors for cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director.

(c) If the office of any director becomes vacant by reason of death, resignation, disqualification, removal, failure to elect, or otherwise, the remaining directors, although more or less than a quorum, by a majority vote of such remaining directors may elect a successor or successors who shall hold office for the unexpired term.

3.2. Resignation. Any director of the Company may resign at any time by giving written notice to the Chairman of the Board, the Chief Executive Officer, or the Secretary of the Company. Such resignation shall take effect at the time specified therein, at the time of receipt if no time is specified therein and at the time of acceptance if the effectiveness of such resignation is conditioned upon its acceptance. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

3.3. Removal. Except as may otherwise be provided by the DGCL or the Company’s Certificate of Incorporation, any director or the entire Board of Directors may be removed with or without cause only by the vote of the holders of a majority of the shares of the Company’s stock entitled to vote for the election of directors.

3.4. Place of Meetings and Books. The Board of Directors may hold their meetings and keep the books of the Company outside the State of Delaware, at such places as they may from time to time determine.

3.5. General Powers. In addition to the powers and authority expressly conferred upon them by these by-laws, the board may exercise all such powers of the Company and do all such lawful acts and things as are not by statute or by the Company’s Certificate of Incorporation or by these by-laws directed or required to be exercised or done by the stockholders.

3.6. Other Committees. The Board of Directors may designate one or more committees, each consisting or one or more directors, by resolution or resolutions passed by a majority of the whole board; such committee or committees shall consist of one or more directors of the Company, and to the extent provided in the resolution or resolutions designating them, shall have and may exercise specific powers of the Board of Directors in the management of the business and affairs of the Company to the extent permitted by the DGCL and shall have power to authorize the seal of the Company to be affixed to all papers that may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors.

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3.7. Powers Denied to Committees. Committees of the Board of Directors shall not, in any event, have any power or authority to amend the Company’s Certificate of Incorporation, to approve, adopt or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by this chapter to be submitted to stockholders for approval or adopt, amend or repeal any bylaw of the corporation.

3.8. Substitute Committee Member. In the absence or on the disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any committee shall keep regular minutes of its proceedings and report the same to the board as may be required by the board.

3.9. Compensation of Directors. The Board of Directors shall have the power to fix the compensation of directors and members of committees of the Board. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Company in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

3.10. Regular Meetings. No notice shall be required for regular meetings of the Board of Directors for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given for special meetings in sufficient time for the convenient assembly of the directors thereat. Notice need not be given to any director who submits a written waiver of notice signed by him before or after the time stated therein. Attendance of any such person at a meeting shall constitute a waiver of notice of such meeting, except when he attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors need be specified in any written waiver of notice.

3.11. Special Meetings. Special meetings of the board may be called by the Chairman of the Board, if any, or the Chief Executive Officer, on two (2) days notice to each director, or such shorter period of time before the meeting as will nonetheless be sufficient for the convenient assembly of the directors so notified; special meetings shall be called by the Secretary in like manner and on like notice, on the written request of two or more directors.

3.12. Quorum. At all meetings of the Board of Directors, a majority of the whole board shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically permitted or provided by statute, or by the Company’s Certificate of Incorporation, or by these by-laws.

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If at any meeting of the board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting that shall be so adjourned.

3.13. Telephonic Participation in Meetings. Members of the Board of Directors or any committee designated by such board may participate in a meeting of the board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this section shall constitute presence in person at such meeting.

3.14. Action by Consent. Unless otherwise restricted by the Company’s Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if written consent thereto is signed by all members of the board or of such committee as the case may be and such written consent is filed with the minutes of proceedings of the board or committee.

Article IV. - Officers.

4.1. Selection; Statutory Officers. The officers of the Company shall be chosen by the Board of Directors. There shall be a Chief Executive Officer, President, a Secretary, and a Chief Financial Officer, and there may be a Chairman of the Board of Directors, one or more Vice Chairmen, one or more Vice Presidents, one or more Assistant Secretaries and one or more Assistant Chief Financial Officers as the Board of Directors may elect. Any number of offices may be held by the same person, except that the offices of President and Secretary shall not be held by the same person simultaneously.

4.2. Time of Election. The officers above named shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders. None of said officers need be a director.

4.3. Additional Officers. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.

4.4. Terms of Office. Each officer of the Company shall hold office until his successor is chosen and qualified, or until his earlier resignation or removal. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the board of directors.

4.5. Compensation of Officers. The Board of Directors shall have power to fix the compensation of all officers of the Company. It may authorize any officer, upon whom the power of appointing subordinate officers may have been conferred, to fix the compensation of such subordinate officers.

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4.6. Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the stockholders and directors, and shall have such other duties as may be assigned to him from time to time by the Board of Directors.

4.7. Vice-Chairmen. The Vice-Chairmen shall perform such of the duties of the Chairman of the Board on behalf of the Company as may be respectively assigned to them from time to time by the Board of Directors or by the Chairman of the Board.

4.8 Chief Executive Officer. The Chief Executive Officer, subject to the control of the Board, shall have general charge and supervision and authority over the business and affairs of the Corporation, and shall have such other powers and perform such other duties as are incident to this office and as may be assigned to him by the Board. If and so long as, the Chief Executive Officer shall be a duly elected and incumbent member of the Board, the Chief Executive Officer may be designated as Chairman and shall preside at all Shareholder Meetings and, if designated as Chairman or if no other Director is designated as Chairman, at Board Meetings.

4.9 President. The President shall be subject to the control of the Chief Executive Officer and the Board, and shall have such other powers and perform such other duties as are incident to this office and as may be assigned to him by the Chief Executive Officer or the Board. In the case of the absence or disability of the Chief Executive Officer, the President shall fulfill the duties of the Chief Executive Officer.

4.10 Chief Operating Officer. The Chief Operating Officer shall be subject to the control of the Chief Executive Officer and the Board, and shall have general charge of and supervision and authority over the operations of the Corporation, and shall have such other powers and perform such other duties as are incident to this office and as may be assigned to him by the Chief Executive Officer or the Board.

4.10 Vice-Presidents. The Vice-Presidents shall perform such of the duties of the President on behalf of the Company as may be respectively assigned to them from time to time by the Board of Directors or by the President. The Board of Directors may designate one of the Vice-Presidents as the Executive Vice-President, and in the absence or inability of the President to act, such Executive Vice-President shall have and possess all of the powers and discharge all of the duties of the President, subject to the control of the Board of Directors.

4.11 Chief Financial Officer. The Chief Financial Officer shall have the care and custody of all the funds and securities of the Company that may come into his hands as Chief Financial Officer, and the power and authority to endorse checks, drafts and other instruments for the payment of money for deposit or collection when necessary or proper and to deposit the same to the credit of the Company in such bank or banks or depository as the Board of Directors, or the officers or agents to whom the Board of Directors may delegate

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such authority, may designate, and he may endorse all commercial documents requiring endorsements for or on behalf of the Company. He may sign all receipts and vouchers for the payments made to the Company. He shall render an account of his transactions to the Board of Directors as often as the board or the committee shall require the same. He shall enter regularly in the books to be kept by him for that purpose full and adequate account of all moneys received and paid by him on account of the Company. He shall perform all acts incident to the position of Chief Financial Officer, subject to the control of the Board of Directors. He shall when requested, pursuant to vote of the Board of Directors, give a bond to the Company conditioned for the faithful performance of his duties, the expense of which bond shall be borne by the Company.

4.12 Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and of the stockholders; he shall attend to the giving and serving of all notices of the Company. Except as otherwise ordered by the Board of Directors, he shall attest the seal of the Company upon all contracts and instruments executed under such seal and shall affix the seal of the Company thereto and to all certificates of shares of capital stock of the Company. He shall have charge of the stock certificate book, transfer book and stock ledger, and such other books and papers as the Board of Directors may direct. He shall, in general, perform all the duties of Secretary, subject to the control of the Board of Directors.

4.13 Assistant Secretary. The Board of Directors or any two of the officers of the Company acting jointly may appoint or remove one or more Assistant Secretaries of the Company. Any Assistant Secretary upon his appointment shall perform such duties of the Secretary, and also any and all such other duties as the Board of Directors or the President or the Executive Vice-President or the Chief Financial Officer or the Secretary may designate.

4.14 Assistant Chief Financial Officer. The Board of Directors or any two of the officers of the Company acting jointly may appoint or remove one or more Assistant Chief Financial Officers of the Company. Any Assistant Chief Financial Officer upon his appointment shall perform such of the duties of the Chief Financial Officer, and also any and all such other duties as the Board of Directors or the President or the Executive Vice-President or the Chief Financial Officer or the Secretary may designate.

4.15 Subordinate Officers. The Board of Directors may select such subordinate officers as it may deem desirable. Each such officer shall hold office for such period, have such authority, and perform such duties as the Board of Directors may prescribe. The Board of Directors may, from time to time, authorize any officer to appoint and remove subordinate officers and to prescribe the powers and duties thereof.

Article V. - Stock.

5.1. Stock. Each stockholder shall be entitled to a certificate or certificates of stock of the Company in such form as the Board of Directors may from time to time prescribe. The certificates of stock of the Company shall be numbered and shall be entered in the books of the Company as they are issued. They shall certify the holder’s name and number and class of shares and shall be signed by both of (i) any one of the Chairman of the Board, a

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Vice-Chairman, the Chief Executive Officer, the President or a Vice-President, and (ii) any one of the Chief Financial Officer, an Assistant Chief Financial Officer, the Secretary or an Assistant Secretary, and may be sealed with the corporate seal of the Company. If such certificate is countersigned (l) by a transfer agent other than the Company or its employee, or, (2) by a registrar other than the Company or its employee, the signature of the officers of the Company and the corporate seal may be facsimiles. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Company, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Company, such certificate or certificates may nevertheless be adopted by the Company and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature shall have been used thereon had not ceased to be such officer or officers of the Company.

5.2. Fractional Share Interests. The Company may, but shall not be required to, issue fractions of a share. If the Company does not issue fractions of a share, it shall (i) arrange for the disposition of fractional interests by those entitled thereto, (ii) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (iii) issue scrip or warrants in registered or bearer form that shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall or an uncertificated fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any of the assets of the Company in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares or uncertificated full shares before a specified date, or subject to the conditions that the shares for which scrip or warrants are exchangeable may be sold by the Company and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions that the Board of Directors may impose.

5.3. Transfers of Stock. Subject to any transfer restrictions then in force, the shares of stock of the Company shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives and upon such transfer the old certificates shall be surrendered to the Company by the delivery thereof to the person in charge of the stock and transfer books and ledgers or to such other person as the directors may designate by whom they shall be canceled and new certificates shall thereupon be issued. The Company shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person whether or not it shall have express or other notice thereof save as expressly provided by the laws of Delaware.

5.4. Record Date. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or the allotment of any rights, or

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entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, that shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If no such record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

5.5. Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents or transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them.

5.6. Dividends.

(a) Power to Declare. Dividends upon the capital stock of the Company, subject to the provisions of the Company’s Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Company’s Certificate of Incorporation and the laws of Delaware.

(b) Reserves. Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Company, or for such other purpose as the directors shall think conducive to the interest of the Company, and the directors may modify or abolish any such reserve in the manner in which it was created.

5.7. Lost, Stolen, or Destroyed Certificates. No certificates for shares of stock of the Company shall be issued in place of any certificate alleged to have been lost, stolen, or destroyed, except upon production of such evidence of the loss, theft, or destruction and upon indemnification of the Company and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe.

5.8. Inspection of Books. The stockholders of the Company, by a majority vote at any meeting of stockholders duly called, or in case the stockholders shall fail to act, the Board of Directors shall have power from time to time to determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the Company (other than the stock ledger) or any of them, shall be open to

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inspection of stockholders; and no stockholder shall have any right to inspect any account or book or document of the Company except as conferred by statute or authorized by the Board of Directors or by a resolution of the stockholders.

Article VI. - Miscellaneous Management Provisions.

6.1. Checks, Drafts, and Notes. All checks, drafts, or orders for the payment of money, and all notes and acceptances of the Company shall be signed by such officer or officers, or such agent or agents, as the Board of Directors may designate.

6.2. Notices.

(a) Notices to directors may, and notices to stockholders shall, be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the Company. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram, telecopy or orally, by telephone or in person.

(b) Whenever any notice is required to be given under the provisions of any applicable statute or of the Company’s Certificate of Incorporation or of these by-laws, a written waiver of notice, signed by the person or persons entitled to said notice, whether before or after the time stated therein or the meeting or action to which such notice relates, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

6.3. Conflict of Interest. No contract or transaction between the Company and one or more of its directors or officers, or between the Company and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board committee that authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if: (i) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee and the board or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to the director’s of officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders of the Company entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of such stockholders; or (iii) the contract or transaction is fair as to the Company as of the time it is authorized, approved, or ratified, by the Board of Directors, a committee or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes the contract or transaction.

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6.3.1. Voting of Securities owned by the Company. 

Subject always to the specific directions of the Board of Directors, (i) any shares or other securities issued by any other corporation and owned or controlled by the Company may be voted in person at any meeting of security holders of such other corporation by the President of the Company if he is present at such meeting, or in his absence by the Chief Financial Officer of the Company if he is present at such meeting, and (ii) whenever, in the judgment of the President, it is desirable for the Company to execute a proxy or written consent in respect to any shares or other securities issued by any other corporation and owned by the Company, such proxy or consent shall be executed in the name of the Company by the President, without the necessity of any authorization by the Board of Directors, affixation of corporate seal or countersignature or attestation by another officer, provided that if the President is unable to execute such proxy or consent by reason of sickness, absence from the United States or other similar cause, the Chief Financial Officer may execute such proxy or consent. Any person or persons designated in the manner above stated as the proxy or proxies of the Company shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by the Company the same as such shares or other securities might be voted by the Company.

Article VII. - Indemnification.

7.1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of being or having been a director or officer of the Company or serving or having served at the request of the Company as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “Indemnitee”), whether the basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than permitted prior thereto) (as used in this Article 7, the “Delaware Law”), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee, or agent and shall inure to the benefit of the Indemnitee’s heirs, executors, and administrators; provided, however, that, except as provided in §7.2 hereof with respect to Proceedings to enforce rights to indemnification, the Company shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Company. The right to indemnification conferred in this Article 7 shall be a contract right and shall include the right to be paid by the Company the expenses (including attorneys’ fees) incurred in defending any such Proceeding in advance of its final disposition (an

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“Advancement of Expenses”); provided, however, that, if the Delaware Law so requires, an Advancement of Expenses incurred by an Indemnitee shall be made only upon delivery to the Company of an undertaking (an “Undertaking”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a “Final Adjudication”) that such Indemnitee is not entitled to be indemnified for such expenses under this Article 7 or otherwise.

7.2. Right of Indemnitee to Bring Suit. If a claim under §7.1 hereof is not paid in full by the Company within sixty days after a written claim has been received by the Company, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be twenty days, the Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a defense that, and (ii) in any suit by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking the Company shall be entitled to recover such expenses upon a Final Adjudication that, the Indemnitee has not met the applicable standard of conduct set forth in the Delaware Law. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware Law, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an Advancement of Expenses hereunder, or by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such Advancement of Expenses, under this Article 7 or otherwise shall be on the Company.

7.3. Non-Exclusivity of Rights. The rights to indemnification and to the Advancement of Expenses conferred in this Article 7 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, the Company’s Certificate or Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise.

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7.4. Insurance. The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under this Article 7 or under the Delaware Law.

7.5. Indemnification of Employees and Agents of the Company. The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the Advancement of Expenses, to any employee or agent of the Company to the fullest extent of the provisions of this Article 7 with respect to the indemnification and Advancement of Expenses of directors and officers of the Company.

Article VIII. - Amendments.

8.1. Amendments. Subject always to any limitations imposed by the Company’s Certificate of Incorporation, these By-Laws may be altered, amended, or repealed, or new By-Laws may be adopted, only by (i) the affirmative vote of the holders of at least a majority of the outstanding voting stock of the Company, provided, that the affirmative vote of the holders of at least 67% of the outstanding voting stock of the Company shall be required for any such alteration, amendment, repeal, or adoption that would affect or be inconsistent with the provisions of Sections 2.8, 2.11, 2.12, 3.1(b) (with regards to the minimum and maximum number of directors that can constitute the board) and this Section 8.1 (in each case, in addition to any separate class vote that may be required pursuant to the terms of any then outstanding preferred stock of the Company), or (ii) by resolution of the Board of Directors duly adopted by not less than a majority of the directors then constituting the full Board of Directors.

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EX-4.2

Exhibit 4.2

GREGG APPLIANCES, INC.,

as Issuer,

HHG DISTRIBUTING, LLC,

as Subsidiary Guarantor,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Trustee

Indenture

Dated as of February 3, 2005

$165,000,000

9% Senior Notes due 2013

TABLE OF CONTENTS

		Page
ARTICLE ONE    DEFINITIONS AND INCORPORATION BY REFERENCE		1
Section 1.01.	Definitions	1
Section 1.02.	Other Definitions	16
Section 1.03.	Incorporation by Reference of Trust Indenture Act	17
Section 1.04.	Rules of Construction	17
ARTICLE TWO    THE NOTES		17
Section 2.01.	Form and Dating	17
Section 2.02.	Execution and Authentication	18
Section 2.03.	[Reserved]	18
Section 2.04.	Registrar and Paying Agent	18
Section 2.05.	Paying Agent to Hold Money in Trust	19
Section 2.06.	Lists of Holders of Notes	19
Section 2.07.	Transfer and Exchange	19
Section 2.08.	Replacement Notes	29
Section 2.09.	Outstanding Notes; Treasury Notes	29
Section 2.10.	Temporary Notes	30
Section 2.11.	Cancellation	30
Section 2.12.	Defaulted Interest	30
Section 2.13.	CUSIP Number	31
Section 2.14.	Persons Deemed Owners	31
Section 2.15.	Issuance of Additional Notes	31
ARTICLE THREE    REDEMPTION		31
Section 3.01.	Notice to Trustee	31
Section 3.02.	Selection of Notes to Be Redeemed	31
Section 3.03.	Notice of Redemption	31
Section 3.04.	Effect of Notice of Redemption	32
Section 3.05.	Deposit of Redemption Price	32
Section 3.06.	Notes Redeemed in Part	32
ARTICLE FOUR    COVENANTS		33
Section 4.01.	Payment of Notes	33
Section 4.02.	Commission Reports	33
Section 4.03.	Compliance Certificates	34
Section 4.04.	Maintenance of Office or Agency	34
Section 4.05.	Corporate Existence	34
Section 4.06.	Waiver of Stay, Extension or Usury Laws	35
Section 4.07.	Payment of Taxes and Other Claims	35
Section 4.08.	Business Activities	35
Section 4.09.	Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock	35
Section 4.10.	Limitation on Restricted Payments	37
Section 4.11.	Limitation on Sale of Assets	40
Section 4.12.	Limitation on Liens	43
Section 4.13.	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries	43
Section 4.14.	Limitation on Transactions with Affiliates	44

Section 4.15.	Subordinated Notes	46
Section 4.16.	Change of Control	46
Section 4.17.	Designation of Restricted and Unrestricted Subsidiaries	47
Section 4.18.	Payments for Consent	48
Section 4.19.	Future Guarantees by Restricted Subsidiaries; Release of Subsidiary Guarantees	48
Section 4.20.	Limitation on Sale and Leaseback Transactions	49
Section 4.21.	Limitation on Issuance and Sale of Equity Interests on Restricted Subsidiaries	49
Section 4.22.	Limitation on Subordinated Indebtedness	50
ARTICLE FIVE    SUCCESSOR CORPORATION		50
Section 5.01.	Merger, Consolidation or Sale of Assets	50
Section 5.02.	Successor Corporation Substituted	51
ARTICLE SIX    DEFAULTS AND REMEDIES		51
Section 6.01.	Events of Default	51
Section 6.02.	Acceleration	53
Section 6.03.	Other Remedies	53
Section 6.04.	Waiver of Past Defaults	54
Section 6.05.	Control by Majority	54
Section 6.06.	Limitation on Remedies	54
Section 6.07.	Rights of Holders to Receive Payment	54
Section 6.08.	Collection Suit by Trustee	55
Section 6.09.	Trustee May File Proofs of Claim	55
Section 6.10.	Priorities	55
Section 6.11.	Undertaking for Costs	55
ARTICLE SEVEN    TRUSTEE		56
Section 7.01.	Duties of Trustee	56
Section 7.02.	Rights of Trustee	56
Section 7.03.	Individual Rights of Trustee	57
Section 7.04.	Trustee’s Disclaimer	57
Section 7.05.	Notice of Defaults	57
Section 7.06.	Reports by Trustee to Holders	57
Section 7.07.	Compensation and Indemnity	57
Section 7.08.	Replacement of Trustee	58
Section 7.09.	Successor Trustee by Merger, Etc.	59
Section 7.10.	Eligibility; Disqualification	59
Section 7.11.	Preferential Collection of Claims Against the Company	59
ARTICLE EIGHT    SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE		59
Section 8.01.	Satisfaction and Discharge	59
Section 8.02.	Legal Defeasance and Covenant Defeasance	60
Section 8.03.	Conditions to Legal Defeasance or Covenant Defeasance	61
Section 8.04.	Application of Trust Money	62
Section 8.05.	Reinstatement	62
ARTICLE NINE    AMENDMENTS, SUPPLEMENTS AND WAIVERS		63
Section 9.01.	Without Consent of Holders	63
Section 9.02.	With Consent of Holders	64

ii

Section 9.03.	Compliance with Trust Indenture Act	65
Section 9.04.	Revocation and Effect of Consents	65
Section 9.05.	Notation on or Exchange of Notes	65
Section 9.06.	Trustee Protected	65
ARTICLE TEN    [INTENTIONALLY OMITTED]		66
ARTICLE ELEVEN    GUARANTEE		66
Section 11.01.	Unconditional Guarantee	66
Section 11.02.	Limitation of Subsidiary Guarantor’s Liability	66
Section 11.03.	Execution and Delivery of Subsidiary Guarantees	67
Section 11.04.	Severability	67
Section 11.05.	Execution of Guarantee	67
ARTICLE TWELVE    [INTENTIONALLY OMITTED]		68
ARTICLE THIRTEEN    MISCELLANEOUS		68
Section 13.01.	Trust Indenture Act Controls	68
Section 13.02.	Notices	68
Section 13.03.	Communication by Holders with Other Holders	69
Section 13.04.	Certificate and Opinion as to Conditions Precedent	69
Section 13.05.	Statements Required in Certificate or Opinion	69
Section 13.06.	Rules by Trustee and Agents	69
Section 13.07.	Legal Holidays	69
Section 13.08.	No Personal Liability of Directors, Officers, Employees and Stockholders	69
Section 13.09.	Repayment to Company	70
Section 13.10.	Governing Law	70
Section 13.11.	No Adverse Interpretation of Other Agreements	70
Section 13.12.	Successors	70
Section 13.13.	Duplicate Originals	70
Section 13.14.	Severability	70

Exhibit A – Form of Note

Exhibit B – Form of Certificate of Transfer

Exhibit C – Form of Certificate of Exchange

Exhibit D – Form of Certificate from Acquiring Institutional Accredited Investor

Exhibit E – Form of Guarantee

iii

CROSS-REFERENCE TABLE

Trust Indenture     Act Section	Indenture Section
310 (a)(1)	7.10
(a)(2)	7.10
(a)(3)	N/A
(a)(4)	N/A
(a)(5)	N/A
(b)	7.10
(c)	N/A
311 (a)	7.11
(b)	7.11
(c)	N/A
312 (a)	N/A
(b)	13.03
(c)	13.03
313 (a)	7.06
313 (b)	7.06
(b)(1)	N/A
(b)(2)	N/A
(c)	7.06
(d)	7.06
314 (a)	N/A
(b)	N/A
(c)(1)	N/A
(c)(2)	N/A
(c)(3)	N/A
(d)	N/A
(e)	N/A
(f)	N/A
315 (a)	N/A
(b)	7.05
(c)	N/A
(d)	N/A
(e)	N/A
316 (a)(1)(A)	N/A
(a)(1)(B)	N/A
(a)(2)	N/A
(b)	N/A
(c)	N/A
317 (a)(1)	N/A
(a)(2)	N/A
(b)	N/A
318 (a)	N/A
(b)	N/A
(c)	13.01

N/A means Not Applicable

NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be part of this Indenture.

iv

INDENTURE, dated as of February 3, 2005, among GREGG APPLIANCES, INC., an Indiana corporation (the “Company”), HHG DISTRIBUTING, LLC, an Indiana limited liability company (“Subsidiary Guarantor”), and Wells Fargo Bank, National Association, as Trustee.

The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance, initially, of up to $165,000,000 aggregate principal amount of the Company’s 9% Senior Notes due 2013 (the “Notes”) issuable as provided in this Indenture. All actions necessary to make this Indenture a valid and legally binding agreement of the Company and the Subsidiary Guarantor, in accordance with its terms, have been taken.

Each party agrees as follows for the benefit of the other parties and for the benefit of the Holders:

ARTICLE ONE

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01.     Definitions.

“144A Global Note” means a global note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.

“Acquired Debt” means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into, or becomes a Subsidiary of, such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Affiliate” of any specified Person means (1) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (2) any executive officer or director of such specified Person. For purposes of this definition, “control,” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” shall have correlative meanings.

“Agent” means any Registrar, Paying Agent or co-registrar.

“Applicable Procedures” means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange.

“Asset Acquisition” means:

(1) any transaction pursuant to which any Person shall become a Restricted Subsidiary of the Company or shall be consolidated or merged with the Company or any Restricted Subsidiary of the Company; or

(2) the acquisition by the Company or any Restricted Subsidiary of the Company of assets of any Person comprising all or substantially all of the assets of such Person or of a division or line of business of such Person; provided that the assets acquired are related, ancillary or complementary to the business of the Company and its Restricted Subsidiaries on the date of such acquisition.

“Asset Sale” means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by Section 4.16 and/or Section 5.01 and not by Section 4.11 and (2) the issuance of Equity Interests by any of the Company’s Restricted Subsidiaries or the sale by the Company or any Restricted Subsidiary of Equity Interests in any of its Subsidiaries. Notwithstanding the preceding, the following items shall be deemed not to be Asset Sales: (a) any single transaction or series of related transactions that involves assets having a fair market value of less than $1.0 million; (b) a transfer of assets between or among the Company and its Restricted Subsidiaries; (c) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (d) the sale or lease of equipment, inventory, accounts receivable, fixtures, leasehold improvements or other assets in the ordinary course of business; (e) the sale or other disposition of cash or Cash Equivalents; (f) the payment of a dividend that is permitted by Section 4.10 hereof; (g) the lease of delivery vehicles to any Person that is not an Affiliate of the Company in connection with an outsourcing transaction approved by the Board of Directors; and (h) any sale or disposition of any property or equipment that has become damaged, worn out, obsolete or otherwise unsuitable for use in connection with the business of the Company or its Restricted Subsidiaries.

“Attributable Debt” in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction, including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” shall have a corresponding meaning.

“Board of Directors” means (1) with respect to a corporation, the board of directors of the corporation; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; (3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and (4) with respect to any other Person, the board or committee of such Person serving a similar function.

“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Borrowing Base” means, as of any date, an amount equal to the sum of:

(1) 85% of the book value of all accounts receivable owned by the Company and its Restricted Subsidiaries; plus

(2) 65% of the net book value of all inventory of the Company and its Restricted Subsidiaries;

all calculated on a consolidated basis in accordance with GAAP by reference to the consolidated balance sheet of the Company as of the most recent month for which such a balance sheet of the Company is available. In the event that information with respect to any element of the Borrowing Base is not available as of any date, then the most recently available information shall be utilized.

“Build-to-Suit Sale and Leaseback Transaction” means, in respect of any real property acquired and improved by the Company or any of its Restricted Subsidiaries (whether before or after the date hereof) solely in connection with the opening of a new store, warehouse or distribution center, any transaction occurring after the Closing Date whereby such real property is sold by and leased back to the Company or such Restricted Subsidiary

2

within a period ending not later than 18 months after the date on which construction work to improve such real property commenced; provided that such property was purchased by the Company or such Restricted Subsidiary no more than one year prior to such commencement date.

“Business Day” means any day other than a Saturday, a Sunday or any other day on which banking institutions in the City of New York, the City of Indianapolis, Indiana or the City of Minneapolis, Minnesota are required or authorized by law or governmental action to be closed.

“Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet in accordance with GAAP.

“Capital Stock” means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Cash Equivalents” means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months (or longer in the case of securities used to defease the Notes pursuant to Section 8.02 hereof) from the date of acquisition (including repurchase agreements and reverse repurchase agreements relating to such securities); (3) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case, maturing within one year from the date of acquisition, and having, at the time of acquisition, a credit rating of at least “A-1” from S&P or at least “P-1” from Moody’s; (4) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus in excess of $250.0 million and outstanding debt which is rated “A” (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act); (5) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clauses (2), (3) and (4) above entered into with any financial institution meeting the qualifications specified in clause (4) above; (6) commercial paper having the highest rating obtainable from Moody’s Investors Service, Inc. or Standard & Poor’s Rating Services and, in each case, maturing within six months after the date of acquisition; and (7) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (6) of this definition.

“Change of Control” means the occurrence of any of the following: the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder; (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) (a) prior to the occurrence of a Public Market, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder becomes the ultimate beneficial owner, directly or indirectly, of more than 50% of the voting power of the Voting Stock of the Company; and (b) after the occurrence of a Public Market, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder becomes the ultimate Beneficial Owner, directly or indirectly, of 35% or more of the voting power of the Voting Stock of the Company, and the Permitted Holders beneficially own a lesser percentage of such voting power of the Voting Stock than such Person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Company’s Board of Directors; (4) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors; or (5) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where (a) the Voting Stock of the Company outstanding immediately prior to such transaction is

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converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) and (b) immediately after such transaction, no “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than a Permitted Holder, becomes, directly or indirectly, the beneficial owner of 35% or more of the voting power of all classes of Voting Stock of the surviving or transferee Person (unless the Permitted Holders beneficially own an equal or greater percentage of such voting power of the Voting Stock than such Person and have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Company’s Board of Directors).

“Clearstream” means Clearstream Banking, société anonyme, Luxembourg.

“Commission” means the Securities and Exchange Commission.

“Company” means the party named as such above, until a successor replaces such Person in accordance with the terms of this Indenture, and thereafter means such successor.

“Consolidated Cash Flow” means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period, plus (or in the case of (5) minus): (1) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (2) Fixed Charges to the extent deducted in computing such Consolidated Net Income; plus (3) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (including non-cash asset impairment charges but excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; plus (4) to the extent deducted in computing such Consolidated Net Income, expenses and charges resulting from (a) the Recapitalization or (b) any other equity offerings, investments, mergers, recapitalizations, option buyouts, dispositions, acquisitions or similar transactions (provided that, in the case of this clause (b), any such expenses and charges shall have been incurred prior to or no later than three months following the consummation of such transaction); minus (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business; in each case on a basis consistent with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, the Fixed Charges and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount of Consolidated Net Income of such Restricted Subsidiary would be permitted, at the date of determination, to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders.

“Consolidated Net Income” means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income or loss of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the specified Person or a Restricted Subsidiary thereof; (2) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its equity holders; (3) the Net Income of any Person acquired during the specified period for any period prior to the date of such acquisition shall be excluded; (4) the cumulative effect of a change in accounting principles shall be excluded; (5) non-cash expenses or charges arising from the grant, issuance or repricing of stock, stock options or other equity-based awards or any amendment, modification, substitution or

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change of any stock, stock options or other equity-based awards shall be excluded; (6) the Net Income (or loss) of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the specified Person or one of its Subsidiaries; (7) an amount equal to the ESP Adjustment Amount for such period shall be included; and (8) with respect to any period or portion of any period preceding the date hereof, Consolidated Net Income shall be determined without applying FASB, Interpretation No. 46R, Consolidation of Variable Interest Entities (“FIN46R”) or EITF Issue No. 90-15, Impact of Nonsubstantive Lessors, Residual Value Guarantees, and Other Provisions in Leasing Transactions (“EITF Issue No. 90-15”) and EITF Topic No. D-14, Transactions involving Special-Purpose Entities (“EITF Topic No. D-14”).

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date hereof; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election.

“Corporate Trust Office of the Trustee” means, for purposes of presentation or surrender of Notes for payment, registration, transfer, exchange or purchase or for service of notices or demands upon the Company, the office of the Trustee at which at any particular time its corporate trust business shall be administered (which at the date hereof is located at 213 Court Street, Suite 703, Middletown, CT 06457), or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as a successor Trustee may designate from time to time by notice to the Holders and the Company).

“Credit Agreement” means that certain Credit Agreement, dated as of February 3, 2005 by and among the Company, the Subsidiary Guarantor, Congress Financial Corporation (Central), as Administrative Agent and Collateral Agent, and Wachovia Capital Markets LLC, as Sole Lead Arranger and Bookrunner, and the other lenders named therein and all amendments thereto, together with the related documents thereto (including, without limitation, security documents, notes, instruments and other agreements in connection therewith), in each case, as amended from time to time by one or more credit agreements (including any amendment or restatement thereof), including any agreements adding Subsidiaries of the Company as additional borrowers or guarantors thereunder or extending the maturity of, refinancing, replacing or otherwise restructuring all or any portion of the Indebtedness under such agreement or any successor or replacement agreements and whether by the same or any other agent, lender or group of lenders, in each case, in the bank credit market.

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

“Definitive Note” means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.07 hereof, substantially in the form of Exhibit A hereto, except that such Note shall not bear the Global Note Legend and shall not have the “Schedule of Exchanges of Interests in the Global Note” attached thereto.

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.04 hereof as the depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Disposition” means, with respect to any Person, any merger, consolidation or other business combination involving such Person (whether or not such Person is the surviving Person) or the sale, assignment, or transfer, lease, conveyance or other disposition of all or substantially all of such Person’s assets or Capital Stock.

“Disqualified Stock” means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would

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constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.10. The term “Disqualified Stock” shall also include any options, warrants or other rights that are convertible into Disqualified Stock or that are redeemable at the option of the holder, or required to be redeemed, prior to the date that is one year after the date on which the Notes mature. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture shall be the maximum amount that the Company and its Restricted Subsidiaries may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends.

“Domestic Subsidiary” means any Subsidiary of the Company that was formed under the laws of the United States or any state thereof or the District of Columbia.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“ESP Adjustment Amount” means, with respect to the Company and for any period, the excess of (i) the unamortized portion of revenue from the sale of the Company’s Extended Service Plans (“ESPs”) with respect to consumer electronics products during such period over (ii) the sum of the unamortized portion of the commission expense with respect to the sale of such ESPs and the fees that would have been payable to the third-party provider with respect to such ESPs had such ESPs been sold as third-party ESPs (under which the Company is not the obligor) on a basis and under terms similar to the third-party ESPs sold with respect to appliances.

“Euroclear” means Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System, and any successor thereto.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Commission thereunder.

“Exchange Notes” means the Notes issued in the Registered Exchange Offer in accordance with Section 2.07(f) hereof.

“Exchange Offer Registration Statement” has the meaning set forth in the Registration Rights Agreement.

“Existing Indebtedness” means the aggregate principal amount of Indebtedness (other than Indebtedness under the Credit Agreement) in existence on the date hereof, including the Subordinated Notes, until such amounts are repaid.

“fair market value” means the price that would be paid in an arm’s-length transaction between an informed and willing seller under no compulsion to sell and an informed and willing buyer under no compulsion to buy, as determined in good faith by the Board of Directors, whose determination shall be conclusive if evidenced by a Board Resolution (unless provided otherwise in this Indenture).

“Fixed Charge Coverage Ratio” means, with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than working capital borrowings in the ordinary course of business) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the “Calculation Date”), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase, redemption, defeasance or discharge of Indebtedness, or such issuance, repurchase, redemption, defeasance or discharge of preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the

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beginning of the applicable four-quarter reference period. For the avoidance of doubt, notwithstanding the exclusion of working capital borrowings in the ordinary course of business from the pro forma requirements set forth in the immediately preceding sentence, actual interest paid or accrued during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be included in the calculation of Fixed Charges. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions and dispositions of business entities or property and assets constituting a division or line of business of any Person that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations, and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be given pro forma effect as if they had occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated giving effect to any Pro Forma Cost Savings; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, shall be excluded; (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date; and (4) consolidated interest expense attributable to interest on any Indebtedness (whether existing or being incurred) and bearing a floating interest rate shall be computed as if the rate in effect on the Calculation Date (taking into account any interest rate option, swap, cap or similar agreement applicable to such Indebtedness if such agreement has a remaining term in excess of twelve months or, if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate for the entire period.

“Fixed Charges” means (subject to the last sentence of this definition), with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates; plus (2) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period; plus (3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon, the amount of which shall be the portion of interest equal to the proportionate amount (if less than all) of such Indebtedness of such other Person so guaranteed or secured by such Lien; plus (4) the product of (a) all dividends, whether paid or accrued and whether or not in cash, on any series of Disqualified Stock or preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP; less the amortization during such period of debt issuance and deferred financing costs, commissions and fees; provided, however, that the aggregate amount of amortization relating to such debt issuance and deferred financing costs, commissions and fees (other than such debt issuance and deferred financing costs, commissions and fees incurred in connection with the Recapitalization) deducted in calculating Fixed Charges shall not exceed 3.5% of the aggregate amount of the financing giving rise to such debt issuance and deferred financing costs, commissions and fees. With respect to any period or portion of any period preceding the date hereof, any interest expense attributable solely to the consolidation of related party entities pursuant to FIN 46R or EITF Issue No. 90-15 and EITF Topic No. D-14 shall not be included in the definition of “Fixed Charges.”

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Public Company Accounting Oversight Board, which are in effect on the date hereof.

“Global Note Legend” means the legend set forth in Section 2.07(g)(ii), which is required to be placed on all Global Notes issued under this Indenture.

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“Global Notes” means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, substantially in the form of Exhibit A hereto, as appropriate, issued in accordance with Section 2.01 hereof.

“Government Securities” means, securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii) are not callable or redeemable at the option of the issuer thereof.

“Guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements or by agreements to keep-well, to purchase assets, goods, securities, to take or pay or to maintain financial statement conditions or otherwise).

“Hedging Obligations” means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements (whether from fixed to floating or floating to fixed), interest rate cap agreements, interest rate collar agreements and other similar agreements or arrangements; (2) commodity swap agreements, commodity option agreements, forward contracts and other similar agreements or arrangements; and (3) foreign exchange contracts, currency swap agreements and other similar agreements or arrangements.

“Holder” means a Person in whose name a Note is registered on the Registrar’s books.

“incur” means, with respect to any Indebtedness, to incur, create, issue, assume, Guarantee or otherwise become directly or indirectly liable for or with respect to, or become responsible for, the payment of, contingently or otherwise, such Indebtedness; provided that (i) any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary shall be deemed to be incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and (ii) neither the accrual of interest nor the accretion of original issue discount nor the payment of interest in the form of additional Indebtedness (to the extent provided for when the Indebtedness on which such interest is paid was originally issued) shall be considered an incurrence of Indebtedness.

“Indebtedness” means, with respect to any specified Person, any indebtedness of such Person, whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof), but excluding obligations with respect to letters of credit (including trade letters of credit) securing obligations described in clause (5) below entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if drawn upon, to the extent such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement; (3) in respect of banker’s acceptances; (4) representing Capital Lease Obligations; (5) representing the balance deferred and unpaid of the purchase price of any property or services which purchase price is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services, except any such balance that constitutes an accrued expense or trade payable incurred in the ordinary course of business (other than a trade payable that is covered by an inventory floor planning program and that continues to be unpaid on or after the fifteenth day after the due date specified therefor under the terms of the agreement or instrument governing such trade payable); (6) representing Hedging Obligations, other than Hedging Obligations that are incurred for the purpose of protecting the Company or its Restricted Subsidiaries against fluctuations in interest rates, commodity prices or foreign currency exchange rates, and not for speculative purposes, and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in interest rates, commodity prices or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; or (7) representing Disqualified Stock valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends. In addition, the term “Indebtedness” includes (x) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person), provided that the amount of such Indebtedness shall be the lesser of (A) the fair market value of such asset at such date of determination and (B) the amount of such Indebtedness, and

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(y) to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person to the extent of the amount of Indebtedness covered by such Guarantee. For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock, such fair market value shall be determined in good faith by the Board of Directors of the issuer of such Disqualified Stock. The amount of any Indebtedness outstanding as of any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations, the maximum liability upon the occurrence of the contingency giving rise to the obligation, and shall be: (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount; and (ii) the principal amount thereof, together with any interest thereon that is more than thirty (30) days past due, in the case of any other Indebtedness; provided that the obligation to repay money borrowed and set aside at the time of the incurrence of any Indebtedness in order to pre-fund the payment of the interest on such Indebtedness shall be deemed not to be “Indebtedness” so long as such money is held to secure the payment of such interest.

“Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant of nationally recognized standing that is, in the judgment of the Board of Directors, independent and qualified to perform the task for which it has been engaged.

“Indirect Participant” means a Person who holds a beneficial interest in a Global Note through a Participant.

“Institutional Accredited Investor” means an institution that is an “accredited investor” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB.

“Initial Purchasers” means Wachovia Capital Markets, LLC and Jefferies & Company, Inc.

“Investments” means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the form of loans or other extensions of credit (including Guarantees or other arrangements, but excluding advances to customers or suppliers in the ordinary course of business that are, in conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance sheet of the Company or its Restricted Subsidiaries and endorsements for collection or deposit arising in the ordinary course of business), advances (excluding commission, travel, relocation, ordinary business expenses and similar advances to officers and employees made consistent with past practices), capital contributions (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Investment in such Restricted Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.10. Except as otherwise provided in this Indenture, the amount of an Investment shall be determined at the time the Investment is made and without giving effect to subsequent changes in value.

“Issue Date” means the date hereof, which is the date on which the Notes are originally issued under this Indenture.

“Letter of Transmittal” means the Letter of Transmittal to be prepared by the Company and sent to all Holders for use by such Holders in connection with the Registered Exchange Offer.

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“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statute) of any jurisdiction.

“Merger Agreement” means the Agreement and Plan of Merger, dated as of October 19, 2004, by and among the Company, Gregg Investment Corporation, LLC, GIC Corporation and the sellers named therein, as amended by the First Amendment to Agreement and Plan of Merger, dated as of January 13, 2005, by and among such parties, and as amended by the Second Amendment to the Agreement and Plan of Merger, dated as of February 2, 2005, by and among such parties.

“Net Income” means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (1) any gain or loss, together with any related provision for taxes on such gain (or loss), realized, in connection with (a) any asset sale outside the ordinary course of business; or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain or loss, together with any related provision for taxes on such extraordinary gain or loss.

“Net Proceeds” means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of (1) the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result thereof, (2) taxes paid or payable as a result thereof, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, (3) amounts required to be applied to the repayment of Indebtedness owed by Persons other than the Company or a Restricted Subsidiary of the Company and secured by a Lien on the asset or assets that were the subject of such Asset Sale, (4) all distributions and other payments required to be made to any Person owning a beneficial interest in assets subject to sale or minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale, (5) any reserve, established in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by the Company or any Restricted Subsidiary of the Company after such Asset Sale, (6) any reserves established in accordance with GAAP with respect to the purchase price adjustments or indemnification obligations relating to such Asset Sale or otherwise in connection with such Asset Sale and (7) any reserve for adjustment of purchase price in respect of the sale price of such asset or assets or post-employment severance or related amount, established in accordance with GAAP.

“Non-U.S. Person” means a Person who is not a U.S. Person.

“Notes” means the 9% Senior Notes due 2013 of the Company. For all purposes of this Indenture, the term “Notes” shall include the Notes initially issued on the Issue Date, any Exchange Notes to be issued and exchanged for any Notes pursuant to the Registration Rights Agreement and this Indenture and any other Notes issued after the Issue Date under this Indenture. For purposes of this Indenture, all Notes shall vote together as one series of Notes under this Indenture.

“Notes Custodian” means the custodian with respect to a Global Note (as appointed by the Depositary), or any successor person thereto and shall initially be the Trustee.

“Obligations” means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Offering Memorandum” means the final offering memorandum dated January 27, 2005 related to the offering of the Notes on the Issue Date.

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“Officer” means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer or the Treasurer of such Person.

“Officers’ Certificate” means, with respect to any Person, a certificate signed by two Officers, one of which must be the principal executive, principal financial or principal accounting officer of such Person, that satisfies the requirements set forth in Sections 13.04 and 13.05 hereof.

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee, satisfying the requirements of Sections 13.04 and 13.05, as they relate to an Opinion of Counsel. The counsel may be an employee of or counsel to the Company (or any Subsidiary Guarantor, if applicable).

“Participant” means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and with respect to DTC, shall include Euroclear and Clearstream).

“Parent Entity” means Gregg Investment Corporation, LLC and its successors.

“Permitted Business” means any business conducted or proposed to be conducted (as described in the Offering Memorandum) by the Company or its Restricted Subsidiaries on the date hereof and other businesses related, ancillary or complementary to, or a reasonable extension of, the business of the Company or its Restricted Subsidiaries on the date hereof.

“Permitted Holder” means (i) each of Jerry Throgmartin, Gregg Throgmartin and Dennis L. May for so long as such person is a shareholder in, and a member of the senior management of, the Company and (ii)(a) Freeman Spogli & Co. LLC (and any successor entity thereof or other entity controlled by the principals of Freeman Spogli & Co. LLC (other than any of its portfolio companies)) and (b) FS Equity Partners V, L.P., FS Affiliates V, L.P. and any other investment partnerships or limited liability companies formed by the Persons described in clause (ii)(a) for so long as any such investment partnership or limited liability company is controlled by the Persons described in clause (ii)(a); provided, however, that, solely for purposes of determining whether or not a Change of Control under clause 3(b) of the definition thereof has occurred, the aggregate Voting Stock of the Company Beneficially Owned, directly or indirectly, by any of the limited partners or members, as applicable, of FS Equity Partners V, L.P., of FS Affiliates V, L.P. or of any other investment partnerships or limited liability companies formed by the Persons described in clause (ii)(a) that shall have invested as a co-investor or on a side-by-side basis with such investment funds in the Parent Entity in connection with the Recapitalization may be treated as Voting Stock of the Persons described in clause (ii)(a) or (b) unless, on the relevant date of determination, such limited partners Beneficially Own, directly or indirectly, an equal or greater aggregate percentage of voting power of the Voting Stock of the Company than the aggregate percentage Beneficially Owned, directly or indirectly, by the Persons described in clause (ii)(a) or (b) without giving effect to this proviso.

“Permitted Investments” means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Company that is a Subsidiary Guarantor; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.11; (5) Hedging Obligations that are incurred for the purpose of protecting the Company or its Restricted Subsidiaries against fluctuations in interest rates, commodity prices or foreign currency exchange rates, and not for speculative purposes, and that do not increase the Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in interest rates, commodity prices or foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder; (6) other Investments in any Person that is not an Affiliate of the Company having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (6) since the date hereof, not to exceed $10.0 million; (7) loans or advances to employees of

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the Company or any Subsidiary Guarantor in the ordinary course of business or in connection with the purchase of Equity Interests of the Company; (8) any Investments received in compromise or resolution of (a) obligations of creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (b) litigation, arbitration or other disputes with Persons who are not Affiliates; and (9) repurchases of the Notes.

“Permitted Liens” means: (1) Liens on the assets of the Company and any Subsidiary Guarantor securing Indebtedness that is incurred under by clause (1) or (11) of the second paragraph of Section 4.09 hereof; (2) Liens securing the Notes and any Subsidiary Guarantees; (3) Liens in favor of the Company or any Restricted Subsidiary; (4) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Restricted Subsidiary; (5) Liens on property existing at the time of acquisition thereof by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition and do not extend to any property other than the property so acquired by the Company or the Restricted Subsidiary; (6) Liens existing on the date hereof; (7) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding; (8) Liens to secure Indebtedness permitted by clause (4) of the second paragraph of Section 4.09 hereof covering only the assets (and any proceeds thereof) acquired with or financed by such Indebtedness and incurred within 180 days after the date of the acquisition, or the completion of the construction or improvement, thereof; (9) statutory and common law Liens of landlords and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other similar Liens arising in the ordinary course of business and with respect to amounts not yet delinquent or being contested in good faith and for which a reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made; (10) Liens on cash or Cash Equivalents securing Hedging Obligations of the Company or any of its Restricted Subsidiaries (a) that are incurred for the purpose of fixing, hedging or swapping interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements previously made for such purposes), and not for speculative purposes, or (b) securing letters of credit that support such Hedging Obligations; (11) Liens incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other social security obligations; (12) survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights of way, zoning or other restrictions as to the use of properties, and defects in title which, in the case of any of the foregoing, were not incurred or created to secure the payment of Indebtedness, and which in the aggregate do not materially adversely affect the value of such properties or materially impair the use for the purposes of which such properties are held by the Company or any of its Restricted Subsidiaries; (13) judgment and attachment Liens not giving rise to an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and for which adequate reserves have been made; (14) Liens, deposits or pledges to secure public or statutory obligations, surety, stay, appeal, indemnity, performance, return-of-money or other similar bonds or obligations; and Liens, deposits or pledges in lieu of such bonds or obligations, or to secure such bonds or obligations, or to secure letters of credit in lieu of or supporting the payment of such bonds or obligations, or to secure obligations under leases, contracts and other similar obligations (exclusive of obligations for the payment of borrowed money); (15) Liens in favor of collecting or payor banks or credit card issuers or processors having a right of setoff, revocation, refund or charge back with respect to credit balances or money or instruments of the Company or any Subsidiary thereof on deposit with or in possession of such bank; (16) any interest or title of a lessor, licensor or sublicensor in the property subject to any lease, license or sublicense; (17) Liens arising from precautionary UCC financing statements regarding operating leases or consignments; (18) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (19) Liens securing Permitted Refinancing Indebtedness; provided that such Liens do not extend to any property or assets other than the property or assets that secure the Indebtedness being refinanced; (20) unperfected Liens upon specific items of inventory or other goods purchased by the Company or its Restricted Subsidiaries in the ordinary course of business in favor of the vendors thereof; (21) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods that are incurred in the ordinary

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course of business; and (22) Liens upon specific items of inventory subject to inventory financing programs maintained by the Company in favor of the Persons providing such programs.

“Permitted Refinancing Indebtedness” means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus all accrued interest thereon and the amount of any customary expenses and premiums incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final Stated Maturity later than the final Stated Maturity of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes or any Subsidiary Guarantee, such Permitted Refinancing Indebtedness has a final Stated Maturity later than the final Stated Maturity of, and is subordinated in right of payment to, the Notes or such Subsidiary Guarantee, as the case may be, on terms at least as favorable to the Holders as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is pari passu in right of payment to the Notes or the Subsidiary Guarantees, such Permitted Refinancing Indebtedness is pari passu or subordinated in right of payment to the Notes; and (5) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Private Placement Legend” means the legend set forth in Section 2.07(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture.

“Pro Forma Cost Savings” means, with respect to any period for which the Fixed Charge Coverage Ratio is calculated, the reduction in net costs and related adjustments that (i) were directly attributable to an acquisition of a business entity, or property and assets constituting a division or line of business, that occurred during the four-quarter period or after the end of the four-quarter period and on or prior to the Calculation Date and calculated on a basis that is consistent with Regulation S-X under the Securities Act as in effect and applied as of the date hereof, (ii) were actually implemented by the business that was the subject of such acquisition within six months after the date of such acquisition and prior to the Calculation Date and are supportable and quantifiable by the underlying accounting records of such business or (iii) relate to the business that is the subject of such acquisition and that the Company reasonably determines are probable based upon specifically identifiable actions to be taken within six months of the date of such acquisition and, in the case of each of (i), (ii) and (iii), are described, as provided below, in an officer’s certificate, as if all such reductions in costs had been effected as of the beginning of such period. Pro Forma Cost Savings described above shall be accompanied by a certificate delivered to the Trustee from the Company’s Chief Financial Officer that outlines the specific actions taken or to be taken, the net cost savings achieved or to be achieved from each such action and that, in the case of clause (iii) above, such savings have been determined to be probable.

“Public Equity Offering” means an offer and sale of common stock (other than Disqualified Stock) of the Company pursuant to a registration statement that has been declared effective by the Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of the Company).

A “Public Market” shall be deemed to exist if (i) a Public Equity Offering has been consummated and (ii) at least 15% of the total issued and outstanding common stock of the Company has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act.

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“Recapitalization” means the recapitalization transaction contemplated by the Merger Agreement.

“QIB” means a qualified institutional buyer as that term is defined in Rule 144A.

“Registered Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

“Registration Rights Agreement” means the Registration Rights Agreement dated the date hereof among the Company, the Subsidiary Guarantor and the Initial Purchasers, or any other Registration Rights Agreement executed in connection with the issuance of Notes after the Issue Date, as the case may be.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Global Note” means a global note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that shall be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of Regulation S.

“Replacement Assets” means (1) non-current tangible assets that will be used or useful in a Permitted Business or (2) substantially all the assets of a Permitted Business or a majority of the Voting Stock of any Person engaged in a Permitted Business that will become on the date of acquisition thereof a Restricted Subsidiary.

“Restricted Definitive Note” means a Definitive Note bearing the Private Placement Legend.

“Restricted Global Note” means a Global Note bearing the Private Placement Legend.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Subsidiary” of a Person means any Subsidiary of such Person that is not an Unrestricted Subsidiary.

“Retained Equity Interests” means the Equity Interests in the Company retained by Jerry Throgmartin, Gregg Throgmartin and Dennis May upon consummation of the Recapitalization.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 903” means Rule 903 promulgated under the Securities Act.

“Rule 904” means Rule 904 promulgated under the Securities Act.

“sale and leaseback transaction” means, with respect to any Person, any transaction involving any of the assets or properties of such Person whether now owned or hereafter acquired, whereby such Person sells or otherwise transfers such assets or properties and then or thereafter leases such assets or properties or any part thereof or any other assets or properties which such Person intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred but excluding any Build-to-Suit Sale and Leaseback Transaction.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“Shelf Registration Statement” means the registration statement filed by the Company in connection with the offer and sale of Notes pursuant to the Registration Rights Agreement.

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“Significant Subsidiary” means any Subsidiary that would constitute a “significant subsidiary” within the meaning of Article 1 of Regulation S-X promulgated under the Securities Act.

“Stated Maturity” means, with respect to any installment of interest or principal on any series of indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

“Subordinated Notes” means the 6% Junior Subordinated Notes due 2015 issued, on the date hereof, by the Company in an aggregate principal amount of $25.0 million in favor of certain of the sellers named in the Merger Agreement.

“Subsidiary” means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

“Subsidiary Guarantee” means the Guarantee by any Subsidiary Guarantor of the Company’s payment obligations under the Notes on a senior basis, as further described in Article Eleven hereof.

“Subsidiary Guarantors” means (1) each direct or indirect Domestic Subsidiary of the Company and (2) any other Subsidiary that executes a Guarantee of the Notes in accordance with the provisions of this Indenture; and their respective successors and assigns until released from their obligations under their Guarantees and this Indenture in accordance with the terms of this Indenture.

“TIA” means the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date hereof, except as provided in Section 9.03; provided, however, that if the TIA is amended after the date hereof, “TIA” means, to the extent required by any such amendment, the TIA as so amended.

“Trust Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject, and who shall have direct responsibility for the administration of this Indenture.

“Trustee” means the party named as such in the first paragraph of this Indenture until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor.

“Unrestricted Definitive Note” means a Definitive Note that does not bear and is not required to bear the Private Placement Legend.

“Unrestricted Global Note” means a permanent Global Note substantially in the form of Exhibit A attached hereto that bears the Global Note Legend and that has the “Schedule of Exchanges of Interests in the Global Note” attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend.

“Unrestricted Subsidiary” means any Subsidiary of the Company that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution in compliance with Section 4.17 hereof, and any Subsidiary of such Subsidiary.

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“U.S. Government Obligations” means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case under clauses (i) or (ii) are not callable or redeemable at the option of the issuer thereof.

“U.S. Legal Tender” means such coin or currency of the United States as at the time of payment shall be legal tender for the payment of public and private debts.

“U.S. Person” means a U.S. person as defined in Rule 902(k) promulgated under the Securities Act.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness.

“Wholly Owned Restricted Subsidiary” of any specified Person means a Restricted Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares or Investments by foreign nationals mandated by applicable law) shall at the time be owned by such Person and/or by one or more Wholly Owned Restricted Subsidiaries of such Person.

Section 1.02.     Other Definitions.

Term	Defined in Section
“Affiliate Transaction”	4.14
“Asset Sale Offer”	4.11
“Authentication Order”	2.02
“Bankruptcy Law”	6.01
“Change of Control Offer”	4.16
“Change of Control Payment”	4.16
“Change of Control Payment Date”	4.16
“Covenant Defeasance”	8.02
“CUSIP”	2.13
“Custodian”	6.01
“DTC”	2.04
“Event of Default”	6.01
“Excess Proceeds”	4.11
“Legal Defeasance”	8.02
“Note Register”	2.04
“Offer Amount”	4.11
“Offer Period”	4.11
“Paying Agent”	2.04
“Permitted Debt”	4.09
“Purchase Date”	4.11
“Registrar”	2.04
“Restricted Payments”	4.10

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Section 1.03.     Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms, if used in this Indenture, have the following meanings:

“Commission” means the Commission.

“indenture securities” means the Notes and the Subsidiary Guarantees.

“indenture security holder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“obligor” on the indenture securities means the Company, the Subsidiary Guarantor and any other obligor on the Notes or the Subsidiary Guarantees.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meanings assigned to them therein.

Section 1.04.     Rules of Construction.

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) “or” is not exclusive;

(4) words in the singular include the plural, and words in the plural include the singular;

(5) any gender used in this Indenture shall be deemed to include the neuter, masculine or feminine genders;

(6) provisions apply to successive events and transactions; and

(7) “herein,” “hereof” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other Subdivision.

ARTICLE TWO

THE NOTES

Section 2.01.     Form and Dating.

The Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A hereto, the terms of which are incorporated in and made a part of this Indenture. To the extent any provision of any Note conflicts with the express provision of this Indenture, the provisions of this Indenture shall control. The Notes may have such notations, legends or endorsements approved as to form by the Company and required, as applicable, by law, stock exchange rule, agreements to which the Company is subject and/or usage. Each Note shall be dated the

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date of its authentication. The Notes shall be issuable only in denominations of $1,000 and integral multiples thereof. The terms of the Notes set forth in Exhibit A are part of the terms of this Indenture.

(a) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A hereto (including the Global Note Legend thereon and the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A hereto (but without the Global Note Legend thereon and without the “Schedule of Exchanges of Interests in the Global Note” attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee in accordance with instructions given by the Holder thereof as required by Section 2.07 hereof.

(b) Euroclear and Clearstream Procedures Applicable. The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream” and “Customer Handbook” of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream.

Section 2.02.     Execution and Authentication.

Two Officers of the Company shall sign the Notes for the Company, by manual or facsimile signature.

If an Officer of the Company whose signature is on a Note no longer holds that office at the time such Note is authenticated such Note shall be valid nevertheless.

A Note shall not be valid until authenticated by the manual or facsimile signature of the Trustee. The signature of the Trustee shall be conclusive evidence that a Note has been authenticated in accordance with the terms of this Indenture.

The Trustee, upon a written order of the Company signed by two Officers of the Company (an “Authentication Order”), shall authenticate and deliver Notes for original issue in an aggregate principal amount specified in such order. Such Authentication Order shall specify the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is unlimited.

The Trustee may appoint an authenticating agent acceptable to the Company to authenticate the Notes. Unless limited by the terms of such appointment, any such authenticating agent may authenticate the Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such authenticating agent of the Trustee. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company.

Section 2.03.     [Reserved].

Section 2.04.     Registrar and Paying Agent.

The Company shall maintain (i) an office or agency where the Notes may be presented for registration of transfer or for exchange (including any co-registrar, the “Registrar”); and (ii) an office or agency where the Notes may be presented for payment (“Paying Agent”). The Registrar shall keep a register of the Holders and of the transfer and exchange of such Notes (the “Note Register”). The Company may appoint one or more co-registrars and one or more additional paying agents. The term “Paying Agent” shall include any such additional paying agent. The Company may change any Paying Agent, Registrar or co-registrar without prior notice to any Holder of a Note. The Company shall notify the Trustee and the Trustee shall, at the Company’s expense, notify the Holders of the name

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and address of any Agent not a party to this Indenture. The Company or any of its domestically incorporated wholly owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. Any such agency agreement shall implement the provisions of this Indenture that relate to such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such, as appropriate, and shall be entitled to appropriate compensation in accordance with Section 7.07.

The Company initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Company initially appoints the Trustee to act as (i) Registrar and Paying Agent, (ii) Note Custodian with respect to the Global Notes and (iii) agent for service of notices and demands in connection with the Notes.

Section 2.05.     Paying Agent to Hold Money in Trust.

On or prior to each due date of the principal of, premium, if any, and interest on any Note, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal, premium, if any, and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of, premium, if any, and interest on the Notes, and shall notify the Trustee of any Default by the Company in making any such payment. While any such Default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee and accounting for any funds disbursed, the Paying Agent (if other than the Company or one of its wholly owned Subsidiaries) shall have no further liability for the money delivered to the Trustee. If the Company or one of its wholly owned Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent.

Section 2.06.     Lists of Holders of Notes.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Trustee is not the Registrar, the Company shall furnish or cause to be furnished to the Trustee at least ten Business Days before each interest payment date and at such other times as the Trustee may request in writing a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders, including the aggregate principal amount of Notes held by each such Holder of Notes.

Section 2.07.     Transfer and Exchange.

(a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Global Notes shall be exchanged by the Company for Definitive Notes if:

(i) the Company delivers to the Trustee notice from the Depositary that (a) it is unwilling or unable to continue to act as Depositary or (b) it is no longer a clearing agency registered under the Exchange Act and, in the case of (a) and (b), a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary;

(ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Definitive Notes; or

(iii) there shall have occurred and be continuing a Default or Event of Default with respect to the Notes.

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Upon the occurrence of any of the events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.08 and 2.11 hereof. Except as otherwise provided above in this Section 2.07(a), every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.07 or Section 2.08 or 2.11 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.07(a); however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.07(b), (c) or (f) hereof.

(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable:

(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.07(b)(i).

(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.07(b)(i) above, the transferor of such beneficial interest must deliver to the Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above. Upon consummation of a Registered Exchange Offer by the Company in accordance with Section 2.07(f) hereof, the requirements of this Section 2.07(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Notes pursuant to Section 2.07(h) hereof.

(iii) Transfer of Beneficial Interests in a Restricted Global Note to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.07(b)(ii) above and the Registrar receives the following:

(A) if the transferee shall take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and

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(B) if the transferee shall take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof.

(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.07(b)(ii) above and:

(A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the Holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(C) such transfer is effected by a broker-dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(D) the Registrar receives the following:

(1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or

(2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the relevant certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above.

Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note.

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(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.

(i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any Holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof;

(B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof;

(C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 promulgated under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

(D) if such beneficial interest is being transferred to an Institutional Accredited Investor in reliance on an exemption from the registration requirements of the Securities Act other than those listed in subparagraphs (B) and (C) above, a certificate to the effect set forth in Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(b) thereof, if applicable; or

(E) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof,

the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein.

(ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A Holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:

(A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the Holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

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(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(C) such transfer is effected by a broker-dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(D) the Registrar receives the following:

(1) if the Holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or

(2) if the Holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the relevant certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any Holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.07(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.07(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iii) shall be registered in such name or names and in such authorized denomination or denominations as the Holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iii) shall not bear the Private Placement Legend.

(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.

(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation:

(A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof;

(B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; or

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(C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof;

the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note.

(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if:

(A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

(B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(C) such transfer is effected by a broker-dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

(D) the Registrar receives the following:

(1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or

(2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the relevant certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.07(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note.

(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes.

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If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred.

(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder’s compliance with the provisions of this Section 2.07(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.07(e).

(i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following:

(A) if the transfer is being made to a QIB in accordance with Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof;

(B) if the transfer is being made to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof;

(C) if the transfer is being made to an Institutional Accredited Investor pursuant to an exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3)(b) thereof, if applicable; and

(D) if the transfer is being made to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item 3(b) thereof.

(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if:

(A) such exchange or transfer is effected pursuant to the Registered Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company;

(B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement;

(C) any such transfer is effected by a broker-dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or

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(D) the Registrar receives the following:

(1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or

(2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the relevant certifications in item (4) thereof;

and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act.

(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof.

(f) Registered Exchange Offer. Upon the occurrence of the Registered Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Registered Exchange Offer, or (ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Registered Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Restricted Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. Any Notes that remain outstanding after the consummation of the Registered Exchange Offer, and Exchange Notes issued in connection with the Registered Exchange Offer, shall be treated as a single class of securities under this Indenture.

(g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture.

(i) Private Placement Legend. Except as permitted below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form:

“THIS SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT:

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(A) SUCH SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY

(i) (a) FOR SO LONG AS THE SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHICH NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (b) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 UNDER THE SECURITIES ACT, (c) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN “INSTITUTIONAL ACCREDITED INVESTOR”)) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL, IF THE ISSUER SO REQUESTS),

(ii) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, OR

(iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT

AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION; AND

(B) THE HOLDER SHALL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.

Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) of this Section 2.07 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend.

(ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form:

“THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.

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UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.”

(h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase.

(i) General Provisions Relating to Transfers and Exchanges.

(i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company’s order or at the Registrar’s request.

(ii) No service charge shall be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 4.11, 4.16 and 9.05 hereof).

(iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid and legally binding obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(v) The Company or the Registrar, as applicable, shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date.

(vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the

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absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary.

(vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof.

(viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.07 to effect a registration of transfer or exchange may be submitted by facsimile with the original to follow by first class mail.

(j) No Obligation of the Trustee.

(i) The Trustee shall have no responsibility or obligation to any Indirect Participant, Participant or other Person with respect to the accuracy of the records of the Depositary or its nominee or of any Participant with respect to any ownership interest in the Notes or with respect to the delivery to any Indirect Participant, Participant or other Person (other than the Depositary) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to or upon the order of the registered Holders (which shall be the Depositary or its nominee in the case of the Global Note). The rights of Indirect Participants shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its Participants and Indirect Participants.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Participants or Indirect Participants) other than to make any required delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

Section 2.08.     Replacement Notes.

If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Company’s and the Trustee’s requirements for the replacements of Notes are met. If required by the Trustee or the Company, an indemnity bond shall be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent or any authenticating agent from any loss which any of them may suffer if a Note is replaced. The Company may charge for its expenses (including fees and expenses of the Trustee) in replacing a Note.

Every replacement Note shall be an obligation of the Company and shall be entitled to all benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

Section 2.09.     Outstanding Notes; Treasury Notes.

The Notes outstanding at any time are all the Notes authenticated by the Trustee, except for those canceled by it, those delivered to it for cancellation and those described in this Section 2.09 as not outstanding. A Note does not cease to be outstanding because the Company, a Subsidiary Guarantor or any of their respective Subsidiaries or Affiliates of the Company holds such Note.

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In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, any Subsidiary Guarantor or an Affiliate of the Company shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded.

If a Note is replaced pursuant to Section 2.08, it shall cease to be outstanding unless the Trustee receives proof satisfactory to it that such replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.08.

If the Paying Agent holds (or segregates if the Company is the Paying Agent) in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) shall cease to be outstanding and interest thereon shall cease to accrue.

Section 2.10.     Temporary Notes.

Until certificates in definitive form for the Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate certificates in temporary form for the Notes. Certificates in temporary form for the Notes shall be substantially in the form of certificates in definitive form for the Notes but may have such variations as the Company and the Trustee consider appropriate for certificates in temporary form for the Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate certificates in definitive form for the Notes in exchange for certificates in temporary form for the Notes. Until such exchange, certificates in temporary form for the Notes shall be entitled to the same rights, benefits and privileges as certificates in definitive form for the Notes.

Section 2.11.     Cancellation.

The Company or any Subsidiary Guarantor at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation, and shall dispose of such canceled Notes in its customary manner.

Section 2.12.     Defaulted Interest.

If the Company defaults in a payment of interest on the Notes, the Company shall pay such defaulted interest in any lawful manner. The Company may pay such defaulted interest to the Persons who are Holders on a subsequent special record date, which date shall be at least five Business Days prior to the payment date, in each case at the rate provided in the Notes. The Company shall fix or cause to be fixed any such special record date and payment date, and, at least 15 days prior to the special record date, the Company (or upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to each Holder of a Note a notice that states such special record date, such related payment date and the amount of any such defaulted interest to be paid to Holders.

Notwithstanding the foregoing, any defaulted interest which is paid prior to the expiration of the grace period provided in Section 6.01 (1) hereof shall be paid to the Holders of the Notes (in addition to any interest otherwise due) as of the regular record date for interest that has not been paid.

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Section 2.13.     CUSIP Number.

The Company in issuing the Notes may use a “CUSIP” number, and, if the Company shall do so, the Trustee shall use such CUSIP number in notices of redemption or exchange as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in such notice or on the Notes and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in a CUSIP number.

Section 2.14.     Persons Deemed Owners.

The Company, any Subsidiary Guarantor, the Trustee, any Paying Agent and any authenticating agent may treat the Person in whose name any Note is registered as the owner of such Note for the purpose of receiving payments of principal of, premium, if any, or interest on such Note and for all other purposes. None of the Company, any Subsidiary Guarantor, the Trustee, any Paying Agent or any authenticating agent shall be affected by any notice to the contrary.

Section 2.15.     Issuance of Additional Notes.

The Company may, subject to Article Four hereof and applicable law, issue additional Notes under this Indenture. The Notes issued on the Issue Date and any additional Notes subsequently issued shall be treated as a single class for all purposes under this Indenture.

ARTICLE THREE

REDEMPTION

Section 3.01.     Notice to Trustee.

If the Company elects to redeem Notes pursuant to the optional redemption provisions of paragraph 7 of the Notes, it shall furnish to the Trustee, at least 45 days before the redemption date (unless a shorter period shall be acceptable to the Trustee), an Officers’ Certificate setting forth the redemption date, the principal amount of Notes to be redeemed and the redemption price.

Section 3.02.     Selection of Notes to Be Redeemed.

If less than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed in multiples of $1,000 pro rata, by lot or by any other method that the Trustee considers fair and appropriate; provided that if the Notes are listed on any securities exchange, that such method complies with the requirements of such exchange. The Trustee shall make the selection from outstanding Notes not previously called for redemption not less than thirty (30) nor more than sixty (60) days prior to the redemption date. The Trustee may select for redemption portions of the principal of Notes that have denominations larger than $1,000. Notes and portions of them it selects shall be in amounts of $1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall notify the Company promptly of the Notes or portions of Notes selected for redemption.

Section 3.03.     Notice of Redemption.

(a) At least thirty (30) days but not more than sixty (60) days before a redemption date, the Company shall mail a notice of redemption by first-class mail to each Holder of Notes to be redeemed at such Holder’s registered address.

The notice shall identify the Notes to be redeemed and shall state:

(1) the redemption date;

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(2) the redemption price;

(3) the aggregate principal amount of Notes being redeemed;

(4) the name and address of the Paying Agent;

(5) if applicable, that Notes called for redemption must be surrendered to the Paying Agent at the address specified in such notice to collect the redemption price;

(6) that, unless the Company defaults in the payment of the redemption price or accrued interest, interest on Notes called for redemption ceases to accrue on and after the redemption date and the only remaining right of the Holders is to receive payment of the redemption price and accrued interest upon surrender to the Paying Agent of the Notes;

(7) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued;

(8) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed; and

(9) the CUSIP number of the Notes.

(b) At the Company’s request, the Trustee shall give the notice of redemption required in Section 3.03(a) in the Company’s name and at the Company’s expense; provided, however, that the Company shall deliver to the Trustee, at least 45 days prior to the redemption date (unless a shorter period shall be acceptable to the Trustee), an Officers’ Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in Section 3.03(a).

Section 3.04.     Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become due and payable on the redemption date at the redemption price. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price, plus accrued interest to the redemption date.

Section 3.05.     Deposit of Redemption Price.

On or prior to 10:00 a.m. Eastern Time on the redemption date, the Company shall deposit with the Paying Agent funds available not later than 10:00 a.m. Eastern Time on the redemption date sufficient to pay the redemption price of, and accrued interest on, the Notes to be redeemed on that date. The Paying Agent shall promptly return to the Company any money so deposited which is not required for that purpose upon the written request of the Company, except with respect to monies owed as obligations to the Trustee pursuant to Article Seven.

If any Note called for redemption shall not be so paid upon redemption because of the failure of the Company to comply with the preceding paragraph, interest shall continue to be payable on the unpaid principal and premium, if any, including from the redemption date until such principal and premium, if any, is paid, and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06.     Notes Redeemed in Part.

Upon surrender of a Note that is to be redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder, at the expense of the Company, a new Note equal in aggregate amount to the unredeemed portion of the Note surrendered.

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ARTICLE FOUR

COVENANTS

Section 4.01.     Payment of Notes.

The Company shall pay the principal of, premium, if any, and interest on, the Notes on the dates and in the manner provided in the Notes and this Indenture. Principal, premium, if any, and interest shall be considered paid on the date due if the Trustee or Paying Agent holds (or segregates if the Company is the Paying Agent), as of 10:00 a.m. Eastern Time, on that date money deposited by the Company designated for and sufficient to pay all principal, premium, if any, and interest then due. Reference in this Indenture and the Notes to “interest” with respect to the Notes shall include any additional interest that accrues on the Notes as a result of the provisions of the Registration Rights Agreement, which additional interest on the Notes shall be due and payable as provided by the Registration Rights Agreement.

The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal, and premium, if any, at the rate borne by the Notes to the extent lawful; and it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

Section 4.02.     Commission Reports.

(a) Whether or not required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company shall furnish to the Trustee, following the consummation of the Registered Exchange Offer for the Notes, within the time periods specified in the Commission’s rules and regulations:

(1) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Company’s certified independent accountants; and

(2) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports.

All reports shall be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. In addition, following the consummation of the Registered Exchange Offer for the Notes, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission’s rules and regulations (unless the Commission will not accept such a filing) and make such information available to prospective investors upon request. In addition, for so long as any Notes remain outstanding, if at any time the Company is not required to file with the Commission the reports required by paragraphs (a) and (b) of this Section 4.02 the Company and the Subsidiary Guarantor shall furnish to the Holders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

(b) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraph shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the financial condition and results of

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operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company.

(c) Delivery of such reports, information, and documents to the Trustee pursuant to the provisions of this Section 4.02 is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

Section 4.03.     Compliance Certificates.

(a) The Company (and each Subsidiary Guarantor to the extent that the Subsidiary Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers’ Certificate stating that a review of the activities of the Company and its Subsidiaries (or such Subsidiary Guarantor and its Subsidiaries) during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company (or such Subsidiary Guarantor) has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge, the Company (or such Subsidiary Guarantor) has kept, observed, performed and fulfilled its obligations under this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company (or such Subsidiary Guarantor) is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company (or such Subsidiary Guarantor) is taking or proposes to take with respect thereto.

(b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

Section 4.04.     Maintenance of Office or Agency.

The Company shall maintain an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company initially designates the Trustee, at the Corporate Trust Office of the Trustee to be its agent for purposes of the preceding sentence. The Company shall give prompt written notice to the Trustee of any change in the location of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

Section 4.05.     Corporate Existence.

Subject to the provisions of Article Five hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and the corporate, partnership or other existence of each Restricted Subsidiary and all rights (charter and statutory) and franchises of the Company and the Restricted Subsidiaries; provided that the Company shall not be required to preserve the existence of any Restricted Subsidiary, or any such right or franchise, if the Board of Directors of the Company shall determine that the

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preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries taken as a whole and that the loss thereof would not reasonably be expected to have a material adverse effect on the ability of the Company to perform its obligations hereunder; and provided further, that the foregoing shall not prohibit a sale, transfer or conveyance of a Restricted Subsidiary or any of its assets in compliance with the terms of this Indenture.

Section 4.06.     Waiver of Stay, Extension or Usury Laws.

Each of the Company and the Subsidiary Guarantor covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and each of the Company and the Subsidiary Guarantor (to the extent that it may lawfully do so), hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

Section 4.07.     Payment of Taxes and Other Claims.

The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, any material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders.

Section 4.08.     Business Activities.

The Company shall not, and shall not permit any Restricted Subsidiary to, engage in any business other than Permitted Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole.

Section 4.09.     Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, incur any Indebtedness (including Acquired Debt), and the Company shall not permit any of its Restricted Subsidiaries that are not Subsidiary Guarantors to issue any preferred stock; provided, however, that the Company and any Subsidiary Guarantor may incur Indebtedness (including Acquired Debt) if the Fixed Charge Coverage Ratio for the Company’s most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred at the beginning of such four-quarter period.

The first paragraph of this Section 4.09 shall not prohibit the incurrence of any of the following items of Indebtedness (collectively, “Permitted Debt”):

(1) the incurrence by the Company or any Subsidiary Guarantor of Indebtedness under the Credit Agreement in an aggregate principal amount at any one time outstanding (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed the greater of (a) $85 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any Restricted Subsidiary to permanently repay any such Indebtedness (and, in the case of any revolving credit Indebtedness, to effect a corresponding permanent commitment reduction thereunder) pursuant to Section 4.11 hereof and (b) the Borrowing Base;

(2) the incurrence by the Company or any of its Restricted Subsidiaries of Existing Indebtedness;

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(3) the incurrence by the Company and the Subsidiary Guarantors of Indebtedness represented by the Notes and the related Subsidiary Guarantees to be issued on the date hereof and the Exchange Notes and the related Subsidiary Guarantees to be issued pursuant to the Registration Rights Agreement;

(4) the incurrence by the Company or any Subsidiary Guarantor of Indebtedness (including, without limitation, Capital Lease Obligations, mortgage financings or purchase money obligations), in each case, incurred for the purpose of financing all or any part of the purchase price or cost of design, construction, installation or improvement of property, plant or equipment or other assets used or useful in the business of the Company or the Subsidiary Guarantor (whether through the direct purchase of assets or the Capital Stock of any Person owing such assets and whether such Indebtedness is owed to the seller or Person carrying out such construction or improvement or to any third party), in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (4), not to exceed $25.0 million at any time outstanding;

(5) the incurrence by the Company or any Restricted Subsidiary of the Company of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under the first paragraph of this Section 4.09 or clauses (2), (3), (4), (5) or (11) of this paragraph;

(6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness owing to and held by the Company or any of its Restricted Subsidiaries; provided, however, that:

(a) if the Company or any Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes, in the case of the Company, or the Subsidiary Guarantee, in the case of a Subsidiary Guarantor;

(b) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); and

(c) Indebtedness owed to the Company or any Subsidiary Guarantor must be evidenced by an unsubordinated promissory note, unless the obligor under such Indebtedness is the Company or a Subsidiary Guarantor;

(7) the Guarantee by the Company or any Subsidiary Guarantor of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; provided that, if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the Guarantee shall be subordinated or pari passu to the same extent as the Indebtedness Guaranteed;

(8) the incurrence by the Company of Indebtedness to the extent the proceeds thereof are deposited to defease all outstanding Notes in the manner described in Sections 8.01 and 8.02;

(9) (i) Indebtedness of the Company or any of its Restricted Subsidiaries under agreements providing for indemnification, adjustment of purchase price or similar obligations, or Guarantees or letters of credit, surety bonds or performance bonds securing any obligations of the Company or any of its

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Restricted Subsidiaries pursuant to such agreements, in any case, incurred in connection with the Recapitalization or the acquisition or disposition of any business or assets, so long as (in the case of a disposition) the principal amount does not exceed the gross proceeds actually received by the Company or any Restricted Subsidiary of the Company in connection with such disposition, and (ii) Indebtedness of the Company or any of its Restricted Subsidiaries represented by letters of credit for the account of the Company or such Restricted Subsidiary, as the case may be, issued in the ordinary course of business of the Company or such Restricted Subsidiary to provide security for workers’ compensation claims, unemployment insurance claims or other types of social security claims or payment obligations in connection with self-insurance or similar requirements in the ordinary course of business and other Indebtedness with respect to worker’s compensation claims, unemployment insurance claims or other types of social security claims, self-insurance obligations, bankers’ acceptances, performance, surety and similar bonds and completion guarantees provided by the Company or any of its Restricted Subsidiaries in the ordinary course of business;

(10) the incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business, so long as such Indebtedness is covered within five Business Days; and

(11) the incurrence by the Company or any Subsidiary Guarantor of other Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance or replace, defease or discharge any Indebtedness incurred pursuant to this clause (11), not to exceed $10.0 million at any time outstanding.

For purposes of determining compliance with this Section 4.09, if any proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (11) above, or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness in any manner that complies with this Section 4.09. Indebtedness under the Credit Agreement outstanding on the Issue Date shall be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt.

The accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of preferred stock as Indebtedness due to a change in accounting principles, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued. Notwithstanding any other provision of this Section 4.09, the maximum amount of Indebtedness that may be Incurred pursuant to this Section 4.09 shall not be deemed to be exceeded with respect to any outstanding Indebtedness, due solely to the result of fluctuations in the exchange rates of currencies.

Section 4.10.     Limitation on Restricted Payments.

(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable (i) in Equity Interests (other than Disqualified Stock) of the Company or (ii) to the Company or a Restricted Subsidiary of the Company);

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(2) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any Subsidiary of the Company (other than any such Equity Interests owned by the Company or any of its Restricted Subsidiaries);

(3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes or any Subsidiary Guarantee, except scheduled payments of interest or installments of principal, or payments of principal at the Stated Maturity thereof; or

(4) make any Restricted Investment (all such payments and other actions set forth in clauses (1) through (4) of this Section 4.10(a) being collectively referred to as “Restricted Payments”),

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

(2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and

(3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date hereof (excluding Restricted Payments permitted by clauses (2), (3), (5) and (9) of the next succeeding paragraph (b)), is less than the sum, without duplication, of:

(a) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date hereof to the end of the Company’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus

(b) 100% of the aggregate net cash proceeds, and the fair market value of the property other than cash received by the Company since the date hereof as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus

(c) without duplication, 100% of the sum of

(I) the aggregate amount returned in cash on or with respect to Restricted Investments made after the date hereof, whether through interest payments, dividends or other distributions or payments;

(II) the Net Proceeds received from the disposition of all or any portion of such Investments (other than to a Subsidiary of the Company); and

(III) upon designation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair market value of such Subsidiary (valued in each case as provided in the definition of “Investment”);

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provided, however, that the sum of clauses (I), (II) and (III) above shall not exceed the aggregate amount of all such Investments made by the Company or any Restricted Subsidiary in the relevant Person or Unrestricted Subsidiary after the date hereof.

(b) So long as no Default has occurred and is continuing or would be caused thereby, the preceding provisions shall not prohibit:

(1) the payment of any dividend within sixty (60) days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture;

(2) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness of the Company or any Restricted Subsidiary or of any Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock) or from a substantially concurrent contribution in cash of common equity capital to the Company; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (3)(b) of the preceding paragraph (a);

(3) the defeasance, redemption, repurchase or other acquisition or retirement for value of subordinated Indebtedness of the Company or any Subsidiary Guarantor with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

(4) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis;

(5) Investments acquired as a capital contribution to, or in exchange for, or out of the net cash proceeds of a substantially concurrent offering of, Capital Stock (other than Disqualified Stock) of the Company; provided that the amount of any such net cash proceeds that are utilized for any such acquisition or exchange shall be excluded from clause (3)(b) of the preceding paragraph (a);

(6) the repurchase of Capital Stock deemed to occur upon the exercise of options or warrants if such Capital Stock represents all or a portion of the exercise price thereof;

(7) dividends paid on shares of Disqualified Stock of the Company issued in accordance with Section 4.09 hereof;

(8) (a) the repurchase, redemption or other acquisition or retirement for value (other than by way of cancellation of stock purchase notes in exchange for the surrender of such Equity Interests) of any Equity Interests of the Company or any Restricted Subsidiary of the Company or (b) the payment of dividends or the making of advances by the Company to the Parent Entity to enable the Parent Entity to repurchase, redeem or otherwise acquire or retire for value any Equity Interests of the Parent Entity, in the case of (a) or (b), held by any current or former officer, director or employee of the Company or any of its Restricted Subsidiaries pursuant to any equity subscription agreement, stock option agreement, shareholders agreement or similar agreement; provided, that the aggregate of all amounts paid by the Company under (a) and (b) (net of the amount of any cash received from the substantially concurrent issuance of new Equity Interests to other employees of the Company or any Restricted Subsidiary of the Company (provided that such amount shall be excluded from clause (3)(b) of the preceding paragraph (a))) may not exceed $1.5 million in any twelve-month period; and provided further that the Company, as a designee of the Parent Entity, may purchase Equity Interests held by Dennis L. May pursuant to the Parent Entity’s rights of first refusal under the stockholders agreement upon a permitted transfer of stock by Mr. May following his termination of employment without “cause” (as defined in his employment agreement), in an aggregate principal amount not to exceed $7.0 million;

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(9) the repurchase pursuant to the Merger Agreement of all of the Equity Interests of the Company other than Retained Equity Interests;

(10) the purchase or redemption of (a) Indebtedness that is subordinated to the Notes (including Indebtedness under the Subordinated Notes, subject to the terms of the Subordinated Notes) or (b) preferred stock of the Company held by Persons that are not Affiliates of the Company, in the case of each of (a) and (b), utilizing any Net Cash Proceeds remaining after the Company has complied with the other requirements of Sections 4.11 and 4.16;

(11) dividends, loans or advances, in an aggregate amount not exceeding $500,000 in any twelve-month period, to the Parent Entity so that the Parent Entity may (a) pay corporate operating expenses (including, without limitation, directors fees and expenses) and overhead expenses in the ordinary course of business and (b) pay taxes which are due and payable by the Parent Entity as part of the consolidated group consisting of the Parent Entity, the Company and the Company’s Subsidiaries;

(12) the cashless exercise of options or warrants;

(13) the making of cash payments in lieu of the issuance of fractional shares in connection with the exercise of warrants, options or other securities convertible or exchangeable for Equity Interests of the Company; and

(14) other Restricted Payments in an aggregate amount not to exceed $10.0 million.

The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued to or by the Company or the Subsidiary of the Company, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.10 shall be determined by the Board of Directors, as evidenced by a Board Resolution. The Board of Directors’ determination must be based upon an opinion or appraisal issued by an independent accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $10.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers’ Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.10 were computed, together with a copy of any fairness opinion or appraisal required by this Indenture.

Section 4.11.     Limitation on Sale of Assets.

The Company shall not and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or Equity Interests issued or sold or otherwise disposed of;

(2) such fair market value is (a) with respect to transactions in excess of $2.5 million, determined by the Company’s Board of Directors and evidenced by a resolution of the Board of Directors set forth in an officer’s certificate delivered to the Trustee and (b) with respect to transactions in excess of $1.0 million but less than or equal to $2.5 million, certified by an officer’s certificate delivered to the Trustee; and

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(3) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash, Cash Equivalents or Replacement Assets or a combination of any of the three. For purposes of this provision, each of the following shall be deemed to be cash:

(a) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Subsidiary Guarantee and liabilities that are owed to the Company or any Affiliate of the Company) that are assumed by the transferee of any such assets pursuant to a customary written novation agreement that releases the Company or such Restricted Subsidiary from further liability; and

(b) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received in that conversion) within sixty (60) days of receipt.

Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds at its option:

(1) to repay Indebtedness secured by such assets and, if the Indebtedness repaid is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; or

(2) to purchase Replacement Assets or to make a capital expenditure.

Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as provided in the preceding paragraph shall constitute “Excess Proceeds.” Within thirty (30) days after the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall make an “Asset Sale Offer” to all Holders and all holders of other Indebtedness that is pari passu with the Notes or any Subsidiary Guarantee containing provisions similar to those set forth in this Indenture with respect to offers to purchase with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of principal amount of the Notes being purchased plus accrued and unpaid interest to the date of purchase, and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness tendered. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

The Asset Sale Offer shall remain open for a period of 20 Business Days or such longer period as may be required by applicable law (the “Offer Period”). On the Purchase Date (as defined below), the Company shall purchase the principal amount of Notes required to be purchased pursuant to the immediately preceding paragraph above (the “Offer Amount”) or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made.

If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

Within thirty (30) days after the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The

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Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(1) that the Asset Sale Offer is being made pursuant to this Section 4.11 and the length of time the Asset Sale Offer shall remain open;

(2) the Offer Amount, the purchase price and the purchase date (which shall be no earlier than 20 Business Days nor later than thirty (30) Business Days from the date such notice is mailed, other than as may be required by law, the “Purchase Date”);

(3) that any Note not tendered or accepted for payment shall continue to accrue interest;

(4) that, unless the Company defaults in making such payment, any Note (or portion thereof) accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date;

(5) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only;

(6) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, or transfer such Holder’s interest in the Note by book-entry transfer, to the Paying Agent at the address specified in the notice at least three days before the Purchase Date;

(7) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the expiration of the Offer Period, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(8) that, if the aggregate amount of Notes surrendered by Holders exceeds the Offer Amount, the Trustee shall, subject to the provisions of this Section 4.11, select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and

(9) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer).

On the Purchase Date, the Company shall, to the extent lawful and subject to the provisions of this Section 4.11, accept for payment on a pro rata basis to the extent necessary, the Offer Amount of Notes (or portions thereof) tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers’ Certificate stating that such Notes (or portions thereof) were accepted for payment by the Company in accordance with the terms of this Section 4.11. The Paying Agent shall promptly (but in any case not later than three Business Days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of Notes tendered by such Holder, as the case may be, and accepted by the Company for purchase, and the Company shall promptly issue a new Note. The Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount at maturity equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the respective Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date.

The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sales provisions of this Indenture, the Company shall comply with the applicable

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securities laws and regulations and shall not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such compliance.

Section 4.12.     Limitation on Liens.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured (or, in the case of subordinated Indebtedness, prior or senior thereto, with the same relative priority as the Notes shall have with respect to such subordinated Indebtedness) until such time as such obligations are no longer secured by a Lien.

Section 4.13.     Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary of the Company to:

(1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries;

(2) make loans or advances to the Company or any of its Restricted Subsidiaries; or

(3) sell, lease or otherwise transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries.

However, the preceding restrictions shall not apply to encumbrances or restrictions existing under, by reason of or with respect to:

(1) the Credit Agreement, Existing Indebtedness or any other agreements in effect on the date hereof and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend or other payment restrictions than those in effect on the date hereof;

(2) this Indenture, the Notes and the Subsidiary Guarantees;

(3) applicable law, rule, regulation or order;

(4) any instrument governing Indebtedness or capital stock of any Person, or the property or assets of such Person, acquired by the Company or any of its Restricted Subsidiaries, existing at the time of such acquisition and not incurred in connection with or in contemplation of such acquisition, which encumbrance or restriction is not applicable to any Person or the properties or assets of any Person, other than the Person, or the property or assets of such Person, so acquired and any amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof, provided that the encumbrances and restrictions in any such amendments, modifications, restatements, renewals, extensions, supplements, refundings, replacements or refinancings are no more restrictive, taken as a whole, with respect to such dividend or other payment restrictions than those in effect on the date of the acquisition;

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(5) in the case of clause (3) of the first paragraph of this Section 4.13:

(a) restricting in a customary manner the subletting, assignment or transfer of any property or asset that is a lease, license, conveyance or contract or similar property or asset,

(b) existing by virtue of any transfer of, agreement to transfer, option or right with respect to, or Lien on, any property or assets of the Company or any Restricted Subsidiary not otherwise prohibited by this Indenture, or

(c) arising or agreed to in the ordinary course of business, not relating to any Indebtedness, and that do not, individually or in the aggregate, detract from the value of property or assets of the Company or any Restricted Subsidiary in any manner material to the Company or any Restricted Subsidiary;

(6) any agreement for the sale or other disposition of all or substantially all of the Capital Stock of, or property and assets of, a Restricted Subsidiary;

(7) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced;

(8) the terms of any Indebtedness or any agreement pursuant to which such Indebtedness was issued if:

(a) the encumbrance or restriction applies only in the event of a payment default or a default with respect to a financial covenant contained in such Indebtedness or agreement,

(b) the encumbrance or restriction is not materially more disadvantageous to the Holders than is customary in comparable financings (as determined by the Company in good faith), and

(c) the Company determines that any such encumbrance or restriction will not materially affect the Company’s ability to make principal or interest payments on the Notes.

(9) obligations applicable to property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased, constructed, improved or leased of the nature described in clause (3) of the preceding paragraph;

(10) Liens permitted to be incurred under Section 4.12 that limit the right of the debtor to dispose of the asset subject to such Lien;

(11) customary non-assignment provisions in contracts, leases and licenses entered into in the ordinary course of business;

(12) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into with the approval of the Company’s Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements; and

(13) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business.

Section 4.14.     Limitation on Transactions with Affiliates.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from,

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or enter into, make, amend, renew or extend any transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the benefit of, any Affiliate of the Company (each, an “Affiliate Transaction”), unless:

(1) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm’s-length transaction by the Company or such Restricted Subsidiary with a Person that is not an Affiliate of the Company; and

(2) the Company delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $2.5 million, a Board Resolution of the Company and an Officers’ Certificate certifying that such Affiliate Transaction or series of related Affiliate Transactions complies with this Section 4.14 and that such Affiliate Transaction or series of related Affiliate Transactions has been approved by a majority of the disinterested members of the Board of Directors of the Company; and

(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10.0 million, an opinion as to the fairness to the Company or such Restricted Subsidiary of such Affiliate Transaction or series of related Affiliate Transactions from a financial point of view issued by an Independent Financial Advisor.

The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of the prior paragraph:

(1) transactions between or among the Company and/or its Restricted Subsidiaries;

(2) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto;

(3) transactions with any Person (other than an Unrestricted Subsidiary) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person;

(4) transactions pursuant to or contemplated by any agreement of, or any instrument entered into or issued by, the Company or any Restricted Subsidiary as in effect on the date hereof (as such agreement or instrument is disclosed in the Offering Memorandum with respect to the offering of the Notes), or any amendment thereto or any replacement agreements so long as any such amendment or replacement agreement is not more disadvantageous to the holders in any material respect than the original agreement or instrument as in effect on the date hereof;

(5) Restricted Payments that do not violate the provisions of Section 4.10;

(6) payment of reasonable directors’ fees to Persons who are not otherwise Affiliates of the Company;

(7) loans or advances or reasonable compensation to employees of the Company in the ordinary course of business;

(8) loans to employees of the Company in connection with the purchase of Equity Interests of the Company by such employees up to $3.0 million in the aggregate;

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(9) payment of fees by the Company to Freeman Spogli & Co. LLC for any financial or mergers and acquisitions advisory, financing, underwriting or placement services (whether structured as a fee or an underwriting discount) in connection with financings, acquisitions or divestitures, provided that (a) the fees for any such transaction shall not exceed the greater of 2% of the transaction value and 5% of the amount of any new equity invested by Freeman Spogli & Co. LLC in connection with such transaction and (b) each such payment shall be approved by a majority of the disinterested members of the Board of Directors of the Company; and

(10) issuances of Equity Interests (other than Disqualified Stock) of the Company.

Section 4.15.     Subordinated Notes

Notwithstanding anything in this Indenture to the contrary, (a) the Company shall comply with the terms of the Subordinated Notes and (b) the Company shall not, without the consent of the Trustee or Holders of a majority of the principal amount of the Notes, amend, modify, supplement or restate any of the Subordinated Notes in any manner that would adversely affect the rights of the Holders of Notes (including as to the subordination and redemption provisions contained in the provisions of the Subordinated Notes).

Section 4.16.     Change of Control.

(a) If a Change of Control occurs, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder’s Notes pursuant to the offer described below (the “Change of Control Offer”) at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon to the date of purchase (the “Change of Control Payment”). Within thirty (30) days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and stating (1) that the Change of Control Offer is being made pursuant to this Section 4.16 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than thirty (30) days and no later than sixty (60) days from the date such notice is mailed (the “Change of Control Payment Date”); (3) that any Note not tendered shall continue to accrue interest; (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Notes completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple of $1,000. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture relating to such Change of Control Offer, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.16 by virtue of such compliance.

(b) By 12:00 p.m. (noon) Eastern Time on the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered, and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail or wire transfer to each Holder of Notes so

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tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple of $1,000. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(c) If a Change of Control occurs, this Section 4.16 shall be applicable notwithstanding Article Three hereof.

(d) Notwithstanding anything to the contrary in this Section 4.16, the Company shall not be required to make a Change of Control Offer upon a Change of Control if (i) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.16 and all other provisions of this Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer, or (ii) the Company effects Legal Defeasance or Covenant Defeasance of the Notes under Article Eight hereof prior to the occurrence of such Change of Control or otherwise discharges this Indenture under Article Eight hereof.

Section 4.17.     Designation of Restricted and Unrestricted Subsidiaries.

The Board of Directors of the Company may designate any Restricted Subsidiary of the Company to be an Unrestricted Subsidiary; provided that:

(1) any Guarantee by the Company or any Restricted Subsidiary of the Company of any Indebtedness of the Subsidiary being so designated shall be deemed to be an incurrence of Indebtedness by the Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation, and such incurrence of Indebtedness would be permitted under Section 4.09 hereof;

(2) the aggregate fair market value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary being so designated (including any Guarantee by the Company or any Restricted Subsidiary of the Company of any Indebtedness of the Subsidiary) shall be deemed to be a Restricted Investment made as of the time of such designation and that such Investment would be permitted under Section 4.10 hereof;

(3) such Subsidiary does not own any Equity Interests of, or hold any Liens on any property of, the Company or any Restricted Subsidiary thereof;

(4) the Subsidiary being so designated:

(a) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company;

(b) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for additional Equity Interests or (ii) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results; and

(c) has at least one director on its Board of Directors that is not a director or officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or officer of the Company or any of its Restricted Subsidiaries; and

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(5) no Default or Event of Default would be in existence immediately following such designation.

Any designation of a Restricted Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the preceding conditions and was permitted by this Indenture.

The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided that:

(1) such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if such Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period;

(2) all outstanding Investments owned by such Unrestricted Subsidiary shall be deemed to be made as of the time of such designation and such Investments shall only be permitted if such Investments would be permitted under Section 4.10 hereof;

(3) all Liens on any of the properties of such Unrestricted Subsidiary existing at the time of such designation would be permitted under Section 4.12 hereof; and

(4) no Default or Event of Default would be in existence immediately following such designation.

Section 4.18.     Payments for Consent.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to all Holders and is paid to all Holders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Section 4.19.     Future Guarantees by Restricted Subsidiaries; Release of Subsidiary Guarantees

(a) If the Company acquires or creates a Domestic Subsidiary after the date hereof, then that newly acquired or created Domestic Subsidiary shall be a Restricted Subsidiary, and shall become a Subsidiary Guarantor and execute a supplemental indenture and deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel to the effect that the supplemental indenture has been duly authorized, executed and delivered by such Domestic Subsidiary and constitutes a valid and binding obligation of such Domestic Subsidiary, enforceable against such Domestic Subsidiary in accordance with its terms (subject to customary exceptions) all within ten (10) Business Days of the date on which it was acquired or created; provided, however, that the foregoing shall not apply to Subsidiaries that have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture for so long as they continue to constitute Unrestricted Subsidiaries.

(b) The Subsidiary Guarantee of a Subsidiary Guarantor shall be released:

(1) in connection with any sale or other disposition of a majority of the Capital Stock of a Subsidiary Guarantor to a Person that is not (either before or after giving effect to such transaction) an Affiliate of the Company, if the sale or other disposition complies with Section 4.11 hereof;

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(2) in connection with any sale or disposition of all or substantially all of the assets of a Subsidiary Guarantor (including by way of merger or consolidation) to a Person that is not (either before or after giving effect to such transaction) an Affiliate of the Company, if the sale or other disposition of all or substantially all of the assets of that Subsidiary Guarantor complies with Section 5.01 hereof:

(3) in connection with the release or discharge of the Guarantee which resulted in the creation of such Subsidiary Guarantee pursuant to this Section 4.19, except a discharge or release by, or as a result of, a payment under such Guarantee;

(4) if the Company properly designates any Restricted Subsidiary that is a Subsidiary Guarantor as an Unrestricted Subsidiary; or

(5) in connection with the liquidation, dissolution or winding up of a Subsidiary Guarantor.

Upon the occurrence of any of the foregoing events described in this Section 4.19(b), the Subsidiary Guarantor shall be released from its Subsidiary Guarantee upon receipt by the Trustee of a request by the Company accompanied by an Officer’s Certificate and an Opinion of Counsel certifying that all conditions specified in this Indenture for such release have been satisfied in accordance with the provisions of this Indenture. Upon receipt of the items specified in the preceding sentence, the Trustee shall deliver to the Company an appropriate instrument evidencing such release. Any Subsidiary Guarantee not so released remains liable for the full amount of principal of and interest on the Notes as provided in Article Eleven.

Section 4.20.     Limitation on Sale and Leaseback Transactions.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, enter into any sale and leaseback transaction; provided that the Company or any Restricted Subsidiary may enter into a sale and leaseback transaction if:

(a) the Company or that Restricted Subsidiary, as applicable, could have incurred Indebtedness in an amount equal to the Attributable Debt relating to such sale and leaseback transaction under the Fixed Charge Coverage Ratio test in the first paragraph of Section 4.09 hereof;

(b) the gross cash proceeds of that sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in an Officers’ Certificate delivered to the Trustee, of the property that is the subject of that sale and leaseback transaction; and

(c) the transfer of assets in that sale and leaseback transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, Section 4.11 hereof.

Section 4.21.     Limitation on Issuance and Sale of Equity Interests on Restricted Subsidiaries.

The Company shall not transfer, convey, sell, lease or otherwise dispose of, and shall not permit any of its Restricted Subsidiaries to, issue, transfer, convey, sell, lease or otherwise dispose of any Equity Interests in any Restricted Subsidiary of the Company to any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company and, if necessary, shares of its Capital Stock constituting directors’ qualifying shares or issuances of shares of Capital Stock of foreign Restricted Subsidiaries to foreign nationals, to the extent required by applicable law), except:

(a) if, immediately after giving effect to such issuance, transfer, conveyance, sale, lease or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such issuance or sale would have been permitted under Section 4.10 hereof if made on the date of such issuance or sale; and

(b) the Company or such Restricted Subsidiary complies with Section 4.11 hereof.

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Section 4.22.     Limitation on Subordinated Indebtedness.

The Company shall not incur any Indebtedness that is subordinate or junior in right of payment to any other Indebtedness of the Company unless it is made expressly subordinate in right of payment to the Notes to the same extent and in the same manner as such Indebtedness is subordinated to such other Indebtedness. No Subsidiary Guarantor shall incur any Indebtedness that is subordinate or junior in right of payment to any other Indebtedness of the Subsidiary Guarantor unless it is made expressly subordinate in right of payment to its Subsidiary Guarantee to the same extent and in the same manner as such Indebtedness is subordinated to such other Indebtedness. For purposes of the foregoing, no Indebtedness shall be deemed to be subordinated in right of payment to any other Indebtedness of the Company or any Subsidiary Guarantor solely by reason of any Liens or Guarantees arising or created in respect of such other Indebtedness or by virtue of the fact that the holders of any secured Indebtedness have entered into intercreditor agreements giving one or more of such holders priority over the other holders in the collateral held by them.

ARTICLE FIVE

SUCCESSOR CORPORATION

Section 5.01.     Merger, Consolidation or Sale of Assets.

The Company shall not, directly or indirectly: (1) consolidate or merge with or into another Person (whether or not the Company is the surviving corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties and assets of the Company and its Subsidiaries taken as a whole, in one or more related transactions, to another Person or Persons; unless:

(1) either: (a) the Company is the surviving corporation; or (b) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition shall have been made (i) is a corporation, limited liability company, partnership or trust organized or existing under the laws of the United States, any state thereof or the District of Columbia, and (ii) assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee;

(2) immediately after giving effect to such transaction, no Default or Event of Default exists;

(3) immediately after giving effect to such transaction on a pro forma basis, the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition shall have been made shall, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and

(4) each Subsidiary Guarantor (if any), unless the Subsidiary Guarantor is the Person with which the Company has entered into a transaction under this Section 5.01, shall have by amendment to its Subsidiary Guarantee confirmed that its Subsidiary Guarantee shall apply to the obligations of the Company or the surviving Person in accordance with the Notes and this Indenture.

A Subsidiary Guarantor may not sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not the Subsidiary Guarantor is the surviving Person), another Person, other than the Company or another Subsidiary Guarantor, unless:

(1) immediately after giving effect to that transaction, no Default or Event of Default exists; and

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(2) either:

(a) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger is a corporation, limited liability company, partnership or trust organized or existing under the laws of the United States, any state thereof or the District of Columbia and assumes all the obligations of that Subsidiary Guarantor under this Indenture, its Subsidiary Guarantee and the Registration Rights Agreement pursuant to a supplemental indenture satisfactory to the Trustee; or

(b) such sale or other disposition complies with Section 4.11 hereof, including the application of the Net Proceeds therefrom.

In addition, neither the Company nor any Restricted Subsidiary may, directly or indirectly, lease all or substantially all of its properties or assets, in one or more related transactions, to any other Person. Clause (3) of the first paragraph of this Section 5.01 shall not apply to any merger, consolidation, sale, assignment, transfer, conveyance or other disposition of assets between or among the Company and any of its Restricted Subsidiaries.

Section 5.02.     Successor Corporation Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer conveyance or other disposition, the provisions of this Indenture referring to the “Company” shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and thereafter the predecessor Company shall be relieved of all further obligations and covenants under this Indenture and the Notes.

ARTICLE SIX

DEFAULTS AND REMEDIES

Section 6.01.     Events of Default.

Each of the following is an “Event of Default”:

(1) default for thirty (30) days in the payment when due of interest on the Notes whether or not prohibited by the subordination provisions of this Indenture;

(2) default in payment when due (whether at maturity, upon acceleration, redemption or otherwise) of the principal of, or premium, if any, on the Notes;

(3) failure by the Company or any of its Restricted Subsidiaries to comply with the provisions described under Sections 4.16 and 4.11 and Article Five;

(4) failure by the Company or any of its Restricted Subsidiaries for thirty (30) days after written notice by the Trustee or Holders representing 25% or more of the aggregate principal amount of Notes outstanding to comply with any of the other agreements in this Indenture;

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(5) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is Guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date hereof, if that default:

(a) is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to expiration of any applicable grace period after the Stated Maturity thereof; or

(b) results in the acceleration of such Indebtedness prior to its Stated Maturity,

and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a payment default or the maturity of which has been accelerated, aggregates $10.0 million or more;

(6) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of sixty (60) consecutive days;

(7) except as permitted by this Indenture, any Subsidiary Guarantee issued by a Significant Subsidiary shall be held in any judicial proceeding to be unenforceable or invalid, or shall cease for any reason to be in full force and effect, or any Subsidiary Guarantor that is a Significant Subsidiary, or any Person acting on behalf of such Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee;

(8) the Company, any of its Significant Subsidiaries or any Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:

(a) commences a voluntary case,

(b) consents to the entry of an order for relief against it in an involuntary case,

(c) makes a general assignment for the benefit of its creditors, or

(d) generally is not paying its debts as they become due; and

(9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(a) is for relief against the Company, any of its Significant Subsidiaries or any Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, in an involuntary case;

(b) appoints a Custodian for the Company, any of its Significant Subsidiaries or any Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, or for all or substantially all of the properties of the Company, any of its Significant Subsidiaries or any Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary; or

(c) orders the liquidation of the Company, any of its Significant Subsidiaries or any Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary;

and the order or decree remains unstayed and in effect for sixty (60) consecutive days.

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The term “Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

Section 6.02.     Acceleration.

If an Event of Default specified in clause (8) or (9) of Section 6.01 occurs, all unpaid principal of, and accrued interest on, the Notes then outstanding shall become due and payable immediately, without any declaration or other act on the part of the Trustee or any Holder. If an Event of Default (other than an Event of Default specified in clauses (8) and (9)) under Section 6.01 occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the then outstanding Notes may declare the unpaid principal of, premium, if any, and accrued and unpaid interest on, all the Notes then outstanding to be due and payable immediately, by a notice in writing to the Company (and to the Trustee, if given by Holders) specifying the respective Event of Default and upon any such declaration such principal, premium, if any, and accrued and unpaid interest shall become immediately due and payable.

If any Event of Default occurs by reason of any willful action taken or not taken by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of paragraph 7 of the Notes, then, upon acceleration of the Notes, an equivalent premium shall also become and be immediately due and payable, to the extent permitted by law, anything in this Indenture or in the Notes to the contrary notwithstanding. If an Event of Default occurs during any time that the Notes are outstanding, by reason of any willful action taken or not taken by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes, then, the premium specified in the second paragraph of paragraph 7 of the Notes shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes.

If (i) (A) the Company or any Subsidiary Guarantor has paid or deposited with the Trustee a sum sufficient to pay (1) all overdue installments of interest on all the Notes, (2) the principal of, and premium, if any, on any Notes that have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in the Notes, (3) to the extent that payment of such interest is lawful, interest on the defaulted interest at the rate or rates prescribed therefor in the Notes, and (4) all money paid or advanced by the Trustee thereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; (B) all Events of Default, other than the nonpayment of the principal of any Notes that have become due solely by such declaration of acceleration, have been cured or waived as provided in this Indenture; and (C) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction and (ii) the Holders of a majority in aggregate principal amount of then outstanding Notes give written notice to the Company, the Subsidiary Guarantor and the Trustee of their desire to rescind and annul a declaration of acceleration and its consequences, then such declaration of acceleration shall be deemed rescinded and annulled. No such rescission shall affect any subsequent Event of Default or impair any right consequent thereon.

Section 6.03.     Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name and as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

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Section 6.04.     Waiver of Past Defaults.

Subject to Sections 6.07 and 9.02, the Holders of at least a majority in aggregate principal amount of Notes then outstanding by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a continuing Default or Event of Default in payment of interest or premium, if any, on, or the principal of, the Notes, including any optional redemption payments or Change of Control Payment or Asset Sale Offer payments.

Section 6.05.     Control by Majority.

The Holders of a majority in aggregate principal amount of the Notes then outstanding shall have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee under this Indenture or exercising any trust or power conferred on such Trustee; provided that the Trustee (i) may refuse to follow any direction that is in conflict with any rule of law or with this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be prejudicial to the rights of Holders not joining in the giving of such direction and (ii) may take any other action it deems proper that is not inconsistent with any such direction received from Holders. If the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification reasonably satisfactory to it against any loss, liability or expense caused by taking such action or following such direction.

Section 6.06.     Limitation on Remedies.

No Holder of any of the Notes shall have any right to institute any proceeding, judicial or otherwise, or for the appointment of a receiver or trustee or pursue any remedy under this Indenture, unless:

(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default;

(2) the Holders of not less than 25% in aggregate principal amount of the outstanding Notes have made written request to the Trustee to pursue such remedy, including, if applicable, to institute proceedings in respect of such Event of Default in its own name as Trustee under this Indenture;

(3) such Holder or Holders have offered to the Trustee reasonable indemnity and security satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request;

(4) the Trustee for sixty (60) days after its receipt of such notice, request and offer of indemnity has failed to institute such requested proceeding; and

(5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the outstanding Notes.

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over other Holders.

Section 6.07.     Rights of Holders to Receive Payment.

Notwithstanding any other provision of this Indenture, the Holder of any Notes shall have the right, which is absolute and unconditional, to receive payment of the principal of, premium, if any, and interest on such Notes on the Stated Maturity therefor and to institute suit for the enforcement of any such payment, and such right may not be impaired without the consent of such Holder.

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Section 6.08.     Collection Suit by Trustee.

If an Event of Default in payment of principal, premium, if any, or interest specified in Section 6.01(l) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any Subsidiary Guarantor for the whole amount of principal, premium, if any, and interest remaining unpaid with respect to the Notes, and interest on overdue principal and premium, if any, and, to the extent lawful, interest on overdue interest, and such further amounts as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation and expenses of the Trustee, its agents and counsel.

Section 6.09.     Trustee May File Proofs of Claim.

(a) The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, the Subsidiary Guarantor, its creditors or their property and may collect and receive any money or other property payable or deliverable on any such claims and to distribute the same.

(b) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.10.     Priorities.

If the Trustee collects any money pursuant to this Article Six, it shall pay out the money in the following order:

First:	to the Trustee for amounts due under Sections 6.08 and 7.07;
Second:	to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and
Third:	to the Company.

The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

Section 6.11.     Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorney’s fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. The foregoing shall not apply to a suit by the Trustee, a suit by a holder pursuant to Section 6.07 hereof, or a suit by Holders or more than 10% in aggregate principal amount of the then outstanding Notes.

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ARTICLE SEVEN

TRUSTEE

Section 7.01.     Duties of Trustee.

The duties and responsibilities of the Trustee shall be as provided by the TIA. No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.01. The Trustee shall not be liable for interest on any money or asset received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02.     Rights of Trustee.

Subject to Section 7.01 (including the first sentence thereof):

(a) The Trustee may rely and shall be fully protected in acting or refraining from acting upon any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel or both. In the absence of bad faith on the part of the Trustee, the Trustee shall not be liable for any action it takes or omits to take in reliance on such Officer’s Certificate or Opinion of Counsel.

(c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys, and the Trustee shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.

(d) The Trustee shall not be liable for any action it takes, suffers or omits to take in good faith which it believes to be authorized or within its rights, discretion or powers.

(e) The Trustee may consult with counsel of its selection and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.

(f) Any request or direction of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution.

(g) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request, order or discretion.

(h) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may make such further inquiry or

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investigation into such facts or matters as it may see fit. If the Trustee shall determine to make such further inquiry or investigation, the Trustee shall be entitled, upon reasonable notice to the Company and in good faith, to examine the books, records and premises of the Company or any Subsidiary Guarantor, personally or by agent or attorney.

(i) Except with respect to Section 4.01, the Trustee shall have no duty to inquire as to the performance of the Company with respect to the covenants contained in Article Four. In addition, the Trustee shall not be deemed to have notice of an Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless the Trustee shall have received written notice thereof at the corporate trust office of the Trustee, and such notice references the Notes and this Indenture.

Section 7.03.     Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and Guarantees and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11.

Section 7.04.     Trustee’s Disclaimer.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or the Notes other than the Trustee’s certificate of authentication. The recitals contained herein are statements of the Company.

Section 7.05.     Notice of Defaults.

If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Holder notice of the Default or Event of Default within thirty (30) days after the occurrence thereof. Except in the case of a Default or an Event of Default in payment of principal of, premium, if any, or interest on, any Note or a Default or Event of Default in complying with Section 5.01, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interest of Holders. This Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and such proviso to Section 315(b) of the TIA is hereby expressly excluded from this Indenture and the Notes, as permitted by the TIA.

Section 7.06.     Reports by Trustee to Holders.

Within sixty (60) days after each May 15 of each year, the Trustee shall, to the extent that any of the events described in TIA Section 313(a) occurred within the previous twelve months, but not otherwise, mail to each Holder a brief report dated as of such date that complies with TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b), 313(c) and 313(d).

A copy of each report at the time of its mailing to Holders shall be mailed to the Company and filed with the SEC and each securities exchange, if any, on which the Notes are listed.

The Company shall promptly notify the Trustee if the Notes become listed on any securities exchange or of any delisting thereof.

Section 7.07.     Compensation and Indemnity.

The Company shall pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses

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incurred or made by it in addition to the compensation for its services except any such disbursements, expenses and advances as may be attributable to the Trustee’s negligence or bad faith. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents, accountants, experts and counsel and any taxes or other expenses incurred by a trust created pursuant to Article Eight.

The Company shall indemnify the Trustee and its agents, employees, attorneys-in-fact, officers, directors and shareholders for, and hold it harmless against, any and all loss, damage, claims, liability or expense, including taxes (other than franchise taxes imposed on the Trustee and taxes based upon, measured by or determined by the income of the Trustee), arising out of or in connection with the acceptance or administration of the trust or trusts hereunder (including its services as Registrar or Paying Agent, if so appointed by the Company), including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent that such loss, damage, claim, liability or expense is due to its own negligence or bad faith. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense (and may employ its own counsel) at the Company’s expense; provided, however, that the Company’s reimbursement obligation with respect to counsel employed by the Trustee shall be limited to the reasonable fees and expenses of such counsel.

The Company need not pay for any settlement made without its written consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee as a result of the violation of this Indenture by the Trustee, or arising out of the Trustee’s negligence or willful misconduct.

To secure the Company’s payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes against all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, premium, if any, or interest on particular Notes.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(8) or (9) occurs, such expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. The Company’s obligations under this Section 7.07 and any lien arising hereunder shall survive the resignation or removal of any Trustee, the discharge of the Company’s obligations pursuant to Article Eight and any rejection or termination under any Bankruptcy Law.

Section 7.08.     Replacement of Trustee.

The Trustee may resign at any time by so notifying the Company in writing. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing and may appoint a successor Trustee with the Company’s consent, which consent shall not be unreasonably withheld. The Company may remove the Trustee if:

(a) the Trustee fails to comply with Section 7.10;

(b) the Trustee is adjudged a bankrupt or an insolvent under any Bankruptcy Law;

(c) a receiver or other public officer takes charge of the Trustee or its property; or

(d) the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee.

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A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. As promptly as practicable after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07, all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder.

If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company’s obligations under Section 7.07 shall continue for the benefit of the retiring Trustee.

Section 7.09.     Successor Trustee by Merger, Etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or banking corporation, the resulting, surviving or transferee corporation or banking corporation without any further act shall, if such resulting, surviving or transferee corporation or banking corporation is otherwise eligible hereunder, be the successor Trustee.

Section 7.10.     Eligibility; Disqualification.

This Indenture shall always have a Trustee which shall be eligible to act as Trustee under TIA Sections 310(a)(1) and 310(a)(2). The Trustee must have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. If the Trustee has or shall acquire any “conflicting interest” within the meaning of TIA Section 310(b), the Trustee and the Company shall comply with the provisions of TIA Section 310(b); provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, the Trustee shall resign immediately in the manner and with the effect hereinbefore specified in this Article Seven.

Section 7.11.     Preferential Collection of Claims Against the Company.

The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE EIGHT

SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE

Section 8.01.     Satisfaction and Discharge.

This Indenture, the Notes and the Subsidiary Guarantees shall be discharged and shall cease to be of further effect (except as to surviving rights of registration of transfer or exchange of the Notes, as expressly provided for in this Indenture) as to all outstanding Notes when:

(1) either:

(a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 13.09) have been delivered to the Trustee for cancellation; or

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(b) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or shall become due and payable within one year and the Company or any Subsidiary Guarantor has irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, U.S. Government Obligations, or a combination thereof, in such amounts as shall be sufficient without consideration of any reinvestment of interest, to pay and discharge the entire indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and accrued interest to the date of maturity or redemption;

(2) no Default or Event of Default shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit shall not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Subsidiary Guarantor is a party or by which the Company or any Subsidiary Guarantor is bound;

(3) the Company has paid all other sums payable under this Indenture by the Company;

(4) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be; and

(5) the Company has delivered an Officers’ Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Section 8.02.     Legal Defeasance and Covenant Defeasance.

(a) The Company may, at its option by Board Resolution of the Company, at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Notes upon compliance with the conditions set forth in Section 8.03.

(b) Upon the Company’s exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Company and, if it so selects, each Subsidiary Guarantor, shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.04 and the other Sections of this Indenture referred to in clauses (1), (2), (3) and (4) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions, which shall survive until otherwise terminated or discharged hereunder:

(1) the rights of Holders to receive solely from the trust fund described in Section 8.04, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest on such Notes when such payments are due;

(2) the Company’s obligations with respect to such Notes under Article Two and Section 4.04;

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(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder, and the Company’s and each Subsidiary Guarantor’s obligations in connection therewith; and

(4) this Article Eight.

Subject to compliance with this Article Eight, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) hereof.

(c) Upon the Company’s exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Company and any Subsidiary Guarantor shall, subject to the satisfaction of the conditions set forth in Section 8.03, be released from its obligations under Section 4.02, Sections 4.07 through Section 4.22 (inclusive) and clause (3) of Section 5.01 hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such Sections, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(4), but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company’s exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03, Sections 6.01(3), 6.01(4), 6.01(5), 6.01(6) and 6.01(7) shall not constitute Events of Default.

Section 8.03.     Conditions to Legal Defeasance or Covenant Defeasance.

The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) to the outstanding Notes:

In order to exercise either Legal Defeasance or Covenant Defeasance:

(a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. Legal Tender, Government Securities, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent registered public accountants, to pay the principal of, premium, if any, and interest, if any, on the outstanding Notes on the Stated Maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; provided that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such U.S. Government Obligations to the payment of such principal of, premium, if any, and interest on the outstanding Notes on such Stated Maturity date or such redemption date;

(b) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon, such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(c) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders of the outstanding

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Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(d) no Default or Event of Default shall have occurred and be continuing either: (a) on the date of such deposit; or (b) insofar as Sections 6.01(8) and (9) apply, at any time in the period ending on the 123^rd day after the date of deposit;

(e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(f) the Company must have delivered to the Trustee an Opinion of Counsel to the effect that, (1) assuming no intervening bankruptcy of the Company or any Subsidiary Guarantor between the date of deposit and the 123^rd day following the deposit and assuming that no Holder is an “insider” of the Company under applicable bankruptcy law, after the 123^rd day following the deposit, the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or any applicable state bankruptcy, insolvency, reorganization or similar state law affecting creditors’ rights generally and (2) the creation of the defeasance trust does not violate the Investment Company Act of 1940;

(g) the Company must deliver to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others;

(h) if the Notes are to be redeemed prior to their Stated Maturity, the Company must deliver to the Trustee irrevocable instructions to redeem all of the Notes on the specified redemption date; and

(i) the Company must deliver to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Section 8.04.     Application of Trust Money.

The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to this Article Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender or U.S. Government Obligations except as it may agree with the Company.

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.03 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company’s request any U.S. Legal Tender or U.S. Government Obligations held by it as provided in Section 8.03 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.05.     Reinstatement.

If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with this Article Eight by reason of any legal proceeding or by reason of any order or judgment of any

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court of governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s and the Subsidiary Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with Article Eight; upon payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Company or any Subsidiary Guarantor, as the case may be, shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE NINE

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 9.01.     Without Consent of Holders.

The Company, each Subsidiary Guarantor and the Trustee may modify, amend or supplement this Indenture or the Notes without notice to or consent of any Holder:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3) to provide for the assumption of the Company’s or any Subsidiary Guarantor’s Obligations to the Holders in the case of a merger or consolidation or sale of all or substantially all of the Company’s or such Subsidiary Guarantor’s assets;

(4) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect in any material respect the legal rights under this Indenture of any such Holder;

(5) to comply with requirements of the Commission in order to effect or maintain the qualification of this Indenture under the TIA;

(6) to conform the text of this Indenture or the Notes to any provision of the section “Description of Notes” in the Offering Memorandum to the extent that such provision in such section was intended to be a verbatim recitation of a provision of this Indenture or the Notes;

(7) to comply with the provisions described under Section 4.19 hereof; or

(8) to evidence and provide for the acceptance of appointment by a successor Trustee.

Upon the request of the Company and the Subsidiary Guarantor, accompanied by a Board Resolution of the Company and each Subsidiary Guarantor authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.06, the Trustee may, but shall not be obligated to, join with the Company and each Subsidiary Guarantor in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and make any further appropriate agreements and stipulations that may be therein contained. After an amendment or waiver under this Section becomes effective, the Company shall mail to the Holders of each Note affected thereby a notice briefly describing the amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

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Section 9.02.     With Consent of Holders.

Except as provided below in this Section 9.02, the Company, each Subsidiary Guarantor and the Trustee may amend this Indenture or the Notes with the written consent (including consents obtained in connection with a tender offer or exchange offer for Notes or a solicitation of consents in respect of Notes, provided that in each case such offer or solicitation is made to all Holders of then outstanding Notes on equal terms) of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes.

Upon the request of the Company and each Subsidiary Guarantor, accompanied by a Board Resolution of the Company and each Subsidiary Guarantor authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the Opinion of Counsel documents described in Section 9.06, the Trustee may, but shall not be obligated to, join with the Company and each Subsidiary Guarantor in the execution of such supplemental indenture.

It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

The Holders of a majority in aggregate principal amount of the then outstanding Notes may waive compliance in a particular instance by the Company or any Subsidiary Guarantor with any provision of this Indenture or the Notes (including waivers obtained in connection with a tender offer or exchange offer for Notes or a solicitation of consents in respect of Notes, provided that in each case such offer or solicitation is made to all Holders of the then outstanding Notes on equal terms). However, without the consent of each Holder affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

(1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Note or alter the provisions, or waive any payment, with respect to the redemption of the Notes;

(3) reduce the rate of or change the time for payment of interest on any Note;

(4) waive a Default or Event of Default in the payment of principal of, premium or additional interest, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration);

(5) make any Note payable in money other than U.S. dollars;

(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of, premium, if any, or interest on the Notes;

(7) release any Subsidiary Guarantor from any of its obligations under its Subsidiary Guarantee or this Indenture, except in accordance with the terms of this Indenture;

(8) impair the right to institute suit for the enforcement of any payment on or with respect to the Notes or the Subsidiary Guarantees;

(9) after an Asset Sale or Change of Control has occurred, amend, change or modify the obligation of the Company to make and consummate an Asset Sale Offer with respect to any Asset Sale in accordance with Section 4.11 hereof or the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control in accordance with Section 4.16 hereof, including, in each case, amending, changing or modifying any definition relating thereto;

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(10) except as otherwise permitted under Sections 5.01 or 4.19(b) hereof, consent to the assignment or transfer by the Company or any Subsidiary Guarantor of any of their rights or obligations under this Indenture; and

(11) make any change in the preceding amendment and waiver provisions.

The right of any Holder to participate in any consent required or sought pursuant to any provision of this Indenture (and the obligation of the Company to obtain any such consent otherwise required from such Holder) may be subject to the requirement that such Holder shall have been the Holder of record of any Notes with respect to which such consent is required or sought as of a date identified by the Trustee in a notice furnished to Holders in accordance with the terms of this Indenture.

Section 9.03.     Compliance with Trust Indenture Act.

Every amendment to or supplement of this Indenture or the Notes shall comply with the TIA as then in effect.

Section 9.04.     Revocation and Effect of Consents.

A consent to an amendment, supplement or waiver by a Holder of a Note shall bind the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, until an amendment, supplement or waiver becomes effective, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note. For such revocation to be effective, the Trustee must receive the notice of revocation before the date the amendment, supplement or waiver becomes effective.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver. If the Company elects to fix a record date for such purpose, the record date shall be fixed at such date as the Company may designate. If a record date is fixed, then notwithstanding the provisions of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No consent shall be valid or effective for more than 90 days after such record date unless consent from the Holders of the principal amount of Notes required hereunder for such amendment or waiver to be effective also shall have been given and not revoked within such 90-day period.

After an amendment, supplement or waiver becomes effective, it shall bind every Holder unless it makes a change described in any of clauses (1) through (11) of Section 9.02. In that case the amendment, supplement or waiver shall bind each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note.

Section 9.05.     Notation on or Exchange of Notes.

If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms.

Section 9.06.     Trustee Protected.

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and shall be provided with, and (subject to Article Seven) shall be fully

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protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment or supplement or waiver is authorized or permitted by and complies with this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

ARTICLE TEN

[INTENTIONALLY OMITTED]

ARTICLE ELEVEN

GUARANTEE

Section 11.01.     Unconditional Guarantee.

Each Subsidiary Guarantor hereby unconditionally guarantees on a senior basis to each Holder and to the Trustee the due and punctual payment of the principal of, premium, if any, and interest on the Notes and all other amounts due and payable under this Indenture and the Notes by the Company whether at maturity, by acceleration, redemption, repurchase or otherwise, including, without limitation, interest on the overdue principal of, premium, if any, and interest on the Notes, to the extent lawful, all in accordance with the terms hereof and thereof; subject, however, to the limitations set forth in this Article Eleven.

Failing payment when due of any amount so guaranteed for whatever reason, each Subsidiary Guarantor shall be obligated to pay the same immediately. Each Subsidiary Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Subsidiary Guarantor hereby waives diligence, presentment, demand of payments, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and in such Subsidiary Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Company, any Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or such Subsidiary Guarantor, any amount paid by the Company or such Subsidiary Guarantor to the Trustee or such Holder, the relevant Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Subsidiary Guarantor agrees it shall not seek to enforce any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of the relevant Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any acceleration of such Obligations as provided in Article Six, such obligations (whether or not due and payable) shall forthwith become due and payable by each Subsidiary Guarantor for the purpose of its Subsidiary Guarantee.

Section 11.02.     Limitation of Subsidiary Guarantor’s Liability.

Each Subsidiary Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a fraudulent transfer or conveyance for purposes of any federal, state or foreign law. To effectuate the foregoing intention, the Holders and such Subsidiary Guarantor hereby irrevocably agree that the obligations of such

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Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law.

Section 11.03.     Execution and Delivery of Subsidiary Guarantees.

Each Subsidiary Guarantor hereby agrees that its execution and delivery of this Indenture or any supplemental indentures hereof shall evidence its Subsidiary Guarantee set forth in Section 11.01 without the need for any further notation on the Notes.

Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation relating to its Subsidiary Guarantee.

If an Officer of a Subsidiary Guarantor whose signature is on this Indenture, any Supplemental indenture no longer holds that office at the time the Trustee authenticates such Notes or at any time thereafter, such Subsidiary Guarantor’s Subsidiary Guarantee shall be valid nevertheless.

The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of each Subsidiary Guarantee set forth in this Indenture on behalf of each Subsidiary Guarantor.

Section 11.04.     Severability.

In case any provision of this Subsidiary Guarantee shall be invalid, illegal or unenforceable, that portion of such provision that is not invalid, illegal or unenforceable shall remain in effect, and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 11.05.     Execution of Guarantee.

To evidence its Guarantee to the Holders set forth in this Article Eleven, each Subsidiary Guarantor hereby agrees to execute the Guarantee in substantially the form included in Exhibit E, which shall be endorsed on each Note ordered to be authenticated and delivered by the Trustee. Each Subsidiary Guarantor hereby agrees that its Guarantee set forth in this Article Eleven shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Guarantee. The Guarantee shall be signed on behalf of any Subsidiary Guarantor by two officers (who shall have been duly authorized by all requisite corporate actions), and delivery of such Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of such Guarantee on behalf of such Subsidiary Guarantor. Such signature upon the Guarantee may be by manual or facsimile signature of such officers and may be imprinted or otherwise reproduced on the Guarantee, and in case any such officer who shall have signed the Guarantee shall cease to be such officer before the Note on which such Guarantee is endorsed shall have been authenticated and delivered by the Trustee or disposed of by the Company, such Note nevertheless may be authenticated and delivered or disposed of as though the Person who signed the Guarantee had not ceased to be such officer of such Subsidiary Guarantor.

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ARTICLE TWELVE

[INTENTIONALLY OMITTED]

ARTICLE THIRTEEN

MISCELLANEOUS

Section 13.01.     Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by operation of TIA Section 318(c), the imposed duties shall control.

Section 13.02.     Notices.

Any notice or communication shall be sufficiently given if in writing and delivered in person or mailed by certified or registered mail (return receipt requested), telecopier or overnight air courier guaranteeing next day delivery, addressed as follows:

If to the Company or any Subsidiary Guarantor:

Gregg Appliances, Inc.

4151 East 96th Street

Indianapolis, Indiana 46240

Facsimile: (317) 848-8768

Attention: Treasurer

If to the Trustee:

Wells Fargo Bank, National Association

213 Court Street, Suite 703

Middletown, CT 06457

Attention: Corporation Trust Services

The Company or any Subsidiary Guarantor or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

All notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery.

Any notice or communication mailed to a Holder shall be mailed to him by first-class mail at his address as it appears on the registration books of the Registrar and shall be sufficiently given to him if so mailed within the time prescribed. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. If the Company or any Subsidiary Guarantor mails notice or communications to Holders it shall mail a copy to the Trustee and each Agent at the same time.

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Section 13.03.     Communication by Holders with Other Holders.

Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, each Subsidiary Guarantor, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).

Section 13.04.     Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Company or any Subsidiary Guarantor to the Trustee to take any action under this Indenture (except with respect to the initial issuance of the Notes), the Company or such Subsidiary Guarantor, as the case may be, shall furnish to the Trustee, at the request of the Trustee:

(1) an Officers’ Certificate (which shall include the statements set forth in Section 13.05) stating that, in the opinion of the signers, the conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel stating that, in the opinion of such counsel, such conditions precedent have been complied with and such other opinions as the Trustee may reasonably require.

Section 13.05.     Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(1) a statement that each person making such certificate or opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of each such person, such covenant or condition has been complied with.

Section 13.06.     Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or for a meeting of Holders. The Registrar or Paying Agent may make reasonable rules for its functions.

Section 13.07.     Legal Holidays.

If a payment date is a not a Business Day at a place of payment, payment may be made at that place on the next succeeding Business Day, and no interest shall accrue for the intervening period.

Section 13.08.      No Personal Liability of Directors, Officers, Employees and Stockholders.

No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or such Subsidiary Guarantor under the Notes, this Indenture, or any Subsidiary Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. This waiver and release are part of the consideration for issuance of the Notes.

69

Section 13.09.     Repayment to Company.

Subject to Section 7.07 and this Article Eight, the Trustee and the Paying Agent shall promptly pay to the Company, or if deposited with the Trustee by any Subsidiary Guarantor, to such Subsidiary Guarantor, upon request any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company, or if deposited by any Subsidiary Guarantor, to such Subsidiary Guarantor, upon request any money held by them for the payment of principal or interest that remains unclaimed for two years after the date of payment of such principal and interest; provided that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in The City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein, which shall be at least thirty (30) days from the date of such publication or mailing, any unclaimed balance of such money then remaining shall be repaid to the Company or a Subsidiary Guarantor. After payment to the Company or a Subsidiary Guarantor, as the case may be, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person and all liability of the Trustee and such Paying Agent with respect to such money shall cease.

Section 13.10.     Governing Law.

THIS INDENTURE AND THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE UNDERSIGNED HEREBY AGREE TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.

Section 13.11.     No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company, any Subsidiary Guarantor or any other Subsidiary. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 13.12.     Successors.

All agreements of the Company and each Subsidiary Guarantor in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.

Section 13.13.     Duplicate Originals.

The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same instrument.

Section 13.14.     Severability.

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto.

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SIGNATURES

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

GREGG APPLIANCES, INC.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chief Executive Officer
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:	/s/ Joseph P. O’Donnell
	Name:	Joseph P. O’Donnell
	Title:	Assistant Vice President
HHG DISTRIBUTING, LLC, as Subsidiary Guarantor
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	President and Secretary

E-1

EX-4.3

Exhibit 4.3

STOCKHOLDERS AGREEMENT

by and among

FS EQUITY PARTNERS V, L.P.,

GREGG INVESTMENT CORPORATION, LLC,

JERRY W. THROGMARTIN,

GREGG WILLIAM THROGMARTIN,

DENNIS L. MAY,

AND

GREGG APPLIANCES, INC.

February 3, 2005

TABLE OF CONTENTS

		Page
1.	DEFINITIONS	2
2.	RIGHTS RELATING TO ISSUANCE OF ADDITIONAL SECURITIES	4
	2.1    Issuance Notice	4
	2.2    Response Notice	4
	2.3    Revised Issuance Notice	4
	2.4    Pro Rata Share	4
	2.5    Termination and Assignment	4
3.	TRANSFER OF SHARES BY INVESTOR OR EXISTING STOCKHOLDERS; RIGHTS OF INCLUSION	5
	3.1    Rights of Inclusion	5
	3.2    Third-Party Offer	5
	3.3    Allocation of Included Shares	7
	3.4    Consummation	8
	3.5    Termination and Assignment	9
	3.6    Indirect Sale by FSEP V	9
4.	OBLIGATION TO SELL SECURITIES	9
	4.1    Sale Obligation	9
	4.2    Termination and Assignment	10
	4.3    Indirect Sale by FSEP V	10
5.	RESTRICTIONS ON TRANSFERS OF SECURITIES; RIGHTS OF FIRST REFUSAL	10
	5.1    Transfer Restrictions	10
	5.2    Rights of First Refusal	11
6.	REGISTRATION RIGHTS	13
7.	REPRESENTATION ON THE BOARD OF DIRECTORS	14
	7.1    The Board	14
	7.2    Termination and Assignment	15
	7.3    Certain Actions of the Board; Stockholders to Cooperate	16
8.	INDEMNIFICATION OF INVESTOR	17
9.	INDEMNIFICATION OF CERTAIN OFFICERS	17
10.	INDEPENDENT AUDITORS	17

i

TABLE OF CONTENTS

(continued)

		Page
11.	COPY OF AGREEMENT	17
12.	GOVERNING LAW	17
13.	WAIVER OF JURY TRIAL	17
14.	AMENDMENT OF ARTICLES	18
15.	REPRESENTATIONS AND WARRANTIES	18
16.	AMENDMENT AND WAIVER; SUCCESSORS; AFTER ACQUIRED SHARES	18
17.	INTERPRETATION	19
18.	NOTICES	19
19.	LEGENDS	20
20.	FURTHER ASSURANCES	21
21.	INJUNCTIVE RELIEF; DISPUTES	21
22.	SEVERABILITY	21
23.	ENTIRE AGREEMENT	21
24.	COUNTERPARTS	21
25.	TERMINATION	21

Schedule 1 Ownership of Capital Stock by Stockholders Upon Consummation of Transactions Contemplated by Merger Agreement

ii

STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT (this “Agreement”) is made and entered into as of February 3, 2005 by and among Gregg Appliances, Inc., an Indiana corporation (the “Company”), Gregg Investment Corporation, LLC, a Delaware limited liability company (the “Investor”), FS Equity Partners V, L.P., a Delaware limited partnership and the sole member of Investor (“FSEP V” and, collectively with Investor, the “Investor Parties”), and Jerry W. Throgmartin, Gregg William Throgmartin, and Dennis L. May (each of such three individuals, an “Existing Stockholder” and, collectively, the “Existing Stockholders”).

R E C I T A L S

A. The Existing Stockholders own a majority of the issued and outstanding stock of the Company.

B. The Investor Parties, the Existing Stockholders, the Company and others have entered into that certain Agreement and Plan of Merger, dated as of October 19, 2004, as amended (the “Merger Agreement”), pursuant to which, immediately after the merger contemplated in the Merger Agreement (the “Merger”), the Investor will own 80.01% of the issued and outstanding Common Stock of the Company, the Existing Stockholders will own in the aggregate 19.99% of the issued and outstanding Common Stock of the Company, and FSEP V will own at least a majority of the equity of the Investor. The Existing Stockholders also shall receive the Junior Subordinated Notes (as defined in the Merger Agreement) as consideration in the Merger and Section 7.1(f) below will govern certain actions of the Company and the Investor Parties with respect to such instruments.

C. To induce the Investor Parties and the Existing Stockholders to consummate the transactions contemplated by the Merger Agreement, the Investor Parties, the Existing Stockholders, and the Company desire to execute this Agreement.

D. Upon consummation of the transactions contemplated by the Merger Agreement the Investor and the Existing Stockholders will own the shares of Common Stock of the Company set forth on Schedule 1 hereto.

E. The Investor Parties, the Existing Stockholders and the Company wish to establish through this Agreement certain rights, obligations and restrictions with respect to the securities of the Company.

A G R E E M E N T

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings:

Additional Securities: All Securities which are issued and sold by the Company other than (i) the Initial Shares, (ii) any Securities issued or issuable to all of the holders of Common Stock then outstanding on a proportionate basis, (iii) any Securities issued or issuable to any Employees pursuant to any equity incentive plan, individual agreement, bonus, award, stock purchase plan, stock option plan or other stock agreement or arrangement which in each event is approved by the Board, or Securities issued or issuable to Investor in connection with the purchase of membership or equity interests or units of Investor by Employees, (iv) any Securities issued in exchange for debt securities of the Company or any Subsidiary; provided, that the overall terms of the exchange transaction are fair to and in the best interests of the Company as determined in good faith by the Board, (v) any Securities issued to any source of, or to any party arranging, financing for the Company or any Subsidiary of the Company; provided, that the overall terms of the financing transaction involving the issuance of debt and Securities are fair to and in the best interests of the Company as determined in good faith by the Board, (vi) any Securities issued pursuant to a public offering registered under the Securities Act, (vii) any Securities issued or issuable in connection with the acquisition by the Company or a Subsidiary of any business, business assets or securities from any Person; provided, that such Securities are not issued for less than their fair market value, as determined in good faith by the Board, and (viii) any Securities not described in (ii) through (vii) above that are issued or issuable upon the exercise of rights, options or warrants to purchase Securities, or upon the conversion or exchange of Securities convertible into or exchangeable for Securities, for which an Issuance Notice was given under the terms of this Agreement in connection with the issuance of such rights, options, or warrants or such convertible or exchangeable Securities.

Affiliate: Such term shall have the meaning given to such term pursuant to Rule 12b-2 of the General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended.

Board: The Board of Directors of the Company.

Business: Selling brand name appliances and consumer electronics, and providing related installation, servicing, extended warranty plans, financing, and repair.

Closing: The closing of the transactions contemplated by the Merger Agreement.

Common Stock: The Common Stock, no par value per share, of the Company.

Employee: Any employee, director or consultant of the Company or any Subsidiary of the Company.

FS Group: FSEP V and its Affiliates (including related funds) and their respective related management companies, general partners, portfolio companies, and the officers, directors, employees, agents or representatives of the foregoing.

5

FS Existing Stockholders: Brad J. Brutocao, Mark J. Doran, Bradford M. Freeman, Benjamin D. Geiger, Todd W. Halloran, Jon D. Ralph, John M. Roth, Charles P. Rullman, Jr., J. Frederick Simmons, Ronald P. Spogli, and William M. Wardlaw.

Initial Shares: The 13,900,000 shares of Common Stock issued and outstanding on the date hereof.

Permitted Transferee: Permitted Transferee shall mean, (i) with respect to the Investor, (A) Freeman Spogli & Co. V, L.P., or any direct or indirect wholly owned subsidiaries of Freeman Spogli & Co. V, L.P., or (B) FSEP V or any investment fund or partnership that is organized and controlled by three or more of the FS Existing Stockholders and any investor or general or limited partner in, or employee of, or member or manager of, such fund or partnership, or any management company of such fund or partnership, (ii) with respect to Dennis L. May, to any other Existing Stockholder; provided that the Transfer to such other Existing Stockholder takes place after the termination of Mr. May’s employment by the Company without “Cause,” as such term is defined in the Employment Agreement, dated of even date herewith, between Mr. May and the Company; and provided further that such Transfer shall be subject to Section 5.2(a), and (iii) with respect to an Existing Stockholder, a family trust, limited partnership, corporation or other entity established by such Existing Stockholder, all of the beneficiaries or owners of which are immediate family members of such Existing Stockholder, (provided that in the case of any entity established by an Existing Stockholder, the owners thereof shall specifically agree that, notwithstanding anything contained in this Agreement to the contrary, such owners shall not further Transfer their ownership interests in such entity to any other Person).

Person: Any individual, corporation, entity, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or other entity.

Public Offering: A public offering of shares of Common Stock of the Company registered under the Securities Act, but shall not include an offering registered on Form S-4 or Form S-8 (or any substitute form that is adopted by the SEC). The term “Initial Public Offering” shall mean an underwritten Public Offering of Common Stock which results in aggregate proceeds from the offering in excess of $50 million.

SEC: The Securities and Exchange Commission.

Securities: Shall mean (i) Common Stock, (ii) all rights, options, warrants to purchase such Common Stock or the securities described in the following clause and (iii) all other securities or capital stock of any type whatsoever, including, without limitation, preferred stock and securities that are, or may become, convertible into or exchangeable for, or that entitle the holder to purchase, Common Stock.

Securities Act: The Securities Act of 1933, as amended.

Stockholders: The Investor and the Existing Stockholders.

Subsidiary: With respect to any Person, a corporation or other entity of which a majority of the shares of stock or other ownership interests are owned, directly or indirectly, by such Person.

6

2. Rights Relating to Issuance of Additional Securities. The Company hereby grants to each Stockholder the following rights with respect to any and all proposed issuances or sales of Additional Securities by the Company:

2.1 Issuance Notice. The Company shall give to each Stockholder written notice of the Company’s intention to issue and sell Additional Securities (the “Issuance Notice”), describing the type of Additional Securities, the price at which the Additional Securities will be issued and sold and the general terms upon which the Company proposes to issue and sell the Additional Securities, including the anticipated date of such issuance or sale.

2.2 Response Notice. Each Stockholder shall have 20 days from the date the Issuance Notice is received to agree to purchase all or any portion of its Pro Rata Share (as defined below in Subsection 2.4) of such Additional Securities by giving written notice to the Company of its desire to purchase Additional Securities (the “Response Notice”) and stating therein the quantity of Additional Securities to be purchased. Such Response Notice shall constitute the irrevocable agreement of such Stockholder to purchase the quantity of Additional Securities indicated in the Response Notice at the price and upon the terms stated in the Issuance Notice. Any purchase by Stockholders of Additional Securities shall be consummated on the later of (i) the closing date specified in the Issuance Notice or (ii) the closing date on which Additional Securities described in the applicable Issuance Notice are first issued and sold if other Persons are also purchasing Additional Securities. Each Stockholder that has elected to purchase its Pro Rata Share of Additional Securities will have the right to purchase all or any portion of the Additional Securities unsubscribed for by the other Stockholders, up to its pro rata share of such unsubscribed portion (determined by the number of shares of Common Stock owned by the party or parties who elect to purchase such unsubscribed for portion) if oversubscribed.

2.3 Revised Issuance Notice. The Company shall have 120 days from the date of the Issuance Notice to consummate the proposed issuance and sale of the Additional Securities that are not being purchased by the Stockholders at a price and upon terms that are not materially less favorable to the Company than those specified in the Issuance Notice. If the Company proposes to issue Additional Securities after such 120-day period or at a price and upon terms that are materially less favorable to the Company than those specified in the Issuance Notice, it must again comply with this Section 2.

2.4 Pro Rata Share. For purposes of this Section 2, the Pro Rata Share of a Stockholder shall be a fraction, (i) the numerator of which shall be the total number of shares of Common Stock then held by the Stockholder and (ii) the denominator of which shall be the total number of shares of Common Stock then issued and outstanding.

2.5 Termination and Assignment. The rights provided to each of the Stockholders under this Section 2 shall terminate upon the earlier to occur of (i) with respect to all of the Stockholders, upon the consummation of an Initial Public Offering, and (ii) with respect to any particular Stockholder, at such time as such Stockholder has Transferred (other than to persons or entities set forth in clauses (i) or (iii) of the definition of Permitted Transferees) a number of shares of Common Stock in excess of 50 percent of the shares of Common Stock in the Company owned by such Stockholder immediately after the Merger. The rights granted under this Section 2 shall not be assignable; provided, however, that a Stockholder may assign its rights under this Section 2 to a Permitted Transferee with respect to shares transferred to such Permitted Transferee.

7

3. Transfer of Shares by Investor or Existing Stockholders; Rights of Inclusion

3.1 Rights of Inclusion

(a) The Investor agrees not to Transfer (as defined in Section 5.1) all or any portion of the shares of Common Stock or other Securities it holds to any Person (individually, a “Third Party” and, collectively, “Third Parties”) unless each Existing Stockholder is given an opportunity to sell to the Third Party such number of shares of Common Stock or other Securities owned by such Existing Stockholder as is determined in accordance with Subsection 3.3 of this Section 3; provided, however, that the Existing Stockholders shall have no rights pursuant to this Section 3 with respect to Transfers by the Investor or a Permitted Transferee of the Investor of Securities (i) to any Permitted Transferee of the Investor, (ii) to any limited or general partner or employee of FSEP V, (iii) to any partner or member or employee of any Permitted Transferee of the Investor, or (iv) to any member of the immediate family or to any family trust of any Person described in subclause (ii) or (iii) above.

(b) Each of the Existing Stockholders agrees not to Transfer (as defined in Section 5.1) all or any portion of the shares of Common Stock or other Securities he holds to any Third Party unless the Investor is given an opportunity to sell to the Third Party such number of shares of Common Stock or other Securities owned by the Investor as is determined in accordance with Subsection 3.3 of this Section 3; provided, however, that the Investor shall have no rights pursuant to this Section 3 with respect to Transfers by the Existing Stockholders to any Permitted Transferee of the Existing Stockholders.

3.2 Third-Party Offer

(a) Prior to the consummation of any sale of all or any portion of the shares of Common Stock or other Securities held by the Investor to a Third Party, the Investor shall cause each bona fide offer from such Third Party to purchase such shares from the Investor (a “Third-Party Offer”) to be reduced to writing and shall send written notice of such Third-Party Offer (the “Initial Offer Notice”) to the Existing Stockholders and any other Persons who are parties to written agreements with the Investor entitling such stockholders to include shares of Common Stock or other Securities in such sale (the Existing Stockholders and such other stockholders, collectively, the “Company Stockholders”). Each Third-Party Offer shall include an offer to purchase shares of Common Stock or other Securities from the Company Stockholders, in the amounts determined in accordance with Subsection 3.3 of this Section 3, at the same time, at the same price and on the same terms as the sale by the Investor to the Third Party, and according to the terms and conditions of this Agreement. The Initial Offer Notice shall be accompanied by a true copy of the Third-Party Offer (including all material information available to the Investor relating thereto). If a Company Stockholder desires to accept the offer contained in the Initial Offer Notice, such Company Stockholder shall furnish written notice to the Investor, within 15 days after its receipt of the Initial Offer Notice, indicating such Stockholder’s irrevocable acceptance of the offer included in the Initial Offer Notice and setting forth the maximum number of Securities such Stockholder agrees to sell to the Third Party (the “Acceptance Notice”). If a Company Stockholder does not furnish an Acceptance Notice to the Investor in accordance with these provisions by the end of such 15-day period, such Company Stockholder shall be deemed to have irrevocably rejected the offer contained in the Initial Offer

8

Notice. All Securities set forth in the Acceptance Notices of the Company Stockholders, together with the Securities proposed to be sold by the Investor to the Third Party, are referred to with respect to Investor individually or a single Company Stockholder as the “Individual Offered Shares” and collectively as “All Offered Shares”. Within three days after the date on which the Third Party informs the Investor of the total number of Securities which such Third Party has agreed to purchase in accordance with the terms specified in the Initial Offer Notice, the Investor shall send written notice (the “Final Notice”) to the participating Company Stockholders setting forth the number of Securities each participating Company Stockholder shall sell to the Third Party as determined in accordance with Subsection 3.3 of this Section 3, which number shall not exceed the maximum number specified by a Company Stockholder in its Acceptance Notice. Within five days after the date of the Final Notice (or such shorter period as may reasonably be requested by the Investor to facilitate the sale), the participating Company Stockholders shall furnish to the Investor (i) a written undertaking to deliver, upon the consummation of the sale of Securities to the Third Party as indicated in the Final Notice, the certificates representing the Securities held by each Company Stockholder, which will be transferred pursuant to such Third-Party Offer (such shares shall be referred to herein as the “Included Shares”) and (ii) a limited power-of-attorney authorizing the Investor to transfer the Included Shares pursuant to the terms of such Third-Party Offer. Each Company Stockholder shall be required to make customary representations and warranties in connection with such transfer with respect to its own authority to transfer and its title to the Securities transferred, together with such other representations and warranties concerning the Company as are made by the Investor in connection with such sale. In any such transaction, the Existing Stockholders and the Company will cooperate with all other Company Stockholders to facilitate the transaction. Notwithstanding the foregoing, the Investor shall have no obligation under this Section 3.2(a) in the event that the Investor is selling all of its Securities in the Company through any form of transaction and is exercising its rights under Section 5.1.

(b) Prior to the consummation of any sale of all or any portion of the shares of Common Stock or other Securities held by an Existing Stockholder to a Third Party, and subject to compliance with its obligations pursuant to Section 5.1 and Section 5.2, the selling Existing Stockholder shall cause each bona fide offer from such Third Party to purchase such shares from the selling Existing Stockholder (a “Third-Party Offer”) to be reduced to writing and shall send written notice of such Third-Party Offer (the “Initial Offer Notice”) to the Investor and if Investor does not exercise its right to acquire such Securities pursuant to Section 5.2, to the other Stockholders (including the non-selling Existing Stockholders). Each Third-Party Offer shall include an offer to purchase shares of Common Stock or other Securities from the Investor, and the other Stockholders, in the amounts determined in accordance with Subsection 3.3 of this Section 3, at the same time, at the same price and on the same terms as the sale by the selling Existing Stockholder to the Third Party, and according to the terms and conditions of this Agreement. The Initial Offer Notice shall be accompanied by a true copy of the Third-Party Offer (including all material information available to the Existing Stockholders relating thereto). If the Investor desires to accept the offer contained in the Initial Offer Notice, the Investor shall furnish an acceptance notice to that effect (the “Acceptance Notice”) to the selling Existing Stockholder within 15 business days after its receipt of the Initial Offer Notice (which the selling Existing Stockholder shall provide concurrently with the Stockholder Notice described in Section 5.2(a)). If the Investor does not furnish an Acceptance Notice to the selling Existing Stockholder in accordance with these provisions by the end of such 15-day period, the Investor

9

shall be deemed to have irrevocably rejected the offer contained in the Initial Offer Notice. If the Investor does not furnish the Acceptance Notice described, the selling Existing Stockholder will then transmit the Initial Offer Notice to the other Stockholders in accordance with the provisions specified above. The other Stockholders will then have an opportunity to accept the offer contained in the Initial Offer Notice, within 15 days of their respective receipt of the Initial Offer Notice, on the terms specified herein and therein. All Securities set forth in the Acceptance Notice of the Investor under this Section 3.2(b), together with the Securities proposed to be sold by the other Stockholders, if applicable, to the Third Party are referred to with respect to Investor individually or any other Stockholder individually as the “Individual Offered Shares” and collectively as “All Offered Shares”. Within three days after the date on which the Third Party informs the selling Existing Stockholder of the total number of Securities which such Third Party has agreed to purchase in accordance with the terms specified in the Initial Offer Notice, the selling Existing Stockholder shall send written notice (the “Final Notice”) to the Investor and the other Stockholders setting forth the number of Securities the Investor and the other Stockholders shall sell to the Third Party as determined in accordance with Subsection 3.3 of this Section 3, which number shall not exceed the maximum number specified by the Investor and the other Stockholders in their respective Acceptance Notices. Within five days after the date of the Final Notice (or such shorter period as may reasonably be requested by the Existing Stockholders to facilitate the sale), the Investor, and the other Stockholders shall furnish to the selling Existing Stockholder (i) a written undertaking to deliver, upon the consummation of the sale of Securities to the Third Party as indicated in the Final Notice, the certificates representing the Securities held by the Investor and the other Stockholders which will be transferred pursuant to such Third-Party Offer (such shares shall be referred to herein as the “Included Shares”) and (ii) a limited power-of-attorney authorizing the selling Existing Stockholder to transfer the Included Shares pursuant to the terms of such Third-Party Offer. The Investor and the other Stockholders shall be required to make customary representations and warranties in connection with such transfer with respect to its own authority to transfer and its title to the Securities transferred, together with such other representations and warranties concerning the Company as are made by the selling Existing Stockholders in connection with such sale. In any such transaction, the Investor, the other Stockholders, and the Company will cooperate to facilitate the transaction.

3.3 Allocation of Included Shares. The maximum number of shares of Common Stock and other Securities that may individually be sold by Investor (pursuant to Sections 3.1(b) and 3.2(b)), each Existing Stockholder (pursuant to Sections 3.1(a) and 3.2(a)), and each other holder of Securities who has rights to participate in sales of Securities by the Investor or the Existing Stockholders pursuant to written agreements by and between the Company and any such holder (the “Other Tag-Along Rights Holders”), in any sale governed by this Section 3 shall be (i) such Person’s Individual Offered Shares in the event the Third Party has agreed to purchase All Offered Shares and all Securities that the Other Tag-Along Rights Holders who have elected to participate in such sale seek to include in such sale or (ii) such number of shares of Common Stock or other Securities, as applicable, equal in each case to the product of (a) the total number of shares of such type or class of security which the Third Party has agreed to purchase times (b) a fraction, the numerator of which is the total number of shares of such type or class of security owned by such Investor, Existing Stockholder, or Other Tag-Along Rights Holder who is eligible to and has elected to participate in such sale, as the case may be, on the date of the applicable Final Notice, and the denominator of which is the aggregate total number of shares of such type or class of security owned on the date of the applicable Final Notice by the Investor, the Existing Stockholders, and the Other Tag-Along

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Rights Holders who have elected to participate in such sale; provided, however, that, in the event the Investor, the Existing Stockholders, or any Other Tag-Along Rights Holder elects to sell a number of any type or class of security which is less than the number such holder could sell pursuant to clause (ii) above, the shares of such type or class of security that the others of such holders can sell in such transaction shall be increased by an aggregate amount equal to the number of shares which any of the Investor, the Existing Stockholders, or any Other Tag-Along Rights Holder could have sold in such transaction but chose not to sell, and any such increase shall be allocated among such other holders on a pro rata basis based upon the total number of shares of such type or class of security owned on the date of the applicable Final Notice by such other holders. Without the prior written consent of Jerry W. Throgmartin, neither the Company nor Investor shall enter into any agreement that grants rights to any Other Tag Along Rights Holder that are inconsistent with the provisions of this Section 3.3.

3.4 Consummation. The Investor or the Existing Stockholders shall have 120 days from the date of the applicable Final Notice in which to sell to the Third Party the Securities owned by the Investor or the Existing Stockholders and the Included Shares of the Other Tag-Along Rights Holders on terms which are not materially less favorable to the sellers of Securities than those specified in the applicable Initial Offer Notice; provided, however, that in the event there is a decrease in the price to be paid by the Third Party for the Securities to be sold from the price set forth in the applicable Initial Offer Notice, which decrease is acceptable to the Investor or the Existing Stockholders, as applicable, or other material change in terms which are less favorable to the Investor or the Existing Stockholders, as the case may be, but which are acceptable to the Investor or the Existing Stockholders, as the case may be, the Investor or the Existing Stockholders, as the case may be, shall notify the participating Stockholders of such decrease or change in terms, and each of the participating Stockholders shall have five business days from the date of receipt of the notice of such decrease or change in terms to reduce the number of Securities it will sell to such Third Party as previously indicated in the applicable Acceptance Notice, and the number of shares that all other participating Stockholders (including Other Tag-Along Rights Holders) may transfer shall be increased in accordance with the provisions of Section 3.3; and provided, further, that in the event there is an increase in the price to be paid by the Third Party for the Securities to be sold from the price set forth in the applicable Initial Offer Notice or other material change in terms which are more favorable to the Investor or the Existing Stockholders, as the case may be, the Investor or the Existing Stockholders, as the case may be, shall notify the other Stockholders of such increase or change in terms, and each of the Stockholders who was eligible to but did not elect to participate to the full extent of its rights hereunder shall have five business days from the date of receipt of the notice of such increase or change in terms to increase the number of Securities it will sell to such Third Party, and the number of shares that all other participating Stockholders (including the Other Tag-Along Rights Holders) may transfer shall be decreased proportionately if necessary. A Third Party purchaser of Securities which complies with this Section 3 in connection with such purchase shall not be subject to the obligations contained in this Section 3 with respect to its future sales of such Securities. The Investor or the Existing Stockholders, as the case may be, shall cause to be remitted to the participating Stockholders the total sales price of the Included Shares of the participating Stockholders sold pursuant thereto, which consideration shall be in the same form and per share amount as the consideration received by the Investor or the Existing Stockholders, as the case may be, and as specified in the applicable Initial Offer Notice, net of the pro rata portion (based on the total value of the consideration received by such Stockholder compared to the aggregate consideration received by all Stockholders in the transaction) of the reasonable out-of-pocket expenses incurred in connection with a sale consummated pursuant to this Section 3. The Investor or the Existing Stockholder shall furnish, or shall cause to be furnished, such other evidence of the

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completion and time of completion of such sale and the terms thereof as may be reasonably requested by the participating Stockholders including, without limitation, evidence of the expenses incurred by the Investor or the Existing Stockholder, as the case may be, in connection with such sale. If and to the extent that, at the end of 120 days following the date of the applicable Final Notice, the Investor or the Existing Stockholder, as the case may be, has not completed the sale contemplated thereby, the Investor or the Existing Stockholder, as the case may be, shall return to the other participating Stockholders all certificates representing the Included Shares and all powers-of-attorney which the other participating Stockholders may have transmitted pursuant to the terms hereof.

3.5 Termination and Assignment. Any Permitted Transferee of the Investor and any assignee of the Investor’s rights under Section 4 shall agree to be bound by this Section 3 to the same extent as the Investor. Any Permitted Transferee of an Existing Stockholder shall agree to be bound by this Section 3 to the same extent as the Existing Stockholder. The obligations of the Investor and the Existing Stockholders and any Permitted Transferee or assignee pursuant to the provisions of this Section 3 shall terminate upon consummation of an Initial Public Offering and shall terminate with respect to any particular Stockholder’s tag-along rights at such time as such Stockholder has Transferred (other than to Permitted Transferees) a number of shares of Common Stock in excess of 50 percent of the shares of Common Stock in the Company owned by such Stockholder immediately after the Merger. The rights granted to the Stockholders under this Section 3 shall not be assignable except to a Permitted Transferee in accordance with Article V, and only then if the Permitted Transferee executes a written undertaking to be, and is, bound by this Agreement in the same manner and to the same extent as the other Stockholders. A distribution by the Investor to FSEP V or by Investor or FSEP V to FSEP V’s general or limited partners of all or any portion of its Securities shall not give rise to any rights of the other Stockholders under this Section 3.

3.6 Indirect Sale by FSEP V. For purposes of this Section 3, any sale by FSEP V of all or any portion of the equity of the Investor to a Third Party shall be considered to be a sale of a proportionate percentage of the shares of Common Stock or other Securities held by the Investor to a Third Party. Accordingly, prior to the consummation of any sale by FSEP V of all or any portion of the equity of the Investor to a Third Party, FSEP V shall cause the Investor to provide the related Initial Offer Notice to the Existing Stockholders, and the Existing Stockholders shall have an opportunity to participate in such sale transaction by providing their respective Acceptance Notices to the Investor as provided above.

4. Obligation to Sell Securities

4.1 Sale Obligation. If the Investor proposes to sell to a Third-Party any of the shares of Common Stock and other Securities held by the Investor (including its Permitted Transferees and assignees) (whether such sale is by way of purchase, merger, recapitalization or other form of transaction), then upon the request of the Investor, each of the Existing Stockholders shall sell the same percentage, as applicable, of the shares of Common Stock and other Securities beneficially owned by such Existing Stockholder to such third-party buyer pursuant to the same terms and conditions negotiated by the Investor for the sale of the Securities held by the Investor. For example, if Investor proposes to sell 35% of the shares of Common Stock held by it, the Existing Stockholders shall, upon request of Investor, sell 35% of the shares of Common Stock held by them. Each of the Existing Stockholders agrees to such sale and to execute such agreements, powers of attorney, voting proxies or other documents and instruments as may be necessary or desirable to consummate such sale. Each of the Existing Stockholders further agrees to timely take such other

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actions as the Investor may reasonably request as necessary in connection with the approval of the consummation of such sale, including voting all securities with voting rights in favor of such sale and waiving any dissenters’ rights. Each Existing Stockholder shall be required to make customary representations and warranties in connection with such transfer with respect to its own authority to transfer and its title to the Securities transferred, together with such other representations and warranties with respect to the Company as are made by the Investor in connection with such sale. Each Existing Stockholder shall pay its pro rata portion (based on the total value of the consideration received by such Stockholder compared to the aggregate consideration received by all Stockholders in the transaction) of the reasonable out-of-pocket expenses incurred in connection with a sale consummated pursuant to this Section 4.

4.2 Termination and Assignment. The obligations of the Existing Stockholders pursuant to this Section 4 shall be binding on any transferee of or purchaser of Securities from an Existing Stockholder or from one of their respective Permitted Transferees, and any subsequent transferee, and an Existing Stockholder, Permitted Transferee or any other transferee shall obtain and deliver to the Investor a written commitment to be bound by such provisions from each such transferee or Permitted Transferee prior to any Transfer. The obligations of the Existing Stockholders pursuant to this Section 4, and the obligations of any such transferee and Permitted Transferee, shall terminate upon the consummation of an Initial Public Offering. The rights of the Investor under this Section 4 shall not be assignable except to a Permitted Transferee or to a purchaser of more than 50% of the shares of Common Stock held by Investor immediately after the Merger.

4.3 Indirect Sale by FSEP V. For purposes of this Section 4, a proposed sale by FSEP V of all or a substantial percentage of the equity of the Investor to a Third Party shall be deemed to be a proposed sale of all or a substantial percentage, as the case may be, of the shares of Common Stock or other Securities held by the Investor. Accordingly, upon the request of FSEP V, each of the Existing Stockholders shall sell all or the same percentage, as applicable, of the shares of Common Stock and other Securities beneficially owned by such Existing Stockholder to such third-party buyer pursuant to the same terms and conditions negotiated by FSEP V for the deemed sale of the Securities held by the Investor.

5. Restrictions on Transfers of Securities; Rights of First Refusal

5.1 Transfer Restrictions

(a) Transfer Restrictions Binding Stockholders. The Existing Stockholders shall not (i) pledge, hypothecate or encumber any Securities, without the prior written approval of the Investor, (ii) sell, assign, transfer, gift or otherwise dispose of (“Transfer”) any Securities, or any right, title or interest therein, except in compliance with the Securities Act and all applicable state securities laws, or (iii) Transfer any Securities or any right, title or interest therein, except for Transfers of Securities expressly in compliance with this Agreement, including (without limitation) Section 5.2 and the following provisions of this Section 5.1(a). Notwithstanding the foregoing, (i) under no circumstances other than pursuant to Section 5.3 will any Existing Stockholder Transfer Securities then held by it to any Person who directly or indirectly carries on or participates in any business in competition with the Business (whether conducted by the Company or any Subsidiary or controlled Affiliate of the Company); and (ii) until the third anniversary of the date of this Agreement (the “Permitted 50% Transfer

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Date”), no Existing Stockholder may Transfer any Securities, or any right, title or interest therein, other than to a Permitted Transferee or pursuant to Section 3.1(a) or Section 4, and (iii) after the Permitted 50% Transfer Date but prior to the fifth anniversary of the date of this Agreement (the “Permitted Full Transfer Date”), no Existing Stockholder may Transfer more than 50% of the number of shares of Common Stock owned by such Stockholder immediately after the Merger, other than to a Permitted Transferee or pursuant to Section 3.1(a) or Section 4. The Transfer of Securities from any Stockholder to persons or entities set forth in clause (iii) of the definition of Permitted Transferee may be made without complying with Section 5.2; provided, that each of such transferees executes a written undertaking to be and is bound by this Agreement in the same manner and to the same extent as such Stockholder and (i) executes an irrevocable power of attorney appointing the transferring Stockholder as such transferee’s attorney-in-fact with sole irrevocable power and authority to make all decisions on behalf of and take all actions required to be taken by such transferee in connection with this Agreement, including (without limitation) any required sale of Securities pursuant to Section 4 or 5.3 hereof, and (ii) if requested by the Investor, delivers an opinion of legal counsel reasonably satisfactory to the Investor that such undertaking is binding and enforceable.

(b) Conditions to Transfer. Any attempt to Transfer, pledge, hypothecate or encumber Securities, or any right, title or interest therein, not in compliance with this Agreement shall be null and void, and the Company shall not give effect to any such attempted transaction or Transfer. Any Securities Transferred pursuant to the terms and requirements of this Agreement (including Sections 3, 4 and 5) shall be Transferred free and clear of all mortgages, liens, pledges, charges and security interests or encumbrances, or any obligations or liabilities in connection therewith, other than obligations under this Agreement of transferees. Each Stockholder, on the execution and delivery of this Agreement, agrees that such Stockholder will not Transfer any Securities prior to delivery to the Company of an opinion of counsel in form and substance reasonably satisfactory to the Company with respect to compliance with the Securities Act, or until a registration statement with respect to such Securities under the Securities Act has become effective; except that no opinion shall be required in the case of a Transfer by any Stockholder to a Permitted Transferee or by the Investor or a Permitted Transferee to any limited or general partner or employee of the Investor, FSEP V, or any Permitted Transferee. Except as expressly provided to the contrary herein, all transferees of Securities will be bound by this Agreement in the same manner and to the same extent as the transferor and prior to any Transfer must deliver to the Company and the non-transferring Stockholders a written undertaking to be and become so bound. Upon completion of any Transfer in compliance with this Agreement, the transferee shall be entitled to the rights expressly provided to the transferee hereunder.

(c) Termination. Subject to the terms and provisions of Section 5.2 and Section 6 of this Agreement, the restrictions upon the Stockholders contained in this Section 5.1 will terminate upon consummation of an Initial Public Offering.

5.2 Rights of First Refusal

(a) Investor’s Right of First Refusal. In addition to the transfer restrictions contained in Section 5.1, each of the Existing Stockholders hereby also agrees not to Transfer any of the Common Stock or other Securities held by it to any Person (other than

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persons or entities set forth in clause (iii) of the definition of Permitted Transferees) unless the Investor (or any third person(s) designated by Investor, which may include Affiliates of Investor or the Company) is given the right to acquire such Securities pursuant to the provisions of this paragraph (a). If an Existing Stockholder receives an offer from any Person (other than persons or entities set forth in clause (iii) of the definition of its Permitted Transferees) to acquire any such Securities, or decides to solicit or cause to be solicited a proposal or proposals to acquire such Securities, such Existing Stockholder shall first give Investor written notice (the “Stockholder Notice”) of such intention, which notice shall include a term sheet stating, among other material terms, the minimum cash sales price (the “Target Price”) that such Existing Stockholder would entertain for the shares of Common Stock or other Securities to be sold (the “Offered Securities”). Investor (or its designee) shall have the right for a period of 20 business days following the delivery of the Stockholder Notice (the “Acceptance Period”) to accept the offer to purchase all or any portion of the Offered Securities at the Target Price and upon the other terms provided with the Stockholder Notice (or, in the alternative, to exercise its tag-along rights as provided in Section 3.2(b)) (the “Acceptance Notice”). The Investor (or its designee) shall exercise its rights under this subparagraph (a) by delivering to such Existing Stockholder an irrevocable written notice of its election prior to 5:00 p.m. New York time on the final day of the Acceptance Period. If the Investor (or its designee) exercises its rights under this subparagraph (a), the sale of the Offered Securities to it shall be consummated on the 15th business day after the final day of the Acceptance Period (the “Purchase Period”). If the Investor (or its designee) does not elect to purchase the Offered Securities on such terms (and the failure to deliver an irrevocable notice of acceptance shall be conclusively deemed to be rejection of such opportunity) or fails to consummate a purchase of the Offered Securities for cash within the Purchase Period, such Existing Stockholder shall have the right (without limitation to other rights it may have) to consummate the sale of the Offered Securities on terms not materially more favorable to the purchaser than specified in the Stockholder Notice for a period of 90 days (the “Consummation Period”) after the expiration of the Acceptance Period or, if applicable, the Purchase Period. If such Existing Stockholder does not complete such sale, transfer or conveyance within the Consummation Period, such Existing Stockholder shall not have the right to sell, transfer or convey any of the Offered Securities without again complying with this subparagraph (a). In the event such Existing Stockholder intends to sell the Offered Securities for consideration other than cash, such Existing Stockholder shall notify the Investor (or its designee) of the terms of such non-cash consideration. Investor (or its designee) may elect within 20 business days of such notice to have the fair market value of such non-cash consideration determined, with the parties jointly selecting a neutral investment banking firm to resolve any dispute regarding the fair market value of such non-cash consideration. The fees and expenses of such neutral firm shall be paid by the Company. If the sum of the fair market value of the non-cash consideration and the cash consideration (in the case of a sale that is partially for cash) is less than the cash price offered to Investor (or its designee) pursuant to this subparagraph (a), then (i) the Existing Stockholder shall have the right to terminate the proposed transaction in its entirety (as it relates both to the Investor as well as to the Person that originally proposed to acquire the Offered Securities), and (ii) to the extent that the Existing Stockholder does not terminate the proposed transaction in its entirety, the Investor (or its designee) may, within 20 business days of the determination of the fair market value of the non-cash consideration, elect to purchase the Offered Securities proposed to be sold for an amount in cash equal to the sum of (i) the fair market value of the non-cash consideration and (ii) the cash

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consideration, if any. Such purchase must be consummated on the 15th business day after the determination of fair market value. If such Existing Stockholder receives a written offer for the Offered Securities at any time during the Consummation Period which is acceptable to such Existing Stockholder but is less than the Target Price or is upon terms materially less favorable to such Existing Stockholder than the terms provided to Investor (or its designee) in the Stockholder Notice (the “Below Target Price Offer”), such Existing Stockholder shall promptly deliver a copy of such written offer to Investor (or its designee). During the 20 business day period following delivery of such written offer, Investor (or its designee) shall have the right to accept the offer to purchase the Offered Securities on the terms reflected in such written offer. Investor (or its designee) shall, if it so desires, exercise such right by delivering to such Existing Stockholder written notice of its election to purchase all but not less than all of the Offered Securities prior to 5:00 p.m. New York time on the final day of such additional 20 business day period and the sale of the Offered Securities shall be consummated on the 15th business day after the delivery of such written notice. If Investor (or its designee) does not elect to accept the offer to purchase the Offered Securities on such terms within such 20 business day period or fails to consummate the purchase of the Offered Securities on the 15th business day after the date of Investors (or its designee’s) acceptance of the Below Target Price Offer, such Existing Stockholder shall have (without limitation to any other rights it may have) 90 days to consummate the sale of the Offered Securities at a price and upon terms that are not materially less favorable to such Existing Stockholder than the price and terms specified in the written offer delivered to Investor (or its designee). In the event a Below Target Price Offer involves any non-cash consideration, the procedures for valuing such non-cash consideration set forth above shall be utilized to determine the fair market value of such non-cash consideration and all time periods specified herein, extended accordingly.

(b) Termination and Assignment. The obligations of an Existing Stockholder pursuant to Section 5.2(a) shall terminate (i) upon the consummation of an Initial Public Offering, or (ii) at such time as Investor has Transferred (other than to Permitted Transferees) a number of shares of Common Stock in excess of 50 percent of the shares of Common Stock in the Company owned by such Stockholder immediately after the Merger or (iii) at such time as FSEP V has transferred in excess of 50% of the equity in Investor held by FSEP V immediately after the Merger. The rights granted to Investor under subparagraph (a) shall not be assignable except to a Permitted Transferee or to a purchaser of more than 50% of the shares of Common Stock held by Investor immediately after the Merger. Any transferee of Securities from an Existing Stockholder shall be bound by the provisions of this Section 5.2, and the Existing Stockholder shall obtain and deliver to each other Stockholder a written commitment by any such proposed transferee to be bound by such provisions prior to any transfer to such proposed transferee.

6. Registration Rights. The Stockholders shall be entitled to certain registration rights with respect to their shares of Common Stock (the “Registration Rights”). The terms of the Registration Rights are set forth in that certain Registration Rights Agreement of even date herewith by and among the Company, the Investor and the Existing Stockholders.

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7. Representation on the Board of Directors.

7.1 The Board.

(a) Subject to the limitations and conditions set forth in this section and Section 7.2, Jerry W. Throgmartin shall have a personal, nonassignable, right to be on the Board, and Dennis L. May shall have a personal, nonassignable, right to be on the Board. Mr. Throgmartin and Mr. May are hereinafter referred to collectively as the “Management Directors.” Subject to the limitations and conditions set forth in this section Investor shall be entitled to establish the size of the Board and to nominate the remaining members of the Board (the “Investor Nominees”). If necessary, the Board shall elect such independent members, if any, as may be required under applicable law or stock exchange requirements or by the National Association of Securities Dealers or underwriters in connection with the Initial Public Offering, and the Investor, and the Existing Stockholders shall each take all actions necessary in connection therewith (provided, that such independent directors shall be reasonably acceptable to, and elected by, a majority of the Board). The foregoing provisions of this Section 7.1(a) shall also apply with respect to the Board of each direct and indirect subsidiary of the Company. Accordingly, the parties agree to use their commercially reasonable efforts to ensure that the Board of each direct and indirect subsidiary of the Company is similarly constituted.

(b) (i) Each of the Stockholders agrees to vote or cause to be voted all of the shares beneficially owned or held of record by such Stockholder at any regular or special meeting of the stockholders of the Company called for the purpose of filling positions on the Board, or in any written consent executed in lieu of such a meeting of stockholders, and agrees to take or cause to be taken all actions otherwise necessary, to ensure the election to the Board of the Management Directors and the Investor Nominees.

(ii) The Company and each Stockholder hereby agrees to use its reasonable best efforts to call, or cause the appropriate officers and directors of the Company to call, a special meeting of stockholders of the Company, and each Stockholder hereby agrees to vote or cause to be voted all of the Securities with voting rights beneficially owned or held of record by such Stockholder for, or to take or cause to be taken all actions by written consent in lieu of any such meeting necessary to cause, the removal of (A) any Management Director for Cause, if such Cause exists, and (B) any Investor Nominee if the Investor requests such director’s removal for any reason. The Investor shall have the right to nominate a new nominee in the event any Management Director or Investor Nominee, as the case may be, shall be so removed or shall vacate his directorship for any reason.

(c) Except as provided in Section 7.1(b)(ii), each Stockholder hereby agrees that it will not vote in favor of the removal of any Management Director or Investor Nominee unless such removal shall be for Cause. For the purposes of this Section 7.1, “Cause” shall mean the willful and continued failure by a director substantially to perform his duties as a director of the Company, the willful engaging by a director in conduct which is demonstrably and materially injurious to the Company, the director’s conviction of any crime constituting a felony, or any attempt by the director to circumvent those provisions of the Company’s by-laws referred to in Section 7.1(e) below or to have any such provision declared illegal, invalid, or unenforceable.

(d) Subject to Section 7.2, if at any time from and after the date hereof, any director previously nominated by Investor or to serve on the Board or any Management Director ceases to be a director (whether by reason of death, resignation, removal or otherwise),

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Investor shall be entitled to nominate a successor director to fill the vacancy created thereby, and the Investor and the Existing Stockholders agree to exercise voting rights with respect to the shares of securities with voting rights held of record or beneficially owned by them so as to elect such nominee as a director of the Company.

(e) The Company and each Stockholder hereby agrees to comply and cooperate at all times with those provisions of the Company’s by-laws which state in effect that (i) a quorum of directors shall not exist at any meeting of directors unless at least one director who is an employee of FSEP V or an employee or member of the general partner of FSEP V (an “FSEP V Director”) is present at such meeting, and (ii) any FSEP V Director may call for a vote of the stockholders of the Company with respect to any action taken or proposed to be taken by the Board, and may adjourn any Board meeting for such purpose, and such action, whether or not taken before or after such call for a vote of the stockholders, shall not become a valid and enforceable action of the Company unless and until it is properly approved by such stockholders; provided, however, that such vote of the stockholders shall not be effective unless, prior to such vote, the Board has met (whether in person or by telephonic conference call) and had a full and fair opportunity to discuss the action taken or proposed to be taken.

(f) The Investor Parties will not take any action and will not cause or authorize Investor Nominees who are FS Existing Stockholders or who are employees or members of Freeman Spogli & Co., LLC or Freeman Spogli & Co. V, L.P. and its general partner Freeman Spogli & Co. V, LLC to take any action, that would violate Sections 1.07(d) or (e) of the Junior Subordinated Notes. The Investor Parties shall refund to the Company any property received from the Company in violation of Sections 1.07(d) or (e) of the Junior Subordinated Notes.

(g) The Investor Parties will not and will not cause or authorize Investor Nominees who are FS Existing Stockholders or who are employees or members of Freeman Spogli & Co., LLC or Freeman Spogli & Co. V., L.P. and its general partner Freeman Spogli & Co. V, LLC to approve any resolution or issue or approve any order to any officer or employee of the Company that prohibits or restricts the payment of any cash interest payment otherwise payable to a holder of a Junior Subordinated Note in accordance with the terms of the Junior Subordinated Note, unless such Investor Nominees determine in good faith at a duly noticed meeting of the Board of Directors that it is in the best interests of the Company and its stockholders to restrict or prohibit the payment of such cash interest.

7.2 Termination and Assignment. Notwithstanding the foregoing, at such time as Jerry W. Throgmartin has Transferred (other than to Permitted Transferees) a number of shares of Common Stock in excess of 50 percent of the shares of Common Stock in the Company owned by Mr. Throgmartin immediately after the Merger, his right to be on the Board shall terminate, and at such time as Dennis L. May has Transferred (other than to persons or entities set forth in clause (iii) of the definition of Permitted Transferees) a number of shares of Common Stock in excess of 50 percent of the shares of Common Stock in the Company owned by Mr. May immediately after the Merger, his right to be on the Board shall terminate. Similarly, at such time as the Investor has Transferred (other than to Permitted Transferees) a number of shares of Common Stock in excess of 50 percent of the shares of Common Stock in the Company owned by the Investor immediately after the Merger, its contractual right hereunder to establish the size of the Board and to nominate

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members of the Board shall terminate. The rights contained in Section 7 shall not be assignable other than by the Investor to a Permitted Transferee.

7.3 Certain Actions of the Board; Stockholders to Cooperate. Notwithstanding the terms and provisions of Section 7.1, no action of the Company, which under the law of the state of incorporation of the Company would have required the prior approval of a majority of the Company’s stockholders, will be taken unless and until a meeting of the Board of Directors of the Company (as opposed to a committee thereof) has been called and convened (upon prior notice duly given in accordance with the bylaws of the Company) for the purpose of discussing such action. If at any time in the future the Board approves a plan to reorganize the Company as a Delaware corporation, each of the Stockholders agrees to vote or cause to be voted all of the shares beneficially owned or held of record by such Stockholder in favor of such reorganization so long as such reorganization does not involve a termination of or material reduction in the indemnification rights afforded by the Company to such Stockholder by contract or in its charter documents (not considering any differences in the laws of the Company’s pre- and post-reorganization jurisdiction of organization). Furthermore, if in the future the Board approves a plan to reorganize the Company preparatory to or in anticipation of a Public Offering, each of the Stockholders agrees to vote or cause to be voted all of the shares beneficially owned or held of record by such Stockholder in favor of such reorganization and further agrees to cooperate with the Company to accomplish such reorganization.

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8. Indemnification of Investor. The Company agrees to indemnify, defend and hold harmless to the fullest extent permitted by applicable law, the Investor, its successors, assigns, partners and Affiliates, and each of the Investor’s and such other persons’ employees, officers, directors, members, managers, partners, stockholders, agents, advisors, representatives and Affiliates (each an “Indemnitee”) from and against all claims, liabilities, causes of action, actions, suits, proceedings, investigations, judgments, decrees, losses, damages, fees, costs and expenses (including attorney fees and expenses of investigation and of enforcing the rights under this Section 8), whether incurred with respect to third parties or otherwise, arising out of, resulting from or in connection with, based upon or relating to, (A) the fact that an Indemnitee is or was a stockholder of the Company, (B) any action or inaction taken in such capacity or (C) any breach or alleged breach by an Indemnitee of any fiduciary duty as a stockholder of the Company (collectively “Claims”). The Company may participate in, but not assume the defense of or control the defense with respect to, any Claim. The Company shall advance all costs and expenses, including attorneys fees incurred by any Indemnitee in advance of any final disposition of a Claim within 30 days of receipt of a notice setting forth the amount of such costs in expenses, subject to receipt of an undertaking to repay such advances if such Indemnitee is finally determined not to be entitled to indemnification by the Company. An Indemnitee may compromise, settle or resolve any Claim at the expense and risk of the Company. The Company may not settle, compromise or resolve any Claim without the consent of the affected Indemnitee, which consent shall not be unreasonably withheld.

9. Indemnification of Certain Officers. The Company shall enter into customary indemnification agreements with Jerry W. Throgmartin, Dennis L. May and Michael D. Stout in their capacities as officers of the Company.

10. Independent Auditors. The Company covenants and agrees that it will not at any time, without Investor’s express written consent, terminate the Company’s independent outside auditors — currently KPMG LLP — or hire another outside accounting firm to perform or assist with any audit of any of the financial statements of the Company or any division or Subsidiary of the Company. Furthermore, the Company covenants and agrees that it will not at any time, without Investor’s express written consent, hire the Company’s independent outside auditors or any other accounting firm to perform any non-audit services for the Company, including but not limited to bookkeeping or similar services, financial information systems design and implementation, appraisal or valuation services, actuarial services, internal audit outsourcing services, management functions or human resources, broker or dealer, investment adviser, or investment banking services, legal services and expert services unrelated to the audit, or any other service constituting a “non-audit service” within the meaning of Section 201 of the Sarbanes-Oxley Act of 2002.

11. Copy of Agreement. A copy of this Agreement and all amendments hereto shall be filed with the Secretary of Company and shall be kept at the principal executive offices of Company.

12. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware without regard to the conflicts of laws rules thereof.

13. Waiver of Jury Trial. The parties hereto waive, to the fullest extent permitted by law, all right to trial by jury.

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14. Amendment of Articles. Each of the parties hereto hereby agrees that it will not vote to approve any amendment to the Company’s Articles of Incorporation that does not apply to all holders of Common Stock generally unless Jerry W. Throgmartin votes to approve such amendment.

15. Representations and Warranties. Each Stockholder represents and warrants (a) that such Stockholder has full power, capacity, right and authority, and any requisite approvals or consents to enter into and perform this Agreement; (b) that this Agreement and the performance of its obligations hereunder have been duly authorized, and that this Agreement has been duly executed and delivered by such Stockholder and is a valid and binding agreement, enforceable against such Stockholder in accordance with its terms; and (c) that such Stockholder will, immediately after the Merger, own beneficially and of record the shares of Common Stock set forth opposite its name on Schedule 1 hereto, free and clear of any lien, claim, charge, option, security interest, restriction or encumbrance.

16. Amendment and Waiver; Successors; After Acquired Shares. This Agreement may be amended, modified or supplemented, and compliance with any provision hereof may be waived, with the written consent of the Investor and Jerry W. Throgmartin, together, and without the consent of any other Stockholder, except that to the extent any of the Existing Stockholders’ rights would be disproportionately prejudiced thereby, the written consents of such Existing Stockholders shall also be required. Any such amendment, modification, supplement or waiver so consented to in writing shall be binding upon the parties hereto and their successors and Permitted Transferees and assigns (if any). This Agreement shall be binding on the parties hereto and their successors, transferees, assigns, heirs and personal representatives; provided however, that unless expressly permitted herein, this Agreement and the rights granted hereunder shall not be assignable to an assignee or Permitted Transferee without the written consent of all of the parties hereto, which consent may be withheld in each such party’s sole discretion. If any right hereunder is not assignable, it shall not be transferred to any subsequent holder of Securities by reason of the transfer of Securities to such holder. The Agreement shall apply to all Securities now owned or hereafter acquired by any Stockholder. Notwithstanding the foregoing, the Investor may amend this Agreement at any time to specifically impose upon a Permitted Transferee the Obligation to Sell Securities contained in Section 4 and the Right of First Refusal contained in Section 5.2.

16.2 New Investors in Investor. The Company and the Existing Stockholders agree to execute such amendments to this Agreement and the Registration Rights Agreement, and take such other actions, in each case as are reasonably necessary to allow limited partners or Affiliates of limited partners of FSEPV to invest in membership or equity interests or units of Investor after consummation of the Merger in order to allow such parties to participate in rights granted to Investor under this Agreement and the Registration Rights Agreement, including, but not limited to, registration rights, rights of first refusal and rights with respect to the issuance of additional securities and the transfer of shares, and to be granted any other reasonable and customary rights requested by such limited partner or Affiliate, other than veto rights with respect to major transactions.

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17. Interpretation. The headings of the Sections contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not affect the meaning or interpretation of this Agreement.

18. Notices. All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed duly given, unless otherwise expressly indicated to the contrary in this Agreement, (i) when personally delivered, (ii) upon receipt of a telephonic facsimile transmission with a confirmed telephonic transmission answer back, (iii) three (3) Business Days after having been deposited in the United States mail, certified or registered, return receipt requested, postage prepaid, or (iv) one (1) Business Day after having been dispatched by a nationally recognized overnight courier service, addressed to the parties or their permitted assigns at the following addresses (or at such other address or number as is given in writing by either party to the other) as follows:

if to Investor or the Company:

Gregg Investment Corporation, LLC

c/o Freeman Spogli & Co.

599 Lexington Avenue

18^th Floor

New York, New York 10022

Facsimile: (212) 758-7499

Attention: John Roth and Ben Geiger

with a copy to:

Bingham McCutchen LLP

355 S. Grand Avenue, 44th Floor

Los Angeles, California 90071

Facsimile: (213) 680-6499

Attention: Richard J. Welch, Esq.

if to the Existing Stockholders:

c/o Jerry W. Throgmartin

4151 East 96^th Street

Indianapolis, Indiana 46240

Facsimile No.: (317) 848-8768

with a copy to:

Ice Miller

One American Square

Box 82001

Indianapolis, Indiana 46282-0002

Facsimile No.: (317) 592-4675

Attention: Steven K. Humke

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19. Legends. The Company agrees that all certificates evidencing Securities which are issued to any of the Investor or the Existing Stockholders or to any other Company stockholders shall be legended as follows (in addition to any other legend required to be placed thereon):

“THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AND OBLIGATIONS WITH RESPECT TO THE TRANSFER, PLEDGE, HYPOTHECATION, DISTRIBUTION AND VOTING THEREOF AS SET FORTH IN THAT CERTAIN STOCKHOLDERS AGREEMENT DATED AS OF February 3, 2005, WHICH MAY BE REVIEWED AT THE PRINCIPAL PLACE OF BUSINESS OF THE CORPORATION AND A COPY OF WHICH MAY BE OBTAINED FROM THE CORPORATION WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR.”

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20. Further Assurances. The Stockholders shall exercise, or cause to be exercised, voting rights with respect to securities held of record or beneficially owned by them in a manner so that, and shall otherwise take any necessary actions in order that, the covenants and understandings of the parties set forth in this Agreement shall be implemented. Each party hereto agrees to perform any further acts and execute and deliver any documents which may be reasonably necessary to carry out the intent of this Agreement and to make appropriate changes to the procedures set forth herein to implement such rights to the extent necessary to conform to the Delaware General Corporation Law or other applicable law. The Company covenants and agrees that it will act in good faith to preserve for each of the Stockholders the benefits of this Agreement and that it will take no voluntary action to impair the benefit hereof or to avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder or to deny to any of the Stockholders any of the benefits or protections contemplated hereby.

21. Injunctive Relief; Disputes. It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties hereto fail to comply with any of the obligations herein imposed on them and that, in the event of any such failure, an aggrieved party hereto will be irreparably damaged and will not have an adequate remedy at law. Any such party shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law.

22. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect to the maximum extent permitted by applicable law. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that this Agreement be enforced as originally contemplated to the greatest extent possible.

23. Entire Agreement. This Agreement, together with the Company’s Certificate of Incorporation and Bylaws as in effect on the date hereof, constitute the entire agreement and understanding among the parties pertaining to the subject matter hereof and supersede any and all prior agreements, whether written or oral, relating hereto.

24. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

25. Termination. Except for Sections 8 and 9, which shall survive and continue in full force and effect in all events, and as otherwise provided herein, this Agreement shall terminate upon the written agreement of Stockholders owning, in the aggregate, at least 90% of the Common Stock of the Company.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

GREGG APPLIANCES, INC., an Indiana corporation
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer

GREGG INVESTMENT CORPORATION, LLC, a Delaware limited liability company
By:	FS Capital Partners V, L.P.
Its:	Managing Member
	By:	FS Capital Partners, V, LLC
	Its:	General Partner
	By:	/s/ John M. Roth
		Name:	John M. Roth
		Title:	Managing Member
FS EQUITY PARTNERS V, L.P., a Delaware limited partnership
By:	FS Capital Partners, LLC
Its:	General Partner
By:	/s/ John M. Roth
	Name:	John M. Roth
	Title:	Managing Member

“EXISTING STOCKHOLDERS”
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin
By:	/s/ Dennis L. May
	Name:	Dennis L. May

EX-4.4

Exhibit 4.4

FIRST AMENDMENT TO

STOCKHOLDERS AGREEMENT

This First Amendment to Stockholders Agreement (this “Amendment”), dated as of March 8, 2005, relates to the Stockholders Agreement (as amended and in effect from time to time, the “Stockholders Agreement”) by and among Gregg Appliances, Inc., an Indiana corporation (the “Company”), Gregg Investment Corporation, LLC, a Delaware limited liability company (the “Investor”), FS Equity Partners V, L.P., a Delaware limited partnership (“FSEP V”), Jerry W. Throgmartin, Gregg William Throgmartin and Dennis L. May.

R E C I T A L S

A. A.S.F. Co-Investment Partners II, L.P. and California State Teachers’ Retirement System (collectively, the “Purchasers”) are purchasing from FSEP V and its affiliate, FS Affiliates V, L.P., a portion of the membership interests held by them in the Investor (the “Offered Interest”).

B. To induce the Purchasers to purchase the Offered Interest, the Purchasers have requested the right to observe the meetings of the board of directors of the Company.

C. The parties hereto have agreed that it is desirable to amend the Stockholders Agreement to grant the Purchasers the right to observe meetings of the board of directors of the Company.

D. All capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Stockholders Agreement.

A G R E E M E N T

NOW, THEREFORE, in consideration of the foregoing recitals, the parties, intending to be legally bound, agree as follows:

1. Amendments to the Stockholders Agreement.

(a) Section 1 of the Stockholders Agreement is hereby amended by adding the following definitions in alphanumerical order:

“ASF: ASF shall mean A.S.F. Co-Investment Partners II, L.P.”

“CalSTRS: CalSTRS shall mean California State Teachers’ Retirement System.”

(b) Section 7.1 of the Stockholders Agreement is hereby amended by adding subsection (f) as set forth below:

“(f) For so long as each of CalSTRS and ASF holds its units in the Investor initially purchased by such Person on March 8, 2005, each of CalSTRS and ASF shall have the right to have a representative attend

any meeting of the Board and to receive copies of all documents pertaining to any such meeting and any notice or documents distributed to the directors in connection with such meeting prior to such meeting.”

2. No Other Amendments. Except as expressly provided in this Amendment, all of the terms and conditions of the Stockholders Agreement shall remain in full force and effect.

3. Miscellaneous.

(a) Further Assurances. Each party hereto agrees to perform any further acts and execute and deliver any document which may be reasonably necessary to carry out the intent of this Amendment.

(b) Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of laws rules thereof.

(c) Headings. Introductory headings at the beginning of each section of this Amendment are solely for the convenience of the parties and shall not be deemed to be a limitation upon or description of the contents of any such section.

(d) Counterparts. This Amendment may be executed in two or more counterparts, all of which, when taken together, shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the day and year first above written.

GREGG APPLIANCES, INC.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer
GREGG INVESTMENT CORPORATION, LLC
By:	FS Equity Partners V, L.P.
Its:	Managing Member
By:	FS Capital Partners V, LLC
Its:	General Partner
	By:	/s/ John M. Roth
		Name:	John M. Roth
		Title:	Managing Member
FS EQUITY PARTNERS V, L.P.
By:	FS Capital Partners V, LLC
Its:	General Partner
	By:	/s/ John M. Roth
		Name:	John M. Roth
		Title:	Managing Member
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin
By:	/s/ Dennis L. May
	Name:	Dennis L. May

EX-4.5

Exhibit 4.5

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of February 3, 2005 by and among Gregg Appliances, Inc., an Indiana corporation (the “Company”), Gregg Investment Corporation, LLC, a Delaware limited liability company (the “Investor”), and Jerry W. Throgmartin, Gregg William Throgmartin, and Dennis L. May (each of such three individuals, an “Existing Stockholder” and, collectively, the “Existing Stockholders”).

R E C I T A L S

A. The Existing Stockholders own a majority of the issued and outstanding stock of the Company.

B. The Investor, the Existing Stockholders, the Company and others have entered into that certain Agreement and Plan of Merger, dated as of October 19, 2004, as amended (the “Merger Agreement”), pursuant to which, immediately after the merger contemplated in the Merger Agreement (the “Merger”), the Investor will own 80.01% of the issued and outstanding Common Stock of the Company and the Existing Stockholders will own in the aggregate 19.99% of the issued and outstanding Common Stock of the Company (the “Common Stock”).

C. In connection with such transactions, the Investor and the Existing Stockholders are to be granted certain registration rights with respect to the Common Stock held by them.

D. In order to ensure that such parties are granted such rights, the parties hereto desire to enter into this Agreement.

A G R E E M E N T

NOW, THEREFORE, the parties agree as follows:

ARTICLE I

SECTION 1.1 Definitions. Terms defined in that certain Stockholders Agreement of even date herewith (the “Stockholders Agreement”) by and among the Investor, the Existing Stockholders, the Company, and FS Equity Partners V, L.P., a Delaware limited partnership and the sole member of Investor (“FSEP V”) are used herein as therein defined. In addition, the following terms shall have the following meanings:

“Demand Registration” means an Investor Demand Registration or an ES Demand Registration, each as defined in Section 2.1.

“Excess Amount” means, with respect to an underwritten offering, the number of Registrable Securities requested by a Holder or Holders to be sold pursuant to Section 2.1 or 2.2 which the managing Underwriter or Underwriters determines exceeds the largest number of

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Registrable Securities which can successfully be sold in an orderly manner in such offering within a price range acceptable to the Holder holding a majority of the Registrable Securities proposed to be sold in such underwritten offering.

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations thereunder.

“Existing Stockholders” means Jerry W. Throgmartin, Gregg William Throgmartin, and Dennis L. May.

“Holder” means the Investor and the Existing Stockholders (or any Permitted Transferee thereof).

“Other Holder Notice” means an Other Holder Notice as defined in Section 2.1.

“Other Registration Rights Holders” means any persons who hereafter purchase Common Stock from the Company and enter into an agreement with the Company allowing such persons to join in the Demand Registrations and Piggy-Back Registrations hereunder.

“Piggy-Back Registration” means a Piggy-Back Registration as defined in Section 2.2.

“Pro Rata Share” of a Stockholder shall be a fraction, (i) the numerator of which shall be the total number of shares of Common Stock then held by the Stockholder and (ii) the denominator of which shall be the total aggregate number of shares of Common Stock then held by all Holders and Other Registration Rights Holders.

“Qualified IPO” shall mean the first Registration pursuant to an underwritten public offering of shares of the Common Stock under the Securities Act in which the aggregate proceeds from the offering are not less than $50,000,000.

“Registrable Securities” means shares of Common Stock held by any Holder or Other Registration Rights Holder until (i) a registration statement covering such Common Stock has been declared effective by the SEC and it has been disposed of pursuant to such effective registration statement, (ii) such shares have been sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met or (iii) (x) such shares have been otherwise Transferred, (y) the Company has delivered a new certificate or other evidence of ownership for the shares that does not bear the legend required pursuant to the Stockholders Agreement, and (z) such shares may be resold without subsequent registration under the Securities Act.

“Register”, “Registered” and “Registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

“Requisite Share Number” means the number of shares of Common Stock representing not less than $25,000,000 in fair market value as determined by the Board.

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“Securities Act” means the Securities Act of 1933 and the rules and regulations thereunder.

“SEC” means the Securities and Exchange Commission.

“Selling Holder” means a Holder or Other Registration Rights Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act.

“Stockholder” shall mean any of the Existing Stockholders or the Investor.

“Stockholders Agreement” means that certain Stockholders Agreement dated as of even date herewith by and among the Company, the Existing Stockholders, FSEP V, and the Investor.

“Transfer” means any direct or indirect transfer, sale, assignment or other disposition of Common Stock.

“Underwriter” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

ARTICLE II

SECTION 2.1 Demand Registration.

(a) Request for Registration. At any time or from time to time, the Investor (and/or its Permitted Transferees) then owning, individually or in the aggregate, at least the Requisite Share Number may make a written request for registration under the Securities Act of all or part of its or their Registrable Securities (an “ Investor Demand Registration”); provided that the Holder or Holders making the request are together requesting that at least the Requisite Share Number of their shares be registered; provided further that the Company shall not be obligated to effect more than three (3) Demand Registrations, collectively, for the Investor and/or its Permitted Transferees. At any time on or after the date which is 180 days following the closing of the Qualified IPO, Jerry W. Throgmartin (and/or his Permitted Transferees) then owning, individually or in the aggregate, at least the Requisite Share Number (and for this purpose, shares held by the other Existing Stockholders may be included if such Existing Stockholders elect to join in the request) may make a written request for registration under the Securities Act of all or part of his or their Registrable Securities (an “ES Demand Registration”); provided that Jerry W. Throgmartin (and/or his Permitted Transferees) and the other Existing Stockholders joining in the request are together requesting that at least the Requisite Share Number of their shares be registered; provided further that the Company shall not be obligated to effect more than one (1) Demand Registration, in the aggregate, for the Existing Stockholders and/or their Permitted Transferees. Any such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. The Company shall give written notice of such registration request within ten days after the receipt thereof to all other Holders and Other Registration Rights Holders. If one or more of the Existing Stockholders requests an ES Demand Registration meeting all of the foregoing requirements (the “Initial Request”), the Investor (or its Permitted Transferees), any

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Existing Stockholder (or its Permitted Transferees) who did not join in the Initial Request, and any Other Registration Rights Holder shall be entitled to submit to the Company, within ten (10) days after receipt of notice of the Initial Request, a written request (the “Follow-on Request”) to join in such ES Demand Registration, and thereupon Investor, each Existing Stockholder who made the Initial Request or a Follow-on Request, and each Other Registration Rights Holder who made a Follow-on Request shall be entitled to include Registrable Securities in such Demand Registration on a pro rata basis, determined based on the Pro Rata Share then held by the Investor and the Existing Stockholders (in each case including any Permitted Transferees) and the Other Registration Rights Holders up to the number of Registrable Securities proposed to be sold in such ES Demand Registration; provided, that any such ES Demand Registration initiated by one or more of the Existing Stockholders shall be treated as the Existing Stockholders’ one (1) permitted Demand Registration and not as one of the Investor’s three (3) permitted Demand Registrations. If the Investor requests an Investor Demand Registration meeting all of the foregoing requirements, each of the Existing Stockholders (or their Permitted Transferees) and each of the Other Registration Rights Holders shall be entitled to submit to the Company, within ten (10) days after receipt of notice of the Investor’s request for an Investor Demand Registration, a written request to join in such Investor Demand Registration, and if such a follow-on request is made, thereupon the Existing Stockholders or Other Registration Rights Holders who made such a follow-on request shall be entitled to include Registrable Securities in such Investor Demand Registration on a pro rata basis, determined based on the Pro Rata Share then held by the Investor and the Existing Stockholders (in each case including Permitted Transferees) and the Other Registration Rights Holders up to the number of Registrable Securities proposed to be sold in such Investor Demand Registration; provided, that each such Investor Demand Registration shall count as one of the Investor’s three (3) Demand Registrations and not as the one (1) Demand Registration to which the Existing Stockholders are, collectively, entitled. The Company shall not have any right to participate in a Demand Registration.

(b) Effective Registration. A registration will not count as a Demand Registration (or request therefor) until it has become effective.

(c) Underwritten Offering. If the Company or the initiating Holder of a Demand Registration so elects, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Company and the initiating Holder of the Demand Registration shall jointly select one or more nationally recognized firms of investment bankers to act as the managing Underwriter or Underwriters in connection with such offering and shall select any additional managers to be used in connection with the offering.

(d) Required Delays. Notwithstanding anything contained in this Section 2.1 to the contrary, if any request for Demand Registration is delivered at a time when (i) the Company has determined or is currently planning (and its Board of Directors has approved such determination or plan) to file a Registration Statement with respect to an underwritten primary registration of Common Stock on behalf of the Company (so long as a Registration Statement is filed with respect thereto within two months of the Holder’s or Holders’ request for Demand Registration), the Company may require the Holder or Holders to postpone such request until the expiration of the 90-day period following the effective date of such registration, or (ii) in the

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opinion of a majority of the Company’s Board such registration would adversely affect a material acquisition or merger to which the Company is a party, or otherwise materially and adversely affect the Company or the market for the Company’s Common Stock (it being understood that the ordinary effect of a Demand Registration on the market for securities does not meet the foregoing standard) (a “Material Event Postponement”), the Company — with the prior authorization of the Board of Directors — may require the Holder to postpone such request for an appropriate period (not to exceed 90 consecutive days (with a 30 day break between any two consecutive periods) or 180 days in any 12 month period). In the event of a Material Event Postponement and the aforementioned prior Board authorization, the Company shall deliver a certificate signed by the President or the Chairman confirming the Company’s reasons for postponing the registration and will effect such registration as promptly as possible after removal of such reasons.

SECTION 2.2 Piggy-Back Registration. If at any time on or after the closing of the Company’s Qualified IPO, the Company proposes to file a registration statement under the Securities Act, with respect to an offering by the Company for its own account or for the account of any of its respective security holders of any security of the same class as the Registrable Securities (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC), or a registration statement filed in connection with an exchange offer or offering of securities solely to the Company’s existing security holders), which registration would permit the inclusion of such Registrable Securities pursuant to this Section 2.2 then, the Company shall give written notice of such proposed filing to the Holders and Other Registration Rights Holders as soon as practicable, and such notice shall offer such Holders and Other Registration Rights Holders the opportunity to register such number of shares of Registrable Securities as each such Holder or Other Registration Rights Holder may request in writing within ten (10) days of receipt of such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder or Other Registration Rights Holder and the intended method of distribution thereof) (a “Piggy-Back Registration”). The Company shall use its commercially reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company included therein to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Subject to Section 2.3(b), any Holder or Other Registration Rights Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of its request to withdraw within ten (10) days of its request for inclusion; provided, that the Registration Statement including such shares (a “Piggy-Back Registration Statement”) is not yet effective. The Company may withdraw a Piggy-Back Registration Statement at any time prior to the time it becomes effective.

SECTION 2.3 Reduction of Offering.

(a) Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.1 or 2.2 determine that the size of the offering that the Holders, the Company or any other Persons intend to make is such that the success of the offering or the price at which the offering would reasonably be expected to occur would be adversely affected by inclusion of the Registrable Securities requested to be included,

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then (i) with respect to a Demand Registration, if the size of the offering is the basis of such Underwriter’s or Underwriters’ determination, the Company shall not be required to include in such registration an amount of Registrable Securities requested to be included in such offering equal to the Excess Amount, such reduction to be allocated (1) if the offering is pursuant to an ES Demand Registration, pro rata among all Selling Holders other than the Existing Stockholders (and their Permitted Transferees) according to the Pro Rata Share of such other Selling Holders, and (2) if the offering is not pursuant to an ES Demand Registration, pro rata among all Selling Holders according to the Pro Rata Share of such Selling Holders, and (ii) in the case of a Piggy-Back Registration, if securities are being offered for the account of other Persons as well as the Company, the securities the Company seeks to include shall have priority over securities sought to be included by any other Person (including the Holders and Other Registration Rights Holders) and, with respect to the Registrable Securities intended to be offered by Holders or Other Registration Rights Holders, such Registrable Securities shall be included pro rata on the basis of the number of shares of Common Stock proposed to be included in the Piggy-Back Registration by the Holders and Other Registration Rights Holders, collectively; provided, however, that if such Other Registration Rights Holder is intending to offer Registrable Securities pursuant to a demand right granted by the Company, such Other Registration Rights Holder’s Registrable Securities shall have priority over the Registrable Securities proposed to be included in the Piggyback Registration by the Holders; and provided further that the proportion by which the amount of such class of securities intended to be offered by Holders or Other Registration Rights Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other Persons is reduced (it being understood that with respect to the Holders, Other Registration Rights Holders, and third parties, such reduction may be all of such class of securities).

(b) If, as a result of the proration provisions of Section 2.3(a), any Holder or Other Registration Rights Holder shall not be entitled to include all Registrable Securities in a Demand Registration or Piggy-Back Registration that such Holder or Other Registration Rights Holder has requested to be included, such Holder or Other Registration Rights Holder may elect to withdraw his request to include Registrable Securities in such registration (a “Withdrawal Election”); provided, however, that a Withdrawal Election shall be irrevocable and, after making a Withdrawal Election, a Holder or Other Registration Rights Holder shall no longer have any right to include Registrable Securities in the registration as to which such Withdrawal Election was made.

ARTICLE III

SECTION 3.1 Filings; Information. Whenever any Holder requests that any Registrable Securities be registered pursuant to Section 2.1, the Company will use its commercially reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as reasonably practicable, and in connection with any such request:

(a) The Company will, subject to Section 2.1(d), as expeditiously as possible prepare and file with the SEC a registration statement on any form for which the Company then qualifies and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its

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commercially reasonable best efforts to cause such filed registration statement to become and remain effective until the earlier of (i) 90 days from the date such registration statement became effective or (ii) the date on which the sale of Registrable Securities has been completed. If the Company receives multiple demands for registration in accordance with this Agreement, then, except as provided in Section 2.1(a), such demands shall be handled in the order received.

(b) The Company will, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder, one counsel representing all such Selling Holders, and each Underwriter, if any, of the Registrable Securities covered by such registration statement, copies of such registration statement as proposed to be filed, together with exhibits thereto, which documents will be subject to prompt review and approval by the foregoing, and thereafter furnish to such Selling Holder, counsel and Underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder.

(c) After the filing of the registration statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the SEC and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

(d) The Company will use its commercially reasonable best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as any Selling Holder reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction (other than special service of process).

(e) The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly make available to each Selling Holder any such supplement or amendment.

(f) The Company will enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are

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reasonably required in order to expedite or facilitate the disposition of such Registrable Securities.

(g) The Company will deliver promptly to each Selling Holder of such Registrable Securities and each Underwriter, if any, subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement and make available for inspection by any Selling Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”), subject to restrictions imposed by any governmental authority governing access to classified information, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other process; provided that prior to any disclosure or release pursuant to clause (ii), the Inspectors shall provide the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors’ obligation not to disclose such Records; and provided further, that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the Inspectors may disclose that portion of the Records which counsel has advised the Inspectors that the Inspectors are compelled to disclose. Each Selling Holder of such Registrable Securities agrees that information obtained by it solely as a result of such inspections (not including any information obtained from a third party who, insofar as is known to the Selling Holder after reasonable inquiry, is not prohibited from providing such information by a contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company or its Affiliates unless and until such is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

(h) The Company will otherwise use its commercially reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act.

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(i) The Company will use its commercially reasonable best efforts (a) to cause all such Registrable Securities to be listed on each national securities exchange on which similar securities issued by the Company are then listed (if any), if the listing of such Registrable Securities is then permitted under the rules of such exchange or (b) to secure designation of all such Registrable Securities as a National Association of Securities Dealers Automatic Quotation (“NASDAQ”) “national market system security” within the meaning of Rule 11Aa2-l of the SEC or, to secure NASDAQ authorization for such Registrable Securities, if similar securities issued by the Company are so designated.

(j) The Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.

(k) The Chairman of the Board of Directors of the Company, the Chief Executive Officer of the Company, all other executive officers, and all other members of the management of the Company will cooperate fully in any offering of Registrable Securities pursuant to Section 2.1 hereof, including, without limitation, participation in meetings with potential investors, preparation of all materials for such investors, and making management of the Company available for “road show” presentations and similar selling efforts.

Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1(e) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1(e) hereof (such period during which a Selling Holder is required to refrain from disposition of Registrable Securities, a “Suspension Period”), and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 3.1(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 3.1(e) hereof to the date when the Company shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 3.1(e) hereof.

SECTION 3.2 Registration Expenses. In connection with any Demand Registration pursuant to Section 2.1 hereof and any registration statement filed pursuant to Section 2.2, the Company shall pay the following registration expenses incurred in connection with the registration thereunder, whether or not such registration becomes effective: (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses, if any, incurred in connection with the listing of the

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Registrable Securities, (vi) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company, (vii) the fees and expenses of any special experts retained by the Company in connection with such registration, and (viii) with respect to a Demand Registration only, reasonable fees and expenses of one counsel (who shall be reasonably acceptable to the Company) for all of the Selling Holders (in addition to counsel for the Company), with such counsel selected by Holders of a majority of the Registrable Securities being registered in the Demand Registration. The Company shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities, or any other out-of-pocket expenses of the Holders.

ARTICLE IV

SECTION 4.1 Indemnification by the Company.

(a) The Company agrees to indemnify and hold harmless each Selling Holder, its officers, directors and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any loss, claim, damage or liability and any action in respect thereof to which such Selling Holder, its officers, directors and agents, and any such controlling Person may become subject under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or arises out of, or is based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Selling Holder, its officers, directors and agents, and each such controlling Person for any legal and other expenses reasonably incurred by that Selling Holder, its officers, directors and agents, or any such controlling Person in investigating or defending or preparing to defend against any such loss, claim, damage, liability or action. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.1.

(b) The indemnity agreement contained in Section 4.1(a) shall not apply to amounts paid in settlement of any such loss, claim, damage or liability and any action in respect thereof if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any loss, claim, damage, liability and any action in respect thereof to the extent that it arises from or is based upon written information relating to the Indemnified Person furnished expressly for use in connection with such registration by such Person, nor shall the Company be liable to any Person for any such loss, claim, damage or liability and any action in respect thereof to the extent it arises from or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities delivered by such Person after such Person had received written notice from the Company pursuant to Section 3.1(e) that such registration statement or prospectus contained such untrue

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statement or alleged untrue statement of a material fact and stating specifically that a Suspension Period is then in effect, (b) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading after such Person has received written notice from the Company pursuant to Section 3.1(e) that such registration statement or prospectus contained such omission or alleged omission and stating specifically that a Suspension Period is then in effect, or (c) the failure of such Person to deliver any preliminary or final prospectus, or any amendments or supplements thereto, required under applicable securities laws, including the Securities Act, to be so delivered, provided that a sufficient number of copies thereof had been provided by the Company to such Person.

SECTION 4.2 Indemnification by Selling Holders. Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with reference to information related to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. Each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.2. In no event, however, shall any indemnity obligation under this Section 4.2 exceed the net proceeds from the offering received by such Selling Holder.

SECTION 4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any person in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2 (an “Indemnified Party”) of notice of any claim or the commencement of any action, the Indemnified Party shall, if a claim in respect thereof is to be made against the person against whom such indemnity may be sought (an “Indemnifying Party”) notify the Indemnifying Party in writing of the claim or the commencement of such action provided that the failure to notify the Indemnifying Party shall not relieve it from any liability which it may have to an Indemnified Party except to the extent of any actual prejudice resulting therefrom. If any such claim or action shall be brought against an Indemnified Party, and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party shall have the right to employ separate counsel to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) based upon the advice of counsel of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying

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Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settlement is made with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any loss, claim, damage, or liability by reason of such settlement or judgment. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

SECTION 4.4 Contribution. If the indemnification provided for in this Article IV is unavailable to, or is insufficient to hold harmless, the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Company and the Selling Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each Selling Holder on the other, or as among the Selling Holders, as the case may be, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder and the relative benefit received by each of them in connection with such statements or omissions, as well as any other relevant equitable considerations; provided, however, that no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) by a court of competent jurisdiction shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation). The relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Holders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other, and with respect to the Selling Holders among themselves, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

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The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Selling Holder were offered to the public (less underwriting discounts and commissions) exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Each Selling Holder’s obligations to contribute pursuant to this Section 4.4 are several in that proportion which the net proceeds of the offering received by such Selling Holder bears to the total net proceeds of the offering received by all the Selling Holders, and not joint.

ARTICLE V

SECTION 5.1 Participation in Underwritten Registrations. No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these Registration Rights. In addition, no Person may participate in any underwritten registration hereunder unless all Junior Subordinated Notes (as defined in the Merger Agreement) have been repaid in full or will be repaid in full in connection with the public offering effected pursuant to such registration; provided, however, that this sentence shall not apply to any limited partner of FS Equity Partners V, L.P. that purchases common stock of the Company in connection with the Merger or from the Investor after the consummation of the Merger.

SECTION 5.2 Rule 144. The Company covenants that, after it becomes subject to the reporting obligations of the Exchange Act, it will use its commercially reasonable best efforts to file any reports required to be filed by it under the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent reasonably required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the Securities Act, as such Rules may be amended from time to time, or (b) any similar Rule or

13

regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

SECTION 5.3 Holdback Agreements.

(a) Each Holder of Registrable Securities agrees not to effect any sale or distribution of the issue being registered or of a similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the 14 days prior to, and during such period as is required by a managing underwriter beginning on and continuing after the effective date of the registration statement filed by the Company (except as part of such registration) in the case of an underwritten public offering, which period shall be 180 days after the effective date of the registration statement in the case of the Company’s Qualified IPO, or such other period as is required by the managing underwriter.

(b) With respect to a Demand Registration effected pursuant to Section 2.1 hereof, the Company agrees (i) not to effect any sale or distribution of any securities similar to those being registered in accordance with Section 2.1 hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during such period as is required by a managing underwriter beginning on and continuing after the effective date of any registration statement (except as part of a registration statement where the Holder making such Demand Registration consents) or the commencement of a public distribution of Registrable Securities; and (ii) that any agreement entered into after the date hereof pursuant to which the Company issues or agrees to issue any privately placed securities shall contain a provision under which holders of such securities agree not to effect any sale or distribution of any such securities during the periods described in (a) above, in each case including a sale pursuant to Rule 144 (except as part of any such registration, if permitted); provided, however, that the provisions of this paragraph (b) shall not prevent the conversion or exchange of any securities pursuant to their terms into or for other securities and shall not prevent the issuance of securities by the Company under any employee benefit, stock option or stock subscription plans or in private placements.

SECTION 5.4 Stockholders Agreement. Notwithstanding anything above to the contrary, all Transfers of Registrable Securities subject to the provisions of the Stockholders Agreement shall be made only in accordance with such provisions.

SECTION 5.5 Successors and Assigns. This Agreement, and all obligations and rights hereunder, shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided that no rights of any Stockholder under this Agreement may be assigned, except that any Stockholder may assign its rights hereunder to any Permitted Transferee (as defined in the Stockholders Agreement) and except that Investor may assign its rights hereunder to any transferee who acquires more than 50% of the Registrable Securities owned by Investor immediately after the Merger in a transaction in compliance with the applicable terms of the Stockholders Agreement (a “Permitted Assignee”); provided further, that, prior to such assignment, such Permitted Transferee or Permitted Assignee shall enter into a written agreement to be bound by the terms and conditions of this Agreement applicable to such Stockholder.

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SECTION 5.6 No Waivers; Amendments.

(a) No failure or delay by any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

(b) This Agreement may be amended, modified or supplemented, and compliance with any provision hereof may be waived, with the written consent of the Company, the Investor and Jerry W. Throgmartin, together, and without the consent of any other Stockholder or Other Registration Rights Holder, except that to the extent any of the Existing Stockholders’ rights would be disproportionately prejudiced thereby, the written consents of such Existing Stockholders shall also be required. Any such amendment, modification, supplement or waiver so consented to in writing shall be binding upon the parties hereto and their successors and Permitted Transferees and assigns (if any). The parties hereby expressly agree that the Company’s grant of additional demand and piggy-back registration rights in the future that do not apply to the Investor differently than they apply to the Existing Stockholders shall not constitute an amendment or modification of, or a supplement to, this Agreement.

SECTION 5.7 Notices. All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed duly given, unless otherwise expressly indicated to the contrary in this Agreement, (i) when personally delivered, (ii) upon receipt of a telephonic facsimile transmission with a confirmed telephonic transmission answer back, (iii) three (3) Business Days after having been deposited in the United States mail, certified or registered, return receipt requested, postage prepaid, or (iv) one (1) Business Day after having been dispatched by a nationally recognized overnight courier service, addressed to the parties or their permitted assigns at the following addresses (or at such other address or number as is given in writing by either party to the other) as follows:

if to Investor or the Company:

Gregg Investment Corporation, LLC

c/o Freeman Spogli & Co.

599 Lexington Avenue

18^th Floor

New York, New York 10022

Facsimile: (212) 758-7499

Attention: John Roth and Ben Geiger

with a copy to:

Bingham McCutchen LLP

355 S. Grand Avenue, 44th Floor

Los Angeles, California 90071

Facsimile: (213) 680-6499

Attention: Richard J. Welch, Esq.

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if to the Existing Stockholders:

c/o Jerry W. Throgmartin

4151 East 96^th Street

Indianapolis, Indiana 46240

Facsimile No.: (317) 848-8768

with a copy to:

Ice Miller

One American Square

Box 82001

Indianapolis, Indiana 46282-0002

Facsimile No.: (317) 592-4675

Attention: Steven K. Humke

SECTION 5.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to the choice of law provisions thereof).

SECTION 5.9 Entire Agreement. This Agreement constitutes the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements and understandings, written or oral, relating to the subject matter hereof.

SECTION 5.10 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdictions, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

SECTION 5.11 Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and which together shall constitute one and the same agreement.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

GREGG APPLIANCES, INC., an Indiana corporation
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer
GREGG INVESTMENT CORPORATION, LLC
By:	FS EQUITY PARTNERS V, L.P., a Delaware limited partnership
	By:	FS Capital Partners, LLC
	Its:	General Partner
	By:	/s/ John M. Roth
		Name:	John M. Roth
		Title:	Managing Member
“EXISTING STOCKHOLDERS”
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
By:	/s/ Gregg William Throgmartin
	Name:	Gregg William Throgmartin
By:	/s/ Dennis L. May
	Name:	Dennis L. May

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EX-4.6

Exhibit 4.6

REGISTRATION RIGHTS AGREEMENT

by and among

FS EQUITY PARTNERS V, L.P.

FS AFFILIATES V, L.P.

CALIFORNIA STATE TEACHERS’ RETIREMENT SYSTEM

A.S.F. CO-INVESTMENT PARTNERS II, L.P.

THE JERRY W. THROGMARTIN 2007 GRANTOR RETAINED ANNUITY TRUST

JERRY W. THROGMARTIN

GREGG WILLIAM THROGMARTIN

DENNIS L. MAY

and

hhgregg, Inc.

April 12, 2007

TABLE OF CONTENTS

		Page
SECTION 1.1.	Definitions	1
SECTION 2.1.	Demand Registration	4
SECTION 2.2.	Piggy-Back Registration	6
SECTION 2.3.	Reduction of Offering	7
SECTION 3.1.	Filings; Information	7
SECTION 3.2.	Registration Expenses	11
SECTION 4.1.	Indemnification by the Company	11
SECTION 4.2.	Indemnification by Selling Holders	12
SECTION 4.3.	Conduct of Indemnification Proceedings	12
SECTION 4.4.	Contribution	13
SECTION 5.1.	Participation in Underwritten Registrations	14
SECTION 5.2.	Rule 144	15
SECTION 5.3.	Holdback Agreements	15
SECTION 5.4.	Successors and Assigns	15
SECTION 5.5.	No Waivers; Amendments	16
SECTION 5.6.	Notices	16
SECTION 5.7.	Governing Law	17
SECTION 5.8.	Consent to Jurisdiction; Service of Process; Waiver of Jury Trial	17
SECTION 5.9.	Aggregate Holdings	18
SECTION 5.10.	Entire Agreement	18
SECTION 5.11.	Severability	18
SECTION 5.12.	Counterparts	18
SECTION 5.13.	Interpretation	18

i

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of April 12, 2007 by and among hhgregg, Inc., a Delaware corporation (the “Company”), FS Equity Partners V, L.P., a Delaware limited partnership (“FSEP V”), FS Affiliates V, L.P., a Delaware limited partnership (“FSA V”), California State Teachers’ Retirement System, a government pension plan (“Cal STRS”), A.S.F. Co-Investment Partners II, L.P., a Delaware limited partnership (“ASF”), the Jerry W. Throgmartin 2007 Grantor Retained Annuity Trust (the “J. Throgmartin Trust”), and Jerry W. Throgmartin, Gregg William Throgmartin, and Dennis L. May (the “Individual Stockholders” and, collectively with the J. Throgmartin Trust, FSA V, Cal STRS and ASF, the “Existing Stockholders”).

RECITALS

A. The parties hereto have entered into an Incorporation and Exchange Agreement of even date herewith (the “Exchange Agreement”) for purposes of forming a corporation under Delaware law to complete an initial public offering of common stock, par value $0.0001 per share, of the Company (the “Common Stock”).

B. Pursuant to the Exchange Agreement, the parties hereto have agreed to terminate that certain Registration Rights Agreement dated February 3, 2005 (the “Gregg Registration Rights Agreement”) by and among Gregg Appliances, Inc., an Indiana corporation, Gregg Investment Corporation, LLC, a Delaware limited liability company, and the Individual Stockholders effective upon the Closing under the Exchange Agreement in consideration of the rights granted under this Agreement, which are intended to substantially replicate the registration rights granted under the Gregg Registration Rights Agreement, with respect to the Common Stock, with this Agreement to become effective upon the Closing under the Exchange Agreement.

C. In order to ensure that such parties are granted such rights, the parties hereto desire to enter into this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1.1. Definitions. Terms used but not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Exchange Agreement. As used herein, the following terms shall have the following meanings:

Agreement: Shall mean this Agreement, including all exhibits, annexes and schedules hereto, as the same may be amended or supplemented from time to time in accordance with the terms hereof.

Demand Registration: An FSEP V Demand Registration or an Individual Demand Registration, each as defined in Section 2.1.

Excess Amount: With respect to an underwritten offering, the number of Registrable Securities requested by Holder or Holders to be sold pursuant to Section 2.1 or 2.2 which the managing Underwriter or Underwriters determines exceeds the largest number of Registrable Securities which can successfully be sold in an orderly manner in such offering within a price range acceptable to the Holder or Holders holding a majority of the Registrable Securities proposed to be sold in such underwritten offering.

Exchange Act: The Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.

Follow-on Request: Shall have the meaning set forth in Section 2.1(b).

Gregg Registration Rights Agreement: Shall have the meaning set forth in the recitals.

Holder: FSEP V and the Existing Stockholders (or any Permitted Transferee thereof).

Indemnified Party: Shall have the meaning set forth in Section 4.3.

Indemnifying Party: Shall have the meaning set forth in Section 4.3.

Individual Stockholders: Jerry W. Throgmartin, Gregg William Throgmartin, and Dennis L. May or any Permitted Transferee thereof.

Initial Request: Shall have the meaning set forth in Section 2.1(b).

Inspectors: Shall have the meaning set forth in Section 3.1(g).

Investor Stockholders: FSA V, Cal STRS and ASF.

Material Event Postponement: Shall have the meaning set forth in Section 2.1(e).

NASDAQ: Shall have the meaning set forth in Section 3.1(i).

Other Holder Notice: An Other Holder Notice as defined in Section 2.1.

Other Registration Rights Holders: Any persons who hereafter purchase Common Stock from the Company and enter into an agreement with the Company allowing such persons to join in the Demand Registrations and Piggy-Back Registrations hereunder.

Permitted Assignee: Shall have the meaning set forth in Section 5.4.

Permitted Transferee: (i) With respect to an Individual Stockholder, a family trust, limited partnership, corporation or other entity established by such Individual Stockholder, all of the beneficiaries or owners of which are either the Individual Stockholder or immediate family members of such Individual Stockholder; (ii) with respect to an Individual Stockholder, any

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other Individual Stockholder; (iii) with respect to Jerry W. Throgmartin, the J. Throgmartin Trust; and (iv) with respect to FSEP V or an Investor Stockholder, any Affiliate of FSEP V or such Investor Stockholder if such Affiliate is an accredited investor within the meaning of the Securities Act.

Piggy-Back Registration: A Piggy-Back Registration as defined in Section 2.2.

Piggy-Back Registration Statement: Shall have the meaning set forth in Section 2.2.

Pro Rata Share: The Pro Rata Share of a Stockholder shall be a fraction, (i) the numerator of which shall be the total number of shares of Common Stock then held by the Stockholder and (ii) the denominator of which shall be the total aggregate number of shares of Common Stock then held by all Holders and Other Registration Rights Holders.

Qualified IPO: The first Registration pursuant to an underwritten public offering of shares of the Common Stock under the Securities Act in which the aggregate proceeds from the offering are not less than $50,000,000.

Records: Shall have the meaning set forth in Section 3.1(g).

Registrable Securities: (a) Any Common Stock now owned or hereafter acquired by any Holder or Other Registration Rights Holder, and (b) any securities issued or issuable with respect to such Common Stock referred to in clause (a) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (ii) such securities shall have been sold pursuant to Rule 144 (or any successor provision) under the Securities Act or are eligible for sale under Rule 144(k) (or any successor provision) without being subject to any volume limitation, (iii) such securities shall have been otherwise transferred to a person who is not a Permitted Transferee of the Holder or (iv) such securities shall have ceased to be outstanding.

Register, Registered and Registration: A registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

Requisite Share Number: The number of shares of Common Stock representing not less than $25,000,000 in fair market value as determined by the Board.

Securities Act: The Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

SEC: The Securities and Exchange Commission.

Selling Holder: A Holder or Other Registration Rights Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act.

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Stockholder: Any of the Existing Stockholders or FSEP V.

Suspension Period: Shall have the meaning set forth in Section 3.1.

Transfer: Any direct or indirect transfer, sale, assignment or other disposition of Common Stock.

Underwriter: A securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

Withdrawal Election: Shall have the meaning set forth in Section 2.3(b).

SECTION 2.1. Demand Registration.

(a) FSEP V Request for Registration. At any time or from time to time, FSEP V (and/or its Affiliate) then owning, individually or in the aggregate at least the Requisite Share Number (and for this purpose shares held by the Investor Stockholders may be included) may make a written request for registration under the Securities Act of all or part of its or their Registrable Securities (an “FSEP V Demand Registration”); provided that the Holder or Holders making the request are together requesting that at least the Requisite Share Number of their shares be registered; provided further that the Company shall not be obligated to effect more than three (3) Demand Registrations, collectively, for FSEP V and/or its Permitted Transferees. Any such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Prior to making its FSEP V Demand Registration request, FSEP V shall determine the number of shares held by each of the Investor Stockholders which such Investor Stockholder wishes to be included in such FSEP V Demand Registration by providing ten (10) days written notice to the Investor Stockholders or by otherwise determining the number of shares such Investor Stockholder wishes to include up to the Pro Rata Share in relation to the number shares held by FSEP V (and/or its Affiliates) and the Investor Stockholders. The Company shall give written notice of such FSEP V Demand Registration within ten (10) days after the receipt thereof to all other Holders and Other Registration Rights Holders. If FSEP V requests an FSEP V Demand Registration meeting all of the foregoing requirements, each of the other Existing Stockholders (or their Permitted Transferees) and each of the Other Registration Rights Holders shall be entitled to submit to the Company, within ten (10) days after receipt of notice of FSEP V’s request for an FSEP V Demand Registration, a written request to join in such FSEP V Demand Registration, and if such a follow-on request is made, thereupon the Existing Stockholders or Other Registration Rights Holders who made such a follow-on request shall be entitled to include Registrable Securities in such FSEP V Demand Registration on a pro rata basis, determined based on the Pro Rata Share then held by FSEP V and the Existing Stockholders (in each case including Permitted Transferees) and the Other Registration Rights Holders participating in the offering up to the number of Registrable Securities proposed to be sold in such FSEP V Demand Registration; provided, that each such FSEP V Demand Registration shall count as one of FSEP V’s three (3) Demand Registrations and not as the one (1) Demand Registration to which the Individual Stockholders are, collectively, entitled. The Company shall not have any right to participate in a Demand Registration.

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(b) Individual Stockholder Request for Registration. At any time on or after the date which is 180 days following the closing of the Qualified IPO, Jerry W. Throgmartin (and/or his Permitted Transferees), then owning, individually or in the aggregate, at least the Requisite Share Number (and for this purpose, shares held by the other Individual Stockholders may be included if such Individual Stockholders elect to join in the request) may make a written request for registration under the Securities Act of all or part of his or their Registrable Securities (an “Individual Demand Registration”); provided that Jerry W. Throgmartin (and/or his Permitted Transferees) and the other Individual Stockholders joining in the request are together requesting that at least the Requisite Share Number of their shares be registered; provided further that the Company shall not be obligated to effect more than one (1) Demand Registration, in the aggregate, for the Individual Stockholders and/or their Permitted Transferees. Any such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. The Company shall give written notice of such registration request within ten days after the receipt thereof to all other Holders and Other Registration Rights Holders. If one or more of the Individual Stockholders requests an Individual Demand Registration meeting all of the foregoing requirements (the “Initial Request”), any Individual Stockholder (or his Permitted Transferees) who did not join in the Initial Request, and any other Holder or Other Registration Rights Holder shall be entitled to submit to the Company, within ten (10) days after receipt of notice of the Initial Request, a written request (a “Follow-on Request”) to join in such Individual Demand Registration, and thereupon FSEP V, each Individual Stockholder who made the Initial Request or a Follow-on Request, and each other Holder or Other Registration Rights Holder who made a Follow-on Request shall be entitled to include Registrable Securities in such Demand Registration on a pro rata basis, based on the Pro Rata Share then held by the Individual Stockholders, FSEP V, the other Holders and the Other Registration Rights Holders participating in the offering, up to the number of Registrable Securities proposed to be sold in such Individual Demand Registration; provided, that any such Individual Demand Registration initiated by one or more of the Individual Stockholders shall be treated as the Individual Stockholders’ one (1) permitted Demand Registration and not as one of FSEP V’s three (3) permitted Demand Registrations.

(c) Effective Registration. A registration will not count as a Demand Registration (or request therefor) until it has become effective.

(d) Underwritten Offering. If the Company or the initiating Holder of a Demand Registration so elects, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. The Company and the initiating Holder of the Demand Registration shall jointly select one or more nationally recognized firms of investment bankers to act as the managing Underwriter or Underwriters in connection with such offering and shall select any additional managers to be used in connection with the offering.

(e) Required Delays. Notwithstanding anything contained in this Section 2.1 to the contrary, if any request for Demand Registration is delivered at a time when (i) the Company has determined or is currently planning (and its Board of Directors has approved such determination or plan) to file a registration statement with respect to an

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underwritten primary registration of Common Stock on behalf of the Company (so long as a registration statement is filed with respect thereto within two months of the Holder’s or Holders’ request for Demand Registration), the Company may require the Holder or Holders to postpone such request until the expiration of the 90-day period following the effective date of such registration, or (ii) in the opinion of a majority of the Company’s Board such registration would adversely affect a material acquisition or merger to which the Company is a party, or otherwise materially and adversely affect the Company or the market for the Company’s Common Stock (it being understood that the ordinary effect of a Demand Registration on the market for securities does not meet the foregoing standard) (a “Material Event Postponement”), the Company, with the prior authorization of the Board of Directors, may require the Holder to postpone such request for an appropriate period (not to exceed 90 consecutive days (with a 30-day break between any two consecutive periods) or 180 days in any 12-month period). In the event of a Material Event Postponement and the aforementioned prior Board authorization, the Company shall deliver a certificate signed by the President or the Chairman confirming the Company’s reasons for postponing the registration and will effect such registration as promptly as possible after removal of such reasons.

SECTION 2.2. Piggy-Back Registration. If at any time on or after the closing of the Company’s Qualified IPO, the Company proposes to file a registration statement under the Securities Act, with respect to an offering by the Company for its own account or for the account of any of its respective security holders of any security of the same class as the Registrable Securities (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC), or a registration statement filed in connection with an exchange offer or offering of securities solely to the Company’s existing security holders), which registration would permit the inclusion of such Registrable Securities pursuant to this Section 2.2 then, the Company shall give written notice of such proposed filing to the Holders and Other Registration Rights Holders as soon as practicable, and such notice shall offer such Holders and Other Registration Rights Holders the opportunity to register such number of shares of Registrable Securities as each such Holder or Other Registration Rights Holder may request in writing within ten (10) days of receipt of such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder or Other Registration Rights Holder and the intended method of distribution thereof) (a “Piggy-Back Registration”). The Company shall use its commercially reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company included therein to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. Subject to Section 2.3(b), any Holder or Other Registration Rights Holder shall have the right to withdraw its request for inclusion of its Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of its request to withdraw within ten (10) days of its request for inclusion; provided, that the registration statement including such shares (a “Piggy-Back Registration Statement”) is not yet effective. The Company may withdraw a Piggy-Back Registration Statement at any time prior to the time it becomes effective.

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SECTION 2.3. Reduction of Offering.

(a) Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.1 or 2.2 determine that the size of the offering that the Holders, the Other Registration Rights Holders, the Company or any other Persons intend to make is such that the success of the offering or the price at which the offering would reasonably be expected to occur would be adversely affected by inclusion of the Registrable Securities requested to be included, then (i) with respect to a Demand Registration, if the size of the offering is the basis of such Underwriter’s or Underwriters’ determination, the Company shall not be required to include in such registration an amount of Registrable Securities requested to be included in such offering equal to the Excess Amount, such reduction to be allocated (1) if the offering is pursuant to an Individual Demand Registration, on a pro rata basis among all Selling Holders other than the Individual Stockholders (and their Permitted Transferees) according to the Pro Rata Share of such other Selling Holders, and (2) if the offering is not pursuant to an Individual Demand Registration, on a pro rata basis among all Selling Holders according to the Pro Rata Share of such Selling Holders, and (ii) in the case of a Piggy-Back Registration, if securities are being offered for the account of other Persons as well as the Company, the securities the Company seeks to include shall have priority over securities sought to be included by any other Person (including the Holders and Other Registration Rights Holders) and, with respect to the Registrable Securities intended to be offered by Holders or Other Registration Rights Holders, such Registrable Securities shall be included pro rata on the basis of the number of shares of Common Stock proposed to be included in the Piggyback Registration by the Holders and Other Registration Rights Holders, collectively; provided, however, that if such Other Registration Rights Holder is intending to offer Registrable Securities pursuant to a demand right granted by the Company, such Other Registration Rights Holder’s Registrable Securities shall have priority over the Registrable Securities proposed to be included in the Piggyback Registration by the Holders; and provided further that the proportion by which the amount of such class of securities intended to be offered by Holders or Other Registration Rights Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other Persons is reduced (it being understood that with respect to the Holders, Other Registration Rights Holders, and third parties, such reduction may be all of such class of securities).

(b) If, as a result of the proration provisions of Section 2.3(a), any Holder or Other Registration Rights Holder shall not be entitled to include all Registrable Securities in a Demand Registration or Piggy-Back Registration that such Holder or Other Registration Rights Holder has requested to be included, such Holder or Other Registration Rights Holder may elect to withdraw his request to include Registrable Securities in such registration (a “Withdrawal Election”); provided, however, that a Withdrawal Election shall be irrevocable and, after making a Withdrawal Election, a Holder or Other Registration Rights Holder shall no longer have any right to include Registrable Securities in the registration as to which such Withdrawal Election was made.

SECTION 3.1. Filings; Information. Whenever any Holder requests that any Registrable Securities be registered pursuant to Section 2.1, the Company will use its commercially reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof as quickly as reasonably practicable, and in connection with any such request:

(a) The Company will, subject to Section 2.1(d), as expeditiously as possible prepare and file with the SEC a registration statement on any form for which the Company then qualifies and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof, and use its commercially reasonable best efforts to cause such filed registration statement to become and remain effective until the earlier of (i) 90 days from the date such registration statement became effective or (ii) the date on which the sale of Registrable Securities has been completed. If the Company receives multiple demands for registration in accordance with this Agreement, then, except as provided in Section 2.1(a), such demands shall be handled in the order received.

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(b) The Company will, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder, one counsel representing all such Selling Holders, and each Underwriter, if any, of the Registrable Securities covered by such registration statement, copies of such registration statement as proposed to be filed, together with exhibits thereto, which documents will be subject to prompt review and approval by the foregoing, and thereafter furnish to such Selling Holder, counsel and Underwriter, if any, such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder.

(c) After the filing of the registration statement, the Company will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the SEC and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered.

(d) The Company will use its commercially reasonable best efforts to (i) register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions in the United States as any Selling Holder reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities in the United States as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction (other than special service of process).

(e) The Company will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be

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delivered under the Securities Act, of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly make available to each Selling Holder any such supplement or amendment.

(f) The Company will enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities.

(g) The Company will deliver promptly to each Selling Holder of such Registrable Securities and each Underwriter, if any, subject to restrictions imposed by the United States federal government or any agency or instrumentality thereof, copies of all correspondence between the SEC and the Company, its counsel or auditors and all memoranda relating to discussions with the SEC or its staff with respect to the registration statement and make available for inspection by any Selling Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any such Selling Holder or Underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”), subject to restrictions imposed by any governmental authority governing access to classified information, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which the Company determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the disclosure or release of such Records is requested or required pursuant to oral questions, interrogatories, requests for information or documents or a subpoena or other order from a court of competent jurisdiction or other process; provided that prior to any disclosure or release pursuant to clause (ii), the Inspectors shall provide the Company with prompt notice of any such request or requirement so that the Company may seek an appropriate protective order or waive such Inspectors’ obligation not to disclose such Records; and provided further, that if failing the entry of a protective order or the waiver by the Company permitting the disclosure or release of such Records, the Inspectors, upon advice of counsel, are compelled to disclose such Records, the Inspectors may disclose that portion of the Records which counsel has advised the Inspectors that the Inspectors are compelled to disclose. Each Selling Holder of such Registrable Securities agrees that information obtained by it solely as a result of such inspections (not including any information obtained from a third party who, insofar as is known to the Selling Holder after reasonable inquiry, is not prohibited from providing such information by a contractual, legal or fiduciary obligation to the Company) shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company or its Affiliates unless and until such information is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is

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sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

(h) The Company will otherwise use its commercially reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act.

(i) The Company will use its commercially reasonable best efforts (a) to cause all such Registrable Securities to be listed on each national securities exchange on which similar securities issued by the Company are then listed (if any), if the listing of such Registrable Securities is then permitted under the rules of such exchange or (b) to secure designation of all such Registrable Securities as a National Association of Securities Dealers Automatic Quotation (“NASDAQ”) “national market system security” within the meaning of Rule 11Aa2-l of the SEC or, to secure NASDAQ authorization for such Registrable Securities, if similar securities issued by the Company are so designated.

(j) The Company may require each Selling Holder of Registrable Securities to promptly furnish in writing to the Company such information regarding the distribution of the Registrable Securities as the Company may from time to time reasonably request and such other information as may be legally required in connection with such registration.

(k) The Chairman of the Board of Directors of the Company, the Chief Executive Officer of the Company, all other executive officers, and all other members of the management of the Company will cooperate fully in any offering of Registrable Securities pursuant to Section 2.1 hereof, including, without limitation, participation in meetings with potential investors, preparation of all materials for such investors, and making management of the Company available for “road show” presentations and similar selling efforts.

Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1(e) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Selling Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3.1(e) hereof (such period during which a Selling Holder is required to refrain from disposition of Registrable Securities, a “Suspension Period”), and, if so directed by the Company, such Selling Holder will deliver to the Company all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company shall give such notice, the Company shall extend the period during which such registration statement shall be maintained effective (including the period referred to in Section 3.1(a) hereof) by the number of days during the period from and including the date of the giving of notice pursuant to Section 3.1(e) hereof to the date when the Company shall make available to the Selling Holders of Registrable Securities covered by such registration statement a prospectus supplemented or amended to conform with the requirements of Section 3.1(e) hereof.

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SECTION 3.2. Registration Expenses. In connection with any Demand Registration pursuant to Section 2.1 hereof and any registration statement filed pursuant to Section 2.2, the Company shall pay the following registration expenses incurred in connection with the registration thereunder, whether or not such registration becomes effective: (i) all registration and filing fees, (ii) fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) printing expenses, (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), (v) the fees and expenses, if any, incurred in connection with the listing of the Registrable Securities, (vi) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company, (vii) the fees and expenses of any special experts retained by the Company in connection with such registration, and (viii) with respect to a Demand Registration only, reasonable fees and expenses of one counsel (who shall be reasonably acceptable to the Company) for all of the Selling Holders (in addition to counsel for the Company), with such counsel selected by Holders of a majority of the Registrable Securities being registered in the Demand Registration. The Company shall have no obligation to pay any underwriting fees, discounts or commissions attributable to the sale of Registrable Securities, or any other out-of-pocket expenses of the Holders.

SECTION 4.1. Indemnification by the Company.

(a) The Company agrees to indemnify and hold harmless each Selling Holder, its officers, directors and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any loss, claim, damage or liability and any action in respect thereof to which such Selling Holder, its officers, directors and agents, and any such controlling Person may become subject under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or arises out of, or is based upon, any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Selling Holder, its officers, directors and agents, and each such controlling Person for any legal and other expenses reasonably incurred by that Selling Holder, its officers, directors and agents, or any such controlling Person in investigating or defending or preparing to defend against any such loss, claim, damage, liability or action. The Company also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.1.

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(b) The indemnity agreement contained in Section 4.1(a) shall not apply to amounts paid in settlement of any such loss, claim, damage or liability and any action in respect thereof if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any loss, claim, damage, liability and any action in respect thereof to the extent that it arises from or is based upon written information relating to the Indemnified Person furnished expressly for use in connection with such registration by such Person, nor shall the Company be liable to any Person for any such loss, claim, damage or liability and any action in respect thereof to the extent it arises from or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities delivered by such Person after such Person had received written notice from the Company pursuant to Section 3.1(e) that such registration statement or prospectus contained such untrue statement or alleged untrue statement of a material fact and stating specifically that a Suspension Period is then in effect, (b) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading after such Person has received written notice from the Company pursuant to Section 3.1(e) that such registration statement or prospectus contained such omission or alleged omission and stating specifically that a Suspension Period is then in effect, or (c) the failure of such Person to deliver any preliminary or final prospectus, or any amendments or supplements thereto, required under applicable securities laws, including the Securities Act, to be so delivered, provided that a sufficient number of copies thereof had been provided by the Company to such Person.

SECTION 4.2. Indemnification by Selling Holders. Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Company, its officers, directors and agents and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with reference to information related to such Selling Holder furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. Each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable Securities, their officers and directors and each Person who controls such Underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.2. In no event, however, shall any indemnity obligation under this Section 4.2 exceed the net proceeds from the offering received by such Selling Holder.

SECTION 4.3. Conduct of Indemnification Proceedings. Promptly after receipt by any person of notice of any claim or the commencement of any action, in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2 (an “Indemnified Party”) of notice of any claim or the commencement of any action, the Indemnified Party shall, if a claim in respect thereof is to be made against the person against whom such indemnity may be sought (an “Indemnifying Party”), notify the Indemnifying Party in writing of the claim or the commencement of such action; provided that the failure to notify the Indemnifying Party shall not relieve it from any liability which it may have to an Indemnified Party except to the extent of any actual prejudice resulting therefrom. If any such claim or action shall be brought against an Indemnified Party,

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and it shall notify the Indemnifying Party thereof, the Indemnifying Party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified Indemnifying Party, to assume the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided that the Indemnified Party shall have the right to employ separate counsel to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, but the fees and expenses of such counsel shall be for the account of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) based upon the advice of counsel of such Indemnified Party representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settlement is made with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify the Indemnified Party from and against any loss, claim, damage, or liability by reason of such settlement or judgment. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

SECTION 4.4. Contribution. If the indemnification provided for in this Article IV is unavailable to, or is insufficient to hold harmless, the Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein, then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between the Company and the Selling Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each Selling Holder on the other, or as among the Selling Holders, as the case may be, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder and the relative benefit received by each of them in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Holders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Holders bear to the total underwriting discounts and commissions

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received by the Underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the Underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other, and with respect to the Selling Holders among themselves, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) by a court of competent jurisdiction shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation).

The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Selling Holder were offered to the public (less underwriting discounts and commissions) exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. Each Selling Holder’s obligations to contribute pursuant to this Section 4.4 are several in that proportion which the net proceeds of the offering received by such Selling Holder bears to the total net proceeds of the offering received by all the Selling Holders, and not joint.

SECTION 5.1. Participation in Underwritten Registrations. No Person may participate in any underwritten registration hereunder unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these Registration Rights.

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SECTION 5.2. Rule 144. The Company covenants that it will use its commercially reasonable best efforts to file any reports required to be filed by it under the Exchange Act and that it will take such further action as any Holder may reasonably request, all to the extent reasonably required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rules may be amended from time to time, or (b) any similar Rule or regulation hereafter adopted by the SEC. Upon the request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements.

SECTION 5.3. Holdback Agreements.

(a) Each Holder of Registrable Securities agrees not to effect any sale or distribution of the issue being registered or of a similar security of the Company, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during such period as is required by a managing underwriter beginning on and continuing after the effective date of the registration statement filed by the Company (except as part of such registration) in the case of an underwritten public offering, which period shall be 180 days after the effective date of the registration statement in the case of the Company’s Qualified IPO, or such other period as is required by the managing underwriter.

(b) With respect to a Demand Registration effected pursuant to Section 2.1 hereof, the Company agrees (i) not to effect any sale or distribution of any securities similar to those being registered in accordance with Section 2.1 hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during such period as is required by a managing underwriter beginning on and continuing after the effective date of any registration statement (except as part of a registration statement where the Holder making such Demand Registration consents) or the commencement of a public distribution of Registrable Securities; and (ii) that any agreement entered into after the date hereof pursuant to which the Company issues or agrees to issue any privately placed securities shall contain a provision under which holders of such securities agree not to effect any sale or distribution of any such securities during the periods described in (a) above, in each case including a sale pursuant to Rule 144 (except as part of any such registration, if permitted); provided, however, that the provisions of this paragraph (b) shall not prevent the conversion or exchange of any securities pursuant to their terms into or for other securities and shall not prevent the issuance of securities by the Company under any employee benefit, stock option or stock subscription plans or in private placements.

SECTION 5.4. Successors and Assigns. This Agreement, and all obligations and rights hereunder, shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns; provided that no rights of any Stockholder under this Agreement may be assigned, except that any Stockholder may assign its rights hereunder to any Permitted Transferee and except that FSEP V may assign its rights hereunder to any transferee who acquires more than fifty percent (50%) of the Registrable Securities owned by FSEP V as of the date hereof (a “Permitted Assignee”); provided further, that, prior to such

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assignment, such Permitted Transferee or Permitted Assignee shall enter into a written agreement to be bound by the terms and conditions of this Agreement applicable to such Stockholder.

SECTION 5.5. No Waivers; Amendments.

(a) No failure or delay by any party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

(b) This Agreement may be amended, modified or supplemented, and compliance with any provision hereof may be waived, with the written consent of the Company and FSEP V together, and without the consent of any other Stockholder or Other Registration Rights Holder, except that to the extent any of the Individual Stockholders’ rights would be disproportionately prejudiced thereby, the written consents of such Individual Stockholders shall also be required. Any such amendment, modification, supplement or waiver so consented to in writing shall be binding upon the parties hereto and their successors, Permitted Transferees and assigns (if any). The parties hereby expressly agree that the Company’s grant of additional demand and piggy-back registration rights in the future that do not apply to FSEP V differently than they apply to the Individual Stockholders shall not constitute an amendment or modification of, or a supplement to, this Agreement.

SECTION 5.6. Notices. All notices, requests, demands and other communications under this Agreement must be in writing and will be deemed duly given, unless otherwise expressly indicated to the contrary in this Agreement, (i) when personally delivered, (ii) upon receipt of a telephonic facsimile transmission with a confirmed telephonic transmission answer back, (iii) three (3) Business Days after having been deposited in the United States mail, certified or registered, return receipt requested, postage prepaid, or (iv) one (1) Business Day after having been dispatched by a nationally recognized overnight courier service, addressed to the parties or their permitted assigns at the following addresses (or at such other address or number as is given in writing by either party to the other) as follows:

if to FSEP V:

c/o Freeman Spogli & Co. LLC

299 Park Avenue

20^th Floor

New York, New York 10171

Facsimile: (212) 758-7499

Attention: John Roth and Ben Geiger

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with a copy to:

Bingham McCutchen LLP

355 S. Grand Avenue, 44th Floor

Los Angeles, California 90071

Facsimile: (213) 680-6499

Attention: Richard J. Welch, Esq.

if to the Individual Stockholders:

c/o Jerry W. Throgmartin

4151 East 96^th Street

Indianapolis, Indiana 46240

Facsimile No.: (317) 848-8768

with a copy to:

Ice Miller LLP

One American Square

Suite 3100

Indianapolis, Indiana 46282-0002

Facsimile No.: (317) 592-4675

Attention: Steven K. Humke

SECTION 5.7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to the choice of law provisions thereof).

SECTION 5.8. Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.

(a) Any claim arising out of or relating to this Agreement or the transactions contemplated hereby may be instituted in any of the state or federal courts located in Delaware, and each party hereby agrees not to assert, by way of motion, as a defense or otherwise, in any such claim, that it, he or she is not subject personally to the jurisdiction of such court, that the claim is brought in an inconvenient forum, that the venue of the claim is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court. Each party further irrevocably submits to the jurisdiction of such court in any such claim.

(b) Any and all service of process and any other notice in any such claim shall be effective against any party if given personally or by registered or certified mail, return receipt requested or by any other means of delivery that requires a signed receipt, postage prepaid, mailed to such party as herein provided. Nothing herein contained shall be deemed to affect the right of any party to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against any other party in any other jurisdiction.

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(c) EACH PARTY ACKNOWLEGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY.

(d) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN SECTION 5.8(c), (ii) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS IN SECTION 5.8 (c) AND THIS SECTION 5.8(d).

SECTION 5.9. Aggregate Holdings. In determining the number of shares of Common Stock owned by a Stockholder for all purposes of this Agreement, all shares held by a Permitted Transferee of such Stockholder shall be aggregated together (provided that no shares shall be attributed to more than one entity or person within any such group of entities or persons).

SECTION 5.10. Entire Agreement. This Agreement and the Exchange Agreement constitute the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and thereof and supersede any and all prior agreements and understandings, written or oral, relating to the subject matter hereof and thereof.

SECTION 5.11. Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdictions, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

SECTION 5.12. Counterparts. This Agreement may be executed in any number of counterparts and by facsimile, each of which shall be deemed an original, but all of which taken together shall constitute one instrument.

SECTION 5.13. Interpretation. The headings used in this agreement are for convenience only and shall not affect the interpretation of this agreement.

[Remainder of page intentionally left blank; signature pages follow]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

hhgregg, Inc.,
a Delaware corporation
By:	/s/ Jerry W. Throgmartin
	Jerry W. Throgmartin
	Chairman and Chief Executive Officer
FS Equity Partners V, L.P.,
a Delaware limited partnership
By:	FS Capital Partners V, LLC
Its:	General Partner
By:	/s/ John M. Roth
Name:	John M. Roth
Title:	Managing Member
FS AFFILIATES V, L.P.,
By:	FS Capital Partners V, LLC
Its:	General Partner
By:	/s/ John M. Roth
Name:	John M. Roth
Title:	Managing Member
CALIFORNIA STATE TEACHER’S RETIREMENT SYSTEM
By:	/s/ Christopher J. Ailman
Name:	Christopher J. Ailman
Title:	Chief Investment Officer

A.S.F CO-INVESTMENT PARTNERS II, L.P.
By:	PAF 1/03, LLC
Its:	General Partner
By:	Old Kings II, LLC
Its:	Managing Member
By:	/s/ William J. Indelicato
Name:	William J. Indelicato
Title:	Managing Director
THE JERRY W. THROGMIRE 2007 GRANTOR RETAINED ANNUITY TRUST
By:	/s/ Jerry W. Throgmartin
	Jerry W. Throgmartin, Trustee

“INDIVIDUAL STOCKHOLDERS”

/s/ Jerry W. Throgmartin

Jerry W. Throgmartin

/s/ Gregg William Throgmartin

Gregg William Throgmartin

/s/ Dennis L. May

Dennis L. May

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS AGREEMENT is entered into as of October 19, 2004 between Gregg Appliances, Inc., an Indiana corporation (the “Company”), and Jerry W. Throgmartin (“Executive”).

W I T N E S S E T H

WHEREAS, in connection with a recapitalization of the Company, the Company and Executive have entered into various agreements concerning the Company and its stockholders, including a Stockholders Agreement, a Registration Rights Agreement, and the Merger Agreement (as defined below);

WHEREAS, pursuant to the transactions contemplated by the Agreement and Plan of Merger dated as of October 19, 2004 (such Agreement and Plan of Merger is referred to herein as the “Merger Agreement”) by and among the Company, Gregg Investment Corporation, LLC, a Delaware limited liability company (“Investor”), and GIC Corporation, a Delaware corporation (“Merger Sub”), it is currently contemplated that Merger Sub will merge with and into the Company, with the Company to be the surviving corporation (the “Merger”);

WHEREAS, Executive has served as Chairman of the Board and Chief Executive Officer of the Company, and it is the desire of the Company and Investor, following the Effective Time of the Merger (as such term is defined in the Merger Agreement) to continue to have the benefit of Executive’s experience and loyalty, and Executive is willing to provide his services on the terms and conditions set forth herein; and

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WHEREAS, it is agreed by the parties hereto that this Agreement shall only be effective as of the Effective Time and solely upon the condition that the Merger becomes effective in accordance with applicable law.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

1. Employment and Duties.

(a) General. The Company hereby employs Executive, and Executive agrees, upon the terms and conditions herein set forth, to serve as the Company’s Chief Executive Officer. In such capacity, Executive shall perform such duties as may be delineated in the by-laws of the Company, and such other duties as may be assigned to Executive from time to time by the Company’s Board of Directors. During the Period (as defined in paragraph 2 below), if Executive also serves as a member of the Company’s Board of Directors he shall not be entitled to additional compensation for his service as a member of the Board.

(b) Full-Time Service. Throughout the Period, Executive shall, except as may from time to time be otherwise agreed in writing by the Company and unless prevented by ill health, devote his full-time working hours to his duties hereunder, shall in all respects conform to and comply with the lawful and reasonable directions and instructions given to him by the Company’s Board of Directors and shall use his best efforts to promote and serve the interests of the Company.

(c) No Other Employment. Throughout the Period, Executive shall not, directly or indirectly, render services to any other person or organization for which he receives compensation without the explicit written consent of the Company’s Board of Directors or otherwise engage in activities which would interfere with his performance of his duties

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hereunder. The activities described on Schedule A, attached hereto and incorporated by this reference, shall for this purpose be deemed to have been approved by the Company’s Board of Directors so long as such activities do not interfere with Executive’s performance of his duties hereunder.

(d) Other Benefits. Executive shall have twenty (20) vacation days per year. The Company shall reimburse Executive for his reasonable business expenses incurred in connection with his employment with the Company or his service on the Company’s Board of Directors so long as Executive complies with the Company’s general policies and guidelines with respect to such expenses. Executive shall be entitled to use the airplane leased by the Company from Throgmartin Leasing, LLC for up to twenty (20) hours per year for personal purposes at the Company’s expense. In the event Executive’s usage of such airplane exceeds twenty (20) hours in any year during the Term, Executive shall reimburse the Company for its actual costs in connection with any hours of use in excess of twenty (20) hours.

2. Term and Period of Employment. The Company shall retain Executive and Executive shall serve in the employ of the Company for a period of two (2) years commencing at the Effective Time and extending through and including the second anniversary of the Effective Time (the “Term”), unless earlier terminated pursuant to the provisions of this Agreement. In addition, on the last day of each calendar month during the period of Executive’s employment hereunder, the Term shall be automatically extended by one month unless either party has given prior written notice to the other that the Term is not to be further extended (i.e., that the Term is to expire two years after the giving of such notice). Notwithstanding such Term and any extension thereof, the period of Executive’s employment with the Company shall be subject to earlier termination during the Term — during both the initial Term and any extended

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Term — pursuant to the provisions of this Agreement. The period of Executive’s employment by the Company, whether terminated due to expiration of the Term or terminated earlier during the Term pursuant to the provisions of this Agreement, is hereinafter referred to as the “Period.”

3. Compensation and Other Benefits. Subject to the provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to Executive during the Period as compensation for services rendered hereunder:

(a) Base Salary. The Company shall pay to Executive an annual base salary (the “Base Salary”) at the rate of $300,000 per annum, payable in accordance with the Company’s then current payroll practice. The Base Salary shall be reviewed annually and may be increased in the sole discretion of the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”). The Company shall be entitled to deduct or withhold all taxes and charges which the Company may be required to deduct or withhold therefrom.

(b) Bonus. Executive shall be entitled to participate in bonus programs of the Company — which programs shall, during the Term, be the same as or substantially similar to the bonus programs of the Company in existence at the time of the Merger — and any bonuses granted to Executive shall be in addition to the compensation provided for in Section 3(a) hereof.

(c) Employee Benefit Plans. At all times during the Period, Executive shall be provided the opportunity to participate in pension and welfare plans, programs and arrangements (the “Plans”) that are generally made available to executives of the Company, and such other Plans, if any, as may be deemed appropriate by the Compensation Committee acting in its sole discretion.

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4. Termination of Employment.

(a) Termination for Cause.

(i) If, prior to the expiration of the Term, Executive’s employment is terminated by the Company for Cause, as defined in subparagraph 4(a)(ii), Executive shall not be eligible to receive Base Salary under subparagraph 3(a) or to participate in any Plans under subparagraph 3(c) with respect to the remainder of the Term or any other future periods after the date of such termination except for the right to receive benefits which have become vested under any Plan in accordance with the terms of such Plan. In addition, Executive shall not be eligible to receive any bonus described in subparagraph 3(b) for the Company’s fiscal year during which the date of termination occurs and any later year.

(ii) Termination for “Cause” shall mean termination of Executive’s employment with the Company by the Company’s Board of Directors because of (a) Executive’s repeated failures to perform his duties in a manner reasonably consistent with the criteria established by the Board of Directors of the Company and communicated to Executive; provided, however, that the termination pursuant to this clause shall be preceded by a written notice providing a reasonable opportunity for Executive to correct his conduct, if the conduct in question can be corrected, (b) conduct on the part of the Executive that constituted a breach of any statutory, contractual, or common law duty of loyalty or care owed to the Company, or other conduct on the part of the Executive that demonstrated dishonesty or deceit in his dealings with the Company, (c) misconduct by Executive which was material to the performance of his duties to the Company, including, without limitation, the disclosure of Confidential

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Information or a breach of noncompetition or non-solicitation obligations, including a breach of Executive’s obligations under Section 7.02 of the Merger Agreement, (d) conduct causing or aiding a breach by the Company of Section 9 (pertaining to the hiring of auditors or accountants) of the Stockholders Agreement, or (e) the commission by Executive of any crime involving moral turpitude or any felony.

(iii) The date of termination of employment by the Company under this paragraph 4(a) shall be the date specified in a written notice of termination (which date shall be no earlier than the date of furnishing such notice), or if no such date is specified therein, the date of receipt by Executive of such written notice of termination.

(b) Termination Without Cause.

(i) Subject to the provisions of subparagraph 4(b)(ii) and subparagraph 4(b)(v), if, prior to the expiration of the Term, Executive’s employment is terminated by the Company without Cause, Executive shall generally be entitled to receive, as “Severance Benefits”, (A) for the remainder of the Term his then current Base Salary and continued coverage under health and insurance plans or, if any such plan does not permit continued coverage of Executive, the Company shall arrange to provide a benefit substantially similar to and no less favorable than the benefits he was entitled to under such plan, and (B) for the year in which such termination occurs, a pro-rated bonus for the portion of such year during which Executive was employed by the Company. Notwithstanding the foregoing, if Executive becomes employed by another employer during the time that Severance Benefits are payable to Executive pursuant to this paragraph 4(b), the amount of Severance Benefits to which Executive would be entitled in the absence of such other employment shall be reduced by the amount of any

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compensation and benefits received or accrued by Executive due to such other employment. Executive shall provide the Company with any evidence of compensation and benefit amounts received or accrued in connection with other employment which the Company shall reasonably request. Executive shall be under no obligation to look for, solicit or accept employment with another employer during the period he is entitled to receive Severance Benefits.

(ii) If, following a termination of employment, Executive breaches the provisions of paragraph 5 hereof or of Section 7.02 of the Merger Agreement, Executive shall not be eligible, as of the date of such breach, for the payment of Severance Benefits and all obligations and agreements of the Company to pay Severance Benefits shall thereupon cease.

(iii) The date of termination of employment by the Company under this paragraph 4(b) shall be the date specified in a written notice of termination to Executive (which date shall be no earlier than the date of furnishing such notice) or, if no such date is specified therein, the date on which such notice is given to Executive.

(iv) Severance Benefits representing Base Salary continuation shall be paid in accordance with the Company’s then current payroll practice commencing on the next payroll date following the date of the termination of Executive’s employment under subparagraph 4(b).

(v) In the event that the Severance Benefits would not be deductible in whole or in part in the calculation of Federal income tax owed by the Company or any of its affiliates or any other person or entity making such payment or providing such benefit by reason of Section 280G of the Internal Revenue Code of 1986

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(the “Code”), the Severance Benefits shall be reduced by only the amount necessary such that no portion of the Severance Benefits is not deductible by reason of Section 280G of the Code.

(c) Death. If Executive dies while an employee of the Company, his Base Salary will be paid to his beneficiary or estate through the remaining portion of the Term.

(d) Disability. If Executive becomes Permanently Disabled, as defined below in this subparagraph, prior to the expiration of the Term, the Company shall be entitled to terminate his employment and Executive shall be entitled to receive disability benefits in accordance with the disability policy maintained by the Company as of the date of such disability, if any. For the purposes of this subparagraph, Executive shall be deemed “Permanently Disabled” when, and only when, he suffers a physical or mental disability or infirmity that prevents the normal performance of duties lasting for a continuous period of six months or more.

5. Secrecy and Noncompetition.

(a) No Competing Employment. For five years after the Effective Time or for so long as Executive is receiving, or is entitled to receive, any payments under or pursuant to this Agreement, whichever period is longer (such period being referred to hereinafter as the “Restricted Period”), Executive shall not, directly or indirectly, whether as principal, agent, officer, director, investor, consultant, stockholder, lender, partner, member, owner, sponsor, or otherwise, alone or in association with any other person (except ownership of less than 3% of the number of shares outstanding of any securities which are publicly traded), carry on, manage, operate, finance, sponsor, or become engaged or concerned in, or otherwise take part in, a business, anywhere in the contiguous United States, similar to or in competition with any part of the Company’s business, which generally consists of selling home appliances and consumer electronics and similar items and

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providing related installation, extended warranty or service plans, servicing, financing, and repair (the business of the Company is hereinafter referred to as the “Business”), or be employed in a competitive capacity by or render services to, or own, share in the earnings of, or invest in the stock, bonds, or other securities of, or lend money or extend credit to, or otherwise directly or indirectly assist, any business similar to or in competition with any part of the Business, anywhere in the contiguous United States, except for the aforementioned 3% ownership of publicly traded securities. If any portion of the restricted geographic area in any state shall be adjudicated in such state to be invalid or unenforceable as so identified, such identification shall be deemed amended to properly reflect the largest aggregate geographic area in such state which would be valid and enforceable under the laws of such state; provided, further, that such invalidity or unenforceability shall apply only with respect to part or all of the restricted geographic area in the particular state in which such adjudication is made. Executive acknowledges and agrees that the restrictions set forth in this Section 5(a) are reasonable and appropriate and will not materially interfere with or impede Executive’s ability to obtain other employment during the period that these restrictions are in effect.

(b) No Interference. During the Restricted Period, Executive shall not, directly or indirectly, solicit, induce, recruit, or encourage to leave the employment of the Company for any reason or to perform work for a competitor of the Company as an employee, independent contractor or otherwise (such conduct is collectively referred to herein as “Solicitation”), any person who is then employed by the Company or who left the employ of the Company less than six months prior to the Solicitation. Nothing in this subparagraph (b) shall prevent Executive from hiring any person (i) who contacts the Executive on his or her initiative without any direct or indirect solicitation by or encouragement by the Executive, or (ii) as a result of placing general advertisements in trade journals, newspapers or similar publications which are not directed at the Company or its employees.

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(c) Secrecy. Executive recognizes that the services to be performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder and his past employment with the Company, he may acquire or has acquired confidential information and trade secrets concerning the operations of the Company or its Affiliates, the use or disclosure of which could cause the Company substantial loss and damages which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Executive covenants and agrees with the Company that he will not at any time, except in performance of Executive’s obligations to the Company hereunder or with the prior written consent of the Managing Member of Investor, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company, or any predecessors to its business, or use any such information to the detriment of the Company, Investor or any of their Affiliates. The term “confidential information” includes, without limitation, information not previously disclosed to the public or to the trade by the Company’s management with respect to the Company’s or its subsidiaries’ or affiliates’ business plans, prospects and opportunities, the identity of clients, suppliers or customers, information regarding operational strengths and weaknesses, trade secrets, know-how and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, marketing plans or strategies, and financial information. “Confidential information” does not include information in the public domain, so long as such information did not become part of the public domain through the actions of Executive. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(c) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive’s employment hereunder.

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(d) Exclusive Property. Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company. Upon the termination of his employment with the Company or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not, without the consent of the Company, retain copies of any written materials not previously made available to the public, including but not limited to records and documents made by Executive or coming into his possession concerning the business or affairs of the Company. Executive may retain records relating exclusively to the terms and conditions of his employment relationship with the Company. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(d) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive’s employment hereunder.

(e) Stock Ownership. Other than as provided in subparagraph 1(c) or 5(a) hereof, nothing in this Agreement shall prohibit Executive from acquiring or holding any issue of stock or securities of any company or other business entity not engaged in any business similar to or in competition with any part of the Business, provided that Executive does not participate in the operations of any such company, and provided further that this Agreement shall not be deemed to prohibit investing as a passive investor in any publicly-held entity engaged in any business similar to or in competition with any part of the Business as long as such investments in such entity do not, in the aggregate, exceed three (3) percent of such entity’s total ownership.

(f) Injunctive Relief. Executive acknowledges that any actual or threatened breach of any of the covenants contained in this paragraph 5 shall cause irreparable

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injury to the Company, inadequately compensable in monetary damages. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company, the Executive agrees to waive any defense that the Company has an adequate remedy at law and further agrees that the Company shall be able to seek and obtain injunctive relief in the form of a temporary restraining order, preliminary injunction, or permanent injunction. The Company shall not be required to demonstrate actual injury or damage to obtain injunctive relief from the courts.

6. Nonassignability; Binding Agreement. Neither this Agreement nor any right, duty, obligation or interest hereunder shall be assignable or delegable by Executive without the Company’s prior written consent; provided, however, that nothing in this paragraph shall preclude Executive from designating any of his beneficiaries to receive any benefits payable hereunder upon his death, or the executors, administrators, or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto.

This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Company and Executive’s heirs and the personal representatives’ of Executive’s estate.

7. Severability. If a final and binding (on Executive and the Company) determination of a court of competent jurisdiction is made that any term or provision hereof is invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) the court shall limit the application of such term or provision or modify such term or provision and proceed to enforce such term or provision as so limited or modified, which limited or modified term or provision will be effective, binding, and enforceable against Executive.

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8. Amendment; Waiver. This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

9. Governing Law. All matters affecting this Agreement, including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of Indiana.

10. Notices. Any notice hereunder by either party to the other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address last known to the Company, or if addressed to the Company, the notice shall be delivered or mailed to the Company at its executive offices to the attention of the Board of Directors of the Company. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt.

11. Supersedes Previous Agreements. This Agreement supersedes all prior or contemporaneous negotiations, commitments, agreements and writings with respect to the subject matter hereof, other than the Company’s existing benefits plans insofar as they apply to Executive due to his past services as an employee of the Company. Subject to that one exception, all such other negotiations, commitments, agreements and writings will have no further force or effect, and the parties to any such other negotiation, commitment, agreement or writing will have no further rights or obligations thereunder.

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12. Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both such counterparts shall together constitute one and the same instrument.

13. Headings. The headings of paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

14. Withholding Tax. The Company shall be entitled to deduct or withhold from any payment made hereunder all Federal, state and local taxes which the Company is required by law to deduct or withhold therefrom.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has caused the Agreement to be signed by its officer pursuant to the authority of its Board of Directors, and Executive has executed this Agreement, as of the day and year first written above.

GREGG APPLIANCES, INC.			JERRY THROGMARTIN
By:	/s/ Jerry W. Throgmartin		By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin		Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer

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Schedule A

Activities Deemed Approved by the Board of Directors

Provided They Do Not Interfere With Executive’s Duties

(1) Participation in WGT V, LLC so long as the activities of such entity are limited to the leasing of real estate to the Company.

(2) Service on Board of Trustees of the University of Indianapolis

(3) Service as Chairman of the Cancer Center Development Board of Directors, Indiana University Medical Center

(4) Service on the Board of Directors of the Indiana Chamber of Commerce

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EX-10.2

Exhibit 10.2

EXECUTION COPY

AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT to Employment Agreement (this “Amendment”), dated as of April 12, 2007, is made by and among Gregg Appliances, Inc., an Indiana corporation (“Gregg Appliances”), hhgregg, Inc., a Delaware corporation (“hhgregg”), and Jerry W. Throgmartin (“Executive”).

W I T N E S S E T H

WHEREAS, Gregg Appliances and Executive are parties to that certain Employment Agreement (the “Original Employment Agreement”) dated as of October 19, 2004;

WHEREAS, Gregg Appliances will become a wholly-owned subsidiary of hhgregg pursuant to the transactions contemplated by the Incorporation and Exchange Agreement dated as of April 12, 2007 by and among Gregg Appliances, Gregg Investment Corporation, LLC, a Delaware limited liability company, Executive, Gregg William Throgmartin, Dennis L. May, FS Equity Partners V, L.P., a Delaware limited partnership, FS Affiliates V L.P., a Delaware limited partnership, California State Teachers’ Retirement System, a government pension plan, A.S.F. Co-Investment Partners II, L.P., a Delaware limited partnership, and hhgregg; and

WHEREAS, the parties hereto desire to amend the Original Employment Agreement as herein provided.

NOW, THEREFORE, the parties hereto, in consideration of the premises hereof and other good and valuable consideration, hereby agree as follows:

1. Definitions. Capitalized terms used in this Amendment which are not defined herein are to have the meanings given to such terms in the Original Employment Agreement. The term “Agreement” means the Original Employment Agreement, as amended by this Amendment; (ii) “Board” means the Board of Directors of Gregg Appliances and the Board of Directors of hhgregg; and (iii) “Company” means Gregg Appliances and hhgregg, jointly and severally.

2. Employment and Duties; Other Benefits. The first sentence of subparagraph 1(d) of the Original Employment Agreement is hereby revised to read in its entirety as follows: “Executive shall be entitled to a reasonable number of vacation days per year.”

3. Life Insurance Benefits. In addition to the benefits referred to in the Original Employment Agreement, the Company shall assign to Executive all of Company’s right, title and interest in and to the life insurance policy on the life of Executive after he is no longer employed as the Company’s Chief Executive Officer with Executive responsible for payment of all premiums and costs under such policy after such assignment.

4. Post-Employment Health Plan Benefits. Provided that Executive’s employment is not terminated by the Company for Cause, following the termination of Executive’s employment with the Company and until he attains the age of sixty-five (65) years, Executive shall be entitled to participate in the group major medical health plan as in effect from time to time for active executive employees of the Company (the “Health Plan”) on the same terms as active executive employees of the Company; provided, however, that Executive’s participation in the Health Plan shall be contingent upon his continued payment of the entire cost of coverage for Executive and his eligible dependents, if any; and further provided that Executive shall be permitted to continue participation in the Health Plan only to the extent that the Health Plan remains in effect for active executive employees of the Company and subject to the terms of the Health Plan in effect from time to time, including any modifications and amendments thereto following Executive’s termination of employment. The obligation to allow Executive to obtain continued coverage under the Health Plan pursuant to this paragraph 4 shall not reduce the Company’s obligation to provide Severance Benefits coverage under any group health plan of the Company to Executive pursuant to subparagraph 4(b)(i)(A) of the Original Employment Agreement.

5. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective heirs, executors, administrators, successors and assigns.

6. Original Employment Agreement. Except as amended hereby, the terms and conditions of the Original Employment Agreement shall continue unchanged and remain in full force and effect.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused this Agreement to be executed by their duly authorized representatives as of the date first above written.

GREGG APPLIANCES, INC.,
By:	/s/ Dennis L. May
	Name: Dennis L. May Title: President
hhgregg, Inc.,
By:	/s/ Dennis L. May
	Name: Dennis L. May Title: President
/s/ Jerry W. Throgmartin
Jerry W. Throgmartin

EX-10.3

Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS AGREEMENT is entered into as of October 19, 2004 between Gregg Appliances, Inc., an Indiana corporation (the “Company”), and Dennis L. May (“Executive”).

W I T N E S S E T H

WHEREAS, in connection with a recapitalization of the Company, the Company and Executive have entered into various agreements concerning the Company and its stockholders, including a Stockholders Agreement, a Registration Rights Agreement, and the Merger Agreement (as defined below);

WHEREAS, pursuant to the transactions contemplated by the Agreement and Plan of Merger dated as of October 19, 2004 (such Agreement and Plan of Merger is referred to herein as the “Merger Agreement”) by and among the Company, Gregg Investment Corporation, LLC, a Delaware limited liability company (“Investor”), and GIC Corporation, a Delaware corporation (“Merger Sub”), it is currently contemplated that Merger Sub will merge with and into the Company, with the Company to be the surviving corporation (the “Merger”);

WHEREAS, Executive has served as President and Chief Operating Officer of the Company, and it is the desire of the Company and Investor, following the Effective Time of the Merger (as such term is defined in the Merger Agreement) to continue to have the benefit of Executive’s experience and loyalty, and Executive is willing to provide his services on the terms and conditions set forth herein; and

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WHEREAS, it is agreed by the parties hereto that this Agreement shall only be effective as of the Effective Time and solely upon the condition that the Merger becomes effective in accordance with applicable law.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

1. Employment and Duties.

(a) General. The Company hereby employs Executive, and Executive agrees, upon the terms and conditions herein set forth, to serve as the Company’s President and Chief Operating Officer. In such capacity, Executive shall perform such duties as may be delineated in the by-laws of the Company, and such other duties as may be assigned to Executive from time to time by the Company’s Board of Directors or its Chief Executive Officer. During the Period (as defined in paragraph 2 below), if Executive also serves as a member of the Company’s Board of Directors he shall not be entitled to additional compensation for his service as a member of the Board.

(b) Full-Time Service. Throughout the Period, Executive shall, except as may from time to time be otherwise agreed in writing by the Company and unless prevented by ill health, devote his full-time working hours to his duties hereunder, shall in all respects conform to and comply with the lawful and reasonable directions and instructions given to him by the Company’s Board of Directors or its Chief Executive Officer and shall use his best efforts to promote and serve the interests of the Company.

(c) No Other Employment. Throughout the Period, Executive shall not, directly or indirectly, render services to any other person or organization for which he receives compensation without the explicit written consent of the Company’s Board of Directors

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or otherwise engage in activities which would interfere with his performance of his duties hereunder. The activities described on Schedule A, attached hereto and incorporated by this reference, shall for this purpose be deemed to have been approved by the Company’s Board of Directors so long as such activities do not interfere with Executive’s performance of his duties hereunder.

2. Term and Period of Employment. The Company shall retain Executive and Executive shall serve in the employ of the Company for a period of two (2) years commencing at the Effective Time and extending through and including the second anniversary of the Effective Time (the “Term”), unless earlier terminated pursuant to the provisions of this Agreement. In addition, on the last day of each calendar month during the period of Executive’s employment hereunder, the Term shall be automatically extended by one month unless either party has given prior written notice to the other that the Term is not to be further extended (i.e., that the Term is to expire two years after the giving of such notice). Notwithstanding such Term and any extension thereof, the period of Executive’s employment with the Company shall be subject to earlier termination during the Term — during both the initial Term and any extended Term — pursuant to the provisions of this Agreement. The period of Executive’s employment by the Company, whether terminated due to expiration of the Term or terminated earlier during the Term pursuant to the provisions of this Agreement, is hereinafter referred to as the “Period.”

3. Compensation and Other Benefits. Subject to the provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to Executive during the Period as compensation for services rendered hereunder:

(a) Base Salary. The Company shall pay to Executive an annual base salary (the “Base Salary”) at the rate of $250,000 per annum, payable in accordance with the

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Company’s then current payroll practice. The Base Salary shall be reviewed annually and may be increased in the sole discretion of the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”). The Company shall be entitled to deduct or withhold all taxes and charges which the Company may be required to deduct or withhold therefrom.

(b) Bonus. Executive shall be entitled to participate in bonus programs of the Company — which programs shall, during the Term, be the same as or substantially similar to the bonus programs of the Company in existence at the time of the Merger — and any bonuses granted to Executive shall be in addition to the compensation provided for in Section 3(a) hereof.

(c) Employee Benefit Plans. At all times during the Period, Executive shall be provided the opportunity to participate in pension and welfare plans, programs and arrangements (the “Plans”) that are generally made available to executives of the Company, and such other Plans, if any, as may be deemed appropriate by the Compensation Committee acting in its sole discretion.

(d) Other Benefits. Executive shall have twenty (20) vacation days per year. The Company shall reimburse Executive for his reasonable business expenses incurred in connection with his employment with the Company or his service on the Company’s Board of Directors so long as Executive complies with the Company’s general policies and guidelines with respect to such expenses.

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4. Termination of Employment.

(a) Termination for Cause.

(i) If, prior to the expiration of the Term, Executive’s employment is terminated by the Company for Cause, as defined in subparagraph 4(a)(ii), Executive shall not be eligible to receive Base Salary under subparagraph 3(a) or to participate in any Plans under subparagraph 3(c) with respect to the remainder of the Term or any other future periods after the date of such termination except for the right to receive benefits which have become vested under any Plan in accordance with the terms of such Plan. In addition, Executive shall not be eligible to receive any bonus described in subparagraph 3(b) for the Company’s fiscal year during which the date of termination occurs and any later year.

(ii) Termination for “Cause” shall mean termination of Executive’s employment with the Company by the Company’s Board of Directors because of (a) Executive’s repeated failures to perform his duties in a manner reasonably consistent with the criteria established by the Board of Directors of the Company and communicated to Executive; provided, however, that the termination pursuant to this clause shall be preceded by a written notice providing a reasonable opportunity for Executive to correct his conduct, if the conduct in question can be corrected, (b) conduct on the part of the Executive that constituted a breach of any statutory, contractual, or common law duty of loyalty or care owed to the Company, or other conduct on the part of the Executive that demonstrated dishonesty or deceit in his dealings with the Company, (c) misconduct by Executive which was material to the performance of his duties to the Company, including, without limitation, the disclosure of Confidential

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Information or a breach of noncompetition or non-solicitation obligations, including a breach of Executive’s obligations under Section 7.02 of the Merger Agreement, (d) conduct causing or aiding a breach by the Company of Section 9 (pertaining to the hiring of auditors or accountants) of the Stockholders Agreement, or (e) the commission by Executive of any crime involving moral turpitude or any felony.

(iii) The date of termination of employment by the Company under this paragraph 4(a) shall be the date specified in a written notice of termination (which date shall be no earlier than the date of furnishing such notice), or if no such date is specified therein, the date of receipt by Executive of such written notice of termination.

(b) Termination Without Cause.

(i) Subject to the provisions of subparagraph 4(b)(ii) and subparagraph 4(b)(v), if, prior to the expiration of the Term, Executive’s employment is terminated by the Company without Cause, Executive shall generally be entitled to receive, as “Severance Benefits”, (A) for the remainder of the Term his then current Base Salary and continued coverage under health and insurance plans or, if any such plan does not permit continued coverage of Executive, the Company shall arrange to provide a benefit substantially similar to and no less favorable than the benefits he was entitled to under such plan, and (B) for the year in which such termination occurs, a pro-rated bonus for the portion of such year during which Executive was employed by the Company. Notwithstanding the foregoing, if Executive becomes employed by another employer during the time that Severance Benefits are payable to Executive pursuant to this paragraph 4(b), the amount of Severance Benefits to which Executive would be entitled in the absence of such other employment shall be reduced by the amount of any

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compensation and benefits received or accrued by Executive due to such other employment. Executive shall provide the Company with any evidence of compensation and benefit amounts received or accrued in connection with other employment which the Company shall reasonably request. Executive shall be under no obligation to look for, solicit or accept employment with another employer during the period he is entitled to receive Severance Benefits.

(ii) If, following a termination of employment, Executive breaches the provisions of paragraph 5 hereof or of Section 7.02 of the Merger Agreement, Executive shall not be eligible, as of the date of such breach, for the payment of Severance Benefits and all obligations and agreements of the Company to pay Severance Benefits shall thereupon cease.

(iii) The date of termination of employment by the Company under this paragraph 4(b) shall be the date specified in a written notice of termination to Executive (which date shall be no earlier than the date of furnishing such notice) or, if no such date is specified therein, the date on which such notice is given to Executive.

(iv) Severance Benefits representing Base Salary continuation shall be paid in accordance with the Company’s then current payroll practice commencing on the next payroll date following the date of the termination of Executive’s employment under subparagraph 4(b).

(v) In the event that the Severance Benefits would not be deductible in whole or in part in the calculation of Federal income tax owed by the Company or any of its affiliates or any other person or entity making such payment or providing such benefit by reason of Section 280G of the Internal Revenue Code of 1986

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(the “Code”), the Severance Benefits shall be reduced by only the amount necessary such that no portion of the Severance Benefits is not deductible by reason of Section 280G of the Code.

(c) Death. If Executive dies while an employee of the Company, his Base Salary will be paid to his beneficiary or estate through the remaining portion of the Term.

(d) Disability. If Executive becomes Permanently Disabled, as defined below in this subparagraph, prior to the expiration of the Term, the Company shall be entitled to terminate his employment and Executive shall be entitled to receive disability benefits in accordance with the disability policy maintained by the Company as of the date of such disability, if any. For the purposes of this subparagraph, Executive shall be deemed “Permanently Disabled” when, and only when, he suffers a physical or mental disability or infirmity that prevents the normal performance of duties lasting for a continuous period of six months or more.

5. Secrecy and Noncompetition.

(a) No Competing Employment. For two years after the Effective Time or for so long as Executive is receiving, or is entitled to receive, any payments under or pursuant to this Agreement, whichever period is longer (such period being referred to hereinafter as the “Restricted Period”), Executive shall not, directly or indirectly, whether as principal, agent, officer, director, investor, consultant, stockholder, lender, partner, member, owner, sponsor, or otherwise, alone or in association with any other person (except ownership of less than 3% of the number of shares outstanding of any securities which are publicly traded), carry on, manage, operate, finance, sponsor, or become engaged or concerned in, or otherwise take part in, a business, anywhere in any State in which the Company has opened, or has existing plans to open, stores and in all States contiguous with such States, similar to or in competition with any part of the Company’s business,

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which generally consists of selling home appliances and consumer electronics and similar items and providing related installation, extended warranty or service plans, servicing, financing, and repair (the business of the Company is hereinafter referred to as the “Business”), or be employed in a competitive capacity by or render services to, or own, share in the earnings of, or invest in the stock, bonds, or other securities of, or lend money or extend credit to, or otherwise directly or indirectly assist, any business similar to or in competition with any part of the Business, anywhere in any State in which the Company has opened, or has existing plans to open, stores and in all States contiguous with such States, except for the aforementioned 3% ownership of publicly traded securities. If any portion of the restricted geographic area in any state shall be adjudicated in such state to be invalid or unenforceable as so identified, such identification shall be deemed amended to properly reflect the largest aggregate geographic area in such state which would be valid and enforceable under the laws of such state; provided, further, that such invalidity or unenforceability shall apply only with respect to part or all of the restricted geographic area in the particular state in which such adjudication is made. Notwithstanding the foregoing, this subparagraph 5(a) shall automatically terminate and be of no further force or effect if any Severance Benefit that Executive is entitled to receive is not paid in a timely manner and the Company fails to cure such default within thirty (30) days of its receipt of written notice from Executive of such default. Executive acknowledges and agrees that the restrictions set forth in this Section 5(a) are reasonable and appropriate and will not materially interfere with or impede Executive’s ability to obtain other employment during the period that these restrictions are in effect.

(b) No Interference. During the Restricted Period, Executive shall not, directly or indirectly, solicit, induce, recruit, or encourage to leave the employment of the Company for any reason or to perform work for a competitor of the Company as an employee, independent contractor or otherwise (such conduct is collectively referred to herein as

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“Solicitation”), any person who is then employed by the Company or who left the employ of the Company less than six months prior to the Solicitation. Nothing in this subparagraph (b) shall prevent Executive from hiring any person (i) who contacts the Executive on his or her initiative without any direct or indirect solicitation by or encouragement by the Executive, or (ii) as a result of placing general advertisements in trade journals, newspapers or similar publications which are not directed at the Company or its employees.

(c) Secrecy. Executive recognizes that the services to be performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder and his past employment with the Company, he may acquire or has acquired confidential information and trade secrets concerning the operations of the Company or its Affiliates, the use or disclosure of which could cause the Company substantial loss and damages which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Executive covenants and agrees with the Company that he will not at any time, except in performance of Executive’s obligations to the Company hereunder or with the prior written consent of the Managing Member of Investor, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company, or any predecessors to its business, or use any such information to the detriment of the Company, Investor or any of their Affiliates. The term “confidential information” includes, without limitation, information not previously disclosed to the public or to the trade by the Company’s management with respect to the Company’s or its subsidiaries’ or affiliates’ business plans, prospects and opportunities, the identity of clients, suppliers or customers, information regarding operational strengths and weaknesses, trade secrets, know-how and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, marketing plans

10

or strategies, and financial information. “Confidential information” does not include information in the public domain, so long as such information did not become part of the public domain through the actions of Executive. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(c) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive’s employment hereunder.

(d) Exclusive Property. Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company. Upon the termination of his employment with the Company or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not, without the consent of the Company, retain copies of any written materials not previously made available to the public, including but not limited to records and documents made by Executive or coming into his possession concerning the business or affairs of the Company. Executive may retain records relating exclusively to the terms and conditions of his employment relationship with the Company. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(d) are perpetual and, in any case, shall extend beyond the Restricted Period and Executive’s employment hereunder.

(e) Stock Ownership. Other than as provided in subparagraph 1(c) or 5(a) hereof, nothing in this Agreement shall prohibit Executive from acquiring or holding any issue of stock or securities of any company or other business entity not engaged in any business similar to or in competition with any part of the Business, provided that Executive does not participate in the operations of any such company, and provided further that this Agreement shall not be deemed to prohibit investing as a passive investor in any publicly-held entity engaged in

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any business similar to or in competition with any part of the Business as long as such investments in such entity do not, in the aggregate, exceed three (3) percent of such entity’s total ownership.

(f) Injunctive Relief. Executive acknowledges that any actual or threatened breach of any of the covenants contained in this paragraph 5 shall cause irreparable injury to the Company, inadequately compensable in monetary damages. Accordingly, in addition to any other legal or equitable remedies that may be available to the Company, the Executive agrees to waive any defense that the Company has an adequate remedy at law and further agrees that the Company shall be able to seek and obtain injunctive relief in the form of a temporary restraining order, preliminary injunction, or permanent injunction. The Company shall not be required to demonstrate actual injury or damage to obtain injunctive relief from the courts.

6. Nonassignability; Binding Agreement. Neither this Agreement nor any right, duty, obligation or interest hereunder shall be assignable or delegable by Executive without the Company’s prior written consent; provided, however, that nothing in this paragraph shall preclude Executive from designating any of his beneficiaries to receive any benefits payable hereunder upon his death, or the executors, administrators, or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto.

This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Company and Executive’s heirs and the personal representatives’ of Executive’s estate.

7. Severability. If a final and binding (on Executive and the Company) determination of a court of competent jurisdiction is made that any term or provision hereof is

12

invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) the court shall limit the application of such term or provision or modify such term or provision and proceed to enforce such term or provision as so limited or modified, which limited or modified term or provision will be effective, binding, and enforceable against Executive.

8. Amendment; Waiver. This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

9. Governing Law. All matters affecting this Agreement, including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of Indiana.

10. Notices. Any notice hereunder by either party to the other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address last known to the Company, or if addressed to the Company, the notice shall be delivered or mailed to the Company at its executive offices to the attention of the Board of Directors of the Company. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt.

11. Supersedes Previous Agreements. This Agreement supersedes all prior or contemporaneous negotiations, commitments, agreements and writings with respect to the subject matter hereof, other than the Company’s existing benefits plans insofar as they apply to Executive due to his past services as an employee of the Company. Subject to that one

13

exception, all such other negotiations, commitments, agreements and writings will have no further force or effect, and the parties to any such other negotiation, commitment, agreement or writing will have no further rights or obligations thereunder.

12. Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both such counterparts shall together constitute one and the same instrument.

13. Headings. The headings of paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

14. Withholding Tax. The Company shall be entitled to deduct or withhold from any payment made hereunder all Federal, state and local taxes which the Company is required by law to deduct or withhold therefrom.

[SIGNATURE PAGE FOLLOWS]

14

IN WITNESS WHEREOF, the Company has caused the Agreement to be signed by its officer pursuant to the authority of its Board of Directors, and Executive has executed this Agreement, as of the day and year first written above.

GREGG APPLIANCES, INC.			DENNIS L. MAY
By:	/s/ Jerry W. Throgmartin		By:	/s/ Dennis L. May
	Name:	Jerry W. Throgmartin		Name:	Dennis L. May
	Title:	Chairman and Chief Executive Officer

15

Schedule A

Activities Deemed Approved by the Board of Directors

Provided They Do Not Interfere With Executive’s Duties

None.

16

EX-10.4

Exhibit 10.4

APPLIANCES & ELECTRONICS

Compensation Agreement

Employee Name: John Hickey

Position: Vice President - Commercial Business Development

Promotion: —

Effective Date:

Wages

Salary:

— 2004-2005 Year 1: $125,000 annual — $4,807.69 per two-week pay period

— 2006 Year 2: $135,000 annual — $5,192.30 per two-week pay period

— 2007 Year 3: $145,000 annual — $5,576.92 per two-week pay period

Bonus:

— 2004 Year-End: $100,000

— thereafter - $100,000 potential based on targets payable end of Fiscal year ($50,000 guaranteed for 2005)

Commission:

— 50% of profit on HH Gregg Distribution & Sales not to HH Gregg—split 3 ways; (J. Hickey to receive 1/3)

Long-Term Compensation:

— Stay on incentive of $375,000 payable at end of 5 years employment

— Stock options same as other management level plans

[Involuntary termination of employment prior to 5 years will result in early payout of Stay On Incentive; Voluntary termination will result in forfeiture]

Incentive Benefits:

— Participation in Non-Qualified Pension

— 401(k)

— 3 weeks vacation beginning 2005

Other

Company provided cellular phone/plan

Car Allowance of $500 per month

As agreed this 10th day of September, 2004:

/s/ John S. Hickey	/s/ Jerry W. Throgmartin
Signature	Signature
John S. Hickey	Jerry W. Throgmartin
Printed Name	Printed Name
September 7, 2004	September 7, 2004
Date	Date

EX-10.5

Exhibit 10.5

H.H. GREGG

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

ADOPTION OF

H.H. GREGG SUPPLEMENTAL

EXECUTIVE RETIREMENT PLAN

Pursuant to resolutions adopted by the Board of Directors of Gregg Appliances, Inc. (the “Company”) on January 22, 2001, the undersigned officers of the Company hereby adopt H.H. Gregg Supplemental Executive Retirement Plan, effective as of April 1, 2000, on behalf of the Company, in the form attached hereto.

Dated this 22nd day of January, 2001.

		GREGG APPLIANCES, INC.
		By:	/s/ Jerry W. Throgmartin
			Name: Jerry W. Throgmartin Title: President
ATTEST:
/s/ Michael D. Stout
Its:	/s/ Secretary

H.H. GREGG

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

ARTICLE		PAGE
ARTICLE I	INTRODUCTION	1
Section 1.1.	Purpose	1
Section 1.2.	Effective Date; Plan Year	1
Section 1.3.	Administration	1
Section 1.4.	Supplements	1
ARTICLE II	ELIGIBILITY AND PARTICIPATION	1
ARTICLE III	BENEFITS	1
Section 3.1.	Plan Accounts	1
Section 3.2.	Company Credits	2
Section 3.3.	Interest Credits	2
ARTICLE IV	BENEFIT PAYMENTS	2
Section 4.1.	Time of Payment of Benefits	2
Section 4.2.	Manner of Payment	3
Section 4.3.	Vesting	3
ARTICLE V	BENEFIT CLAIMS	3
ARTICLE VI	AMENDMENT AND TERMINATION OF THE PLAN	4
Section 6.1.	Amendment of the Plan	4
Section 6.2.	Termination of the Plan	4
ARTICLE VII	MISCELLANEOUS	4
Section 7.1.	Governing Law	4
Section 7.2.	Headings and Gender	4
Section 7.3.	Withholding of Taxes	4
Section 7.4.	Spendthrift Clause	4
Section 7.5.	Counterparts	4
Section 7.6.	No Enlargement of Employment Rights	4
Section 7.7.	Limitations on Liability	5
Section 7.8.	Incapacity of Participant or Beneficiary	5
Section 7.9.	Corporate Successors	5

i

TABLE OF CONTENTS

(continued)

ARTICLE		PAGE
Section 7.10.	Evidence	5
Section 7.11.	Action by Company	5
Section 7.12.	Severability	5
Section 7.13.	Funding	5
Section 7.14.	Information to be Furnished by Participants	6

ii

ARTICLE I

INTRODUCTION

Section 1.1. Purpose. The purpose of the H.H. Gregg Supplemental Executive Retirement Plan (the “Plan”) is to provide a select group of management or highly compensated employees with supplemental retirement benefits. It is the intention of Gregg Appliances, Inc. (the “Company”) that the Plan constitute an unfunded arrangement maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for federal income tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. Consequently, it will be administered and its provisions interpreted consistently with that intention.

Section 1.2. Effective Date; Plan Year. The “Effective Date” of the Plan is April 1, 2000. The “Plan Year” is the 12-month period beginning on each April 1 and ending on the next following March 31.

Section 1.3. Administration. The Plan will be administered by the Company or by a committee appointed by the Company (the “Administrator”). The Administrator, from time to time, may adopt any rules and procedures it deems necessary or desirable for the proper and efficient administration of the Plan that are consistent with the terms of the Plan. Any notice or document required to be given or filed with the Administrator will be properly given or filed if delivered to or mailed, by registered mail, postage paid, to Jerry W. Throgmartin, Gregg Appliances, Inc., 4151 E. 96th Street, Indianapolis, Indiana 46240.

Section 1.4. Supplements. The provisions of the Plan may be modified by supplements to the Plan. The terms and provisions of each supplement are a part of the Plan and supersede any other provisions of the Plan to the extent necessary to eliminate any inconsistencies between the supplement and any other Plan provisions.

ARTICLE II

ELIGIBILITY AND PARTICIPATION

Participation in the Plan will be limited to those management or highly compensated employees of the Company or of any Affiliate who, from time to time, are designated to participate by the Company. A designated employee will become a Plan “Participant” as of the later of the Effective Date or the date specified by the Company. A Participant may be removed as an active Participant under the Plan by the Company as of any future date so that no credits will be made to his Account under Section 3.2 on or after that date. For purposes of this Plan, the term “Affiliate” means any corporation or trade or business treated as an affiliate under a tax-qualified retirement plan maintained by the Company.

ARTICLE III

BENEFITS

Section 3.1. Plan Accounts. The Administrator will establish and maintain an “Account” under the Plan for each Participant, to which the Administrator will credit the amounts as provided in this Article III and debit payments made as provided in Article IV.

Section 3.2. Company Credits. As of the last day of each Plan Year, a Participant who is employed by the Company on that day will receive a credit to his Account in an amount determined as follows:

(a) In the case of a Participant who is classified by the Company as an officer of the Company, (i) if the Company’s pre-tax net profit for the Plan Year equals or exceeds four percent, the credit will equal ten percent of the Participant’s base salary; (ii) if the Company’s pre-tax net profit for the Plan Year is at least two percent, but not four percent, the credit will equal seven percent of the Participant’s base salary; and (iii) if the Company’s pre-tax net profit for the Plan Year is less than two percent, no credit will be made.

(b) In the case of a Participant who is classified by the Company as a senior manager of the Company, (i) if the Company’s pre-tax net profit for the Plan Year equals or exceeds four percent, the credit will equal seven percent of the Participant’s base salary; (ii) if the Company’s pre-tax net profit for the Plan year is at least two percent, but not four percent, the credit will equal five percent of the Participant’s base salary; and (iii) if the Company’s pre-tax net profit for the Plan Year is less than two percent, no credit will be made.

(c) In the case of a Participant who is classified by the Company as a manager of the Company, (i) if the Company’s pre-tax net profit for the Plan Year equals or exceeds four percent, the credit will equal five percent of the Participant’s base salary; (ii) if the Company’s pre-tax net profit for the Plan Year is at least two percent, but not four percent, the credit will equal three percent of the Participant’s base salary; and (iii) if the Company’s pre-tax net profit for the Plan Year is less than two percent, no credit will be made.

(d) In addition to the credits described in subsections (a), (b) and (c), the Administrator may credit any Participant’s Account with an additional amount, in an amount it determines in its sole discretion.

Section 3.3. Interest Credits. As of the last day of each Plan Year, each Participant’s Account will be credited with an amount equal to a rate of “interest” determined by the Administrator in its sole discretion for that year multiplied by the Participant’s Account balance on the first day of the Plan Year.

ARTICLE IV

BENEFIT PAYMENTS

Section 4.1. Time of Payment of Benefits. A Participant (or, in the event of his death, his beneficiary) will receive payment of his Account balance (as determined under Article III) as soon as administratively practicable following the later of (i) date the Participant terminates employment with the Company and all Affiliates or (ii) the date the Participant attains

- 2 -

age 55 (or would have attained age 55, if payment is to be made to the beneficiary and the Participant dies before age 55). Notwithstanding the foregoing, no payment will be made to a Participant unless he is a Vested Participant and his Account is not forfeited, as provided in Section 4.3.

Section 4.2. Manner of Payment. The Account balance payable to a Participant under Section 4.1 will be paid in a single cash payment.

Section 4.3. Vesting. A Participant will become a “Vested Participant” upon the earlier of his (i) attainment of age 55, or (ii) completion of ten years of continuous service with the Company or an Affiliate (beginning with the Participant’s most recent hire date with the Company or an Affiliate). A Participant will also become a Vested Participant upon his death or total and permanent disability. For purposes of this Plan, a Participant will be deemed to have incurred a total and permanent disability if the Participant has a disability as determined for purposes of the Federal Social Security Act which qualifies the Participant for permanent disability insurance payments in accordance with such Act. A minimal level of earnings in restricted activity during any period of disability shall not disqualify a Participant from receiving disability benefits for such period if the disabled Participant receives disability benefits under the Social Security Act for the same period. If a Participant’s employment terminates before the Participant has attained age 55 or completed ten years of continuous service and the Participant is rehired and is again designated to participate, his prior service with the Company or an Affiliate will be disregarded.

Notwithstanding the foregoing, in the event the Participant is terminated for Cause by the Company, the Participant will forfeit his Account so that no payment will be made to the Participant or any beneficiary. For purposes of this Plan, the term “Cause” means a reasonable determination by the Administrator that the Participant (i) failed to obey or follow the reasonable and lawful orders or rules of the Company’s President or Board of Directors (including those described in the employee handbooks, or policies of the Company which are applicable to him), (ii) failed to achieve reasonable performance objectives, (iii) acted with gross negligence in the performance of his obligations or in a manner materially detrimental to the Company or an Affiliate, (iv) willfully breached or habitually neglected his duty to the Company, or (v) has been convicted of a felony or committed any act involving dishonesty, theft or fraud.

ARTICLE V

BENEFIT CLAIMS

A Participant need not file a claim to receive his benefit under the Plan. However, if a Participant wishes to do so, a claim must be in writing and filed with the Administrator. If a claim is denied, the Administrator will furnish the claimant with written notice of its decision, setting forth the specific reasons for the denial, references to the Plan provisions on which the denial is based, additional information necessary to perfect the claim, if any, and a description of the procedure for review of the denial. A claimant may request a review of the denial of a claim for benefits by filing a written application with the Administrator within 60 days after the claimant receives notice of the denial. The claimant is entitled to review pertinent Plan documents and submit written issues and comments to the Administrator. The Administrator, within a reasonable time after it receives a request for review, will undertake that review and will

- 3 -

furnish the claimant with written notice of its decision, setting forth the specific reasons for the decision and references to the pertinent Plan provisions on which the decision is based.

ARTICLE VI

AMENDMENT AND TERMINATION OF THE PLAN

Section 6.1. Amendment of the Plan. The Company may amend the Plan at any time in its sole discretion. Notwithstanding the foregoing, the Company may not amend the Plan to reduce a Participant’s Account balance as determined on the day preceding the effective date of the amendment.

Section 6.2. Termination of the Plan. The Company may terminate the Plan at any time in its sole discretion. Absent an amendment to the contrary, Plan benefits that had accrued prior to the termination will be paid at the times and in the manner provided for by the Plan at the time of the termination.

ARTICLE VII

MISCELLANEOUS

Section 7.1. Governing Law. The Plan shall be construed, regulated and administered according to the laws of the State of Indiana, without reference to that state’s choice of law principles, except in those areas preempted by the laws of the United States of America in which case the federal laws will control.

Section 7.2. Headings and Gender. The headings and subheadings in the Plan have been inserted for convenience of reference only and will not affect the construction of the Plan provisions. In any necessary construction, the masculine will include the feminine and the singular the plural, and vice versa.

Section 7.3. Withholding of Taxes. The Company, or any Affiliate designated by the Company, will withhold from any amount payable under this Plan all federal, state, city and local taxes as legally required.

Section 7.4. Spendthrift Clause. No benefit or interest available under the Plan will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Participant or the Participant’s beneficiary, either voluntarily or involuntarily.

Section 7.5. Counterparts. This Plan may be executed in any number of counterparts, each one constituting but one and the same instrument, and may be sufficiently evidenced by any one counterpart.

Section 7.6. No Enlargement of Employment Rights. Nothing contained in the Plan may be construed as a contract of employment between the Company or an Affiliate and any person, nor may the Plan be deemed to give any person the right to be retained in the employ of the Company or an Affiliate or limit the right of the Company or an Affiliate to employ or discharge any person with or without cause.

- 4 -

Section 7.7. Limitations on Liability. Notwithstanding any other provision of the Plan, none of the Company, the Affiliates, the committee members and each individual acting as an employee or agent of any of them will be liable to any Participant, employee or beneficiary for any claim, loss, liability or expense incurred in connection with the Plan, except when the same has been judicially determined to be due to the gross negligence or willful misconduct of that person.

Section 7.8. Incapacity of Participant or Beneficiary. If any person entitled to receive a distribution under the Plan is physically or mentally incapable of personally receiving and giving a valid receipt for any payment due (unless a prior claim for the distribution has been made by a duly qualified guardian or other legal representative), then, unless and until a claim for the distribution has been made by a duly appointed guardian or other legal representative of the person, the Administrator may provide for the distribution to be made to any other individual or institution then contributing toward or providing for the care and maintenance of the person. Any payment made for the benefit of the person under this Section 7.8 will be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan.

Section 7.9. Corporate Successors. In the event of the dissolution, merger, consolidation or reorganization of the Company or the sale of the Company of all or substantially all of its assets, provision may be made by which the Plan will be continued by the Company’s successor; and, in that event, the successor will be substituted for the Company under the Plan. Upon the substitution, the successor will assume all Plan liabilities and will assume all of the powers, duties and responsibilities of the Company under the Plan.

Section 7.10. Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person relying on the evidence considers pertinent and reliable, and signed, made or presented by the proper party or parties.

Section 7.11. Action by Company. Any action required of or permitted by the Company under the Plan will be by resolution of the Company’s Board of Directors, or by a person or persons authorized by resolution of that Board of Directors.

Section 7.12. Severability. In the event any provisions of the Plan are held to be illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and endorsed as if the illegal or invalid provisions had never been contained in the Plan.

Section 7.13. Funding. Benefits payable under this Plan to a Participant or to a beneficiary or beneficiaries will be paid directly by the Company from its general assets. The Company is not required to segregate on its books or otherwise establish any funding procedure for any amount to be used for the payment of benefits under this Plan. The Company may, however, in its sole discretion, set funds aside in investments, including a so-called “rabbi trust,” to meet its anticipated obligations under the Plan. Any such action or set-aside may not be deemed to create a trust of any kind between the Company and any Participant or beneficiary or beneficiaries or to constitute the funding of any Plan benefits. Consequently, any person entitled to a payment under the Plan will have no rights greater than the rights of any other unsecured creditor of the Company.

- 5 -

Section 7.14. Information to be Furnished by Participants. Participants, or any other persons entitled to benefits under the Plan, must furnish the Administrator with any and all documents, evidence, data or other information the Administrator considers necessary or desirable for the purpose of administering the Plan. Benefit payments under the Plan are conditioned on the Participant (or other person who is entitled to benefits) furnishing full, true and complete data, evidence or other information to the Administrator, and on the prompt execution of any document reasonably related to the administration of the Plan requested by the Administrator.

- 6 -

EX-10.6

Exhibit 10.6

AMENDMENT NUMBER ONE

TO

H.H. GREGG SUPPLEMENTAL RETIREMENT EXECUTIVE RETIREMENT PLAN

THIS AMENDMENT NUMBER ONE to the H.H. Gregg Supplemental Retirement Executive Plan (“Plan”) is executed this 26 day of December, 2004, by Gregg Appliances, Inc.(“Company”).

WITNESSETH:

WHEREAS, the Company established the Plan effective as of April 1, 2000;

WHEREAS, the Company reserved the right to amend the Plan pursuant to Section 6.1 of the Plan;

WHEREAS, the Company now desires to amend the Plan to eliminate the possibility of successor liability as provided in Section 7.9 of the Plan; and

WHEREAS, the Company now desires to amend the Plan to comply with Section 409A of the Internal Revenue Code of 1986 (“Code”) which becomes effective with respect to deferrals of compensation on and after January 1, 2005.

NOW, THEREFORE, the Plan is hereby amended, effective as provided herein, as follows:

1. Section 6.2 “Termination of the Plan” is amended effective January 1, 2005 to be and read as follows:

“‘Section 6.2. Termination of the Plan.’ The Company may terminate the Plan at any time in its sole discretion. Absent an amendment to the contrary, Plan benefits that had accrued prior to the termination will be paid at the times and in the manner provided for by the Plan at the time of

the termination. No accelerated distributions shall be permitted by the Plan, with or without a Plan amendment, with respect to the termination of the Plan on or after January 1, 2005 and with respect to credits, earned on or after January 1, 2005, and earnings on such credits to the extent such accelerated distributions are prohibited by the Internal Revenue Code Section 409A.”

2. Section 7.9 “Corporate Successors” is amended effective November 1, 2004 to be and read as follows:

“‘Section 7.9. Corporate Successors.’ In the event of the sale of the Company, the Plan shall continue, however, the acquiring company shall not be liable for any obligations under the plan and the Company shall remain responsible for the liabilities of the Plan.”

3. A new Section 7.15 “Internal Revenue Code Section 409A” is incorporated into the Plan, effective January 1, 2005, to be and read as follows:

“‘Section 7.15 Internal Revenue Code Section 409A.’ Notwithstanding anything in the Plan to the contrary and to the extent required by Internal Revenue Code Section 409A, the Plan shall comply with and be operated and interpreted to be consistent with all of the requirements of Internal Revenue Code Section 409A including the restrictions on the timing of elections and Changes to elections as to deferrals, timing and form of distributions.”

4. In all other respects the Agreement shall remain unchanged.

2

IN WITNESS WHEREOF, the Company has caused this Amendment Number One to be executed as of the date and year set forth above.

GREGG APPLIANCES, INC.
By:	/s/ Jerry W. Throgmartin
Title:	Chief Executive Officer

ATTEST:

/s/ Michael D. Stout

3

EX-10.7

Exhibit 10.7

THE CORPORATE PLAN

FOR RETIREMENT^SM

(PROFIT SHARING/401(K) PLAN)

A FIDELITY PROTOTYPE PLAN

Non-Standardized Adoption Agreement No. 001

For use With

Fidelity Basic Plan Document No. 02

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

ADOPTION AGREEMENT

ARTICLE 1

NON-STANDARDIZED PROFIT SHARING/401(K) PLAN

1.01.   PLAN INFORMATION

(a) Name of Plan:

This is the Gregg Appliances, Inc. Employees Retirement Plan (the “Plan”)

(b) Type of Plan:

(1)	¨	401(k) Only
(2)	þ	401(k) and Profit Sharing
(3)	¨	Profit Sharing Only

(c) Administrator Name (if not the Employer):

Address:

Telephone Number:

The Administrator is the agent for service of legal process for the Plan.

(d) Plan Year End (month/day):                                 12/31

(e) Three Digit Plan Number:                                     001

(f) Limitation Year (check one):

(1)	þ	Calendar Year
(2)	¨	Plan Year
(3)	¨	Other:

(g) Plan Status (check appropriate box(es)):

(1)	¨	New Plan Effective Date:
(2)	þ	Amendment Effective Date:                         2/1/2005

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

1

(A)	þ	an amendment and restatement of a Basic Plan Document No. 02 Adoption Agreement previously executed by the Employer; or
(B)	¨	a conversion to a Basic Plan Document No. 02 Adoption Agreement.

     The original effective date of the Plan: 1/1/1990

(3)	¨	This is an amendment and restatement of the Plan and the Plan was not amended prior to the effective date specified in Subsection 1.01(g)(2) above to comply with the requirements of the Acts specified in the Snap Off Addendum to the Adoption Agreement. The provisions specified in the Snap Off Addendum are effective as of the dates specified in the Snap Off Addendum, which dates may be prior to the Amendment Effective Date. Please read and complete, if necessary, the Snap Off Addendum to the Adoption Agreement.
(4)	¨	Special Effective Dates - Certain provisions of the Plan shall be effective as of a date other than the date specified above. Please complete the Special Effective Dates Addendum to the Adoption Agreement indicating the affected provisions and their effective dates.
(5)	¨	Plan Merger Effective Dates. Certain plan(s) were merged into the Plan and certain provisions of the Plan are effective with respect to the merged plan(s) as of a date other than the date specified above. Please complete the Special Effective Dates Addendum to the Adoption Agreement indicating the plan(s) that have merged into the Plan and the effective date(s) of such merger(s).

1.02.   EMPLOYER

(a)	Employer Name:	Gregg Appliances, Inc.
	Address:	4151 East 96th Street
		Indianapolis, IN 46240
	Contact’s Name:	Ms. Julie McKinney
	Telephone Number:	(317) 571-7799 Ext. 1135

(1)	Employer’s Tax Identification Number:	35-1049508
(2)	Employer’s fiscal year end:	3/31
(3)	Date business commenced:	1/1/1955

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

2

(b) The term “Employer” includes the following Related Employer(s) (as defined in Subsection 2.0I(rr)) (list each participating Related Employer and its Employer Tax Identification Number):

1.03. TRUSTEE

(a)	Trustee Name:	Fidelity Management Trust Company
	Address:	82 Devonshire Street
		Boston, MA 02109

1.04. COVERAGE

All Employees who meet the conditions specified below shall be eligible to participate in the Plan:

(a) Age Requirement (check one):

(1)	¨	no age requirement.
(2)	þ	must have attained age: 21.0 (not to exceed 21).

(b) Eligibility Service Requirement

(1)	Eligibility to Participate in Plan (check one):
	(A)	¨	no Eligibility Service requirement.
	(B)	¨	(not to exceed 11) months of Eligibility Service requirement (no minimum number Hours of Service can be required).
	(C)	þ	one year of Eligibility Service requirement (at least 1,000 Hours of Service are required during the Eligibility Computation Period).
	(D)	¨	two years of Eligibility Service requirement (at least 1,000 Hours of Service are required during each Eligibility Computation Period). (Do not select if Option 1.01(b)(1), 401(k) Only, is checked, unless a different Eligibility Service requirement applies to Deferral Contributions under Option 1.04(b)(2).)

Note: If the Employer selects the two year Eligibility Service requirement, then contributions subject to such Eligibility Service requirement must be 100% vested when made.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

3

	(2)	¨	Special Eligibility Service requirement for Deferral Contributions and/or Matching Employer Contributions:
		(A)	The special Eligibility Service requirement applies to (check the appropriate box(es)):
			(i)	¨	Deferral Contributions.
			(ii)	¨	Matching Employer Contributions.
		(B)	The special Eligibility Service requirement is:                      (Fill in (A), (B), or (C) from Subsection 1.04 (b)(1) above).
(c)	Eligible Class of Employees (check one):
	Note: The Plan may not cover employees who are residents of Puerto Rico. These employees are automatically excluded from the eligible class, regardless of the Employer’s selection under this Subsection 1.04(c).
	(1)	¨	includes all Employees of the Employer.
	(2)	þ	includes all Employees of the Employer except for (check the appropriate box(es)):
		(A)	¨	employees covered by a collective bargaining agreement.
		(B)	¨	Highly Compensated Employees as defined in Code Section 414(q).
		(C)	¨	Leased Employees as defined in Subsection 2.01(cc).
		(D)	¨	nonresident aliens who do not receive any earned income from the Employer which constitutes United States source income.
		(E)	þ	other: Excludes employees of Successor Company and its affiliates who are not employees of Gregg Appliances, Inc.
			Note: The Employer should exercise caution when excluding employees from participation in the Plan. Exclusion of employees may adversely affect the Plan’s satisfaction of the minimum coverage requirements, as provided in Code Section 410(b).
(d)	The Entry Dates shall be (check one):
	(1)	¨	immediate upon meeting the eligibility requirements specified in Subsections 1.04(a), (b), and (c).
	(2)	¨	the first day of each Plan Year and the first day of the seventh month of each Plan Year.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

4

	(3)	þ	the first day of each Plan Year and the first day of the fourth, seventh, and tenth months of each Plan Year.
	(4)	¨	the first day of each month.
	(5)	¨	the first day of each Plan Year. (Do not select if there is an Eligibility Service requirement of more than six months in Subsection I.04(b) or if there is an age requirement of more than 20 1/2 in Subsection I.04(a).)
(e)	¨	Special Entry Date(s) - In addition to the Entry Dates specified in Subsection 1.04(d) above, the following special Entry Date(s) apply for Deferral and/or Matching Employer Contributions. (Special Entry Dates may only be selected if Option I.04(b)(2), special Eligibility Service requirement, is checked. The same Entry Dates must be selected for contributions that are subject to the same Eligibility Service requirements.)
	(1)	The special Entry Date(s) shall apply to (check the appropriate box(es)):
		(A)	¨	Deferral Contributions.
		(B)	¨	Matching Employer Contributions.
	(2)	The special Entry Date(s) shall be:                      (Fill in (1), (2), (3), (4), or (5) from Subsection 1.04(d) above).
(f)	Date of Initial Participation - An Employee shall become a Participant unless excluded by Subsection 1.04(c) above on the Entry Date immediately following the date the Employee completes the service and age requirement(s) in Subsections 1.04(a) and (b), if any, except (check one):
	(1)	þ	no exceptions.
	(2)	¨	Employees employed on the Effective Date in Subsection 1.01(g)(1) or (2) shall become Participants on that date.
	(3)	¨	Employees who meet the age and service requirement(s) of Subsections 1.04(a) and (b) on the Effective Date in Subsection 1.01(g)(1) or (2) shall become Participants on that date.

1.05. COMPENSATION

Compensation for purposes of determining contributions shall be as defined in Section 5.02, modified as provided below.

(a) Compensation Exclusions: Compensation shall exclude the item(s) listed below for purposes of determining Deferral Contributions, Employee Contributions, if any, and Qualified Nonelective Employer Contributions, or, if Subsection 1.01(b)(3), Profit Sharing Only, is selected, Nonelective Employer Contributions. Unless otherwise indicated in Subsection 1.05(b), these exclusions shall also apply in determining all other Employer-provided contributions. (Check the

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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	appropriate box(es); Options (2), (3), (4), (5), and (6) may not be elected with respect to Deferral Contributions if Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, is checked):
	(1)	þ	No exclusions.
	(2)	¨	Overtime Pay.
	(3)	¨	Bonuses.
	(4)	¨	Commissions.
	(5)	¨	The value of a qualified or a non-qualified stock option granted to an Employee by the Employer to the extent such value is includable in the Employee’s taxable income.
	(6)	¨	Severance Pay.
(b)	Special Compensation Exclusions for Determining Employer-Provided Contributions in Article 5 (either (1) or (2) may be selected, but not both):
	(1)	¨	Compensation for purposes of determining Matching, Qualified Matching, and Nonelective Employer Contributions shall exclude:                          (Fill in number(s) for item(s) from Subsection 1.05(a) above that apply.)
	(2)	¨	Compensation for purposes of determining Nonelective Employer Contributions only shall exclude:                      (Fill in number(s) for item(s) from Subsection 1.05(a) above that apply.)
		Note: If the Employer selects Option (2), (3), (4), (5), or (6) with respect to Nonelective Employer Contributions, Compensation must be tested to show that it meets the requirements of Code Section 414(s) or 401(a)(4). These exclusions shall not apply for purposes of the “Top Heavy” requirements in Section 15.03, for allocating safe harbor Matching Employer Contributions if Subsection 1.10(a)(3) is selected, for allocating safe harbor Nonelective Employer Contributions if Subsection 1.11(a)(3) is selected, or for allocating non-safe harbor Nonelective Employer Contributions if the Integrated Formula is elected in Subsection 1.11(b)(2).
(c)	Compensation for the First Year of Participation - Contributions for the Plan Year in which an Employee first becomes a Participant shall be determined based on the Employee’s Compensation (check one):
	(1)	¨	for the entire Plan Year.
	(2)	þ	for the portion of the Plan Year in which the Employee is eligible to participate in the Plan.
	Note: If the initial Plan Year of a new Plan consists of fewer than 12 months from the Effective Date in Subsection 1.01(g)(1) through the end of the initial Plan Year, Compensation for purposes

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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of determining the amount of contributions, other than non-safe harbor Nonelective Employer Contributions, under the Plan shall be the period from such Effective Date through the end of the initial year. However, for purposes of determining the amount of non-safe harbor Nonelective Employer Contributions and for other Plan purposes, where appropriate, the full 12-consecutive-month period ending on the last day of the initial Plan Year shall be used.

1.06.  TESTING RULES

(a) ADP/ACP Present Testing Method - The testing method for purposes of applying the “ADP” and “ACP” tests described in Sections 6.03 and 6.06 of the Plan shall be the (check one):

(1)	þ	Current Year Testing Method - The “ADP” or “ACP” of Highly Compensated Employees for the Plan Year shall be compared to the “ADP” or “ACP” of Non-Highly Compensated Employees for the same Plan Year. (Must choose if Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, or Option 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked.)
(2)	¨	Prior Year Testing Method - The “ADP” or “ACP” of Highly Compensated Employees for the Plan Year shall be compared to the “ADP” or “ACP” of Non-Highly Compensated Employees for the immediately preceding Plan Year. (Do not choose if Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, or Option 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked.)
(3)	¨	Not applicable. (Only if Option 1.01(b)(3), Profit Sharing Only, is checked or Option 1.04(c)(2)(B), excluding all Highly Compensated Employees from the eligible class of Employees, is checked.)

Note: Restrictions apply on elections to change testing methods that are made after the end of the GUST remedial amendment period.

(b) First Year Testing Method - If the first Plan Year that the Plan, other than a successor plan, permits Deferral Contributions or provides for either Employee or Matching Employer Contributions, occurs on or after the Effective Date specified in Subsection 1.01(g), the “ADP” and/or “ACP” test for such first Plan Year shall be applied using the actual “ADP” and/or “ACP” of Non-Highly Compensated Employees for such first Plan Year, unless otherwise provided below.

(1) ¨ The “ADP” and/or “ACP” test for the first Plan Year that the Plan permits Deferral Contributions or provides for either Employee or Matching Employer Contributions shall be applied assuming a 3% “ADP” and/or “ACP” for Non-Highly Compensated Employees. (Do not choose unless Plan uses prior year testing method described in Subsection 1.06(a)(2).)

(c) HCE Determinations: Look Back Year - The look back year for purposes of determining which Employees are Highly Compensated Employees shall be the 12-consecutive-month period preceding the Plan Year, unless otherwise provided below.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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(1) ¨ Calendar Year Determination - The look back year shall be the calendar year beginning within the preceding Plan Year. (Do not choose if the Plan Year is the calendar year.)

(d) HCE Determinations: Top Paid Group Election - All Employees with Compensation exceeding $80,000 (as indexed) shall be considered Highly Compensated Employees, unless Top Paid Group Election below is checked.

(1) ¨ Top Paid Group Election - Employees with Compensation exceeding $80,000 (as indexed) shall be considered Highly Compensated Employees only if they are in the top paid group (the top 20% of Employees ranked by Compensation).

Note: Effective for determination years beginning on or after January 1, 1998, if the Employer elects Option 1.06(c)(1) and/or 1.06(d)(1), such election(s) must apply consistently to all retirement plans of the Employer for determination years that begin with or within the same calendar year (except that Option 1.06(c)(1), Calendar Year Determination, shall not apply to calendar year plans).

1.07.  DEFERRAL CONTRIBUTIONS

(a)	þ	Deferral Contributions - Participants may elect to have a portion of their Compensation contributed to the Plan on a before-tax basis pursuant to Code Section 401(k).
	(1)	Regular Contributions - The Employer shall make a Deferral Contribution in accordance with Section 5.03 on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the payroll period in question, not to exceed 60% of Compensation for that period.

Note: For Limitation Years beginning prior to 2002, the percentage elected above must be less than 25% in order to satisfy the limitation on annual additions under Code Section 415 if other types of contributions are provided under the Plan.

(A)	¨	Instead of specifying a percentage of Compensation, a Participant’s salary reduction agreement may specify a dollar amount to be contributed each payroll period, provided such dollar amount does not exceed the maximum percentage of Compensation specified in Subsection 1.07(a)(1) above.
(B)	A Participant may increase or decrease, on a prospective basis, his salary reduction agreement percentage (check one):

(i)	þ	as of the beginning of each payroll period.
(ii)	¨	as of the first day of each month.
(iii)	¨	as of the next Entry Date. (Do not select if immediate entry is elected with respect to Deferral Contributions in Subsection I.04(d) or 1.04(e).)

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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(iv)	¨	other. (Specify, but must be at least once per Plan Year)
		____________________________________________________________________________
		____________________________________________________________________________

Note: Notwithstanding the Employer’s election hereunder, if Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, or 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked, the Plan provides that an Active Participant may change his salary reduction agreement percentage for the Plan Year within a reasonable period (not fewer than 30 days) of receiving the notice described in Section 6.10.

(C) A Participant may revoke, on a prospective basis, a salary reduction agreement at any time upon proper notice to the Administrator but in such case may not file a new salary reduction agreement until (check one):

(i)	¨	the first day of the next Plan Year.
(ii)	¨	any subsequent Entry Date. (Do not select if immediate entry is elected with respect to Deferral Contributions in Subsection 1.04(d) or I.04(e).)
(iii)	þ	other. (Specify, but must be at least once per Plan Year) beginning of a payroll period

(2)	¨	Additional Deferral Contributions - The Employer may allow Participants upon proper notice and approval to enter into a special salary reduction agreement to make additional Deferral Contributions in an amount up to 100% of their Compensation for the payroll period(s) designated by the Employer.
(3)	¨	Bonus Contributions - The Employer may allow Participants upon proper notice and approval to enter into a special salary reduction agreement to make Deferral Contributions in an amount up to 100% of any Employer paid cash bonuses designated by the Employer on a uniform and non-discriminatory basis that are made for such Participants during the Plan Year. The Compensation definition elected by the Employer in Subsection 1.05(a) must include bonuses if bonus contributions are permitted.

Note: A Participant’s contributions under Subsection 1.07(a)(2) and/or (3) may not cause the Participant to exceed the percentage limit specified by the Employer in Subsection 1.07(a)(1) for the full Plan Year. If the Administrator anticipates that the Plan will not satisfy the “ADP” and/or “ACP” test for the year, the Administrator may reduce the rate of Deferral Contributions of Participants who are Highly Compensated Employees to an amount objectively determined by the Administrator to be necessary to satisfy the “ADP” and/or “ACP” test.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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1.08.   EMPLOYEE CONTRIBUTIONS (AFTER-TAX CONTRIBUTIONS)

(a) ¨ Employee Contributions - Either (1) Participants will be permitted to contribute amounts to the Plan on an after-tax basis or (2) the Employer maintains frozen Employee Contributions Accounts (check one):

(1)	¨	Future Employee Contributions - Participants may make voluntary, non-deductible, after-tax Employee Contributions pursuant to Section 5.04 of the Plan. (Only if Option 1.07(a), Deferral Contributions, is checked.)
(2)	¨	Frozen Employee Contributions - Participants may not currently make after-tax Employee Contributions to the Plan, but the Employer does maintain frozen Employee Contributions Accounts.

1.09.   QUALIFIED NONELECTIVE CONTRIBUTIONS

  (a) Qualified Nonelective Employer Contributions - If Option 1.07(a), Deferral Contributions, is checked, the Employer may contribute an amount which it designates as a Qualified Nonelective Employer Contribution to be included in the “ADP” or “ACP” test. Unless otherwise provided below, Qualified Nonelective Employer Contributions shall be allocated to Participants who were eligible to participate in the Plan at any time during the Plan Year and are Non-Highly Compensated Employees either (A) in the ratio which each Participant’s “testing compensation”, as defined in Subsection 6.01(t), for the Plan Year bears to the total of all Participants’ “testing compensation” for the Plan Year or (B) as a flat dollar amount.

(1) ¨ Qualified Nonelective Employer Contributions shall be allocated to Participants as a percentage of the lowest paid Participant’s “testing compensation”, as defined in Subsection 6.01(t), for the Plan Year up to the lower of (A) the maximum amount contributable under the Plan or (B) the amount necessary to satisfy the “ADP” or “ACP” test. If any Qualified Nonelective Employer Contribution remains, allocation shall continue in the same manner to the next lowest paid Participants until the Qualified Nonelective Employer Contribution is exhausted.

1.10.   MATCHING EMPLOYER CONTRIBUTIONS (Only if Option 1.07(a), Deferral Contributions, is checked)

  (a) þ Basic Matching Employer Contributions (check one):

(1) ¨ Non-Discretionary Matching Employer Contributions - The Employer shall make a basic Matching Employer Contribution on behalf of each Participant in an amount equal to the following percentage of a Participant’s Deferral Contributions during the Contribution Period (check (A) or (B) and, if applicable, (C)):

Note: Effective for Plan Years beginning on or after January 1, 1999, if the Employer elected Option 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions and meets the requirements for deemed satisfaction of the “ADP” test in Section 6.10 for a Plan Year,

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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the Plan will also be deemed to satisfy the “ACP” test for such Plan Year with respect to Matching Employer Contributions if Matching Employer Contributions hereunder meet the requirements in Section 6.11.

(A)	¨        Single Percentage Match:             %
(B)	¨        Tiered Match:
	%of the first             % of the Active Participant’s Compensation contributed to the Plan,
	%of the next             % of the Active Participant’s Compensation contributed to the Plan,
	%of the next             % of the Active Participant’s Compensation contributed to the Plan.
	Note: The percentages specified above for basic Matching Employer Contributions may not increase as the percentage of Compensation contributed increases.

(C)	¨		Limit on Non-Discretionary Matching Employer Contributions (check the appropriate box(es)):
	(i)	¨	Deferral Contributions in excess of             % of the Participant’s Compensation for the period in question shall not be considered for non-discretionary Matching Employer Contributions.
		Note: If the Employer elected a percentage limit in (i) above and requested the Trustee to account separately for matched and unmatched Deferral Contributions made to the Plan, the non-discretionary Matching Employer Contributions allocated to each Participant must be computed, and the percentage limit applied, based upon each payroll period.
	(ii)	¨	Matching Employer Contributions for each Participant for each Plan Year shall be limited to $                    .

(2) þ Discretionary Matching Employer Contributions - The Employer may make a basic Matching Employer Contribution on behalf of each Participant in an amount equal to the percentage declared for the Contribution Period, if any, by a Board of Directors’ Resolution (or by a Letter of Intent for a sole proprietor or partnership) of the Deferral Contributions made by each Participant during the Contribution Period. The Board of Directors’ Resolution (or Letter of Intent, if applicable) may limit the Deferral Contributions matched to a specified percentage of Compensation or limit the amount of the match to a specified dollar amount.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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(A) ¨ 4% Limitation on Discretionary Matching Employer Contributions for Deemed Satisfaction of “ACP” Test - In no event may the dollar amount of the discretionary Matching Employer Contribution made on a Participant’s behalf for the Plan Year exceed 4% of the Participant’s Compensation for the Plan Year. (Only if Option 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked.)

(3) ¨ Safe Harbor Matching Employer Contributions - Effective only for Plan Years beginning on or after January 1, 1999, if the Employer elects one of the safe harbor formula Options provided in the Safe Harbor Matching Employer Contribution Addendum to the Adoption Agreement and provides written notice each Plan Year to all Active Participants of their rights and obligations under the Plan, the Plan shall be deemed to satisfy the “ADP” test and, under certain circumstances, the “ACP” test.

(b)	¨	Additional Matching Employer Contributions - The Employer may at Plan Year end make an additional Matching Employer Contribution equal to a percentage declared by the Employer, through a Board of Directors’ Resolution (or by a Letter of Intent for a sole proprietor or partnership), of the Deferral Contributions made by each Participant during the Plan Year. (Only if Option 1.10(a)(1) or (3) is checked.) The Board of Directors’ Resolution (or Letter of Intent, if applicable) may limit the Deferral Contributions matched to a specified percentage of Compensation or limit the amount of the match to a specified dollar amount.
	(1)	¨	4% Limitation on Additional Matching Employer Contributions for Deemed Satisfaction of “ACP” Test - In no event may the dollar amount of the additional Matching Employer Contribution made on a Participant’s behalf for the Plan Year exceed 4% of the Participant’s Compensation for the Plan Year. (Only if Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, or Option 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions is checked.)
	Note: If the Employer elected Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, above and wants to be deemed to have satisfied the “ADP” test for Plan Years beginning on or after January 1, 1999, the additional Matching Employer Contribution must meet the requirements of Section 6.10. In addition to the foregoing requirements, if the Employer elected either Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, or Option 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions, and wants to be deemed to have satisfied the “ACP” test with respect to Matching Employer Contributions for the Plan Year, the Deferral Contributions matched may not exceed the limitations in Section 6.11.
(c)	Contribution Period for Matching Employer Contributions - The Contribution Period for purposes of calculating the amount of basic Matching Employer Contributions described in Subsection 1.10(a) is:
	(1)	¨	each calendar month.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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	(2)	¨	each Plan Year quarter.
	(3)	¨	each Plan Year.
	(4)	þ	each payroll period.
	The Contribution Period for additional Matching Employer Contributions described in Subsection 1.10(b) is the Plan Year.
(d)	Continuing Eligibility Requirement(s) - A Participant who makes Deferral Contributions during a Contribution Period shall only be entitled to receive Matching Employer Contributions under Section 1.10 for that Contribution Period if the Participant satisfies the following requirement(s) (Check the appropriate box(es). Options (3) and (4) may not be elected together; Option (5) may not be elected with Option (2), (3), or (4); Options (2), (3), (4), (5), and (7) may not be elected with respect to basic Matching Employer Contributions if Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, is checked):
	(1)	þ	No requirements.
	(2)	¨	Is employed by the Employer or a Related Employer on the last day of the Contribution Period.
	(3)	¨	Earns at least 501 Hours of Service during the Plan Year. (Only if the Contribution Period is the Plan Year.)
	(4)	¨	Earns at least 1,000 Hours of Service during the Plan Year. (Only if the Contribution Period is the Plan Year.)
	(5)	¨	Either earns at least 501 Hours of Service during the Plan Year or is employed by the Employer or a Related Employer on the last day of the Plan Year. (Only if the Contribution Period is the Plan Year.)
	(6)	¨	Is not a Highly Compensated Employee for the Plan Year.
	(7)	¨	Is not a partner or a member of the Employer, if the Employer is a partnership or an entity taxed as a partnership.
	(8)	¨	Special continuing eligibility requirement(s) for additional Matching Employer Contributions. (Only if Option 1.10(b), Additional Matching Employer Contributions, is checked.)
		(A)	The continuing eligibility requirement(s) for additional Matching Employer Contributions is/are: (Fill in number of applicable eligibility requirement(s) from above.)
	Note: If Option (2), (3), (4), or (5) above is selected, then Matching Employer Contributions can only be funded by the Employer after the Contribution Period or Plan Year ends. Matching Employer Contributions funded during the Contribution Period or Plan Year shall not be subject

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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	to the eligibility requirements of Option (2), (3), (4), or (5). If Option (2), (3), (4), or (5) is adopted during a Contribution Period or Plan Year, as applicable, such Option shall not become effective until the first day of the next Contribution Period or Plan Year.
(e)	¨	Qualified Matching Employer Contributions - Prior to making any Matching Employer Contribution hereunder (other than a safe harbor Matching Employer Contribution), the Employer may designate all or a portion of such Matching Employer Contribution as a Qualified Matching Employer Contribution that may be used to satisfy the “ADP” test on Deferral Contributions and excluded in applying the “ACP” test on Employee and Matching Employer Contributions. Unless the additional eligibility requirement is selected below, Qualified Matching Employer Contributions shall be allocated to all Participants who meet the continuing eligibility requirement(s) described in Subsection 1.10(d) above for the type of Matching Employer Contribution being characterized as a Qualified Matching Employer Contribution.
	(1)	¨	To receive an allocation of Qualified Matching Employer Contributions a Participant must also be a Non-Highly Compensated Employee for the Plan Year.
	Note: Qualified Matching Employer Contributions may not be excluded in applying the “ACP” test for a Plan Year if the Employer elected Option 1.10(a)(3), Safe Harbor Matching Employer Contributions, or Option 1.11(a)(3), Safe Harbor Formula, with respect to Nonelective Employer Contributions, and the “ADP” test is deemed satisfied under Section 6.10 for such Plan Year.

1.11.   NONELECTIVE EMPLOYER CONTRIBUTIONS

Note: An Employer may elect both a fixed formula and a discretionary formula. If both are selected, the discretionary formula shall be treated as an additional Nonelective Employer Contribution and allocated separately in accordance with the allocation formula selected by the Employer.
(a)	¨	Fixed Formula (An Employer may elect both the Safe Harbor Formula and one of the other fixed formulas. Otherwise, the Employer may only select one of the following.)
	(1)	¨	Fixed Percentage Employer Contribution - For each Plan Year, the Employer shall contribute for each eligible Active Participant an amount equal to             % (not to exceed 15% for Plan Years beginning prior to 2002 and 25% for Plan Years beginning on or after January 1, 2002) of such Active Participant’s Compensation.
	(2)	¨	Fixed Flat Dollar Employer Contribution - The Employer shall contribute for each eligible Active Participant an amount equal to $            .
		The contribution amount is based on an Active Participant’s service for the following period:
		(A)	¨   Each paid hour.
		(B)	¨   Each payroll period.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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		(C)	¨        Each Plan Year.
		(D)	¨        Other:
	(3)	¨	Safe Harbor Formula - Effective only with respect to Plan Years that begin on or after January 1, 1999, the Nonelective Employer Contribution specified in the Safe Harbor Nonelective Employer Contribution Addendum is intended to satisfy the safe harbor contribution requirements under the Code such that the “ADP” test (and, under certain circumstances, the “ACP” test) is deemed satisfied. Please complete the Safe Harbor Nonelective Employer Contribution Addendum to the Adoption Agreement. (Choose only if Option 1.07(a), Deferral Contributions, is checked.)
(b)	þ	Discretionary Formula - The Employer may decide each Plan Year whether to make a discretionary Nonelective Employer Contribution on behalf of eligible Active Participants in accordance with Section 5.10. Such contributions shall be allocated to eligible Active Participants based upon the following (check (1) (or (2)):
	(1)	þ	Non-Integrated Allocation Formula - In the ratio that each eligible Active Participant’s Compensation bears to the total Compensation paid to all eligible Active Participants for the Plan Year.
	(2)	¨	Integrated Allocation Formula - As (A) a percentage of each eligible Active Participant’s Compensation plus (B) a percentage of each eligible Active Participant’s Compensation in excess of the “integration level” as defined below. The percentage of Compensation in excess of the “integration level” shall be equal to the lesser of the percentage of the Active Participant’s Compensation allocated under (A) above or the “permitted disparity limit” as defined below.
		Note: An Employer that has elected the Safe Harbor formula in Subsection 1.11(a)(3) above may not take Nonelective Employer Contributions made to satisfy the safe harbor into account in applying the integrated allocation formula described above. “Integration level” means the Social Security taxable wage base for the Plan Year, unless the Employer elects a lesser amount in (A) or (B) below.
		(A)	% (not to exceed 100%) of the Social Security taxable wage base for the Plan Year, or
		(B)	$             (not to exceed the Social Security taxable wage base).

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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“Permitted disparity limit” means the percentage provided by the following table:

The “Integration Level” is         % of the Taxable Wage Base	The “Permitted Disparity Limit” is
20% or less	5.7%
More than 20%, but not more than 80%	4.3%
More than 80%, but less than 100%	5.4%
100%	5.7%

Note: An Employer who maintains any other plan that provides for Social Security Integration (permitted disparity) may not elect Option 1.11(b)(2).

(c) Continuing Eligibility Requirement(s) - A Participant shall only be entitled to receive Nonelective Employer Contributions for a Plan Year under this Section 1.11 if the Participant satisfies the following requirement(s) (Check the appropriate box(es) - Options (3) and (4) may not be elected together; Option (5) may not be elected with Option (2), (3), or (4); Options (2), (3), (4), (5), and (7) may not be elected with respect to Nonelective Employer Contributions under the fixed formula if Option 1.11(a)(3), Safe Harbor Formula, is checked):

(1)	¨	No requirements.
(2)	¨	Is employed by the Employer or a Related Employer on the last day of the Plan Year.
(3)	¨	Earns at least 501 Hours of Service during the Plan Year.
(4)	¨	Earns at least 1,000 Hours of Service during the Plan Year.
(5)	þ	Either earns at least 501 Hours of Service during the Plan Year or is employed by the Employer or a Related Employer on the last day of the Plan Year.
(6)	¨	Is not a Highly Compensated Employee for the Plan Year.
(7)	¨	Is not a partner or a member of the Employer, if the Employer is a partnership or an entity taxed as a partnership.
(8)	¨	Special continuing eligibility requirement(s) for discretionary Nonelective Employer Contributions. (Only if both Options I.11(a) and (b) are checked.)
	(A)	The continuing eligibility requirement(s) for discretionary Nonelective Employer Contributions is/are:              (Fill in number of applicable eligibility requirement(s) from above.)

Note: If Option (2), (3), (4), or (5) above is selected then Nonelective Employer Contributions can only be funded by the Employer after the Plan Year ends. Nonelective Employer Contributions funded during the Plan Year shall not be subject to the eligibility requirements of Option (2), (3), (4), or (5). If Option (2), (3), (4), or (5) is adopted during a Plan Year, such Option shall not become effective until the first day of the next Plan Year.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

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1.12.  EXCEPTIONS TO CONTINUING ELIGIBILITY REQUIREMENTS

¨ Death, Disability, and Retirement Exception to Eligibility Requirements - Active Participants who do not meet any last day or Hours of Service requirement under Subsection 1.10(d) or 1.11(c) because they become disabled, as defined in Section 1.14, retire, as provided in Subsection 1.13(a), (b), or (c), or die shall nevertheless receive an allocation of Nonelective Employer and/or Matching Employer Contributions. No Compensation shall be imputed to Active Participants who become disabled for the period following their disability.

1.13.  RETIREMENT

(a) The Normal Retirement Age under the Plan is (check one):

	(1)	þ	age 65.
	(2)	¨	age          (specify between 55 and 64).
	(3)	¨	later of age          (not to exceed 65) or the fifth anniversary of the Participant’s Employment Commencement Date.
(b)	þ	The Early Retirement Age is the first day of the month after the Participant attains age 55.0 (specify 55 or greater) and completes 6.0 years of Vesting Service.
	Note: If this Option is elected, Participants who are employed by the Employer or a Related Employer on the date they reach Early Retirement Age shall be 100% vested in their Accounts under the Plan.
(c)	þ	A Participant who becomes disabled, as defined in Section 1.14, is eligible for disability retirement.
	Note: If this Option is elected, Participants who are employed by the Employer or a Related Employer on the date they reach Early Retirement Age shall be 100% vested in their Accounts under the Plan.

1.14.  DEFINITION OF DISABLED

A Participant is disabled if he/she (check the appropriate box(es)):

(a)	¨	satisfies the requirements for benefits under the Employer’s long-term disability plan.
(b)	þ	satisfies the requirements for Social Security disability benefits.
(c)	¨	is determined to be disabled by a physician approved by the Employer.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

17

1.15.  VESTING

A Participant’s vested interest in Matching Employer Contributions and/or Nonelective Employer Contributions, other than Safe Harbor Matching Employer and/or Nonelective Employer Contributions elected in Subsection 1.10(a)(3) or 1.11(a)(3), shall be based upon his years of Vesting Service and the schedule(s) selected below, except as provided in Subsection 1.21(d) or in the Vesting Schedule Addendum to the Adoption Agreement.

(a)	¨	Years of Vesting Service shall exclude:
	(1)	¨	for new plans, service prior to the Effective Date as defined in Subsection 1.01(g)(1).
	(2)	¨	for existing plans converting from another plan document, service prior to the original Effective Date as defined in Subsection 1.01(g)(2).
(b)	Vesting Schedule(s)
	Note: The vesting schedule selected below applies only to Nonelective Employer Contributions and Matching Employer Contributions other than safe harbor contributions under Option 1.11(a)(3) or Option 1.10(a)(3). Safe harbor contributions under Options 1.11(a)(3) and 1.10(a)(3) are always 100% vested immediately.

(1)    Nonelective Employer Contributions (check one)	(2)    Matching Employer Contributions (check one):
(A)   ¨ N/A - No Nonelective	(A)   ¨ N/A - - No Matching
(B)   ¨ 100% Vesting immediately	(B)   ¨ 100% Vesting immediately
(C)   ¨ 3 year cliff (see C below)	(C)   ¨ 3 year cliff (see C below)
(D)   ¨ 5 year cliff (see D below)	(D)   ¨ 5 year cliff (see D below)
(E)   þ 6 year graduated (see E below)	(E)   þ 6 year graduated (see E below)
(F)   ¨ 7 year graduated (see F below)	(F)   ¨ year graduated (see F below)
(G)   ¨ Other vesting         (Complete G1 below)	(G)   ¨ Other vesting         (Complete G1 below)

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

18

	Applicable Vesting Schedule(s)
Years of Vesting Service	C		D		E		F		G1		G2
0	0	%	0	%	0	%	0	%	____	%	____	%
1	0	%	0	%	0	%	0	%	____	%	____	%
2	0	%	0	%	20	%	0	%	____	%	____	%
3	100	%	0	%	40	%	20	%	____	%	____	%
4	100	%	0	%	60	%	40	%	____	%	____	%
5	100	%	100	%	80	%	60	%	____	%	____	%
6	100	%	100	%	100	%	80	%	____	%	____	%
7 or more	100	%	100	%	100	%	100	%	100	%	100	%

Note: A schedule elected under G1 or G2 above must be at least as favorable as one of the schedules in C, D, E or F above.

Note: If the Plan is being amended to provide a more restrictive vesting schedule, the more favorable vesting schedule shall continue to apply to Participants who are Active Participants immediately prior to the later of (1) the effective date of the amendment or (2) the date the amendment is adopted.

(c)	¨	A vesting schedule more favorable than the vesting schedule(s) selected above applies to certain Participants. Please complete the Vesting Schedule Addendum to the Adoption Agreement.
(d)	Application of Forfeitures - If a Participant forfeits any portion of his non-vested Account balance as provided in Section 6.02, 6.04, 6.07, or 11.08, such forfeitures shall be (check one):
	(1)	¨	N/A - Either (A) no Matching Employer Contributions are made with respect to Deferral Contributions under the Plan and all other Employer Contributions are 100% vested when made or (B) there are no Employer Contributions under the Plan.
	(2)	þ	applied to reduce Employer contributions.
	(3)	¨	allocated among the Accounts of eligible Participants in the manner provided in Section 1.11. (Only if Option I.11(a) or (b) is checked.)

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

19

1.16.  PREDECESSOR EMPLOYER SERVICE

þ Service for purposes of eligibility in Subsection 1.04(b) and vesting in Subsection 1.15(b) of this Plan shall include service with the following predecessor employer(s):

J.D. Rich, Inc.

1.17.  PARTICIPANT LOANS

Participant loans (check one):

(a)	þ	are allowed in accordance with Article 9 and loan procedures outlined in the Service Agreement
(b)	¨	are not allowed.

1.18.  IN-SERVICE WITHDRAWALS

Participants may make withdrawals prior to termination of employment under the following circumstances (check the appropriate box(es)):

(a)	þ	Hardship Withdrawals - Hardship withdrawals from a Participant’s Deferral Contributions Account shall be allowed in accordance with Section 10.05, subject to a $500 minimum amount.
(b)	þ	Age 59 1/2 - Participants shall be entitled to receive a distribution of all or any portion of the following Accounts upon attainment of age 59 1/2 (check one):
	(1)	¨        Deferral Contributions Account.
	(2)	þ      All vested account balances.

(c) Withdrawal of Employee Contributions and Rollover Contributions -

(1) Unless otherwise provided below, Employee Contributions may be withdrawn in accordance with Section 10.02 at any time.

(A) ¨ Employees may not make withdrawals of Employee Contributions more frequently than:                                                  .

(2) Rollover Contributions may be withdrawn in accordance with Section 10.03 at any time.

(d)	¨	Protected In-Service Withdrawal Provisions - Check if the Plan was converted by plan amendment or received transfer contributions from another defined contribution plan, and benefits under the other defined contribution plan were payable as (check the appropriate box(es)):
	(1)	¨	an in-service withdrawal of vested employer contributions maintained in a Participant’s Account (check (A) and/or (B)):
		(A)	¨        for at least              (24 or more) months.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

20

		(i)	¨	Special restrictions applied to such in-service withdrawals under the prior plan that the Employer wishes to continue under the Plan as restated hereunder. Please complete the Protected In-Service Withdrawals Addendum to the Adoption Agreement identifying the restrictions.
	(B)	¨	after the Participant has at least 60 months of participation.
		(i)	¨	Special restrictions applied to such in-service withdrawals under the prior plan that the Employer wishes to continue under the Plan as restated hereunder. Please complete the Protected In-Service Withdrawals Addendum to the Adoption Agreement identifying the restrictions.
(2)	¨	another in-service withdrawal option that is a “protected benefit” under Code Section 411(d)(6) or an in-service hardship withdrawal option not otherwise described in Section 1.18(a). Please complete the Protected In-Service Withdrawals Addendum to the Adoption Agreement identifying the in-service withdrawal option(s).

1.19.  FORM OF DISTRIBUTIONS

Subject to Section 13.01, 13.02 and Article 14, distributions under the Plan shall be paid as provided below. (Check the appropriate box(es) and, if any forms of payment selected in (b), (c) and/or (d) apply only to a specific class of Participants, complete Subsection (b) of the Forms of Payment Addendum.)

(a) Lump Sum Payments - Lump sum payments are always available under the Plan.

(b)	þ	Installment Payments - Participants may elect distribution under a systematic withdrawal plan (installments).
(c)	¨	Annuities (Check if the Plan is retaining any annuity form(s) of payment.)

(1) An annuity form of payment is available under the Plan for the following reason(s) (check (A) and/or (B), as applicable):

(A)	¨	As a result of the Plan’s receipt of a transfer of assets from another defined contribution plan or pursuant to the Plan terms prior to the Amendment Effective Date specified in Section 1.01(g)(2), benefits were previously payable in the form of an annuity that the Employer elects to continue to be offered as a form of payment under the Plan.
(B)	¨	The Plan received a transfer of assets from a defined benefit plan or another defined contribution plan that was subject to the minimum funding requirements of Code Section 412 and therefore an annuity form of payment is a protected benefit under the Plan in accordance with Code Section 411(d)(6).

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

21

(2) The normal form of payment under the Plan is (check (A) or (B)):

(A)	¨	A lump sum payment.
	(i)	Optional annuity forms of payment (check (I) and/or (II), as applicable). (Must check and complete (I) if a life annuity is one of the optional annuity forms of payment under the Plan.)
		(I)	¨	A married Participant who elects an annuity form of payment shall receive a qualified joint and        % (at least 50%) survivor annuity. An unmarried Participant shall receive a single life annuity, unless a different form of payment is specified below:
		(II)	¨	Other annuity form(s) of payment. Please complete Subsection (a) of the Forms of Payment Addendum describing the other annuity form(s) of payment available under the Plan.
(B)	¨	A life annuity (complete (i) and (ii) and check (iii) if applicable).
	(i)	The normal form for married Participants is a qualified joint and         % (at least 50%) survivor annuity. The normal form for unmarried Participants is a single life annuity, unless a different annuity form is specified below:
		___________________________________________
	(ii)	The qualified preretirement survivor annuity provided to a Participant’s spouse is purchased with ____% (at least 50%) of the Participant’s Account.
	(iii)	¨	Other annuity form(s) of payment. Please complete Subsection (a) of the Forms of Payment Addendum describing the other annuity form(s) of payment available under the Plan.

(d)	¨	Other Non-Annuity Form(s) of Payment - As a result of the Plan’s receipt of a transfer of assets from another plan or pursuant to the Plan terms prior to the Amendment Effective Date specified in 1.01(g)(2), benefits were previously payable in the following form(s) of payment not described in (a), (b) or (c) above and the Plan will continue to offer these form(s) of payment:
		________________________________________
(e)	¨	Eliminated Forms of Payment Not Protected Under Code Section 411(d)(6). Check if either (1) under the Plan terms prior to the Amendment Effective Date or (2) under the terms of another plan from which assets were transferred, benefits were payable in a form of payment that will cease to be offered after a specified date. Please complete

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

22

Subsection (c) of the Forms of Payment Addendum describing the forms of payment previously available and the effective date of the elimination of the form(s) of payment.

1.20.  TIMING OF DISTRIBUTIONS

Except as provided in Subsection 1.20(a) or (b) and the Postponed Distribution Addendum to the Adoption Agreement, distribution shall be made to an eligible Participant from his vested interest in his Account as soon as reasonably practicable following the date the Participant’s application for distribution is received by the Administrator.

(a) Required Commencement of Distribution - If a Participant does not elect to receive benefits as of an earlier date, as permitted under the Plan, distribution of a Participant’s Account shall begin as of the Participant’s Required Beginning Date.

(b) ¨ Postponed Distributions - Check if the Plan was converted by plan amendment from another defined contribution plan that provided for the postponement of certain distributions from the Plan to eligible Participants and the Employer wants to continue to administer the Plan using the postponed distribution provisions. Please complete the Postponed Distribution Addendum to the Adoption Agreement indicating the types of distributions that are subject to postponement and the period of postponement.

Note: An Employer may not provide for postponement of distribution to a Participant beyond the 60th day following the close of the Plan Year in which (1) the Participant attains Normal Retirement Age under the Plan, (2) the Participant’s 10th anniversary of participation in the Plan occurs, or (3) the Participant’s employment terminates, whichever is latest.

1.21.  TOP HEAVY STATUS

(a) The Plan shall be subject to the Top-Heavy Plan requirements of Article 15 (check one):

(1)	¨	for each Plan Year, whether or not the Plan is a “top-heavy plan” as defined in Subsection 15.01(f).
(2)	þ	for each Plan Year, if any, for which the Plan is a “top-heavy plan” as defined in Subsection 15.01(f).
(3)	¨	Not applicable. (Choose only if Plan covers only employees subject to a collective bargaining agreement)

(b) In determining whether the Plan is a “top-heavy plan” for an Employer with at least one defined benefit plan, the following assumptions shall apply:

(1)	¨	Interest rate:         % per annum.
(2)	¨	Mortality table:
(3)	þ	Not applicable. (Choose only if either (A) Plan covers only employees subject to a collective bargaining agreement or (B) Employer does not maintain and

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

23

has not maintained any defined benefit plan during the five-year period ending on the applicable “determination date”, as defined in Subsection 15.01(a).)

(c) If the Plan is or is treated as a “top-heavy plan” for a Plan Year, each non-key Employee shall receive an Employer Contribution of at least 5.0 (3, 4, 5, or 71/2) % of Compensation for the Plan Year in accordance with Section 15.03. The minimum Employer Contribution provided in this Subsection 1.21(c) shall be made under this Plan only if the Participant is not entitled to such contribution under another qualified plan of the Employer, unless the Employer elects otherwise below:

(1)	¨	The minimum Employer Contribution shall be paid under this Plan in any event.
(2)	¨	Another method of satisfying the requirements of Code Section 416. Please complete the 416 Contribution Addendum to the Adoption Agreement describing the way in which the minimum contribution requirements will be satisfied in the event the Plan is or is treated as a “top-heavy plan”.
(3)	¨	Not applicable. (Choose only if Plan covers only employees subject to a collective bargaining agreement.)

Note: The minimum Employer contribution may be less than the percentage indicated in Subsection 1.21(c) above to the extent provided in Section 15.03.

(d) If the Plan is or is treated as a “top-heavy plan” for a Plan Year, the following vesting schedule shall apply instead of the schedule(s) elected in Subsection 1.15(6) for such Plan Year and each Plan Year thereafter (check one):

(1)	¨	Not applicable. (Choose only if either (A) Plan provides for Nonelective Employer Contributions and the schedule elected in Subsection 1.15(b)(1) is at least as favorable in all cases as the schedules available below or (B) Plan covers only employees subject to a collective bargaining agreement.)
(2)	¨	100% vested after              (not in excess of 3) years of Vesting Service.
(3)	þ	Graded vesting:

Years of Vesting Service	Vesting Percentage		Must be at Least
0	0.00	%	0	%
1	0.00	%	0	%
2	20.00	%	20	%
3	40.00	%	40	%
4	60.00	%	60	%
5	80.00	%	80	%
6 or more	100.00	%	100	%

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

24

Note: If the Plan provides for Nonelective Employer Contributions and the schedule elected in Subsection 1.15(b)(1) is more favorable in all cases than the schedule elected in Subsection 1.21(d) above, then the schedule in Subsection 1.15(b)(1) shall continue to apply even in Plan Years in which the Plan is a “top-heavy plan”.

1.22.  CORRECTION TO MEET 415 REQUIREMENTS UNDER MULTIPLE DEFINED CONTRIBUTION PLANS

If the Employer maintains other defined contribution plans, annual additions to a Participant’s Account shall be limited as provided in Section 6.12 of the Plan to meet the requirements of Code Section 415, unless the Employer elects otherwise below and completes the 415 Correction Addendum describing the order in which annual additions shall be limited among the plans.

(a) ¨ Other Order for Limiting Annual Additions

1.23.  INVESTMENT DIRECTION

Investment Directions - Participant Accounts shall be invested (check one):

(a)	¨	in accordance with the investment directions provided to the Trustee by the Employer for allocating all Participant Accounts among the Options listed in the Service Agreement.
(b)	þ	in accordance with the investment directions provided to the Trustee by each Participant for allocating his entire Account among the Options listed in the Service Agreement.
(c)	¨	in accordance with the investment directions provided to the Trustee by each Participant for all contribution sources in his Account, except that the following sources shall be invested in accordance with the investment directions provided by the Employer (check (1) and/or (2)):
	(1)	¨	Nonelective Employer Contributions
	(2)	¨	Matching Employer Contributions
		The Employer must direct the applicable sources among the same investment options made available for Participant directed sources listed in the Service Agreement.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

25

1.24.  RELIANCE ON OPINION LETTER

An adopting Employer may rely on the opinion letter issued by the Internal Revenue Service as evidence that this Plan is qualified under Code Section 401 only to the extent provided in Announcement 2001-77, 2001-30 I.R.B. The Employer may not rely on the opinion letter in certain other circumstances or with respect to certain qualification requirements, which are specified in the opinion letter issued with respect to this Plan and in Announcement 2001-77. In order to have reliance in such circumstances or with respect to such qualification requirements, application for a determination letter must be made to Employee Plans Determinations of the Internal Revenue Service. Failure to fill out the Adoption Agreement properly may result in disqualification of the Plan.

This Adoption Agreement may be used only in conjunction with Fidelity Basic Plan Document No. 02. The Prototype Sponsor shall inform the adopting Employer of any amendments made to the Plan or of the discontinuance or abandonment of the prototype plan document.

1.25.  PROTOTYPE INFORMATION:

Name of Prototype Sponsor:	Fidelity Management & Research Company
Address of Prototype Sponsor:	82 Devonshire Street Boston, MA 02109

Questions regarding this prototype document may be directed to the following telephone number: 1-800-343-9184.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

26

EXECUTION PAGE

(Fidelity’s Copy)

IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be executed this 29 day of January, 2005.

Employer:	Gregg Appliances, Inc.
By:	/s/ Michael D. Stout
Title:	Secretary
Employer:
By:
Title:

Accepted by:
Fidelity Management Trust Company, as Trustee
By:	/s/ Joan M. Berning	Date:	February 11, 2005
Title:	Authorized Signatory

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

27

EXECUTION PAGE

(Employer’s Copy)

IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be executed this 29 day of January, 2005.

Employer:	Gregg Appliances, Inc.
By:	/s/ Michael D. Stout
Title:	Secretary
Employer:
By:
Title:

Accepted by:
Fidelity Management Trust Company, as Trustee
By:	/s/ Joan M. Berning	Date:	February 11, 2005
Title:	Authorized Signatory

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

28

ADDENDUM

Re: SPECIAL EFFECTIVE DATES

for

Plan Name:	Gregg Appliances, Inc. Employees Retirement Plan
(a)	¨	Special Effective Dates for Other Provisions - The following provisions (e.g., new eligibility requirements, new contribution formula, etc.) shall be effective as of the dates specified herein:
		___________________________________________________________________________________________
		___________________________________________________________________________________________
		___________________________________________________________________________________________
		___________________________________________________________________________________________
		___________________________________________________________________________________________
		___________________________________________________________________________________________
(b)	¨	Plan Merger Effective Dates - The following plan(s) were merged into the Plan after the Effective Date indicated in Subsection 1.01(g)(1) or (2), as applicable. The provisions of the Plan are effective with respect to the merged plan(s) as of the date(s) indicated below:
		(1)	Name of merged plan:	_____________________________________________________________
		___________________________________________________________________________________________
		___________________________________________________________________________________________
		Effective Date: _______________________________________________________________________________
		(2)	Name of merged plan:	_____________________________________________________________
		___________________________________________________________________________________________
		___________________________________________________________________________________________
		Effective Date: _______________________________________________________________________________
		(3)	Name of merged plan:	_____________________________________________________________

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

29

___________________________________________________________________________________________
___________________________________________________________________________________________
Effective Date: _______________________________________________________________________________
(4)	Name of merged plan:	_____________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
Effective Date: _______________________________________________________________________________
(5)	Name of merged plan:	_____________________________________________________________
___________________________________________________________________________________________
___________________________________________________________________________________________
Effective Date: _______________________________________________________________________________

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

30

ADDENDUM

Re: SAFE HARBOR MATCHING EMPLOYER CONTRIBUTION

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

(a) Safe Harbor Matching Employer Contribution Formula

Note: Matching Employer Contributions made under this Option must be 100% vested when made and may only be distributed because of death, disability, separation from service, age 59 1/2, or termination of the Plan without the establishment of a successor plan. In addition, each Plan Year, the Employer must provide written notice to all Active Participants of their rights and obligations under the Plan.

(1)	¨	100% of the first 3% of the Active Participant’s Compensation contributed to the Plan and 50% of the next 2% of the Active Participant’s Compensation contributed to the Plan.
	(A)	¨	Safe harbor Matching Employer Contributions shall not be made on behalf of Highly Compensated Employees.
		Note: If the Employer selects this formula and does not elect Option 1.10(b), Additional Matching Employer Contributions, Matching Employer Contributions will automatically meet the safe harbor contribution requirements for deemed satisfaction of the “ACP” test. (Employee Contributions must still be tested.)
(2)		¨	Other Enhanced Match:
		% of the first         % of the Active Participant’s Compensation contributed to the plan,
		% of the next         % of the Active Participant’s Compensation contributed to the plan,
		% of the next         % of the Active Participant’s Compensation contributed to the plan.
		Note: To satisfy the safe harbor contribution requirement for the “ADP” test, the percentages specified above for Matching Employer Contributions may not increase as the percentage of Compensation contributed increases, and the aggregate amount of Matching Employer Contributions at such rates must at least equal the aggregate amount of Matching Employer Contributions which would be made under the percentages described in (a)(1) of this Addendum.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

31

(A)	¨	Safe harbor Matching Employer Contributions shall not be made on behalf of Highly Compensated Employees.
(B)	¨	The formula specified above is also intended to satisfy the safe harbor contribution requirement for deemed satisfaction of the “ACP” test with respect to Matching Employer Contributions. (Employee Contributions must still be tested.)
	Note: To satisfy the safe harbor contribution requirement for the “ACP” test, the Deferral Contributions and/or Employee Contributions matched cannot exceed 6% of a Participant’s Compensation.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

32

ADDENDUM

Re: SAFE HARBOR NONELECTIVE EMPLOYER CONTRIBUTION

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

(a) Safe Harbor Non elective Employer Contribution Election

(1)	¨	For each Plan Year, the Employer shall contribute for each eligible Active Participant an amount equal to         % (not less than 3% nor more than 15%) of such Active Participant’s Compensation.
(2)	¨	The Employer may decide each Plan Year whether to amend the Plan by electing and completing (A) below to provide for a contribution on behalf of each eligible Active Participant in an amount equal to at least 3% of such Active Participant’s Compensation.
Note: An Employer that has selected Subsection (a)(2) above must amend the Plan by electing (A) below and completing the Amendment Execution Page no later than 30 days prior to the end of each Plan Year for which safe harbor Nonelective Employer Contributions are being made.
	(A)	¨	For the Plan Year beginning ______, the Employer shall contribute for each eligible Active Participant an amount equal to  % (not less than 3% nor more than 15%) of such Active Participant’s Compensation.
Note: Safe harbor Nonelective Employer Contributions must be 100% vested when made and may only be distributed because of death, disability, separation from service, age 59 1/2, or termination of the Plan without the establishment of a successor plan. In addition, each Plan Year, the Employer must provide written notice to all Active Participants of their rights and obligations under the Plan.

(b)	¨	Safe harbor Nonelective Employer Contributions shall not be made on behalf of Highly Compensated Employees.
(c)	¨	In conjunction with its election of the safe harbor described above, the Employer has elected to make Matching Employer Contributions under Subsection 1.10 that are intended to meet the requirements for deemed satisfaction of the “ACP” test with respect to Matching Employer Contributions.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

33

ADDENDUM

Re: PROTECTED IN-SERVICE WITHDRAWALS

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

(a) Restrictions on In-Service Withdrawals of Amounts Held for Specified Period - The following restrictions apply to in-service withdrawals made in accordance with Subsection 1.18(d)(1)(A) (cannot include any mandatory suspension of contributions restriction):

(b) Restrictions on In-Service Withdrawals Because of Participation in Plan for 60 or More Months - The following restrictions apply to in-service withdrawals made in accordance with Subsection 1.18(d)(1)(B) (cannot include any mandatory suspension of contributions restriction):

(c) Other In-Service Hardship Withdrawal Provisions - In-service hardship withdrawals are permitted from a Participant’s Deferral Contributions Account and the other sub-accounts specified below, subject to the conditions otherwise applicable to hardship withdrawals from a Participant’s Deferral Contributions Account:

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

34

(d) Other In-Service Withdrawal Provisions - In-service withdrawals from a Participant’s Accounts specified below shall be available to Participants who satisfy the requirements also specified below:

(1) ¨ The following restrictions apply to a Participant’s Account following an in-service withdrawal made pursuant to (d) above (cannot include any mandatory suspension of contributions restriction):

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

35

ADDENDUM

Re: FORMS OF PAYMENT

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

(a) The following optional forms of annuity will continue to be offered under the Plan:

(b) The forms of payment described in Section 1.19(b), (c) and/or (d) apply to the following class(es) of Participants:

Note: Please indicate if different classes of Participants are subject to different forms of payment.

(c) The following forms of payment were previously available under the Plan but will be eliminated as of the date specified in subsection (4) below (check the applicable (box(es) and complete (4)):

(1)	¨	Installment Payments.
(2)	¨	Annuities.
	(A)	¨	The normal form of payment under the Plan was a lump sum and all optional annuity forms of payment not listed under Section 1.19(c)(2)(A)(i) are eliminated. The eliminated forms of payment include the following:
	(B)	¨	The normal form of payment under the Plan was a life annuity and all annuity forms of payment not listed under Section 1.19(c)(2)(B) are eliminated. (Complete (i) and (ii) and, if applicable, (iii).)
		(i)	The normal form for married Participants was a qualified joint and         % (at least 50%) survivor annuity. The normal form for unmarried Participants was a single life annuity, unless a different form is specified below:
			____________________________________________________________________________________________

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

36

		(ii)	The qualified preretirement survivor annuity provided to a Participant’s spouse was purchased with ____% (at least 50%) of the Participant’s Account.
		(iii)	The other annuity form(s) of payment previously available under the Plan included the following:
			_______________________________________________________________________________________________
(3)	¨	Other Non-Annuity Forms of Payment. All other non-annuity forms of payment that are not listed in Section 1.19(d) but that were previously available under the Plan are eliminated. The eliminated non-annuity forms of payment include the following:
		__________________________________________________________________________________________________
(4)	The form(s) of payment described in this Subsection (c) will not be offered to Participants who have an Annuity Starting Date which occurs on or after ____________ (cannot be earlier than September 6, 2000). Notwithstanding the date entered above, the forms of payment described in this Subsection (c) will continue to be offered to Participants who have an Annuity Starting Date that occurs (1) within 90 days following the date the Employer provides affected Participants with a summary that satisfies the requirements of 29 CFR 2520.104b-3 and that notifies them of the elimination of the applicable form(s) of payment, but (2) no later than the first day of the second Plan Year following the Plan Year in which the amendment eliminating the applicable form(s) of payment is adopted.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

37

ADDENDUM

Re: VESTING SCHEDULE

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

(a) More Favorable Vesting Schedule

(1) The following vesting schedule applies to the class of Participants described in (a)(2) below:

(2) The vesting schedule specified in (a)(1) above applies to the following class of Participants:

(b) ¨     Additional Vesting Schedule

(1) The following vesting schedule applies to the class of Participants described in (b)(2) below:

(2) The vesting schedule specified in (b)(1) above applies to the following class of Participants:

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

38

ADDENDUM

Re: POSTPONED DISTRIBUTIONS

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

Postponement of Certain Distributions to Eligible Participants - The types of distributions specified below to eligible Participants of their vested interests in their Accounts shall be postponed for the period also specified below:

Notwithstanding the foregoing, if the Employer selected an Early Retirement Age in Subsection 1.14(b) that is the later of an attained age or completion of a specified number of years of Vesting Service, any Participant who terminates employment on or after completing the required number of years of Vesting Service, but before attaining the required age shall be eligible to commence distribution of his vested interest in his Account upon attaining the required age.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

39

ADDENDUM

Re: 415 CORRECTION

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

(a) Other Formula for Limiting Annual Additions to Meet 415 - If the Employer, or any employer required to be aggregated with the Employer under Code Section 415, maintains any other qualified defined contribution plans or any “welfare benefit fund”, “individual medical account”, or “simplified medical account”, annual additions to such plans shall be limited as follows to meet the requirements of Code Section 415:

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

40

ADDENDUM

Re: 416 CONTRIBUTION

for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

(a) Other Method of Satisfying the Requirements of 416 - If the Employer, or any employer required to be aggregated with the Employer under Code Section 416, maintains any other qualified defined contribution or defined benefit plans, the minimum benefit requirements of Code Section 416 shall be satisfied as follows:

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

41

THE CORPORATE PLAN FOR RETIREMENT^SM (PROFIT SHARING/401(K) PLAN)

ADDENDUM TO ADOPTION AGREEMENT

FIDELITY BASIC PLAN DOCUMENT No. 02

RE: ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001 (“EGTRRA”) AMENDMENTS for

Plan Name: Gregg Appliances, Inc. Employees Retirement Plan

PREAMBLE

Adoption and Effective Date of Amendment. This amendment of the Plan is adopted to reflect certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”). This amendment is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and guidance issued thereunder. Except as otherwise provided below, this amendment shall be effective as of the first day of the first plan year beginning after December 31, 2001.

Supersession of Inconsistent Provisions. This amendment shall supersede the provisions of the Plan to the extent those provisions are inconsistent with the provisions of this amendment.

(a) Catch-up Contributions. The Employer must select either (1) or (2) below to indicate whether eligible Participants age 50 or older by the end of a calendar year will be permitted to make catch-up contributions to the Plan, as described in Section 5.03(b)(1):

(1) þ Catch-up contributions shall apply effective January 1, 2002, unless a later effective date is specified herein,             .

(2) ¨ Catch-up contributions shall not apply.

Note: The Employer must not select (a)(1) above unless all plans of all employers treated, with the Employer, as a single employer under subsections (b), (c), (m), or (o) of Code Section 414 also permit catch up contributions (except a plan maintained by the Employer that is qualified under Puerto Rico law), as provided in Code Section 414(v)(4) and IRS guidance issued thereunder. The effective date applicable to catch-up contributions must likewise be consistent among all plans described immediately above, to the extent required in Code Section 414(v)(4) and IRS guidance issued thereunder.

(b) Plan Limit on Elective Deferral for Plans Permitting Catch-up Contributions. This Section (b) is inapplicable if the Plan converted to this Fidelity document from any other document effective after April 1, 2002.

For Plans that permit catch-up contributions beginning on or before April 1, 2002, pursuant to (a)(1) above, the 60% Plan Limit described in Section 5.03(b)(2) shall apply beginning April 1, 2002, unless (b)(1) or (b)(2) is selected below. For Plans that permit catch up contributions beginning after April 1, 2002, pursuant to (a)(1) above, the Plan Limit set out in Section 1.07(a)(1) shall continue to apply unless and until the Employer’s election in (b)(2) below, if any, provides for a change in the Plan Limit.

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

1

(1)	¨	The Plan Limit set out in Section 1.07(a)(1) shall continue to apply on and after April 1, 2002.
(2)	¨	The Plan Limit set out in Section 1.07(a)(1) shall continue to apply until              (cannot be before April 1, 2002), and the Plan Limit after that date shall be         % of Compensation each payroll period.

(c) Matching Employer Contributions on Catch-up Contributions. The Employer must select the box below only if the Employer selected (a)(1) above, and the Employer wants to provide Matching Employer Contributions on catch-up contributions. In that event, the same rules that apply to Matching Employer Contributions on Deferral Contributions other than catch-up contributions will apply to Matching Employer Contributions on catch-up contributions.

¨ Notwithstanding anything in 2.01(1) to the contrary, Matching Employer Contributions under Section 1.10 shall apply to catch-up contributions described in Section 5.03(b)(1).

(d) Vesting of Matching Employer Contributions. Complete this section (d) only if the vesting schedule for Matching Employer Contributions under the Plan must be amended to comply with EGTRRA. This is the case if, in the absence of an amendment, the vesting schedule for Matching Employer Contributions would not be at least as rapid as Three-Year Cliff or Six-Year Graded Vesting, effective for Participants with at least one Hour of Service on or after the first Plan Year beginning after December 31, 2001, subject to the rule described in (2) below. Complete (d)(1) to specify the new vesting schedule; any vesting schedule changes must conform to the requirements of Section 16.04 of the Plan. Only complete (d)(2) if your Plan is maintained pursuant to a collective bargaining agreement ratified by June 7, 2001. Complete (d)(3) if the Employer wants to apply the vesting schedule selected in (d)(1) to only the portion of a Participant’s accrued benefits derived from Matching Employer Contributions for Plan Years beginning after December 31, 2001.

(1) Vesting Schedule for Matching Employer Contributions. Unless the Employer checks the box in (d)(3) of this EGTRRA Amendments Addendum, the Vesting Schedule set forth below shall apply to all accrued benefits derived from Matching Employer Contributions for Participants who complete an Hour of Service under the Plan in a Plan Year beginning after December 31, 2001, regardless of the Plan Year for which such contributions are made, subject to the Employer’s election of a later effective date as indicated in (d)(2) below:

¨ 100% Vesting immediately

¨ 3-Year Cliff (see C below)

¨ 6-Year Graded (see E below)

¨ Other Vesting Schedule (complete G3 below, but must be at least as favorable as either C or E)

Applicable Vesting Schedule

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

2

Years of Vesting Service	C		E		G3
0	0	%	0	%	___	%
1	0	%	0	%	___	%
2	0	%	20	%	___	%
3	100	%	40	%	___	%
4	100	%	60	%	___	%
5	100	%	80	%	___	%
6 or more	100	%	100	%	100	%

(2) Delayed Effective Date for Plans Subject to Collective Bargaining. If the plan is maintained pursuant to one or more collective bargaining agreements ratified by June 7, 2001, the effective date for faster vesting of Matching Employer Contributions for Participants covered by such a collective bargaining agreement can be delayed by checking the box below and inserting the effective date, which is the first day of the first Plan Year beginning on or after the earlier of (i) January 1, 2006, or (ii) the later of the date on which the last of the collective bargaining agreements described above terminates (without regard to any extension on or after June 7, 2001), or January 1, 2002.

¨ The vesting schedule elected by the Employer in (d)(1) above shall apply to those Participants covered by a collective bargaining agreement(s) ratified by June 7, 2001, who have at least one Hour of Service on or after             . Unless the Employer selects the box in (d)(3) below, the vesting schedule selected in (d)(1) above shall apply to the entire accrued benefit derived from Matching Employer Contributions of such Participants with an Hour of Service in a Plan Year beginning on or after the date specified herein. For all other Participants, the vesting schedule shall apply as of the date and in the manner described in (d)(1) and, where applicable, (d)(3).

(3) Grandfathered Application of Prior Vesting Schedule. The Employer must check the box below only if the Employer wants to grandfather an existing vesting schedule and apply the vesting schedule that the Employer selected in (d)(1) above to only that portion of a Participant’s accrued benefit derived from Matching Employer Contributions for Plan Years beginning after December 31, 2001, (and/or for Plan Years beginning on or after the date specified in (d)(2), for any Participants subject to (d)(2), if selected by the Employer).

¨ The Vesting Schedule in (d)(1) above shall apply only to the portion of a Participant’s accrued benefits derived from Matching Employer Contributions under the Plan in a Plan Year beginning after December 31, 2001, or such later date applicable to the Participant if specified in (d)(2) above.

(e) Rollovers of After-Tax Employee Contributions to the Plan. The Employer must mark the box below only if the Employer does not want the Plan to accept Participant Rollover Contributions of qualified plan after-tax

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

3

employee contributions, as described in Section 5.06, which would otherwise be effective for distributions after December 31, 2001:

¨ Participant Rollover Contributions or direct rollovers of qualified plan after-tax employee contributions shall not be accepted by the Plan at any time.

(f) Application of the Same Desk Rule. The Employer must mark the box below only if the Employer wants to discontinue the application of the same desk rule set forth in Section 12.01(a).

¨ Effective for distributions from the Plan after December 31, 2001, or such later date as specified herein             , a Participant’s elective deferrals, qualified nonelective contributions and qualified matching contributions, if applicable, and earnings attributable to such amounts shall be distributable, upon a severance from employment as described in Section 12.01(b), effective only for severances occurring after              (or, if no date is entered, regardless of when the severance occurred).

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

4

Amendment Execution

(Fidelity’s Copy)

IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this 29^th day of January, 2005.

Employer:	Gregg Appliances, Inc.	Employer:
By:	/s/ Michael D. Stout	By:
Title:	Secretary	Title:

Accepted by: Fidelity Management Trust Company, as Trustee

By:	Joan M. Berning	Date:	February 11, 2005
Title:	Authorized Signatory

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

5

Amendment Execution

(Employer’s Copy)

IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed this 29th day of January, 2005.

Employer:	Gregg Appliances, Inc.	Employer:
By:	Michael D. Stout	By:
Title:	Secretary	Title:

Accepted by: Fidelity Management Trust Company, as Trustee

By:	/s/ Joan M. Berning	Date:	February 11, 2005
Title:	Secretary

Plan Number: 31022 The CORPORATEplan for RetirementSM	Non-Std PS Plan 10/09/2003
©2003 FMR Corp. All rights reserved.

6

EX-10.8

Exhibit 10.8

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS.

6% JUNIOR SUBORDINATED NOTE

$________________ February 3, 2005

FOR VALUE RECEIVED, the undersigned, Gregg Appliances, Inc., an Indiana corporation (“Borrower”), HEREBY PROMISES TO PAY to the order of                                      (the “Holder”), the principal amount of                                                   ($                        ), together with interest accrued on the unpaid principal amount of this Note, payable as provided herein. This Note is being issued to the Holder pursuant to the Merger Agreement. Simultaneously with the execution and delivery of this Note by Borrower and pursuant to the Merger Agreement, Borrower is executing and delivering certain other Junior Creditor Agreements in favor of the other Junior Creditors.

Certain capitalized terms used in this Note are defined in Schedule A attached hereto.

ARTICLE I

TERMS OF PAYMENT

SECTION 1.01. Payment of Principal. The full principal amount of this Note and any interest accrued, but unpaid, as of such date shall be payable on February 3, 2015 (the “Maturity Date”).

SECTION 1.02. Interest. (a) Interest shall accrue on the outstanding principal amount of this Note at a rate per annum equal to six percent (6%). Interest shall be payable in cash in arrears semiannually on February 1 and August 1 of each year, unless prohibited by Section 2.02 below, and on the date on which the principal amount of this Note is paid in full. The first interest payment shall be made on August 1, 2005.

(b) Notwithstanding the foregoing, the outstanding principal amount of this Note will be increased by the amount of any interest payment not paid on the date due in full in cash pursuant to Section 1.02(a) as a result of the prohibition of such payment pursuant to Section 2.02 below.

SECTION 1.03. Optional Prepayments. Subject to the provisions of Articles II and III below, Borrower may, on any Business Day, prepay the then outstanding principal amount of this Note, in whole or in part, together with accrued interest to the date of such prepayment on the principal amount prepaid. Borrower shall give the Holder written notice of the optional prepayment under this Section 1.02 not less than 10 days and not more than 30 days prior to the Business Day fixed for such prepayment. Any prepayments made to the Holder pursuant to this Section 1.03 shall be made on a pro rata basis with the other Junior Creditors, unless the Holder and the other Junior Creditors otherwise consent in writing. All sums received as prepayment shall first be applied in payment of accrued but unpaid interest, if any, and the excess shall be applied to the unpaid principal amount.

SECTION 1.04. Mandatory Prepayment. Subject to the provisions of the Senior Debt Agreements and Articles II and III below, Borrower shall pay this Note in full, together with all accrued and unpaid interest to the date of such prepayment on the principal amount outstanding, in connection with (i) a Change of Control or (ii) a Public Equity Offering, in each case on a Business Day not more than 30 days after the date of occurrence of the Change of Control or consummation of the Public Equity Offering, as applicable, as provided in a written notice from Borrower to the Holder not less than 10 days and not more than 30 days prior to the date fixed for such prepayment; provided that in the case of a mandatory prepayment pursuant to clause (ii) above, the principal amount of this Note that may be prepaid with the proceeds of a Public Equity Offering shall be subject to the restrictions set forth in Section 2.2 below.

SECTION 1.05. Payments and Computations. (a) Borrower shall make each payment hereunder not later than at 11:00 A.M. (New York City time) on the day when due in United States dollars to the Holder in same day funds.

(b) All computations of interest shall be made on the basis of a 360-day year comprised of twelve 30-day months for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable.

(c) Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest.

SECTION 1.06. Default Notice. So long as any principal amount of this Note shall remain unpaid, Borrower shall, unless the Holder shall otherwise consent in writing, furnish to the Holder as soon as possible and, in any event, within two days after the occurrence of each Event of Default, as defined below, continuing on the date of such statement, a statement of the chief financial officer of Borrower setting forth the details of such Event of Default and the action that Borrower has taken and proposes to take with respect thereto.

SECTION 1.07. Events of Default. If any of the following events shall occur and be continuing (in each case, an “Event of Default”):

(a) Borrower shall fail to pay any principal of, or, subject to Section 1.02(b) above, interest on, this Note within three (3) Business Days of the date due; or

2

(b) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Borrower, or of a substantial part of the property or assets of Borrower, under any applicable bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Borrower or for a substantial part of the property or assets of Borrower or (iii) the winding-up or liquidation of either Borrower or any of its subsidiaries; and such proceeding or petition shall continue undismissed or unstayed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(c) Borrower shall (i) voluntarily commence any Insolvency Proceeding, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner or file an answer admitting the material allegations of a petition filed against it, in any Insolvency Proceeding, (iii) admit in writing its inability or fail generally to pay its debts as they become due or (iv) take any corporate action for the purpose of effecting any of the foregoing; or

(d) Prior to the consummation of a Public Equity Offering, Borrower’s board of directors declares a dividend or other distribution in favor of the shareholders of Borrower other than the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of Borrower or any subsidiary of Borrower held by any current or former officer, director or employee of Borrower or any of its subsidiaries pursuant to any equity subscription agreement, stock option agreement, shareholders agreement or similar agreement;

(e) Borrower loans money or otherwise pays any fees to Freeman Spogli & Co. LLC (or any successor entity thereof or other entity controlled by the principals of Freeman Spogli & Co. LLC) other than payment of fees by Borrower for any financial or mergers and acquisitions advisory, financing, underwriting or placement services (whether structured as a fee or an underwriting discount) in connection with financings, acquisitions or divestitures (provided that such fees for any such transaction (a) do not exceed the greater of 2% of the transaction value or 5% of the amount of any new equity invested by Freeman Spogli & Co. LLC in connection with such transaction and (b) shall be approved by a majority of the disinterested members of the Board of Directors of the Company);

then, and in any such event, the Holder may, by notice to Borrower, declare this Note, all interest thereon and all other amounts payable under this Note, subject to the terms and conditions of Article II below, to be forthwith due and payable, whereupon this Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower. In addition, if an Event of Default has occurred and is continuing, from and after the date such Event of Default occurred the entire outstanding principal amount of this Note, and to the extent permitted by applicable law, any unpaid interest from time to time due thereon will bear interest, payable on demand, at the rate of eight percent (8%) per annum. Interest payable pursuant to this section 1.07 that is in excess of, or at a time other than, regularly scheduled interest payments shall not be paid in cash or otherwise and the outstanding principal amount of this Note shall be increased by such amount.

3

ARTICLE II

SUBORDINATION OF NOTE

SECTION 2.01. Subordination. Except as specifically set forth in Section 2.02 below, the Holder hereby subordinates its right to payment and satisfaction of this Note and the payment thereof, directly or indirectly, by any means whatsoever, is deferred, to the Payment in Full of all of the Senior Debt, to the extent and manner provided herein. The Holder agrees that, notwithstanding any rights or remedies available to it under this Note, applicable law or otherwise, until the Payment in Full of the Senior Debt, the Holder shall not, directly or indirectly, (a) seek to collect from Borrower under this Note or commence any legal proceeding for such purpose or exercise any of its rights or remedies upon a default or event of default by Borrower under the this Note or (b) commence any Insolvency Proceedings against Borrower or its properties or (c) take any other action against Borrower or its properties.

SECTION 2.02. Permitted Payments. Notwithstanding anything to the contrary contained in Section 2.01 hereof, unless a Default or an Event of Default as defined in and under any of the Senior Debt Agreements has occurred and is continuing, (a) Borrower may make and the Holder may receive and retain only regularly scheduled payments of interest, on an unaccelerated basis, in respect of this Note in accordance with its terms as in effect on the date hereof and payment of principal on the Maturity Date, and (b) Borrower may make a prepayment in respect of the outstanding principal amount of this Note upon the occurrence of a Change of Control or Public Equity Offering, as provided in Section 1.04; provided, that, on the date of any such payment and after giving effect thereto, each of the following conditions is satisfied (prior to the Payment in Full of the Senior Debt arising under the Senior Loan Documents, in the determination of Senior Loan Agent): (i) the principal amount of this Note that may be prepaid with the proceeds of a Public Equity Offering shall be subject to reduction by such amount as the lead underwriter of such Public Equity Offering shall determine to be appropriate in order to ensure the successful execution and consummation of such Public Equity Offering, (ii) prior to the Payment in Full of the Senior Debt arising under the Senior Loan Documents, Excess Availability (as defined in the Senior Loan Agreement) of Borrower shall not be less than $15,000,000, and (iii) no Default or Event of Default as defined in and under any of the Senior Debt Agreements shall exist or have occurred and be continuing.

SECTION 2.03. Distributions.

(a) In the event of any distribution, division, or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the assets of Borrower or the proceeds thereof to the creditors of Borrower or readjustment of the obligations and indebtedness of Borrower in any Insolvency Proceeding or upon the sale of all or substantially all of Borrower’s assets, then, and in any such event, (i) Senior Creditors shall first receive Payment in Full of all of the Senior Debt prior to the payment of all or any part of this Note, and (ii) Senior Creditors shall be entitled to receive any payment or distribution of any kind or character, whether in cash, securities or other property, which is payable or deliverable in respect of any or all of this Note, ratably in accordance with the amount of the Senior Debt owed to each Senior Creditor, after giving effect to all the payments Senior Loan Agent and Senior

4

Loan Lenders are entitled to receive as a secured creditor of Borrower, and in accordance with applicable law.

(b) The Holder hereby authorizes and empowers Senior Loan Agent in any Insolvency Proceeding to file a proof of claim on behalf of the Holder with respect to this Note (i) if the Holder fails to file such proof of claim prior to thirty (30) days before the expiration of the time period during which such claims must be submitted, or (ii) if Senior Loan Agent, in good faith, determines that any statements or assertions in a proof of claim filed by the Holder are not consistent with the terms and conditions hereof; provided, that any failure of Senior Loan Agent to file such proof of claim shall not be deemed to be a waiver by Senior Creditors of any of the rights and benefits granted herein by the Holder. The Holder shall provide Senior Loan Agent with a copy of any proof of claim filed by the Holder in any Insolvency Proceeding.

(c) The Holder hereby irrevocably grants Senior Loan Agent the authority and power in any Insolvency Proceeding, unless and until the Payment in Full of all of the Senior Debt is made: (i) to accept and receive any payment or distribution which may be payable or deliverable at any time upon or in respect of this Note; and (ii) to take such other action as may be necessary or advisable to effectuate the foregoing, which distributions and payments shall be shared by the Senior Creditors in accordance with Section 2.03(a) hereof. The Holder shall provide to the Senior Loan Agent, the Senior Note Trustee and the other representatives of the Senior Creditors, if any, all information and documents necessary to present claims or seek enforcement as described in the immediately preceding sentence. To the extent necessary for Senior Creditors to realize the benefits of the subordination of this Note provided for herein (including the right to receive any payment and distributions which might otherwise be payable or deliverable in respect of this Note in any Insolvency Proceeding or otherwise), the Holder shall execute and deliver to the Senior Loan Agent and the Senior Note Trustee, as the case may be, such instruments or documents (together with such assignments or endorsements as the Senior Loan Agent or the Senior Note Trustee, as the case may be, shall deem necessary), as may be requested by the Senior Loan Agent or the Senior Note Trustee, as the case may be.

(d) The Holder hereby agrees that, while it shall retain the right to vote its claims and, except as otherwise provided in this Note, otherwise act in any Insolvency Proceeding relative to Borrower (including, without limitation, the right to vote to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition, or extension), the Holder shall not: (i) take any action or vote in any way so as to directly or indirectly challenge or contest (A) the validity or the enforceability of any of the Senior Debt Agreements or the liens and security interests granted to Senior Loan Agent with respect to the Senior Debt under the Senior Loan Documents and any other secured Senior Debt, (B) the rights and duties of the Senior Creditors established in any of the Senior Debt Agreements, or (C) the validity or enforceability of this Note; (ii) seek, or acquiesce in any request, to dismiss any Insolvency Proceeding or to convert an Insolvency Proceeding under Chapter 11 of the Bankruptcy Code to a case under Chapter 7 of the Bankruptcy Code; (iii) seek, or acquiesce in any request for, the appointment of a trustee or examiner with expanded powers for Borrower; (iv) propose, vote in favor of or otherwise approve a plan of reorganization, arrangement or liquidation, or file any motion or pleading in support of any plan of reorganization, arrangement or liquidation, unless it provides that for the Payment in Full of the Senior Debt or unless Senior Creditors have approved of the treatment of their claims with respect to the Senior Debt under

5

such plan; (v) object to the treatment under a plan of reorganization or arrangement of the claims with respect to the Senior Debt; (vi) seek relief from the automatic stay of Section 362 of the Bankruptcy Code or any other stay in any Insolvency Proceeding in respect of any portion of the Collateral (as defined in the Senior Loan Agreement); or (vii) directly or indirectly oppose any relief requested or supported by Senior Creditors, including any sale or other disposition of property free and clear of the liens and security interests of the Holder under Section 363(f) of the Bankruptcy Code or any other similar provision of applicable law.

(e) Senior Creditors shall not in any event be liable for: (i) any failure to prove this Note; (ii) any failure to exercise any rights with respect thereto; (iii) any failure to collect any sums payable thereon; or (iv) any impairment or nonpayment of this Note that results, directly or indirectly, from the exercise by Senior Creditors of any of their rights or remedies under this Note, any of the Senior Debt Agreements or under applicable law.

(f) (i) Upon the Payment in Full of the Senior Debt arising under the Senior Loan Documents and prior to Payment in Full of the Senior Debt arising under the Senior Note Documents, (A) the authorization of the Senior Loan Agent to take all actions permitted under Sections 2.03(a), (b) and (c) and 2.04 hereof shall terminate, (B) each Senior Creditor hereby authorizes and empowers Senior Note Trustee to take all actions permitted under Sections 2.03(a), (b) and (c) and 2.04 hereof and (C) the Holder shall make all payments otherwise required to be made to Senior Loan Agent pursuant to Section 2.04 hereof to the Senior Note Trustee and (ii) upon the Payment in Full of the Senior Debt arising under the Senior Note Agreements, the authorization of the Senior Note Trustee to take all actions permitted under Sections 2.03(a), (b) and (c) and 2.04 hereof shall terminate.

SECTION 2.04. Payments Received by the Holder. Except for payments received by the Holder as permitted in Section 2.02 hereof, and subject to Section 2.03(a) hereof, should any payment or distribution or security or instrument or proceeds thereof be received by the Holder in respect of the this Note, the Holder shall receive and hold the same in trust, as trustee, for the benefit of Senior Creditors, segregated from other funds and property of the Holder and shall (a) at all times prior to the Payment in Full of the Senior Debt arising under the Senior Loan Documents, forthwith deliver the same to Senior Loan Agent (together with any endorsement or assignment of the Holder where necessary), for application to any of the Senior Debt arising under the Senior Loan Documents and (b) at all times after the Payment in Full of the Senior Debt arising under the Senior Loan Documents, forthwith deliver the same to Senior Note Trustee (together with any endorsement or assignment of the Holder where necessary), for application to any of the Senior Debt arising under the Senior Note Agreements. In the event of the failure of the Holder to make any such endorsement or assignment to Senior Loan Agent or Senior Note Trustee, as applicable, Senior Loan Agent or Senior Note Trustee, as applicable, or any of their respective officers or employees, are hereby irrevocably authorized on behalf of the Holder to make the same.

SECTION 2.05. Term of Subordination. The provisions of this Article II shall remain in full force and effect until the Payment in Full of all of the Senior Debt.

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ARTICLE III

COVENANTS

SECTION 3.01. Additional Covenants. The Holder and Borrower agree in favor of Senior Creditors that:

(a) except as specifically set forth in Section 2.02 hereof, Borrower shall not, directly or indirectly, make and the Holder shall not, directly or indirectly, accept or receive any payment of principal or interest or any prepayment or non-mandatory payment or any payment pursuant to acceleration or claims of breach;

(b) Borrower shall not grant to the Holder, and the Holder shall not acquire, any security interest, lien, claim or encumbrance on any assets or properties of Borrower or any guarantees for any of this Note;

(c) The Holder and Borrower shall execute and deliver to Senior Loan Agent and Senior Note Trustee such additional agreements, documents and instruments and take such further actions as may be necessary or desirable in the opinion of Senior Loan Agent or Senior Note Trustee to effectuate the provisions and purposes of Article II of this Note; and

(d) The Holder and Borrower shall, at any time or times upon the request of Senior Loan Agent or Senior Note Trustee, promptly furnish to Senior Loan Agent or Senior Note Trustee, as applicable, a true, correct and complete statement of the aggregate principal amount outstanding of this Note.

SECTION 3.02. Additional Representations and Warranties. The Holder and Borrower represent and warrant to Senior Creditors that:

(a) the Holder has no security interest, lien, claim or encumbrance on any assets and properties of Borrower and this Note is unsecured;

(b) as of the date hereof, no Event of Default, or event which with notice or passage of time or both would constitute an Event of Default exists or has occurred under this Note;

(c) the Holder is the exclusive legal and beneficial owner of this Note;

(d) this Note is not subject to any lien, security interest, financing statements, subordination, assignment or other claim, except in favor of Senior Creditors; and

(e) this Note constitutes the legal, valid and binding obligation of the Holder, enforceable in accordance with its terms.

SECTION 3.03. Waivers. Notice of acceptance hereof, the making of loans, advances and extensions of credit or other financial accommodations to, and the incurring of any expenses by or in respect of, Borrower by Senior Creditors, and presentment, demand, protest, notice of protest, notice of nonpayment or default and all other notices to which the Holder and

7

Borrower are or may be entitled are hereby waived (except as expressly provided for herein or as to Borrower, in any of the Senior Debt Agreements). The Holder also waives notice of, and hereby consents to, (a) any amendment, modification, supplement, renewal or restatement of any of the Senior Debt Agreements or extensions of time of payment of or increase or decrease in the amount of any of the Senior Debt or any collateral at any time granted to or held by Senior Loan Agent, (b) the taking, exchange, surrender and releasing of collateral at any time granted to or held by Senior Loan Agent or guarantees now or at any time held by or available to Senior Creditors in respect of the Senior Debt or any other person at any time liable for or in respect of the Senior Debt, (c) the exercise of, or refraining from the exercise of any rights against Borrower or any other obligor or any collateral at any time granted to or held by Senior Loan Agent, (d) the settlement, compromise or release of, or the waiver of any default with respect to, any of the Senior Debt, and/or (e) Senior Creditors’ election, in any proceeding instituted under the Bankruptcy Code of the application of Section 1111(b)(2) of the Bankruptcy Code. Any of the foregoing shall not, in any manner, affect the terms hereof or impair the obligations of the Holder hereunder. The Holder acknowledges and agrees that all of the Senior Debt shall be deemed to have been made or incurred, and Senior Creditors have entered into the Senior Loan Documents and the Senior Note Agreements, respectively, in reliance upon the provisions of this Note, including without limitation Articles II and III hereof, and Senior Creditors are and shall be deemed to be third party beneficiaries of this Note.

SECTION 3.04. Subrogation; Marshalling. The Holder shall not be subrogated to, or be entitled to any assignment of any Senior Debt or of any collateral for or guarantees or evidence of any thereof until all of the Payment in Full of all of the Senior Debt. The Holder hereby waives any and all rights to have any collateral or any part thereof granted to or held by Senior Loan Agent marshaled upon any foreclosure or other disposition of such collateral by Senior Loan Agent or Borrower with the consent of Senior Loan Agent.

SECTION 3.05. No Offset. In the event the Holder at any time incurs any obligation to pay money to Borrower, the Holder hereby irrevocably agrees that it shall pay such obligation in cash or cash equivalents in accordance with the terms of the contract governing such obligation and shall not deduct from or setoff against any amounts owed by the Holder to Borrower in connection with any such transaction any amounts the Holder claims are due to it with respect to this Note. In the event that either (a) Borrower has an indemnification claim against the Holder pursuant to Article X of the Merger Agreement or (b) Borrower has a claim against the Holder relating to an actual or claimed breach or other violation by the Holder of any contract to which Borrower and the Holder are parties (including, without limitation, the Merger Agreement), Borrower hereby irrevocably agrees that it shall proceed against the Holder in accordance with Article X of the Merger Agreement or the terms of the contract governing such breach or violation, as the case may be, and shall not deduct from or setoff against any amounts owed by Borrower to the Holder in connection with any amounts due with respect to this Note.

ARTICLE IV

MISCELLANEOUS

SECTION 4.01. Amendments, Etc. (a) No amendment, modification or waiver of any provision of this Note, and no consent to any departure by Borrower herefrom, shall in

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any event be effective unless the same shall be in writing and signed by the Holder, the Senior Loan Agent (at all times prior to the Payment in Full of the Senior Debt arising under the Senior Loan Documents) and the Senior Note Trustee (at all times prior to the Payment in Full of the Senior Debt arising under the Senior Note Documents), and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

(b) Subject to the rights of any Senior Creditors set forth herein, which shall not be affected by this Section 4.01(b), (i) this Note may be modified or amended only by an agreement in writing signed by Borrower and the Stockholders Representative (as defined in the Merger Agreement) acting on behalf of the Holder; (ii) any waiver of any term, covenant or provision of this Note shall be effective only if given in writing by the Stockholders Representative acting on behalf of the Holder; and (iii) no action on or with respect to this Note (including those contemplated in Section 2.03(d) hereof) may be taken except by the Stockholders Representative acting on behalf of the Holder.

SECTION 4.02. Expenses. Borrower hereby agrees upon demand to pay to the Holder the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel, which the Holder may incur in connection with the exercise or enforcement of any of the rights of the Holder hereunder.

SECTION 4.03. Waivers; Remedies. No failure on the part of the Holder to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

SECTION 4.04. Assignment.

(a) This Note shall not be negotiable, assignable or transferable; provided that upon the death of the Holder, this Note may be transferred to the Holder’s successors, assigns, heirs, executors or administrators. Any assignment or transfer in contradiction of this Section shall be null and void.

(b) This Note shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the Holder and Senior Creditors and their respective successors, participants and assigns.

(c) In connection with any participation or other transfer or assignment of the Senior Debt arising pursuant to the Senior Loan Documents, Senior Loan Agent and Senior Loan Lenders (i) may disclose to such assignee, participant or other transferee or assignee all documents and information which Senior Loan Agent or any Senior Loan Lenders now or hereafter may have relating to the Senior Debt or any Collateral (as defined in the Senior Loan Documents) and (ii) may disclose to such participant or other transferee or assignee the existence and terms and conditions of this Note.

(d) In connection with any assignment or transfer of any or all of the Senior Debt, or any or all rights of Senior Creditors in the property of Borrower (other than pursuant to

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a participation), the Holder agrees to execute and deliver an agreement containing terms substantially identical to those contained herein in favor of any such assignee or transferee and, in addition, will execute and deliver an agreement containing terms substantially identical to those contained herein in favor of any third person who succeeds to or replaces or refinances any or all of Senior Creditors’ financing of Borrower, whether such successor financing or replacement or refinancing occurs by transfer, assignment, refinancing, “takeout” or any other means.

SECTION 4.05. Insolvency. The terms of this Note shall be applicable both before and after the filing of any petition by or against Borrower under the Bankruptcy Code and all converted or succeeding cases in respect thereof, and all references herein to Borrower shall be deemed to apply to a trustee for Borrower and Borrower as debtor-in-possession. The relative rights of Senior Creditors and the Holder to repayment of the Senior Debt and the Indebtedness arising pursuant to this Note, respectively, and in or to any distributions from or in respect of Borrower or any proceeds of Borrower’s property and assets, shall continue after the filing thereof on the same basis as prior to the date of the petition, subject to any court order approving the financing of, or use of cash collateral by, Borrower as debtor-in-possession.

SECTION 4.06. Bankruptcy Financing. If Borrower shall become subject to a proceeding under the Bankruptcy Code and if Senior Loan Agent and Senior Loan Lenders desire to permit the use of cash collateral or to provide financing to Borrower under either Section 363 or Section 364 of the Bankruptcy Code, the Holder agrees as follows: (a) adequate notice to the Holder shall have been provided for such financing or use of cash collateral if the Holder receives notice two (2) business days prior to the entry of the order approving such financing or use of cash collateral and (b) no objection will be raised by such the Holder to any such use of cash collateral or financing.

SECTION 4.07. Notices. All notices, requests and demands to or upon the respective parties hereto shall be in writing and shall be deemed to have been duly given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if mailed by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands are to be given or made to the respective parties at their addresses set forth below (or to such other addresses as any party may designate by notice in accordance with the provisions of this Section:

(a) to Senior Creditors:

Congress Financial Corporation (Central), as Agent

150 South Wacker Drive

Chicago, Illinois 60606

Attention: Portfolio Manager — Gregg Appliances

and

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Wells Fargo Bank, N.A.

213 Court Street

Suite 703

Middletown, CT 06457

Attention: Corporate Trust Services

(b) to Holder:

[Namee]

[Address]

[Address]

(c) to Borrower:

Gregg Appliances, Inc.

4151 East 96th Street

Indianapolis, Indiana 46240

Attention: Chief Executive Officer

With notice to Freeman Spogli & Co. LLC:

Freeman Spogli & Co. LLC

299 Park Avenue

20th Floor

New York, NY 10171

SECTION 4.08. Severability. In case any provision or obligation under this Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

SECTION 4.09. Consent to Jurisdiction; Waiver of Jury Trial. Each of the parties hereto hereby irrevocably consents to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County, New York and the United States District Court for the Southern District of New York and waives trial by jury in any action or proceeding with respect to this Note.

SECTION 4.10. Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT EXCLUDING (to the greatest extent permitted by law) ANY PRINCIPLES OF CONFLICTS OF LAW OR OTHER RULE OF LAW THAT WOULD RESULT IN THE APPLICATION OF THE LAW OF ANY JURISDICTION OTHER THAN THE LAWS OF THE STATE OF NEW YORK.

SECTION 4.11. No Third Parties Benefited. Except as expressly provided in Section 4.04 hereof, this Note is solely for the benefit of Borrower, the Holder and the Senior Creditors and their respective successors, participants and assigns, and no other person shall have any right, benefit, priority or interest under, or because of the existence of, this Note.

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IN WITNESS WHEREOF, the parties hereto have caused this Note to be duly executed as of the date first above written.

GREGG APPLIANCES, INC.
By:
	Name:
	Title:
[NAME OF HOLDER]
By:
	Name:

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Schedule A

Definitions

“Bankruptcy Code” means the United States Bankruptcy Code, being Title 11 of the United States Code as enacted in 1978, as the same has heretofore been or may hereafter be amended, recodified, modified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition. The terms “Beneficially Owns” and “Beneficially Owned” shall have a corresponding meaning.

“Borrower” means Gregg Appliances, Inc., an Indiana corporation, and its successors and assigns, including, without limitation, a receiver, trustee or debtor-in-possession on behalf of such person or on behalf of any such successor or assign.

“Business Day” means any day other than a Saturday, a Sunday or a day on which commercial banking institutions are authorized or required by law, regulation or executive order to close in New York City.

“Capital Stock” means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Change of Control” means (1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of Borrower and its subsidiaries, taken as a whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than Permitted Holders; (2) the adoption of a plan relating to the liquidation or dissolution of Borrower; (3) (a) prior to the occurrence of a Public Market, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder becomes the ultimate beneficial owner, directly or indirectly, of more than 50% of the voting power of the Voting Stock of Borrower; and (b) after the occurrence of a Public Market, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder becomes the ultimate Beneficial Owner, directly or indirectly, of 35% or more of the voting power of the Voting Stock of Borrower, and the Permitted Holders beneficially own a lesser percentage of such voting power of the Voting Stock than such Person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of Borrower’s board of directors; (4) the first day on which a majority of

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the members of the board of directors of Borrower are not Continuing Directors; or (5) Borrower consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into Borrower, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of Borrower or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where (a) the Voting Stock of Borrower outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance) and (b) immediately after such transaction, no “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than a Permitted Holder, becomes, directly or indirectly, the beneficial owner (as defined above) of 35% or more of the voting power of all classes of Voting Stock of the surviving or transferee Person (unless the Permitted Holders beneficially own an equal or greater percentage of such voting power of the Voting Stock than such Person and have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of Borrower’s board of directors).

“Continuing Director” means, as of any date of determination, any member of the board of directors of Borrower who: (1) was a member of such board of directors on the date of the Note Indenture; or (2) was nominated for election or elected to such board of directors with the approval of a majority of the Continuing Directors who were members of such board of directors at the time of such nomination or election.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

“Guarantor” means HHG Distributing, LLC, an Indiana limited liability company, and its successors and assigns, including, without limitation, a receiver, trustee or debtor-in-possession on behalf of such person or on behalf of any such successor or assign.

“Indebtedness” means, without duplication, with respect to any Person, any liability, whether or not contingent, in each case as determined in accordance with generally accepted accounting principles set forth in the opinions and pronouncements of the Public Company Accounting Oversight Board, which are in effect on the date hereof (“GAAP”) (1) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (2) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor created, incurred, assumed or guaranteed in the ordinary course of business in connection with obtaining goods, materials or services); (3) all obligations as lessee under leases which have been, or should be, in accordance with GAAP capitalized on a balance sheet (“capital leases”); (4) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of

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income, or other financial condition; (5) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (6) all Indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any assets of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; provided, that, for the purposes hereof, to the extent such Indebtedness referred to in this clause (6) is non-recourse to such Person, the amount of such Indebtedness shall not be deemed to exceed the lesser of (i) the principal amount of such Indebtedness or (ii) the value of the asset(s) securing such Indebtedness; and (7) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values.

“Insolvency Proceeding” means, as to any Person, any of the following: (a) any case or proceeding with respect to such Person under the Bankruptcy Code or any other federal or state bankruptcy, insolvency, reorganization or other law affecting creditors’ rights generally or any other or similar proceedings seeking any stay, reorganization, arrangement, composition or readjustment of the obligations and indebtedness of such Person or (b) any proceeding seeking the appointment of any trustee, receiver, liquidator, custodian or other insolvency official with similar powers with respect to such Person or any or all of its assets or properties or (c) any proceedings for liquidation, dissolution or other winding up of the business of such Person or (d) any assignment for the benefit of creditors or any marshaling of assets of such Person.

“Inventory Financing Facilities” means any and all financial arrangements entered into from time to time by Borrower to finance the purchase of inventory sold in the ordinary course of business, including that certain Agreement for Wholesale Financing dated September 8, 2000 by and between Borrower and GE Commercial Distribution Finance Corporation, as amended from time to time.

“Investor” means Gregg Investment Corporation, LLC, a Delaware limited liability company, and its successors and assigns.

“Junior Creditor Agreements” means, collectively, the 6% Junior Subordinated Notes, each dated of even date herewith, by Borrower in favor of each Junior Creditor, and all agreements, documents and instruments at any time executed and/or delivered by Borrower or any other person to, with or in favor of Junior Creditors in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

“Junior Creditors” means, collectively, the Holder, Gregg William Throgmartin, Kelli Throgmartin Ball, Sandra M. Throgmartin, Janice K. Malone, Monica L. Adams, William G. Throgmartin and Dennis L. May and their respective successors and assigns; each sometimes individually referred to herein as a “Junior Creditor.”

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“Merger Agreement” means that certain Agreement and Plan of Merger, dated October 19, 2004, by and among Investor, GIC Corporation, Borrower and the sellers named therein, as amended, as the same now exists or may hereafter be amended, modified or supplemented.

“Note Indenture” means that certain Indenture, dated as of February 3, 2005, by and among Borrower, Guarantor and Senior Note Trustee, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated, refinanced or replaced.

“Payment in Full” means, as to any Senior Debt, the final payment and satisfaction in full in immediately available funds of all of such Senior Debt arising under the applicable Senior Debt Agreements and the termination of the commitments of such applicable Senior Creditors thereunder (but not including for this purpose the refinancing or replacement of Senior Creditors). If after receipt of any payment of, or proceeds of collateral applied to the payment of, any Senior Debt, any Senior Creditor is required to surrender or return such payment or proceeds to any person for any reason, then the Senior Debt intended to be satisfied by such payment or proceeds shall be reinstated and continue as if such payment or proceeds had not been received by such holder.

“Permitted Holder” means (i) each of Jerry Throgmartin, Gregg Throgmartin and Dennis L. May for so long as such person is a shareholder in, and a member of the senior management of, the Company and (ii)(a) Freeman Spogli & Co. LLC (and any successor entity thereof or other entity controlled by the principals of Freeman Spogli & Co. LLC (other than any of its portfolio companies)) and (b) FS Equity Partners V, L.P., FS Affiliates V, L.P. and any other investment partnerships or limited liability companies formed by the Persons described in clause (ii)(a) for so long as any such investment partnership or limited liability company is controlled by the Persons described in clause (ii)(a); provided, however, that, solely for purposes of determining whether or not a Change of Control under clause 3(b) of the definition thereof has occurred, the aggregate Voting Stock of the Company Beneficially Owned, directly or indirectly, by any of the limited partners or members, as applicable, of FS Equity Partners V, L.P., of FS Affiliates V, L.P. or of any other investment partnerships or limited liability companies formed by the Persons described in clause (ii)(a) that shall have invested as a co-investor or on a side-by-side basis with such investment funds in the Investor in connection with the recapitalization transaction contemplated by the Merger Agreement may be treated as Voting Stock of the Persons described in clause (ii)(a) or (b) unless, on the relevant date of determination, such limited partners Beneficially Own, directly or indirectly, an equal or greater aggregate percentage of voting power of the Voting Stock of Borrower than the aggregate percentage Beneficially Owned, directly or indirectly, by the Persons described in clause (ii)(a) or (b) without giving effect to this proviso.

“Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity.

“Public Equity Offering” means an offer and sale of common stock of Borrower pursuant to a registration statement that has been declared effective by the Securities and Exchange Commission pursuant to the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of Borrower).

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A “Public Market” shall be deemed to exist if (i) a Public Equity Offering has been consummated and (ii) at least 15% of the total issued and outstanding common stock of Borrower has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act.

“Securities Act” means the Securities Act of 1933, or any comparable statement under any similar federal statute then in force.

“Senior Creditors” means, (i) in respect of the Senior Debt incurred pursuant to the Senior Loan Documents, the Senior Loan Agent and Senior Loan Lenders, (ii) in respect of the Senior Debt incurred pursuant to the Senior Note Agreements, the holders from time to time of such Senior Notes and the Senior Note Trustee, (iii) in respect of the Senior Debt incurred pursuant to the Inventory Financing Facilities the creditors from time to time thereunder and (iv) any other holders from time to time of any Senior Debt; each sometimes referred to individually as a “Senior Creditor.”

“Senior Debt” means all Indebtedness and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower and Guarantor to Senior Creditors and/or their respective affiliates, or participants, including principal, interest, charges, fees, premiums, indemnities and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of any of the Senior Debt Agreements or after the commencement of any case with respect to Borrower or Guarantor under the Bankruptcy Code or any similar statute or any other Insolvency Proceeding (and including, without limitation, any principal, interest, fees, costs, expenses and other amounts, whether or not such amounts are allowable either in whole or in part, in any such case or similar proceeding), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and whether arising directly or howsoever acquired by Senior Creditors, arising under (a) the Senior Loan Documents and the Senior Note Agreements, or (b) any other Indebtedness of Borrower unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Junior Creditor Agreements, in the case of each of (a) and (b), excluding (1) any liability for federal, state, local or other taxes owed or owing by Borrower or any guarantor of any Indebtedness of Borrower; (2) any Indebtedness of Borrower or any guarantor of any Indebtedness of Borrower to any of its subsidiaries or other affiliates or, in the case of Indebtedness of any guarantor of any Indebtedness of Borrower, to Borrower; (3) any trade payables; (4) any Indebtedness of Borrower or any guarantor of any Indebtedness of Borrower that, when incurred, was without recourse to the Borrower; or (5) any Indebtedness owed to any employee of the Borrower or any of its subsidiaries.

“Senior Debt Agreements” means, collectively, (i) the Senior Loan Documents, (ii) the Senior Note Agreements, (iii) solely to the extent of any obligations thereunder as may with the passage of time become Senior Debt pursuant to the terms thereof, any Inventory Financing Facilities and (iv) all other agreements, documents and instruments at any time executed and/or delivered by Borrower under which any other Senior Debt is issued, as each such agreement, document or instrument now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated, refinanced, replaced or restructured (in whole or in part and including any

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agreements with, to or in favor of any other lender or group of lenders that at any time refinances, replaces or succeeds to all or any portion of the Senior Debt evidenced by the Senior Debt Agreements).

“Senior Loan Agent” means Congress Financial Corporation (Central), an Illinois corporation, in its capacity as agent on behalf of Senior Loan Lenders pursuant to the Senior Loan Agreement, and its successors and assigns, and any successor or replacement Senior Loan Agent for and on behalf of Senior Loan Lenders under the Senior Loan Agreement.

“Senior Loan Agreement” means that certain Loan and Security Agreement, dated as of February 3, 2005, by and among the Borrower, Guarantor, the Senior Loan Agent, Wachovia Capital Markets, LLC, as Arranger, and Senior Loan Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated, refinanced or replaced.

“Senior Loan Documents” means, collectively, the Senior Loan Agreement and all agreements, documents and instruments at any time executed and/or delivered by Borrower or Guarantor or any other person to, with or in favor of Senior Loan Agent or any Senior Loan Lenders in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated, refinanced, replaced or restructured (in whole or in part and including any agreements with, to or in favor of any other lender or group of lenders that at any time refinances, replaces or succeeds to all or any portion of the Senior Debt arising under the Senior Loan Documents).

“Senior Loan Lenders” means Congress Financial Corporation (Central), an Illinois corporation, in its individual capacity, and any other party to the Senior Loan Agreement as a lender, and their respective successors and assigns and any lender or group of lenders that at any time refinances, replaces or succeeds to all or any portion of the Senior Debt incurred pursuant to the Senior Loan Documents or is otherwise party, as a lender, to the Senior Loan Documents.

“Senior Note Agreements” means, collectively, the Note Indenture, the Senior Notes and all agreements, documents and instruments at any time executed and/or delivered by Borrower or Guarantor or any other person to, with or in favor of Senior Note Trustee or any holder of the Senior Notes in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated, refinanced, replaced or restructured (in whole or in part and including any agreements with, to or in favor of any other Person that at any time refinances, replaces or succeeds to all or any portion of the Senior Debt arising under the Senior Note Agreements).

“Senior Notes” means the 9% Senior Notes due 2013 of Borrower issued under the Note Indenture.

“Senior Note Trustee” means Wells Fargo Bank, N.A., as trustee under the Note Indenture, and any successor, replacement or additional trustee and their respective successors and assigns; provided that if, and for so long as, any such indebtedness lacks such representative, then the Senior Note Trustee of the holders of the Senior Notes shall at all times constitute the holders of a majority in outstanding principal amount of such indebtedness in respect of the Senior Notes.

A-6

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

A-7

EX-10.9

Exhibit 10.9

EXECUTION

LOAN AND SECURITY AGREEMENT

by and among

GREGG APPLIANCES, INC.

as Borrower

and

HHG DISTRIBUTING, LLC

as Guarantor

CONGRESS FINANCIAL CORPORATION (CENTRAL)

as Administrative Agent and Collateral Agent

WACHOVIA CAPITAL MARKETS LLC

as Sole Lead Arranger and Bookrunner

WACHOVIA BANK, NATIONAL ASSOCIATION

as Syndication Agent

and

THE LENDERS FROM TIME TO TIME PARTY HERETO

as Lenders

Dated: February 3, 2005

TABLE OF CONTENTS

		Page
SECTION 1.	DEFINITIONS	1
SECTION 2.	CREDIT FACILITIES	34
2.1	Loans	34
2.2	Letter of Credit Accommodations	34
2.3	Commitments	39
2.4	Bank Products	39
SECTION 3.	INTEREST AND FEES	39
3.1	Interest	39
3.2	Fees	40
3.3	Changes in Laws and Increased Costs of Loans	41
SECTION 4.	CONDITIONS PRECEDENT	43
4.1	Conditions Precedent to Initial Loans and Letter of Credit Accommodations	43
4.2	Conditions Precedent to All Loans and Letter of Credit Accommodations	47
SECTION 5.	GRANT AND PERFECTION OF SECURITY INTEREST	47
5.1	Grant of Security Interest	47
5.2	Perfection of Security Interests	48
5.3	Special Provisions Regarding Collateral	52
SECTION 6.	COLLECTION AND ADMINISTRATION	53
6.1	Borrower’s Loan Accounts	53
6.2	Statements	53
6.3	Collection of Accounts	53
6.4	Payments	55
6.5	Authorization to Make Loans	56
6.6	Use of Proceeds	56
6.7	Pro Rata Treatment	57
6.8	Sharing of Payments, Etc.	57
6.9	Settlement Procedures	58
6.10	Obligations Several; Independent Nature of Lenders’ Rights	60
6.11	Taxes	61

(i)

SECTION 7.	COLLATERAL REPORTING AND COVENANTS	63
7.1	Collateral Reporting	63
7.2	Accounts Covenants	65
7.3	Inventory Covenants	66
7.4	Equipment and Real Property Covenants	67
7.5	Power of Attorney	68
7.6	Right to Cure	68
7.7	Access to Premises	69
SECTION 8.	REPRESENTATIONS AND WARRANTIES	69
8.1	Corporate Existence, Power and Authority	69
8.2	Name; State of Organization; Chief Executive Office; Collateral Locations	70
8.3	Financial Statements; No Material Adverse Change	70
8.4	Priority of Liens; Title to Properties	71
8.5	Tax Returns	71
8.6	Litigation	71
8.7	Compliance with Other Agreements and Applicable Laws	72
8.8	Environmental Compliance	72
8.9	Employee Benefits	73
8.10	Bank Accounts	73
8.11	Intellectual Property	74
8.12	Subsidiaries; Affiliates; Capitalization; Solvency	74
8.13	Labor Disputes	75
8.14	Restrictions on Subsidiaries	75
8.15	Material Contracts	76
8.16	Credit Card Agreements	76
8.17	Intentionally Deleted	76
8.18	The Merger	76
8.19	Accuracy and Completeness of Information	77
8.20	Survival of Warranties; Cumulative	77
SECTION 9.	AFFIRMATIVE AND NEGATIVE COVENANTS	77
9.1	Maintenance of Existence	77
9.2	New Collateral Locations	78
9.3	Compliance with Laws, Regulations, Etc.	78
9.4	Payment of Taxes and Claims	79
9.5	Insurance	80
9.6	Financial Statements and Other Information	81
9.7	Sale of Assets, Consolidation, Merger, Dissolution, Etc.	83
9.8	Encumbrances	86
9.9	Indebtedness	89
9.10	Loans, Investments, Etc.	93

(ii)

9.11	Dividends and Redemptions	100
9.12	Transactions with Affiliates	101
9.13	Credit Card Agreements	102
9.14	Compliance with ERISA	102
9.15	End of Fiscal Years; Fiscal Quarters	102
9.16	Change in Business	103
9.17	Limitation of Restrictions Affecting Subsidiaries	103
9.18	Fixed Charge Coverage Ratio	103
9.19	License Agreements	103
9.20	After Acquired Real Property	105
9.21	Costs and Expenses	105
9.22	Wholesale Agreements	106
9.23	Consignment and Vendor Financing Agreements	106
9.24	Further Assurances	107
SECTION 10.	EVENTS OF DEFAULT AND REMEDIES	107
10.1	Events of Default	107
10.2	Remedies	109
SECTION 11.	JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW	113
11.1	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver	113
11.2	Waiver of Notices	114
11.3	Amendments and Waivers	115
11.4	Waiver of Counterclaims	116
11.5	Indemnification	116
SECTION 12.	THE AGENT	117
12.1	Appointment, Powers and Immunities	117
12.2	Reliance by Agent	118
12.3	Events of Default	118
12.4	Congress in its Individual Capacity	119
12.5	Indemnification	119
12.6	Non-Reliance on Agent and Other Lenders	119
12.7	Failure to Act	120
12.8	Additional Loans	120
12.9	Concerning the Collateral and the Related Financing Agreements	120
12.10	Field Audit, Examination Reports and other Information; Disclaimer by Lenders	120
12.11	Collateral Matters	121
12.12	Agency for Perfection	123
12.13	Successor Agent	123

(iii)

12.14	Co-Agents	124
SECTION 13.	TERM OF AGREEMENT; MISCELLANEOUS	124
13.1	Term	124
13.2	Interpretative Provisions	126
13.3	Notices	127
13.4	Partial Invalidity	128
13.5	Confidentiality	128
13.6	Successors	129
13.7	Assignments; Participations	130
13.8	Entire Agreement	132
13.9	USA Patriot Act	132
13.10	Counterparts, Etc.	132

(iv)

INDEX TO

EXHIBITS AND SCHEDULES

Exhibit A	Form of Assignment and Acceptance
Exhibit B	Information Certificate
Exhibit C	Form of Compliance Certificate
Schedule 1.56	Existing Lenders
Schedule 1.57	Existing Letters of Credit
Schedule 1.64	Frigidaire Consignment Collateral
Schedule 1.97	Permitted Holders
Schedule 1.135	Wholesale Collateral
Schedule 8.3	Financial Statements
Schedule 8.16	Credit Card Agreements
Schedule 9.5	Leased Locations
Schedule 9.7	Real Property to be Sold
Schedule 9.12	Affiliate Transactions

(v)

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement, dated February 3, 2005 (the “Agreement”), is entered into by and among Gregg Appliances, Inc. an Indiana corporation (“Borrower”), HHG Distributing, LLC, an Indiana limited liability company (“Guarantor”), the parties hereto from time to time as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively, “Lenders”), Congress Financial Corporation (Central), an Illinois corporation (“Congress”), in its capacity as administrative agent and collateral agent for Lenders (in such capacity “Agent”), Wachovia Capital Markets LLC, a Delaware limited liability company (“WCM”), in its capacity as lead arranger and bookrunner for the credit facility (in such capacity, the “Lead Arranger”), and Wachovia Bank, National Association, in is capacity as syndication agent for the credit facility.

W I T N E S S E T H:

WHEREAS, Borrower and Guarantors have requested that Agent and Lenders enter into financing arrangements with Borrower pursuant to which Lenders may make loans and provide other financial accommodations to Borrower; and

WHEREAS, each Lender is willing to agree (severally and not jointly) to make such loans and provide such financial accommodations to Borrower on a pro rata basis according to its Commitment (as defined below) on the terms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements;

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1. DEFINITIONS

For purposes of this Agreement, the following terms shall have the respective meanings given to them below:

1.1 “Accounts” shall mean, as to Borrower and each Guarantor, all present and future rights of Borrower and each Guarantor to payment of a monetary obligation, whether or not earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.

1.2 “ACH Transactions” shall mean the automatic clearing house transfer of funds by Agent, any Lender or any of their respective Affiliates for the account of Borrower or its Subsidiaries, in each case pursuant to agreements entered into with Borrower or any of its Subsidiaries.

1.3 “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one-thousandth (1/1000) of one (1%) percent) determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States or foreign banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any change in the Reserve Percentage.

1.4 “Affiliate” shall mean, with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing, includes (a) any Person which beneficially owns or holds ten (10%) percent or more of any class of Voting Stock of such Person or other equity interests in such Person, (b) any Person of which such Person beneficially owns or holds ten (10%) percent or more of any class of Voting Stock or in which such Person beneficially owns or holds ten (10%) percent or more of the equity interests, and (c) any director or executive officer of such Person. For the purposes of this definition, the term “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise.

1.5 “Agent” shall mean Congress Financial Corporation (Central), in its capacity as agent on behalf of Lenders pursuant to the terms hereof and any replacement or successor agent hereunder.

1.6 “Agent Payment Account” shall mean account no. 5000000030266 of Agent at Wachovia Bank, National Association, or such other account of Agent as Agent may from time to time designate to Borrower as the Agent Payment Account for purposes of this Agreement and the other Financing Agreements.

2

1.7 “Applicable Margin” shall mean, at any time, with respect to the calculation of the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans, the applicable percentage (on a per annum basis) set forth below if either LTM EBITDA as of the end of any fiscal quarter (for which financial statements have been delivered to Agent pursuant to Section 9.6(a) hereof) or the Quarterly Average Excess Availability for the immediately preceding fiscal quarter is at or within the amounts indicated for such percentage:

		Applicable Margin
LTM EBITDA	Quarterly Average Excess Availability	Prime Rate Loans		Eurodollar Rate Loans
Less than $40,000,000	Less than $10,000,000	¾	%	2.00	%
Greater than or equal to $40,000,000 and less than $50,000,000	Greater than or equal to $10,000,000 but less than $20,000,000	½	%	1 ¾	%
Greater than or equal to $50,000,000 and less than $60,000,000	Greater than or equal to $20,000,000 and less than $40,000,000	¼	%	1 ½	%

provided, that, the Applicable Margin shall be calculated and established once each fiscal quarter (commencing with the fiscal quarter ending on or about June 30, 2005 in accordance with the terms of Section 1.77 hereof) and shall remain in effect until adjusted thereafter during the next fiscal quarter; and provided, that, in the event that after June 30, 2005, LTM EBITDA is greater than $60,000,000 and Quarterly Average Excess Availability is greater than $40,000,000 for same measurement period, then the Applicable Margin shall be 1¼% for Eurodollar Rate Loans and ¼% for Prime Rate Loans. If the Quarterly Excess Availability or LTM EBITDA tests for any period would result in different levels of Applicable Margin, the Applicable Margin for such period shall be the lower level set forth above based on Quarterly Excess Availability or LTM EBITDA.

1.8 “Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’s interest hereunder in accordance with the provisions of Section 13.7 hereof.

1.9 “Bank Products” shall mean any one or more of the following types of services or facilities extended to Borrower or its Subsidiaries by a Bank Product Provider: (a) credit cards, (b) ACH Transactions, (c) any overdrafts, cash management or related services, and (d) Hedging Transactions, if and to the extent provided hereunder.

3

1.10 “Bank Product Providers” shall mean the Agent, any Lender and any of their respective Affiliates that may, from time to time, provide any Bank Products to Borrower, Guarantor or any of their respective Subsidiaries.

1.11 “Beneficial” shall mean, collectively, Beneficial Kentucky Inc., Beneficial Consumer Discount Company, Beneficial Indiana Inc., and Beneficial Tennessee Inc., and their respective successors and assigns.

1.12 “Beneficial Accounts” shall mean all amounts owed to Borrower by Beneficial under the Beneficial Agreement.

1.13 “Beneficial Agreement” shall mean the Agreement for the Purchase of Closed End Contracts, dated as of May 1, 1998, by and among Borrower and Beneficial, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.14 “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.

1.15 “Borrowing Base” shall mean, at any time, the amount equal to:

(a) the lesser of:

(i) (A) prior to and including December 31, 2005, the amount equal to: (1) eighty-five (85%) percent of the amount of Eligible Commercial Accounts, plus (2) eighty-five (85%) percent of the amount of Eligible Credit Card Receivables, plus (3) the lesser of (aa) ninety (90%) percent (or ninety-three (93%) percent during the Seasonal Period) of the Net Recovery Percentage multiplied by the Value of such Eligible Inventory, or (bb) sixty-five (65%) percent of the net book value of Eligible Inventory; and (B) after December 31, 2005, the amount equal to: (i) eighty-five (85%) percent of the amount of Eligible Commercial Accounts, plus (ii) eighty-five (85%) percent of the amount of Eligible Credit Card Receivables, plus (iii) the lesser of (1) eighty-five (85%) percent (or ninety (90%) percent during the Seasonal Period) of the Net Recovery Percentage multiplied by the Value of such Eligible Inventory, or (2) sixty-five (65%) percent of the net book value of Eligible Inventory; or

(ii) the Maximum Credit,

minus

(b) Reserves.

1.16 “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of Illinois or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if a determination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Rate market.

4

1.17 “Capital Leases” shall mean, as applied to any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be capitalized on the balance sheet of such Person.

1.18 “Capital Stock” shall mean, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock).

1.19 “Cash Dominion Event” shall mean either (a) an Event of Default shall exist or have occurred and be continuing or (b) the period commencing on any date on which Excess Availability is less than $8,500,000 (other than any period commencing the date that any payment of interest is made by Borrower under the Senior Note Indenture and ending five (5) Business Days thereafter) and ending on a Cash Dominion Reversion.

1.20 “Cash Dominion Reversion “ shall mean with respect to the first two (2) Cash Dominion Events in any twelve (12) month period, that Excess Availability has been equal to or greater than $8,500,000 for sixty (60) consecutive days, provided, that, if a third Cash Dominion Event occurs during such twelve (12) month period, a Cash Dominion Reversion will occur only in the event that Excess Availability has been equal to or greater than $8,500,000 for three hundred sixty (360) consecutive days.

1.21 “Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the United States of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $250,000,000; (c) commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation (except an Affiliate of Borrower or any Guarantor) organized under the laws of any State of the United States of America or the District of Columbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30) days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $1,000,000,000; (e) repurchase agreements and reverse repurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States of America, in each case maturing within ninety (90) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions with Securities Dealers and

5

Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described in clauses (a) through (e) above.

1.22 “Change of Control” shall mean (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Borrower or any Guarantor to any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the liquidation or dissolution of Borrower or any Guarantor or the adoption of a plan by the stockholders of Borrower or any Guarantor relating to the dissolution or liquidation of Borrower or any Guarantor, other than as permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders, of beneficial ownership, directly or indirectly, of a majority of the voting power of the total outstanding Voting Stock of Borrower or any Guarantor or the Board of Directors of Borrower or any Guarantor; (d) during any period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of Borrower or any Guarantor (together with any new directors who have been appointed by any Permitted Holder, or whose nomination for election by the stockholders of Borrower or any Guarantor, as the case may be, was approved by a vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors then 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 to constitute a majority of the Board of Directors of Borrower or any Guarantor then still in office; or (e) (i) prior to the occurrence of a Public Market, Permitted Holders, either individually or collectively, directly or indirectly, fail to own at least sixty (60%) percent of the voting power of the Voting Stock of Borrower; and (ii) after the occurrence of a Public Market, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than a Permitted Holder becomes the ultimate legal or beneficial owner, directly or indirectly, of 35% or more of the voting power of the total outstanding Voting Stock of Borrower, and the Permitted Holders beneficially own a lesser percentage of such voting power of the Voting Stock than such Person and Permitted Holders do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of Borrower’s Board of Directors.

1.23 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified, recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto.

1.24 “Collateral” shall have the meaning set forth in Section 5 hereof.

1.25 “Collateral Access Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, from any lessor of premises to Borrower or any Guarantor, or any other person to whom any Collateral (including Inventory, Equipment, bills of lading or other documents of title) is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of such Collateral is located, in favor of Agent with respect to the Collateral at such premises or otherwise in the custody, control or possession of such lessor, consignee or other person.

6

1.26 “Commitment” shall mean, at any time, as to each Lender, the principal amount set forth below such Lender’s signature on the signature pages hereto designated as such Lender’s the commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may be adjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as “Commitments”.

1.27 “Congress” shall mean Congress Financial Corporation (Central), an Illinois corporation, in its individual capacity, and its successors and assigns.

1.28 “Consolidated Net Income” shall mean, with respect to any Person for any period, the aggregate of the net income (or loss) of such Person and its Subsidiaries for such period, on a consolidated basis (excluding to the extent included therein any extraordinary and/or one time or unusual and non-recurring gains or any non-cash losses and adjusted to reflect any charge, tax or expense incurred or accrued by such Person as though such charge, tax or expense had been incurred by such person to the extent permitted to be incurred under this Agreement) after deducting all charges which should be deducted before arriving at the net income (loss) for such period and, without duplication, after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided, that, (a) the net income of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or a Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or the date that such Person’s assets are acquired by such Person or by its Subsidiaries shall be excluded; (c) the net income (if positive) of any Subsidiary (other than Borrower or an Obligor) to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person is not at the date of determination permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary shall be excluded, (d) the amount equal to the ESP Adjustment Amount for such period shall be included, and (e) with respect to any period or portion of any period preceding the date of this Agreement, the impact attributable solely to the consolation of related party entities pursuant to FIN 46R or EITF Issue No. 90-15 and EITF Topic No. D-14 shall be excluded. For the purposes of this definition, net income excludes any gain or loss, together with any related Provision for Taxes for such gain or loss, realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any Capital Stock of such Person or a Subsidiary of such Person and any net income realized or loss incurred as a result of changes in accounting principles or the application thereof to such Person.

1.29 “Cost” shall mean, as to the Inventory as of any date, the cost of such Inventory as of such date, determined on the weighted average cost basis in accordance with GAAP.

7

1.30 “Credit Card Acknowledgments” shall mean, collectively, the agreements by Credit Card Issuers or Credit Card Processors who are parties to Credit Card Agreements in favor of Agent acknowledging Agent’s first priority security interest in the monies due and to become due to Borrower (including, without limitation, credits and reserves) under the Credit Card Agreements, and agreeing to transfer all such amounts to the Blocked Accounts, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced; sometimes being referred to herein individually as a “Credit Card Acknowledgment”.

1.31 “Credit Card Agreements” shall mean all agreements now or hereafter entered into by Borrower with any Credit Card Issuer or any Credit Card Processor, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, including, but not limited to, the agreements set forth on Schedule 8.16 hereto; sometimes being referred to herein individually as a “Credit Card Agreement”.

1.32 “Credit Card Issuer” shall mean any person (other than Borrower) who issues or whose members issue credit cards, including, without limitation, MasterCard or VISA bank credit or debit cards or other bank credit or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and American Express, Discover, Diners Club, Carte Blanche and other non-bank credit or debit cards, including, without limitation, credit or debit cards issued by or through American Express Travel Related Services Company, Inc. and Discover Financial Services, Inc.

1.33 “Credit Card Processor” shall mean any servicing or processing agent or any factor or financial intermediary who facilitates, services, processes or manages the credit authorization, billing transfer and/or payment procedures with respect to any of Borrower’s sales transactions involving credit card or debit card purchases by customers using credit cards or debit cards issued by any Credit Card Issuer.

1.34 “Credit Card Receivables” shall mean, collectively, (a) all present and future rights of Borrower to payment from any Credit Card Issuer, Credit Card Processor or other third party arising from sales of goods or rendition of services to customers who have purchased such goods or services using a credit or debit card, and (b) all present and future rights of Borrower to payment from any Credit Card Issuer, Credit Card Processor or other third party in connection with the sale or transfer of Accounts arising pursuant to the sale of goods or rendition of services to customers who have purchased such goods or services using a credit card or a debit card, including, but not limited to, all amounts at any time due or to become due from any Credit Card Issuer or Credit Card Processor under the Credit Card Agreements or otherwise.

1.35 “Credit Facility” shall mean the Loans and Letter of Credit Accommodations provided to or for the benefit of Borrower pursuant to Sections 2.1 and 2.2 hereof.

1.36 “Default” shall mean an act, condition or event which with notice or passage of time or both would constitute an Event of Default.

1.37 “Defaulting Lender” shall have the meaning set forth in Section 6.9(d) hereof.

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1.38 “Deposit Account Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, Borrower or any Guarantor (as the case may be) with a deposit account at any bank and the bank at which such deposit account is at any time maintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by Borrower or such Guarantor and has such other terms and conditions as Agent may require.

1.39 “EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to (without duplication) the sum of: (a) the Consolidated Net Income of such Person and its Subsidiaries for such period, plus (b) depreciation, amortization and other non-cash charges (including, but not limited to, imputed interest, deferred compensation and charges associated with impairment of goodwill pursuant to FASB 142) for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (d) the Provision for Taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person plus (e) to the extent deducted in the computation of Consolidated Net Income, expenses and charges resulting from (i) the Merger, (ii) any other equity offerings, investments, mergers, recapitalizations, option buyouts, dispositions, acquisitions or similar transactions (provided, that, any such expenses and charges shall have been incurred prior to or no later than three (3) months following the consummation of such transaction), all as determined in accordance with GAAP).

1.40 “Eligible Commercial Accounts” shall mean Accounts created by Borrower which are and continue to be acceptable to Agent in good faith based on the criteria set forth below. In general, Accounts shall be Eligible Commercial Accounts if:

(a) such Accounts arise from the actual and bona fide sale and delivery of goods by Borrower in the ordinary course of its business to customers who are not individual retail customers which transactions are completed in accordance with the terms and provisions contained in any documents related thereto;

(b) such Accounts are not unpaid more than one hundred twenty (120) days after the date of the original invoice for them;

(c) such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement;

(d) such Accounts do not arise from (i) sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent, (ii) the sale of warranty contracts or warranty services, (iii) sales of satellite systems in respect of which Dish Network is the account debtor, (iv) merchandise which is on loan to builders, (v) the sale of goods and services pursuant to Installment Sales Contracts, (vi) the sale of Installment Sales Contracts to Beneficial pursuant to the Beneficial Agreement, and (vii) merchandise which is damaged by Borrower’s delivery services, provided,

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that, Accounts arising pursuant to clauses (d)(ii) and (iv) hereof shall be deemed Eligible Commercial Accounts but only to the extent of the portion of all such Accounts not in excess of $100,000 in the aggregate;

(e) the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada (provided, that, at any time promptly upon Agent’s request, Borrower shall execute and deliver, or cause to be executed and delivered, such other agreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with the applicable laws of the Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may request to enable Agent as secured party with respect thereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Agent’s option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is located other than in the United States of America or Canada, then if either: (i) the account debtor has delivered to Borrower an irrevocable letter of credit issued or confirmed by a bank satisfactory to Agent and payable only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form and substance satisfactory to Agent and if required by Agent, the original of such letter of credit has been delivered to Agent or Agent’s agent and the issuer thereof, and Borrower has complied with the terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurance payable to Agent issued by an insurer and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all respects to Agent (subject to such lending formula with respect thereto as Agent may determine);

(f) such Accounts do not consist of progress billings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices or retainage invoices, except as to bill and hold invoices, if Agent shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Agent, confirming the unconditional obligation of the account debtor to take the goods related thereto and pay such invoice;

(g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and is not owed or does not claim to be owed any amounts that may give rise to any right of setoff or recoupment against such Accounts (but only to the extent of the portion of the Accounts of such account debtor owed by Borrower to such account debtor or claimed to be owed by such account debtor);

(h) there are no facts, events or occurrences which would impair the validity or enforceability of such Accounts;

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(i) such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any liens except those permitted in this Agreement that are either (A) subject to an intercreditor agreement in form and substance satisfactory to Agent between the holder of such security interest or lien and Agent or (B) inchoate tax liens permitted in accordance with Section 9.8 hereof, provided, that, such liens do not have priority over the liens of the Agent therein;

(j) neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of Borrower or any Guarantor;

(k) the account debtors with respect to such Accounts are not any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department, agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent;

(l) the account debtors with respect to such Accounts are not the subject of any bankruptcy, dissolution, liquidation, reorganization or similar proceeding;

(m) the aggregate amount of such Accounts owing by a single account debtor do not constitute more than fifteen (15%) percent of the aggregate amount of all otherwise Eligible Commercial Accounts (but only to the extent of the portion of the Accounts in excess of the applicable percentages);

(n) such Accounts are not owed by an account debtor who has Accounts unpaid more than ninety (90) days after the original invoice date for them which constitute more than twenty-five (25%) percent of the total Accounts of such account debtor;

(o) the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order to permit Borrower to seek judicial enforcement in such State of payment of such Account, unless Borrower has qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without any material delay or material cost;

(p) such Accounts are not Credit Card Receivables; and

(q) such Accounts are owed by account debtors deemed creditworthy with respect to their ability to pay their respective Accounts as determined by Borrower consistent with their ordinary course business practices and is acceptable to Agent in good faith.

The criteria for Eligible Commercial Accounts set forth above may only be changed and any new criteria for Eligible Commercial Accounts may only be established by Agent in good

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faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent. Any Accounts that are not Eligible Commercial Accounts shall nevertheless be part of the Collateral.

1.41 “Eligible Credit Card Receivables” shall mean the Credit Card Receivables of Borrower and Beneficial Accounts which are and continue to be acceptable to Agent based on the criteria set forth below. Credit Card Receivables and Beneficial Accounts shall be Eligible Credit Card Receivables if:

(a) such Credit Card Receivables or Beneficial Accounts, as the case may be, arise from the actual and bona fide sale and delivery of goods in the ordinary course of the business of Borrower which transactions are completed in accordance with the terms and provisions contained in any agreements binding on Borrower or the other party or parties related thereto, provided, that, in the case of Credit Card Receivables, such Credit Card Receivables do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under which payment by the account debtor may be conditional or contingent;

(b) such Credit Card Receivables or Beneficial Accounts, as the case may be, are not past due (beyond any stated applicable grace period, if any, therefor) pursuant to the terms set forth in (i) the Credit Card Agreements with the Credit Card Issuer or Credit Card Processor of the credit card or debit card used in the purchase which give rise to such Credit Card Receivables, or (ii) the Beneficial Agreement, as the case may be;

(c) (i) such Credit Card Receivables are not unpaid more than ten (10) Business Days after the date of the sale of Inventory giving rise to such Credit Card Receivables and (ii) such Beneficial Accounts are not unpaid more than twenty (20) days after such payment is due by customer to Beneficial;

(d) all procedures required by the Credit Card Issuer or the Credit Card Processor of the credit card or debit card used in the purchase which gave rise to such Credit Card Receivables shall have been followed in all material respects by Borrower and all documents required for the authorization and approval by such Credit Card Issuer or Credit Card Processor shall have been obtained in connection with the sale giving rise to such Credit Card Receivables;

(e) the required authorization and approval by such Credit Card Issuer or Credit Card Processor shall have been obtained for the sale giving rise to such Credit Card Receivables;

(f) Borrower shall have submitted all sales slips, drafts, charges and other reports and other materials required by the Credit Card Issuer or Credit Card Processor obligated in

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respect of such Credit Card Receivables in order for Borrower to be entitled to payment in respect thereof;

(g) such Credit Card Receivables and Beneficial Accounts comply with the applicable terms and conditions contained in Section 7.2 of this Agreement;

(h) (i) with respect to Credit Card Receivables, the Credit Card Issuer or Credit Card Processor with respect to such Credit Card Receivables has not asserted a counterclaim, defense or dispute and does not have any right of setoff against such Credit Card Receivables (other than transactions in the ordinary course of the business of Borrower) and such Credit Card Issuer or Credit Card Processor has not setoff against amounts otherwise payable by such Credit Card Issuer or Credit Card Processor to Borrower for the purpose of establishing a reserve or collateral for obligations of Borrower to such Credit Card Issuer or Credit Card Processor other than any rights of setoff for fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with Borrower as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of Borrower), and (ii) with respect to Beneficial Accounts, Beneficial has not asserted a counterclaim, defense or dispute and does not have any right of setoff against such Beneficial Account and Beneficial has not setoff against amounts otherwise payable by Beneficial to Borrower;

(i) there are no facts, events or occurrences which would impair in any material respect the validity, enforceability or collectability of such Credit Card Receivables or Beneficial Accounts or reduce the amount payable or delay payment thereunder (other than for setoffs for fees and chargebacks consistent with the practices of such Credit Card Issuer or Credit Card Processor with Borrower as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of Borrower);

(j) such Credit Card Receivables and Beneficial Accounts are subject to the first priority, valid and perfected security interest and lien of Agent, for and on behalf of Lenders, as to such Credit Card Receivables of Borrower and any goods giving rise thereto are not, and were not at the time of the sale thereof, subject to any encumbrances permitted under the terms hereof;

(k) (i) as of the date which is one hundred eighty (180) days after the date hereof, Agent shall have received, in form and substance satisfactory to Agent in good faith, a Credit Card Acknowledgment duly authorized, executed and delivered by the Credit Card Issuer (except in the case of American Express) or Credit Card Processor for the credit card or debit card used in the sale which gave rise to such Credit Card Receivable, such Credit Card Acknowledgment shall be in full force and effect and the Credit Card Issuer or Credit Card Processor party thereto shall be in compliance with the terms thereof, and (ii) as of the date hereof, Agent shall have received, in form and substance satisfactory to Agent in good faith, an agreement duly authorized, executed and delivered by Beneficial;

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(l) (i) there are no proceedings or actions which are pending or to the best of Borrower’s knowledge threatened, against the Credit Card Issuers or Credit Card Processors with respect to such Credit Card Receivables which would reasonably be expected to result in any material adverse change in the continued collectability of the Credit Card Receivables with respect to the Credit Card Issuers or Credit Card Processors or (ii) there are no proceedings or actions which are pending or to the best of Borrower’s knowledge threatened, against Beneficial with respect to such Beneficial Accounts which would reasonably be expected to result in any material adverse change in the continued collectability of the Beneficial Accounts;

(m) (i) such Credit Card Receivables are owed by Credit Card Issuers or Credit Card Processors deemed creditworthy at all times by Agent in good faith and (ii) Beneficial is deemed creditworthy at all times by Agent;

(n) (i) no material default or material event of default has occurred under the Credit Card Agreement of Borrower with the Credit Card Issuer or Credit Card Processor who has issued the credit card or debit card or handles payments under the credit card or debit card used in the sale which gave rise to such Credit Card Receivables which default gives such Credit Card Issuer or Credit Card Processor the right to cease or suspend payments to Borrower and no material default or material event of default shall have occurred which gives such Credit Card Issuer or Credit Card Processor the right to setoff against amounts otherwise payable to Borrower (other than for then current fees and chargebacks consistent with the current practices of such Credit Card Issuer or Credit Card Processor as of the date hereof or as such practices may hereafter change as a result of changes to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of Borrower) or the right to establish reserves or establish or demand collateral and such Credit Card Agreements are otherwise in full force and effect and constitute the legal, valid, binding and enforceable obligations of the parties thereto and (ii) no material default or material event of default has occurred under the Beneficial Agreement which default gives Beneficial the right to cease or suspend payments to Borrower and no material default or material event of default shall have occurred which gives Beneficial the right to setoff against amounts otherwise payable to Borrower and the Beneficial Agreement is otherwise in full force and effect and constitutes the legal, valid, binding and enforceable obligations of the parties thereto;

(o) the terms of the sale giving rise to such Credit Card Receivables and Beneficial Accounts and all practices of Borrower with respect to such Credit Card Receivables and Beneficial Accounts comply in all material respects with applicable Federal, State, and local laws and regulations;

(p) the Credit Card Issuer or Credit Card Processor has not sent any notice of default and/or notice of its intention to cease or suspend payments to Borrower in respect of such Credit Card Receivables or to establish reserves or cash collateral for obligations of Borrower to such Credit Card Issuer or Credit Card Processor (other than for then current fees and chargebacks consistent with the current practices of such Credit Card Issuer or Credit Card Processor as of the date hereof or as such practices may hereafter change as a result of changes

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to the policies of such Credit Card Issuer or Credit Card Processor applicable to its customers generally and unrelated to the circumstances of Borrower); and

(q) such Credit Card Receivable does not arise from a customer’s use of the Private Label Credit Card or any co-branded credit card.

General criteria for Eligible Credit Card Receivables may only be changed and any new criteria for Eligible Credit Card Receivables may only be established by Agent in good faith, based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the collectability of the Credit Card Receivables in the good faith determination of Agent. Any Credit Card Receivables which are not Eligible Credit Card Receivables shall nevertheless be part of the Collateral.

1.42 “Eligible Inventory” shall mean, as to Borrower, Inventory of Borrower consisting of finished goods held for resale in the ordinary course of the business of Borrower, in each case that are acceptable to Agent based on the criteria set forth below. In general, Eligible Inventory shall not include (a) work-in-process; (b) raw materials; (c) spare parts for equipment and service parts; (d) packaging and shipping materials; (e) supplies used or consumed in Borrower’s business; (f) Inventory at premises other than those owned or leased and controlled by Borrower (Inventory of Borrower which is in-transit from any location of Borrower permitted herein to another such location shall be considered Eligible Inventory provided, that, it otherwise satisfies the criteria for Eligible Inventory set forth herein and is not in-transit more than five (5) consecutive days); provided, that, (i) as to retail store locations which are leased by Borrower, Agent may, at its option, establish Reserves in respect of rental payments and other amounts in respect of such leased location of the type and to the extent Agent shall determine in accordance with the definition of the term Reserves herein, (ii) as to all other locations leased by Borrower, if Agent shall not have received a Collateral Access Agreement from the owner and lessor with respect to such location, duly authorized, executed and delivered by such owner and lessor (or Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, establish such Reserves in respect of amounts at any time due or to become due to the owner and lessor thereof as Agent shall determine, and (iii) as to all locations owned and operated by a person other than Borrower and not covered by clause (i) and (ii) hereof, if Agent shall not have received a Collateral Access Agreement from the owner and operator with respect to such location, duly authorized, executed and delivered by such owner and operator (or Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, establish such Reserves in respect of amounts at any time due or to become due to the owner and operator thereof as Agent shall determine; provided, that, in addition, if required by Agent, in order for such Inventory at locations owned and operated by a third person to be Eligible Inventory, Agent shall have received: (A) UCC financing statements between the owner and operator, as consignee or bailee and Borrower, as consignor or bailor, in form and substance satisfactory to Agent in good faith, which are duly assigned to Agent and the written authorization to file such

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financing statements in a form satisfactory to Agent and (B) a written notice to any lender to the owner and operator of the first priority security interest in such Inventory of Agent; (g) Inventory subject to a security interest or lien in favor of any Person other than Agent, including without limitation, the Wholesale Collateral; (h) bill and hold goods; (i) intentionally deleted; (j) Inventory that is not subject to the first priority, valid and perfected security interest of Agent; (k) damaged and/or defective Inventory; (l) returned Inventory which is not held for sale in the ordinary course of business; (m) Inventory purchased or sold on consignment, including without limitation, Frigidaire Consignment Collateral, and (n) Inventory located outside the United States of America. The criteria for Eligible Inventory set forth above may only be changed and any new criteria for Eligible Inventory may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affect the Inventory in the good faith determination of Agent. Any Inventory that is not Eligible Inventory shall nevertheless be part of the Collateral.

1.43 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at least fifty (50%) percent owned by such Lender or its parent company; (c) any Person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and in each case is approved by Agent; and (d) any commercial bank having a combined capital and surplus of at least $250,000,000 or financial institution having a net worth (or the equivalent thereof in the case of an investment partnership, managed account, limited liability company or similar entity) calculated in accordance with applicable generally accepted accounting principles of not less than $100,000,000, or “accredited investor” (as defined in Regulation D under the Securities Act) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business having a net worth (or the equivalent thereof in the case of an investment partnership, managed account, limited liability company or similar entity) calculated in accordance with applicable generally accepted accounting principles of not less than $100,000,000, and in each case, approved by Agent, provided, that, (i) in the case of the approval of clauses (c) and (d) above, unless an Event of Default has occurred and is continuing at the time any assignment is effected hereunder, Borrower shall have the right to approve such assignments, such approval not to be unreasonably withheld, conditioned or delayed by Borrower, and such approval shall be deemed to have been given by Borrower if no objection from Borrower is received by the assigning Lender and Agent within five (5) Business Days after notice of such proposed assignment has been provided by the assigning Lender or Agent to Borrower, (ii) neither Borrower nor any Guarantor or any Affiliate of Borrower or any Guarantor shall qualify as an Eligible Assignee and (iii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of Borrower or any

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Guarantor shall qualify as an Eligible Transferee, except as Administrative Agent may otherwise specifically agree.

1.44 “Environmental Laws” shall mean all foreign, Federal, State and local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between Borrower or any Guarantor and any Governmental Authority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, release or disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. The term “Environmental Laws” includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to such laws and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials.

1.45 “Equipment” shall mean, as to Borrower and each Guarantor, all of Borrower’s and Guarantor’s now owned and hereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located.

1.46 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, together with all rules, regulations and interpretations thereunder or related thereto.

1.47 “ERISA Affiliate” shall mean any person required to be aggregated with Borrower, any Guarantor or any of its or their respective Subsidiaries under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

1.48 “ERISA Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a Plan as to which the requirement of notice has not been waived; (b) the adoption of any amendment to a Plan that would require the provision of security pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (d) the

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filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (e) a complete or partial withdrawal by Borrower, Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification that a Multiemployer Plan is in reorganization; (f) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (g) an event or condition which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (h) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon Borrower, Guarantor or any ERISA Affiliate in excess of $1,000,000.

1.49 “ESP Adjustment Amount” means, with respect to the Company and for any period, the excess of (i) the unamortized portion of revenue from the sale of ESPs with respect to consumer electronics products during such period over (ii) the sum of the unamortized portion of the commission expense with respect to the sale of such ESPs and the fees that would have been payable to the third-party provider with respect to such ESPs had such ESPs been sold as third-party ESPs (under which Borrower is not the obligor) on a basis and under terms similar to the third-party ESPs sold with respect to appliances.

1.50 “Eurodollar Rate” shall mean with respect to any Interest Period for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the next one-thousandth (1/1000^th) of one (1%) percent) at which Reference Bank is offered deposits of United States dollars in the London interbank market (or other Eurodollar Rate market selected by Borrower and approved by Agent) on or about 11:00 a.m. (Chicago, Illinois time) two (2) Business Days prior to the commencement of such Interest Period in amounts substantially equal to the principal amount of the Eurodollar Rate Loans requested by and available to Borrower in accordance with this Agreement, with a maturity of comparable duration to the Interest Period selected by or on behalf of Borrower.

1.51 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof.

1.52 “Event of Default” shall mean the occurrence or existence of any event or condition described in Section 10.1 hereof.

1.53 “Excess Availability” shall mean the amount, as determined by Agent, calculated at any date of determination in accordance with the terms hereof, equal to: (a) the Borrowing Base (after giving effect to any Reserves other than any Reserves in respect of Letter of Credit Accommodations), minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations (other than any outstanding Letter of Credit Accommodations) plus (ii) the amount of all Reserves then established in respect of Letter of Credit Accommodations.

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1.54 “Excess Closing Availability” shall mean the amount, as determined by Agent, calculated as of the date hereof, equal to: (a) the Borrowing Base (after giving effect to any Reserves other than Reserves in respect of Letter of Credit Accommodations), minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations, plus (ii) the amount of all Reserves then established in respect of Letter of Credit Accommodations, plus (iii) the aggregate amount of all then outstanding and unpaid trade payables and other obligations of Borrower which are outstanding more than sixty (60) days past the original due date as of such time (other than trade payables or other obligations being contested or disputed by Borrower in good faith), plus (iv) without duplication, the amount of checks issued by Borrower to pay trade payables and other obligations which are more than sixty (60) days past the original due date as of such time (other than trade payables or other obligations being contested or disputed by Borrower in good faith), but not yet sent.

1.55 “Exchange Act” shall mean the Securities Exchange Act of 1934, together with all rules, regulations and interpretations thereunder or related thereto.

1.56 “Existing Lenders” shall mean the lenders to Borrower listed on Schedule 1.56 hereto (and including National City Bank in its capacity as agent acting for such lenders) and their respective predecessors, successors and assigns.

1.57 “Existing Letters of Credit” shall mean, collectively, the letters of credit issued for the account of Borrower or any Guarantor or for which Borrower or such Guarantor is otherwise liable listed on Schedule 1.57 hereto, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.58 “Fee Letter” shall mean the letter agreement, dated October 19, 2004, by and among Borrower, Agent, Wachovia Capital Markets LLC, Wachovia Bank, National Association, Wachovia Capital Investments, Inc., setting forth, among other fees certain fees payable by Borrower to Agent for the benefit of itself and Lenders, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.59 “Financing Agreements” shall mean, collectively, this Agreement and all notes, guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditor agreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower or any Obligor in connection with this Agreement; provided, that, the Financing Agreements shall not include any agreements with respect to Hedging Transactions.

1.60 “Fixed Charge Coverage Ratio” shall mean, as to Borrower and its Subsidiaries on a consolidated basis, the ratio, of any date of determination, of (a) EBITDA to (b) Fixed Charges.

1.61 “Fixed Charges” shall mean, as to Borrower and its Subsidiaries (on a consolidated basis), with respect to any period, the sum of, without duplication, (a) all cash Interest Expense during such period, plus (b) all cash Capital Expenditures (other than any Capital Expenditures that have been financed or are attributable to any sale leaseback transaction or Capital

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Expenditures that are reimbursed by a lessor for tenant allowances) during such period, plus (c) all regularly scheduled (as determined at the beginning of the respective period) principal payments in respect of Indebtedness for borrowed money and Indebtedness with respect to Capital Leases (and without duplicating items (a) and (c) of this definition, the interest component with respect to Indebtedness under Capital Leases) during such period, plus (d) all income taxes paid during such period in cash, all as determined in accordance with GAAP. With respect to any period or portion of any period preceding the date of this Agreement, any Interest Expense attributable solely to the consolidation of related party entities pursuant to FIN 46R or EITF Issue No. 9D-15 and EITF Topic No. D-14 shall be excluded for purposes of this “Fixed Charges” definition. For purposes of this definition, “Capital Expenditures” shall mean, for any period, as to any Person and its Subsidiaries, all expenditures by such Person and its Subsidiaries for, or contracts for expenditures (other than contracts for such expenditures where payments for such expenditures are to be made in any subsequent period) for, any fixed or capital assets or improvements, or for replacements, substitutions or additions thereto, which have a useful life of more than one (1) year, including, but not limited to, the direct or indirect acquisition of such assets by way of offset items or otherwise and obligations under Capital Leases incurred in respect of such fixed or capital assets during such period, but excluding from such calculations expenditures for fixed or capital assets having a cost of $2,500 or less which are expensed and not capitalized in accordance with Borrower’s current practices.

1.62 “Frigidaire” shall mean Electrolux Home Products, Inc. (as successor in interest to White Consolidated Industries, Inc., and its successors and assigns.

1.63 “Frigidaire Consignment Agreement” shall mean the Consignment Agreement, dated September 24, 2003, by and between Frigidaire and Borrower with respect to certain inventory manufactured by Frigidaire and sold by Borrower, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.64 “Frigidaire Consignment Collateral” shall mean the items and types of property described on Schedule 1.64 hereto.

1.65 “Frigidaire Intercreditor Agreement” shall mean the Intercreditor Agreement, dated of even date herewith, by and between Agent and Frigidaire, as acknowledged and agreed to by Borrower, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.66 “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, for purposes of Section 9.18, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof.

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1.67 “Governmental Authority” shall mean any nation or government, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

1.68 “Guarantors” shall mean, (i) HHG Distributing, LLC, an Indiana limited liability company and its respective successors and assigns, and (ii) any Subsidiaries of Borrower which become parties to this Agreement, in accordance with Section 9.10(g) hereof (together with their respective successors and assigns); each sometimes being referred to herein individually as a “Guarantor”).

1.69 “Hazardous Materials” shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solvents and/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic under any Environmental Law).

1.70 “Hedging Transactions” shall mean (a) any and all rate swap transactions, basis swaps, 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, 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 transaction, currency options 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, or (b) any and all transactions of any kind, and the related confirmations, that are subject to the terms or conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., or any other master agreement, as amended, restated, extended, supplemented or otherwise modified in writing from time to time, including but not limited to, any such obligations or liabilities under any such agreement.

1.71 “Indebtedness” shall mean, with respect to any Person, without duplication, any liability, whether or not contingent, in each case as determined in accordance with GAAP (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) or evidenced by bonds, notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not an Affiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the trade payable is being

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contested in good faith); (c) all obligations as lessee under Capital Leases which have been, or should be capitalized on the balance sheet of such Person in accordance with GAAP; (d) any contractual obligation, contingent or otherwise, of such Person to pay or be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquire such indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect to redeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowed money or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any assets of such Person, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; provided, that, for the purposes hereof, to the extent such Indebtedness referred to in this clause (g) is non-recourse to such Person, the amount of such Indebtedness shall not be deemed to exceed the lesser of (i) the principal amount of such Indebtedness or (ii) the value of the asset(s) securing such Indebtedness; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising under swap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values; (i) all obligations owed by such Person under License Agreements with respect to non-refundable, advance or minimum guarantee royalty payments; and (j) the principal and interest portions of all rental obligations of such Person under any synthetic lease or similar off-balance sheet financing where such transaction is considered to be borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP.

1.72 “Information Certificate” shall mean, collectively, the Information Certificate of Borrower and each Guarantor constituting Exhibit B hereto containing material information with respect to Borrower and Guarantors, their respective businesses and assets provided by or on behalf of Borrower and Guarantors to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein.

1.73 “Installment Sales Contracts” shall mean, collectively, all installment sales contracts (and related documents) entered into by Borrower with any retailer customers for the sale of goods or services, including accessories.

1.74 “Intellectual Property” shall mean, as to Borrower and each Guarantor, Borrower’s and Guarantor’s now owned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright applications, copyright registrations, trademarks, servicemarks, trade names, trade styles,

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trademark and service mark applications, and licenses and rights to use any of the foregoing and all applications, registrations and recordings relating to any of the foregoing as may be filed in the United States Copyright Office, the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, any political subdivision thereof or in any other country or jurisdiction, together with all rights and privileges arising under applicable law with respect to Borrower’s or Guarantor’s use of any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating standards; goodwill (including any goodwill associated with any trademark or servicemark, or the license of any trademark or servicemark); customer and other lists in whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registration; source codes, object code, executable codes, data, databases and other physical manifestations or embodiments of any of the foregoing; software and contract rights relating to computer software programs, in whatever form created or maintained.

1.75 “Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, the total interest expense of such Person, whether paid or accrued during such period (including the interest component of Capital Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts and bank fees, commissions, discounts and other fees and charges owed with respect to letters of credit, banker’s acceptances or similar instruments.

1.76 “Interest Period” shall mean for any Eurodollar Rate Loan, a period of approximately one (1), two (2), three (3) or six (6) months duration as Borrower may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided, that, Borrower may not elect an Interest Period which will end after the last day of the then-current term of this Agreement.

1.77 “Interest Rate” shall mean,

(a) Subject to clauses (b) and (c) of this definition below:

(i) as to Prime Rate Loans, a rate equal to one-half of one (1/2%) percent per annum in excess of the Prime Rate, and

(ii) as to Eurodollar Rate Loans, a rate equal to one and three-quarters ( 1 3/4%) percent per annum in excess of the Adjusted Eurodollar Rate (in each case, based on the Eurodollar Rate applicable for the Interest Period selected by Borrower, as in effect three (3) Business Days after the date of receipt by Agent of the request of or on behalf of Borrower for such Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is higher or lower than any rate previously quoted to Borrower).

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(b) Subject to clause (c) of this definition below, effective as of the first (1^st) day of the second month of each fiscal quarter (commencing with second month after the fiscal quarter ending on or about June 30, 2005), the Interest Rate payable by Borrower in respect of Loans shall be increased or decreased, as the case may be, in accordance with the definition of Applicable Margin, (i) as to Loans which are Prime Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Prime Rate, and (ii) as to Loans which are Eurodollar Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate.

(c) Notwithstanding anything to the contrary contained in clauses (a) or (b) of this definition, the Interest Rate shall mean the per annum rates set forth above plus (in each case) two (2%) percent per annum, at Agent’s option, without notice, (i) either (A) for the period on and after the date of termination or non-renewal in accordance with terms hereof until such time as all of the Obligations are paid and satisfied in full in immediately available funds, or (B) from and after the date of the occurrence of any Event of Default, and for so long as such Event of Default is continuing as determined by Agent in good faith and (ii) on the Loans to Borrower at any time outstanding in excess of the Borrowing Base (whether or not such excess(es) arise or are made with or without Agent’s or any Lender’s knowledge or consent and whether made before or after an Event of Default).

1.78 “Inventory” shall mean, as to Borrower and each Guarantor, all of Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods, wherever located, which (a) are leased by Borrower or any Guarantor as lessor; (b) are held by Borrower or any Guarantor for sale or lease or to be furnished under a contract of service; (c) are furnished by Borrower or any Guarantor under a contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business.

1.79 “Investment Property Control Agreement” shall mean an agreement in writing, in form and substance reasonably satisfactory to Agent, by and among Agent, Borrower or any Guarantor (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of any investment property of Borrower or any Guarantor (as the case may be) acknowledging, among other things, that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply with entitlement orders originated by Agent with respect to such investment property, or other instructions of Agent.

1.80 “Lenders” shall mean the financial institutions who are signatories hereto as Lenders and other persons made a party to this Agreement as a Lender in accordance with Section 13.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Lender”.

1.81 “Letter of Credit Accommodations” shall mean, collectively, the letters of credit, merchandise purchase or other guaranties which are from time to time either (a) issued or opened by Agent or any Lender for the account of Borrower or any Obligor or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guaranteed to the issuer the

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performance by Borrower or any Obligor of its obligations to such issuer; sometimes being referred to herein individually as “Letter of Credit Accommodation”.

1.82 “License Agreements” shall have the meaning set forth in Section 8.11 hereof.

1.83 “Loans” shall mean the loans now or hereafter made by or on behalf of any Lender or by Agent for the account of any Lender on a revolving basis pursuant to the Credit Facility (involving advances, repayments and readvances) as set forth in Section 2.1 hereof.

1.84 “LTM EBITDA” shall mean as of the end of any fiscal quarter, the EBITDA of Borrower and its Subsidiaries for the four (4) consecutive fiscal quarters then ended.

1.85 “Material Adverse Effect” shall mean a material adverse effect on (a) the financial condition, business, performance or operations of Borrower; (b) the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (c) the legality, validity, enforceability, perfection or priority of the security interests and liens of Agent upon the Collateral; (d) Collateral having an aggregate value in excess of $500,000; (e) the ability of Borrower to repay the Obligations or of Borrower to perform its obligations under this Agreement or any of the other Financing Agreements as and when to be performed; or (f) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Agent and Lenders under this Agreement or any of the other Financing Agreements.

1.86 “Material Contract” shall mean (a) any contract or other agreement (other than the Financing Agreements and any purchase agreements or orders the subject of which is Inventory having a value of less than $10,000,000), written or oral, of Borrower or any Guarantor involving monetary liability of or to any Person in an amount in excess of $10,000,000 in any fiscal year and (b) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which Borrower or any Guarantor is a party as to which the breach, nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect.

1.87 “Maximum Credit” shall mean the amount of $75,000,000.

1.88 “Merger” shall mean the merger of GIC Corporation, an Indiana corporation, with and into Gregg Appliances, Inc., an Indiana corporation, with Borrower as the surviving corporation pursuant to the terms of the Merger Agreements.

1.89 “Merger Agreements” shall mean, collectively, the following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced from time to time): (a) the Agreement and Plan of Merger, dated as of October 19, 2004, by and among Gregg Investment Corporation, LLC, Gregg Appliances, Inc. and the Sellers as amended by the First Amendment thereto, dated as of January 13, 2005, and the Second Amendment thereto, dated as of January 31, 2005, and (b) all related agreements, documents and instruments related thereto.

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1.90 “Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any time during the current year or the immediately preceding six (6) years contributed to by Borrower, Guarantor or any ERISA Affiliate.

1.91 “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the numerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time on a “an in-store going out of business sale” basis as set forth in the most recent acceptable appraisal of Inventory received by Agent in accordance with Section 7.3, net of operating expenses, liquidation expenses and commissions, and (b) the denominator of which is the applicable original Cost of the aggregate amount of the Inventory subject to such appraisal.

1.92 “Obligations” shall mean (a) any and all Loans, Letter of Credit Accommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower or any Guarantor to Agent or any Lender and/or any of their respective Affiliates, in each case, including principal, interest, charges, fees, costs and expenses, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, or secured or unsecured and (b) for purposes only of Section 5.1 hereof and subject to the priority in right of payment set forth in Section 6.4 hereof, upon Borrower’s request (which request may be evidenced by its signature on the agreement referred to in clause (i) below) and with the prior consent of Agent, all obligations, liabilities and indebtedness of every kind, nature and description owing by any or all of Borrower or any Guarantor to Agent or any Bank Product Provider arising under or pursuant to any Bank Products, whether now existing or hereafter arising to the extent such obligations, liabilities and indebtedness would not cause the total amount of the Obligations to exceed the value of the Collateral; provided, that, (i) as to any such obligations, liabilities and indebtedness arising under or pursuant to a Hedging Transaction, the same shall only be included within the Obligations if upon Agent’s request, Agent shall have entered into an agreement, in form and substance satisfactory to Agent, with such Bank Product Provider that is a counterparty to such Hedging Transaction, as acknowledged and agreed to by Borrower and each Guarantor, providing for the delivery to Agent by such counterparty of information with respect to the amount of such obligations and providing for the other rights of Agent and such Bank Product Provider in connection with such arrangements, and (ii) in no event shall any Bank Product Provider to whom such obligations, liabilities or indebtedness are owing be deemed a Lender for purposes hereof to the extent of and as to such obligations, liabilities or indebtedness other than for purposes of Section 5.1 hereof and other than for purposes of Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9, 12.12 and 13.5 hereof and in no event shall the approval of any such person be required in connection with the release or termination of any security interest or lien of Agent.

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1.93 “Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations (including, without limitation, Guarantor), other than Borrower.

1.94 “Other Taxes” shall mean any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Financing Agreements.

1.95 “Parent” shall mean Gregg Investment Corporation, LLC, a Delaware limited liability company, and its successors and assigns.

1.96 “Participant” shall mean any financial institution that acquires and holds a participation in the interest of any Lender in any of the Loans and Letter of Credit Accommodations in conformity with the provisions of Section 13.7 of this Agreement governing participations.

1.97 “Permitted Holders” shall mean the persons listed on Schedule 1.97 hereto and their respective successors and assigns.

1.98 “Person” or “person” shall mean any individual, sole proprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

1.99 “Purchase Price” shall have the meaning set forth in the Merger Agreements, as in effect on the date hereof.

1.100 “Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) which Borrower or any Guarantor sponsors, maintains, or to which it makes, is making, or is obligated to make contributions other than any Multiemployer Plan.

1.101 “Prime Rate” shall mean the rate from time to time publicly announced by Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rate available at such bank.

1.102 “Prime Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof.

1.103 “Private Label Credit Card” shall mean the private label credit card or private label credit cards issued by GE Capital Consumer Co.(or any subsequent Credit Card Issuer replacing GE Capital Consumer Co.) with respect to such private label credit card or private label credit cards to customers or prospective customers of Borrower pursuant to the Private Label Credit Card Agreement.

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1.104 “Private Label Credit Card Agreement” shall mean the Private Label Consumer Credit Card Program Agreement, dated as of August 26, 2004, by and between Borrower and GE Capital Consumer Card Co., as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.105 “Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; provided, that, if the Commitments have been terminated, the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Loans and Letter of Credit Accommodations.

1.106 “Provision for Taxes” shall mean an amount equal to all taxes imposed on or measured by, or determined by reference to, net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP.

1.107 “Public Equity Offering” means an offer and sale of Capital Stock (other than Disqualified Stock, as such term is defined in the Senior Note Indenture) of Borrower pursuant to an effective registration statement under the Securities Act (other than a registration statement on Form S-8 or otherwise relating to equity securities issuable under any employee benefit plan of Borrower).

1.108 “Public Market” shall mean that (a) a Public Equity Offering has been consummated, and (b) at least 15% of the total issued and outstanding Capital Stock of Borrower consisting of common stock of Borrower has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act.

1.109 “Qualified Public Offering” shall mean any bona fide, firm commitment, underwritten offering to the public by Borrower of not less than twenty (20%) percent of the Capital Stock of Borrower pursuant to an effective registration statement under the Securities Act.

1.110 “Quarterly Average Excess Availability” shall mean, at any time, the daily average of the aggregate amount of the Excess Availability (calculated without regard to any Maximum Credit limitation) for the immediately preceding fiscal quarter.

1.111 “Real Property” shall mean all now owned and hereafter acquired real property of Borrower and each Guarantor, including leasehold interests, together with all of Borrower’s and Guarantor’s right, title and interest in and to all buildings, structures, and other improvements located thereon and all of Borrower’s and Guarantor’s right, title and interest in and to all licenses, easements and appurtenances relating thereto, wherever located.

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1.112 “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of Borrower and each Guarantor: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of Borrower or any Guarantor; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable to Borrower or any Guarantor or otherwise in favor of or delivered to Borrower or any Guarantor in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to Borrower or any Guarantor, whether from the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by Borrower or any Guarantor or to or for the benefit of any third person (including loans or advances to any Affiliates or Subsidiaries of Borrower or any Guarantor) or otherwise associated with any Accounts, Inventory or general intangibles of Borrower or any Guarantor (including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to Borrower or any Guarantor in connection with the termination of any Plan or other employee benefit plan and any other amounts payable to Borrower or any Guarantor from any Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which Borrower or any Guarantor is a beneficiary).

1.113 “Records” shall mean, as to Borrower and each Guarantor, all of Borrower’s and Guarantor’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower or any Guarantor with respect to the foregoing maintained with or by any other person).

1.114 “Reference Bank” shall mean Wachovia Bank, National Association, or such other bank as Agent may from time to time designate.

1.115 “Register” shall have the meaning set forth in Section 13.7 hereof.

1.116 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate more than fifty (50%) percent of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom at least more than fifty (50%) percent of the then outstanding Obligations are owing; provided, that, so long as any one Lender’s Pro Rata Share is more than fifty (50%) percent of the aggregate of the Commitments of all Lenders, then Required Lenders shall mean such Lender and any other Lender.

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1.117 “Reserves” shall mean as of any date of determination, such amounts as Agent may from time to time establish and revise in good faith reducing the amount of Loans and Letter of Credit Accommodations which would otherwise be available to Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security for the Obligations, its value or the amount that might be received by Agent from the sale or other disposition or realization upon such Collateral, or (ii) the assets, business or prospects of Borrower or any Obligor or (iii) the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) to reflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Obligor to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) to reflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Agent determines in good faith constitutes a Default or an Event of Default. Without limiting the generality of the foregoing, Reserves may, at Agent’s option, be established to reflect: (i) dilution with respect to the Accounts (based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of Borrower for such period) as calculated by Agent for any period is or is reasonably anticipated to be greater than five (5%) percent (the “Dilution Reserve”); provided, that, as of the date of this Agreement, the Dilution Reserve shall be two (2%) percent until otherwise adjusted by Agent; (ii) inventory shrinkage and variances between the perpetual inventory records of Borrower and the results of the test counts of Inventory conducted by Agent with respect thereto in excess of the percentage acceptable to Agent, (iii) cost variances (pursuant to discrepancies between the purchase order price of Inventory and the actual cost thereof), (iv) retail markdowns or markups inconsistent with prior period practice and performance and any increase in the number of days of the turnover of Inventory or a change in the mix of the Inventory that results in an overall decrease in the value thereof or a deterioration in its nature or quality (but only to the extent not addressed by the lending formulas in a manner satisfactory to Agent) or any material increase (in the good faith determination of Agent) in levels of slow moving or obsolete Inventory, (v) amounts past due in respect of sales, use and/or withholding taxes, (vi) any rental payments, service charges or other amounts to become due to lessors of real property to the extent Inventory or Records are located in or on such property or such Records are needed to monitor or otherwise deal with the Collateral (other than for those locations where Agent has received a Collateral Access Agreement that Agent has accepted in writing); provided, that, the Reserves established pursuant to this clause (vi) as to retail store locations that are leased shall not, except as Agent may otherwise determine in good faith, exceed at any time the aggregate of amounts payable for the next two (2) months from any such time to the lessors of such retail store locations located in those States where any right of the lessor to Collateral may have priority over the security interest and lien of Agent therein, provided, that, such general practice with respect to the amount of the Reserves pursuant to this clause (vi) shall only apply so long as: (A) no Default or Event of Default shall exist or have occurred and be continuing, (B) neither Borrower nor Agent shall have received notice of any event of default by the lessee under the lease with respect to such location, and (C) Borrower shall not have granted to the lessor a security interest or lien

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upon any assets of Borrower, (vii) amounts owing by Borrower to Credit Card Issuers or Credit Card Processors in connection with the Credit Card Agreements (other than amounts owing by Borrower under the Private Label Credit Card Agreement), (viii) with respect to merchandise gift certificates, customer deposits, gift cards, vouchers, and coupons, an amount equal to fifty (50%) percent of the aggregate amount thereof, (ix) the purchase price of layaway goods and the amount of all check request refunds, (x) amounts which must be paid by Borrower as royalties, fees or other charges in respect of licenses or other agreements to use Intellectual Property owned by third parties other than Guarantor, (xi) the dollar amount of merchandise returned by customers which gave rise to Eligible Credit Card Receivables, (xii) the extent to which, the percentage of Inventory of Borrower subject to the Wholesale Financing Agreement (as a percentage of all Inventory of Borrower) materially (in the good faith determination of Agent) exceeds the percentage of such Inventory as of the last appraisal delivered to Agent pursuant to the terms of this Agreement, (xiii) at any time that a Default or Cash Dominion Event has occurred and is continuing, amounts owing by Borrower to Frigidaire under the Frigidaire Consignment Agreement, and (xiv) obligations, liabilities or indebtedness (contingent or otherwise) of Borrower or any Guarantor to Agent or any Bank Product Provider arising under or in connection with any Bank Products or as such Bank Product Provider may otherwise require in connection therewith to the extent that such obligations, liabilities or indebtedness constitute Obligations as such term is defined herein or otherwise receive the benefit of the security interest of Agent in any Collateral. To the extent Agent may revise the lending formulas used to determine the Borrowing Base or establish new criteria or revise existing criteria for Eligible Commercial Receivables, Eligible Credit Card Receivables or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose. The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith. The amount of any Reserve established by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith.

1.118 “Scheduled Maturity Date” shall the meaning set forth in Section 13.1 hereof.

1.119 “Seasonal Period” shall mean the period beginning on October 1 of each calendar year and ending on December 31 of the same calendar year.

1.120 “Securities Act” shall mean the Securities Act of 1933, or any comparable statement under any similar federal statute then in force.

1.121 “Seller Notes” shall mean, collectively, the 6% Junior Subordinated Notes, each dated of even date herewith, by Borrower in favor of each Seller, in the aggregate principal amount of $25,000,000 and all agreements, documents and instruments at any time executed and/or delivered by Borrower or any other person to, with or in favor of Sellers in connection therewith or related thereto, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

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1.122 “Sellers” shall mean, collectively, Jerry W. Throgmartin, Gregg William Throgmartin, Kelli Throgmartin Ball, Sandra M. Throgmartin, Janice K. Malone, Monica L. Adams, William G. Throgmartin and Dennis L. May, each an individual residing in the State of Indiana, and their heirs, executors, successors and assigns.

1.123 “Senior Note Indenture” shall mean the Indenture, dated of even date herewith, by and among Borrower, as issuer, Guarantor, as Subsidiary Guarantor and Senior Note Trustee, as trustee, with respect to the Senior Notes, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.124 “Senior Notes” shall mean, collectively, the Senior Notes due 2013 issued by Borrower pursuant to the Senior Note Indenture in the original aggregate principal amount of $165,000,000, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.125 “Senior Note Trustee” shall mean Wells Fargo Bank, National Association, as trustee under the Senior Note Indenture and any successor, replacement or additional trustee and their respective successors and assigns.

1.126 “Solvent” shall mean, at any time with respect to any Person, that at such time such Person (a) is able to pay its debts as they mature and has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of such Person at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person) are greater than the Indebtedness of such Person, and including subordinated and contingent liabilities computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and including as to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability).

1.127 “Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.

1.128 “Store Accounts” shall have the meaning set forth in Section 6.3 hereof.

1.129 “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of the outstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or one or more subsidiaries of such Person.

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1.130 “UCC” shall mean the Uniform Commercial Code as in effect in the State of New York, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine).

1.131 “Value” shall mean, as determined by Agent in good faith, with respect to Inventory, the lower of (a) Cost or (b) market value, provided, that, for purposes of the calculation of the Borrowing Base, (i) the Value of the Inventory shall not include: (A) the portion of the value of Inventory equal to the profit earned by any Affiliate on the sale thereof to Borrower, (B) storage and purchasing costs in respect of Inventory of Borrower which are capitalized, (C) vendor rebates or (D) write-ups or write-downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computed in the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Agent prior to the date hereof, if any.

1.132 “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general voting powers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of any contingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition.

1.133 “Wholesale” shall mean GE Commercial Distribution Finance Corporation, Inc. ((f/k/a Deutsche Financial Services Corporation), and its respective successors and assigns under the Wholesale Agreement.

1.134 “Wholesale Agreement” shall mean the Agreement for Wholesale Financing, dated as of September 8, 2000, by and between Borrower and Wholesale, as amended through the date hereof (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced).

1.135 “Wholesale Collateral” shall mean the items of property described on Schedule 1.135 hereto.

1.136 “Wholesale Financing Intercreditor Agreement” shall mean the Intercreditor Agreement, dated of even date herewith, by and between Agent and Wholesale, as acknowledged and agreed to by Borrower, as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

1.137 “Wholesale Financing Limit” shall mean $32,000,000 through and including the fiscal year ending March 31, 2006, provided, that, such limit may increase once after the end of each fiscal quarter of Borrower, commencing with the fiscal quarter ending subsequent to such date, by an amount equal to $500,000 for each new retail store location opened by Borrower

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during such fiscal quarter, based on the report delivered to Agent in accordance with Section 7.1(a)(iv) hereof. It is understood that any calculation of the amount owed by Borrower to Wholesale shall not include the outstanding amount owed to Wholesale for Wholesale Collateral which has been ordered and not received by Borrower.

SECTION 2. CREDIT FACILITIES

2.1 Loans.

(a) Subject to and upon the terms and conditions contained herein, each Lender severally (and not jointly) agrees to make its Pro Rata Share of Loans to Borrower from time to time in amounts requested by Borrower up to the aggregate amount outstanding for all Lenders at any time equal to the lesser of (i) Borrowing Base or (ii) the Maximum Credit.

(b) Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall not exceed the Maximum Credit, and (ii) the aggregate principal amount of the Loans outstanding at any time to Borrower shall not exceed the Borrowing Base.

(c) In the event that the aggregate principal amount of the Loans outstanding to Borrower exceed the Borrowing Base, or the aggregate amount of the outstanding Letter of Credit Accommodations exceeds the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate amount of the Loans and Letter of Credit Accommodations exceed the Maximum Credit, such event shall not limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrower shall, upon at least one (1) day’s prior written notice from Agent to Borrower, which may be made at any time or from time to time, immediately repay to Agent the entire amount of any such excess(es) for which payment is demanded.

(d) Borrower may from time to time request and repay Loans subject to the provisions of this Agreement and the other Financing Agreements.

2.2 Letter of Credit Accommodations.

(a) Subject to and upon the terms and conditions contained herein, at the request of Borrower, Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations for the account of Borrower containing terms and conditions acceptable to Agent and the issuer thereof. Any payments made by or on behalf of Agent or any Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations provided to or for the benefit of Borrower shall constitute additional Loans to Borrower pursuant to this Section 2 (or Special Agent Advances as the case may be).

(b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations, Borrower shall pay to Agent, for the

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benefit of Lenders, a letter of credit fee at a rate equal to (i) one and three-quarters (1 ¾%) percent per annum on the daily outstanding balance of such Letter of Credit Accommodations, for the period from the date hereof through and including the first (1^st) day of the second month after the fiscal quarter ending on or about June 30, 2005, and (ii) the Applicable Margin (then in effect pursuant to the terms of this Agreement) in excess of the Adjusted Eurodollar Rate per annum on the daily outstanding balance of such Letter of Credit Accommodations at all times thereafter, except that Agent may, and upon the written direction of Required Lenders shall, require Borrower to pay to Agent for the benefit of Lenders such letter of credit fee, at a rate equal to two (2%) percent per annum in excess of the Applicable Margin on such daily outstanding balance for: (A) the period from and after the date of termination hereof until Agent and Lenders have received full and final payment of all Obligations (notwithstanding entry of a judgment against Borrower) and (B) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent. Such letter of credit fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrower to pay such fee shall survive the termination of this Agreement. In addition to the letter of credit fees set forth above, Borrower agrees to pay to Agent, for the account of Agent, in respect of each Letter of Credit Accommodation issued pursuant to the terms of this Agreement, a fronting fee at a rate equal to one-eighth of one (1/8%) percent (on a per annum basis) calculated upon the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or part thereof), payable in arrears as of the first day of each succeeding month.

(c) Borrower shall give Agent two (2) Business Days’ prior written notice of Borrower’s request for the issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day and in no event shall be a date less than ten (10) days prior to the end of the then current term of this Agreement) of issuance of such requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a Business Day), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation. Borrower shall attach to such notice the proposed terms of the Letter of Credit Accommodation.

(d) In addition to being subject to the satisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have been satisfied in a manner satisfactory to Agent: (i) Borrower shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application, in form and substance reasonably satisfactory to Agent and satisfactory to such proposed issuer, for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodation shall be satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain

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money center banks generally from issuing letters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of such Letters of Credit Accommodation; and (iii) Excess Availability prior to giving effect to any Reserves with respect to such Letter of Credit Accommodation, on the date of the proposed issuance of any Letter of Credit Accommodation, shall be equal to or greater than: (A) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consigned to the issuer, the sum of (1) the percentage equal to one hundred (100%) percent minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of Borrower’s locations for Eligible Inventory within the United States of America and (B) if the proposed Letter of Credit Accommodation is for any other purpose or the documents of title are not consigned to the issuer in connection with a Letter of Credit Accommodation for the purpose of purchasing Inventory, an amount equal to one hundred (100%) percent of the face amount thereof and all other commitments and obligations made or incurred by Agent with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be established in the applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).

(e) Except in Agent’s discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations and all other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed $25,000,000.

(f) Borrower and each Guarantor shall indemnify and hold Agent and Lenders harmless from and against any and all losses, claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages, liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Borrower and each Guarantor assume all risks with respect to the acts or omissions of the drawer under or beneficiary of any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed Borrower’s agent. Borrower and each Guarantor each assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and levies relating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Borrower and each Guarantor each hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions, whether caused by Borrower, Guarantor, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit

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Accommodation, except for the gross negligence or willful misconduct of Agent or any Lender as determined pursuant to a final, non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement.

(g) In connection with Inventory purchased pursuant to Letter of Credit Accommodations, Borrower and each Guarantor shall, at Agent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/or subject to Agent’s order, and if they shall come into Borrower’s or Guarantor’s possession, to deliver them, upon Agent’s request, to Agent in their original form. Borrower and each Guarantor shall also, at Agent’s request, designate Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents.

(h) Borrower and each Guarantor each hereby irrevocably authorizes and directs any issuer of a Letter of Credit Accommodation to name Borrower or such Guarantor as the account party therein and to deliver to Agent all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit Accommodations or the applications therefor. Nothing contained herein shall be deemed or construed to grant Borrower or any Guarantor any right or authority to pledge the credit of Agent or any Lender in any manner. Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Agent or any Lender unless Agent has duly executed and delivered to such issuer the application or a guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrower and each Guarantor shall be bound by any reasonable interpretation made in good faith by Agent, or any other issuer or correspondent under or in connection with any Letter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions of Borrower or such Guarantor.

(i) So long as no Event of Default exists or has occurred and is continuing, Borrower may (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (iv) with Agent’s consent, grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral.

(j) At any time an Event of Default exists or has occurred and is continuing, Agent shall have the right and authority to, and Borrower shall not, without the prior written consent of Agent, (i) approve or resolve any questions of non-compliance of documents, (ii) give any instructions as to acceptance or rejection of any documents or goods, (iii) execute any and all

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applications for steamship or airway guaranties, indemnities or delivery orders, (iv) grant any extensions of the maturity of, time of payments for, or time of presentation of, any drafts, acceptances, or documents, and (v) agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Agent may take such actions either in its own name or in Borrower’s name.

(k) Any rights, remedies, duties or obligations granted or undertaken by Borrower or any Guarantor to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to any Letter of Credit Accommodation, shall be deemed to have been granted or undertaken by Borrower or such Guarantor to Agent for the ratable benefit of Lenders. Any duties or obligations undertaken by Agent to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement by Agent in favor of any issuer or correspondent to the extent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrower and each Guarantors to Agent for the ratable benefit of Lenders and to apply in all respects to Borrower and each Guarantors.

(l) Immediately upon the issuance or amendment of any Letter of Credit Accommodation, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest and participation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit Accommodation (including, without limitation, all Obligations with respect thereto).

(m) Borrower is irrevocably and unconditionally obligated, without presentment, demand or protest, to pay to Agent any amounts paid by an issuer of a Letter of Credit Accommodation with respect to such Letter of Credit Accommodation (whether through the borrowing of Loans in accordance with Section 2.2(a) or otherwise). In the event that Borrower fails to pay Agent on the date of any payment under a Letter of Credit Accommodation in an amount equal to the amount of such payment, Agent (to the extent it has actual notice thereof) shall promptly notify each Lender of the unreimbursed amount of such payment and each Lender agrees, upon one (1) Business Day’s notice, to fund to Agent the purchase of its participation in such Letter of Credit Accommodation in an amount equal to its Pro Rata Share of the unpaid amount. The obligation of each Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence is absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuance of any Event of Default, the failure to satisfy any other condition set forth in Section 4 or any other event or circumstance. If such amount is not made available by a Lender when due, Agent shall be entitled to recover such amount on demand from such Lender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the interest rate then payable by Borrower in respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a) hereof.

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2.3 Commitments. The aggregate amount of each Lender’s Pro Rata Share of the Loans and Letter of Credit Accommodations shall not exceed the amount of such Lender’s Commitment, as the same may from time to time be amended in accordance with the provisions hereof.

2.4 Bank Products. Borrower or any of its Subsidiaries may (but no such Person is required to) request that the Bank Product Providers provide or arrange for such Person to obtain Bank Products from Bank Product Providers, and each Bank Product Provider may, in its sole discretion, provide or arrange for such Person to obtain the requested Bank Products. Borrower or any of its Subsidiaries that obtains Bank Products shall indemnify and hold Agent, each Lender and their respective Affiliates harmless from any and all obligations now or hereafter owing to any other Person by any Bank Product Provider in connection with any Bank Products other than for gross negligence or willful misconduct on the part of any such indemnified Person. Borrower and its Subsidiaries acknowledge and agree that the obtaining of Bank Products from Bank Product Providers (a) is in the sole discretion of such Bank Product Provider, and (b) is subject to all rules and regulations of such Bank Product Provider.

SECTION 3. INTEREST AND FEES

3.1 Interest.

(a) Borrower shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount of the Loans at the Interest Rate. All interest accruing hereunder on and after the date of any Event of Default or termination hereof shall be payable on demand.

(b) Borrower may from time to time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from Borrower shall specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions contained herein, three (3) Business Days after receipt by Agent of such a request from Borrower, such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided, that, (i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) no party hereto shall have sent any notice of termination of this Agreement, Borrower shall have complied with such customary procedures as are established by Agent and specified by Agent to Borrower from time to time for requests by Borrower for Eurodollar Rate Loans, (iii) no more than eight (8) Interest Periods may be in effect at any one time, (iv) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof, (v) at all times that a Cash Dominion Event has occurred and is continuing (and at all other times, Borrower shall use its best efforts to ensure that) the maximum amount of the Eurodollar Rate Loans in the aggregate at any time requested by Borrower shall not exceed the amount equal to the lowest principal amount of the Loans which it is anticipated will be outstanding during the

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applicable Interest Period, in each case as determined by Agent in good faith (but with no obligation of Agent or Lenders to make such Loans), and (vi) Agent and each Lender shall have determined that the Interest Period or Adjusted Eurodollar Rate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by Borrower. Any request by or on behalf of Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the London interbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans.

(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate Loans upon the last day of the applicable Interest Period, unless Agent has received and approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof. Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent to Borrower, be subsequently converted to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed. Borrower shall pay to Agent, for the benefit of Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account of Borrower) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by such person, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans.

(d) Interest shall be payable by Borrower to Agent, for the account of Lenders, monthly in arrears not later than the first day of each calendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal to each increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs. In no event shall charges constituting interest payable by Borrower to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law or regulation, such part or provision shall be deemed amended to conform thereto.

3.2 Fees.

(a) Borrower shall pay to Agent, for the account of Lenders, monthly an unused line fee at a rate equal to three-eighths (3/8%) percent per annum calculated upon the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be payable on the first day of each month in arrears.

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(b) Borrower agrees to pay to Agent the other fees and amounts set forth in the Fee Letter in the amounts and at the times specified therein.

3.3 Changes in Laws and Increased Costs of Loans.

(a) If after the date hereof, either (i) any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to Lender or any banking or financial institution from whom any Lender borrows funds or obtains credit (a “Funding Bank”), or (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or any Lender determines that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof has or would have the effect described below, or a Funding Bank or any Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has or would have the direct or indirect effect of reducing the rate of return on any Lender’s capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change or compliance (taking into consideration the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an amount deemed by such Lender, in good faith, to be material, and the result of any of the foregoing events described in clauses (i), (ii) or (iii) is or results in an actual increase in the cost to any Lender of funding or maintaining the Loans, the Letter of Credit Accommodations or its Commitment, then Borrower and each Guarantor shall from time to time upon demand by Agent pay to Agent additional amounts sufficient to indemnify Lenders against such actual increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified). A certificate as to the amount of such actual increased cost and showing in reasonable detail the computation thereof shall be submitted to Borrower by Agent and shall be conclusive, absent manifest error.

(b) If prior to the first day of any Interest Period, (i) Agent shall have determined in good faith (which determination shall be conclusive and binding upon Borrower and each Guarantor) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, (ii) Agent has received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to which such Interest Period is to be applicable are not generally available in the London interbank market, Agent shall give telecopy or telephonic notice thereof to Borrower as soon as practicable thereafter, and will also give prompt written notice to Borrower when such conditions no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Rate Loans

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shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then-current Interest Period thereof, to Prime Rate Loans. Until such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor shall Borrower has the right to convert Prime Rate Loans to Eurodollar Rate Loans.

(c) Notwithstanding any other provision herein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after the date hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written notice of such circumstances to Borrower (which notice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii) such Lender’s Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Rate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrower and each Guarantor shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below.

(d) Borrower and each Guarantor shall indemnify Agent and each Lender and to hold Agent and each Lender harmless from any loss or expense which Agent or such Lender may sustain or incur as a consequence of (i) default by Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after Borrower has given a notice requesting the same in accordance with the provisions of this Loan Agreement, (ii) default by Borrower in making any prepayment of a Eurodollar Rate Loan after Borrower has given a notice thereof in accordance with the provisions of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Rate Loans, such indemnification may include an amount equal to the excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Rate Loans provided for herein over (B) the amount of interest (as determined by such Agent or such Lender) which would have accrued to Agent or such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market. This covenant shall survive the termination or non-renewal of this Loan Agreement and the payment of the Obligations.

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SECTION 4. CONDITIONS PRECEDENT

4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations. Each of the following is a condition precedent to Agent and Lenders making the initial Loans and providing the initial Letter of Credit Accommodations hereunder:

(a) Agent shall have received, in form and substance reasonably satisfactory to Agent, all releases, terminations and such other documents as Agent may reasonably request to evidence and effectuate the termination by the Existing Lenders of their respective financing arrangements with Borrower and each Guarantor and the termination and release by it or them, as the case may be, of any interest in and to any assets and properties of Borrower and each Guarantor, duly authorized, executed and delivered by it or each of them, including, but not limited to, (i) UCC termination statements for all UCC financing statements previously filed by it or any of them or their predecessors, as secured party and Borrower or such Guarantor, as debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by Borrower or such Guarantor in favor of it or any of them, in form acceptable for recording with the appropriate Governmental Authority;

(b) all requisite corporate action or limited liability company action, as applicable, and proceedings in connection with this Agreement and the other Financing Agreements shall be reasonably satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisite corporate action and proceedings which Agent may have reasonably requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of the certificate of incorporation of Borrower and each Guarantors certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate or limited liability company name of Borrower or such Guarantor, as the case may be, as is set forth herein and such document as shall set forth the organizational identification number of Borrower or such Guarantor, if one is issued in its jurisdiction of incorporation or organization);

(c) no material adverse change shall have occurred in the assets, business or prospects of Borrower since the date of Agent’s latest field examination (not including for this purpose the field review referred to in clause (d) below) and no change or event shall have occurred which would impair in any material respect the ability of Borrower or any Obligor to perform its obligations hereunder or under any of the other Financing Agreements to which it is a party or of Agent or any Lender to enforce the Obligations or realize upon the Collateral;

(d) Agent shall have completed a field review of the Records and such other information with respect to the Collateral as Agent may reasonably require to determine the amount of Loans available to Borrower (including, without limitation, current perpetual inventory records and/or roll-forwards of Accounts and Inventory through the date of closing and test counts of the Inventory in a manner satisfactory to Agent, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Agent to accurately identify and verify the Collateral), the results

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of which in each case shall be satisfactory to Agent, not more than ten (10) Business Days prior to the date hereof;

(e) Agent shall have received, in form and substance reasonably satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may reasonably deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, the Merger Agreements and the Senior Note Indenture, including, without limitation, Collateral Access Agreements;

(f) Agent shall have received evidence, in form and substance reasonably satisfactory to Agent in good faith, that the Merger Agreements have been duly executed and delivered by and to the appropriate parties thereto, and the transactions contemplated under the terms of the Merger Agreements have been consummated prior to the execution of this Agreement;

(g) Agent shall have received, in form and substance reasonably satisfactory to Agent, copies of the Seller Notes, executed by all of the parties thereto, providing for, among other things, the subordination in rights of payment of all Indebtedness owing by Borrower or any Obligors to the Sellers under the Seller Notes to the right of Agent and Lenders to receive the final and indefeasible payment and satisfaction in full of all of the Obligations and related matters;

(h) Intentionally Deleted.

(i) Agent shall have (i) received evidence, in form and substance reasonably satisfactory to it, in good faith, that Borrower has consummated the transactions contemplated by the Senior Note Indenture and received cash proceeds from the issuance of Senior Notes pursuant thereto of not less than $165,000,000, and (ii) received and been satisfied with its review of the Senior Note Indenture and all documentation related thereto;

(j) Agent shall have received evidence reasonably satisfactory to it, in good faith, of the receipt by Borrower on or prior to the date hereof of cash equity contributions from Parent and management of Borrower such that, after giving effect to such contributions, at least forty-three (43%) percent of the consolidated capitalization of Borrower will be in the form of Capital Stock owned by Parent and the management of Borrower;

(k) the Excess Closing Availability as determined by Agent, in good faith, as of the date hereof, shall be not less than $10,000,000 after giving effect to the initial Loans made or to be made and Letter of Credit Accommodations issued or to be issued in connection with the initial transactions hereunder;

(l) Agent shall have received, in form and substance reasonably satisfactory to Agent in good faith, true, correct and complete copy of the Senior Note Indenture, duly authorized, executed and delivered by the parties thereto;

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(m) Agent shall have received, in form and substance reasonably satisfactory to Agent in good faith, the Wholesale Financing Intercreditor Agreement and the Frigidaire Intercreditor Agreement, in each case, duly authorized, executed and delivered by each of the parties thereto;

(n) Agent shall have received, in form and substance reasonably satisfactory to Agent, Deposit Account Control Agreements by and among Agent, Borrower and each Guarantor, as the case may be and each bank where Borrower (or Guarantor) has a deposit account (other than Store Accounts), in each case, duly authorized, executed and delivered by such bank and Borrower or Guarantor, as the case may be (or Agent shall be the bank’s customer with respect to such deposit account as Agent may specify);

(o) Agent shall have received evidence, in form and substance reasonably satisfactory to Agent, that Agent has a valid perfected first priority security interest in all of the Collateral;

(p) Lender shall have received Credit Card Acknowledgments in each case, duly authorized, executed and delivered by the Credit Card Issuers and Credit Card Processors;

(q) Agent shall have received (i) un-audited financial statements of Borrower for the fiscal month and year to date ended October 31, 2004 and (ii) Borrower’s projected financial statements for the period from the date hereof through the fiscal year ending on or about March 31, 2006, which shall be prepared on a quarterly basis, and projected financial statements for the fiscal years ending on or about March 31, 2007, March 31, 2008 and March 31, 2009, which shall be prepared on an annual basis, together with a certificate, dated the date hereof, of an authorized officer of Borrower stating that such projected financial statements were prepared by an authorized officer of Borrower in good faith and are based on assumptions that are believed to be reasonable in light of all facts and circumstances known to Borrower at such time, all of which shall be satisfactory to Agent and Lenders in good faith (it being understood that any forward-looking statement or projection shall be judged in light of the circumstances then known to, or which reasonably should have been known to a person making such statement or projection and having the information reasonably available to a Person so situated);

(r) Agent and Lenders shall be satisfied that, immediately after giving effect to the transactions contemplated to occur under this Agreement, the consummation of the transactions contemplated by the Merger Agreements, the Senior Note Indenture on or before the date hereof, (i) Borrower and Guarantors, on a consolidated basis, are Solvent, (ii) Borrower and Guarantors are able to pay their debts as they mature, (iii) Borrower and Guarantors, on a consolidated basis, have sufficient capital (and not unreasonably small capital) to carry on their business and all businesses in which they are about to engage, and (iv) the assets and properties of Borrower and Guarantors, on a consolidated basis, at fair valuation (taken on a going concern basis) and at their present saleable value are greater than the Indebtedness of Borrower and Guarantor, including subordinated and contingent liabilities computed at the amount which,

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to the best of Borrower’s and each Guarantor’s knowledge, represents an amount which can reasonably be expected to become an actual or matured liability;

(s) Agent shall have received, in form and substance satisfactory to Agent in good faith, a pro-forma balance sheet of Borrower reflecting the initial transactions contemplated hereunder, including, but not limited to Loans and Letter of Credit Accommodations provided by Agent and Lenders to Borrower on the date hereof and the use of the proceeds of the initial Loans as provided herein, the consummation of the transactions contemplated by the Merger Agreements and the Senior Note Indenture, accompanied by a certificate, dated as of even date herewith, of the chief financial officer of Borrower stating that (i) such pro-forma balance sheet was prepared in good faith by Borrower and based on assumptions that are reasonable in light of all facts and circumstances known to Borrower at such time, and (ii) in the opinion of such officer, the Borrower is and will be Solvent after giving effect to all such transactions;

(t) Agent shall have received and reviewed lien and judgment search results for the jurisdiction of incorporation and organization of Borrower, Guarantors, Gregg Investment Corporation LLC, the jurisdiction of the chief executive office of Borrower and Guarantors and all jurisdictions in which assets of Borrower and each Guarantor are located, which search results shall be in form and substance satisfactory to Agent;

(u) Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other Financing Agreements, in form and substance satisfactory to Agent, and certificates of insurance policies and/or endorsements naming Agent as loss payee;

(v) Agent and its counsel shall have reviewed and been reasonably satisfied with any changes to the terms of the Merger Agreements and the structure of the transactions contemplated by the Merger Agreements from those set forth in the forms provided to Agent as of October 19, 2004 as amended by the First Amendment thereto dated as of January 13, 2005, and Second Amendment thereto dated as of January 31, 2005;

(w) Agent shall have received, in form and substance reasonably satisfactory to Agent, such opinion letters of counsel to Borrower and each Guarantor with respect to the Financing Agreements, the Merger Agreements and the Senior Note Indenture and such other matters as Agent may request; and

(x) the other Financing Agreements and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Agent, in form and substance satisfactory to Agent.

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4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations. Each of the following is an additional condition precedent to the Loans and/or providing Letter of Credit Accommodations to Borrower, including the initial Loans and Letter of Credit Accommodations and any future Loans and Letter of Credit Accommodations:

(a) all representations and warranties contained herein and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date);

(b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before any arbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplated pursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect; and

(c) no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan or providing each such Letter of Credit Accommodation and after giving effect thereto.

SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST

5.1 Grant of Security Interest. To secure payment and performance of all Obligations, Borrower and each Guarantor hereby grants to Agent, for itself and the benefit of Lenders and Bank Product Providers, a continuing security interest in, a lien upon, and a right of set off against, and hereby assigns to Agent, for itself and the benefit of Lenders and Bank Product Providers, as security, all personal and real property and fixtures, and interests in property and fixtures, of Borrower and such Guarantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”), including:

(a) all Accounts;

(b) all general intangibles, including, without limitation, all Intellectual Property;

(c) all goods, including, without limitation, Inventory and Equipment;

(d) all fixtures;

(e) all chattel paper, including, without limitation, all tangible and electronic chattel paper;

(f) all instruments, including, without limitation, all promissory notes;

(g) all documents and all credit card sales drafts, credit card sales slips or charge slips or receipts and other forms of store receipts;

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(h) all deposit accounts;

(i) all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights;

(j) all supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing the obligations of account debtors;

(k) all (i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of Borrower or Guarantors now or hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from or for the account of Borrower or any Guarantor, whether for safekeeping, pledge, custody, transmission, collection or otherwise;

(l) all commercial tort claims, including, without limitation, those identified in the Information Certificate;

(m) to the extent not otherwise described above, all Receivables;

(n) all Records; and

(o) all products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral.

5.2 Perfection of Security Interests.

(a) Borrower and each Guarantor each irrevocably and unconditionally authorizes Agent (or its agent) to file at any time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and Borrower or such Guarantor as debtor, as Agent may require, and including any other information with respect to Borrower or Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Borrower and each Guarantor hereby ratifies and approves all financing statements naming Agent or its designee as secured party and Borrower or Guarantor, as the case may be, as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of Agent prior to

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the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any). Borrower and each Guarantor hereby authorizes Agent to adopt on behalf of Borrower and such Guarantor any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and Borrower or Guarantor as debtor includes assets and properties of Borrower or Guarantor that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by Borrower or Guarantor to the extent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. Until such time as all of the Obligations have been paid in full in accordance with Section 13.1(a) hereof, in no event shall Borrower or Guarantor at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured party and Borrower or Guarantor as debtor.

(b) Neither Borrower nor any Guarantor has any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower or any Guarantor shall be entitled to or shall receive any chattel paper or instrument after the date hereof, Borrower and such Guarantor shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of Borrower or Guarantor (including by any agent or representative), Borrower or such Guarantor shall deliver, or cause to be delivered to Agent, all tangible chattel paper and instruments that Borrower or Guarantor has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent may otherwise agree. At Agent’s option, Borrower and each Guarantor shall, or Agent may at any time on behalf of Borrower or Guarantor, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with the following legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Congress Financial Corporation (Central), as Agent and any sale, transfer, assignment or encumbrance of this [chattel paper][instrument] violates the rights of such secured party.”

(c) In the event that Borrower or any Guarantor shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction) with a value in excess of $250,000, in the aggregate, Borrower or such Guarantor shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrower or such Guarantor shall take, or cause to be taken, such actions as Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction.

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(d) Neither Borrower nor any Guarantor has any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Borrower and Guarantors shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit account unless each of the following conditions is satisfied: (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower or Guarantor to open or establish such account, which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom Borrower or Guarantor is dealing and the purpose of the account, (ii) the bank where such account is opened or maintained shall be reasonably acceptable to Agent, and (iii) on or before the opening of such deposit account (other than the opening of a Store Account), Borrower or Guarantor shall, as Agent may specify, either (A) deliver to Agent a Deposit Account Control Agreement with respect to such deposit account duly authorized, executed and delivered by Borrower or Guarantor and the bank at which such deposit account is opened and maintained or (B) arrange for Agent to become the customer of the bank with respect to the deposit account on terms and conditions acceptable to Agent. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s or Guarantor’s employees.

(e) Neither Borrower nor any Guarantor owns or holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate.

(i) In the event that Borrower or any Guarantor shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities, Borrower or such Guarantor shall promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify. If any securities, now or hereafter acquired by Borrower or any Guarantor are uncertificated and are issued to Borrower or such Guarantor or its nominee directly by the issuer thereof, Borrower or such Guarantor shall immediately notify Agent thereof and shall as Agent may specify, either (A) cause the issuer to agree to comply with instructions from Agent as to such securities, without further consent of Borrower or such Guarantor or such nominee, or (B) arrange for Agent to become the registered owner of the securities.

(ii) Neither Borrower nor any Guarantor shall, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of the following conditions is satisfied: (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower or any Guarantor to open or establish such account which notice shall specify in reasonable detail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity

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intermediary at which such account is to be opened or established, the individual at such intermediary with whom Borrower or such Guarantor is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be reasonably acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, Borrower or such Guarantor shall as Agent may specify either (1) execute and deliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by Borrower or such Guarantor and such securities intermediary or commodity intermediary or (2) arrange for Agent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent.

(f) Neither Borrower nor any Guarantor is the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance or similar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower or Guarantor shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similar instrument with a principal amount in excess of $250,000, individually, and $500,000, in the aggregate whether as beneficiary thereof or otherwise after the date hereof, Borrower or Guarantor shall promptly notify Agent thereof in writing. Borrower or Guarantor shall immediately, as Agent may specify, either (i) deliver, or cause to be delivered to Agent, with respect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank), in form and substance satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by Borrower or Guarantor and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent to become, at Borrower’s expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be).

(g) Neither Borrower nor any Guarantors has any commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower or any Guarantor shall at any time after the date hereof have any commercial tort claims for an amount in excess of $250,000, individually, and $500,000 in the aggregate, Borrower or such Guarantor shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercial tort claim and (ii) include the express grant by Borrower or such Guarantor to Agent of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereof by Borrower or such Guarantor to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by Borrower or such Guarantor of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Agent or its designee as secured party and Borrower or such Guarantor as debtor, or any amendments to any financing statements,

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covering any such commercial tort claim as Collateral. In addition, Borrower and Guarantors shall promptly upon Agent’s request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may require in connection with such commercial tort claim.

(h) Borrower and Guarantors do not have any goods, documents of title or other Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of Borrower or a Guarantor permitted herein in the ordinary course of business of Borrower or such Guarantor in the possession of the carrier transporting such goods. In the event that any goods, documents of title or other Collateral (other than goods in-transit) with a Value in excess of $250,000 either individually or in the aggregate, are at any time after the date hereof in the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrower and Guarantors shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrower and Guarantors shall deliver to Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and the Borrower or such Guarantor that is the owner of such Collateral.

(i) Borrower and each Guarantor shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and first priority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that Borrower’s or Guarantor’s signature thereon is required therefor, (ii) causing Agent’s name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iv) obtaining the consents and approvals of any Governmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant jurisdiction.

5.3 Special Provisions Regarding Collateral. Notwithstanding anything to the contrary contained in this Section 5, the types or items of Collateral described in Section 5.1 shall not include any rights or interest in any lease, contract, license, permit or license agreement covering personal or real property of Borrower or Guarantor, so long as under the terms of such lease, permit, contract, license, or license agreement, or applicable law with respect thereto, the grant of a security interest or lien therein to Agent is prohibited and such prohibition has not been or is not waived or the consent of the other party to such contract, license or license agreement has not been or is not otherwise obtained; provided, that, the foregoing exclusion shall in no way be construed (i) to apply if any such prohibition is unenforceable under the UCC or other applicable law or (ii) so as to limit, impair or otherwise affect Agent’s unconditional continuing security interests in and liens upon any rights or interests of Borrower or Guarantor in or to monies due or

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to become due under any such lease, permit, contract, license or license agreement (including any Receivables).

SECTION 6. COLLECTION AND ADMINISTRATION

6.1 Borrower’s Loan Accounts. Agent shall maintain one or more loan account(s) on its books in which shall be recorded (a) all Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of Borrower or Guarantor and (c) all other appropriate debits and credits as provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Agent’s customary practices as in effect from time to time.

6.2 Statements. Agent shall render to Borrower each month a statement setting forth the balance in the Borrower’s loan account(s) maintained by Agent for Borrower pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequent adjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrower and each Guarantor and conclusively binding upon Borrower and each Guarantor as an account stated except to the extent that Agent receives a written notice from Borrower of any specific exceptions of Borrower thereto within thirty (30) days after the date such statement has been received by Borrower. Until such time as Agent shall have rendered to Borrower a written statement as provided above, the balance in Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrower and each Guarantor.

6.3 Collection of Accounts.

(a) Borrower and each Guarantor shall establish and maintain, at its expense, deposit account arrangements and merchant payment arrangements with the banks set forth on Schedule 8.10 to the Information Certificate and, subject to Section 5.2(d) hereof, such other banks as Borrower may hereafter select. The banks set forth on Schedule 8.10 to the Information Certificate constitute all of the banks with which Borrower and each Guarantor have deposit account arrangements and merchant payment arrangements as of the date hereof and identifies each of the deposit accounts at such banks that are used solely for receiving store receipts from one or more retail store location(s) of Borrower and making ordinary course disbursements on account of each such retail store location(s) (together with any other deposit accounts at any time established or used by Borrower for receiving such store receipts from any retail store location, collectively, the “Store Accounts” and each individually, a “Store Account”) or otherwise describes the nature of the use of such deposit account by Borrower.

(i) Borrower shall deposit all proceeds from sales of Inventory in every form, including, without limitation, cash, checks, credit card sales drafts, credit card sales or charge slips or receipts and other forms of daily store receipts (other than nominal amounts retained in registers at the retail store locations as cash on hand), from each retail store location of Borrower on each Business Day into the Store Account of Borrower used solely for such purpose. All such funds deposited into the Store Accounts shall be sent by wire transfer or other electronic funds

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transfer no less frequently than three (3) times a week (or more frequently upon Agent’s request at any time after the occurrence of a Cash Dominion Event) to the Blocked Accounts as provided in Section 6.3(a)(ii) below, except nominal amounts which are required to be maintained in such Store Accounts under the terms of Borrower’s arrangements with the bank at which such Store Accounts are maintained, which nominal amounts shall not exceed $5,000 at any time as to any individual retail store location.

(ii) Borrower shall establish and maintain, at its expense, deposit accounts with such banks as are reasonably acceptable to Agent (the “Blocked Accounts”) into which Borrower shall promptly either cause all amounts on deposit in the Store Accounts of Borrower to be sent as provided in Section 6.3(a)(i) above or shall itself deposit or cause to be deposited all proceeds from sales of Inventory, and all other amounts payable to Borrower from Credit Card Issuers and Credit Card Processors and all other proceeds of Collateral. Borrower and each Guarantor shall deliver, or cause to be delivered to Agent a Deposit Account Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account is maintained as provided in Section 5.2 hereof or at any time and from time to time Agent may become the bank’s customer with respect to any of the Blocked Accounts and promptly upon Lender’s request, Borrower shall execute and deliver such agreements and documents as Lender may require in connection therewith. Borrower and each Guarantor each agree that all payments made to such Blocked Accounts or other funds received and collected by Agent, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or otherwise shall be treated as payments to Agent in respect of the Obligations and therefore shall constitute the property of Agent to the extent of the then outstanding Obligations; provided, that, each Deposit Account Control Agreement shall provide that the applicable depository banks at which the Blocked Accounts are maintained are authorized by Agent to transfer the funds on deposit in the Blocked Accounts to such operating bank account of Borrower as Borrower may specify in writing to Agent until such time as Agent shall notify the depository bank otherwise. Agent may instruct the depository banks at which the Blocked Accounts are maintained to transfer all funds received or deposited into the Blocked Accounts to the Payment Account at any time a Cash Dominion Event shall exist or have occurred.

(b) For purposes of calculating the amount of the Loans available to Borrower, such payments shall be applied (conditional upon final collection) to the Obligations, in accordance with Section 6.4(a) hereof on the Business Day of receipt by Agent of immediately available funds in the Agent Payment Account provided such payments and notice thereof are received in accordance with Agent’s usual and customary practices, as in effect from time to time, by 11:00 a.m. Chicago, Illinois time and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other funds received will be applied (conditional upon final collection) to the Obligations on the date of receipt of immediately available funds by Agent in the Agent Payment Account and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day.

(c) Borrower and each Guarantor and their respective shareholders, directors, employees, agents, Subsidiaries or other Affiliates shall, acting as trustee for Agent, receive, as the property of Agent, any monies, cash, checks, credit card sales drafts, credit card sales or

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change slips or receipts, notes, drafts all forms of store receipts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into their possession or under their control and immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Agent, provided, that, if at any time a Cash Dominion Event has occurred and is continuing, Borrower shall promptly upon Agent’s request cause the portion thereof representing sales and/or use taxes payable in connection with such sales or otherwise to be deposited into a separate bank account or accounts established for such purpose. Borrower agrees to reimburse Agent on demand for any amounts owed or paid to any bank or other financial institution at which a Blocked Account or any other deposit account or investment account is established or any other bank, financial institution or other person involved in the transfer of funds to or from the Blocked Accounts arising out of Agent’s payments to or indemnification of such bank, financial institution or other person. The obligations of Borrower to reimburse Agent for such amounts pursuant to this Section 6.3 shall survive the termination of this Agreement.

6.4 Payments.

(a) All Obligations shall be payable to the Agent Payment Account as provided in Section 6.3 or such other place as Agent may designate from time to time. Subject to the other terms and conditions contained herein, Agent shall apply payments received or collected from Borrower or Guarantor or for the account of Borrower or Guarantor (including the monetary proceeds of collections or of realization upon any Collateral) as follows: first, to pay any fees, indemnities or expense reimbursements then due to Agent and Lenders from Borrower or Guarantor; second, to pay interest due in respect of any Loans (and including any Special Agent Advances); third, to pay or prepay principal in respect of Special Agent Advances; fourth, to pay or prepay principal in respect of the Loans and to pay or prepay any Obligations arising under or pursuant to any Hedging Transactions of Borrower or Guarantor with any Bank Product Provider (up to the amount of the any then effective Reserve established in respect of such Obligations), on a pro rata basis; fifth, to pay or prepay any other Obligations (but not including for this purpose any Obligations arising under or pursuant to any Bank Products) whether or not then due, in such order and manner as Agent determines and, at any time on or after an Event of Default and for so long as same is continuing, to be held as cash collateral with respect to any Letter of Credit Accommodation or other contingent Obligations (but not including for this purpose any Obligations arising under or pursuant to any Bank Products); and sixth, at any time after an Event of Default and for so long as same is continuing, to pay or prepay any Obligations arising under or pursuant to any Bank Products (other than to the extent provided for above) on a pro rata basis. Notwithstanding anything to the contrary contained in this Agreement, (i) unless so directed by Borrower, or unless a Default or an Event of Default shall exist or have occurred and be continuing, Agent shall not apply any payments which it receives to any Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period applicable to any such Eurodollar Rate Loans or (B) in the event that there are no outstanding Prime Rate Loans and (ii) to the extent Borrower uses any proceeds of the Loans or Letter of Credit Accommodations to acquire rights in or the use of any Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral, payments in respect of the Obligations shall be deemed applied first to the Obligations arising from Loans and Letter of

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Credit Accommodations that were not used for such purposes and second to the Obligations arising from Loans and Letter of Credit Accommodations the proceeds of which were used to acquire rights in or the use of any Collateral in the chronological order in which Borrower acquired such rights in or the use of such Collateral.

(b) At Agent’s option, all principal, interest, fees, costs, expenses and other charges provided for in this Agreement or the other Financing Agreements may be charged directly to the loan account(s) of Borrower maintained by Agent, provided, that, Agent shall use best efforts to notify Borrower no less than three (3) Business Days prior to charging Borrower’s loan account for any fees, costs or expenses. Borrower and each Guarantor shall make all payments to Agent and Lenders on the Obligations free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to the payment of, any of the Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Borrower and each Guarantor shall be liable to pay to Agent, and do hereby indemnify and hold Agent and Lenders harmless for the amount of any payments or proceeds surrendered or returned. This Section 6.4(b) shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This Section 6.4 shall survive the payment of the Obligations and the termination of this Agreement.

6.5 Authorization to Make Loans. Agent and Lenders are authorized to make the Loans and provide the Letter of Credit Accommodations based upon telephonic or other instructions received from anyone purporting to be an officer of Borrower or other authorized person or, at the discretion of Agent, if such Loans are necessary to satisfy any Obligations. All requests for Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requested advance is to be made or Letter of Credit Accommodations established (which day shall be a Business Day) and the amount of the requested Loan. Requests received after 11:00 a.m. Chicago, Illinois time on any day shall be deemed to have been made as of the opening of business on the immediately following Business Day. All Loans and Letter of Credit Accommodations under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, Borrower or Guarantor when deposited to the credit of Borrower or Guarantor or otherwise disbursed or established in accordance with the instructions of Borrower or Guarantor or in accordance with the terms and conditions of this Agreement.

6.6 Use of Proceeds. Borrower shall use the initial proceeds of the Loans provided by Agent to Borrower hereunder only for: (a) payments to each of the persons listed in the disbursement direction letter furnished by Borrower to Agent on or about the date hereof and (b) costs, expenses and fees in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements and the Merger Agreements, provided, that, no more than $15,000,000 of Loan proceeds may be used to fund the Purchase

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Price on the date hereof, and to fund Purchase Price or comparable adjustments payable to the Sellers pursuant to the terms of the Merger Agreements. All other Loans made or Letter of Credit Accommodations provided to or for the benefit of Borrower pursuant to the provisions hereof shall be used by Borrower only for general operating purposes, working capital, to fund adjustments to the Purchase Price payable to Sellers pursuant to the terms of the Merger Agreements and other proper corporate purposes of Borrower not otherwise prohibited by the terms hereof. None of the proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended.

6.7 Pro Rata Treatment. Except to the extent otherwise provided in this Agreement: (a) the making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata Shares as to the Loans and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respect of any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be distributed accordingly.

6.8 Sharing of Payments, Etc.

(a) Borrower and each Guarantor, jointly and severally agrees that, in addition to (and without limitation of) any right of setoff, banker’s lien or counterclaim Agent or any Lender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of Borrower or any Guarantor at any of its offices, in dollars or in any other currency, against any principal of or interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (after the expiration of any particular grace period and regardless of whether such balances are then due to Borrower or any Guarantor), in which case it shall promptly notify Borrower and Agent thereof; provided, that, such Lender’s failure to give such notice shall not affect the validity thereof.

(b) If any Lender (including Agent) shall obtain from Borrower or Guarantor payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker’s lien or counterclaim or similar right or otherwise (other than from Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loans or more than its share of such other amounts then due hereunder or thereunder by Borrower or Guarantor to such Lender than the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in the Loans or such other amounts, respectively, owing to such other Lenders (or such interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in

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obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall make appropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored.

(c) Borrower and each Guarantor agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent with this Section, all rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation.

(d) Nothing contained herein shall require any Lender to exercise any right of setoff, banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other Indebtedness or obligation of Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assign such rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

6.9 Settlement Procedures.

(a) In order to administer the Credit Facility in an efficient manner and to minimize the transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of this Section, make available, on behalf of Lenders, the full amount of the Loans requested or charged to Borrower’s loan account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof, without requirement of prior notice to Lenders of the proposed Loans.

(b) With respect to all Loans made by Agent on behalf of Lenders as provided in this Section, the amount of each Lender’s Pro Rata Share of the outstanding Loans shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 3:00 p.m. Chicago, Illinois time on the Business Day immediately preceding the date of each settlement computation; provided, that, Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly, but in no event more than twice in any week. Agent shall deliver to each of the Lenders after the end of each week, or at such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereinafter referred to as a “Settlement Period”). If the summary statement is sent by Agent and received by a Lender prior to 12:00 p.m. Chicago, Illinois time, then such Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m. Chicago, Illinois time on the same Business Day and if received by a Lender after 12:00 p.m. Chicago, Illinois time, then such Lender shall make the settlement transfer by not later than 3:00 p.m. Chicago, Illinois time on the next Business Day following

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the date of receipt. If, as of the end of any Settlement Period, the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than such Lender’s Pro Rata Share of the outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in the preceding sentence) transfer to Agent by wire transfer in immediately available funds the amount of the increase. Alternatively, if the amount of a Lender’s Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount of such Lender’s Pro Rata Share of the outstanding Loans for the previous Settlement Period, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of the decrease. The obligation of each of the Lenders to transfer such funds and effect such settlement shall be irrevocable and unconditional and without recourse to or warranty by Agent. Agent and each Lender agrees to mark its books and records at the end of each Settlement Period to show at all times the dollar amount of its Pro Rata Share of the outstanding Loans and Letter of Credit Accommodations. Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Loans to the extent such Loans have been funded by such Lender. Because the Agent on behalf of Lenders may be advancing and/or may be repaid Loans prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually advanced by and repaid to each Lender and the Agent and shall accrue from and including the date such Loans are so advanced to but excluding the date such Loans are either repaid by Borrower or actually settled with the applicable Lender as described in this Section.

(c) To the extent that Agent has made any such amounts available and the settlement described above shall not yet have occurred, upon repayment of any Loans by Borrower, Agent may apply such amounts repaid directly to any amounts made available by Agent pursuant to this Section. In lieu of weekly or more frequent settlements, Agent may, at its option, at any time require each Lender to provide Agent with immediately available funds representing its Pro Rata Share of each Loan, prior to Agent’s disbursement of such Loan to Borrower. In such event, all Loans under this Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in the other Lender’s obligation to make a Loan requested hereunder nor shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in the other Lender’s obligation to make a Loan hereunder.

(d) If Agent is not funding a particular Loan to Borrower pursuant to Sections 6.9(a) and 6.9(b) above on any day, but is requiring each Lender to provide Agent with immediately available funds on the date of such Loan as provided in Section 6.9(c) above, Agent may assume that each Lender will make available to Agent such Lender’s Pro Rata Share of the Loan requested or otherwise made on such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding amount to be made available to or for the benefit of Borrower on such day. If Agent makes such corresponding amount available to Borrower and such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the

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Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans. During the period in which such Lender has not paid such corresponding amount to Agent, notwithstanding anything to the contrary contained in this Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the benefit of Borrower shall, for all purposes hereof, be a Loan made by Agent for its own account. Upon any such failure by a Lender to pay Agent, Agent shall promptly thereafter notify Borrower of such failure and Borrower shall pay such corresponding amount to Agent for its own account within five (5) Business Days of Borrower’s receipt of such notice. A Lender who fails to pay Agent its Pro Rata Share of any Loans made available by the Agent on such Lender’s behalf, or any Lender who fails to pay any other amount owing by it to Agent, is a “Defaulting Lender”. Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may hold and, in its discretion, relend to Borrower the amount of all such payments received or retained by it for the account of such Defaulting Lender. For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero (0). This Section shall remain effective with respect to a Defaulting Lender until such default is cured. The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, or relieve or excuse the performance by Borrower or any Obligor of their duties and obligations hereunder.

(e) Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by any Lender hereunder in fulfilling its Commitment.

6.10 Obligations Several; Independent Nature of Lenders’ Rights. The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other Financing Agreements and no action taken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

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6.11 Taxes.

(a) Any and all payments by Borrower and any Guarantors to Agent or any Lender under this Agreement and any of the other Financing Agreements shall be made free and clear of, and without deduction or withholding for, any Taxes. In addition, Borrower shall pay all Other Taxes (or Agent may, at its option, pay such Other Taxes and charge the loan account of Borrower for such amounts so paid).

(b) Subject to the last sentence of Section 6.11(f), Borrower and Guarantors shall indemnify and hold harmless Agent and Lenders for the full amount of Taxes or Other Taxes paid by Agent or any Lender (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section, but not including Other Taxes that arise as a result of Agent’s or any Lender’s arrangements with the applicable taxing jurisdiction, if any, and not as a result of this Agreement) and any liability (including penalties, interest and expenses (including reasonable attorney’s fees and expenses) other than those resulting solely from a failure by Agent or any Lender to pay any Taxes or Other Taxes which it is required to pay and for which it received an indemnity payment) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority. Payment under this indemnification shall be made within ten (10) days after the date Agent or any Lender makes written demand therefor. If Borrower reasonably believes that such Taxes or Other Taxes were not correctly or legally asserted, Agent or such Lender shall, upon Borrower’s request and at Borrower’s expense, provide such documents to Borrower in form and substance reasonably satisfactory to Borrower, to enable Borrower to contest such Taxes or Other Taxes pursuant to appropriate proceedings then available to Borrower (so long as providing such documents shall not, in the good faith determination of Agent, have a reasonable likelihood of resulting in any liability of Agent or any Lender).

(c) If Borrower or Guarantor shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder or under the other Financing Agreements to Agent or any Lender, then:

(i) subject to the last sentence of Section 6.11(f) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) Agent or such Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made;

(ii) Borrower or Guarantor shall make such deductions and withholdings;

(iii) Borrower or Guarantor shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and

(iv) to the extent not paid to Agent or Lenders pursuant to Section 6.11(c)(i), Borrower or Guarantor shall also pay to Agent or any Lender, at the time interest is paid, all additional amounts which are necessary to preserve the after-tax yield Agent or such Lender

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would have received pursuant to the Financing Agreements if such Taxes or Other Taxes had not been imposed.

(d) Within thirty (30) days after the date of any payment by Borrower or Guarantor of Taxes or Other Taxes, Borrower or Guarantor shall furnish to Agent the original or a certified copy of a receipt or any other or other evidence of payment reasonably satisfactory to Agent.

(e) If Borrower or Guarantor otherwise would be required to pay additional amounts to Agent or a Lender pursuant to Section 6.11(c), then upon Borrower’s written request, such Lender shall use reasonable efforts at Borrower’s expense (consistent with legal and regulatory restrictions) to take such action, including changing the jurisdiction of its lending office so as to eliminate any such additional payment by Borrower or Guarantor which may thereafter accrue. Borrower hereby agrees to pay all reasonable costs and expenses incurred by such Lender in connection with any action taken by such Lender in accordance with this Section 6.11(e).

(f) In the event that Borrower or Guarantors are required to pay additional amounts or to make indemnity payments pursuant to this Section 6.11, Borrower may, upon notice to Agent and the applicable Lender, either prepay in whole or in part the outstanding balance of any Loan being maintained by the applicable Lender or require such Lender to assign and delegate without recourse all of its interests, rights and obligations under this Agreement to an Eligible Transferee selected by Borrower or Agent.

(g) In the event a Lender shall assign the Obligations and its rights hereunder to an assignee which is organized under the laws of a jurisdiction outside the United States, such assignee of a Lender shall provide Borrower with an IRS Form W-8BEN or Form W-8ECI or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying as to such assignee’s being entitled to full exemption from United States withholding tax with respect to all payments to be made to such assignee hereunder and under any of the other Financing Agreements (unless such assignee of a Lender is unable to do so by reason of a change in law, including, without limitation, any statute, treaty, ruling, determination or regulation occurring subsequent to the effective date of such assignment). Notwithstanding anything to the contrary contained in this Section 6.11, unless Borrower has received forms or other documents indicating that payments to such assignee hereunder or under any of the other Financing Agreements are not subject to United States of America withholding tax, Borrower shall, in the case of payments to or for any assignee of a Lender organized under the laws of a jurisdiction outside the United States (i) withhold taxes from such payments at the applicable statutory rate, or at a rate reduced by an applicable tax treaty and (ii) pay such assignee such payment net of any taxes so withheld. Such assignee will be required to use reasonable efforts (including reasonable efforts to change its lending office) to avoid or to minimize any amounts which might otherwise be payable by Borrower or Guarantor pursuant to this Section 6.11; provided, that, such efforts shall not cause the imposition on such assignee of any additional costs or legal or regulatory burdens deemed by such assignee in good faith to be material.

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(h) If Agent or any Lender receives a permanent tax benefit in respect of any Taxes or Other Taxes for which Agent or such Lender has received an indemnification payment from Borrower or Guarantor hereunder, so long as no Event of Default shall exist or have occurred and be continuing, Agent or such Lender (as the case may be) shall credit to the loan account of Borrower the amount of such permanent tax benefit.

(i) Each Person that is a Lender as of the date of this Agreement (i) represents and warrants to Borrower that such Person is incorporated or organized under the laws of the United States or a state thereof, (ii) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to Agent and Borrower prior to the time that Agent or Borrower is required to make any payment of principal, interest or fees hereunder, duplicate executed originals of either U.S. Internal Revenue Service Form W-8BEN or W-8ECI, as applicable (wherein such Lender claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder) and agrees to provide new such forms upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by such Lender, and (iii) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

SECTION 7. COLLATERAL REPORTING AND COVENANTS

7.1 Collateral Reporting.

(a) Borrower shall provide Agent with the following documents in a form satisfactory to Agent:

(i) as soon as possible after the end of each month (except during a Cash Dominion Period, then as soon as possible after the end of each week), but in any event within ten (10) Business Days after the end of such month (or during a Cash Dominion Event by the third (3^rd) Business Day after the end of such week) or as more frequently as Borrower may desire, (A) schedules of sales made, credits issued and cash received during such period (provided, that, the such schedules shall not be required to be provided to Agent until July 2006), (B) inventory reports by categories, location, and mix (including indicating the amounts of Inventory at warehouses and stores, and detail regarding Inventory subject to the Wholesale Financing Agreement and the Frigidaire Consignment Agreement) as of the end of such period, (C) reports of sales of Inventory, indicating gross sales, returns, allowances and net sales, and reports of aggregate Inventory purchases (including all costs related thereto, such as freight, duty and taxes) during such period, and (D) a report of credit card sales during such period, including the amount of the chargebacks and credits with respect thereto and providing an aging of such sales identifying those outstanding more than ten (10) Business Days since the sale date giving rise thereto; provided, that, this report does not have to be provided to Agent unless a Cash Dominion Event has occurred and is continuing;

(ii) as soon as possible after the end of each month (but in any event within ten (10) Business Days after the end thereof), or during a Cash Dominion Event, more frequently as

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Agent may request, (A) agings of accounts receivable (together with a reconciliation to the previous month’s aging and general ledger), and (B) agings of accounts payable (including information indicating the aggregate amount owing to owners and lessors of leased premises, warehouses, fulfillment centers, processors and other third parties from time to time in possession of any Collateral) as of the end of such month;

(iii) as soon as possible after the end of each month (but in any event ten (10) Business Days after the end thereof), in each case certified by the chief financial officer, treasurer or controller of Borrower as true and correct: (A) a statement confirming the payment of rent and other amounts due to owners and lessors of real property used by Borrower in the immediately preceding month, subject to year-end or monthly percentage rent payment adjustments, (B) the addresses of all new retail store locations of Borrower opened and existing retail store locations closed or sold (including a report of results by category of inventory of any going out of business sales and identifying the proceeds of any other assets of Borrower sold in connection with such store closures), in each case since the date of the most recent certificate delivered to Agent containing the information required under this clause, (C) reports regarding consigned inventory, (D) reports regarding inventory subject to the Wholesale Agreement, (E) reports regarding customer deposits and gift cards, and (F) a report of any new deposit account established or used by Borrower with any bank or other financial institution, including the name of the account, the account number, the name and address of the financial institution at which such account is maintained, the purpose of such account and, if any, the amount held in such account on or about the date of such report;

(iv) a report from the chief financial officer, treasurer or controller of Borrower as soon as possible after the end of each fiscal quarter (but in any event within ten (10) Business Days after the end thereof), commencing with the fiscal quarter ending (a) March 31, 2005, certifying the number of shares of Capital Stock issued by Borrower to Parent in conjunction with the issuance by Parent of its Capital Stock to employees of Borrower or its Subsidiaries and including information contemplated by Section 9.7(b)(iii) with respect to such issuances, and (b) June 30, 2006, certifying the number of new retail store locations opened by Borrower during such period,

(v) upon Agent’s request, (A) reports of sales for each category of Inventory, (B) reports of aggregate Inventory purchases (including all costs related thereto, such as freight, duty and taxes) and identifying items of Inventory in transit to Borrower related to the applicable documentary letter of credit and/or bill of lading number, (C) copies of purchase orders, sales invoices, credit memos, remittance advices and reports, and copies of deposit slips and bank statements, (D) copies of shipping and delivery documents, (E) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by Borrower, (F) reports by retail store location of sales and operating profits for each such retail store location, (G) reports on sales and use tax collections, deposits and payments, including monthly sales and use tax accruals, (H) perpetual inventory reports, and (I) the monthly statements received by Borrower or any of its Affiliates from any Credit Card Issuers or Credit Card Processors, together with such additional information with respect thereto as shall be sufficient to enable Agent to monitor the transactions pursuant to the Credit Card Agreements; and

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(vi) such other reports as to the Collateral as Agent shall reasonably request from time to time.

(b) If Borrower’s or any Guarantor’s records or reports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, Borrower and each Guarantor hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and related documents to Agent and to follow Agent’s instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing.

7.2 Accounts Covenants. Borrower shall, to the extent any of the following exceeds $500,000, notify Agent promptly of: (i) any material delay in Borrower’s performance of any of its material obligations to any account debtor or the assertion of any material claims, offsets, defenses or counterclaims by any account debtor, Credit Card Issuer or Credit Card Processor or any material disputes with account debtors, or any settlement, adjustment or compromise thereof, and (ii) all material adverse information known to Borrower or Guarantor relating to the financial condition of any account debtor, Credit Card Issuer or Credit Card Processor and (iii) any event or circumstance which, to the best of Borrower’s or Guarantor’s knowledge, would cause Agent to consider any then existing Accounts as no longer constituting Eligible Accounts. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor, Credit Card Issuer or Credit Card Processor without Agent’s consent, except in the ordinary course of Borrower’s or Guarantor’s business in accordance with current practices of Borrower in effect on the date hereof or as such practices may hereafter change as a result of changes to the policies of Borrower applicable to its similarly situated customers generally and unrelated to the circumstances of Borrower or as otherwise with the prior approval of Agent. So long as no Event of Default exists or has occurred and is continuing, Borrower and Guarantors shall settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor, Credit Card Issuer or Credit Card Processor. At any time that an Event of Default exists or has occurred and is continuing, Agent shall, at its option, have the exclusive right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors, Credit Card Issuer or Credit Card Processor or grant any credits, discounts or allowances.

(b) With respect to each Account: (i) no payments shall be made thereon except payments delivered to Agent pursuant to the terms of this Agreement, (ii) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect thereto, if in the aggregate with all other Accounts, the same exceed $500,000 and (iii) none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations, all documentation relating thereto will be legally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or similar laws limiting creditors’ rights generally and be general equitable principles.

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(c) Borrower shall notify Agent promptly of: (i) any notice of a material default by Borrower under any of the Credit Card Agreements or of any default which has a reasonable likelihood of resulting in the Credit Card Issuer or Credit Card Processor ceasing to make payments or suspending payments to Borrower, (ii) any notice from any Credit Card Issuer or Credit Card Processor that such person is ceasing or suspending, or will cease or suspend, any present or future payments due or to become due to Borrower from such person, or that such person is terminating or will terminate any of the Credit Card Agreements, and (iii) the failure of Borrower to comply with any material terms of the Credit Card Agreements or any terms thereof which has a reasonable likelihood of resulting in the Credit Card Issuer or Credit Card Processor ceasing or suspending payments to Borrower.

(d) Agent shall have the right at any time or times (but prior to the occurrence of a Cash Dominion Event, nor more frequently than once per fiscal quarter), in Agent’s name or in the name of a nominee of Agent, to verify the validity, amount or any other matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise.

7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower and each Guarantor shall at all times maintain inventory records reasonably satisfactory to Agent, keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, Borrower’s or Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrower and Guarantors shall conduct a physical count of the Inventory either through periodic cycle counts or wall to wall counts, so that all Inventory is subject to such counts at least once each year but at any time or times as Agent may request after an Event of Default has occurred and is continuing, and promptly following such physical inventory (whether through periodic cycle counts or wall to wall counts) shall supply Agent with a report in the form and with such specificity as may be satisfactory to Agent concerning such physical count; (c) Borrower and Guarantors shall not remove any Inventory from the locations set forth or permitted herein, without the prior written consent of Agent, except for sales of Inventory in the ordinary course of its business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventory shipped from the manufacturer thereof to Borrower or Guarantor which is in transit to the locations set forth or permitted herein; (d) upon Agent’s request, Borrower shall, at their expense, no more than two (2) times in any twelve (12) month period (and only one (1) time in any twelve (12) month period, at the Agent’s option, in the event that Excess Availability is equal to or greater than $15,000,000), but at any time or times as Agent may reasonably request at the expense of Agent and Lenders, or at any time or times a Agent may request at Borrower’s expense at any time after an Event of Default exists or has occurred and is continuing, deliver or cause to be delivered to Agent written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrower and Guarantors shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) in the event any count conducted pursuant to Section 7.3(b) above indicates any material irregularities or other adverse

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information regarding Inventory, in the good faith determination of Agent, upon Agent’s request, Borrower shall, at its expense, conduct through RGIS Inventory Specialists, Inc. or another inventory counting service reasonably acceptable to Agent, a count of the Inventory in form, scope and methodology reasonably acceptable to Agent no more than one (1) times in any twelve (12) month period, but at any time or times as Agent may request at any time an Event of Default exists or has occurred and is continuing or at any time or times as Agent may request in the event of test count variances in excess of the shrinkage reserve established by Borrower, the results of which shall be reported directly by such inventory counting service to Agent and Borrower shall promptly deliver confirmation in a form satisfactory to Agent that appropriate adjustments have been made to the inventory records of Borrower to reconcile the inventory count to Borrower’s inventory records; (g) none of the Inventory or other Collateral constitutes farm products or the proceeds thereof; (h) Borrower and each Guarantor assumes all responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (i) Borrower and Guarantors shall not sell Inventory to any customer on approval, or any other basis which entitles the customer to return or may obligate Borrower or any Guarantor to repurchase such Inventory; except for the right of return given to retail customers of Borrower in the ordinary course of the business of Borrower in accordance with the then current return policy of Borrower; (j) Borrower and Guarantors shall keep the Inventory in good and marketable condition (subject to Borrower’s normal reserves for damaged and defective Inventory), and (k) Borrower and Guarantors shall not, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.

7.4 Equipment and Real Property Covenants. With respect to the Equipment and Real Property: (a) upon Agent’s request, at any time or times as Agent may request on or after an Event of Default has occurred and is continuing, Borrower shall deliver or cause to be delivered to Agent written appraisals as to the Equipment and/or the Real Property acquired by Borrower pursuant to Section 9.20 hereof in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; (b) Borrower and Guarantors shall keep the Equipment used or useful in the ordinary course of Borrower’s business in good order, repair, and in running and marketable condition (ordinary wear and tear excepted); (c) Borrower and Guarantors shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity in all material respects with all applicable laws; (d) the Equipment is and shall be used in the business of Borrower and Guarantors and not for personal, family, household or farming use; (e) Borrower and Guarantors shall not remove any Equipment from the locations set forth or permitted herein, except to the extent expressly permitted under this Agreement or necessary to have any Equipment repaired or maintained in the ordinary course of its business or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of Borrower or any Guarantor in the ordinary course of business; (f) the Equipment is now and shall remain personal property and Borrower and Guarantor shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) Borrower and each Guarantor assumes all responsibility and liability arising from the use of the Equipment and Real Property.

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7.5 Power of Attorney. Borrower and each Guarantors hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as Borrower’s and Guarantor’s true and lawful attorney-in-fact, and authorizes Agent, in Borrower’s, Guarantor’s or Agent’s name, to: (a) at any time an Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of Borrower’s or such Guarantor’s rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign Borrower’s or such Guarantor’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Agent, and open and dispose of all mail addressed to Borrower or such Guarantor and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary, in Agent’s determination, to fulfill Borrower’s or such Guarantor’s obligations under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Agent or any Lender, (ii) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral are sent or received, (iii) endorse Borrower’s or such Guarantor’s name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Agent and any Lender and deposit the same in Agent’s account for application to the Obligations, (iv) endorse Borrower’s or such Guarantor’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, (v) clear Inventory the purchase of which was financed with Letter of Credit Accommodations through U.S. Customs or foreign export control authorities in Borrower’s or Guarantor’s name, Agent’s name or the name of Agent’s designee, and to sign and deliver to customs officials powers of attorney in Borrower’s or such Guarantor’s name for such purpose, and to complete in Borrower’s or such Guarantor’s or Agent’s name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (vi) sign Borrower’s or such Guarantor’s name on any verification of Receivables and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof. Borrower and each Guarantor hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent’s or any Lender’s own gross negligence or wilful misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction.

7.6 Right to Cure. Agent may, at its option, upon notice to Borrower, (a) cure any default by Borrower or any Guarantor under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise dispose of the

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Collateral or the rights and remedies of Agent or any Lender therein or the ability of Borrower or any Guarantor to perform its obligations hereunder or under any of the other Financing Agreements, at any time on or after a Default or Event of Default exists or has occurred and is continuing, or if after giving effect to any Reserve in respect of such default Excess Availability is or would be less than $10,000,000; (b) pay or bond on appeal any judgment entered against Borrower, any Guarantor or any Subsidiary of Borrower, at any time on or after a Default or Event of Default exists or has occurred and is continuing, or if after giving effect to any Reserve in respect of such judgment Excess Availability is or would be less than $10,000,000; (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and pay any amount, incur any expense or perform any act which, in Agent’s judgment, is necessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto; provided, that, Agent shall not exercise its right pursuant to this Section 7.6(c) to discharge such taxes, liens, security interest or other encumbrances that are permitted under Section 9.8 hereof, unless either (i) a Default or Event of Default shall exist or have occurred and be continuing, or (ii) with respect to liens, security interests or other encumbrances, the beneficiary or holder of such lien, security interest or other encumbrance has the right to take action against or with respect to the Collateral which right is not subject to an effective stay pursuant to applicable law. Agent may add any amounts so expended to the Obligations and charge Borrower’s account therefor, such amounts to be repayable by Borrower on demand. Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of Borrower or any Guarantor. Any payment made or other action taken by Agent under this Section shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly.

7.7 Access to Premises. From time to time as requested by Agent, at the cost and expense of Borrower, (a) Agent or its designee shall have complete access to all of Borrower’s and Guarantors’ premises during normal business hours and after notice to Borrower, or at any time and without notice to Borrower if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of Borrower’s and Guarantors’ books and records, including the Records, and (b) Borrower and Guarantor shall promptly furnish to Agent such copies of such books and records or extracts therefrom as Agent may request, and Agent or any Lender or Agent’s designee may use during normal business hours of Borrower’s and such Guarantor’s personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of other Collateral.

SECTION 8. REPRESENTATIONS AND WARRANTIES

Borrower and each Guarantor hereby represents and warrants to Agent and Lenders the following (which shall survive the execution and delivery of this Agreement):

8.1 Corporate Existence, Power and Authority. Borrower is a corporation and Guarantor is a limited liability company, each duly organized and in good standing under the

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laws of its state of incorporation or organization, and duly qualified as a foreign corporation and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within Borrower’s and Guarantor’s corporate or limited liability company powers, as applicable, (b) have been duly authorized, (c) are not in contravention of law or the terms of Borrower’s or Guarantor’s applicable other organizational documentation, or any indenture, agreement or undertaking to which Borrower or Guarantor is a party or by which Borrower or Guarantor or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security interest, charge or other encumbrance upon any property of Borrower or Guarantor. This Agreement and the other Financing Agreements to which Borrower or Guarantor is a party constitute legal, valid and binding obligations of Borrower and Guarantor enforceable in accordance with their respective terms except as such enforceability may be limited by bankruptcy, insolvency, moratorium or similar laws limiting creditors’ rights generally and be general equitable principles.

8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.

(a) The exact legal name of Borrower and each Guarantor is as set forth on the signature page of this Agreement and in the Information Certificate. Neither Borrower nor any Guarantor has, during the five years prior to the date of this Agreement, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth in the Information Certificate.

(b) Borrower and each Guarantor is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets forth the organizational identification number of Borrower and each Guarantor or accurately states that Borrower or Guarantor has none and accurately sets forth the federal employer identification number of Borrower and each Guarantor.

(c) The chief executive office and mailing address of Borrower and each Guarantor and Borrower’s and Guarantor’s Records concerning Accounts are located only at the address identified as such in Schedule 8.2 to the Information Certificate and its only other places of business and the only other locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to the Information Certificate, subject to the rights of Borrower or Guarantor to establish new locations in accordance with Section 9.2 below. The Information Certificate correctly identifies any of such locations which are not owned by Borrower or Guarantor and sets forth the owners and/or operators thereof.

8.3 Financial Statements; No Material Adverse Change. Except as set forth on Schedule 8.3 hereto, all financial statements relating to Borrower or Guarantor which have been or may hereafter be delivered by Borrower or Guarantor to Agent and Lenders have been

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prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject to normal year-end adjustments and do not include any notes) and fairly present in all material respects the financial condition and the results of operation of Borrower and each Guarantor as at the dates and for the periods set forth therein. Except as disclosed in any interim financial statements furnished by Borrower and each Guarantor to Agent prior to the date of this Agreement, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recent audited financial statements of Borrower or Guarantor furnished by Borrower or Guarantor to Agent prior to the date of this Agreement.

8.4 Priority of Liens; Title to Properties. The security interests and liens granted to Agent under this Agreement and the other Financing Agreements constitute valid and perfected first priority liens and security interests in and upon the Collateral subject only to the liens indicated on Schedule 8.4 to the Information Certificate and the other liens permitted under Section 9.8 hereof. Borrower and each Guarantor has good and marketable fee simple title to or valid leasehold interests in all of its Real Property and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, except those granted to Agent and such others as are specifically listed on Schedule 8.4 to the Information Certificate or permitted under Section 9.8 hereof.

8.5 Tax Returns. Borrower and each Guarantor has filed, or caused to be filed, in a timely manner all tax returns, reports and declarations which are required to be filed by it. All information in such tax returns, reports and declarations is complete and accurate in all material respects. Borrower and each Guarantor has paid or caused to be paid all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or Guarantor and with respect to which adequate reserves have been set aside on its books. Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.

8.6 Litigation. Except as set forth on Schedule 8.6 to the Information Certificate, (a) there is no investigation by any Governmental Authority pending, or to the best of Borrower’s or any Guarantor’s knowledge threatened, against or affecting Borrower or such Guarantor, its or their assets or business and (b) there is no action, suit, proceeding or claim by any Person pending, or to the best of Borrower’s or any Guarantor’s knowledge threatened, against Borrower or Guarantor or its or their assets or goodwill, or against or affecting any transactions contemplated by this Agreement, the Senior Note Indenture or the Merger Agreements, in each case, which if adversely determined against Borrower or any Guarantor has or could reasonably be expected to have a Material Adverse Effect.

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8.7 Compliance with Other Agreements and Applicable Laws.

(a) Borrower and Guarantors are not in default in any respect under, or in violation in any respect of the terms of, any material agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound, except for defaults or violations which would not be reasonably expected to result in a Material Adverse Effect. Borrower and Guarantors are in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority relating to their respective businesses, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the rules and regulations thereunder, and all Environmental Laws, except for instances of non-compliance which would not be reasonably expected to result in a Material Adverse Effect.

(b) Borrower and Guarantors have obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authority required for the lawful conduct of its business (the “Permits”). All of the Permits are valid and subsisting and in full force and effect. There are no actions, claims or proceedings pending or to the best of Borrower’s or Guarantor’s knowledge, threatened that seek the revocation, cancellation, suspension or modification of any of the Permits to the extent the same would be reasonably expected to have a Material Adverse Effect.

8.8 Environmental Compliance.

(a) Except as set forth on Schedule 8.8 to the Information Certificate, Borrower, Guarantor and any Subsidiary of Borrower or Guarantors have not generated, used, stored, treated, transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates any applicable Environmental Law or Permit, and the operations of Borrower, Guarantor and any Subsidiary of Borrower or any Guarantor complies all Environmental Laws and all Permits except for any violation or non-compliance which would not reasonably be expected to have a Material Adverse Effect.

(b) Except as set forth on Schedule 8.8 to the Information Certificate, there is no outstanding investigation by any Governmental Authority or any outstanding proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of Borrower’s or any Guarantor’s knowledge threatened, with respect to any non-compliance with or violation of the requirements of any Environmental Law by Borrower or Guarantor and any Subsidiary of Borrower or any Guarantor or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, in each case, which if adversely determined against Borrower or any Guarantor would reasonably be expected to have a Material Adverse Effect.

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(c) Except as set forth on Schedule 8.8 to the Information Certificate, Borrower, Guarantors and their Subsidiaries have no liability (contingent or otherwise) in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials, except for any liability which would not reasonably be expected to have a Material Adverse Effect.

(d) Borrower, Guarantors and their Subsidiaries have all Permits required to be obtained or filed in connection with the operations of Borrower and Guarantors under any Environmental Law and all of such licenses, certificates, approvals or similar authorizations and other Permits are valid and in full force and effect.

8.9 Employee Benefits.

(a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or State law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best of Borrower’s or Guarantor’s knowledge, nothing has occurred which would cause the loss of such qualification. Borrower and its ERISA Affiliates have made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.

(b) There are no pending, or to the best of Borrower’s or Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan except where such prohibited transaction or violation would not reasonably be expected to have a Material Adverse Effect.

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) the current value of each Plan’s assets (determined in accordance with the assumptions used for funding such Plan pursuant to Section 412 of the Code) are not less than such Plan’s liabilities under Section 4001(a)(16) of ERISA; (iii) Borrower and Guarantors have not incurred and do not reasonably expect to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) Borrower and Guarantors have not incurred and do not reasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) Borrower, Guarantors, and their ERISA Affiliates, have not engaged in a transaction that would be subject to Section 4069(a) or 4212(c) of ERISA.

8.10 Bank Accounts. All of the deposit accounts, investment accounts or other accounts in the name of or used by Borrower or Guarantor maintained at any bank or other financial institution are set forth on Schedule 8.10 to the Information Certificate, subject to the

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right of Borrower and Guarantors to establish new accounts in accordance with Section 5.2 hereof.

8.11 Intellectual Property. Borrower and each Guarantor owns or licenses or otherwise has the right to use all Intellectual Property necessary for the operation of its business as presently conducted or proposed to be conducted. As of the date hereof, Borrower and Guarantors do not have any Intellectual Property registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in Schedule 8.11 to the Information Certificate and has not granted any licenses with respect thereto other than as set forth in Schedule 8.11 to the Information Certificate. No event has occurred which permits or would permit after notice or passage of time or both, the revocation, suspension or termination of such rights. To the best of Borrower’s and each Guarantor’s knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by Borrower or Guarantor infringes any patent, trademark, servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently and no claim or litigation is pending or threatened against or affecting Borrower or any Guarantor contesting its right to sell or use any such Intellectual Property. Schedule 8.11 to the Information Certificate sets forth all of the agreements or other arrangements of Borrower and Guarantor pursuant to which Borrower or Guarantor has a license (other than commercially available off-the-shelf software) or other right to use any trademarks, logos, designs, representations or other Intellectual Property owned by another person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of Borrower or Guarantors as in effect on the date hereof (collectively, together with such agreements or other arrangements as may be entered into by Borrower or Guarantor after the date hereof, collectively, the “License Agreements” and individually, a “License Agreement”). No trademark, servicemark, copyright or other Intellectual Property at any time used by Borrower or Guarantors which is owned by another person, or owned by Borrower or Guarantor subject to any security interest, lien, collateral assignment, pledge or other encumbrance in favor of any person other than Agent, is affixed to any Eligible Inventory, except (a) to the extent permitted under the term of the license agreements listed on Schedule 8.11 to the Information Certificate and (b) to the extent the sale of Inventory to which such Intellectual Property is affixed is permitted to be sold by Borrower or Guarantor under applicable law (including the United States Copyright Act of 1976).

8.12 Subsidiaries; Affiliates; Capitalization; Solvency.

(a) Borrower and Guarantors do not have any direct or indirect Subsidiaries and are not engaged in any joint venture or partnership except as set forth in Schedule 8.12 to the Information Certificate.

(b) Borrower and Guarantors are the record and beneficial owners of all of the issued and outstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being owned by Borrower or Guarantor and there are no

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proxies, irrevocable or otherwise, with respect to such shares and no equity securities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings or arrangements by which any Subsidiary is or may become bound to issue additional shares of it Capital Stock or securities convertible into or exchangeable for such shares.

(c) The issued and outstanding shares of Capital Stock of Borrower and Guarantors are directly and beneficially owned and held by the persons indicated in the Information Certificate, and in each case all of such shares have been duly authorized and in the case of the Capital Stock of Borrower are fully paid and non-assessable, free and clear of all claims, liens, pledges and encumbrances of any kind, except as disclosed in writing to Agent prior to the date hereof.

(d) An Affiliate or Affiliates of Freeman Spogli & Co. LLC has, on or before the date hereof, made a cash equity contribution to Borrower in the amount of $111,200,000 as consideration for 11,121,390 shares of the issued and outstanding shares of Capital Stock of Borrower consisting of common stock, and such equity contribution shall be used to fund part of the Purchase Price.

(e) Borrower and Guarantors, on a consolidated basis, are Solvent and will continue to be Solvent after the creation of the Obligations, the security interests of Agent and the other transactions contemplated hereunder, and the consummation of the transactions under the Merger Agreements (including, without limitation the payment of the Purchase Price) and the issuance of the Seller Notes, and the Senior Note Indenture.

8.13 Labor Disputes.

(a) Set forth on Schedule 8.13 to the Information Certificate is a list (including dates of termination) of all collective bargaining or similar agreements between or applicable to Borrower and any Guarantor and any union, labor organization or other bargaining agent in respect of the employees of Borrower or any Guarantor on the date hereof.

(b) There is (i) no significant unfair labor practice complaint pending against Borrower or Guarantor or, to the best of Borrower’s or each Guarantor’s knowledge, threatened against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the date hereof against Borrower or any Guarantor or, to best of Borrower’s or any Guarantor’s knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against Borrower or any Guarantor or, to the best of Borrower’s or any Guarantor’s knowledge, threatened against Borrower or any Guarantor.

8.14 Restrictions on Subsidiaries. Except for restrictions contained in this Agreement or any other agreement with respect to Indebtedness of Borrower or Guarantors permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on

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Borrower or Guarantors or any of their respective Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between Borrower or any Guarantor and any of its or their Subsidiaries or (ii) between any Subsidiaries of Borrower or any Guarantor or (b) the ability of Borrower or any Guarantor or any of its or their Subsidiaries to incur Indebtedness or grant security interests to Agent or any Lender in the Collateral, other than such restrictions as are permitted by Section 9.17 hereof.

8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets forth all Material Contracts to which Borrower or Guarantor is a party or is bound as of the date hereof. Borrower and each Guarantor have delivered true, correct and complete copies of such Material Contracts to Agent on or before the date hereof. Borrower and each Guarantor are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party thereto to terminate any Material Contract.

8.16 Credit Card Agreements. Set forth in Schedule 8.16 hereto is a correct and complete list of all of the Credit Card Agreements. The Credit Card Agreements constitute all of such agreements necessary for Borrower to operate its business as presently conducted with respect to credit cards and debit cards and no Accounts of Borrower or Guarantor arise from purchases by customers of Inventory with credit cards or debit cards, other than those which are issued by Credit Card Issuers with whom Borrower has entered into one of the Credit Card Agreements set forth on Schedule 8.16 hereto or with whom Borrower has entered into a Credit Card Agreement in accordance with Section 9.13 hereof. Each of the Credit Card Agreements constitutes the legal, valid and binding obligations of Borrower or Guarantor that is a party thereto and to the best of Borrower’s and Guarantor’s knowledge, the other parties thereto, enforceable in accordance with their respective terms and are in full force and effect. No default or event of default, or act, condition or event which after notice or passage of time or both, would constitute a default or an event of default under any of the Credit Card Agreements exists or has occurred. Borrower and each Guarantor and the other parties thereto have complied with all of the terms and conditions of the Credit Card Agreements to the extent necessary for Borrower and each Guarantor to be entitled to receive all payments thereunder. Borrower has delivered, or caused to be delivered to Agent, true, correct and complete copies of all of the Credit Card Agreements.

8.17 Intentionally Deleted.

8.18 The Merger.

(a) The Merger is valid and effective in accordance with the terms of the Merger Agreements, and the corporation statutes of the State of Indiana, and Borrower is the surviving corporation pursuant to the Merger.

(b) All actions and proceedings required by the Merger Agreements, applicable law and regulation (including, but not limited to, compliance by Borrower, Guarantor and Seller with the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, and compliance by Parent, Borrower and each Guarantor with the Worker Adjustment and Retaining

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Notification Act) have been taken and the transactions required thereunder have been duly and validly taken and consummated.

(c) No court of competent jurisdiction has issued any injunction, restraining order or other order which prohibits consummation of the transactions described in the Merger Agreements and no governmental action or proceeding has been threatened or commenced seeking any injunction, restraining order or other order which seeks to void or otherwise modify the transactions described in the Merger Agreements.

(d) Borrower and each Guarantor have delivered, or caused to be delivered, to Agent, true, correct and complete copies of the Merger Agreements

8.19 Accuracy and Completeness of Information. All information furnished by or on behalf of Borrower or Guarantor in writing to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificate is true and correct in all material respects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading (it being understood that any forward-looking statement or projection shall be judged in light of the circumstances then known to, or which were reasonably believed by a person making such statement or projection and having the information reasonably available to a Person so situated). No event or circumstance has occurred which has had or could reasonably be expected to have a Material Adverse Effect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof.

8.20 Survival of Warranties; Cumulative. All representations and warranties contained in this Agreement or any of the other Financing Agreements shall survive the execution and delivery of this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of each additional borrowing or other credit accommodation hereunder and shall be conclusively presumed to have been relied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warranties which Borrower or Guarantor shall now or hereafter give, or cause to be given, to Agent or any Lender.

SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS

9.1 Maintenance of Existence.

(a) Each of Borrower and Guarantor shall at all times preserve, renew and keep in full force and effect its corporate and limited liability (as the case may be) existence and rights and franchises with respect thereto and maintain in full force and effect all licenses, trademarks, tradenames, approvals, authorizations, leases, contracts and Permits, in each case, necessary to carry on the business as presently or proposed to be conducted, except as to in each case Guarantor as permitted in Section 9.7 hereof.

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(b) Neither Borrower nor Guarantor shall change its name unless each of the following conditions is satisfied: (i) Agent shall have received not less than thirty (30) days prior written notice from Borrower of such proposed change in its name, which notice shall accurately set forth the new name; and (ii) Agent shall have received a copy of the amendment to the Certificate of Incorporation (or Certificate of Formation, as the case may be), of Borrower or Guarantor providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of Borrower or Guarantor as soon as it is available.

(c) Neither Borrower nor Guarantor shall change its chief executive office or its mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days’ prior written notice from Borrower of such proposed change, which notice shall set forth such information with respect thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably require in connection therewith. Neither Borrower nor Guarantor shall change its type of organization, jurisdiction of organization or other legal structure.

9.2 New Collateral Locations. Borrower and Guarantors may only open any new location within the continental United States provided Borrower or such Guarantor (a) gives Agent thirty (30) days prior written notice of the intended opening of any such new location and (b) executes and delivers, or causes to be executed and delivered, to Agent such agreements, documents, and instruments as Agent may deem reasonably necessary or desirable to protect its interests in the Collateral at such location; provided, that, without limiting the obligations of Borrower and Guarantors under Section 7.1 hereof or as may otherwise be provided herein, Borrower and Guarantors shall not be required to give such notice or cause to be executed or delivered any Landlord Agreement pursuant to this Section 9.2 with respect to any retail store location established after the date hereof.

9.3 Compliance with Laws, Regulations, Etc.

(a) Borrower and Guarantors shall, and shall cause any Subsidiary to, at all times, comply in all material respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local Governmental Authority, the failure to comply with or observe which would be reasonably likely to have a Material Adverse Effect.

(b) Borrower and Guarantors shall give written notice to Agent immediately upon Borrower’s or Guarantor’s receipt of any notice of, or Borrower’s or such Guarantor’s otherwise obtaining knowledge of, (i) the occurrence of any material event involving the release, spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any material non-compliance with or violation of any Environmental Law by Borrower or any Guarantor or (B) the material release, spill or discharge, threatened or actual, of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law. Copies of all environmental surveys, audits, assessments, feasibility studies and results of remedial investigations shall be promptly

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furnished, or caused to be furnished, by Borrower or such Guarantor to Agent. Borrower and Guarantors shall take prompt action to respond to any material non-compliance with any of the Environmental Laws and shall regularly report to Agent on such response.

(c) Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance by Borrower or Guarantors, or any condition which requires any action by or on behalf of Borrower or Guarantor in order to avoid any non-compliance by Borrower or Guarantor, with any Environmental Law, Borrower shall, at Agent’s request and Borrower’s expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where non-compliance or alleged non-compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Agent a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to any environmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such non-compliance, or Borrower’s or such Guarantor’s response thereto or the estimated costs thereof, shall change in any material respect.

(d) Borrower and Guarantors shall each indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presence of a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of Borrower or Guarantors and the preparation and implementation of any closure, remedial or other required plans (“Losses”) unless it is determined pursuant to a final non-appealable order of a court of competent jurisdiction that the Losses were the result of acts or omissions constituting gross negligence or willful misconduct of Agent or any Lender (but without limiting the obligations of Borrower or Guarantors as to any other Indemnitee (other than any officers, directors, agents or employees of the Indemnitee whose gross negligence or willful misconduct resulted in such losses, claims, damages, liabilities, costs or expenses)). All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the termination of this Agreement.

9.4 Payment of Taxes and Claims. Borrower and Guarantors shall, and shall cause any Subsidiary to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower, any Guarantor or Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books. Borrower and Guarantor shall be liable for any tax or penalties imposed on Agent or any Lender as a result of the financing arrangements provided for herein and Borrower and each Guarantor agrees to indemnify and hold Agent and Lenders harmless with respect to the foregoing, and to repay to Agent, for the benefit of Lenders, on demand the amount thereof, and until paid by Borrower or Guarantor such amount shall be added

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and deemed part of the Loans, provided, that, nothing contained herein shall be construed to require Borrower or Guarantors to pay any income, or franchise taxes attributable to the income of Lenders from any amounts charged by or paid hereunder to Lenders. The foregoing indemnity shall survive the payment of the Obligations and the termination of this Agreement.

9.5 Insurance.

(a) Borrower and Guarantors shall, and shall cause any Subsidiary to, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer. Borrower and Guarantors shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably require as proof of such insurance, and, if Borrower or any Guarantor fails to do so, Agent is authorized, but not required, to obtain such insurance at the expense of Borrower. All policies shall provide for at least thirty (30) days prior written notice to Agent of any cancellation or reduction of coverage and that Agent may act as attorney for Borrower and Guarantors in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrower and Guarantors shall cause Agent to be named as a loss payee and an additional insured (but without any liability for any premiums) under such insurance policies and Borrower and Guarantor shall obtain non-contributory lender’s loss payable endorsements to all insurance policies in form and substance satisfactory to Agent. Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent as its interests may appear and further specify that Agent and Lenders shall be paid regardless of any act or omission by Borrower, any Guarantor or any of its or their Affiliates.

(b) At its option, Agent may apply any insurance proceeds (other than insurance proceeds of Equipment which is subject to purchase money security interests or liens permitted by Section 9.8 hereof; in which case Agent shall, to the extent it receives such insurance proceeds, remit same to Borrower) received by Agent at any time to the cost of repairs or replacement of Collateral and/or to payment of the Obligations, whether or not then due, in any order and in such manner as Agent may in good faith determine or hold such proceeds as cash collateral for the Obligations, except that notwithstanding anything to the contrary contained herein, if any Equipment is lost, physically damaged or destroyed, upon the written request of Borrower, Agent shall release the net cash proceeds from insurance received by Agent pursuant to this Section 9.5 to Borrower as a result of such loss, damage or destruction to the extent necessary for the repair, refurbishing or replacement of such Equipment, provided, that, each of the following conditions is satisfied: (i) no Event of Default shall exist or have occurred and be continuing at the time immediately after giving effect to such release, (ii) such proceeds shall be used solely to repair, refurbish or replace the property so lost, damaged or destroyed (free and clear of any security interests, liens, claims or other encumbrances other than as permitted in Section 9.8 hereof), (iii) the repair, refurbishing or replacement of the property so lost, damaged or destroyed shall be commenced as soon as reasonably practicable and shall be diligently

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pursued to satisfactory completion, (iv) so long as a Cash Dominion Event has occurred and is continuing, the proceeds shall be held by Agent as cash collateral for the Obligations and shall be disbursed from such cash collateral from time to time as needed and/or, at Agent’s option, released by Agent directly to the contractor, subcontractor, materialmen, laborers, engineers, architects and other persons rendering services or materials to repair, refurbish or replace the property so lost, damaged or destroyed, (v) the amount of the insurance proceeds and Borrower’s unrestricted cash available for such purposes are sufficient in Agent’s reasonable determination, to allow Borrower to effect such repair, refurbishing or replacement in a satisfactory manner, (vi) the repair, refurbishing or replacement to which the proceeds are applied shall cause the Equipment so lost, damaged, destroyed to be of at least equal value and substantially the same character as prior to such loss, damage or destruction, and (vii) the casualty shall have resulted in payment of $1,000,000 in insurance proceeds or less. Upon completion of the work and payment in full therefor, or upon the failure to commence, or diligently to continue the work or the replacement of the Collateral, Agent may, at Agent’s option and after prior notice to Borrower, either apply the amount of any such proceeds then or thereafter in the possession of Agent to the payment of the Obligations or hold such proceeds as cash collateral for the Obligations on terms and conditions acceptable to Agent and not release such funds to Borrower, provided, that, nothing contained herein shall limit the right of Agent to apply any or all of such proceeds to the Obligations at any time an Event of Default shall exist or have occurred and be continuing.

(c) Notwithstanding anything to the contrary set forth in Section 9.5(a) and (b) above, Agent acknowledges that with respect to certain retail store location leases identified on Schedule 9.5 hereof, Borrower has obtained separate property insurance policies covering (i) the improvements and fixtures owned by the lessor of such retail store location, under which such lessor is named as the “loss payee” thereunder, provided, that, Borrower represents and warrants that none of such lessors have any interest in Borrower’s business interruption insurance or the Collateral, and (ii) the Collateral constituting tangible personal property located at the premises demised under such leases, under which Agent and Lenders are named as the “loss payee” thereunder. In no event shall any such lessor be named as a “loss payee” or “additional insured” under the insurance policies described in clause (ii) above. Any amounts received by or on behalf of Borrower in respect of its rights as a lessee in respect of a leasehold, or improvements thereon as a result of any casualty or condemnation affecting such lease or the real property and improvements demised under such lease, shall be paid to Agent, in accordance with Section 9.5(a) hereof, to the extent that Borrower has used its own funds or proceeds of Loans to fund such restoration costs) of restoration costs for the affected premises.

9.6 Financial Statements and Other Information.

(a) Borrower and Guarantors shall, and shall cause any Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings or transactions of or in relation to the Collateral and the business of Borrower, Guarantors and their Subsidiaries in accordance with sound business practices sufficient to permit the preparation of financial statements in accordance with GAAP. Borrower and Guarantor shall promptly furnish to Agent and Lenders all such financial and other information as Agent shall

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reasonably request relating to the Collateral and the assets, business and operations of Borrower and Guarantors, and Borrower shall notify the auditors and accountants of Borrower and Guarantors that Agent is authorized to obtain such information directly from them. Without limiting the foregoing, Borrower and Guarantors shall furnish or cause to be furnished to Agent, the following: (i) within thirty (30) days after the end of each fiscal month, monthly unaudited consolidated financial statements, (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Borrower and its Subsidiaries as of the end of and through such fiscal month (together with a comparison to the applicable prior year period), certified to be correct by the chief financial officer of Borrower, subject to normal year-end adjustments and no footnotes and, in the case of financial statements as of the end of a fiscal quarter of Borrower, accompanied by a compliance certificate substantially in the form of Exhibit C hereto, along with a schedule in a form satisfactory to Agent of the calculations used in determining, as of the end of such quarter, whether Borrower and Guarantor are in compliance with the covenants set forth in Section 9.18 of this Agreement as of the end of such quarter and (ii) within ninety (90) days after the end of each fiscal year, audited consolidated financial statements and unaudited consolidating financial statements of Borrower and its Subsidiaries (including in each case balance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting in all material respects the financial position and the results of the operations of Borrower and its Subsidiaries as of the end of and for such fiscal year, together with the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which accountants shall be KPMG or another independent accounting firm of nationally recognized reputation selected by Borrower, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly in all material respects the results of operations and financial condition of Borrower and its Subsidiaries as of the end of and for the fiscal year then ended.

(b) Borrower and Guarantors shall promptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $1,000,000 or which if adversely determined would be reasonably expected to result in a Material Adverse Effect, (ii) any Material Contract being terminated or amended or any new Material Contract entered into (in which event Borrower and Guarantor shall provide Agent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $1,000,000 shall have been entered against Borrower or Guarantor any of its or their properties or assets, (iv) any notification of a material violation of laws or regulations received by Borrower or Guarantor, (v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default.

(c) Borrower and Guarantors shall promptly after the sending or filing thereof furnish or cause to be furnished to Agent copies of all reports and registration statements which Borrower or Guarantor files with the Securities and Exchange Commission, any national securities exchange or the National Association of Securities Dealers, Inc.

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(d) Borrower and Guarantors shall furnish or cause to be furnished to Agent as soon as the same are complete, but in no event more than thirty (30) days after the commencement of each fiscal year of Borrower, a consolidated budget presented on a quarterly basis for such fiscal year (including a projected consolidated balance sheet and related statements of projected operations and cash flow as of the end of and for such fiscal year) and, during a Cash Dominion Event, furnish or cause to be furnished to Agent, no less frequently than quarterly, any significant revisions of such budget.

(e) Agent is hereby authorized to deliver a copy of any financial statement or any other information relating to the business of Borrower and Guarantors to any court or other Governmental Authority or to any Lender or Participant or prospective Lender or Participant or any Affiliate of any Lender or Participant or prospective Lender or Participant or any Affiliate or Participant subject to Section 13.5 hereof. Borrower and Guarantor each hereby irrevocably authorizes and directs all accountants or auditors to deliver to Agent, at Borrower’s expense, copies of the financial statements of Borrower and Guarantor and any reports or management letters prepared by such accountants or auditors on behalf of Borrower or Guarantor and to disclose to Agent and Lenders, subject to Section 13.5 hereof, such information as they may have regarding the business of Borrower and Guarantors. Any documents, schedules, invoices or other papers delivered to Agent or any Lender may be destroyed or otherwise disposed of by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Borrower to Agent or such Lender in writing.

(f) Borrower shall deliver, or cause to be delivered, to Agent, as soon as practicable and in any event within one hundred twenty (120) days from the date hereof, an opening balance sheet of Borrower and Guarantors after giving effect to the transactions contemplated by this Agreement, the Merger Agreements and the Senior Note Indenture.

(g) Borrower and Guarantors shall furnish to Agent all reports, notices, demands or other documents related to any adjustments to the Purchase Price (as defined in the Merger Agreements) received by Borrower or on its behalf promptly after the receipt thereof, or sent by Borrower or on its behalf concurrently with the sending thereof, as the case may be.

9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower and each Guarantor shall not, and shall not permit any Subsidiary to, directly or indirectly,

(a) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it, except, that, Guarantor or any wholly owned Subsidiary of Guarantor or Borrower may merge with and into or consolidate with Borrower or any other wholly owned Subsidiary of Borrower, provided, that, each of the following conditions is satisfied as determined by Agent: (i) Agent shall have received not less than five (5) days’ prior written notice of the consummation of any merger or consolidation of Borrower or any Guarantor to so merge or consolidate and such information with respect thereto as Agent may reasonably request, (ii) as of the effective date of the merger or consolidation and after giving effect thereto, no Event of Default or Default, shall exist or have occurred, (iii) Agent shall have received, true, correct and complete copies of all agreements,

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documents and instruments relating to such merger, including, but not limited to, the certificate or certificates of merger as filed with each appropriate Secretary of State, (iv) the surviving entity shall, immediately before and immediately after giving effect to such transaction or series of transactions have a net worth (including, without limitation, any Indebtedness incurred or anticipated to be incurred in connection with or in respect of such transaction or series of transactions) equal to or greater than the net worth of Borrower or such Guarantor involved in such merger immediately prior to such transaction or series of transactions, (v) the surviving entity shall expressly confirm, ratify and assume the Obligations and the Financing Agreements to which it is a party in writing, in form and substance reasonably satisfactory to Agent, and execute and deliver such other agreements, documents and instruments as Agent may request in connection therewith, (vi) the surviving entity of a merger between Borrower and Guarantor or any other Subsidiary of Borrower or such Guarantor shall be Borrower, and (vii) in a merger where such Guarantor is the surviving entity, such Guarantor shall ratify and confirm that its guarantee of the Obligations and shall apply to the Obligations as assumed by such surviving entity;

(b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital Stock or Indebtedness to any other Person or any of its assets to any other Person, except for:

(i) sales of Inventory in the ordinary course of business,

(ii) (A) the sale or other disposition (other than in connection with the closing or sale of a retail store location) of Equipment (including worn-out or obsolete Equipment or Equipment no longer used or useful in the business of Borrower or any Guarantor) so long as such sales or other dispositions do not involve Equipment having an aggregate fair market value in excess of $750,000 for all such Equipment disposed of in any fiscal year of Borrower or as Agent may otherwise agree and (B) the sale of the Real Property identified on Schedule 9.7 hereto, provided, that, except as Agent may otherwise agree in writing, in the event that a Cash Dominion Event has occurred and is continuing, all of the net proceeds of the sale of such Real Property shall be paid to Agent for application to the Obligations in such order and manner as Agent may determine,

(iii) the issuance and sale by Borrower or any Guarantor of Capital Stock of Borrower or Guarantor after the date hereof; provided, that, (A) except in the case of Capital Stock issued by Borrower to Parent in conjunction with the issuance by Parent of its Capital Stock to employees of Borrower or its Subsidiaries (which shall be reported quarterly to Agent in accordance with Section 7.1(a)(iv) hereof), Agent shall have received not less than ten (10) Business Days’ prior written notice of such issuance and sale by Borrower or Guarantor which notice shall specify the parties to whom such shares are to be sold, the terms of such sale, the total amount which it is anticipated will be realized from the issuance and sale of such stock and the net cash proceeds which it is anticipated will be received by Borrower or any Guarantor from such sale, (B) Borrower or Guarantor shall not be required to pay any cash dividends or repurchase or redeem such Capital Stock or make any other payments in respect thereof, except as otherwise permitted in Section 9.11 hereof, (C) the terms of such Capital Stock, and the terms

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and conditions of the purchase and sale thereof, shall not include any terms that include any limitation on the right of Borrower to request or receive Loans or Letter of Credit Accommodations or the right of Borrower and Guarantors to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements or otherwise in any way relate to or affect the arrangements of Borrower and Guarantors with Agent and Lenders or are more restrictive or burdensome to Borrower or Guarantors than the terms of any Capital Stock in effect on the date hereof, (D) except as Agent may otherwise agree in writing or as is otherwise permitted in Section 9.9(e)(v) hereof, all of the proceeds of the sale and issuance of such Capital Stock shall be paid to Agent for application to the Obligations in such order and manner as Agent may determine so long as a Cash Dominion Event has occurred and is continuing, and (E) in no event shall Borrower or Guarantors issue or sell Capital Stock which would result in a Change of Control,

(iv) the issuance of Capital Stock of Borrower or any Guarantor consisting of common stock pursuant to an employee stock option or grant or similar equity plan or 401(k) plans of Borrower or any Guarantor for the benefit of its employees, directors and consultants, provided, that, in no event shall Borrower or Guarantor be required to issue, or shall Borrower or any Guarantor issue, Capital Stock pursuant to such stock plans or 401(k) plans which would result in a Change of Control or other Event of Default,

(v) sales or other dispositions by Borrower of assets in connection with the closing or sale of a retail store location of Borrower in the ordinary course of Borrower’s business which consist of leasehold interests in the premises of such store, the Equipment and fixtures located at such premises and the books and records relating exclusively and directly to the operations of such store; provided, that, as to each and all such sales, (A) on the date of, and after giving effect to, any such sale, in any calendar year, Borrower shall not have closed or sold retail store locations accounting for more than five (5%) percent of all sales of Borrower in the immediately preceding twelve (12) month period, (B) Agent shall have received not less than ten (10) Business Days prior written notice of such sale, which notice shall set forth in reasonable detail satisfactory to Agent, the parties to such sale or other disposition, the assets to be sold or otherwise disposed of, the purchase price and the manner of payment thereof and such other information with respect thereto as Agent may request, (C) as of the date of such sale or other disposition and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (D) such sale shall be on commercially reasonable prices and terms in a bona fide arm’s length transaction, and (E) any and all net proceeds payable or delivered to Borrower in respect of such sale or other disposition shall be paid or delivered, or caused to be paid or delivered, to Agent in accordance with the terms of this Agreement,

(vi) sales of Installment Sales Contracts to Beneficial pursuant to the terms of the Beneficial Agreements (as in effect on the date hereof) in the ordinary course of business,

(vii) Intentionally Deleted, or

(viii) the sale or lease of delivery vehicles to non-Affiliates of Borrower in connection with an outsourcing transaction related to the companies, provided, that, except as

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Agent may otherwise agree in writing, all of the proceeds of the such sales and leases shall be paid to Agent for application to the Obligations in such order and manner as Agent may determine so long as a Cash Dominion Event has occurred and is continuing; and

(c) wind up, liquidate or dissolve except that any Guarantor or any Subsidiary may wind up, liquidate and dissolve; provided, that, each of the following conditions is satisfied: (i) the winding up, liquidation and dissolution of such Guarantor or Subsidiary shall not violate any law or any order or decree of any court or other Governmental Authority in any material respect and shall not conflict with or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, or any other agreement or instrument to which Borrower or such Guarantor is a party or may be bound, (ii) such winding up, liquidation or dissolution shall be done in accordance with the requirements of all applicable laws and regulations, (iii) effective upon such winding up, liquidation or dissolution, all of the assets and properties of such Guarantor or Subsidiary shall be duly and validly transferred and assigned to Borrower or such Guarantor, free and clear of any liens, restrictions or encumbrances other than the security interest and liens of Agent (and Agent shall have received such evidence thereof as Agent may require) or as permitted under Section 9.8 of this Agreement and Agent shall have received such deeds, assignments or other agreements as Agent may request to evidence and confirm the transfer of such assets to of such Guarantor or Subsidiary to Borrower, or Guarantor, as applicable, (iv) Agent shall have received all documents and agreements that Borrower or such Guarantor has filed with any Governmental Authority or as are otherwise required to effectuate such winding up, liquidation or dissolution, (v) neither Borrower nor any Guarantor shall assume any Indebtedness, obligations or liabilities as a result of such winding up, liquidation or dissolution, or otherwise become liable in respect of any obligations or liabilities of the entity that is winding up, liquidating or dissolving, unless such Indebtedness is otherwise expressly permitted hereunder, and the amount of such obligations and liabilities in excess of the book value of any assets transferred to Borrower in the aggregate do not exceed $250,000, (vi) Agent shall have received not less than ten (10) Business Days prior written notice of the intention of such Guarantor to wind up, liquidate or dissolve, and (vii) as of the date of such winding up, liquidation or dissolution and after giving effect thereto, no Default or Event of Default shall exist or have occurred; or

(d) agree to do any of the foregoing unless the consummation of the applicable agreement is contingent upon Borrower’s obtaining Agent and Lenders’ consent to such transaction.

9.8 Encumbrances. Borrower and Guarantors shall not, and shall not permit any Subsidiary to, create, incur, assume or suffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except:

(a) the security interests and liens of Agent for itself and the benefit of Lenders and the Bank Product Providers (but only to the extent provided for herein);

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(b) liens securing the payment of taxes, assessments or other governmental charges or levies either not yet delinquent or the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower, any Guarantor or any Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books;

(c) non-consensual statutory liens (other than liens securing the payment of taxes) arising in the ordinary course of Borrower’s, any Guarantor’s or Subsidiary’s business to the extent: (i) such liens secure Indebtedness which is not overdue or (ii) such liens secure Indebtedness relating to claims or liabilities which are fully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to Borrower, any Guarantor or such Subsidiary, in each case prior to the commencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books;

(d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any material respect with the use of such Real Property or ordinary conduct of the business of Borrower, any Guarantor or such Subsidiary as presently conducted thereon or materially impair the value of the Real Property which may be subject thereto;

(e) purchase money security interests or other security interests in Equipment (including Capital Leases) and purchase money mortgages or other mortgages on Real Property to secure Indebtedness permitted under Section 9.9(b) hereof so long as such security interests and mortgages do not apply to any property of Borrower, any Guarantor or any Subsidiary other than the Equipment or Real Property so acquired (and the proceeds thereof), and the Indebtedness secured thereby does not exceed the cost of the Equipment or Real Property so acquired, constructed, remodeled or improved, as the case may be, and such security interests are granted within 180 days of the date of such acquisition or completion of construction, remodeling or improvement of such Equipment or Real Property, as the case may be;

(f) pledges and deposits of cash by Borrower or any Guarantor after the date hereof in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security benefits;

(g) pledges and deposits of cash by Borrower or any Guarantor after the date hereof to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business of Borrower or such Guarantor; provided, that, in connection with any performance bonds issued by a surety or other person, the issuer of such bond shall have waived in writing any rights in or to, or other interest in, any of the Collateral in an agreement, in form and substance satisfactory to Agent;

(h) liens arising from (i) operating leases and the precautionary UCC financing statement filings in respect thereof and (ii) equipment or other materials which are not owned

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by Borrower or Guarantor located on the premises of Borrower or any Guarantor (but not in connection with, or as part of, the financing thereof) from time to time in the ordinary course of business and consistent with current practices of Borrower or such Guarantor and the precautionary UCC financing statement filings in respect thereof;

(i) liens or rights of setoff against credit balances of Borrower with Credit Card Issuers or Credit Card Processors or amounts owing by such Credit Card Issuers or Credit Card Processors to Borrower in the ordinary course of business, but not liens on or rights of setoff against any other property or assets of Borrower, pursuant to the Credit Card Agreements (as in effect on the date hereof) to secure the obligations of Borrower to the Credit Card Issuers or Credit Card Processors as a result of fees and chargebacks;

(j) statutory or common law liens or rights of setoff of depository banks with respect to funds of Borrower at such banks to secure fees and charges in connection with returned items or the standard fees and charges of such banks in connection with the deposit accounts maintained by Borrower at such banks (but not any other Indebtedness or obligations);

(k) deposits of cash with the owner or lessor of premises leased and operated by Borrower in the ordinary course of the business of Borrower to secure the performance by Borrower of their respective obligations under the terms of the lease for such premises;

(l) judgments and other similar liens arising in connection with court proceedings that do not constitute an Event of Default; provided, that, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor, (iii) a stay of enforcement of any such lien is imposed with the period specified in Section 10.1(d) hereof in effect and (iv) Agent may establish a Reserve with respect thereto;

(m) the security interests and liens upon the Wholesale Collateral in favor of Wholesale to secure Indebtedness owing GE under the Wholesale Agreements as permitted in Section 9.9 (g) hereof; provided, that, such security interests and liens shall at all times be subject to the terms of the Wholesale Finance Intercreditor Agreement;

(n) the security interests and liens upon the Frigidaire Consignment Collateral in favor of Frigidaire to secure Indebtedness owing Frigidaire under the Frigidaire Consignment Collateral as permitted in Section 9.9(i) hereof; provided, that, such security interests and liens shall at all times be subject to the terms of the Frigidaire Consignment Intercreditor Agreement;

(o) the liens of customs brokers on Inventory of Borrower incurred in the ordinary course of business in the connection with the importation of Inventory; provided, that, such Inventory is not Eligible Inventory; and

(p) the security interests and liens set forth on Schedule 8.4 to the Information Certificate.

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9.9 Indebtedness. Borrower and Guarantors shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance, obligations or dividends of any other Person, except:

(a) the Obligations;

(b) Indebtedness (including Capital Leases) arising after the date hereof to the extent secured by security interests in Equipment (including Capital Leases) and mortgages on Real Property to finance the acquisition, construction, remodeling or improvement thereof not to exceed $25,000,000 in the aggregate at any time outstanding so long as such security interests and mortgages do not apply to any property of Borrower, any Guarantor or any Subsidiary other than the Equipment or Real Property so acquired (and the proceeds thereof), and the Indebtedness secured thereby does not exceed the cost of the Equipment or Real Property so acquired, constructed, remodeled or improved, as the case may be, and such security interests are granted within 180 days of the date of such acquisition or completion of construction, remodeling or improvement of such Equipment or Real Property as the case may be;

(c) guarantees by any Guarantor of the Obligations of Borrower or any other Guarantor in favor of Agent for the benefit of Lenders;

(d) the Indebtedness of Borrower or any Guarantor arising after the date hereof pursuant to loans by Borrower or any Guarantor to the other permitted under Section 9.10(g) hereof;

(e) Indebtedness of Borrower evidenced by the Senior Notes as in effect on the date hereof or as permitted to be amended pursuant to the terms hereof, provided, that:

(i) the aggregate amount of such Indebtedness shall not exceed $165,000,000, less the aggregate amount of all repayments or redemptions, whether optional or mandatory, in respect thereof, plus interest thereon at the rate provided for in the Senior Notes as in effect on the date hereof,

(ii) this Agreement is and shall at all times continue to be the “Credit Agreement” as such term is defined in the Senior Note Indenture as in effect on the date hereof and is and shall be entitled to all of the rights and benefits thereof under the Senior Note Indenture as in effect on the date hereof,

(iii) Borrower and Guarantors shall not, directly or indirectly, make any payments in respect of such Indebtedness, except that they may make (A) regularly scheduled payments of interest, in respect of such Indebtedness when due in accordance with the terms of the Senior Notes and the Senior Note Indenture, in each case as in effect on the date hereof and (B) payments of principal in respect of such Indebtedness when scheduled to mature in

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accordance with the terms of the Senior Note Indenture as in effect on the date hereof and earlier to the extent permitted under Section 9.9(e)(v) below,

(iv) Borrower and Guarantors shall not, directly or indirectly, amend, modify, alter or change in any material respect any terms of such Indebtedness or any of the Senior Notes, the Senior Note Indenture or any related agreements, documents and instruments, except that Borrower may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness other than pursuant to payments thereof, or to reduce the interest rate or any fees in connection therewith,

(v) Borrower and Guarantors shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire all or any part of such Indebtedness other than at maturity (as set forth in the Senior Note Indenture as in effect on the date hereof), or set aside or otherwise deposit or invest any sums for such purpose, except that, Borrower or Guarantor may redeem or purchase such Indebtedness with the proceeds of the issuance and sale of Capital Stock of Borrower pursuant to a public or private offering permitted hereunder; provided, that, as of the date of any such redemption or purchase or any payment in respect thereof and after giving effect thereto: (A) Borrower and Guarantors shall have complied with all of the requirements of Section 9.7(b)(iii) with respect to such issuance and sale of Capital Stock and in addition to such requirements, the notice provided to Agent pursuant thereto shall specify that the proceeds are to be used for the redemption or purchase of such Indebtedness, the maximum amount that Borrower and Guarantors will pay in respect thereof and the range of the principal amount of the Senior Notes Borrower anticipates will be so redeemed or purchased, (B) the redemption or repurchase shall be consummated within ninety (90) days after the issuance and sale of the Capital Stock of Borrower pursuant to such public or private offering, and (C) as of the date of any such payment and after giving effect thereto, no Default, Event of Default or other Cash Dominion Event shall exist or have occurred and be continuing,

(vi) such Indebtedness shall be unsecured,

(vii) Agent shall have received true, correct and complete copy of the Senior Note Indenture (including all amendments and supplemental indentures with respect thereto) and all related agreements, documents and instruments at any time entered into in connection therewith, and

(viii) Borrower and Guarantors shall furnish to Agent all material written notices or demands in connection with such Indebtedness either received by Borrower or any Guarantor or on its behalf, promptly after the receipt thereof, or sent by Borrower or any Guarantor or on its behalf, concurrently with the sending thereof, as the case may be;

(f) unsecured Indebtedness of Borrower or Guarantors arising after the date hereof to any third person (but not to Borrower or any other Guarantor), provided, that, each of the following conditions is satisfied as determined by Agent: (i) such Indebtedness shall be on terms and conditions acceptable to Agent and shall be subject and subordinate in right of

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payment to the right of Agent and Lenders to receive the prior indefeasible payment and satisfaction in full payment of all of the Obligations pursuant to the terms of an intercreditor agreement between Agent and such third party, in form and substance satisfactory to Agent, (ii) Agent shall have received not less than ten (10) days prior written notice of the intention of Borrower or any Guarantor to incur such Indebtedness, which notice shall set forth in reasonable detail satisfactory to Agent the amount of such Indebtedness, the person or persons to whom such Indebtedness will be owed, the interest rate, the schedule of repayments and maturity date with respect thereto and such other information as Agent may request with respect thereto, (iii) Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness, (iv) except as Agent may otherwise agree in writing, all of the proceeds of the loans or other accommodations giving rise to such Indebtedness shall be paid to Agent for application to the Obligations in such order and manner as Agent may determine or at Agent’s option, to be held as cash collateral for the Obligations, (v) in no event shall the aggregate principal amount of such Indebtedness incurred during the term of this Agreement exceed $10,000,000, (vi) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (vii) Borrower and Guarantors shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto, except, that, Borrower or any Guarantor may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness (except pursuant to regularly scheduled payments permitted herein), or set aside or otherwise deposit or invest any sums for such purpose, and (viii) Borrower and Guarantors shall furnish to Agent all notices or demands in connection with such Indebtedness either received by Borrower or any Guarantor or on its behalf promptly after the receipt thereof, or sent by Borrower or any Guarantor or on its behalf concurrently with the sending thereof, as the case may be;

(g) Indebtedness of Borrower or any Guarantor entered into in the ordinary course of business pursuant to a Hedging Transaction; provided, that, (i) such arrangements are either with a Bank Product Provider or other financial institutions acceptable to Agent, (ii) such arrangements are not for speculative purposes, and (iii) such Indebtedness shall be unsecured, except as to obligations under Hedging Transactions with Bank Product Providers, but only to the extent of the security interest of Agent in the Collateral as provided herein,

(h) Indebtedness of Borrower to Sellers evidenced by the Seller Notes; provided, that, each of the following conditions is satisfied as determined by Agent,

(i) the aggregate principal amount of such Indebtedness shall not exceed $25,000,000 (plus interest not paid in cash which is added to the outstanding principal amount of the Seller Notes in accordance with the terms and conditions thereof), less the aggregate amount of all repayments, repurchases or redemptions, whether optional or mandatory, in respect thereof,

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plus interest thereon at the rate provided for in such agreement or instrument as in effect on the date hereof,

(ii) such Indebtedness is and shall at all times (A) be unsecured and (B) continue to be subject and subordinate in right of payment to the right of Agent and Lenders to receive the prior indefeasible payment and satisfaction in full payment of all of the Obligations on terms and conditions acceptable to Agent,

(iii) Borrower shall not, directly or indirectly, make any payments in respect of such Indebtedness, except, that, Borrower may make (A) regularly scheduled payments of interest in accordance with the terms of such Indebtedness as in effect on the date hereof, provided, that, as to any such payment as of the date of such payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred, (B) a prepayment of the outstanding principal amount of the Seller Notes upon the occurrence of a Public Equity Offering (as defined in the Senior Debt Agreements), provided, that, on the date of any such payment and after giving effect thereto, each of the following conditions is satisfied as determined by Agent: (1) the principal amount of the Seller Notes that may be prepaid with the proceeds of a Public Equity Offering shall be subject to reduction by such amount as the lead underwriter of such Public Equity Offering shall determine to be appropriate in order to ensure the successful execution and consummation of such Public Equity Offering, (2) as of the date of such payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred, and (3) as of the date of such payment and after giving effect thereto, Excess Availability shall have been not less than $15,000,000, (C) upon a Change of Control, in respect of which Agent and Lenders waived, in writing, their right to be paid in full in respect of the Obligations, a payment of principal in respect of the Seller Notes, and (D) the payment of principal scheduled to be due on the stated maturity date of such Seller Notes (as in effect on the date hereof),

(iv) Agent shall have received true, correct and complete copies of all agreements, documents and instruments evidencing or otherwise related to such Indebtedness,

(v) Borrower shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto, except, that, Borrower may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness or set aside or otherwise deposit or invest any sums for such purpose except as permitted in Section 9.9(h)(iii) hereof, and

(vi) Borrower shall furnish to Agent all notices or demands in connection with such Indebtedness either received by Borrower or on its behalf promptly after the receipt thereof, or sent by Borrower or on its behalf concurrently with the sending thereof, as the case may be;

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(i) the Indebtedness set forth on Schedule 9.9 to the Information Certificate; provided, that, (i) Borrower and Guarantor may only make regularly scheduled payments of principal and interest in respect of such Indebtedness in accordance with the terms of the agreement or instrument evidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) Borrower and Guarantor shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument related thereto as in effect on the date hereof except, that, Borrower and Guarantor may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or set aside or otherwise deposit or invest any sums for such purpose except as permitted in Section 9.9(i)(i) hereof, and (iii) Borrower and Guarantor shall furnish to Agent all notices or demands in connection with such Indebtedness either received by Borrower or Guarantor or on its behalf, promptly after the receipt thereof, or sent by Borrower or Guarantor or on its behalf, concurrently with the sending thereof, as the case may be;

(j) unsecured Indebtedness of Borrower and Guarantors arising after the date hereof to any third person (but not to any other Borrower or Guarantor) that is not otherwise permitted pursuant to Sections 9.9(a) through (i), provided, that, each of the following conditions is satisfied as determined by Agent: (i) in no event shall the aggregate principal amount of such Indebtedness incurred during the term of this Agreement exceed $5,000,000, (ii) as of the date of incurring such Indebtedness and after giving effect thereto, no Default or Event of Default shall exist or have occurred, and (iii) Borrower and Guarantors shall furnish to Agent all material notices or demands in connection with such Indebtedness either received by Borrower or any Guarantor or on its behalf promptly after the receipt thereof, or sent by Borrower or any Guarantor or on its behalf concurrently with the sending thereof, as the case may be; and

(k) unsecured guarantees by Borrower or any Guarantor in respect of leases and Capital Leases permitted hereunder that are entered into by Borrower’s Subsidiaries in the ordinary course of business or unsecured guarantees by Borrower in respect of obligations of Borrowers’ Subsidiaries (other than for Indebtedness for borrowed money) otherwise permitted hereunder and incurred in the ordinary course of business.

9.10 Loans, Investments, Etc. Borrower and Guarantors shall not, and shall not permit any Subsidiary to, directly or indirectly, make any loans or advance money or property to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all or a substantial part of the assets or property of any person, or form or acquire any Subsidiaries, or agree to do any of the foregoing, except:

(a) the endorsement of instruments for collection or deposit in the ordinary course of business;

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(b) investments in cash or Cash Equivalents, provided, that, (i) no Loans are then outstanding, except that notwithstanding that any Loans are outstanding, Borrower may from time to time in the ordinary course of business make deposits of cash or other immediately available funds in operating demand deposit accounts used for disbursements to the extent required to provide funds for amounts drawn or anticipated to be drawn shortly on such accounts and such funds may be held in Cash Equivalents consisting of overnight investments until so drawn (so long as such funds and Cash Equivalents are not held more than five (5) Business Days from the date of the initial deposit thereof and do not exceed $2,500,000, except that, during the thirty (30) days prior to any scheduled interest payment date under the Senior Note Indenture (as in effect on the date hereof), Borrower may make such deposits and such funds may be held in Cash Equivalents so long as such funds and Cash Equivalents are not held more than thirty (30) days and do not exceed $10,000,000) and (ii) the terms and conditions of Section 5.2 hereof shall have been satisfied with respect to the deposit account, investment account or other account in which such cash or Cash Equivalents are held;

(c) the existing equity investments of Borrower and Guarantors as of the date hereof in its Subsidiaries, provided, that, Borrower or any Guarantor shall not have any further obligations or liabilities to make any capital contributions or other additional investments or other payments to or in or for the benefit of any of such Subsidiaries;

(d) loans and advances by Borrower or any Guarantor to employees of Borrower or any Guarantor: (i) not to exceed the principal amount of $1,000,000 in the aggregate at any time outstanding with respect to employees which are not senior executives of Borrower (A) for reasonably and necessary work-related travel or other ordinary business expenses to be incurred by such employee in connection with their work for Borrower or Guarantor and (B) reasonable and necessary relocation expenses of such employees (including home mortgage financing for relocated employees), (ii) not to exceed the principal amount of $4,000,000 in the aggregate at any time outstanding with respect to employees who are senior executives of Borrower (A) for reasonably and necessary work-related travel or other ordinary business expenses to be incurred by such employee in connection with their work for Borrower or any Guarantor and (B) reasonable and necessary relocation expenses of such senior executive employees (including home mortgage financing for relocated employees), and (iii) not to exceed the principal amount of $3,000,000 in the aggregate at any time outstanding in connection with the acquisition by employees of Capital Stock of Borrower;

(e) stock or obligations issued to Borrower or any Guarantor by any Person (or the representative of such Person) in respect of Indebtedness of such Person owing to Borrower or Guarantor in connection with the insolvency, bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person; provided, that, the original of any such stock or instrument evidencing such obligations shall be promptly delivered to Agent, upon Agent’s request, together with such stock power, assignment or endorsement by Borrower or Guarantor as Agent may request;

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(f) loans by Borrower or any Guarantor to the other after the date hereof, provided, that,

(i) as to all of such loans, (A) within thirty (30) days after the end of each fiscal month, Borrower shall provide to Agent a report in form and substance satisfactory to Agent of the outstanding amount of such loans as of the last day of the immediately preceding month and indicating any loans made and payments received during the immediately preceding month, (B) the Indebtedness arising pursuant to any such loan shall not be evidenced by a promissory note or other instrument, unless the single original of such note or other instrument is promptly delivered to Agent upon its request to hold as part of the Collateral, with such endorsement and/or assignment by the payee of such note or other instrument as Agent may require, (C) as of the date of any such loan and after giving effect thereto, Borrower or Guarantor making such loan shall be Solvent, and (D) as of the date of any such loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing,

(ii) as to loans by any Guarantor to Borrower, (A) the Indebtedness arising pursuant to such loan shall be subject to, and subordinate in right of payment to, the right of Agent and Lenders to receive the prior final payment and satisfaction in full of all of the Obligations on terms and conditions acceptable to Agent, (B) promptly upon Agent’s request, Agent shall have received a subordination agreement, in form and substance satisfactory to Agent, providing for the terms of the subordination in right of payment of such Indebtedness of Borrower to the prior final payment and satisfaction in full of all of the Obligations, duly authorized, executed and delivered by such Guarantor and Borrower, and (C) Borrower shall not, directly or indirectly make, or be required to make, any payments in respect of such Indebtedness prior to the end of the then current term of this Agreement, and

(iii) as to loans by Borrower to any Guarantor, other than loans to a Guarantor made for the purpose of acquiring a Subsidiary in accordance with Section 9.10(g) below, as of the date of any such loan and after giving effect thereto, (A) the Excess Availability of Borrower shall be not less than $8,500,000, and (B) the aggregate principal amount of all such loans outstanding at any time shall not exceed $10,000,000, and

(g) loans of money or property (other than Collateral) after the date hereof by Borrower or any Guarantor to any Person (other than to Borrower or another Guarantor) or investment after the date hereof by Borrower or any Guarantor by capital contribution in any Person, or the formation or acquisition after the date hereof by Borrower or Guarantor of any direct wholly-owned Subsidiary of Borrower or Guarantor after the date hereof organized under the laws of a jurisdiction in the United States of America; provided, that, as to any such loans or investments, or the formation or acquisition of any such Subsidiary, each of the following conditions is satisfied or waived as determined, in good faith, by Agent:

(i) as of the date of any such loan or investment, or the formation or acquisition of such Subsidiary or any payments in connection with the formation or acquisition of such Subsidiary, and in each case after giving effect thereto, no Default or Event of Default shall exist or have occurred,

(ii) the amount of such loan or investment in connection with any particular loan or investment (or series of related loans and investments) or any payments made in

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connection with the acquisition of a Subsidiary or series of related acquisitions shall not exceed $10,000,000 in any fiscal year of Borrower and not more than $25,000,000 in the aggregate during the term of this Agreement,

(iii) as of the date of any such loan or investment, or the formation or acquisition of such Subsidiary or any payments in connection with the formation or acquisition of such Subsidiary, and in each case after giving effect thereto, the aggregate dollar amount of all payments by Borrower or Guarantor in connection with one or any series of acquisitions permitted under Sections 9.10(g) and (h) shall not exceed $10,000,000 in any fiscal year of Borrower and not more than $25,000,000 in the aggregate during the term of this Agreement,

(iv) prior to the date of any proposed acquisition, Borrower shall have delivered financial projections to Agent for the period commencing the date of such acquisition and ending thirty days thereafter, which projections shall be in form and substance reasonably satisfactory to Agent (and reflect on a pro-forma basis the effect of the proposed acquisition) and reflect that Excess Availability is projected to be not less than $15,000,000 for each day of the thirty (30) day period immediately after (but not including) the date of the consummation of such acquisition,

(v) the Person receiving such loan or investment or the Subsidiary formed or acquired, as the case may be, shall be engaged in a business related, ancillary or complementary to the business of Borrower,

(vi) in the case of an investment by capital contribution, at Agent’s option, the original stock certificate or other instrument evidencing such capital contribution (or such other evidence as may be issued in the case of a limited liability company) shall be promptly delivered to Agent, together with such stock power, assignment or endorsement as Agent may request, and promptly upon Agent’s reasonable request, Borrower or such Guarantor making such investment shall execute and deliver to Agent a pledge and security agreement, (in form and substance substantially similar to the same types of agreements executed in connection with this Agreement on the date hereof) reasonably satisfactory to Agent, granting to Agent a first priority pledge of, security interest in and lien upon all of the issued and outstanding shares of such stock or other instrument or interest (and in the case of a limited liability company take such other actions as Agent shall reasonably require with respect to Agent’s security interests therein),

(vii) in the case of loans of money or property, the original of any promissory note or other instrument evidencing the Indebtedness arising pursuant to such loans shall be delivered, or caused to be delivered, to Agent, at Agent’s option, together with an appropriate endorsement, in form and substance reasonably satisfactory to Agent,

(viii) in the case of the formation or acquisition by a Borrower or any Guarantor of any Subsidiary, as to any such Subsidiary, (A) the Borrower or Guarantor forming such Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, the following (each in form and substance satisfactory to Agent), (1) an absolute and unconditional guarantee of payment of the Obligations, (2) a security agreement granting to Agent a first security interest

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and lien (except as otherwise consented to in writing by Agent and such liens as are otherwise permitted to exist under the terms of the Financing Agreements) upon all of the assets of any such Subsidiary, and (3) a joinder agreement, in form and substance satisfactory to Agent, which will evidence that such Subsidiary shall be a Guarantor under the Loan Agreement, such other agreements, documents and instruments as Agent may require, including, but not limited to, supplements and amendments hereto and other loan agreements or instruments evidencing Indebtedness of such new Subsidiary to Agent (all such agreements to be (in form and substance substantially similar to the same types of agreements executed in connection with this Agreement on the date hereof), and (B) the Borrower or Guarantor forming such Subsidiary shall (1) execute and deliver to Agent, a pledge and security agreement, (in form and substance substantially similar to the same types of agreements executed in connection with this Agreement on the date hereof), granting to Agent a first pledge of and lien on all of the issued and outstanding shares of Capital Stock of any such Subsidiary, and (C) deliver the original stock certificates evidencing such shares of Capital Stock (or such other evidence as may be issued in the case of a limited liability company), together with stock powers with respect thereto duly executed in blank (or the equivalent thereof in the case of a limited liability company in which such interests are certificated, or otherwise take such actions as Agent shall reasonably require with respect to Agent’s security interests therein),

(ix) in the case of the formation or acquisition by a Borrower or any Guarantor of any Subsidiary, as to any such Subsidiary, the assets of such Subsidiary shall be free and clear of any security interest, mortgage, pledge, lien, charge or other encumbrance (other than those permitted in this Agreement) and Agent shall have received evidence satisfactory to it of the same,

(x) Agent shall have received (A) not less than ten (10) Business Days’ prior written notice thereof setting forth in reasonable detail the nature and terms thereof, (B) true, correct and complete copies of all agreements, documents and instruments relating thereto and (C) such other information with respect thereto as Agent may request;

(h) the purchase by Borrower or any Guarantor of all or a substantial part of the assets or property of any Person located in the United States (other than Capital Stock), provided, that, each of the following conditions is satisfied as determined by Agent in good faith;

(i) as of the date of such purchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing,

(ii) the purchase price in respect of any such acquisition of assets or series of related acquisitions shall not exceed $10,000,000 in any fiscal year of Borrower and not more than $25,000,000 in the aggregate during the term of this Agreement,

(iii) as of the date of any payment in connection with such acquisition and after giving effect thereto, the aggregate dollar amount of all payments by Borrowers or Guarantors in connection with one or any series of acquisitions permitted under Sections 9.10(g) and (h) shall

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not exceed $10,000,000 in any fiscal year of Borrower and not more than $25,000,000 in the aggregate during the term of this Agreement,

(iv) prior to the date of any proposed acquisition, Borrower shall have delivered financial projections to Agent for the period commencing the date of such proposed acquisition and ending thirty days thereafter, which projections shall be in form and substance reasonably satisfactory to Agent (and reflect on a pro-forma basis the effect of the proposed acquisition) and reflect that Excess Availability is projected to be not less than $15,000,000 for each day of the thirty (30) day period immediately after (but not including) the date of the consummation of such acquisition,

(v) Agent shall have received not less than ten (10) Business Days’ prior written notice of the proposed acquisition and such information with respect thereto as Agent may reasonably request, including (A) the proposed date and amount of the acquisition, (B) a description of the assets to be acquired, and (C) the total purchase price for the assets to be purchased (and the terms of payment of such purchase price),

(vi) promptly upon Agent’s reasonable request, Borrower or Guarantor purchasing such assets shall deliver, or cause to be delivered to Agent, true, correct and complete copies of all material agreements, documents and instruments relating to such acquisition,

(vii) the assets and properties being acquired by Borrower or such Guarantor shall be related, ancillary or complementary to the business of Borrower,

(viii) the assets acquired by Borrower or such Guarantor shall be free and clear of any security interest, mortgage, pledge, lien, charge or other encumbrance (other than those permitted in this Agreement) and Agent shall have received evidence reasonably satisfactory to it of the same,

(ix) the acquisition by Borrower or such Guarantor of such assets shall not violate any law or regulation or any order or decree of any court or Governmental Authority in any material respect and shall not and will not conflict with or result in the breach of, or constitute a material default in any respect under, any Material Contract, document or instrument to which Borrower or such Guarantor is a party or may be bound, or result in the creation or imposition of, or the obligation to grant, any lien, charge or encumbrance upon any of the property of Borrower or such Guarantor violate any provision of the certificate of incorporation, by-laws, certificate of formation, operating agreement or other organizational documentation of Borrower or such Guarantor,

(x) such purchase shall be in a bona fide arms’ length transaction with a Person that is not an Affiliate of Borrower or such Guarantor,

(xi) neither Borrower nor any Guarantor shall become obligated with respect to any Indebtedness, nor any of its property become subject to any security interest or lien, pursuant to such acquisition unless Borrower or such Guarantor could incur such Indebtedness or create

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such security interest or lien hereunder or under the other Financing Agreements other than as set forth in clause (viii) above,

(xii) Agent shall have received, in form and substance reasonably satisfactory to Agent, (A) evidence that Agent has valid and perfected security interests in and liens upon all purchased assets to the extent such assets constitute Collateral hereunder, (B) UCC financing statements or other similar registrations required in any foreign jurisdiction), (C) all Collateral Access Agreements and other consents, waivers, acknowledgments and other agreements from third persons which Agent may reasonably deem necessary or desirable in order to permit, protect and perfect its security interests in and liens upon the assets purchased consistent with the requirements of Section 5 hereof and the other provisions regarding Collateral set forth herein and in the other Financing Agreements, (D) the agreement of the seller consenting to the collateral assignment by Borrower or such Guarantor purchasing such assets of all rights and remedies and claims for damages of Borrower or such Guarantor relating to the Collateral under the agreements, documents and instruments relating to such acquisition, which Borrowers and Guarantors shall use commercially reasonable efforts to obtain, and (E) such other agreements, documents and instruments as Agent may reasonably request in connection therewith, and

(xiii) in no event shall any Accounts or Inventory so acquired by Borrower pursuant to such acquisition be deemed Eligible Commercial Accounts, Eligible Credit Card Receivables or Eligible Inventory unless and until Agent shall have conducted a field examination with respect thereto and then only to the extent the criteria for Eligible Commercial Accounts, Eligible Credit Card Receivables or Eligible Inventory and set forth herein are satisfied with respect thereto in accordance with this Agreement (or such other or additional criteria as Agent may, at its option, establish with respect thereto in accordance with this Agreement and subject to such Reserves as Agent may establish in accordance with this Agreement), and upon the request of Agent, the Accounts and Inventory acquired by such Borrower or Guarantor pursuant to such acquisition shall at all times after such acquisition be separately identified and reported to Agent in a manner satisfactory to Agent;

(i) the loans and advances set forth on Schedule 9.10 to the Information Certificate; provided, that, as to such loans and advances, Borrower and Guarantors shall not, directly or indirectly, amend, modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto and Borrower and Guarantors shall furnish to Agent all notices or demands in connection with such loans and advances either received by Borrower or Guarantors or on their behalf, promptly after the receipt thereof, or sent by Borrower or such Guarantor or on its behalf, concurrently with the sending thereof, as the case may be; and

(j) loans and advances to Parent, the proceeds of which shall be used to make repurchases of Capital Stock of Parent issued to employees of Borrower, provided, that, as to any such loan, each of the following conditions is satisfied in the determination of Agent: (i) as of the date of any such loan and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) such repurchase by Parent shall be paid with funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or

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the terms of any indenture, agreement or undertaking to which Parent, Borrower or Guarantor is a party or by which Borrower or Guarantor or its or their property are bound, and (iv) the aggregate amount of all payments for such repurchases in any fiscal year, when taken together with the repurchases permitted under Section 9.11(d) hereof shall not exceed $1,500,000 (net of cash proceeds of any sales of Capital Stock to other employees and excluding the cancellation of stock purchase notes), except, that, the Borrower or Parent (and Borrower may make the loan to Parent to makes such repurchase) may repurchase the Capital Stock of Borrower owned by Dennis L. May upon his death, retirement or termination of employment in accordance with the terms of the Stockholders Agreement, dated the date hereof, by and among FS Equity Partners V, L.P., Gregg Investment Corporation, LLC, Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May and Borrower (as in effect on the date hereof) provided, that, each of the following conditions is satisfied or waived in the determination of Agent: (A) as of the date of any such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (B) as of the date of such payment and after giving effect thereto, Excess Availability shall be not less than $10,000,000, and (C) the aggregate amount of payments made in respect of such repurchase shall not exceed $7,000,000.

9.11 Dividends and Redemptions. Borrower and Guarantors shall not, directly or indirectly, declare or pay any dividends on account of any shares of class of any Capital Stock of Borrower or any Guarantor now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing, except that:

(a) Borrower or any Guarantor may declare and pay such dividends or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock for consideration in the form of shares of common stock (so long as after giving effect thereto no Change of Control or other Event of Default shall exist or occur);

(b) Borrower and Guarantor may pay dividends to the extent permitted in Section 9.12 below;

(c) any Subsidiary of Borrower or any Guarantor may pay dividends to Borrower; and

(d) Borrower and Guarantors may repurchase Capital Stock consisting of common stock held by employees pursuant to any employee stock ownership plan thereof upon the termination, retirement or death of any such employee in accordance with the provisions of such plan, provided, that, as to any such repurchase, each of the following conditions is satisfied: (i) as of the date of the payment for such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) such repurchase shall be paid with funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or the terms of any indenture, agreement or undertaking to which Borrower or

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Guarantor is a party or by which Borrower or Guarantor or its or their property are bound, and (iv) the aggregate amount of all payments for such repurchases in any fiscal year (when taken together with the aggregate amount of loans made by Borrower to Parent in accordance with Section 9.10 (j) hereof) shall not exceed $1,500,000 (net of cash proceeds of any sales of Capital Stock to other employees and excluding the cancellation of stock purchase notes), except, that, the Borrower may repurchase the Capital Stock of Borrower owned by Dennis L. May upon his death, retirement or termination of employment in accordance with the terms of the Stockholders Agreement, dated the date hereof, by and among FS Equity Partners V, L.P., Gregg Investment Corporation, LLC, Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May and Borrower (as in effect on the date hereof) provided, that, each of the following conditions is satisfied or waived in the determination of Agent: (A) as of the date of any such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (B) as of the date of such payment and after giving effect thereto, Excess Availability shall be not less than $10,000,000, and (C) the aggregate amount of payments made in respect of such repurchase shall not exceed $7,000,000.

9.12 Transactions with Affiliates. Borrower and Guarantors shall not, directly or indirectly:

(a) Except for the existing arrangements described on Schedule 9.12, purchase, acquire or lease any property from, or sell, transfer or lease any property to (other than Capital Stock of Borrower, as permitted herein), any officer, director or other Affiliate of Borrower or any Guarantor, except (i) in the ordinary course of and pursuant to the reasonable requirements of Borrower’s or any Guarantor’s business (as the case may be) and upon fair and reasonable terms no less favorable to Borrower or such Guarantor than Borrower or such Guarantor would obtain in a comparable arm’s length transaction with an unaffiliated person, and (ii) payments to the Sellers required to be made pursuant to the terms of the Merger Agreements (as in effect on the date hereof) subject to the provisions of Section 6.6 hereof; or

(b) make any payments (whether by dividend, loan or otherwise) of management, consulting or other fees for management or similar services, or of any Indebtedness owing to any officer, employee, shareholder, director or any other Affiliate of Borrower or any Guarantor, except (i) reasonable compensation to officers, employees and directors for services rendered to Borrower or Guarantor in the ordinary course of business, (ii) payments by Borrower or any Guarantor to Parent for actual and necessary reasonable out-of-pocket legal and accounting, insurance, marketing, payroll and similar types of services paid for by Parent on behalf of Borrower or any Guarantor, in the ordinary course of their respective businesses or as the same may be directly attributable to Borrower or any Guarantor, provided, that, the aggregate amount of all such payments in any fiscal year shall not exceed $500,000, (iii) payment of fees by the Borrower to Freeman Spogli & Co. LLC for any financial or M&A advisory, financing, underwriting or placement services (whether structured as a fee or an underwriting discount) in connection with financings, acquisitions or divestitures, provided, that, (a) the fees for any such transaction shall not exceed the greater of 2% of the transaction value and 5% of the amount of any new equity invested by Freeman Spogli & Co. LLC in connection with such transaction, (b) each such payment shall be approved by a majority of the

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disinterested members of the Board of Directors of the Borrower, and (c) as of the date of any such fee payment and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (iv) loans and advances to employees permitted under Section 9.10(d) hereof, and (v) payments to Affiliates permitted under Section 9.11(d) hereof.

9.13 Credit Card Agreements. Borrower shall (a) observe and perform all material terms, covenants, conditions and provisions of the Credit Card Agreements to be observed and performed by it at the times set forth therein; and (b) at all times maintain in full force and effect the Credit Card Agreements and not terminate, cancel, surrender, modify, amend, waive or release any of the Credit Card Agreements, or consent to or permit to occur any of the foregoing; except, that, (i) Borrower may terminate, cancel or amend in any manner that would not have a Material Adverse Effect any of the Credit Card Agreements in the ordinary course of the business of Borrower; provided, that, Borrower shall give Agent not less than fifteen (15) days prior written notice of its intention to so terminate, cancel, amend or modify any of the Credit Card Agreements; (c) not enter into any new Credit Card Agreements with any new Credit Card Issuer or Credit Card Processor unless (i) Agent shall have received not less than thirty (30) days prior written notice of the intention of Borrower to enter into such agreement (together with such other information with respect thereto as Agent may request) and (ii) Borrower delivers, or causes to be delivered to Agent, a Credit Card Acknowledgment in favor of Agent duly authorized, executed and delivered by the new Credit Card Issuer or Credit Card Processor; (d) give Agent immediate written notice of any Credit Card Agreement entered into by Borrower after the date hereof, together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may request; and (e) furnish to Agent, promptly upon the request of Agent, such information and evidence as Agent may reasonably require from time to time concerning the observance, performance and compliance by Borrower or the other party or parties thereto with the terms, covenants or provisions of the Credit Card Agreements.

9.14 Compliance with ERISA. Borrower and Guarantors shall: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any of such Plans so as to incur any material liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited transaction involving any of such Plans or any trust created thereunder which would subject Borrower or Guarantors to a material tax or penalty or other material liability on prohibited transactions imposed under Section 4975 of the Code or ERISA; (e) make all required contributions to any Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code; (f) not allow or suffer to exist any accumulated funding deficiency, whether or not waived, with respect to any such Plan; or (g) not allow nor suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension Benefit Guaranty Corporation of any such Plan that is a single employer plan, which termination could result in any material liability of the Borrower or Guarantors to the Pension Benefit Guaranty Corporation.

9.15 End of Fiscal Years; Fiscal Quarters. Borrower and each Guarantor shall, for financial reporting purposes, cause its, and each of its Subsidiaries’ (a) fiscal years to end on

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March 31^st of each year and (b) fiscal quarters to end on June 30^th, September 30^th, December 31^st, and March 31^st of each year.

9.16 Change in Business. Borrower and Guarantors shall not engage in any business other than the business of Borrower or Guarantors on the date hereof and any business reasonably related, ancillary or complementary to the business in which Borrower or such Guarantor is engaged on the date hereof.

9.17 Limitation of Restrictions Affecting Subsidiaries. Borrower and Guarantors shall not, directly, or indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of Borrower or any Guarantor to (a) pay dividends or make other distributions or pay any Indebtedness owed to Borrower or any Guarantor or any Subsidiary of Borrower or Guarantor; (b) make loans or advances to Borrower or any Guarantor or any Subsidiary of Borrower or any Guarantor, (c) transfer any of its properties or assets to Borrower or any Guarantor or any Subsidiary of Borrower or such Guarantor; or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any agreement, lease or license of Borrower or such Guarantor or any Subsidiary of Borrower or any Guarantor, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of Borrower or such Guarantor or any Subsidiary of Borrower or such Guarantor, (v) any agreement relating to permitted Indebtedness incurred by a Subsidiary of Borrower or such Guarantor prior to the date on which such Subsidiary was acquired by Borrower or such Guarantor and outstanding on such acquisition date, (vi) any agreement restricting liens on property securing Indebtedness permitted to be incurred under Section 9.9(b) hereof, and (vii) the extension or continuation of contractual obligations in existence on the date hereof; provided, that, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to Agent and Lenders than those encumbrances and restrictions under or pursuant to the contractual obligations so extended or continued.

9.18 Fixed Charge Coverage Ratio. At all times during which Excess Availability (calculated without regard to any Maximum Credit limitation) is less than $8,500,000, Borrower and Guarantors, on a consolidated basis shall, when measured as of the fiscal quarter most recently ended for which Agent has received financial statements in accordance with Section 9.6(a)(i), for the four (4) immediately preceding consecutive fiscal quarters then ended, maintain, a Fixed Charge Coverage Ratio of not less than 1.10 to 1; provided, that, for each quarter during the period commencing March 1, 2005 through December 31, 2005, the period measured shall begin on the fiscal quarter ending nearest the date hereof (i.e, December 31, 2004) and ended as of such fiscal quarter end.

9.19 License Agreements.

(a) Borrower and Guarantors shall (i) promptly and faithfully observe and perform all of the material terms, covenants, conditions and provisions of the material License

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Agreements to which it is a party to be observed and performed by it, at the times set forth therein, if any, (ii) not do, permit, suffer or refrain from doing anything that could reasonably be expected to result in a material default under or material breach of any of the terms of any material License Agreement, (iii) not cancel, surrender, modify, amend, waive or release any material License Agreement in any material respect or any term, provision or right of the licensee thereunder in any material respect, or consent to or permit to occur any of the foregoing; except, that, subject to Section 9.19(b) below, Borrower or Guarantors may amend, modify, cancel, surrender or release any material License in the ordinary course of the business of Borrower or Guarantor; provided, that, Borrower or any Guarantor (as the case may be) shall give Agent not less than thirty (30) days prior written notice of its intention to so amend, modify, cancel, surrender and release any such material License Agreement, (iv) give Agent prompt written notice of any material License Agreement entered into by Borrower or any Guarantor after the date hereof, together with a true, correct and complete copy thereof and such other information with respect thereto as Agent may request, (v) give Agent prompt written notice of any material breach of any obligation, or any default, by any party under any material License Agreement, and deliver to Agent (promptly upon the receipt thereof by Borrower or any Guarantor in the case of a notice to Borrower or Guarantor and concurrently with the sending thereof in the case of a notice from Borrower or Guarantor) a copy of each notice of default and every other notice and other communication received or delivered by Borrower or any Guarantor in connection with any material License Agreement which relates to the right of Borrower or any Guarantor to continue to use the property subject to such License Agreement, and (vi) furnish to Agent, promptly upon the request of Agent, such information and evidence as Agent may reasonably require from time to time concerning the observance, performance and compliance by Borrower or any Guarantor or the other party or parties thereto with the material terms, covenants or provisions of any material License Agreement.

(b) Borrower and Guarantors will either exercise any option to renew or extend the term of each material License Agreement to which it is a party in such manner as will cause the term of such material License Agreement to be effectively renewed or extended for the period provided by such option and give prompt written notice thereof to Agent or give Agent prior written notice that Borrower or such Guarantor does not intend to renew or extend the term of any such material License Agreement or that the term thereof shall otherwise be expiring, not less than sixty (60) days prior to the date of any such non-renewal or expiration. In the event of the failure of Borrower or such Guarantor to extend or renew any material License Agreement to which it is a party, Agent shall have, and is hereby granted, the irrevocable right and authority, at its option, to renew or extend the term of such material License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Agent or in the name and behalf of Borrower or such Guarantor, as Agent shall determine at any time that an Event of Default shall exist or have occurred and be continuing. Agent may, but shall not be required to, perform any or all of such obligations of Borrower or such Guarantor under any of the License Agreements, including, but not limited to, the payment of any or all sums due from Borrower or such Guarantor thereunder. Any sums so paid by Agent shall constitute part of the Obligations.

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9.20 After Acquired Real Property. If Borrower or any Guarantor hereafter acquires any fee interest in Real Property, and if such Real Property, has a fair market value in an amount equal to or greater than $500,000 (or if a Default or Event of Default exists, then regardless of the fair market value of such assets), without limiting any other rights of Agent or any Lender, or duties or obligations of Borrower or such Guarantor, promptly upon Agent’s request, Borrower or such Guarantor shall execute and deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent may determine, in form and substance substantially similar to the Mortgages and as to any provisions relating to specific state laws satisfactory to Agent and in form appropriate for recording in the real estate records of the jurisdiction in which such Real Property or other property is located granting to Agent a first and only lien and mortgage on and security interest in such Real Property and related fixtures or other property (except for and subject to encumbrances that Borrower or such Guarantor would otherwise be permitted to incur under Section 9.8 hereof or as otherwise consented to in writing by Agent) and such other agreements, documents and instruments as Agent may require in connection therewith.

9.21 Costs and Expenses. Borrower and Guarantors shall pay to Agent on demand all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, syndication, administration, collection, liquidation, enforcement and defense of the Obligations, Agent’s rights in the Collateral, this Agreement, the other Financing Agreements and all other documents related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing or recording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) costs and expenses and fees for insurance premiums, environmental audits, title insurance premiums, surveys, assessments, engineering reports and inspections, appraisal fees and search fees, costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts, together with Agent’s customary charges and fees with respect thereto; (c) charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (d) costs and expenses of preserving and protecting the Collateral; (e) costs and expenses paid or incurred in connection with obtaining payment of the Obligations, enforcing the security interests and liens of Agent, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claims made or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (f) all out-of-pocket expenses and costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations of the Collateral and Borrower’s or such Guarantor’s operations, plus a per diem charge at Agent’s then standard rate for Agent’s examiners in the field and office (which rate as of the date hereof is $850 per person per day); provided, that, no more than two (2) periodic field exams, at Borrower’s expense, will be conducted in any consecutive twelve (12) month period prior to the occurrence of an Event of Default (and only one (1) time in any twelve (12) month period prior to the occurrence of an Event of Default, at the Agent’s option, in the event that Excess Availability is equal to or greater than $15,000,000);

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and (g) the reasonable fees and disbursements of counsel (including legal assistants) to Agent in connection with any of the foregoing.

9.22 Wholesale Agreements. Borrower and Guarantors shall not, and shall not permit any Subsidiary to, incur, create, assume, become or be liable (whether or not such liabilities constitute Indebtedness) in any manner with respect to, or permit to exist, any amounts to be owed to Wholesale under the Wholesale Agreement except as evidenced by the Wholesale Agreement (as in effect on the date hereof or as permitted to be amended pursuant to the terms hereof) provided, that:

(a) the outstanding principal amount of all liabilities, obligations and amounts at anytime owing to Wholesaler under the Wholesale Agreement shall not, at any time, exceed the Wholesale Financing Limit then in effect, plus interest or any late fees thereon at the rates provided in the Wholesale Agreements as in effect on the date hereof,

(b) as of the date hereof, no event of default, or event which with notice or passage of time or both would constitute an event of default exists, or has occurred under the Wholesale Agreements,

(c) Agent shall have received true, correct and complete copies of all of the Wholesale Agreements, as duly authorized, executed and delivered by the parties thereto,

(d) Borrower shall not, directly or indirectly, amend, modify, alter or change the terms of such Wholesale Agreement (including without limitation any expansion of the list of vendors and their products subject thereto) or any agreement, document or instrument related thereto, except, that, Borrower may, after prior written notice to Agent, amend, modify, alter or change the payment terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof, or to forgive or cancel any portion of such amounts owing with respect thereto (other than pursuant to payments thereof), or to reduce the interest rate, late charge or any fees in connection therewith, and

(e) Borrower shall furnish to Agent all material notices or demands in connection with such Wholesale Agreements either received by Borrower or Guarantor or on its behalf promptly after the receipt thereof, or sent by Borrower or Guarantor or on its behalf concurrently with the sending thereof, as the case may be.

9.23 Consignment and Vendor Financing Agreements. Borrower and each Guarantor shall not, and shall not permit any Subsidiary to, after the date hereof, enter into any agreements similar in substance to the Wholesale Financing Agreement or to the Frigidaire Consignment Agreement, except, that, Borrower may replace the Wholesale Financing Agreement and enter into other consignment agreements similar to the Frigidaire Agreement, provided, that, Borrower has obtained the prior written consent of Agent which will not be unreasonably withheld (it being understood that such consent shall, be conditioned upon other things, Agent’s receipt of intercreditor agreements from such third parties, on terms and conditions satisfactory to Agent).

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9.24 Further Assurances. At the request of Agent at any time and from time to time, Borrower and each Guarantor shall, at their expense, duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of this Agreement or any of the other Financing Agreements. Agent may at any time and from time to time request a certificate from an officer of Borrower or any Guarantor representing that all conditions precedent to the making of Loans and providing Letter of Credit Accommodations contained herein are satisfied. In the event of such request by Agent, Agent and Lenders may, at Agent’s option, cease to make any further Loans or provide any further Letter of Credit Accommodations until Agent has received such certificate and, in addition, Agent has determined that such conditions are satisfied.

SECTION 10. EVENTS OF DEFAULT AND REMEDIES

10.1 Events of Default. The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”:

(a) Borrower or any Obligor fails to pay any of the Obligations within two (2) days of when due (other than payments of principal in respect of the Loans which shall be paid when due) or (ii) Borrower or any Obligor fails to perform any of the covenants contained in Sections 9.3, 9.4, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such failure shall continue for fifteen (15) days; provided, that, such fifteen (15) day period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such fifteen (15) day period or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by Borrower or any Obligor of any such covenant or (iii) Borrower or any Obligor fails to perform any of the terms, covenants, conditions or provisions contained in this Agreement or any of the other Financing Agreements other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;

(b) any representation, warranty or statement of fact made by Borrower or any Guarantor to Agent in this Agreement, the other Financing Agreements or any other written agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect;

(c) any Obligor revokes or terminates or purports to revoke or terminate or fails to perform any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Agent or any Lender;

(d) any judgment for the payment of money is rendered against Borrower or any Obligor in excess of $1,000,000 in any one case or in excess of $2,500,000 in the aggregate (to the extent not covered by insurance where the insurer has assumed responsibility in writing for such judgment) and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the

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payment of money, or injunction, attachment, garnishment or execution is rendered against Borrower or any Obligor or any of the Collateral having a value in excess of $500,000 and shall remain undischarged or unvacated for a period in excess of ten (10) days;

(e) Borrower or any Obligor, which is a partnership, limited liability company, limited liability partnership or a corporation, dissolves or suspends or discontinues doing business;

(f) Borrower or any Obligor makes an assignment for the benefit of creditors, makes or sends notice of a bulk transfer or calls a meeting of its creditors or principal creditors in connection with a moratorium or adjustment of the Indebtedness due to them;

(g) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against Borrower or any Obligor or all or any part of its properties and such petition or application is not dismissed within forty-five (45) days after the date of its filing or Borrower or any Obligor shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested is granted sooner;

(h) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by Borrower or any Obligor or for all or any part of its property;

(i) any default in respect of any Indebtedness of Borrower or any Obligor (other than Indebtedness owing to Agent and Lenders hereunder), in any case in an amount in excess of $10,000,000, which default continues for more than the applicable cure period, if any, with respect thereto or any default by Borrower or any Obligor under any Material Contract (including, without limitation, any of the Credit Card Agreements, the Wholesale Agreement or the Frigidaire Consignment Agreement), which default continues for more than the applicable cure period, if any, with respect thereto and/or is not waived in writing by the other parties thereto or any Credit Card Issuer or Credit Card Processor withholds payment of amounts otherwise payable to Borrower to fund a reserve account or otherwise hold as collateral, or shall require Borrower to pay funds into a reserve account or for such Credit Card Issuer or Credit Card Processor to otherwise hold as collateral, or Borrower shall provide a letter of credit, guarantee, indemnity or similar instrument to or in favor of such Credit Card Issuer or Credit Card Processor or any Credit Card Issuer, or Credit Card Processor shall debit or deduct any amounts from any deposit account of Borrower, such that in the aggregate all of such funds in the reserve account, other amounts held as collateral and the amount of such letters of credit, guarantees, indemnities or similar instruments or debits shall exceed in the aggregate $1,000,000;

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(j) any Credit Card Issuer or Credit Card Processor shall send notice to Borrower that it is ceasing to make or suspending payments to Borrower of amounts due or to become due to Borrower or shall cease or suspend such payments, or shall send notice to Borrower that it is terminating its arrangements with Borrower or such arrangements shall terminate as a result of any event of default under such arrangements, which continues for more than the applicable cure period, if any, with respect thereto, unless Borrower shall have entered into arrangements with another Credit Card Issuer or Credit Card Processor, as the case may be, within thirty (30) days after the date of any such notice;

(k) any material provision hereof or of any of the other Financing Agreements shall for any reason cease to be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any action or fail to take any action based on the assertion that any provision hereof or of any of the other Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interest provided for herein or in any of the other Financing Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral purported to be subject thereto (except as otherwise permitted herein or therein);

(l) an ERISA Event shall occur which results in or would reasonably be expected to result in liability of Borrower in an aggregate amount in excess of $1,000,000;

(m) any Change of Control;

(n) the indictment by any Governmental Authority, or the threatened indictment by any Governmental Authority of Borrower or any Obligor of which Borrower, any Obligor or Agent receives notice, in either case, as to which there is a reasonable possibility of an adverse determination, in the good faith determination of Agent, under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against Borrower or any Obligor, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of (i) any of the Collateral having a value in excess of $500,000 or (ii) any other property of Borrower or Guarantor which is necessary or material to the conduct of its business;

(o) there shall occur, after the date hereof, any event, development or condition that would constitute or have a Material Adverse Effect; or

(p) there shall be an event of default under any of the other Financing Agreements.

10.2 Remedies.

(a) At any time an Event of Default exists or has occurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by Borrower or any Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies

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and powers granted to Agent and Lenders hereunder, under any of the other Financing Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by Borrower or any Obligor of this Agreement or any of the other Financing Agreements. Subject to Section 12 hereof, Agent may, and at the direction of the Required Lenders shall, at any time or times, proceed directly against Borrower or any Obligor to collect the Obligations without prior recourse to the Collateral.

(b) Without limiting the generality of the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders, (i) upon notice to Borrower, accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders and the Bank Product Providers (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations shall automatically become immediately due and payable), and (ii) terminate the Commitments and this Agreement (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), the Commitments and any other obligation of the Agent or a Lender hereunder shall automatically terminate).

(c) Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, in its discretion (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (ii) require Borrower or any Obligor, at Borrower’s expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Agent or elsewhere) at such prices or terms as Agent may deem reasonable, for cash, upon credit or for future delivery, with the Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Borrower or any Obligor, which right or equity of redemption is hereby expressly waived and released by Borrower and Obligors and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery, the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Borrower designating the time and place of any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrower and Obligors waive any other notice. In the event Agent institutes an action to recover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, Borrower and each Obligor waives the posting of any bond which might otherwise be required.

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At any time an Event of Default exists or has occurred and is continuing, upon Agent’s request, Borrower will either, as Agent shall specify, furnish cash collateral to the issuer to be used to secure and fund Agent’s reimbursement obligations to the issuer in connection with any Letter of Credit Accommodations or furnish cash collateral to Agent for the Letter of Credit Accommodations. Such cash collateral shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Accommodations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations.

(d) At any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, enforce the rights of Borrower or any Obligor against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing, Agent may, in its discretion, at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assigned to Agent and that Agent has a security interest therein and Agent may direct any or all accounts debtors, secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settle or adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereof without affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce the payment thereof nor for the negligence of its agents or attorneys with respect thereto, and (iv) take whatever other action Agent may reasonably deem necessary or desirable for the protection of its interests and the interests of Lenders. At any time that an Event of Default exists or has occurred and is continuing, at Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directly and only to Agent and Borrower and each Obligors shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require. In the event any account debtor returns Inventory when an Event of Default exists or has occurred and is continuing, Borrower shall, upon Agent’s request, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of the returned Inventory solely according to Agent’s instructions, and not issue any credits, discounts or allowances with respect thereto without Agent’s prior written consent.

(e) To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such law), Borrower and Guarantor acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender to prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain consents of any Governmental

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Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as Borrower or Guarantor, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insure Agent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Borrower and Guarantor acknowledges that the purpose of this Section is to provide non-exhaustive indications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed to grant any rights to Borrower or Guarantor or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

(f) For the purpose of enabling Agent to exercise the rights and remedies hereunder, Borrower and each Obligor hereby grants to Agent or its designee, to the extent assignable under each of the applicable licenses or sublicenses, an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and for so long as the same is continuing) without payment of royalty or other compensation to Borrower or any Obligor, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and general intangibles now owned or hereafter acquired by Borrower or any Obligor, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout thereof.

(g) At any time an Event of Default exists or has occurred and is continuing, Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in accordance with the terms hereof, whether or not then due or may hold such proceeds as cash collateral for the Obligations. Borrower and Guarantor shall remain liable to

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Agent and Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, including attorneys’ fees and expenses.

(h) Without limiting the foregoing, upon the occurrence of a Default or an Event of Default, (i) Agent and Lenders may, at Agent’s option, and upon the occurrence of an Event of Default at the direction of the Required Lenders, Agent and Lenders shall, without notice, (A) cease making Loans or arranging for Letter of Credit Accommodations or reduce the lending formulas or amounts of Loans and Letter of Credit Accommodations available to Borrower and/or (B) terminate any provision of this Agreement providing for any future Loans or Letter of Credit Accommodations to be made by Agent and Lenders to Borrower and (ii) Agent may, at its option, establish such Reserves as Agent determines, without limitation or restriction, notwithstanding anything to the contrary contained herein.

SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a) The validity, interpretation and enforcement of this Agreement and the other Financing Agreements (except as otherwise provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

(b) Borrower, each Guarantor, Agent and Lenders irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York for New York County and the United States District Court for the Southern District of New York, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against Borrower or any Guarantor or its or their property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Borrower or Guarantor or its or their property).

(c) Borrower and Guarantors each hereby waive personal service of any and all process upon it and consents that all such service of process may be made by certified mail

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(return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent’s option, by service upon Borrower or such Guarantor (or Borrower on behalf of such Guarantor) in any other manner provided under the rules of any such courts.

(d) BORROWER, EACH GUARANTOR, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER, EACH GUARANTOR, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e) Agent and Lenders shall not have any liability to Borrower or Guarantors (whether in tort, contract, equity or otherwise) for losses suffered by Borrower or Guarantors in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent and such Lender, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable presumption that it or they acted in good faith and with the exercise of ordinary care in the performance by it or them of the terms of this Agreement. Borrower and Guarantors each: (i) certifies that neither Agent, any Lender nor any representative, agent or attorney acting for or on behalf of Agent or any Lender has represented, expressly or otherwise, that Agent and Lenders would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements, Agent and Lenders are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein.

11.2 Waiver of Notices. Borrower and each Guarantor hereby expressly waive demand, presentment, protest and notice of protest and notice of dishonor with respect to any and all instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on Borrower or any Guarantor which Agent or any Lender may elect to

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give shall entitle Borrower or any Guarantor to any other or further notice or demand in the same, similar or other circumstances.

11.3 Amendments and Waivers.

(a) Neither this Agreement nor any other Financing Agreement nor any terms hereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent’s option, by Agent with the authorization of the Required Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 12 hereof), by Borrower; except, that, no such amendment, waiver, discharge or termination shall:

(i) reduce the interest rate or any fees or extend the time of payment of principal (including the extension of the Scheduled Maturity Date), interest or any fees or reduce the principal amount of any Loan or Letter of Credit Accommodations, in each case without the consent of each Lender directly affected thereby,

(ii) increase the Commitment of any Lender over the amount thereof then in effect or provided hereunder, in each case without the consent of the Lender directly affected thereby,

(iii) release any Collateral (except as expressly required hereunder or under any of the other Financing Agreements or applicable law and except as permitted under Section 12.11(b) hereof), without the consent of Agent and all of Lenders,

(iv) reduce any percentage specified in the definition of Required Lenders, without the consent of Agent and all of Lenders,

(v) consent to the assignment or transfer by Borrower or Guarantor of any of their rights and obligations under this Agreement, without the consent of Agent and all of Lenders,

(vi) amend, modify or waive any terms of this Section 11.3 hereof, without the consent of Agent and all of Lenders, or

(vii) increase the advance rates constituting part of the Borrowing Base or increase the sublimit with respect to Letter of Credit Accommodations, without the consent of Agent and all of Lenders.

(b) Agent and Lenders shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its or their rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Agent or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent or any Lender would otherwise have on any future occasion, whether similar in kind or otherwise.

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(c) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shall fail to consent or fail to consent in a timely manner (such Lender being referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required are obtained, if any, then Congress shall have the right, but not the obligation, at any time thereafter, and upon the exercise by Congress of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to Congress or such Eligible Transferee as Congress may specify, the Commitment of such Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto. Congress shall provide the Non-Consenting Lender with prior written notice of its intent to exercise its right under this Section, which notice shall specify on date on which such purchase and sale shall occur. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed by the Non-Consenting Lender), except that on the date of such purchase and sale, Congress, or such Eligible Transferee specified by Congress, shall pay to the Non-Consenting Lender (except as Congress and such Non-Consenting Lender may otherwise agree) the amount equal to: (i) the principal balance of the Loans held by the Non-Consenting Lender outstanding as of the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to the Non-Consenting Lender to the effective date of the purchase (but in no event shall the Non-Consenting Lender be deemed entitled to any early termination fee). Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall terminate on such date.

(d) The consent of Agent shall be required for any amendment, waiver or consent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of its rights hereunder with respect to Reserves or Eligible Commercial Accounts, Eligible Credit Card Receivables or Eligible Inventory shall not be deemed an amendment to the advance rates or Borrowing Base provided for in this Section 11.3.

11.4 Waiver of Counterclaims. Borrower and each Guarantor waive all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

11.5 Indemnification. Borrower and Guarantor shall, jointly and severally, indemnify and hold Agent and each Lender, and its officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an “Indemnitee”), harmless from and against any and all losses, claims, damages, liabilities, costs or expenses (including attorneys’ fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation, preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or

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proceeding related to any of the transactions contemplated hereby or any act, omission, event or transaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel except that Borrower and each Guarantor shall not have any obligation under this Section 11.5 to indemnify an Indemnitee with respect to a matter covered hereby resulting from the gross negligence or wilful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrower or Guarantor as to any other Indemnitee (other than any officers, directors, agents or employees of the Indemnitee whose gross negligence or willful misconduct resulted in such losses, claims, damages, liabilities, costs or expenses)). To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrower and each Guarantor shall pay the maximum portion which it is permitted to pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, no Borrower or Guarantor shall assert, and Borrower and each Guarantor hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking or transaction contemplated hereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

SECTION 12. THE AGENT

12.1 Appointment, Powers and Immunities. Each Lender irrevocably designates, appoints and authorizes Congress to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with such other powers as are reasonably incidental thereto. Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any other Financing Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by Borrower or any Obligor or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not be responsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith, except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any note as the holder thereof for all purposes hereof unless and until the assignment thereof

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pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent. The identification of Wachovia Capital Markets, LLC as lead arranger and book runner and Wachovia Bank, National Association, as syndication agent shall not create any rights in favor of such parties in such capacities nor subject such parties to any duties or obligations in such capacities.

12.2 Reliance by Agent. Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Agents and any action taken or failure to act pursuant thereto shall be binding on all Lenders.

12.3 Events of Default.

(a) Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, unless and until Agent has received notice from a Lender, or Borrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a “Notice of Default or Failure of Condition”. In the event that Agent receives such a Notice of Default or Failure of Condition, Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7) take such action with respect to any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders to the extent provided for herein; provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of condition precedent, as it shall deem advisable in the best interest of Lenders. Without limiting the foregoing, and notwithstanding the existence or occurrence and continuance of an Event of Default or any other failure to satisfy any of the conditions precedent set forth in Section 4 of this Agreement to the contrary, unless and until otherwise directed by the Required Lenders, Agent may, but shall have no obligation to, continue to make Loans and issue or cause to be issued Letter of Credit Accommodations for the ratable account and risk of Lenders from time to time if Agent believes making such Loans or issuing or causing to be issued such Letter of Credit Accommodations is in the best interests of Lenders.

(b) Except with the prior written consent of Agent, no Lender may assert or exercise any enforcement right or remedy in respect of the Loans, Letter of Credit Accommodations or other Obligations, as against Borrower or any Obligor or any of the Collateral or other property of Borrower or any Obligor.

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12.4 Congress in its Individual Capacity. With respect to its Commitment and the Loans made and Letter of Credit Accommodations issued or caused to be issued by it (and any successor acting as Agent), so long as Congress shall be a Lender hereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates, include Congress in its individual capacity as Lender hereunder. Congress (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in any kind of business with Borrower (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and Congress and its Affiliates may accept fees and other consideration from Borrower or Guarantor and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders.

12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not reimbursed by Borrower hereunder and without limiting any obligations of Borrower hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or asserted against Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided, that, no Lender shall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement.

12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Agent or other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of Borrower and Obligors and has made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements. Agent shall not be required to keep itself informed as to the performance or observance by Borrower or any Obligor of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein or therein or to inspect the properties or books of Borrower or any Obligor. Agent will use reasonable efforts to provide Lenders with any information received by Agent from Borrower or any Obligor which is required to be provided to Lenders or deemed to be requested by Lenders hereunder and with a copy of any Notice of Default or Failure of Condition received by Agent from Borrower or any Lender; provided, that, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributable to Agent’s own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to Lenders by Agent

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or deemed requested by Lenders hereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of Borrower or any Obligor that may come into the possession of Agent.

12.7 Failure to Act. Except for action expressly required of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders of their indemnification obligations under Section 12.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.

12.8 Additional Loans. Agent shall not make any Loans or provide any Letter of Credit Accommodations to Borrower on behalf of Lenders intentionally and with actual knowledge that such Loans or Letter of Credit Accommodations would cause the aggregate amount of the total outstanding Loans and Letter of Credit Accommodations to Borrower to exceed the Borrowing Base, without the prior consent of all Lenders, except, that, Agent may make such additional Loans or provide such additional Letter of Credit Accommodations on behalf of Lenders, intentionally and with actual knowledge that such Loans or Letter of Credit Accommodations will cause the total outstanding Loans and Letter of Credit Accommodations to Borrower to exceed the Borrowing Base, as Agent may deem necessary or advisable in its discretion, provided, that: (a) the total principal amount of the additional Loans or additional Letter of Credit Accommodations to Borrower which Agent may make or provide after obtaining such actual knowledge that the aggregate principal amount of the Loans equal or exceed the Borrowing Base, plus the amount of Special Agent Advances made pursuant to Section 12.11(a)(ii) hereof then outstanding, shall not exceed the aggregate amount equal to ten (10%) of the Maximum Credit and shall not cause the total principal amount of the Loans and Letter of Credit Accommodations to exceed the Maximum Credit and (b) no such additional Loan or Letter of Credit Accommodation shall be outstanding more than ninety (90) days after the date such additional Loan or Letter of Credit Accommodation is made or issued (as the case may be), except as the Required Lenders may otherwise agree. Each Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any such additional Loans or Letter of Credit Accommodations.

12.9 Concerning the Collateral and the Related Financing Agreements. Each Lender authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each Lender agrees that any action taken by Agent or Required Lenders in accordance with the terms of this Agreement or the other Financing Agreements and the exercise by Agent or Required Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders.

12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders. By signing this Agreement, each Lender:

(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report and report with respect to

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the Borrowing Base prepared or received by Agent (each field audit or examination report and report with respect to the Borrowing Base being referred to herein as a “Report” and collectively, “Reports”), appraisals with respect to the Collateral and financial statements with respect Borrower and its Subsidiaries received by Agent;

(b) expressly agrees and acknowledges that Agent (i) does not make any representation or warranty as to the accuracy of any Report, appraisal or financial statement or (ii) shall not be liable for any information contained in any Report, appraisal or financial statement;

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or any other party performing any audit or examination will inspect only specific information regarding Borrower and Guarantors and will rely significantly upon Borrower’s and Guarantor’s books and records, as well as on representations of Borrower’ and any Guarantor’s personnel; and

(d) agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 13.5 hereof, and not to distribute or use any Report in any other manner.

12.11 Collateral Matters.

(a) Agent may, at its option, from time to time, at any time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, make such disbursements and advances (“Special Agent Advances”) which Agent, in its sole discretion, (i) deems necessary or desirable either to preserve or protect the Collateral or any portion thereof or (ii) to enhance the likelihood or maximize the amount of repayment by Borrower and Guarantor of the Loans and other Obligations, provided, that, the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii), plus the then outstanding principal amount of the additional Loans and Letter of Credit Accommodations which Agent may make or provide as set forth in Section 12.8 hereof, shall not exceed the aggregate amount of ten (10%) percent of the Maximum Credit or (iii) to pay any other amount chargeable to Borrower or Guarantor pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of (A) costs, fees and expenses and (B) payments to any issuer of Letter of Credit Accommodations. Special Agent Advances shall be repayable on demand and together with all interest thereon shall constitute Obligations secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwise constitute Obligations hereunder. Interest on Special Agent Advances shall be payable at the Interest Rate then applicable to Prime Rate Loans and shall be payable on demand. Without limitation of its obligations pursuant to Section 6.10, each Lender agrees that it shall make available to Agent, upon Agent’s demand, in immediately available funds, the amount equal to such Lender’s Pro Rata Share of each such Special Agent Advance. If such funds are not made available to Agent by such Lender, such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day

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from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.

(b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release, or in the case of clause (v) of this subsection (b), subordinate, any security interest in, mortgage or lien upon, any of the Collateral (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations and delivery of cash collateral to the extent required under Section 13.1 below, or (ii) constituting property being sold or disposed of if Borrower certifies to Agent that the sale or disposition is made in compliance with Section 9.7 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which Borrower or Guarantor did not own an interest at the time the security interest, mortgage or lien was granted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than $5,000,000, and to the extent Agent may release its security interest in and lien upon any such Collateral pursuant to the sale or other disposition thereof, such sale or other disposition shall be deemed consented to by Lenders, or (v) constituting property to be subject to Liens permitted by Section 9.8(b) to secure financing permitted by Section 9.9(b) (or subordinate if permitted by the Person providing such financing) or (vi) if required or permitted under the terms of any of the other Financing Agreements, including any intercreditor agreement, or (vii) approved, authorized or ratified in writing by all of Lenders. Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior written authorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in writing Agent’s authority to release particular types or items of Collateral pursuant to this Section.

(c) Without any manner limiting Agent’s authority to act without any specific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section. Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; provided, that, (i) Agent shall not be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of such security interest, mortgage or liens without recourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien upon (or obligations of Borrower or Guarantor in respect of) the Collateral retained by Borrower or Guarantor.

(d) Agent shall have no obligation whatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by Borrower or Guarantor

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or is cared for, protected or insured or has been encumbered, or that any particular items of Collateral meet the eligibility criteria applicable in respect of the Loans or Letter of Credit Accommodations hereunder, or whether any particular reserves are appropriate, or that the liens and security interests granted to Agent pursuant hereto or any of the Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, subject to the other terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any other Lender.

(e) Without limiting the generality of the foregoing, each Lender agrees that it is and will be bound (as a Lender) by the terms and conditions of the Frigidaire Intercreditor Agreement and the Wholesale Financing Intercreditor Agreement, whether or not such Lender executes such Intercreditor Agreements.

12.12 Agency for Perfection. Each Lender hereby appoints Agent and each other Lender as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral of Agent in assets which, in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Lender hereby acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party. Should any Lender obtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance with Agent’s instructions.

12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days’ notice to Lenders and Borrower. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with Lenders and Borrower, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all of the rights, powers and duties of the retiring Agent and the term “Agent” as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nonetheless thereupon become effective and Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

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12.14 Co-Agents. Agent may at any time and from time to time determine that a Lender may, in addition, be a “Co-Agent”, “Co-Lead Arranger”, “Co-Documentation Agent”, “Syndication Agent” or similar designation hereunder and enter into an agreement with such Lender to have it so identified for purposes of this Agreement. Agent shall provide written notice to Borrower of any such agreement. Any Lender that is designated as a Co-Agent, Co-Lead Arranger, Co-Documentation Agent, Syndication Agent, or such similar designation by Agent shall have no right, power, obligation, liability, responsibility or duty under this Agreement or any of the other Financing Agreements other than those applicable to all Lenders as such. Without limiting the foregoing, the Lenders so identified shall not have or be deemed to have any fiduciary relationship with any Lender and no Lender shall be deemed to have relied, nor shall any Lender rely, on a Lender so identified as a Co-Agent, Co-Lead Arranger, Co-Documentation Agent, Syndication Agent, or such similar designation in deciding to enter into this Agreement or in taking or not taking action hereunder. The identification of Wachovia Capital Markers LLC, as lead arranger and book runner and Wachovia Bank, National Association as syndication agent shall not create any rights in favor of such parties in such capacities nor subject such parties to any duties or obligations in such capacities.

SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS

13.1 Term.

(a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in full force and effect for a term ending on the date five (5) years from the date hereof (the “Scheduled Maturity Date”), unless sooner terminated pursuant to the terms hereof. In addition, Borrower may terminate this Agreement at any time upon thirty (30) days prior written notice to Agent (which notice shall be irrevocable) and Agent may, at its option, and shall at the direction of Required Lenders, terminate this Agreement at any time on or after an Event of Default. Upon the Scheduled Maturity Date or any other effective date of termination of the Financing Agreements, Borrower shall pay to Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrower and at Borrower’s expense, in form and substance satisfactory to Agent, by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or expense, including attorneys’ fees and expenses, in connection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yet received final and indefeasible payment and any continuing obligations of Agent or any Lender pursuant to any Deposit Account Control Agreement. The amount of such cash collateral (or letter of credit, as Agent may determine) as to any Letter of Credit Accommodations shall be in the amount equal to one hundred five (105%) percent of the amount of the Letter of Credit Accommodations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations. Such payments in respect of the Obligations and cash collateral shall be remitted by wire transfer in Federal funds to the Agent Payment Account or such other bank

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account of Agent, as Agent may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until and including the next Business Day, if the amounts so paid by Borrower to the Agent Payment Account or other bank account designated by Agent are received in such bank account later than 12:00 noon, Chicago, Illinois time.

(b) No termination of this Agreement or the other Financing Agreements shall relieve or discharge Borrower or Guarantor of its respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all outstanding Obligations have been fully and finally discharged and paid as set forth in clause (a) hereof and Agent’s continuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations outstanding on the date of termination have been fully and finally discharged and paid as provided for in Section 13.1(a) hereof. Accordingly, Borrower and Guarantor waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrower or Guarantor, or to file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations paid and satisfied in full in immediately available funds or as otherwise provided for in Section 13.1(a) hereof.

(c) If for any reason this Agreement is terminated prior to and including the date of the first anniversary of this Agreement, in view of the impracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Agent’s and each Lender’s lost profits as a result thereof, Borrower agrees to pay to Agent, for the benefit of Lenders, upon the effective date of such termination, an early termination fee in the amount equal to one half of one ( ½%) percent of the Maximum Credit .

Such early termination fee shall be presumed to be the amount of damages sustained by Agent and Lenders as a result of such early termination and Borrower and Guarantor agree that it is reasonable under the circumstances currently existing. In addition, Agent and Lenders shall be entitled to such early termination fee upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders do not exercise the right to terminate this Agreement, but elect, at their option, to provide financing to Borrower or permit the use of cash collateral under the United States Bankruptcy Code. The early termination fee provided for in this Section 13.1 shall be deemed included in the Obligations.

(d) Notwithstanding anything to the contrary contained in Section 13.1(c) hereof, in the event of the termination by Borrower of the financing arrangements provided for herein, Borrower shall not be required to pay the early termination fee provided for in Section 13.1(c) hereof if all of the following conditions are satisfied: (i) all of the Obligations (other than contingent Obligations) are repaid in full in immediately available funds in accordance with the terms hereof and Agent shall have received cash collateral with respect to all of the contingent Obligations all as provided in Section 13.1(a) hereof from the proceeds of a Qualified Public Offering upon the consummation thereof, (ii) no Default or Event of Default shall exist or have

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occurred and be continuing, and (iii) Agent shall have received not less than twenty (20) days’ prior written notice of the intention of Borrower to so repay the Obligations.

13.2 Interpretative Provisions.

(a) All terms used herein which are defined in Article 1, Article 8 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement.

(b) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires.

(c) All references to Borrower, Guarantor, Agent and Lenders pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns.

(d) The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced.

(e) The word “including” when used in this Agreement shall mean “including, without limitation” and the word “will” when used in this Agreement shall be construed to have the same meaning and effect as the word “shall”.

(f) An Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 11.3 or is cured in a manner satisfactory to Agent, if such Event of Default is capable of being cured as determined, in good faith, by Agent.

(g) All references to the terms “good faith” “or “reasonable” or “reasonably” used herein or in the other Financing Agreements when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in fact in the conduct or transaction concerned and the observance of reasonable commercial standards of fair dealing based on how an asset-based lender with similar rights providing a credit facility of the type set forth herein would act in similar circumstances at the time with the information then available to it. Borrower and Guarantor shall have the burden of proving any lack of good faith on the part of Agent or any Lender alleged by Borrower or Guarantor at any time.

(h) Any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed unless otherwise specifically provided herein, in accordance with GAAP as consistently applied and using the same method for inventory valuation as used in the preparation of the financial statements of Borrower most recently received by Agent prior to the date hereof. Notwithstanding anything to the contrary contained in GAAP or any interpretations or other pronouncements by the Financial Accounting Standards Board or otherwise, the term “unqualified opinion” as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is

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unqualified and also does not include any explanation, supplemental comment or other comment concerning the ability of the applicable person to continue as a going concern or the scope of the audit.

(i) 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”.

(j) Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing Agreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.

(k) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.

(l) This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms.

(m) This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other Financing Agreements shall not be construed against Agent or Lenders merely because of Agent’s or any Lender’s involvement in their preparation.

13.3 Notices. All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to Borrower or Guarantor: Gregg Appliances, Inc. 4151 East 96^th Street Indianapolis, Indiana 46240 Attention: Chief Executive Officer Telephone No.: (317) 848-8710 Telecopy No.: (317) 848-8768

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If to Agent: Congress Financial Corporation (Central) 150 South Wacker Drive, Suite 2200 Chicago, Illinois 60606-4401 Attention: Portfolio Manager- Gregg Appliances Telephone No.: (312)-332-0420 Telecopy No.: (312) 332-0424

13.4 Partial Invalidity. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

13.5 Confidentiality.

(a) Agent and each Lender shall use all reasonable efforts to keep confidential, in accordance with its customary procedures for handling confidential information and safe and sound lending practices, any non-public information supplied to it by Borrower pursuant to this Agreement which is clearly and marked as confidential at the time such information is furnished by Borrower to Agent or such Lender, provided, that, nothing contained herein shall limit the disclosure of any such information: (i) to the extent required by statute, rule, regulation, subpoena or court order, (ii) to bank examiners and other regulators, auditors and/or accountants, in connection with any litigation to which Agent or such Lender is a party, (iii) to any Lender or Participant (or prospective Lender or Participant) or to any Affiliate of any Lender so long as such Lender or Participant (or prospective Lender or Participant) or Affiliate shall have been instructed to treat such information as confidential in accordance with this Section 13.5, or (iv) to counsel for Agent or any Lender or Participant (or prospective Lender or Participant) so long as such counsel shall have been instructed to treat such information as confidential in accordance with Section 13.5.

(b) In the event that Agent or any Lender receives a request or demand to disclose any confidential information pursuant to any subpoena or court order, Agent or such Lender, as the case may be, agrees (i) to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that it will not create any risk of liability to Agent or such Lender, Agent or such Lender will promptly notify Borrower of such request so that Borrower may seek a protective order or other appropriate relief or remedy and (ii) if disclosure of such information is required, disclose such information and, subject to reimbursement by Borrower of Agent’s or such Lender’s expenses, cooperate with Borrower in the reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed information which Borrower so designates, to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that it will not create any risk of liability to Agent or such Lender.

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(c) In no event shall this Section 13.5 or any other provision of this Agreement, any of the other Financing Agreements or applicable law be deemed: (i) to apply to or restrict disclosure of information that has been or is made public by Borrower, Guarantor or any third party or otherwise becomes generally available to the public other than as a result of a disclosure in violation hereof, (ii) to apply to or restrict disclosure of information that was or becomes available to Agent or any Lender (or any Affiliate of any Lender) on a non-confidential basis from a person other than Borrower or Guarantor, (iii) to require Agent or any Lender to return any materials furnished by Borrower or Guarantor to Agent or a Lender or prevent Agent or a Lender from responding to routine informational requests in accordance with the Code of Ethics for the Exchange of Credit Information promulgated by The Robert Morris Associates or other applicable industry standards relating to the exchange of credit information. The obligations of Agent and Lenders under this Section 13.5 shall supersede and replace the obligations of Agent and Lenders under any confidentiality letter signed prior to the date hereof or any other arrangements concerning the confidentiality of information provided by Borrower or Guarantor to Agent or any Lender.

(d) Borrower and Guarantor each acknowledge and agree that Agent and Lenders may share with their respective affiliates any information relating to the Credit Facility and Borrower and Guarantor so long as such affiliates have been instructed to treat such information as confidential in accordance with this Section 13.5. Borrower and Guarantor each further acknowledge and agree to the disclosure by Agent and Lenders and their respective affiliates of information relating to the Credit Facility to Gold Sheets and other similar bank trade publications, with such information to consist of deal terms and other information customarily found in such publications. In addition, Borrower and Guarantor hereby authorizes Agent and Lenders and their respective affiliates to use the name, logos and other insignia of Borrower and Guarantor and the amount of the Credit Facility in any “tombstone” or comparable advertising, on its website or in other marketing materials of the Agent and Lenders and their respective affiliates.

13.6 Successors. This Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Lenders, Borrower, Guarantor and their respective successors and assigns, except that Borrower may not assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Agent and Lenders. Any such purported assignment without such express prior written consent shall be void. No Lender may assign its rights and obligations under this Agreement without the prior written consent of Agent, except as provided in Section 13.7 below. The terms and provisions of this Agreement and the other Financing Agreements are for the purpose of defining the relative rights and obligations of Borrower, Guarantor, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms and provisions of this Agreement or any of the other Financing Agreements.

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13.7 Assignments; Participations.

(a) Each Lender may, with the prior written consent of Agent, assign all or, if less than all, a portion equal to at least $10,000,000 in the aggregate for the assigning Lender, of such rights and obligations under this Agreement to one or more Eligible Transferees (but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, (i) such transfer or assignment will not be effective until recorded by Agent on the Register and (ii) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $5,000.

(b) Agent shall maintain a register of the names and addresses of Lenders, their Commitments and the principal amount of their Loans (the “Register”). Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give effect to each Assignment and Acceptance. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, Obligors, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(c) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rights and obligations (including, without limitation, the obligation to participate in Letter of Credit Accommodations) of a Lender hereunder and thereunder and the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement.

(d) By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower, Obligor or any of their Subsidiaries or the performance or observance by Borrower or any Obligor of any of the Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning

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Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender. Agent and Lenders may furnish any information concerning Borrower or any Obligor in the possession of Agent or any Lender from time to time to assignees and Participants.

(e) Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of its Commitments and the Loans owing to it and its participation in the Letter of Credit Accommodations, without the consent of Agent or the other Lenders); provided, that, (i) such Lender’s obligations under this Agreement (including, without limitation, its Commitment hereunder) and the other Financing Agreements shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and Borrower, Guarantor, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Agreements, and (iii) the Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the Participant relating thereto) and all amounts payable by Borrower or any Obligor hereunder shall be determined as if such Lender had not sold such participation.

(f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of borrowings made by such Lenders from such Federal Reserve Bank; provided, that, no such pledge shall release such Lender from any of its obligations hereunder or substitute any such pledgee for such Lender as a party hereto.

(g) Borrower and Guarantor shall assist Agent to sell assignments or participations under this Section 13.7 in connection with Agent’s original syndication of this credit facility whatever manner reasonably necessary in order to enable or effect any such assignment or participation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and the delivery of informational materials, appraisals or other documents for, and the participation of relevant management in meetings and conference calls with, potential Lenders or Participants. Borrower shall certify the correctness, completeness and accuracy, in all material respects, of all descriptions of Borrower and Guarantor and their affairs provided, prepared or reviewed by Borrower or Guarantor that are contained in any selling materials and all other information provided by it and included in such materials.

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13.8 Entire Agreement. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern.

13.9 USA Patriot Act. Each Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act, it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender to identify Borrower in accordance with the requirements of such Act and any other applicable law.

13.10 Counterparts, Etc. This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or any of such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability or binding effect of such agreement.

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IN WITNESS WHEREOF, Agent, Lenders, Borrower and Guarantor have caused these presents to be duly executed as of the day and year first above written.

AGENT
CONGRESS FINANCIAL CORPORATION (CENTRAL), as Agent
By:	/s/ Vicky L. Balmont
	Name:	Vicky L. Balmont
	Title:	Executive Vice-President
BORROWER
GREGG APPLIANCES, INC.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer
GUARANTOR
HHG DISTRIBUTING, LLC By: Gregg Appliances, Inc.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer

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LENDERS
CONGRESS FINANCIAL CORPORATION (CENTRAL)
By:	/s/ Vicky L. Balmont
	Name:	Vicky L. Balmont
	Title:	Executive Vice President

Commitment: $40,000,000

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NATIONAL CITY BUSINESS CREDIT, INC.
By:	/s/ Christopher R. Snyder
	Name:	Christopher R. Snyder
	Title:	Director

Commitment: $17,500,000

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WELLS FARGO FOOTHILL, LLC
By:	/s/ Sanat S. Amladi
	Name:	Sanat S. Amladi
	Title:	Vice President

Commitment: $17,500,000

EX-10.10

Exhibit 10.10

AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT

This AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of February 13, 2006, is entered into by and among Gregg Appliances, Inc., an Indiana corporation (“Borrower”), HHG Distributing, LLC, an Indiana limited liability company (“Guarantor”), the financial institutions from time to time parties to the Loan Agreement (as hereinafter defined) as lenders (individually, each a “Lender” and collectively, “Lenders”), and Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), as agent for Lenders (in such capacity, “Agent”).

W  I  T  N  E  S  S  E  T  H:

WHEREAS, Agent and Lenders have entered into financing arrangements with Borrower pursuant to which Agent and Lenders may, upon certain terms and conditions, make loans and advances and provide other financial accommodations to Borrower as set forth in the Loan and Security Agreement, dated February 3, 2005, among Agent, Lenders, Borrower and Guarantor (as the same now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other agreements, documents and instruments referred to therein or any time executed and/or delivered in connection therewith or related thereto, including this Amendment (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”);

WHEREAS, Borrower has requested that Agent and Lenders make certain amendments to the Loan Agreement, and Agent and Lenders are willing to agree to such amendments, subject to the terms and conditions contained herein;

WHEREAS, the parties hereto desire to enter into this Amendment to evidence and effectuate such amendments, subject to the terms and conditions and to the extent set forth herein;

NOW, THEREFORE, in consideration of the premises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Definitions. Capitalized terms used herein which are not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement.

2. Collateral Reporting.

(a) Section 7.1(a)(iii) of the Loan Agreement is hereby amended by (i) deleting the word “and” at the end of clause (E) of such Section, and (ii) inserting the following immediately prior to the semicolon at the end of such Section:

“, and (G) a report of each purchase of Senior Notes permitted pursuant to Section 9.9(e)(v)(B) hereof made during the immediately preceding month, which report shall include the effective date of each such purchase, the principal amount of Senior Notes purchased during such month and the amount that Borrower or Guarantor paid in respect thereof (including interest, fees and commissions, if any, paid in connection with any such purchase)”

(b) Section 7.1(a)(iv) of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

“(iv) a report from the chief financial officer, treasurer or controller of Borrower as soon as possible after the end of each fiscal quarter (but in any event within ten (10) Business Days after the end thereof), commencing with the fiscal quarter ending (a) March 31, 2005, certifying the number of shares of Capital Stock issued by Borrower to Parent in conjunction with the issuance by Parent of its Capital Stock to employees of Borrower or its Subsidiaries or directors of Borrower and including information contemplated by Section 9.7(b)(iii) with respect to such issuances, and (b) June 30, 2006, certifying the number of new retail store locations opened by Borrower during such period,”

3. Sale of Assets, Consolidation, Merger, Dissolution, Etc. Section 9.7(b)(iii) of the Loan Agreement is hereby amended by deleting clause (A) to the proviso thereof in its entirety and replacing it with the following:

“(A) except in the case of Capital Stock issued by Borrower to Parent in conjunction with the issuance by Parent of its Capital Stock to employees of Borrower or its Subsidiaries or directors of Borrower (which shall be reported quarterly to Agent in accordance with Section 7.1(a)(iv) hereof), Agent shall have received not less than ten (10) Business Days’ prior written notice of such issuance and sale by Borrower or Guarantor, which notice shall specify the parties to whom such shares are to be sold, the terms of such sale, the total amount which it is anticipated with be realized from the issuance and sale of such stock and the net cash proceeds which it is anticipated will be received by Borrower or any Guarantor from such sale,”

4. Indebtedness. Section 9.9(e) of the Loan Agreement is hereby amended by deleting clause (v) thereof in its entirety and replacing it with the following:

“(v) Borrower and Guarantors shall not, directly or indirectly, redeem, retire, defease, purchase or otherwise acquire all or any part of such Indebtedness other than at maturity (as set forth in the Senior Note Indenture as in effect on the date hereof), or set aside or otherwise deposit or invest any sums for such purpose, except that:

(A) Borrower or any Guarantor may redeem or purchase such Indebtedness with the proceeds of the issuance and sale of Capital Stock of Borrower pursuant to a public or private offering permitted hereunder; provided,

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that, as of the date of any such redemption or purchase or any payment in respect thereof and after giving effect thereto: (1) Borrower and Guarantors shall have complied with all of the requirements of Section 9.7(b)(iii) with respect to such issuance and sale of Capital Stock and in addition to such requirements, the notice provided to Agent pursuant thereto shall specify that the proceeds are to be used for the redemption or purchase of such Indebtedness, the maximum amount that Borrower and Guarantors will pay in respect thereof and the range of the principal amount of the Senior Notes that Borrower anticipates will be so redeemed or purchased, (2) the redemption or repurchase shall be consummated within ninety (90) days after the issuance and sale of the Capital Stock of Borrower pursuant to such public or private offering, and (3) no Default, Event of Default or other Cash Dominion Event shall exist or have occurred and be continuing, and

(B) Borrower or any Guarantor may purchase such Indebtedness from the holders of the Senior Notes with the proceeds of the Loans or with cash on hand in one or a series of arm’s length transactions; provided, that (1) the maximum aggregate amount that Borrower or such Guarantor may pay in respect thereof shall not exceed $20,000,000 (exclusive of any unpaid accrued interest on the Senior Notes so purchased and any fees and commissions paid in connection with such purchase), (2) as of the date of any such purchase or any payment in respect thereof and after giving effect thereto, Excess Availability shall have been not less than $15,000,000, and (3) as of the date of any such purchase or any payment in respect thereof and after giving effect thereto, no Default, Event of Default or other Cash Dominion Event shall exist or have occurred and be continuing,”

5. Dividends and Redemptions. Section 9.11(d) of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

(d) Borrower and Guarantors may repurchase Capital Stock consisting of common stock held by (1) employees of Borrower and its Subsidiaries or directors of Borrower pursuant to any stock ownership or option plan upon the termination, retirement or death of any such employee or director in accordance with the provisions of such plan, or (2) Parent in connection with the contemporaneous repurchase by Parent of an equal number of shares of its Capital Stock from such employees or directors, so long as (x) the repurchase from any such employee or director is pursuant to any stock ownership or option plan upon the termination, retirement or death of such employee or director in accordance with the provisions of such plan and (y) the purchase price per share is equal to the purchase price per share paid to such employee or director; provided, that, as to any such repurchase, each of the following conditions is satisfied: (i) as of the date of the payment for such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) such repurchase shall be paid with funds legally available therefor, (iii) such repurchase shall not violate any law or regulation or the terms of any indenture, agreement or undertaking to which Borrower or Guarantor is a party or by which

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Borrower or Guarantor or its or their property are bound, and (iv) the aggregate amount of all payments for such repurchases in any fiscal year (when taken together with the aggregate amount of loans made by Borrower to Parent in accordance with Section 9.10 (j) hereof) shall not exceed $1,500,000 (net of cash proceeds of any sales of Capital Stock to other employees and excluding the cancellation of stock purchase notes), except, that, the Borrower may repurchase the Capital Stock of Borrower owned by Dennis L. May upon his death, retirement or termination of employment in accordance with the terms of the Stockholders Agreement, dated the date hereof, by and among FS Equity Partners V, L.P., Gregg Investment Corporation, LLC, Jerry W. Throgmartin, Gregg William Throgmartin, Dennis L. May and Borrower (as in effect on the date hereof) provided, that, each of the following conditions is satisfied or waived in the determination of Agent: (A) as of the date of any such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (B) as of the date of such payment and after giving effect thereto, Excess Availability shall be not less than $10,000,000, and (C) the aggregate amount of payments made in respect of such repurchase shall not exceed $7,000,000.”

6. Conditions Precedent. The provisions contained herein shall be effective as of the date hereof, but only upon the satisfaction of each of the following conditions precedent, in a manner satisfactory to Agent:

(a) Agent shall have received an original of this Amendment, duly authorized, executed and delivered by Borrower, Guarantor and the Required Lenders;

(b) Agent shall have received, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to effectuate the provisions or purposes of this Amendment or to permit, protect and perfect its security interests in and liens upon the Collateral;

(c) the representations and warranties set forth herein and in the Loan Agreement (as amended hereby) that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties that are not so qualified shall be true and correct in all material respects, in each case with the same effect as though such representations and warranties had been made on and as of the date hereof and after giving effect thereto, except to the extent that any such representations or warranties expressly relate solely to an earlier date (in which case such representations or warranties shall have been true and correct on and as of such earlier date); and

(d) as of the date of this Amendment and after giving effect hereto, no Default or Event of Default shall exist or shall have occurred and be continuing.

7. Additional Representations, Warranties and Covenants. Each of Borrower and Guarantor, jointly and severally, represents, warrants and covenants with and to Agent and Lenders as follows, which representations, warranties and covenants are continuing and shall survive the execution and delivery hereof, and the truth and accuracy of, or compliance with

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each, together with the representations, warranties and covenants in the other Financing Agreements, being a continuing condition of the making of Loans by Lenders to Borrower:

(a) this Amendment has been duly authorized, executed and delivered by all necessary action on the part of Borrower and Guarantor which is a party hereto and, if necessary, its stockholders or members, and the agreements and obligations of Borrower and Guarantor contained herein constitute the legal, valid and binding obligations of Borrower and Guarantor enforceable against Borrower and Guarantor in accordance with their respective terms;

(b) No action of, or filing with, or consent of any Governmental Authority, and no approval or consent of any other third party (including, without limitation, the Senior Note Trustee), is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of this Amendment;

(c) neither the execution and delivery of this Amendment, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof (i) does or shall conflict with or result in the breach of, or constitute a default in any respect under any mortgage, deed of trust, security agreement or other agreement, document or instrument to which Borrower or Guarantor is a party or may be bound (including, without limitation, the Senior Note Indenture), or (ii) shall violate any provision of the certificate of incorporation, certificate of formation, bylaws or operating agreement, as applicable, of Borrower or Guarantor; and

(d) as of the date of this Amendment, no Default or Event of Default exists or has occurred and is continuing.

8. Effect of this Amendment; Entire Agreement. Except as modified pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. This Amendment represent the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. To the extent of conflict between the terms of this Amendment and the other Financing Agreements, the terms of this Amendment shall control. The Loan Agreement and this Amendment shall be read and construed as one agreement.

9. Further Assurances. The parties hereto shall execute and deliver such additional documents and take such additional action as may be reasonably necessary or desirable to effectuate the provisions and purposes of this Amendment.

10. Governing Law. The validity, interpretation and enforcement of this Amendment and any dispute arising out of the relationship between the parties hereto whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

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11. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

12. Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment.

13. Counterparts. This Amendment may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. This Amendment may be executed and delivered by telecopier with the same force and effect as if it were a manually executed and delivered counterpart.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the day and year first written.

GREGG APPLIANCES, INC.
By:	/S/    JERRY W. THROGMARTIN
Title:	Chief Executive Officer

HHG DISTRIBUTING, LLC
By: Gregg Appliances, Inc.
By:	/S/    JERRY W. THROGMARTIN
Title:	Chief Executive Officer

AGREED AND ACCEPTED:

WACHOVIA CAPITAL FINANCE CORPORATION

(CENTRAL), formerly known as Congress Financial

Corporation (Central), as Agent and as Lender

By:	/S/    GERALD C. WORDALL
Title:	Vice President

NATIONAL CITY BUSINESS CREDIT, INC., as Lender

By:	/S/    JOSEPH KWASNY
Title:	Director

WELLS FARGO FOOTHILL, LLC, as Lender

By:	YELENA KRAVCHUK
Title:	Assistant Vice President

EX-10.11

Exhibit 10.11

AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT

This AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of January 17, 2007, is entered into by and among Gregg Appliances, Inc., an Indiana corporation (“Borrower”), HHG Distributing, LLC, an Indiana limited liability company (“Guarantor”), the financial institutions from time to time parties to the Loan Agreement (as hereinafter defined) as lenders (individually, each a “Lender” and collectively, “Lenders”), and Wachovia Capital Finance Corporation (Central), formerly known as Congress Financial Corporation (Central), as agent for Lenders (in such capacity, “Agent”).

WITNESSETH:

WHEREAS, Agent and Lenders have entered into financing arrangements with Borrower pursuant to which Agent and Lenders may, upon certain terms and conditions, make loans and advances and provide other financial accommodations to Borrower as set forth in the Loan and Security Agreement, dated February 3, 2005, among Agent, Lenders, Borrower and Guarantor, as amended by Amendment No.1 to Loan and Security Agreement, dated as of February 13, 2006, among Agent, Lenders and Borrower and Guarantor (as the same now exists and may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other agreements, documents and instruments referred to therein or any time executed and/or delivered in connection therewith or related thereto, including this Amendment (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”);

WHEREAS, Borrower has requested that Agent and Lenders make certain amendments to the Loan Agreement, and Agent and Lenders are willing to agree to such amendments, subject to the terms and conditions contained herein;

WHEREAS, the parties hereto desire to enter into this Amendment to evidence and effectuate such amendments, subject to the terms and conditions and to the extent set forth herein;

NOW, THEREFORE, in consideration of the premises and covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Definitions.

(a) Additional Definition. As used herein, the following terms shall have the meanings given to them below and the Loan Agreement shall be deemed and is hereby amended to include, in addition and not in limitation, the following definition:

(i) “Monthly Average Excess Availability” shall mean, at any time, the daily average of the aggregate amount of the Excess Availability (calculated without regard to any Maximum Credit limitation) for the immediately preceding calendar month.

(b) Amendments to Definitions.

(i) Applicable Margin. The definition of “Applicable Margin” set forth in Section 1.7 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“1.7 ‘Applicable Margin’ shall mean, at any time, with respect to the calculation of the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans, the applicable percentage (on a per annum basis) set forth below if as of the end of any calendar month the Monthly Average Excess Availability for the immediately preceding calendar month is at or within the amounts indicated for such percentage:

		Applicable Margin
Tier	Monthly Average  Excess Availability	Prime Rate Loans		Eurodollar Rate Loans
Tier I	Less than $10,000,000	.25	%	1.75	%
Tier II	Greater than or equal to $10,000,000 but less than or equal to $20,000,000	0	%	1.50
Tier III	Greater than $20,000,000	-.25	%	1.25

provided, that, (i) the Applicable Margin shall be calculated and established once each calendar month and shall remain in effect until adjusted thereafter during the next calendar month; (ii) each adjustment of the Applicable Margin shall be effective as of the first day of a calendar month based on the Monthly Average Excess Availability for the immediately preceding calendar month and (iii) the Applicable Margin for the period from January 1, 2007 through January 31, 2007 shall be the amount for Tier III set forth above. In the event that at any time after the end of a calendar month, Agent shall have determined that the amount of the Monthly Average Excess Availability for such month initially used for the determination of the Applicable Margin was greater than the actual amount of the Monthly Average Excess Availability for such month, the Applicable Margin shall be appropriately adjusted based on such actual Monthly Average Excess Availability and any additional interest for the applicable period payable as a result of such recalculation shall be promptly paid to Agent, for the benefit of Lenders. The foregoing shall not be construed to limit the rights of Agent and Lenders with respect to the amount of interest payable after a Default or Event of Default whether based on such recalculated percentage or otherwise.”

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(ii) Borrowing Base. The definition of “Borrowing Base” set forth in Section 1.15 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“1.15 ‘Borrowing Base’ shall mean, at any time, the amount equal to: (a) the lesser of: (i) the sum of (A) eighty-five (85%) percent of the amount of Eligible Commercial Accounts, plus (B) eighty-five (85%) percent of the amount of Eligible Credit Card Receivables, plus (C) the lesser of (1) ninety-two (92%) percent (or ninety-five (95%) percent during the Seasonal Period) of the Net Recovery Percentage multiplied by the Value of such Eligible Inventory, or (2) seventy (70%) percent of the net book value of Eligible Inventory; or (ii) the Maximum Credit, minus (b) Reserves.”

(iii) Cash Dominion Event. The definition of “Cash Dominion Event” set forth in Section 1.19 of the Loan Agreement is hereby amended by deleting the reference to “$8,500,000” and replacing it with “$5,000,000”.

(iv) Cash Dominion Reversion. The definition of “Cash Dominion Reversion” set forth in Section 1.20 of the Loan Agreement is hereby amended by deleting each reference to “$8,500,000” and replacing it with “$5,000,000”.

(v) Indebtedness. The following proviso is added to the end of the definition of “Indebtedness” set forth in Section 1.71 of the Loan Agreement; “provided, that, amounts in respect of landlord improvement allowances that in accordance with GAAP are included on Borrower’s balance sheet as liabilities shall not be deemed “Indebtedness.”

(vi) Interest Rate. The definition of “Interest Rate” set forth in Section 1.77 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

“1.77 ‘Interest Rate’ shall mean,

(a) Subject to clause (b) of this definition below:

(i) as to Prime Rate Loans, a rate equal to the then Applicable Margin for Prime Rate Loans on a per annum basis plus the Prime Rate, and

(ii) as to Eurodollar Rate Loans, a rate equal to the then Applicable Margin for Eurodollar Rate Loans on a per annum basis plus the Adjusted Eurodollar Rate.

(b) Notwithstanding anything to the contrary contained in clause (a) of this definition, the Interest Rate shall mean the per annum rates set forth above plus (in each case) two (2%) percent per annum, at Agent’s option, without notice: (i) either (A) for the period from and after the effective date of termination or non-renewal hereof until Agent and Lenders have received full and final payment of all outstanding and unpaid Obligations which are not contingent and cash collateral or letter of credit, as Agent may specify, in the amounts and on the

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terms required under Section 13.1 hereof for contingent Obligations (notwithstanding entry of a judgment against Borrower or Guarantor) or (B) from and after the date of the occurrence of an Event of Default and for so long as such Event of Default is continuing as determined by Agent in good faith and (ii) on Loans at any time outstanding in excess of the Borrowing Base (whether or not such excess(es) arise or are made with or without the knowledge or consent of Agent or any Lender and whether made before or after an Event of Default).”

(c) Interpretation. Capitalized terms used herein which are not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement.

2. Fees.

(a) Section 3.2(a) of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

“(a) Borrower shall pay to Agent, for the account of Lenders, monthly an unused line fee at a rate equal to one-quarter (1/4%) percent per annum calculated upon the amount by which the Maximum Credit exceeds the average daily principal balance of the outstanding Loans and Letter of Credit Accommodations during the immediately preceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any of the Obligations are outstanding, which fee shall be payable on the first day of each month in arrears.”

(b) Notwithstanding anything to the contrary set forth in the Fee Letter or the Loan Agreement, Section 3 of the Fee Letter is hereby amended by deleting the reference to “$6,000” set forth therein and replacing it with “$3,000”.

3. Inventory Covenants. Section 7.3(d) of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

“(d) upon Agent’s request, Borrower shall deliver or cause to be delivered to Agent written appraisals as to the Inventory in form, scope and methodology reasonably acceptable to Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely: (i) one (1) time in any twelve (12) month period at Borrower’s expense (unless at such time (x) Excess Availability is equal to or greater than $10,000,000 and (y) LTM EBITDA is equal to or greater than $17,500,000, in which event such the cost of such appraisal shall be at the expense of Agent and Lenders), (ii) at any time or times as Agent may reasonably request at the expense of Agent and Lenders, and (iii) at any time or times as Agent may request at Borrower’s expense at any time after an Event of Default exists or has occurred and is continuing;”.

4. Financial Statements. Section 9.6(a)(ii) of the Loan Agreement is hereby amended by deleting the phrase “within thirty (30) days after the end of each fiscal month” and replacing it with “within thirty (30) days after the end of each fiscal month (except for fiscal months which are the end of fiscal quarters, then within forty-five (45) days after the end of the first three fiscal quarters and within ninety (90) days after the end of the fourth fiscal quarter)”.

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5. Encumbrances. Section 9.8(m) of the Loan Agreement is amended by deleting such Section in its entirety and replacing it with the following:

“(m) the security interests and liens upon the Wholesale Collateral in favor of Wholesale to secure Indebtedness and other liabilities owing to GE under the Wholesale Agreements to the extent permitted under Section 9.22 hereof; provided, that, such security interests and liens shall at all times be subject to the terms of the Wholesale Finance Intercreditor Agreement;”.

6. Indebtedness.

(a) Section 9.9(e)(v)(B) of the Loan Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following:

“(B) Borrower or Guarantor may purchase such Indebtedness from the holders of the Senior Notes with the proceeds of the Loans or with cash on hand in one or a series of arm’s length transactions; provided, that (1) Borrower shall provide Agent with written notice immediately following such purchase, and in any event within one (1) Business Day following the date of such purchase, which notice shall include, among other things, the dollar amount of Senior Notes so purchased, (2) Excess Availability on the date of and after giving effect to any such purchase or payment in respect thereof shall not be less than $10,000,000, and (3) as of the date of any such purchase or payment in respect thereof and after giving effect thereto, no Default, Event of Default or other Cash Dominion Event shall exist or have occurred and be continuing,”

(b) Section 9.9 of the Loan Agreement is hereby further amended by adding the following as Section 9.9(l):

“(l) Indebtedness arising under the Wholesale Agreement to the extent permitted under Section 9.22 hereof.”

7. Consent to Amendment to Wholesale Agreement. Notwithstanding anything to the contrary contained in Section 9.22(d) of the Loan Agreement, and subject to the terms and conditions contained herein, Agent and Lenders hereby consent to Borrower entering into the Fifth Amendment to the Wholesale Agreement, dated May 25, 2006, between Borrower and Wholesale (the “Wholesale Amendment”), so long as Agent shall have received a true, correct and complete copy of the Wholesale Amendment, duly authorized, executed and delivered by the parties thereto, and such other information and documents related thereto as Agent may request.

8. Waiver of Event of Default.

(a) Subject to the satisfaction of each of the conditions precedent set forth herein, Agents and Lenders hereby waive the Event of Default (if any) under Section 10.1(a)(iii) of the Loan Agreement arising as a result of the failure of Borrower to obtain the consent of Agent and Lenders to Wholesale Amendment as required by Section 9.22(d) of the Loan Agreement (the “Existing Default”).

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(b) Agents and Lenders have not waived, are not by this Amendment waiving, and have no intention of waiving any Event of Default which may have occurred on or prior to the date hereof, whether or not continuing on the date hereof, or which may occur after the date hereof (whether the same or similar to the Existing Default or otherwise), other than the Existing Default (subject to the terms and conditions set forth herein). The foregoing waivers shall not be construed as a bar to or a waiver of any other or further Event of Default on any future occasion, whether similar in kind or otherwise and shall not constitute a waiver, express or implied, of any of the rights and remedies of Agents and Lenders arising under the terms of the Loan Agreement or any other Financing Agreements on any future occasion or otherwise.

9. Amendment Fee. In addition to all other fees, charges, interest and expenses payable by Borrower to Agent and Lenders under the Loan Agreement and the other Financing Agreements, Borrower shall pay to Agent, for the account of Lenders (to the extent and in accordance with the arrangements between Agent and each Lender), an amendment fee in the amount of $20,000, which fee shall be fully earned and due and payable on the effective date hereof and may be charged by Agent directly to the loan account of Borrower.

10. Conditions Precedent. The provisions contained herein shall be effective as of the date hereof, but only upon the satisfaction of each of the following conditions precedent, in a manner satisfactory to Agent:

(a) Agent shall have received an original of this Amendment, duly authorized, executed and delivered by Borrower, Guarantor and all Lenders;

(b) Agent shall have received, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to effectuate the provisions or purposes of this Amendment or to permit, protect and perfect its security interests in and liens upon the Collateral;

(c) the representations and warranties set forth herein and in the Loan Agreement (as amended hereby) that are qualified as to materiality or Material Adverse Effect shall be true and correct and the representations and warranties that are not so qualified shall be true and correct in all material respects, in each case with the same effect as though such representations and warranties had been made on and as of the date hereof and after giving effect thereto, except to the extent that any such representations or warranties expressly relate solely to an earlier date (in which case such representations or warranties shall have been true and correct on and as of such earlier date); and

(d) after giving effect to the amendments and waiver set forth herein, as of the date of this Amendment and after giving effect hereto, no Default or Event of Default shall exist or shall have occurred and be continuing.

11. Additional Representations, Warranties and Covenants. Each of Borrower and Guarantor, jointly and severally, represents, warrants and covenants with and to Agent and Lenders as follows, which representations, warranties and covenants are continuing and shall

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survive the execution and delivery hereof, and the truth and accuracy of, or compliance with each, together with the representations, warranties and covenants in the other Financing Agreements, being a continuing condition of the making of Loans by Lenders to Borrower:

(a) this Amendment has been duly authorized, executed and delivered by all necessary action on the part of Borrower and Guarantor which is a party hereto and, if necessary, its stockholders or members, and the agreements and obligations of Borrower and Guarantor contained herein constitute the legal, valid and binding obligations of Borrower and Guarantor enforceable against Borrower and Guarantor in accordance with their respective terms;

(b) No action of, or filing with, or consent of any Governmental Authority, and no approval or consent of any other third party (including, without limitation, the Senior Note Trustee), is required to authorize, or is otherwise required in connection with, the execution, delivery and performance of this Amendment;

(c) neither the execution and delivery of this Amendment, nor the consummation of the transactions herein contemplated, nor compliance with the provisions hereof (i) does or shall conflict with or result in the breach of, or constitute a default in any respect under any mortgage, deed of trust, security agreement or other agreement, document or instrument to which Borrower or Guarantor is a party or may be bound (including, without limitation, the Senior Note Indenture), or (ii) shall violate any provision of the certificate of incorporation, certificate of formation, bylaws or operating agreement, as applicable, of Borrower or Guarantor; and

(d) after giving effect to the amendments and waiver set forth herein, as of the date of this Amendment, no Default or Event of Default exists or has occurred and is continuing.

12. Effect of this Amendment; Entire Agreement. Except as modified pursuant hereto, no other changes or modifications to the Financing Agreements are intended or implied, and in all other respects the Financing Agreements are hereby specifically ratified, restated and confirmed by all parties hereto as of the date hereof. This Amendment represents the entire agreement and understanding concerning the subject matter hereof and thereof among the parties hereto, and supersede all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. To the extent of conflict between the terms of this Amendment and the other Financing Agreements, the terms of this Amendment shall control. The Loan Agreement and this Amendment shall be read and construed as one agreement.

13. Further Assurances. The parties hereto shall execute and deliver such additional documents and take such additional action as may be reasonably necessary or desirable to effectuate the provisions and purposes of this Amendment.

14. Governing Law. The validity, interpretation and enforcement of this Amendment and any dispute arising out of the relationship between the parties hereto whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

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15. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

16. Headings. The headings listed herein are for convenience only and do not constitute matters to be construed in interpreting this Amendment.

17. Counterparts. This Amendment may be executed in any number of counterparts, but all of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. This Amendment may be executed and delivered by telecopier with the same force and effect as if it were a manually executed and delivered counterpart.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the day and year first written.

BORROWER
GREGG APPLIANCES, INC.
By:	/s/ Dennis May
Title:	President, C.O.O.

GUARANTOR
HHG DISTRIBUTING, LLC
By:	Gregg Appliances, Inc.
By:	/s/ Dennis May
Title:	President, C.O.O.

AGREED AND ACCEPTED:
AGENT AND LENDERS
WACHOVIA CAPITAL FINANCE CORPORATION (CENTRAL), as Agent and as a Lender
By:	/s/ Vicky Geist
Title:	Director

NATIONAL CITY BUSINESS CREDIT, INC., as a Lender
By:	/s/ Joe Kwasney
Title:	Director

WELLS FARGO FOOTHILL, LLC, as a Lender
By:	/s/ Yelena Kravchuk
Title:	AVP

EX-10.12

Exhibit 10.12

[Execution]

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT, dated as of February 3, 2005 (as amended, modified, supplemented, restated or replaced, this “Pledge Agreement”), is by GREGG APPLIANCES, INC., an Indiana corporation (“Pledgor”), to and in favor of CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation, in its capacity as agent for the Lenders described below (in such capacity, together with its successors and assigns, “Pledgee”).

W I T N E S S E T H:

WHEREAS, Pledgor is now the direct and beneficial owner of all of the issued and outstanding membership interests of HHG Distributing, LLC, an Indiana limited liability company (“Issuer”), as described on Exhibit A hereto and made a part hereof (the “Pledged Interests”);

WHEREAS, Pledgor and Issuer have entered into or are about to enter into or are about to enter into financing arrangements with Pledgee and the parties to the Loan Agreement (as hereinafter defined) as lenders (collectively, “Lenders” and individually a “Lender”) pursuant to which Lenders (or Pledgee on behalf of Lenders) may make loans and advances and provide other financial accommodations to Pledgor as set forth in the Loan and Security Agreement, dated of even date herewith, by and among Pledgor, Issuer, Pledgee and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (as hereinafter defined) and this Pledge Agreement (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”); and

WHEREAS, in order to induce Pledgee and Lenders to enter into the Loan Agreement and the other Financing Agreements and to make loans and advances and provide other financial accommodations to Pledgor pursuant thereto, Pledgor has agreed to secure the payment and performance of the Obligations and to accomplish same by (i) executing and delivering to Pledgee this Pledge Agreement and (ii) delivering to Pledgee any and all other documents which Pledgee deems necessary to protect Pledgee’s interests hereunder;

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor hereby agrees as follows:

1. GRANT OF SECURITY INTEREST

(a) As collateral security for the prompt performance, observance and payment in full of all of the Obligations, Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to Pledgee and grants to Pledgee a security interest in and lien upon the following

(collectively, the “Collateral”): (i) the Pledged Interests and all other ownership interests of Pledgor in Issuer, all certificates (if any) at any time representing or evidencing such ownership interests and (A) all right, title and interest in, to and under the Operating Agreement with respect to Issuer set forth on Exhibit A hereto (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated, or replaced, the “LLC Agreement”), including, without limitation, all of its right, title and interest as a member to participate in the operation or management of Issuer and all of its ownership interests under the LLC Agreement, and (B) all present and future rights of Pledgor to receive payment of money or other distribution of payments arising out of or in connection with the Pledged Interests and all other ownership interests and its rights under the LLC Agreement, now or hereafter owned by Pledgor, (ii) all proceeds of and to any of the property of Pledgor described above, including, without limitation, all causes of action, claims and warranties now or hereafter held by Pledgor in respect of any of the items listed above, and (iii) Pledgor’s books and records with respect to any of the foregoing.

(b) This Pledge Agreement is executed only as security for the Obligations and, therefore, the execution and delivery of this Pledge Agreement shall not subject Pledgee or any Lender to, or transfer or pass to Pledgee or any Lender, or in any way affect or modify, the liability of Pledgor under the LLC Agreement or any related agreements, documents or instruments or otherwise. In no event shall the acceptance of this Pledge Agreement by Pledgee or Lenders or the exercise by Pledgee or any Lender of any rights hereunder or assigned hereby, constitute an assumption of any liability or obligation of Pledgor to, under or in connection with the LLC Agreement or any related agreements, documents or instruments or otherwise.

2. OBLIGATIONS SECURED

The security interest, lien and other interests granted to Pledgee pursuant to this Pledge Agreement shall secure the prompt performance and payment in full of any and all Obligations, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Loan Agreement, or after the commencement of any case with respect to Pledgor under the United States Bankruptcy Code or any similar domestic or foreign statute (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, and liquidated or unliquidated, secured or unsecured, and however acquired by Pledgee or any Lender.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS

Pledgor hereby represents, warrants and covenants with and to Pledgee and Lenders the following (all of such representations, warranties and covenants being continuing so long as any of the Obligations are outstanding):

(a) The Pledged Interests are duly authorized, validly existing and constitute all of the issued and outstanding membership interests in Issuer and Pledgor is the registered owner of such membership interests. Pledgor is the holder of one hundred (100%) percent of the membership interests therein and is the sole member of Issuer.

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(b) The Collateral is directly, legally and beneficially owned by Pledgor, free and clear of all claims, liens, pledges and encumbrances of any kind, nature or description, except for the pledge, lien and security interest in favor of Pledgee and the pledges, claims, liens, encumbrances and security interests permitted under the Loan Agreement.

(c) The Collateral is not subject to any restrictions relative to the transfer thereof and Pledgor has the right to transfer and hypothecate the Collateral free and clear of any liens, encumbrances or restrictions.

(d) The Collateral is duly and validly pledged to Pledgee, no consent or approval of any governmental or regulatory authority or of any securities exchange or the like, nor any consent or approval of any other third party, was or is necessary to the validity and enforceability of this Pledge Agreement.

(e) To the extent applicable, Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the Collateral, (ii) perform any and all other acts which Pledgee in good faith deems reasonable and/or necessary for the protection and preservation of the Collateral or its value or Pledgee’s security interest therein, including, without limitation, transferring, registering or arranging for the transfer or registration of the Collateral to or in Pledgee’s, or any Lender’s, own name and receiving the income therefrom as additional security for the Obligations and (iii) pay any charges or expenses which Pledgee deems reasonably necessary for the foregoing purpose, but without any obligation to do so. Any obligation of Pledgee for reasonable care for the Collateral in Pledgee’s possession shall be limited to the same degree of care which Pledgee uses for similar property pledged to Pledgee by other persons.

(f) As of the date hereof, there are no certificates or other written instruments evidencing or representing the Pledged Interests. If at any time after the date hereof Pledgor shall become entitled to receive or acquire, or shall receive any membership interest certificate, or option or right with respect to the membership interests of Issuer (including without limitation, any certificate representing a distribution or exchange of or in connection with reclassification of the Pledged Interest) whether as an addition to, in substitution of, or in exchange for any of the Collateral or otherwise, Pledgor agrees to accept same as Pledgee’s agent, to hold same in trust for Pledgee and to deliver same forthwith to Pledgee or Pledgee’s agent or bailee in the form received, with the endorsement(s) of Pledgor where necessary and/or appropriate powers and/or assignments duly executed to be held by Pledgee or Pledgee’s agent or bailee subject to the terms hereof, as further security for the Obligations.

(g) The Collateral is not and shall not at any time hereafter be investment property or otherwise subject to Article 8 of the Uniform Commercial Code as in effect in the State of New York on the date hereof (the “UCC”), except as Pledgee may otherwise expressly agree.

(h) Pledgor shall keep full and accurate books and records relating to the Collateral and stamp or otherwise mark such books and records in such manner as Pledgee may in good faith require in order to reflect the security interests granted by this Pledge Agreement.

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(i) Pledgor shall not, without the prior consent of Pledgee, directly or indirectly, sell, assign, transfer, or otherwise dispose of, or grant any option with respect to the Collateral, nor shall Pledgor create, incur or permit any further pledge, hypothecation, encumbrance, lien, mortgage or security interest with respect to the Collateral, except as permitted under the Loan Agreement.

(j) So long as no Event of Default (as hereinafter defined) has occurred and is continuing, Pledgor shall have the right to exercise all limited liability company rights with respect to the Collateral, except as expressly prohibited herein or in any of the other Financing Agreements, and to receive any distributions payable in respect of the Collateral (but subject to terms of the Loan Agreement with respect thereto).

(k) Pledgor has delivered to Pledgee a true, correct and complete copy of the LLC Agreement and the certificate of formation of Issuer. There are and shall be no other agreements governing the formation, organization or terms of the membership interests with respect to Issuer.

(l) Pledgor shall not permit Issuer, directly or indirectly, to (i) issue, sell, grant, assign, transfer or otherwise dispose of, any additional membership interests of Issuer or any option or warrant with respect to, or other right or security convertible into, any additional membership interests, now or hereafter authorized, unless all such additional membership interests, options, warrants, rights or other such securities are made and shall remain part of the Collateral subject to the pledge and security interest granted herein, (ii) take any action to withdraw the authority of or to limit or restrict the authority of Issuer’s managers or officers to deal and contract with Pledgee and to bind and obligate Issuer, or (iv) pay any interim distribution in cash or other assets to any member, except as permitted in the Loan Agreement. Any distribution by Issuer other than as permitted in the Loan Agreement shall constitute a “wrongful distribution” for purposes of applicable law.

(m) Pledgor shall promptly notify Pledgee in writing of the occurrence of any event specified in the LLC Agreement or the certificate of formation of Issuer that may result in Issuer’s dissolution or liquidation.

(n) Pledgor shall not, and shall not permit Issuer, directly or indirectly, to, amend, modify or supplement any of the provisions of the LLC Agreement or the certificate of formation of Issuer without the prior written consent of Pledgee if any such amendment, modification or supplement would or could affect any rights of Pledgee hereunder or under any of the other Financing Agreements or would limit or restrict the permissible activities in which Issuer may engage.

(o) In accordance with the LLC Agreement, Pledgor as the sole member of Issuer, hereby acknowledges and agrees that Pledgee or any of its successors, assigns or designees, shall, at Pledgee’s option upon written notice to Pledgor of Pledgee’s intent to be admitted itself (or to have any such successor, assignee or designee admitted) as a member of Issuer at any time an Event of Default exists or has occurred and is continuing, be admitted as a member of Issuer without any further approval of Pledgor and without compliance by Pledgee or any other person with any of the conditions or other requirements of the LLC Agreement and

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without conferring upon any member thereof any option (whether under the LLC Agreement or otherwise) to acquire the membership interests so transferred to Pledgee, its successors, assigns, or designees. Pledgor agrees to take such other action and execute such further documents as Pledgee may reasonably request from time to time in order to give effect to the foregoing provisions of this Section.

(p) Pledgor shall pay all charges and assessments of any nature against the Collateral or with respect thereto prior to said charges and/or assessments being delinquent, except for charges or assessments as are being contested in good faith by Pledgor and/or Issuer, following written notice to Pledgee, in accordance with the provisions of the Loan Agreement.

(q) Pledgor shall promptly reimburse Pledgee, on demand, together with interest at the highest rate then applicable to the Obligations set forth in the Loan Agreement, for any charges, assessments or expenses paid or incurred by Pledgee for the protection, preservation and maintenance of the Collateral and the enforcement of Pledgee’s or Lenders’ rights hereunder, including, without limitation, reasonable attorneys’ fees and legal expenses incurred by Pledgee in seeking to protect, collect or enforce its rights in the Collateral or otherwise hereunder. Any such amounts paid or incurred by Pledgee shall constitute part of the Obligations secured hereby and may be charged by Pledgee to any loan account of Pledgor maintained by Pledgee or any Lender, at its option.

(r) Pledgor shall furnish, or cause to be furnished, to Pledgee such information concerning Issuer and the Collateral as Pledgee may from time to time request, including, without limitation, current financial statements to the extent available.

(s) Pledgee may notify Issuer or the appropriate transfer agent of the Collateral to register the security interest and pledge granted herein and to honor the rights of Pledgee with respect thereto.

(t) Pledgor waives: (i) all rights to require Pledgee or Lenders to proceed against any other person, entity or collateral or to exercise any remedy, (i) the defense of the statute of limitations in any action upon any of the Obligations, (iii) any right of subrogation or interest in the Obligations or Collateral until the termination of the Commitments and the payment and satisfaction in full of all outstanding and unpaid Obligations in immediately available funds and the delivery of cash collateral to Pledgee (or at Pledgee’s option, a letter of credit issued for the account of Pledgor) to the extent required under Section 13.1 of the Loan Agreement, (iv) any rights to notice of any kind or nature whatsoever, unless specifically required in this Pledge Agreement, the Loan Agreement (to the extent applicable to this Pledge Agreement) or non-waivable under any applicable law, and (v) to the extent permissible, its rights under Section 9-207 of the UCC. Pledgor agrees that the Collateral, other collateral, or any other guarantor or endorser may be released, substituted or added with respect to the Obligations, in whole or in part, without releasing or otherwise affecting the liability of Pledgor, the pledge and security interests granted hereunder, or this Pledge Agreement. Pledgee is entitled to all of the benefits of a secured party set forth in Section 9-207 of the UCC.

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4. AUTHORIZATION TO PLEDGE IN LLC AGREEMENT.

Pledgor hereby represents, warrants and covenants with and to Pledgee and Lenders that as of the date hereof:

(a) the LLC Agreement permits Pledgor to pledge and assign all of the membership interests in Issuer (including, without limitation, the Pledged Interests) to Pledgee, for itself and the ratable benefit of Lenders and the LLC Agreement shall not be amended, modified, altered or changed in such a manner to limit, restrict or prevent such pledge and assignment; and

(b) the LLC Agreement permits Pledgee and its successors, assigns and designees to be admitted to Issuer as a member thereof upon transfer of membership interests to Pledgee as provided in Section 7 hereof without compliance by Pledgee or any other person with any of the conditions or other requirements of the LLC Agreement and without conferring upon Issuer or any other member thereof any option to acquire the membership interests so transferred to Pledgee or its designees.

(c) Pledgor agrees to take such other action and execute such further documents as Pledgee may from time to time request in order to give effect to the foregoing provisions of this Section 4.

5. NO ASSUMPTION OF LIABILITIES.

(a) Nothing herein shall be construed to make Pledgee or any Lender liable as a member of Issuer and Pledgee or any Lender by virtue of this Pledge Agreement or otherwise shall not have any of the duties, obligations or liabilities of a member of Issuer. The parties hereto expressly agree that this Pledge Agreement shall not be construed as creating a partnership or joint venture among Pledgee or any Lender and Pledgor and/or Issuer.

(b) By accepting this Pledge Agreement, Pledgee and Lenders do not intend to become a member of Issuer or otherwise be deemed to be a co-venturer with respect to Pledgor or Issuer either before or after an Event of Default shall have occurred. Pledgee and Lenders shall have only those powers set forth herein and shall assume none of the duties, obligations or liabilities of Pledgor or of a member of Issuer. Pledgee and Lenders shall not be obligated to perform or discharge any obligation of Pledgor as a result of the pledge hereby effected.

(c) The acceptance by Pledgee and Lenders of this Pledge Agreement, with all of the rights, powers, privileges and authority so created, shall not at any time or in any event obligate Pledgee or any Lender to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expense or perform or discharge any obligation, duty or liability hereunder or otherwise with respect to the Collateral (other than the duty to exercise reasonable care to assure the safe custody of the Collateral).

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6. EVENTS OF DEFAULT

The occurrence or existence of any Event of Default under the Loan Agreement is referred to herein individually as an “Event of Default” and collectively as “Events of Default”.

7. RIGHTS AND REMEDIES

At any time an Event of Default exists or has occurred and is continuing, in addition to all other rights and remedies of Pledgee and Lenders, whether provided under this Pledge Agreement, the Loan Agreement, the other Financing Agreements, applicable law or otherwise, Pledgee shall have the following rights and remedies which may be exercised without notice to, or consent by, Pledgor except as such notice or consent is expressly provided for hereunder or under the Loan Agreement (to the extent applicable to this Pledge Agreement);

(a) Pledgee, at its option, shall be empowered to exercise its continuing right to instruct Issuer (or the appropriate transfer agent of the Collateral) to register any or all of the Collateral in the name of Pledgee or in the name of Pledgee’s nominee and Pledgee may complete, in any manner Pledgee may deem expedient, any assignments or other documents heretofore or hereafter executed in blank by Pledgor and delivered to Pledgee. After said instruction, and without further notice, Pledgee shall have the exclusive right to exercise all rights with respect to the Collateral (including all voting and limited liability company rights), and exercise any and all rights of conversion, redemption, exchange, subscription or any other rights, privileges, or options pertaining to the Collateral as if Pledgee were the absolute owner thereof, including, without limitation, the right to exchange, in its discretion, any and all of the Collateral upon any merger, consolidation, reorganization, recapitalization or other readjustment with respect thereto. Upon the exercise of any such rights, privileges or options by Pledgee, Pledgee shall have the right to deposit and deliver any and all of the Collateral to any committee, depository, transfer agent, registrar or other designated agency upon such terms and conditions as Pledgee may determine, all without liability, except to account for property actually received by Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options (all of which are exercisable in the sole discretion of Pledgee) and shall not be responsible for any failure to do so or delay in doing so.

(b) Upon prior written notice thereof to Issuer and Pledgor, (i) Pledgee may transfer the membership interests of Pledgor in Issuer into the name of Pledgee (or its successors or assignees, or designee) and (ii) Pledgee (or its successors, assignees, or designees) shall be admitted as a member of Issuer in the place of Pledgor.

(c) In addition to all the rights and remedies of a secured party under the UCC or other applicable law, Pledgee shall have the right, at any time and without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Pledgor or any other person (all and each of which demands, advertisements and/or notices are hereby expressly waived to the extent permitted by applicable law), to proceed forthwith to collect, redeem, recover, receive, appropriate, realize, sell, or otherwise dispose of and deliver the Collateral or any part thereof in one or more lots at public or private sale or sales at any exchange, broker’s board or at any of Pledgee’s offices or elsewhere at such prices and on such terms as Pledgee may deem best. The

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foregoing disposition(s) may be for cash or on credit or for future delivery without assumption of any credit risk, with Pledgee having the right to purchase all or any part of the Collateral so sold at any such sale or sales, public or private, free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly waived or released by Pledgor. The proceeds of any such collection, redemption, recovery, receipt, appropriation, realization, sale or other disposition, after deducting all costs and expenses of every kind incurred relative thereto or incidental to the care, safekeeping or otherwise of any and all Collateral or in any way relating to the rights of Pledgee hereunder, including reasonable attorneys’ fees and legal expenses, shall be applied first to the satisfaction of the Obligations (in such order as set forth in the Financing Agreements) and then to the payment of any other amounts required by applicable law, including Section 9-615(a)(3) of the UCC, with Pledgor to be and remain liable for any deficiency. Pledgor shall be liable to Pledgee and Lenders for the payment on demand of all such costs and expenses, together with interest at the highest rate then applicable to Obligations set forth in the Loan Agreement and any reasonable attorneys’ fees and legal expenses incurred by Pledgee. Any such amounts shall constitute Obligations under the Loan Agreement and may be charged by Pledgee to the loan account of Pledgor maintained by Pledgee at its option. Pledgor agrees that ten (10) days prior written notice by Pledgee designating the place and time of any public sale or of the time after which any private sale or other intended disposition of any or all of the Collateral is to be made, is reasonable notification of such matters.

(d) Pledgor recognizes that Pledgee may be unable to effect a public sale of all or part of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended, as now or hereafter in effect or in applicable Blue Sky or other state securities law, as now or hereafter in effect, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire such Collateral for their own account for investment and not with a view to the distribution or resale thereof. If at the time of any sale of the Collateral or any part thereof, the same shall not, for any reason whatsoever, be effectively registered (if required) under the Securities Act of 1933 (or other applicable state securities law), as then in effect, Pledgee in its sole and absolute discretion is authorized to sell such Collateral or such part thereof by private sale in such manner and under such circumstances as Pledgee or its counsel may deem necessary or advisable in order that such sale may legally be effected without registration. Pledgor agrees that private sales so made may be at prices and other terms less favorable to the seller than if such Collateral were sold at public sale, and that Pledgee has no obligation to delay the sale of any such Collateral for the period of time necessary to permit Issuer, even if Issuer would agree, to register such Collateral for public sale under such applicable securities laws. Pledgor agrees that it will not assert that any private sale made under the foregoing circumstances has not been conducted in a commercially reasonable manner solely because such sale was conducted as a private rather than a public sale.

(e) All of the rights and remedies of Pledgee and Lenders, including, but not limited to, the foregoing and those otherwise arising under this Pledge Agreement, the Loan Agreement and the other Financing Agreements, the instruments comprising the Collateral, applicable law or otherwise, shall be cumulative and not exclusive and shall be enforceable alternatively, successively or concurrently as Pledgee may deem expedient. No failure or delay on the part of Pledgee or any Lender in exercising any of its options, powers or rights or partial or single exercise thereof, shall constitute a waiver of such option, power or right.

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8. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

(a) The validity, interpretation and enforcement of this Pledge Agreement and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

(b) Pledgor irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York in New York County, New York and the United States District Court for the Southern District of New York, whichever Pledgee may elect, and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Pledge Agreement or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Pledge Agreement or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute with respect to any such matters shall be heard only in the courts described above (except that Pledgee shall have the right to bring any action or proceeding against Pledgor or its property in the courts of any other jurisdiction which Pledgee deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Pledgor or its property).

(c) Pledgor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Pledgee’s option, by service upon Pledgor in any other manner provided under the rules of any such courts.

(d) EACH OF PLEDGOR AND PLEDGEE HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF PLEDGOR AND PLEDGEE OR ANY LENDER IN RESPECT OF THIS PLEDGE AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. PLEDGOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT PLEDGOR OR PLEDGEE MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS PLEDGE AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e) Pledgee and Lenders shall not have any liability to Pledgor (whether in tort, contract, equity or otherwise) for losses suffered by Pledgor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Pledge Agreement, or any act, omission or event occurring in connection herewith, unless it is

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determined by a final and non-appealable judgment or court order binding on Pledgee or such Lender, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Pledgee shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Pledge Agreement.

9. MISCELLANEOUS

(a) Pledgor agrees that at any time and from time to time upon the written request of Pledgee, Pledgor shall execute and deliver such further documents, in form satisfactory to Pledgee, and will take or cause to be taken such further acts as Pledgee may in good faith request in order to effect the purposes of this Pledge Agreement and perfect or continue the perfection of the security interest in the Collateral granted to Pledgee hereunder.

(b) Other than the duty to exercise reasonable care to assure the safe custody of the Collateral (whether such custody is exercised by Pledgee, or Pledgee’s nominee, agent or bailee), Pledgee or Pledgee’s nominee agent or bailee shall have no duty or liability to protect or preserve any rights pertaining thereto and shall be relieved of all responsibility for the Collateral upon surrendering it to Pledgor or foreclosure with respect thereto.

(c) All notices, requests and demands to or upon the respective parties hereto shall be in writing and shall be deemed to have been duly given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by registered or certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to Pledgor:	Gregg Appliances, Inc.
	4151 East 96th Street
	Indianapolis, Indiana 46240
	Telecopier: (317) 848-8768
	Attention: Jerry W. Throgmartin
If to Pledgee and	Congress Financial Corporation (Central), as Agent
Lenders:	150 South Wacker Drive
	Chicago, Illinois 60606
	Telecopier: (312) 332-0424
	Attention: Portfolio Manager

(d) Capitalized terms used and not defined herein and all references to the terms “reasonable” and “good faith” shall have the meanings assigned to them in the Loan Agreement. All references to the plural herein shall also mean the singular and to the singular shall also mean the plural. All references to Pledgor, Issuer, Pledgee or any Lender pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. The words “hereof,” “herein,” “hereunder,” “this Pledge

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Agreement” and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not any particular provision of this Pledge Agreement and as this Pledge Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. An Event of Default shall exist or continue or be continuing until such Event of Default is cured or waived in accordance with the terms of the Loan Agreement or is cured in a manner satisfactory to Pledgee. All references to the term “Person” or “Persons” herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability corporation, limited liability company, limited liability partnership, business trust, unincorporated association, joint stock company, trust, joint venture or other entity or any government or any agency, instrumentality or political subdivision thereof.

(e) This Pledge Agreement, shall be binding upon Pledgor and its successors and assigns and inure to the benefit of and be enforceable by Pledgee and its successors and assigns.

(f) If any provision of this Pledge Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Pledge Agreement as a whole, but this Pledge Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

(g) Neither this Pledge Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Pledgee (in the case of a waiver or discharge) or by an authorized officer of Pledgee and Pledgor (in the case of an amendment or modification). Pledgee and Lenders shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of their rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Pledgee. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Pledgee or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Pledgee or such Lender would otherwise have on any future occasion, whether similar in kind or otherwise.

(h) This Pledge Agreement and the liens and security interests granted hereunder shall automatically terminate upon the termination of the Commitments and the payment and satisfaction in full of all outstanding and unpaid Obligations in immediately available funds and the delivery of cash collateral to Pledgee (or at Pledgee’s option, a letter of credit issued for the account of Pledgor) to the extent required under Section 13.1 of the Loan Agreement, and promptly thereafter, Pledgee shall release its security interest in the Collateral and return to Pledgor the certificates (if any) evidencing the Pledged Interests.

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IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of the day and year first above written.

GREGG APPLIANCES, INC.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer

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EX-10.13

Exhibit 10.13

[Execution]

TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT

THIS TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT, dated February 3, 2005 (as amended, modified, supplemented, restated or replaced, this “Trademark Security Agreement”), is by and between GREGG APPLIANCES, INC., an Indiana corporation (“Debtor”), with its chief executive office at 4151 East 96^th Street, Indianapolis, Indiana 46240, and CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation, in its capacity as agent for the Lenders described below (in such capacity, “Secured Party”), having an office at 150 South Wacker Drive, Chicago, Illinois 60606.

W I T N E S S E T H:

WHEREAS, Debtor has adopted, used and is using, and is the owner of the entire right, title, and interest in and to the trademarks, trade names, terms, designs and applications therefor described in Exhibit A hereto and made a part hereof;

WHEREAS, Secured Party, the financial institutions which are parties to the Loan Agreement (as hereinafter defined) as lenders (each individually, a “Lender” and collectively, “Lenders”) and Debtor have entered into financing arrangements pursuant to which Secured Party and Lenders may make loans and advances and provide other financial accommodations to Debtor as set forth in the Loan and Security Agreement, dated of even date herewith, by and among Debtor, HHG Distributing, LLC, Secured Party and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Trademark Security Agreement (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”); and

WHEREAS, in order to induce Secured Party and Lenders to enter into the Loan Agreement and the other Financing Agreements and to make loans and advances and provide other financial accommodations to Debtor pursuant thereto, Debtor has agreed to grant to Secured Party certain collateral security as set forth herein.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Debtor hereby agrees as follows:

1. GRANT OF SECURITY INTEREST. As collateral security for the prompt performance, observance and indefeasible payment in full of all of the Obligations, Debtor hereby grants to Secured Party a continuing security interest in and a general lien upon, and a collateral assignment of, the following (being collectively referred to herein as the “Collateral”):

(a) all of Debtor’s now existing or hereafter acquired right, title, and interest in and to: (i) all of Debtor’s trademarks, trade names, trade styles and service marks and all applications, registrations and recordings relating to the foregoing as may at any time be filed in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, any political subdivision thereof or in any other country, including, without limitation, the trademarks, terms, designs and applications described in Exhibit A hereto, together with all rights and privileges arising under applicable law with respect to Debtor’s use of any trademarks, trade names, trade styles and service marks, and all reissues, extensions, continuation and renewals thereof (all of the foregoing being collectively referred to herein as the “Trademarks”); and (ii) all prints and labels on which such trademarks, trade names, trade styles and service marks appear, have appeared or will appear, and all designs and general intangibles of a like nature; (b) the goodwill of the business symbolized by each of the Trademarks, including, without limitation, all customer lists and other records relating to the distribution of products or services bearing the Trademarks; (c) all income, fees, royalties and other payments at any time due or payable with respect thereto, including, without limitation, payments under all licenses at any time entered into in connection therewith; (d) the right to sue for past, present and future infringements thereof; (e) all rights corresponding thereto throughout the world; and (f) any and all other proceeds of any of the foregoing, including, without limitation, all damages and payments or claims by Debtor against third parties for past or future infringement of the Trademarks.

2. OBLIGATIONS SECURED

The security interest, lien and other interests granted to Secured Party pursuant to this Trademark Security Agreement shall secure the prompt performance, observance and payment in full of any and all of the Obligations, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Loan Agreement or after the commencement of any case with respect to Debtor under the United States Bankruptcy Code or any similar domestic or foreign statute (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Secured Party or any Lender.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS

Debtor hereby represents, warrants and covenants with and to Secured Party the following (all of such representations, warranties and covenants being continuing so long as any of the Obligations are outstanding):

(a) Debtor shall pay and perform all of the Obligations according to their terms.

(b) All of the existing Trademarks and all of the other existing Collateral that is material to the operation of the business of Debtor are valid and subsisting in full force and effect and Debtor owns the sole, full and clear title thereto, and the right and power to grant the security

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interest and collateral assignment granted hereunder. Debtor shall, at Debtor’s expense, perform all acts and execute all documents necessary to maintain the existence of the Collateral consisting of registered Trademarks as registered trademarks and to maintain the existence of all of the Collateral as valid and subsisting, including, without limitation, the filing of any renewal affidavits and applications, in each case to the extent such Collateral is material to the operation of the business of Debtor (it being understood for purposes of this Trademark Security Agreement that the Trademarks set forth on Exhibit A hereto which are marked with an asterisk are material to the operation of the business of Debtor as of the date hereof). The Collateral is not subject to any liens, claims, mortgages, assignments, licenses, security interests or encumbrances of any nature whatsoever, except: (i) the security interests granted hereunder and pursuant to the Loan Agreement, (ii) the security interests permitted under the Loan Agreement and (iii) the licenses permitted under Section 3(e) below and other non-exclusive licenses that Debtor may grant from time to time in the ordinary course of business as permitted by the Loan Agreement.

(c) Debtor shall not assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security interest in or lien upon, encumber, grant an exclusive license relating to the Collateral or a non-exclusive license relating to the Collateral which is not permitted by the Loan Agreement, or otherwise dispose of any of the Collateral, in each case without the prior written consent of Secured Party, except as otherwise permitted herein or in the Loan Agreement. Nothing in this Trademark Security Agreement shall be deemed a consent by Secured Party to any such action, except as such action is expressly permitted hereunder.

(d) Debtor shall, at Debtor’s expense, promptly perform all acts and execute all documents requested at any time by Secured Party in good faith to evidence, perfect, maintain, record or enforce the security interest in and collateral assignment of the Collateral granted hereunder or to otherwise further the provisions of this Trademark Security Agreement. Debtor hereby authorizes Secured Party to execute and file one or more financing statements (or similar documents) with respect to the Collateral, signed only by Secured Party or as otherwise determined by Secured Party. Debtor further authorizes Secured Party to have this Trademark Security Agreement or any other similar security agreement filed with the Commissioner of Patents and Trademarks or any other appropriate federal, state or government office.

(e) As of the date hereof, Debtor does not have any Trademarks registered, or subject to pending applications, in the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in Exhibit A hereto, and has not granted any licenses with respect thereto other than as set forth in Exhibit B hereto.

(f) Debtor shall, concurrently with the execution and delivery of this Trademark Security Agreement, execute and deliver to Secured Party five (5) originals of a Special Power of Attorney in the form of Exhibit C annexed hereto for the implementation of the assignment, sale or other disposition of the Collateral pursuant to Secured Party’s exercise of the rights and remedies granted to Secured Party hereunder.

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(g) Secured Party may, in its discretion, pay any amount or do any act which Debtor fails to pay or do as required hereunder or as reasonably requested by Secured Party in good faith to preserve, defend, protect, maintain, record or enforce the Obligations, the Collateral, or the security interest and collateral assignment granted hereunder, including, but not limited to, all filing or recording fees, court costs, collection charges, attorneys’ fees and legal expenses. Debtor shall be liable to Secured Party for any such payment, which payment shall be deemed an advance by Secured Party to Debtor, shall be payable on demand together with interest at the rate then applicable to the Obligations set forth in the Loan Agreement and shall be part of the Obligations secured hereby.

(h) Debtor shall notify Secured Party in writing within thirty (30) days following the filing of any application for the registration of a Trademark with the United States Patent and Trademark Office or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country. If, after the date hereof, Debtor shall (i) obtain any registered trademark or trade name, or apply for any such registration in the United States Patent and Trademark Office or in any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, or (ii) become the owner of any trademark registrations or applications for trademark registration used in the United States, any State thereof, any political subdivision thereof or in any other country, the provisions of Section 1 hereof shall automatically apply thereto. Upon the request of Secured Party, Debtor shall promptly execute and deliver to Secured Party any and all assignments, agreements, instruments, documents and such other papers as may be requested by Secured Party to evidence the security interest in and collateral assignment of such Trademark in favor of Secured Party.

(i) Debtor has not abandoned any of the Trademarks and Debtor will not do any act, nor omit to do any act, whereby the Trademarks may become abandoned, invalidated, unenforceable, avoided, or avoidable, except that, with the prior written consent of Secured Party, Debtor may abandon any Trademark that is no longer material to the operation of its business. Debtor shall notify Secured Party immediately if it knows or has reason to know of any reason why any application, registration, or recording with respect to the Trademarks may become abandoned, canceled, invalidated, avoided, or avoidable.

(j) Debtor shall render any assistance, as Secured Party shall determine is necessary, to Secured Party in any proceeding before the United States Patent and Trademark Office, any federal or state court, or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, to maintain such application and registration of the Trademarks as Debtor’s exclusive property and to protect Secured Party’s interest therein, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference, and cancellation proceedings.

(k) To Debtor’s knowledge, no material infringement or unauthorized use presently is being made of any of the Trademarks that would adversely affect in any material respect the fair market value of the Collateral or the benefits of this Trademark Security Agreement granted to Secured Party, including, without limitation, the validity, priority or perfection of the security interest granted herein or the remedies of Secured Party hereunder. There has been no judgment holding any of the Trademarks invalid or unenforceable, in whole or in part, nor is the validity or enforceability of any of the Trademarks presently being questioned in any litigation or

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proceeding to which Debtor is a party. Debtor shall promptly notify Secured Party if Debtor (or any affiliate or subsidiary thereof) learns of any use by any person of any term or design which infringes on any Trademark or is likely to cause confusion with any Trademark. If requested by Secured Party, Debtor, at Debtor’s expense, shall join with Secured Party in such action as Secured Party, in Secured Party’s discretion, may deem advisable for the protection of Secured Party’s interest in and to the Trademarks that are material to the operation of the business of Debtor.

(l) Debtor assumes all responsibility and liability arising from the use of the Trademarks and Debtor hereby indemnifies and holds Secured Party and Lenders harmless from and against any claim, suit, loss, damage, or expense (including reasonable attorneys’ fees and legal expenses) arising out of any alleged defect in any product manufactured, promoted, or sold by Debtor (or any affiliate or subsidiary thereof) in connection with any Trademark or out of the manufacture, promotion, labeling, sale or advertisement of any such product by Debtor (or any affiliate or subsidiary thereof). The foregoing indemnity shall survive the payment of the Obligations, the termination of this Trademark Security Agreement and the termination or non-renewal of the Loan Agreement.

(m) Debtor shall promptly pay Secured Party and Lenders for any and all expenditures made by Secured Party or any Lender pursuant to the provisions of this Trademark Security Agreement or for the defense, protection or enforcement of the Obligations, the Collateral, or the security interests and collateral assignment granted hereunder, including, but not limited to, all filing or recording fees, court costs, collection charges, travel expenses, and reasonable attorneys’ fees and legal expenses. Such expenditures shall be payable on demand, together with interest at the rate then applicable to the Obligations set forth in the Loan Agreement and shall be part of the Obligations secured hereby.

4. EVENTS OF DEFAULT

The occurrence or existence of any Event of Default under the Loan Agreement is referred to herein individually as an “Event of Default” and collectively as “Events of Default”.

5. RIGHTS AND REMEDIES

At any time an Event of Default exists or has occurred and is continuing, in addition to all other rights and remedies of Secured Party, whether provided under this Trademark Security Agreement, the Loan Agreement, the other Financing Agreements, applicable law or otherwise, Secured Party shall have the following rights and remedies which may be exercised without notice to, or consent by, Debtor except as such notice or consent is expressly provided for hereunder:

(a) Secured Party may require that neither Debtor nor any affiliate or subsidiary of Debtor make any use of the Trademarks or any marks similar thereto for any purpose whatsoever. Secured Party may make use of any Trademarks for the sale of goods, completion of work-in-process or rendering of services or otherwise in connection with enforcing any other security interest granted to Secured Party by Debtor or any subsidiary or affiliate of Debtor or for such other reason as Secured Party may determine.

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(b) Secured Party may grant such license or licenses relating to the Collateral for such term or terms, on such conditions, and in such manner, as Secured Party shall in its discretion deem appropriate. Such license or licenses may be general, special or otherwise, and may be granted on an exclusive or non-exclusive basis throughout all or any part of the United States of America, its territories and possessions, and all foreign countries.

(c) Secured Party may assign, sell or otherwise dispose of the Collateral or any part thereof, either with or without special conditions or stipulations except that if notice to Debtor of intended disposition of Collateral is required by law, the giving of five (5) days prior written notice to Debtor of any proposed disposition shall be deemed reasonable notice thereof and Debtor waives any other notice with respect thereto. Secured Party shall have the power to buy the Collateral or any part thereof, and Secured Party shall also have the power to execute assurances and perform all other acts which Secured Party may, in its discretion, deem appropriate or proper to complete such assignment, sale, or disposition. In any such event, Debtor shall be liable for any deficiency.

(d) In addition to the foregoing, in order to implement the assignment, sale, or other disposition of any of the Collateral pursuant to the terms hereof, Secured Party may at any time execute and deliver on behalf of Debtor, pursuant to the authority granted in the Powers of Attorney described in Section 3(f) hereof, one or more instruments of assignment of the Trademarks (or any application, registration, or recording relating thereto), in form suitable for filing, recording, or registration. Debtor agrees to pay Secured Party on demand all costs incurred in any such transfer of the Collateral, including, but not limited to, any taxes, fees, and reasonable attorneys’ fees and legal expenses. Debtor agrees that Secured Party and Lenders have no obligation to preserve rights to the Trademarks against any other parties.

(e) Secured Party may first apply the proceeds actually received from any such license, assignment, sale or other disposition of any of the Collateral to the costs and expenses thereof, including, without limitation, reasonable attorneys’ fees and all legal, travel and other expenses which may be incurred by Secured Party. Thereafter, Secured Party may apply any remaining proceeds to the Obligations in the order set forth in the Financing Agreements. Debtor shall remain liable to Secured Party for any of the Obligations remaining unpaid after the application of such proceeds, and Debtor shall pay Secured Party on demand any such unpaid amount, together with interest at the rate then applicable to the Obligations set forth in the Loan Agreement.

(f) Upon Secured Party’s request therefore, Debtor shall supply to Secured Party or to Secured Party’s designee, Debtor’s knowledge and expertise relating to the manufacture, sale and distribution of the products and services bearing the Trademarks and Debtor’s customer lists and other records relating to the Trademarks and the distribution thereof.

(g) Nothing contained herein shall be construed as requiring Secured Party or any Lender to take any such action at any time. All of Secured Party’s and any Lender’s rights and remedies, whether provided under this Trademark Security Agreement, the other Financing

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Agreements, applicable law, or otherwise, shall be cumulative and none is exclusive. Such rights and remedies may be enforced alternatively, successively, or concurrently.

6. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

(a) The validity, interpretation and enforcement of this Trademark Security Agreement and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of laws or other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

(b) Debtor and Secured Party irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York in New York County, New York and the United States District Court for the Southern District of New York, whichever Secured Party may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Trademark Security Agreement or any of the other Financing Agreements or in any way connected or related or incidental to the dealings of Debtor and Secured Party or any Lender in respect of this Trademark Security Agreement or the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or thereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Secured Party shall have the right to bring any action or proceeding against Debtor or its property in the courts of any other jurisdiction which Secured Party deems necessary or appropriate in order to realize on the Collateral or to otherwise enforce its rights against Debtor or its property).

(c) Debtor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Secured Party’s option, by service upon Debtor in any other manner provided under the rules of any such courts.

(d) DEBTOR AND SECURED PARTY EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS TRADEMARK SECURITY AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF DEBTOR AND SECURED PARTY OR ANY LENDER IN RESPECT OF THIS TRADEMARK SECURITY AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR AND SECURED PARTY EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT DEBTOR OR SECURED PARTY MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS TRADEMARK SECURITY

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AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF DEBTOR AND SECURED PARTY TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e) Notwithstanding any other provision contained herein, Secured Party and Lenders shall not have any liability to Debtor (whether in tort, contract, equity or otherwise) for losses suffered by Debtor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Trademark Security Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Secured Party or such Lender that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Secured Party and Lenders shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Trademark Security Agreement and the other Financing Agreements.

7. MISCELLANEOUS

(a) All notices, requests and demands to or upon the respective parties hereto shall be in writing and shall be deemed to have been duly given or made: if delivered in person, immediately upon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by registered or certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to Debtor:	Gregg Appliances, Inc.
	4151 East 96th Street
	Indianapolis, Indiana 46240
	Attention: Jerry W. Throgmartin
	Telecopier No.: 317-848-8768
If to Secured Party:	Congress Financial Corporation (Central), as Agent
	150 South Wacker Drive
	Chicago, Illinois 60606
	Attention: Portfolio Manager
	Telecopier No.: 312-332-0424

(b) Capitalized terms used and not defined herein and all references to the terms “reasonable” and “good faith” shall have the meanings assigned to them in the Loan Agreement. All references to the plural herein shall also mean the singular and to the singular shall also mean the plural. All references to Debtor, Secured Party and any Lender pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. The words “hereof,” “herein,” “hereunder,” “this Trademark Security Agreement” and words of similar import when used in this Trademark Security Agreement shall refer to this Trademark Security Agreement as a whole and not any particular provision of this Trademark

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Security Agreement and as this Trademark Security Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. An Event of Default shall exist or continue or be continuing until such Event of Default is cured or waived in accordance with the terms of the Loan Agreement. All references to the term “Person” or “person” herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock company, trust, joint venture or other entity or any government or any agency or instrumentality or political subdivision thereof.

(c) This Trademark Security Agreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon Debtor and its successors and assigns and inure to the benefit of and be enforceable by Secured Party and Lenders and their respective successors and assigns.

(d) If any provision of this Trademark Security Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Trademark Security Agreement as a whole, but this Trademark Security Agreement shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

(e) Neither this Trademark Security Agreement nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Secured Party (in the case of a waiver or discharge) or by an authorized officer of Secured Party and Debtor (in the case of an amendment or modification). Secured Party and Lenders shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Secured Party. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Secured Party or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Secured Party or such Lender would otherwise have on any future occasion, whether similar in kind or otherwise.

(f) This Trademark Security Agreement and the liens and security interests granted hereunder shall automatically terminate upon the termination of the Commitments and the payment and satisfaction in full of all outstanding and unpaid Obligations in immediately available funds and the delivery of cash collateral to Secured Party (or at Secured Party’s option, a letter of credit issued for the account of Debtor) to the extent required under Section 13.1 of the Loan Agreement, and promptly upon such termination, Secured Party shall cause to be released, reassigned, transferred or delivered to Debtor, as applicable, any remaining Collateral.

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IN WITNESS WHEREOF, Debtor and Secured Party have executed this Trademark Security Agreement as of the day and year first above written.

GREGG APPLIANCES, INC.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chief Executive Officer
CONGRESS FINANCIAL CORPORATION (CENTRAL), as Agent
By:	/s/ Vicky L. Balmont
	Name:	Vicky L. Balmont
	Title:	Executive Vice President

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STATE OF ___________	)
	)	ss.:
COUNTY OF _________	)

On this      day of February, 2005, before me personally came                     , to me known, who being duly sworn, did depose and say that he is the                      of Gregg Appliances, Inc., the corporation which executed the foregoing instrument and that he signed his name thereto by order of the Board of Directors of said corporation.

Notary Public

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STATE OF CALIFORNIA	)
	)	ss.:
COUNTY OF LOS ANGELES	)

On this      day of February, 2005, before me personally came Vicky L. Balmot, to me known, who being duly sworn, did depose and say, that she is the Executive Vice President of Congress Financial Corporation (Central), the corporation described in and which executed the foregoing instrument and that she signed her name thereto by order of the Board of Directors of said corporation.

Notary Public

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EX-10.14

Exhibit 10.14

[Execution]

COLLATERAL ASSIGNMENT OF MERGER AGREEMENTS

THIS COLLATERAL ASSIGNMENT OF MERGER AGREEMENTS, dated February 3, 2005 (as amended, modified, supplemented, restated or replaced, this “Assignment”), is by GREGG APPLIANCES, INC., a Delaware corporation (“Assignor”), with its chief executive office at 4151 East 96^th Street, Indianapolis, Indiana 46240, in favor of CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation, having an office at 150 South Wacker Drive, Chicago, Illinois 60606, in its capacity as agent (“Assignee”) pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the financial institutions which are parties thereto as lenders (each individually, a “Lender” and collectively, “Lenders”).

W I T N E S S E T H:

WHEREAS, pursuant to the Agreement and Plan of Merger, dated October 19, 2004, as amended by the First Amendment to Agreement and Plan of Merger, dated January 13, 2005, and the Second Amendment to Agreement and Plan of Merger, dated as of January 31, 2005, by and among Gregg Investment Corporation, LLC, a Delaware limited liability company, GIC Corporation, an Indiana corporation (“Merger Sub”), Jerry W. Throgmartin, Gregg William Throgmartin, Kelli Throgmartin Ball, Sandra M. Throgmartin, Janice K. Malone, Monica L. Adams, William G. Throgmartin and Dennis L. May (collectively, “Sellers”) and Assignor (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Agreement and Plan of Merger”, and together with the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith, or related thereto, collectively, the “Merger Agreements”), Merger Sub will merge with and into Assignor;

WHEREAS, Assignor, Assignee and Lenders have entered into financing arrangements pursuant to which Assignee and Lenders may make loans and advances and provide other financial accommodations to Assignor as set forth in the Loan and Security Agreement, dated of even date herewith, by and among Assignee, Lenders, Assignor and HHG Distributing, LLC (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Assignment (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”); and

WHEREAS, in order to induce Assignee and Lenders to make loans and advances and provide other financial accommodations to Assignor pursuant to the Loan Agreement and the other Financing Agreements, Assignor has agreed to grant to Assignee, for the benefit of Lenders, certain collateral security as set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. GRANT OF SECURITY INTEREST AND ASSIGNMENT

As collateral security for the prompt performance, observance and indefeasible payment in full of all of the Obligations, Assignor hereby collaterally assigns, pledges, transfers and sets over to Assignee, and grants to Assignee a continuing security interest in and a general lien upon, all of Assignor’s now existing or hereafter arising right, title and interest in and to each of the Merger Agreements and all proceeds thereof, including, but not limited to, (a) all rights of Assignor to receive monies due or to become due to it thereunder or in connection therewith; (b) all rights of Assignor to indemnification and claims for damages or other relief pursuant to or in respect of the Merger Agreements; (c) all rights of Assignor to perform and exercise all remedies thereunder and to require performance by the other parties to the Merger Agreements of their obligations thereunder; and (d) all proceeds, collections, recoveries and rights of subrogation with respect to the foregoing (all of the foregoing being collectively referred to herein as the “Collateral”).

2. OBLIGATIONS SECURED

The assignment, security interest and lien granted to Assignee pursuant to this Assignment shall secure the prompt performance, observance and payment in full of any and all of the Obligations, whether now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of the Loan Agreement or after the commencement of any case with respect to Assignor under the United States Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the commencement of such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Assignee or any Lender.

3. NO ASSUMPTION OF DUTIES

This Assignment is executed only as security for the Obligations and, therefore, the execution and delivery of this Assignment shall not subject Assignee or any Lender to, or transfer or pass to Assignee or any Lender, or in any way affect or modify, the liability of Assignor under the Merger Agreements. In no event shall the acceptance of this Assignment by Assignee or the exercise by Assignee or any Lender of any rights hereunder or assigned hereby, constitute an assumption of any liability or obligation of Assignor or any Lender to any of the other parties to the Merger Agreements or any other persons.

4. REPRESENTATIONS, WARRANTIES AND COVENANTS

Assignor hereby represents, warrants and covenants with and to Assignee and Lenders the following (all of such representations, warranties and covenants being continuing as long as any of the Obligations are outstanding):

(a) Each of the Merger Agreements is and shall be a legal, valid and binding obligation of Assignor.

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(b) No default or event of default by Assignor under or with respect to the Merger Agreements exists or has occurred, and to the best knowledge of Assignor, no default or event of default by any other party to the Merger Agreements under or with respect to the Merger Agreements exists or has occurred.

(c) Assignor has obtained all consents required for the valid and binding collateral assignment to Assignee of all of its rights in, to and under the Merger Agreements.

(d) Assignor shall promptly and faithfully abide by, perform and discharge in all material respects the obligations, covenants, conditions and duties which the Merger Agreements provide are to be performed by Assignor.

(e) Each of the Merger Agreements is in full force and effect and, without the prior written consent of Assignee, Assignor will not amend, supplement or otherwise modify or terminate any of the terms or provisions of any of the Merger Agreements; provided, that, unless and until an Event of Default (as hereinafter defined) exists or has occurred and is continuing, Assignor may, after not less than ten (10) business days’ prior written notice to Agent, amend, supplement or otherwise modify or terminate any of the terms or provisions of the Merger Agreements so long as either (i) such amendment, supplement, modification or termination does not waive, release or limit any rights or claims of Assignor, or increase the obligations of Assignor or make any terms thereof more restrictive or burdensome to Assignor or in any manner adversely affect Assignee or any Lender or any rights of Assignee or any Lender as determined in good faith by Assignee and confirmed by Assignee to Assignor in writing or (ii) Assignee has consented in writing to such amendment, supplement, modification or termination.

(f) At Assignor’s sole cost and expense, Assignor shall appear in and defend any action or proceedings affecting Assignee or any Lender and arising under, growing out of or in any manner connected with the obligations, covenants, conditions, duties, agreements or liabilities of Assignor under the Merger Agreements.

(g) Assignor shall: (i) promptly notify Assignee of each and every dispute with, proceeding or claim against, cause of action or litigation involving any person for which Assignor has or may have any right to indemnification or claim for damages or other relief or remedies, whether at law or in equity, arising under or in connection with the Merger Agreements, (ii) to the extent commercially advisable, diligently enforce all rights to indemnification or claim for damages or other relief or remedies, whether at law or in equity, arising under or in connection with the Merger Agreements and (iii) not take or permit, and has not taken or permitted since the execution of the Merger Agreements, any action that adversely affects, in the good faith judgment of Assignee, the Obligations or the Collateral.

(h) Assignor shall promptly deliver or cause to be delivered to Assignee a copy of every written notice or communication sent or received by Assignor pursuant to any of the Merger Agreements that adversely affects, or could reasonably be expected to adversely affect, the

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Obligations or the Collateral, in the manner and at the place provided for notices contained herein.

(i) In no event shall Assignor, without the prior written consent of Assignee, waive, release or discharge any of its rights or any of the obligations, duties or liabilities of any other party to the Merger Agreements, or compromise or settle any right or claim or dispute with respect to any of its rights or any of the obligations, duties or liabilities of any other party to the Merger Agreements. No such waiver, release, discharge, compromise or settlement shall be effective without the prior written consent of Assignee.

5. EVENTS OF DEFAULT

The occurrence or existence of any Event of Default under the Loan Agreement is referred to herein individually as an “Event of Default” and collectively as “Events of Default”.

6. RIGHTS AND REMEDIES

(a) At any time an Event of Default exists or has occurred and is continuing, Assignee shall have all rights and remedies under this Assignment, the Uniform Commercial Code and other applicable law, and shall have the absolute right to enforce, in its name, any and all rights to indemnification or claim for damages or other relief or remedies, whether at law or in equity, arising under or in connection with the Merger Agreements, or otherwise and apply the proceeds thereof to the Obligations in such order or manner as set forth in the Financing Agreements.

(b) In order to effectuate the provisions of Section 6(a) above, Assignor, for itself and its respective successors and assigns, hereby constitutes and appoints Assignee and each officer and employee thereof as its attorney-in-fact with power at any time after an Event of Default exists or has occurred and is continuing, to assert claims and commence and prosecute suit against any Person or to settle or compromise any such claim or suit relating to any such right, claim, relief or remedy, and to sign and file any and all papers required in connection therewith and to take any and all other action which Assignee may, in its good faith discretion, deem appropriate. Assignor hereby ratifies and approves all acts which Assignee or any officer or employee thereof as attorney may do and this power of attorney, being coupled with an interest, is irrevocable as long as any of the Obligations remain outstanding.

(c) No failure to exercise, and no delay in exercising on the part of Assignee or any Lender any right, power or privilege under this Assignment, the Loan Agreement or under any of the other Financing Agreements or other documents referred to herein or therein shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power and privilege. The rights and remedies of Assignee and Lenders under this Assignment, the other Financing Agreements or applicable law, are cumulative and not exclusive and all such rights and remedies may be exercised alternatively, successively or concurrently.

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7. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

(a) The validity, interpretation and enforcement of this Assignment and the other Financing Agreements and any dispute arising out of the relationship between the parties hereto, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York without regard to principles of conflict of laws, but excluding any conflicts of law principles or any other rule of law that would cause the application of the law of any jurisdiction other than the laws of the State of New York.

(b) Assignor and Assignee irrevocably consent and submit to the non-exclusive jurisdiction of the Supreme Court of the State of New York in New York County and the United States District Court for the Southern District of New York, whichever Assignee may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Assignment or any of the other Financing Agreements or in any way connected or related or incidental to the dealings of Assignor and Assignee in respect of this Assignment or the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or thereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courts described above (except that Assignee shall have the right to bring any action or proceeding against Assignor or its property in the courts of any other jurisdiction which Assignee deems necessary or appropriate in order to realize on any collateral granted to Assignee or to otherwise enforce its rights against Assignor or its property).

(c) Assignor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Assignee’s option, by service upon Assignor in any other manner provided under the rules of any such courts.

(d) ASSIGNOR AND ASSIGNEE EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS ASSIGNMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF ASSIGNOR, LENDERS AND ASSIGNEE IN RESPECT TO THIS ASSIGNMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. ASSIGNOR AND ASSIGNEE EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ASSIGNOR OR ASSIGNEE MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS ASSIGNMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ASSIGNOR AND ASSIGNEE TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.

8. MISCELLANEOUS

(a) All notices, requests and demands hereunder shall be in writing and shall be deemed to have been duly given or made: if delivered in person, immediately upon delivery; if by telex, telegram, or facsimile transmission, immediately upon sending and upon confirmation of receipt;

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if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending; and if by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate by notice in accordance with this Section):

If to Assignor:	Gregg Appliances, Inc.
	4151 East 96th Street
	Indianapolis, Indiana
	Attention: Jerry W. Throgmartin
	Telecopy No.: 317-848-8768
If to Assignee:	Congress Financial Corporation (Central), as Agent
	150 South Wacker Drive
	Chicago, Illinois 60606
	Attention: Portfolio Manager
	Telecopy No.: 312-332-0424

(b) Capitalized terms used and not defined herein and all references to the terms “reasonable” and “good faith” shall have the meanings assigned to them in the Loan Agreement. All references to the plural herein shall also mean the singular and to the singular shall also mean the plural. All references to Assignor, Assignee and any Lender herein shall include their respective successors and assigns. All references to the term “Person” or “person” herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects Subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability corporation, limited liability partnership, business trust, unincorporated association, joint stock company, trust, joint venture or other entity or any government or any agency instrumentality or political subdivision thereof.

(c) No provision hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

(d) This Assignment shall be binding upon Assignor and its successors and assigns and inure to the benefit of and be enforceable by Assignee and Lenders and their permitted successors and assigns.

(e) If any provision of this Assignment is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Assignment as a whole but this Assignment shall be construed as though it did not contain the particular provision or provisions held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by law.

(f) This Assignment (i) may be executed in separate counterparts, each of which when taken together shall constitute one and the same instrument and (ii) may be executed and delivered by telecopier with the same force and effect as if it were a manually executed and delivered counterpart.

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(g) This Assignment and the liens and security interests granted hereunder shall automatically terminate upon the termination of the Commitments and the payment and satisfaction in full of all outstanding and unpaid Obligations in immediately available funds and the delivery of cash collateral to Assignee (or at Assignee’s option, a letter of credit issued for the account of Assignor) to the extent required under Section 13.1 of the Loan Agreement, and promptly thereafter, Assignee shall cause to be released, reassigned, transferred or delivered, as applicable, to Assignor any remaining Collateral.

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IN WITNESS WHEREOF, the parties have caused this instrument to be executed by persons duly authorized, as of the date first above written.

ASSIGNOR:
GREGG APPLIANCES, INC.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer
ASSIGNEE:
CONGRESS FINANCIAL CORPORATION (CENTRAL), as Agent
By:	/s/ Vicky L. Balmont
	Name:	Vicky L. Balmont
	Title:	Executive Vice President

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EX-10.15

Exhibit 10.15

[Execution]

GUARANTEE

THIS GUARANTEE, dated February 3, 2005 (as amended, modified, supplemented, extended, renewed, restated or replaced, this “Guarantee”), is by HHG DISTRIBUTING, LLC, an Indiana limited liability company (“Guarantor”), with its chief executive office at 4151 East 96^th Street, Indianapolis, Indiana 46240, in favor of CONGRESS FINANCIAL CORPORATION (CENTRAL), an Illinois corporation, as administrative agent for the Lenders described below (in such capacity, together with its successors and assigns, “Agent”), having an office at 150 South Wacker Drive, Chicago, Illinois 60606.

W I T N E S S E T H :

WHEREAS, Agent, Lenders (as hereinafter defined) and Gregg Appliances, Inc., an Indiana corporation (“Borrower”), have entered into financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial accommodations to Borrower as set forth in the Loan and Security Agreement, dated of even date herewith, by and among Agent, the financial institutions from time to time party thereto as lenders (collectively, together with their successors and assigns, “Lenders”), Borrower and Guarantor (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”) and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto, including, but not limited to, this Guarantee (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”); and

WHEREAS, due to the close business and financial relationships between Borrower and Guarantor, and in consideration of the benefits which will accrue to Guarantor and as an inducement for and in consideration of Agent and Lenders making loans and advances and providing other financial accommodations to Borrower pursuant to the Loan Agreement and the other Financing Agreements, Guarantor has agreed to make this Guarantee in favor of Agent, for itself and the benefit of the Lenders; and

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby agrees in favor of Agent and Lenders as follows:

1. Guarantee.

(a) Guarantor absolutely and unconditionally, jointly and severally with any subsequent guarantors of the Guaranteed Obligations (as hereinafter defined), guarantees and agrees to be liable for the full and indefeasible payment and performance when due of the following (all of which are collectively referred to herein as the “Guaranteed Obligations”): (i) the Obligations (as defined in the Loan Agreement), whether now existing or hereafter

arising, whether arising before, during or after the initial or any renewal term of the Loan Agreement or after the commencement of any case with respect to Borrower under the United States Bankruptcy Code or any similar statute (including, without limitation, the payment of interest and other amounts, which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in any such case and including loans, interest, fees, charges and expenses related thereto and all other obligations of Borrower or its successors to Agent and Lenders arising after the commencement of such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and however acquired by Agent and Lenders, and (ii) all expenses (including, without limitation, reasonable attorneys’ fees and legal expenses) incurred by Agent or any Lender in connection with the preparation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of Borrower’s obligations, liabilities and indebtedness as aforesaid to Agent or any Lender, the rights of Agent or any Lender in any collateral as set forth in the Financing Agreements or under this Guarantee and all other Financing Agreements or in any way involving claims by or against Agent or any Lender directly or indirectly arising out of or related to the relationships between Borrower, Guarantor or any other Obligor (as hereinafter defined) and Agent or any Lender, whether such expenses are incurred before, during or after the initial or any renewal term of the Loan Agreement and the other Financing Agreements or after the commencement of any case with respect to Borrower or Guarantor under the United States Bankruptcy Code or any similar statute.

(b) This Guarantee is a guaranty of payment and not of collection. Guarantor agrees that Agent and Lenders need not attempt to collect any Guaranteed Obligations from Borrower, Guarantor or any other Obligor or to realize upon any collateral, but may require Guarantor to make immediate payment of all of the Guaranteed Obligations to Agent and Lenders when due, whether by maturity, acceleration or otherwise, or at any time thereafter. Agent and Lenders may apply any amounts received in respect of the Guaranteed Obligations to any of the Guaranteed Obligations, in whole or in part (including reasonable attorneys’ fees and legal expenses incurred by Agent or any Lender with respect thereto or otherwise chargeable to Borrower or Guarantor) and in such order as Agent may elect.

(c) Any payment required to be made by Guarantor under this Guarantee shall be made to Agent at the office of Agent from time to time on demand as Guaranteed Obligations become due. Guarantor shall make all such payments to Agent free and clear of, and without deduction or withholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. In the event any claim or action, or action on any judgment, based on this Guarantee is brought against Guarantor, Guarantor agrees not to deduct, set-off, or seek any counterclaim for or recoup any amounts which are or may be owed by Agent or any Lender to Guarantor.

(d) Notwithstanding anything to the contrary contained herein, the amount of the obligations payable by Guarantor under this Guarantee shall be the aggregate amount of the Guaranteed Obligations unless a court of competent jurisdiction adjudicates Guarantor’s obligations to be invalid, avoidable or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), in which case the amount of the Guaranteed Obligations payable by Guarantor

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hereunder shall be limited to the maximum amount that could be guaranteed by Guarantor without rendering Guarantor’s obligations under this Guarantee invalid, avoidable or unenforceable under such applicable law.

2. Waivers and Consents.

(a) Notice of acceptance of this Guarantee, the making of loans and advances and providing other financial accommodations to Borrower and presentment, demand, protest, notice of protest, notice of nonpayment or default and all other notices to which Borrower or Guarantor is entitled are hereby waived by Guarantor to the extent permitted by applicable law. Guarantor also waives notice of and hereby consents to, (i) any amendment, modification, supplement, extension, renewal, or restatement of the Loan Agreement and any of the other Financing Agreements, including, without limitation, extensions of time of payment of or increase or decrease in the amount of any of the Guaranteed Obligations, the interest rate, fees, other charges, or any collateral, and the guarantee made herein shall apply to the Loan Agreement and the other Financing Agreements and the Guaranteed Obligations as so amended, modified, supplemented, renewed, restated or extended, increased or decreased, (ii) the taking, exchange, surrender and releasing of collateral or guarantees now or at any time held by or available to Agent for itself and for the benefit of the Lenders for the obligations of Borrower or any other party at any time liable on or in respect of the Guaranteed Obligations or who is the owner of any property which is security for the Guaranteed Obligations (individually, an “Obligor” and collectively, the “Obligors”), (iii) the exercise of, or refraining from the exercise of any rights against Borrower, Guarantor or any other Obligor or any collateral, (iv) the settlement, compromise or release of, or the waiver of any default with respect to, any of the Guaranteed Obligations and (v) any financing by Agent and/or any Lender of Borrower under Section 364 of the United States Bankruptcy Code or consent to the use of cash collateral by Agent and Lenders under Section 363 of the United States Bankruptcy Code. Guarantor agrees that the amount of the Guaranteed Obligations shall not be diminished and the liability of Guarantor hereunder shall not be otherwise impaired or affected by any of the foregoing.

(b) No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations shall affect, impair or be a defense to this Guarantee, nor shall any other circumstance which might otherwise constitute a defense available to or legal or equitable discharge of Borrower in respect of any of the Guaranteed Obligations, or Guarantor in respect of this Guarantee, affect, impair or be a defense to this Guarantee. Without limitation of the foregoing, the liability of Guarantor hereunder shall not be discharged or impaired in any respect by reason of any failure by Agent to perfect or continue perfection of any lien or security interest in any collateral or any delay by Agent in perfecting any such lien or security interest. As to Guaranteed Obligations consisting of interest, fees and expenses, whether arising before or after the commencement of any case with respect to Borrower under the United States Bankruptcy Code or any similar statute, Guarantor shall be liable therefor, even if Borrower’s liability for such amounts does not, or ceases to, exist by operation of law. Guarantor acknowledges that neither Agent nor any Lender has made any representations to Guarantor with respect to Borrower, any other Obligor or otherwise in connection with the execution and delivery by Guarantor of this Guarantee and Guarantor is not in any respect relying upon Agent or any Lender or any statements by Agent or any Lender in connection with this Guarantee.

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(c) Unless and until the termination of the Commitments and the indefeasible payment and satisfaction in full of all outstanding and unpaid Guaranteed Obligations in immediately available funds and the delivery of cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrower) to the extent required under Section 13.1 of the Loan Agreement, Guarantor hereby irrevocably and unconditionally waives and relinquishes (i) all statutory, contractual, common law, equitable and all other claims against Borrower, any collateral for the Guaranteed Obligations or other assets of Borrower or any other Obligor, for subrogation, reimbursement, exoneration, contribution, indemnification, setoff or other recourse in respect to sums paid or payable to Agent or any Lender by Guarantor hereunder and (ii) any and all other benefits which Guarantor might otherwise directly or indirectly receive or be entitled to receive by reason of any amounts paid by or collected or due from Guarantor, Borrower or any other Obligor upon the Guaranteed Obligations or realized from their property.

3. Subordination. Payment of all amounts now or hereafter owed to Guarantor by Borrower or any other Obligor is hereby subordinated in right of payment to the indefeasible payment in full to Agent and Lenders of the Guaranteed Obligations and all such amounts and any security and guarantees therefor are hereby assigned to Agent as security for the Guaranteed Obligations.

4. Acceleration. Notwithstanding anything to the contrary contained herein or any of the terms of any of the other Financing Agreements, at any time an Event of Default exists or has occurred and is continuing, Agent may, at its option and shall upon the direction of the Required Lenders in accordance with Section 10.2 of the Loan Agreement, upon notice to Guarantor, accelerate the payment of all Guaranteed Obligations and demand immediate payment thereof to Agent for itself and the benefit of Lenders and the Bank Product Providers; provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h) of the Loan Agreement, all Guaranteed Obligations shall automatically become immediately due and payable.

5. Account Stated. The books and records of Agent showing the account between Agent and Borrower shall be admissible in evidence in any action or proceeding against or involving Guarantor as prima facie proof of the items therein set forth, and the monthly statements of Agent rendered to Borrower, to the extent to which no written objection is made within thirty (30) days from the date of sending thereof to Borrower, shall be deemed conclusively correct and constitute an account stated among Agent, Lenders and Borrower and be binding on Guarantor.

6. Termination. This Guarantee is continuing, unlimited, absolute and unconditional. All Guaranteed Obligations shall be conclusively presumed to have been created in reliance on this Guarantee. Guarantor shall continue to be liable hereunder until one of Agent’s officers actually receives a written termination notice from Guarantor sent to Agent at its address set forth above by certified mail, return receipt requested and thereafter as set forth below. Revocation or termination hereof by Guarantor shall not affect, in any manner, the rights of Agent or any obligations or duties of Guarantor under this Guarantee with respect to (a) Guaranteed Obligations which have been created, contracted, assumed or incurred prior to the receipt by Agent of such written notice of revocation or termination as provided herein, including, without limitation, (i) all amendments, extensions, renewals and modifications of such Guaranteed Obligations (whether or not evidenced by new or additional agreements, documents or instruments executed on or after such notice of revocation or termination), (ii) all interest, fees

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and similar charges accruing or due on and after revocation or termination, and (iii) all reasonable attorneys’ fees and legal expenses, costs and other expenses paid or incurred on or after such notice of revocation or termination in attempting to collect or enforce any of the Guaranteed Obligations against Borrower, Guarantor or any other Obligor (whether or not suit be brought), or (b) Guaranteed Obligations which have been created, contracted, assumed or incurred after the receipt by Agent of such written notice of revocation or termination as provided herein pursuant to any contract entered into by Agent or any Lender prior to receipt of such notice. The sole effect of such revocation or termination by Guarantor shall be to exclude from this Guarantee the liability of Guarantor for those Guaranteed Obligations arising after the date of receipt by Agent of such written notice which are unrelated to Guaranteed Obligations arising or transactions entered into prior to such date. Without limiting the foregoing, this Guarantee may not be terminated and shall continue so long as the Loan Agreement shall be in effect (whether during its original term or any renewal, substitution or extension thereof); provided, that, this Guarantee shall automatically terminated upon the termination of the Commitments and the indefeasible payment and satisfaction in full of all outstanding and unpaid Guaranteed Obligations in immediately available funds and the delivery of cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrower) to the extent required under Section 13.1 of the Loan Agreement.

7. Reinstatement. If after receipt of any payment of, or proceeds of collateral applied to the payment of, any of the Guaranteed Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Guaranteed Obligations intended to be satisfied by such payment or proceeds shall be reinstated and continue and this Guarantee shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Guarantor shall be liable to pay to Agent and each Lender, and does indemnify and hold Agent and such Lender harmless for the amount of any payments or proceeds surrendered or returned. This Section 7 shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This Section 7 shall survive the termination or revocation of this Guarantee.

8. Amendments and Waivers. Neither this Guarantee nor any provision hereof shall be amended, modified, waived or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Agent (in the case of a waiver or discharge) or by an authorized officer of Agent and Guarantor (in the case of an amendment or modification). Agent shall not by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in writing and signed by an authorized officer of Agent. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Agent of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent would otherwise have on any future occasion, whether similar in kind or otherwise.

9. Existence, Power and Authority. Guarantor is a limited liability company, duly organized and in good standing under the laws of its state of formation and is duly qualified as a foreign limited liability company and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or the ownership of assets makes such

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qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a material adverse effect on the financial condition, results of operation or business of Guarantor or the rights of Agent and Lenders hereunder or under any of the other Financing Agreements. The execution, delivery and performance of this Guarantee is within the limited liability company powers of Guarantor, and this Guarantee has been duly authorized and is not in contravention of law or the terms of the certificate of formation, operating agreement or other organizational documentation of Guarantor, or any indenture, agreement or undertaking to which Guarantor is a party or by which Guarantor or its property is bound. This Guarantee constitutes the legal, valid and binding obligation of Guarantor enforceable in accordance with its terms.

10. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.

(a) The validity, interpretation and enforcement of this Guarantee and any dispute arising out of the relationship between Guarantor and Agent or any Lender, whether in contract, tort, equity or otherwise, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would result in the application of the law of any jurisdiction other than the laws of the State of New York.

(b) Guarantor hereby irrevocably consents and submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York in New York County, New York and the United States District Court for the Southern District of New York, whichever Agent may elect, and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Guarantee or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of Guarantor and Agent or any Lender in respect of this Guarantee or any of the other Financing Agreements or the transactions related hereto or thereto, in each case whether now existing or hereafter arising and whether in contract, tort, equity or otherwise, and agrees that any dispute arising out of the relationship between Guarantor or Borrower and Agent or any Lender or the conduct of any such persons in connection with this Guarantee, the other Financing Agreements or otherwise shall be heard only in the courts described above (except that Agent and Lenders shall have the right to bring any action or proceeding against Guarantor or its property in the courts of any other jurisdiction which Agent deems necessary or appropriate in order to realize on collateral at any time granted by Borrower or Guarantor to Agent or to otherwise enforce its rights against Guarantor or its property).

(c) Guarantor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt requested) directed to its address set forth on the signature pages hereof and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent’s option, by service upon Guarantor in any other manner provided under the rules of any such courts.

(d) GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF GUARANTOR AND AGENT, OR AGENT OR ANY LENDER IN RESPECT OF THIS GUARANTEE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE

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TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. GUARANTOR HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT GUARANTOR, AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF GUARANTOR, AGENT AND LENDERS TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

(e) Neither Agent nor any Lender shall have any liability to Guarantor (whether in tort, contract, equity or otherwise) for losses suffered by Guarantor in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Guarantee, or any act, omission or event occurring in connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent or such Lender that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In any such litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of the Loan Agreement and the other Financing Agreements.

11. Notices. All notices, requests and demands hereunder shall be in writing and (a) made to Agent at its address set forth above and to Guarantor at its chief executive office set forth above, or to such other address as either party may designate by written notice to the other in accordance with this provision, and (b) deemed to have been given or made, if delivered in person, immediately upon delivery, if by facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next business day, one (1) business day after sending, and if by certified mail, return receipt requested, five (5) days after mailing.

12. Partial Invalidity. If any provision of this Guarantee is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Guarantee as a whole, but this Guarantee shall be construed as though it did not contain the particular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law.

13. Entire Agreement. This Guarantee represents the entire agreement and understanding of this parties concerning the subject matter hereof, and supersedes all other prior agreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written.

14. Successors and Assigns. This Guarantee shall be binding upon Guarantor and its successors and assigns and shall inure to the benefit of Agent and Lenders and their respective successors, endorsees, transferees and assigns. The liquidation, dissolution or termination of Guarantor shall not terminate this Guarantee.

15. Construction. Capitalized terms used and not defined herein and all references to the terms “reasonable” and “good faith” shall have the meanings assigned to them in the Loan Agreement. All references to the term “Guarantor” wherever used herein shall mean Guarantor

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and its successors and assigns, individually and collectively, jointly and severally (including, without limitation, any receiver, trustee or custodian for Guarantor or any of its assets or Guarantor in its capacity as debtor or debtor-in-possession under the United States Bankruptcy Code). All references to the term “Agent”, “Lenders” wherever used herein shall mean Agent and Lenders and their respective successors and assigns and all references to the term “Borrower” wherever used herein shall mean Borrower and its successors and assigns (including, without limitation, any receiver, trustee or custodian for Borrower or any of its assets or Borrower in its capacity as debtor or debtor-in-possession under the United States Bankruptcy Code). All references to the term “Person” or “person” wherever used herein shall mean any individual, sole proprietorship, partnership, corporation (including, without limitation, any corporation which elects subchapter S status under the Internal Revenue Code of 1986, as amended), limited liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entity or any government or any agency or instrumentality of political subdivision thereof. All references to the plural shall also mean the singular and to the singular shall also mean the plural.

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IN WITNESS WHEREOF, Guarantor has executed and delivered this Guarantee as of the day and year first above written.

HHG DISTRIBUTING, LLC
By:	Gregg Appliances, Inc.
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	Chairman and Chief Executive Officer

EX-10.16

Exhibit 10.16

GUARANTEE

For value received, each Subsidiary Guarantor (which term includes any successor Person under the Indenture) hereby fully and unconditionally, jointly and severally, guarantees on a senior basis (the “Subsidiary Guarantee”) (i) the due and punctual payment of the principal of and interest on the Notes, whether at maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal and interest, if any, on the Notes, to the extent lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms set forth in Article Eleven of the Indenture (as defined below) and (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations, that the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. This Guarantee shall become effective in accordance with Article Eleven of the Indenture and its terms shall be evidenced therein. The validity and enforceability of any Guarantee shall not be affected by the fact that it is not affixed to any particular Note.

Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Indenture, dated as of February 3, 2005 among Gregg Appliances, Inc., an Indiana corporation, as issuer, HHG Distributing, LLC, an Indiana limited liability company, as Guarantor, and Wells Fargo Bank, National Association, as trustee (the “Trustee”), as amended or supplemented (the “Indenture”).

THIS SUBSIDIARY GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. THE UNDERSIGNED SUBSIDIARY GUARANTOR HEREBY AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUBSIDIARY GUARANTEE.

This Subsidiary Guarantee is subject to release upon the terms set forth in the Indenture.

IN WITNESS THEREOF, the Subsidiary Guarantor has caused this Subsidiary Guarantee to be signed manually or by facsimile by its duly authorized officer.

HHG DISTRIBUTING, LLC
By:	/s/ Jerry W. Throgmartin
	Name:	Jerry W. Throgmartin
	Title:	President and Secretary

EX-10.17

Exhibit 10.17

GREGG APPLIANCES, INC.

2005 STOCK OPTION PLAN

Section 1. Description of Plan. This is the 2005 Stock Option Plan dated March 8, 2005 (the “Plan”) of Gregg Appliances, Inc., an Indiana corporation (the “Company”). This Plan will provide a means whereby designated employees, directors, officers or consultants of the Company may be granted options to purchase shares of the common stock, no par value, of the Company (the “Shares” or the “Common Stock”). It is intended that the options under this Plan will either qualify for treatment as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and be designated “Incentive Stock Options” or not qualify for such treatment and be designated “Nonqualified Stock Options.” Incentive Stock Options may only be granted to employees. This Plan is intended to qualify as and constitute a compensatory benefit plan under Rule 701 promulgated under the Securities Act of 1933, as amended (such act, and the rules and regulations promulgated thereunder, the “Act”).

Section 2. Purpose of Plan. The purpose of the Plan and of granting options (the “Options”) to specified persons is to further the growth, development and financial success of the Company by providing additional incentives to its employees, directors, officers or consultants. By assisting such persons in acquiring Shares, the Company can ensure that such persons will themselves benefit directly from the Company’s growth, development and financial success.

Section 3. Eligibility. The persons who shall be eligible to receive grants of Options under the Plan shall be the designated employees, directors, officers or consultants of the Company as determined from time to time by the Board of Directors (the “Board”) of the Company. A person who holds an Option or has purchased Shares pursuant to the exercise of the Option is herein referred to as a “Participant,” and more than one Option may be granted to any Participant.

Section 4. Administration and Authorization.

(a) Committee. Except as otherwise provided herein, the Plan shall be administered by the Board or, at the Board’s option, by a compensation committee thereof from time to time constituted, to whom administration of this Plan has been duly delegated (the Board and/or such committee, are referred to hereinafter as the “Committee”). Any action of the Committee with respect to administration of the Plan shall be taken by a majority vote or written consent of its members. Upon the first registration of an equity security of the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to the extent possible and advisable, the Committee may be constituted so as to permit this Plan to comply with Rule 16b-3 promulgated under Section 16 of the Exchange Act and Section 162(m) of the Code.

(b) Interpretation; Powers of Committee. Subject to the express provisions of this Plan and any express limitations on the delegated authority, the Committee is authorized and empowered to administer the Plan and (i) to determine the dates upon which Options shall be granted, the exercise price of the Options, the number of Shares subject to the Options and to specify the other terms and conditions thereof in a manner consistent with this Plan, which terms and conditions need not be identical as to the various Options granted; (ii) to interpret the Plan; (iii) to grant Options; (iv) to determine eligibility and the particular Participants; (v) to determine the fair market value of the Shares; (vi) to accelerate the time during which an Option may be exercised in accordance with the provisions of Section 14 hereof, and to otherwise accelerate the time during which an Option may be exercised, in each case notwithstanding the provisions in the Option Agreement (as defined in Section 11 hereof) stating the time during which it may be exercised; (vii) to exercise, terminate or waive any repurchase rights of the Company with respect to Shares; (viii) to reissue the Plan and related benefits hereunder as a direct plan of a subsidiary or subsidiaries, converting the Options and Shares issued under this Plan to options and shares of such subsidiary or subsidiaries, as the case may be; (ix) to prescribe, amend and rescind rules relating to the Plan; (x) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted by the Committee; (xi) to determine the rights and obligations of Participants under the Plan; and (xii) to make all other determinations deemed necessary or advisable for the administration of the Plan.

(c) Binding Determinations. Any action taken by, or inaction of, the Company, the Board or the Committee relating or pursuant to this Plan (including, without limitation, any determination of Fair Market Value and Repurchase Price (as such terms may be defined in the applicable Option Agreement (as defined in Section 11)) will be within the sole discretion of that entity or body and will be conclusive and binding upon all persons. Subject only to compliance with the express provisions hereof, the Board and Committee may act in their sole discretion in matters within their authority related to this Plan.

(d) Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Committee or the Board, as the case may be, may obtain and may rely upon the advice of experts, including employees of and professional advisors to the Company.

(e) Delegation. The Committee may delegate ministerial, non-discretionary functions to individuals who are officers, employees or agents of the Company.

(f) No Liability. No director, officer or agent of the Company will be liable for any action, omission or decision under this Plan taken, made or omitted in good faith.

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Section 5. Shares Subject to Plan.

(a) Shares Available. The only capital stock that may be delivered under the Plan will be the Shares.

(b) Share Limits. The aggregate number of Shares for which Options may be granted pursuant to the Plan shall be 2,500,000. Such number shall be automatically adjusted for any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction of the Company. The number of Shares which may be purchased by a Participant upon exercise of each Option shall be determined by the Committee and set forth in each Option Agreement. Upon the expiration or termination, in whole or in part, for any reason of an outstanding Option or any portion thereof which shall not have vested or shall not have been exercised in full, or in the event Shares are tendered as payment of the Option exercise price or any Shares acquired pursuant to the Plan are reacquired by the Company, (a) any Shares which have not been purchased (b) Shares tendered as payment of the Option exercise price or (c) the Shares reacquired, as the case may be, shall again become available for the granting of additional Options under the Plan.

Section 6. Restrictions on Grants; Vesting of Options. Notwithstanding any other provisions set forth herein or in any Option Agreement, no Options may be granted under the Plan subsequent to ten (10) years from the date hereof. Each Option shall grant the Participant the right to purchase a specified number of Shares at a price determined by the Committee, as such price or the basis upon which price is determined is set forth in each respective Option Agreement (the “Exercise Price”). The shares of Common Stock subject to Options granted under the Plan will become exercisable in three equal annual installments with the first installment exercisable one year from the date of grant of the Option and have a term of seven years from the date of grant. If the Participant is a 10% stockholder of the Company (as defined in Section 422(b)(6) of the Code) at the time such Participant is granted an Incentive Stock Option, the Exercise Price shall be not less than 110% of the fair market value of such Shares on the date of grant of the Option. Such fair market value shall be determined by the Committee on the basis of such evidence as it deems appropriate in its sole discretion.

Section 7. Exercise of Options and Option Period.

(a) Exercise. Once vested, the Options may be exercised by the Participant by (i) giving written notice to the Company specifying the number of Shares to be purchased and accompanied by payment of the full Exercise Price therefor in cash, by check or in such other form of lawful consideration as the Committee may approve from time to time, including without limitation and in the sole discretion of the Committee, the assignment in transfer by the Participant to the Company of outstanding shares of Common Stock theretofore held by the Participant in a manner intended to comply with the provisions of Rule 16b-3 under the Exchange Act, if applicable, (ii) if required by the Committee, delivering an agreement to be bound by the terms and provisions of that certain Stockholders Agreement by and among the Company, FS Equity Partners V, L.P., Gregg Investment Corporation, LLC, Jerry W. Throgmartin,

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Gregg William Throgmartin and Dennis L. May dated February 3, 2005, as amended (the “Stockholders Agreement”) and (iii) satisfying any other requirements set forth herein or in the applicable Option Agreements.

(b) Option Period. Any Option and all rights thereunder shall expire not more than seven (7) years after the date of grant; provided that, the Options will be subject to earlier termination as set forth in Sections 13 and 14 hereof.

Section 8. Transfer and other Limitations on Options and Shares.

(a) Limits On Exercise and Transfer. Except as expressly provided in (or pursuant to) Section 8(b), by applicable law or by the Option Agreement, as the same may be amended:

(i) all Options are non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge;

(ii) Options must be exercised only by the Participant; and

(iii) Shares issuable pursuant to an Option must be delivered only to (or for the account of) the Participant.

In addition, the Shares shall be subject to the restrictions imposed in the applicable Option Agreement.

(b) Exceptions to Limits on Exercise and Transfer. The exercise and transfer restrictions in Section 8(a) will not apply to:

(i) transfers to the Company;

(ii) the designation of a beneficiary to receive benefits if the Participant dies or, if the Participant has died, transfers to or exercises by the Participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution; or

(iii) if the Participant has suffered a disability, transfers or exercises on behalf of the Participant by the Participant’s duly authorized legal representative in accordance with the applicable Option Agreement.

Section 9. Limitations on Grants and Terms of Incentive Stock Options.

(a) $100,000 Limit. The aggregate fair market value (determined as of the time an Option is granted) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by any Participant in any calendar year under this Plan and any other incentive stock option plans of the Company, its parent and its subsidiaries (as defined in Section 422(e) and 422(f) of the Code respectively) (which qualify under Section 422 of the Code) shall not exceed $100,000.

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(b) Other Code Limits. Incentive Stock Options may only be granted to employees of the Company that satisfy the other eligibility requirements of the Code. There will be imposed in any Option Agreement relating to Incentive Stock Options such other terms and conditions as from time to time are required in order that the Option be an Incentive Stock Option under Section 422 of the Code.

Section 10. Adjustments Upon Recapitalization or Reorganization.

(a) Adjustments. Subject to Section 13(b) hereof, if the outstanding shares of Common Stock of the Company are changed into, or exchanged for, a different number or kind of shares or securities of the Company through any capital reorganization or reclassification, or if the number of outstanding shares is changed through a stock split or stock dividend, an appropriate adjustment shall be made by the Committee in the number, kind or exercise price of shares as to which Options may be granted under the Plan. A corresponding adjustment shall likewise be made in the number, kind or exercise price of shares with respect to which unexercised Options have theretofore been granted. Any such adjustment in an outstanding Option, however, shall be made without change in the total price applicable to the unexercised portion of the Option but with a corresponding adjustment in the price for each Share covered by the Option. In making such adjustments, or in determining that no such adjustments are necessary, the Committee may rely upon the advice of counsel and accountants to the Company, and the good faith determination of the Committee shall be final, conclusive and binding. No fractional shares of stock shall be issued or issuable under the Plan on account of any such adjustment.

(b) Related Matters. Any adjustment made pursuant to this Section 10 shall be determined and made, if at all, by the Committee and shall include any correlative modification of terms which the Committee may deem necessary or appropriate so as to ensure the rights of the Participants in their respective Options are not substantially diminished nor enlarged as a result of the adjustment and corporate action other than as expressly contemplated in this Section 10. No adjustment of an Option exercise price per share pursuant to this Section 10 shall result in an exercise price which is less than the par value of the Common Stock.

Section 11. Option Agreement. Each Option granted under the Plan shall be evidenced by a written option agreement (an “Option Agreement”) executed by the Company and the Participant which (a) shall contain each of the provisions and agreements herein specifically required to be contained therein; (b) shall contain provisions which give the Company (or its designee) a right of first refusal to purchase any Shares issued pursuant to the exercise of Options granted under the Plan which a Participant proposes to sell; (c) shall contain certain repurchase rights of the Company; and (d) may contain such other terms and conditions as the Committee deems desirable and which are not inconsistent with the Plan.

Section 12. Privileges of Stock Ownership. Persons entitled to exercise any Options granted under this Plan shall have all of the rights or privileges of a shareholder of the Company in respect of any shares of Common Stock issuable upon exercise of

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such Option from and after the date of exercise of an Option. No Shares shall be issued and delivered upon exercise of any Option unless and until, in the opinion of counsel for the Company, there shall have been full compliance with any applicable registration requirements of the Securities Act, any applicable listing requirements of any national securities exchange or automated quotation system on which the Common Stock is then listed or quoted, and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery. The Company agrees to take all actions reasonably necessary to comply with all such requirements.

The Company agrees that Shares issued upon the exercise of Options shall, at the time of delivery, be validly issued and outstanding, fully paid and nonassessable. The Company covenants and agrees that it will pay, when due and payable, any and all federal and state stamp, original issue, or similar taxes which may be payable in respect of the issue of the Option or of Shares upon the exercise thereof.

Section 13. Termination of Options.

(a) Each Option granted under the Plan shall set forth a termination date thereof, which shall be not later than seven (7) years from the date such Option is granted subject to earlier termination as set forth in Section 13(b), or Section 14 hereof, or as otherwise set forth in each particular Option Agreement; provided, however, with respect to Incentive Stock Options, such termination shall be not later than five (5) years from the date such Option is granted if the Participant is a 10% stockholder of the Company (as defined in Section 422(b)(6) of the Code) at the time such Option is granted. An Incentive Stock Option shall contain any termination events required by Section 422 of the Code. The termination of employment, or service as a director, officer or consultant, of a Participant for any reason shall not accelerate or otherwise increase the number of Shares which may be purchased upon exercise of an Option; following such termination, the Option may only be exercised in accordance with the applicable Option Agreement and with respect to that number of Shares which could have been purchased under the Option had the Option been exercised by the Participant on the date of such termination.

(b) Subject to Section 14 hereof (i) upon the dissolution, liquidation or sale of all or substantially all of the business, properties and assets of the Company, (ii) upon any reorganization, merger, consolidation, sale or exchange of securities in which the Company does not survive (other than a merger whereby the Company merely reincorporates in another jurisdiction), or (iii) upon any sale (of more than fifty percent (50%) of the Company’s outstanding shares of Common Stock), reorganization, merger, consolidation or exchange of securities in which the Company does survive and any of the Company’s stockholders have the opportunity to receive cash, securities of another corporation, partnership or limited liability company and/or other property in exchange for their capital stock of the Company, or (iv) upon any acquisition by any person or group (as defined in Section 13(d) of the Exchange Act) of beneficial ownership of securities of the Company possessing more than fifty percent (50%) of the Company’s total combined voting power after the date of adoption of this plan (each of the events

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described in clauses (i), (ii), (iii) or (iv) is referred to herein as an “Extraordinary Event”), the Plan and each outstanding Option shall terminate. In such event each Participant shall have the right, by giving notice ten (10) days before the effective date of such Extraordinary Event (the “Effective Date”), to exercise on or before the Effective Date, in whole or in part, any unexpired Option issued to the Participant, to the extent that said Option is vested as of the Effective Date and exercisable as of the Effective Date, and otherwise is vested and exercisable pursuant to the provisions of said Option and of Section 6 of the Plan.

Section 14. Acceleration of Options.

(a) Acceleration. Notwithstanding the provisions of Section 6 or Section 13 hereof, or any provision to the contrary contained in a particular Option Agreement, the Committee, in its sole discretion, may accelerate the vesting of all or any portion of any Option then outstanding. The decision by the Committee to accelerate an Option or to decline to accelerate an Option shall be final. In the event of the acceleration of the exercisability of Options as the result of a decision by the Committee pursuant to this Section 14, each outstanding Option so accelerated shall be exercisable for a period from and after the date of such acceleration and upon such other terms and conditions as the Committee may determine in its sole discretion, provided that such terms and conditions (other than terms and conditions relating solely to the acceleration of exercisability and the related termination of an Option) may not materially adversely affect the rights of any Participant without the consent of the Participant so materially adversely affected. Any outstanding Option which has not been exercised by the holder at the end of such period shall terminate automatically at that time.

(b) Possible Rescission of Acceleration. If the vesting of an Option has been accelerated in anticipation of an event and the Committee or the Board later determines that the event will not occur, the Committee may rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested Options.

(c) Recapitalization Exception. Any discretion with respect to the events addressed in Section 13 or 14 shall be limited to the extent required by applicable accounting requirements in the case of a transaction intended to be accounted for as a recapitalization transaction.

Section 15. Substitute Options. If the Company at any time should succeed to the business of another entity through a merger, consolidation, corporate reorganization or exchange, or through the acquisition of stock or assets of such entity or its subsidiaries or otherwise, Options may be granted under the Plan to option holders of such entity or its subsidiaries, in substitution for options to purchase Shares in such entity held by them at the time of succession. The Committee, in its sole and absolute discretion, shall determine the extent to which such substitute Options shall be granted (if at all), the person or persons to receive such substitute Options (who need not be all option holders of such entity), the number of Options to be received by each such person, the exercise price of such Option and the other terms and conditions of such substitute Options.

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Section 16. Withholding Of Taxes. The Company may deduct and withhold from the wages, salary, bonus and other income paid by the Company to the Participant the requisite tax upon the amount of taxable income, if any, recognized by the Participant in connection with the exercise in whole or in part of any Option or the sale of the Shares issued to the Participant upon the exercise of an Option, as may be required from time to time under any federal or state tax laws and regulations. This withholding of tax shall be made from the Company’s concurrent or next payment of wages, salary, bonus or other income to the Participant or by payment to the Company by the Participant of the required withholding tax, as the Committee may determine; provided, however, that, in the sole discretion of the Committee, the Participant may pay such tax by reducing the number of Shares issued upon exercise of an Option (for which purpose such Shares shall be valued at fair market value as determined by the Committee on the basis of such evidence as it deems appropriate in its sole discretion). Notwithstanding the foregoing, the Company shall not be obligated to issue certificates representing the shares of Common Stock to be acquired through the exercise of such Option if such Participant fails to provide the Company with adequate assurance that such Participant will pay such amounts to the Company as herein above required. Participants shall notify the Company in writing of any amounts included as income in the Participants’ federal income tax returns in connection with an Option.

Section 17. Compliance with Laws.

(a) General. This Plan, the granting and vesting of Options under this Plan, the offer, issuance and delivery of the Shares, the payment of money under this Plan or under Options are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities laws and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. In addition, any securities delivered under this Plan may be subject to any special restrictions that the Committee may require to preserve recapitalization treatment under generally accepted accounting principles. Any Shares issued by the Company upon exercise of an Option granted hereunder shall be subject to (w) a right of first refusal of the Company with respect to all Shares proposed to be transferred by Participant, (x) certain repurchase rights of the Company, (y) certain drag-along rights and (z) certain other restrictions, in each case as set forth in each particular Option Agreement.

(b) The person acquiring any securities under this Plan will, if requested by the Company, provide such assurances and representations to the Company as the Committee may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements. The Company shall deliver annually to Participants such financial statements of the Company as are required to satisfy applicable securities laws.

(c) Compliance with Securities Laws. No Participant shall sell, pledge or otherwise transfer Shares acquired pursuant to an Option or any interest in such Shares

8

except in accordance with the express terms of this Plan and the applicable Option Agreement. Any attempted transfer in violation of this Section 17 shall be void and of no effect. Without in any way limiting the provisions set forth above, no Participant shall make any disposition of all or any portion of Shares acquired or to be acquired pursuant to an Option, except in compliance with all applicable federal and state securities laws and unless and until:

(i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

(ii) such disposition is made in accordance with Rule 144 under the Securities Act; or

(iii) the Participant notifies the Company of the proposed disposition and furnishes the Company with a statement of the circumstances surrounding the proposed disposition, and, if requested by the Company, furnishes to the Company an opinion of counsel acceptable to the Company’s counsel, that such disposition will not require registration under the Securities Act and will be in compliance with all applicable state securities laws.

Notwithstanding anything else herein to the contrary, the Company has no obligation to register the Shares or file any registration statement under either federal or state securities laws, nor does the Company make any representation concerning the likelihood of a public offering of the Shares or any other securities of the Company.

(d) Share Legends. All certificates evidencing Shares issued or delivered under this Plan shall bear the following legends and/or any other appropriate or required legends under applicable laws:

“OWNERSHIP OF THIS CERTIFICATE, THE SHARES EVIDENCED BY THIS CERTIFICATE AND ANY INTEREST THEREIN ARE SUBJECT TO SUBSTANTIAL RESTRICTIONS ON TRANSFER UNDER APPLICABLE LAW AND UNDER AGREEMENTS WITH THE COMPANY, INCLUDING RESTRICTIONS ON SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION.”

“THE SHARES ARE SUBJECT TO THE COMPANY’S RIGHT OF FIRST REFUSAL, COMPANY’S RIGHT TO REPURCHASE AND CERTAIN OBLIGATIONS TO SELL UNDER THE COMPANY’S 2005 STOCK OPTION PLAN AND AGREEMENTS WITH THE COMPANY THEREUNDER, COPIES OF WHICH ARE AVAILABLE FOR REVIEW AT THE OFFICE OF THE SECRETARY OF THE COMPANY.”

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“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL TO THE COMPANY, REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.”

Section 18. Effectiveness and Termination of the Plan. The Plan shall be effective as of the date on which this Plan is approved by the Board. The Plan shall terminate at the earliest of the time when all Shares which may be issued hereunder have been so issued. However, the Board may, in its sole discretion, terminate the Plan at any prior time. Subject to Section 13 hereof, no such termination shall in any way affect any Option then outstanding.

Section 19. Time of Granting Options. The date of grant of an Option shall, for all purposes, be the date on which the Board makes the determination granting such an Option. Notice of the determination shall be given to each Participant to whom an Option is so granted within a reasonable time after the date of such grant.

Section 20. Amendment of Plan. Subject to Section 14, the Committee may make such amendments to the Plan as it shall deem advisable. Subject to Section 14, no amendment shall materially adversely affect any Option then outstanding, without the consent of the Participant so materially adversely affected.

Section 21. Leaves of Absence. For purposes of the Plan, a Participant who is granted in writing a leave of absence shall be deemed to have remained in the employ of the Company during such leave of absence.

Section 22. No Obligation to Exercise Option. The granting of an Option shall impose no obligation on the Participant to exercise such Option.

Section 23. Indemnification. In addition to such other rights of indemnification as they may have as members of the Board of Directors, the members of the Committee shall be indemnified by the Company to the fullest extent permitted by law against the reasonable expenses, including attorney’s fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal thereof, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Option granted thereunder,

10

and against all amounts paid by them in satisfaction of a judgment in any such action, suit or proceeding except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is not entitled to indemnification under applicable law; provided, however, that within sixty (60) days after institution of any such action, suit or proceeding such Committee member shall in writing offer the Company the opportunity, at the Company’s expense to handle and defend the same, and such Committee member shall cooperate with and assist the Company in the defense of any such action, suit or proceeding. The Company shall not be obligated to indemnify any Committee member with regard to any settlement of any action, suit or proceeding to which the Company did not consent to in writing prior to such settlement.

Section 24. Not an Employment or Consulting Agreement. Nothing contained in the Plan or in any Option Agreement shall confer, intend to confer or imply any right of employment or right to continued employment by, or rights to a continued relationship with, the Company in favor of any Participant or limit the ability of the Company to terminate, with or without cause, in its sole and absolute discretion, the employment of any Participant, subject to the terms of any written employment to which a Participant is a party. In addition, nothing contained in the Plan or in any Option Agreement shall preclude any lawful action by the Company or the Board.

Section 25. Miscellaneous.

(a) Choice of Law. This Plan, the Options, all documents evidencing Options and all other related documents will be governed by, and construed in accordance with, the laws of the State of Indiana.

(b) Severability. If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan will continue in effect provided that the essential economic terms of this Plan and any Option granted under it can still be enforced.

(c) Captions. Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings will not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.

(d) Non-Exclusivity of Plan. Nothing in this Plan will limit or be deemed to limit the authority of the Board or the Committee to grant awards or authorize any other compensation, with or without reference to the Shares, under any other plan or independent authority.

(e) No Restriction on Corporate Powers. The existence of the Plan and the awards granted hereunder shall not affect or restrict in anyway the right or power of the Board or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting the Company’s capital stock or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding.

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EX-10.18

Exhibit 10.18

Amendments to 2005 Stock Option Plan

RESOLVED:	That, effective as of the Closing pursuant to the Exchange Agreement (the “Plan Assumption Date”), the Gregg Appliances, Inc. 2005 Stock Option Plan (the “GA 2005 Plan”) shall be assumed by hhgregg, following which no new grants of options may be made under the GA 2005 Plan and each option outstanding thereunder as of the Assumption Date shall constitute an option to purchase shares of the common stock, $0.001 par value per share, of hhgregg.
RESOLVED:	That effective as of the Closing pursuant to the Exchange Agreement, the GA 2005 Plan shall be amended in substantially the form of the Amendment to the 2005 Stock Option Plan attached hereto as Exhibit M (the “GA 2005 Plan Amendment”).
RESOLVED:	That, effective as of the Plan Assumption Date, no further shares of stock of Gregg Appliances may be delivered under the GA 2005 Plan on exercise of options granted pursuant to the GA 2005 Plan, and no shares of stock of Gregg Appliances shall be reserved for issuance under the GA 2005 Plan.

a. Section 1 is hereby amended to read in its entirety as follows:

“Section 1. Description of Plan. This is the 2005 Stock Option Plan dated March 8, 2005 (the “Plan”) of Gregg Appliances, Inc., an Indiana corporation (“Gregg Appliances”). This Plan was established to provide a means whereby designated employees, directors, officers or consultants of Gregg Appliances could be granted options to purchase shares of the common stock, no par value, of Gregg Appliances.

“Effective April 12, 2007 (the “Plan Assumption Date”), this Plan was assumed by hhgregg, Inc., a Delaware corporation (the “Company”). After the Plan Assumption Date, no new grants of options may be made hereunder and each option outstanding as of the Assumption Date shall constitute an option to purchase shares of the common stock, $0.0001 par value per share, of the Company (the “Shares” or the “Common Stock”).

“It is intended that the options under this Plan will either qualify for treatment as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) and be designated “Incentive Stock Options” or not qualify for such treatment and be designated “Nonqualified Stock Options.” Incentive Stock Options may only be granted to employees. This Plan is intended to qualify as and constitute a compensatory benefit plan under Rule 701 promulgated under the Securities Act of 1933, as amended (such act, and the rules and regulations promulgated thereunder, the “Act”).”

b. Section 5, subsection (b) is hereby amended to read in its entirety as follows:

“(b) Share Limits. The aggregate number of Shares which may be issued under the Plan after the Plan Assumption Date shall not exceed the number of Shares issuable pursuant to Options granted under the Plan on or prior to the Plan Assumption Date. Such number shall be automatically adjusted for any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction of the Company.”

c. Section 6 is hereby amended to read in its entirety as follows:

“Section 6. Restrictions on Grants; Vesting of Options. Notwithstanding any other provisions set forth herein or in any Option Agreement, no Options may be granted under the Plan subsequent to ten (10) years from the date hereof nor after the Plan Assumption Date. Each Option shall grant the Participant the right to purchase a specified number of Shares at a price determined by the Committee, as such price or the basis upon which price is determined is set forth in each respective Option Agreement (the “Exercise Price”). The shares of Common Stock subject to Options granted under the Plan will become exercisable in three equal annual installments with the first installment exercisable one year from the date of grant of the Option and have a term of seven years from the date of grant. If the Participant is a 10% stockholder of the Company (as defined in Section 422(b)(6) of the Code) at the time such Participant is

granted an Incentive Stock Option, the Exercise Price shall be not less than 110% of the fair market value of such Shares on the date of grant of the Option. Such fair market value shall be determined by the Committee on the basis of such evidence as it deems appropriate in its sole discretion.”

d. Section 13, subsection (b), is hereby amended to read in its entirety as following:

“(b) Subject to Section 14 hereof (i) upon the dissolution, liquidation or sale of all or substantially all of the business, properties and assets of the Company, (ii) upon any reorganization, merger, consolidation, sale or exchange of securities in which the Company does not survive (other than a merger whereby the Company merely reincorporates in another jurisdiction), or (iii) upon any sale (of more than fifty percent (50%) of the Company’s outstanding shares of Common Stock), reorganization, merger, consolidation or exchange of securities in which the Company does survive and any of the Company’s stockholders have the opportunity to receive cash, securities of another corporation, partnership or limited liability company and/or other property in exchange for their capital stock of the Company, or (iv) upon any acquisition by any person or group (as defined in Section 13(d) of the Exchange Act) of beneficial ownership of securities of the Company possessing more than fifty percent (50%) of the Company’s total combined voting power after the date of adoption of this plan (each of the events described in clauses (i), (ii), (iii) or (iv) is referred to herein as an “Extraordinary Event”), the Plan and each outstanding Option shall terminate unless and to the extent that the Company and any acquiring or successor corporation (or parent corporation of either) shall agree, each acting in its sole discretion, that such acquiring or successor corporation (or parent corporation of either) shall assume all or part of one or more of the outstanding Options or grant options in substitution for all or part of one or more of the outstanding Options. In such event each Participant shall have the right, by giving notice ten (10) days before the effective date of such Extraordinary Event (the “Effective Date”), to exercise on or before the Effective Date, in whole or in part, any unexpired Option issued to the Participant, to the extent that said Option is vested as of the Effective Date and exercisable as of the Effective Date, and otherwise is vested and exercisable pursuant to the provisions of said Option and of Section 6 of the Plan.”

e. The initial sentence of Section 17, subsection (d)(“Share Legends”), is hereby amended by adding at the beginning thereto the following: “To the extent the Committee deems necessary or appropriate in the circumstances, . . .”

EX-10.19

Exhibit 10.19

GREGG INVESTMENT CORPORATION, LLC

2005 RESTRICTED UNIT SUBSCRIPTION PLAN

Section 1. Description of Plan. This is the 2005 Restricted Unit Subscription Plan, dated June 14, 2005 (the “Plan”), of Gregg Investment Corporation, LLC, a Delaware limited liability company (the “Company”). Under the Plan, directors, officers, employees and consultants of Gregg Appliances, Inc., a majority owned subsidiary of the Company (“Gregg”), to be selected as set forth below, may be sold and issued Series A Units of the Company (“Units”).

Section 2. Purpose of Plan. The purpose of the Plan and the issuance and sale of Units to specified persons is to further the growth, development and financial success of the Company and Gregg by providing additional incentives to directors, officers, employees and consultants of Gregg. By assisting such persons in acquiring Units, the Company can ensure that such persons will themselves benefit directly from the Company’s and Gregg’s growth, development and financial success and increases in value in the Company’s investment in Gregg arising therefrom.

Section 3. Eligibility. The persons who shall be eligible to receive Units under the Plan shall be the directors, officers, employees and consultants of Gregg, designated by the Managing Member (as defined below) and the Board of Directors of Gregg (each, a “Participant”).

Section 4. Administration. The Plan shall be administered by the Managing Member of the Company (the “Managing Member”) who shall be empowered to interpret and administer the Plan in its sole discretion.

Section 5. Units Subject to the Plan. Units shall be subject to the Plan when the Managing Member authorizes issuances of Units to Participants and the number of Units subject to the Plan will be the number of outstanding Units, which number may be increased at such time as the Managing Member issues Units, subject to adjustment to reflect any split, combination, recapitalization or reclassification with respect to the Units.

Section 6. Issuance of Units. The Company’s obligation to issue Units pursuant to the Plan is expressly conditioned upon the completion by the Company of any registration or other qualification of such Units under any state and/or federal law or rulings and regulations of any government regulatory body and the making of such investment representations or other representations and undertakings by a Participant (or such person’s legal representative, heir or legatee, as the case may be) in order to comply with the requirements of any exemption from any such registration or other qualification of such Units which the Company in its sole discretion shall deem necessary or advisable.

Section 7. Restricted Unit Subscription Agreement. The Units issued and sold pursuant to the Plan shall be evidenced by a written restricted unit subscription agreement (the “Unit Subscription Agreement”) executed by the Company and the Participant. The Unit Subscription Agreement (i) shall contain such terms and conditions as the Managing Member

deems desirable and which are not inconsistent with the Plan; (ii) shall contain each of the provisions and agreements herein specifically required to be contained therein; and (iii) may contain provisions which give the Company (or its designee) a right to repurchase all or any portion of a Participant’s Units under specified circumstances, and (B) specify the form of lawful consideration for the payment of Units by a Participant who proposes to purchase under the Plan.

Section 8. Withholding of Taxes. Gregg, at the direction of the Company, may deduct and withhold from the wages, salary, bonus and other income paid by Gregg to a Participant the requisite tax upon the amount of taxable income, if any, recognized by such person in connection with the issuance of the Company’s Units, as may be required from time to time under any federal or state tax laws and regulations. This withholding of tax shall be made from Gregg’s concurrent or next payment of wages, salary, bonus or other income to a Participant or by payment to Gregg by the such person of the required withholding tax, as the Managing Member may determine.

Section 9. Effectiveness and Termination of Plan. The Plan shall be effective on the date on which it is adopted by the Managing Member and the Managing Member may in its sole discretion terminate the Plan at any time.

Section 10. Amendment of Plan. The Managing Member may make such amendments to the Plan and, with the written consent of each Participant affected, to the terms and conditions of the Unit Subscription Agreement as it shall deem advisable.

Section 11. Indemnification. In addition to such other rights of indemnification as it may have as Managing Member, the Managing Member shall be indemnified by the Company against the reasonable expenses, including attorneys’ fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal thereof, to which it may be a party by reason of any action taken or failure to act under or in connection with the Plan, and against all amounts paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Managing Member is liable for negligence or misconduct in the performance of its duties; provided that within 60 days after institution of any such action, suit or proceeding the Managing Member shall in writing offer the Company the opportunity, at the Company’s expense, to handle and defend the same.

Section 12. Governing Law. The Plan shall be construed under and governed by the laws of the State of Delaware without regard to conflict of law provisions thereof.

Section 13. Not an Employment or Other Agreement. Nothing contained in the Plan or in any Unit Subscription Agreement shall confer, intend to confer or imply any rights of employment or rights to any other relationship or rights to continued employment by, or rights to a continued relationship with, the Company or Gregg in favor of any Participant or limit the ability of the Company or Gregg to terminate, with or without cause, in its sole and absolute discretion, the employment of, or relationship with, any Participant subject to the terms of any written employment or other agreement to which a Participant is a party.

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EX-10.20

Exhibit 10.20

HHGREGG, INC.

2007 EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

1.	Purpose	1
2.	Definitions	1
3.	Term of the Plan	5
4.	Stock Subject to the Plan	5
5.	Administration	5
6.	Authorization of Grants	6
7.	Specific Terms of Awards	7
8.	Adjustment Provisions	13
9.	Change of Control	14
10.	Settlement of Awards	15
11.	Reservation of Stock	17
12.	Limitation of Rights in Stock; No Special Service Rights	17
13.	Unfunded Status of Plan	17
14.	Nonexclusivity of the Plan	18
15.	Termination and Amendment of the Plan	18
16.	Notices and Other Communications	18
17.	Governing Law	19

HHGREGG, INC.

2007 EQUITY INCENTIVE PLAN

1. Purpose

This Plan is intended to encourage ownership of Stock by employees, consultants and directors of the Company and its Affiliates and to provide additional incentive for them to promote the success of the Company’s business through the grant of Awards of or pertaining to shares of the Company’s Stock. The Plan is intended to be an incentive stock option plan within the meaning of Section 422 of the Code, but not all Awards are required to be Incentive Options.

2. Definitions

As used in this Plan, the following terms shall have the following meanings:

2.1. Accelerate, Accelerated, and Acceleration, means: (a) when used with respect to an Option or Stock Appreciation Right, that as of the time of reference the Option or Stock Appreciation Right will become exercisable with respect to some or all of the shares of Stock for which it was not then otherwise exercisable by its terms; (b) when used with respect to Restricted Stock or Restricted Stock Units, that the Risk of Forfeiture otherwise applicable to the Stock or Units shall expire with respect to some or all of the shares of Restricted Stock or Units then still otherwise subject to the Risk of Forfeiture; and (c) when used with respect to Performance Units, that the applicable Performance Goals shall be deemed to have been met as to some or all of the Units.

2.2. Acquisition means a merger or consolidation of the Company into another person (i.e., which merger or consolidation the Company does not survive) or the sale, transfer, or other disposition of all or substantially all of the Company’s assets to one or more other persons in a single transaction or series of related transactions.

2.3. Affiliate means any corporation, partnership, limited liability company, business trust, or other entity controlling, controlled by or under common control with the Company.

2.4. Award means any grant or sale pursuant to the Plan of Options, Stock Appreciation Rights, Performance Units, Restricted Stock, Restricted Stock Units, or Stock Grants.

2.5. Award Agreement means an agreement between the Company and the recipient of an Award, setting forth the terms and conditions of the Award.

2.6. Board means the Company’s Board of Directors.

2.7. Change of Control means the occurrence of any of the following after the date of the approval of the Plan by the Board:

(a) an Acquisition, unless securities possessing more than 50% of the total combined voting power of the survivor’s or acquiror’s outstanding securities (or the securities of any parent thereof) are held by a person or persons who held securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities immediately prior to that transaction, or

(b) any person or group of persons (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended and in effect from time to time) directly or indirectly acquires, including but not limited to by means of a merger or consolidation, beneficial ownership (determined pursuant to Securities and Exchange Commission Rule 13d-3 promulgated under the said Exchange Act) of securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders that the Board does not recommend such stockholders accept, other than (i) the Company or an Affiliate, (ii) an employee benefit plan of the Company or any of its Affiliates, (iii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, or (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or

(c) over a period of 36 consecutive months or less, there is a change in the composition of the Board such that a majority of the Board members (rounded up to the next whole number, if a fraction) ceases, by reason of one or more proxy contests for the election of Board members, to be composed of individuals who either (i) have been Board members continuously since the beginning of that period, or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in the preceding clause (i) who were still in office at the time that election or nomination was approved by the Board; or

(d) a majority of the Board votes in favor of a decision that a Change of Control has occurred.

2.8. Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto, and any regulations issued from time to time thereunder.

2.9. Committee means the Compensation Committee of the Board, which in general is responsible for the administration of the Plan, as provided in Section 5 of the Plan. For any period during which no such committee is in existence “Committee” shall mean the Board and all authority and responsibility assigned to the Committee under the Plan shall be exercised, if at all, by the Board.

2.10. Company means hhgregg, Inc., a corporation organized under the laws of the State of Delaware.

2.11. Covered Employee means an employee who is a “covered employee” within the meaning of Section 162(m) of the Code.

2.12. Grant Date means the date as of which an Option is granted, as determined under Section 7.1(a).

2.13. Incentive Option means an Option which by its terms is to be treated as an “incentive stock option” within the meaning of Section 422 of the Code.

2.14. Market Value means the value of a share of Stock on a particular date determined by such methods or procedures as may be established by the Committee. Unless otherwise

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determined by the Committee, the Market Value of Stock as of any date is the closing price for the Stock as reported on the New York Stock Exchange (or on any other national securities exchange on which the Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was reported. For purposes of Awards effective as of the effective date of the Company’s initial public offering, Market Value of Stock shall be the price at which the Company’s Stock is offered to the public in its initial public offering.

2.15. Nonstatutory Option means any Option that is not an Incentive Option.

2.16. Option means an option to purchase shares of Stock.

2.17. Optionee means a Participant to whom an Option shall have been granted under the Plan.

2.18. Participant means any holder of an outstanding Award under the Plan.

2.19. Performance Criteria means the criteria that the Committee selects for purposes of establishing the Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria used to establish Performance Goals are limited to: (i) cash flow (before or after dividends), (ii) earnings per share (including, without limitation, earnings before interest, taxes, depreciation and amortization), (iii) stock price, (iv) return on equity, (v) stockholder return or total stockholder return, (vi) return on capital (including, without limitation, return on total capital or return on invested capital), (vii) return on investment, (viii) return on assets or net assets, (ix) market capitalization, (x) economic value added, (xi) debt leverage, (xii) same store sales, (xiii) sales or net sales, (xiv) store openings, (xv) completion and financial performance of acquisitions, (xvi) income, pre-tax income or net income, (xvii) operating income or pre-tax profit, (xviii) operating profit, net operating profit or economic profit, (xix) gross margin, operating margin or profit margin, (xx) return on operating revenue or return on operating assets, (xxi) cash from operations, (xxii) operating ratio, (xxiii) operating revenue, (xxiv) market share improvement, (xxv) general and administrative expenses, and (xxvi) customer service.

2.20. Performance Goals means, for a Performance Period, the written goal or goals established by the Committee for the Performance Period based upon the Performance Criteria. The Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, subsidiary, or an individual, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Affiliate, either individually, alternatively or in any combination, and measured either quarterly, annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Committee. The Committee will, in the manner and within the time prescribed by Section 162(m) of the Code in the case of Qualified Performance-Based Awards, objectively define the manner of calculating the Performance Goal or Goals it selects to use for such Performance Period for such Participant. To the extent consistent with Section 162(m) of the Code, the Committee may appropriately adjust any evaluation of performance against a Performance Goal to exclude any of the following events that occurs during a Performance Period: (i) acquisitions or dispositions, (ii) asset write-downs, (iii) litigation, claims, judgments or settlements, (iv) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (v) accruals for reorganization and restructuring programs;

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and (vi) any extraordinary, unusual, non-recurring or non-comparable items (A) as described in Accounting Principles Board Opinion No. 30, (B) as described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s Annual Report to stockholders for the applicable year, or (C) publicly announced by the Company in a press release or conference call relating to the Company’s results of operations or financial condition for a completed quarterly or annual fiscal period.

2.21. Performance Period means the one or more periods of time, which may be of varying and overlapping durations, selected by the Committee, over which the attainment of one or more Performance Goals or other business objectives will be measured for purposes of determining a Participant’s right to, and the payment of, a Performance Unit.

2.22. Performance Unit means a right granted to a Participant under Section 7.5, to receive cash, Stock or other Awards, the payment of which is contingent on achieving Performance Goals or other business objectives established by the Committee.

2.23. Plan means this 2007 Equity Incentive Plan of the Company, as amended from time to time, and including any attachments or addenda hereto.

2.24. Qualified Performance-Based Awards means Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

2.25. Restricted Stock means a grant or sale of shares of Stock to a Participant subject to a Risk of Forfeiture.

2.26. Restricted Stock Units means rights to receive shares of Stock at the close of a Restriction Period, subject to a Risk of Forfeiture.

2.27. Restriction Period means the period of time, established by the Committee in connection with an Award of Restricted Stock or Restricted Stock Units, during which the shares of Restricted Stock are subject to a Risk of Forfeiture described in the applicable Award Agreement.

2.28. Risk of Forfeiture means a limitation on the right of the Participant to retain Restricted Stock or Restricted Stock Units, including a right of the Company to reacquire shares of Restricted Stock at less than their then Market Value, arising because of the occurrence or non-occurrence of specified events or conditions.

2.29. Stock means common stock, par value $0.0001 per share, of the Company, and such other securities as may be substituted for Stock pursuant to Section 8.

2.30. Stock Appreciation Right means a right to receive any excess in the Market Value of shares of Stock (except as otherwise provided in Section 7.2(c)) over a specified exercise price.

2.31. Stock Grant means the grant of shares of Stock not subject to restrictions or other forfeiture conditions.

2.32. Stockholders’ Agreement means any agreement by and among the holders of at least a majority of the outstanding voting securities of the Company and setting forth, among other provisions, restrictions upon the transfer of shares of Stock or on the exercise of rights appurtenant thereto (including but not limited to voting rights).

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2.33. Ten Percent Owner means a person who owns, or is deemed within the meaning of Section 422(b)(6) of the Code to own, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company (or any parent or subsidiary corporations of the Company, as defined in Sections 424(e) and (f), respectively, of the Code). Whether a person is a Ten Percent Owner shall be determined with respect to an Option based on the facts existing immediately prior to the Grant Date of the Option.

3. Term of the Plan

Unless the Plan shall have been earlier terminated by the Board, Awards may be granted under this Plan at any time in the period commencing on the date of approval of the Plan by the Board and ending immediately prior to the tenth anniversary of the earlier of the adoption of the Plan by the Board or approval of the Plan by the Company’s stockholders. Awards granted pursuant to the Plan within that period shall not expire solely by reason of the termination of the Plan. Awards of Incentive Options granted prior to stockholder approval of the Plan are expressly conditioned upon such approval, but in the event of the failure of the stockholders to approve the Plan shall thereafter and for all purposes be deemed to constitute Nonstatutory Options.

4. Stock Subject to the Plan

At no time shall the number of shares of Stock issued pursuant to or subject to outstanding Awards granted under the Plan (including pursuant to Incentive Options), nor the number of shares of Stock issued pursuant to Incentive Options, exceed 1,500,000 shares of Stock; subject, however, to the provisions of Section 8 of the Plan. For purposes of applying the foregoing limitation, (a) if any Option or Stock Appreciation Right expires, terminates, or is cancelled for any reason without having been exercised in full, or if any other Award is forfeited by the recipient or repurchased at less than its Market Value, the shares not purchased by the Optionee or which are forfeited by the recipient or repurchased shall again be available for Awards to be granted under the Plan and (b) if any Option is exercised by delivering previously owned shares in payment of the exercise price therefor, only the net number of shares, that is, the number of shares issued minus the number received by the Company in payment of the exercise price, shall be considered to have been issued pursuant to an Award granted under the Plan. In addition, settlement of any Award shall not count against the foregoing limitations except to the extent settled in the form of Stock. Shares of Stock issued pursuant to the Plan may be either authorized but unissued shares or shares held by the Company in its treasury.

5. Administration

The Plan shall be administered by the Committee; provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities hereunder. Subject to the provisions of the Plan, the Committee shall have complete authority, in its discretion, to make or to select the manner of making all determinations with respect to each Award to be granted by the Company under the Plan including the employee, consultant or director to receive the Award and the form of Award. In making such determinations, the

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Committee may take into account the nature of the services rendered by the respective employees, consultants, and directors, their present and potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Award Agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan. The Committee’s determinations made in good faith on matters referred to in the Plan shall be final, binding and conclusive on all persons having or claiming any interest under the Plan or an Award made pursuant hereto.

6. Authorization of Grants

6.1. Eligibility. The Committee may grant from time to time and at any time prior to the termination of the Plan one or more Awards, either alone or in combination with any other Awards, to any employee of or consultant to one or more of the Company and its Affiliates or to non-employee member of the Board or of any board of directors (or similar governing authority) of any Affiliate. However, only employees of the Company, and of any parent or subsidiary corporations of the Company, as defined in Sections 424(e) and (f), respectively, of the Code, shall be eligible for the grant of an Incentive Option. Further, in no event shall the number of shares of Stock covered by Options or other Awards granted to any one person in any one calendar year exceed the aggregate number of shares of Stock subject to the Plan.

6.2. General Terms of Awards. Each grant of an Award shall be subject to all applicable terms and conditions of the Plan (including but not limited to any specific terms and conditions applicable to that type of Award set out in the following Section), and such other terms and conditions, not inconsistent with the terms of the Plan, as the Committee may prescribe. No prospective Participant shall have any rights with respect to an Award, unless and until such Participant shall have complied with the applicable terms and conditions of such Award (including if applicable delivering a fully executed copy of any agreement evidencing an Award to the Company).

6.3. Effect of Termination of Employment, Etc. Unless the Committee shall provide otherwise with respect to any Award, if the Participant’s employment or other association with the Company and its Affiliates ends for any reason, including because of the Participant’s employer ceasing to be an Affiliate, (a) any outstanding Option or SAR of the Participant shall cease to be exercisable in any respect not later than 90 days following that event and, for the period it remains exercisable following that event, shall be exercisable only to the extent exercisable at the date of that event, and (b) any other outstanding Award of the Participant shall be forfeited or otherwise subject to return to or repurchase by the Company on the terms specified in the applicable Award Agreement. Military or sick leave or other bona fide leave shall not be deemed a termination of employment or other association, provided that it does not exceed the longer of ninety (90) days or the period during which the absent Participant’s reemployment rights, if any, are guaranteed by statute or by contract.

6.4. Non-Transferability of Awards. Except as otherwise provided in this Section 6.4, Awards shall not be transferable, and no Award or interest therein may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. All of a Participant’s rights in any Award may be exercised during the life of the Participant only by the Participant or the Participant’s legal representative. However,

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the Committee may, at or after the grant of an Award of a Nonstatutory Option, or shares of Restricted Stock, provide that such Award may be transferred by the recipient to a family member; provided, however, that any such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless first approved by the Committee, acting in its sole discretion. For this purpose, “family member” means any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which the foregoing persons have more than fifty (50) percent of the beneficial interests, a foundation in which the foregoing persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty (50) percent of the voting interests.

7. Specific Terms of Awards

7.1. Options.

(a) Date of Grant. The granting of an Option shall take place at the time specified in the Award Agreement. Only if expressly so provided in the applicable Award Agreement shall the Grant Date be the date on which the Award Agreement shall have been duly executed and delivered by the Company and the Optionee.

(b) Exercise Price. The price at which shares of Stock may be acquired under each Incentive Option shall be not less than 100% of the Market Value of Stock on the Grant Date, or not less than 110% of the Market Value of Stock on the Grant Date if the Optionee is a Ten Percent Owner. The price at which shares may be acquired under each Nonstatutory Option shall not be so limited solely by reason of this Section.

(c) Option Period. No Incentive Option may be exercised on or after the tenth anniversary of the Grant Date, or on or after the fifth anniversary of the Grant Date if the Optionee is a Ten Percent Owner. The Option period under each Nonstatutory Option shall not be so limited solely by reason of this Section.

(d) Exercisability. An Option may be immediately exercisable or become exercisable in such installments, cumulative or non-cumulative, as the Committee may determine. In the case of an Option not otherwise immediately exercisable in full, the Committee may Accelerate such Option in whole or in part at any time; provided, however, that in the case of an Incentive Option, any such Acceleration of the Option would not cause the Option to fail to comply with the provisions of Section 422 of the Code or the Optionee consents to the Acceleration.

(e) Method of Exercise. An Option may be exercised by the Optionee giving written notice, in the manner provided in Section 16, specifying the number of shares with respect to which the Option is then being exercised. The notice shall be accompanied by payment in the form of cash or check payable to the order of the Company in an amount equal to the exercise price of the shares to be purchased. In lieu of payment in cash or by check, but subject in each instance to the Committee’s approval, acting in its sole discretion, and to such conditions, if any, as the Committee may deem necessary to avoid adverse accounting effects to the Company, payment may be made

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(i) by delivery to the Company of shares of Stock having a Market Value equal to the exercise price of the shares to be purchased, or

(ii) by surrender of the Option as to all or part of the shares of Stock for which the Option is then exercisable in exchange for shares of Stock having an aggregate Market Value equal to the difference between (1) the aggregate Market Value of the surrendered portion of the Option, and (2) the aggregate exercise price under the Option for the surrendered portion of the Option, or

(iii) unless prohibited by applicable law, by delivery to the Company of the Optionee’s executed promissory note in the principal amount equal to the exercise price of the shares to be purchased and otherwise in such form as the Committee shall have approved.

If the Stock is traded on an established market, payment of any exercise price may also be made through and under the terms and conditions of any formal cashless exercise program authorized by the Company entailing the sale of the Stock subject to an Option in a brokered transaction (other than to the Company). Receipt by the Company of such notice and payment in any authorized or combination of authorized means shall constitute the exercise of the Option. Within thirty (30) days thereafter but subject to the remaining provisions of the Plan, the Company shall deliver or cause to be delivered to the Optionee or his agent a certificate or certificates for the number of shares then being purchased. Such shares shall be fully paid and nonassessable.

(f) Limit on Incentive Option Characterization. An Incentive Option shall be considered to be an Incentive Option only to the extent that the number of shares of Stock for which the Option first becomes exercisable in a calendar year do not have an aggregate Market Value (as of the date of the grant of the Option) in excess of the “current limit”. The current limit for any Optionee for any calendar year shall be $100,000 minus the aggregate Market Value at the date of grant of the number of shares of Stock available for purchase for the first time in the same year under each other Incentive Option previously granted to the Optionee under the Plan, and under each other incentive stock option previously granted to the Optionee under any other incentive stock option plan of the Company and its Affiliates, after December 31, 1986. Any shares of Stock which would cause the foregoing limit to be violated shall be deemed to have been granted under a separate Nonstatutory Option, otherwise identical in its terms to those of the Incentive Option.

(g) Notification of Disposition. Each person exercising any Incentive Option granted under the Plan shall be deemed to have covenanted with the Company to report to the Company any disposition of such shares prior to the expiration of the holding periods specified by Section 422(a)(1) of the Code and, if and to the extent that the realization of income in such a disposition imposes upon the Company federal, state, local or other withholding tax requirements, or any such withholding is required to secure for the Company an otherwise available tax deduction, to remit to the Company an amount in cash sufficient to satisfy those requirements.

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7.2. Stock Appreciation Rights.

(a) Tandem or Stand-Alone. Stock Appreciation Rights may be granted in tandem with an Option (at or, in the case of a Nonstatutory Option, after, the award of the Option), or alone and unrelated to an Option. Stock Appreciation Rights in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem Stock Appreciation Rights are exercised.

(b) Exercise Price. Stock Appreciation Rights shall have an exercise price of not less than fifty percent (50%) of the Market Value of the Stock on the date of award, or in the case of Stock Appreciation Rights in tandem with Options, the exercise price of the related Option.

(c) Other Terms. Except as the Committee may deem inappropriate or inapplicable in the circumstances, Stock Appreciation Rights shall be subject to terms and conditions substantially similar to those applicable to a Nonstatutory Option. In addition, an SAR related to an Option which can only be exercised during limited periods following a Change of Control may entitle the Participant to receive an amount based upon the highest price paid or offered for Stock in any transaction relating to the Change of Control or paid during the thirty (30) day period immediately preceding the occurrence of the Change of Control in any transaction reported in the stock market in which the Stock is normally traded.

7.3. Restricted Stock.

(a) Purchase Price. Shares of Restricted Stock shall be issued under the Plan for such consideration, in cash, other property or services, or any combination thereof, as is determined by the Committee.

(b) Issuance of Certificates. Each Participant receiving a Restricted Stock Award, subject to subsection (c) below, shall be issued a stock certificate in respect of such shares of Restricted Stock. Such certificate shall be registered in the name of such Participant, and, if applicable, shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award substantially in the following form:

The transferability of this certificate and the shares represented by this certificate are subject to the terms and conditions of hhgregg, Inc. 2007 Equity Incentive Plan and an Award Agreement entered into by the registered owner and hhgregg, Inc. Copies of such Plan and Agreement are on file in the offices of hhgregg, Inc.

(c) Escrow of Shares. The Committee may require that the stock certificates evidencing shares of Restricted Stock be held in custody by a designated escrow agent (which may but need not be the Company) until the restrictions thereon shall have lapsed, and that the Participant deliver a stock power, endorsed in blank, relating to the Stock covered by such Award.

(d) Restrictions and Restriction Period. During the Restriction Period applicable to shares of Restricted Stock, such shares shall be subject to limitations on transferability and a Risk of Forfeiture arising on the basis of such conditions related to the

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performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the applicable Award Agreement. Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems appropriate.

(e) Rights Pending Lapse of Risk of Forfeiture or Forfeiture of Award. Except as otherwise provided in the Plan or the applicable Award Agreement, at all times prior to lapse of any Risk of Forfeiture applicable to, or forfeiture of, an Award of Restricted Stock, the Participant shall have all of the rights of a stockholder of the Company, including the right to vote, and the right to receive any dividends with respect to, the shares of Restricted Stock. The Committee, as determined at the time of Award, may permit or require the payment of cash dividends to be deferred and, if the Committee so determines, reinvested in additional Restricted Stock to the extent shares are available under Section 4.

(f) Lapse of Restrictions. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock, the certificates for such shares shall be delivered to the Participant promptly if not theretofore so delivered.

7.4. Restricted Stock Units.

(a) Character. Each Restricted Stock Unit shall entitle the recipient to a share of Stock at a close of such Restriction Period as the Committee may establish and subject to a Risk of Forfeiture arising on the basis of such conditions relating to the performance of services, Company or Affiliate performance or otherwise as the Committee may determine and provide for in the applicable Award Agreement. Any such Risk of Forfeiture may be waived or terminated, or the Restriction Period shortened, at any time by the Committee on such basis as it deems appropriate.

(b) Form and Timing of Payment. Payment of earned Restricted Stock Units shall be made in a single lump sum following the close of the applicable Restriction Period. At the discretion of the Committee, Participants may be entitled to receive payments equivalent to any dividends declared with respect to Stock referenced in grants of Restricted Stock Units but only following the close of the applicable Restriction Period and then only if the underlying Stock shall have been earned. Unless the Committee shall provide otherwise, any such dividend equivalents shall be paid, if at all, without interest or other earnings.

7.5. Performance Units.

(a) Character. Each Performance Unit shall entitle the recipient to the value of a specified number of shares of Stock, over the initial value for such number of shares, if any, established by the Committee at the time of grant, at the close of a specified Performance Period to the extent specified business objectives, including but not limited to Performance Goals, shall have been achieved.

(b) Earning of Performance Units. The Committee shall set Performance Goals or other business objectives in its discretion which, depending on the extent to which they are met within the applicable Performance Period, will determine the number and value of Performance Units that will be paid out to the Participant. After the applicable Performance Period has ended, the holder of Performance Units shall be entitled to receive payout on the number and value of Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals or other business objectives have been achieved.

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(c) Form and Timing of Payment. Payment of earned Performance Units shall be made in a single lump sum following the close of the applicable Performance Period. At the discretion of the Committee, Participants may be entitled to receive any dividends declared with respect to Stock which have been earned in connection with grants of Performance Units which have been earned, but not yet distributed to Participants. The Committee may permit or, if it so provides at grant require, a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Stock that would otherwise be due to such Participant by virtue of the satisfaction of any requirements or goals with respect to Performance Units. If any such deferral election is required or permitted, the Committee shall establish rules and procedures for such payment deferrals.

7.6. Stock Grants. Stock Grants shall be awarded in recognition of significant prior or expected contributions to the success of the Company or its Affiliates, in lieu of compensation otherwise already due, as inducements to employment and in such other circumstances as the Committee deems appropriate. Stock Grants shall be made without forfeiture conditions of any kind.

7.7. Qualified Performance-Based Awards.

(a) Purpose. The purpose of this Section 7.7 is to provide the Committee the ability to qualify Awards as “performance-based compensation” under Section 162(m) of the Code. If the Committee, in its discretion, decides to grant an Award as a Qualified Performance-Based Award, the provisions of this Section 7.7 will control over any contrary provision contained in the Plan. In the course of granting any Award, the Committee may specifically designate the Award as intended to qualify as a Qualified Performance-Based Award. However, no Award shall be considered to have failed to qualify as a Qualified Performance-Based Award solely because the Award is not expressly designated as a Qualified Performance-Based Award, if the Award otherwise satisfies the provisions of this Section 7.7 and the requirements of Section 162(m) of the Code and the regulations promulgated thereunder applicable to “performance-based compensation.”

(b) Authority. All grants of Awards intended to qualify as Qualified Performance-Based Awards and determination of terms applicable thereto shall be made by the Committee or, if not all of the members thereof qualify as “outside directors” within the meaning of applicable IRS regulations under Section 162 of the Code, a subcommittee of the Committee consisting of such of the members of the Committee as do so qualify. Any action by such a subcommittee shall be considered the action of the Committee for purposes of the Plan.

(b) Applicability. This Section 7.7 will apply only to those Covered Employees, or to those persons who the Committee determines are reasonably likely to become Covered Employees in the period covered by an Award, selected by the Committee to receive Qualified Performance-Based Awards. The Committee may, in its discretion, grant Awards to Covered Employees that do not satisfy the requirements of this Section 7.7.

(c) Discretion of Committee with Respect to Qualified Performance-Based Awards. Options may be granted as Qualified Performance-Based Awards in accordance with Section 7.1, except that the exercise price of any Option intended to qualify as a Qualified

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Performance-Based Award shall in no event be less that the Market Value of the Stock on the date of grant. Other Awards intended to qualify as Qualified Performance-Based Awards, such as Restricted Stock, Restricted Stock Units, or Performance Units, shall be subject to satisfaction of one or more Performance Goals. The Committee will have full discretion to select the length of any applicable Restriction Period or Performance Period, the kind and/or level of the applicable Performance Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary or any division or business unit or to the individual. Any Performance Goal or Goals applicable to Qualified Performance-Based Awards shall be objective, shall be established not later than ninety (90) days after the beginning of any applicable Performance Period (or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code) and shall otherwise meet the requirements of Section 162(m) of the Code, including the requirement that the outcome of the Performance Goal or Goals be substantially uncertain (as defined in the regulations under Section 162(m) of the Code) at the time established.

(d) Payment of Qualified Performance-Based Awards. A Participant will be eligible to receive payment under a Qualified Performance-Based Award which is subject to achievement of a Performance Goal or Goals only if the applicable Performance Goal or Goals period are achieved within the applicable Performance Period, as determined by the Committee. In determining the actual size of an individual Qualified Performance-Based Award, the Committee may reduce or eliminate the amount of the Qualified Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.

(e) Maximum Award Payable. The maximum Qualified Performance-Based Award payment to any one Participant under the Plan for a Performance Period is the number of shares of Stock set forth in Section 4 above, or if the Qualified Performance-Based Award is paid in cash, that number of shares multiplied by the Market Value of the Stock as of the date the Qualified Performance-Based Award is granted.

(f) Limitation on Adjustments for Certain Events. No adjustment of any Qualified Performance-Based Award pursuant to Section 8 shall be made except on such basis, if any, as will not cause such Award to provide other than “performance-based compensation” within the meaning of Section 162(m) of the Code.

7.8. Awards to Participants Outside the United States. The Committee may modify the terms of any Award under the Plan granted to a Participant who is, at the time of grant or during the term of the Award, resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that the Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. The Committee may establish supplements to, or amendments, restatements, or alternative versions of the Plan for the purpose of granting and administrating any such modified Award. No such modification, supplement, amendment, restatement or alternative version may increase the share limit of Section 4.

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8. Adjustment Provisions

8.1. Adjustment for Corporate Actions. All of the share numbers set forth in the Plan reflect the capital structure of the Company as of its incorporation, taking into account the transactions contemplated under the Incorporation and Exchange Agreement by and among, among others, Gregg Appliances, Inc. and the Company dated as of April         , 2007. Subject to Section 8.2, if subsequent to that date the outstanding shares of Stock (or any other securities covered by the Plan by reason of the prior application of this Section) are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to shares of Stock, through merger, consolidation, sale of all or substantially all the property of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar distribution with respect to such shares of Stock, an appropriate and proportionate adjustment will be made in (i) the maximum numbers and kinds of shares provided in Section 4, (ii) the numbers and kinds of shares or other securities subject to the then outstanding Awards, (iii) the exercise price for each share or other unit of any other securities subject to then outstanding Options and Stock Appreciation Rights (without change in the aggregate purchase price as to which such Options or Rights remain exercisable), and (iv) the repurchase price of each share of Restricted Stock then subject to a Risk of Forfeiture in the form of a Company repurchase right.

8.2. Treatment in Certain Acquisitions. Subject to any provisions of then outstanding Awards granting greater rights to the holders thereof, in the event of an Acquisition in which outstanding Awards are not Accelerated in full pursuant to Section 9, any then outstanding Awards shall nevertheless Accelerate to the extent not assumed or replaced by comparable Awards referencing shares of the capital stock of the successor or acquiring entity or parent thereof, and thereafter (or after a reasonable period following the Acquisition, as determined by the Committee) terminate. As to any one or more outstanding Awards which are not otherwise Accelerated in full by reason of such Acquisition, the Committee may also, either in advance of an Acquisition or at the time thereof and upon such terms as it may deem appropriate, provide for the Acceleration of such outstanding Awards in the event that the employment of the Participants should subsequently terminate following the Acquisition. Each outstanding Award that is assumed in connection with an Acquisition, or is otherwise to continue in effect subsequent to the Acquisition, will be appropriately adjusted, immediately after the Acquisition, as to the number and class of securities and other relevant terms in accordance with Section 8.1.

8.3. Dissolution or Liquidation. Upon dissolution or liquidation of the Company, other than as part of an Acquisition or similar transaction, each outstanding Option and SAR shall terminate, but the Optionee or SAR holder (if at the time in the employ of or otherwise associated with the Company or any of its Affiliates) shall have the right, immediately prior to the dissolution or liquidation, to exercise the Option or SAR to the extent exercisable on the date of dissolution or liquidation.

8.4. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. In the event of any corporate action not specifically covered by the preceding Sections, including but not limited to an extraordinary cash distribution on Stock, a corporate separation or other reorganization or liquidation, the Committee may make such adjustment of outstanding Awards and their terms, if any, as it, in its sole discretion, may deem equitable and appropriate in the circumstances. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in this Section) affecting the Company or the financial statements

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of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

8.5. Related Matters. Any adjustment in Awards made pursuant to this Section 8 shall be determined and made, if at all, by the Committee and shall include any correlative modification of terms, including of Option exercise prices, rates of vesting or exercisability, Risks of Forfeiture, applicable repurchase prices for Restricted Stock, and Performance Goals and other financial objectives which the Committee may deem necessary or appropriate so as to ensure the rights of the Participants in their respective Awards are not substantially diminished nor enlarged as a result of the adjustment and corporate action other than as expressly contemplated in this Section 8. No fraction of a share shall be purchasable or deliverable upon exercise, but in the event any adjustment hereunder of the number of shares covered by an Award shall cause such number to include a fraction of a share, such number of shares shall be adjusted to the nearest smaller whole number of shares. No adjustment of an Option exercise price per share pursuant to this Section 8 shall result in an exercise price which is less than the par value of the Stock.

9. Change of Control

Except as otherwise provided below, upon the occurrence of a Change of Control:

(a) any and all Options and Stock Appreciation Rights not already exercisable in full shall Accelerate with respect to 100% of the shares for which such Options or Stock Appreciation Rights are not then exercisable;

(b) any Risk of Forfeiture applicable to Restricted Stock and Restricted Stock Units which is not based on achievement of Performance Goals shall lapse with respect to 100% of the Restricted Stock and Restricted Stock Units still subject to such Risk of Forfeiture immediately prior to the Change of Control; and

(c) all outstanding Awards of Restricted Stock and Restricted Stock Units conditioned on the achievement of Performance Goals or other business objectives and the target payout opportunities attainable under outstanding Performance Units shall be deemed to have been satisfied as of the effective date of the Change of Control as to a pro rata number of shares based on the assumed achievement of all relevant Performance Goals or objectives and the length of time within the Performance Period which has elapsed prior to the Change of Control. All such Awards of Performance Units and Restricted Stock Units shall be paid to the extent earned to Participants in accordance with their terms within thirty (30) days following the effective date of the Change of Control.

None of the foregoing shall apply, however, (i) in the case of a Qualified Performance-Based Award specifically designated as such by the Committee at the time of grant (except to the extent allowed by Section 162(m) of the Code), (ii) in the case of any Award pursuant to an Award Agreement requiring other or additional terms upon a Change of Control (or similar event), or (iii) if specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchanges.

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10. Settlement of Awards

10.1. In General. Options and Restricted Stock shall be settled in accordance with their terms. All other Awards may be settled in cash, Stock, or other Awards, or a combination thereof, as determined by the Committee at or after grant and subject to any contrary Award Agreement. The Committee may not require settlement of any Award in Stock pursuant to the immediately preceding sentence to the extent issuance of such Stock would be prohibited or unreasonably delayed by reason of any other provision of the Plan.

10.2. Violation of Law. Notwithstanding any other provision of the Plan or the relevant Award Agreement, if, at any time, in the reasonable opinion of the Company, the issuance of shares of Stock covered by an Award may constitute a violation of law, then the Company may delay such issuance and the delivery of a certificate for such shares until (i) approval shall have been obtained from such governmental agencies, other than the Securities and Exchange Commission, as may be required under any applicable law, rule, or regulation and (ii) in the case where such issuance would constitute a violation of a law administered by or a regulation of the Securities and Exchange Commission, one of the following conditions shall have been satisfied:

(a) the shares are at the time of the issue of such shares effectively registered under the Securities Act of 1933; or

(b) the Company shall have determined, on such basis as it deems appropriate (including an opinion of counsel in form and substance satisfactory to the Company) that the sale, transfer, assignment, pledge, encumbrance or other disposition of such shares or such beneficial interest, as the case may be, does not require registration under the Securities Act of 1933, as amended or any applicable State securities laws.

The Company shall make all reasonable efforts to bring about the occurrence of said events.

10.3. Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the charter, certificate or articles, and by-laws, of the Company. Whenever Stock is to be issued pursuant to an Award, if the Committee so directs at or after grant, the Company shall be under no obligation to issue such shares until such time, if ever, as the recipient of the Award (and any person who exercises any Option, in whole or in part), shall have become a party to and bound by the Stockholders’ Agreement, if any. In the event of any conflict between the provisions of this Plan and the provisions of the Stockholders’ Agreement, the provisions of the Stockholders’ Agreement shall control except as required to fulfill the intention that this Plan constitute an incentive stock option plan within the meaning of Section 422 of the Code, but insofar as possible the provisions of the Plan and such Agreement shall be construed so as to give full force and effect to all such provisions.

10.4. Investment Representations. The Company shall be under no obligation to issue any shares covered by any Award unless the shares to be issued pursuant to Awards granted under the Plan have been effectively registered under the Securities Act of 1933, as amended, or the Participant shall have made such written representations to the Company (upon which the Company believes it may reasonably rely) as the Company may deem necessary or appropriate for purposes of confirming that the issuance of such shares will be exempt from the registration requirements of that Act and any applicable state securities laws and otherwise in compliance

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with all applicable laws, rules and regulations, including but not limited to that the Participant is acquiring the shares for his or her own account for the purpose of investment and not with a view to, or for sale in connection with, the distribution of any such shares.

10.5. Registration. If the Company shall deem it necessary or desirable to register under the Securities Act of 1933, as amended or other applicable statutes any shares of Stock issued or to be issued pursuant to Awards granted under the Plan, or to qualify any such shares of Stock for exemption from the Securities Act of 1933, as amended or other applicable statutes, then the Company shall take such action at its own expense. The Company may require from each recipient of an Award, or each holder of shares of Stock acquired pursuant to the Plan, such information in writing for use in any registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for that purpose and may require reasonable indemnity to the Company and its officers and directors from that holder against all losses, claims, damage and liabilities arising from use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made. In addition, the Company may require of any such person that he or she agree that, without the prior written consent of the Company or the managing underwriter in any public offering of shares of Stock, he or she will not sell, make any short sale of, loan, grant any option for the purchase of, pledge or otherwise encumber, or otherwise dispose of, any shares of Stock during the 180 day period commencing on the effective date of the registration statement relating to the underwritten public offering of securities. Without limiting the generality of the foregoing provisions of this Section 10.5, if in connection with any underwritten public offering of securities of the Company the managing underwriter of such offering requires that the Company’s directors and officers enter into a lock-up agreement containing provisions that are more restrictive than the provisions set forth in the preceding sentence, then (a) each holder of shares of Stock acquired pursuant to the Plan (regardless of whether such person has complied or complies with the provisions of clause (b) below) shall be bound by, and shall be deemed to have agreed to, the same lock-up terms as those to which the Company’s directors and officers are required to adhere; and (b) at the request of the Company or such managing underwriter, each such person shall execute and deliver a lock-up agreement in form and substance equivalent to that which is required to be executed by the Company’s directors and officers.

10.6. Placement of Legends; Stop Orders; etc. Each share of Stock to be issued pursuant to Awards granted under the Plan may bear a reference to the investment representation made in accordance with Section 10.4 in addition to any other applicable restriction under the Plan, the terms of the Award and if applicable under the Stockholders’ Agreement and to the fact that no registration statement has been filed with the Securities and Exchange Commission in respect to such shares of Stock. All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

10.7. Tax Withholding. Whenever shares of Stock are issued or to be issued pursuant to Awards granted under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the

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Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares. The obligations of the Company under the Plan shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the recipient of an Award. However, in such cases Participants may elect, subject to the approval of the Committee, acting in its sole discretion, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares to satisfy their tax obligations. Participants may only elect to have Shares withheld having a Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee deems appropriate.

11. Reservation of Stock

The Company shall at all times during the term of the Plan and any outstanding Awards granted hereunder reserve or otherwise keep available such number of shares of Stock as will be sufficient to satisfy the requirements of the Plan (if then in effect) and the Awards and shall pay all fees and expenses necessarily incurred by the Company in connection therewith.

12. Limitation of Rights in Stock; No Special Service Rights

A Participant shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the shares of Stock subject to an Award, unless and until a certificate shall have been issued therefor and delivered to the Participant or his agent. Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Certificate of Incorporation and the By-laws of the Company. Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or corporate articles or by-laws to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the recipient’s employment or other association with the Company and its Affiliates.

13. Unfunded Status of Plan

The Plan is intended to constitute an “unfunded” plan for incentive compensation, and the Plan is not intended to constitute a plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or payments with respect to Options, Stock Appreciation Rights and other Awards hereunder, provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan.

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14. Nonexclusivity of the Plan

Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of stock options and restricted stock other than under the Plan, and such arrangements may be either applicable generally or only in specific cases.

15. Termination and Amendment

15.1. Termination or Amendment of the Plan. The Board may at any time terminate the Plan or make such modifications of the Plan as it shall deem advisable. Unless the Board otherwise expressly provides, no amendment of the Plan shall affect the terms of any Award outstanding on the date of such amendment.

15.2. Termination or Amendment of Outstanding Awards. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, provided that the Award as amended is consistent with the terms of the Plan. Also within the limitations of the Plan, the Committee may modify, extend or assume outstanding Awards or may accept the cancellation of outstanding Awards or of outstanding stock options or other equity-based compensation awards granted by another issuer in return for the grant of new Awards for the same or a different number of shares and on the same or different terms and conditions (including but not limited to the exercise price of any Option). Furthermore, the Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Award previously granted or (b) authorize the recipient of an Award to elect to cash out an Award previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish.

15.3. Limitations on Amendments, Etc. No amendment, modification or cancellation shall effect a repricing of any outstanding Option without the prior consent of the stockholders of the Company. No amendment or modification of the Plan by the Board or any outstanding Award by the Committee, shall impair the rights of the recipient of any Award outstanding on the date of such amendment or modification or such Award, as the case may be, without the Participant’s consent; provided, however, that no such consent shall be required if (i) the Board or Committee, as the case may be, determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation, including without limitation the provisions of Section 409A of the Code or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, or (ii) the Board or Committee, as the case may be, determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration is not reasonably likely to significantly diminish the benefits provided under the Award, or that any such diminution has been adequately compensated.

16. Notices and Other Communications

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular, certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the recipient of an Award, at his or her residence address last filed with the

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Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Treasurer, or to such other address or telecopier number, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; and (iii) in the case of facsimile transmission, when confirmed by facsimile machine report.

17. Governing Law

The Plan and all Award Agreements and actions taken thereunder shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.

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EX-10.21

Exhibit 10.21

February 3, 2005

Mr. W. Gerald Throgmartin

Gregg Appliances, Inc.

4151 E. 96^th Street

Indianapolis, Indiana 46240

Dear Gerald:

This letter confirms our agreement regarding the terms of your employment, effective February 3, 2005.

The general terms of your employment will be as follows:

Position and Duties. You will continue as a consultant to the Chief Executive Officer of Gregg Appliances, Inc. (the “Company”), and your employment will remain subject to the Company’s standard employment policies for such a position, unless otherwise stated to the contrary in this letter. Your duties will remain consistent with those duties performed by you in the past for the Company and you will agree to devote such time and effort as may reasonably be required by the Chief Executive Officer.

Compensation. Beginning February 3, 2005, your base annual rate of compensation will be $25,000.00. All compensation payments are subject to taxes and other withholdings required by law. We will not reduce your base rate of compensation during your term of employment except by mutual agreement between you and the Company.

Duration of Employment. Unless earlier terminated by you in writing, your employment will be for five (5) years.

Benefits. You will continue to be eligible for the Company’s benefits plans on the same basis as they are provided to all employees with similar levels of responsibility.

[SIGNATURE PAGE FOLLOWS]

	Very truly yours,
	GREGG APPLIANCES, INC.
	By:	/s/ Jerry W. Throgmartin
		Jerry W. Throgmartin, Chief Executive Officer
Agreed to and accepted by: /s/ W. Gerald Throgmartin
W. Gerald Throgmartin

Date:         February 3, 2005        

EX-10.22

Exhibit 10.22

SEVERANCE AGREEMENT

THIS AGREEMENT is entered into as of October 25, 2005 between Gregg Appliances, Inc., an Indiana corporation (the “Company”), and Donald J. B. Van der Wiel (“Executive”).

W  I  T  N  E  S  S  E  T  H

WHEREAS, in connection with the Executive’s employment as Chief Financial Officer of the Company, the Company and Executive wish to set forth the terms of the Executive’s severance benefit and protection in the event Executive’s employment is terminated without Cause (as defined below).

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

1. Employment and Duties.

(a) General. The Company hereby employs Executive, and Executive agrees, upon the terms and conditions herein set forth, to serve as the Company’s Chief Financial Officer. In such capacity, Executive shall perform such duties as may be delineated in the by-laws of the Company, and such other duties as may be assigned to Executive from time to time by the Company’s Board of Directors or its Chief Executive Officer.

2. Compensation and Other Benefits. Subject to the provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to Executive as compensation for services rendered hereunder:

(a) Base Salary. The Company shall pay to Executive an annual base salary (the “Base Salary”) at the rate of $225,000 per annum, payable in accordance with the

1

Company’s then current payroll practice. The Base Salary shall be reviewed annually and may be increased in the sole discretion of the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”), with the advice and input of the Chief Executive Officer of the Company. The Company shall be entitled to deduct or withhold all taxes and charges which the Company may be required to deduct or withhold therefrom.

(b) Bonus. Executive shall be eligible for a bonus target of $200,000 per year paid annually based on achieving specific company goals as established by the Board of Directors. For the period beginning on October 31, 2005 and ending on March 31, 2006, Executive will be guaranteed a minimum bonus of $100,000.

(c) Executive Benefit Plans. At all times during the Period, Executive shall be provided the opportunity to participate in pension and welfare plans, programs and arrangements (the “Plans”) that are generally made available to executives of the Company, and such other Plans, if any, as may be deemed appropriate by the Compensation Committee acting in its sole discretion.

3. Term. This Agreement shall continue indefinitely until Executive terminates his employment with the Company or the Company terminates Executive’s employment with the Company, provided that the provisions of Section 6 shall survive any termination of this Agreement.

4. Termination of Employment.

(a) Termination for Cause.

(i) If Executive’s employment is terminated by the Company for Cause, as defined in subparagraph 4(a)(ii), Executive shall not be eligible to receive Base Salary under subparagraph 2(a) or to participate in any Plans under subparagraph

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2(c) after the date of such termination or any other future periods after the date of such termination except for the right to receive benefits which have become vested under any Plan in accordance with the terms of such Plan. In addition, Executive shall not be eligible to receive any bonus described in subparagraph 2(b) for the Company’s fiscal year during which the date of termination occurs and any later year.

(ii) Termination for “Cause” shall mean termination of Executive’s employment with the Company by the Company’s Board of Directors because of (a) Executive’s repeated failures to perform his duties in a manner reasonably consistent with the criteria established by the Board of Directors of the Company or the Chief Executive Officer and communicated to Executive; provided, however, that the termination pursuant to this clause shall be preceded by a written notice providing a reasonable opportunity for Executive to correct his conduct, if the conduct in question can be corrected, (b) conduct on the part of the Executive that constituted a breach of any statutory, contractual, or common law duty of loyalty or care owed to the Company, or other conduct on the part of the Executive that demonstrated dishonesty or deceit in his dealings with the Company, (c) misconduct by Executive which was material to the performance of his duties to the Company, including, without limitation, the disclosure of Confidential Information or a breach of noncompetition or non-solicitation obligations, or (d) the commission by Executive of any crime involving moral turpitude or any felony.

(iii) The date of termination of employment by the Company under this paragraph 4(a) shall be the date specified in a written notice of termination (which date shall be no earlier than the date of furnishing such notice), or if no such date is specified therein, the date of receipt by Executive of such written notice of termination.

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(b) Termination Without Cause.

(i) Subject to the provisions of subparagraph 4(b)(v), if, Executive’s employment is terminated by the Company without Cause, Executive shall be entitled to receive, as “Severance Benefits”, his current Base Salary for a period of 12 months following his departure from the Company. Executive shall not be eligible to participate in any Plans after the date of termination or any future period except for the right to receive benefits which have vested under any Plan in accordance with the terms of such Plan and Executive shall not be eligible to receive any bonus described in Subparagraph 2(b) for the Company’s fiscal year during which the date of termination occurs and any later year.

(ii) The date of termination of employment by the Company under this paragraph 4(b) shall be the date specified in a written notice of termination to Executive (which date shall be no earlier than the date of furnishing such notice) or, if no such date is specified therein, the date on which such notice is given to Executive.

(iii) Severance Benefits representing Base Salary continuation shall be paid in accordance with the Company’s then current payroll practice commencing on the next payroll date following the date of the termination of Executive’s employment under subparagraph 4(b).

(c) Termination by Executive. If Executive resigns or otherwise terminates his employment (including as a result of death or disability) with the Company he shall have no right to receive any Base Salary continuation or other severance benefits. Executive shall not be eligible to participate in any Plans except for the right to receive benefits which have vested under any Plan and Executive shall not be eligible to receive any bonus described in paragraph 2(b) for the Company’s fiscal year during which the date of termination occurs and any later year.

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5. Secrecy and Noncompetition.

(a) Secrecy. Executive recognizes that the services to be performed by him hereunder are special, unique and extraordinary in that, by reason of his employment hereunder, he may acquire or has acquired confidential information and trade secrets concerning the operations of the Company or its affiliates, the use or disclosure of which could cause the Company substantial loss and damages which could not be readily calculated and for which no remedy at law would be adequate. Accordingly, Executive covenants and agrees with the Company that he will not at any time, except in performance of Executive’s obligations to the Company hereunder, directly or indirectly, disclose any secret or confidential information that he may learn or has learned by reason of his association with the Company, or any predecessors to its business, or use any such information to the detriment of the Company, or any of its affiliates. The term “confidential information” includes, without limitation, information not previously disclosed to the public or to the trade by the Company’s management with respect to the Company’s or its subsidiaries’ or affiliates’ business plans, prospects and opportunities, the identity of clients, suppliers or customers, information regarding operational strengths and weaknesses, trade secrets, know-how and other intellectual property, systems, procedures, manuals, confidential reports, product price lists, marketing plans or strategies, and financial information. “Confidential information” does not include information in the public domain, so long as such information did not become part of the public domain through the actions of Executive. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(a) are perpetual and, in any case, shall extend beyond the Executive’s employment hereunder.

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(b) Exclusive Property. Executive confirms that all confidential information is and shall remain the exclusive property of the Company. All business records, papers and documents kept or made by Executive relating to the business of the Company shall be and remain the property of the Company. Upon the termination of his employment with the Company or upon the request of the Company at any time, Executive shall promptly deliver to the Company, and shall not, without the consent of the Company, retain copies of any written materials not previously made available to the public, including but not limited to records and documents made by Executive or coming into his possession concerning the business or affairs of the Company. Executive may retain records relating exclusively to the terms and conditions of his employment relationship with the Company. Executive understands and agrees that the rights and obligations set forth in this subparagraph 5(b) are perpetual and, in any case, shall extend beyond the Executive’s employment hereunder.

6. Nonassignability; Binding Agreement. Neither this Agreement nor any right, duty, obligation or interest hereunder shall be assignable or delegable by Executive without the Company’s prior written consent; provided, however, that nothing in this paragraph shall preclude Executive from designating any of his beneficiaries to receive any benefits payable hereunder upon his death, or the executors, administrators, or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto.

This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Company and Executive’s heirs and the personal representatives’ of Executive’s estate.

7. Severability. If a final and binding (on Executive and the Company) determination of a court of competent jurisdiction is made that any term or provision hereof is

6

invalid or unenforceable, (a) the remaining terms and provisions hereof shall be unimpaired and (b) the court shall limit the application of such term or provision or modify such term or provision and proceed to enforce such term or provision as so limited or modified, which limited or modified term or provision will be effective, binding, and enforceable against Executive.

8. Amendment; Waiver. This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement.

9. Governing Law. All matters affecting this Agreement, including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of Indiana.

10. Notices. Any notice hereunder by either party to the other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address last known to the Company, or if addressed to the Company, the notice shall be delivered or mailed to the Company at its executive offices to the attention of the Board of Directors of the Company. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt.

11. Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both such counterparts shall together constitute one and the same instrument.

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12. Headings. The headings of paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

13. Withholding Tax. The Company shall be entitled to deduct or withhold from any payment made hereunder all Federal, state and local taxes which the Company is required by law to deduct or withhold therefrom.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has caused the Agreement to be signed by its officer pursuant to the authority of its Board of Directors, and Executive has executed this Agreement, as of the day and year first written above.

GREGG APPLIANCES, INC.		DONALD J. B. VAN DER WIEL
By	/s/ Jerry W. Throgmartin	/s/ Donald J. B. Van der Wiel
	Jerry W. Throgmartin	Donald J. B. Van der Wiel
	Chairman and Chief Executive Officer

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EX-14.1

Exhibit 14.1

Finance Code of Ethics

hhgregg, Inc. has adopted this Finance Code of Ethics (“Code”) which applies to its Chairman and Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer, Chief Administrative Officer and all other financial professionals with financial reporting responsibilities.

This Code covers a wide range of financial and non-financial business practices and procedures. This Code does not cover every issue that may arise, but it sets out basic principles to guide all individuals with financial reporting responsibilities for the Company. If a law or regulation conflicts with a policy in this Code, the individuals with financial reporting responsibilities are expected to comply with the law or regulation. If an individual with financial reporting responsibilities has any questions about this Code or potential conflicts with a law or regulation, they should contact a supervisor, a human resources representative, the Director of Internal Audit, and/or the Chairman of the Audit Committee.

An individual with financial reporting responsibilities who violates the standards of this Code will be subject to disciplinary action up to and including termination of employment.

FINANCIAL CODE PRINCIPLES AND RESPONSIBILITIES

Financial Professionals shall adhere to and advocate to the best of their knowledge and ability the following principles and responsibilities governing their professional and ethical conduct.

1. Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships.

2. Provide constituents with information that is accurate, complete, objective, relevant, timely and understandable.

3. Comply with rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.

4. Act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing their independent judgment to be subordinated.

5. Protect and respect the confidentiality of information acquired in the course of their work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of their work is not used for personal advantage.

6. Share knowledge and maintain skills important and relevant to their constituents’ needs.

7. Proactively promote ethical behavior as a responsible partner among peers in their work environment.

8. Achieve responsible use of and control over all assets and resources employed or entrusted to them.

9. Report known or suspected violations of this Code to a supervisor, a human resources representative, the Director of Internal Audit, and/or the Chairman of the Audit Committee.

10. Are accountable for adhering to this Code.

WAIVERS OF THE CODE

Any waiver of this Finance Code for Ethics may be made only by the Audit Committee of the Board of Directors and will be promptly disclosed as required by law. Requests for waivers must be made in writing to the Chairman of the Audit Committee prior to the occurrence of the violation of the Code.

REPORTING OF VIOLATIONS OF THE CODE, ILLEGAL OR UNETHICAL BEHAVIOR

Individuals with financial reporting responsibilities should report observed violations of the Code and illegal or unethical behavior to a supervisor, a human resources representative, the Director of Internal Audit, and/or the Chairman of the Audit Committee. All reports will be treated in a confidential manner and it is the Company’s policy to not allow retaliation for reports made in good faith of misconduct by others. The Director of Internal Audit, or another delegate so authorized by the Chairman of the Audit Committee, will lead investigations of alleged violations or misconduct. All employees are expected to cooperate in internal investigations of misconduct and violations of this Code.

ANNUAL CERTIFICATION

At least one time each calendar year, individuals with financial reporting responsibilities subject to this Code will sign a statement stating that they have complied with this Code. A copy of the annual certification that each individual with financial reporting responsibilities is required to sign is attached as Exhibit A.

Exhibit A -

Finance Code of Ethics Certification

In my role as an executive or a finance professional of Gregg Appliances, Inc., I certify to you that I adhere to and advocate the following principles and responsibilities governing my professional and ethical conduct.

To the best of my knowledge and ability:

1. I act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships.

2. I provide constituents with information that is accurate, complete, objective, relevant, timely and understandable.

3. I comply with rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies.

4. I act in good faith, responsibly, with due care, competence and diligence, without misrepresenting material facts or allowing my independent judgment to be subordinated.

5. I protect and respect the confidentiality of information acquired in the course of my work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of my work is not used for personal advantage.

6. I share knowledge and maintain skills important and relevant to my constituents’ needs.

7. I proactively promote ethical behavior as a responsible partner among peers in my work environment.

8. I achieve responsible use of and control over all assets and resources employed or entrusted to me.

9. I report known or suspected violations of this Code to a supervisor, a human resources representative, the Director of Internal Audit, and/or the Chairman of the Audit Committee.

10. I am accountable for adhering to this Code.

[Signature]

EX-23.1

Exhibit 23.1

Logo

KPMG LLP

2400 First Indiana Plaza

135 North Pennsylvania Street

Indianapolis, IN 46204-2452

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Gregg Appliances, Inc.:

We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

Indianapolis, Indiana

April 17, 2007