LOAN AND SECURITY AGREEMENT

THIS AGREEMENT is made as of this 15^th day of April, 2002 between Fleet Retail Finance Inc., a Delaware corporation with offices at 40 Broad Street, Boston, Massachusetts 02109 as agent (in such capacity, herein the "Administrative Agent") for the benefit of the Lenders, on a Pro Rata basis, based upon each Lender's Percentage Commitment, who are, at present, those financial institutions identified on the signature pages of this Agreement and who in the future are those Persons (if any) who become a "Lender" in accordance with the provisions of Article VII of the Agency Agreement (defined below); Fleet Retail Finance Inc., a Delaware corporation with offices at 40 Broad Street, Boston, Massachusetts 02109 as agent (in such capacity, herein the "Collateral Agent") for the benefit of the Lenders and the Administrative Agent, Wells Fargo Retail Finance, LLC, a Delaware limited liability company with offices at One Boston Place, Boston, Massachusetts 02108 (in such capacity, herein, the "Documentation Agent") and Duckwall-Alco Stores, Inc., a Kansas corporation, ("Lead Borrower" and a "Borrower"), SPD Truck Line, Inc., a Kansas corporation, and Duckwall-Alco, LP, a Kansas limited partnership, (collectively the "Borrowers" or the "Borrower" and each individually, a "Borrower"), each of which has its principal executive offices at 401 Cottage Avenue, Abilene, Kansas 67410-2832 in consideration of the mutual covenants contained herein and benefits to be derived herefrom,

WITNESSETH:

ARTICLE I. - Definitions:

As herein used, the following terms have the following meanings or are defined in the section of this Agreement so indicated:

"Acceleration": With respect to any Indebtedness, its becoming due and payable prior to its stated maturity. Derivations of the word "Acceleration" (such as "Accelerate") are used with like meaning in this Agreement.

"Accounts": "Accounts" as defined in the UCC.

"ACH": Automated clearing house.

"Account Debtor": Has the meaning given that term in the UCC.

"Administrative Agent": Defined in the Preamble.

"Affiliate":

(a) With respect to any two Persons, a relationship in which (i) one holds, directly or indirectly, not less than Twenty Five Percent (25%) of the capital stock, beneficial interests, partnership interests, or other equity interests of the other; or (ii) one has, directly or indirectly, the right, under ordinary circumstances, to elect a majority of the directors (or other body or Person who has those powers customarily vested in a board of directors of a corporation); or (iii) the same third Person holds, directly or indirectly, not less than Twenty Five Percent (25%) of their respective capital stock, beneficial interests, partnership interests or other equity interests; or has directly or indirectly the right to elect the majority of directors of both such parties; or

(b) Any corporation, limited liability company, trust, partnership, joint venture, or other enterprise which: is a parent, brother‑sister, subsidiary, or affiliate, of any Borrower; could have such enterprise's tax returns or financial statements consolidated with the Lead Borrower's; could be a member of the same controlled group of corporations (within the meaning of Section 1563(a)(1), (2) and (3) of the Internal Revenue Code of 1986, as amended from time to time) of which the Lead Borrower is a member; controls or is controlled by the Lead Borrower.

"Agreement": This Loan and Security Agreement, and it may be modified, amended, supplemented or restated from time to time.

"Agency Agreement": That certain Agency Agreement dated April 15, 2002 by and among the Administrative Agent, the Collateral Agent, and the Lenders.

"Agent": When not preceded by "Administrative" or "Collateral", the terms "Agent" or "Agents" refer collectively and individually to the Administrative Agent and the Collateral Agent.

"Agent Fees": Defined in Section 2.13 hereof.

"Agent's Rights and Remedies": Defined in Section 11.6.

"Aggregate Commitments": The sum of all the Lender's Commitments hereunder.

"Appraised Inventory Liquidation Value": The product of (a) the Cost of Eligible Inventory (net of Inventory Reserves) multiplied by (b) that percentage, determined by the Collateral Agent from the then most recent appraisal of the Borrowers' Inventory obtained by the Collateral Agent, to reflect the appraiser's estimate of the net realization on Cost of the Liquidation of the Borrowers' Inventory.

"Appraised Inventory Percentage": 85%

"Approved Electronic Form Notice": Defined in Section 14.22.

"Approved Electronic Form": Defined in Section 14.22.

"Authorized Officer": The Lead Borrower's President, Treasurer, Assistant Treasurer or Chief Financial Officer duly authorized by the Lead Borrower's Board of Directors, or, in the case of Borrowing Base Certificates, such person as is authorized by the Board of Directors of the Borrower.

"Availability": The lesser of (a) or (b), where

(a) is the result of

(i) The Revolving Credit Loan Ceiling

Minus

(ii) The aggregate unpaid balance of the Loan Account

Minus

(iii) The aggregate undrawn Stated Amount of all then outstanding L/C's.

Minus

(iv) The aggregate of the Availability Reserves.

(b) is the result of

(i) The Borrowing Base

Minus

(ii) The aggregate unpaid balance of the Loan Account

Minus

(iii) The aggregate undrawn Stated Amount of all then outstanding L/C's.

Minus

(iv) The aggregate of the Availability Reserves.

"Availability Reserves": Such reserves as the Collateral Agent from time to time reasonably determines in the Collateral Agent's discretion as being appropriate to reflect the impediments to the Collateral Agent's ability to realize upon the Collateral. Without limiting the generality of the foregoing, Availability Reserves may include (but are not limited to) reserves based on the following:

(i)                  Rent for any location in a Landlord State in respect to which a Landlord Waiver has not been received by the Collateral Agent (which initially shall be three (3) months rent for any such location).

(ii)                Customer Credit Liabilities.

(iii)               Taxes and other governmental charges, including, ad valorem, personal property, and other taxes which might have priority over the Collateral Interests of the Collateral Agent in the Collateral.

"Bankruptcy Code": Title 11, U.S.C., as amended from time to time.

"Base": The Base Rate is the publicly announced prime rate from time to time by Fleet National Bank (or any successor in interest to Fleet) (which is not intended to be Fleet's lowest or most favorable rate in effect at any time). In the event that said bank (or any such successor) ceases to announce such a rate, "Base" shall refer to that rate or Index announced or published from time to time as the Agent, in good faith, designates as the functional equivalent to said Base Rate. Any change in "Base" shall be effective, for purposes of the calculation of interest due hereunder, when such change is made effective generally by the bank on whose rate or Index "Base" is being set. In all events, interest that is determined by reference to Base (or any successor to Base) shall be calculated on a 360-day year and actual days elapsed.

"Base Margin": As determined pursuant to the applicable section of the Margin Pricing Grid set forth in Section 2.11(f) hereof. Notwithstanding any of the foregoing to the contrary, for the period from the date hereof through the first Margin Adjustment Date, the Base Margin shall be the zero (0) basis point Tier I Base Margin.

"Base Margin Loan": Each Revolving Credit Loan while bearing interest at the Base Margin Rate.

"Base Margin Rate": The aggregate of Base plus the applicable Base Margin per annum.

"Blocked Account": Any DDA into which the contents of any other DDA is transferred.

"Blocked Account Agreement": An agreement, in form satisfactory to the Collateral Agent, which agreement recognizes the Collateral Agent's Collateral Interest in the contents of the DDA which is the subject of such agreement and under which the institution at which a Blocked Account is maintained agrees that upon the occurrence of a Cash Control Activation Event such contents shall be transferred only to the Concentration Account or as otherwise instructed by the Collateral Agent.

"Borrowers" or "Borrower": Defined in the Preamble.

"Borrowing Base": The lesser of (i) the Cost of Eligible Inventory (net of Inventory Reserves) multiplied by the Inventory Advance Rate and (ii) the Appraised Inventory Percentage of the Appraised Inventory Liquidation Value.

"Borrowing Base Certificate": Defined in Section 5.4.

"Business Day": Any day (with any references herein to time of day requirements meaning such times based on Eastern time) other than (a) Saturday or Sunday; (b) any day on which banks in Boston, Massachusetts, generally are not open to the general public for the purpose of conducting commercial banking business; or (c) a day on which the principal office of the Agents or Lenders is not open to the general public to conduct business.

"Business Plan": The Borrowers' business plan annexed hereto as EXHIBIT 5.12(b) and any revision, amendment, or update of such business plan, reasonably satisfactory to Administrative Agent.

"Capital Adequacy Demand": Defined in Section 14.8.

"Capital Adequacy Charge": Defined in Section 14.8.

"Capital Expenditures": The expenditure of funds or the incurrence of liabilities which may be capitalized in accordance with GAAP.

"Capital Lease": Any lease which may be capitalized in accordance with GAAP.

"Cash Management Activation Event": The occurrence of any of the following: (i) the Borrower's failure to maintain Excess Availability of at least [Twenty Million Dollars ($20,000,000)] for three (3) consecutive Business Days or [Seventeen Million Five Hundred Thousand Dollars ($17,500,000)] on any day or (ii) a Suspension Event hereunder; provided, however, that if, following the occurrence of the first two (2) Cash Management Activation Events (other than a Suspension Event) in any of the Borrower's fiscal years, the Borrower maintains Excess Availability of at least Twenty Seven Million Five Hundred Thousand Dollars ($27,500,000) for a period of twenty (20) consecutive Business Days, such Cash Management Activation Event shall be deemed to have been cured and shall cease to exist, and provided, further, however, that Borrower shall be permitted to cure a Cash Management Activation Event pursuant to the immediately preceding proviso no more than twice during each fiscal year of the term of this Loan Agreement.

"Certificate": Any certificate in form and substance acceptable to the Agents. Each Certificate shall be deemed to be given under oath by the signatory to such Certificate.

"Change in Control": The occurrence of any of the following:

(a) The acquisition after the date hereof, by any group of persons (within the meaning of the Securities Exchange Act of 1934, as amended) or by any Person, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended), directly or indirectly, of 51% or more of the issued and outstanding capital stock of any Borrower having the right to vote for the election of directors of such Borrower.

(b) More than half of the persons who were directors of the Lead Borrower on the first day of any period consisting of twelve (12) consecutive calendar months (the first of which twelve (12) month periods commencing with the first day of the month during which this Agreement was executed), cease, for any reason other than death or disability, to be directors of such Borrower, unless (i) the persons succeeding such persons as directors were approved by the board of directors of the Lead Borrower or (ii) the board of directors as thereafter constituted is acceptable to the Administrative Agent.

"Chattel Paper": Has the meaning given that term in the UCC.

"Closing Date": The date on which all conditions precedent in Article III of this Agreement are satisfied and the initial Revolving Credit Loans are made under this Agreement.

"Collateral": Defined in Section 8.1.

"Collateral Agent": Defined in the Preamble.

"Collateral Interest": Any interest in property to secure an obligation, including, without limitation, a security interest, mortgage, and deed of trust.

"Commitment": With respect to each Lender, that respective Lender's Dollar Commitment.

"Concentration Account": The deposit account established by the Agent over which the Agent has sole dominion and control.

"Consolidated": When used to modify a financial term, test, statement, or report, refers to the application or preparation of such term, test, statement, or report (as applicable) based upon the consolidation, in accordance with GAAP, with any adjustments or modifications acceptable to the Administrative Agent, of the financial condition or operating results of the Borrowers.

"Cost": The lower of

(a) the calculated cost of purchases, based upon the Borrowers' accounting practices, on a retail inventory method, known to the Collateral Agent, which practices are in effect on the date on which this Agreement was executed as such calculated cost is determined from invoices received by the Borrowers; such Borrower's purchase journal; or such Borrower's stock ledger; and

(b) the cost equivalent of the lowest ticketed or promoted price at which the subject Inventory is offered to the public, after all mark-downs (whether or not such price is then reflected on the Borrowers' accounting system), determined in accordance with the retail method of accounting and reflecting the Borrowers' historic business practices.

"Costs of Collection": Includes, without limitation, all attorneys' reasonable fees and reasonable out‑of‑pocket expenses incurred by the Agents' or the Documentation Agent's attorneys, and all reasonable costs incurred by any Agent including, without limitation, reasonable costs and expenses associated with any bankruptcy or insolvency proceeding or travel on behalf of any Agent, where such costs and expenses are directly or indirectly related to or in respect of such Agent's or the Documentation Agent's administration and management of the Liabilities; negotiation, documentation, and amendment of any Loan Document; or efforts to preserve, protect, collect, or enforce the Collateral, the Liabilities, and/or the Agent's Rights and Remedies and/or any of the rights and remedies of such Agent against or in respect of any guarantor or other person liable in respect of the Liabilities (whether or not suit is instituted in connection with such efforts). The Costs of Collection are Liabilities, and at the Administrative Agent's option may bear interest at the then effective Base Margin Rate.

"Covenant Activation Period": Any period commencing upon the occurrence of either of the following events (i) the Borrowers' failure to maintain Excess Availability of at least Twenty Seven Million Five Hundred Thousand Dollars ($27,500,000) on any day or (ii) a Suspension Event hereunder, provided, however, that if, following the occurrence of the first two (2) Covenant Activation Periods (other than Covenant Activation Periods initiated on account of a Suspension Event) in any of the Borrower's fiscal years, the Borrower maintains Excess Availability of at least Twenty Seven Million Five Hundred Thousand Dollars ($27,500,000) for a period of sixty (60) consecutive Business Days, such Covenant Activation Period shall cease to exist and provided, further, however, that Borrower shall be permitted to cure a Covenant Activation Period pursuant to the preceding proviso no more than twice during each fiscal year of the term of this Loan Agreement.

"Customer Credit Liability": Gift certificates, customer deposits, merchandise credits, layaway obligations, frequent shopping programs, and similar liabilities of any Borrower to its retail customers and prospective customers.

"Customs Broker Agreement": A tri-agreement in form satisfactory to the Collateral Agent, among the Lead Borrower or any Borrower, and a customs broker or other carrier, in which the customs broker or other carrier acknowledges that it has control over and holds the documents evidencing ownership of the subject Inventory for the benefit of the Collateral Agent and agrees, upon notice from the Collateral Agent, to hold and dispose of the subject Inventory solely as directed by the Collateral Agent.

"DDA": Any checking or other demand depository account maintained by any of the Borrowers other than an Exempt DDA.

"Deposit Account": Has the meaning given that term in the UCC.

"Documentation Agent": Wells Fargo Retail Finance, LLC.

"Documents": Has the meaning given that term in the UCC.

"Dollar Commitment": As set forth on EXHIBIT 2.24(a), annexed hereto, (as such amounts may change in accordance with the provisions of this Agreement). The aggregate of the Dollar Commitments shall not exceed the Revolving Credit Loan Ceiling.

"Eligible Inventory": Borrowers' Inventory, at such locations, and of such types, character, quality and quantities, as the Collateral Agent in its discretion from time to time determines to be acceptable for purposes of inclusion in the calculation of the Borrowing Base, as to which the Collateral Agent has a perfected security interest that is prior and superior to all claims and all Encumbrances (other than Permitted Encumbrances, subject to the Collateral Agent's rights to establish Reserves therefore).

In no event, shall "Eligible Inventory" include: (i) any non‑merchandise inventory (such as labels, bags, and packaging materials) ; (ii) damaged goods, return to vendor merchandise, packaways, consigned inventory, and other similar categories of Goods; and (iii) any Inventory located in any store of the Borrowers which has been closed for business for more than 20 days in any fiscal quarter.

"Eligible L/C Inventory": That portion of the Borrowers' Inventory (without duplication of other Eligible Inventory) the purchase of which is supported by a documentary L/C then having an initial expiry of sixty (60) or less days, provided that

(a) Such Inventory is of such types, character, quality and quantities as the Collateral Agent in its discretion from time to time determines to be Eligible Inventory; and

(b) The documentary L/C which relate to such shipment names the Collateral Agent as consignee of the subject Inventory and the Collateral Agent has control over the documents which evidence ownership of the subject Inventory (such as by the providing to the Collateral Agent of a Customs Brokers Agreement to the Collateral Agent); and

(c) Such Inventory has not yet been delivered to the Borrowers' warehouse or distribution center and has been in transit from the applicable foreign location for no more than sixty (60) days.

"Employee Benefit Plan": As defined in ERISA.

"Encumbrance": Each of the following:

(a) Any security interest, mortgage, pledge, hypothecation, lien, attachment, or charge of any kind (including any agreement to give any of the foregoing); the interest of a lessor under a Capital Lease; conditional sale, consignment or other title retention agreement; sale of Accounts or Chattel Paper; or other arrangement pursuant to which any Person is entitled to any preference or priority with respect to the property or assets of another Person or the income or profits of such other Person or which constitutes an interest in property to secure an obligation; each of the foregoing whether consensual or non‑consensual and whether arising by way of agreement, operation of law, legal process or otherwise.

(b) The filing of any financing statement under the UCC or comparable law of any jurisdiction.

"End Date": The date upon which both (a) all Liabilities have been indefeasibly paid in full and (b) all obligations of the Agents and Lenders to make loans and advances and to provide other financial accommodations to the Borrowers hereunder shall have been irrevocably terminated.

"Environmental Laws": All of the following:

(a) Any and all federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements which regulate or relate to, or impose any standard of conduct or liability on account of or in respect to environmental protection matters, including, without limitation, Hazardous Materials, as are now or hereafter in effect.

(b) The common law relating to damage to Persons or property from Hazardous Materials.

"Equipment": Includes, without limitation, Goods which qualify as "equipment" as defined in the UCC, and all of the Borrower's now owned and hereinafter acquired equipment, wherever located, including machinery, data processing and computer equipment and computer hardware and software, whether owned or licensed, and including embedded software, machinery, office equipment store fixtures, furniture, and other goods, property, and assets and any and all attachments, accessions or additions thereto, and substitutions and replacements thereof, wherever located.

"ERISA": The Employee Retirement Income Security Act of 1974, as amended, together with all orders, regulations and interpretations thereunder or related thereto.

"ERISA Affiliate": Any Person which is under common control with the Borrowers within the meaning of Section 4001 of ERISA or is part of a group including the Borrowers and which would be treated as a single employer under Section 414 of the Internal Revenue Code of 1986, as amended.

"Events of Default": Defined in Article X. Each reference to an "Event of Default" is to an Event of Default that has not been duly waived in writing by the Administrative Agent. In the event of such due waiver, the so‑waived Event of Default shall be deemed never to have occurred, other than with respect to any post‑default interest which accrued prior to such waiver and with respect to any reimbursement obligation in respect of any Costs of Collection.

"Excess Availability": The difference between (a) Availability minus (b) all then past due obligations of the Borrowers, including accounts payable which are beyond customary trade terms and rent obligations for leases which are beyond applicable grace periods, provided, however, that at any time that the Borrowing Base is greater than $80,000,000 (or $85,000,000 if the Revolving Credit Loan Ceiling has been increased to $75,000,000 pursuant to Section 2.1(e) hereof), Excess Availability shall be calculated solely by reference to subsection (b) of the definition of Availability and without regard to the Revolving Credit Loan Ceiling in subsection (a) of such definition.

"Exempt DDA": A depository account maintained by any Borrower, the only contents of which may be transfers from the Operating Account and actually used solely (i) for petty cash purposes; or (ii) for payroll and payroll taxes.

"Fiscal Year": Each twelve (12) month accounting period of the Borrowers, which ends on the Sunday closest to January 31 of each year.

"Fleet Bank": Fleet National Bank.

"GAAP": Principles which are consistent with those promulgated or adopted by the Financial Accounting Standards Board and its predecessors (or successors) in effect and applicable to that accounting period in respect of which reference to GAAP is being made.

"General Intangibles": Includes, without limitation, "general intangibles" as defined in the UCC.

"Goods": Has the meaning given that term in the UCC.

"Hazardous Materials": Any (a) hazardous materials, hazardous waste, hazardous or toxic substances or petroleum products, which (as to any of the foregoing) are defined or regulated as a hazardous material in or under any Environmental Law and (b) oil in any physical state.

"Import Landing Costs": To the extent not included in the Stated Amount of an L/C, Landing Costs for Inventory, the purchase of which is supported by such L/C, or customs, duty, freight, and other out-of-pocket costs and expenses which will be expended to "land" in transit Inventory and which is not included in invoices for prepaid Inventory.

"Increased Commitment Fee": The $25,000 fee payable upon the Borrower's election to increase the Revolving Credit Loan Ceiling to $75,000,000 pursuant to Section 2.1(e) hereof.

"Increased Commitment Effective Date": The date on which the Borrower's election to increase the Revolving Credit Commitment to $75,000,000 becomes effective pursuant to Section 2.1(e) hereof.

"Indebtedness": All indebtedness and obligations of or assumed by any Person on account of or in respect to any of the following:

(a) Money borrowed (including any indebtedness which is non‑recourse to the credit of such Person but which is secured by an Encumbrance on any asset of such Person) whether or not evidenced by a promissory note, bond, debenture or other written obligation to pay money;

(b) Any reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letter of credit or acceptance transactions (including, without limitation, the Stated Amount of all outstanding letters of credit and acceptances issued for the account of such Person, and (without duplication) any amount for which such Person would be obligated to provide reimbursement or for which such Person is liable in connection with a letter of credit or acceptance transaction;

(d) On account of recourse or repayment obligations with respect to deposits or advances;

(e) As lessee under Capital Leases;

(f) In connection with any sale and leaseback transaction.

(g) All obligations with respect to redeemable stock and redemption or repurchase obligations under any equity securities issued by such Person.

(h) Indebtedness of others secured by an Encumbrance on any asset of such Person, whether or not such Indebtedness is assumed by or are a personal liability of such Person.

(i) Any guaranty, endorsement, suretyship or other undertaking pursuant to which that Person may be liable on account of any obligation of any third party other than on account of the endorsement of checks and other items in the ordinary course; and.

(j) The Indebtedness of a partnership or joint venture in which such Person is a general partner or joint venturer.

"Indemnified Person": Defined in Section 14.13.

"Index Business Day": Any day which is both a Business Day and a day on which the principal market in Eurodollar deposits in London in which Fleet Bank or its successors participate is open for dealings in United States Dollar deposits.

"Index Loan": Any Revolving Credit Loan which bears interest at an Index Rate.

"Index Margin": As determined pursuant to the applicable section of the Margin Pricing Grid set forth in Section 2.11(f), for loans initiated on or after the date when so set, that is to say Index contracts in effect at the time of increases/decreases in margin will remain in effect at the margin originally utilized when the contract was opened. The margin in effect at a given time will apply to contracts opened at that time and shall be based upon the Margin Pricing Grid. Notwithstanding any of the foregoing to the contrary, for the period from the date hereof through the first Margin Adjustment Date, the Index Margin shall be the 150 basis point Tier I Index Margin.

"Index Offer Rate": With respect to any Index Loan, the rate of interest (rounded upwards, if necessary, to the next 1/100 of 1%) determined by the Administrative Agent to be the highest prevailing rate per annum at which deposits on U.S. Dollars are offered to Fleet Bank, by first-class banks in the Eurodollar market in which Fleet Bank participates at or about 10:00 AM (Boston Time) three (3) Index Business Days before the first day of the Interest Period for the subject Index Loan, for a deposit approximately in the amount of the subject loan for a period of time approximately equal to such Interest Period.

"Index Rate": That per annum rate (calculated on a 360-day year and actual days elapsed) equal to the Index Offer Rate plus the Index Margin except that, in the event that the Administrative Agent determines that any Lender may be subject to the Reserve Percentage, the "Index Rate" shall mean, with respect to any Index Loans then outstanding (from the date on which that Reserve Percentage first became applicable to such loans), and with respect to all Index Loans thereafter made, an interest rate per annum equal to the sum of (a) plus (b), where:

(a) is the decimal equivalent of the following fraction:

Index Offer Rate

1 minus Reserve Percentage

(b) is the applicable Index Margin.

"Instruments": Has the meaning given that term in the UCC.

"Interest Payment Date": With reference to:

(a) Each Index Loan: the last day of the Interest Period relating thereto, and the Termination Date and the End Date, except that in respect to an Index Loan with an Interest Period of 180 days, the Interest Payment Dates shall be on the ninetieth (90^th) day on such Interest Period and the last day of such Interest Period.

(b) Each Base Margin Loan: the last Business Day of each month in arrears; the Termination Date; and the End Date.

"Interest Period":

(a) With respect to each Index Loan: subject to Subsection (b), below, the period commencing on the date of the making or continuation of, or conversion to, the subject Index Loan and ending on the day that corresponds numerically to such date, thirty (30), sixty (60), ninety (90), or one hundred and eighty (180) days thereafter, as the Lead Borrower may elect by irrevocable notice (pursuant to Section 2.5(b)) to the Administrative Agent.

(b) The setting of Interest Periods is in all instances subject to the following:

(i) Any Interest Period for a Index Loan which would otherwise end on a day that is not an Index Business Day shall be extended to the next succeeding Index Business Day, unless that succeeding Index Business Day is in the next calendar month, in which event such Interest Period shall end on the last Index Business Day of the month during which the Interest Period ends.

(ii) Subject to Subsections (iii) and (iv), below, any Interest Period applicable to an Index Loan, which Interest Period begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period ends, shall end on the last Index Business Day of the month during which that Interest Period ends.

(iii) Any Interest Period which would otherwise end after the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date.

(iv) The Lead Borrower shall not select, renew, or convert any interest rate for a Revolving Credit Loan such that, in addition to interest at the Base Margin Rate, there are more than three (3) Interest Periods applicable to Index Loans at any one time.

"Inventory": Includes, without limitation, "inventory" as defined in the UCC and also all: packaging, advertising, and shipping materials related to any of the foregoing, and all names or marks affixed or to be affixed thereto for identifying or selling the same; Goods held for sale or lease or furnished or to be furnished under a contract or contracts of sale or service by the Borrowers, or used or consumed or to be used or consumed in the Borrowers' business; Goods of said description in transit: returned, repossessed and rejected Goods of said description; and all Documents (whether or not negotiable) which represent any of the foregoing.

"Inventory Advance Rate": The following percentages of Eligible Inventory during the periods of each calendar year indicated in the chart below:

Period	Percentage
January	70%
February	70%
March	70%
April	70%
May	70%
June	70%
July	70%
August	72%
September	72%
October	72%
November	72%
December	72%

"Inventory Reserves": Such Reserves as may be reasonably established from time to time by the Collateral Agent in the Collateral Agent's discretion with respect to the determination of the saleability, at Retail, of the Eligible Inventory or which reflect such other factors as affect the market value of the Eligible Inventory. Without limiting the generality of the foregoing, Inventory Reserves may include (but are not limited to) reserves based on the following:

(i) Obsolescence (based upon Inventory on hand beyond a given number of days).

(ii) Seasonality.

(iii) Shrinkage.

(iv) Imbalance.

(v) Change in Inventory character.

(vi) Change in Inventory composition.

(vii) Change in Inventory mix.

(viii) Markdowns (both permanent and point of sale)

(ix) Retail mark ons and markups inconsistent with prior period practice and performance; industry standards; current business plans; or advertising calendar and planned advertising events.

(x) Return to vendors.

(xi) Damage.

(xii) Inventory in the possession of any bailee.

"Issuer": The issuer of any L/C.

"Landing Costs": Customs, duty, freight, and other out-of-pocket costs and expenses which will be expended to "land" in transit Inventory, without duplication of Import Landing Costs.

"Landlord State": Initially Washington, Virginia, and Pennsylvania and such other states in which a landlord's claim for rent has priority over the Encumbrances of the Collateral Agent in the Collateral.

"L/C": Any letter of credit, the issuance of which is procured by the Administrative Agent for the account of any Borrower and any acceptance made on account of such letter of credit.

"Lease": Any lease or other agreement, no matter how styled or structured, pursuant to which any Borrower is entitled to the use or occupancy of any space.

"Letter of Credit Rights": Has the meaning given that term in the UCC.

"Liabilities": The following:

(a) All and each of the following, whether now existing or hereafter arising under this Agreement or under any of the other Loan Documents:

(i) Any and all direct and indirect liabilities, debts, and obligations of the Borrowers to any Agent or the Lenders, each of every kind, nature, and description.

(ii) Each obligation to repay any loan, advance, indebtedness, note, obligation, overdraft, or amount now or hereafter owing by the Borrowers to any Agent or the Lenders, (including all future advances whether or not made pursuant to a commitment by any Agent or the Lenders), whether or not any of such are liquidated, unliquidated, primary, secondary, secured, unsecured, direct, indirect, absolute, contingent, or of any other type, nature, or description, or by reason of any cause of action which any Agent or the Lenders, may hold against the Borrowers.

(iii) All notes and other obligations of the Borrowers now or hereafter assigned to or held by any Agent or the Lenders, each of every kind, nature, and description.

(iv) All interest, fees, and charges and other amounts which may be charged by any Agent or the Lenders, to the Borrowers and/or which may be due from the Borrowers to any Agent or the Lenders, from time to time.

(v) All costs and expenses incurred or paid by any Agent or the Lenders, in respect of any agreement between the Borrowers and any Agent or the Lenders , or instrument furnished by the Borrowers to any Agent or Lenders (including, without limitation, Costs of Collection, attorneys' reasonable fees, including reasonable fees and expenses of Lenders' Special Counsel, and all court and litigation costs and expenses).

(vi) Any and all covenants of the Borrowers to or with any Agent or the Lenders, and any and all obligations of the Borrowers to act or to refrain from acting in accordance with any agreement between the Borrowers and any Agent or the Lenders, or instrument furnished by the Borrowers to any Agent or the Lenders.

(vii) Each of the foregoing as if each reference to "Agent," were to each Affiliate of such Agent and each of the foregoing as if each reference to "Lenders," were to each Affiliate of the Lenders.

(b) Any and all direct or indirect liabilities, debts, and obligations of the Borrowers to any Agent or the Lenders or any Affiliate of any Agent or Affiliate of any of the Lenders, each of every kind, nature, and description owing on account of any service or accommodation provided to, or for the account of any Borrowers pursuant to this or any other Loan Document, including cash management services, interest rate and hedging products and the issuances of L/C's.

"Liquidation": The exercise, by the Collateral Agent, of those rights accorded to the Collateral Agent under the Loan Documents or applicable law as a creditor of the Borrowers following and on account of the occurrence of an Event of Default looking towards the realization on the Collateral. Derivations of the word "Liquidation" (such as "Liquidate") are used with like meaning in this Agreement.

"Loan Account": Defined in Section 2.8.

"Loan Documents": This Agreement, each instrument and document executed and/or delivered as contemplated by Article III, below, each instrument and document executed and/or delivered as contemplated by Article III or Article V, hereof, (including without limitation the fee letters by and between any of the Agents and the Borrowers or any of the Lenders and the Borrowers)and each other instrument or document from time to time executed and/or delivered in connection with the arrangements contemplated hereby or in connection with any transaction with any Agent or any Affiliate of any Agent or, including, without limitation, any transaction which arises out of any cash management (including any ACH transfer arrangements), depository, investment, letter of credit, or interest rate protection, or equipment leasing services provided by any Agent or any Affiliate of any Agent, as each may be amended from time to time.

"Margin Adjustment Date": As defined in Section 2.11(f)

"Margin Pricing Grid": Provides for periodic adjustment to the interest rate to be charged on Revolving Credit Loans based upon the level of Excess Availability then existing and is shown in Section 2.11(f).

"Material Accounting Change": Any change in GAAP applicable to accounting periods subsequent to the Borrowers' fiscal year most recently completed prior to the execution of this Agreement, if such change has a material effect on the Borrowers' financial condition or operating results, as reflected on financial statements and reports prepared by or for the Borrowers, when compared with such condition or results as if such change had not taken place, or where preparation of the Borrowers' statements and reports in compliance with such change results in the breach of a financial performance covenant imposed pursuant to Section 5.12, where such a breach would not have occurred if such change had not taken place or visa versa.

"Maturity Date": April 15, 2006, or if such day is not a Business Day, the next succeeding Business Day.

"Notice Address": With respect to the Administrative Agent, as provided in Section 12.1.

With respect to the Collateral Agent, as provided in Section 12.1.

With respect to any Lender, as indicated adjacent to such Lender's signature at the foot of this Agreement. With respect to any Person who becomes a Lender hereafter pursuant to Section 7.2 of the Agency Agreement, as indicated in the Assignment and Acceptance of such Person.

Each Notice Address is subject to change as provided in Section 12.1.

"Operating Account": Defined in Section 7.3(a)(iii).

"Overloan": A loan, advance, or providing of credit support (such as the issuance of any L/C) to the extent that, at the time it is made, it exceeds Availability immediately prior to or following the making of such loan, advance, or providing of credit support.

"Participant": Defined in Section 14.16.

"Payment Intangible": Has the meaning given that term in the UCC.

"Percentage Commitment": As set forth on EXHIBIT 2.24(a), annexed hereto, reflecting, with respect to any Lender, the ratio of (i) the amount of the Dollar Commitment of such Lender to (ii) the Aggregate Commitments of all Lenders (as such percentage may change in accordance with the provisions of this Agreement).

"Permissible Disposition": Defined in Section 4.14(d).

"Permissible Overloans": Defined in the Agency Agreement.

"Permitted Encumbrances": The following:

(a) Encumbrances in favor of the Collateral Agent.

(b) Those Encumbrances (if any) listed on EXHIBIT 4.7, annexed hereto.

(c) Liens securing the payment of taxes, either not yet overdue or the validity of which is being contested in good faith by the Borrowers and for which the Borrowers have established adequate cash reserve; non-consensual statutory liens (other than liens securing the payment of taxes) arising in the ordinary course of Borrowers' business to the extent such liens secure (i) indebtedness that is not overdue, (ii) 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 are being contested by the Borrowers in good faith by appropriate proceedings diligently pursued, in each instance prior to the commencement of foreclosure or other similar proceedings and provided that adequate reserves therefor have been set aside on the Borrowers' books (provided, however, that the inclusion of any of the foregoing as "Permitted Encumbrances" shall not affect their respective relative priorities vis a vis the security interests created herein), or (iii) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of real property.

(d) Deposits under workmen's compensation, unemployment insurance and social security laws, or to secure the performance of bids, tenders, contracts (other than for the repayment of borrowed money) or leases, or to secure statutory obligations or surety or appeal bonds, or to secure indemnity, performance or other similar bonds arising in the ordinary course of business.

(e) Landlord's liens arising by operation of law where waivers have not been obtained.

(f) Purchase money security interests or capitalized equipment leases on any Equipment acquired or held by the Borrowers in the ordinary course of business and securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such Equipment; provided however that (i) any such Encumbrance attaches to such property concurrently with or within twenty (20) days after the acquisition thereof, (ii) such Encumbrance attaches solely to the Equipment so acquired in such transaction and (iii) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such Equipment.

"Person": Any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, entity, party or foreign or United States government (whether federal, state, county, city, municipal or otherwise), including, without limitation, any instrumentality, division, agency, body or department thereof.

"Proceeds": Includes, without limitation, "Proceeds" as defined in the UCC (defined below), and proceeds of all Collateral. In respect to Inventory, Proceeds includes all Receipts, Accounts, Chattel Paper, Payment Intangibles, Letter of Credit Rights, Documents, Instruments, Deposit Accounts and Supporting Obligations arising upon the sale thereof.

"Pro Rata": (a) With respect to any Lender vis a vis any other Lender, a fraction (expressed as a percentage), the numerator of which shall be the amount of such Lender's Dollar Commitment and the denominator of which shall be the Aggregate Commitment, as adjusted from time to time in accordance with the provisions of Section 7.1 of the Agency Agreement, provided that, if all Commitments have been terminated, the numerator shall be the unpaid amount of such Lender's Loans and its interest in L/C exposure and the denominator shall be the aggregate unpaid principal amount of all unpaid Loans and L/C exposure.

"Receipts": All cash, cash equivalents, checks, and credit card slips and receipts as arise out of the sale of the Inventory and other Collateral.

"Regulatory Change": Defined in Section 2.21(c).

"Reporting Activation Event": The occurrence of either of the following: (i) the failure of Borrowers to maintain Excess Availability of at least Twenty Million Dollars ($20,000,000) for three (3) consecutive Business Days or Seventeen Million Five Hundred Thousand ($17,500,000) on any Business Day, or (ii) a Suspension Event hereunder, provided, however, that, if following the occurrence of the first two (2) Reporting Activation Events (other than a Suspension Event in any fiscal year), the Borrowers maintain Excess Availability of at least Twenty Seven Million Five Hundred Thousand Dollars ($27,500,000) for sixty (60) consecutive Business Days, the Reporting Activation Event shall be deemed to have ceased to exist and provided, further, however that Borrower shall be permitted to cure a Reporting Activation Event pursuant to the immediately preceding proviso no more than twice in any fiscal year.

"Requirement of Law": As to any Person:

(a) (i) All statutes, rules, regulations, orders, or other requirements having the force of law and (ii) all court orders and injunctions, arbitrator's decisions, and/or similar rulings, in each instance ((i) and (ii)) of or by any federal, state, municipal, and other governmental authority, or court, tribunal, panel, or other body which has or claims jurisdiction over such Person, or any property of such Person, or of any other Person for whose conduct such Person would be responsible.

(b) That Person's charter, certificate of incorporation, articles of organization, and/or other organizational documents, as applicable; and

"Reserves": The following: Availability Reserves and Inventory Reserves.

"Reserve Percentage": The decimal equivalent of that rate applicable to a Lender under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement of that Lender with respect to "Eurocurrency liabilities" as defined in such regulations. The Reserve Percentage applicable to a particular Index Loan shall be based upon that in effect during the subject Interest Period, with changes in the Reserve Percentage which take effect during such Interest Period to take effect (and to consequently change any interest rate determined with reference to the Reserve Percentage) if and when such change is applicable to such loans.

"Revolving Credit": Defined in Section 2.1(a).

"Revolving Credit Commitment Fee": Defined in Section 2.12(a).

"Revolving Credit Early Termination Fee": Defined in Section 2.15.

"Revolving Credit Loans": Defined in Section 2.1(a).

"Revolving Credit Loan Ceiling": Initially Seventy Million Dollars ($70,000,000), provided, however, that if Lead Borrower elects to increase the Revolving Credit Loan Ceiling to $75,000,000 pursuant to Section 2.1(e) hereof, the Revolving Credit Loan Ceiling shall mean $75,000,000 from and after the Increased Commitment Effective Date.

"Revolving Credit Note": Defined in Section 2.9.

"Revolving Credit Obligations": The aggregate of the Borrowers' liabilities, obligations, and indebtedness of any character on account of or in respect to the Revolving Credit.

"Stated Amount": The maximum amount for which an L/C may be honored, less any amounts already drawn thereunder.

"Subsidiary": Any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time stock of any other class of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, owned by any Borrower, or any partnership, joint venture or limited liability company of which more than fifty percent (50%) of the outstanding equity interests are at the time, directly or indirectly, owned by any Borrower or any partnership of which any Borrower is a general partner.

"Supporting Obligation": Has the meaning given that term in the UCC and also refers to a Letter-of-Credit Right or secondary obligation which supports the payment or performance of an Account, Chattel Paper, a Document, a General Intangible, an Instrument, or Investment Property.

"Suspension Event": Any occurrence, circumstance, or state of facts which (a) is an Event of Default; or (b) would become an Event of Default if any requisite notice were given and/or any requisite period of time were to run and such occurrence, circumstance, or state of facts were not absolutely cured within any applicable grace period.

"SwingLine": The facility pursuant to which the SwingLine Lender may advance SwingLine Loan to the Borrower aggregating up to the SwingLine Loan Ceiling.

"SwingLine Ceiling": $5,000,000.

"SwingLine Lender": Fleet Retail Finance Inc., or another financial institution designated by the Administrative Agent.

"SwingLine Loans": Defined in Section 2.7(a).

"SwingLine Note": Defined in Section 2.7(c).

"Tax": In relation to any Index Loans and the applicable Index Rate, any tax, levy, impost, duty, deduction, withholding or charges of whatever nature required to be paid by the Agent and/or (ii) to be withheld or deducted from any payment otherwise required hereby to be made by the Borrowers to the Agent; provided, that the term "Tax" shall not include any taxes imposed upon the net income of the Agent.

"Termination Date": The earliest of (a) the Maturity Date; or (b) the occurrence of any event described in Section 10.11, below; or (c) the date set as the Termination Date in a notice by the Agent to the Lead Borrower on account of the occurrence of any Event of Default other than as described in Section 10.11, below..

"Transfer": Wire transfer pursuant to the wire transfer system maintained by the Board of Governors of the Federal Reserve Board, or as otherwise may be agreed to from time to time by the Administrative Agent. Wire instructions may be changed in the same manner that Notice Addresses may be changed pursuant to Section 12.1 of this Agreement, except that no change of the wire instructions for Transfers to the Agent shall be effective without the consent of the Administrative Agent.

"UCC": The Uniform Commercial Code as presently in effect in Massachusetts (Mass. Gen. Laws, Ch. 106) as used herein in the context of any definitions; otherwise, as in effect from time to time is Massachusetts.

"Unused Line Fee": Defined in Section 2.14.

ARTICLE II. - The Revolving Credit

2.1 Establishment of Revolving Credit

(a)    The Lenders hereby establish a revolving line of credit (the "Revolving Credit") in the Borrowers' favor pursuant to which the Lenders, acting through the Administrative Agent, shall make loans and advances and otherwise provide financial accommodations to and for the account of the Borrowers until the Maturity Date equal to each Lender's Pro Rata share of advances (each, a "Revolving Credit Loan") as provided herein in each instance equal to its applicable Percentage Commitment of Availability, up to the maximum amount of its applicable Dollar Commitment (as such Dollar Commitment may be increased as provided in Section 2.1(e) hereof). The obligations of each Lender hereunder shall be several and not joint.

(b)   Loans, advances, and financial accommodations under the Revolving Credit shall be made with reference to the Borrowing Base and shall be subject to Availability. The Borrowing Base and Availability shall be determined by the Collateral Agent by reference to Borrowing Base Certificates furnished as provided in Section 5.4 below (subject to Reserves established by the Collateral Agent):

(c)    The commitment of each Lender to provide such loans, advances, and financial accommodations is subject to Section 2.2.

(d)   The proceeds of borrowings under the Revolving Credit shall be used solely to (i) repay the Borrowers existing obligations to Bank of America in an amount not to exceed $45,000,000 and (ii) for working capital, letters of credit and Capital Expenditures and other general corporate purposes of the Borrower in accordance with the Business Plan, all solely to the extent permitted by this Agreement. No proceeds of a borrowing under the Revolving Credit may be used, nor shall any be requested, with a view towards the accumulation of any general fund or funded reserve of the Borrowers other than in the ordinary course of the Borrowers' business and consistent with the provisions of this Agreement.

(e)    At any time on or before April 15, 2005, the Lead Borrower shall have the one time right to elect to permanently increase the Revolving Credit Loan Ceiling by Five Million Dollars ($5,000,000) to Seventy Five Million Dollars ($75,000,000) by written notice to Agent, provided that (i) no Cash Management Activation Event exists hereunder at the time that the Lead Borrower notifies Agent of its election so to increase the Revolving Credit Loan Ceiling and no Cash Management Activation Event has existed at any time during the period of one hundred eighty (180) days immediately prior to such date; (ii) the Lead Borrower provides the Administrative Agent with at least thirty (30) days prior written notice of its intention to effectuate such an increase; (iii) the Lead Borrower provides the Administrative Agent with a Business Plan, which plan is satisfactory in form and substance to Administrative Agent in its reasonable judgment and includes projections based on reasonable assumptions which forecast that the Borrower will have Excess Availability of at least $27,500,000 during the twelve (12) month period following the month in which such increase becomes effective; and (v) the Borrower pays to the Administrative Agent an Increased Commitment Fee, for the pro rata account of the Lenders, of $25,000. Such increase in the Revolving Credit Ceiling shall become effective on a date ("Increased Commitment Effective Date") designated by Borrower which is at least thirty (30) days after the date of Borrower's notice. In the event that the Lead Borrower elects to increase the Revolving Credit Ceiling, the $5,000,000 increase in the Revolving Credit Loan Commitment shall be allocated Pro Rata amongst the Lenders and each Lender's Dollar Commitment shall automatically increase by an amount equal to the product obtained by multiplying (A) $5,000,000, times, (B) such Lender's Percentage Commitment on the Increased Commitment Effective Date. The Borrowers agree to pay the Lender's fees and expenses including reasonable attorneys fees in connection with any increase of the Revolving Credit Loan Ceiling.

2.2 Advances in Excess of Borrowing Base (Overloans)

(a)    No Lender has any obligation to make any loan or advance, or otherwise to provide any credit to or for the benefit of the Borrowers where the result of such loan, advance, or credit is an Overloan except in respect to Permissible Overloans which the Agents deem prudent.

(b)   The Lenders' obligations, among themselves, are subject to Section 3.3 of the Agency Agreement(which relates to each Lender's making amounts available to the Administrative Agent) and to Sections 6.1(d) and 6.5(a) of the Agency Agreement (which relate to Permissible Overloans).

(c)    The Lenders' providing of an Overloan on any one occasion does not affect the obligations of the Borrowers hereunder (such as the Borrowers' obligation to immediately repay any amount which otherwise constitutes an Overloan) nor shall it obligate the Lenders to do so on any other occasion.

2.3 Risks of Value of Collateral.

Any reference to a given asset in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit and/or the monitoring of compliance with the provisions hereof shall not be deemed a determination by any Agent or the Lenders relative to the actual value of the asset in question. All risks concerning the value of the Collateral are and remain upon the Borrowers. All Collateral secures the prompt, punctual, and faithful performance of the Liabilities whether or not relied upon by the Agents in connection with the making of loans, credits, and advances and the providing of financial accommodations under the Revolving Credit.

2.4 Commitment to Make Revolving Credit Loans and Support Letters of Credit.

Subject to the provisions of this Agreement, the Lenders shall make a loan or advance under the Revolving Credit and the Administrative Agent shall endeavor to have an L/C issued for the account of the Borrowers, in each instance if duly and timely requested by the Lead Borrower as provided herein provided that:

(a) No Overloan is then outstanding and none will result therefrom.

(b) Subject to Section 2.5(h) hereof, no Suspension Event or Event of Default exists and none will be created by the issuance of the Letter of Credit or the making of such Revolving Credit Loan.

2.5 Revolving Credit Loan Requests.

(a)    Requests for loans and advances under the Revolving Credit or for the continuance or conversion of an interest rate applicable to a Revolving Credit Loan may be requested by the Lead Borrower in such manner as may from time to time be reasonably acceptable to the Administrative Agent.

(b)   Subject to the provisions of this Agreement, the Lead Borrower may request a Revolving Credit Loan and elect an interest rate and Interest Period to be applicable to that Revolving Credit Loan by giving notice to the Administrative Agent by no later than the following:

(i)                  If such Revolving Credit Loan is to be or is to be converted to a Base Margin Loan: By 1:00 PM Boston time on the Business Day on which the subject Revolving Credit Loan is to be made or is to be so converted . Base Margin Loans requested by the Lead Borrower, other than those resulting from the conversion of a Index Loan, shall not be less than $10,000.00.

(ii)                If such Revolving Credit Loan is to be or is to be converted to a an Index Loan: By 1:00 PM Boston time, three (3) Index Business Days before the commencement of any new Interest Period or the end of the then applicable Interest Period. Index Loans and conversions to Index Loans shall each be not less than $1,000,000.00 and in increments of $100,000.00 in excess of such minimum.

(iii)               Any Index Loan which matures while a Suspension Event is extended may be converted, at the option of the Administrative Agent, to a Base Margin Loan notwithstanding any notice from the Lead Borrower that such Revolving Credit Loan is to be continued as a Index Loan.

(c)    Any request for a Revolving Credit Loan or for the continuance or conversion of a Revolving Credit Loan which is made after the applicable deadline therefor, as set forth above, shall be deemed to have been made at the opening of business on the then next Business Day or Index Business Day, as applicable, unless the Administrative Agent, in its discretion, determines to deem it to have been made earlier. Each request for a Revolving Credit Loan or for the conversion of a Revolving Credit Loan shall be made in such manner as may from time to time be acceptable to the Administrative Agent.

(d)   INTENTIONALLY OMITTED .

(e)    The Lead Borrower may request that the Administrative Agent cause the issuance of L/C's for the account of the Borrowers as provided in Section 2.18.

(f)     The Administrative Agent may rely on any request for a loan or advance, or other financial accommodation under the Revolving Credit which the Administrative Agent, in good faith, believes to have been made by a Person duly authorized to act on behalf of the Lead Borrower and may decline to make any such requested loan or advance, or issuance, or to provide any such financial accommodation pending the Administrative Agent's being furnished with such documentation concerning that Person's authority to act as may be satisfactory to the Administrative Agent.

(g)    A request by the Lead Borrower for loan or advance or other financial accommodation under the Revolving Credit shall be irrevocable and shall constitute certification by each Borrower that as of the date of such request, each of the following is true and correct:

(i)                  There has been no material adverse change in the Borrowers' financial condition (taken as a whole) from the most recent financial information furnished Administrative Agent or any Lender pursuant to this Agreement.

(ii)                Each representation, not relating to a specific date, which is made herein or in any of the Loan Documents is then true and correct in all material respects as of and as if made on the date of such request (except (A) to the extent of changes resulting from transactions contemplated or permitted by this Agreement or the other Loan Documents and changes occurring in the ordinary course of business which singly or in the aggregate are not materially adverse and (B) to the extent that such representations and warranties expressly relate to an earlier date)..

(iii)               No Suspension Event then exists.

(h)    If, at any time or from time to time, a Suspension Event or Event of Default exists,

(i)                  The Administrative Agent may suspend the Revolving Credit immediately, in which event neither the Administrative Agent nor the Lenders shall be obligated during such suspension to make any loans or advances or to provide any financial accommodation hereunder or to seek the issuance of any L/C.

(ii)                The Administrative Agent may suspend the right of the Lead Borrower to request any Index Loan or to convert any Base Margin Loan to a Index Loan.

2.6 Making Of Revolving Credit Loans

(a)    A loan or advance under the Revolving Credit shall be made by the Transfer of the proceeds of such loan or advance to the Disbursement Account or as otherwise instructed by the Lead Borrower.

(b)   A loan or advance shall be deemed to have been made under the Revolving Credit (and the Borrowers shall be indebted to the Agent or Lenders for the amount thereof immediately) upon the Agent's initiation of the Transfer of the proceeds of such loan or advance in accordance with the Lead Borrower's instructions (if such loan or advance is of funds requested by the Lead Borrower) or the charging of the amount of such loan to the Loan Account (in all other circumstances).

(c)    There shall not be any recourse to or liability of the Agent or Lenders (except to the extent caused by the gross negligence or willful misconduct of the Agent or Lenders as determined by a court of competent jurisdiction), on account of:

(i)                  Any delay in the making of any loan or advance requested under the Revolving Credit.

(ii)                Any delay by any bank or other depository institution in treating the proceeds of any such loan or advance as collected funds.

(iii)               Any delay in the receipt, and/or any loss, of funds which constitute a loan or advance under the Revolving Credit, the wire transfer of which was properly initiated by the Agent or Lenders in accordance with wire instructions provided to the Agent by the Lead Borrower).

2.7 SwingLine Loans.

(a)    For ease of administration of Revolving Credit Loans, Revolving Credit Loans which are Base Margin Loans may be made by the Agent, as a SwingLine Lender (in the aggregate, the "SwingLine Loans") in accordance with the procedures set forth in this Agreement for the making of Revolving Credit Loans. The unpaid principal balance of the SwingLine Loans shall not at any one time be in excess of the SwingLine Loan Ceiling (which SwingLine Loan Ceiling is subject to amendment from time to time, by reasonable advance notice by the Agent to the Lead Borrower).

(b)   The aggregate unpaid principal balance of SwingLine Loans shall bear interest at the rate applicable to Base Margin Loans and shall be repayable as a Revolving Credit Loan under the Revolving Credit.

(c)    The Borrower's obligation to repay SwingLine Loans may be evidenced by a Note in the form of EXHIBIT 2.7 ("SwingLine Note"), executed by the Borrowers and payable to the Agent. Neither the original nor a copy of the SwingLine Note shall be required to establish or prove any Liability.   Upon the Lead Borrower being provided with an affidavit (which shall include an indemnity reasonably satisfactory to the Lead Borrower) from the Agent to the effect that the SwingLine Note has been lost, mutilated, or destroyed, the Borrowers shall execute and deliver a replacement of any SwingLine Note to the Agent.

(d)   For all purposes of this Loan Agreement, the SwingLine Loans and the Borrower's obligations to the Agent constitute Revolving Credit Loans and are secured as "Liabilities".

(e)    SwingLine Loans may be subject to periodic settlement with the Lenders.

2.8 The Loan Account.

(a)    An account ("Loan Account") shall be opened on the books of the Agent in which a record shall be kept of all loans and advances made under the Revolving Credit.

(b)   The Agent may also keep a record (either in the Loan Account or elsewhere, as the Agent may from time to time elect) of all interest, fees, service charges, costs, expenses, and other debits owed to the Agent and the Lender on account of the Liabilities and of all credits against such amounts so owed.

(c)    All credits against the Liabilities shall be conditional upon receipt of final payment to the Agent and the Lenders of the items giving rise to such credits. The amount of any item credited against the Liabilities which is charged back against the Agent or the Lenders for any reason or is not so paid shall be a Liability and shall be added to the Loan Account, whether or not the item so charged back or not so paid is returned.

(d)   Except as otherwise provided herein, all fees, service charges, costs, and expenses for which the Borrowers are obligated hereunder are payable on demand. In the determination of Availability, the Agent may deem fees, service charges, accrued interest (except for interest charged on Index Loans, which, absent the occurrence of an Event of Default, shall be charged on the maturity date of the Index contract), and other payments which will be due and payable between the date of such determination and the first day of the then next succeeding month as having been advanced under the Revolving Credit whether or not such amounts are then due and payable.

(e)    The Agent, without the request of the Lead Borrower, may advance under the Revolving Credit any interest, fee, service charge, or other payment to which the Agent or the Lenders is entitled from the Borrowers pursuant hereto and may charge the same to the Loan Account notwithstanding that such amount so advanced may result in Borrowing Base's being exceeded. Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.7(e) shall bear interest , at the interest rate then and thereafter applicable to Base Margin Loans. Such action on the part of the Agent shall not constitute a waiver of the Agent's right or the Borrowers' obligations under Section 2.10(b).

(f)     Any statement rendered by the Agent or the Lenders to the Borrowers concerning the Liabilities shall, in the absence of manifest error, be considered correct and accepted by the Borrowers and shall be conclusively binding upon the Borrowers unless the Lead Borrower provides the Agent with written objection thereto within forty five (45) days from the mailing of such statement, which written objection shall indicate, with particularity, the reason for such objection. In the absence of manifest error, the Loan Account and the Agent's and Lenders' books and records concerning the loan arrangement contemplated herein and the Liabilities shall be prima facie evidence and proof of the items described therein.

2.9 The Revolving Credit Note.

The Borrowers' obligation to repay loans and advances under the Revolving Credit, with interest as provided herein, may be evidenced by one or more Notes (each, a "Revolving Credit Note") in the form of EXHIBIT 2.9, annexed hereto, executed by the Lead Borrower on behalf of itself and the other Borrowers, payable to each Lender in the amount of its Dollar Commitment. Neither the original nor a copy of any Revolving Credit Note shall be required, however, to establish or prove any Liability. Upon the Lead Borrower being provided with an affidavit (which shall include an indemnity reasonably satisfactory to the Lead Borrower) from the Lenders to the effect that the Revolving Credit has been lost, mutilated, or destroyed, the Borrower on behalf of itself and the other Borrowers shall execute and deliver a replacement thereof to the Lenders.

2.10 Payment of the Loan Account.

(a)    Subject to Section 2.15 hereof, the Borrowers may repay all or any portion of the principal balance of the Loan Account from time to time until the Termination Date.

(b)   The Borrowers, without notice or demand from the Agent, shall pay the Agent that amount, from time to time, which is necessary so that there is no Overloan outstanding.

(c)    The Borrowers shall repay the then entire unpaid balance of the Revolving Credit and all other Liabilities on the Termination Date.

(d)   The Agent shall endeavor to cause payments, pursuant to Sections 2.10(a) and 2.10(b), to be applied in accordance with Section 7.5(a) of this Agreement. The Agent shall endeavor to cause those application of payments (if any), pursuant to Sections 2.10(a) and 2.10(b) against Index Loans then outstanding in such manner as results in the least cost to the Borrowers, but shall not have any affirmative obligation to do so nor liability on account of the Agent's failure to have done so. In no event shall action or inaction taken by the Agent excuse the Borrowers from any indemnification obligation under Section 2.10(e)

(e)    Upon the request of the Agent, the Borrowers shall indemnify the Agent and Lenders and hold the Agent and Lenders harmless from and against any loss, cost or expense (including loss of anticipated profits) which the Agent or Lenders may sustain or incur (including, without limitation, by virtue of acceleration after the occurrence of any Event of Default) as a consequence of any of the following:

(i)                  Default by the Borrowers in payment of the principal amount of or any interest on any Index Loan as and when due and payable, including any such loss or expense arising from interest or fees payable by the Agent or Lenders in order to maintain its Index Loans.

(ii)                Default by the Borrowers in making a borrowing or conversion after the Borrowers has given (or is deemed to have given) a request for a Revolving Credit Loan or a request to convert a Revolving Credit Loan from one applicable interest rate to another.

(f)     The making of any payment on an Index Loan or the making of any conversion of any such Loan to a Base Margin Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by the Agent and Lenders as "breakage fees".

2.11 Interest On Revolving Credit Loans.

(a)    Each Revolving Credit Loan which consists of a Base Margin Loan shall bear interest at the Base Margin Rate (determined based upon a 360-day year and actual days elapsed), unless and until it is made as, or is converted to, an Index Loan pursuant to Section 2.5 hereof.

(b)   Each Revolving Credit Loan which consists of an Index Loan shall bear interest at the applicable Index Rate (determined based upon a 360-day year and actual days elapsed)

(c)    Subject to, and in accordance with, the provisions of this Agreement, the Lead Borrower may cause all or a part of the unpaid principal balance of Revolving Credit Loans to bear interest at the Base Margin Rate or the Index Rate as specified from time to time by the Lead Borrower.

(d)   The Lead Borrower shall not select, renew, or convert any interest rate for a Revolving Credit Loan such that, in addition to interest at the Base Margin Rate, there are more than three (3) Index Periods applicable to the outstanding Index Loans at any one time.

(e)    The Borrowers shall pay accrued and unpaid interest on each Revolving Credit Loan in arrears on the applicable Interest Payment Date therefor. Following the occurrence of any Event of Default (and whether or not the Agent exercises the Agent's rights on account thereof), all Revolving Credit Loans shall bear interest, at the option of the Agent, at rate which is the aggregate in the case of Base Margin Loan, of the then applicable Base Margin Rate plus two percent (2%) per annum, and in the case of Index Loans, the then applicable Index Rate plus two percent (2%) per annum.

(f)     The Index Margin and Base Margin shall be reset quarterly, effective as of the first day of each of the Borrower's fiscal quarters (the "Margin Adjustment Date"), commencing on August 1, 2002, based upon the Margin Pricing Grid set forth below, subject to the provisions in the definitions of "Base Margin" and "Index Margin" and the provisions of the paragraph following the Margin Pricing Grid:

MARGIN PRICING GRID

Tier	Average Availability*	Index MARGIN (Basis Points)	BASE MARGIN (Percentage)
I	≥ = $27,500,000	1.50%	0.00%
II	≥ = $20,000,000 and ≤ $27,500,000	1.75%	0.25%
III	≤ = $20,000,000	2.00%	0.5%

From the date hereof through the First Margin Adjustment Date, the Level I Index Margin and Base Rate Margin shall be in effect. If a Suspension Event has occurred and is continuing at the time any reduction in the Index Margin and Base Margin is to be implemented, that reduction shall be deferred until the next Margin Adjustment Date following the date on which such is waived or cured.

2.12 Revolving Credit Commitment Fee.

(a) As compensation for the respective commitments of the Lenders at the execution of this Agreement to make loans and advances to the Borrowers under the Revolving Credit and as compensation for the Lenders' maintenance of sufficient funds available for such purpose, the Borrower shall pay the Agent, for the ratable benefit of the Lenders, on the Closing Date, the "Revolving Credit Commitment Fee" of $262,500 which fee shall be fully earned and payable at Closing and not subject to refund under any circumstances.

2.13 Agent's Fee.

In addition to any other fee or expense to be paid by the Borrowers on account of the Revolving Credit, the Borrower shall pay an "Agent's Fee" to Agents of $24,000 per annum, which Agent's

Duckwall Alco Stores Inc · 10-K · For 2/3/03 · EX-10.16

Filed On 4/25/03 12:10pm ET · SEC File 0-20269 · Accession Number 30302-3-2

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EX-10.16 · Loan and Security Agreement

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

ARTICLE I. - Definitions:

(i) Rent for any location in a Landlord State in respect to which a Landlord Waiver has not been received by the Collateral Agent (which initially shall be three (3) months rent for any such location).

(ii) Customer Credit Liabilities.

(iii) Taxes and other governmental charges, including, ad valorem, personal property, and other taxes which might have priority over the Collateral Interests of the Collateral Agent in the Collateral.

(c) The commitment of each Lender to provide such loans, advances, and financial accommodations is subject to Section 2.2.

(a) No Lender has any obligation to make any loan or advance, or otherwise to provide any credit to or for the benefit of the Borrowers where the result of such loan, advance, or credit is an Overloan except in respect to Permissible Overloans which the Agents deem prudent.

(b) The Lenders' obligations, among themselves, are subject to Section 3.3 of the Agency Agreement(which relates to each Lender's making amounts available to the Administrative Agent) and to Sections 6.1(d) and 6.5(a) of the Agency Agreement (which relate to Permissible Overloans).

(c) The Lenders' providing of an Overloan on any one occasion does not affect the obligations of the Borrowers hereunder (such as the Borrowers' obligation to immediately repay any amount which otherwise constitutes an Overloan) nor shall it obligate the Lenders to do so on any other occasion.

(a) No Overloan is then outstanding and none will result therefrom.

(b) Subject to Section 2.5(h) hereof, no Suspension Event or Event of Default exists and none will be created by the issuance of the Letter of Credit or the making of such Revolving Credit Loan.

(a) Requests for loans and advances under the Revolving Credit or for the continuance or conversion of an interest rate applicable to a Revolving Credit Loan may be requested by the Lead Borrower in such manner as may from time to time be reasonably acceptable to the Administrative Agent.

(b) Subject to the provisions of this Agreement, the Lead Borrower may request a Revolving Credit Loan and elect an interest rate and Interest Period to be applicable to that Revolving Credit Loan by giving notice to the Administrative Agent by no later than the following:

(iii) Any Index Loan which matures while a Suspension Event is extended may be converted, at the option of the Administrative Agent, to a Base Margin Loan notwithstanding any notice from the Lead Borrower that such Revolving Credit Loan is to be continued as a Index Loan.

(d) INTENTIONALLY OMITTED .

(e) The Lead Borrower may request that the Administrative Agent cause the issuance of L/C's for the account of the Borrowers as provided in Section 2.18.

(g) A request by the Lead Borrower for loan or advance or other financial accommodation under the Revolving Credit shall be irrevocable and shall constitute certification by each Borrower that as of the date of such request, each of the following is true and correct:

(i) There has been no material adverse change in the Borrowers' financial condition (taken as a whole) from the most recent financial information furnished Administrative Agent or any Lender pursuant to this Agreement.

(iii) No Suspension Event then exists.

(h) If, at any time or from time to time, a Suspension Event or Event of Default exists,

(i) The Administrative Agent may suspend the Revolving Credit immediately, in which event neither the Administrative Agent nor the Lenders shall be obligated during such suspension to make any loans or advances or to provide any financial accommodation hereunder or to seek the issuance of any L/C.

(ii) The Administrative Agent may suspend the right of the Lead Borrower to request any Index Loan or to convert any Base Margin Loan to a Index Loan.

(a) A loan or advance under the Revolving Credit shall be made by the Transfer of the proceeds of such loan or advance to the Disbursement Account or as otherwise instructed by the Lead Borrower.

(c) There shall not be any recourse to or liability of the Agent or Lenders (except to the extent caused by the gross negligence or willful misconduct of the Agent or Lenders as determined by a court of competent jurisdiction), on account of:

(i) Any delay in the making of any loan or advance requested under the Revolving Credit.

(ii) Any delay by any bank or other depository institution in treating the proceeds of any such loan or advance as collected funds.

(iii) Any delay in the receipt, and/or any loss, of funds which constitute a loan or advance under the Revolving Credit, the wire transfer of which was properly initiated by the Agent or Lenders in accordance with wire instructions provided to the Agent by the Lead Borrower).

(b) The aggregate unpaid principal balance of SwingLine Loans shall bear interest at the rate applicable to Base Margin Loans and shall be repayable as a Revolving Credit Loan under the Revolving Credit.

(d) For all purposes of this Loan Agreement, the SwingLine Loans and the Borrower's obligations to the Agent constitute Revolving Credit Loans and are secured as "Liabilities".

(e) SwingLine Loans may be subject to periodic settlement with the Lenders.

(a) An account ("Loan Account") shall be opened on the books of the Agent in which a record shall be kept of all loans and advances made under the Revolving Credit.

(a) Subject to Section 2.15 hereof, the Borrowers may repay all or any portion of the principal balance of the Loan Account from time to time until the Termination Date.

(b) The Borrowers, without notice or demand from the Agent, shall pay the Agent that amount, from time to time, which is necessary so that there is no Overloan outstanding.

(c) The Borrowers shall repay the then entire unpaid balance of the Revolving Credit and all other Liabilities on the Termination Date.

(i) Default by the Borrowers in payment of the principal amount of or any interest on any Index Loan as and when due and payable, including any such loss or expense arising from interest or fees payable by the Agent or Lenders in order to maintain its Index Loans.

(ii) Default by the Borrowers in making a borrowing or conversion after the Borrowers has given (or is deemed to have given) a request for a Revolving Credit Loan or a request to convert a Revolving Credit Loan from one applicable interest rate to another.

(f) The making of any payment on an Index Loan or the making of any conversion of any such Loan to a Base Margin Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by the Agent and Lenders as "breakage fees".

(a) Each Revolving Credit Loan which consists of a Base Margin Loan shall bear interest at the Base Margin Rate (determined based upon a 360-day year and actual days elapsed), unless and until it is made as, or is converted to, an Index Loan pursuant to Section 2.5 hereof.

(b) Each Revolving Credit Loan which consists of an Index Loan shall bear interest at the applicable Index Rate (determined based upon a 360-day year and actual days elapsed)

(c) Subject to, and in accordance with, the provisions of this Agreement, the Lead Borrower may cause all or a part of the unpaid principal balance of Revolving Credit Loans to bear interest at the Base Margin Rate or the Index Rate as specified from time to time by the Lead Borrower.

(d) The Lead Borrower shall not select, renew, or convert any interest rate for a Revolving Credit Loan such that, in addition to interest at the Base Margin Rate, there are more than three (3) Index Periods applicable to the outstanding Index Loans at any one time.

In addition to any other fee or expense to be paid by the Borrowers on account of the Revolving Credit, the Borrower shall pay an "Agent's Fee" to Agents of $24,000 per annum, which Agent's

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